Resources

Few things in life inspire such uncertainty and fear as buying or selling a home, so we'd like to share our knowledge with you as time goes by to help make that a little less stressful.

Glossary of Real Estate Terms

One of the things we have learned in our years in real estate investment is that an informed customer is a happy customer. We have created this resource section for our users with the goal of helping you understand our industry. We feel that the more you know about our techniques and language, the more comfortable you will be with the decision to sell your home with us.

Home Selling Tips from Professionals

You can sell your home yourself.
Use these professional home selling tips to help you get the best price.

Selling a House is Easy

The thought of selling a house strikes fear into most people. The contracts, the legalese, the exorbitant costs — they all conspire to make the experience unpleasant at best, and a nightmare at worst. But it doesn't have to be that way.

"We Buy Houses" Scams — How to Spot Them and How to Avoid Them

There are many reasons why a home owner would want to sell a house fast. Job change, relocation, debt problems, divorce and inheritance are just a few. Unfortunately, people in need also tend to attract predators who have no problem profiting from someone else's misfortune.

Stop Foreclosure: Protect Your Credit and Keep Your Home

Every day thousands of people across the U.S. fall deeper into debt, often through no fault of their own. Left unchecked, this debt ultimately threatens their number one asset, their home, through the process of foreclosure. It doesn't have to end there, though. There are ways to stop foreclosure, protect your credit and keep your home.

The U.S. Department of Justice vs. the Realty Industry, and Its Effect on Consumers

From the National Association of Realtors' Virtual Office Website policy, to laws and regulations in individual states across the country, the U.S. Department of Justice has been fighting since 2003 what it believes are illegal practices by the U.S. realty industry that harm the American consumer. The issues can be complex at times, but understanding what's going on can be very valuable when buying or selling a home.

Why "Average Sale Price" Statistics are Misleading

One of the most common statistics used when gauging the strength of an area's real estate market is the average sale price of its homes, but looking into that figure more deeply reveals just how misleading it can be.

Home Seller Resources: Glossary of Real Estate Terms

# | A | B | C | D | E | F | G | H | I | J | K | L | M |
N | O | P | Q | R | S | T | U | V | W | X | Y | Z

#

401(k) – Employer-sponsored investment plan allowing individuals to save tax-deferred income for retirement.

403(b) – Similar to 401(k); however, used by not for profit employers

401(k) Loan – Loan against the monies set aside in a 401(k) plan. May also be used as an acceptable form of down payment for most types of loans.

A

Acceleration Clause – A clause in a loan contract allowing the lender to call the loan due upon default of the borrower. If the borrower gets behind on payments, the lender may require the borrower to satisfy the entire loan amount in full.

Adjustable Rate Mortgage (ARM) – A mortgage where interest rates will fluctuate with changes in the market. As rates increase in the indexes, the mortgage interest rate will also increase, and vice versa. ARMs will generally have a maximum rate to protect the borrower from dramatic rate increases.

Amortization – Loan payments that include monthly interest payments plus some principle payments. The payment remains the same from month to month; however, over time, the amount paid towards interest will decrease and the amount paid towards the principle will increase.

Annual Percentage Rate (APR) – Different than the rate on a loan. The APR reflects the true cost of borrowing as a percentage.

Appraisal – written explanation of the fair market value of a property. Usually based on comparable home sales in the same area.

Appraised Value – the home value based on the appraiser's opinion. The appraised value usually comes from a survey of the home, comparable sales in the area, and the appraiser's expertise.

Appreciation – The increase in the value of a home based on inflation, market conditions, and other factors.

Appurtenance – any improvement or easement to real property that "goes with the land”

Assessed Value – The value given to a property by the public tax assessor for the amount of property taxes to be paid.

Assumed Loan – The ability for the buyer to take over the sellers current mortgage in a home sale. The buyer generally must also qualify for the loan.

B

Balloon Note Mortgage – Usually an interest only mortgage where interest payments are made monthly and the entire principle is due upon the end of the term.

Bankruptcy – The ability to relieve oneself from outstanding debts. The person filing for bankruptcy must file in federal bankruptcy court, and usually cannot receive a new loan for two years and must be able to show ability to repay the note. Most people who file for bankruptcy, file for Chapter 7, No Asset Bankruptcy.

Bill of Sale – the document used to transfer personal property rights such as a car.

Broker – The person responsible for managing local real estate businesses; the broker is responsible for all of it's listings and the acts of his/her real estate agents.

Buy down – The ability for the borrower to have the interest rate reduced for a period of time (usually one to three years) by paying a portion of the principle up front.

C

Cap – the maximum interest rate that may be charged on an ARM

Clear Title – A title that is free of liens and clouds

Closing – The meeting between the buyer, seller, and the agents to finalize a home sale. This is where the documents are signed, and money is exchanged.

Closing Costs – Payments that must be paid at closing. Closing costs consist of non-recurring costs and prepaid items. Non-recurring costs include things that are paid only at the time of closing such as transfer taxes, intangibles taxes, and personal property sales associated with the home sale (i.e.: selling furniture/appliances along with the home). Prepaid items include costs such as property tax and insurance adjustments.

Cloud on Title – Conditions that adversely affect the title to real property. Clouds can be removed by court action, releases, or by the deed. Clouds could include other's claims to property rights, another parties name on the deed, etc.

Collateral – What is given up to the lender in case of default on a loan. In a mortgage, the home is the collateral, as the bank will foreclose on the house in the event of default.

Commission – Monies paid to the realtors for their services in a real estate transaction. Usually a percentage of the sales price, but may be a flat fee.

Common Areas – Areas of a condominium, co-op, or another multi-family establishment that are used by all residents. Ex. Swimming pools, tennis courts, parking areas, etc.

Common Area Assessments – Charges to residents of condos, co-ops, etc. that cover property taxes on the common areas.

Community Property – Property acquired by husband and wife after marriage. Both parties have equal rights to the property. Similar to Joint Tenancy, used mainly in Southwest, USA.

Condemnation – The process used to practice eminent domain.

Condominium – Type of ownership where all parties have ownership rights in common areas, and has freehold title to their individual units.

Contingency – Conditions that must be met in order for a contract to be binding. For example a home sale contract may have a mortgage approval contingency stating that if the buyer cannot qualify for a loan, the contract would be void.

Contract – Written or verbal agreement to perform or not perform a specific act.

Conventional Mortgage – Home loan from traditional lender such as a bank or any other non-government lender

Convertible Adjustable Rate Mortgage (ARM) – an ARM that can be switched over to a fixed-rate mortgage within a specified period of time.

Cooperative (CO-OP) – Form of co-ownership where each party owns a share in the co-oping corporation that owns the property. Each co-op shareowner has the right to occupy a particular apartment or unit of the property.

Credit – the agreement that a borrower will receive something of value with the promise to repay the lender with in a certain period of time.

Credit History – record of a person's ability to repay debts. Credit Histories are used by lenders to determine what interest rates to charge and to determine if a loan can be issued at all.

Credit Report – Credit history report compiled by a credit bureau; used to by lenders to ability to issue a loan.

Creditor – The person who is owed the money

D

Deed – The legal document used to show title to property

Deed of Trust or Trust Deed – Similar to mortgage, but used in states that do not recognize "mortgages”. The satisfaction of the loan is managed by a neutral third party (trustee).

Deed in Lieu of Foreclosure – The opportunity for a person who is facing foreclosure to turn over title to the home to the lender to avoid an actual foreclosure. In some cases, this may be done to save a person's credit, and to keep the situation from becoming a matter of public record.

Default – Failure to make payments on a loan with a specified period of time.

Delinquency – What happens when loan payments are not paid on time. If the payment is late the loan is said to be delinquent.

Deposit or Earnest Money – Good faith payment of a portion of the total sales price in advance. Paying earnest money shows the seller you are sincere in your offer, and secures your offer.

Depreciation – A drop in the value of a property over time. Opposite of Appreciation.

Discount Points – Usually associated with FHA and VA loans. They buyer may receive discount points to lower the interest rate by paying an additional sum down payment with the loan origination fee.

Down Payment – The amount of money paid on a home that comes out of the buyer's pocket and is not covered by the loan amount. For example in a conventional 80% LTV loan, the loan would be for 80% of the sale price and the down payment would be the other 20% paid directly by the buyer.

Due on Sale Clause – provision in a mortgage that allows the lender to call the mortgage due upon sale of the home.

E

Earnest Money – (see Deposit)

Easement - The irrevocable right of a person(s) to use one's property. Ex: The right of the utility companies to use land for running cables, shared driveways, etc

Eminent Domain – The right of the government to seize one's land for the "good of the public” Ex. The right for the government to take the front ten feet of a person's yard to widen a road, or the right to take a person's entire property to build a shopping center. Must be done through the process of Condemnation.

Encroachment – an improvement to real property that illegally extends onto or above another person's property.

Encumbrance – anything that burdens a person's title to real property. May include, liens, restrictions, and easements.

Equal Credit Opportunity Act (ECOA) – federal law making it illegal for any institutional lender to discriminate against any person that seeks a loan based upon race, color, religion, sex, national origin, age, or familial status.

Equity – the amount of financial interest a homeowner has in a property. Equity is the difference between the Fair Market Value of the home and the amount of money that is still owed on the mortgage.

Escrow Account - Separate account where additional payments paid with the monthly mortgage payments are held to cover property tax and homeowner's insurance payments.

Estate – The extent of a person's interest in real property rights. Covers the total of all real property and personal property owned at time of death.

Eviction – The lawful removal of tenant from a property. Must generally be performed by the sheriff's department.

Exclusive Listing – unilateral contract between a homeowner and one sales agent. If the agent procures the buyer, then the agent is paid a commission for his/her service. If the seller procures the buyer, then no commission is paid. Often used in F.S.B.O.s

Exclusive Right to Sell Listing – similar to the exclusive listing, only now only the listing agent may sell the home and is paid a commission regardless of if the buyer was procured by the seller or the agent. Most common form of listing with Agents

Executor – the person named in a will to execute the wishes of the will

Executrix – female form of Executor

F

Fair Credit Reporting Act – created to protect consumers and ensures the disclosure of credit reports by credit reporting agencies and sets procedures for correcting mistakes on one's credit history.

Fair Market Value (FMV) – The highest price a buyer would be willing and able to pay and the lowest price the seller would be willing to accept

Federal National Mortgage Association (FNMA) – Also known as "Fannie Mae". FNMA is the largest secondary mortgage organization and the largest supplier of home mortgage funds. They are a sort of a middleman between institutional banks and the Federal Reserve.

Fee Simple – The highest extent of ownership, extends all the way to death and passes on with heirs. What we typically think of as ownership. Ownership of a fee simple estate has no definite end time making the estate inheritable on one's heirs.

FHA Loan – A lone that is insured by the Federal Housing Administration. Often referred to as a government loan. All FHA loans require and escrow.

Firm Commitment – A lender's promise to issue a mortgage to a particular buyer for a particular property.

First Mortgage – The mortgage that is number one in priority of all other recorded loans against a property

Fixed Rate Mortgage – A mortgage in which the interest rate remains the same for the entire term of the loan.

Fixture – A piece of personal property that has become real property once installed or connected to the property. Ex: Installing ceiling fan, or bookshelves.

Flood Insurance – insures damage to property caused by flooding. Flood insurance is required in designated flood plains.

Foreclosure – legal process in which a property is taken from a defaulting borrower later sold at auction to satisfy the mortgage debt.

G

Grantee – The person who receives the rights to real property in a transaction.

Grantor – The person relinquishes their rights to real property in a transaction.

H

Hazard Insurance – Insures damage to property caused by natural hazards (i.e. fire, wind, earthquake, etc)

Home Equity Loan / Line of Credit – loan allowing a person to borrow against the equity already put into the home. Home equity loans are generally in a second position to the first mortgage.

Home Inspection – Thorough inspection of a property by a professional who evaluates the structural and mechanical condition of the home. Inspections are generally a requirement in the closing contract.

Homeowners' Association – Organization that oversees neighborhoods, PUDs, and Condos. Used to manage common areas and to ensure that covenants are not broken.

Homeowners' Insurance – insures certain items within the home in need of repair such as heating and air systems and items damaged from theft.

HUD Median Income – median income of a particular city or county as figured by the Department of Housing and Urban Development (HUD).

J

Joint Tenancy – form of multiple party ownership where each party has an equal interest in the property. Not inheritable as the surviving member takes sole ownership upon the death of the other tenants (Right Of Survivorship).

Judgment – a courts ruling on a case. In the event the judgment requires payment, a lien maybe placed against one's real and personal property.

Judgment Lien – a lien placed against one's personal and real property to satisfy a judgment.

Judicial Foreclosure – Foreclosure process that must be carried out in the courts. Not used in every state.

L

Lease – written contract between a property owner and a tenant specifying the terms and conditions for which the tenant may occupy the property.

Leasehold Estate – Extent of ownership of real property where the borrower does not actually own the property, but rather has a recorded long-term lease on the property.

Legal Description – Precise, detailed description of a property that identifies it as being unique. Cannot simply be an address and is often acquired through a survey.

Lender – The party who is loaning out the money. Often referred to as the Mortgagee.

Liabilities – Financial obligations including short and long-term debt.

Liability Insurance – covers property owner against claims in which negligence has caused some injury to another party.

Lien – legal claim against a property that must be satisfied by the time the property is sold. (i.e. mortgage, trust deed, security deed)

Loan – lending of a particular sum of cash that is repaid over a set period of time and usually carries interest.

Loan Origination – the process of creating a new loan.

Loan to Value (LTV) – percentage relationship between the amount of the loan and the sales price or appraised value (which ever less).

Lock In – agreement that the lender will agree to a fixed interest rate on loan for a particular period of time and cost.

M

Margin – The difference in the interest rate on an adjustable rate mortgage (ARM) and the index rate. The difference remains constant as the ARM rate changes with the index.

Maturity – The date in which a loan is called due.

Modification – a change in a written contract. Must be initialed and dated by each party.

Mortgage – legal document that offers real property as collateral for a loan allowing foreclosure in case of default.

Mortgagee – the lender

Mortgagor – the borrower

N

Note – legal document stating that a loan has been issued and requires repayment with interest within a set period of time

Notice of Default – written notice that a loan is in default and legal action will be taken to satisfy the loan.

O

Origination Fee – The total number of points a borrower pays on a new loan. One point is equal to one percent of the principle. On government loans, the origination fee is one percent of the principle plus any points.

Owner Financing – closing transaction in which the seller provides financing to the buyer.

P

Personal Property – all property other than real property

P.I.T.I. – Principle, Interest, Taxes, and Insurance. Everything covered on monthly mortgage payments when the loan requires an escrow.

Planned Unit Development (PUD) – Similar to a condominium where the owner owns the unit in which he/she lives; however, all members own the common areas together. May also be a subdivision where the common areas are owned by a homeowners' association for the sole use of the PUD members.

Point – Once percent of the loan principle paid in advance at closing.

Power of Attorney – written permission for a person to sign legal documents on behalf of another party.

Prepayment – money paid on a loan to reduce the principle prior to the due date

Prepayment Penalty – the fee charged to a borrower who pays of a loan prior to the date of maturity. Usually a percentage of the loan amount.

Principle – the amount of money borrowed or the amount of money remaining on a loan.

Principle, Interest, Taxes & Insurance (P.I.T.I.) – refers to the four components of the total monthly payments on a mortgage.

Private Mortgage Insurance (P.M.I.) – insurance taken out by the lender to protect itself from loss in the event of default by the borrower. P.M.I. is generally required on conventional loans greater than 80% L.T.V.

Promissory Note – written promise to repay a debt over a specific period of time.

Public Auction – public meeting to sell a home that has been foreclosed on to satisfy the loan in default.

Purchase Agreement – written agreement between the buyer and seller explaining the details of the home purchase arrangement.

Q

Quitclaim Deed – a deed that makes no promises of actual ownership. Often used to clear a cloud on the title.

R

Real Estate Agent – licensed individual to represent buyers and sellers in real estate transactions for a commission

Real Estate Settlement Procedures Act – law requiring lenders to inform consumers in advance of all closing costs.

Real Property – land plus appurtenances. Includes all structures, trees, fences, etc.

Realtor – Agent, broker, or associate broker who is a member of a local real estate board that is associated with the National Board of Realtors.

Recording – noting the details of legal transactions, such as real estate sales, mortgage notes, etc, making them a matter of public record.

Refinancing – process of satisfying one loan with the proceeds of a new loan using the same property as collateral to secure the debt.

Right of Survivorship – In joint tenancy, the right of the surviving parties to inherit the property rights of the deceased party. For example, when a husband dies, the wife would inherit the husband's interest.

S

Sale - Leaseback – an arrangement in which the seller will lease the property back to the seller.

Second Mortgage – a property lien placed in a secondary position to the original mortgage.

Secondary Market – buying and selling of existing mortgages.

Secured Loan – loans backed by collateral.

Security – the collateral for a secured loan.

Subdivision – housing development where a larger tract of land is subdivided into smaller lots for purchase.

Survey – map of a property outlining the boundaries of a property, location of improvements, easements, and encroachments.

T

Tenancy in Common – Co-ownership in real property where individual interests may not be equal and is inheritable.

Title – legal document that transfers rights in real property.

Title Insurance – protects lenders and buyers from loss caused by disputes on the title.

Title Search – checking public records to ensure the seller is the legal owner of the property.

Transfer Tax – state tax on the transfer of real property. 1/1000th of the sale price minus any loan assumption.

Trustee – middleman who holds or controls property for the benefit of another.

Truth in Lending (Regulation Z) – federal law requiring lenders to disclose of terms and conditions of a loan

V

V.A. Loan – mortgages guaranteed by the Dept. of Veteran's Affairs.

Veteran's Administration – department of the federal government to guarantee mortgages to eligible veterans and protects lenders from loss due to default.

 

Home Selling Tips from Professionals

You can sell your home yourself.
Use these professional home selling tips to help you get the best price.

Price Your Home According To The Market

  • Look at recent sales comparisons, and consider your competition.
  • An overpriced home will immediately discourage potential buyers from viewing your home.
  • Consider getting an appraisal to establish the true value of your home.

Make A Positive First Impression

  • Curb appeal is important and easy to enhance without spending a fortune.
  • Make your home attractive and welcoming to buyers by:
  • Planting flowers around your mailbox
  • Removing bikes and clutter from the yard
  • Weeding and keeping lawns mowed
  • Trimming overgrown shrubs around the home and walkways
  • Pressure-washing driveway, walkways, and patios
  • Painting the front door is needed and purchasing a new door mat
  • Replacing any wood rot, and repairing garage doors, fences and door sashes.

Keep Your Home Inviting and Well-Maintained

  • Clean walls, floors, doors and carpets.
  • Replace worn-out carpet with a neutral color.
  • Paint scuffed walls with a neutral color. Painting is one of the least expensive improvements you can do to make your home more appealing.
  • Remember you are selling your "space." Remove clutter and your home will appear lighter, brighter and more spacious.
  • Your home can never be too clean for a potential buyer, so:
  • Clean the oven, refrigerator, and organize cupboards.
  • Clear off countertops and remove pictures from the refrigerator.
  • Clean all ceiling fans, light fixtures and blinds.
  • Organize the laundry room, garage and closets.
  • Store excess furniture and make rooms less crowded.
  • Eliminate strong odors or unpleasant smells from pets or cooking.

Stage Your Home For All Showings

  • Make sure lights are on in every room including bathrooms, closets and hallways.
  • Pull back drapes and open or raise blinds.
  • Place potpourri in several rooms of your home.
  • Turn on soft easy-listening music.
  • Keep all pets away during showings and store pet dishes.
  • Put kitchen garbage under the sink.
  • Display fresh towels in the bathrooms.

Selling a House is Easy

The thought of selling a house strikes fear into most people. The contracts, the legalese, the exorbitant costs — they all conspire to make the experience unpleasant at best, and a nightmare at worst. It doesn't have to be that way, though.

Let's take a look at three different scenarios for selling the same house. We'll assume an average house in an average town in America, whose market value has been established at $150,000.

Scenario 1: A Traditional Home Sell

If the value of the home is $150,000, a realtor will often suggest a list price of $149,900 — and rightfully so. Although you lose $100 before the house ever goes on the market, studies show that buyers actually see a difference in the two prices much greater than $100, so the ultimate benefit outweighs the initial loss.

Statistics show that the average home sells for 90 to 93% of the asking price, so let's suppose you accept an offer of 91% — or $136,400. That's not bad, but it's not what you actually walk away from closing with. There are several other costs that figure in.

The realtor, on average, will take a 6% commission. That reduces your price by $8,360 to $128,020. The average seller contribution to the buyer's closing costs is 3%, so your final amount is reduced by another $4,092 to $123,928. Add in $2,000 or so in realtor-recommended upgrades to make the house show better, and your ultimate take is down to $121,928.

The other factor is how long it takes to sell the home. After finding and interviewing realtors, going through the listing appointment and getting the home into the Multiple Listing Service (MLS), your first offer usually will not come in until more than 30 to 90 days from the point at which you decided to sell. And from the point that the offer is accepted, it then often takes 60 days or more for the sale to close.

So an average home in an average American town will take more than 120 days to sell, and the homeowner will walk away from closing with just 80% of the home's actual value.

Scenario 2: Using a Discount Realtor

A home selling method increasing in prominence across the U.S. over the past few years has been the use of a discount realtor. These services take a much smaller commission, allowing you to pocket anywhere from 2 to 5% more of your initial asking price — as much as $7,500 for the average house in our example.

The downside of discount realtors is that they often provide services much more limited than a full-service realtor, and while your home does get listed in the MLS, it's frequently not shown by other realtors specifically because it was listed through a discount realtor. In fact, the Wall Street Journal reported in May 2005 , that U.S. antitrust regulators are preparing to file suit against the National Association of Realtors for practices they believe are intended to stifle Internet-based rivals and discounters.

So until those practices cease, selling a house through a discount realtor, while cost-effective, may lead to a time-to-sell much longer than the 120 days under a traditional realtor — still a good route if you don't need to sell right away.

Scenario 3: Selling to a Professional Home Buyer

Another home selling method that is growing in popularity is selling the home to a professional home buyer or real estate investor. These individuals will buy a home for 80 to 90% of its market value and can usually close in 10 days or less. It's free to get an offer from a home buyer, and there's no obligation.

Under this scenario, you could easily walk away from closing with more than you would under a traditional scenario and do it in less than two weeks. Additionally, you set the timetable for closing. If you need to sell the house in two months instead of two weeks, the home buyer works on your schedule, instead of the other way around.

The downside of going through a home buyer is the risk of working with someone unscrupulous who doesn't mind taking advantage of you. There are any number of ways to get ripped off and be left with no home and no cash — or, worse yet, no home, no cash, and a mountain of debt.

So going through a home buyer, the average home in our example could sell for just as much as through traditional methods, but sell in just 10 days instead of 120 days or more.

Conclusion

These scenarios all assume an average house in an average American town, so your actual experience could vary significantly. Homeowners in red-hot real estate markets like areas of California and Florida, for example, frequently receive offers matching, or even exceeding, their asking price.

So it's imperative to review all your options before you sell. Non-traditional methods are gaining in prominence because they're a very viable, and often better, alternative to going through a traditional realtor. They deserve a good look the next time you decide to sell a house.

"We Buy Houses" Scams

How to Spot Them and How to Avoid Them

There are many reasons why a home owner would want to sell a house fast. Job change, relocation, debt problems, divorce and inheritance are just a few. Unfortunately, people in need also tend to attract predators who have no problem profiting from someone else's misfortune.

If you're looking to sell a house fast, here are a few scams to be on the lookout for and how to avoid becoming a victim yourself.

Equity Skimming

One of the most common types of "we buy houses" scams allows the "buyer" of the home to make off with most or all of your equity. It begins with you transferring your home's deed to the "buyer." The buyer may then have you make payments to him instead of the mortgage company, or he may have you move out so he can begin renting out the house.

There are several ways the buyer can then profit from this transaction. First, he receives some sort of payment every month — whether from you or from the renter. Second, he can use the equity in your home to secure home equity loans or other lines of financing. Third, he can simply resell the house without satisfying the outstanding mortgage.

Ultimately, once most of his profit is exhausted, he simply stops making payments on the mortgage and allows the home to go into foreclosure, because while he holds the deed to the home, he never assumed liability for the mortgage. As a result, you are left with a foreclosed home, no remaining equity and a significant black spot on your credit history.

Contract Bait and Switch

The contract "bait and switch" is a clever scheme that takes advantage of the trust between buyer and seller.

In one version of this scam, the home buyer inspects your house and makes a verbal offer that you accept. A few days later, he presents you with a written contract that he presents as "just a formal, legal version" of your verbal agreement. Because you believe it to be the same offer you had already agreed to, you simply skim it and sign on the dotted line.

In the time between signing and closing, he may also deliver one or more "minor changes" to the contract. He presents these as simply "a few tweaks" and nothing that really affects the original agreement.

At some point, though, possibly at the closing or even later, you discover that the last contract you signed actually bears little resemblance to the initial offer, and you are either stuck with a losing home sale or tangled in legal battles for months or even years to get out of the contract.

Liberian FSBO

This scam is an interesting twist on the Nigerian Scam or 419 Scam . In it, a person outside the U.S. contacts you after seeing your house on a For Sale By Owner site, telling you that he is looking to move to the U.S. soon and can pay cash for your home. His story is compelling to the point that you actually feel good about helping him out — not to mention being able to sell your home.

Ultimately, though, his only goal is to get you to transfer him money and/or to get access to your bank account so that he can transfer the funds himself before you realize what has happened. And because he is outside the U.S., recovering your money can be next to impossible.

How to Protect Yourself from Scams

If you need to sell a house fast, here are a few rules for protecting
yourself from falling prey to a scam like these.

Only Work with Professionals

The best way to protect yourself from scams is to work only with professionals who have
an established history of home buying. These days, anyone can order a book from an infomercial and become a "professional home buyer," but real professionals have been in business for many years and have closed millions of dollars in real estate transactions. Their primary concern is the health of their business, and they will not risk that by cheating you
or otherwise treating you unfairly.

Check Out the Buyer

If you have any concerns about the buyer, don't hesitate to check them out. Contact your state Attorney General's office, your state's Real Estate Commission, or your District Attorney's Consumer Fraud Unit. If they are an established business, also check out the Better Business Bureau.

Always Understand What You're Signing

Not asking questions because you are afraid of looking stupid could end up costing you tens of thousands of dollars or more if you end up in a deal that wasn't what you thought it was. A lawyer or even your mortgage company can help you if you want professional advice from a third party. Never, ever sign a contract that you don't understand.

Get All Agreements in Writing

If a disagreement arises about a verbal agreement, the issue becomes your word against theirs and often must go to a court of law to be settled. Don't risk that. Insist that all terms be in writing, and don't agree to anything that isn't.

Be Willing to Walk Away

If you have any doubts about the buyer or the contract — or if it just doesn't feel right — just walk away. It's never worth the months (and maybe years) of future headaches to sell your house a few days sooner.

Conclusion

If something sounds too good to be true, it usually is. So don't get so emotionally tied up in the sale of your home that you abandon caution and logic. Your home is both a major financial obligation and a major asset. Falling prey to a scam like these will have major repercussions many, many years down the road — and maybe for the rest of your

Stop Foreclosure

Protect Your Credit and Keep Your Home

John lost his manufacturing job six months ago in a round of mass layoffs, and he's been unable to find consistent work since. He and his wife had little in savings, and with every day that passes they're getting further and further behind on their bills.

Two months ago today, Mary's husband walked out on her and the kids. Between childcare costs and other bills, she can barely afford to put food on the table.

Every day thousands of people across the U.S. fall deeper into debt, often through no fault of their own. Left unchecked, this debt ultimately threatens their number one asset, their home, through the process of foreclosure.

It doesn't have to end there, though. There are ways to stop foreclosure, protect your credit and keep your home.

What is Foreclosure?

In most states, when you buy a home there are actually two parties on the buying side: you (the mortgagor) and the lender (the mortgagee). You own the home, but the mortgagee holds a lien on the property for as long as the mortgage has an outstanding balance. The lien gives the lender the right to assume ownership of the property should you fall behind on payments. That process by which the lender assumes ownership is called foreclosure.

All other states use a deed of trust, which serves the same purpose as a mortgage but actually involves three parties: you (the trustor), the lender (the beneficiary), and a third party (the trustee) who holds the temporary title on the home until the full balance is paid. In these states, the foreclosure process involves the trustee selling your home when you become delinquent.

A key difference between mortgages and deeds of trust is in the foreclosure process. With a mortgage, the lender must go through the court system to foreclose on your home. Not so with a deed of trust. The trustee must first fulfill certain requirements, but is then free to sell your home without going through the court system, leading to a much faster foreclosure.


How to Stop Foreclosure

Contact the Lender

Absolutely the first step to avoid foreclosure is to contact the lender and let them know your situation. In many cases, they can work with you to temporarily modify payment terms until your situation is resolved.

Never, ever ignore late notices, letters or calls from your lender. They would much prefer to work together with you to resolve the situation, but will not hesitate to begin foreclosure proceedings if it appears that you are unwilling to work with them to avoid foreclosure.

Redo Your Mortgage

If you're still current on your payments, or not too far behind, refinancing may be a viable option for you. Refinancing will pay off your current mortgage and in many cases lower your monthly payment at the same time. It can be the most straightforward method to avoid foreclosure.

Sell Your House

This may be the toughest route to stopping foreclosure, particularly if you still need somewhere to live, but it may be the only way to stay out of trouble and prevent a black mark from appearing on your credit record. If you need to sell fast, there are home buyers in your area who will allow you to do that. They can close in 10 days or less, or on whatever timetable fits your schedule, and allow you to walk away with cash at closing.

Be very, very careful, though. There is no shortage of people who will use this opportunity to make a profit for themselves at your expense. To keep yourself from falling victim to these predators, be sure to read "We Buy Houses" Scams — How to Spot Them and How to Avoid Them.

Protecting Your Credit

Ultimately, protecting your credit must be your number one goal. Your credit report will be with you for the rest of your life, and having a foreclosure noted on it will cause problems for many, many years down the road — problems that only time will erase. Take steps now to keep that from happening. It may be difficult in the short-term, but the long-term results far outweigh the alternative.

The U.S. Department of Justice vs. the Realty Industry

And Its Effect on Consumers

From the National Association of Realtors' Virtual Office Website policy, to laws and regulations in individual states across the country, the U.S. Department of Justice has been fighting since 2003 what it believes are illegal practices by the U.S. realty industry that harm the American consumer. The issues can be complex at times, but understanding what's going on can be very valuable when buying or selling a home.

The Virtual Office Website Policy

In May 2003, the National Association of Realtors (NAR) passed their Virtual Office Website policy which allows realtors to selectively exclude their listings from other websites. Later that same year, the U.S. Department of Justice (DOJ) launched an official inquiry into the policy—concerned that the policy could lead to practices which were anticompetitive and monopolistic.

Realtors could now, for example, allow fellow realtors access to their listings, but deny access to other competitors who threatened the traditional business model of the realty industry—by undercutting the standard 6% commission, for example. Colluding with competitors in order to stifle others, however, violates U.S. antitrust law.

Two years later, the DOJ investigation into the policy is still ongoing. While the NAR has stated publicly that they believe "the opt-out provision is legal and appropriate" and that they would "go to court for as long as it takes," just five days after a May 9 Wall Street Journal report that the DOJ was preparing to finally bring suit in the case, the NAR authorized its leadership to develop a single, uniform policy governing the sharing of its listings.

DOJ vs. Local Realtor Organizations

While investigating the NAR's VOW policy, the DOJ has also been involved in a number of individual local cases.

In March 2005, the DOJ sued the Kentucky Real Estate Commission, challenging their regulation that prohibits Kentucky real estate brokers and sales associates from offering rebates and other inducements to attract customers. The DOJ charges that the regulation violates Section 1 of the Sherman Act by stifling competition and thus restraining trade. Fourteen other states have similar policies.

In April 2005, the DOJ sent an official inquiry to the Greater Tulsa (Oklahoma) Association of Realtors on charges of "boycotting"—refusal by traditional realtors to show homes listed by discount realty companies. While the practice is well-known to industry insiders, it's both an antitrust violation and a violation of the realtor's responsibility to their home buying clients.

Justice has also weighed in on debates in Oklahoma and Texas, who are considering bills that could eliminate many discount brokerage models by mandating that firms provide some minimum level of real estate services—bills championed by the realtor organizations in each state. Illinois already has passed similar legislation.

Effects of DOJ Efforts

At the root of all these cases is the issue of collusion. In order to maintain the current realtor-controlled market for home buying and selling, realtors, who are in all other respects direct competitors with one another, agree to "play nice" with other realtors, while at the same time excluding competitors who operate differently. That's a direct violation of U.S. antitrust law.

However, while the DOJ has continued to increase its investigations into antitrust behavior by the real estate industry, no suits have actually yet gone to court. The debate has been played out only in the media.

Still, even with no concrete results to show for them yet, their efforts have begun to shed light on the issues and to raise some valid questions about how the market works. More and more consumers are realizing that there are other, increasingly viable options for buying or selling a home. And those who still choose to go the traditional route are finding more realtors whose main focus is the customer and not simply the maintenance of a way of doing business.

In the long-run competition increases, and increased competition means both lower prices for consumers and also companies who work much harder to bring value to their customers. Realtors who fail to adjust to this new environment will find themselves out of business, but those who are able to best meet the needs of their customers will still find a market rich with opportunity.

Buyers and sellers will always need help through the complicated process of buying and selling a home. What is changing is who provides that help and how they do it—all to the benefit of the consumer.

Why "Average Sale Price" Statistics are Misleading

by Duane LeGate, House Buyer Network

One of the most common statistics used when gauging the strength of an area's real estate market is the average sale price of its homes, but looking into that figure more deeply reveals just how misleading it can be.

When listing a home for sale, most realtors establish a price for the home based on market comps of the area — taking into account what other houses sold for and how the home they are listing compares to those. That price is a gross sale price, however, and doesn't reflect what the home owner actually receives from the sale. The difference between the gross sale price and the amount with which the seller actually gets to walk away from closing is affected by a number of factors.

Most people would be surprised to discover that home owners in hot U.S. real estate markets like California, Florida or Las Vegas often receive offers for their homes that actually exceed the asking price. That is because in almost all other U.S. cities, statistics suggest that a realtor usually secures an average sales price of only 90 to 93% of the listing price. In addition, a number of other costs must be subtracted from that figure as well:

  • 6 to 7% for realtor commission
  • 3% toward the buyer's closing costs (on average)
  • Realtor-recommended upgrades to make the house show better: new paint, carpet, minor landscaping, etc.

After all costs are figured in, the seller often walks away with only 75 to 85% of what the house "sold" for.

This should not reflect negatively on realtors by any means — their services are still very much in demand and are invaluable for many home owners — but the more people realize the difference between what their home sells for and what they actually net, the more the number selling their home through "non-traditional" methods continues to rise.

It's easy to find two houses on the same street in any neighborhood in the U.S. where the seller who sold their house for a higher price actually received less money at closing. If real estate prices were discussed in terms of net price to the seller rather than gross sales price, more home owners would discover that, for them, alternate channels for selling their home are more profitable than going through a realtor.