Home sellers using rent-back as safety net

Some sellers who own one home and want to move to another have been having a difficult time making the move in the current housing market. Most sellers can't afford to buy a new home first, move in and then sell the old house.

Financial constraints usually force sellers into a position where they need to sell first, unless they are buying in a soft market where sellers are open to accepting offers made contingent on the sale of another property.

For sellers who need to sell first, the nagging question is: Where do I move when this house sells? If you can buy contingent on the sale of your current home or contingent on the close of that sale if you already have a buyer for your home, you can move directly from your current home to the new one.

One family was able to make a seamless move from one house to the next because they were buying in a market where there were plenty of homes for sale. Once all contingencies were removed from the contract to sell their home, they were able to buy a new home contingent on the close of the old one and avoid a double move.

Not all sellers are so lucky. There are many low-inventory markets around the country. It's usually easier to sell in a low-inventory market, but it can be difficult finding a replacement home to buy. Finding an interim rental is sometimes the only option.

The advantage of renting temporarily while you look for a new home is that you don't need to feel rushed to buy a home that may not suit your needs. Given the uncertainty in the market, you should buy only for the long run. It could take time to find the right place.

A disadvantage of renting before buying is that you might have to pay to store some of your furniture while you rent, and you'll have to move twice.

HOUSE HUNTING TIP: Negotiating an option to rent back your current home after closing may help you avoid a double move, or at least give you time to find a suitable rental. Rentals are also scarce in some areas, so it may not be easy to line up temporary quarters on short notice.

A rent-back agreement allows you to rent your home back from the buyers for a certain period of time. Be aware that many lenders won't allow the sellers to rent back for more than 30 days after closing.

The cost of a rent-back varies. If there are buyers vying for your home, you may be offered free rent for a period of time. However, typically, the rent-back cost is equal to the buyers' principal, interest, taxes and insurance prorated on a per diem basis.

This may cost more or less than you currently pay to own your home. Keep in mind that you do this for convenience, not because it's the best deal on a rental.

Sellers who think they might want to rent back after closing but don't have their next home lined up at the time they accept an offer should include a clause in the contract that gives them the option to rent back for a certain time.

Recently, a seller insisted that she didn't need a rent-back option, confident that finding a rental would not be a problem. As it turned out, it was a problem. She asked the buyers if she could move out later than the contract date. The buyers couldn't change their moving plans, so the seller had to move out on time.

THE CLOSING: If you don't use the rent-back or part of it, make sure you don't have to pay for it.

HOMEOWNER TIPS: 7 easy fixes for common door problems

By Paul Bianchina
Inman News®

If you have some doors around your house that aren't working quite right, don't despair. There are a number of quick and easy fixes that will take care of whatever's sticking, squeaking, swinging or otherwise ailing your doors.

The door binds in the upper corner of the jamb: This is a common complaint, since the weight of the door wants to pull it down at an angle from the top corner, opposite the upper hinge. This causes the door to bind against the jamb in that corner. To fix it, remove one or two of the screws that hold the hinge to the jamb.

Replace these screws with new ones that are long enough to reach all the way through the jamb and into the stud behind the jamb; predrill new pilot holes through the existing holes in the jamb to make it easier to drive the screws.

These new, longer screws will pull the jamb back up against the stud and take the angle out of the door frame, relieving that pinch point in the corner.

The door binds against other parts of the jamb: First of all, ask yourself when this started happening. Is it only in the winter? If so, it's probably due to seasonal swelling, which happens when the wood absorbs moisture from the air.

Check to see if the door is being directly exposed to moisture, such as a drip from a leaky gutter, or perhaps it's constantly shaded by overhanging trees and rarely dries. If you can identify the cause of the seasonal moisture, correct it.

Be careful about planing a door during the winter: When it dries out again, it'll be undersized for the opening.

If the binding isn't seasonal, look for stress cracks in the drywall or moldings around the door. This can indicate settling issues, which may be caused by shifts in the home's foundation, or simple drying of the wood framing, especially in newer homes.

If the settling doesn't continue and the binding doesn't worsen, you can relieve the bound area by tapping against the frame with a hammer and a block of wood, or by removing the door from its hinges and planing it a little. If the settling is worsening, consult with a contractor or structural engineer.

Door won't stay latched: If the door won't stay latched, or if it needs to be pushed hard to get it to latch into the strike plate, first look at the way the door is fitting in the jamb. If you see that it appears to be leaning down at the upper corner, try installing longer screws as described above.

Otherwise, it's a matter of readjusting the strike plate. Site the latch to see where it's hitting the strike plate, to try to determine if the plate needs to move up or down. If necessary, try coating the latch with lipstick or crayon and then closing the door -- the resulting marks on the strike plate will help indicate where it's hitting.

If only a small adjustment is needed, try grinding the opening in the strike plate to make it larger as needed. Use a small file or a rotary tool with a metal grinding bit. If a larger adjustment is needed, unscrew and remove the strike plate, then reposition it on the jamb and reinstall it. You may need to chisel the jamb slightly to accept the plate in its new position.

Screws are coming out: If the screws that hold the hinges are coming out of the jamb, or you've had to reposition the strike plate and the screws want to go back into the old holes, you need to create new wood for the screws to grab into. This is easily done by drilling out the old screw holes to the size of a standard hardwood dowel, typically 3/8 inch. Apply glue to the dowel, insert it into the hole, allow it to dry, then cut it off flush with the surrounding surface. Drill a new pilot hole into the dowel, and reinsert the screws.

Door swings and won't stay open: This is caused by a door that's out of plumb in its opening. To correct it, you need to insert a small amount of shim between the back of the hinge and the door jamb -- usually the bottom hinge. To do that, loosen the hinge screws almost all the way, so that you have some play between the hinge and the jamb.

Insert a piece of wooden shim or other material, such as small pieces of plastic laminate, behind the hinge, then retighten the screws. You may need to adjust the amount of shim to get the door to swing correctly, and you may also need to add a small amount of shim to the center hinge as well.

The door latch hits the strike plate: This is caused by a strike cylinder that's worked loose, or by a loose doorknob. If the strike cylinder that goes into the edge of the door is held in place with a small rectangular plate and two screws, first try tightening the screws.

If they'll tighten and hold OK, that will pull the cylinder back into the door and hold it. If the screws won't hold, then you'll need to install dowels as described above.

Many newer doors have strike cylinders that are drive-in, meaning they're held in place by a friction fit in the hole that's drilled in the edge of the door, rather than by screws. They're also held by tension on the doorknob, which is what the strike cylinder is connected to. First, loosen the screws holding the doorknob, so that you have a little play in the knob.

Set a block of wood against the strike cylinder, and tap it with a hammer to drive it back into the door until it's flush with the door's edge. Finally, securely tighten the doorknob's screws to hold the knob and cylinder in place.

The door hits the wall: You need a door stop. There are three types of door stops available, depending on the situation. The simplest is a solid or flexible stop with a screw on one end and a rubber cap on the other, which is screwed into a pilot hole that's drilled into the door or into the baseboard.

Another style is a hinge stop, which is used when you want to stop the door before it can open far enough to contact a stop on a wall. To install this type of stop, remove the top or center hinge pin, slip it through the hinge stop, then reinstall the pin in the hinge.

The hinge stop has an adjustable rod that screws in and out to contact the door at different points, allowing you to stop the door's swing exactly where you want it.

The third type is called a floor stop. Floor stops are attached directly to the floor, and are the strongest of all the stops, making them especially well suited for commercial applications. On the downside, because they sit directly on the floor, they can sometimes be in the way.

Floor stops typically have a long pin that fits into a predrilled hole in the floor for strength, along with a screw that secures it to the floor.

4 things homeowners must stop doing

By Tara-Nicholle Nelson
Inman News®

Bad-habit cessation is the holy grail of behavior-change specialists and self-help gurus alike. Many millions of dollars have been made and books bought by consumers on the hunt for the key to stop whatever self-destructive actions constitute their particular vice, from smoking to overeating to overspending and gambling.

But these are simply the behaviors on the extremely and obviously destructive end of the bad-behavior spectrum.

In almost every area of our lives, there's something we could do differently or better to get closer to the results we want. Often, we learn these lessons and are motivated out of our bad behavior the hard way, as so many homeowners and mortgage consumers learned what not do to with respect to their real estate decisions by the collective spanking the housing market took in the recent recession. But our memories can be short, and the more subtle bad habits can be the hardest to break.

So even while the market seems to be giving off hints that it might be making a slow turn onto the path to recovery, I think now is precisely the right time to revisit some of the common homeowner behaviors that we should stop doing -- now.

1. Trying to time the market. There is some core human psychological craving to chase after windfalls, no matter how risky or unlikely the chase, and to avoid losses at any costs. Perhaps it's even a sign of a healthy dose of self-esteem that we each seem to feel entitled to avoid the natural ups and downs of the economic markets, including the real estate market.

When it comes to buying and selling homes, locking mortgage rates and the like, people who have zero financial credentials and can barely balance their checkbooks seem, for some strange reason, to believe that they can and should make moves timed to always sell at the top and buy and lock in their interest rates at the very bottom.

The problem is, the data overwhelmingly shows that other human tendencies and flawed logic flows make the vast majority of us really, really bad at timing the market -- especially the housing market.

Think about it, at the top of the market, you see your neighbors achieve such high profits on their homes that you feel like a fool if you're not in the game, and buy as much house as you can as soon as you can. At the bottom, you are afraid to buy a home that may still continue to decline in value after closing, so you sit right on that fence until prices come up -- maybe even selling a home or walking away in a desire to cut your losses, locking them in in the process.

Bargain-hunting buyers who wait for the bottom tend to wait too long, until prices have already started to recover, when buying seems like it might be a good idea once again.

Think about it: The true market-beating strategy with any investment is to buy at or just before the bottom and to sell at the top, which, by definition, is when others are buying. But homes are nowhere near as liquid (easy to sell) as other investments, and they are not even pure investments. For most us, they're also the place where we live!

I believe that we'll make better real estate decisions around our homes when we make those decisions based on what is right for our lifestyles and our families and our personal finances at a given time (then optimize those decisions based on market dynamics), rather than trying to time the market for big profits and no losses.

2. Complaining. For such an affluent bunch (on average, relative to renters), homeowners sure do complain a lot. They complain about the market. They complain about real estate commissions. They complain about buyers and how aggressive they are. They complain about property taxes ... heaters breaking down ... the banks ... this president ... the last president ... the president before that ... and the list goes on.

They say that whatever we focus on grows. So, if we focus on our complaints, they will seem to get larger and larger, more and more important, crowding out all the things we should truly be grateful for, like the fact that a mortgage empowered us to buy the comfortable place in which we live, or the amazing tax advantages we're getting by virtue of homeownership, or simply having a roof over our heads and having made it through the recession this intact.

Complaining is precisely how homeowners who planned to be in their homes for decades and still have the same jobs and incomes they always did wind themselves up into being frustrated with the down market and strategically defaulting on their mortgages, losing their homes and incurring myriad credit and even legal troubles when it really doesn't make financial sense. (This is not to say that strategic defaults are never sensible, just that I've observed many that are not.)

3. Fixating on things beyond their control. You can't make the banks grant your loan modification. You can't make interest rates stay where you want them until you can wrangle a high-enough appraisal to refinance your home. You can't make a buyer show up with a suitcase full of exactly enough cash to pay off your mortgage and slide you comfortably into your next home.

So stop fixating on these things.

Obsessing about things that we have no control over is a shortcut to fear, panic and chronic stress, all of which, in turn, lead to irrational decision-making. If you're inclined to engage in these sorts of fixations, shift your focus to the things over which you do have some control, like:

• following up and making sure every "i" is dotted and every "t" crossed on your modification paperwork (even if that means sending the same documents in a dozen times);
• watching the sales prices of homes in your area for any seasonal spring upticks in sales prices that might boost the chances your refinance appraisal will come through; and
• staging, prepping, primping and pricing your property to lure in the right buyers and get it sold.

4. Looking for tricks and shortcuts to sound financial principles. A homeowner I know recently told me that he'd applied over and over for a loan modification (on a mortgage vastly outsized to what he can truly afford, by the way) and was frustrated by the repeated rejections he'd received. The specifics of the situation suggested to me that it was not that he failed to show a sufficient hardship, but more an indicator that the subprime-era mortgage was simply set up to fail because the home was more than his income would ever be able to sustainably support.

As I tried to advise this young man, he said in exasperation: "I know they just want me to say the right numbers, but no one will tell me what they are. I need an inside connection!"

As I see it, one of the worst impacts on the housing-consumer populace of the subprime era and late-night "get rich with real estate" infomercials has been the creation of the sense that it is acceptable, even savvy, to game the mortgage system to get your short-term real estate goals met, at any cost.

Sometimes, situations arise in which you may have to go to great lengths or leverage your agent or mortgage broker's relationships or expertise to get your mortgage application approved or to get your loan mod application through the bowels of your lender's loss mitigation maze.

But engaging in paperwork or document trickery with the specific intention to subvert the core financial standards and affordability principles that were once built into loan-qualifying guidelines has turned out to be more harmful than helpful, on net, to American homeowners.

DOs and DON'Ts for Listing Your Home

Dos:

Be flexible.  Often it's the little things that push a buyer into the "yes" zone.  If the buyer goes on and on about how much they love your ice maker, throw it in.  If the buyer would like to close earlier and your new home is not ready, use a PODS container and store your belongings so you can meet the buyer's request.

Clean up.  One person's baseball card collection is another person's cluttered nightmare.  Declutter your home before you list it.  PODS containers work well to store personal collections that cause clutter and can distract buyers from seeing the true potential of a home.

Wash the windows.  Inside and out.

Clean your kitchen and bathrooms.  Scrub like crazy, particularly the kitchen and bath (s).  The kitchen may be old but it can still sparkle.  De-clutter here too, especially counter top appliances, canisters, etc.

Don'ts:

Don't be greedy.  The market-not your emotions-dictate's the price of your home.  If comparables in the area, and several trusted real estate agents tell you your home is worth $400,000, you are not fooling anyone by pricing it at $500,000.

Don't get personal.  If you're selling your house for a certain amount, and someone offers something much lower, don't take this as a personal affront and refuse to counteroffer.  Negotiation is part of the process and letting your emotions get in the way can potentially ruin the deal.

Don't procrastinate.  If you are serious about selling, consider doing it now.