Q & A with Dottie Herman

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Q1 - I have been trying to sell my home for a few months. I recently got a buyer, but they are unable to get a mortgage. They are first time buyers, with poor credit scores due to school loans, etc. I am in good financial shape. Should I hold their mortgage? Or should I just hold out for another buyer who can get qualified? I do not want to end up with them not paying the payments- what recourse would I have if that happened?

A - This is a decision only you can make.  If you decide to hold a mortgage, you are trading receipt of all of your money at closing for the Cash flow and the interest. This may be more beneficial to you if you prefer the income monthly.  Should you do this and they stop paying, you are in a position where you need to take legal action and foreclose to force the sale of the home in order to be repaid.  This can be expensive and can take 2 years, or longer, in some states.  You will not have the payments coming in for this period and will only recover what you are owed if the home can be sold for more than they owe you. So consider that another buyer may be out there, and if you do decide to hold a mortgage make sure you do not lend more than 70% of the sales price to make sure there is enough equity should you need to foreclose.

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Q2 - My husband and I are trying to buy our first home and we are extremely disappointed that the first time homebuyer tax credit has expired. Do you think it is unreasonable for us to ask the seller to give us that credit back? Or take it off the sale price?

A - Not at all, in fact many homeowners are offering just this type of thing to enhance the marketability of their home.  So go for it!

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Q3 - I have been in my home for 5 years and we are starting to out-grow this house. We need to move to expand our family, however, we bought this house in the height of the market and definitely overpaid. We know we are not going to get our money back that we paid plus the renovations; however, we have a large mortgage. Should we pay down our mortgage before we try and sell? Should we try and pay extra each month? We have a 470,000 mortgage and that is probably what we will walk away with from this sale and we need to make some money in order to upgrade.

A - When you sell you will need to make sure you can pay off your mortgage if the selling price is not enough.  Paying down your mortgage each month will accomplish this and also save you some interest on the loan. Your other option is to save the money and just pay what is needed at the time you sell.

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Q4 - I am trying to sell my house--however; it was just appraised at a very low value. I find it hard to believe that this is correct, especially since my neighbor just sold their house and theirs was appraised much higher. What can I do? Should I have another appraisal?

A - Problems with appraisals are becoming increasingly commonplace in the home selling process. The new regulations, namely the Home Valuation Code of Conduct (HVCC) has weakened the quality of appraisals significantly by reducing emphasis on local market experts.  

If the appraisal that you describe was done for the bank your buyer is using, that bank cannot consider an appraisal provided outside of their lending process. Getting another appraisal done is not going to help you.  If you have access to the appraisal, take a look at the sales data and adjustments that were made and determine whether the neighbor's house was used in the report and is accurately described.  If not, you should pass along your insight along to your broker who can work with the buyer's broker to submit your information to the bank.  However, the probability of this new information overturning the original estimate is very low.  The only other solution, assuming the buyer feels the same way about the report as you do, is to recommend the buyer apply with a different bank. 

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If you have a real estate question for Dottie, please send it to; Dottie@RealEstateChannel.com.
 
NOTE: Due to high volume of questions, not everyone can be answered, but she'll do her best.

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