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Another Type of Financing Concession

by The Mike Parker Team

Price, condition and terms are factors that any owner must consider when marketing their home.  Price is usually the easiest to adjust to compensate for shortcomings in location or condition of the home.  Improving the condition of the property is more time consuming but updates to kitchens, baths and other things can appeal to a buyer.

One of the most overlooked marketing factors are terms which are also referred to as financing concessions.

Paying part or all a buyer's closing costs is the most common financing concession.  By doing so, the buyer doesn't need as much cash to get into the home which can be attractive to more buyers. 

There is another financing concession that is not used very often in today's market but it is still allowed and can increase the marketability of a home. A temporary buy-down of the interest rate makes a lower payment for an initial period.

It is still a fixed-rate mortgage that the buyer must qualify for at the note rate and there is no negative amortization.  The seller pre-pays the interest in advance at closing so the buyer has lower payments in the initial period.

Instead of lowering the price of the home, let's say the seller has decided to offer $6,875 worth of financing concessions that the buyer can apply any way they want.  One way might be to get a 2/1 buy-down which means that the first year, the payment would be based on 2% less than the note rate of the mortgage and the second year, it would be 1% less than the note rate.  The third through thirtieth years, the payment would be the actual note rate.

On a $275,000 home with a 3.5% down payment at 5% for 30 years, the first year's mortgage payment would be figured at 3% which would be $305.76 less than normal.  The second year's payment would be figured at 4% and would be $157.65 less than normal.  The third through thirtieth years, the payment would be the normal payment of $1,424.59.

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It would save the buyer $5,560.90 in interest in the first two years and there would still be $1,314 of the financing concession to apply toward the buyer's closing costs.

The financing concessions paid by the seller give the buyer lower payments for the first two years and less money needed for the closing cost.  An added bonus for the buyer is that the buyer can deduct the pre-paid interest the seller paid as qualified mortgage interest.

Some lenders may tell you that temporary buy downs cannot be done.  They've been around for over thirty years and can still be done today on FHA, VA and conventional loans.  Call (859) 647-0700 if you need a recommendation of a trusted mortgage professional or check out a 2/1 Buydown with your own numbers.

Friday HOME MATTERS

by The Mike Parker Team

Our weekly round-up of real estate-related tips and advice from around the web- Enjoy! 

 


  

In an ideal world, your family would sit down at a reasonable hour every night for a hot, made-from-scratch meal. There’d be no phones or TV. Nobody would be fidgeting. And conversation would be fun, interesting and a reminder to everyone of how much they love and appreciate one another.  
 
The reality for many people is more like meatloaf hitting the fan. Unpredictable work schedules, after-school sports practices, last-minute grocery trips, fidgety children and distracting screens can make family dinners something to dread rather than look forward to. 

 

It’s a nightmare situation: You’ve spent months searching for your dream house, finally get an offer accepted, and then…the house doesn’t appraise for the agreed-upon price. 

 

Now what? 

 

Green paint colors are making a comeback. When Pantone announced Greenery as its 2017 Color of the Year, the bright, grassy shade tapped into our desires to connect our homes with nature. Another year, another excuse to buy a succulent! (Am I right?) But even though we always endorse adding a little more plant life to your space, we think it might be time for a bolder move: green paint. 

 

Spring brings out home buyers en masse. But in these waning days of winter, many home sellers are still hibernating. Well, it’s time to wake up! Although technically the peak home-buying period is still a few months away, the time to get your home in shape to sell is right now. 

 

Many homeowners face a particular set of perils in wintertime — potential mishaps that could lead to property damageinsurance claims, and even lawsuits. Take a look at some of the most notorious winter home-insurance claims, then learn how to reduce your risk. 

Four Reasons to Rent Your Retirement Property

by The Mike Parker Team



If you have a vacation home that you had hoped to retire to some day but have since changed your mind, don’t jump to sell it…consider renting it out instead.

For many, it seemed like a great idea to buy that vacation condo 20 years ago. The plan was to vacation there as often as possible, then some day sell your primary residence and retire there for your Golden Years. But lifestyle changes or financial situations might now be causing you to consider selling it instead.

However, as a member of the Top 5 in Real Estate Network®, I have seen many a client successfully rent a retirement home instead of selling it. Author Christine Karpinski, director of Owner Community for HomeAway.com (HomeAway.com), offers some good reasons to consider renting your second home:

1. Circumstances have changed. Maybe grandchildren have arrived on the scene and you can't bear the thought of moving hundreds of miles away from them. Or your parents are in poor health and need you nearby.

2. You've suddenly realized there's no place like home and you've simply changed your mind. You've decided you like being near your friends and you don't want to leave your church or synagogue. Renting your second home out during the time you are not staying there makes it financially feasible to keep both homes.

3. You've decided to "retire" from retirement. These days, it’s not unusual for people to test-drive retirement and find that it's just not for them. Work can provide many rich rewards—structure, social interaction, mental stimulation, a sense of purpose, and so forth—that people keenly miss when they retire. And, let's be honest—sometimes people simply can't afford to retire.

4. Your fixed income hasn't kept up with your lifestyle. Even when you're happy to give up the daily grind of your job, losing the paycheck that comes with it can be pretty painful. Factor in inflation, rising taxes, and unexpected "new" expenses, and you may find that what seemed like a manageable cost of living five years ago doesn't seem that way anymore. Your second home, even if it's paid for, may start looking like a liability due to property taxes, homeowner's association dues, and maintenance costs. Not if you rent it out, says Karpinski. Then it becomes a source of new income.


So don’t give up and seek to unload your second home just yet! There are still many ways to make this investment pay off. For more information on renting or buying a second, potential retirement home, please e-mail me. And please forward this email to any friends and family who could benefit from these insights.

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Photo of Mike Parker - CRS Real Estate
Mike Parker - CRS
HUFF Realty
60 Cavalier Blvd.
Florence KY 41042
859-647-0700