Q&A WITH MARK SPRAGUE
Mark Sprague is a noted and respected expert on the real estate industry and the Austin market, in particular. He is also the Director of Business Development for Mission Mortgage and we are fortunate to have access to his expertise and opinions. Recently, Mark was asked for his advice about setting the list price for a resale home on the market and employment qualifications for mortgages. Here are the questions and his responses.
Question – I recently put my home on the market. I wanted a much higher price than my realtor suggested. Should I go with their price or stick to what I think my home is worth?
Answer – The reason we all go to a licensed doctor, lawyer, banker is that we want a qualified opinion. Go with a Realtor that comes highly recommended by peers, professionals, etc. (not your brother in law or sister unless they are who everyone recommends). Review with your realtor the data upon which the price recommendation was made. Look at historical trends as well as present market situation. In today’s market you should be pricing to sell in the 1st 90 days, which typically requires pricing from the middle of the market and lower. Otherwise in Austin you should expect a large discount requirement to sell the property. Remember, I am looking at all data for the market, each individual sell should be looked on its own merits. If recent sales of comparable properties and those currently on the market support the realtor’s recommendation, go with the suggested price. Properties that are priced correctly, are selling. Buyers today have on-line access to all the data, and they know when a property is priced too high. By pricing your property unrealistically, you may risk being perceived by buyers and other brokers as not a serious seller. The goal is to generate offers, and over-pricing a property will be a deterrent.
Question – I recently started a new job. I get paid on commissions and I am not a salaried employee. Although my wife is currently employed, I just started working after being unemployed for a few months. How long do I have to wait to qualify for a mortgage?
Anwsers – Lenders require a minimum of two years’ history for variable income such as commission, bonus, and overtime. In addition they average the last two years to determine the allowable income for qualifying. This means that if you make $50,000 one year and $100,000 the next year the lender will use the average of $75,000 as your income. You must also be careful if the income goes down year over year as a lender will not include or may reduce the allowable income further if they see it may be less in the future. The exception to this is if you have changed jobs in the same field doing the same work and have a prior history of working on commission – in this case most lenders will consider this consistent and use the income from the prior employment as well. So this is a challenge if you have just started your job on commission.
Let me remind you of one last item that often impacts those on commission when applying for a mortgage. Commission income often has expenses or “write offs” against it for business expenses, so please keep in mind that your income will be determined as the net amount listed as adjusted gross income on your income tax form – the average for two years. Unless your wife’s’ income is enough to qualify for the mortgage, you may need to wait until you have enough “usable” income from your job.