Putting a Roof Over Your Head: The Case for Buying or Renting
One of the basic human needs all of us have is "to provide a roof over our heads" so to speak. How we do that is a very unique, individual choice. We may choose a loft dwelling, apartment, farm house, igloo, hut, or even a flat in the Trump Tower. The question facing everyone at various points in their lifetime is: "Should I rent my next home, or should I buy"?
With the run-up in appreciation in residential property values during the latest real estate boom, it became a commonly accepted belief that if you were not a homeowner, renting created a lost opportunity for you.
Here are some tips to help you figure out the pros and cons of buying or renting. · Weigh your housing priorities — Consider how long you expect to live in the house you want to move to. Many experts say if you expect to reside in a property for five years or less, it often makes just as good sense to rent.
Perhaps you need a bigger space and more living area than a rental property in your area can provide, and you need to buy.
Perhaps you'd prefer not to have the "worry" of home ownership, and you decide to rent. · Evaluate the cost/benefit of home ownership — Fully explore not only what your initial outlay will be for purchasing a home, but go beyond your down payment, closing costs, and monthly payment including property taxes. Also take into consideration needed improvements to upgrade the property to your standard as well as maintenance over time. Many websites provide a lease versus buy analysis that will help you with the calculations. · Examine if it is the "right time" to buy — Be sure to inquire with the local experts about sales trends in your new neighborhood to give you guidance. Consider also the median time it takes for houses to turn over. That's a good indicator of the local market and how close the asking price may be to market value. · Some reasons to rent may include: · You do not have the down payment accumulated to purchase a home · There is significant downward pricing pressure on the local market, and you are fearful about overpaying · You want the amenities some rental properties afford such as club house, tennis courts, swimming pools, playgrounds, etc. · You expect to live in the property five years or less · You like the freedom of not having to maintain a property and can call the landlord when repairs are needed · Some reasons to buy may include: · You have the financial resources to cover the down payment and closing costs · Few rental properties are available which meet your housing needs · You prefer to lock in a monthly payment and do not want to leave yourself vulnerable to rent increases after the end of your lease · You desire to have the tax benefits home ownership affords through the property tax and mortgage interest deductions · You want access to better schools · Buying a home affords the opportunity to build equity for long-term investment (asset appreciation) · Eventually you may be able to own the home "free and clear" with no monthly payment · You think the market has bottomed out and it's a great time to buy · You want a better quality of life than renting can offer · You desire pride of ownership and the ability to make any changes you wish to your home · Things to remember when buying: · Don't pay more than you can afford (preventing from losing the house by not being able to make payments). · Don't pay more than the home is worth - this is where a good real estate agent who specializes in the local area can help you assess value before making the purchase. · You decide to buy, so "now what"? You have looked at all of your options and it's clearyou want to buy. Hire an experienced, professional real estate agent. Look for an agent who works full-time, has several years of real estate experience, and has successfully sold homes in the area you wish to buy. Additionally, some agents specialize in working with renters, so ask if that is part of their service.
Ideally a buyer's agent specializes in the local area, is a strong negotiator and a good communicator. Interview several agents before choosing one. Be sure to select someone you think you can work well with and suits your business style. No matter what decision you make, there is generally some risk involved regardless as to what route you take. Do what makes sense for you and your family given your personal circumstances. Please contact me with any questions. I look forward to earning your business.
3 Simple Steps to Finding the Right REALTOR® September 14, 2007
Finding the right real estate agent can make your home buying or selling experience more productive, positive and stress-free.
Buying or selling a home takes a great deal of preparation, decision-making, patience, scheduling flexibility, and in many markets, acting quickly - all the ingredients for a potentially stressful experience.
The key to a successful relationship with your real estate agent is a result of following these three simple steps. 1. Know What Is Important To You
Take a few minutes to consider what is important to you as you embark on buying or selling your home. Knowing what is important to you will help you make a confident decision on which real estate agent to select. - First, understand what your overall objective in this process is. Is speed most important? Or is the right price critical?
- Second, understand how you want this process to unfold. Is this a process you want to control completely, or do you want someone else making the decisions? Is constant communication important to you or do you require minimal disruption in your busy life?
- Thirdly, recognize if there are certain credentials or background you expect in your agent. Do you want a top producer, a hard sales person or a methodical project manager? How long has this agent been working or living in this area?
2. Screen Potential Agents On The Phone Or Via Email
As you begin your process, you'll gather a handful of potential agents by meeting them at open houses, receiving advertisements at your home, or getting referrals from neighbors or friends. Once you select a few agents you think are potential candidates, contact them in a fashion most comfortable to you and do a screening interview.
You'll most likely get to know their personality best by speaking to them on the phone. Ask them about their approach in handling new clients. Listen to their communication style and ask about their negotiating skills. If you need to leave a phone message or send an email, keep track of how long it takes for the agent to get back to you.
3. Select One Or All Agents To Meet Personally
Many HomeGain homebuyers and sellers review the "factual" information of the agent proposals, and then after talking on the phone, they can narrow down their selection to just one agent that they meet personally to ensure the "chemistry" is right. During this interview include more detailed questions like whom they recommend getting a mortgage loan from, how many other clients they are currently working with, and about their breadth of knowledge about the areas you are most interested in living. The end result is that you have done your homework in the most expedient, yet thorough, way on a decision that should ensure you a stress-free relationship and positive outcome.
Please contact me with any questions. I look forward to earning your business.
101 Reasons to Use a Real Estate Agent Appreciating the Numerous Steps an Agent Takes for Homeowners Don’t even THINK about not using an agent to help sell your home! With more real estate resources available on the Internet, it may seem as if buying and selling a home is an easy task. These 101 reasons will show you the extent of knowledge, experience and hard work that an agent provides to help you through a real estate transaction. Verified by top-performing agents, and numerous REALTORS®, the 101 reasons listed here reflect actions, procedures and processes that a real estate agent may typically perform during a residential real estate transaction— and are all things that you could avoid doing yourself! Typical Pre-Listing Activities 1. Research Current Properties 2. Research Sales Activity from MLS and public records databases 3. Provide Average Days on Market Assessment 4. Review Property Tax Roll 5. Prepare a Comparable Market Analysis (CMA) 6. Verify Ownership and Deed Type 7. Verify County Public Property Records 8. Perform Curb Appeal Assessment 9. Provide Public School Value 10. Provide a Listing Presentation Selling the Property Activities 18. Review Title Details 19. Order Plat Map 20. Create Showing Instructions 21. Obtain Mortgage Loan Information 22. Review Homeowner Association Fees and Bylaws 23. Submit Homeowner Warranty Application 24. Add Homeowner Warranty in MLS 25. Review Electricity Details 26. Arrange Inspections for City Sewer/Septic Tank Systems 27. Collect Natural Gas Information 28. Provide Security System Status 29. Determine Termite Bond Status 30. Analyze Lead-based Paint Status 11. Analyze Current Market Conditions 12. Present Credentials 13. Deliver CMA Results 14. Discuss Planning and Strategy 15. Explain Listing Contract, Disclosures & Addendum 16. Screen Calls from Buyers or Agents 17. Explain Homeowner Warranty 31. Distribute Disclosure Packages 32. Prepare Property Amenities 33. Detail Inclusions & Conveyances with Sale 34. Compile Repairs Needed List 35. Send Seller Vacancy Checklist 36. Install Lockbox 37. Make Copies of Leases for Rental Units (if applicable) 38. Verify Rents, Utilities, Water, and Deposits for Rentals 39. Inform Tenants of Listing for Rentals 40. Install Yard Sign 41. Perform Interior Assessment Advertising and Marketing a Listing 42. Perform Exterior Assessment 43. Enter a Profile Sheet into the MLS Listing Database 44. Provide Copies of MLS Agreement 45. Take Additional Photos for MLS and Marketing 46. Create and Advertise Property Listing 47. Coordinate Showing Times 48. Create and Mail Flyers 49. Compare MLS Listings 50. Develop Marketing Brochure 51. Notify the Network Referral Program 52. Create Special Feature Cards 53. Analyze Feedback Emails and Faxes REASONS 101 TO USE AN AGENT Handling Offers and Contracts 54. Receive Offer(s) to Purchase 55. Evaluate Net Sheet 56. Counsel and Mediate Offer(s) 57. Deliver Seller's Disclosure 58. Obtain Pre-qualification Letter 59. Negotiate Offers on the Seller's Behalf 60. Mediate Counteroffers or Amendments 61. Fax Contract Copies 62. Deliver ‘Offer to Purchase’ Copies 63. Assist with Escrow Account 64. Distribute Under-Contract Showing Restrictions 65. Update MLS to “Sale Pending” 66. Review Credit Report 67. Deliver Unrecorded Property Information 68. Order Well Flow Test Reports (if applicable) 69. Order Termite Inspection (if applicable) 70. Order Mold Inspection (if applicable) 71. Confirm Deposit and Buyer's Employment 72. Follow Up with Loan Processing 73. Communicate with Lender 74. Confirm Approval of Loan 75. Remove Loan Contingency Home Inspection and Home Appraisal Activities 76. Coordinate Buyer's Home Inspection 77. Review Home Inspector's Report 78. Interpret Loan Limits 79. Verify Home Inspection Clauses 80. Contractor Preparation 81. Confirm Repair Completion 82. Attend Appraiser Appointment Closing Preparations and Actions 83. Provide Appraiser Information and Remove Contingency 84. Ensure Contract is Sealed 85. Coordinate Closing Process 86. Coordinate Closing Formal Procedure 87. Assist with Title Issues 88. Perform Final Walk-through 89. Verify Tax and Utility Preparations 90. Review and Distribute Final Closing Figures 91. Request Closing Document Copies 92. Confirm Receipt of Title Insurance Commitment 93. Make Homeowners Warranty Available 94. Review Closing Documents 95. Confirm and Assist with Final Deposit 96. Coordinate with Next Purchase 97. Ensure "No Surprises" Closing 98. Final MLS Update 99. Follow Up and Resolve Repairs 100. Documentation Follow Up 101. Hand the keys to the new owners Remember to Thank your Real Estate Agent! Please contact me with any questions. I look forward to earning your business.
Getting Started
How much can I afford to spend?
Experts say you will typically spend about a third of your income on financing your home. Before you start to look for your dream house, you should figure out just how much of that dream you can afford. Mortgage lenders look at your ability to repay the mortgage loan by reviewing:
· Your credit history · Your monthly gross income · How much cash you can accumulate for a down payment, which is usually 10 percent to 20 percent of the sale price.
For details on checking your credit history, see the bankrate.com report "Credit: The Basics."
What is the best time to buy?
Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are anxious to buy so they can move during summer vacation, before the new school year begins.
The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.
How long does it take to buy a house?
Buying a house can take from a few days to a few years. In most cases, the process will take several months of diligent effort.
How long should I look before buying a home?
You should look until you find the home that is right for you. This could take a week or a year depending on your personal needs and the state of the real estate market. Ideally, you would like to find a home after you have looked long enough to know what you like and what you do not like. You need time to educate yourself about the housing inventory.
How many times should I look at a house before I make an offer?
You will no doubt want to take a second or third look at a house that interests you. Your agent can arrange this; you should not call the sellers directly for access. But you should drive or walk by the house to get a better feel for the neighborhood. Return several times, at least once during rush hour, to see if the street is busy or congested. Drive a few blocks away from the house to see if the neighborhood holds up to your expectations. A map is a handy house-hunting aid.
How do you find a good agent?
A good agent typically works full-time and has several years of experience at minimum.
You don't usually pay for your agent's services (in the form of a commission, or percentage of the sales price of the home). The seller usually pays all agents in a transaction from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it's legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer's brokers, whose legal obligation is exclusively to you.
What do all of those real estate acronyms in the ads mean?
If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section: · assum. fin. -- assumable financing · dk -- deck · gar -- garage (garden is usually abbreviated "gard") · expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase. · fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views · FDR -- formal dining room (not the former president) · frplc, fplc, FP -- fireplace · grmet kit -- gourmet kitchen · HDW, HWF, Hdwd -- hardwood floors · hi ceils -- high ceilings · In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first · large E-2 plan -- this is one of several floor plans available in a specific building · lsd pkg. -- leased parking area, may come with an additional cost · lo dues -- find out just how low these homeowner's dues are, and in comparison to what? · nr bst schls -- near the best schools · pvt -- private · pwdr rm -- powder room, or half-bath · upr- upper floor · vw, vu, vws, vus -- view(s) · Wow! -- better check this one out.
Resources: "Real Estate's Ambiguous Language You Oughtta Understand," Glennon H. Neubauer, Ethos Group Publishing, Diamond Bar, CA; 1993.
Please contact me with any questions. I look forward to earning your business.
Are You Ready to be a "First-time Buyer"? If you are thinking about buying a home, and are weighing the options, here are some things to take into consideration.
If you've never bought a home before, this might be the perfect real estate market for you. Home prices continue to drop throughout the country and sellers are figuring out that they have to be flexible with their prices and terms or their houses will not sell. Buyers now have a greater choice of affordable homes, and can use the slow seller's market to negotiate more favorable prices and terms. This means more opportunity for homebuyers, especially first-time buyers, to find a good deal.
How do you know if you are ready to take the leap to becoming a homeowner? If you are thinking about buying a home, and are weighing the options, here are some things to take into consideration. · Keep renting or buy? Compare the cost of renting with the cost of owning. You'll want to research interest rates, and estimate the costs that aren't included in renting, like insurance, HOA dues, home maintenance and improvements. The average price of a home in the U.S. is $243,408 per The National Association of Realtors®. Consider what you have for a down payment, as well. Researching all of your potential costs will prepare you for what it will be like when you are ready to buy. · How much should I spend? When you begin your home buying search, it's wise to get pre-approved by at least one lender. The lender will help you understand your financial situation and provide guidance on how much home you can afford to buy. You may find lenders online or through your real estate agent. When you meet with the lender, take your recent pay stubs, a copy of your W-2 form, and your bank statements. · Where could I live? Don't just pick a city or neighborhood on a map and decide that's where you want to live. Research all aspects the areas where you'd like to live, including home prices and availability, commute times, the quality of public or private schools, insurance rates, the availability of parks, and anything else that may be important to you or your family now or in the future. If the market changes, you may be in your home longer than expected so it's good to prepare yourself long-term. · How do I start my search? Besides working with a real estate agent to show you homes for sale online, the Internet is a terrific place to start your own home search. Websites like www.nextgenerationrealtygroup.com, will help you with all your real estate needs, including finding an agent, viewing homes for sale, and getting more tips on buying a home.
You'll find the more you know about buying a home, the better prepared you'll be and the more comfortable you'll feel when it comes time to make your purchase.
Good luck!
Please contact me with any questions. I look forward to earning your business.
Testing For Lead Based Paint Lead paint can negatively affect everyone in your family, and children are often at highest risk. Younger children will commonly put all sorts of things, like paint chips, in their mouths, exposing them to potentially deadly lead poisoning.
Even if your home's condition looks perfect, doing any repairs or renovations in the future can be a hazard since dust still contains lead and may be breathed in by your family.
If you know the house you want to buy was built before 1978, the year when paint containing lead was banned, there are five tips you should consider.
1. Know Where to Look for Lead
· Walls and woodwork · Window Sills · Interior and exterior flaking paint · Furniture · Toys, particularly old play equipment 2. Know the Law · Sellers must disclose in writing any information about known lead paint in the home. · If sellers have performed lead tests, they must disclose the test results. · Sales contracts must give buyers up to 10 days to check for lead hazards. Homebuyers aren't required to test for lead, but they must be given the opportunity to do so. · Home sellers or real estate agents must give buyers a copy of the U.S. Environmental Protection Agency (EPA) publication, "Protect Your Family From Lead in Your Home." 3. Test for Lead
In addition to getting the seller's disclosure information about lead-based paint, your real estate agent should ensure that the seller's inspector includes an assessment, as well as your own inspector.
Assessment will typically involve a range of methods, including: visual inspection of paint condition and location; lab tests of paint samples; and surface dust tests. You can also buy your own lead paint test kit on the Internet, Amazon for example, hardware stores or large variety stores like Target.
4. If You Find Lead
The EPA recently confirmed that old lead paint that is is well maintained does not present a hazard and is best left undisturbed. However, if the old lead paint is in poor condition like peeling, chipping, or cracking, it is considered a hazard.
Before you make an offer on the house, speak to your real estate about your options. Two such options may include: · Ask the sellers to hire a professional contractor trained in proper handling and removal of lead-based paint. · Present a lower offer on the home to cover costs of hiring your own contractor - and get the work done before you move in. 5. For More Information
For a copy of Protect Your Family from Lead in Your Home, Reducing Lead Hazards When Remodeling Your Home, the sample disclosure forms, or the rule, call the National Lead Information Center (NLIC) at (800) 424 LEAD, or visit the NLIC's website at http://www.epa.gov/lead/index.html. Please contact me with any questions. I look forward to earning your business.
Starting Your Search How do I start the home search? One way is to review online real estate listings that meet your criteria. If you decide to work with an agent, have him or her show you four or five houses that piqued your interest. (Looking at more than five houses at one time is likely to leave you more confused than enlightened). Be candid with your agent about what you like and dislike in the houses you see. The more you communicate with your agent, the easier it will be to find a house.
How do appraisers come to their conclusions? Most appraisers determine market value by comparing the subject property with three similar homes in the vicinity that have sold and closed within the past six months. The appraiser adds to the value of the subject property if it has amenities not found in the comparable houses. Value is subtracted if the subject property lacks amenities in comparison to the others homes.
How important are open houses? Open houses can be very important. Touring a number of houses in a short period of time is the best way to learn market value and to educate yourself about what is available. But if you limit your home search to only those homes, you may miss out on a house that is right for you. Please contact me with any questions. I look forward to earning your business.
Questions to Ask a Buyer's Agent Be sure you choose a Buyer's agent that will help you through a successful home purchase. Here are questions to ask a prospective agent about representing you to buy a home.
Questions Buyers Should Ask in Agent Interviews 1. Do you work full-time or part-time as a REALTOR®?
Full-time work typically means more attention for you. 2. How well do you know the area(s) I am interested in?
A REALTOR® who specializes in the area that you are interested in is preferable. He or she will be able to advise you as to home prices and how quickly you'll need to act based on the demand in that area. 3. How many other buyers are you representing now?
The busiest REALTORS® are often the most efficient. 4. Will you handle all aspects of my transaction or will you delegate some tasks to a sales associate or administrative assistant?
A knowledgeable assistant can be invaluable, but make sure that you can connect with your REALTOR® when you need to. 5. Can you give me a Comparative Market Analysis (CMA) of recent sales in the area and homes currently on the market?
This should contain listing and sales prices for recently sold homes as well as listing prices and the listing dates of homes currently for sale. It also should include detailed property descriptions (such as square footage and numbers of bedrooms and baths). 6. Can you provide me with information on the area?
Your REALTOR® should have access to information on local schools, community services, transportation, shopping etc. 7. Is your license in good standing?
You should check a REALTOR'S® certification yourself with your state's department of real estate. Many states provide this information online. For example, in California residents may check at http://www.dre.cahwnet.gov/licstats.htm 8. How many years of education and experience do you have?
Experience and continuing education typically make for better REALTORS® 9. Are you also a broker and/or a REALTOR®?
Brokers have more stringent licensing requirements and responsibilities. REALTORS® are voluntary members of the National Association of REALTORS®, a trade group. Please contact me with any questions. I look forward to earning your business.
How is a home's value determined?
You have several ways to determine the value of a home.
An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house.
A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business.
You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.
What is the difference between market value and appraised value?
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
What standards do appraisers use to estimate value?
Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at
550 W. Van Buren St, Suite 1000
Chicago, IL 60607
(312) 335-4100
Fax: (312) 335-4400
Where do I get information on housing market stats?
A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards.
For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying. Your local builders association probably gets this report. If not, the housing research firm is located in Canton, Mich.; call (800) 755-6269 for information; the firm also maintains an Internet site. Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 495-4700. The census bureau also maintains a site on the Internet. The Chicago Title Company also has published a pamphlet, "Who's Buying Homes in America." Write Chicago Title and Trust Family of Title Insurers, 171 North Clark St., Chicago, IL 60601-3294.
Please contact me with any questions. I look forward to earning your business. How to Win Against Multiple Home Offers Often times people find themselves in a multiple offer situation, whether it's the time of year, a very desirable home or an appealing listing price. How can you increase your chances of winning against competing home buyers?
Although the winner is usually the most qualified home buyer with the best price and the fewest strings attached, there are some other secrets to winning the bid. Not all buyers are interested in more than just price, and that makes knowing what to offer in this type of situation critical.
9 Tips to Winning A Multiple Offer Home Bid
HIGHEST OFFER
The winning buyer in a multiple offer presentation is often the one who makes the highest offer, pure and simple. Learn as much as possible about local market values. Look at comparable properties. Ask your REALTOR® to prepare a comparative market analysis (CMA) of the property that will tell you recent selling prices of comparable properties. When market values are rising, there may be a bit of guesswork involved in pricing. You may need to pay more than yesterday's comparable sales in order to be the successful bidder.
CLEAN OFFER
A clean offer means that it has few contingencies, which means certain conditions that must be satisfied in order for the sale to go through. Typical home purchase contract contingencies include financing, inspections and the sale of another home. Put yourself ahead of the crowd by limiting as many conditions as possible before presenting your offer, however, do not forego important - and expensive - things that need to be fixed, e.g. a cracked foundation or leaking roof.
REQUEST A PRE-INSPECTION
Home buyers who know they have competition will often have properties inspected before an offer is made. Ask your REALTOR® to find out if other buyers are having pre-sale inspections done. If so, you may want to ask the sellers for permission to complete a home inspection, and any other inspections you believe necessary. This will enable you to make an offer that doesn't include an inspection contingency.
APPROVAL LETTER UP FRONT FROM YOUR LENDER
Although you may not be able to get completely approved for financing on a new home before you make an offer, you can get preapproved for a loan. If you find a place to buy before you are preapproved, submit a loan application to a lender or mortgage broker and have your credit checked before writing an offer. The loan agent can then write a letter stating that the loan application was submitted and the credit is acceptable. This way the home sellers know the home sale will be more likely to go through without financing issues.
MONEY DOWN
If you can put 10 to 20 percent down, the sellers will be more impressed with that amount than a five percent down payment. You may be able to change your financing terms later but what matters is the money is at the table at closing.
EARNEST MONEY DEPOSIT
Putting as much of your down payment into your earnest money deposit makes a very strong impression when you write the offer. The "earnest money" is part of your down payment which you simply put down a month earlier. This lets the seller know of your intentions because if the seller accepts your offer and you break the contract, you would lose your earnest money deposit.
TRUST YOUR REALTOR
Your real estate agent has the ability and knowledge to influence and impact your decisions throughout the offer process and presenting the offer itself. Trust your Realtor's advice and guidance. They do this for a living and are working for your benefit.
COPIES OF REPORTS
Again, find out all you can about the property before writing an offer. Get copies of any existing reports and seller disclosures. If they seem adequate, let the sellers know that you have read and approved the reports.
PERSONAL APPEAL
Find out as much as you can about the home sellers and their situation. Attempt to meet the sellers face to face to let them know how much you love their home. Or write a letter about why you would love to live in the house. Some sellers are influenced by emotional appeal, particularly if they're looking at multiple, similar offers. Find out when the seller wants to close, and offer post-occupancy agreements in case the sellers need to stay while they find a new place to live. These steps will help you stand out from the rest.
These are a few ways to try to win a multiple bidding situation on a home. Trust your Realtor to help you beat out the competition and remember to appeal to the home seller's emotional side, especially if they have lived in the house a long time. It can't hurt to try! If you don't win the first time, you'll most likely be able to find another home you love. With any luck, next time perhaps you can avoid a bidding war.
The Offer Process Now that it's finally time to present your offer, what are the next steps?
If you are like the majority of homebuyers today, you began your home search on the Internet. You have also been able to view thousands of property listings through the MLS online, you have likely attended dozens of open houses in the communities you are interested in living, and you have viewed many more properties with your real estate agent.
Once you narrow down the selection to your preferred house, it's finally time to make an offer to the seller!
The Offer Process
Working through your agent or attorney, you will draft an offer with price and terms that you are comfortable with and that you think, hopefully, the seller can accept.
The first issue that comes to mind for most people when making an offer on a property is, of course, price. However, terms that also need to be considered and presented in the offer are such items as the earnest money, down payment you are making, mortgage loan amount and type you will secure, what date you will close the contract, when you will occupy the property and whether or not there are personal property items (not included with the property) for which you are asking. Inspections need to be specified and can include a general property, pool and/or roof inspections. Your agent/attorney can advise on other terms particular to your offer, which need to be addressed in the offer.
Be sure to take adequate time to thoroughly read through the contract, and ask your agent or attorney to go over the contract with you in detail, answering any questions you might have. You will then sign the purchase offer and receive a copy of all documents, including the offer itself, real estate agency disclosures and any pertinent local disclosures. It is better to have a face-to-face with your agent to write the offer, if possible. However, if time and location prevent a meeting, current accepted real estate practice is to fax copies of the contract to the parties.
Presentation of The Offer
You and your agent have taken a lot of time and care in preparing a fair offer you think has every chance of being accepted. You want your offer to be accepted. Generally, the best opportunity to open a productive dialogue that will result in a successful sale is to have the buyer's agent present the buyer's offer to the sellers, and their listing agent, in person. That way the buyer's agent can be the most effective in the presentation to "sell the sellers" on their buyers, and their ability to qualify and close on the property. The buyer's agent can hopefully meet any objections the seller may have about the offer and offer an explanation as to why the terms are written as they are.
Most frequently, the presentation will take place in one of the agent's office, or possibly at the home of the seller if that is more convenient. Since "time is of the essence" occasionally offers can be negotiated over the phone and contracts faxed for signatures of people are not physically available.
What should be avoided is to either have the offer faxed to the seller or their agent direct without a presentation, or have the offer dropped or mailed to the seller without a presentation. There is a good chance the offer will lose out to competing offers. If the seller is not available, make sure the offer is presented to the listing agent.
With the offer itself, it is recommended a letter pre-approval from a lender be included, particularly in tight markets.
The way in which the offer is written, and the way in which the offer is presented, can have a major impact not only on whether or not you are successful in getting a contract, but on the price and terms to which the seller will agree Please contact me with any questions. I look forward to earning your business.
What is a CMA? By Barry James The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA
Everyone who has ever sold a car knows they have to first find out how much it is worth and what people are willing to pay for it. It's easy to gather the information you need to set a price from newspapers, the Blue Book, or online used car sales sites. When you've gathered this information you can then set a price that potential buyers will find attractive. It's really pretty simple and requires very little pricing expertise.
If you want to sell your home, it's not so easy and it's certainly not simple. The value of your home is much more difficult to predict and the information available to home sellers can be untrustworthy. Online home valuation sites are fun to play with, but they are based on past sales, not current market factors. Newspaper listings give you some information, but houses are usually so different that it's hard to compare.
The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA, or Comparative Market Analysis. CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market.
The best part about a CMA is that it's usually free!
When should I ask for a CMA?
If you don't get a CMA before list your home you might try to sell it for the wrong price. Setting the price too low means you'll get less money for your home; setting it too high means it might not sell at all. Every real estate agent in the country will want to complete a CMA on your home before helping you sell it. Sellers who haven't yet chosen a real estate agent often ask several agents to complete CMAs so there is opportunity to meet different agents and to see how they work.
How is a CMA prepared?
First, an agent will walk through your home. The home does not have to be in perfect condition. However, property condition does affect price, so if you plan to do work on the property, let the agent know. At this point the agent may recommend improvements to increase your home's value.
Second, the agent will research information about comparable properties in the area, usually using a real estate industry resource called the Multiple Listing Service. This includes: · Properties that have sold and closed within the last 12 months · Active listings - properties currently for sale · Pending sales - listings that have sold but not yet closed · Expired listings - properties that did not sell during the listing period Lastly, the agent suggests a probable selling price. Don't be surprised if a CMA results in a price range rather than a set price, particularly in markets were there are price differences due to property size, age, architectural style or physical condition.
What can you expect to see in a CMA?
A completed CMA is presented in the form of a report, which includes the selling price, detailed information about your home, and the comparable properties that were researched to determine its value. Because the price derived from a CMA is somewhat subjective, some agents may include brief statements on the perceived selling points your home.
A CMA is not an appraisal.
A real estate appraisal is a comprehensive evaluation performed by an independent professional appraiser. With a CMA, the agent's experience in the business and familiarity with the local area can affect the accuracy. Typically, a CMA prepared by an experienced agent with good knowledge of the local market is right in line with your home's appraised value. A CMA can therefore be a very useful tool in a real estate transaction.
When selling your car, an incorrect price might cost you a few hundred dollars. If you set the wrong price for your home, you could lose tens of thousands of dollars. Do your homework and ask a real estate professional for a Comparative Market Analysis to ensure you get the most value for your home. Please contact me with any questions. I look forward to earning your business.
How to Prepare for Your Home Closing Ten steps homebuyers should expect prior to the closing of a home.
The final days before closing on a home are a busy and emotional time for both the homebuyer and seller. The homebuyers may be wondering if they made the right decision or about making their new mortgage payment. The sellers may be worrying about all the paperwork on both ends being submitted and approved, and about moving into their new home.
Closing on a home means that the sale is complete, and all the terms and conditions of the purchase agreement have been met and the sellers give the buyers marketable title to the property. Closing costs are the total cost of completing the transfer of ownership of a home or property. These costs are extra fees and expenses aside from the purchase price.
On average, closing costs range from three percent to five percent of the total loan amount. For example, for a loan of $300,000, closing costs might run in the $12,000 range.
The signed sales contract and the signed loan commitment letter obligate both the homebuyer and seller to complete the transaction. Failure to do so will cause the buyer to forfeit the deposit, and perhaps be slapped with a lawsuit.
After the contract contingencies are settled, but before the close of the home sale, several tasks need to be completed. Beyond some obvious steps like setting up movers, forwarding your mail, and canceling your utilities, here are 10 steps you'll also want to expect prior to closing: 1. Set the closing date - The closing date is set after your mortgage loan has been approved and you accept the commitment letter. Your agent will coordinate this date with you, the seller, your lender, and the closing agent. Your signature will have to be notarized when you sign closing documents, so remember to bring your driver's license or other accepted identification with you to the actual signing. 2. Meet conditions of the loan offer - Understand the conditions of the loan offer that are stated in the mortgage lender's commitment letter. If the home you are buying has been found to be in violation of a building code or zoning regulation, the commitment letter may specify that those problems must be corrected before the closing. If the seller has agreed to make repairs required by the lender, you will want to make sure the work is finished (and done properly) before closing. 3. Secure title services - Before the closing, a title search on the property is required. Mortgage lenders require a title search to ensure the borrower receives a clean title, to establish that the seller is indeed the owner of the property, and confirm that there are no liens filed against the property. You'll also need to decide how you want to hold title to the property. The way you hold title to property has estate planning and tax implications, so you may opt to consult with a specialized accountant or attorney. 4. Title insurance - To further insure that the seller is handing over a clean title, the lender will require title insurance. There are two types of policies that the buyer can purchase: a lender's policy, and an owner's policy. The lender's policy protects the lender in the event a flaw in the title is detected after the property has been bought. The owner's policy protects the buyer. Obtaining a combined lender's-owner's policy could save money. 5. Termite certificate - When buying a home, a termite inspection may be required, depending on where you live. The seller usually covers the cost of this inspection. Once completed, the homebuyer receives a certificate stating that the property is free of termites and termite damage. 6. Homeowner's insurance - Mortgage lenders require homeowner's insurance, which protects the buyer and the mortgage lender from loss in the event the house is damaged or destroyed. Ask your agent or mortgage lender, or get quotes on your own. If you do obtain insurance on your own, bring the insurance policy and paid receipt with you to the closing. 7. Homeowner's warranty - When buying a new home, look into purchasing a homeowner's warranty, which protects against certain defects in your home. If buying an older home, or if you are a first-time buyer, you may especially want to be covered for repairs of major systems like plumbing, heating and air conditioning. 8. Final walk-through inspection - Make sure that your contract allows you to examine the property within 24 hours prior to closing. This is the buyer's last chance to make sure that everything works, and that the seller has vacated the house, leaving the appliances or property in agreed upon terms. If, during the walk-through, the buyers find major problems or violations of the purchase contract, they have the right to hold up the settlement until things are fixed. 9. House tour with seller - If the seller is willing, it is wise to tour the house with the seller either before or shortly after the closing to learn peculiarities of the home. Get the names and phone numbers of contractors, electricians, plumbers, roofers, and carpenters who have worked on the house. Also get copies of operating and instruction manuals for appliances, and security and irrigation systems. 10. Final estimate of closing costs - The mortgage lender is required to give the buyer an estimate of closing costs soon after the loan application has been filed. The buyer will usually be required to pay the remainder of the down payment at this time, not including the deposit, and closing costs. Personal checks are not accepted so be prepared with a certified or cashier's check. Please contact me with any questions. I look forward to earning your business.
Home Defects - A Buyer or Seller Cost? Inspection contingencies give homebuyers a chance to negotiate additional costs of minor home defects
Determining who pays for defects that are found during inspections before the closing can be a controversial and touchy subject, especially if you are talking to the home seller. Although it's not always true, most sellers feel that once a price is negotiated for buying the home, that price accounts for and includes any defects that may be found on his property in the last inspection stages.
Fact is, home inspection defects found after a home sale price is determined, is a negotiated matter in the contract that the seller's and buyer's real estate agents can work out.
Home inspections are performed to protect the buyer, and are typically allowed 10 to 14 days from acceptance of the home sale contract. An inspection contingency allows the buyer to ask for legitimate defects to be corrected. It is a negotiated part of most contracts, and can reflect a big challenge during the home closing. However, less than five percent of all transactions unravel during inspection, so rest assured it is something that works out most of the time.
Homebuyers should discuss contingencies with their agent. Your agent will know what to recommend for contingencies. Agents negotiate inspections nearly every time they work on selling or buying a home. They are skilled at ensuring that the terms of the contract are at the standard of which the seller is obligated. However, if a contract states an "as is" purchase, the seller is not obligated to pay for defects and there is no negotiation if any defects are found during the home inspection. If a contract states a "seller warranty" clause, the seller may be obligated to fix certain defects.
Typically, the buyer, the buyer's agent and the buyer's inspector, and frequently the seller, are present during the inspection. Most inspections can take between two to four hours to perform. The buyer usually covers the cost of the general home inspection. Other common inspections a buyer may wish to request are for termite, roof, pool, and radon.
What kind of defects does the contingency normally include? Defects discovered during these inspections are often issues that neither the buyers nor sellers were aware of before they entered into an agreement. For the seller, the inspection must address true defects in the property and cannot address issues such as normal wear and tear and/or items of a cosmetic nature. Some commons findings on home inspections include clogged gutters, stuck windows, missing retaining walls or deck security.
How can you prepare for a faster home buying or selling process? For sellers, choose to have an inspection before listing to get informed about the defect items that may need to be corrected. For buyers, discuss this subject with your agent before you go into contract. Please contact me with any questions. I look forward to earning your business.
Making an offer: six tips for getting a great deal You have looked at literally hundreds of homes over several weeks and finally think you have found your dream home. Now, at last it's time to make an offer.
Putting in an offer on a property is similar to opening a case on "Deal or No Deal." On the game show, you have no idea how much money is in the "closed case" before calling out the case number, nor do you generally have any idea what the seller's desired sales price is before you start negotiations.
The seller's case is only revealed when they accept your offer, or propose a counter offer. The challenge is to know how to structure your offer going in so you have the best opportunity to make the deal you want.
As a buyer, the good news is inventories are way up in most areas of the country. Mortgage rates continue at historic lows and are very favorable to buyers. This summer may just be the perfect time to purchase a home with the best terms possible.
Here are six tips to getting a great deal: · Find out what the interest level is – Have your agent contact the listing agent and find out what the recent activity level on the listing has been, including how many showings have there been recently. Also ask if there have been offers already presented on the property and, if so, how many, and why is the seller selling?
Finding out this information before you write the offer can help you assess the motivation of the seller so you and your agent can determine how to best structure your offer price. · Do your homework on the current market – Familiarize yourself with the competition in the area by looking at other homes for sale in the neighborhood, even if they don't entirely meet your criteria. That will provide you with much needed information to help establish your offer price, as well as the price you will eventually agree to pay for the property. · Be realistic about your ideal price – Determine in advance what you will pay for a particular piece of property. Base what you can afford to pay for a home on your available down payment and monthly mortgage costs you are willing and able to carry, plus other hidden housing expenses such as maintenance and minor improvements. Just because you fell in love with your "dream house" it is not a wise idea to overpay for a property. You may be better off walking away so you don't regret overpaying later on. · Expect several offer rounds – Negotiations require both parties to give and take some, hopefully resulting in an enforceable contract in the end. Home sellers are usually very attached to the home they may have lived in for years and perhaps raised a family. It can be difficult for sellers to detach themselves and see the real worth of the property. · Split the difference – Once your agent has presented your initial offer, negotiations and counter offering begin. One commonly accepted approach for coming to an agreement on price is to split the difference between how much the seller wants to sell for and how much you, the buyer, want to pay. Doing so often can make for a win–win situation which allows both parties to be satisfied with the contract terms and eventual sale. · Hire an experienced, professional real estate agent – Look for an agent who works full–time, has several years of real estate experience, and has successfully sold homes in the area you wish to buy. Please contact me with any questions. I look forward to earning your business.
Home Buying Strategies How do I figure out what to offer?
Learn as much about market values as you can. Look at comparable properties. Ask your agent to prepare a comparative market evaluation of the property that will tell you recent selling prices of comparable properties. When market values are rising, there is a bit of guesswork involved in pricing. You may need to be a trendsetter and pay a bit more than recent comparable sales to be the successful bidder. Find out all you can about the property before writing an offer.
Do sellers have to disclose the terms of other offers?
Sellers are not legally obligated to disclose the terms of other offers to prospective buyers.
How do I get the real scoop on homes I am looking at?
Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
· In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor. · Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom. · The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump. · Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces. · Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels. · The type of water heater, water supply, sewer system or septic tank also should be disclosed. Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions.
It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you. What are the standard contingencies?
Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction.
As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.
The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
What are some tips on negotiation?
There are several cardinal rules to negotiating effectively. One is do your homework, and learn as much about the seller or the buyer as you can. Another is to play your cards close to your vest and not reveal too much information to the other party or their agent. Don't let yourself get rushed into any decision, no matter how tempting it may be. Finally, if you have doubts about your negotiating skill, hire someone to help.
The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home.
Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.
Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.
What contingencies should be put in an offer?
Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction.
A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.
The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
Is a low offer a good idea?
While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer.
Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:
· Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition. · Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead? · Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency. You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons. How do I handle the purchase offer when buying a for-sale-by-owner home?
If you do not have the expertise to draft a purchase contract, consider hiring a real estate attorney for this critical part of the transaction. If you are short on time and have little experience with real estate sales, you also can hire a real estate agent for an hourly rate or a fixed fee to represent you in the transaction. Some agents will handle such a transaction for a discounted fee because they will not have to spend time and money marketing the property or showing you the property.
Please contact me with any questions. I look forward to earning your business.
Home Financing Facts How do mortgages work?
A mortgage is basically a long-term loan that you arrange through a bank or other financial institution, or even through the seller of the property. The house and/or property serve as collateral for the loan.
A home mortgage is most likely the largest debt you will assume. You typically pay off that debt in monthly payments over a long period of time, most often 15 to 30 years.
What is in a mortgage payment?
A monthly mortgage payment typically includes the following, known as PITI:
· Principal · Interest · Real estate Taxes · Property Insurance and, often, private mortgage insurance, known as PMI. PMI gives the lender protection if the homeowner should default on the loan. The mortgage company charges insurance if the down payment is less than 20 percent of the sale price or appraised value. PMI usually can be eliminated once the principal balance of the mortgage reaches
80 percent of the sale price or appraised value, which is known as the loan-to-value (LTV) ratio.
The process of paying the principal takes years because mortgages are based on a repayment plan called amortization. During the years of the mortgage, a homeowner pays a lot of money toward interest in order to have manageable monthly payments on the huge house debt. During the first few years, most of the mortgage payments will be applied toward the interest. During the final years of the loan, the payments will be applied primarily to the remaining principal.
What are the types of fixed rate mortgages?
Most lenders offer several types of mortgages; the most common are the fixed-rate mortgages for 30 years or 15 years.
30-year fixed rate
This mortgage is an industry standard, as total payments are spread over so many years that your monthly payments are lower than they would be on a shorter-term loan. The interest rate, which is set, or locked in, at the time of obtaining the mortgage, remains the same throughout the life of the loan. Check out the latest bankrate.com survey of interest rates on 30-year fixed mortgages.
On a 30-year loan, you end up paying thousands of dollars more in interest compared with a shorter-term obligation, but this interest is 100-percent tax deductible, which reduces your after-tax cost.
15-year fixed rate
This mortgage also is becoming a common loan because borrowers pay a lower interest rate in exchange for larger monthly payments. Note, however, that a smaller portion of your monthly payment goes for interest and therefore the tax deduction is smaller.
What are the types of adjustable rate mortgages?
With a 15-year mortgage you could get an interest rate that is typically one-quarter to one-half percent lower than a 30-year mortgage. The shorter the term, generally the lower the interest. Yet, the main advantage is the fortune in interest you will be saving during the life of the loan. Check out the latest bankrate.com survey of interest rates on 15-year fixed mortgages.
Adjustable-rate mortgages, known as ARMs, differ from fixed-rate mortgages in that the interest rate moves up or down. ARMs are tied to a number of indexes, which usually are published interest rates. The margin is the amount a lender adds to the index , usually two percentage points or four percentage points, to set the actual interest rate of the ARM.
The most common index for ARM adjustments is the one-year U.S. Treasury bill. The one-year bill has a yield very near that offered by the 30-year Treasury bond, which is used to set rates on 30-year fixed mortgages.
The initial ARM rate is generally lower than the fixed mortgage rate, though in the current economy the one-year ARM rate has been only slightly lower, about one-quarter to one-third of a percentage point. Check out the latest bankrate.com survey of ARM interest rates.
Some ARMs adjust the interest rate every year, while others have an initial fixed rate period of 3, 5, 7 or even 10 years, after which the rate adjusts on an annual basis.
The more short term the index that your ARM is tied to, the more volatile your payments will be. That's good if interest rates fall, but it can cause trouble if interest rates rise.
Most ARMS offer built-in caps to protect against enormous increases in payments:
Lifetime cap - Limits how much the interest rate can rise during the life of the loan.
Periodic rate cap - Limits how much your payments can rise at one time.
Payment cap - Offered in some ARMs, it limits the amount the payment can rise over the life of the loan. So if the underlying index rises, your payment would increase only to the limit of the payment cap.
Keep in mind that rate caps work when the rates rise and when they fall. To get a better understanding of how ARMS work, we compare adjustable and fixed-rate mortgages in the next section.
What other costs are associated with purchasing a home?
In addition to the down payment, there are many other typical closing costs. You need to have enough cash to cover these basic costs plus your down payment. Lenders estimate 3 percent to 6 percent of the loan amount in closing costs. On a $100,000 mortgage that would be $3,000 to $6,000.
Closing costs could include:
· Loan application fees and credit report · Title search and insurance fees · Lender's attorney fees · Property appraisal · Inspections · Survey · Recording fees · Transfer taxes · Buyer's attorney · Documentary stamps on new note · Origination fees on mortgage · Condominium application fee · Escrow account balances/prepaids (for taxes, insurance)* Real estate closing practices vary widely from state to state and even county to county. Where you live will determine exactly what you will have to pay. Even if you are not required to escrow money for taxes, you may want to set aside this amount to assure that you will be able to pay those tax bills when they fall due. You can get a good idea of what applies where you are buying by checking with a few real estate agents and lenders or title agents.
For more on closing costs, ask for the "Consumer's Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415) 974-2163.
Please contact me with any questions. I look forward to earning your business.
An Introduction to Interest Rates Less is more with interest rates
Affordability increases as interest rates decrease. Affordability also increases if you use an adjustable rate mortgage rather than fixed-rate financing because the lower initial adjustable interest rate makes qualifying easier. There will be a range of prices you can afford depending on what kind of financing you choose.
Not even the Fed knows for sure
Mortgage interest rates are affected by many unpredictable political, economic and social events. So there is no guarantee what direction interest rates will go, despite the forecasts of the experts. Therefore, make your financial decision based on where things are today including your budget, your needs and your future plans.
Step lively to lock in
If you do decide you want to lock in at a certain interest rate, get a completed loan application to your lender as soon as possible so that your commitment doesn't run out before your loan is approved. Follow up and make sure any additional documentation required by the lender (employment and deposit verification) is sent without delay. Have the loan agent order the property appraisal right away, which probably will require you to pay an up-front fee of approximately $300. Make sure that payoff demands from existing lenders are ordered in time. Existing loans must be paid off before a new first loan can be secured against the property.
Writing interest guarantee into contract
Although most sellers will attempt to accommodate buyers who are in jeopardy of losing an interest rate, a seller doesn't have to agree to do so unless it's part of the purchase agreement. One way to insure that the sellers will cooperate is to include a provision in the original purchase contract that requires them to close early, if necessary, in order for you to preserve an interest rate. Give the sellers the option to rent back at a cost equal to your principal, interest, property tax and insurance payment if they can't vacate before the contract closing date.
Negotiating a buy-down with a lender
Most lenders will allow you to design your own buy-down loan. That is, you can decide how long you want the interest rate to be reduced, how much the rate will be reduced, how many points you'll pay and how often the interest rate will adjust (for example, every 6 months or annually). It's possible to pay fewer points for a buy-down in exchange for a higher interest rate and/or a shorter buy-down period.
Buy-downs cut both ways
Buyers who don't intend to own their homes for very long will probably save money by taking an adjustable rate mortgage rather than paying the cost to buy down an interest rate. Sometimes, however, a seller or builder may be willing to pay the up-front buy-down fee for you. When real estate markets slow, you'll find more sellers willing to pay to buy down a rate for a buyer. But, if you can qualify for a loan without a buy-down, you'll probably be better off negotiating a lower purchase price rather than asking the seller for a buy-down concession.
Try not to obsess about interest rates
Although rising interest rates can add stress to the home-buying experience, waiting for rates to come down may not be the answer. You could pay a higher price later, and you can always refinance if interest rates come down.
Please contact me with any questions. I look forward to earning your business.
Distributed by Inman News Features
Avoid the Shock of Homeownership Costs Buying a home means it's in great condition, right? Wrong! Evaluating a home's key features is an essential part of the home buying decision.
There are so many things to consider when buying a home from "Can I afford the monthly mortgage payment?" to "Is this the right neighborhood?" and "What school district will I be sending my kids to?" that sometimes the last thing on your mind is "Will the toilet flush?" You aren't alone. Not anticipating the cost of home maintenance is a very common oversight among homebuyers. Many first-time homeowners are shocked when they see how costs add up. Plus, minor improvement costs to make a house become your home add up quickly as well.
How much should you budget annually?
A recent HomeGain survey reports that U.S. homeowners think it's wise to annually save between one and three percent of your home value for repair and maintenance. This means that if you paid $250,000 for the house, you should save approximately $5,000 for the year.
Ask experts to help you calculate how much it will cost to maintain the property before it becomes your responsibility. It may require that you get bids from contractors (plumber, roofer, electrician), but it may be worth it in the long run. Ask your agent if the seller has had contractors work on the property, and if they are willing to speak to you. They may be able to give you a good inside look at current and future maintenance costs.
5 Home Features to Evaluate
If your real estate agent isn't telling you what to look for, you'll want to make sure you evaluate the cost of these five things before you buy the home.
· Plumbing - Find out what type of pipes and water heater the home has and when they were last updated. This includes the kitchen, bathrooms and laundry room. You can ask the neighbors to see if there have been any issues with the overall neighborhood pipes and drains. Beware of clay pipes, and relax if you hear the word copper. · Electrical - Consider what kind of appliances and technology you'll be using in the house, and how often. If you have multiple TVs and computers running, while doing a few loads of laundry, you'll want to make sure your wiring can handle it. New wiring in a 2-level home can run anywhere from $4,000 and up. · Roof - Examine the type of roof, including the type of tiles, the shape and gutter system. Consider having a professional roof inspection conducted by a roofer. Inside the house, look for signs of leaking on the ceilings, especially if there are skylights. New roofing estimates can run as high as $25,000. However, the good news is that a roof's life span can be 5-15 years, depending on the environmental conditions. · Foundation - Foundation problems often appear on the exterior of a building, in the form of cracks in mortar or bricks. On the interior, these problems show up as sticking doors or sheetrock cracking. You'll want a professional inspector to analyze the condition of the foundation because the cost of repair could be steep in the tens of thousands of dollars. · Heating - Determine the age of the furnace and, if possible, the brand. If it's a rare brand, you may have difficulty finding replacement parts. Keep in mind, monthly heating and utility bills will vary from one month to the next, especially in comparing the summer and winter months. Get a Thorough Inspection
It is a good recommendation to hire an experienced and reputable home inspector to do a thorough inspection of the home you are thinking of buying. Your REALTOR® will be able to provide you with names of several licensed and bonded companies in the area who can conduct an inspection for you.
Tell the inspector that you are interested in learning about the current condition of the property, as well as give you an idea of when to expect making some of the major replacements and repairs.
Naturally, some homes cost more to maintain than others. Older homes usually need more maintenance than newer homes, even if it has been recently renovated. Also, don't assume that because a home is new, it won't need any maintenance for a while. All homes need to be attended to on a regular basis to keep them from falling into a state of disrepair. Unless you rent or pay condo maintenance fees, you can anticipate making upgrades in the future to your home. Knowledge is power, and the same can be said for homeownership. The best way to avoid the shock of homeownership costs is to prepare yourself mentally and financially.
Good luck with your new home!
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Home Closing Costs - The Who and The What Who pays for closing costs may vary depending on the location and the market. Requirements differ in each state and sometimes in each city. For example, sellers normally pay for title insurance in Los Angeles, while in San Francisco the buyer typically pays. In a buyer's market, sellers may opt to cover the costs just to have a better chance of getting closer to the price they want.
What are closing costs?
Not only does the buyer need to bring cash to the closing table for the down payment, but also cash for closing costs. Those costs can include fees such as pre-paid taxes and hazard insurance required to fund the borrower's impound account set up by the lender, along with title insurance and recording fees, among others.
These fees are in addition to the purchase price. If closings costs are not figured correctly, the sale may possibly be affected. It's not common, but real estate closings have failed because the buyer is short on cash.
Buyers are typically expected to pay the following closing costs: · Fees for obtaining a mortgage · Inspection costs · Homeowner's insurance (must be prepaid for one year at closing) · Property taxes · Transfer taxes (although the seller may pay these or they may be shared 50-50 between buyer and seller) · Title insurance and settlement fees · Attorney's fees where applicable Your real estate agent can tell you which fees the buyer in your area normally pays for. He can also calculate the estimated costs you will be responsible for, based on the sales price, so there will be no surprises at the closing table.
Sellers are typically expected to cover closing costs like: · Loan payoff fees · Real estate commission (in some cases, a portion of this may be paid by the buyer) · Termite repairs · Transfer taxes · Title insurance and settlement fees · Attorney's fees where applicable Doing some research and asking around will familiarize yourself with the area where you are buying or selling so that you can understand what exactly you will be expected to pay. Please contact me with any questions. I look forward to earning your business.
Do I Need a Home Warranty Protection Plan? Purchasing a home warranty protection plan is one way to get some peace of mind after buying a home
Homeownership can be one of life's many joys, but it's not always cheap. Probably the last thing a homebuyer wants to do after closing on their new home is dish out even more money on appliances or systems that unexpectedly break or malfunction. It's a normal part of being a homeowner, though, and purchasing a home warranty protection plan is one way you can achieve some peace of mind.
A home warranty is an especially good idea if you're a first-time homebuyer with no experience in maintaining a home or property. Homeowners insurance does not cover breakdown of a home's major systems or appliances, but a home warranty protection plan can help with repair costs such as an air conditioning system that breaks down in the middle of the night, or your refrigerator suddenly stops running.
Who pays for a home warranty plan?
Normally, the buyer will pay for a warranty plan, but depending on where you live, it could depend on local traditions. Some sellers opt to pay for the coverage because it's a seller benefit. You can ask your agent in the offer to request the seller pay, and they may agree. The National Home Warranty Association says homes with protection plans sell about 50% faster than unprotected homes. Many real estate agents will also give buyers a home warranty as a gift at closing.
How does a home warranty work?
With most plans, you will pay an annual premium for coverage. When a repair is needed you call the plan's service provider, which normally operates 24 hours a day, 7 days a week, and they send an authorized service contractor to your home. A small service fee is required - typically in ranging from $35 to $50, and usually less than $100 - and the contractor makes the repairs or recommends the appliance be replaced.
Policies usually last for one year, costing an average of $295 per year for a moderate sized home.
What does a home warranty protection plan cover?
Home warranty protection plans may offer different levels of coverage. Most standard plans offer repair or replacement coverage for a home's heating system and ductwork, plumbing, and electrical systems. Other major appliances that can be added include the dishwasher, the water heater, stove, clothes washer and dryer, even swimming pool equipment.
If you are expecting your appliances or systems to break down sooner than later, you can also consider increasing your deductible in order to make a guaranteed replacement provision more affordable. Increasing your deductible from $500 to $1,000 can often reduce your premiums.
The majority of plans do not require an inspection of a home's systems or appliances. Because coverage's will vary from state to state and from policy to policy, ask to see a copy of the policy before you commit.
What does a home warranty not cover?
Pre-existing conditions are typically not covered. For example, if the water heater hasn't worked properly for some time, it probably won't be covered in the buyer's home warranty plan. Also, there may be limitations on coverage, which cover costs only up to a certain dollar amount. Items typically not covered include: sprinklers, faucet repairs, and permit fees.
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Taxes
How can owning a home cut my income taxes?
Owners are entitled to write off mortgage interest and property taxes. However, you can only take these deductions if you switch from the standard deduction, which all taxpayers are entitled to, to itemized deductions. If your itemized deductions, including mortgage interest and property taxes, do not exceed the standard deduction amount, you are better off taking the standard deduction. Not all owners get a tax break from owning their homes.
Are property taxes deductible?
Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.
How do property taxes work?
Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property's current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas.
What is an impound account?
An impound account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month.
Where can I learn more about appealing my property taxes?
Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal process, which begin with an appeal filed with the appropriate assessment appeals board.
Are seller-paid points deductible?
As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.
Are taxes on second homes deductible?
Interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.
What home-buying costs are deductible?
Any points you or the seller pay for your home loan are deductible for that year. Property taxes and interest are deductible every year.
But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees.
Where do I get information on IRS publications?
The Internal Revenue Service publishes a number of real estate publications. They are listed by number: · 521 "Moving Expenses" · 523 "Selling Your Home" · 527 "Residential Rental Property" · 534 "Depreciation" · 541 "Tax Information on Partnerships" · 551 "Basis of Assets" · 555 "Federal Tax Information on Community Property" · 561 "Determining the Value of Donated Property" · 590 "Individual Retirement Arrangements" · 908 "Bankruptcy and Other Debt Cancellation" · 936 "Home Mortgage Interest Deduction" Order by calling 1-800-TAX-FORM. To call the Internal Revenue Service about general questions, call (800) TAX-1040. Please contact me with any questions. I look forward to earning your business.
Home Buying Common Questions
Do I need an attorney when I buy a house?
In some states, you do need an attorney to complete a real estate transaction, but in others you do not.
Most homebuyers are capable of handling routine real estate purchase contracts as long as they make certain they read the fine print and understand all the terms of the contract. In particular, you should be clear on the terms of any contingency clauses that will allow them to back out of the contract.
If you have any questions at all, it may be advisable to consult an attorney to avoid future legal hassles. In looking for an attorney, ask friends for recommendations or ask your real estate agent to recommend several. Call to inquire about fees and to check on their experience. In general, more experienced attorneys will cost more, but real estate fees, as a rule, are small relative to the cost of the property you are buying.
Where do I get information about finding a real estate attorney?
To find a real estate attorney, contact your local bar association, which may offer local referral services. You may also ask friends or your real estate agent for their recommendations. When you have several names, call each to find out about fees and their level of experience.
When does foreclosure begin?
Lenders will initiate foreclosure proceedings when homeowners become delinquent in their mortgage obligations, usually after three payments are missed. The lender will then notify the buyer in writing that he or she is in default. The lender can request a trustee's sale or a judicial foreclosure, in which the property is sold at public auction.
A borrower can cure the default by paying the overdue amount and the pending payment after the notice of default is recorded, usually no later than a few days before the property's sale.
Some sales allow the successful bidder to take possession immediately. If the former owner refuses to vacate the premises, the court can issue an unlawful detainer that allows the sheriff to come out and evict them.
Borrowers should do everything they can to avoid foreclosure, which is one of the most damaging events that can occur in an individual's credit history.
How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years.
Some lenders will consider a borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.
Where do I get information on filing consumer complaints?
For information about filing consumer complaints, look to these sources: · Consumer Federation of America, 1424 16th St. N.W., Suite 604, Washington, DC 20036; (202) 387-6121. · United Homeowners Association; 1511 K St., N.W.; Washington, DC 20005; (202) 408-8842. · Consumers Union, 1535 Mission St., San Francisco, CA 94103 or call (415) 431-6747. · Consumer Action Council, 116 New Montgomery St., Suite 233, San Francisco, CA 94105; (415) 777-9648
How do lease options work and what are the benefits?
A lease option is an arrangement with you and a seller to exercise the option to buy a house after you have rented it for a specific period. A portion of your rent would be applied toward the purchase if the option is exercised. This is referred to as rent credit, which most institutional lenders will accept as part of the down payment if rental payments exceed the market rent and if a valid lease-purchase agreement is in effect, a copy of which must be attached to the loan application.
Read any lease-option arrangement carefully for details on transferring the option and other important concerns.
For more information, contact your real estate agent (some even specialize in such transactions) or read up on lease options at the public library. If you have a real estate attorney, ask if he or she has any prepared information you can review. Most bookstores have a fairly hefty real estate book section these days. Many current real estate books have at least a section on lease options. You can get a copy of "How Lease- Options Benefit Realty Buyers, Sellers, Agents and Investors," available for $4 from Tribune Media Services, 64 E. Concord St., Orlando, FL 32801.
If you are considering a lease option, be sure you do your homework first. And have an attorney or financial advisor on hand to review any paperwork before you sign. Please contact me with any questions. I look forward to earning your business. |