Monday, June 9, 2008

Thousands facing negative equity

Bit of ugly news from the BBC
By Richard Scott Personal finance correspondent, BBC News

Lenders are more reluctant to lend to borrowers
More than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity, according to figures obtained by the BBC.
Falling house prices mean the amount borrowed could be greater than the value of their properties.
The data from the Council of Mortgage Lenders comes as figures show the housing market is slowing down further.
Separate housing figures suggest the number of transactions per estate agent has hit a 30-year low.
These figures from the Royal Institution of Chartered Surveyors come as banks are imposing stricter requirements on borrowers, in the wake of the credit crisis.
Turned away
If a house loses its value it is not necessarily a problem unless the owner has to move, or cannot afford to pay the mortgage.
In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back.
But as prices have been falling, the risks have increased and lenders are turning borrowers away if they don't have a deposit.
There is a warning that the situation may deteriorate further.
"House prices are down 6% in just the last five months, and the worst of the credit crisis - all that still lies ahead," said Michael Saunders, head economist at Citigroup.
He had predicted that house prices would fall by 15% in 2008 and 2009 but now he says that drop could be even greater.

Sunday, June 8, 2008

Exclusive or General?

June 6, 2008

If you are one of the long-suffering people trying to sell a property and you’re wondering how many more months you will have to wait for a sale, you are probably starting to wonder what’s going wrong.
You’ll be asking yourself “Is it my agent’s fault? or “Is our price too high?”
If it’s the latter, I’d suggest your agent isn’t doing his job. He should have told you that already. However I’d like to concentrate on another question you’re certain to ask: “Should we change to a general listing when our exclusive deal runs out?”
What’s the difference?
An exclusive listing is an agreement you have with a specific real estate company to market your property for sale – for a fee if successful.
What this means is that if the property changes hands inside the agreed period of the contract, then you agree to pay the fees stated in your contract – usually 3.5% to 4% of the sale price of your home.
It doesn’t matter who sells the property to whom or who trades or swaps what for the property. You still have to pay the agency.
A general listing, on the other hand, is an agreement between you and as many agencies as you want, for as long as you want, and you usually also have the right to sell the property yourself. The agent who finds a buyer gets paid by you at the rate you agreed to in the contract to sell. The fee is usually the same as for the exclusive listing.
Sounds like a fairer deal, eh? But is it an effective way to sell your property? Could it cost you more in the long run?
The short answer to the first question is probably not. And to the second it’s quite probably yes. Here’s why:
When you and an agent agree to an exclusive listing, you are saying you trust your agent to take control of the marketing of your home to attract buyers, to contact and organise the potential buyers he has on his database and keep you informed about interest in the property.
You also trust him to tell you if and when you need to adjust the price, to organise and control open homes, and negotiate on your behalf when a buyer makes an offer.
Ideally your agent will create a situation where multiple buyers want the property and compete with each other, driving up the final sale price. He does all these things because there is a high likelihood that he’ll get paid his due commission and cement his reputation as an effective and professional agent to deal with.
A general listing means your agent has no direct control over the property. Because all comers – including yourself - may sell the property without him being paid a cent, he is unlikely to advertise the property and unlikely to organise open homes, because any other agent can make that a complete waste of time by bringing a buyer along any old time.
Most importantly, here’s what happens when the agent gets to work in the morning. He looks at his big white board of listings. The top half of his board has all the properties that he’s listed exclusively and which not only demand his loyalty but also give him the opportunity to earn the most. At the bottom of his list are the general listings – ones that probably won’t make him a cent.
So when you are considering listing your home for sale or simply re-listing it, give your agent another go at an exclusive listing.
If on the other hand you want to try someone else, try someone else on an exclusive basis. Don’t be tempted to sign all comers, because it’s highly likely you won’t get the result you want.