Garage sales can be a great way to get rid of clutter — and earn a little extra cash — before you sell your home. But make sure the timing is right. Garage sales can take on a life of their own, and it might not be the best use of your energy right before putting your home on the market. Follow these tips for a successful sale.
1. Don’t wait until the last minute. You don’t want to be scrambling to hold a garage sale the week before an open house. Depending on how long you’ve lived in the home and how much stuff you have to sell, planning a garage sale can demand a lot of time and energy.
2. Get a permit. Most municipalities will require you to obtain a special permit or license in order to hold a garage sale. The permits are often free or very inexpensive, but still require you to register with the city.
3. See if neighbors want to join in. You can turn your garage sale into a block-wide event and lure more shoppers if you team up with neighbors. However, a permit may be necessary for each home owner, even if it’s a group event.
4. Schedule the sale. Sales on Saturdays and Sundays will generate the most traffic, especially if the weather cooperates. Start the sale early, 8 a.m. or 9 a.m. is best, and be prepared for early birds.
5. Advertise. Place an ad in free classified papers and Web sites, and in your local newspapers. Include the dates, time, and address. Let the public know if certain types of items will be sold, such as baby clothes, furniture, or weightlifting equipment. On the day of the sale, balloons and signs with prominent arrows will help to grab the attention of passersby.
6. Price your goods. Lay out everything that you plan to sell, and attach prices with removable stickers. Remember, garage sales are supposed to be bargains, so try to be objective as you set prices. Assign simple prices to your goods: 50 cents, 3 for $1, $5, $10, etc.
7. If it’s really junk, don’t sell it. Decide what’s worth selling and what’s not. If it’s really garbage, then throw it away. Broken appliances, for example, should be tossed. (Know where a nearby electrical outlet is, in case a customer wants to make sure something works.)
8. Check for mistakes. Make sure that items you want to keep don’t accidentally end up in the garage sale pile.
9. Create an organized display. Lay out your items by category, and display neatly so customers don’t have to dig through boxes.
10. Stock up on bags and newspapers. People who buy many small items will appreciate a bag to carry their goods. Newspapers are handy for wrapping fragile items.
11. Manage your money. Make a trip to the bank to get ample change for your cashbox. Throughout the sale, keep a close eye on your cash; never leave the cashbox unattended. It’s smart to have one person who manages the money throughout the day, keeping a tally of what was purchased and for how much. Keep a calculator nearby.
12. Prepare for your home sale. Donate the remaining stuff or sell it to a resale shop. Now that all of your clutter is cleared out, it’s time to focus on preparing your house for a successful sale!
Thursday, July 29, 2010
How to Hold a Successful Garage Sale
Garage sales can be a great way to get rid of clutter — and earn a little extra cash — before you sell your home. But make sure the timing is right. Garage sales can take on a life of their own, and it might not be the best use of your energy right before putting your home on the market. Follow these tips for a successful sale.
1. Don’t wait until the last minute. You don’t want to be scrambling to hold a garage sale the week before an open house. Depending on how long you’ve lived in the home and how much stuff you have to sell, planning a garage sale can demand a lot of time and energy.
2. Get a permit. Most municipalities will require you to obtain a special permit or license in order to hold a garage sale. The permits are often free or very inexpensive, but still require you to register with the city.
3. See if neighbors want to join in. You can turn your garage sale into a block-wide event and lure more shoppers if you team up with neighbors. However, a permit may be necessary for each home owner, even if it’s a group event.
4. Schedule the sale. Sales on Saturdays and Sundays will generate the most traffic, especially if the weather cooperates. Start the sale early, 8 a.m. or 9 a.m. is best, and be prepared for early birds.
5. Advertise. Place an ad in free classified papers and Web sites, and in your local newspapers. Include the dates, time, and address. Let the public know if certain types of items will be sold, such as baby clothes, furniture, or weightlifting equipment. On the day of the sale, balloons and signs with prominent arrows will help to grab the attention of passersby.
6. Price your goods. Lay out everything that you plan to sell, and attach prices with removable stickers. Remember, garage sales are supposed to be bargains, so try to be objective as you set prices. Assign simple prices to your goods: 50 cents, 3 for $1, $5, $10, etc.
7. If it’s really junk, don’t sell it. Decide what’s worth selling and what’s not. If it’s really garbage, then throw it away. Broken appliances, for example, should be tossed. (Know where a nearby electrical outlet is, in case a customer wants to make sure something works.)
8. Check for mistakes. Make sure that items you want to keep don’t accidentally end up in the garage sale pile.
9. Create an organized display. Lay out your items by category, and display neatly so customers don’t have to dig through boxes.
10. Stock up on bags and newspapers. People who buy many small items will appreciate a bag to carry their goods. Newspapers are handy for wrapping fragile items.
11. Manage your money. Make a trip to the bank to get ample change for your cashbox. Throughout the sale, keep a close eye on your cash; never leave the cashbox unattended. It’s smart to have one person who manages the money throughout the day, keeping a tally of what was purchased and for how much. Keep a calculator nearby.
12. Prepare for your home sale. Donate the remaining stuff or sell it to a resale shop. Now that all of your clutter is cleared out, it’s time to focus on preparing your house for a successful sale!
1. Don’t wait until the last minute. You don’t want to be scrambling to hold a garage sale the week before an open house. Depending on how long you’ve lived in the home and how much stuff you have to sell, planning a garage sale can demand a lot of time and energy.
2. Get a permit. Most municipalities will require you to obtain a special permit or license in order to hold a garage sale. The permits are often free or very inexpensive, but still require you to register with the city.
3. See if neighbors want to join in. You can turn your garage sale into a block-wide event and lure more shoppers if you team up with neighbors. However, a permit may be necessary for each home owner, even if it’s a group event.
4. Schedule the sale. Sales on Saturdays and Sundays will generate the most traffic, especially if the weather cooperates. Start the sale early, 8 a.m. or 9 a.m. is best, and be prepared for early birds.
5. Advertise. Place an ad in free classified papers and Web sites, and in your local newspapers. Include the dates, time, and address. Let the public know if certain types of items will be sold, such as baby clothes, furniture, or weightlifting equipment. On the day of the sale, balloons and signs with prominent arrows will help to grab the attention of passersby.
6. Price your goods. Lay out everything that you plan to sell, and attach prices with removable stickers. Remember, garage sales are supposed to be bargains, so try to be objective as you set prices. Assign simple prices to your goods: 50 cents, 3 for $1, $5, $10, etc.
7. If it’s really junk, don’t sell it. Decide what’s worth selling and what’s not. If it’s really garbage, then throw it away. Broken appliances, for example, should be tossed. (Know where a nearby electrical outlet is, in case a customer wants to make sure something works.)
8. Check for mistakes. Make sure that items you want to keep don’t accidentally end up in the garage sale pile.
9. Create an organized display. Lay out your items by category, and display neatly so customers don’t have to dig through boxes.
10. Stock up on bags and newspapers. People who buy many small items will appreciate a bag to carry their goods. Newspapers are handy for wrapping fragile items.
11. Manage your money. Make a trip to the bank to get ample change for your cashbox. Throughout the sale, keep a close eye on your cash; never leave the cashbox unattended. It’s smart to have one person who manages the money throughout the day, keeping a tally of what was purchased and for how much. Keep a calculator nearby.
12. Prepare for your home sale. Donate the remaining stuff or sell it to a resale shop. Now that all of your clutter is cleared out, it’s time to focus on preparing your house for a successful sale!
Understand Agency Relationships
It’s important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transaction. Ask what type of agency relationship your agent has with you:
Seller's representative (also known as a listing agent or seller's agent)
A seller's agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.
Buyer's representative (also known as a buyer’s agent)
A buyer’s agent is hired by prospective buyers to represent them in a real estate transaction. The buyer's rep works in the buyer's best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer's rep may be paid by the seller or through a commission split with the seller’s agent.
Subagent
A subagent owes the same fiduciary duties to the agent's customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.
Disclosed dual agent
Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it's vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
Designated agent (also called appointed agent)
This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.
Nonagency relationship (called, among other things, a transaction broker or facilitator)
Some states permit a real estate licensee to have a type of nonagency relationship with a consumer. These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
Seller's representative (also known as a listing agent or seller's agent)
A seller's agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.
Buyer's representative (also known as a buyer’s agent)
A buyer’s agent is hired by prospective buyers to represent them in a real estate transaction. The buyer's rep works in the buyer's best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer's rep may be paid by the seller or through a commission split with the seller’s agent.
Subagent
A subagent owes the same fiduciary duties to the agent's customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.
Disclosed dual agent
Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it's vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
Designated agent (also called appointed agent)
This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.
Nonagency relationship (called, among other things, a transaction broker or facilitator)
Some states permit a real estate licensee to have a type of nonagency relationship with a consumer. These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
Common Closing Costs for Buyers
Common Closing Costs for Buyers
You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount for:
• Down payment
• Loan origination
• Points, or loan discount fees, which you pay to receive a lower interest rate
• Home inspection
• Appraisal
• Credit report
• Private mortgage insurance premium
• Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
• Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
• Deed recording
• Title insurance policy premiums
• Land survey
• Notary fees
• Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount for:
• Down payment
• Loan origination
• Points, or loan discount fees, which you pay to receive a lower interest rate
• Home inspection
• Appraisal
• Credit report
• Private mortgage insurance premium
• Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
• Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
• Deed recording
• Title insurance policy premiums
• Land survey
• Notary fees
• Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
Buying a house? Step 10
Buying Step 10: What's Left to Do After Closing?
You've done it. You've looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Is there any more to the home buying process? Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take.
Safeguard settlement papers: Your settlement papers are extremely valuable, so hold onto them. In the short term, they can help establish tax deductions for the year in which the property was purchased. In the long term, they will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Transfer utilities: Also at closing, determine the status of your home’s utilities, such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by the seller as of closing, and services to be transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORS® can provide contact numbers and related information.
Confirm your property deed records: About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.
Photograph or video record your possessions: Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure your records.
Get proper insurance coverage: You should have fire, theft and liability insurance. As the value of your property increases such coverage should also be increased. Again, speak with your insurance professional for details.
Expect a “broom clean” home: It is generally understood that sellers will leave homes "broom clean" when moving out, not "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.
Enjoy your home: Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that homeownership should be a wonderful experience. Enjoy!
You've done it. You've looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Is there any more to the home buying process? Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take.
Safeguard settlement papers: Your settlement papers are extremely valuable, so hold onto them. In the short term, they can help establish tax deductions for the year in which the property was purchased. In the long term, they will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Transfer utilities: Also at closing, determine the status of your home’s utilities, such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by the seller as of closing, and services to be transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORS® can provide contact numbers and related information.
Confirm your property deed records: About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.
Photograph or video record your possessions: Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure your records.
Get proper insurance coverage: You should have fire, theft and liability insurance. As the value of your property increases such coverage should also be increased. Again, speak with your insurance professional for details.
Expect a “broom clean” home: It is generally understood that sellers will leave homes "broom clean" when moving out, not "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.
Enjoy your home: Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that homeownership should be a wonderful experience. Enjoy!
Wednesday, July 28, 2010
Understanding Capital Gains in Real Estate
Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
Buying ahouse ? Step 9
Buying Step 9: Signing the Deal: Closing / Settlement / Escrow
It might seem as though once a sale agreement has been signed that the buying process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.
Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® can help buyers complete the transaction process by assisting with the many requirements found in a typical sale agreement. The REALTOR® also helps the buyer prepare for closing, that is, finalizing the sale.
What’s in a Sale Agreement?
A sale agreement sets a purchase price for the home and a series of terms and conditions. For instance:
• Contracts routinely depend on the ability of a buyer to obtain financing and/or sell their current home, which is why most sellers prefer buyers with mortgage preapproval letters.
• A growing percentage of transactions involve a home inspection, or a physical review of the home by a trained and independent observer. Generally the buyer’s agent arranges the inspections, which the buyer typically pays for.
• Lenders will establish numerous conditions before granting a loan. They will want a title exam, title insurance to protect against title errors, termite inspections, surveys and an appraisal to assure that the home has sufficient value to secure the loan.
When Should You Close?
With online transaction management now available, closings can occur within a week in some areas - at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.
While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it's possible that the buyer will no longer be able to afford the home and thus the deal may fall through.
The result of these considerations is that most homes close 30 to 45 days after a sale agreement has been signed.
What Happens during Closing?
Before closing, buyers typically have a final opportunity to walk through the property to ensure that its condition has not materially changed since the sale agreement was signed.
“Closing” is also known as "settlement" or "escrow." It is usually a brief office meeting to sign the paperwork needed to complete the sale transaction. All necessary papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties in the transaction to verify their interests.
Settlement is increasingly computerized and automated. One of the best parts of settlement is that there is very little that buyers and sellers need to do. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery. Some areas have services that allow most of the transaction to be completed online. If buyer and seller are present, they may be at the same table, or they may complete their papers separately.
Whatever the process, the outcome of the closing is the following:
• Property title is transferred from seller to buyer.
• The buyer receives the keys.
• The seller receives payment for the home.
• From the amount credited to the seller, the closing agent subtracts money to pay existing mortgage and other transaction costs.
• Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices. Usually the closing agent also completes the paperwork needed to record the loan.
• Transfer taxes are paid and other claims settled (including closing costs, legal fees and adjustments).
It might seem as though once a sale agreement has been signed that the buying process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.
Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® can help buyers complete the transaction process by assisting with the many requirements found in a typical sale agreement. The REALTOR® also helps the buyer prepare for closing, that is, finalizing the sale.
What’s in a Sale Agreement?
A sale agreement sets a purchase price for the home and a series of terms and conditions. For instance:
• Contracts routinely depend on the ability of a buyer to obtain financing and/or sell their current home, which is why most sellers prefer buyers with mortgage preapproval letters.
• A growing percentage of transactions involve a home inspection, or a physical review of the home by a trained and independent observer. Generally the buyer’s agent arranges the inspections, which the buyer typically pays for.
• Lenders will establish numerous conditions before granting a loan. They will want a title exam, title insurance to protect against title errors, termite inspections, surveys and an appraisal to assure that the home has sufficient value to secure the loan.
When Should You Close?
With online transaction management now available, closings can occur within a week in some areas - at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.
While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it's possible that the buyer will no longer be able to afford the home and thus the deal may fall through.
The result of these considerations is that most homes close 30 to 45 days after a sale agreement has been signed.
What Happens during Closing?
Before closing, buyers typically have a final opportunity to walk through the property to ensure that its condition has not materially changed since the sale agreement was signed.
“Closing” is also known as "settlement" or "escrow." It is usually a brief office meeting to sign the paperwork needed to complete the sale transaction. All necessary papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties in the transaction to verify their interests.
Settlement is increasingly computerized and automated. One of the best parts of settlement is that there is very little that buyers and sellers need to do. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery. Some areas have services that allow most of the transaction to be completed online. If buyer and seller are present, they may be at the same table, or they may complete their papers separately.
Whatever the process, the outcome of the closing is the following:
• Property title is transferred from seller to buyer.
• The buyer receives the keys.
• The seller receives payment for the home.
• From the amount credited to the seller, the closing agent subtracts money to pay existing mortgage and other transaction costs.
• Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices. Usually the closing agent also completes the paperwork needed to record the loan.
• Transfer taxes are paid and other claims settled (including closing costs, legal fees and adjustments).
Tuesday, July 27, 2010
Short Sales Tips for Sellers
Short Sales Tips for Sellers
If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:
• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.
2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. A qualified real estate professional can:
• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:
• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years
4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:
• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.
If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:
• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.
2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. A qualified real estate professional can:
• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:
• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years
4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:
• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.
Buying a house? Step 8
Buying Step 8: Get Homeowner Insurance
Homeowner insurance protects homeowners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
Insurance and warranty coverage should be in place for the sale closing. Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles, costs and "endorsements" (additional forms of coverage that may be available). For details, speak with REALTORS®, insurance brokers and home builders.
There are various forms of insurance associated with home ownership, including the major types listed below.
Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price, i.e., protects both the mortgage amount and the value of the down payment.
Homeowners' insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, sometimes including such property as wedding rings, furniture and home office equipment.
Flood insurance: Generally required in high-risk, flood-prone areas, this insurance is issued by the federal government and provides coverage for both property and contents. Your REALTOR® will know what coverage you require.
Home warranties: Buyers of new homes want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for a short term; mechanical problems, such as plumbing and wiring, for a short term; and structural defects for a long term.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Homeowner insurance protects homeowners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
Insurance and warranty coverage should be in place for the sale closing. Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles, costs and "endorsements" (additional forms of coverage that may be available). For details, speak with REALTORS®, insurance brokers and home builders.
There are various forms of insurance associated with home ownership, including the major types listed below.
Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price, i.e., protects both the mortgage amount and the value of the down payment.
Homeowners' insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, sometimes including such property as wedding rings, furniture and home office equipment.
Flood insurance: Generally required in high-risk, flood-prone areas, this insurance is issued by the federal government and provides coverage for both property and contents. Your REALTOR® will know what coverage you require.
Home warranties: Buyers of new homes want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for a short term; mechanical problems, such as plumbing and wiring, for a short term; and structural defects for a long term.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Monday, July 26, 2010
buying a House? Step 7
Buying Step 7: Do a Title Search and Finalize Your Financing
Do a Title Search
After making an offer, you need to do a title search on the property you wish to buy. Your agent or a lawyer can do this for you. Typically, all homes listed on an MLS are required to have this done by the listing agent and your agent can obtain a copy. If not, title records are kept at local courthouses and detail real estate ownership (sometimes over hundreds of years) in the local community.
These records are important because they provide proof that the owner has valid, marketable and insurable title to the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they in turn sell the property.
Title insurance is necessary because even though the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself. Title insurance is paid at closing.
Finalize Your Financing
Often, the cost of real estate financing is greater than the original purchase price of a home (after including interest and closing costs).
Now that you’re offer has been accepted and there is valid title to the property you are purchasing, it is time to finalize your preapproved financing. Your mortgage broker or REALTOR® or loan officer can help you select the mortgage option that is best for you. Because there are so many mortgage options and lenders, it’s a good idea to shop around for a mortgage just as you shopped around for a home.
Do a Title Search
After making an offer, you need to do a title search on the property you wish to buy. Your agent or a lawyer can do this for you. Typically, all homes listed on an MLS are required to have this done by the listing agent and your agent can obtain a copy. If not, title records are kept at local courthouses and detail real estate ownership (sometimes over hundreds of years) in the local community.
These records are important because they provide proof that the owner has valid, marketable and insurable title to the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they in turn sell the property.
Title insurance is necessary because even though the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself. Title insurance is paid at closing.
Finalize Your Financing
Often, the cost of real estate financing is greater than the original purchase price of a home (after including interest and closing costs).
Now that you’re offer has been accepted and there is valid title to the property you are purchasing, it is time to finalize your preapproved financing. Your mortgage broker or REALTOR® or loan officer can help you select the mortgage option that is best for you. Because there are so many mortgage options and lenders, it’s a good idea to shop around for a mortgage just as you shopped around for a home.
Friday, July 23, 2010
Buying a house? Step 6
Buying Step 6: Home Inspections
An offer to buy a home can include a “subject to” clause that is dependent on a home inspection. Not all buyers elect to include this clause because they may be purchasing a new home that is already under warranty, they may know enough about homes and building that the inspection is unnecessary, or they may want to save money.
Home inspections give you a professional assessment of a home’s condition. With such a major purchase as a home, an inspection gives you peace of mind in knowing whether there are any deficiencies that need to be dealt with now or in the future.
When writing your offer, include a clause that purchase is contingent on a satisfactory home inspection. Also include a clause for a final pre close walkthrough to ensure the property is in the condition you have agreed to and that any required fixes have been made.
Types of Inspections
A number of inspections are common in residential realty transactions. They include
• structural inspections (which may also include the foundation, roof, boiler room, furnace, heating, plumbing, appliances, etc.)
• termite inspection
• property boundary survey
• pre close walkthrough
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material or physical defects and whether expensive repairs and replacements are likely to be required in the next few years. This is the kind of inspection discussed in this article.
Condos: Review Strata Minutes
For condos, it’s crucial for the buyer and buyer’s agent to closely review the strata minutes. The agent will often do this beforehand because they know what to look for. Any structural or mechanical issues and potential special assessments based on structural problems found in reviewing the strata minutes can be brought to the attention of the inspector in advance, so he or she can keep an eye out for these issues and for associated problems.
Finding an Inspector
Your REALTOR® should be able to advise you on which types of inspections you need and where to find a licensed inspector. You can also look in the yellow pages or online for home inspection associations and home inspectors. Be sure to shop around and find an impartial inspector, as this can often be an issue.
Inspections
Be aware that new home builders or sellers may try to prevent inspections and make final settlement walkthroughs difficult by not allowing enough time to schedule and carry out an inspection. Be suspicious if the owner refuses to have an inspection done.
Time must also be allowed for you to receive and review the inspection report. You may choose to forego an inspection, but then you also choose to forego finding any issues that may cause major problems and expense in the future.
Inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property's mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through. The buyer agent should be present so that questions and issues can be discussed and noted. The listing agent may sometimes be present.
After the Inspection
After inspection, the buyer may decide to proceed with the offer as is, make a counteroffer with terms that address any issues found in the inspection, or withdraw their offer.
Inspectors can also offer suggestions for making appropriate and cost-efficient repairs.
Final Walkthrough Inspection
Before you close on your property, do a final walkthrough to ensure everything is in the condition specified in the sale agreement and that any repairs that were agreed to based on the inspection report have been made as arranged.
Buying a home is a major investment and doing inspections gives valuable professional assessments that allow the buyer to make an informed decision on whether or not their investment has any significant defects.
An offer to buy a home can include a “subject to” clause that is dependent on a home inspection. Not all buyers elect to include this clause because they may be purchasing a new home that is already under warranty, they may know enough about homes and building that the inspection is unnecessary, or they may want to save money.
Home inspections give you a professional assessment of a home’s condition. With such a major purchase as a home, an inspection gives you peace of mind in knowing whether there are any deficiencies that need to be dealt with now or in the future.
When writing your offer, include a clause that purchase is contingent on a satisfactory home inspection. Also include a clause for a final pre close walkthrough to ensure the property is in the condition you have agreed to and that any required fixes have been made.
Types of Inspections
A number of inspections are common in residential realty transactions. They include
• structural inspections (which may also include the foundation, roof, boiler room, furnace, heating, plumbing, appliances, etc.)
• termite inspection
• property boundary survey
• pre close walkthrough
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material or physical defects and whether expensive repairs and replacements are likely to be required in the next few years. This is the kind of inspection discussed in this article.
Condos: Review Strata Minutes
For condos, it’s crucial for the buyer and buyer’s agent to closely review the strata minutes. The agent will often do this beforehand because they know what to look for. Any structural or mechanical issues and potential special assessments based on structural problems found in reviewing the strata minutes can be brought to the attention of the inspector in advance, so he or she can keep an eye out for these issues and for associated problems.
Finding an Inspector
Your REALTOR® should be able to advise you on which types of inspections you need and where to find a licensed inspector. You can also look in the yellow pages or online for home inspection associations and home inspectors. Be sure to shop around and find an impartial inspector, as this can often be an issue.
Inspections
Be aware that new home builders or sellers may try to prevent inspections and make final settlement walkthroughs difficult by not allowing enough time to schedule and carry out an inspection. Be suspicious if the owner refuses to have an inspection done.
Time must also be allowed for you to receive and review the inspection report. You may choose to forego an inspection, but then you also choose to forego finding any issues that may cause major problems and expense in the future.
Inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property's mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through. The buyer agent should be present so that questions and issues can be discussed and noted. The listing agent may sometimes be present.
After the Inspection
After inspection, the buyer may decide to proceed with the offer as is, make a counteroffer with terms that address any issues found in the inspection, or withdraw their offer.
Inspectors can also offer suggestions for making appropriate and cost-efficient repairs.
Final Walkthrough Inspection
Before you close on your property, do a final walkthrough to ensure everything is in the condition specified in the sale agreement and that any repairs that were agreed to based on the inspection report have been made as arranged.
Buying a home is a major investment and doing inspections gives valuable professional assessments that allow the buyer to make an informed decision on whether or not their investment has any significant defects.
Thursday, July 22, 2010
Home Buyers Who Missed 8,000 Dollar Tax Credit Coming Out Ahead
http://rismedia.com/2010-06-28/home-buyers-who-missed-8000-dollar-tax-credit-coming-out-ahead-2/
Buying a house? Step 5
Buying Step 5: Offers, Counteroffers and Negotiation
When you are ready to buy, you will need to make a written offer. REALTORS® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. Your REALTOR® will guide you through the offer, counteroffer, negotiating and closing processes.
How Much Should You Offer?
You sometimes hear that the amount of your offer should be x percent below the seller's asking price or y percent less than you're really willing to pay. In practice, a successful offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order. Your REALTOR® will help you determine a suitable offer price and terms.
Terms and Conditions
While much attention is given to offering prices, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value for buyers - or additional costs. Terms are extremely important and should be carefully reviewed; they may include an escrow deposit, contingency deadlines for inspection and/or mortgage approval, payment of closing costs, etc.
Contingencies and “Subject to” Clauses
Buyer offers often contain contingencies or “subject to” clauses that must be met before the contract is considered binding. This gives you time to take care of final details. Contingencies can include the following:
• approved financing
• buyer selling an existing home
• satisfactory home inspection report
• test results for environmental factors including radon, mold and water quality
• termite inspections
• easements
• liens
Work with your REALTOR® to determine which contingencies you should include for your home buying situation. You will likely be required to include a time clause, also called a kick-out clause, which limits the contingency to a short time period (say 12, 24 or 48 hours) should the seller receive another acceptable offer.
How Do You Make an Offer?
When a home is made available for sale the owner is essentially making an offer to buyers: for a given number of dollars and other terms you can acquire this home. Buyers, in turn, can respond with several options:
• accept the offer
• decline the offer
• make a counteroffer
The process of making offers varies around the country. Typically, you complete a written offer that the REALTOR® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counteroffer.
What is a Counteroffer?
A counteroffer is nothing more than a new offer with different terms. Offers and counteroffers reflect the back-and-forth activity of the marketplace. It's a common, efficient and practical process, but also one that may contain tricky clauses and hidden costs. Because of this, and because counteroffers are common, it's important for buyers to remain in close contact with a REALTOR® during the negotiation process so that any proposed changes can be quickly reviewed.
How Do You Negotiate?
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Real estate bargaining typically involves compromises by both sides. It's not war; it's not winner-take-all. Instead, negotiating should be seen as a natural business process: buyers should be treated with respect, and owners should never lose sight of either their best interests or their baseline transaction requirements, which must be met before the home can be sold.
There are a lot of considerations, not just price, in making and negotiating offers. This is where the working with an experienced REALTOR® can guide you to a win-win negotiation.
When you are ready to buy, you will need to make a written offer. REALTORS® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. Your REALTOR® will guide you through the offer, counteroffer, negotiating and closing processes.
How Much Should You Offer?
You sometimes hear that the amount of your offer should be x percent below the seller's asking price or y percent less than you're really willing to pay. In practice, a successful offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order. Your REALTOR® will help you determine a suitable offer price and terms.
Terms and Conditions
While much attention is given to offering prices, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value for buyers - or additional costs. Terms are extremely important and should be carefully reviewed; they may include an escrow deposit, contingency deadlines for inspection and/or mortgage approval, payment of closing costs, etc.
Contingencies and “Subject to” Clauses
Buyer offers often contain contingencies or “subject to” clauses that must be met before the contract is considered binding. This gives you time to take care of final details. Contingencies can include the following:
• approved financing
• buyer selling an existing home
• satisfactory home inspection report
• test results for environmental factors including radon, mold and water quality
• termite inspections
• easements
• liens
Work with your REALTOR® to determine which contingencies you should include for your home buying situation. You will likely be required to include a time clause, also called a kick-out clause, which limits the contingency to a short time period (say 12, 24 or 48 hours) should the seller receive another acceptable offer.
How Do You Make an Offer?
When a home is made available for sale the owner is essentially making an offer to buyers: for a given number of dollars and other terms you can acquire this home. Buyers, in turn, can respond with several options:
• accept the offer
• decline the offer
• make a counteroffer
The process of making offers varies around the country. Typically, you complete a written offer that the REALTOR® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counteroffer.
What is a Counteroffer?
A counteroffer is nothing more than a new offer with different terms. Offers and counteroffers reflect the back-and-forth activity of the marketplace. It's a common, efficient and practical process, but also one that may contain tricky clauses and hidden costs. Because of this, and because counteroffers are common, it's important for buyers to remain in close contact with a REALTOR® during the negotiation process so that any proposed changes can be quickly reviewed.
How Do You Negotiate?
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Real estate bargaining typically involves compromises by both sides. It's not war; it's not winner-take-all. Instead, negotiating should be seen as a natural business process: buyers should be treated with respect, and owners should never lose sight of either their best interests or their baseline transaction requirements, which must be met before the home can be sold.
There are a lot of considerations, not just price, in making and negotiating offers. This is where the working with an experienced REALTOR® can guide you to a win-win negotiation.
Tuesday, July 20, 2010
Buying a house? step 4
Buying Step 4: Target Your Search, Look at Properties and Choose a Home
Millions of homes are sold each year. There's no shortage of housing options, but with so many choices the challenge becomes finding the property which best meets your needs.
The housing market is complicated because the stock of homes for sale is always in flux. Even if you could have a complete list of every home for sale at a given moment in a given community, such a list would become quickly obsolete as new homes become available and listed properties are sold.
In effect, buyers are looking at a dynamic market. So it is important to know as much as possible about the choices in preferred markets, and the way to do that is by working closely with a local REALTOR® who is familiar with local markets and current real estate trends. Also, REALTORS® have access to all homes on the market, including those that have not yet been advertised.
Determine What You Want in a Home
A home is more than just a collection of bedrooms and bathrooms. Several properties - each with four bedrooms, three baths, and the same price - may well have radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, exterior finishes, neighborhoods, etc.
First, list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).
Next, determine your priorities. If you can't get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?
Last, consider your future needs. If you'll need a larger home later on, maybe now is the time to buy a bigger house rather than moving or expanding in the future.
Target Your Search
Know what your want and target your search in preparation for working with a REALTOR®. NATIONAL ASSOCIATION OF REALTORS® (NAR) statistics show that a high percentage of buyers now research their options online and elsewhere for about six months on average before consulting a REALTOR®.
Basic targeting measures, such as general location and affordability, can help you refine your search and focus on homes that offer the most desirable features.
Target your desired neighborhood. All neighborhoods and communities have a unique character and value. One community may be well known for historic homes while another offers both suburban living with easy access to downtown office areas. Determine which neighborhood(s) will work for you so you do not waste time looking where you would not want to live.
Look for Homes
Your REALTOR® will find you home listings based on your criteria. You can also look for homes online, in local papers and real estate guides and by driving through neighborhoods that you’ve targeted.
Look at as many homes as possible both locally and online so you can make a sound decision when you choose a home. You may want to keep a file with information on each of the homes you like. Your REALTOR® can help you determine the pros and cons of the properties you are interested in.
If you are buying a condo, it is important that you and your agent review the strata minutes to determine whether there are any critical structural or mechanical defects. Also, take a close look at the current financial statements to make sure the finances are sound.
Choose a Home
A house is shelter. But a home is far more: it's where you live, relax, entertain friends, raise families, and work. A home is where you spend much of your life, so take your time to choose a house you can become your home.
Don’t make hasty decisions, especially about financing. Be sure you can really afford the home you choose.
Millions of homes are sold each year. There's no shortage of housing options, but with so many choices the challenge becomes finding the property which best meets your needs.
The housing market is complicated because the stock of homes for sale is always in flux. Even if you could have a complete list of every home for sale at a given moment in a given community, such a list would become quickly obsolete as new homes become available and listed properties are sold.
In effect, buyers are looking at a dynamic market. So it is important to know as much as possible about the choices in preferred markets, and the way to do that is by working closely with a local REALTOR® who is familiar with local markets and current real estate trends. Also, REALTORS® have access to all homes on the market, including those that have not yet been advertised.
Determine What You Want in a Home
A home is more than just a collection of bedrooms and bathrooms. Several properties - each with four bedrooms, three baths, and the same price - may well have radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, exterior finishes, neighborhoods, etc.
First, list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).
Next, determine your priorities. If you can't get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?
Last, consider your future needs. If you'll need a larger home later on, maybe now is the time to buy a bigger house rather than moving or expanding in the future.
Target Your Search
Know what your want and target your search in preparation for working with a REALTOR®. NATIONAL ASSOCIATION OF REALTORS® (NAR) statistics show that a high percentage of buyers now research their options online and elsewhere for about six months on average before consulting a REALTOR®.
Basic targeting measures, such as general location and affordability, can help you refine your search and focus on homes that offer the most desirable features.
Target your desired neighborhood. All neighborhoods and communities have a unique character and value. One community may be well known for historic homes while another offers both suburban living with easy access to downtown office areas. Determine which neighborhood(s) will work for you so you do not waste time looking where you would not want to live.
Look for Homes
Your REALTOR® will find you home listings based on your criteria. You can also look for homes online, in local papers and real estate guides and by driving through neighborhoods that you’ve targeted.
Look at as many homes as possible both locally and online so you can make a sound decision when you choose a home. You may want to keep a file with information on each of the homes you like. Your REALTOR® can help you determine the pros and cons of the properties you are interested in.
If you are buying a condo, it is important that you and your agent review the strata minutes to determine whether there are any critical structural or mechanical defects. Also, take a close look at the current financial statements to make sure the finances are sound.
Choose a Home
A house is shelter. But a home is far more: it's where you live, relax, entertain friends, raise families, and work. A home is where you spend much of your life, so take your time to choose a house you can become your home.
Don’t make hasty decisions, especially about financing. Be sure you can really afford the home you choose.
Friday, July 16, 2010
Buying a hose? Step 3
Buying Step 3: Get Loan Preapproval
Few people can buy a home for cash. Most buyers, especially first-time purchasers, require a loan. Real estate financing is not just about getting a loan, it’s about getting the loan that's right for you. In other words, a mortgage with the lowest cost and best terms.
Get a Preapproved Mortgage
Start the mortgage process well before bidding on a home. REALTORS® can often recommend a mortgage source, or a mortgage broker who’ll shop around for you. There are many mortgage options and lenders so it pays to shop around. By meeting with lenders - either face to face or online - and researching loan options, you will find which programs best meet your needs and how much you can afford.
Preapprovals are also recommended for another reason: purchase forms often require buyers to apply for financing within a given time period. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, do a check credit and rush into a financing decision that may not be the best option.
What is Preapproval?
"Preapproval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one does a new credit check, and too many credit checks could adversely affect your credit rating.
Although it is not a final loan commitment, the preapproval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
How Do You Get Preapproval?
Real estate financing is available from numerous sources, including mortgage brokers, mortgage companies, banks, online lenders and, in some cases, individual REALTORS® themselves. A REALTOR® may suggest one or more lenders that are known to offer competitive programs and deliver promised rates and terms.
To get preapproval you must complete a written application and provide supporting documentation, such as recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, a loan officer will describe the type of paperwork required.
A loan officer will carefully review your financial situation, including your credit report and other information, then suggest programs which most closely meet your needs
Doing your legwork and researching mortgages and lenders ahead of time, and getting a preapproved mortgage gives you a clear idea of what you can afford, tells sellers you are serious and means that you don’t have to rush the financing once you find a home that you want to buy.
Few people can buy a home for cash. Most buyers, especially first-time purchasers, require a loan. Real estate financing is not just about getting a loan, it’s about getting the loan that's right for you. In other words, a mortgage with the lowest cost and best terms.
Get a Preapproved Mortgage
Start the mortgage process well before bidding on a home. REALTORS® can often recommend a mortgage source, or a mortgage broker who’ll shop around for you. There are many mortgage options and lenders so it pays to shop around. By meeting with lenders - either face to face or online - and researching loan options, you will find which programs best meet your needs and how much you can afford.
Preapprovals are also recommended for another reason: purchase forms often require buyers to apply for financing within a given time period. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, do a check credit and rush into a financing decision that may not be the best option.
What is Preapproval?
"Preapproval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one does a new credit check, and too many credit checks could adversely affect your credit rating.
Although it is not a final loan commitment, the preapproval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
How Do You Get Preapproval?
Real estate financing is available from numerous sources, including mortgage brokers, mortgage companies, banks, online lenders and, in some cases, individual REALTORS® themselves. A REALTOR® may suggest one or more lenders that are known to offer competitive programs and deliver promised rates and terms.
To get preapproval you must complete a written application and provide supporting documentation, such as recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, a loan officer will describe the type of paperwork required.
A loan officer will carefully review your financial situation, including your credit report and other information, then suggest programs which most closely meet your needs
Doing your legwork and researching mortgages and lenders ahead of time, and getting a preapproved mortgage gives you a clear idea of what you can afford, tells sellers you are serious and means that you don’t have to rush the financing once you find a home that you want to buy.
Wednesday, July 14, 2010
Buying a House? Step 2
Buying Step 2: Get a REALTOR® When You Buy a Home
Real estate is a tough business with a steep dropout rate, and although many people have earned real estate licenses, only a small percentage of them actively help buyers and sellers.
Real estate brokers and salespeople who belong to the NATIONAL ASSOCIATION OF REALTORS® (NAR) are bound together with a strong Code of Ethics, extensive training opportunities and a wealth of community information. NAR members are routinely active in a variety of community organizations. Active community involvement provides REALTORS® with a better understanding of the area in which they are selling.
Why Use a REALTOR® When You Buy A Home?
Buying and selling real estate is a complex matter. At first it might seem that by checking local real estate magazines or Web sites you could quickly find the right home at the right price. But a basic rule in real estate is that all properties are unique. No two properties - even two identical models on the same street - are exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two real estate transactions are alike.
In the maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with professionals who know the community and much more. Those professionals are the local REALTORS® who actively serve your area.
How Do You Choose a REALTOR®?
Many communities have independent real estate agents and realty brokerages. You can find a local REALTOR® in local advertising, on REALTOR.com® and other Web sites, and by referrals from other agents, neighbors, lenders, attorneys, financial planners and CPAs. Recommendations of past clients can be valuable.
Many buyers interview several REALTORS® before selecting one to work with. These interviews are a good opportunity to consider such issues as experience, track record, market knowledge, marketing approach, professional network, representation, certification and fees.
What Should You Ask a REALTOR®?
• What services do you offer?
• What type of representation do you provide? Different states have different forms of representation: some agents represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different agents in a single firm may represent different parties within a transaction.
• What experience do you have in my immediate area?
• What is your track record?
• What is your market knowledge?
• What kind of professional network do you have?
• What are your certifications/designations?
• What is your fee? Fees are established in the marketplace and not set by law or regulation. In some circumstances, a buyer agent might ask you for compensation in addition to his/her commission.
• What disclosures should I receive? State rules require agents to provide extensive agency disclosure information, usually at the first sit-down meeting.
What Should You Expect When Working with a REALTOR® to Buy a Home?
Your REALTOR® will explain the options available to you, describe how he or she typically works with individuals and provide you with complete agency disclosures (the details of your relationship with the agent) as required in your state.
Your REALTOR® will work with you to find listings and homes that match your requirements. You will get detailed information on current market conditions, financing options and negotiating issues that might apply to a given situation. But remember that since market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information can vary from situation to situation.
During your time in the marketplace, your REALTOR® will keep you updated and alert you to each step in the transaction process. Agents will also help you find a conveyance lawyer, an inspector, as well as recommend other professionals in their network. Your agent will help you understand, evaluate, write and deliver offers and counteroffers.
Your REALTOR®’s expertise and experience is a valuable resource in a complex undertaking of buying a home. Your realtor will help you every step of the way.
Real estate is a tough business with a steep dropout rate, and although many people have earned real estate licenses, only a small percentage of them actively help buyers and sellers.
Real estate brokers and salespeople who belong to the NATIONAL ASSOCIATION OF REALTORS® (NAR) are bound together with a strong Code of Ethics, extensive training opportunities and a wealth of community information. NAR members are routinely active in a variety of community organizations. Active community involvement provides REALTORS® with a better understanding of the area in which they are selling.
Why Use a REALTOR® When You Buy A Home?
Buying and selling real estate is a complex matter. At first it might seem that by checking local real estate magazines or Web sites you could quickly find the right home at the right price. But a basic rule in real estate is that all properties are unique. No two properties - even two identical models on the same street - are exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two real estate transactions are alike.
In the maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with professionals who know the community and much more. Those professionals are the local REALTORS® who actively serve your area.
How Do You Choose a REALTOR®?
Many communities have independent real estate agents and realty brokerages. You can find a local REALTOR® in local advertising, on REALTOR.com® and other Web sites, and by referrals from other agents, neighbors, lenders, attorneys, financial planners and CPAs. Recommendations of past clients can be valuable.
Many buyers interview several REALTORS® before selecting one to work with. These interviews are a good opportunity to consider such issues as experience, track record, market knowledge, marketing approach, professional network, representation, certification and fees.
What Should You Ask a REALTOR®?
• What services do you offer?
• What type of representation do you provide? Different states have different forms of representation: some agents represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different agents in a single firm may represent different parties within a transaction.
• What experience do you have in my immediate area?
• What is your track record?
• What is your market knowledge?
• What kind of professional network do you have?
• What are your certifications/designations?
• What is your fee? Fees are established in the marketplace and not set by law or regulation. In some circumstances, a buyer agent might ask you for compensation in addition to his/her commission.
• What disclosures should I receive? State rules require agents to provide extensive agency disclosure information, usually at the first sit-down meeting.
What Should You Expect When Working with a REALTOR® to Buy a Home?
Your REALTOR® will explain the options available to you, describe how he or she typically works with individuals and provide you with complete agency disclosures (the details of your relationship with the agent) as required in your state.
Your REALTOR® will work with you to find listings and homes that match your requirements. You will get detailed information on current market conditions, financing options and negotiating issues that might apply to a given situation. But remember that since market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information can vary from situation to situation.
During your time in the marketplace, your REALTOR® will keep you updated and alert you to each step in the transaction process. Agents will also help you find a conveyance lawyer, an inspector, as well as recommend other professionals in their network. Your agent will help you understand, evaluate, write and deliver offers and counteroffers.
Your REALTOR®’s expertise and experience is a valuable resource in a complex undertaking of buying a home. Your realtor will help you every step of the way.
Tuesday, July 13, 2010
Buyers: How to Choose a REALTOR®
Not all agents or brokers are REALTORS® - there is a difference.
As a prerequisite for selling real estate, real estate professionals must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state-by-state basis, must be met. After receiving a real estate license, most agents join their local board or association of REALTORS® and the National Association of REALTORS® (NAR), the world's largest professional trade association. They can then call themselves REALTORS®.
The term "REALTOR®" is a registered collective membership mark that identifies a real estate professional who is a member of NAR and who adheres to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.
What Are an Agent’s Obligations to You?
A real estate agent is bound by certain legal obligations. Traditionally, these common-law obligations are to
• put the client's interests above anyone else's
• keep the client's information confidential
• obey the client's lawful instructions
• report to the client anything that would be useful
• account to the client for any money involved
A REALTOR® is held to an even higher standard of conduct under the NAR’s Code of Ethics.
In recent years, state laws have been passed setting up various duties for different types of agents. When you first start working with a REALTOR®, ask for a clear explanation of your state's current regulations, so that you will know where you stand on these important matters.
Seller’s Agents and Buyer's Agents
Suppose you sign an offer to buy a home for $150,000. You really want the property and there's a chance other offers are coming in, so you tell the agent that "We'll go up to $160,000 if we have to. But of course don't tell that to the seller."
If you're dealing with a seller's agent, he or she may be duty-bound to tell the seller that important fact. In most states, the seller's agent doesn't have any duty of confidentiality towards you. Honest treatment might require that the agent warn you that "I must convey to the seller anything that would be useful so don't tell me anything you wouldn't tell the seller."
If you're dealing with seller's agents, it’s a good idea to keep confidential information to yourself.
These days many home buyers prefer to hire a buyer's agent, one who owes the full range of duties, including confidentiality and obedience, to the buyer. A buyer's agent is often paid by the seller, regardless of the agency relationship.
Evaluating a Real Estate Agent
In making your decision to work with an agent, there are certain questions you should ask when evaluating a potential agent. The first question you should ask is whether the agent is a REALTOR®. Here are other questions you should then ask the agent:
• Do you have an active real estate license in good standing? To find this information, you can check with your state’s governing agency.
• Do you belong to the MLS and/or a reliable online home buyer’s search service? Multiple Listing Services are cooperative information networks of REALTORS® that provide descriptions of most of the houses for sale in a particular region.
• Is real estate your full-time career?
• What real estate designations do you hold?
• Which party do you represent - the buyer or the seller? This discussion is supposed to occur early on, at "first serious contact" with you. The agent should discuss your state's particular definitions of agency, so you'll know where you stand.
• When I commit to working with you, how will you help me accomplish my goals? Will the agent show you homes that meet your requirements and will he or she provide you with a list of the properties you’ve been shown?
As a prerequisite for selling real estate, real estate professionals must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state-by-state basis, must be met. After receiving a real estate license, most agents join their local board or association of REALTORS® and the National Association of REALTORS® (NAR), the world's largest professional trade association. They can then call themselves REALTORS®.
The term "REALTOR®" is a registered collective membership mark that identifies a real estate professional who is a member of NAR and who adheres to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.
What Are an Agent’s Obligations to You?
A real estate agent is bound by certain legal obligations. Traditionally, these common-law obligations are to
• put the client's interests above anyone else's
• keep the client's information confidential
• obey the client's lawful instructions
• report to the client anything that would be useful
• account to the client for any money involved
A REALTOR® is held to an even higher standard of conduct under the NAR’s Code of Ethics.
In recent years, state laws have been passed setting up various duties for different types of agents. When you first start working with a REALTOR®, ask for a clear explanation of your state's current regulations, so that you will know where you stand on these important matters.
Seller’s Agents and Buyer's Agents
Suppose you sign an offer to buy a home for $150,000. You really want the property and there's a chance other offers are coming in, so you tell the agent that "We'll go up to $160,000 if we have to. But of course don't tell that to the seller."
If you're dealing with a seller's agent, he or she may be duty-bound to tell the seller that important fact. In most states, the seller's agent doesn't have any duty of confidentiality towards you. Honest treatment might require that the agent warn you that "I must convey to the seller anything that would be useful so don't tell me anything you wouldn't tell the seller."
If you're dealing with seller's agents, it’s a good idea to keep confidential information to yourself.
These days many home buyers prefer to hire a buyer's agent, one who owes the full range of duties, including confidentiality and obedience, to the buyer. A buyer's agent is often paid by the seller, regardless of the agency relationship.
Evaluating a Real Estate Agent
In making your decision to work with an agent, there are certain questions you should ask when evaluating a potential agent. The first question you should ask is whether the agent is a REALTOR®. Here are other questions you should then ask the agent:
• Do you have an active real estate license in good standing? To find this information, you can check with your state’s governing agency.
• Do you belong to the MLS and/or a reliable online home buyer’s search service? Multiple Listing Services are cooperative information networks of REALTORS® that provide descriptions of most of the houses for sale in a particular region.
• Is real estate your full-time career?
• What real estate designations do you hold?
• Which party do you represent - the buyer or the seller? This discussion is supposed to occur early on, at "first serious contact" with you. The agent should discuss your state's particular definitions of agency, so you'll know where you stand.
• When I commit to working with you, how will you help me accomplish my goals? Will the agent show you homes that meet your requirements and will he or she provide you with a list of the properties you’ve been shown?
Monday, July 12, 2010
Easy steps to getting a loan
3 Easy Steps to Getting a Mortgage
Examine your finances and shop around before you apply for a mortgage. Shopping for a mortgage is the first step toward owning a home and perhaps the most daunting, especially if you are not prepared.
Once a simple task that meant comparing fixed rates from among perhaps a dozen or fewer savings and loan companies, the mortgage hunt today is like finding your way through a maze.
There are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions and even stock brokerage firms.
Contrary to popular belief, finding a mortgage doesn't begin with an application.
Education is a better first choice. Mortgage information sources are as vast as the number of mortgages available: Web sites, topical newspaper articles, mortgage books, consumer seminars and workshops, financial planners, real estate agents, mortgage brokers and lenders are all available to assist you along the way.
First and foremost, you must determine how your mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road.
If you discover too late that you can't afford your mortgage, you'll not only face the possibility of losing the roof over your head, but you could also damage your ability to purchase a home in the future.
Step 1: Examine Your Finances
If you can afford to buy a home, you must then determine how much mortgage you can afford. Lenders are apt to put your loan application in the best light and qualify you for as much as they are willing to lend, which can be more than you can afford.
It's up to you to take stock of your income and expenses, both current and projected, to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.
Step 2: Shop for a Loan
When you are ready to shop for a loan you have two basic types of mortgage stores to shop from: direct lenders and mortgage brokers.
Direct lenders have money to lend. They make the final decision on your application. Lenders have a limited number of in-house loans available.
Mortgage brokers are intermediaries who, like you, have many lenders from which to choose. Brokers shop from many lenders, each with their own offering of loans.
If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need. Mortgage brokers, however, are paid with a slice of the amount you borrow - some more than others, so it pays to compare rates. Internet brokers today perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.
Along with shopping the source, you'll also have to shop for loan costs, including the interest rate, broker fees, points (a point is an amount paid to the lender and is charged at one percent of the amount you borrow), prepayment penalties, loan term, application fees, credit report fee, appraisal and a host of others.
Step 3: Apply for a Loan
The application process is the easy part - provided you've gathered the documents necessary to prove claims you make on the application.
The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).
The lender will run a credit check to determine your credit status, but you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance and other documentation. A lender that deems you creditworthy will likely hire a professional appraiser to make sure the value of the home you are about to buy is truly worth your loan amount.
Examine your finances and shop around before you apply for a mortgage. Shopping for a mortgage is the first step toward owning a home and perhaps the most daunting, especially if you are not prepared.
Once a simple task that meant comparing fixed rates from among perhaps a dozen or fewer savings and loan companies, the mortgage hunt today is like finding your way through a maze.
There are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions and even stock brokerage firms.
Contrary to popular belief, finding a mortgage doesn't begin with an application.
Education is a better first choice. Mortgage information sources are as vast as the number of mortgages available: Web sites, topical newspaper articles, mortgage books, consumer seminars and workshops, financial planners, real estate agents, mortgage brokers and lenders are all available to assist you along the way.
First and foremost, you must determine how your mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road.
If you discover too late that you can't afford your mortgage, you'll not only face the possibility of losing the roof over your head, but you could also damage your ability to purchase a home in the future.
Step 1: Examine Your Finances
If you can afford to buy a home, you must then determine how much mortgage you can afford. Lenders are apt to put your loan application in the best light and qualify you for as much as they are willing to lend, which can be more than you can afford.
It's up to you to take stock of your income and expenses, both current and projected, to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.
Step 2: Shop for a Loan
When you are ready to shop for a loan you have two basic types of mortgage stores to shop from: direct lenders and mortgage brokers.
Direct lenders have money to lend. They make the final decision on your application. Lenders have a limited number of in-house loans available.
Mortgage brokers are intermediaries who, like you, have many lenders from which to choose. Brokers shop from many lenders, each with their own offering of loans.
If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need. Mortgage brokers, however, are paid with a slice of the amount you borrow - some more than others, so it pays to compare rates. Internet brokers today perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.
Along with shopping the source, you'll also have to shop for loan costs, including the interest rate, broker fees, points (a point is an amount paid to the lender and is charged at one percent of the amount you borrow), prepayment penalties, loan term, application fees, credit report fee, appraisal and a host of others.
Step 3: Apply for a Loan
The application process is the easy part - provided you've gathered the documents necessary to prove claims you make on the application.
The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).
The lender will run a credit check to determine your credit status, but you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance and other documentation. A lender that deems you creditworthy will likely hire a professional appraiser to make sure the value of the home you are about to buy is truly worth your loan amount.
Friday, July 9, 2010
Buying a house?
10 Home Finance Mistakes You Can't Afford
Most advice columns tell you what you should do, but just as importantly, there some things you shouldn't do. Here are 10 frequent home finance mistakes that consumers make - and that you should avoid.
1. Don’t choose the wrong mortgage: With the advent of instant refinancing, home loans are no longer the lifetime obligations they used to be. Still, you don't want to be saddled for even a short period of time with the wrong mortgage.
Investigate all your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility of prepayment penalties.
2. Don’t confuse "preapproved" and prequalified" with a loan commitment: These are debatable terms in real estate because not all lenders define them the same way. In fact, one leading real estate dictionary contains neither expression because their definitions are uncertain.
According to one school of thought, when you are prequalified, the lender is making an educated guess about how much you can borrow based on information you've provided. When you are preapproved, the lender has verified everything you have told him or her and is offering to lend you up to a given amount at current interest rates - under certain conditions.
Whether prequalified or preapproved, final clearance and a check at closing - a loan commitment - are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check and other verifications. When meeting with lenders, always ask how they define each term and what additional steps will be required to actually obtain a loan.
3. Don’t have too much credit: Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any major purchases until after you buy your house.
4. Don’t lie on your loan application: Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars, but if they find out later, they can call your loan due and payable.
And don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrower who ends up paying the price, often in the form of unaffordable monthly loan payments.
5. Don’t hide if you can't make your payments: The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments. Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice.
6. Don’t skip a home inspection: Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake. Independent home inspectors examine houses from stem to stern. They'll be able to tell you whether the roof and/or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last. They can't report on things they can't see, but at least their trained eyes are better than yours. So don't pass just to save a few hundred dollars - it’s money very well spent.
7. Don’t hire just any agent to sell your house: All real estate agents are not the same. You want to work with an agent who specializes in your neighborhood and who is a top producer. Ask your candidates how they plan to market your house, what you can do to make the place more attractive to prospects and what you should set as a selling price. If you don't like any of the answers, look elsewhere. And above all, stay away from relatives; unless Aunt Amy or Nephew Nick fit the description above, keep looking.
8. Don’t fail to check out a contractor’s credentials: Never, ever hire a contractor who knocks on your door or says his prices are good for only a few days. Reputable contractors don't solicit door-to-door, and they don't cut prices just because they happen to be in your neighborhood. Check out potential contractors thoroughly by calling several of their past clients, their bankers and suppliers, your local better business bureau and your local consumer affairs agency.
9. Don’t pay a contractor too much upfront: If a contractor asks for more than a third of the contract price as a down payment, chances are something's wrong. At worst, he's a scam artist who has no intention of returning after he cashes your check. At best, he's undercapitalized and can't afford to purchase materials on his own. Or, in between, he could be using your money to pay workers on another job. Also, never give a contractor cash.
10. Don’t burn your mortgage: It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan documents in a safe place.
Most advice columns tell you what you should do, but just as importantly, there some things you shouldn't do. Here are 10 frequent home finance mistakes that consumers make - and that you should avoid.
1. Don’t choose the wrong mortgage: With the advent of instant refinancing, home loans are no longer the lifetime obligations they used to be. Still, you don't want to be saddled for even a short period of time with the wrong mortgage.
Investigate all your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility of prepayment penalties.
2. Don’t confuse "preapproved" and prequalified" with a loan commitment: These are debatable terms in real estate because not all lenders define them the same way. In fact, one leading real estate dictionary contains neither expression because their definitions are uncertain.
According to one school of thought, when you are prequalified, the lender is making an educated guess about how much you can borrow based on information you've provided. When you are preapproved, the lender has verified everything you have told him or her and is offering to lend you up to a given amount at current interest rates - under certain conditions.
Whether prequalified or preapproved, final clearance and a check at closing - a loan commitment - are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check and other verifications. When meeting with lenders, always ask how they define each term and what additional steps will be required to actually obtain a loan.
3. Don’t have too much credit: Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any major purchases until after you buy your house.
4. Don’t lie on your loan application: Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars, but if they find out later, they can call your loan due and payable.
And don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrower who ends up paying the price, often in the form of unaffordable monthly loan payments.
5. Don’t hide if you can't make your payments: The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments. Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice.
6. Don’t skip a home inspection: Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake. Independent home inspectors examine houses from stem to stern. They'll be able to tell you whether the roof and/or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last. They can't report on things they can't see, but at least their trained eyes are better than yours. So don't pass just to save a few hundred dollars - it’s money very well spent.
7. Don’t hire just any agent to sell your house: All real estate agents are not the same. You want to work with an agent who specializes in your neighborhood and who is a top producer. Ask your candidates how they plan to market your house, what you can do to make the place more attractive to prospects and what you should set as a selling price. If you don't like any of the answers, look elsewhere. And above all, stay away from relatives; unless Aunt Amy or Nephew Nick fit the description above, keep looking.
8. Don’t fail to check out a contractor’s credentials: Never, ever hire a contractor who knocks on your door or says his prices are good for only a few days. Reputable contractors don't solicit door-to-door, and they don't cut prices just because they happen to be in your neighborhood. Check out potential contractors thoroughly by calling several of their past clients, their bankers and suppliers, your local better business bureau and your local consumer affairs agency.
9. Don’t pay a contractor too much upfront: If a contractor asks for more than a third of the contract price as a down payment, chances are something's wrong. At worst, he's a scam artist who has no intention of returning after he cashes your check. At best, he's undercapitalized and can't afford to purchase materials on his own. Or, in between, he could be using your money to pay workers on another job. Also, never give a contractor cash.
10. Don’t burn your mortgage: It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan documents in a safe place.
Thursday, July 8, 2010
About myself
Hello to everyone:
I'm a license Real Estate broker with 7 years of experience. I own Catana Real Estate Investments Group,LLC. Located at:
1730 Main Street Suite 226, Weston, Florida 33326
We are a full service real estate company ready to help you in the process to buy or sell,a residence o business, to help you with the process to get financing or manage your existing investments and much more.
Please follow me in Twiter,Facebook,linkdelin I will be posting tips about what you you need to do to buy or sell a property.
Thank you.
I'm a license Real Estate broker with 7 years of experience. I own Catana Real Estate Investments Group,LLC. Located at:
1730 Main Street Suite 226, Weston, Florida 33326
We are a full service real estate company ready to help you in the process to buy or sell,a residence o business, to help you with the process to get financing or manage your existing investments and much more.
Please follow me in Twiter,Facebook,linkdelin I will be posting tips about what you you need to do to buy or sell a property.
Thank you.
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