If buyers are willing to talk finances, be prepared to calculate
their likely monthly mortgage payment per thousand dollars
borrowed: just pick the current interest rate from the table below
(which assumes a 25-year amortization):
| |
5.0% |
$5.82 |
7.5% |
$7.32 |
10.0% |
$8.95 |
| |
5.5% |
$6.11 |
8.0% |
$7.64 |
10.5% |
$9.29 |
| |
6.0% |
$6.40 |
8.5% |
$7.96 |
11.0% |
$9.63 |
| |
6.5% |
$6.70 |
9.0% |
$8.28 |
11.5% |
$9.98 |
| |
7.0% |
$7.01 |
9.5% |
$8.62 |
12.0% |
$10.32 |
Make sure they know that bankers will use two calculations
to determine whether they qualify for a mortgage:
- their monthly mortgage payment plus property taxes plus
heating costs plus ½ their condo fees (if any) should not
exceed 30-32% of their gross monthly income (the so-called
GDS ratio), and
- payments after adding in other debts (eg. car
loans, credit card payments) should not exceed 40% of their
gross monthly income (the TDS ratio).
In short, qualifying prospects is not nearly the problem realtors make
it out to be, IF you’re prepared to ask the right questions and take full
advantage of PrivateList resources.
DEALING WITH IFFY CONDITIONS
Any conditions written into an offer to purchase amount to a potential
escape clause for the purchaser - which is why they should be as few as
possible and very specific as to what needs to be done and by when (see
our Offer To Purchase guide for a list of
some of the more common subject-to clauses).
Provided the deadline and terms are clear and reasonable, you should have
no qualms about accepting a financing condition, since the vast majority of
house purchases involve mortgages.
But what about subject-to clauses which, though legitimate, are a little
out of the ordinary? For example, should you make your house unavailable to
other prospects for the four weeks it may take an otherwise attractive buyer
to find out if his raise has gone through?
One way you can give an unusual offer every chance to succeed, yet remain
open to a less iffy offer if one comes along, is to employ an "escape clause"
of your own. Check with your lawyer for wording similar to:
"Vendor reserves the right to require that this condition be
waived within 24 hours of another acceptable offer
being received on the property, failing which removal this offer
shall become null and void."
This strategy spreads the risk between you and your original buyers. They
tie up the property with what amounts to a right of first refusal. But your
property is essentially still on the market - and no less attractive to the
other buyers, since they'll know within a mere 24 hours whether any offer they
make can proceed.
Not many buyers would accept this strategy if applied to the more common
subject-tos, but for unusual circumstances it could prove a deal-saver.
FRIENDLY REMINDERS . . .
It's important to maintain an active marketing focus until your
property is sold. Just an hour every week-end, spent reviewing progress to
date and mapping out a response, can pay real dividends.
Therefore, each e-mail version of PrivateList PROACTIVE ends with a
series of reminders, and links to tips and tools for your on-going campaign.
To access these resources, press here.
©2000 PrivateList
