Buy Benicia Real Estate: Tips and information for buying real estate
Please enjoy the following articles addressing many pertinent topics for those considering a real estate transaction. Together we will analyze comparable sales data, determine the right purchase or sales price, and quantify the closing costs associated with each option. My goal is that you are thoroughly informed, and consequently, appropriately confident, to make the necessary decisions to meet your real estate objectives. - Kathleen Olson
Please contact me at your convenience to discuss this content, or any other real estate matter.
From the Feds: Buying a Home from the U.S. Government
If you are a first time homebuyer or are in the low to moderate income range, buying a home listed through the Department of Housing and Urban Development (HUD) is an appealing option. HUD homes are actually available to anyone who can qualify for a mortgage. Although they are popular with lower income families, they are also appropriate for savvy consumers looking for a great deal. HUD also has special purchase programs for educators and law enforcement officers, which may qualify them for discounts up to 50%.
If you have fallen on hard times or have less than stellar credit, you may still be able to purchase a home with government assistance. There are several government programs available to those in need. You can go over your alternatives with a HUD funded housing counseling agency.
In order to find a HUD home, go to your state’s HUD website. You will be able to browse the available homes. When you find a home you like, you should find a HUD approved real estate office to show you the property. The agency’s website will have a list of approved offices. Contact them so that they can set you up with an agent. When you meet with an agent, the process is much like buying any home. You want to lay out your wants and needs so that the agent knows what you are looking for in a home. Pictures may not be enough to base your decision on, so you need to have an open dialogue with the agent.
The home buying process is a little different for HUD homes than it is for a regular listing. If a homeowner with a HUD insured mortgage cannot make the payments, the home is auctioned off after the lender forecloses. HUD pays the lender for what is owed on the property and takes ownership of the home. These homes are sometimes auctioned off for less than the appraised market value. This is why such great deals can be found on HUD homes. The auction is considered the “offer period”. Everyone places their bids and the highest bidder gets the house. You can submit a bid at any time if the house isn’t sold in the offer period. If HUD approves your bid, your agent will be contacted within 48 hours.
In the event that your bid wins, your agent will help you with the paperwork. Your settlement date will usually fall within 30-60 days of your winning bid. It is important to remember that you cannot finance a home through HUD. You need to have your own financing arrangements. Have everything ready to go at the time you place your bid. If your bid wins, but you do not close, you may lose your deposit.
If the home is in need of repairs, the responsibility falls on the buyer. HUD homes are sold “as is” and do not come with a warranty. HUD will not make the repairs because the price of the home is always adjusted downward to reflect the cost of repairs. Don’t consider buying a HUD home unless you are willing to absorb the cost of repairs. The repairs might be minor, so don’t turn your back on good home because it needs a little work. Before looking for homes, you should determine what your repair threshold is and stick to that. Some like the challenge of it and others would prefer to keep repairs to a minimum. It is important to have the home inspected prior to making an offer so that you can figure the cost of repairs into your bid.
If you are purchasing a HUD home for real estate investing, you should be aware that you cannot bid during the initial offering. Families in need of housing take priority; therefore, the initial offering is only available to buyers with the intent to live in the home. If no one bids on the home, investors can then place their bids.
If a foreclosure cannot be sold within 6 months, HUD will then sell them to charities or agencies for the purpose of providing housing for needy families. Either way, the homes are likely going to those individuals that need them the most.
Appraisals: The facts about Real Estate Appraisals
Real Estate Appraisals are a necessary step in the home buying process. There is a lot of confusion out there regarding the truth about appraisals. Some people are confused about their purpose and often think of them as home inspections. Some people think that a low appraisal for their home is the kiss of death. People should take the time to learn the facts about real estate appraisals. The more people learn beforehand, the better prepared they will be to tackle this crucial step.
Your home loan approval is contingent upon the results of the real estate appraisal. It is as simple as no appraisal…no loan. Since very few people have the ability to pay for a house with cash, the appraisal is going to be necessary. A loan is never going to go through without an appraisal. The purpose of the appraisal is to establish the home’s market value. The sales price will be based on the market value.
The main goal of the appraiser is to protect the lender. Lenders don’t want to be stuck with property that is not worth its price tag, so the appraisal must be completed before the lender will approve the loan. The information contained in appraisal is invaluable to the lender. The lender will study the details of the appraisal before reaching a final decision. It makes sense. If they are going to be funding the transaction, they should be aware of the property’s value.
The lender will often dictate the choice of appraiser. It might have one in house or through a contract with an independent appraiser. If you go with your own choice for appraiser, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual appraisal reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The appraiser will then list any issues that he or she feels might diminish the property’s value. The next component is a list of any serious problems like bad roofs or weak foundations. The appraiser then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property.
It is important to note that the real estate appraisal is not the same thing as an inspection. The appraiser might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender. A home inspection is a different process altogether.
Real estate appraisals only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
Everyone fears the possibility of a low appraisal. It happens all of the time, usually during closing. There are some things you can do to remedy this common but stressful situation. The buyer can make a larger down payment. If this is not feasible, the seller and buyer can negotiate the price some more. Additionally, the appraisal can always be disputed.
What all goes into an appraisal? Appraisers are looking at the condition and size of the house, its proximity to good schools, and the size of the lot. Appraisers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don’t work.
Appraisals are not being conducted by just anyone off the street. Real estate appraisers are trained professionals licensed by the state in which they work. They are qualified for the work they do by completing state certification requirements like exams and continuing education courses. This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
Ten Tips for the First Time Home Buyer
Buying your first home is one of the most exciting things you will ever do. If you have spent years living in apartments, there is nothing more satisfying than owning your own property. The process can be a little lengthy and you might hit a few bumps in the road to home ownership. The following tips will help the first time homeowner avoid some of the hiccups.
The first thing you should do is talk to a real estate agent about the home buying process. It should not be a sales meeting and you should be able to find an agent that will agree to meet with you about the basics without having to sign a sales agreement with them. If you can’t find a good agent to talk to, you might want to consider talking to a loan officer at your bank or a mortgage broker.
An equally important tip is to get your finances in order before you apply for a mortgage. Order a copy of your credit report so you can check it for accuracy. Mistakes are common and you want to make sure that there is no fraudulent activity. You have the right to dispute errors on your credit report. If you come across something that you know is an error, circle it and send it to the reporting agency along with a letter of dispute.
Next, you should really study the mortgage industry. You need to be able to find the right loan and lender most suitable for your needs. Familiarize yourself with industry terms like debt to income ratio and adjustable rate mortgage. Learn the difference between pre-approval and pre-qualified. It will all seem foreign at first, but taking the time to learn the business will spare you from headaches in the future.
Also, you need to figure out what your wants and needs are. What kinds of amenities are you looking for? How many bedrooms? One story or two story home? You also need to consider the size of the down payment and figure out what you need to do to come up with the money for it.
You must learn about how real estate agents work. There are buyer’s agents and seller’s agents. A buyer’s agent’s responsibility is to negotiate the best deal for the buyer. The goal of the seller’s agent is to get the price that the seller most desires. The best way to find the right agent is to ask your friends for suggestions. They have all probably been in the same boat, so they can probably recommend a good real estate agent. When meeting with a potential agent, pay attention to how they treat you. Make sure they listen to you when you talk about what you want. Also, how are their follow up skills? Do they take the time to return your calls or emails? If they don’t take the time to respond, move on. There is a better agent out there for you.
When looking for a home, consider all of the possibilities. Look up real estate agent’s websites. Don’t rule out For Sale by Owner Properties and foreclosed homes. Housing and Urban Development (HUD) homes can often be found for very reasonable prices. You do need to find an agent that is approved to sell HUD homes if you choose to take that road to home ownership.
Before you even think about making an offer, you need to consider the resale value. You might plan on being there for a long time, but you just never know. You might opt for a different climate to alleviate your allergies or you could simply be transferred by your company. You want to pick a good location that will be attractive to others as well.
Another issue that cannot be ignored are the deed restrictions, which govern what you can and cannot do with the property. If it has always been your dream to have a pool, you want to make sure that you don’t buy a home in a subdivision that won’t allow it because of deed restrictions.
Home inspections are an important part of the equation. Talk to your agent to find out when the inspection will be performed. It varies state to state. Sometimes the inspection will be right before the contract is signed and other times, they are performed right after an offer is made.
Finally, make sure you stay on top of things. Any number of problems can crop up at the last minute and delay the purchase of your home. If you aren’t sure about something with the paperwork, don’t be afraid to ask questions. You might think of something that everyone else has overlooked. Purchasing a home is a time consuming task, but it is worth it when you have your backyard barbeques.
Home Warranties: What are they and do you really need one?
A home warranty is not much different from a warranty you might have on your car, your computer or your home entertainment center. A warranty on your home usually covers all of your home’s major mechanical systems, including hot tubs, pools, wells, septic tanks and all of your appliances. Some policies even cover the roof of your home and almost anything else you’d like to include, as long as it’s specified in the policy.
Home warranties are obtainable for most any dwelling, including mobile homes, condominiums, town houses and manufactured homes. They can be purchased by either the buyer or the seller; some sellers will include a home warranty policy to make purchasing their home more attractive. Including a home warranty with the sale is an excellent idea, especially if the home is older and the systems and appliances are aging. Since the policy can be purchased at closing, the seller doesn’t have to come up with the premium out of pocket. Further, the cost of the policy can be split between the buyer and the seller, depending on the terms of the sale.
Home warranty policies are generally effective for one year and are renewable. However, you can expect to pay a little more for coverage each year, as the items covered continue to age. This is reasonable. Policy costs vary according to the list of things covered, but an average cost would be between $350 and $500 per year. Obviously, when obtaining a policy it is important to be specific about coverage. You can expect to pay a small co-payment when the repair person responds to make a repair. This is an industry standard. Your payment will range from $35 to $55 per visit.
According to a Gallup poll, 79% of buyers and sellers surveyed rated home warranties as one of the most important aspects of buying a home. These policies are not like hazard insurance, which covers losses due to fires, storms and accidents; home warranties cover normal wear and tear breakdowns. A new home and its major systems are usually warranted by the builder for at least one year; thereafter, your home warranty policy coverage will take effect. Be sure to understand the limitations and intent of your home warranty. As an example, should your microwave oven catch fire and damage your kitchen cabinets, your home warranty would cover the cost of the microwave; your home owners insurance would pay to fix the cabinets.
Before buying your home warranty policy, you should shop around and find the best and most cost-effective provider. Get recommendations from your mortgage company, your builder, your friends, and from the Better Business Bureau. Obviously, some companies are better and more reliable than others. Ask specific questions: Do they subcontract their work? What is their normal response time? If your freezer stops running you need someone to respond quickly.
When trying to decide whether or not you need a home warranty, the rule of thumb is: the older your home, the more you will benefit from a home warranty policy. Most systems and appliances covered under a home warranty can be expected to last at least 5 years. Therefore, during the early years of your new home, the home warranty policy may not be necessary. As the components of your home age, the need for a home warranty policy becomes more critical. It is obviously more attractive to pay $400 or $500 in policy premiums than shell out several thousand dollars for a new furnace or even several hundred for a new refrigerator. The policy will easily pay for itself if a major home system has to be repaired or even one major appliance has to be replaced.
If you’re the owner of rental property, you should definitely consider a home warranty policy. Unlike the appliances and systems in your own home, you have little, if any, control over the frequency and manner in which these things are used by your tenants. Odds are that you will have to replace or repair items and systems more frequently in your rental property than in your own home. As a landlord, your home warranty policy may very well save you money, but just as importantly, it can buy you peace of mind.
The search is on: Ways to make the most of your house hunting trip
It has been said that moving and divorce are the two of the most stressful events a person or family can experience. Divorce is a subject for another time. Let’s consider the event of moving and look at some ways to make your house hunting trip less stressful and more effective.
Location is the first factor to consider when planning a move. If you have children, or are planning a family, you will want to know about the schools in the area. How about shopping centers, medical facilities, recreational opportunities and of course how far will you be from your place of employment. If you require public transportation, is there any within walking distance of your prospective new home. What about the crime rate? A check with the local law enforcement agency can either put your mind at ease or give you reason to look elsewhere. And finally, try to assess the quality and character of the people who live in the area. This is obviously difficult to do without interviewing them, but you can get a rough impression from the condition of their homes and properties and from the activities you might observe. As an example, if your prospective neighbor has discarded appliances all over the front yard and their son is roaring around the neighborhood on a mini-bike with no muffler, you might want to take all that into consideration. And remember, a poor location will definitely be a negative factor when and if you attempt to resell the home at some later date.
Once you’ve zeroed in on your preferred location, you can start to think seriously about searching for your dream home. Rather than spin your wheels by looking at houses randomly, you should determine what you really want in a house and let those things help you focus your search. Make a list and start with the obvious: how many bedrooms do you need; do you want a garage; must you have a single story home due to your inability to climb stairs; is a fenced yard an absolute necessity? After listing the absolute “must haves”, think about the things you like and dislike about your current residence and factor those things into your wish list. Making a list will not only save you time, it will be a big help to your realtor in planning your viewings.
Most people don’t really know how much house they can afford. Affordability is based upon income, credit status, interest rates, down payment, closing costs and the type of loan selected. By getting pre-qualified by a lending institution, you will know what you can afford to spend. Often, that figure is quite a surprise to prospective home buyers. In any case, pre-qualification will save you time and trouble by establishing your price range.
Typically, house hunting involves seeing as many homes as possible in a short period of time. Both the house hunter and the assisting realtor have busy schedules and want to tour fast and furious. However, after the first two or three houses, they all start to run together. You need to make notes after each viewing. One effective means of qualifying each home is to make multiple copies of your list of priorities and use it as a checklist to grade each home visited. This little tip will eliminate confusion when trying to make mental comparisons at the end of the day.
Regard your hunt as an excursion. If you were going to the zoo for the day and contemplated a lot of walking, you would dress comfortably and wear comfortable shoes. House hunting is no different; you’ll be walking, climbing stairs, quite possibly going into basements and attics and constantly getting in and out of cars. Dressing to impress homeowners or your realtor should not be your top priority. Dress clean and neat of course, but comfortable is the name of the hunting game.
And last but not least, use your own realtor. When you call the realtor on a “house for sale” sign you’re speaking to the seller’s agent. Keep in mind that he or she represents the seller and will be looking after the seller’s interests. You need your own realtor; someone who is working for you and is looking out for your interests.
House hunting can actually be an enjoyable experience if you take your time and do your homework.
Location, Location, Location: How to find all the details about the neighborhood before you buy.
The Jones’ family found their dream home and moved into it with all of the excitement and enthusiasm of a kid on Christmas morning. After a long and hectic day of unpacking, they collapsed into bed anticipating a good night’s rest. Unfortunately, they were shocked and dismayed when they began to hear the very obvious noise of trucks roaring along the inter-state highway situated less than a half mile to the rear of their home. Too late!
This unfortunate situation exemplifies the need to focus on location when contemplating the purchase of a home. A ten million dollar mansion isn’t worth a dime if it’s sitting next to a toxic waste dump. This example is far-fetched and outrageous, but it makes the point that finding the right location is certainly as important as finding the right house.
How do you investigate a potential neighborhood? There are a number of factors and issues to be considered in your evaluation. Some of them can be covered merely through visual observation; others will have to be explored with the assistance of community and government organizations.
One of your first and most significant concerns should be the crime rate. If every other house on the block is being burglarized every other month, you might want to look elsewhere. Talk to a spokesperson of the local law enforcement agency. Ask for a listing of their monthly crime stats and a copy of their year ending report. When talking to the spokesperson about crime rates, ask about their response times in your area. If it’s over five minutes, ask why. If the community has a neighborhood watch group or a neighborhood citizens’ security patrol, attend one of their meetings or speak with their group representatives.
How far is your new neighborhood from your place of employment? How far is too far? Bottom line: check the driving time and traffic patterns, both coming and going, by driving the route you’ll take. Are there any activities or facilities in the area that will make the trip more unpleasant or time consuming on specific days of the week? As an example, is there a bridge that backs up on Friday afternoons as people rush to their weekend retreats?
If you have children, or anticipate having them, you’ll want to check out the schools in the area. Visit the schools and talk to the Principals or school counselors. Ask about class sizes, bus service, curriculum and even school menus. If your child is a gifted student, you’ll want to inquire about accelerated courses. If your child needs special Ed opportunities, ask about them. Knowing about your child’s school is one of your primary responsibilities as a parent.
This may sound a bit picky, but you should visit and evaluate your local markets, shops and restaurants. Do they sell quality products? Is there a convenient place to purchase daily necessities such as milk, luncheon items, coffee, etc.? Do the local restaurants suit your taste? The answers to these questions may not factor substantially into your moving decision, but they are part of the equation and should at least be recognized and considered.
Availability of community services should not be overlooked. Is there a good hospital in the immediate vicinity? Do they have an emergency room? How about parks and a library?
You should visit the neighborhood at various times of the day and night to check for sounds, smells, heavy traffic and the presence of any activities that you might find offensive as a resident. Sometimes the complexion of a neighborhood changes at night. Drive around after dark and look for the presence of undesirables lounging about in public places. Try to get a sense and feeling of the neighborhood.
Finally, you will want to find out if the community has a community association. If so, visit the association and ask about membership dues, restrictions and covenants. If the representative is forthcoming, ask if there are any problems in the area that you as a prospective new resident should consider.
You are about to make one of the biggest financial decisions of your life. Don’t be timid. Ask questions, make notes and weigh all the pro’s and con’s before deciding.
Adjustable Rate Mortgages: What you need to know.
If you’ve been trying to buy a house you may have noticed there are a lot of numbers to consider: the price of the house, your savings, the amounts of the down payment and monthly payments you can afford, as well as a host of other figures and fees. Trying to find a mortgage that meets your needs is another numbers game, but this one can work in your favor.
You may not realize it, but there is great variety available to home buyers shopping around for a suitable mortgage. Different banks, brokers and other lending institutions all offer their own mix of short-term and long-term mortgages, as well as both fixed rate and adjustable rate mortgages.
So how do you know which combination is the best for you? That depends on your circumstances.
Traditional fixed rate mortgages allow you the security and stability of knowing that your mortgage interest rate will not fluctuate with market conditions. This means that if interest rates spike, you will be protected. Conversely, if interest rates drop, you will not be able to take advantage of the potential savings without transferring your mortgage to another institution or making other possibly complicated arrangements.
Adjustable rate mortgages (also known as variable rate mortgages), are different than fixed mortgages in that the interest rate you pay on the outstanding principal of your loan fluctuates according to changes in the posted index rate. There is a certain amount of risk involved with an adjustable rate mortgage in that you may end up paying more money in the long run if interest rates rise and stay high. You also have the potential to take advantage of savings if interest rates fall. An additional bonus to adjustable rate mortgage is the lower initial interest rate. You may be risking higher or unstable payments, but you are rewarded with a lower interest rate when your loan is at its fullest point. Unless interest rates rise dramatically, this advantage is likely to save you more money than if you had chosen a fixed rate mortgage.
There are advantages and disadvantage to securing an adjustable rate mortgage loan. However, you may find an adjustable rate mortgage worthwhile if you intend to pay off a large portion of your outstanding balance early into your loan period. By doing so, you reduce the bulk of your loan while paying the initially lower interest rate. An adjustable rate mortgage may also be the best choice for you if you anticipate greater future income or if you intend to pay off the entire mortgage loan quickly – again due to the lower initial interest rate. Even if rates were to increase early into your mortgage period, the fluctuation would unlikely be so great that it negated the difference in interest rates between a fixed rate plan and a variable rate plan.
You can reduce the financial risks associated with an adjustable rate mortgage by asking your lender about interest rate ceilings or caps that protect mortgage holders from sharp increases in the amount of money they must pay each month (or whatever their payment period is: monthly, weekly, bi-weekly, etc.). The overall ‘ceiling’ restriction is legislated in almost all cases, and it limits the total possible interest rate increases over the period you hold the loan. Periodic caps help control interest rate hikes between adjustment periods.
Your lender may also be willing to consider payment caps, which stabilize your monthly or periodic payments so any interest rate fluctuations are worked into your payment by way of adjusting the ratio of principal to interest each payment covers. This is a great option if you have limited income flexibility, but could result in a negative amortization period over the long haul. This happens when the balance of your mortgage is actually growing rather than shrinking because your regular payments are not large enough to pay all the interest plus a portion of your outstanding principal.
A final option to consider is arranging to have the ability to convert your adjustable rate mortgage into a fixed rate mortgage at a designated time. You may pay a fee for converting your mortgage, but if you find yourself in a situation where interest rates are rising rapidly, it may be worthwhile to stabilize your payments and balance by switching to a fixed rate plan.
Speak to your financial advisor to find a mortgage plan that fits your budget and your needs.
FHA Loans: What are they and do you qualify?
Home ownership has long been a major part of the American Dream. Yet for many Americans, the skyrocketing price of real estate makes it impossible for them to save enough money to qualify for an adequate mortgage let alone buying a home outright. That’s why the Federal Housing Administration of the United States Department of Housing and Urban Development has a loan insurance option that allows first-time buyers or anyone without a lot of money for a down payment to purchase a home.
By guaranteeing lenders won’t lose all of their money if you default on your home loan, FHA’s insurance program increases the number of potential home buyers who are able to secure a loan from the lending institution of their choice. While the FHA program does help qualified buyers secure home loans, not everyone is qualified.
The first measures of whether a potential home buyer will qualify for FHA assistance is whether he or she has a good credit history and whether he or she is employed or has enough income to handle a house loan. It is a good idea to start establishing a credit history as early as you can. You can do this by paying your utility bills, school loans, and car loans on time, or by applying for credit cards and paying the bills in a timely fashion. You may not qualify for a standard credit card right away, but most departments will issue their in-house charge card with very little proof of income, and using these cards is a good way to build a solid credit history. It is also a good idea to keep copies of bank statements, pay stubs and contracts as proof of steady income when you go to apply for a home loan.
Most lending institutions require a down payment equal to about 25 percent, or one quarter, of the full price of the home you wish to purchase. With real estate prices booming as they are, this goal is out of reach for many Americans. However, with an FHA-insured loan, qualified home buyers can secure a house loan with as little as a three percent down payment.
So how do you know if you qualify? Either before you begin looking for a home to buy, or after you have found one you think is a good prospect, do some simple calculations to find out how much of a home loan burden you can afford each month. To determine how much you can afford to pay, multiply your monthly income by .29. Most loan experts agree that spending 29 percent of your gross monthly income on housing costs is a reasonable burden for buyers looking to secure a FHA loan. The amount you get by multiplying your gross monthly income by .29 will give you that magic 29 percent figure. Total housing costs include more than your mortgage principal and interest costs. You also have to calculate your estimated property taxes and insurance, as well as utility costs such as heat, water and electricity. Your total monthly debt load, including payments for any long-term debt you may have, should not exceed 41 percent of your gross monthly income. These debt burden figures are slightly more favorable than conventional loans, which generally require a debt load one to five percent less than what is needed for an FHA loan.
Once you know how much you can afford to pay, you also have to figure out if you can raise enough cash to make a down payment equal to no less than two to three percent of the price you pay for your home. This money will be due on the date you close or settle the deal. You may actually need more than that amount to pay for private mortgage insurance, title insurance, title search fees, attorney’s fees, loan origination fees, discount points costs and any other relevant disbursements, so leave a financial cushion to handled these additional expenses.
Buying a home is exciting, but it is also an investment that requires planning and careful management. An FHA loan can help you buy the home of your dreams, but be sure you can afford the house you want to buy so that the dream does not turn into a financial nightmare.
VA Loans: Facts that you should know
American veterans currently serve and have served their country for modest pay and limited financial security. In some cases, a prolonged period outside of the private workforce, or injuries incurred while serving in the U.S. armed forces have resulted in diminished employment and earning potential, leaving some veterans unable to afford a home under regular mortgage and home loan circumstances. That is part of the reason why the United States Department of Veterans Affairs provides guaranteed home loans to help American veterans pay for a home of their own.
VA home loans encompass several advantages over traditional loans, and are available to retired and active duty service personnel, some members of the Selected Reserve, and spouses who fall into certain categories such as the un-remarried wives and husbands of Armed Service personnel who perished from service-related injuries or conditions, or who have been missing in action or a prisoner of war for more than 90 days. The following guidelines may help you determine whether your service makes you eligible for a VA guaranteed loan:
Eligibility for a VA loan is made by Veterans Affairs. Qualified individuals will receive a certificate which they can use when applying for a VA loan. Certificates can be obtained from any VA Eligibility Center upon submission of VA Form 26-1880 and suitable proof of service and discharge conditions. A copy, or Certificate in Lieu of Lost or Destroyed Discharge papers is available to veterans who can prove their military service but who may no longer have their original discharge documentation. This certificate can be helpful in obtaining a VA loan.
Each Veterans Affairs home loan supplies an amount of money that it guarantees lenders against loss on loans made to veterans. The maximum entitlement amount is currently $36,000 (or up to $60,000 for certain larger loans), but that figure is always subject to legislative changes. Contact your local VA office regarding loan figures and eligibility before agreeing to a particular loan. This entitlement amount is a one-time allotment unless a prior VA loan has been paid in full and the property it was used to obtain has been sold. The entitlement may also be restored if a qualified buyer agrees to assume the outstanding loan balance and substitute his or her own entitlement (same amount used on the original loan). If only part of the entitlement has been used to secure a loan, the remaining balance may be used for a second loan. This ‘remaining entitlement’ option may be particularly useful for veterans who secured a loan using their entitlement when the maximum amount was lower than its present value: in this case, a veteran may use the difference between what he or she was eligible for then and the new maximum to help secure another loan.
When trying to determine which property to buy or fix, veterans should consider that most lenders require the total of the guaranteed entitlement and any cash down payment the veteran is able to make to equal about one quarter of the total sale price of the property in question. This limitation may help veterans decide what they can afford to spend to buy a home, mobile home, townhouse, or VA-approved condominium, to build or repair a home, to refinance an existing home loan, or to purchase a domestic lot for a home.
Finally, VA guaranteed home loans are not administered by Veterans Affairs. Rather, veterans obtain the loans by applying to regularly lending facilities and supplying the necessary proof that they qualify for a VA guarantee.
RESPA: What it means to you
The United States Department of Housing and Urban Development (HUD) drafted and enacted the Real Estate Settlement Procedures Act (RESPA) more than 30 years ago as a consumer protection statute designed to help home buyers navigate their way through the sometimes complicated business of real estate. Specifically, RESPA addresses the issue of home buying closing costs and settlement procedures.
Under the terms of RESPA, home buyers are entitled to receive certain disclosures during the course of a real estate transaction. The law also prohibits kickbacks and referral fees that unnecessarily inflate the cost of settlement services and therefore falsely driving up the cost buying a home. RESPA provisions apply to loans secured with a mortgage on residential properties designed to house one to four families. Examples of the types of loans covered by RESPA include:
Lines of credit based on equity An office within HUD, called ‘RESPA and Interstate Land Sales’ enforces the RESPA statute. Buyers may contact the office directly if they think the terms of closing and settlement in their house deal do not respect RESPA provisions.
RESPA stipulates that certain disclosures be made at particular times during the real estate transaction process. When a buyer goes to apply for a mortgage loan, his or her broker or lender must provide – either at the time of the application or by mail within three days – a Special Information Booklet, a Good Faith Estimate (GFE) of potential settlement fees, and a Mortgage Servicing Disclosure Statement.
The Special Information is required for home purchases only, and contains details about different kinds of real estate settlement services. The GFE outlines the type and amount of settlement costs the buyer will likely encounter when his or her house deal closes, as well as whether the broker or lender requires the buyer to use a particular settlement services vendor. The figures in the GFE are estimates, but they should be relatively close to the actual settlement costs at closing. Finally, the Mortgage Servicing Disclosure Statement reveals whether the broker or lender will handle the buyer’s loan or whether it will be transferred to another lender. The Mortgage Servicing Disclosure Statement should also have a section dedicated to options the buyer may employ to resolve any complaints.
If the buyer decides to go ahead with the transaction after securing appropriate financing, the next RESPA-required disclosure is an Affiliated Business Arrangement disclosure (AfBA), which is used if a settlement service vendor or provider refers the buyer to another provider that is affiliated with the original service provider. The affiliation can be part or full ownership of any other beneficial interest. The AfBA disclosure must be made before or at the time the referral is made, and it must give a full description of the relationship that exists between the two companies as well as a reasonable estimate of the fees of the second settlement service provider. In most cases, the buyer is not obligated to accept the services offered by the second service provider, but he or she may choose to do so.
One day before the settlement (or closing) date, the borrower may see the HUD-1 Settlement form, which details all settlement charges imposed on borrowers and sellers. All parties receive a complete copy of this form, showing all of the actual settlement costs, at the time of settlement, or in the mail shortly thereafter.
Another disclosure that is made at the time of settlement is the Initial Escrow Statement, which lists the estimates of charges that are expected to be paid from the escrow account during the first year of the loan. Charges may include taxes and insurance premiums. After the first year, loan servicers must provide borrowers with an updated annual escrow, which lists all deposits and payments, as well as any relevant shortages or surpluses related to the account.
If, at some point after the settlement occurs, the loan servicer reassigns the loan to another servicer, the borrower must be notified 15 days in advance by means of a Servicing Transfer Statement.
While RESPA does not set out particular penalties for non-disclosure of the above mentioned items, kickbacks and referral fees that violate Section 8 of the law are subject to fines of up to $10,000 and imprisonment for up to one year.
Settlement or closing fees cost Americans about $55 billion each year. HUD has initiated a RESPA reform process that the department hopes will simplify the costs involved with buying a home to better reflect the Bush administration’s goal of helping to build an ‘ownership society’ in which all Americans can own their own home. The reform process has not been completed, and for now, the rules remain as they have been for the past three decades.
Discount Points: Does it make sense for you?
Juggling the financial burdens of everyday life while paying off a mortgage can be very difficult. There are plenty of budgetary unknowns to try to anticipate over a 10 or 25 year period (or longer), so it helps to have as much information as possible. One of the financial options you should inform yourself about and consider is purchasing discount points to lower the interest rate on your loan.
Discount fees are essentially fees you pay to your financial lender at the time of closing to secure a lower interest rate on your home loan. Each ‘discount point’ costs the home buyer one percent of the loan amount and generally lowers the interest rate on the buyer’s 30 year loan by 0.125 percent. So if a buyer with a home financing loan of $200,000 with an eight percent interest rate pays an extra $2,000 at the time of closing (two discount points worth), he or she can lower his or her interest rate to 7.75 percent. The discount points system lowers the interest rate because the lender is able to collect its money earlier rather than spread out over the course of the loan period.
Buying discount points to lower your loan interest rate may seem like a good idea, and it is for many home buyers, but not all. Depending on the specifics of your loan and your financial situation, buying discount points to lower your interest may save you money or it may not. In some cases, the savings may be so inconsequential that buying the discount points may not be worth the extra financial burden or cash flow stress that it causes.
So how do you know whether or not buying discount points is a worthwhile option for you and your financial situation? The length of time you intend to keep the loan is a key factor to finding the answer to that question. Once you have that information, in an ideal world, there would be no unexpected life expenses and the answer would be revealed with a few simple calculations. Unfortunately, life often dishes out the unexpected and sometimes that costs a lot of money, so it’s impossible to have a fool-proof plan. The good news is the calculations are still fairly straight-forward, and barring any major catastrophes, they can give you a good idea about whether or not it makes sense for you to take advantage of discount points to reduce your loan interest rate.
Begin by using an online mortgage calculator to determine what your monthly payment would be at the interest rate if you do not purchase discount points from your lender. Then do the same calculation to find out how much your month payment would be if you do decide to purchase discount points. Subtract the first amount from the second to figure out the difference you could save each month and then divide the amount it would cost to buy discount points at closing by the monthly amount saved. The resulting figure represents the number of additional months you would have to keep the loan to break even or recover the cost incurred by using points. If you do not intend to stay in the house long enough to recover the cost, you may not want to buy the discount points.
By using a amortization schedule (also available online or from your financial institution) to compare the financial impact of both loan scenarios, you may discover that the reduced-rate loan has a nominally lower principal balance at the end of the discount point cost recoup period, which may also play into your decision.
Finally, you may want to consider the tax advantages presented by purchasing discount points from your lender. The cost of real estate discount points is deductible in the year in which it is paid. Of particular note, buyers are able to deduct the cost of discount points even if the seller actually pays for them.
While there are pros and cons to buying discount points from your home financing lender, your final decision must be based on your specific needs and financial situation. Speak to your financial advisor or lending institution to decide on the best course of action to ensure you can pay off your loan in the best possible way.
The Real Estate Bubble: Do you know how it can effect you?
The real estate bubble is a much discussed phenomenon used to describe a situation in which property values, both or either commercial and residential, expand very rapidly. The result is an over-inflated market that sees buyers purchasing property at prices far above standard value while fearing the market will burst and property values will plummet as fast as they rose. Buying in such a market can be risky for those who cannot afford to lose on their investment.
It’s difficult to say what qualifies as a bona fide real estate bubble and what is just a hot market. There is no quantifiable standard to identify a real estate bubble and so we are left to depend on experts to tell us which areas of the country are experiencing a bubble and which areas are not. However, not even the experts can agree on the difference between a bubble, which is risky and unstable, and a boom, which has less risk of a rapid downturn. Some mortgage companies and other organizations with an interest in the real estate industry study the market and produce reports to help buyers identify potential windfalls and potential pitfalls by naming cities with what they determine is the greatest chance of a bursting bubble.
Homeowners who buy in a real estate bubble situation risk putting themselves in an undesirable financial situation, particularly if they have very low equity in their home. Equity is how much of the home you own, as opposed to the portion owned by the bank or other lending institution. If you have a lot to pay off before the home is truly yours, and the bubble bursts, you can find yourself in a position where you are paying off a significant debt on a property that can no longer fetch the same or higher value you paid for it. Of course, such a loss is only theoretical unless you actually try to sell your home. Property values fluctuate up and down on a regular basis, with both dramatic increases and decreases in value, so if you can stay in the home until the value rises again (even if it doesn’t go all the way back up), you can avoid significant losses when it does come time for you to move. If you are forced to move before the market becomes more favourable, you could find yourself in a negative equity situation, which will affect your ability to buy your next home.
The situation is less serious if you have greater equity in your home, or if you have the financial ability to absorb a loss, in which case a bursting bubble situation is more of an irritant than a financial catastrophe.
If you’re a person of average financial means who wants to buy a property in an area that may be undergoing a real estate bubble phenomenon, do so from an informed position. Be aware of the potential for loss and measure carefully the pros and cons of going ahead with your planned purchase. Do a little homework before you jump into a purchase: follow the local market for a couple months and track fluctuations; take note of any sale trends, and pay attention to what the experts (conflicted as they may be) report about the area in which you are interested. Use all of the information you gather to help you determine whether your potential positives outweigh the potential negatives.
Practising common sense can help you survive a bursting bubble scenario in the best possible shape. For example, it is wise to minimize your overall debt load to help you manage your financial burden if you are forced to move at an inopportune time. Invest your equity and any unexpected financial gains into improving the value of your home rather than in luxury or impulse buys. Most real estate experts agree that you can recoup between 80 and 90 percent of your investment in remodelling a kitchen or bathroom when it comes time to sell your property. Of course, your best protection is to purchase a home with excellent re-sale potential to minimize possible losses if real estate values plummet unexpectedly.
Re-Sale Value: It IS important
A home is more than a place to live. It also represents a major financial investment. Most of us will buy and sell several homes over the course of our lifetime, so it is important to consider the resale potential of each home you purchase —before you buy it.
Consider your intentions when you go looking for a new or new-to-you home. Are you searching for your dream home, a place you hope to hang your coat for a long time? Or perhaps you are looking for smaller, lower-maintenance place to ease you into retirement? Maybe you’ve spotted a hot market and are hoping to turn a profit with a fast buy and a fast sell sometime in the near future. Your plans for your new house and how long you intend to stay there can affect its re-sale potential. For example, the trendy new neighborhood where your house is located may not be so trendy and popular ten years from now.
Regardless of your intentions, there are several other factors that will affect the re-sale potential of your home. First among these is location. You’ve probably seen house-for-sale advertisements boasting about a home’s location, and it’s true, location is very important. Today’s preferred location may not be the same five or ten years from now, but many of the elements that make it desirable will be the same. Large lots, mature trees, wide sidewalks, proximity to schools, shopping and public transit are all features that increase an area’s lasting appeal and will therefore fetch higher re-sale prices than homes in areas that do not offer the same advantages. When thinking about location, you should also consider the population and economic growth trends in your city or town, and in which direction growth appears to be moving.
Demographics can also come into play when it comes to home re-sale value. With baby boomers heading into retirement and their ‘golden years’, one-level homes with wide passage ways and rooms large enough to accommodate wheelchairs may become more popular in certain areas, while suburbs filled with young families may put more of an emphasis on large yards and ample public green space and playground facilities. Try to learn about a town or city’s population before you purchase a home there.
Be aware of the features that sell. Peruse local real estate advertising to find out the most desirable attributes in the area in which you want to buy. You may notice that homes with one bathroom sell for less than homes that have more bathrooms, or that homes with old, inefficient windows sell for less than those with newer, vinyl-clad windows and energy-efficient panes. The same can be said about a variety of features including closets, number of bedrooms, fireplaces, swimming pools and kitchen functionality. Don’t despair, however, if a dated or less desirable home is all you can afford: outdated houses present an opportunity for renovations and upgrades that can vastly increase their value and re-sale potential. With a small investment and a little work, you can turn a fixer-upper into cash in your bank account. The profit margin increase can be significant enough to justify enlisting the help of a professional to help with major projects.
A residential building inspector can also help you identify the ‘shelf life’ of a home you are considering buying. A thorough inspection report will give estimates on the lifespan of major home components such as the roof, furnace and driveway. If several of these components are reaching maturity at or near the time you want to sell, the re-sale potential of the home could be devalued as a result of the impending repairs. Take these timelines into consideration if you plan on moving in the near future, or if your cash flow will be compromised during the same period in which upgrades will become necessary.
Buying a house should be about meeting your needs and desires, but a little forward-thinking can mean an easier sell, and even a profit, a few years in the future if your needs change or you want to move on. A purchase designed to meet your current needs while accommodating future re-sale potential is a smart investment that will help you fund a bigger, better house when the time comes, or to create a little nest egg for future investments or retirement. Considering the re-sale value of a home before you buy it takes little effort but produces great routines – all in all, a logical thing to do.
Title Insurance: Do you need it? What is it?
Buying a home is a significant investment. A title insurance policy helps you protect that investment against potential losses that may occur after your house deal closes and you discover that someone else has an ownership claim to the property.
It may seem unlikely that such a scenario could play out, but it is a surprisingly common occurrence – frequent enough to make purchasing a title insurance policy a good idea to safeguard your investment.
When you buy a home, your lawyer or legal representative will conduct a title search (also called a title examination) to determine ownership of the property in question. A title search involves collecting and examining, in detail, all of the public records that involve the title to the property you are purchasing. The search may include past deeds, wills, trusts or other liens against the property to ensure that it has passed properly from owner to owner. The person conducting the search will also attempt to confirm that all previous mortgages and judgements involving the property have been fully paid.
Most times, your title search will come back clear. On occasion, however, a ‘cloud’ or ‘defect’ such as a missing signature will be detected, and while the defect is likely the result of an administrative error, it should be cleared before your deal is completed. A thorough title search should also reveal nuisance issues such as easements that may affect your interest in purchasing the property. Easements or right of ways may not present an immediate problem, but could adversely affect the property in the future.
Title searches are helpful in identifying any potential title-related issues relating to your property, but mistakes happen (in the public records themselves, as opposed to just mistakes on the part of your examiner), and you may find yourself involved in a legal battle in the future if a title conflict does come to light after the close of your house deal. That’s where title insurance comes into play; if you have a title insurance policy, your legal fees will be paid if you are forced to go to court, and if you lose the property as a result of a title dispute, you will be reimbursed up to the limit of your policy.
Similar to other types of insurance, title insurance policies do have certain exclusions, so it is important to clarify what your policy covers and what it does not. Some title insurance policies, for example, do not cover, or have limited coverage of problems related to easements, liens or mineral rights. Shop around if you want greater coverage and are willing to pay extra for it. No matter which policy you purchase, defects that occurred after you bought the property are not covered by title insurance.
Now that you have a better idea of what title insurance is and how it is used, do you need it? Maybe. If you pay cash for your property and do not require a mortgage, you may choose whether or not you want to purchase title insurance for your own protection. If, however, you are obtaining a mortgage to finance your house purchase your lender will likely insist on title insurance coverage to protect its own interests in the event of a title dispute. Your lender may also stipulate additional coverage to guard your portion of the home’s value. Policies vary by insurance carrier, but generally, a lender’s policy is for the amount of the mortgage and is payable to the lender in the event of a lost dispute while an owner’s policy covers the full cost of the property plus legal fees. An issue to consider when purchasing title insurance is whether your policy includes inflation riders that will increase the amount of your coverage as your property value rises. You may pay a premium for this service.
Home buyers are usually responsible for the cost of title insurance, but may defray the charge by including title coverage as a condition of sale or by having the seller’s policy adjusted and transferred to the buyer’s name. Additionally, some states may require the seller to pay some or all of the title insurance costs, which are typically paid in full as part of your property’s closing costs. Ask your legal representative to outline your responsibilities and the seller’s responsibilities.
Why great homes don’t sell
You have a fabulous home in a great location, yet it’s been sitting on the market for months with little or no interest. What can you do?
Real estate is a fickle business with markets fluctuating according to season, the economy and supply and demand. The general market aside, there could be other reasons your great home isn’t selling.
One of the top reasons great homes don’t sell is because they are overpriced. Setting a sale price for your home is tricky business. You want to get the maximum possible return on the sale without alienating potential buyers with a too-high price. Many home sellers also mistakenly think padding the price of their home gives them an opportunity to negotiate down toward a more reasonable selling price. While this may seem logical, your initial high price may be driving away potential buyers put off by your over-valuation of your home. They may think your home is simply out of their price range, or that you are being greedy or unreasonable in your thinking.
It is important to price your house according to the market in which it is located. For example, a house located near schools and other amenities may sell for more than an identical house situated in a remote area with few amenities. Additionally, if there are a lot of houses for sale in your neighbourhood, it becomes a buyers’ market and you may not be able to secure the price you think you should get if your neighbors are willing to go lower. Finally, there are trade-offs when selling your house: a lower price usually means a larger market of potential buyers and a faster sale while a higher price means a smaller market of potential buyers and a slower sale. If you are determined to get a certain price for your home, you must be prepared to wait to get it.
Another reason your house may not be selling is exposure. Are you trying to sell it yourself? If so, it may be difficult to arrange showings around your work and family schedule, therefore limiting the potential for a sale. Listing your house with a realtor may give you the exposure boost you need to sell your home. Not only does a realtor have more flexibility in showing your home, he or she will also advertise the house and list it on the widely used MLS (Multiple Listing Service) website.
Even if your house is listed with a realtor, it may not be attracting buyers because of a poor photo on the MLS listing, advertising or feature sheets. Many potential buyers will dismiss a home as a possibility based on the impression made by the photo they see.
Curb Appeal: Make your home stand out!
Enhancing the look of your home from a street perspective is a great way to attract potential buyers. After all, the ‘curb appeal’ of your home is like a major plus for people driving through your neighbourhood or who see your house in a real estate for-sale photo. By putting in a little extra effort, you can improve your home’s curb appeal and increase your chances of an earlier sale at a higher price.
You probably live in the house you are trying to sell, and therefore you are familiar with its appearance – perhaps too familiar. Chances are, you don’t notice small cracks or peeling paint the same way someone seeing your home for the first time would. Starting from a position on the street, take a close look at your home. What stands out? What looks wrong? Does the tree in front need pruning? Perhaps a shutter needs to be repainted? Maybe the porch light fixture is broken. These are generally small tasks that don’t take a lot of time or money to repair, but that make – or detract—from the look of your home. It may help to take a photograph of your home from the street to see if that gives you a new perspective.
Here are some areas to consider when sprucing up your home for increased curb appeal and sale:
Your home is an investment, and by taking a little time to put it in top form, you will get a higher return on that investment when you decide to sell.
Escrow: Do you really know what that means to you?
Mortgage escrow accounts were developed more than fifty years ago when many Americans started losing their homes to foreclosures, mostly due to late tax payments. Homeowners were burdened to come up with large, lump sums of money at tax time that was often too difficult to pay. To ease the burden, lenders agreed to collect the taxes in small monthly payments made along with the mortgage payment. In 1934, this became standard procedure when the government stepped in and made it mandatory that lenders manage escrow accounts on all Federal Housing Administration (FHA) mortgages.
Mortgage escrow accounts are made to protect the homeowner by making sure that all insurance premiums and property taxes are paid in a timely manner. Escrow guarantees that there will always be enough money available to pay these bills on time. This way, the homeowner can avoid overdue taxes and insurance.
The U.S. Department of Urban Development (HUD) has administered the Real Estate Settlement Procedure Act (RESPA) to regulate all escrows and include laws for all lenders to follow when managing and funding the borrower’s escrow account. All lenders must maintain their escrow accounts and comply with federal law, with the interpretations set by HUD. Lenders are required to release itemized statements of escrow accounts to all borrowers yearly. While most lenders already issue these statements, the 1990 Housing Bill will ensure this practice.
Although borrowers are not required to maintain an escrow account with their lender, the lender may require it of the borrower. Escrows are made to protect the lender and as well as the borrower. Borrowers who do not understand the purpose of the escrow account, or those who have questions or other concerns, should consult with their lenders right away. It’s important for the borrower to understand escrow completely in order to be aware of all the benefits.
Escrows reassure homeowners that their mortgage related bills will be paid on time by automatically budgeting the borrowers insurance and tax obligations over a years time. This way homeowners can rest assured that their obligations are taken care of without having the burden of coming up with several large, lump sums of cash each year. In addition, it’s comforting that homeowners don’t have to calculate any unexpected increases in their insurance premiums or taxes. It is the lender’s responsibility to allow any potential increases in the payments, therefore covering the bill, without charge to the borrower, if there are not enough funds in the mortgage escrow to pay the increased bill. Many lenders will pay for the insurance and taxes when the payments are due regardless if the money has been collected by the homeowner at that time. In 1989, lenders advanced an estimated $600 million to homeowners to avoid penalties and any risk of not paying their insurance and taxes on time.
Escrow accounts have made it possible for mortgages to lower their rates and have lower down payments while protecting the interests of the investors. This has made the home mortgages more attractive as a secure investment, allowing escrow to lead the way to a stronger home mortgage market. Escrow accounts also prove beneficial to local governments by saving them money by using a less expensive and more efficient way of collecting taxes. Municipalities will only need to collect from a few hundred lenders instead of millions of homeowners.
For borrowers who decide to refinance or transfer their loan to another lender, the new lender will take on the responsibility of managing that borrower’s escrow account. The new lender may review the borrower’s escrow account to be certain that the funds are being collected sufficiently enough to cover all payments. Should the collected amount need readjustment, the new lender will notify the borrower of the change in monthly payments. Lenders in some states may pay interest on the money held in an escrow account although the RESPA does not require it.
Some lenders may ask borrowers to keep an excess balance that is often called a cushion, in their escrow account to cover potential increases in the borrowers insurance and tax bills. Many lenders may ask that the borrowers fund their cushion to the maximum amount of one-sixth of the total amount paid each year. If for some reason a lender asks the borrower to keep more than one-sixth in the escrow cushion, the borrower has the right for an explanation. If the borrower is not satisfied with the explanation, then they may file a complaint with HUD.
Easement, Right of Way, and Restrictive Covenants: What are they and why do you need to know?
When you are in the market to buy a home, you are going to come across a lot of terms and real estate lingo that you have probably never heard of before. Buying property is like stepping into a whole new world with so much to learn, processes to endure and rules and regulations that must be followed to a T. Most home buyers are amazed on how much they learn so fast. Take for instance the importance and benefits of an easement, right of way and restrictive covenants. What are they and why do you need to know? Well, let’s take a look.
Easement. An easement is the right to use someone else’s property for a specific purpose. Normally these easements are granted to telephone companies or to public utility services to run lines under joint properties or perform other work on or under your property to neighboring houses. A housing developer may also possess an easement to allow him to build or maintain a water storage facility on your property.
Long ago easements were limited to the right over flowing waters and other rights that would only be attached to adjacent properties to benefit all parties involved and not just one specific person. Easements can be beneficial to a property as well as significantly affecting the value of the property. All easements should be included and described in your deed and remain there until your land is sold.
Usually a land owner who grants an easement cannot install fences or build other structures within the easement area that would impede access. Before purchasing any property, you should be fully informed of where all the easements are placed and any restrictions associated with them.
Right of Way. A right of way is a different form of an easement that has been granted by a property owner to give permission to others to have reasonable use of your property as long as it doesn’t interfere with your personal time. Ownership rights to the property may be lessened by an easement, but there can be a great amount of benefits due to the additional freedom.
Restrictive Covenants. They may not sound like it, but restrictive covenants are actually a good thing. Restrictive covenants are basically deed restrictions that apply to groups of homes as in a subdivision. The restrictions are normally placed there by the developer and can be different, depending on what area you live in. These restrictive covenants help give a development a more common appearance and market value and will also help control some of the activities taken place within those boundaries. When enforced, these covenant restrictions can help prevent homeowners from letting the appearance of their property fall into disarray and actually protect the property values.
Although these restrictions are normally a plus, all home buyers should always do their homework and study the restrictive covenants before making an offer on any home. It’s important for home buyers to understand restrictive covenants and other deed restrictions because these restrictions dictate how you can use the property. Home buyers need to be certain that they will be able to live with the rules and regulations before deciding to buy.
Other issues you may see in a restrictive covenant may be:
This is only an example of what can be expected in a restrictive covenant. This is why it is so important to thoroughly investigate what restrictions apply before placing an offer. Your real estate agent or the seller of the property should supply you with a list of restrictions before you make an offer. These restrictions may or may not benefit you, it all depends on the buyer and what you are looking for. It’s important for you, as the buyer, to be well informed to protect your own interests.
The Fixer-Upper: How much work is too much?
The term “fixer upper” may often strike fear in the hearts of home buyers. There are no strict measures in defining exactly what a fixer upper is. It could mean a historical house in need of minor repairs or it could mean a run down house with sagging floors, a leaky roof and a serious foundation problem. Still, fixer uppers represent a great way for some home buyers to move up into larger homes at a fraction of the cost, provided their willingness to accept the effort and costs needed to make the necessary repairs and improvements the home needs.
Don’t let the term “fixer upper” discourage you from considering them in your search of buying a home. By all means, consider these homes during your house hunting escapade, but you should take your time and carefully look into all of the repairs needed in order to make the house a home. More important, you will need to figure out how much it will cost you. A seemingly great bargain can turn into the money pit if you don’t do your homework.
In your quest for a fixer upper, you can check out various real estate web sites on the internet and in your local newspaper. Even if you’re new to house hunting, you will shortly learn frequent discrepancies in between a house that seems too good to be true and reality. Even if you pull up to a house that seems to live up to the promises that were advertised, have your real estate agent take you inside the house for a walk through so you can get a better look. Many fixer upper houses can look extremely appealing on the outside, when the inside can be a completely different story. You will learn soon enough how to recognize fixer upper houses that are worth further investigation and the houses that are not.
Even if you decide that a house in need of a substantial number of repairs, don’t let the prospect of a great buy tempt you into ignoring the house’s problems. Many fixer uppers can appear intoxicating, when buyers are looking for the greatest deal of all times. Sometimes the seller of the fixer upper may try to make the problems seem less complicated or try to convince you that the repairs will be an easy fix to make a quick sale. They may also try to discourage you from having an appraisal on the house, where the appraisers may be able to find more problems in the house and therefore reduce the value of the house even more.
Never let a seller pressure you into buying a fixer upper or offer you a special once in a life time deal if you agree to buy the house right then and there. Never make a same day decision when buying a house. Buying a house is an important financial commitment that should not be taken lightly and should be carefully considered. Buyers need to allow themselves enough time to consider how much work, time and money it will cost them before committing to a house. You’ll be surprised how much different that great buy will seem after a day or so of consideration and after looking at other potential houses.
Buyers should also find out how the asking price compares with the prices of other houses in the area. Are there any other fixer upper houses in the neighborhood? Have any other nearby houses been renovated and sold? What do you expect to get for the house if you renovate it and decide to sell it? There is nothing more aggravating to a home owner than renovating a home with the intent to make a profit, only to discover the real estate market had turned bad. If home values are depreciating, the home you purchase may be worth less than you originally paid for it even after all the hard work of making the home improvements and repairs.
Once you find your dream fixer upper and have already been pre-approved for a mortgage, you must now find yourself an experienced house inspector to perform a thorough inspection before you commit to the purchase. Sometimes house inspectors can turn up significant problems’ that the interested buyer was not aware of.
Loan Fraud: Don’t be a victim
Home loan fraud is not an item of the past, but it is still costing people their homes, if not more today than ever. Home loan fraud has been on the rise since the 1990's despite the most recent federal disclosure laws. Take into consideration these two examples of home loan fraud that occurs when lenders misrepresent themselves or the terms of a loan to trick homeowners into default.
Bill is a 75-year-old widower who receives a notice that he is about to default on his mortgage. Soon after he receives this notice, he is visited by a man who represents himself as a foreclosure advisor and convinces Bill to sign a loan contract with him in order to save his home. The loan payments will me much higher than Bill can afford to pay and before long he has accepted more loans from the same lender. Once Bill is unable to meet the payments, he will default on the loans and the advisor will foreclose on Bill’s property and force him out of his home and sell all of his possessions.
In Florida, a door-to-door contractor convinces Maggie, a 62-year-old woman into taking out a second mortgage on her house in order to be able to afford repairs after a flood damaged her home. The contractor tells Maggie that she qualifies for a federal grant that will help her repay the loan. Unbeknownst to her, the federal grant does not exist and Maggie will default on the loan and lose her home.
Home loan frauds can be presented in many ways, ending in the same results, with somebody misrepresenting themselves and lying to you for the purpose of taking your home from you.
You can avoid being a victim of home loan fraud and the nightmares that follow by conforming to these simple rules:
Although most senior citizens make prime targets for home loan fraud, it can happen to anyone, anywhere. These deceptive lenders will even target homeowners with poor credit, minority communities and low-income neighborhoods. Wherever there’s a homeowner, there is the possibility of coming face to face with a fraudulent lender.
These fraudulent lenders will reach their targets in a number of ways, such as: sending out mail to a certain zip code or area, searching public records to find homeowners who are behind or their taxes or mortgage, and for those homeowners who are in the process of filing a bankruptcy. The most common way these deceitful lenders reach their target is by phone. Offering their wonderful services to you with no obligation, if you allow them to come by your house and speak with you for a few minutes. Over the phone, they may make you feel like this is your lucky day, when in fact, they are wolves in sheep clothing.
Mortgage vs. Deed Trust
Most of us think of our home loan as a mortgage, when that isn’t particularly true. When a borrower agrees to pay a lender a certain amount of money, under certain conditions, the borrower will sign a promissory note. A lender will then require the borrower to sign a mortgage, as a security tool to give the lender a legal form of security. A mortgage is a written document to protect the lender’s interests in your property. Therefore, a mortgage is not a loan.
A mortgage is between two parties, you the “mortgagor” and your lender. The mortgage is a document that creates a lien on your property that is entered into public records to serve as the lenders security for that debt. Possession cannot be transferred to another party until you, as the borrower, pay the debt to release the lien. Only you have all the rights of ownership to your property, even if your loan is secured with a mortgage.
Only if the borrower defaults on their mortgage will the lender have the right to protect their interests and foreclose on the property in order to recover funds. When a mortgage is used as the lenders security, foreclosure will usually go through the judicial foreclosure process through the court system that may take up to four months. Mortgages are used as security tools in more than half of the states in the U.S., while other states may use a deed of trust. Both the mortgages and the deed of trust, often serves the same purpose, but with some significant differences.
Like the mortgage, a deed of trust is entered into public records to put a lien on your property. There are three parties involved with a deed of trust: you, as the “trustor,” the lender as the “beneficiary” and a “trustee,” who is a third party that holds a temporary title until the lien is paid. The trustee holding the temporary title, should be a neutral party that does not favor the trustor or the lender, if problems should arise. These third parties acting as neutral trustee’s can be attorneys, an escrow company or title insurance companies. Under no circumstances can the third party, or trustee, take over your property.
The deed of trust will only be removed when the debt to the lender is paid. Only then will the will the trustee issue a release of the deed that should be recorded at the county recorder’s office and made available to the public that the loan has been paid in full and that the lender interests in the property have come to an end.
The difference between a deed of trust and a mortgage will only affect home owners when foreclosure becomes an issue. This is when the trustee has the authority to sell your home when your loan becomes delinquent. It is up to the lender to provide the trustee with proof of the delinquency and to request foreclosure proceedings to begin. The trustee must then proceed as allowed by law and as it is dictated in the deed of trust. The process may bypass the court system to make a much less expensive and quicker way to go for the lender during a foreclosure.
A deed of trust and a mortgage can also differ during foreclosure. Depending on where you live, state law will have to determine how a foreclosure will be handled. Normally, a deed of trust allows for a speedier foreclosure. When the borrower defaults on a loan, the lender gives the deed of trust to the trustee to sell the property. A mortgage is normally requiring a judicial foreclosure, which may take longer. Properties may not be foreclosed upon until all rules are followed and notices have been sent.
Borrowers cannot choose which way their loan is secured, whether it’s by a mortgage or a deed of trust, this is all determined by what state you live in or are buying in. It’s very important to have a complete understanding of the type of lien that will secure the debt of your home. This should all be explained to you thoroughly by your lender or trustee. Do your homework and ask questions before signing any documents. Borrowers must protect themselves as the lenders and other companies do.
Maximize the look of your home: Getting ready to show off
First impressions mean a lot especially if you’re trying to sell your home. Time and effort should be invested into your house for the needed repairs and cleanup both inside and out. All homes can use some sprucing up and fixing, and with the right attitude and plan your house can go onto the market looking sharp and neat, and you can feel more confident that it will find that perfect buyer in a timely manner.
The outside appearance of your home can mean the difference between selling it or not. When trying to ready your house for showing it to potential buyers you need to become a curb appeal inspector so to speak. Curb appeal is how your home presents itself to the prospective buyer, and it is one of the key factors that will draw many people into looking at your house, and increasing the chances of selling your home. Remember too that not only will your front yard and house draw attention, but many lookers will often quickly pull into a driveway to see if they can see the perspective of the back. Your curb appeal should begin with a curb side view of how your house looks. View your house at different times of the day because light intensities will help you notice the different aspects that need attention. Go out into the road and approach your house and write down its positive and negative aspects. Take note of any repair and maintenance work that needs to be done, and look for ways to enhance the positive and improve the negative.
Once you have made a check list of the curb appeal begin with the overall maintenance of the yard both front and back. Drastic improvement can be seen by mowing, weed eating, raking, trimming trees, and eliminating blown trash from the road, or unsightly visible garbage cans. Take the time to power spray siding and brick, and any other concrete area outside your house. Look on top of your house and fix any loose shingles or hanging gutters or leaning vent pipes. Dirty screens and windows need to be cleaned too, and do a little polishing on mail boxes and front door house numbers. Window seals should be inspected for cracking, and dirty window boxes should be painted and replaced with new flowers for the season. Fenced areas whether wooden, metal or plastic should be inspected for dirt, cracking and peeling paint, and promptly fixed so your house will not present a run down and dingy look. Consider too that improvements can be made by eliminating obstructive views of your house, such as trees, poles or large unattractive lawn decorations too. New lighting fixtures add a warm glow for buyers at night. Approach maintenance work with the right view point of if it needs to be fixed it will be improved.
Moving from the outside to inside is the goal. Now that you are inside look around and become a home living inspector. Make your house as home friendly as it can be without the clutter. Organize and store unnecessary closet junk. Wipe down walls in mildew areas such as the kitchen, bathroom and laundry. Clean and organize their supply places and wipe off cabinets. Ceiling fans, lights and mirrors when cleaned will add a real glow to the inside, and will shine brightly outside, if you have done your proper outside curb inspection. Take down curtains and shades and clean according to directions. If necessary replace existing shades if they are to dirty to clean. Always save cleaning floors for last whether it is carpet, linoleum or tile. Don’t forget to spray an air neutralizer, and to leave the heating or cooling system on. Stale or smoke filled air will turn most potential buyers off. If your house smells clean buyers will know that you care, and in effect this means that your house will not sit on the market long because of buyer confidence.
Preparing your house to sell does not have to be an intimidating process. Start with a plan and stick to it. If necessary ask for others input, such as a realtor or friends and neighbors. Think deep cleaning and maintenance, and as you wait for your home to sell continue to keep up all the improvements you have made, so you will be closing on a new house in record time.
Choosing a Listing agent: 5 questions to ask
Choosing a listing agent is the most important aspect in selling your home. Few people realize though that choosing one is a two step process, and it can be confusing, if you’re not prepared in choosing the best realtor for your situation, and knowing what questions to ask once you have decided upon a listing agent.
When starting your search for a listing agent to sell your home there are a few important considerations and questions that you will need to investigate. First, consider that you need a realtor that realizes that every seller has a unique situation not only financially, but in many other ways too, such as deadlines for selling, or even times for showing your house to buyers. You will want to find a listing agent that not only you can work with, but also one that has your best interests at heart, and not just their commission. It’s a working relationship, but it’s one in which they are employed by you to sell your home hassle free and for the best price.
Begin your home listing agent search by investigating all of the different realtors in your area. A handy telephone book with agents listing and asking friends and neighbors about any realtors that they may have had experience with are two places to begin. Remember though that one persons experience doesn’t mean that you will have the same exact negative or positive one. After writing down a list of agents take some time to dig a little further by grabbing a local paper with home listings, and look for particulars. Note how the agents list their available homes. Check to see if you’re impressed by the quality of not only pictures, but how well the information is presented about the homes. Be wary of any listing that has grammatical errors, or leaves out vital information such as correct contact numbers. Also, look for the realtor’s websites, and take note of how well their information is displayed, but also see if the site is easy to navigate to find the necessary information about the homes listed. There can be nothing worse than a listing that is extremely hard to find. Potential buyers will click away if your homes’ listing is buried beneath tons of frustrating non essential information. Note too the different forms or types of advertising that each realtor has, such as radio, print, magazine, and internet. The broader informational services your realtor uses the better chances your home will sell according to your schedule and price.
After researching your potential realtors, and deciding on which ones you might like to work with, make an appointment to delve further into their services. Again, write down pointed questions, and their answers to them. Key questions that most home sellers like to know will have a big affect on their wallets, and if their home sells or not. Make sure answers are effectually given to your satisfaction. Here are 5 important questions that you will need to ask.
Finally, when making a decision on an agent to represent you and your home remember to be thorough. If there are any questions that you feel during your interview with a listing agent that suddenly occur to you as important don’t be hesitant to ask. Any confident and qualified agent will be more than happy to openly discuss in a non hurried manner any questions that you might have. Selling your home is an intensely personal one with serious financial matters at stake. You deserve the detailed and caring attention of a professional. Working with any realtor should be as stress free as possible, and your home should be presented in its best light, so buyers will come knocking at your door.
Closing costs: What to expect
It might surprise you to find out that there are many fees associated with buying a home. Often future homeowners are shocked at the added costs of buying a home because of the varied closing fees for things such as document preparation and other types of administration fees. Having an expectation of the potential closing cost associated with buying your home will aid you to budget your finances appropriately, and help you determine early on what you can realistically afford to pay for a home.
Lenders fees vary from state to state. However, you can expect certain fees to be tacked onto your loan. Make sure to check out with your lender the different costs that will be applied to your purchase for your home. Typically you will be required to pay these fees at the closing.
You need to be aware that there are other fees that will be incurred when purchasing a home. Some of the fees associated with home buying are advanced or one time fees and others are fees that will have to be paid again. Check out some of the other fees that you will be required to pay when purchasing your home.
It’s easy to see why most first time home buyers believe that there couldn’t possibly be any more fees to consider when purchasing their home. However, there are other fees that they might not realize that they will have to pay to be able to move into their dream home. Other fees include title clearance fees which insure that the title is properly titled, and cleared to and for them. Also, notary fees for the different documents associated with home buying is necessary, it makes the documents a legal and viable document. Costs to have your documents notarized are not that expensive, but it is another fee that you must consider. Fees for recording your documents at your local courthouse are another area of cost; again they are not that costly.
This list of fees is certainly not an all inclusive list, other costs can be found when dealing with mortgage companies, or federally sponsored programs such as HUD (Housing and Urban Development). The best defense against rising cost, and subsequently defaulted loans and ruined credit, is to check out as much as you can about home owning in general, and then to wisely evaluated your economic portfolio. Consider other factors outside of closing costs, such as long term savings and investments that will need to be managed once you retire. Never jump too quickly into the responsibility of a long term financial commitment such as home ownership unless you’re sure that you can meet it.
Modular Homes: What are they and do you want to buy one?
Understanding the differences between housing options when you are searching for a home to purchase is very important. In your search for your dream house, you will encounter housing terms such as stick built, modular, and manufactured (mobile home). Each type of dwelling has their benefits and drawbacks, both temporary and long term. Primarily though confusion exists about modular home manufacturing. Also, many are unaware of the benefits of owning one.
The overall production of modular homes is a unique process. However, design begins as with most floor plans; with an architectural engineer using a CAD (Computer Aided Design) program, and is approved by structural engineers for durability and safety. There are benefits to having your home constructed in the fashion of a modular home. The construction of the modular home sections begins on an enclosed factory floor. Quality control is strictly adhered too for each section of the house. Your home during the building phase is never subjected to inclement weather conditions, and usually the home can be ordered and delivered on site with in two weeks. Also, during this phase your contractor can set a pre - made foundation, and ensure that all necessary permits and grading work is completed in time for your modular home delivery. Finishing work such as crown molding, carpeting and appliance installation is completed once the home is joined and all utilities are hooked up. During this phase you can begin to pack and schedule your date for move in. Note worthy too is the fact that many modular homes can be special ordered from any standard house design on the market.
Other beneficial considerations of modular home purchasing are that because they meet state and local home building requirements, and are inspected by a certified inspector they usually exceed existing building codes, which makes obtaining financing easier. Banks and other types of mortgage lenders consider modular homes on par with the traditional on site stick built homes for varied reasons such as meeting state codes, and the use of a permanent foundation. Insurance rates for your home is in line and competitive with the traditionally constructed home too. Over all these factors influence two very important aspects of your home – its appreciation in value and the equity. If you ever decide to sell your home you will find few if any problems with anyone obtaining financing, or questioning the value of the home as compared to other stick built homes.
In a comparison between modular and manufactured homes the differences are clearly amplified, and the benefits of owning a modular home clarified too. When comparing them, the potential home owner must think in terms of the long run. Its true manufactured housing does have short term benefits, but over the long haul it might be wise to invest a little more money into a modular home. Take a glance at a few important comparisons below.
Other benefits of modular housing are that many contractor groups specialize in not only assembly of the home, but also in the other facets associated with home site development. For example, larger firms can help you finance your new home. Also, site excavation, site preparation and the installation of the foundations for the home and garage can easily be done. Not only will this eliminate any unnecessary headaches for you, in the end it will save your hard earned dollars. Modular homes are fast becoming the housing choice for the future, but whatever housing option you choose make sure it’s a decision you can live with.
Foreclosure: Buying A Foreclosed Home
Foreclosure begins when a property owner defaults on the mortgage of a property, mainly due to financial difficulties or the inability to keep up with the mortgage payments for some reason or another. In the event that a property succumbs to a foreclosure, it’s most likely that the property has not been maintained as it should have been. This means that perhaps the roof is in dire need of repair, a damaged foundation or the landscaping has been severely neglected, or a number of other maintenance or repair issues that may be costly. Some foreclosure homes may only need a fair amount of TLC. The amount of repairs needed or required for the foreclosure property may greatly reflect on the asking price. A major fixer upper may be offered at a lower than normal price, whereas a property that is in fair condition may go for a price just the below the market value.
When a mortgage lending institution decides to foreclose on a property, they will file a notice of default that will become a public record for all buyers who are interested in locating foreclosed properties for purchase. There are many places buyers can look to find foreclosed properties such as: various web sites on the Internet, real estate agents or brokers and real estate magazines.
Once the buyer locates a foreclosed property they are interested in, the buyer can assess the public records and check for any liens on the property. Most liens that are placed on foreclosed properties are for unpaid taxes. Interested buyers should also check the values of the neighboring properties before entering into a contract, to make sure they would be getting a fair market value.
Novice buyers may be interested in checking out bank owned foreclosure properties. These bank owned foreclosure properties may prove to be at lower risks to the novice buyer. With bank owned foreclosure properties, there are usually no tenants to evict, no liens against the property and no past due taxes.
Some lending institutions may be eager to sell their foreclosed properties and may offer to finance the foreclosed property to the buyer at a low market rate or with a small down payment. If the lending institution has already done an appraisal, the interested buyer may not have to pay an additional appraisal fee. Most lending institutions that are eager to sell a foreclosed property may also include title insurance that generally removes most of the risks that come with buying properties early on in the foreclosure process.
The more experienced buyer may decide to find a pre-foreclosure property owner about to go into default and offer to buy the property for a portion of the difference between the property equity and the market value. This may be an acceptable offer to a property owner who doesn’t want to end up losing all of the equity that has been invested in the property. Some pre-foreclosure property owners may offer bargains to a persistent buyer. This is mostly because at this stage, credit collection agencies are constantly hounding the property owners, who would in turn want to resolve these issues to avoid any further harassment.
Buyers may sometimes find that contacting the owner of a pre-foreclosed property can be difficult. Usually by this time, the property owner may not have any electricity or a telephone. Sometimes these pre-foreclosed property owners may also be difficult to deal with directly, due to a drug or alcohol addiction that put them in their situation in the first place. Some owners may also be hostile to the buyer or unpleasant to deal with because they are bitter and frightened about losing their home and perhaps they have no other place to go. Some of these owners may even see the buyers of their foreclosed properties as their mortal enemy and may do some extra damage to the foreclosed property before evacuating the premises.
Many foreclosed properties are normally sold at prices close to the assessed value. Depending on what city or neighborhood the buyer is interested in, what the neighboring property values are, how long it has been on the market and what amount of work needs to be done to the foreclosed property will greatly reflect on the asking price.
Everything but the kitchen sink: What stays, what goes. The importance of a contract.
Back in the old days, most deals were sealed with the contractor’s word and a handshake. Back then contractors seemed to be fairly honest and hardworking with the customer’s satisfaction in mind. In today’s world, where there are contractors out there who take advantage of what customers they can, or just simply fraudulent contractors wanting the money up front and then never seeing them again. The significance of having all agreements in writing is so important, the verbal contract has become obsolete. There are too many contractors out there that hear one thing while the customer is explaining something completely different.
All agreements should be drawn up in the form of a contract and signed by both parties, the contractor and the customer. Without a contract, if any defaults are declared, like work unfinished, work done poorly or not at all, nothing can be presented in the court of law besides he said/she said. The contractors words and the customers words mean nothing unless it is all in a written contract.
As the customer, you can visualize exactly what you want your kitchen to look like, but contractors can not read minds and share your visualization. You as the customer must get together with the contractors and list the details in writing of what work should be done. From listing what items will stay and what items will go, to listing who will be responsible to hauling away the debris. Always be as specific as possible in the written contract, listing all the details of how you want the work to be done and what should be the outcome.
Before entering into any contract for home improvements or home repair, there are two steps that should be completed: Scope and Specs. Scope out the work in writing and a write detailed list of specifications. These two should be recorded in detail prior to speaking with a contractor. This will help the customer get a better idea about the amount of work involved in a particular home improvement or home repair project.
As the customer approaches the contractor with these recorded details in hand, it will be easier to show the contractor what they need or expect more quickly. This will also be an easy starting point to discuss the project at hand and so that the project can become more visible to the contractor. For any home improvement or home repair projects that may be complicated, most contractors may have comments or questions as they look over the proposal. Working together, the proposal may have to be edited or re-written as the terms, conditions and procedures may need to be negotiated before the contract is complete and ready for both parties to sign.
Keep in mind that there are no free estimates or any kind of free labor for that matter. Many companies or independent contractors may advertise free estimates or free labor as a way to attract business. There are no freebies, only estimates and labor fees that are not billed directly as such. Most of the so called free estimates and labor have fees worked into the costs of other work that is done. This way the customer is none the wiser.
Each time a home improvement project or a home repair project is under contract, most customers end up paying a portion of the overhead of the company or person doing the work. That overhead involves everything from the time the contractor spends looking at other possible projects in the house to preparing the actual estimate. Most estimates have some additional amount added in to cover any contingencies, if and when they occur. The better organized and knowledgeable the customer is about the project, the less likely it will be for those contingencies to come up.
Customers should refrain from asking the contractor about the hidden fee’s or contingencies that are figured into the total cost of the contract. This isn’t something that a customer can ask the contractor directly and expect an honest response, but the customer may choose to save a fair amount of money while completing any home improvement or home repair project by spending a little time on it first.
10 Sure Fire Ways to Negotiate a Contract like a Pro
The art of negotiation is the procedure of communicating back and forth in order to come to a mutual agreement. Negotiation is done when two parties have different expectations and must come to a mutual agreement before a contract can be signed. The most experienced negotiators will bring an attitude of high expectations to the negotiation table. They work hard to solve the problems and are easy on the people. It’s more effective to remain cooperative and efficient in order to preserve a civil relationship between the buyer and the seller, so they can work together to solve any problems and to complete the transaction as painlessly as possible.
Most buyers usually offer less than the listed price of the house. So, how much under the listed price should you offer? That all depends if the house is listed in a strong seller’s market and the market analyses of the recent sales in the neighborhood from where the house is being sold. The buyer should do their homework before submitting an offer so low, they might risk offending the seller and have their offer rejected immediately.
If there are multiple offers on one property, disclosure is favored among all parties. However, the seller or agent representing them will make the final decision as to how the offers will be handled. The seller may disclose the terms of one offer to stimulate another buyer to submit a better offer. Normally the procedure for multiple offers is to notify each party of the multiple offers that have been received. Each of the parties is then given an opportunity to amend their offer and submit it within a certain amount of time. After all offers are on the table, the seller is once again free to review the amended offers and select a buyer to negotiate with. Sellers are in no way obligated to accept the first offer that comes in. Any offer selected may be countered, negotiated, or accepted as is.
10 Things you can do to increase the property value of your house
There are many things a home owner can do to increase the value of their home. This can be done on the interior or the exterior of the home, from do-it-yourself for the smaller projects to hiring a contractor for the larger jobs. You can give your home a face lift a little at a time. Most home owners don’t have the finances for a complete over haul done all at once. To most people, their home is their largest investment and they would like to keep it in prime condition. Although the price of your home is mostly determined by the current market conditions, there are several things you can do to maximize your homes value.
Adding value to your home can be as simple and as affordable as you want it to be. Most improvements can be accomplished a little at a time, all depending on your time and budget. Smaller improvements can be made by simply adding potted plants along the stairs up to your freshly painted front door or by adding a small table or work of art in your foyer.
A visit to the home improvement store or looking through magazines can spark creativity when remodeling your home. Even if you have no idea where to start, one spark can lead to another and another, until before you know it, you have created a beautiful home that you may never want to leave.
Interest only loans vs. traditional loans: What is the difference?
There are a variety of loans available to consumers who wish to buy a home. Out of this variety there are two major choices that most consumers will choose from. These choices are the interest only loans and the traditional loans. What’s the difference? Let’s look at these a little more closely.
An interest only loan is not a type of mortgage. This is only an option that can be attached to a mortgage. Although the interest only loans are not less costly to amortize, more than 31% of all homes in the U.S. have been issued with interest only loans. Many of these loans include refinancing as well. Interest only loans may be attractive to the first time home owners by offering low monthly payments for up to seven years, thus allowing people the opportunity to buy a home at prices they would be able to afford. During the first few years, the borrower may not have to pay down the balance of the loan, making the payments easier and seemingly more affordable. Unfortunately, once the borrower starts paying on the principle, they may be shocked to see the payments rise significantly. If the price of the home begins to stagnate or descend, the borrowers could find themselves between a rock and a hard place as the risks of default begin to increase.
Investors often flock to the interest only home loans when they have intentions on selling the property in a few years for a profit. Otherwise, first time home owners may need the interest only loan in order to qualify for the home they would like to buy. In today’s mobile society where some home owners tend to change residences every seven years, the lower monthly payments with the interest only loan can make sense. But if the home decreases in value over this time, the home owner may decide not to sell and will be left with the high back end payments they didn’t mean to make.
Many lending institutions may charge higher rates to the interest only loans because of the high risks of default. Interest only loans may seem borrower friendly on the surface and most lending institutions will be more than willing to accommodate you on this kind of a loan. But – Buyer Beware! Interest only loans are starting to drop in popularity due to the long- term interest rates dropping to record lows. These low rates are causing people to rethink their interest only loans and having them want to get out of the interested only loan and into a long term loan at a fixed rate.
As an alternative to the interest only loan, a more traditional home loan such as a fixed rate mortgage can offer the predictability of a fixed monthly payment with a choice between a 15 to 30 year loan terms. These fixed rate loans are available for both purchasing a new home or refinancing a home.
The fixed rate mortgage is a traditional loan that offers a fixed interest rate over the entire life of the loan, which can run from 10 to 30 years. With a fixed rate loan, the monthly payments for principal and interest will never change, although your property taxes, insurance and escrow may change each year. Down payments required for these fixed rate loans may be as low as 5%. This is a good deal for those who wish to have predictable mortgage payments over the entire life of the loan.
There are also those adjustable rate mortgages (ARM) that basically start at a low interest rate, with even lower monthly payments. But the interest rates and monthly payments can fluctuate regularly depending on the current market interest rates. The ARM loans have become increasingly popular with those buyers who are expecting an increase in their income over the next few years so they can buy more home on their current lower income. Confidence in their increasing income can make the higher payments more affordable, especially if the interest rates go up in the coming years.
While you are shopping for a mortgage, take advantage of the online tools that can help you learn more about the variety of mortgages offered and choose carefully what kind of mortgage loan will work in your best interests.
The Basics of Buying a Home
Buying a home can be one of the biggest and most important investments you can make. The process of buying the home that you want can be a long and tedious process, taking up most of your time. It’s up to you, as the consumer, to ask any questions, pay attention to details and to learn about the real estate market in the area in which you intend to buy.
Step One You must know what your wants and needs are before embarking on the long journey of house hunting. Taking a piece of paper, sit down and write down all the features that are most important to you:
You may choose to add or remove certain features you do not want or are willing to make compromises on. Don’t be disappointed if you can not find the “perfect” home. Most homes do not come “perfect,” they can only be made that way through time and patience.
Step Two Before you begin looking at properties, you will need to get your finances in order. This will be a good time to review your credit report and possibly clean it up a bit to improve your credit score. It’s important to check your credit report to make sure there are no discrepancies. Any past due amounts should be paid in full or most companies will be willing to negotiate a settlement price to close the debt.
For example: If you have a past due credit card debt you no longer use and that has been entered into collections at an amount of $900. You may be able to offer the company a settlement of $500 to settle that debt and have the debt stricken from your records. Before paying this settlement, have this agreement in writing. Be sure to keep all of the receipts to the items you settle on your credit report because it may take weeks or even months for the settled debt to be removed from your credit report.
Step Three Now decide what kind of property you are interested in buying. Are you interested in a HUD, foreclosure, real estate or for sale by owner property? There are many web sites on line where you can find homes by city, state, or price range. On these sites, you can see the picture of the home, many with virtual tours, and review the listing features and details.
Step Four Now is the time to find a lender and get pre-approved for the loan. This will give you a better understanding of what price range you can look into. Being pre-approved also serves a great advantage for when you find the home that you want, so that you can move ahead and place an offer on the house without having to wait on a pre-approval while someone else steps in and takes the house right from under you.
Lenders may offer special programs on loans, such as the FHA or Ameri-Dream, that can save you extra money in the closing process. Before deciding on a loan, ask the lender about any of these special programs and what would work to your advantage.
Step Five Most first time home buyers prefer to work closely with a reputable real estate agent, regardless of the type of property you wish to buy. Real estate agents are very knowledgeable and can give you many helpful tips and information that can benefit you. They are also great negotiators and will help explain the complicated paperwork involved when placing an offer on the house or when closing a deal. Be certain that your real estate agent is working for you as the buyer and not for the seller of the house you would like to purchase. This can lead to a conflict of interests and cause many problems.
Choosing a real estate agent to work with should take more than picking a number out of the phone book. Talk to your friends and neighbors and ask them for any recommendations. You should only work with an agent you feel comfortable with.
The Basics of Selling a Home
The process of selling your home can differ from state to state. Before putting your house on the market, there are some important steps you must take to get the most from your investment and to protect your interests.
Step One Get pre-approved to buy another house before you sign a contract to sell your own home. If your financial situation changed since your last purchase, it’s possible that you may no longer qualify for another loan. You may also be unable to sell your house for a price that will allow you to buy another house you want. This way, you won’t end up renting or buying a house you don’t really want. When applying for a pre-approval, be sure the lender discloses the estimated costs required for you to purchase a new home, such as: the loan price, down payment, new insurance, title and inspections fees.
Step Two Call your lender to check the mortgage pay off and calculate the estimated proceeds. First, you will need to subtract the mortgage pay off from the fair market value of your home. Second, you will need to subtract the costs to sell your home from the remainder in order to get an idea of the proceeds you can expect to be paid at closing.
Step Three Determine your homes fair market value. Most real estate agents will gladly help you determine the market value as a courtesy and may also give you helpful hints to what you can do to increase the value of your house. You may also consider hiring a licensed appraiser, which you will have to pay for out of pocket, to perform an appraisal on the subject property.
Professional appraisers will provide you with a detailed report that will usually include: the neighboring property values in comparison to your own, an evaluation of the real estate market in your area, harmful issues to the property’s value and any defective qualities.
Step Four Estimate what it will cost you to sell your house. If you are using a real estate agent, you may have to pay their commission. If you are planning to sell by owner, then you must consider the advertising, signs, attorney fees, closing agents and other possible fees involved. These other fees may include: appraisal, inspections, surveys, taxes and home owner association fees. Real estate agents can give you a more precise estimate of the closing costs and any other fees that may be involved. Real estate agents are professionals that deal with these transactions every day and can prove to be a valuable asset to you.
Step Five Make repairs. Whether these repairs can be done by you or by hiring a contractor, they should be completed. If there are too many repairs that need to be done, your home will be considered a fixer upper. You want to get the most out of your house and dissuade potential buyers from submitting insultingly low offers. These repairs can range from fixing a broken window, adding a fresh coat of paint, replacing or repairing the flooring, to spackling a hole in the wall. The larger repairs may include fixing a damaged roof or repairing damaged siding. Other issues that can deter a potential buyer is mold and mildew stains and odors, leaky basements, lead based paint, broken gutters, location or type of circuit breaker, plumbing problems and old or faulty electrical wiring.
Step Six Before you show your house, do some spring cleaning, regardless of what season it actually is. Organize your shelves and closets, wash the crayons off the wall, dust off the blinds and window sills, clean away the cob webs and wash all windows and appliances. You will want to make everything as spotless as possible and remove any offensive odors and clear the clutter. You will need to present your home in a clean and appealing way to the potential buyers.
You may also need to work on the exterior part of the house by scraping and painting porches and windows or maintaining an appealing lawn. You can also add low maintenance decorative flowering plants and shrubs to dress up your yard.
Now that your home is ready to show, make it accessible to real estate agents with potential buyers at all times. Most buyers feel more comfortable being shown a house when the owner is not present. If you decide to take a walk while your house is being showed, make a note to the agent if there are any pets on the premises. You will want to be sure that your cat doesn’t get out the door or that your dog is securely locked up in a crate or in the back yard. You want everything to go as smoothly as possible.
Investment homes: Things to look for
Investing into real estate can be an expensive lesson. Before deciding to attempt this for a business or hobby there is much research that needs to be done. The type of business this requires is hard work, plenty of time and an abundance of money. However, this type of venture can pay off enormously in the end. The thrill of this type of dealing, buying, fixing and selling is a magnificent step.
As with any endeavor knowing as much as you can before you lay out cash is very beneficial. When looking at the prospective home, look for anything that will need to be fixed or updated. Bring a notepad and a pencil when viewing potential real estate and jot down any problems you see or any questions you have. Inspect the house by flushing toilets, turning on lights, examine the floorboards, look for cracks or drooping ceilings, and check the plumbing and water faucets. Explore everything plausible. Once you find a home you’re interested in, hire a house inspector. The house inspector will give you an idea on how much it will cost you to fix up and resell. Make sure to purchase your real estate in the best location you can afford. Is it in a nice neighborhood, close to schools and shopping malls? Is there freeway access nearby? Are homes selling quickly in this neighborhood? Check with the local police department to get local crime rates. Do some research on the housing market. Understanding the type of houses people are looking for will help to have a better experience in what kind of market will sell.
Sentiment is a downfall in any business relationship. Having a poker face at the correct time can save considerably in funds. Remember, the end goal of an investment house is resale. Loving the house personally will not make the house easier to sell. Make very sure you have capital for this deal. Invest the time and expertise of an appraiser. What is the house really worth before and after renovation? How much will renovations cost? Decide before hand by research and word of mouth, which would benefit you the most, resale or renting the home. Inquire the help of professionals in this type of enterprise. Find out their thoughts about problems you are facing.
There may be other types of monies involved that you have not thought of. For one, property tax. Before taking that plunge discover how much the yearly taxes are. Different zones in diverse neighborhoods can be a drastic change in prices. Not only should you check for yourself while overhauling the house but also safeguard the ones who will be buying this place in the future. Some people inquire about taxes before they buy a home. If the amount is extremely high they will pass it up for a more reasonable price.
Do you plan on doing intense maintenance to the estate? If so, you must look into building permits. Will you be doing the renovation yourself, or hiring a reliable company to do it for you. The difference in cost may sway your decision. But be prepared, renovation can be hard work and you may need to hire someone in the end after all. This type of investment requires an ample amount of time and patience. This is a very important fact.
You can receive financial aid to help with the purchase of this investment, just as you would with a home you are purchasing for your family. However, you need to think of the amount you are putting into this and how much you will be taking out. If a loan lasts 30 years, can you pay it off and still have profit from the sale? Maybe it would be wise to enlist the help of an accountant if dealing with figures is not your forte. The whole idea of investing is earnings, so make sure that this will turn out to be a money maker. The last thing you want to happen is to lose money. No one enjoys flopping on an investment. Take time and do research before jumping in to a resale home. Once your first investment home is restored and sold, you will be well on your way to making this a profitable business.
Historical Homes: Things to know before you buy
Some dwellings of this type can be too run down to renovate. If they are infested with pests, this could take major renovations and not be worth the cost or time to fix. The building could be so ancient that it will be impossible to bring up to modern day regulations. Investing in a home of this degree can be costly. These old building sometimes will have no previous electricity and running water. Completely remodeling a house like this would be very time consuming and expensive. Of course you can do this task if you are knowledgeable in extensive building. Older homes were not built like newer homes today. Foundations may need to be completed redone to meet today’s codes and regulations. Hiring someone that specializes in renovations may be your best bet.
Another thing to consider is the planning and any city licenses you will need before beginning your renovations. Do you have the time and energy to plan a whole reconstruction? You must have documents and sketches of what needs to be done. The whole process will be time consuming. Before buying the house take notes on any major repairs that will need to be done. Price these and calculate how much time and money this will cost. Decide on whether you can do the job yourself or if you need to hire a specialized contractor. What will fit in your budget? Maybe you can do some of the work while hiring a contractor for other projects. Also, a building planner or architect might be a good choice to consult.
Research the permits and zoning laws for this type of project. They differ in every county. The last thing you would like to do is purchase a home that restricts you from renovations. There may be some sanctions against doing everything in your mind. You need to be cautious of property taxes and the cost of permits and licensing for renovations. Check to see if a historical group has a lean on your new home. This may restrain you from performing the remodeling that you would like. Historical groups can also require that certain the home be used for a particular purpose.
Learn the history of the house you hope to purchase. Learning more about the previous owners and what the house was previously used for can give you an idea for future uses. Many older homes will have an interesting story to tell. Do not get caught up in a home that may not be suitable because if its background. If the home you are considering has an unfavorable history you may want to reconsider purchasing this particular house. Perhaps the history is so compelling the choice to it into a museum or another kind of landmark is in the future. When exploring the history of the home, you may find some facts that do not appeal to your family will this be a concern if you are purchasing the house as a family residence?
For a residence, newer homes may not be your forte. Older homes with time and effort may be well worth the price and time needed. Many people disagree on the best way to restore older homes. The only way you can be absolutely sure this is the step you would like to take is to study and research different methods. Historical homes can be revived into beautiful structures.
Please contact me anytime to discuss your real estate goals. firstname.lastname@example.org
OLSON REALTY, INC.
Your real estate specialist for Benicia and Vallejo, California
920 First Street, Suite 101, Benicia, California 94510 • tel: 707.745.3602 • email: email@example.com
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