Any time you enter into a negotiation on an offer to purchase on your home you always have to determine what is the breaking point. What this means is at what point do you say that enough is enough and you don’t care if you lose the buyer or not. Now, please realize that the housing market in the Allen Park or the downriver area as a whole presents a very difficult time for sellers. Sellers are being asked for an extraordinary amount of concessions in order to sell their houses. So, please keep this in mind when you are presented with an offer on your house. Most offers are coming in asking the seller to contribute 6% of the offer price to be used to fund the purchasers cost to close. On a $100,000 dollar house this amounts to $6,000. Now the buyer on most offers have to fund there own down payment. On an FHA mortgage the minimum down payment would be $3,500. Now, my question is “how much does it cost to originate a mortgage?”. Setting up escrow accounts for taxes is the major cost of funding a mortgage so let’s say this amounts to $3,000. Now there is a 1% origination fee, credit reports, home owners insurance, appraisal fees and surveys. The total of these fees (assuming the $3,000 for property tax escrows is correct) is $5,200. This leaves $800. This $800 could be used to (depending on the lender) buy down the interest rate for the buyer. The question I pose to you as the seller is: Is it worth losing the buyer over $800? If you have questions please ask through this medium or call me at the number provided.

At one time there was a mortgage interest rate and that was it. 4,5 6…whatever. Home buyers did not have a choice. Add discount points to this and the answer was always the same…take it or leave it. Today, buyer’s have more choices in how they finance their new home. Often the question is should I pay point’s and buy my interest rate down or should I close at a rate with no points. The answer lies in how long are you going to stay in the house and also do you have the money to buy the rate down.

Let’s say that you are borrowing $100,000 at a rate of 5.5% and the principal and interest amounts to $567.79. If you were to pay 1 discount point ($1,000) and lower the rate to 5.25% the principal and interest payment would be $552.20. A savings of $15.59. The pay back period for this $1,000 investment is 5 years 4.14 months. So if you were planing on staying in the house more than 5 years and 4 months this would appear to be the better thing to do. More on discount points later. If you have any questions on home financing please feel free to respond.

I see hopeful signs about our downriver housing market. First of all, I have been told that about 700 employees have been recalled to National Steel (formerly Great Lakes Steel). Also pending sales are up over June 2009:
Single Family Condominium
June total pending sales: 150 – 143 7
Average list price: $60,701 and $53,343 respectively

Single Family Condominium
July total pending sales: 372 – 353 19

Average list price: $69,307 and $68,540 respectively