What Closing Costs Does A Seller Have to Pay?

With FHA down payments increasing and no real 100% financing options left, many buyers are requesting  some type of closing cost assistance from the sellers.  I’ve talked before about keeping your eye on the bottom line, and looking at what your net proceeds will be from the sale, not how the money is distributed (but a gentle reminder never hurts!). 

Something that many sellers forget though, is the fact that they will have their own closing costs to pay as well.  Since I get this question almost every time I present an offer, I figure that it’s important enough to include some estimates in the FAQ series. 

 

The numbers below are an estimate, not a guarantee that your costs will be the same.

Settlement/Attorney Fees	$195
Title Research and Certificates	$279
Cancellation/Release of Mortgage	$135
Overnight of Mortgage Payoff	$25
Orleans Parish Transfer Tax	$325
Jefferson/Plaquemines Parish Property Tax Proration	The annual taxes from the beginning of the year to the closing date based on the prior year’s actual tax bill.  For example, if you go to Act of Sale on June 30th, you will owe 6 months of property taxes that will be credited to the buyer for payment of the tax bill when it becomes due at the end of the year.
Orleans Parish Property Tax Proration	Since Orleans Parish property taxes are paid in advance, the tax proration will be CREDITED to the seller from the buyer.

 

Thank you to Carolyn Bailey, closing attorney at Stewart Title for helping with the average costs.

Related Reading

Real Estate Talk for Sellers 

Copyright 2008. West Bank Living. All rights reserved.

What is a Real Estate Absorption Rate?

Frequently Asked Real Estate Questions and Answers from Your New Orleans West Bank Real Estate Specialist

Real estate, like any other industry, has its share of jargon and acronyms that make perfect sense to those in the business, but may not be quite so crystal clear to everyone else.  I was asked this week to explain what an absorption rate is, so I figured I would share it with all of my readers. 

 

From realestatewords.com:

An estimate of the amount of sales or occupancy that can be anticipated over a determined period.

 

Absorption rates are not static numbers.  Instead, they change, sometimes every day, as homes are put on the market for sale and as homes are sold or withdrawn from the market.  The absorption rate at any given time is just an overview or snapshot of the current real estate market.

 

Absorption Rate Examples

In June 2008 there were 9 homes sold in Belle Chasse LA.  At the end of June there were 67 active listings on the market.  Assuming that 9 homes will continue to sell each month, Belle Chasse has a current absorption rate of 7.4 months (67 divided by 9).  This rate will vary depending on how many new listings come on the market and if the current rate of sales is steady. 

If the number of listings increases but the rate of sales does not, then the absorption rate will also increase.  Continuing the last example, if in July 77 homes are now on the market and 9 are still selling each month, the absorption rate increases to 8.6 months (77 divided by 9).

 

Why is an absorption rate important to home sellers?

Changes in the absorption rate indicate shifts in your local real estate market and are an important tool to use when pricing your home.  If absorption rates have been climbing in your neighborhood, it is an indicator that there are not enough buyers for the area and your pricing should be more aggressive.  Just like a sponge, there is a point when the market becomes saturated and can’t support any more listings.  When this happens, homes will linger on the market and take much longer to sell.

 

How do the absorption rates affect you?

There really are no “good” or “bad” rates, because each has a benefit to someone, whether a buyer or a seller. 

• A balanced real estate market has around a 5-6 month absorption rate
• A seller’s market has a less than 5 month absorption rate
• A buyer’s market has a greater than 6 month absorption rate

For a current absorption rate report for your New Orleans West Bank neighborhood, feel free to contact Lisa Heindel.  I’d be happy to prepare a free, up to date analysis of the market trends in your area.

Do I Need to Have An Inspection on New Construction?

I often hear that since there is a state required builder’s warranty for new construction in Louisiana, that it is not necessary to have a home inspection done when purchasing one of these properties.

 

WRONG!  No home is perfect, even a newly built one, and it is still important to have a thorough home inspection done.

 

I recently had the chance to work with a terrific military couple relocating to the West Bank of New Orleans.  After a whirlwind search, we found the perfect house for them.  Brand new construction that was just the right size, in just the right neighborhood, with the perfect finishes and upgrades they were hoping for.   I recommended that although the builder would be willing to work from a punch list it was in their best interests to hire a professional home inspector to be sure that everything was done correctly.  Boy, am I glad they followed my advice.

 

Most home buyers and their agents don’t have the expertise or the knowledge of structure, mechanical items and building codes to determine whether or not a home was built properly and it’s easy to overlook things that are not obvious defects. 

 

Just a few of the items that the home inspector uncovered:

• Toilets that were loose and not properly secured to the floor
• A leak in the new HVAC unit that caused sheetrock damage and mildew to begin forming
• Loose shower heads
• Bathroom fans that were improperly vented into the attic instead of the exterior
• Improperly installed insulation in the attic
• Scratches on the granite counter top

 

Armed with the inspection report, we were able to have all of the issues resolved before closing, giving my buyers peace of mind that they were moving into the best possible home in the best possible condition. 

 

This is not meant to be negative about any builder.  The particular one we were dealing with is a reputable businessman and has built and sold many homes on the West Bank.  But, he cannot possibly personally inspect every detail in every home as they are constructed and subcontractors (and their subcontractors) often don’t take the same personal pride in their work that the actual builder does.  Given how responsive he was to the buyers requests, I’m sure that he has a long history of satisfied customers and I wouldn’t hesitate to write an offer on another home he built.

 

The bottom line is that spending just a few hundred dollars up front for a professional home inspection can save you plenty of aggravation, time spent waiting for warranty service and even possibly money, after you have settled in and the builder has moved on to other properties.

 

Are you in the market for a newly constructed West Bank home?  Be sure to use a professional, local REALTORR to represent YOUR interests.  For more information about buying a new West Bank home or for a list of available properties, contact Lisa Heindel.

 

    

---

Here’s the disclaimer part:  The opinions expressed here are strictly those of the author, but you are free to share yours in the comments.  All information is deemed reliable but not guaranteed.

Copyright 2008.  Lisa Heindel, All rights reserved.

What Does “As Is With a Waiver of Redhibition” Mean?

Tracking how people get to my website allows me to see, in detail, exactly what kind of information consumers are looking for about West Bank real estate.  Recently, I had a website visitor that came to me by way of a search for "louisiana property disclosure vs. as-is".  I figure that if one person asked that question, then there are other folks out there wondering the same thing.

 

FIRST, it is important to point out that under Louisiana law, sellers (with few exceptions) are required to provide a property disclosure, whether they are selling the property "as is" or not.  Disclosing or selling "as is" is not a one or the other decision.   Unless you are one of the few who meet the state mandated exceptions, you MUST provide a disclosure to all purchasers.  The law applies equally to those using a professional REALTOR® and those attempting to sell their property on their own.

• For details on what has to be disclosed when selling your West Bank property, read more about Louisiana property disclosures here.
• For a list of those exempt from providing a property disclosure, contact Lisa Heindel.

 

As a listing agent, I always recommend that my sellers transfer their Louisiana property to the new owners with an As-Is Clause and Waiver of Redhibition.  (For people living in other parts of the country, Redhibition is basically the Louisiana civil version of a lemon law, allowing purchasers to sue for unseen defects.)  The waiver of redhibition is intended to minimize the number of lawsuits brought by purchasers against the sellers of real property in Louisiana.  IMPORTANT NOTE:  This does NOT mean that the purchasers cannot do inspections or that they cannot walk away from the purchase if there are inspection issues that cannot be resolved by negotiating repairs or a price adjustment. 

 

It does mean that after inspections have been completed to the purchaser’s satisfaction the following language will become a critical part of the act of sale documents (the highlights are mine).

 

From the Louisiana Real Estate Commission Website:

 

Do you still have questions about As Is and Waivers of Redhibition?  Please contact Lisa Heindel, REALTOR®.  I’d be happy to refer you to a local real estate attorney who is well versed on this topic.

 

    

---

Here’s the disclaimer part:  The opinions expressed here are strictly those of the author, but you are free to share yours in the comments.  All information is deemed reliable but not guaranteed.

Copyright 2008.  Lisa Heindel, All rights reserved.

What Happens If My West Bank Home Doesn’t Appraise?

The real estate market on the West Bank of New Orleans has been in a state of flux since Hurricane Katrina.  Prior to August 2005, we were seeing a slow, but steady, increase in values across the entire West Bank.  Since flooding was limited to just a few affected areas in Jefferson Parish, there was a rush to purchase homes on the West Bank as people began to return to the city…pushing both rents and home prices up very quickly. 

 

After the initial spike in the market, these increases in value have been difficult, if not impossible, to maintain over the long term.  An unfortunate side affect is that many people who purchased a non-flooded home in 2006 paid a premium for it.  As these homes are coming back on the market for sale, some sellers are finding that they are upside down - they owe more than their house is appraised for.

 

The standard Louisiana purchase agreement allows the purchaser to make their offer contingent (conditioned) upon an appraisal that is equal to or greater than the purchase price.   Financing is usually a contingency as well, with the buyer’s mortgage company requiring an approved appraiser inspect your home and determine the current value based on recent comparable sales in the area.  Recent means just that.  It doesn’t matter what price your neighbor got for his house when he sold a year ago.  An appraiser will be researching sales within the last 6 months and prefers sales within the last 90 days.

 

What can you do if your West Bank home appraises for less than the agreed upon sale price?

• Cry.  Go ahead, I’ll pass you tissues and hold your hand until the moment passes.
• Yell.  You are welcome to vent about the qualifications (of lack thereof) of the appraiser, but please don’t yell AT me.
• Have the buyer pay the difference between the contract price and the appraised value.  Take your best shot, but I’ve never seen this happen except in the buying frenzy post Katrina.  Those days are long gone.  Stop and think…Would you pay more for a house than it’s worth? 
• Cancel the sale and go back on the market.  Keep in mind that the next appraiser may come up with the exact same numbers. If you are in an area that is seeing declining values, the next appraisal could even be lower.
• Reduce the sales price to the appraisal amount.  This is the most common (and common sense) solution.  Will doing this cause you undue financial hardship?  Then it’s time to take the sign down and settle back into your home until the market turns.  Please remember that my crystal ball is on the fritz again, so I cannot tell you when that might be.

There is one other option when an appraisal comes in low, and that is for your REALTOR® to provide additional comparable sales for consideration by the appraiser.   Occasionally, this additional information will be considered and result in an adjusted value, but it is the exception, not the norm.

 

The best way to keep from being surprised with a low appraisal is to hire an experienced West Bank REALTOR® who will keep you informed about market changes during the time your home is listed.  A monthly update of neighborhood sales keeps you on top of things and allows you to adjust your price as needed.  If you need more information about setting the right price for your West Bank home, please contact Lisa Heindel, REALTOR®.  I’d be happy to go over the real numbers with you.

 

 

 

---

 

Copyright 2008.  Lisa Heindel, All rights reserved.

Next Page »