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Home buying, selling tips from brokers in shaky 2013 market

A sale-pending sign is a good sign no

A sale-pending sign is a good sign no matter where it is. Home sales prices on Long Island roses modestly in February 2014 over a year ago, a new report says. This sign was on a house in Denver on March 17, 2012. Credit: AP / David Zalubowski

Real estate agents see it all -- from unmade beds to overstuffed garages to the "What were they thinking?" decor.

Over the years, they learn why some houses sell while others linger on the market, and why some promising buyers never make it to the closing table. They know how to get a better deal on the mortgage, and how much the other agents stand to make on your home.

The good news is, they want to share.

The information is useful whether you're a buyer, a seller or both.

In today's market, sellers are again optimistic about the value and price of their homes -- "but buyers aren't," says Ron Phipps, principal with Warwick, R.I.-based Phipps Realty, and past president of the National Association of Realtors.

"Your challenge as a seller is to price the house so that it is compelling," he says.

What does that mean?

"Set a price slightly below market value," he says. Just "a fraction."

For example: If similar homes in your neighborhood are clustered around $210,000, you might price yours at $200,000 or $198,000, he says.

"The longer a house is on the market, the less likely you are to get fair value," Phipps says. "So you really want to position yourself to be the one that sells, not the one that languishes."

And the adage of not wanting to leave any money on the table? Still valid.

If you're also buying a home, and you already have cash in hand, thanks to a fast sale, "that puts you in a very powerful position," Phipps says.

For many potential buyers, frugality ends the minute they get pre-approved for a mortgage, Phipps says. That's when they start running up the cards and opening new lines of credit to buy things for their home-to-be.

But that pre-approval letter is just one of the first steps in the home buying marathon, not the finish line.

Just before closing, a lender will re-examine a prospective buyer's financial situation -- complete with a recent copy of the credit history and other updated information.

If those numbers have changed for the worse (salary decrease, higher card balances, new lines of credit), then the applicant could get clocked with a higher interest rate or even lose the loan. "The number of buyers who get denied is significant," Phipps says.

The moral? Never get new loans or start using credit cards more heavily until after you've actually closed on the home.

Even better, retain your frugality until you've been in the home for a few months and have a good sense of how homeownership affects your finances, Phipps says.

If you're selling a home, it's important to understand the timeline, says Jeffry Wiren, principal broker with Re/Max Equity Group and past president of the Portland, Ore. Metropolitan Association of Realtors.

Underestimating the time it takes -- and building a schedule around those unrealistic expectations -- adds stress, Wiren says.

Wiren's schedule breakdown:

* -- Getting your home in shape: two weeks

* -- Average time on the market (varies widely with location and price): 2 1/2 to three months

* -- Negotiating after an offer: one week

* -- Preparing to close (assuming a traditional transaction): 30 to 45 days

A smart seller allows a minimum of four to six months to sell, Wiren says.

To prove their worthiness, sometimes prospective buyers will show a prequalification letter, Wiren says. "And that means nothing." That's because in a prequalification, lenders usually don't verify buyers' information. But preapproval involves third-party verification.

"'Prequalified,' that means they've talked with a lender and said, 'I have good credit and I make 'X' number of dollars a year,'" Wiren says.

Based on that, the lender responds that the buyer can reasonably expect to borrow a certain amount -- if those self-supplied facts are accurate and there aren't any negatives, he says. Most lenders don't research those details until the buyer applies for a loan, he adds.

Serious (and smart) buyers are "preapproved." That means they've already applied for the loan, the bank has verified their financial information and (if the numbers remain the same until closing), it promises to loan a specific amount at a specific interest rate.

Still, after an offer, smart agents will call the lender and verify that the prospective buyer is preapproved for the necessary amount, Wiren says. At the same time, that agent will verify that the lender would have no problem closing in the expected time period -- usually 30 to 45 days. 

Mortgage rates jumped the week of Dec. 5, 2013 amid stronger-than-expected growth in the private-sector labor market. The 30-year fixed-rate mortgage rose 11 basis points to 4.55 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate mortgage rose 15 basis points to 3.62 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, rose 12 basis points to 4.57 percent.

The 5/1 adjustable-rate mortgage rose 4 basis points to 3.33 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

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