Q & A with Dottie Herman

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Q1 - I am thinking of buying a home- my parents are going to have to contribute a lot of money toward my down payment, do I have to disclose that? Does it matter?

A - Yes, if you are receiving a gift from a member of your family the lender will require that three things are documented.  A letter form the persons giving the gift stating that it is a gift with no expectation of repayment, proof that they have the funds in there personal accounts, and evidence that those exact funds are transferred to the home buyers account.  In addition to documenting the gift, most lenders require that at least 3% of the down payment and some of the closing costs are paid from the homebuyer's own savings. So do make sure you disclose your intentions to use money from a gift and ask your lender about the specific requirements you will need to fulfill as part of the mortgage process.

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Q2 - I am selling my house- I recently received an all cash offer, but it was a very low offer- people keep telling me to take it because it is all cash. I am not sure why they seem to think there is a benefit to that. 

A - The reason that some feel it is more advantageous to accept an all cash offers is because no mortgage financing will be required. Homebuyers not being approved for a mortgage is presently the main reason that home sales do not close.  The mortgage process in today's lending environment is very stringent so by accepting a cash offer this potential issue goes away.  Although it may be advantageous to accept the cash offer, it depends on your needs as a seller.

Also consider that for the vast majority of home sales the buyer does obtain a mortgage. Something to look for is a buyer who has a Pre Approval.  This is a buyer who has a written mortgage loan approval from a lender based upon the buyer submitting a full application and all supporting documents. Accepting an offer from this type of buyer does eliminate much of the uncertainty around the mortgage being approved.

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Q3 - Where do you think interest rates are headed? 

A - Most financial analysts are calling for increasing interest rates in 2010 as government stimulus provided to the financial markets is reduced and the economy strengthens, but we can never be certain.

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Q4 - I'm challenging the property tax assessment of a piece of residential real estate that I own.  I intend to use a capitalized income approach as one alternative.  Where can I find an authoritative source for current capitalization rates?

A - It's my experience that most municipalities will not accept a capitalized income approach for residential properties. This is an approach for commercial properties. You have to use the sales comparison approach for residential properties. I would recommend you try to grieve your taxes using a specialist in this area. They typically charge you ½ of what they save you for the 1st year as their fee. If they are unsuccessful and lowering your taxes there Is no fee to them. Let me know if you need a recommendation. 

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Q5 - My husband and I bought our home in the height of the real estate market. We are thinking of selling now knowing we may take a hit on our home or perhaps breakeven on our sale. We had a broker come over and tell us where he thinks the house should be priced, but my husband wants to have an appraiser come over before we list the home. Is that typical or is that something that generally happens later in the transaction? Would you not recommend this?

A - It is not unusual for an appraisal to be requested by a seller when they are trying to estimate the current market value for their home.  The appraiser is neutral and has no vested interest in the outcome of the sale. However the reliability of the appraisal is determined by how experienced the appraiser is in a particular market.  The appraisal can also be presented to the buyer however the lender providing the mortgage is not permitted to use that appraisal.

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