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Unspoken Communication

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 12th, 2014

With offers and counteroffers flying back and forth across the table, negotiations between buyer and seller are an important part of the real estate dance, with each side trying to glean any advantage they can.

Toward that end, Britain's largest online brokerage firm, House Network, has teamed up with a leading body-language analyst to create a 10-step guide to help sellers decipher the unspoken intentions of potential buyers through their physical behavior. The guide, entitled "The Art of the Silent Sell," offers the insight of body-language expert Robert Phipps, an analyst, public speaker and the author of "Body Language: It's What You Don't Say That Matters."

The guide offers insights into the nuances of what a would-be buyer's body is saying that his mouth isn't. It also provides advice on how sellers can change their own behavior so they don't reveal their bargaining position.

"The importance of understanding nonverbal communication, both yours and that of your buyers, cannot be underestimated," says Phipps. "Buyers make purchase decisions with their senses, so this guide explains how sellers should use this to their advantage by appealing to their buyers' basic instincts, which are hard-wired."

Being an online operation, the House Network doesn't use agents, so much of the advice is premised on the notion that sellers should show their homes themselves.

Here in the States, that's pretty much frowned upon. Sellers are told to sit back, or actually leave the premises, and let the agents do their jobs. But as Graham Lock, co-founder of House Network, points out, no one knows your home better than you, so "you are in the best position to sell its positives."

According to the guide, then, the seller's job is to "present the property's best features and observe" the potential buyer's responses. In this way, you can dwell on more of what the buyer wants and likes, and ignore what they don't want.

With no further ado, here are some of the key points from "Silent Sell":

-- Greeting. Not only does the greeting begin every interaction, it sets the tone from there on out. So be sure you are ready and waiting for the buyer, but don't be too eager. Standing and waiting with an open door may be polite, but it might also make you appear desperate. Better to wait for the prospect to knock or ring the doorbell.

-- Handshake. Although some people don't like to shake hands, Phipps suggests going for it anyway. Most people find it difficult to resist an extended hand, and besides, it will give you an idea how enthusiastic they are about seeing your place for the first time.

-- Eyes. It's called a viewing because people use their eyes more than any other sense.

Your job is to show your home's best attributes. As you do, try to notice whether your visitor is engaging with you by actually looking at the features as you point them out.

-- Smile. This shows someone is happy, relaxed and content. So as you go from room to room, look to see if the corners of the buyer's mouth are turning upward. Make a mental note of their positive reactions and try to point out similar features to continue the mood.

-- Nods. Subtle head-shakes are good indicators of positive or negative feelings.

Encourage visitors to do this by nodding and shaking your own head when you speak about the good things about the property, neighborhood and local amenities.

-- Posture. How you stand has a great impact on how people feel about you. So make sure you are standing up straight. That equates to high confidence, which will help convey a measure of truth to what you are saying.

-- Angles. How you stand or sit in relation to your potential buyers can have a major impact on how comfortable they feel in your home. Greetings are normally face-to-face, but after that, avoid engaging visitors straight on. Rather, sit or stand to the left of the person you are showing around, because most people are right-handed. If they are left-handed, go the other way.

-- Feel. Encourage the prospect to sit on the sofa, lie down on your bed or open the kitchen drawers. The more folks can try things out, the more comfortable they will feel -- and the easier it will be for them to envision themselves in your place and make up their minds. That's why car salespeople practically demand that you sit behind the wheel or take a test drive.

-- Smell. This is the most basic of all the senses. From birth, people react almost automatically to odor in either a positive or negative way. Here, you needn't bake a cake or brew fresh coffee to make people feel at home, although there's nothing wrong with that. But you must make sure your place either smells completely neutral or has a pleasant fragrance.

-- Sound. Every home has noises, from creaky steps to the rush of traffic outside. If you have a noise, fix it. And if you live on a noisy street, pick a showing time when there's the least amount of traffic.

Says Lock: "Each and every buyer will interpret your home differently, according to their needs and requirements. Your challenge is to sell your home's best features.

"Appeal to the senses, notice how your potential buyers react and what their body language tells you, and concentrate on the positive while moving on quickly from the negatives."

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Failure to Refi Proves Costly

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 5th, 2014

Homeowners choose not to refinance their mortgages for any number of reasons. But when they don't, they lose out on tens of thousands of dollars in savings.

Exactly how much they lose depends on each borrower's individual circumstances, but a first-of-its-kind study attempts to quantify what people forfeit by not turning in their old loan rates for lower ones.

Researchers found that the median household, having failed to refinance, gave away $45,000 in savings over the life of its mortgage. The study -- by Benjamin Keys and Devin Pope from the University of Chicago, and Jaren Pope of Brigham Young University -- also found that the mistake of not refinancing is widespread.

Based on a sample of 1.5 million single-family mortgages that were active in December 2010, they estimate that 1 in 5 borrowers -- that is, roughly 300,000 families -- had not refinanced when it appeared profitable to do so.

The findings "suggest that the size and scope of the problem of failing to refinance is large," the researchers said. "While much of the savings a household can receive by refinancing represents a transfer of wealth from investors to households, the foregone savings is clearly significant for each individual household."

Even when controlling the sample for the often-valid reasons borrowers have for sticking with their higher-rate loans, Keys, Pope and Pope found that the losses were just as great, if not more so.

The justifications people have for not refinancing are almost as varied as the borrowers themselves. One factor is that calculating the financial benefit -- or loss -- is relatively complex. Another is that the benefits are not always immediate, but rather accrue over time.

But other factors often are at play. Refinancing can be expensive, often requiring cash out-of-pocket to cover a number of upfront costs.

Sometimes borrowers don't believe the refinancing offers they receive are legitimate. Some don't even open letters from lenders, thinking what's inside is some sort of scam.

In other instances, the borrower's balance is so low that refinancing is seen as not worth the trouble. In other cases, they no longer have the good credit necessary to win approval from lenders. And in yet other cases, they might owe more than their houses are currently worth, meaning they'd have to bring large amounts of cash to the table to gain lower rates.

Absent these factors, though, the authors say, "there are serious consequences for homeowners if they fail to take advantage of refinancing options when interest rates decline."

The typical active loan in the sample was paying 5.52 percent in interest, had 23 years remaining and an unpaid balance of just over $200,000. The average loan-to-value ratio was 74 percent.

The authors estimate that over 91 percent of the households in the full sample would benefit from refinancing -- a percentage they admit is dramatically overstated, since it doesn't allow for homeowners who were planning on moving, those who kept their original loans for tax purposes, and other factors. Allowing for those factors, the researchers calculate that 41 percent of the full sample were in a position where they should have refinanced.

Narrowing the sample even further by weeding out people whose credit scores had declined, whose loan-to-value ratios had increased, and/or who had missed or been late with a mortgage payment reduced the number who should have refinanced to 31 percent. And after removing households that had taken second liens against their properties, the sample was still 20 percent of households in December 2010 who were missing an important financial opportunity.

Worse, perhaps, is that 4 out of 10 of those people were still living in their homes two years later, continuing to make the full and on-time monthly payments, even though rates had continued to decline.

Take a household with a 30-year, fixed-rate loan of $200,000 at 6.5 percent at origination. When rates declined to 4.5 percent between 2008 and 2010, the savings by refinancing over the life of the mortgage is more than $80,000, even after accounting for transaction costs.

When rates reached all-time lows in late 2012, they had dipped to 3.35 percent. So someone with a contract rate of 6.5 percent would save roughly $130,000 by refinancing.

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Short Takes: School Resources, Commuting Concerns and More

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | August 29th, 2014

Native-born Americans looking to move into homeownership for the first time could learn a thing or two from immigrant homeowners, according to recent research.

Economists at Rutgers University and the Georgia Institute of Technology found that immigrants leverage "birthplace networks" to come up with money to not only purchase their homes, but also to maintain them during hard times.

Unique to immigrants, birthplace networks are social groups of friends and family from the same country of origin.

The study's authors found that although homeownership rates among immigrants fell between 2000 and 2012, the decline was less severe when compared to native-born homeowners. The hypothesis offered in the study is the ability of immigrants to call on their networks during both good times and bad. And while the theory calls for more study, Americans of all heritages can consider expanding their support networks to include, say, co-workers, fellow churchgoers or club members. The list, in fact, is almost endless.

The trend may be toward walkable communities: those with amenities close enough to residences that automobiles are unnecessary, at least for everyday needs. But traffic and commuting time are still high on the list of concerns for most homebuyers.

"There is no way to solve traffic congestion," Brookings Institution Economist Anthony Downs said at a recent real estate conference. "Congestion is simply an inexorable part of the way cities grow."

No wonder 3 out of every 4 would-be buyers focus at least somewhat on cutting their commuting costs, according to a National Association of Realtors survey. Only 27 percent said they were unconcerned with commuting expenses.

About 14 percent were so troubled that they compromised on the home they bought to be closer to work. Six percent more bought a smaller house to be closer to family, and 2 percent did the same to be closer to schools.

Few would-be buyers ask about the local police or fire departments, at least not directly. But they almost always want to know about the schools.

Normally, you can find what you're looking for from the school in question or the local school district. But here, from the Counselors of Real Estate -- the trade group for the country's 1,100 or so real estate advisors -- are four websites for more detailed school information:

-- greatschools.org. Submit a school name for test scores, course offerings and parent/student reviews. Input an address to see all nearby schools.

-- education.com/schoolfinder. Plug in a school name to see how it compares to others in the district and the state. Also shows boundary maps for each school.

-- publicschoolreview.com. Enter the home's address to find all nearby schools, plus information -- but not test scores -- for each one.

-- privateschoolreview.com. A similar site locates private institutions.

Even though the home-office deduction is said to be a red flag for federal income tax auditors, it is a legitimate write-off for small-business owners who, in fact, have space in their homes dedicated solely to their businesses.

According to the latest Census Bureau data, the practice of working at home is on the upswing. By last count in 2010, the number of us working at home totaled 13.4 million, up from 9.2 million in 1997.

According to IRS data, some $9.8 billion in home office expenses were claimed on IRS Form 8829 in 2011.

The write-off is split into two classes: direct expenses related to the taxpayer, and indirect expenses that apply to the house as a whole and are only partially deductible. About $6 out of every $7 claimed comes from indirect expenses, such as mortgage interest, utilities and repairs.

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