You're hitting a rough market these days if you are putting a house up for sale. Finding a buyer who can pay the price - and swing the needed mortgage deal - may not be easy. Keep in mind that to help your house sell, you might:
Hire an independent appraiser (whose fee will be somewhere in the £100-£150 range). Check his appraisal against what two or three real estate men say the house is worth. This will help you price it right - and not scare away buyers by reaching for an unrealistically high price that an agent might suggest. Rule of thumb: If it's a £50,000 to £75,000 house, allow maybe 10% for "horse-trading." Ask, say £60,000 - if you're willing to go as low as £54,000. But don't start by asking £70,000 unless you're prepared to wait it out, maybe for months. Note: A suburban bank often will be able to give you the name of a good appraiser.
Take a "purchase-money" or second mortgage yourself. Say that you are selling for £60,000, and the buyer puts down a third of that, or £20,000. He has trouble getting a £40,000 mortgage. You take, say, £10,000 of the £40,000 - in the form of a second mortgage. The lender takes a first mortgage of £30,000. Lenders will often go for this. There is some risk, of course - which you must weight.
Also, keep in mind this selling pointer: If you do sales-appeal repairs and fixing up - quite often neglected by sellers - you will usually stand a much better chance of seeing the house move faster. Put in some new lawn seed, paint the gutters and worn trim, fix the stuck window that won't open or the cracked pane in the garage door. Call it psychological repair work - it counts. And once you've picked a good broker, follow his suggestions as to showing the house to buyers. One tip: Don't walk around with him; you'll spoil his sales pitch. Incidentally, local suburban banks also know the best brokers in town.
You don't want a high-pressure salesman (or saleswoman) - not for the type of property you'll be selling. The financially responsible buyer, possibly an executive coming in from out of town, may steer clear of the fast-talker. You do want a reliable, conservative agent. Besides, you want an agent who won't forget for a moment that he represents you - not the buyer - and one who won't try to pressure you into a quick sale at a lower price than the house deserves for the sake of a fast commission. The kind of agreement you sign with the broker can make a difference.
You might want an "exclusive contract" that gives a single broker the right to handle the deal, though generally this has limited appeal for a seller. It's useful when you have a property that needs some special sales effort - an estate, for example.
In some affluent communities, there are agents today who make a specialty of handling properties in the £100,000 range, and, of course, there are a few national brokers (such as Previews, Ltd) to consider. But most likely, you'll want a "multiple listing" agreement. On balance, it's best for most sellers. Under this system, all "listed" brokers can handle the house, though you deal primarily with just one. He shares the commission, no matter who sells the house.
In any case, be sure your broker's agreement spells out (1) his commission - often 6% in a large metropolitan area, and (2) the time element, lest you get hung up with a broker who can't move the property. If you have an exclusive agreement, two to four weeks is advised; if it's a multiple listing, then maybe 60 to 90 days. It varies.
As seller, you will, of course, have a solicitor approve any contract of sale between you and a buyer - no matter how clear-cut the deal looks. When dealing in real estate, a handshake is a mere sentimental gesture that won't cut any ice in a courtroom. You need it in writing.
Using your house to raise money
One way to pay school bills, add a wing to the house, or maybe take advantage of a once-in-a-lifetime investment opportunity, is to nail down a loan using your house as collateral.
Conditions for refinancing a mortgage are generally better now than at any time in the past three or four years. So if a breadwinner has lived in his home long enough to have paid off a fair chunk of the mortgage, and if his property values have gone up with the national average or better, he may have enough equity to raise the amount he needs without substantially altering his monthly mortgage payments.
Further, if his income has risen appreciably in the intervening years, he may be able to carry much larger mortgage payments. Say he bought a £30,000 house with one-third down in 2005, when he was earning £20,000. In a tight housing area, such as the London or Reading metropolitan regions, that house today may well be reappraised at £50,000. If his current income will carry the load, he might arrange a new mortgage of £40,000 (up to 80%) or so. On that basis, paying off his old mortgage (which is probably £15,000 or so by now) and other costs, leaves him with nearly £20,000 in cash.
Interest rates probably are as low as they are going to get in the foreseeable future. And this may be the last year when you can get a fixed low rate with ease. Variable-rate mortgages are due for a big push from the local Home Loan Bank Board, which hopes their use will help avoid the feast or famine condition of S&L deposits.
At this writing, banks and thrift institutions have plenty of cash to lend. And alternate methods of raising cash still are pretty expensive.
There are a lot of people who have never used the equity and the borrowing power they have in their homes, observes Robert Gruelling, senior vice directorof the Home local Savings & Loan Assn. of Reading. Instead, he notes, they frequently use short-term high-interest-rate personal loans, which may get them into difficulties.
New borrowing, of course, costs money. Even the so-called open-end mortgage, now commonplace in conventional mortgages granted by savings and loan associations, does not make new money available without charge. State laws governing the mechanics of open-end mortgages vary, but there usually is some sort of loan service fee. Mortgage loans insured by the local Housing Administration or the Veterans Administration cannot be refinanced. So if you want to tap the equity in your home, and you have this type of mortgage, you will have to refinance on a conventional basis.
Lenders vary their terms widely on these realty deals. But they agree on some basic points a borrower should consider before refinancing his home mortgage to raise funds:
Refinancing is just like getting a new mortgage. You pay the same closing costs, which can run as high as £600 or £700 on a £30,000 mortgage (not including the tax escrow advance you must pay a new lender), even though you have been a good customer for many years. So make sure you will clear a sufficient amount of cash to justify the higher cost. Generally speaking, lenders don't advise refinancing for anything less than £5,000.
Don't give up a mortgage with a rate of less than 6% unless you absolutely cannot raise the money any other way.
If you are over 45 years of age, make sure the new commitment will not conflict with retirement plans - you don't want to carry a big house payment after your income goes down.
Be sure you know where you stand on prepayment penalties. They can vary from state to state.
Frankly it can cost you just to apply for refinancing. Some banks in London, for example like others, exacts a £35 appraisal fee, whether or not they make the loan.
What about a dog for home protection? "You can't beat a loud barker," says Ridgewood, N.J., police chief John Orr. His town, an affluent suburb of Manhattan, houses many Wall Street and Midtown commuters. "Houses with barkers rarely get broken into," Orr adds. Many policemen agree. They note, too, that the barkers are oftentimes more effective and reliable than complex electronics. "A member of the family can't accidentally 'trip' the family pet," Orr says. "And a dog is cheaper."
There is debate, however, on what kind of dog is best. Some policemen insist that the common, ordinary loud barker is a safer bet for a family than a professionally trained "guard" dog that can literally tear... see: Biter - or Barker?