Real Estate Tips
The Importance of Days on Market
The length of time a property is on the market is a significant factor in the selling process. Buyers want to know how long a home has been on the market before making an offer. Most buyers will make a lower offer when a home has been on the market for more than 30 days. They assume the seller is so anxious for a sale, they will accept less. However, if a home has been available for only a few days, buyers tend to make offers closer to the list price. If the days on market is very high, some buyers will not even consider a property, thinking something may be wrong with it. Educated buyers know what is probably “wrong” is the price was set higher than current market values and they use high days on market to their advantage in negotiating lower offers.
Sellers need to be aware of days on market for two reasons. First, the more time their home is on the market, the lower the offers will be from buyers. This is why properties almost always sell at their highest price in the first days of exposure to the market, especially in depreciating markets when prices are falling. Review the statistical graphs for your area to see if inventory is still high compared to sales, indicating a continuing depreciating market.
Second, sellers need to consider average days on market for the brokerage company they choose to represent them. Coldwell Banker has lower average days on market because we assist sellers in positioning their home to sell in the first days of exposure, resulting in the highest possible price in the current market.
10 Things to Take the Trauma Out of Homebuying
1. Find a real estate agent that’s simpatico. Homebuying is not only a big financial commitment, but also an emotional one. It’s critical that the agent you chose is both skilled and a good fit with your personality.
2. Remember, there’s no “right” time to buy, any more than there’s a right time to sell. If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes don’t usually occur fast enough to make that much difference in price, and a good home won’t stay on the market long.
3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision.
4. Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go.
5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price may lose you the home you love.
6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself—room size, kitchen—that you forget such issues as amenities, noise level, etc., that have a big impact on what it’s like to live in your new home.
7. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.
8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be some costs. Don’t leave yourself short and let your home deteriorate.
9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits.
10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually over from 1998 to 2002, a home’s most important role is as a comfortable, safe place to live.
Tax Credit Creates More Opportunities for Buyers
Coldwell Banker Residential Brokerage When the federal government announced the first-time home buyer's tax credit last year, the housing industry saw a wave of new buyers eager to take advantage of an unprecedented opportunity. Sellers enjoyed a pool of new buyers trying to meet a deadline. It was a great move for buyers, sellers and our economy.
Now, with the recent extended and expanded tax credit adding current homeowners to the buyer pool, up or down-sizing to a more desirable home is more appealing. We are already beginning to see signs of additional activity in the mid and luxury home markets.
Current homeowners who have lived in their primary residence for five of the last eight years are eligible for a tax credit of up to $6,500. First time buyers, which include buyers who have not owned a primary residence in the last three years, are eligible for up to an $8,000 tax credit.
The tax credit is just that - a credit against your tax liability and often results in a refund check. For example, a current homeowner who qualifies for the $6,500 credit and has a 2009 tax liability of $4,000, would be allowed a full tax credit of $4,000 and receive a check for the remaining $2,500. Check with your tax accountant or attorney about how the credit would work specific to your personal situation.
Please remember me if you or someone you know is interested in selling a home. I can help you take advantage of the tax credit before the April 30th deadline.
Questions People Ask
What is condo living? Is Condo a style, a type of ownership, a way of life? What do I own? What is included with the maintenance fee? Do some condos come without maintenance fees? What about townhouses; are townhouses different from condos? These and many more questions are constantly asked about condos and townhouses. I will try to shed some light on this subject.
What is a Condo?
A condo is a home style and a type of ownership. A condo style is referred to as a “Ranch” style of living; all rooms are on one floor. Condos can be found in highrises, midrises, attached row housing, garden apartments, detached housing, or stand-alone houses. A townhouse can also be a condo. A townhouse is an architectural style meaning multiple levels. A townhouse may be a condo type of ownership or not. Merriam-Webster Online defines a townhouse as “a usually single-family house of two or sometimes three stories that are usually connected to a similar house by common sidewall”. However, I have seen townhouses only attached by an outside deck.
A usual subdivision may have upwards of hundreds of units. These subdivisions may have many amenities for the residents. Some of the amenities could be a swimming pool, a clubhouse, exercise rooms, meeting rooms, play areas, and more. But there are many condo complexes that have no amenities and some with only a few amenities.
All condo complexes will have common areas for use by ALL residents, even if it is just the parking areas or hallways.
A condo community usually has a management association that is responsible for general repairs and maintenance of the common areas. Generally, all exterior repairs are the responsibility of the management association. Snow removal is also the responsibility of the association. However, it should be noted that there are a number of definitions of snow removal. The association would more than likely be responsible for the roadways. But some associations will shovel the general walkways, steps, and driveways to each condo unit. Other associations leave the sidewalks, steps, and driveways to the condo unit residents. Each condo unit is required to pay a monthly condo fee to cover all the association’s costs and to maintain a reserve for unexpected costs.
Some condos don’t pay any fees. These are usually small condo complexes or duplex homes. In these cases, the residents get together to share expenses.
Ownership of a condo unit means that the interior, usually from the walls to the center, is the responsibility of the homeowner.
Advantages of Condominium Living
You are not responsible for outside maintenance. Your lawn will always be trimmed.
You can enjoy many amenities without worrying about cost or upkeep.
Transportation is usually close by.
Some condo communities are gated, giving the residents a greater sense of security.
Disadvantages of Condominium Living
You have to pay taxes and association fees.
You have to share all common areas.
The outside land is owned by the association and available to ALL condominium residents. You don’t have the privacy as with single-family homes.
Some associations allow pets and some do not. Some associations only allow small pets. Some allow only cats and no dogs.
Some condominium communities are adult communities with age restrictions.
Condominium association’s rules and fees can change.
When considering a condo ownership, you should know the financials of the association and the association’s rules. Do not rely on your Realtor, or anyone else, since the finances and rules are subject to change.
For more information, please reference:
NJ State Condo Web Page:
This article is subject to errors and omissions. It is the responsibility of the buyer or seller to verify all information.
What Is A PUD Home
PUD stands for Planned Unit Development. Essentially, a PUD home is a single-family home (fee simple ownership) that is part of the condo/townhome community. You have the same privileges as owners of the other condo/townhome units. You are part of the association and you pay a monthly maintenance fee as well. The fee will probably be much lower, since PUDs are responsibly for their homes total maintenance inside and out. Unlike the condo/townhouse owner, they are only responsible for the inside of the their unit.
As a PUD owner, you are still subject to the rules and regulations of the association. If you want to paint your home and the association doesn’t like the color, you don’t paint your home that color. The same goes for major home improvements.
Buying a Duplex Condo
By: Roselind Hejl
Condominium is a form of ownership of real estate. In this type of ownership the owner has individual title to the air space inside the unit, plus an undivided interest in the buildings and land.
Condominium ownership is guided by a set of declarations that are written at the time of creation of the development. This document outlines how the condo will be governed and maintained. The Texas Real Estate Commission contract allows the buyer to receive a copy of the condo documents, and have a certain period of time to review them. The buyer may decline the contract without penalty if he is not satisfied, after reading the documents.
If you are considering a duplex condo, here are seven questions to ask during your document review period:
1. Condominiums usually have an elected board of directors who take charge of scheduling maintenance, paying common bills, and handling any disputes that arise. Of course, in a duplex condo there are only two owners. This creates some special questions on how the governing board will be structured. Will there be a representative from each unit on the board? Check to be sure this is written in the condo documents.
2. Usually, duplex condo owners do not want to incur the expense of a management company. They often handle any common area repairs, insurance and landscaping between themselves. It is important to check whether the declaration requires a third party manager, or allows management be handled by the two owners.
3. How will the two parties resolve a disagreement? In a large condo project, the board may be able to look at how a particular issue has been handled in the past. Or, it may take a vote on a rule interpretation. However, in a two party association, previous decisions may have been made according to the preferences of the two owners. This may not give you as much guidance as you need to handle a difficult issue. Do the condo declarations say how a voting deadlock will be handled?
4. Will there be dues collected for a common budget? In small, two-unit condos, it is possible that there will not be a common budget for the project. Each owner may be required to handle all maintenance of the portion of the building and land that he occupies or uses. If this is the case, how will major structural repairs be handled, should they arise?
5. If dues are collected for a common budget, are you clear on how repairs and maintenance will be divided between the individual owners and the common budget? It may be that the common budget covers all exterior parts of the building, decks, pools, sidewalks, and driveways of both units. Or, the individual owners may be responsible for certain kinds of exterior maintenance of their units. Find out how these responsibilities are divided!
6. Have you considered the possibility that you and the other owner may have very different views on maintenance of the building and grounds? What about differences in temperament and lifestyle? One may be fastidious about painting and upkeep, and the other may let his unit get into bad shape.
7. Does the condo declaration provide for a way, such as mediation or arbitration, to resolve difficult issues that cannot be settled between the two owners?
If you do not feel comfortable analyzing the condo documents yourself, hire a real estate attorney to review them with you before proceeding with your purchase. Do not look to the seller, Realtors, home inspector, lender, or well meaning friends to interpret condo documents. This is not their field of expertise! Ask a lot of questions before proceeding with your purchase. A clear understanding of your obligations and potential problems in the ownership of a two-unit condo will lead to a more satisfying purchase.
About the Author
Roselind Hejl is a Realtor with Coldwell Banker United in Austin, Texas. Her website - http://www.weloveaustin.com - offers homes for sale, market trends, buyer and seller guides. Austin Texas Real Estate Guide(ArticlesBase SC #571559)Article Source: http://www.articlesbase.com/ - Questions to Ask Before Buying a Duplex Condo
Condo/Townhouse Maintenance Fees
Condo fees are maintenance fees used to maintain the common areas of a condominium/townhouse complex. Condo fees can equate to what a single-family homeowner should budget each month to maintain their home and property.
Types of Condo fees vary. The cost to maintain the inside of a condo unit, which is the inside wall to the center of the room, is the responsibility of the condo owner. All other costs to maintain the outside of the complex are shared by each condo unit owner – the maintenance fees.
Here are some costs included in the maintenance fee of the common areas:
§ Maintaining care and repairing the outside of every building
§ Outside pest control
§ All utilities of the common areas
§ Building insurance
§ Pool cleaning and maintenance
§ All other amenities shared by all unit owners
§ Road maintenance
§ Complex employees
§ Snow removal
§ Maintaining a reserve fund for unexpected repairs
The above list contains most of the costs – there may be more or less. Every condominium complex is different. Also, the above list pertains to large complexes. A small complex, which may be a duplex home or complexes with up to 5 or 10 units, may not pay a maintenance fee at all. If something goes wrong with the complex, everyone shares the cost.
Maintenance fees can be completely different in apartment buildings. The fee may be based on the sq ft of each unit. In a larger complex, end units may have a larger share of the maintenance fee than an interior unit.
Maintenance fees, as important as they are, will vary from unit to unit and from complex to complex. It is very important to know exactly what the maintenance fee of the unit is, the taxes that you will be paying, if the reserve fund is sufficient to handle all costs, and how solvent the management company is.
Click the link below to read what the New Jersey appellate court says about Condominium Maintenance Fees:
Condominium Maintenance Fees Must Be Sufficient to Maintain Common Areas
A real estate attorney should review all information.
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.
Caring for your Plumbing
You probably don’t think much about the network of water and sewer pipes inside your walls that deliver your hot and cold water—and eliminate your waste—on demand. But giving your plumbing a little regular attention can prolong its life, prevent leaks, and avoid costly repairs. Here’s how to care for the pipes in your house.
Avoid chemical drain-clearing products
Clogged drains are the most common home plumbing problem, and you can buy chemicals to clear them. But these products sometimes do more harm than good. They can actually erode cast-iron drainpipes.
And because they typically don’t remove the entire clog, the problem is likely to recur, causing you use the chemicals repeatedly. “Each time, they’ll eat away at the pipes a little more,” says Passaic, N.J. plumber Joseph Gove. “Soon, you’re going to get leaks.”
Better to hire a plumber to snake the drain (usually $75 to $150) and completely remove the chunk of hair or grease that’s plugging the line. Or you can pick up a snake of your own, for around $20 at the hardware store, and try clearing the drain yourself.
Prevent future clogging
Clogs aren’t just nuisances. Backed-up water puts added pressure on your wastepipes, stressing them and shortening their lifespan. So avoid plug-ups by watching what goes down your drains. That means keeping food scraps out of kitchen drains, hair out of bathroom drains, and anything but sewage and toilet paper out of toilets.
Install screens over drains in showers and tubs, and pull out what hair you can every few weeks to prevent buildups. Scrape food into the trash before doing dishes—even if you have a disposal—and never put liquid grease down the drain; pour it into a sealable container to put in the garbage after it cools.
“Grease is only liquid when it’s hot,” Gove says. “When you pour it down the drain, it cools and becomes solid. Do that enough, and just like a clogged artery, your drains won’t work anymore.”
Reduce the pressure
As nice as high water pressure can be when you’re taking a shower or filling a stockpot, it stresses your pipes, increasing the likelihood of a leak. “That drastically reduces the life of your plumbing,” says Phoenix, Ariz., plumber Alex Sarandos. “It makes your pipe joints, faucets, and appliance valves work harder.”
You can measure your water pressure with a hose bib gauge, available at the hardware store for under $10. Attach it to an outside spigot and open the line. Normal pressure will register between 40 and 85 psi. If it’s above that range, consider hiring a plumber to install a pressure reducer (around $400).
By the way, adding a low-flow showerhead won’t affect pressure in the pipes. It only affects the amount of water coming out of the showerhead itself.
Soften the water
If your water has a high mineral content—known as hard water—it can shorten your plumbing’s lifespan. Those naturally occurring minerals, usually magnesium or calcium, build up inside your pipes and restrict flow, increasing the pressure. Plus, they can corrode joints and fittings. Although hard water can occur anywhere, it’s most common in the Southwest and parts of the Northeast.
A white buildup on showerheads and faucets is a telltale sign of hard water. Or, if your house receives municipal water service, you can easily find out how hard it is. By law, every municipality must file an annual water quality report with the Environmental Protection Agency. If you have a well, check your most recent water test report for hardness information. Anything over 140 parts per million is considered hard water.
The only way to effectively deal with hard water is by installing a water softener. Most use sodium to counteract the minerals in your water, but new electronic softeners use electromagnetic pulses to dissolve minerals, and have the advantage of not adding sodium to your water.
You’ll need a plumber to install a traditional, sodium-based softener, for $500 to $1,000. Electronic units start below $200, and because the pipes don’t have to be opened up, you can install one yourself. Keep in mind, though, that you’ll need an outlet nearby to power the unit.
If you opt for a sodium-based softener, consider installing a whole-house pre-filter at the same time. Since the plumber will already be cutting into your pipes to install the softener, the pre-filter might add only $100 to the job. And not only will it give you cleaner drinking water by removing particulates and chlorine, you’ll reduce stress on your pipes that can occur when those particles clog faucet filters.
Keep your sewer lines or septic tank clear
If you have municipal sewers, hire a plumber to snake your main sewage cleanout every few years. This will cost $75 to $150, and will remove tree roots that inevitably work their way into these pipes—leading to messy sewage backups. If you have a septic system, get the tank pumped out every three to five years, for $200 to $500.
Other ways to avoid trouble
Learn where your home’s main water shut off valve is—so if there’s ever a leak, you can go straight there and quickly turn off the water to the entire house.
Remove hoses from outdoor spigots in winter to prevent frozen water from cracking the pipes and causing a flood.
Add pipe insulation to the plumbing in cold parts of your house—such as garages, basements, and crawl spaces—to avoid frozen pipes (and to shorten the wait for hot water).
Never use an exposed pipe as a hanger rod for laundry. Doing so can loosen joints and fasteners.
Fix problems quickly. Even small leaks can make pipes corrode more quickly, and cause significant water damage or mold.
A former staff writer for the Wall Street Journal, Joe Bousquin writes about housing, construction and home improvement. The galvanized steel water pipes in his 1930 home in Sacramento, Calif., have all been replaced with copper.
From: National Association of REALTORS®
10 Steps to Home Ownership
One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you'll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process.
Do You Know What You Want?
Whether you are a first-time homebuyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing timeframe?
Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals. As an interesting exercise, it can be worthwhile to look at the questions above and to then discuss them in detail when meeting with local REALTORS®.
Do You Have The Money?
Homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with nothing down.
In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.
Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage payments, so most homebuyers choose to buy with some cash up front.
As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses. Speak with local REALTORS® for details.
Is Your Financial House in Order?
Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.
More than 2 million people in the United States have earned real estate licenses. However, real estate is a tough business with a steep dropout rate, and the result is that only a small percentage of those with licenses actively help buyers and sellers.
The National Association of REALTORS® (NAR) includes 1 million brokers and salespeople, individuals bound together with a strong Code of Ethics, extensive training opportunities and a wealth of community information. NAR members are routinely active in PTAs, local government committees and a variety of neighborhood organizations. Being actively involved in community affairs provides REALTORS® with a better understanding of the area in which they are selling.
Buying and selling real estate is a complex matter. At first it might seem that by checking local picture books or online 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 precisely and exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two transactions are alike.
In this 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 serve your area.
How do you choose?
In every community you're likely to find a number of realty brokerages. Because there is heated competition, local REALTORS® must fight hard to succeed in your community.
Places to find Realtors® are open houses, local advertising, Web sites, referrals from other REALTORS®, recommendations from neighbors and suggestions from lenders, attorneys, financial planners and CPAs. The experiences and recommendations of past clients can be invaluable.
In many cases buyers will interview several REALTORS® before selecting one professional with whom to work. These interviews represent a good opportunity to consider such issues as training, experience, representation and professional certifications.
What should you expect when you work with a REALTOR®?
Once you select a REALTOR® you will want to establish a proper business relationship. You likely know that some REALTORS® represent sellers while others represent buyers. Each REALTOR® will explain the options available, describe how he or she typically works with individuals and provide you with complete agency disclosures (the ins and outs of your relationship with the agent) as required in your state.
Once hired for the job, the REALTOR® will provide you with information detailing current market conditions, financing options and negotiating issues that might apply to a given situation. Remember: Because market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information should not be set in stone. During your time in the marketplace REALTORS® will keep you updated and alert you to each step in the transaction process.
Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers -- especially first-time purchasers -- required a loan.
The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.
REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the sources of money) and programs, for example, are available right here in the finance section of Realtor.com as well as through recommendations from local REALTORS®. By meeting with lenders -- either online or face to face -- and looking at loan options, you will find which programs best meet your needs and how much you can afford.
REALTORS® also recommend pre approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.
What is it?
"Pre-approval" 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 pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre approval 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 pre-approval?
Real estate financing is available from numerous sources, including lenders here in the finance section of Realtor.com, mortgage companies that have worked with local REALTORS® and in some cases, individual REALTORS® themselves. Based on his or her experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.
The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.
Millions of new and existing 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. If it were possible to have a complete list of every home for sale at this very moment in a given community, such a list would become obsolete within seconds as new homes become available and properties now for sale are put under contract.
In effect, buyers are looking at a moving target in a marketplace that is never static. Because of this, 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 has a good lay of the land.
What are you looking for?
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 represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and exterior finishes.
Each of us is different and so it's important to 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, it's important to consider 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?
Lastly, consider your needs in several years. If you'll need a larger home, maybe now is the time to buy a bigger house rather than moving or expanding in the future. If you expect your income to increase, perhaps you should consider a more expensive home financed with a loan program where monthly payments increase in the future.
Where should you look?
All neighborhoods and communities have a special nature that gives them identity and value. One community may be well known for historic homes while another offers both suburban living as well as easy access to downtown office areas.
How do you find a house?
Some buyers like to search REALTOR.com® by looking at listings on the basis of location or price; others prefer to have local REALTORS® suggest properties; and many buyers prefer both approaches.
There's no doubt that choosing a home is a big decision and you want to do it right.
As a buyer, here's what actually happens. A home has been placed on the market for which the seller has established an asking price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller's offer and create a contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller may accept, reject or make a counter-offer.
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.
Is it THE house?
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, and so choosing a house is an enormous decision.
How do you know if a house is THE one? Probably the best approach is to look at as many homes as possible, something made easy by your REALTOR®, where you can quickly and easily view huge numbers of homes, check prices, take video tours and view extensive neighborhood information.
Can you really afford it?
Remember Step 2 - the pre-approval process? Getting pre-approved means you have a very good idea of how much you can borrow, what loan programs will most likely work best in your situation and how much home you can afford.
How reliable is a pre-approval? While pre-approval is not a loan commitment, it's still necessary for lenders to check such items as appraisals and the latest credit reports. Despite fluctuating interest rates, pre-approval nonetheless provides a reasoned, careful analysis of what you can afford. After all, loan officers are routinely paid only when loans are originated. It doesn't make much sense for loan officers to suggest high loan limits that later can't be delivered.
Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.
Realtor.com® provides consumers with extensive mortgage information as well as a variety of loan calculators. Local REALTORS® can provide mortgage information, discuss financing options and recommend loan sources. In addition, some REALTORS® also originate loans.
What kind of loan?
There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be determined by at least several key factors:
How much down? Loans with 5 percent down or less are available -- in fact, loans from major lenders with no money down have appeared in recent years (2010).
If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.
How's your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.
Are you a first-time buyer? It might seem that "first-time buyer" means someone who has never owned property before, but under most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer programs often feature smaller downpayments and below-market interest rates. For details, speak with your local REALTOR®.
How do you get a loan?
To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, the loan officer will describe the type of paperwork required.
Where do you get a loan?
Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies. A growing number of REALTORS® can also arrange financing.
REALTOR® groups, working with legal counsel, have developed forms that are appropriate for realty transactions in specific communities. Such documents include numerous sale conditions and their wording should be carefully reviewed to assure that they reflect the terms you want to offer. REALTORS® can explain the general contracting process in your community as well as his or her role.
While much attention is spent on 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.
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, the 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.
How do you make an offer?
The process of making offers varies around the country. In a typical situation, you will complete an 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 counter-offer.
Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.
How many inspections?
A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections. You can also have inspections for septic systems, radon, well water, pool, oil tanks, and others. Some towns will also have their own safety inspections.
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such 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.
No one would drive a car without insurance, so it figures that no homeowner should be without insurance.
The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
What kind and how much?
There are various forms of insurance associated with home ownership, including these major types:
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. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.
Homeowners' insurance: Homeowner's insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases 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 as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which locations require such coverage.
Home warranties: With new homes, buyers 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 the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
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.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with REALTORS®, insurance brokers and home builders.
Where to look.
REALTORS® often provide home insurance and such policies are also available from insurance brokers.
How do you get insurance?
The time to obtain insurance and warranty coverage is at closing, so speak with a REALTOR® or insurance broker prior to closing. Be sure to ask about limitations, costs, deductibles and "endorsements" (additional forms of coverage that may be available).
Step 9: The Closing
Go to any local courthouse and you can find property records detailing real estate ownership in your community -- sometimes records that date back hundreds of years.
These records are important because they provide today's owners with proof that they have good, marketable and insurable title to the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they sell.
The closing process, which in different parts of the country is also known as "settlement" or "escrow," is increasingly computerized and automated. 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.
In practice, closings bring together a variety of parties who are part of the "transaction" process. For example, while the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself, thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.
What to expect
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
What you need to do
One of the best parts of settlement is that buyers and sellers need to do very little.
Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
Step 10: The 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.
Those papers you received at settlement are extremely valuable, so hold on to them! In the short-term they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by owners as of closing and you also want services transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORSÂ® can provide contact numbers and related information.
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.
It is generally understood that sellers will leave homes "broom clean" when moving out. This expression does not mean "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.
Your home, your money
For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.
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 it.
You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that home ownership should be a wonderful experience. Enjoy!