Dear Michael: My mom passed away and I am putting her house on the market. My Realtor wants me to get rid of most furniture and the obvious clutter that was accumulated over the years. Will getting rid of her belongings really help the sale?
Answer: Absolutely! It’s difficult for many sellers to envision, after so many years of living in the same home and being content with his/ her surroundings, how much more appealing a home will look once it is spruced up. First impression is the most important! Real estate offers no room for second guessing; be willing to do whatever it takes to achieve the highest possible price. This is a seller’s market so I suggest you take advantage of the times…make sure your property stands out, not only by pricing it right but also by making it attractive for all buyers. Your realtor knows best… Good luck!
Dear Michael: Is there a formula to determine how much I can afford to pay for a house?
Answer: There is no simple answer to this question. A “formula” is going to fall short of looking at all the details of your budget, your costs, etc…to determine what really makes sense for you. Consider two employees of the same company that have the same salary and identical savings, credit card, and car debt . . . one of those employees has no children, and the other has two. Obviously, though they make the same amount of money the household budgets of those two potential buyers are going to be substantially different for many years to come. A bank cannot discriminate, but a prudent buyer will have to consider real costs in order to arrive at an affordable payment. Fannie Mae and Freddie Mac indicate, as a guideline only, that the cost of the house payment itself (that is, mortgage, taxes, insurances) should be no more than 28 percent of the gross income (before taxes). Additionally, when factoring in other debt as well as the mortgage (student loans, credit card payments, car payments, etc.), in some cases a lender will allow even more leeway. A lender may allow up to 45-50 percent of the gross income to be used in qualifying, provided the lender is assured that the borrower has substantial savings, good credit history of handling similar payments such as comparable rent and stability. To determine how much you can afford, consider the following: What are your exact household expenses going to be in the new home? How different is that from your current costs? are you currently saving the difference each month? Would you be able to do so? Try living at the same cost standard as your new home for a few months. How much do you have in savings? Would you have enough in a “rainy day” fund if things were difficult for a few months? How do you expect your income and expenses to change in the coming years? What payment number “frightens” you? What do you think you can handle? When you conclude what makes sense to you, talk to your lender . . . using your level of comfort and his/ her numbers, you should be able to arrive at a comfortable figure.
Dear Michael: I am interested in buying a home. Should I allow the listing real estate agent to represent me as well?
Answer: What you are talking about is called agency. There are three types of agency relationships: buyer agency, seller agency and dual agency. The buyer’s agency discusses how the agent is to be compensated for the work he/she is doing for the buyer. The seller agency’s agreement is covered within the listing agreement. Obviously, through the listing agreement the seller and his/ her agent will have discussed the terms of the agreement including what the seller is willing to accept for the property. Compensation to the listing firm and how it is divided is also covered in this agreement. Dual agency can come in two forms. The first is when the brokerage firm has the listing and has a different agent within the same brokerage represent a buyer and one the seller. The second is when the listing agent himself brings a contract to the seller and represents the buyer as well. Dual agency at the company level as far as having agents within a company bringing their clients to see a listing represented by the same company should not cause any problems or raise any eyebrows. But, when a listing agent offers to represent both sides of the transaction, caution is advised as no party should go unrepresented. That is how real estate transactions can remain fair and impartial as well as giving all parties to the transaction an equal chance of getting the highest and best value for their dollar.
Michael Kayem is a Realtor with Re/max estate properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at (310) 390-3337 or e-mail them to him at: homes@ agentmichael.com.