Northwest Living | Bellingham Real Estate Market

Bellingham, WA -  With a strong local economy and favorable home buying conditions this  will prove to be a good time to buy or sell a home. There’s just too many economic conditions in place for home buyers, that are positioned to purchase a home, to ignore any longer.

Now is a good time to buy and sell real estate in Whatcom County, no matter what people may be hearing about the national market. The national media has focused too much on negative things that they only contribute to housing and economic problems instead of help. Thats the news cycle in general though, they tend to focus on negatives and rarely talk about the positive things in life. It’s unfortunate but very much true.

The Puget Sound economy is strong, unemployment rates are low, interest rates are low, local housing inventory is good and the return to good safe mortgage loans are back. It’s not a bad time to sell, especially if sellers will be turning around and buying, but sellers need to be flexible at the negotiating table in this type of market. With rental prices climbing over the last two years with less buyers in the market, It makes more sense to buy then rent currently. Coupled with the fact that home prices have plateaued or declined bodes well for home buyers.

I would have to agree with so many that a lot of the housing problems could be pointed firmly at the media, who are confusing the public by publishing headlines designed to appeal to emotions and reports that use local and national information to distort the truth at times. For them to report about the high number of subprime loans in the south and some how use that for the Northwest is confusing. The Northwest never got into the subprime loans on the scale of a lot of southern states, so no wonder we are doing so much better. But unfortunately that news is not getting out as much as the bad news from other parts of the country.

Limits on Federal Housing Administration loans were recently raised, which should give buyers more homes to choose from at favorable mortgage rates. Hopefully a bill that would lower the down payment requirement for FHA loans from 3 percent to 1.5 percent, making the loans more accessible to first-time buyers gets passed.

This past week both Fannie Mae and Freddie Mac were allowed to lower the amount of funds they kept in security from 30% down to 20%, freeing up two hundred billion for mortgages as well.

The subprime mortgage mess has made lenders return to “old school” restrictions and requirements. Buyers may have to get help from family rather than use a riskier loan. I think in the end it will be much better for buyers who use discipline in budgeting and learn to save for a down payment instead of securing no down payment loans of the past which teaches buyers nothing.

This “normalizing” of the market gives people a chance to take a few months and get their finances in order before purchasing a home.  I think if buyers put more of their own hard earned money in to a home, they will become less likely to fall behind in payments and go into foreclosure.

Jerry Campbell - Muljat Group - Bellingham WA - Bellingham Homes For Sale

Bellingham, WA - March is traditionally when homeowners thinking of selling their homes prepare their property for listing in the local Whatcom County real estate market. The winter holidays are usually the slowest time of the year because of the cold weather and holiday events. As soon as buds start to appear on trees it seems to be the real beginning of the listing season and for sale signs pop up in yards.

The last two years there have been a few more for sale signs than usual and they have stayed longer than the boom years from a few years ago. To stay competitive in this ever changing market most homeowners thinking of selling need an edge to get noticed. The best thing a homeowner can do is make sure their home is in show condition. I’ve posted about the importance of staging a home for sale before, so I won’t go into to much today. Our viewers might want to visit an article we posted called selling your home in a buyer’s market to get an edge in selling their home. There are also some good articles under our Seller Tips category that should help as well.

Bellingham and Whatcom County home owners have it a lot better than many real estate markets in southern states across the nation. According to the statistics, Whatcom County only had 19% of all loans in the sub-prime market, with 81% in prime lending. That number most definitely has dropped even more, now that the mortgage industry has returned to more normal loans. Just because Whatcom County has 19% of mortgages in the sub-prime market does not mean all of these will fail. It’s estimated that only about 5% of these will go into some form of foreclosure. By checking out the following national subprime mortgage map, county by county, home owners can get a better feel for where the real problems are across the nation.

If one were to look at the subprime map, you can see that the Northwest really doesn’t have the same problem that the many areas of the country are experiencing. I mention this because It’s really the negative chatter and consumer sentiment that is making our real estate markets tough in the Northwest. Because we are a national economy it does effect us locally, but certainly not like those in parts of California, Arizona, Texas, Mississippi, Florida, and many more states.

The thing most home owners should take to heart is that if your selling in a buyers market and planning to buy right away, then on the buying side you will gain that advantage. Actually no matter what market your in, as long as your selling and turning around and buying again…you’ll do fine. Happy Saint Patrick’s day everyone and may you find good luck in all your housing needs this year.

Jerry Campbell - Muljat Group - Bellingham WA - Bellingham WA Real Estate

 The real estate industry launched last week it’s version of an online encyclopedia called the Real Estate Wiki. A collection of real estate professionals got together and created the brand new wiki to provide a information on the real estate business in one place.

The new real estate wiki includes real estate definitions, frequently asked questions about home selling, home buying, finance process, home inspections and a whole lot more. The wiki will also provide interesting bio information on leaders in the real estate industry, real estate books, leading real estate brokerage companies, real estate associations, and real estate blogs. They go even further and tell the public about all the designations Realtors earn, courses they take, publications of the industry, our social networks and institutes as well.

With the reputation of the the larger Wikipedia as the world’s largest free encyclopedia on the Internet, this will allow a more targeted drill down to a specific profession like the real estate industry. Since Wikipedia has a reputation for being non-biased and independent the hope is that the consumers will be able to gather tons of useful information at one reliable source.

It’s estimated that at least ten million people work in the industry related to real estate including real estate agents, brokerages, mortgage, financial, construction, and appraisers. With so many consumers now searching the Internet for real estate related information this should be a big plus for buyers, sellers, and renters alike.

This will be very exciting to see how this all evolves and how the public in general takes to the new real estate wiki. This should be a great source for my local Bellingham WA and Whatcom County real estate markets.

Jerry Campbell - Muljat Group - Bellingham WA Real Estate -  360-739-7779

 As the cyclical real estate market takes a turn, and conditions in most parts of the country now favor the buyer. Often referred to as a “buyer’s market,” this means that the inventory of homes for sale exceeds the consumer demand. As a result, buyers can be more selective, and more conservative, with their offers. If you are trying to sell a property in a slower market sector, you might want to try some of the following advice to help your home go from “For Sale” to “Sold.”

Price your Home Right - The number one thing you can do to help your home sell in a buyer’s market is to price it right. A knowledgeable buyer, and an experienced real estate agent, will know value when they see it. If you price the property too high, you are unlikely to receive offers, since buyers know there are plenty of properties to choose from. Also, if you are forced to reduce the price bit by bit, buyers will not always revisit an old listing, especially if new offerings are continually being added to the MLS. If you are priced right, you can expect an offer within 10-15 showings from qualified buyers. Real estate agents that are just previewing your property don’t count.

Make it Show Ready - Make your property stand out from the rest. Do the required prep work, both inside and out, to give it the curb appeal, and charm, that will pique buyer interest. Follow the advice of your real estate agent, to help the home “show well.” Clean the clutter, shampoo the carpets, refinish the floors, paint the walls, etc. You, or your Realtor, should stage your home before each showing by turning on lights, opening blinds, clearing sidewalks of snow, and having heat on at a comfortable temperature. In a buyer’s market, you have to do everything you can to make your property rise above the rest.

Choose Wisely - Hire a real estate professional who has the experience, and network, to get your home sold. In a buyer’s market it is critical to have a professional who is working non-stop to set your home apart, and bring in potential buyers. A good Realtor will help you set the right price, tell you how to stage the home, market your property aggressively, and guide you through negotiations.

Marketing - Many Realtors you interview will tell you they have a real estate website. What you need to ask as a consumer is “How do you rank in Google, MSN and Yahoo”? If the real estate agents website your considering is not organically ranked in the first couple of pages, only consider one who does. Paid placement here today and gone tomorrow. Those sites may appear in the sponsored link section of your search results but can disappear latter that same day once the Realtor’s daily marketing budget has been met. 80% of the public uses the Internet to research and locate potential homes to buy. You need a top full time on-line marketing program not a part time one. People generally search by geographical location and the terms real estate, homes or homes for sale. 

BellinghamWAHomes.com is ranked consistently in organic search term results for Bellingham Real Estate, Bellingham WA Homes, Bellingham homes for sale, and Bellingham WA neighborhoods on Google. They also hold over 3 dozen top 5 positions in similar search terms in Google, MSN and Yahoo. Over an estimated 83% of the public uses Google as their search solution of choice. BellinghamWAHomes.com out ranks Realtor.com, trulia.com, Craigslist, and even most brokerage company’s in the Bellingham WA Market.

Bellingham Real Estate Agent

If you would like more information about the Bellingham Real Estate market as well as anywhere else in the Whatcom County Area contact us at 360-739-7779 today.

Jerry Campbell, is a full time real estate agent in Bellingham WA and prides himself on providing clients with professional guidance in all phases of residential sales, and especially in residential new construction, including market research, product development, consulting, marketing and advertising. His personal mission is to bring to you a level of knowledge, experience, commitment, high standards and results to answer your real estate needs. He believes, the most effective way to provide superior service is to build a strong working relationship with you. His system includes regular consultations and feedback, which is the best tool for identifying and clarifying your real estate objectives and help define strategic solutions.

Jerry Campbell - Muljat Group - Bellingham, WA 98225 - Bellingham Real Estate

 The days of marketing your home for sale in newspapers, magazines, radio and TV are slowly going by the way side. Sure you can still open up the Local Bellingham Sunday paper and one of the real estate magazines and find homes for sale, but that’s not where most buyers today spend their time looking for a home.  The old ways of advertising your home with the media giants are slowly losing its appeal and advertising dollars instead to the speed, ease and comfort of the Internet.

When the market takes a down turn like were experiencing now in the local Bellingham WA housing market the natural tendencies are for sellers to expect more advertising dollars spent selling their home.  So what usually happens, even today, is for sellers to look for their homes to be marketed in the Sunday newspaper, real estate magazines and do lots of open houses.

This might suffice the seller by seeing their home in a magazine, but to be honest, marketing dollars would be better spent if instead they went to marketing online.  One month’s worth of advertising in a real estate magazine can easily cost from about $200 to $500 plus for one page.  The sellers home is usually mixed in with 4-8 other homes on a single page where the real estate agent is showcasing the sellers property and of course that page competes for attention with 100 other pages easily. 

As a seller, your far better off having your home on line where according to the National Association of Realtors, 78% of all buyers search for their next home.  With the likes of of so many quality Realtor search engines on line, for searching real estate, it makes total sense to market your home on the medium of choice for most buyers today. 

Think about the home search in the mind of today’s buyer.  If you took two buyers and told one they could only use the Sunday paper, local real estate magazines and drive the neighborhoods where they wanted to live.  The second buyer had total use of the Internet to surf anytime of the day, and had to forget about the print media.  If I was a betting man, id say buyer two would have a clear advantage just because they would be right there when a brand new fresh listing hit the market.  In many cases a listing will be marketed in print media and by the time it hits the news stands it’s already pending.  

According to Mike Simonton, Senior Director at Fitch ratings he says, “it seems newspapers aren’t the vehicle of choice anymore. Instead, just as more buyers are doing their homework and researching for their next home online, sellers also are turning to the World Wide Web to get their home noticed.”  

“There are some obvious benefits to some of the online search tools that are unavailable in a print product,” explains Simonton.

He says things such as being able to target geographic locations, target price range and the features they want make searching online for a home easier and faster. Ultimately, consumers can filter out homes they don’t want and search specifically for what they do want “in a much more sophisticated way than you’re able to do in a print product,” says Simonton.

Today your Realtor can put your home on their websites and feature the property with unlimited photos, detailed information, virtual tours, PDF files, and so much more.  What an experienced Realtor can to today by utilizing the tools on line is really the way our market is moving. 

When I first got into the real estate business back in the early 90’s, before the Internet, I remember all of our listings were in a thick MLS book and we always looked forward to that new copy once a week.  I don’t think you can even find those big thick clunky books anymore at any of the state wide MLS boards.

This is the same slow death that the print media is experiencing today.  Trust me, there are still some old timers out there, that would like to go back to the mls books, not this guy….smiling.  Simonton has made some very interesting comments to think about when selling one’s home in today’s market and here are a few more:

The ink isn’t running dry in just the newspaper advertising world, “We’ve definitely seen an acceleration of advertising dollars toward the Internet and that’s going on across different mediums. The mediums that have been hurt the most are newspapers for sure, and then radio, broadcast television, Yellow Pages. Anything that’s traditional advertising has been hurt,” says Simonton.

However, real estate advertising in newspapers in some smaller local markets has not yet been affected but Simonton says the clock is ticking there as well.

“I think that as more people in these local markets use broadband some of the trends that we’re seeing in the larger markets will show up in the smaller markets in the future and it’s not so much that the smaller local markets are immune to these changes but these changes haven’t reached them yet,”

There is actually some lead time for newspapers and other mediums in the small markets. If they address the declining advertising revenues and start to move their content online they can help offset the loss in revenue by replacing it with a more real-time approach to advertising.

“Overtime they will need to have a very established online position in order to deal with the fact that most of the consumers in the market are using the Internet to get their information about what’s available in the local market,” explains Simonton.

For the price that’s currently being paid for print media in one month, a better solution is to build an on line presence instead where a sellers home could be on the Internet and virtually marketed 24/7 at much more affordable prices.  It’s just my opinion and my two cents…

Market your home today with Bellingham Real Estate - Jerry Campbell - Muljat Group.

 Relocation Assistance

Moving can often be a traumatic experience - especially if your moving to a new community in a new environment.  Let a professional Realtor assist you in making your move as easy as possible for you and your family.

Moving to Northwest Washington?  Rely on a local Realtor with experience, professionalism & integrity in assisting you in the housing part of your relocation move to Washington State.  A local Realtor should be knowledgeable of all the neighborhoods, schools, parks, and shopping in the area your considering your move to.

In your initial contact with your real estate agent, they should talk to you about your family needs and requirements, your new employment location, acceptable commute times, the time frame for your purchase and other important details.  Ask your Realtor for a relocation packet of information on the local communities of interest to you.

You might want to ask them for a couple referrals on mortgage loan councelors.  As the market in the Bellingham, Whatcom County area is so different than many other areas of the country, a qualified loan councelor can explain to you the various loan programs that are available.

Your Realtor should be able to assisst you with referrals to temporary housing providers, van line companies and other service providers.  Let them know what you need and in most cases they will be able to help you with all the details.

Moving from Northwest Washington?  Your Realtor can also assist you if your relocating from the Bellingham area by referring you to a real estate company and agent in your destination town.  Contact your Realtor and let them know where you will be moving to, the type of property you desire, your housing needs and requirements, and they will locate a Realtor in your destination area.  You will then be contacted by a Realtor with relocation experience in your new location and receive a relocation packet on the new area.  In most cases there is no cost or obligation for this service, but hopefully your pleased with the referral and you decide to purchase through that agent and company.

Your local agent should keep in contact with you to make certain your happy with your referral.  A Realtors goal is to provide a high degree of professionalism in assisting you and to make sure your transition to or from the Bellingham, Whatcom County area goes smoothly.  If there is a service you need in the housing part of your relocation, rely on your local Realtor.  Most Realtors really enjoy helping clients with the relocation process and consider it as part of their job titles, so do indeed ask for this important assistance from your local Realtor professional.

If you don’t have a Realtor in the Bellingham, Whatcom County area or in your move to Northwest Washington, feel free to contact me at anytime.  My name is Jerry Campbell, I’m a fulltime Realtor with The Muljat Group in Bellingham, WA.  Goto my local website for all your Bellingham WA real estate and relocation needs.

 Portland’s once-soaring housing prices are cooling and heading into a buyer’s market.  Just  nine months ago Portland was one of the last hot markets left over from the hot market we all experienced.  However, housing economists say very few sellers are reducing asking prices but may have to soon.

The Northwest has been one area of the country that has weathered the slow down in the housing market over the last two years.  For the most part the Northwest has experienced relatively low unemployment, great retail numbers and just the natural beauty of living in such a quality area.  But, with the rest of the country experiencing this slow down, the downward housing market has now reached this area as well.

The median home price remained at $300,000 — flat from the month before — and homes required nearly two months to sell on average, according to the Regional Multiple Listing Service, the areas main MLS service for home-sales.

The inventory of available homes hit 6.2 months, tied for the highest since 2003 and nearly double the figure from a year earlier.

So far, most sellers have tried to avoid dropping their prices.  It appears the sellers are just reluctant to reduce the prices on their homes and have a false sense about what their home is worth in this market.

At some point sellers will have to reduce prices to start getting offers or risk the chance of chasing a down market.  

Portland prices still are holding as well as any in the country. August’s median sale price was 9 percent higher than a year earlier.  But thats the homes that sold.  the staticians never factor in the hundreds that tested the market and never sold.

Jim Cramer, CNBC News really ripped the housing market on wednesday, but on thursday he said one of the only areas of the country thats holding it’s own was the Seattle housing market.  Listen to Cramer’s comment on the homes market in a CNBC video at this link, Seattle Real Estate.

Hang in there Northwest and like all real estate cycles, we’ll get through this one as well and get back to a normal market once again.

Jerry Campbell - Muljat Group - Bellingham, WA - Bellingham real estate

What are the changes taking place today that will influence our business tomorrow? Learn what the experts at Real Estate Connect think the future of real estate will be like.

I’ve always admired Craig Newmark, the founder of Craigslist.com. He has a terrific sense of humor, especially when he referred to himself at this year’s Connect as “eye candy.” He is an amazing model for our industry. For a man who is worth billions, he describes himself as “just the customer service guy who answers the phone.” I have every confidence that Newmark takes customer service calls. At the heart of what our business should be, even in light of all the technological innovation, is being of service to those who elect to do business with us. Our business is not about just the numbers, it’s about making a difference to those who lives we touch.

Craigslist is in a sense, like a huge blog, because it’s constantly being added to and updated with unique content.  Since Craigslist is so interactive with millions of users it definetly is part of the wave of Web 2.0.  Craigslist founder says that what Web 2.0 offers is a chance for those who are “normal” to have a louder voice than the “crazies.” What does this have to do with real estate?

Newmark says that advertising today is about authenticity; it’s not about scripts or Madison Avenue advertising tactics. Instead, it’s real people telling real stories. It’s time to stop apologizing for who you are and connect with the world out there. Ultimately, it’s the personal chemistry that gets you the business, not how fancy your Web site or advertising copy is. Especailly with the real estate business, where it’s how a Realtor connects on a personally with their clients.

Hugh MacLeod in his keynote echoed similar sentiments. According to MacLeod, “The market for something to believe in is infinite.” MacLeod spoke extensively about “social objects.” A group of 1,000 baseballs could be identical. However, the one that Barry Bonds hits to set a new world record has extreme value. It’s not the object that has value, it’s the story. What matters are the conversations that we have with others about the social object.

This dovetails with the work of Clotaire Rapaille, the marketing guru for 50 of the Fortune 100 companies. Americans are not really buying the bricks and mortar — what they’re really buying is the dream of home ownership.

Web 2.0 is about sharing our experiences. Coca Cola and Doritos elected to have their customers compete to see who could create the best commercial. Customers voted for their favorite. They talked to their friends, argued for why their choice was best, and ultimately created more buzz and word-of-mouth marketing than any well-executed advertising campaign from an agency could generate.

We are already being inundated with stories and pictures from numerous sources. A great video can give you an international reputation in just hours. Sites such as Flickr.com allow us to share our photos. YouTube.com, HelloWorld.com, BlipTV.com and Blinx.com are places to share our videos. Blogs and social networks such as Facebook.com, Linkedin.com, RealTown and MySpace.com are creating international communities of like-minded people where they share their experiences and seek advice. Sites such as Twitter.com allow people to share what they’re doing this moment.

As computers expand from dual processors to 64 processors or even more, our ability to access full-length, high-quality video and even three dimensional communications will follow. The new “maplets” from Google allow you to populate those maps with gas stations, museums, your listings, or just about any other information that you would like to include. Microsoft’s Virtual Earth is also moving into providing the equivalent of 3-D imagery.

Here’s the bottom line: our clients need us to provide them with a stellar customer experience. They want us to be their trusted advisor and a trusted source for timely information about current market conditions. They want to interact with us in a fast, fun and easy-to-use environment. We must be credible; we must be authentic. We need to help them manage their expectations about what they’re buying. They want their information now and they expect us to be mobile. The business of the future belongs to those who are willing to step forward and integrate these innovations in their business.

Perhaps this seems like a tall order for an industry that has been slow to adapt to the Web. If Craig Newmark believes Web 2.0 may be the vehicle for peace in the Middle East, then is it too much to hope for that our industry will embrace these changes to create an entirely new way of conducting business in the 21st century?  Via Bernice Ross, a national speaker and CEO of Realestatecoach.com, the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.

 About two years ago I was attending the annual Washington State Association of Realtors Convention in Bellevue, WA and decided to take an afternoon class on the topic of Feng-shui.  I was a little skeptical at first, but after about thirty minutes of the class I realized maybe there is something to the way we show case a home and it’s energy.

 I’ve actually put some of these ideas to use in some of my client listings up in the Bellingham WA real estate market and thought id pass along this article I recently read by Amy Hoak…

 Tammy Winfield made every effort to depersonalize her home and keep it free of clutter. She even baked cookies before prospective buyers came in for a look, hoping the homey scents would help persuade them to make an offer.

Still, the Truckee, Calif., home that she and her husband, Bill, put on the market last September sat for months without any takers.

“We were getting a lot of showings but not many offers,” she said.

Then, in February, they took some home-selling advice — and a leap of faith.

At the suggestion of their real-estate agent, they brought in a home stager who refocused the home using the concepts of feng shui. The couple closed on the sale of their home in March.

When their agent suggested using feng shui to stage the Winfield home, there wasn’t immediate acceptance of the idea.

“I was somewhat skeptical. My husband was more so,” Tammy Winfield said.

At its heart, feng shui involves adjusting a place’s energy and enhancing the perception of space, often done by reconsidering furniture placement, said Christine Ayres, who staged the Winfields’ home and also co-wrote the book “Sell Your Home with Feng Shui.”

It’s a technique that has been around for hundreds — some say thousands — of years, she said. While the concept has long thrived in China, it’s only recently been embraced in the United States.

A home with a good flow of energy is one that makes someone feel comfortable immediately; a home without it, on some level, makes a person want to leave, Ayers said.

Feng shui also can be used to create a clear path to a home’s “room of first impression,” the room that will make the biggest impact on a buyer, Ayres added.

“Most Realtors are very open to it. They’re going to use any tool possible to help market the property,” Ayres said. There’s also little cost involved, she added.

Some tips to consider for those who want to try feng shui to sell their home:

Furniture shouldn’t be in the direct path of the entrance of the room, said Cynthia Chomos, a feng shui consultant, speaker, teacher and founder of the Feng Shui School for Real Estate Sales in Seattle, Washington.

For example, if the back of a couch faces a room’s entrance, the piece of furniture can cause a person to “pingpong” back to the door, Ayres said.

Chomos also advised having a solid wall of support behind a key piece of furniture — a rule that makes it a bad idea to place a bed under a bedroom window.

The front door, “the mouth of the house” should get special attention because “it’s where the house inhales its vitality and brings in the buyer,” Ayres said.

Spruce it up with a fresh coat of paint, replace scratched hardware or frame the door with matching pots, which has the visual effect of widening it, she said.

If potted plants flank the house, they shouldn’t have sharp, pointed leaves, Chomos said. A plant such as a palm can appear aggressive; “the last thing we want are sharp points pointing at a buyer’s stomach,” she said.

Ayres also suggests hanging a wind chime at the front, right corner of the home. That area is the buyer’s area, she said, where decisions regarding the sale might be made.  Via Amy Hoak.

The subprime fallout has made the once slam-dunk home loans more difficult to obtain. While some Puget Sound neighborhoods continue to be very active, exemplified by one Bainbridge Island home drawing nine offers in one day, other areas have slowed considerably.

In addition, the first notion of back to school already has hit many second-home owners who are beginning to schedule the winterization of the family cabin. Instead of going through another off-season with little use and significant maintenance, some owners will use the last few weeks of the summer season to show and hopefully sell the family getaway, raising for-sale real estate inventory levels in popular areas.

If your house or cabin already has been sitting for sale long enough to bite into your comfort and affordability zones, you might want to consider a lease option.

A lease with an option to buy often can solve a two-mortgage problem for a seller, and provide a cash-poor buyer with an opportunity to “try out” a house while getting a portion on the monthly rent credited toward an eventual down payment.

Many sellers make a commitment to purchase another house contingent on selling the one they’re already in. But when it comes time to purchase the second house, or lose it, the prospective buyer can be faced with making payments on two homes if the first one has not sold.

A 12- to 18-month lease agreement, with an option to buy within the lease period, can solve problems. Here’s how a typical lease-option works:

The buyer and seller agree on a purchase price, usually a figure somewhere between today’s market value and the anticipated market value 12 months down the road.

The seller gives up tomorrow’s presumably higher value for money in hand today. The buyer pays a bit more than today’s value in exchange for very little cash down. Let’s say buyer and seller agree the price will be $335,000.

The seller charges the buyer a nonrefundable fee for agreeing to this option. The amount can vary depending on factors such as how eager the seller is to move and the size and quality of the house. Typically, the higher the fee, the better the buyer maintains the property.

Let’s use $3,000 for the fee in our hypothetical transaction. The fee is in addition to the monthly lease payments. And we’ll have the seller give the buyer the right to purchase the property for $335,000 at any time within the 12-month lease period. If the option is exercised, the fee could be considered part of the down payment.

The lessee has made no down payment, hence the monthly option fee is typically higher than rental market rates. The two parties agree on what portion of the rent will be applied to the down payment. Any amount can be credited. For example, if the monthly fee is $2,000, $800 could be credited to the down payment. (If the seller really is not eager to sell, he may not agree to a higher rent credit.)

Buyer and seller must be sure to specify both lease and sale terms in the agreement. For example, when the time comes for the buyer to exercise the option, if the interest rates are at 8 percent, the buyer may not be able to qualify for a loan. It’s a good idea to set an interest-rate ceiling in the agreement, or ask the seller to finance the home when conventional rates hit a certain level.

Sellers should read their mortgage agreements carefully before entering a lease-option agreement. Some lenders may activate a “due-on-sale” clause if the seller enters into a lease-option with another party. Many times, lenders will permit a specific lease-option period if notified in advance. And lenders usually are more willing to participate when they are assured of future business — like the seller’s or buyer’s new mortgage loan.

Some realty agents have been reluctant to seek lease options for clients because they have been unwilling to gamble their commissions on whether the option would be exercised. Others are skittish about deferring their commission until a deal is solidified. However, when open-minded agents understand a lease-option could keep a deal together and result in future business, the concept is readily accepted.

What’s the once-popular saying … a small piece of something is better than a large piece of nothing? Via HeraldNet and Tom Kelly