Down payment: the mere utterance of the term strikes dread in the hearts of many a homebuyer-to-be. Coming up with a down payment often seems like an obstacle that must be overcome, as it is the biggest test of our ability to save money most of us will ever face and it’s a test that stands between us and our ability to become a homeowner.

• bringing their own funds to the table
• picking a home that meets certain minimum condition criteria and/or
• completing a course of homeowner education classes

While comedic (if slightly troubling), this rule is not that dissimilar from how home buyers approach the art and science of translating home sale listing-speak into what they think is a more accurate understanding of the property’s characteristics and condition.

Just as property staging creates a somewhat contrived scenario buyers can imagine their own families taking part in, property listing descriptions have evolved into a sort of verbal staging exercise where sellers and agents may create an artificial ‘scenario’ that belies the true state of the property.  Fortunately for savvy sellers, there’s another parallel between physical and verbal home staging: it’s all about the edit.

Removing well-intentioned but counterproductive verbal clutter from your listing is simple, but not easy. It starts with understanding what buyers take away from your words vs. what you truly meant or intended to convey.  Here, to start building that understanding, are four common areas of big-time disconnects between what sellers say and what buyers hear.

Sellers Say:  Comfortable, beloved, in the family for generations.

Buyers Hear:  Lots of room, but probably lots of broken stuff to fix, too. Things probably need to be jiggled or turned twice before you yank hard to get them open.  Think: scuff marks.

In all honesty, most buyers love to hear the story of how the sellers’ Great Granny and PaPa met right before the War, then built this house with their own hands and sweat when he came back, raising a family there and watching the town grow up around them.  But they generally like to hear those stories about spruced up, great looking, well-prepared homes they have already fallen in love with.  Leading with this material in a listing is like waving a red flag that warns of a serious probability that:

·         The kitchen surfaces and appliances were last updated in the 60’s (for some reason, it’s rarely the cute 30’s and 40’s machines that survive – families tend to get stuck on the marigold and pea green formica stage);

·         The furnace is so old it is powered by a team of chipmunks on a treadmill, and that the house has similarly ‘vintage’ electrical and plumbing systems (i.e., the same water pressure as a schoolyard drinking fountain); and that

·         You (Seller) will blubber with tears on closing day (which might actually happen, and wouldn’t even be the worst thing in the world).

Part of the problem is that when people hear “multi-generational family home” they tend to think of Tara from Gone with the Wind, or Hearst Castle – or the house from the 80’s drama Dallas. So when the first “Grandma’s house” they see turns out to be a little old house that someone took great care of for 50 years, but hasn’t been upgraded in the same period of time, it bursts their whole bubble and sours their expectations about similar ‘family’ homes. 

My advice is to avoid leading with these sorts of descriptors unless the place is also recently remodeled, and to be super realistic about pricing this sort of property in accordance with any system upgrades that are overdue.

Sellers Say:  Seller Will Carry, Some Seller Financing for Qualified Buyer, Seller will carry a 10% note.

Buyers Hear:  I’ll offer them $1,000 and they’ll give me their house, with low monthly payments!

This one is all about wishful thinking; there’s just something about a buyer on a mission to buy a home – especially one who has trouble qualifying – that makes many of them willing to suspend disbelief and come up with scenarios that are simply too good (for them) and bad (for you) to be true.  Part of the problem is that for years, many people were brainwashed by those guys on the late night infomercials into thinking that buying a home is and should be just that simple (the other part of the problem is that for a number of years, it actually was – particularly during the subprime era).

Sellers who are willing to carry financing on a home generally need a hefty chunk of change up front in order to pay off the mortgage, make their next move or simply feel comfortable signing any interest in their home over to someone who can’t come up with the down payment or the other qualifications to get a ‘regular’ bank mortgage. 

But offering some seller financing – especially in a market where homes are having a tough time appraising or many buyers are fresh out of foreclosure – is such a strong selling point, that it is worth touting in the listing, if you’re willing to do it. Talk with your agent about how to skillfully state the specifics of your seller financing terms in a way that makes clear you’re not ready to give away the farm and finance it, too.

Sellers Say:  Sweet, charming, darling, cute, cozy.

Buyers Hear: Tiny, shoebox, claustrophobic. Or, overly accessorized, with doilies, lace drapes and flowered/striped wallpaper over pink carpet.

Let me be clear, today’s buyers like a classic look just as much – maybe more – than ever before. But when you use these saccharine marketing terms the visual you paint is much more frilly than today’s popular versions of a traditional aesthetic.  Unless your home actually does feature lots of pink carpet and flowered wallpaper (in which case engaging a stager might be in order), consider going with keywords that trigger images of a sleeker, classic look.  One quick and easy shortcut to spark the visuals you want is to reference the popular stores, home improvement shows and décor magazines that are most similar to your home’s design aesthetic, like Shabby Chic, Pottery Barn or Restoration Hardware.  (Caution: if you choose to go this route, please do make sure that you reference the right brands.  Failing to do so is a quick way to create a disaster. Imagine the scene of a Mad Men-styled, Design Within Reach-loving  buyer being shown a linen-ruffled Shabby Chic home. Quelle horreur!)

And if your home is small – buyers will know it by the square footage entry on the listing!  Calling it cozy is not going to make someone interested in a 400 square foot home if they weren’t in the market for something that small in the first place, so ditch the diminutives.

Sellers Say: Up-and-coming neighborhood, upside potential, amazing investment, sweat equity.

Buyers Hear: This place is falling apart! (And you might just have to dodge bullets on the way in and out, to boot.)

Buyers read this marketing lingo for a place or an area that is not being all that it can be, and two things occur:

(1)    All but the most intrepid fixer-seeker-outer starts doing what my doctor does and multiplying whatever you said by a factor of three, awfulizing the property or neighborhood “issues” on the assumption that whatever is said in the listing is likely a vast understatement.

(2)    They start mentally adding zeros to the budget they’ll need for repairs and visualizing how they’ll negotiate down from the list price before they ever step foot in the property.

The Catch-22 for sellers is that if you actually understate the repairs needed or try to price the place high to account for negotiating room, chances are good you’ll have some very angry visitors come to the property, who will feel misled that you didn’t flag the property problems ahead of time. Or you’ll get no showings or offers at all.

So, what’s a seller to do? Most online house hunting searches are so sophisticated that buyers are searching by street, neighborhood, zip code, radius around a focal point or other geographic boundaries. Since buyers already know where your home is, I’d stay away from neighborhood descriptors unless your neighborhood has already up and come.  Instead, just use the name of your area or district without describing it – and let buyers opt in or out based on their own research into the neighborhood. (And talk with your agent about even naming neighborhood names; this is a sensitive subject in some areas.)

If your home needs a basic cosmetic makeover, do it before you list the home.  Do whatever you can afford.  If your home needs more serious work than that, though, don’t try to make your fixer sound like a fabulous deal unless its location, price or other characteristics actually render it a truly fabulous deal!  Call it like it really is; consider even stating factually, in the listing, what systems need repair, after you mention the strong selling points.  Omitting them in the listing is not going to trick someone who doesn’t want to do the repairs into buying the place, and if your place is a home only a serious handyman or investor could love, then you might actually attract the right people to the property by pointing out that the windows are new but the roof and water heater might need replacing.

Also consider some or all of the following steps – consult with your agent about what makes sense in your situation:

·         obtaining a home inspection report and repair bids in advance,

·         pricing your home to account for those repair expenses the buyer will have to incur (with an extra discount for their trouble, if you’re serious about selling), and

·         asking your agent to include in the agent-only online listing these documents and an explanation of the pricing strategy.

It might sound like a lot of trouble, but the extra work is one of very few options you have to differentiate your home from all the fixer short sales and foreclosures on the market.

Sellers: You may not have participated in writing your home’s description or been aware that it carries that much weight with buyers. If your home is on the market, make sure you visit its online listings around the web and review the listing description your agent has entered, if you haven’t before.

Agents and Buyers: What other home listing marketing lingo do you perceive as a signal of something negative about the property?

Fast forward a few years, and it's pretty obvious that this rule of thumb has definitely changed with the real estate market. The housing market crash turned McMansion-villes across the nation into slumburbias full of huge, vacant, foreclosed homes. Smaller homes closer in to urban job centers have become more desirable than ever, due to their relatively recession-resistant values, and lower associated costs of operating, maintenance and commuting.  At the same time, the zeitgeist has definitely moved toward buying a less expensive home than your maximum approved mortgage amount. And everyday homeowners are more and more concerned with the carbon footprint their daily lives are leaving on the planet.

For those of you facing the prospect of deciding exactly how much house you can handle, here are three buckets of considerations I strongly recommend you incorporate into your process:

1. What do your future family and career look like? Answering the question of how much home is the right 'amount' for you requires putting your visionary hat on. One of the reasons previous generations of buyers have erred on the side of buying too much home was that it seemed easier to deal with the problem of having too much space compared with the challenge of having too little. 

But that's a costly decision-making shortcut, as bigger homes cost more to upgrade and repair (with bigger plumbing and other mechanical systems, and larger surface areas of flooring, wall spaces to paint and things like counters and cabinets) and more to operate (heating, cooling, landscaping and even property taxes are generally more expensive for larger homes). Also, the costs of making the mistake of buying too much home on today’s market can be hard to reverse, as homes generally take longer to offload - especially at a profit - than they did at the top of the market.  

Not only is buying too much home an expensive mistake, it’s also an unnecessary one. The way smart buyers avoid it is by taking the time before they  even begin house hunting to get serious about forecasting the space and activity needs of their families (or other housemates) and how they are likely to evolve over the time you expect to own the home, as well as how their career path(s) are likely to intersect with that timeline.  

Given the tough-to-predict ebbs and flows of home values, today’s smart buyers target homes that should work for the space needs of their growing and shrinking families for at least 7 to 10 years. This helps avoid the trauma and drama of being stuck in an upside down home that is too small or too large for your needs. Actually, with today’s uber-low home prices and interest rates presenting what many buyers feel is a once-in-a-lifetime opportunity, I’m hearing lots of talk from young people about buying homes they hope to stay in for even 20 or 30 years!

Given this rebirth of America's traditional long-term perspective on homeownership, and modern changes in how nuclear families are composed, the space needs analysis of a smart homebuyer are quite a bit more complex now than they used to be. 

In assessing how much house they want and need vs. how much might be too much, buyers must consider any of the following life changes that might happen in the time they expect to own the home:

• marriage or mating up, 
• having or adopting kids and animals (and how many), 
• shipping kids off to college or their own separate households,
• adult kids staying at home or returning home, 
• aging parents or other extended family members moving in, 
• whether and when they might need to move for work,
• what work and other activity needs will need to be able to take place in the property over time, and
• how much - or little - ability to reconfigure, expand or even rent out unused spaces the property will allow.

2. What's your bandwidth for fixing, maintaining and engaging?  The handling that has to happen with a home ranges from minimal to massive, in both cost and lifestyle impact. As such, deciding on the optimal level or ranges of the following is an essential step of your ‘how much home can I handle’ calculus:

• fixing (DIY or otherwise), 
• ongoing home maintenance, and 
• needed involvement with Homeowner’s Associations and the like.

As I see it, the issue of bandwidth is a hybrid phenomenon that is about overall resources: time, energy, interest level and cold hard cash, to name a few. The combinations of these resources are endless though, fortunately, the tradeoffs they pose vis-a-vis each other are relatively predictable. For example, do you have the time, inclination and money to deal with the ongoing maintenance of a sprawling ‘50’s rancher on a big suburban lot?  Or would you rather pay a monthly maintenance fee and dues and limit your largest ‘home work’ obligations, so to speak, to attending the meetings of your building’s HOA?  

Or do you, like me, fall somewhere in between these extremes, with little interest in personally swinging a hammer or engaging with neighbors around shared walls and finances, pointing you to prioritize single family homes that are in tip-top shape (or at least a home you can afford to pay the pros to make that way).

Working through this step is really about knowing yourself, your budget and the sort of lifestyle you want to live for the years your own the property. It's also essential here to work with your local agent to get educated about things like using a home warranty plan to minimize your exposure to big home repair costs, and what any individual HOA does or does not handle for its members.

3. What can your finances sustain, in the short- and long-run? When it comes to homes, ‘muchness’ is not just a matter of space, it’s also a matter of money. In fact, some would actually say that to buy smart is to allow the boundaries of your financial resources to trump all the rest.  I like to take a more holistic approach, first scoping the space needs and bandwidth issues that weigh heavily on whether a fixer or a condo or a single family home or a home in move-in condition makes the most sense, as these factors should also be balanced in the decision-making about what is affordable immediately and over time.

Answering this question of financial sustainability is not as simple as buying a less expensive home than you’re approved for, building in room for an unexpected interruption in income someday (though that’s not necessarily a bad move). It might be complicated, as all the line-item questions, answers and outcomes of questions 1 and 2, above, must be included in the number-crunching that goes on in number 3.  

For instance, if you are buying a low-cost foreclosure fixer, you may need to count on some bulky up-front repair costs and even factor in the increase in property taxes that may occur as a result of your home’s assessed value going up when you secure permits for upgrading or expanding the place. If you are considering purchasing a place with space for an adult child or aging parents to move in, can you factor in their income or some of the proceeds of the sale of their home to the resources available for the purchase or payments of the home you’re planning to buy?

Agents, Buyers and Homeowners: What other questions do you suggest buyers ask themselves in figuring out how much home they can handle?

P.S. - You should follow Trulia and Tara on Facebook!      

The list of real estate-related stressors is virtually limitless. Whether you have to decide on whether to rent vs. buy or whether to sell vs. stay put, decide on a list price or an offer price, or pick a buyer’s broker or a listing agent, there is seemingly no end to the high-stakes decisions you must make and triggers you must pull.

Yet there is one real estate phenomenon that can create more stress than even these tough choices: deadlines. 

Deadlines are the most stressful when we don’t learn about them until the last minute, or we find ourselves unable to meet them for reasons beyond our control. In the interest of deactivating at least some of their stress-creating power, here’s an advance briefing on the short list of super important real estate deadlines that every buyer, seller and homeowner should keep on their radar screen.

5. Cancellation of Debt Statement - IRS Form 1099. Homeowners who lost a home to foreclosure, or divested of one by negotiating a short sale or deed in lieu of foreclosure with their lender might receive some version of Form 1099 from their lenders, charging them with income in the amount of the mortgage debt that has been cancelled. You see, if you borrow money from someone, then they cancel the debt, that money you originally borrowed becomes income in the eyes of the IRS - and income is, as you know, taxable.

6. Utility statements for home office.  For the average everyday homeowner who works at their employer’s place of business, utilities are not deductible (sorry!). But if there is a part of your home that is “regularly and exclusively” used for business, you might be able to claim that portion of your home as a home office, and deduct some portion of your home utilities and costs of painting and repairs, as a result.Talk with your tax provider about what expenses are allowable to be claimed under your home office deduction, and whether or not you should take it.

7. Income and Expense statements from rental properties.  Some of you have elevated the art of home ownership to a business!  If you are a landlord, your tax situation is more complicated than that of the average bear; you’ll need to have complete income and expense statements when you put your tax returns together. It might actually behoove you to consult with a tax professional to make sure you are appropriately depreciating the property over time and not taking deductions that will expose you to the risk of audits, as well as to begin cultivating a long-term tax strategy for your real estate portfolio.

8. Contractor receipts from energy efficient home improvements.  Under the Nonbusiness Energy Tax Credit, homeowners who have made improvements to their homes that fall within a list of energy efficient upgrades might be eligible to claim tax credits. If, during 2011, you installed energy efficient improvements such as insulation, new dual-paned windows and furnaces, you might be eligible for a tax credit of 10 percent of the cost of these upgrades, up to  $500 - only $200 of which may be used to offset the cost of windows.

9. Mortgage Credit Certificate (MCC).  If you own a home you bought in the last few years using a Mortgage Credit Certificate issued by a local housing authority, that Certificate may entitle you to a pretty hefty tax credit, based on a percentage of the mortgage interest you paid - on top of your mortgage interest deduction. MCCs apply as long as you live in the home and have a mortgage on it, but they only apply to defray taxes you actually owe - you can’t use them to get a refund.  In any event, your mortgage credit certificate, if you have one, is a must-have document as you start putting your tax prep plan in play.

P.S. - You should follow Trulia and Tara on Facebook!

Most people are highly aware of the fact that their real estate decisions are related to their family matters and their money matters, but many don’t give nearly as much thought to the interconnectedness of whether, how and where you buy your home with your career: past, present and future. 

Here are five ways your career and real estate decisions are linked, and some new ways to think about these topics together, to make decisions that better serve both these areas of your life.

Link #1: Location, location, location.  At the top of the market, many areas saw an outflow of professionals from urban areas to the rows of McMansions that lined the gated cul-de-sacs and subdivisions of the suburbs. But as the prices of closer-in homes have declined, home values have melted down in many of these suburban areas and gas prices skyrocketed, many buyers have begun to prioritize urban areas to be closer to their jobs, some even ditching their cars and taking public transportation or walking to work.

Buying a home near work has obvious efficiencies and conveniences, including giving you back the hours you might otherwise have devoted to your commute. However, if your job is located far away from other companies, buying a home to be very nearby can cause issues – especially if your employer ever hits hard times or closes that location. 

Link #2:  Job choices and income can limit or enlarge your home options.  As you’ve probably heard by now, mortgage guidelines have gotten very tight lately, with lenders forcing borrowers to stay well within their means, shrinking the amount of documented current monthly income that can be consumed by the new mortgage, property tax and home/mortgage insurance payments.  Lenders also view your job history as relevant; large gaps of unemployed time and even major career moves from one industry to another can trigger a lender to require that you be in a stable work situation for at least two years before they agree to finance your home purchase.

While it might seem obvious that your income would have a direct effect of limiting how much you can afford to spend on a home, what is somewhat less obvious is that the way you make it can also have an impact.  Borrowers who work on commission, earn cash tips and even are self-employed or small business owners may find themselves subjected to stricter guidelines than those who earn a salary, because of the greater burden of documentation lenders may impose. For example, if you’re self-employed, your “income” will likely be determined by your Adjusted Gross Income on your last two years’ federal tax returns, which many entrepreneurs work hard to bring down by making aggressive deductions.

Link #3:  Home and mortgage obligations can limit your career decisions.  While most home buyers are very aware of the extent to which their past job decisions and income impact their real estate moves, there are many ways our real estate commitments can impact our future career decisions.  Smart agents advise their clients not to make any major job moves or go from, say, a salaried position to starting that business you’ve always wanted to in the weeks and months just prior to buying your home. But even after you’ve committed to make a mortgage payment in a market like today’s, where selling can take many months or longer, these obligations can actually limit your ability to work fewer hours, move to a lower-paying job in a field you want to break into, or quit your day job and become an entrepreneur without much more intensive planning and saving than you would have had to do otherwise.

Buying a home on today’s market is a long term commitment; most insiders recommend you not buy unless you are okay staying put at least 5 to 7 years (longer if you’re buying in a locale that has been hard hit by the foreclosure crisis; shorter if your market was relatively immune to the recession).  At the same time, the length of time Americans work for one employer is getting shorter and shorter. Gone are the days when your 30-year mortgage matched right up with the 30 years you could expect to stay on a single job. Over the past few years, I’ve heard more than a few reports of unemployed homeowners who felt stuck in their homes, unable to accept job offers across the country because they were deeply underwater or other market forces made it impossible for them to sell their homes. 

The upshot? It’s important to feel comfortable making a long-term geographic commitment to an area before you buy; if you expect you may need to move in the near-term for work, it might be best to rent unless you are able to negotiate for your compensation package to include relocation assistance from your employer.

Link #4:  Health of your local job market impacts your home’s value.  Many news stories have reported how the Silicon Valley real estate market has thrived of late, despite the home value doldrums still being experienced across the rest of the nation. In San Francisco and the South Bay Area, the tech boom means the local job market is booming and employees are being made millionaires by cashing in their stock options when tech companies go public. One of the first purchases many of these new millionaires make is a home.

On the other end of the spectrum, we’ve seen entire regional real estate markets fall into incurable recessions when the only major employer or two in town moves away or shuts down.  Then, not only are you stuck with a home and no job prospects nearby, it becomes very difficult for you to find anyone else to buy it. When an area has a high unemployment rate or no new jobs are being created, not only does it increase the rate of foreclosures and make it difficult to find buyers, it also makes locals who do have jobs very nervous about their job security and hesitant to make the long-term financial and geographic commitment to buying a home.

My advice is to prioritize homes located near bustling job centers and areas with multiple industries that are thriving (and projected to continue doing so), areas in which the job market is not dependent on a single employer or even a single industry.

Link #5:  Your home’s infrastructure can impact your ability to work there.  Things like local internet speeds and networks available, lighting, room configuration - even the age of your home’s electrical system can have a major impact on how comfortably or effectively you are able to work at home – or whether you can work at home at all. And if you are looking to create an area in your home exclusively devoted to working or running a business, that may impact your ability to take extra tax deductions for a home office (a topic you should discuss with your tax professional).  

This also highlights the holistic view you should take on how your choice of home impacts the entirety of your life. If you are able to work at home, your choice of home location vis-à-vis work location might be different than if you are not, which might impact what sort of work you do and which employers you prioritize, if you’re looking for a job. 

It's like Freud didn't say, but could have - in real estate, nothing is just a cigar.

Agents:  What are some ways you’ve seen homebuyers, -sellers and –owners make smart decisions or big mistakes in terms of how their career and real estate choices intersect?

Buyers/Sellers/Owners:  What about you?  Did you ever make a housing decision that intersected – in good, bad, or other ways – with your career life?  I’d love to hear your stories.

P.S. - You should follow Trulia and Tara on Facebook!

If you’re anything like the average New Year’s Resolution-setter, you’ve probably already declared that 2012 will be your year. And that means different things to different people. It might be the year you pay off your credit cards, fit back into your “skinny” clothes, or finally take that dream vacation you’ve been eyeing. 

Given the volatility of the real estate market over the last few years, my guess is that more than a few of you are also considering including real estate resolutions on the short list of things you want to take care of over the next 12 months.

Whether your stage of life renders you more interested in buying, selling, getting right side up - consider adding one of these real estate resolutions to your list:

1.  Buyer Resolution: fix up your financials and buy a home. It’s no secret that the mortgage lending world is tough out there. But don’t let that stop you from buying a home in 2012. The name of the game is to prepare, prepare, prepare. 

In particular:

• Pull your papers together: Spend January gathering up: your past two years’ federal tax returns and W-2s; your last two months’ pay stubs; and statements from bank and other asset accounts, like retirement accounts and investment accounts. You might also find it handy to have marriage and divorce certificates on hand, as well as the statements from any credit, auto or student loan accounts you hold.
• Also, start keeping a running file to collect and keep handy new stubs and statements throughout the year; when you find your dream home, your lender will ask you to refresh your application with the latest versions.
• Compile your cash to close: If you’re serious about buying a home this year, you’ve probably already started saving up - or at least know where and how you plan to access your down payment funds. Early this year, meet up with your real estate and mortgage brokers and do a double-check on how much cash you’ll need for your down payment and closing costs to buy the sort of home you’re looking for in a location you’d like.
• Also, touch base with your team on timing matters around any gift money or money from your own retirement accounts that you plan to use toward your purchase. You might need some lead time in order to draw your own funds, specific documentation of where the monies came from, or a couple of months for the money to sit and ‘season’ in your own accounts before the lender will greenlight the deal; the best practice is to make yourself aware of any such requirements as soon as possible.
• Have your mortgage pro run your credit report. Again, if you’re planning to buy this year, chances are good you’ve already pulled your own reports from the three bureaus. But as you move down the home buying timeline, it’s imperative to get your mortgage broker or banker to pull their versions of your reports, as that what the lender will go by. 

This is another task you should check off your to-do list sooner rather than later. If by chance an error or issue does arise, you’ll need some time to remediate your report, whether by paying off that mystery collection, disputing an erroneous ding on your own or paying for your broker to obtain a Rapid Rescore.

2.  Seller Resolution: Price it, spruce it and sell it. A too-high price is a sure-fire way to ensure  your home lags on the market, causing you more anxiety and costing you more money as the days turn into weeks, months or even longer. Rather than testing the market, the end result of overpricing is usually that you end up receive no or lowball offers, or even resigning yourself to lowering the price below what you could have originally gotten, to offset the stigma of desperation buyers sense when a home has been on the market a long time. 

Resolve to price your home right before it goes on the Multiple Listing Service. Study your local market, visit Open Houses similar to yours, look at as many recent comparable sales as possible, and talk to your agent in detail – talk to several agents, if that makes you more comfortable -- before landing on your home’s list price. 2012 is going to be another competitive year for sellers, so manage your own urge to overprice in order to position your home to best the competition. 

One more thing – given the intense level of competition among homes, curb appeal can go a long way to entice buyers to come and see your house. Of course, it behooves you to stage the inside too, but don’t overlook outside upgrades like shrubbery, flowers and painting the exterior.  

And before you worry about breaking the bank, use your agent as a resource to get insight into what local buyers want, aesthetically, these days. Chances are there are a few critical, inexpensive projects you can undertake to boost buyers’ desire to come in and have a look around. Keep costs down by painting trims, doors, eaves and focusing on landscaping, and using your repair budget on small fixes like driveway cracks and fallen shutters.

3.  Owner Resolution: Get right-side up. Over 25 percent of Americans who have a mortgage owe more than their home is currently worth. While getting right-side up, so to speak, is certainly easier said than done, it’s not impossible (especially if you include getting your payments lowered in your definition of right-side up).

2012 might be your year to:

• take advantage of newly expanded federal underwater refinance programs like the Home Affordable Refinance Program (HARP 2) and Hardest Hit Funds (if you live in one of the states on this list);
• get assertive about getting a loan modification – even if you’ve been rejected before, and even if you have to get help from a non-profit credit counseling organization or a program like NACA’s Home Save program;
• get a second job or rent out a room to catch up on payments or pay down your balance or, if all else fails;
• put your home on the market, listing it as a short sale.

Keep in mind that the federal income tax exemption on mortgage debt that is forgiven through a foreclosure or short sale is currently set to expire on December 31st of this year, but banks are taking around 2 years after the first missed payment, on average, to foreclose on homes. If you list your home as a short sale with an experienced short sale agent, stat, you have a better chance of avoiding the potentially massive income tax implications of offloading your upside down home than you do if you just stop making the payments and walk away from it!  

Talk with a local agent with a their track record of closing short sales, and with a local attorney and CPA before you make this move.

4.  Renter Resolution: Make the rent vs. buy decision and start saving, if you decide to buy. Depending on where you live, it might actually be cheaper to own a home than to rent it! Mortgage rates hit record lows last month (below 4% for a 30-year-fixed!), and there are tons of homes on the market, tilting the supply-demand imbalance in buyers’ favor. If you live in an area with a strong buyer’s market and think you might be ready to commit to homeownership, this is exactly the right time to start getting serious about making the decision whether to proceed down the path to home ownership.

It can take months – even years – to save enough cash to buy a home, not to mention the many moons it takes today’s buyers to find and buy a home. So, if you do decide to buy, you’d be wise to start your saving up for a down payment now to maximize your chances of getting into the market while home prices are still relatively low (even if that is a year or more down the road).

In that vein, look for spending cuts you can make that will enable you to save as much as possible each month until you reach your goal. Take on extra work, if you can, to stash more cash in your savings account. And consider setting up a separate savings account called “Home” where you can watch it grow and stay inspired to keep moving toward your goal.

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• which home improvement projects, if any, to complete before you sell;
• whether to accept a particular offer; and
• how aggressively to negotiate counter-offers, and on which points to push back against a buyer’s offer.

• visiting open houses,
• studying nearby listings, and
• talking with local agents.

• Disclosure documents: This includes any documentation of anything that might impact a buyer’s decision about your home, whether it be inspection reports, repair receipts or estimates for repairs you haven’t actually had done yet. Your local real estate pro will help determine what exactly is needed here.
• Compliance certificates: In some cities, the local government will require certain conditions be met before a property is transferred to another owner. Examples of these requirements include sewer line condition guidelines, and energy conservation ordinances that require low-flow toilets and shower heads to be installed. Again, your  real estate agent and your city’s website can help you figure out which, if any, of these types of ordinances might apply to your home.
• Mortgage statements: Before the property’s title can transfer to another owner, the escrow or title company will need your mortgage statements to order payoff demands from any mortgage holder who has to get paid before that can happen.
• Financials: If you’re planning on a short sale, you’ll have a lot more paperwork to gather in your process, including paycheck stubs, bank and investment account statements, and two years’ W-2 forms or tax returns - the bank will review these to determine whether they will authorize you to sell the home for less than what you owe.

• prep work you’ll be doing to your property before it’s listed for sale - including decluttering, staging and any repairs or cosmetic power-tweaks you plan to make;
• if you’re planning a short sale, a timeline for submitting an application to your lender for approval (this might be before or after the property is listed - consult with your lender and your agent on the matter)
• planned list price (based on current local market conditions - this could change if you don’t plan to list your home for several months);
• the target date on which your home will be listed for sale in the local MLS; and
• how showing arrangements will work so that local agents can get prospective buyers into your house to see the place, and what.

• banks that refuse to do repairs and may take 6 months to green-light a short sale,
• sellers who are so upside down they can barely afford to sell for the list price -- and certainly can't afford to sell for less, and
• areas in which the norm is for foreclosed homes to sell above asking after receiving multiple offers.

Almost everything about the real estate market has changed over the last few years, though, so we thought it was time to provide you with an updated real estate lingo decoder that accounts for those changes in the market. (That's a picture of Ralphie getting his decoder ring in the mail, by the by.)

To that end, here are 14 line items of real estate jargon, divided into 2 buckets and decoded for the post-recession house hunter.

Bucket #1: Transaction signals.  Distressed properties – foreclosures and short sales - make up about a third of the homes currently on the market, and these transactions have their own unique flow, timelines and challenges compared with “regular” equity sales.  So, it only makes sense that listing agents have developed a set of abbreviations to brief prospective buyers on what they can expect and should be prepared for if they make an effort to buy such a home, with just a glance at the listing:

1.       REO:   Real estate owned by the bank/mortgage servicer, this acronym refers to homes that were foreclosed and repossessed by the former owner’s bank.  It also signals that buying this property will involve doing a deal with the bank; possibly dealing with a different escrow timeline, offer process or contract forms than a non-REO sale; and almost always taking the place in as-is condition, among other things.  Oh, yeah – and it might also involve one more thing: a great deal.

2.       S/S, Subject to bank approval:  What once stood for stainless steel is now being used to describe a short sale – a property whose seller anticipates will net them less than they owe on the home.  Short sales are often described as “subject to bank approval,” which simply points out the obvious truth about these transactions, that the seller has very little control over whether the bank will allow the transaction or what price and terms the bank will approve of, and that the transaction might very well take the better part of your natural life could take 6 months or longer to close.  Talk to your agent for more details about short sales, and to determine how you can tell the success-prone short sales from those that are less likely to close.

3.       Pre-approved short sale:  Many knowledgeable agents say no short sale is truly “pre-approved” unless and until the bank looks at a specific buyer’s offer and the seller’s financials at the same time, but some listing agents designate a short sale as “pre-approved” when a previous short sale application was approved at a given price, but fell out of contract for some other reason.

4.       Motivated seller:  This is a perennial term in listing parlance, but against the backdrop of the current market, translates to something like, “Have mercy on me.”  I kid – this phrase often signals a seller’s flexibility in pricing and/or urgency in timing.

5.       Coveted:  In a word, “expensive.”  No, seriously, even on today’s market, many locales have a neighborhood (or a few) which have been relatively recession-proof, have been fairly immune to the foreclosure epidemic and have seen home values continue to rise. If you see the word ‘coveted’ in a listing, chances are you’re house hunting in that sort of neighborhood, or there’s something about the individual property the home’s seller is trying to position as unique and desirable, as compared to competing listings (i.e., the view, location of the lot, or floor plan).

6.       BOM, often accompanied by “No fault of the house:”  Homes go in and fall out of escrows on today’s market constantly, often due to things the seller has no control over.  BOM indicates a home that was in contract to be sold, but is now “Back on the Market.” “No fault of the house” may describe a situation in which the buyer lost interest in the home after a long short sale process or failed to get final loan approval, as contrasted to a situation in which the home’s inspection turned up deal-killing problems or the property failed to appraise at the purchase price.

7.       Not a short sale, not a foreclosure.  Sellers on “regular” equity transactions are often more negotiable on items like price and repairs, and are certainly able to close the transaction (i.e., let the buyer move in) sooner than sellers of REOs and short sale properties.  Some also pride themselves on having maintained their homes in better condition than the distressed homes on the market.  For buyers that seek quick certainty and closure, non-distressed homes can be especially attractive.

Bucket #2: All about the Benjamins.  The government’s role in financing homes has grown exponentially over the housing recession, so the alphabet soup of government housing and home financing agencies, their guidelines and programs is now more important to understand than ever.

8.       OO/NOO:   Owner-Occupied and Non-Owner Occupied – You’ll see this on listings in two different ways.  First, the vast majority of home loans must comply with government loan insurance guidelines, including guidelines around how much of a condo complex must be owner-occupied (i.e., 75 percent, minimum, in most cases).  Also, some bank-owned property sellers will consider offers from owners who plan to occupy the property if they buy it as much as a week or 10 days before they will look at NOO or investor offers.

9.       FHA:  Short for the Federal Housing Administration, which backs the popular 3.5 percent down home loan program. FHA guidelines also include somewhat strict condition and homeowners’ association dictates, so if  a home’s seller notes that they are not taking FHA loans, they might be saying that the property has condition or other issues which disqualify it for FHA financing.

10.   Fannie, Freddie:  Fannie Mae and Freddie Mac, federally controlled company/agency hybrids that now back most non-FHA (conventional) home loans, and thus provide the guidelines most Conventional loans must meet, including guidelines around seller incentives like how much closing cost credit a buyer can receive.

11.   DPA/DAP:  Down-Payment Assistance or Down-Payment Assistance Program

12.   FTH/FTB: First-time homebuyer/First-time buyer – cities, states and large employers like universities tend to be the last bastion of these programs which offer mortgage financing or down payment assistance, usually to people who have not owned a home in the relevant city or state anytime in the preceding 3 years.

13.   HUD:  The federal department of Housing and Urban Development, which governs the guidelines for FHA loans, acts as a seller of homes which were foreclosed on and repossessed for non-payment of FHA-backed loans, and publishes the Good Faith Estimate and settlement statement forms every buyer and borrower will be provided at the time they shop for a loan and close their home purchase, respectively.

14.   HFA:  Short for Housing Finance Administration, this acronym refers to a loose body of state and regional agencies which offer an array of financing and counseling programs that varies by state, from down payment assistance for first time buyers to the Hardest Hit Funds that offer foreclosure relief assistance and principal reducing loan modifications to unemployed and underwater homeowners in the states hardest hit by the foreclosure crisis.

Agents:  What real estate lingo are you seeing being used to describe properties’ transaction types or financing details?

Buyers/Sellers:  What real estate lingo have you seen – and been stumped (or amused!) by?

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• You can rent a home and pay rent to a landlord every month for the rest of your life, or
• You can buy a home with cash, or
• You can use mortgage financing to buy a home, and make payments on it over time.

• repairs the seller completed themselves,
• repeated repairs to the same home system,
• water and leakage issues, and
• any reports of non-functioning mechanical or other systems in the home.

• repair estimates they offer,
• items that seem like they will have to be completed soon (versus upgrades you can do over the long run)
• items that seem like they might run into big ticket dollar amounts, and
• especially watch for any recommendations that you get a specialist to look at something - some of the largest potential repairs are often dealt with in this way by a general property inspector.  

• list your questions and concerns,
• ask the inspector(s) and seller any follow-up questions you have,
• obtain follow-up inspections (including obtaining an extension of your inspection contingency, if needed) and
• obtaining reliable repair estimates.

 Adding a fresh coat of paint to ceilings and walls is a tried and true way to increase your home’s appeal to buyers. Go for white or neutral tones that help lighten your rooms. (Now is not the time to show off your fascination with fuschia and lime green.) Buyers will have an easier time envisioning how they will infuse their own personalities into your home if they’re looking at a relatively blank slate.

Painting lightens and brightens rooms, instantly removes scuffs and dings and gives every room a fresh, polished feel.

(a)    removing your personal belongings and replacing it with more  artwork, decor and cleaner-looking furniture,

(b)    and tweaking the home’s paint, wall coverings and even landscaping to show the place in its very best light.

• Exterior.  The single fastest way to change your home’s look to match your personal preferences is to paint its exeterior.  What did your lifelong dream home look like?  What color was it? Repainting your home can make a massive change to its look and curb appeal, and can turn the home you can afford into the home you've always dreamed of.

• Front door, shutters and fences. If you bought a home that has a relatively fresh paint job or an overall color you like, consider painting just the front door to inject some color and your personal touch.  Aquas and greens, rusty or brick reds and even chic greys and blacks all make for a polished entrance – and the addition of a kick plate or engraved knocker can create a 100 percent personalized look.  Painting shutters, fences, eaves and other exterior accents a contrasting color of your choice are additional quick and inexpensive – but powerful – tweaks that can also make your home look buttoned up and, well, yours.

• Interior. The individual inhabitants of different rooms can pick their colors and custom effects, like harlequin diamonds or fun, personalized murals for kids’ rooms.  Aim to match colors to a room’s purpose, so that bedrooms have a sense of restful sanctuary, bathroom walls read “clean,” and common living areas are warm or energizing, as you wish!  Glidden has a fabulous interactive inspiration tool with amazing suggested palettes that coordinate with the various uses of individual rooms, like Growing Up Colors, for kids' rooms, Fresh Baked Kitchen palettes and my personal favorite: the palette dedicated to Man Cave Colors.
  

2. Closing cost credit.  Many buyers trying to break into the market while prices are low are already scraping the bottom of their savings account barrels to come up with their down payment money.  With most home loans, the buyer will have to come with anywhere from 3 to 6 percent of the loan amount, in cash, on top of their down payment, to cover closing costs like loan fees, escrow services and title or mortgage insurance.  (And strangely enough, the buyers putting the 3.5 percent minimum down payment on an FHA loan are likely to have to come up with the higher end of the closing cost range, 6 percent, to cover their mortgage insurance.)

3. HOA dues credit.  If you are selling a home that is in a homeowners’ association (HOA) that charges monthly or even annual dues, then surely you recall buying that home and being overwhelmed at the prospect of going from rent being your sole monthly housing expense, to having a laundry list of expenses starting with your mortgage, including property taxes and insurance and then having HOA dues as the unpleasant cherry on top.  

4. Broker incentives.  Some savvy sellers who can’t afford to offer buyers several percentage points’ worth of the proceeds of sale toward closing costs take a different route, offering to pay a bonus percentage point (or more) in incentives to the eventual buyer’s broker or agent - on top of the commission, rather than to the buyer themselves.  Over 90 percent of buyers who are ready, willing and able to buy a home on today’s market are represented by a broker.  And brokers have to sort through sometimes hundreds of pretty similar listings to decide which ones to show a buyer any given Sunday. 

If you need to pull both buying and selling off at the same time, it can seem like you're signing up for these complications, squared. On top of that, the very real prospect of spending some time homeless takes the stress of home buying and selling to an entirely new dimension.

Fortunately, getting yourself educated about what to expect on today's market and knowing all your options empowers you to obliterate panic with a strategic approach, an amazing logistics plan (and backup plan) and comprehensive preparedness for all possible outcomes.  In that vein, here are four need-to-knows for those who want or need to sell their current home and buy a new one, at the same time.

1. Meet with a local agent who actively sells homes in your neighborhood, far in advance of listing or house hunting.  You need them to brief you on items like how long you should expect your home to take to sell on today's market, what (if anything) you can do to move it faster, and whether listing after doing some improvements to your home, at a different time of year or at a different price point than you had planned can realistically be expected to make an impact on your time frame. 

You also need their professional opinion as to what price you can expect to get for your home. This will impact whether you need to consider a short sale (if your home's value is less than you owe on it, for example) which, in turn may affect your ability to qualify for a home loan in the short-term. (Short sales often make it difficult to qualify for a new home loan for a couple of years.)  If you need to buy in the near-term, but your home is unlikely to sell except as a short sale, you'll need to discuss the legalities and logistics with your mortgage pro, attorney and/or a CPA, as well.  

Actually, the information about how long your home will take to sell, how much you can expect to sell it for and whether you're expecting to have to unload it at a short sale is all information you'll need to provide to your mortgage pro, so definitely collect it as early as possible in the process. A year before you need to move is not too soon to have your first meet up with your agent.

2.  Meet with your mortgage broker before your start looking for homes or put your own home on the market. Of course, this is something you would have done eventually in preparation for your purchase, but it's essential that you have them walk with you through both your sell and your plans to buy, before you do either. 

Why?

Well, a good local mortgage broker can work with you and your agent to help you:

• do the math on what you'll net from your home sale;
• help you know how much you (a) can qualify to buy, and (b) will need to come up with for your purchase;
• understand whether the sale will impact your credit at all all and by how much, if so; and 
• time your sale vis-a-vis your purchase.

There are dozens of ways the sequence might need to play out, to be successful at both buying and selling, and you'll need your mortgage pro to be a partner in the process of determining how to order things - before you actually do anything.  For example, you might be under the impression that you can't buy before you sell, because you can't qualify for both, when in fact your mortgage pro could suggest a solution like a low- or no-cost refi first, to bring your payment down so you can qualify to buy before you sell. Or maybe you ARE in a situation where you can't qualify to carry two loans, so you need to sell first and use your own cash to make up the difference between what you owe on your home and what it sells for to avoid a short sale so you can still qualify to buy your next property. 

In any event, you won't know what exactly your capabilities are, from a mortgage and timing perspective, until you hear it from the source.  So, get that meeting on the calendar, too, as early as possible.

3.  Know your options for staying in after closing - or moving in early.  Many homeowners try to buy and sell at precisely the simultaneous moment, with very little overlap, because they don't want to throw money away on rentals.  The reality of today's market is that very, very few sales close precisely when they are expected to, mostly for reasons entirely out of the control of either party.  The seller's bank takes months longer than expected to allow a short sale to close, or the buyer's bank takes eons to sign off on the appraised value of the home.  In any event, if you are selling your home, before your purchase will be complete, know that it's okay to ask for a "rent-back" where you can stay in the property for as long as a month or more after the sale closes by agreement with the buyer to pay them rent on the property in the amount of their mortgage payment, taxes and insurance for the time you remain in the home. 

On the other hand, if you are buying after your sale closes, some sellers will allow you to move in before closing on a similar arrangement - essentially a lease or early move-in arrangement.  They may ask you to sign a document waiving their liability for your belongings and anything else that goes wrong while you're there, before closing - you'll have to negotiate and decide what works for all involved.  Before you start to freak out at the thought that your 'buy' won't close when you need it to, know that this option might be available, and talk with your home's seller to see if they'll consider it. 

4.  Plan for gaps - and for overlaps. There is very little in this world we can be sure of, except the high probability of your escrow closing late.  Having a backup plan in place just in case you close one or both transactions off-schedule is essential to avoiding the surprise-induced panic attacks so frequently suffered by those intrepid housing consumers who try to buy and sell homes at the same time. And, frankly, sometimes the best defense against these surprises is simply to plan for gaps and/or overlaps.

So, if you want or need to buy before you sell, build a cash cushion that can cover double payments for a couple of a months - and just plan on that. If that's not in the budget, or if you'd like to try out your new neighborhood or town before you buy, close your home's sale, then plan on renting a place during your house hunt - if you just need a place for a month or two, you might want to consider a suite hotel or a short-term, vacation-style rental like those you can find on sites like Airbnb.

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Most home buyers’ biggest hurdle is coming up with the cash for a sensible down payment. Gone are the days of zero-down loans, so if that was your plan, you’re going to need a new one! Coming up with a down payment for a home is a challenge because it’s not chump change we're talking about, here. The down payment on a $200,000 house, for example, will run you anywhere from $7,000 (on an FHA loan) to $40,000!

That might seem like an insurmountable amount of coin to come up with, but it’s actually more doable than you might think. Some buyers will simply save up their own cash, even if it takes many, many moons. The good news is that if you still need some help to boost your down-payment savings, there are resources you can harness to power your home-buying pursuit:

1. The FHA Bridal Registry.  Yes - you read that right! The FHA Bridal Registry Program enables wanna-be home buyers to apply their families’ wedding gifts toward their down payments. And although it’s named a “bridal registry” program, you don’t have to be a prenuptial couple to use it. You could also use this program to collect gifts for graduation, the arrival of a baby or some other major life event in which people want to give you gifts.
   
   The FHA Bridal Registry works like a traditional registry, but is more flexible. The registrants visit their choice of FHA mortgage lenders and set up what essentially is a custodial savings account for the sole purpose of funding their down payment. The couple’s (or individual’s) family and friends can either deposit funds directly into the account or give the cash or check to the couple or individual, who then deposits it into the account. The account’s flexibility also goes beyond that of traditional down payment gift rules that are applicable to FHA loans, which are detailed below in insider secret #2. With the FHA Bridal Registry Program, the only gift documentation required is “lender and borrower certification of the funds.”

2. Family gifts.  Most lenders will allow home buyers to apply gift money from family members toward their down payment - within guidelines, that is. First, the lender will require a letter from the giver verifying that it in fact is a gift and not a loan. (They generally frown upon it being a loan because it would add to the buyer’s debt and change their debt-to-income ratio.) And second, the person giving you the money must be a relative. The reasoning here is that a friend will most likely expect you to repay the money, whereas a relative won’t.
   
   FHA loans will allow the gift to make up any portion or all of the buyer’s down payment, many conventional (non-FHA) loan programs will restrict the proportion of a buyer’s down payment that can come from gift money.  The lender may also have specific ways they want to see the money go into and out of your accounts. Before you accept a gift toward your down payment, be sure to check with your mortgage broker or loan rep to be sure that you’re dotting all the right i's and crossing all the right t's.

3. Your Employer.  Some companies offer assistance programs to employees. Most are government, university, large company and financial industry employers. One example is safety workers: n some areas, safety workers like firefighters and police can have access to down payment grants from their employers if they buy properties in the city where they are on-call as first responders. Also, many large colleges and universities, very large companies and banks and lending institutions offer down payment help and have below-market-rate mortgages set up for faculty members and staffers.  Check with your Human Resources department to see if any such program is available to you.
   
4. City/County/State Programs.  Some states, counties and cities still offer programs that lend or give home buyers some assistance for down payments. These programs vary widely in scope - for instance, many target buyers with low and moderate incomes, while some seek to help the buyers of foreclosed or fixer-upper type homes. Some don’t have to repaid - meaning they are given as grants and are forgiven entirely if the buyer lives in the property for 30 years, but must be repaid if the buyer sells or rents the home out before the 30 years elapses. The programs pretty much all have some sort of homeowner education component that requires applicants to take personal finance and homeownership preparedness classes before they can receive funds. To learn more, visit your city, county and state websites to learn about programs that might be able to help you.

5. Your Retirement Funds.  Many financial advisors would advise against this, but if you have a 401K or Roth IRA account and some years to go before retirement, you might be able to tap into it or even borrow against your own funds for your down payment. Currently, you can take up to $10,000 out of your Traditional IRA with no penalty to put toward the purchase of your first home, but you will be taxed.  You can take as much as you want out of your Roth IRA contributions with no penalty or taxes, though, and as much as $10,000 from your earnings penalty-free for your down payment.  The rules get a little tricky, here, so definitely check in with your tax and financial advisors. 
   
   And while you can’t similarly draw from your 401K, many retirement and pension plans will allow you to borrow the money against your funds, then repay it to yourself – at interest. So the choice there comes down to paying your lender back with interest or paying yourself with interest. That choice should be you! But first, get some advice from your CPA or financial planner. This option might not make financial sense for your particular situation.

Here are 4 key need-to-knows to help you avoid getting a nasty surprise at the closing table.

Read my lips: no new bills (or other financial blips). Most savvy buyers know better than to run out and buy a car while they’re trying to buy a home.  But you’d be surprised at how many don’t think twice before opening new credit accounts to buy appliances or finance the kitchen remodeling work they plan to have done as soon as they get the keys to the place.  Many a lender will run a quick credit check right before closing, mostly so they can detect whether your bills – your monthly obligations – have increased to a point that pushes your debt-to-income ratio too high to qualify for the home, or would make it tough for you to pay your new mortgage. 

If your escrow runs 45, 60 or 90 days (or longer) as they commonly do in short sales and sales of bank owned homes, new accounts can certainly show up on your credit report in that time frame, endangering the deal and generating a surprise “no deal” from your lender just when you thought you’d be getting a set of closing docs to sign.

Also, some lenders conduct a last-minute check of borrowers bank account statements. Of course they want to make sure that you have the cash you need to seal the deal. But you might be surprised to learn that lenders also want to be sure that there are no unexplained, major deposits to your account, as well. They know some borrowers are inclined to borrow fistfuls of dollars from family and friends just before closing in an effort to scrape together the cash they need to close their home purchase by any means necessary. 

And, unless the money is a lender-approved gift, that’s not allowed! (Why? The mortgage lender wants to avoid the friend or relative later saying they “own” part of the house, and also doesn’t want your obligation to repay a “friend-and-family” loan to interfere with your ability to repay your new home loan!)

If you have any large deposits (other than your normal income) come in just before or during escrow, be prepared to both explain them and document their source.

Make full disclosure when you first apply for your mortgage or short sale. Today’s loan underwriters are notorious for being sticklers about verifying and re-verifying the facts on your loan application.  And as mortgage guidelines have tightened, lenders have also tightened up the underwriting process, creating a virtual gauntlet of review after review, underwriter after underwriter that you have to get past in order to close your deal.  The most critical one?  The funder – it is this underwriter’s job to give the thumbs up (or down) on wiring your mortgage money into escrow.  

Funders are the toughest to get past, understandably, because the buck stops with them when it comes to their employer’s issuance of tens, even hundreds of millions of dollars of mortgage money every year.  So, they want to be sure every last one of your loan qualifying i’s are dotted and t’s crossed – up to the very last possible moment before they green-light the disbursement.  They have the right – scratch that – the responsibility to re-check your credit, assets, even your employment at the last minute, and they take this responsibility very seriously. 

And on a short sale, the pre-closing title check can reveal legal judgments and liens against the seller that have been placed on the property up to the day of closing.

I’ve seen deals fall apart or come to the brink of failure the day or so before they were supposed to close because a buyer had lost a job, turned out to actually be legally married (the divorce they’d put on the application was not yet final), or a new collection account had surfaced.  I recently saw a short sale nearly cancelled when a new collection account of the seller’s was filed as a lien on the house.  Once, I even saw a deal killed beyond salvation when a last minute credit re-check surfaced a social security number flag that revealed one buyer was not in the country legally!

To avoid these sorts of last minute surprises, be 100 percent honest with your real estate and mortgage agents at the beginning of your homebuying (or selling) process about any and every area of your life that corresponds to a mortgage or short sale application question, even before you complete the application – there’s almost no such thing as an overshare at that stage.  That puts them in a position to help you avoid closing table drama from the jump, even if it means they advise you to stay in your job, settle some bills or buy the home on your own, rather than with your spouse.

Watch the calendar closely. Buyers who originally were pre-approved for their mortgage many moons before they find the right property should obtain updated estimates of their mortgage payments and the cash they will need to close their purchase as their house hunting period goes on, and especially once they have a firm closing date estimate. Mortgage interest rates can change dramatically over a period of a few months, and closing costs vary widely based on things as seemingly minor as whether your transaction closes at the beginning or the end of the month.   

To avoid getting to closing and realizing that you have to come up with an extra few weeks’ worth of prepaid mortgage interest because your closing date changed, make sure your real estate and mortgage brokers are in close communication, and ask them to keep you apprised of how any closing date changes will impact the size of the check you’ll have to write to close the deal.  And if you’re buying a property that is a short sale or foreclosure, ask them to give you this briefing as soon as possible (and as frequently as possible!) in the transaction so that you can prepare a little cushion of extra cash in case closing is delayed for reasons beyond your control (which happens very frequently in these sorts of sales). 

Obtain and review your closing documents in advance.  I used to give this advice mostly to buyers, urging them to ask their agent and mortgage broker to provide them with their loan and title documents at least a day or so in advance – earlier, if possible.  If you have to sign 300 pages at the closing table and you know your keys and moving plans hang in the balance, the chances you’ll be scrutinizing every line are pretty slim – and if you do happen to catch an error, the time it will take the lender to revise and reissue a set of papers can throw your moving calendar entirely out of whack. 

The best practice is to get these documents in advance, so you can check on line items like the interest rate and monthly payment in the comfort of your own home or office, ask questions of your representatives and initiate any corrections that need to be made without disrupting the plans for signing and closing.

And this applies to sellers, too – even though buyers have a much higher volume of paperwork to get through at closing (and errors can be costly), closing doc errors occasionally arise that have a serious impact on sellers, as well.  I was once asked for advice in a situation where the seller owned two neighboring parcels of land, and the title paperwork for the sale of one erroneously included the other one, too!  It took a boatload of high-drama legal wrangling to get the mistake corrected, and get the sellers' other lot back.

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Here are 4 simple steps to minimize the risk that you'll become the main character in a homeownership horror story.  

1.  Stick with a fixed-rate mortgage.  Recent data shows that adjustable rate mortgages, or ARMs, are increasingly popular, rising from 9 percent of the mortgage market in the fourth quarter of 2010 to 12 percent in the first quarter of this year.  This might seem crazy to some, but in financially aggressive crowds, the lure of low, 3 percent(ish) interest rates on ARMs is enough to overcome any qualms.  As well, today's ARMs tend to have lower lifetime interest rate caps and require payment of principal, so they don't adjust as violently as the subprime interest-only and option ARMs that contributed to the foreclosure crisis.

If the thought of your mortgage payment changing over time gives you the shakes, you don't want to live in a state of interest rate obsession for the next few decades, or you simply crave the simplicity and predictability of knowing what your housing payment will be for the next 15, 20 or 30 years, then stick to 

a fixed-rate mortgage.  The rates are higher, but with a fixed-rate loan, the risk of scary payment changes are not only lower, they are non-existent. 

2.  Put - and keep - a home warranty in place.  One of the most frightening things about going from renter to homeowner is the prospect of being solely responsible for the care and feeding of your home and all its systems and appliances. Responsibility for both the costs and the actual logistics of repairing things like a leaky roof, a broken hot water heater or a haywire electrical fixture looms large in the minds of first-time buyers, in particular. 

A home warranty plan kicks in when escrow closes, and depending on the coverage you select, will cover your home against the breakdown of major systems and even some appliances, like furnaces and water heaters.  In some cases, you can even upgrade the coverage to protect against roof leaks and some plumbing issues. When a covered item breaks down, just remember to call the home warranty company first - for the cost of a service call you can get the item repaired or even replaced, if necessary.  I remember the home warranty company replacing a $900 water heater in my first home; what a godsend!

Talk with your agent - you might even be able to negotiate for the seller to pay for the first year's cost of the warranty.  Just remember to renew it when it expires every year, to keep a cap on your risk of unexpected repair costs for the duration of your tenure as a homeowner.

3.  Get repair bids and estimates, not just inspections.  After you find the home of your dreams (or the home of your budget!) and get into contract, you'll have a contingency or objection period ranging from 7 to 17 days during which you can obtain all the inspections you want.  Most buyers start out with a general property inspection, a pest inspection and a roof inspection, then get more specialized inspections if the property calls from it.  Pest and roof inspectors will generally provide an inspection report AND a repair bid for any work they find needs to be done.  

But the overall home inspection could very well list a dozen needed repairs, upgrades and maintenance items, without providing any information about how much those repairs will cost.  If your inspection report surfaces work you'll need to have done to fix things (or avoid bigger fixes down the road), work with your agent to schedule actual repair contractors to come in and give you bids on the work before your contingency or inspection period expires.  That will position you to negotiate around repair costs with the seller, or to know what you're getting yourself into, cost-wise, if you take the property as-is.

4.  Buy on the 10-year plan.  Warren Buffett once famously advised stock investors to "only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."  The same advice is good for buying a home in today's real estate market.  Take on a mortgage you know you can sustain, buy at a price you can comfortably afford and avoid having to sell because you need to move for some urgent reason, or because the home no longer meets your needs.  

You can take this last step to hedge against losing money on your home by planning your space, career and lifestyle needs out 5, 7, even 10 years in the future - everything from how many bedrooms and garage spaces you'll need to where you'll want to be located, geographically - and selecting a home that will meet those needs for that foreseeable future. As a general rule of thumb, the harder hit the area was in the recession, the longer you should plan to hold it.

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1. Are you a bank, a broker, or both?  Generally speaking, mortgage lenders that are banks or have their own banking divisions (which many reputable brokerages do) have more control over the appraisal process, including the ability to submit your file to a pool of appraisers they know have some knowledge of your local neighborhood. Given the fact that non-local appraisers and the inability to communicate with appraisers under relatively new guidelines for brokerages are responsible for killing loads and loads of deals, working with a company that is or has a bank could be a deal-saving move, especially if the property is in an area that hasn’t had many recent sales or is otherwise challenging to appraise.

Also, some broker/banks that originate loans and sell them straight to Fannie Mae or Freddie Mac under the FHA loan programs offer the same benefits of an FHA loan - low down payment and moderate qualification guidelines - without the “overlays” imposed by some larger banks, which actually place a more restrictive set of guidelines on FHA loan programs. For example, FHA guidelines do not impose a minimum credit score, but many banks overlay their own 640 minimum FICO requirement. Broker/banks that sell straight to Fannie and Freddie often mirror the FHA minimum guidelines precisely.

Finally, brokerages with their own in-house bank and a large roster of lenders and programs provide the advantage of offering a wider range of fallback options than plain old banks or plain old brokerages - Plans A, B, C and D, if you will - which many borrowers need these days, in the (increasingly common) case your first choice bank or loan program doesn’t work out.

2. Will you explain my Good Faith Estimate to me? May I also have a fee sheet or estimate of funds to close? The current, national standard Good Faith Estimate (GFE) is pretty clear, clarifying all sorts of deal points, from the broker’s commissions to the costs associated with the loan, but as a point of customer service, you should ask your mortgage pro to explain it to you (if they don’t do so under their own initiative).

The one shortfall of the the latest edition of the GFE is that, while it clearly shows the costs associated with a particular loan scenario, it does not always show so clearly the actual amount of funds you’ll need to close the transaction (which might be more or less than those costs)! So, ask your mortgage representative to prepare a fee sheet or an estimate of funds to close as early in the transaction as possible.

3. How long will it take to close my loan? How much time will I need for loan and appraisal contingencies?  The time frames for closing your mortgage - which often drive the time frames for closing your home purchase - often vary widely depending on the type of loan and even the type of lender you work with.(Large bank loans originated by the bankers who sit inside the branch are notoriously slower to close, on average, than loans originated by brokers.) Similarly, the time it takes to get through the FHA loan appraisal and underwriting process might be much longer than it would take, all things being equal, to clear those hurdles and remove your loan and appraisal contingencies on a Conventional (i.e., non-FHA) mortgage.  

When you first meet with your prospective mortgage pro, talk with them about these time frames, so they can help you set realistic expectations and insert realistic time frames into your offer when you make it, to minimize the drama of a contingency clock that ticks way faster than your mortgage process.

4. Are there any fees for the mortgage loan application/approval process? Some lenders charge for credit checks up front, and most require that you pay for your appraisal in advance (although the latter happens only after you find and get into contract on your property. One of the first questions you should ask, when you sit down with a new mortgage broker is how much cash you’ll have to come up with just for the privilege of having them run your application and take the first steps down the road to loan approval.

5. How long have you been originating loans? And how long have you been with your company? Mortgage pros who have been around for a long time have the knowledge of advance troubleshooting, workarounds and backup plans, and the current underwriting practices it takes to get a loan closed in this restrictive mortgage market. If you found them in some way other than a referral, you can even ask for references from a few clients. Most mortgage pros who have been in business for awhile will be able to give you names and numbers of clients they’ve worked with on multiple purchases and/or refis: that’s a very good sign. You’ll rest a lot easier if you know that your loan is in the hands of a seasoned pro who others like you trust with their largest asset - and largest financial obligation.

• understand what does and doesn’t need to be repaired,
• prioritize the work you plan to do to your home (and budget or negotiate with the seller accordingly),
• get used to the constant maintenance that is part and parcel of homeownership, and
• understand the importance of having a home warranty plan.

The fact is, when you’re trying to qualify for a home loan, some of the items on your credit report that can pose a threat to your home finance plans might surprise you. Here are 5 surprising credit report entries you absolutely must fix, especially when you are in the process of buying or refinancing a home.

1.     Account balances you recently paid down or off. If you’ve just finished paying a bill down or off, you might not dispute the elevated balance that remains on your credit report because it’s not actually an error, per se.  But the whole point of paying the balance down was to bring down your credit utilization ratio, which is a heavily weighted factor in your overall credit score.  

Correcting the actual balances of your outstanding bills downward to account for your recent pay-down efforts poses such a large potential improvement impact for your credit score that it might even be worth paying your mortgage professional the $30 to $50 it will cost for them to initiate a Rapid Rescore, which can update your reports to reflect your slimmed-down balances in about 72 hours, compared with the 30 to 60 days you’d expect to wait to see results from a traditional dispute or update.

2.     Incorrect former addresses. Of the 19 percent of consumers who spotted an error on their report in the study, nearly 40 percent of those errors were in what the credit bureaus call “header data," things like the consumer's previous street address. Many elected not to dispute these sorts of line items because the error doesn't seem like it would impact their credit score.  While an inaccurate address might not have much to do with your score, it can still wave a red flag, signaling issues that can foul-up your mortgage application.

A misspelling in an otherwise correct street name should not cause you grave concern.  But if the previous addresses listed are in the wrong city or state, or otherwise come out of nowhere, they might signal that someone has used your name and/or social security number to obtain credit at a different address.  Credit card fraud and identity theft are difficult to unravel when you’re not seeking credit; they are much more complicated to resolve when the credit stakes are high and the underwriter as picky as they are in the course of applying for a mortgage.   

Also, current and previous addresses that conflict with where you’ve told the lender you live(d) can raise suspicion that you might be buying a second or rental home, rather than the owner-occupied home you say you’re trying to buy; that can provoke a lender to demand that you ante up more down payment dough, make you jump through greater hoops to prove your true address or even stop you from qualifying for the loan altogether.

3.     Bills that were never yours in the first place. As with completely bizarre former addresses, accounts listed on your credit report that you never opened in the first place can be a red flag that tips you to the fact that someone else might have stolen your identity and opened a credit card or account in your name.  If you find one of these items on one credit bureau report, but it’s currently closed or has a zero balance, you might be tempted to let it slide, thinking it can’t move the needle on your credit score.  In reality, though, if someone is using your identity to obtain credit and you fail to dispute that the bills belong to you, they might continue to use it, which can cause you real problems.  Of course, if the bills weren’t paid on time or have been placed in collection, disputing the accounts’ presence on your credit report is a must.  

If they were paid on time every time, though, the analysis might be different.  Unfortunately, instituting a fraud-based credit freeze or fraud alert on your credit reports at the same time as you’re applying for a mortgage can complicate your own loan qualification process significantly.  If you find yourself in this situation, carefully scrutinize the rest of your report and the credit reports you receive from the other bureaus to detect whether other fraudulent accounts exist, then consult with your mortgage professional on exactly when and how you should go about disputing the accounts which weren’t actually yours.

4.     Limits listed as lower than they really are. As with closed accounts that were never yours in the first place, accounts that are listed on your credit report as having limits that are lower than they really are might seem like a battle not worth fighting.  But the fact is that only two inputs go into the credit utilization ratio that comprises about 30 percent of your FICO score: how much credit you have available, and how much credit you have used.  So, if you have account balances that show up on your credit reports as lower than they actually are (i.e., that you have less credit available to use), that inaccuracy can skew your credit score and screw up your mortgage qualifying efforts. Big time.

5.    Derogatory items that should have aged off. Very few of us are perfect, and you might have worked hard to pay your bills on time in an effort to overcome a credit ding from back in the days.  Although the impact a derogatory item has on your credit score wanes over time, it’s still your right (and your responsibility) to make sure negative items disappear from your credit report when they are supposed to – that’s 7 years for a late payment, 10 years for a bankruptcy.  If you are still seeing credit dings on your report after more than the relevant time frame has elapsed, dispute them and claim the rehabbed credit (and score) you’ve since earned.

It’s not very common that credit report disputes cause dramatic changes in credit score, but again, many borrowers aren’t disputing these sorts of items they don’t realize could make a difference in their homebuying or refinancing prospect.  

Beyond that, if you’re close to a credit tier cutoff, like 620-640 or 740-760, depending on your loan type, even a few points’ difference can be the difference in qualifying for a home or not, or paying a higher mortgage interest rate for the life of your loan.  For these reasons, it behooves every potential borrower to be proactive in spotting and correcting these 5 must-dispute errors.

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In all seriousness, though, spas tend to have a clean, bright look and feel and luxurious stress-busting features that just flush the tension right out of you (pardon the pun)  - many of which can be installed in your own home for a fraction of what the dreadlocked one paid for her porcelain potty.  For example, pedestal sinks instantly - and inexpensively - open up a bathroom, especially when replacing a dark vanity and wall-to-counter mirrors. I recently put a new pedestal sink in my bathroom for less than $600 - top of the line, including faucets and installation!

• Storage systems. From shelved nooks to closet organizers to garage grids for sports equipment, storage systems eliminate clutter and make sure there’s a place for everything, and that everything has a place. If you can afford a custom cabinet installation or custom closets, they certainly offer the fancy moldings and modules that create luxury appeal.  But many home improvement stores now offer much less expensive versions of these systems that look and work great.

• Desks and bookshelves.  Like storage, but activity-specific, built-in office equipment maintains order and can turn a dead corner of a room into a highly useful workstation.  To replicate this functionality on the cheap, find a corner or nook and put in an armoire-style workstation that closes and folds up when you’re not working.  And built-in bookshelves are a time-tested selling point when your home is being sold, by the by, so, if you have an empty area from old-school built-ins which were removed, installing inexpensive shelving might be a great way to go.

• Wine storage. Dead space under the stairs can easily be transformed into a wine cellar or storage space. My own personal wine cellar is where I store my kid’s chocolate milk, my electrolyte water and a bottle or two fish sauce, but it’s a great feature to have at home, no matter what you’ll use it for!

• Recycling/compost/trash centers.  Try as we might to minimize it, we all generate trash. Built-in centers with clearly marked waste receptacles make this dirty part of life less messy and more manageable.

I personally just put a couple of these  automated trash cans- $60 each! - into my own kitchen. They’re hands free, so eliminate the germiness and clunkiness of opening a lid with your hands or feet, and they were the hit of a recent dinner party!  (Okay, it was the food, then the trash cans that guests admired.  But still.)  Many hands-free or automatic household items are available at very low prices, like automatic soap pumps, paper towel dispensers and robotic vacuum cleaners.  

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Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

Mortgage rates are going up.  Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come.  And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time. 

Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

Rents are going up.  Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so.  As a result, rental homes are in high demand – and rents are rising.

When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

You can reasonably predict the home you’ll need in the years to come.  Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire - and might not want to climb two flights of stairs to get to and from your bedroom - 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.

It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one - are in a row before you make your move.

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But the fact is, there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don’t get the house!)  And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash)!

Step 1: What do the “comps” say?  First things first. When it comes to pricing a home, or making an offer to buy one, the ‘first thing” is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood – i.e., the  comparable sales, or comps.

HINT: You can also find comps for a home listed on Trulia by scrolling down to the section labeled Sold Homes near 1234 Merriweather Lane on the property's Trulia listing page.

Ideally, look for comparables that are very recent sales (3 months or less before you’re listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can:

(a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and

(b) result in a sale price at which the property will actually appraise, later on - avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.

Also, looking at comps is the first step for locating a home’s seller and prospective buyer in the reality-based universe of current home values.  The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today, as is the buyer’s belief that the place was worth $100K less at the trough of the market, in 2009.

Step 2:  What can you afford?  This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.)

Buyers – it’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you.  This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to rejigger your offer accordingly.

Step 3: What’s your competition? (And what’s theirs?)  This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face – whether you are a buyer, or a seller.  As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this).  Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold.

The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!)

Buyers should also be cognizant of the competition level they will face for homes.  Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home’s neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers. 

Your agent can also brief you on:

(1)  (1)    The number of offers – if any - that have been presented on “your” property (which the listing agent will usually, gladly tell).  If there are other offers, you’ll want to make a higher offer to compete successfully against them; and

(2)    (2)  The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have.  (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result! )

4.  How much do they need to sell (or buy) it?  Buyers: Has the listing in which you’re interested been reduced at all?  By how much?  Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell?   

Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work.  Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market, generally speaking, before you set your list price.

Trulia’s new, interactive Price Reductions Map offers a number of clues to critical indicators of buyer and seller motivations in your home’s town and zip code, in just a click on the map - including:

·         how many homes in your target property’s area have had at least one price reduction,

·         how likely a home in the area is to have multiple price reductions.

The higher these numbers are, the stronger of a buyer’s market it is, and the more bargaining power buyers likely have.   And if you’re the seller, the higher these numbers are for your area, the lower you may need to price your home to be successful at getting it sold.

5.  How much do you want to buy, or sell, the place?  Step #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price.  This step is all about you – what’s your level of motivation?  Now, buyers, you certainly shouldn’t offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around.  But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.

1. ID (e.g., driver’s license, state-issued ID, passport).  Who must produce it?  Buyers and sellers.  Why?  Uh, hello!?!  Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home.  Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
2. Paycheck Stubs.  Who must produce it?  Any buyer financing their purchase with a mortgage.  Sellers, usually only in the case of a short sale.  Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
3. Two months’ bank account statements. Who must produce it?  Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own.  Short sellers?  It’s all about the hardship.
4. Two years’ W-2 forms or tax returns. Who must produce it?  Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
5. Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months - even years! - on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such - and its quite common for them to call your office the day before closing to request a last minute verification of employment!
6. Quitclaim deed. Who must produce it?  Married buyers purchasing homes they plan to own as separate property.  Married sellers selling homes that they own separately, or joint owners selling their interests separately.  Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
7. Divorce decree.  Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell.  Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
8. Gift letters.  Who must produce it? Buyers using gift money toward their down payment.  Why? The bank wants to be sure the gift came from a relative, and is their own money to give.  They also want the relative to confirm in writing that it’s a gift, not a loan - a loan would need to be factored into your debt load.
9. Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
10. Mortgage statements. Who must produce it?  Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.

• Alabama: http://www.hardesthitalabama.com/
• Arizona: https://www.savemyhomeaz.gov/
• California: https://www.keepyourhomecalifornia.org/
• Florida: https://www.flhardesthithelp.org/
• Georgia: http://www.dca.state.ga.us/housing/homeownership/programs/hardesthitfund.asp
• Illinois:http://www.ihda.org/
• Indiana: http://www.877gethope.org/
• Kentucky: http://www.kyhousing.org/
• Michigan: http://www.michigan.gov/mshda/buyers/save_the_dream/helping+hardest+hit+homeowners+-+contact+your+mortgage+servicer+for+assistance
• Mississippi: http://www.mshomecorp.com/firstpage.htm
• Nevada: http://www.nahac.org/
• New Jersey: http://www.state.nj.us/dca/hmfa/home/foreclosure/homekeepers.html
• North Carolina: http://www.ncforeclosureprevention.gov/
• Ohio: http://www.savethedream.ohio.gov/
• Oregon: http://www.oregonhomeownerhelp.org/
• Rhode Island: http://www.hhfri.org/
• South Carolina: http://www.scmortgagehelp.com/
• Tennessee: http://www.thda.org/
• Washington D.C.: http://www.dchfa.org/

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2. Plan Ahead and Be Strategic When Taking a Home Office Deduction

According to the Small Business Administration, the average home office deduction is $3,686 – multiply that by your tax bracket – 15%, 20%, 30% or whatever it is, and that's what you'll save on your taxes by writing off your home office. Know, though, that the space you designate as your home office cannot be exempted from capital gains tax when you sell your home later. The $250,000 (single)/ $500,000 (married filing jointly) income tax exemption for capital gains is only good on your personal residence, after all – not including any space in your home you've claimed as your tax-advantaged office. If you foresee selling your home for much more than you bought it in the future, near or far, discuss this with your tax preparer to see if the few hundred bucks you save is worth the capital gains complication later.

3. Tax Relief for Loan Modifications, Short Sales and Foreclosures Is Only Around Through 2012

While the long-term housing outlook is beginning to look up, 2011 is projected to be the peak year for foreclosures during this market cycle. Distressed homeowners who are on the brink of a short sale, loan modification or foreclosure should be aware that normally, any mortgage balance that is wiped out by one of these outcomes is taxed as what the IRS calls Cancellation of Debt Income, or CODI.

Under the Mortgage Debt Forgiveness Relief Act of 2007, the IRS is currently not charging income taxes on CODI incurred through a loan mod, short sale or foreclosure on most primary residences through 2012. But right now, banks are taking many months, or even years, to work out mortgages in all of these ways; the average foreclosure in New York state right now occurs only after 22 months of missed mortgage payments. If you foresee any of these outcomes in your future, don't put things off. Do what you can to get to closure on your distressed home and loan, ASAP, while you won't have income taxes to add as the insult on top of your significant housing injury.

4. Project the Income Tax Consequences of a Refinance or Property Tax Appeal

Homeowners everywhere are working on applying for a lower property tax bill on the basis of the last few years' decline in their home's value. Those who have equity have flocked en masse to refinance their 7% home loans into the 4% to 5% rates of the last few months. These strategies offer some of the heftiest household savings out there for the corresponding investment in time and money they take. But here's a caveat for savvy homeowners who slash these costs: remember that property taxes and mortgage interest, the very costs you're minimizing, are also the basis for the major tax benefits of being a homeowner. So plan ahead for your income tax deductions to go down along with your taxes and interest.

5. Don't Forget Those Closing Costs

If you bought or refinanced your home in 2010, you may be so focused on your mortgage interest and property tax deductions that you forget all about your closing costs. Any origination fees or discount points that were paid to your mortgage lender at closing are tax deductible on your 2010 return, get this – even if the seller paid your closing costs. If you can't figure out exactly what you paid, look for your HUD-1 settlement statement, that legal sized paper full of line item credits and debits that you should have received from your escrow provider or title attorney at, or just after, closing. Can't find it? Drop your real estate agent or mortgage broker an email; they can usually get a copy to you quickly.

Note: This post first appeared on WalletPop.com on 2.28.2011.

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Here are 6 big-time homebuyer turn-offs that make buyers cringe at the thought of your home, and action steps you can take to prevent your home from being an offender:

1.  Stalker-ish sellers.  I know you think you’re being helpful, walking the buyer through your home and pointing out the wagon-wheel light fixture you made with your own two hands, the custom mural of a stingray you paid top dollar to have painted across your living room wall and the way the sounds of happy schoolchildren running across the front yard of your corner lot to get to the school in the next block lifts your spirits.  However, the buyers might be trying really hard to ignore, minimize or figure out how to undo the very features of your home you hold dear.  They also may want or need to have personal space and conversations with their mate or their agent while they’re viewing your home - you being there, especially walking right alongside them while they’re in your home, prevents them from being comfortable about doing this, or discussing all the things they would change if the home were theirs. In my experience, the more nitpicky a buyer gets about a house and the more detailed their list of things they would change, the more serious they are about considering making an offer on this place.

What’s a Seller to do? Back off. Let your home be shown vacant, or leave the house when people come to see it.  If you need to be there, at least walk outside or go sit at the coffee shop down the way while prospective buyers view your home.  If the buyers have questions, their people will contact your people.

2. Shabby, dirty, crowded and/or smelly houses.  You already know this one. Yet, buyers constantly marvel. The buyers who come to see your home are making the decision whether to choose your home for the biggest purchase they’ve ever made during the worst economic conditions most of them have ever experienced.  Your job is to get your home noticed – favorably – above the sea of other homes on the market, many of which are priced very, very low. 

What’s a Seller to do?  Other than listing your home at a competitive price, the only tool within your control for differentiating your home from all the foreclosures and short sales is to show it in tip-top shape. Pre-pack your place up, getting rid of as many of your personal effects as possible. Do not show it without it being completely cleaned up: no laundry or dishes piled up, countertops freshly washed, smelly dogs (I have a couple who smell on occasion – no judgment – but don’t show your house with pet odors) or litter boxes cleaned and/or out of the house.

3.  Irrational seller expectations (i.e., overpricing).  Buying a house on today’s market is hard work!  On top of all the research and analysis about the market and situating their own lives to be sure they’ll be able to afford the place for 5, 7, 10 years - or longer, buyers have to work overtime to separate the real estate wheat from the chaff, get educated about short sales and foreclosures and often put in many, many offers before they get even a single one accepted.  The last thing they want to add to their task lists is trying to argue a seller out of unreasonable expectations or pricing.  And, in fact, there are so many other homes on the market, buyers don’t have to do this.  When they see a home whose seller is clearly clueless about their home’s value and has priced it sky-high, most often they won’t bother even looking at it.  If they love it, they’ll wait for it to sit on the market for awhile, hoping the market will “educate you” into desperation, priming the pump for a later, lowball offer.

What’s a Seller to do? Get real. Get out there and look at the other properties that are for sale in your area and price range. Get multiple agents’ take on what your home should be listed at, and don’t take it personally if their recommendation is low. If your home has much less curb appeal or space or is much less upgraded than the house across the way, don’t list it at the same price and expect it to sell. If you owe more than your home is realistically worth, you may need to reexamine whether you really want or need to sell, or consider a short sale, if you simply have to sell.  Don’t be tempted into testing your market with an obviously too-high price, unless you’re prepared to have your home lag on the market and get lowball offers.

4.  Feeling misled. Here’s the deal.  You will never trick someone into buying your home. If the listing pics are photo-edited within an inch of their lives, or your home is described as an “approved” short sale when, in fact, the bank approved another offer, now withdrawn, but will require a new offer to go through any sort of approval process (even a truncated one), buyers will learn this information at some point.  If your neighborhood is described as funky and vibrant, as code for the fact that your house is under the train tracks and you live in between a wrecking yard and a biker bar, prospects will figure this out.  If the detailed information about your home, neighborhood or even transactional position (e.g., short sale status, seller financing, etc.) is misrepresented, the sheer misrepresentation will turn otherwise interested buyers off.  If you authorize your agent to “verbally approve” the buyer’s offer, don’t go back the next day demanding an extra $5,000. In cases where the buyer feels misled, whether or not that was your intention, running through the buyer’s mind is this question: If they can’t trust you to be honest about this, how can they trust you to be honest about everything else? 

What’s a Seller to do?  Buyers rely on sellers to be upfront and honest – so be both.  If your home has features or aspects that are often perceived negatively, your home’s listing probably shouldn’t lead with them (like the ad I recently saw with the intro line: “this place is a mess!”), but neither should you go out of your way to slant or skew or spin the facts which will be obvious to anyone who visits your home.  Make sure you know what the listing of your home reads like, before it’s published to the web, and that a prospective buyer will not feel misled by it.

5. New, ugly home improvements.  Many a buyer has walked into a house that has clearly been remodeled and upgraded in anticipation of the sale, only to have their heart sink with the further realization that the brand-spanking-new kitchen features a countertop made, not of Carerra marble, but brand-new, pink tiles with a kitty cat in the middle of each one (I saw this once, people – no joke).  Or the pristine, just-installed floors feature carpet in a creamy shade of blue – the buyer’s least favorite color.  New home improvements that run totally counter to a buyer’s aesthetics are a big turn-off, because in today’s era of Conspicuous Frugality, buyers just can’t cotton to ripping out expensive, brand new, perfectly functioning things just on the basis of style – especially since they’ll feel like they paid for these things in the price of the home.

What’s a Seller to do?  Check in with a local broker or agent before you make a big investment in a pre-sale remodel.  They can give you a reality check about the likely return on your investment, and help you prioritize about which projects to do (or not).  Instead of spending $40,000 on a new, less-than-attractive kitchen, they might encourage you to update appliances, have the cabinets painted and spend a few grand on your curb appeal.  Many times, they will also help you do the work of selecting neutral finishes that will work for the largest possible range of buyer tastes.

What’s a Seller to do?  Check your home’s listing on Trulia and make sure that the pics represent your home well.  If not, ask your agent to grab some new shots and get them online (and say pretty please, pretty please!).

P.S. -  Buyers, get your roof inspection or new linens paid for!  Sellers, how'd you like to be able to hire a cleaning service for that pre-showing deep clean?

You still have (a little) time to enter to win a $250 gift card by answering this question on Facebook: What's your American Dream? (If you win - and this is exclusively for readers of the AskTara blog!, we'll let you choose any sort of gift card you want within the $250 limit).

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• their life plans (i.e., they are comfortable making the commitment to live in the same town, and the commitment to )
• their family plans (i.e., whether they plan to get married, have children or empty their nest in the time they plan to own the home - and the implications of these plans on their space needs and location priorities)
• their career plans (including, but not limited to: whether they have job or income security, whether they feel they will be working in the same area for the foreseeable future, and whether they want to work less or start their own business in the months or years to come)
• their financial plans (including foreseeable changes in income and expenses, e.g., kids going to college or making partner at the firm).

Usually, the buyer makes an offer for a certain price and on certain terms. A reverse offer goes in the opposite direction: from seller to buyer. In some cases, a seller whose home has been on the market for ages with lots of viewers, but no offers, may enlist their agent to go back and approach several or even all of the buyers who have come to see the property, and make an offer to the buyer. In other scenarios, the seller's agent extends an offer to a particular buyer who has come to see the property multiple times and seems very interested, but has been hesitant to make an offer.

Reverse offers generally offer to sell the home at a price lower than the list price, and they often sweeten the pot by throwing in added incentives like paying some or all of the buyer's closing costs, buying down the buyer's interest rate, paying for HOA dues or fees or even throwing property like flat-screen TVs, cars or other valuables into the deal.

Here are 3 best practices for sellers making reverse offers:

• Give the buyers a short period of time to respond. The whole point of a reverse offer is to create urgency where the buyer currently feels none. Extend a reverse offer with the caveat that it is only good for a day or two, to push the buyers into moving quickly. Similarly, if you have extended the reverse offer to multiple buyers, let them all know that this is the case and that the first buyer to bite takes the house.

• Great candidates for reverse offers include sellers facing lots of competition. If your home is nearly identical to neighboring homes for sale at the same price, or you are struggling to position it competitively with foreclosures and short sales in the area, consider making a reverse offer. A proactive, reverse offer differentiates your house in the minds of home buyers and, again, creates urgency to act on the part of buyers who otherwise have so many homes to choose from that they feel they have all the time, choice and bargaining leverage in the world.

• If one buyer has viewed your home repeatedly, check in with their agent directly or via Trulia’s contact form before making a reverse offer. Ask your listing agent to contact the broker for any buyers who have made more than one visit to your home, to inquire into what is keeping them on the fence. This will boost the likelihood of making a successful reverse offer by making sure the offer addresses the issues that have made buyers hesitant to pull the trigger.

Critics of the reverse offer express a concern that it may make a seller seem desperate. If you’re worried, hop over to Trulia Voices and ask the real estate professionals for their thoughts. However, when you talk to home buyers on today's market, their biggest beef is sellers who are unrealistic and inflexible, not sellers who seem overly motivated to sell.

No serious home buyer gets turned off by a seller who seems willing to go the extra mile to help them solve the problems that are stopping them from buying a home. Also, a reverse offer doesn't have to chop tens of thousands off the home's list price to work – a percentage point or two can often do the trick. In any event, sellers who extend a reverse offer don't limit their options for responding to low-ball offers from the prospective buyer in any way; if the buyer senses desperation and comes back with a low ball offer, the seller can still take it, counter or leave it, just like they would have been able to do before making the reverse offer (but they end up with a buyer, which they didn't have before the reverse offer).

Note: This post first appeared on WalletPop.com on 11.22.2010.

• that buying a foreclosure might involve hidden costs,
  
• that the buying process itself is risky, and
• that the home might continue to lose value, after escrow closes.

• Vacant foreclosures often have their utilities disconnected.  Work with your agent to make sure the utilities get turned on - even for a single day - so that your property inspector can run the water taps, test the stove and dishwasher, see if the water heater and electrical outlets work, and so forth.
  
• If appliances are there, the bank will probably leave them there, even though they may not have technical “legal” ownership of them, so they may not be included in the contract, like in a "normal" home sale.
• However, the bank will not give you any sort of warranty on appliances, so try to obtain any warranty coverage you want or need elsewhere - from a home warranty company or, potentially, the original manufacturer/retailer.

Here are 6 other worthwhile reasons to own your home, versus renting it - assuming, of course, that your financials and credit make ownership a sensible and sustainable move for you to make.

1.  You've always wanted to.  Many Americans simply believe in homeownership.  This holds true even after the bubble! In a recent study Trulia commissioned with Harris Interactive in August 2010, 72 percent of Americans surveyed stated that homeownership is still a part of their personal American Dream.  Owning a home because it's something you've always wanted to do - whether because you've got a vision of life in a home that belongs to your family, or because you've always dreamed of owning a fixer, or because it's simply a family or financial value you hold dear - is probably one of the better motivations for buying a home. (And it's certainly better than buying it because you think you're supposed to.)

2.  You earn enough to need the tax break.  One-hundred percent of your mortgage interest (the largest part of your monthly mortgage payments) and your property taxes are tax deductible! That's right - Uncle Sam imposes a very strong tax incentive for those who do own their homes. However, even renters are able to take a standard tax deduction, so the true tax advantages of homeownership don't begin accruing unless and until you (a) earn enough to be able to benefit from a tax deduction greater than the standard, and (b) are paying enough mortgage interest and property taxes to accrue a tax deduction larger than the standard deduction.  This is definitely situation-specific; check in with your tax preparer or adviser to find out whether the tax advantages of homeownership would be of benefit to you.

And, fyi - there are even some additional temporary tax incentives for homeowners: if you put less than 20 percent down on your home loan, the private mortgage insurance premium your lender will require you to pay is also fully or partially deductible (depending on your household income) through 2010.

3.  You love a deal.   You might have heard by now that home price have rolled back to 2003 levels, and interest rates are bizarrely low - right around 4.45 percent on a 30-year-fixed rate mortgage.  If you've always had a house hankering and you're one of those types who just loves a good deal, it might be a good time to get serious about buying. Depending on your market, prices will probably stay relatively flat for a little while, so even if you need to put a savings-and-credit-building plan in place, you might have time to build up your reserves, boost your FICO score and still get a great deal.  Get to work!

4.  You want your children to grow up in a home you own. The financial and life management skills required to be a homeowner - like budgeting, making a large financial goal - and meeting it, and staying in the same community over time - tend to get passed down to homeowners' children, as if by osmosis!  Kids whose parents own their home have a lower school dropout rate, teen pregnancy rate and even raises educational achievement and earnings.

It's not clear whether this is due strictly to homeownership or to the fact that kids of homeowners tend to move around less than children of renters, but what is clear is that growing up in a home their parents own increases children's chances of doing well in life.

5.  You plan to stay put.  Rents rise over time. Landlords can evict you - in many places - when they decide to sell the place or otherwise due to no fault of yours. If you know you plan to live in the same town or even neighborhood for years to come, owning your home may be one of the best hedges against being forced to move or pay higher rents - especially if you lock in a low-interest, 30-year fixed rate loan.  30 years from now, you could be without a housing payment at all, other than taxes and insurance, which are forever. 

The ideal is to be committed to staying put for 7 years (plus or minus a year or two, depending on your market), before making the commitment to owning a home makes sense.

6.  You Want to Customize Your Home.  Whether you want to invest your time, money and creativity into a backyard skate park for the neighborhood kids or you'd rather build an addition for a greenhouse/yoga room, whether your vision of home has always included extensive built-in shelving to showcase your sports memorabilia collection or that chef's kitchen so you can replicate the Top Chef contestants' latest creations, if you are looking to create a significantly customized home (for your significantly customized life!), there are some things you will only be able to do in a home that you own, rather than a rental home.

6.5.  You want to eventually own your home free and clear.  If you ever want to own the place you live, free and clear of a mortgage or the obligation to pay rent, the only way to make that happen is to buy your home (and not keep refinancing or extending the term of your loan, once you do!).

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