Real Estate Rapture

Sometimes when we list a home we may be guilty of assuming too much.

Here are some facts we should verify:

1)  Who owns the property?  Seems obvious, but sometimes things are not recorded in the county records properly, and it may turn out that a few phone calls will fix things, but whoever the owners are, those are the ones that should be named on the listing and on the sales contract.

2) If you're listing a portion of the property, are they able to sell it?  For example, we recently had clients that wanted to sell a few acres off of their farm to raise some money to do some remodeling on their home.  It turned out that the bank that held the mortgage needed to release the land even though the house and remaining acreage far exceeded the remaining principle on the loan.

3) Is it going into foreclosure?  If the owners are about to lose the property back to the bank they may not tell you, but if you get a contract on the property and it's two days before closing that is not the time to find out that the bank has to approve the contract because it's too late then.

4) Is it really on sewer & water?  I heard of a house where the current owner and her son the REALTOR said it was on sewer.  A year after the new owners moved in they found out it was on a septic tank.

When we have ways to verify things about our listings we should make the effort to do so.  It can save a lot of trouble down the road.

God is good!

Randy Fry - Broker/Owner
http://www.GreatCommissionRealty.com/permanentreferrals
We're On A Mission!
Home of Permanent Referrals
mailto:realtorrandy@randyfry.com
Ph: (417) 889-3558

An "as is" property is sold without a warranty as to condition, repairs, or structure. With an "as is" sale, the buyer is on notice that the seller makes no promises regarding the property's physical status. With an "as is" sale, it is extremely difficult to make a claim against a seller if something is found to be wrong with the property after closing. "As is" clauses should be seen as an absolute requirement to make the transaction contingent on a professional inspection "satisfactory" to you. With a properly written sale agreement contingency, if you are not satisfied, then the deal is dead and you can get back your deposit in full.  

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

Overall, buyers are looking for a home that looks clean, neat, and well maintained. By addressing exterior issues, you immediately give your buyers a positive “first impression.”

Here are 13 first impression items to examine:

Tip #1: Get into your car and drive away from your home. Drive towards your home the way a potential buyer would. Notice your first impressions of your home? Is the landscaping well groomed? How about the driveway and curb? Can you easily see the architecture of the home, or is it blocked by trees and bushes. Notice your roof? Is it in good condition? Make a list of items that need attention.

Tip #2: Paint your front door and mailbox. Polish your door and entry hardware.

Tip #3: Make sure your doorbell is functional.

Tip #4: Wash or thoroughly clean wood, aluminum and vinyl sided homes. You can hire a contractor to pressure wash an entire house for about $200. Pressure washing can remove dirt, grime, peeling paint, and mildew.

Tip #5: Rake leaves, trim shrubbery and trees, cut the lawn, and plant a few new, fresh flowers. Put down fresh mulch or peat moss around shrubs and flower beds.

Tip #6: Sweep and hose off the walkways and driveways. Pressure wash if necessary.

Tip #7: Clean the gutters and extend downspouts to prevent flooding or basement water seepage.

Tip #8: Organize the garage. Get rid of clutter by either putting it in boxes, or pack ahead of time and rent a storage locker for your garage belongings. Make sure you wash your car.

Tip #9: Check the locks of your home – both entry, back entry, and garage. Locks can give a first impression of a home that’s needing maintenance. And they’re the first thing a buyer sees. A small dab of graphite will make them work like new.

Tip #10: Clean oil stains from your driveway and garage. This is best achieved by using poultice with Portland cement. Scrub with a detergent and rinse. Clean rust stains beneath rails with the commercial product, Zud.

Tip #11: Clean up any litter in the yard or walkways. Remove any leaves in the yard or walkways.

Tip #12: Touch-up the paint on the exterior of the home if necessary. In some cases it pays to repaint the entire exterior if it hasn’t received a coat of paint in years. Hardwood trim on the exterior of the home can make or break its appearance. Make sure it looks clean.

Tip #13: Look for any cracks in exterior plaster, and make sure they’re fixed and repainted to match exterior paint.

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

You can usually tell what issues I've had by the content of my blog...

This week I have had issues trying to get more interior & exterior photos and aerial photos or plats from listing agents. 

I email a lot of clients information on properties.  When they see something they like they often have questions.  Sometimes the questions include a request for more photos (interior & exterior).  Sometimes they want to know the property lines.  Thanks to the MLS most of the listings I email to my clients are not mine, so I contact the listing agent(s) and ask them if they could post more photos or if they could email or fax me plat maps and/or aerial photos.  A) Sometimes the listing agents answer promptly with pictures or plats.  B) Sometimes I don't even get a reply.  C) Sometimes the reply comes back that if I want more photos that I should go take them myself...

Which response do you think is the most professional?

Which response does the best job for the seller, the listing agent's client?

I think A is the most professional and does the best job for the seller.

I understand that not all agents have email.  I understand that not all agents check their email regularly.  I also understand that I do have my own digital camera and I am capable of taking the photos myself and do so in many cases.

The truth of the matter is the listing agent has the most use for the additional photos.  They can use them over and over and over to email to interested parties.  Typically, I only email photos of listings that aren't mine one time.

I hope my response is always in category A whenever another agent contacts me for more photos, plats, or information on one of my listings.

God is good!

Randy Fry - Broker/Owner
http://www.GreatCommissionRealty.com/permanentreferrals
We're On A Mission!
Home of Permanent Referrals
mailto:realtorrandy@randyfry.com
Ph: (417) 889-3558
Fx: (888) 296-5662

Many people go about the home finding process backwards. They go through the entire process of searching, evaluating, and writing an offer on their home, WITHOUT being financially prepared.

And it usually costs them money. Big money!

Doing a few things up front, BEFORE you go searching, will save you a lot of money, time, and hassles. What are those things?

Here are 3 of them.

First, find a MOTIVATED lender. No, don’t just go down to your local bank where you’ll likely to be slowly tortured by some bureaucratic “vice president” who makes his bonuses and gets promoted according to how much paperwork he creates (at YOUR expense) and how many DECLINES he produced.

You see, the only quota a banker has to live by is: “How many BAD loans did you originate?”

They don’t get measured by their production…

They don’t get measured by their service…

They only get measured by the MISTAKES THEY AVOID!

Now, we know if your local banker sees this, he’s going to blow a cork, and start reciting all the ad campaign jargon most banks are spouting these days. But the truth is…

There Is Absolutely NO Incentive For A Traditional Banker To

Serve Your Interests In Any Way

What you want to do is find a mortgage lender who is MOTIVATED to take your loan. One who represents many different products, and can offer you many options for making your loan most affordable.

Here’s an important tip: Ask your REALTOR to refer one or two lenders to you. Why? Because REALTORS have power over lenders, because they send lots of clients. It’s not just YOU alone talking to them.

If they don’t give you first class service, the REALTOR who sent you will refer (ALL) their clients to someone else. So they’re motivated to SERVE YOU. And the minute you have a problem with your loan, you can turn to your REALTOR…who has much more influence and leverage over the lender than you alone.

After all, your REALTOR and lender both want to see the transaction close. There’s power in numbers and influence. Use it to your advantage.

Now, the second thing you want to do is GET PRE-QUALIFIED with a lender. Better yet, try to get PRE-APPROVED.

Why?

Because the first question any home seller will ask when an offer is presented is “Is your buyer approved for a mortgage?”

And rightfully so! The seller doesn’t want the deal to fall through because you couldn’t get financing. When they accept your offer, their home comes OFF the active market. If you fall through, it costs them time and money.

Plus, there’s one more reason to get pre-qualified or approved…

You Will Have Much More Power To Negotiate

Price And Terms When You’re Financially Qualified!

When you have money behind you, the seller knows you’re serious. And a serious buyer ALWAYS has more influence to negotiate. So do yourself a favor, GET PRE-QUALIFIED or PRE-APPROVED!

Now, the third way to become financially prepared is to have deposit funds available immediately. One way to do this is to write a check in the amount of 3% of the highest price you’ve been qualified for financing.

Make the check out to the Brokers Escrow Account, or the Title Agency you will use. The broker or title companies are trustworthy fiduciaries by law, and will hold the check un-cashed until you make an offer that’s accepted.

Now I know what you’re saying… “Pigs will fly before I write a check before we’ve even located a home.” I understand.

But you may want to consider this…

Jim and Susan were buyers from outside their immediate area. Because of their distance, they could only get together with their agent with 2 days notice. And the market was pretty good.

Three homes came on the market, and were sold before they could get together to visit them. Twice, they lost other deals because of bidding wars.

Finally, out of frustration, they placed an un-cashed deposit with their broker.

When they finally found the right home, they decided to write an offer…

And because they placed an un-cashed check on deposit, their agent could enter negotiations with verbal authority to make the offer. And because the agent could demonstrate that he had earnest funds, the buyers were able to sign a faxed copy of the offer, and their deal was secured.

And it’s a good thing! The very next day, 3 more offers came in on the home they just put into escrow! 

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

Potential buyers are much more likely to return to a home that impresses them at first glance, while homes that appear disorderly or poorly maintained seldom sustain buyer interest.

1. The first (and largest) area of concern is home odors. As homeowners, we become desensitized to the odors in our homes, we rarely realize how obvious odors can be to visitors. This is particularly true of those who own pets and smoke.

2. Carpet and flooring. One of the most visible areas of your home is your flooring. If your carpet is worn or dirty, get it replaced or cleaned. If you have vinyl flooring with corners coming up, get it glued down. Special note: Replacing flooring in smaller areas, such as kitchens, with high quality flooring can bring in a premium in price.

3. Paint and Walls. Paint is one of the least expensive ways to “spruce-up” your home. Consider painting outside trim, and interior walls and doors.  Also consider painting walls that have colors that don't appeal to the masses. Neutral is better for trying to sell.  Wallpaper is also a personal taste issue.  Buyers often write homes off their list if there is wallpaper.

4. Get rid of Clutter. Excess clutter is a big buyer turnoff. You have to move anyway, so you might as well pack away items that make your home feel good to you, but turn off buyers. This includes knickknacks, extra furniture, pictures, hangings, plants, etc.

5. Signs of mice, rats, roaches, spiders or bees. If you have any of these symptoms, you should immediately contact a local pest control company and have them eliminated. There’s no better way to show your home is filthy than by infestations. Remove all spider webs with a broom.

6. Poor landscaping. If your landscaping is messy, overgrown, or looks cluttered in any way, you need to fix it. Buyers make positive or negative conclusions about your home within the first 5 minutes. Don’t lose the battle before you’ve even begun.

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

Have you ever asked someone a question, listened to their answer, and know in your gut they really didn't know that they were just trying to convince you they did?

Me too.

Did their behavior instill confidence and trust for them in you?

Me neither.

Why do our clients ask us questions?  Because they want or need to know the answer.  Often, they use our answer to base decisions on.  Buying or selling real estate is no small decision.  That's why I believe that when I don't know the answer, and that happens now and then, that the best answer is "I don't know, but I will find out.".

Then, at my first opportunity I find the answer and then I get the answer to my clients.

It's a chance we have to provide service for our clients.  That's what it's all about.

Honest answers, besides just being the right thing to do, are easier to remember!

God is good!

Randy Fry - Broker/Owner
http://www.GreatCommissionRealty.com/permanentreferrals
We're On A Mission!
Home of Permanent Referrals
mailto:realtorrandy@randyfry.com
Ph: (417) 889-3558

Years ago a real estate expert told me that the party who is less motivated almost always gets the better deal. The ONE single element that will determine how well you negotiate your offer is…

How MOTIVATED Is The Seller,

And How MOTIVATED Are YOU?

If the home has been on the market for over a year, perhaps it’s because the seller hasn’t been motivated enough to sell. Or perhaps the home hasn’t sold and he/she is very motivated.

And if you’ve been looking for 4 months, your kids are late for starting school this year because you haven’t found a home yet, and you now have found the right home, YOU may be very motivated to buy!

Nevertheless, here’s a tip you MUST bring to any real estate transaction…

Move Heaven And Earth To AVOID Emotional Attachment

To The Home You’re Considering

If you’re all giddy about the home. If you can’t hold back your emotions when around the home, then you’re going to get clobbered when negotiating the purchase.

And that’s ONE reason why you need a REALTOR representing you during any transaction. The middle person alone will help save you money.

So let’s say you have a REALTOR representing you (make sure it’s a BUYERS agent, or you could lose a bundle!), and you’re ready to write an offer.

What’s the single best piece of information you can have?

It’s the comparable sales and market data for the entire market, and the area. Ask your REALTOR to print out both for you to use. Now, here’s what you want to do…

You want to take a look at 4 important “market tell-tale signs:”

1. Take a look at the currently active (for sale) listings in the area. Was the home you’re considering priced within reason to other homes? If so, you know you’re at a reasonable starting point.

2. Now, take a look at what the average selling price is compared to the listing price. You may notice that most homes are selling for about 3 or 4 percent less than their offer price. If that’s the case, you know the original offers were LESS than this amount. Take this into consideration when making your offer. And leave plenty of room for negotiating.

3. Now, make sure you visit several of the other listings in the area. How does the home compare to the other homes? Is the home you’re considering in similar shape? Is it better sited? Is it bigger, smaller, better style, better landscaping, etc.? These factors will help you determine how much you should pay for your home vs. how much others paid for similar homes in the neighborhood.

4. Now, take a look at the average market times for homes in the area. If they’re long (evaluated on a market by market basis), the market may be soft, and you might have more negotiating room with your offer.

You’re now ready to make your offer. At this point, I highly recommend you work closely with a BUYERS AGENT to structure your offer. They will talk about strategies such as 1) should you offer a high price and ask the owner to throw in all kinds of extras, or 2) offer a low price and skim your way into the neighborhood?

The correct answer depends on your personal situation. And you need to work closely with your REALTOR to strategize your offer.

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

Do you remember the old riddle that goes, “What do you call the person who graduated dead-last in their medical school class?”

Answer: “DOCTOR!”

Well, it’s the same with REALTORS. Someone with vast experience and extraordinary professionalism usually costs the same as someone with little or no experience, or with compromising standards. You need to know how to tell the difference up front.

Bringing competence and experience into your transaction may mean the difference between a higher negotiated sales price and losing money, selling in less time or in more time (costing you potentially thousands in added interest), and experiencing problems and hassles or a problem-free transaction.

Our community is loaded with REALTORS who are WRONG for you, your area, and your home. Some agents are in business part time for a little extra cash. Others are subsidizing other businesses or careers. And then there’s your “cousin Harry,” whom you feel obligated to because he “really needs your business.”

Selling your home is probably the most important financial transaction you will ever make. That’s why we take our business so seriously.  We're both full-time REALTORS and we take pride in what we do.  We strive to meet & exceed your expectations because in our business referrals are critical.

Billboards don't make a REALTOR good, neither does working in an office of 300 other agents.  Bringing buyers and sellers together for a win-win real estate experience is what makes a REALTOR good.

Being self-employed, a real estate agent also has to be self-motivated.  We all have 24 hours a day, but how we spend them can dictate our satisfaction level and our success.

Ask yourself questions and give honest answers.

What does a typical day of work look like for you?  It might amaze you as much as it amazed me when I did this.

If it involves arranging your stapler or sorting paperclips then it sounds like you need to revise your strategy.

Instead of beating yourself up, how about getting over it, and getting on with it?

Learn from what did not work so that you will never venture down that road again.  If you haven't made mistakes, then learn from someone that has.  It's less expensive and less time consuming that way!

Have a plan and work it.  If you don't have a plan for your business then your chances for success will suffer the consequences.  How many people a day will you talk to about real estate?  How many new people will you meet a day?  How many expireds will you contact?  How many FSBOs will you mail to?  Have a checklist, complete it as early in the day as you can, and do it religously and you will see results.

Evaluate what you do and what you spend to determine if it contributes to your bottom line.  If not, what can you change to make it contribute?  If it doesn't contribute, it might need to be eliminated.

Embrace technology.  If your computer is too slow, upgrade it.  If your internet connection is too slow, upgrade it.  If you have to drive clear across town to get a fax, or you're spending a fortune on toner for junk faxes there's a company that for just $10 a month provides you with a dedicated fax that you can put on your business cards, and then when a fax comes in it comes to your email!  You can decide if you need to print it or just save it to disk or maybe even just delete it!  This tip alone could save you several hours and several dollars a week!

Focus on the positive not the negative.  Simple?  Maybe not, but practice it and it gets easier.  We all have problems, but if we focus on them they control us instead of us controlling them.

Be generous.  This isn't always about money but sometimes it is.  Give part of your time/income to those less fortunate, and there are always those less fortunate than we are.  It's also a great way to meet people!

Don't sit at your desk arranging your stapler or sorting paperclips.  Don't hang around the coffee pot at the office exchanging horror stories.  Don't look at the mega-agents and feel sorry for yourself.  Instead, look at them and find out what they do that you could do, and maybe you could do it even better.  Do it long enough and it will pay off!

God is good!

Randy Fry - Broker/Owner
http://www.GreatCommissionRealty.com/permanentreferrals
We're On A Mission!
Home of Permanent Referrals
mailto:realtorrandy@randyfry.com
Ph: (417) 889-3558
Fx: (888) 296-5662 (one of those $10 a month fax numbers)

One of the biggest mistakes people make when buying homes is they rely solely on “local neighborhood market analysis information” to determine the right price to pay for a home.

Before you buy or refinance your home, INSIST on seeing a “total market overview” of exactly what is going on in the ENTIRE market. Then narrow your analysis to local market information.

Why do I say this? Because you want to know 2 things: 1) What is the ENTIRE market doing with values? Are they going up? And by how much? 2) What is the specific area doing with market values? How does it compare to what the total market is doing? Are the growth rates the same, lower, or higher than the overall market?

Understanding these parameters will save you thousands of dollars when you make an offer on a home. I frequently perform both of these analysis for my buyers, in an easy to understand format, so you know EXACTLY what you’re buying!

OK, so let’s say you’re now pre-qualified with financing, and you’ve also found a number of homes to preview.

The Way You Inspect A Home For Sale Can Save You

Enormous Amounts Of Money And Time

It’s now time to find not only a home that fits your needs, but also a home that will be a good investment. What are some of the things you should look for?

Well, the first thing I always look for is what I call “siting.” Siting involves evaluating 3 areas: Location, Lot siting, and Home siting.

The general location of the home you’re considering could determine how happy you’ll be living there, and what kind of an investment you’re buying. Here’s an important tip that will almost always make you money…

Buy The Midrange Home In The Best Neighborhood You Can Afford

Why do I say this? Because the better the neighborhood, the better the appreciation for you over time. And if you buy the midrange home, the home will “generally” appreciate faster and greater than a higher priced home in the same area.

Plus, you will most certainly spend money updating or decorating your new home, and you don’t want to get “upside down” on your homes value after spending money for improvements. So remember…

NEVER Buy The Top Of The Market!

Now the second area you need to consider is Lot siting. Lot siting has to do with WHERE your particular lot is located in the subdivision you’re considering. Ask your agent for a plat map of the entire subdivision. Now take a look at where your home’s lot is located in the subdivision.

Is it near a common area? Does it capture better views than other lots in the area? Is it more private, or shaped better than other lots? Is it near a loud street?

Lot siting in a neighborhood will give you a basis for knowing how well the home will appreciate vs. other homes in the neighborhood (assuming the home is reasonable).

Finally, you want to look at the Home siting. How well did the builder take advantage of all the amenities the LOT offers a home? Are the views great? How’s the curb appeal? Is there a balance between front and back yards? Do you see any drainage problems because of where the home has been located on the lot?

Think through these things as you visit each home.

Now, as you approach your home, there are other things you want to keep in mind…

1. What is your initial reaction of the home as you approach it from the street? This is called “curb appeal,” and it has a great impact on the value of the home. Is the home sited right on the lot? Notice the areas around the home? Are they well maintained? Is the landscaping groomed?

2. Take a look at the structure of the home? As you go through the home, windows and doors should be square, and they should close correctly. Look around windows and doors for cracks. Check corners of rooms for sloping or tile/wood cracks. These may reveal foundation or water problems.

3. Now think about the floor plan of the home. Is it functional? Do the common areas flow the way you want them to? Are the halls narrow and long, or are they open? How far will you have to carry the groceries from the garage? Are the rooms the right size and height for your desires? If there have been any additions, were they done professionally? Do they fit with the flow and style of the home?

4. Now, check the roof and ceilings. Is the roof the type you prefer? Is it in good condition? When was the last time the home was roofed?

5. Now make a basic check of the plumbing, mechanical, and electrical systems. Do drains and toilets work correctly? Is the property connected to sewer, or will you have to deal with a septic system? Is the electrical wiring up to code? And are the mechanical systems working properly? Make sure you get these systems inspected by a licensed contractor or inspector BEFORE you close any deals.

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558 or Toll Free (877) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

April 2007 has closed and it's time to see what homes have the honor of lowest & highest priced home to sell for the month.

This northeast side fixer-upper sold for $16,900.

This southeast side estate sold for $1,950,000.

We have homes for all budgets!  Drop us an email.

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558
http://www.RandyFry.com - Search 9,000+ Listings!

Just about every agent has good intentions about helping you sell your home. But situations and circumstances change. The agent might have personal problems, or simply decide to retire or get out of the real estate business.

Or other situations may arise where the agent isn’t doing his or her job as you expected. The home may not be getting the exposure you desire. Or perhaps you haven’t heard from your agent in 6 weeks! What do you do now?

When this happens, you should have the right to fire your agent. But the listing agreement you signed is with the BROKER, not the agent. If you’re unhappy, the broker may assign your home to another agent – someone you neither personally selected, nor do you want. But you’re stuck with him or her until the listing agreement expires.

And that can cost you a lot of money.

Always protect yourself by 1) carefully selecting the right REALTOR, and 2) make certain that in a “worst case” situation, you have the flexibility to cancel your listing agreement.

That’s why I offer a compete 100% Guarantee of my services. I place my priorities with yours – to do everything possible to sell your home for top dollar, as fast as possible, with no hassles or headaches. If at any time you’re unhappy with my services, please let me know. If I cannot rectify the situation, you can FIRE ME. No questions asked. Ask any other REALTOR to match my guarantee. You’ll find most get very uncomfortable when you put their feet to the fire to perform.

Your ability to afford a home will be related to a number of items. They are…

1. The PRICE of the home;

2. Your DOWN PAYMENT on your home, and thus the amount financed;

3. The INTEREST RATE and POINTS of your loan – the amount a bank charges you for the money;

4. The TERM of your loan: 10 year, 15 year, and 30 year.

5. The overall TYPE of your loan: Most common is fixed vs. variable rates. But there are hundreds of loan packages to choose from.

And just in case you were looking for a specific “rule of thumb,” for financing your home, you should know that…

There Are NO General Rules Of Thumb About Financing Your Home.

Each case is different, and your personal financial circumstances will have an impact on how much home you can afford.

However, you MUST understand the relationship and impact interest rates, term of loan, points, and type of loan can have on your overall financial picture.

Let’s start with the “amount financed” first. Many people often pay cash or put 20% or more down as equity. The reasons they do this are…

“The bank required us to…”

“We’ve just always put down this amount…”

“We wanted a lower payment.”

Problem is, these reasons could cost you thousands of dollars.

The answer for how much you can put down on your home is different for most people. However, we have learned over time that…

Many People Put Down More Cash On Their Home Than They Need To,

And Could Have Received A Better Return On Investment Had

They Invested The Money Instead Of Putting It Into Their Home

Here’s a simple and fast way to “ballpark” the actual annual return on investment you get from the money you put down on your home:

1. Take a look at the homes in your area. How much have they appreciated, each year on average, over the past 5 years? For example, you might find that values have increased an average of 1.5% a year.

2. Now, take the total cost of your home, multiply that value times 1.5% (the average expected annual appreciation of your home). For example, a $150,000 home increasing value at 1.5% for the first year. Thus, the home will be worth $2,250 more a year from now.

3. Now, divide the amount of increase in your home ($2,250 in the example) by the total amount of Down Payment you put into the home. For example, if you put down 20% (or $30,000), then $2,250/$30,000 = 7.5%.

Now 7.5% sounds like a fair investment. But the question you need to ask is this: Can you make more than 7.5% elsewhere?

And did you notice something else here? Had you put down just $15,000, your return on your Down Payment would be 15%!

The moral of the story: Putting more money into your home may make your banker happy; because it lowers the risk of getting his money out if you default.

And it may make your overall payment a little lower…

But it may be a wiser decision to put less into your home, IF you can locate an alternate investment that will pay greater interest on your hard-earned equity.

Now, let’s shift gears a little and talk about the impact Term and Interest rate will have on your overall financial picture…

How INTEREST RATE and TERM can make or COST you thousands.

Mortgage lenders toss around interest rate numbers as if they didn’t matter.

They DO!

And to illustrate the impact interest rates can have on your overall financial picture, we’ve presented a table below showing the interest you pay over the term of a 30 year, $150,000 loan at 8%, 7% and 6%.

And here’s the clincher: Just ONE percentage point on a $150,000 loan can cost you almost $37,000 over the term of the loan! TWO percentage points will cost you over $72,000!!

Your banker might tell you his “slightly higher rate” is only a matter of $103 a month in payment. But YOU should know better! Take a look at the table below…

That’s money taken out of your pocket if you don’t look for good rates!

And if you think interest rate has an impact on your overall financial picture, take a look at what modifying the TERM of your loan can do…

Here’s another example of a $150,000 loan at 7% interest. But this time, we examine the total interest paid when you select a 30-year vs. a 15-year vs. a 10-year amortization…

The “bottom line?” Estimate the maximum amount of payment you can afford, and adjust TERM and INTEREST RATE of your loan to minimize the amount of total interest you’ll pay.

But then your banker cuts in and says, “but the interest you pay is Tax Deductible…” And you should know this: If you’re in the 28% tax bracket, for every dollar in interest you pay, you only save 28 cents. Don’t go spending a dollar to save 28 cents if you can help it!

Here’s How To Instantly Know How Many Points You Should Pay…

Another consideration in the formula is the amount of POINTS your lender will charge you to initiate your loan. And what you’ll notice is there’s a GAME being played with you.

And if you don’t know the rules of the game, YOU LOSE!

Sitting across from a banker while he throws obscure numbers at you like you’re a human dartboard can be pretty overwhelming. And frequently you’ll hear terms like “7.5% with 1.5 points,” or “7.25 with 1 point.”

All-the-while you’re thinking to yourself, “I have no idea what the financial impact of this guy’s blabbering means to me.” And quite frankly, your banker knows…

The Less You Know About What You’re Paying

The Better For HIM!

So hopefully this little “ballpark” example will help you quickly determine the best points-to-interest rate for you. How many points should you pay, and what formula is best for you? Here’s a little help…

If a banker is giving you several options of interest rates and points, you need to sort out the financial consequences so you don’t lose money. Say, for example, you were considering 2 loans. Both are for $150,000, and both are 30-year amortization.

DEAL #1: One loan he offers you is 7.5% with 0 points for origination…

DEAL #2: Another loan he offers you is 7%, but he wants 2 points to originate the loan.

What’s the ONE factor that will determine which loan is better?

How LONG You Keep The Loan!

The first thing you need to think about is how long you’re going to live in that home. The average homeowner spends about 5.5 years in their home before selling for whatever reason.

So, for example sake, let’s say you plan to live in the home 5 years. Here’s how you determine which deal is better…

1. Take the difference in monthly payments (principal and interest only) of EACH loan…

2. Multiply that amount by 12 months to get the annual amount of difference…

3. DIVIDE that amount into the $$ amount of points you pay to determine the number of years at which you recover the points paid up front. If the number of years is LESS than your anticipated time in your home, you’ll be better off paying the points and getting the lower rate. If it’s higher than you plan to spend in the home, opt for the lower points.

Here’s an Example…

1. The difference in monthly payments is $51 a month ($1049 - $998 = $51).

2. $51 X 12 months is a savings on (approximate) interest of $612 per year.

3. Total Cost Of Points divided by $612 is 6.13 years ($3,750/$612 = 6.13).

The result? If you stay in your home for 5 years, you will NOT recoup the points you paid up front with the savings in a lower interest rate. Recoup time is about 6 years and 2 months to breakeven.

So your best bet would be to select loan #1.

If, however, you planned to keep your home beyond 6 years and 2 months, you’d be better off with loan #2 (i.e. the overall savings in interest rate will exceed the amount you paid in points – not considering the time value of money).

Are you starting to see how important it is to understand your home’s financing? How important it is to shop for the best rates, terms, and points?

Good! Now, let’s move on to another important secret for buying your home…

God is good!

Randy Fry - Broker/Owner
Great Commission Realty - We're On A Mission!
mailto:realtorrandy@randyfry.com
Office: (417) 889-3558 or Toll Free (877) 889-3558
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