Q: "I received a decent offer on my property but the buyer has asked for me to hold a second mortgage. What should I do?"
A: Seller Financing is becoming more common in today’s market. Traditional financing requirements have tightened significantly and in general, our ailing economy has made it more difficult for potential buyers to save money.
You may stand to benefit from ‘holding paper’ on the sale of your property. Firstly, agreeing to participate in the financing could result in a higher sale price for you and more favorable terms overall. You may negotiate the interest rate and terms, and sometimes this rate can be higher than traditional financing. You will be earning interest on your equity in the property, and in the end, you stand to make more money in the transaction. Also, you may qualify for the tax benefits of an installment sale where you can defer a portion of your gain until the loan is paid off. (Consult an accountant on this!)
There are also risks in providing seller financing. Most often, your loan is subordinate to the primary financing, and in the case of default or foreclosure, your equity may be at risk, since the mortgage in first position must be satisfied before you receive any funds. There are steps you can take to protect yourself, however, and you should seek the assistance of your attorney and/or accountant. Make sure you verify the credit worthiness of the buyer. Require the buyer to carry hazard insurance on the property and include a due-on-sale clause. Also, in some instances, you can require the buyer to carry PMI to insure your loan against default.
In summary, you should not be scared off by an offer that asks you to hold financing. With professional advice and the proper protections in place, agreeing to participate in the financing can result in a win-win situation.
Thursday, June 26, 2008
Thursday, June 19, 2008
Lease for an Apartment?
Q: "Should a lease be used when renting an apartment, whether a landlord or tenant?"
A: In most cases, the answer would be yes to protect both the renter known as the Lessee and the landlord known as the Lessor. However, it all depends on personal circumstances.
A lease should clearly define the amount of rent due, names of both parties, the rental start and expiration date.
The Lessee is protected by the terms of a lease. The property must be kept habitable per the criteria stated in the Massachusetts Sanitary Code. Also, the rent amount stays fixed per the lease. The only time a Lessor can increase the rent is at the end of the lease upon renewal. This should be done with at least a thirty days notice. The Lessor cannot ask the Lessee to vacate the property prior to the expiration date unless the Lessee is in violation of the terms of the lease. The Lessor must give at least a thirty days notice when planning on not renewing a lease.
The Lessor is also protected in a lease. The lease guarantees the Lessor that the property will be rented for a specific period of time for a certain amount of rent. There may also be certain terms that the Lessee must abide by that can protect the Lessor’s property. Many leases have clauses that prohibit smoking, clutter and loud noise. Most leases allow only the Lessee to live in the rented space to avoid overcrowding. The Lessee must also give at least a thirty days notice when planning to vacate upon the expiration date.
If there is no lease a “tenancy at will” is in effect. In Massachusetts this unwritten, and sometimes written agreement is subject to all Tenant/Landlord laws, including the thirty day notices to vacate or increase rent.
A: In most cases, the answer would be yes to protect both the renter known as the Lessee and the landlord known as the Lessor. However, it all depends on personal circumstances.
A lease should clearly define the amount of rent due, names of both parties, the rental start and expiration date.
The Lessee is protected by the terms of a lease. The property must be kept habitable per the criteria stated in the Massachusetts Sanitary Code. Also, the rent amount stays fixed per the lease. The only time a Lessor can increase the rent is at the end of the lease upon renewal. This should be done with at least a thirty days notice. The Lessor cannot ask the Lessee to vacate the property prior to the expiration date unless the Lessee is in violation of the terms of the lease. The Lessor must give at least a thirty days notice when planning on not renewing a lease.
The Lessor is also protected in a lease. The lease guarantees the Lessor that the property will be rented for a specific period of time for a certain amount of rent. There may also be certain terms that the Lessee must abide by that can protect the Lessor’s property. Many leases have clauses that prohibit smoking, clutter and loud noise. Most leases allow only the Lessee to live in the rented space to avoid overcrowding. The Lessee must also give at least a thirty days notice when planning to vacate upon the expiration date.
If there is no lease a “tenancy at will” is in effect. In Massachusetts this unwritten, and sometimes written agreement is subject to all Tenant/Landlord laws, including the thirty day notices to vacate or increase rent.
Thursday, June 12, 2008
How accurate is Zillow?
Q: "I have a confession. I am addicted to looking at property values on Zillow.com. I watch my own property value go up and down, and although it makes me nuts, I keep checking. How accurate are the Zestimates?"
A: There are many websites out there that are estimating property values and each one needs to be taken with a grain of salt. Zestimates (the property value stated by Zillow) are all over the place. We have seen them come within 5% of the sales price and other times we have known them to be off by over 20%. They rely upon data from your town’s tax assessor’s database and also upon recent sales data. The problems are many. They have no way of accurately assessing the condition of the property or of taking into account location attributes. When you call up a property, the list of comparable recent sales almost always includes properties that have nothing in common with the subject. A perfect example of this flaw is evident when you search a waterfront property on the outer Cape. You will see comparable sales listed that may only be a half mile from the subject but are light years away in terms of value, yet they are being figured into the equation.
The best way to determine the value of your property is still the human way. Hire a Certified Appraiser to do an appraisal of your property. This can cost a few hundred dollars and will provide you with the definitive value of your property. Or, ask your Real Estate Broker to provide you with an opinion of value and a Comparative Market Analysis. In preparing a CMA for you, we visit the property to assess the condition and attributes, and we do a careful comparison of your property with similar properties that have recently sold to come up with our best assessment of your value.
If you are interested in receiving a complimentary CMA, please contact us at 508-487-2430. info@provincetownrealestatenow.com.
A: There are many websites out there that are estimating property values and each one needs to be taken with a grain of salt. Zestimates (the property value stated by Zillow) are all over the place. We have seen them come within 5% of the sales price and other times we have known them to be off by over 20%. They rely upon data from your town’s tax assessor’s database and also upon recent sales data. The problems are many. They have no way of accurately assessing the condition of the property or of taking into account location attributes. When you call up a property, the list of comparable recent sales almost always includes properties that have nothing in common with the subject. A perfect example of this flaw is evident when you search a waterfront property on the outer Cape. You will see comparable sales listed that may only be a half mile from the subject but are light years away in terms of value, yet they are being figured into the equation.
The best way to determine the value of your property is still the human way. Hire a Certified Appraiser to do an appraisal of your property. This can cost a few hundred dollars and will provide you with the definitive value of your property. Or, ask your Real Estate Broker to provide you with an opinion of value and a Comparative Market Analysis. In preparing a CMA for you, we visit the property to assess the condition and attributes, and we do a careful comparison of your property with similar properties that have recently sold to come up with our best assessment of your value.
If you are interested in receiving a complimentary CMA, please contact us at 508-487-2430. info@provincetownrealestatenow.com.
Thursday, June 5, 2008
Property Manager
Q: "My partner and I just purchased a second home in Truro. We will be using it for two months in the summer. When we are not in Truro we shut the house down. Do we really need a property manager?"
A: Yes, property managers are your eyes and ears for your home when you are not here. When you are hundreds of miles away and something goes wrong, you need to have a trusted manager available to remedy that issue. A skilled property manager will have a network of contacts and vendors to call upon if needed for emergencies or home improvement projects. You can also enjoy peace of mind knowing that someone is a phone call away if needed.
Management companies in Truro usually charge on a monthly basis for a variety of home care packages. A basic management plan may be best for your needs. Always ask for references.
A: Yes, property managers are your eyes and ears for your home when you are not here. When you are hundreds of miles away and something goes wrong, you need to have a trusted manager available to remedy that issue. A skilled property manager will have a network of contacts and vendors to call upon if needed for emergencies or home improvement projects. You can also enjoy peace of mind knowing that someone is a phone call away if needed.
Management companies in Truro usually charge on a monthly basis for a variety of home care packages. A basic management plan may be best for your needs. Always ask for references.
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