What Should Home Seller Expect to Pay at Closing?

The Wall Street Journal

Don't hire any real estate agent that doesn't give you a clear idea of what you should expect to pay at closing, and what you should net from the sale.

Since these costs vary depending on both the location and what other sellers are offering to buyers in your neighborhood, I can't tell you exactly what that number will be. But here's a general rundown on costs:

As a seller, you're responsible for paying certain set costs, such as a grantor's tax (which in Virginia is $1 for every $1,000 of fair market value, based on the higher of assessed or sales value). You will also have to pay any homeowners' association fees and real estate taxes due, prorated to the closing date, as well as any outstanding utility, water and sewer bills.

You'll also have costs that can be negotiated, at least somewhat. These include settlement company charges, any fees your lender may charge for paying off the loan, and of course, the broker's commission.

For all of the above, as a rule of thumb, you can expect closing costs will be about 1.5% of the purchase price, and broker fees to run between 3% (if you use a flat-fee broker) and 6% (if you use a full-service broker). All of these costs are spelled out in the HUD-1 form

But since it's still a buyer's market, it's not unusual for purchasers to ask for help with their own closing costs, or to buy down the interest rate on their loans (their lender must approve this). If the buyers are unhappy with some aspect of the house, such as stained carpeting or old appliances, they may also ask for a decorator's allowance. For this reason, I don't think it's shocking to be asked for $7,500 in concessions.

The buyers' requests will be spelled out in the offer, and you don't have to accept them. However, if other buyers are doing so, you should consider doing it too. Your agent can find out the dollar amount of seller concessions for recently sold homes comparable to yours.

Regardless of what sort of deal you and the buyer work out when you accept their offer, you should also put a few thousand dollars aside for problems that may be revealed after the buyer has the home inspected—even if you have had your own home inspection done before you put your home on the market. You don't want your sale scuttled because of some loose flashing or a sagging porch. It's also wise to offer a one-year home warranty, which costs around $300. That way, the buyer will be calling the warranty company, and not you, should the washer break a month after closing.

And remember that many concessions may be worth making if the buyer offers you a good enough price. It's the bottom line that counts.

U.S. Homebuyers still in the Driver's Seat

CNBC

Prices were cut on nearly one quarter of U.S. homes on the market in May, the same as April, with a growing supply of unsold homes keeping buyers in the driver's seat, real estate web site Trulia.com said Wednesday.

Sellers lowered asking prices at least once on 22 percent of homes listed as of June 1, unchanged in the month and up from 20 percent two months ago, San Francisco-based Trulia said in a report provided to Reuters before official release.

A year ago, prices had been cut on 23.6 percent of listed properties. Sellers may face a setback after a brief spring sales spree driven by a rush for federal tax credits of up to $8,000.

To qualify, borrowers who may have purchased in the summer and fall raced to meet the April 30 deadline to sign contracts.

Spring sales could be "providing sellers with a false state of optimism," said Trulia Chief Executive Pete Flint.

"For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer," he said in a statement.

In the weeks since the tax incentive expired, applications to buy homes toppled to a 13-year low and home builder sentiment worsened.

Inventory levels are growing as sellers gain comfort that the spring season will pave the way for healthier summer sales, Trulia said.

Banks coping with record numbers of repossessed properties will add to the supply as they place the homes on the market, though most economists expect that pace will be measured.

Sellers slashed a total of $26.7 billion in May from asking prices, more than the $25 billion in April and $22.8 billion in March, according to Trulia.

The average discount on the reduced homes held at 10 percent from the original listing. More than a year of tax incentives put the U.S. housing market on a more solid footing.

However, a significant recovery is unattainable without a meaningful improvement in employment, economists agree.

Government data earlier this month showed private-sector hiring rose by 41,000 in May, far overshadowed by the 411,000 temporary census jobs.

Price cutting over the past year was the greatest in cities based in the Midwest and South.

Kansas City, Missouri led by list, with 31 percent of homes for sale cutting prices at least once, up from 20 percent a year earlier.

Other cities with the largest increase in share of homes that lowered prices were Arlington, Texas; Cleveland, Ohio; Louisville, Kentucky, Houston, Texas and Minneapolis, Minnesota.

Western cities had the most improvement in the share of sellers slicing prices over the year.

These were among the cities that had gained the most during the housing boom and have already suffered the most in the crash.

Sellers dropped prices on just 10 percent of properties listed in Las Vegas in May, for example, compared with 30 percent a year earlier.

Six California cities were among the 10 cities showing the most improvement.

Price-cutting on luxury homes listed at $2 million or more was unchanged in May, with an average discount of 14 percent, Trulia said.

Homes in this category account for less than 2 percent of total inventory, but almost one-quarter of total dollars slashed from all homes for sale.

Mortgage Rates Drop Again

Market Watch

15-year fixed-rate mortgage sets record low for fourth week in a row

Bond yields fell and mortgage rates followed after a relatively weak employment report, allowing the 30-year fixed-rate mortgage to hover near its record low set late last year, Freddie Mac's chief economist said on Thursday.

The 30-year fixed-rate mortgage averaged 4.72% for the week ending June 10, down from 4.79% last week and 5.59% a year ago, according to Freddie Mac's weekly survey of conforming mortgage rates.

The 15-year fixed-rate mortgage set a record low for the fourth week in a row, averaging 4.17% this week, down from 4.20% last week and 5.06% a year ago. Freddie Mac started tracking the mortgage in August 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.92%, down from 3.94% last week and 5.17% a year ago. And 1-year Treasury-indexed ARMs averaged 3.91%, down from 3.95% last week and 5.04% a year ago; the ARM hasn't been lower since the week ending May 27, 2004, when it averaged 3.87%.

To obtain the rates, the fixed-rate mortgages and the 5-year ARM required payment of an average 0.7 point, and the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

"Following a relatively weak employment report, bond yields fell this week and mortgage rates followed," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release. "Private payrolls rose by 41,000 jobs in May, less than a quarter of the market forecast consensus of an 180,000 gain."

The economy is showing signs of improvement, Nothaft added.

"The Federal Reserve reported in its June 9 regional economic review that the economy strengthened in all 12 of its Districts over April and May. It also noted that loan quality was stable or improving in most Districts, but remained an issue for banks with large exposure to real estate," he said.

Microsoft eyes 60M Homes for Energy Hogs

USA Today

More than 60 million U.S. homeowners, by simply typing in their address, can now see how their energy efficiency compares with others in their neighborhood or state.

Microsoft Hohm, a free online service that gives tips on how to boost home efficiency, announced Wednesday a new feature that scores homes nationwide. Its estimates are based on public information about a home's size, age and location and other data on an area's typical weather and utility bills.

"The big deal here is that we built the Hohm Score to answer a simple question: Am I an energy hog or an energy miser?" Troy Batterberry, Hohm Score's general manager, says in the announcement.

This new tool comes as companies increasingly compete in the home energy market, either by offering smart meters that connect a home's appliances or -- like Hohm and Google's PowerMeter -- online services.

Which states have the most and least efficient homes?

The average Hohm Score is 61, based on a 1-100 scale. Homes in Hawaii top the list, with an 81, followed by those in Delaware and Maryland (each 70), District of Columbia (68) and New Jersey (67.)

The lowest score went to homes in Texas, Tennessee and Nevada, each with a score of 51, followed by those in Oklahoma (52) and Arkansas (53.)

The scores are estimates unless a homeowner inputs more detailed information, which allows Hohm to provide customized tips for conserving energy such as caulking windows or adding insulation.

Consumers can automatically link their energy bills to a private Hohm page if they're served by these utilities: Seattle City Light, Sacramento (Calif.) Municipal Utility District, and Xcel Energy (eight states in the Midwest and West.)

"Someone could easily save $200, $300, $400 a year just by taking advantage of some of the more basic recommendations we offer you with Hohm," Batterberry says in the announcement.

Hohm charges nothing for its reports, but it may at some point start charging contractors for consumer referrals and utilities for its software, Marja Koopmans told Green House in a March interview. Koopmans is general manager of marketing for Microsoft's start-up business group, which includes Hohm.