Should I Insist on a Home Protection Plan

Several national and some local companies offer plans that give you some insurance protection for the major systems of your home. Typically they cover plumbing (including water heater), heating, air conditioning, electrical, appliances, and so forth. The idea is that for a set period of time after you move in (usually one year), should there be a problem, the home protection company will cover it (minus a small deductible). The cost is usually nominal, a few hundred dollars for a year's worth...

Additional Internet Resource

Robert Irwin www.robertirwm.com The author's Web site If you're just getting introduced to real estate, you'll quickly realize that people in this field have a language all their own. There are points and disclosures and contingencies and dozens of other terms that can make you think people are talking in a foreign language. Since buying a home is one of the biggest financial decisions in life, it's a good idea to become familiar with the following terms, which are frequently used in real...

Advisors You Might Need

Carpenter general contractor Mason (for driveways, paths, foundations) The problem is getting them to come out and look over a property that you don't yet own. You want them to give you advice, maybe a bid, before you buy. In fact, their input will help you to make the purchase decision. However, their time is scarce and they may be hesitant to come out and give you a bid on a maybe. That's why it's important to contact these people in advance and try to gain their confidence. Tell them that...

Alternative Possible Sources of Down Payment

Cash value of life insurance (borrowing on it may be inadvisable check with your financial advisor first) Refinancing or selling an auto or boat Sale of other physical assets to generate cash Sale of stocks, bonds, or other securities (first check with your financial advisor) Gifts or loans from relatives or friends Refinancing investment real estate you already own (should be done before applying for the new loan) Letter of credit or credit line from a bank (should be obtained before applying...

Are There Active versus Inactive Offices

Just as there are two types of agents, there are also two types of offices the active office where sales are constantly happening, and the inactive office where the agents sit around and commiserate with one another about the slow (to them) real estate market. There are a few good ways to tell the two types of offices apart How to Identify Active from Inactive Offices An active office almost advertises heavily. Check the ads in your local paper. An active office usually has quite a few agents...

Are There Agents Who Work for Both Buyer and Seller

There is no easy solution to the problem of agency for buyers. One answer, however, that is gaining increasing popularity in some areas of the country is to have a dual agent. A dual agent represents both buyer and seller. This agent owes both the seller and you, the buyer, integrity, honesty, and loyalty. However, unless permitted by the seller, the dual agent still may not tell you if the seller will accept a price less than the property is listed for. However, to compensate for this, the...

Be Creative Have the Seller Handle the Low DownPayment Financing for

What used to be called creative financing is nothing more than having the seller finance your purchase. Instead of going to an institution, such as a bank, to get a mortgage, the seller carries back the paper, sometimes for the entire price. However, in order for the seller to do this, he or she must have a substantial equity in the property. Often this is the case with retirees who are downsizing. They want to get a smaller home and often have their existing home paid off, or close to it....

Beware of Manipulation

What's given flipping a bad name more than anything else over the past few years are unscrupulous buyers who have manipulated mortgages, appraisals, and rebuyers. Rather than do the real work of the transaction, namely finding properties that are selling below market, they have purchased properties at actual market and then, through manipulation, sold them for above market to unwary buyers. This sometimes has been done in apparent collusion with lenders who secured higher appraisals than were...

Beware of Overbuilt Homes

You're looking at a house in a neighborhood that typically has three-and four-bedroom, single-story homes. Suddenly you come across a house with two stories and six bedrooms. The owner has added on. There's an extra bath, a remodeled kitchen. In fact, the house looks like a palace. And the price is palatial. Nevertheless, it offers so much that you're thinking of some way that you can get into it. Sell the car, the boat, the dog Work an extra two jobs Anything to get this wonderful house....

Budgeting to Determine How Big a Payment You Can Afford

__Increase after calculation for interest and property tax __Increase after eliminating voluntary deductions ___Utilities (Gas, electric, water, garbage) ___Auto (Lease Purchase pmt., ins., gas) ___Maintenance (gardening, painting, etc.) __Income Available for Mortgage Payment *It's important to remember that your net monthly income is after voluntary deductions such as 401K contributions, which can be reduced or eliminated. Also remember, some of your involuntary deductions, such as for...

Can I Find Properties Before They Are Listed

There is another category of property that, though rarer, offers potentially greater financial opportunities to you, the buyer. This is a property that has not yet come onto the market. Sellers have a world of reasons for selling. Sometimes it is a well-thought-out decision determined over a long period of time. In other cases a sudden event such as job change, illness, or death may cause a quick decision to sell. Regardless of how it happens, there is always a period of time between when...

Can I Learn to Negotiate Successfully

In the old days in real estate (by old days I mean as late as the 1950s) the Latin expression caveat emptor was often quoted Let the buyer beware. Since that time, consumer protection laws have swelled to the point where today the buyer who knows how to take advantage of these laws is protected and even has advantages as never before. However, when it comes to the actual negotiations, there are no protections for the buyer. You are at your own mercy. You can make a good deal. Or you can get...

Can I Negotiate on a New House

Sometimes you're buying a brand new home instead of a resale. The builder developer has a set price written in ink on the brochure. Either you pay that price, you are told, or you don't get the home. Right It depends. If the market is hot and new homes are selling as fast as they can be put up, yes, you'll have to pay the set price. In fact, when the market is very hot people will sometimes camp out in front of builder developers' offices for days just for...

Can I Rely on What the Lender Says

Yes, in the sense that today lenders use highly sophisticated computer models based on hundreds of thousands of actual case histories to determine what makes a successful borrower. Where you fit in that financial profile determines the maximum amount that you can borrow. And if you fit the profile of a successful borrower, chances are excellent that you will be one. On the other hand, if you fit the profile of someone who's likely to lose the property to foreclosure, then you might reconsider...

Check Out Your Inspector

Ask your future inspector for at least three referrals from past jobs. Then call those people. Hopefully, it will be at least six months or more since the inspection and they will have had an opportunity to see if something came up that wasn't initially discovered. You may get some surprising answers. Check the inspector's credentials What qualifies him or her to be an inspector Look for someone with a related degree and a broad building background such as a soils or structural engineer. Often...

Checklist for Determining Market Conditions

Are interest rates low or high, rising or falling _ Are housing inventories high and rising, low and falling __ Are listing times getting shorter or longer __ Are their housing shortages in your area __ Can more (or fewer) people afford to buy in your_area Where are you today in the seven-year cycle __ And always keep in mind Will Roger's famous quip about real estate, They ain't makin' any more of it Even if you guess wrong and buy in a down market, if you can just hang on long enough, chances...

Checklist for Selecting a Good Builder

How long has the builder been constructing new homes (Longevity is always a good sign.) Can you get a recommendation (or a condemnation ) from a relative, friend, or associate who's previously had dealings with the builder Check with the Better Business Bureau. This organization normally keeps complaints filed against businesses. Does the builder have many complaints filed Check with any consumer groups active in the area. Also check with the local office of the National Association of Home...

Comparing Adjustable Rate with Fixed Rate Mortgages

Now we're at the stage of comparing apples with oranges. However, in truth, a direct one-to-one comparison isn't usually very helpful. Rather, what's more important to most borrowers is comparing the usefulness of each type. It's sort of like saying, Do I want to eat an orange now, or will an apple taste better Here are some guidelines that may prove helpful. When interest rates are low, get a fixed-rate mortgage to lock in the low rate. When interest rates are high, consider an adjustable-rate...

Do You Negotiate from Weakness

I once had a friend who had a strong dislike for traveling in Mexico, even though her business obligations required that she routinely go to such places. Why I asked her on one occasion. The people are very friendly. The scenery in many areas is spectacular. And the currency exchange rate for Americans is often favorable. So what don't you like about it She glowered at me for a moment, then replied, In many areas, particularly rural ones, you seldom know what the price of anything is. She...

Dont Forget to Bargain on Terms

This is often the case when interest rates are higher and it's difficult for buyers to qualify for mortgages. The builder may be willing to pay down the mortgage by several points. For example, you'll get the mortgage. However, instead of paying the going rate of, say, 9 percent for the first 3 years, you might pay 7 percent, with the builder paying the other 2 percent. On a 200,000 mortgage, 2 percentage points can save you roughly 4000 a year in interest payments. But beware of builders who...

Dont Overlook the Closing Costs

Many buyers simply forget about this very real cost. Don't. Closing costs are expensive. Typically they are around 5 to 8 percent of the purchase price of the house. If you pay 100,000 for a home, expect to pay about 5000 to 8000 in closing costs. These are cash costs. You'll need to come up with them in addition to your down payment. (We'll have more to say about them in Chapter 16.) They include Typical Closing Costs When Purchasing a Home Points (percentage of the mortgage paid to the lender...

Exterior Paint Checklist

Is the paint chipped or peeling Are the colors faded (Faded colors indicate paint that is aging.) Is the caulking around windows starting to fall out Is the paint on the gutters or siding peeling In general, you need an expert to tell you if there are serious plumbing problems. There are, however, some telltale signs you can check for.

Get It in Writing

But by Thursday morning the sellers may be having second thoughts and want to start negotiations all over again. Get yourself immediately down to an attorney or agent who'll write up the deal, and then get everyone's signature. Only then can you breathe a conditional sigh of relief (conditioned on the deal finally closing some 30 days later after you get financing, the seller clears title, and everything goes according to plan).

Have You Asked the Sellers Whats Their Lowest Price

This may come as a surprise to many buyers. You mean I can talk to the seller Of course you can. The worst the seller can say is, I'm not discussing the sale. Talk to my agent. The best the seller can do is to tell you how desperate he or she is and how urgently a sale is needed and how low an offer might be accepted. TRAP AGENTS DON'T LIKE PRINCIPALS TALKING TOGETHER Your agent isn't likely to encourage you to talk to the seller. That bypasses the agent and arouses all kinds of suspicions...

Have You Tried an Appraisal Offer

A daring approach is to make an offer with the price contingent upon an appraisal. In other words, you'll agree to accept whatever the appraiser says the property is worth if the seller will likewise accept it. (Usually there are outs included, which provide that if the price is above a certain point, you won't accept or if it's below a certain point, the seller doesn't have to go through with it.) An offer contingent on appraisal (described above) is sometimes done with investment properties,...

Have You Tried Hiring an Appraiser

The trouble with hiring an appraiser is that it usually takes too much time and is too expensive (typically 150 to 300). But if you have the time and want a professionally acquired figure for the true market value of the property, you can call in an appraiser. And if the appraisal comes in low, it can provide ammunition to blast the seller down from a high asking price. Appraisers usually work on a fee basis for lenders. Chances are that if you're going to get a mortgage on the property, you'll...

Househunting Checklist

Okay, let's say that you have an idea of what you want and you're ready to look. Where do you begin Start by checking the resources you have for finding just the right house. In most cases they include checking the paper, driving around looking for For Sale signs, talking and working with agents, checking bulletin boards, talking to friends, acquaintances, and people at work and, of course, searching on the Internet (most listed homes are on the Internet either at www.realtor.com or some other...

How Big a Deposit Should I Give

Once you've settled on the price, the next consideration for most buyers is the deposit. The deposit is money that you put up at the time you make an offer on a piece of property to show that you are in earnest about buying it. (You're putting your money where your mouth is, so to speak.) Hence the deposit is actually earnest money. It is supposed to demonstrate to the seller that your offer isn't capricious. An offer can be made without a deposit. However, a seller is less likely to accept it....

How Can I Watch Out for Shoddy Construction

One of the advantages of buying a resale is that you pretty well know what you're getting. If the home has been standing for 5, 10, or more years, chances are it will stand another 30 or 40. On the other hand, when you purchase a new home, you're buying something that is as yet untried. If there are defects, they could show up in the first few years of usage. But, I hear many readers saying, aren't new homes fully inspected by city or county building departments Don't they have to meet strict...

How Do I Actually Flip a Property

The mechanics of the deal can be complicated, particularly for novices. Basically, it goes something like this. Once you locate a suitable property, you present a below-market offer. If the seller accepts, you now must quickly resell. Depending on how your offer was structured, your time period can be anywhere from a minimum of about 30 days to a maximum of about six months. You then bring in a rebuyer (one who actually purchases the property) who concludes the sale with the original seller....

How Do I Assign My Purchase

Assignment is the other method of flipping, often preferred by professionals. Here you make an offer to purchase, usually for cash. However, when you make your offer, you state that the buyer is your name or assigns or whatever language is appropriate in you state. What this means is that either you can buy the property, or anyone else you assign the contract to can buy the property. Note that in an option, you the buyer are not committed to purchase. It's at your discretion. The seller,...

How Do I Avoid Garbage Fees

There are two ways, both of which have already been suggested. First, know what the costs and fees should be. If you can't recognize a garbage fee, how can you challenge it Second, demand that all garbage fees be eliminated or at the least reduced. However, you must do this at the opening of escrow. If you wait until the deal is ready to close to try to make changes, you could endanger your loan, which could mean no deal and a very angry seller. If the lender won't dismiss garbage charges when...

How Do I Find a Good Builder

Of course, you can build it all yourself, if you happen to be a relative of Hercules. However, some of the work is extremely hard, such as pouring concrete and lifting heavy timbers. Some requires special skills, such as soldering, plumbing, and plastering. And some is just plain tedious, such as putting up siding and sheet rock. The alternative is to hire workpeople and or a builder. Unless you plan to do at least 75 percent of the work yourself, you're better off striking a deal with a...

How Do I Find the Right New Home

If you're determined to buy a new home, be prepared to spend some time looking. In most areas of the country, the era of the huge tract has given way to smaller, condensed tracts built a phase at a time. To see all of the new homes in your area, you may have to spend time traveling. Many areas have a buyer's guide to new homes a small magazine detailing the houses and their price range and show ing maps of how to get there. The Sunday real estate section of any major newspaper almost always has...

How Do I Help an Agent Help Me

Once you find an active agent, you must decide whether he or she is right for you. Watch for obvious problems such as personality clashes or basic differences in outlook. In addition, you want to be sure that the agent isn't so aggressive as to overwhelm you. You want to be able to control your agent, not the other way around. Remember, agents influence your decision by what they do or do not say. Be sure that they aren't using this power to manipulate you into something you may not want. You...

How Do I Know What the House is Worth Get a CMA

Market value in real estate is determined by comparing what's for sale with what's sold. If a house in a tract sold for 250,000 a month ago and the nearly identical house next door is now for sale, it's a pretty good guess that it, too, is worth at least 250,000. Once you find a house you are interested in, ask to see a CMA or Comparable Market Analysis. Any good real estate agent can very quickly prepare a list of all the similar homes that have sold over the past six months to a year. Check...

How Do I Make a Counteroffer

You make an offer that the agent and or attorney writes up. The agent presents the offer as soon as possible to the sellers. The sellers either accept the offer exactly as presented or turn it down. If the sellers turn down the offer, they can make a counteroffer to you. (They can't both accept and counter.) You may now accept their counteroffer exactly as written, or turn it down. If you turn it down, you may counter back. (You can't both accept and counter.) This countering can go on almost...

How Do I Offer an Option

Real estate options are not much different from stock options. For the buyer, they are an opportunity (but not a requirement) to purchase for a set price at some future date. For the seller, they are a commitment to sell for a set price at a set date. Note, an option is not a purchase. Rather you are buying an option on the property getting the right, but not the obligation, to purchase sometime in the future. For this privilege you would normally give the seller some option money, perhaps 1000...

How Do I Separate the Active from the Inactive Agents

How do you get one First off, remember that active agents are active. Has a number of properties listed Always working tirelessly, including evenings and weekends Extremely familiar with the market in your area Ready and able to refer you to numerous buyers from sales they've made in the past few months Busy with real estate (but not too busy to show you houses) TIP GET A RESPONSIBLE RECOMMENDATION A recommendation from a friend is a good method of finding the active...

How Do I Sniff Out the Areas

Once you've whittled down the general areas that are in your price range, do some investigation on your own. First, drive the areas. You should look for how people keep up their properties. Are all the lawns nicely mowed Or are there broken cars and auto parts strewn across lawns Watch for broken fences, scattered trash, and graffiti sure signs the neighborhood is going downhill and may be unsafe. Check the public transportation. Stop at the bus or train station and talk to people. Find out how...

How Is the Division of Closing Costs between Buyer and Seller Handled

Usually the party (buyer or seller) who pays for the escrow and title insurance is determined by custom in the particular area. Sometimes it is customary to split these costs with the seller. Other times, either the seller or the buyer pays all of them. You will be pressured to follow custom for your area. You don't have to, however. Remember, virtually everything is negotiable in real estate. As part of the escrow charges there may also be other prorations of interest, taxes, rents, and...

How Much Should I Offer

Sellers in most markets ask more that they are willing to take for their homes. They are expecting to come down some, hence the above-market asking price. If you pay what the seller is asking, you could be wasting money. The real trick is knowing how much less than asking price a seller will take. Sometimes a seller will only come down a few thousand dollars. Other times they may drop 10 percent or more. And, of course, there's that occasional seller who refuses to come down a dime. (And in...

How Much Will It Cost to Fix Up

There is an apparent contradiction in the fact that the house that looks the worst, a cosmetic fixer, often costs the most. The trouble arises from the fact that today sellers are sophisticated enough to know that cosmetic fixes are cheap and easy to repair, and they simply don't want to give up any of their profits. Often, in order to get a really good deal, you'll have to buy a house with very serious problems. Of course, that may be simply biting off more than you can chew. One excellent...

How to Avoid Getting Gouged at Closing

They are the transaction costs of buying real estate that we all would rather do without. Nevertheless, closing costs do exist, and sometimes they are abused. It's important to understand that closing costs are not completely regulated. Lenders can sometimes charge what they want, leading to so-called garbage fees or unnecessary charges that only benefit the lender. (What are garbage fees is open to interpretation I give you my take on it throughout this...

How to Compare Variable Rate Mortgages

Variable-rate, also called adjustable-rate, mortgages (ARMs) can also be compared, except that many more factors are involved. The first thing you'll notice is that the interest rates usually will seem much lower for ARMs than for fixed-rate loans. Once again, don't be fooled. Remember, compare apples with apples, not with oranges. The low initial interest rate (often called the teaser) is the traditional appeal of ARMs. As such, they appear to be giving you a better deal. But it isn't...

Info

Buying a Lot, Building a Home Yourself, and Saving Why buy someone else's home when you can design and build your own You'd certainly be the rare person if the thought hadn't at least crossed your mind at some point in your life. It's the secret dream of a great many of us. I know it was the dream of my wife and myself when we first did it years ago in the Sierra woods of Northern California. The lessons we learned, as well as those of other self-builders with whom I've talked, can be extremely...

Interior Paint Checklist

Are there marks on the walls Is the current paint flaking, indicating it will have to be sanded before new paint can be applied Are the colors light or dark (Covering dark colors may require two or more new coats.) Is there lead in the paint (You may want to have it tested. Homes painted prior to 1978 often have lead paint in them. Your agent should be able to suggest a lead testing company nearby or check with www.epa.gov.) Exterior. Weathering is the problem here. Even the best paints...

Is a Larger or View Lot Worth it

If the price isn't that much more, go for it. For example, a lot with a view or a larger lot may cost 3 percent more than a standard lot. Usually this will pay in the long run. On the other hand, back off if the price is excessive. Keep in mind that if you buy a view lot, it may be the best money you can spend. If you're in an area where view lots are prized, you could get it back several times over when you sell. On the other hand, beware if you buy a larger lot. Unless you landscape it so...

Items to Watch Out for in a Final Walk Through

Holes in wall, broken plaster Inoperative or broken appliances such as stove, garbage disposal, and oven Faulty or broken water heater (as evidenced by no hot water), gas heater, or air conditioner. Check to see that the heater heats and the air conditioner cools. Gashes, slashes, or marks in wood floors that will require redoing the floor Damaged or inoperative light fixtures Broken or inoperative heating or air-conditioning thermostat Leaky plumbing, as evidenced by new water marks or water...

Life Is Making Choices

In later chapters we'll see how to get sellers to reduce their price. We'll look at mortgages that require nothing down, indeed, that even pay some of your closing costs We'll see how to rent-to-buy. And more Nevertheless, at some point you'll have to return to the above comparison and one way or the other, make What's left for me to live on fit under, What I must have to live on. You might want to come back to this chapter several times as you go through this book...

New Home Checklist

Three or four is often best for resale, two may restrict your ability to resell quickly, five could make the house overbuilt for the area.__ Number of bathrooms. Two is minimal, three is better, four could be overkill.__ Ceilings. High ceilings are in vogue. A better house will have at least one room with vaulted ceilings, usually a living or family room._ Kitchen. Large and well-equipped kitchens sell houses. If your kitchen has an island in it complete with a stove, all...

New Home Neighborhood Checklist

Are the local schools good (You can ask to see their scores on standardized tests to judge.) Are the schools nearby Are there day-care facilities nearby Is the area relatively crime free (Check with the police department's Public Affairs officer, who can usually give you crime statistics down to the block.) Does the police department seem Is there adequate fire protection (Check with your insurance company for fire ratings in the area.) Is shopping nearby Is there a hospital nearby Is the...

Other Related Organizations

Provides information on real estate (fee) National Association of Realtors www.realtor.com,www.realtor.org. Provides information on members, homes for sale, and other data Real Estate Services Providers Council www.respro.org Provides information on news regarding home closings and other aspects of real estate The legal description www.thelegaldescription.com Provides information on legal news regarding home closings

Pros and Cons of the Option

You've tied up the property at a fixed price. You don't have to qualify for or obtain a mortgage. You also don't have to come up with a down payment. You don't own the property, so you're not responsible for mortgage payments, taxes, insurance, maintenance, or repairs. You've got a relatively small amount of cash tied up. But the money you put up is at risk if you can't find a rebuyer and exercise your option. If you don't exercise your option before it expires, you lose your option money (the...

Reducing or Eliminating the Closing Costs

It's possible to get your closing costs reduced, eliminated, or deferred. One method is to have your mortgage amount increased to cover the closing costs. You are getting a 100,000 mortgage with 5000 in closing costs. This is converted to a 105,000 mortgage with no closing costs. Check with your lender to see if it can be done. Another option is to have the lender roll the closing costs into the loan. You end up with a slightly higher interest rate (around 3 8 percent more), but the lender...

Rely on Yourself

If you've been looking at homes for a while, you should have a pretty good idea what similar houses are listed for. This gives you a good idea of the price range your prospective house is in. TIP HOMES RARELY SELL FOR LISTED PRICE Selling prices and listing prices are usually different. In most markets they sell for less than listed. In some hot markets, of course, they may actually sell for more Check the comps. Ask your agent to let you see the selling prices of similar homes going back at...

Should I Ask the Sellers for a Second Mortgage

If the sellers are willing, it's probably the best mortgage you can get. There's usually no qualifying and you can bargain for the interest rate. (You might offer a slightly higher purchase price for a lower interest rate.) Many sellers, however, cannot give a second mortgage because they need to cash out in order to buy another home. Others are reluctant, fearing you might not make the payments and they would have the considerable expense of foreclosing and taking the property back. You can...

Should I Get a Home Inspection

Just because it's a new home, that doesn't mean it's built right. You should have it inspected both before you move in, and if possible, several times during the construction phase. A good builder will not only allow you to do this, but will encourage you to do it. A professional home inspector (see Chapter 15 on finding one) should be able to give you all sorts of help here. You'll want someone with strong construction background who can check everything from the pouring...

Should I Go Along with the Inspection

It's the only way you can really learn what the home's problems are. An inspection is both oral and written. In the oral part, the inspector describes problems to you as you go through, under, and over the home. You can ask questions and can often get useful information on how to correct a problem as well as how much that correction will cost. A written report, on the other hand, is often more formal. These days many inspectors are afraid to write down any but the most glaring of problems for...

Should I Insist on a Final Walk Through

You see the property before you make the offer. The offer's made and accepted. Then there's a wait of a month or so while financing is arranged, title is cleared, and so forth. Now you're ready to close the deal. But how do you know that the property is now in the same condition as when you first saw it How do you know the seller hasn't smashed holes in the walls and broken the appliances (Unlikely, but it does happen.) How do you know there aren't scratches on the floor, damaged sinks and...

Should I Lowball the Seller

You can't very well go lower after you've previously made a high bid you would lose credibility and the seller's interest. However, if you bid too low initially, the seller may not believe that you're in earnest in buying the property and may simply turn your offer down without even a counter. Which brings up the biggest risk when lowballing, you may lose the property entirely. Now it's a matter of understanding yourself. From an investment perspective, it's...

Should I Work with a Buyers Agent

As if it isn't confusing enough already, there is yet another designation of agent we've hinted at, a buyer's agent. This is an agent who truly works for you, the buyer. (After all, if sellers can have their agents, why can't buyers ) There's are some good reasons to work with a buyer's agent. After all, it's the only way you can be sure the agent is on your side. Remember, a true buyer's agent has a fiduciary responsibility to you, not to the seller. Such agents must tell you everything they...

Steps to Quicker and Easier Home Buying

Imagine trying to win a game of football without knowing the rules. You'd send your team out into the field not knowing the difference between quarters or innings, how many points you would get for a touchdown or a field goal, or even which direction to run It wouldn't matter how professional your team was. If you didn't know how the game was played, even a grammar school team could beat you. Real estate is similar. Buying a home is not like buying anything else. It's not like buying a car, or...

Technique 4Improve Your Income Expense Ratio

You shouldn't fudge, but how you express your income can make a difference. When filling out a mortgage application it usually pays to emphasize length and continuity. For example, you're a teacher who has gotten his first job in years just a month ago. The lender is bound to wonder if you will succeed at the work. However, if you note that you were a teacher with nine years experience a decade ago before leaving the field to help raise children, it can help put your application in a whole new...

Technique 5If Youre Self Employed Try NoDoc LowDoc Loans

How you receive your income is important, too. If you work for an employer and receive wages (meaning a W-2 form at the end of the year), you get preference mainly because it is easy to verify your income and because, presumably, you have something called job security. On the other hand, if you're self-employed, you may be turned down. Usually, at minimum you will be asked to produce the last two years of 1040 tax forms. However, in some cases of self-employed individuals, this may not tell the...

Technique 6Pay Off Excess Debt

In calculating how a big a monthly payment mortgage to give you, lenders take into account your available income. However, the more debt you currently have, the less income is available to pay the new mortgage. Therefore, when possible, pay off as much of your short-term (such as from credit cards) debt as possible. That way you increase your income (less is set aside to pay for the short-term debt) and you may have a better chance of qualifying. There is a downside to this, however. The more...

Technique 7Put More Money Down

I've emphasized in this book that low-down financing is readily available today 10 percent down, 5 percent down, nothing-down, 103 percent financing. However, to get this requires increasingly better credit. On the other hand, if your credit isn't wonderful, then you can still get a good low-interest-rate loan if you're able to increase your down payment. Put down 20 percent and lenders will love you. Put down 30 percent, and you should be able to get an equity loan from a lender no matter how...

Technique 8Borrow Early for the Down Payment and Closing Costs

Ideally your down payment and closing costs will come from your own funds, earned over the years and set aside as savings. Borrowing the down payment can be a problem. Borrowing the down suggests to the lender that you really can't afford the property. Let the lender know you're borrowing your down payment and you almost certainly will be scuttling the loan. Therefore, if you need to borrow money that you intend to use as part of the down payment, do it well in advance of applying for the...

The Hardest Part

Probably the hardest part of buying a fixer is getting the seller to accept a reasonable price. (Refer to our earlier formula for determining how much to pay.) Sellers have heard that property prices have gone up. And they want to participate on the boom. Of course, they don't want to realistically discount their property because of the poor shape it's in. All of which is to say, plan on doing lots of negotiation. And plan on making lots of lowball offers, most of which won't be accepted. Just...

Third Edition

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Tile Roof Checklist

Are any of the tiles broken Are there any signs of leakage in the ceiling or walls inside the house Interior. In a resale, don't expect to get a house that doesn't require repainting. As noted in an earlier chapter, as soon as the seller's furniture gets moved out, you're going to see whole areas that need repainting. The only question is Will you do it or will the seller

Tip 11Keep to the Same Document When Possible

It is good strategy to make the counteroffer (either your own or the sellers') on the same document as the original offer. The reason is psychological. When the sellers counter on the same document, even though you may know that their counter rejects your original offer, using the same document makes it somehow seem like you're closer than before. When you counter the sellers' counteroffer, putting it on the same document does the same thing for the seller. Some agents use sales agreements that...

Tip 1The Terrible Offer

Some buyers will purposely make very unfavorable offers to sellers in the hopes they would counter with a compromise offer that was still far below what they were asking. This is a strategy, also called low-balling the seller, which sometimes works. However, it is also fraught with peril. Remember, the seller may be insulted by the low offer and simply turn it down out of hand and not counter at all, which could end negotiations. If you accept this risk, however, and the seller does counter,...

Tip 7Dont Let Agents Bully You into Giving More Time

Sometimes agents will encourage you put in a long period of time four to five days or even a week for acceptance to take place. They may say that it will take that long to convince the sellers to sign. This approach makes sense only if the sellers are out of the country, maybe off the planet Even then it may only be marginally good advice. Remember, the more time the sellers have to think about it, the more time for them to talk themselves out of accepting it. And the more time there is for...

Tipbe Your Own Contractor

If you do most of the work yourself, you can hire workpeople to do the remaining chores for you. You can do, essentially, what the builder does. You can hire carpenters, plumbers, roofers, tapers, and so forth. However, those you hire typically work on a per job basis instead of an hourly basis. They will want to see your plans and then will bid the job. If they see you're inexperienced, they may give you a high bid. To avoid this, be sure that you get at least three bids for each job.

Tipbuying Later In A New Development Can Pay

Many new developments are built in phases. If the initial phase is successful (a good neighborhood), the later phases usually turn out similar. If you can get a later-phase home at an earlier-phase price, you could be headed for a profit-making deal. Real estate is a localized market. That means that you cannot say that something is true at any given time for all parts of the country. While Southern California, for example, or New York may see property values skyrocket, at the same time parts...

Tipfollow Interest Rates

If you're concerned about the market, be sure to check interest rates regularly. When they are falling, it's almost a sure sign that soon, if not already, prices will likely rise. When they are rising, watch out. Real estate does not like higher interest rates, and a slowdown could be imminent. In a hot market, prices go up for both resales and new homes. When you are seeking a new home in a hot market, the odds are set against you. You are competing against other buyers for relatively few...

Tipget Them Customized

Even if you order plans through the mail, you will probably have to modify them to accommodate your building site. Why not hire a local architect on an hourly basis to modify these plans The cost can be a fraction of what drawing up a set of plans from scratch would be. Custom-made is the most expensive way to go, but you can arrive at a unique and well-built house. You hire an architect to draft a set of plans for you. Typically, the cost is 3 to 5 percent of the cost of building the house....

Tipnew Homes Are Cheaper To Operate

As a rule, new homes will have newer and more efficient heating and cooling systems, more insulation, better windows (double pane and low-E), tighter weather stripping, and so on. This all translates into lower energy costs. While the salespeople in the office try to get you to make a quick decision, remember that you usually have plenty of time. You can leisurely shop around, going from model to model until you find just the right home for you. Once you find it, you can often negotiate more...

Tips for Making Successful Counteroffers

Some people say that writing is, in reality, the art of rewriting. In real estate it's similar. Getting the deal you want isn't just in the offer you make, it's also in the counteroffer. Counteroffers occur when the seller turns down your original offer, but then sends you back a sales agreement that offers different price, terms, or virtually anything else that departs from your original offer. It is at this point that negotiations begin in earnest. How well you respond to the seller's...

Tipsometimes Youll Want To Renegotiate

Nonetheless, buyers have used faults found on the final inspection to attempt to back out of a deal at the last minute. (Their reasons can vary from finding a serious fault in the property, to finding another more preferable house.) My suggestion is that if you want to renegotiate based on the final walk-though, you better have found some serious problem with the house, or else you'll have an angry seller to contend with. Sometimes agents will suggest that a specific date for the final...

Tipstretching Makes Sense In An Up Market

If you are looking at homes after having been out of the market for quite some time, you've probably run into sticker shock. The prices for today's home can be much, much higher than you paid for your old castle. However, your income may have increased sufficiently to handle the new price payments. Further, even if you have to stretch to make the payments, if the market is moving up, it might be worthwhile. In a rising market, the value of your new home, and your equity, will quickly grow.

Tipthe Simple Way To Avoid Occupancy Problems

There's an easy way to help ensure that there is no problem with occupancy. Be sure that the purchase agreement specifies that the sellers are to be out by the time escrow closes, preferably at least one day in advance of the close. Then, before signing all of the loan documents that buyers usually sign, check to see that the sellers have complied. If the property is empty, it's a good sign that the sellers are out, and you're free to sign. If they're not out, it could be a problem, and you may...

Title Insurance Escrow Organizations

ALTA form www.alta.org store forms homeown.pdf Provides the basic form for ALTA policies American Escrow Association http www.a-e-a.org A major escrow trade association American Land Title Associations www.alta.org A major title association trade association California Escrow Association www.ceaescrow.org California's trade escrow association California Land Title Association www.alta.org store forms homeown.pdf California's trade title association Chicago Title Insurance Company www.ctic.com A...

Trapbe Careful When Comparing Mortgages

The best way to compare interest rates is to do it for like-kind mortgages. You don't want to compare apples and oranges. Today there are two major kinds of conventional (nongovernment insured or guaranteed) mortgages available a fixed-rate mortgage, where the interest rate does not change for the life of the loan and a variable-rate mortgage, where the interest rate can change. When you compare mortgages, be sure you compare fixed-rate to fixed-rate and variable to variable. (There are so many...

Trapbeware Of Being Simply Qualified

On the other hand, a mortgage broker or even a real estate agent can ask you a couple of financial questions over the phone and then send you a pre-approval letter. However, if your credit report wasn't checked, if your income and assets weren't verified, if underwriting standards weren't applied (and if it wasn't issued directly by a reputable lender), it probably isn't worth the paper it's written on. The reason is simple no lender will back it up.

Trapbeware Of Hot Markets

During the very hot markets of the first years of this century, prices and sales continued to rise even at year's end Try to avoid buying in late spring and early summer, specifically the months of April, May, and June. Historically, 30 to 40 percent of all homes (new and resales) will be sold during those three months. They are the peak selling times. A big reason that April, May, and June are such good sales months has to do with school schedules. The school year is ending and families with...

Trapbeware Of How You Pay And To Whom

Most builders will want you to sign a building agreement in which you agree to provide them a series of payments out of which they will pay their workers and their materials suppliers. However, if you pay the builder and the builder does not pay the workers and suppliers, you could still be liable for full payment to those workers and suppliers. (They could file mechanic's liens on your property and force payment, even if you have to pay twice ) Your only recourse, in such an event, may be to...

Trapbeware Of The Big Balloon Payment At The

On short-term fixed-rate mortgages, if it turns out that you can't sell or refinance as you planned at the end of the term, you could lose the property to foreclosure You're gambling a lower interest rate on future market and personal financial conditions. Therefore, make sure a shorter-term mortgage includes an automatic refinancing option at the end. Usually this is an ugly adjustable, but at least if worse comes to worst, you won't be without a loan. Hybrid mortgages are available from...

Trapbeware When Borrowing The Down Payment

Many of the sources of cash listed involve borrowing. However, many loan programs restrict the borrowing of funds for a down. (Not all some Fannie Mae and Freddie Mac programs specifically allow it.) Be sure to check with what your lender requires. If you do borrow your down payment, it's a good idea to borrow it at least three months before you enter into a transaction to purchase a home. That way, you'll have the cash in hand and borrowing will show up as an existing loan against your credit,...

Trapbut Will I Do A Good

Chances are you can't do it better than builders whose profession is putting up homes. They know materials and labor, design and construction, as well as where to cut corners and where to be lavish. But what you can offer that they can't is your own unique approach. A lot of room (Sometimes a minus in the city, but usually a Good building soil (It's harder to build in a swamp or rock country.) A lot of level ground (It's also harder to build on a mountainside.) In the city it's something we...

Trapdo Your Homework On A Condo

If you buy into a condo co-op, expect to spend some time on the homeowner association (or board of directors) just for self-protection. If you don't, you'll find that the HOA or board is always doing something that you consider ridiculous and that you don't like. If you're an owner, you'll want to be a part of decisions that affect your home and its value. On the other hand, be aware of HOA burnout. This comes after you've been a member of the board for a year or two and found that you can't...

Trapdont Expect An Allowance

So, you don't like what the builder offers And chances are you don't like the upgrade prices So what do you do The most logical thing is to tell the builder no thanks and that you'd like an allowance for his cost of materials. You'll go out and buy your own. Not a chance (in most cases) Most builders will not give you an allowance against standard items. There are several reasons that builders limit the changes and upgrades you can make. One is cost. They get guaranteed estimates from a few...

Trapdont Get Suckered

It's important to understand that builders and developers like to create the impression that nothing is nego-tiable either you take their price or you don't get the house. That's part of the reason for the elaborate brochures. The truth, however, is that builders are real estate sellers just like any other. When builders need to get rid of homes, they will negotiate down to the bare bones, regardless of what the brochures say. The way you negotiate with builders is to say that you would like to...

Trapdont Get Upside Down

This is real estate jargon that means that it will cost you more to sell your house (after paying off your mortgage, closing costs, and commission) than your house is worth. The trouble with a declining real estate market is that you don't know, and no one can tell you, how far it will fall before it reaches bottom and rebounds. If you buy on the way down, you will lose. Therefore, if the market is declining instead of buying, you may want to rent, at least temporarily. While renting doesn't...

Trapdont Rely On Secondhand Information

You can only get the answer to how big a loan and monthly payment a lender will offer from a lender. Don't make the mistake of thinking you can fill out a quiz in a book, go through some formulas, and get that information. Neither I nor any other author can realistically tell you what you can afford without knowing your specific financial information and without submitting that to a lender. Therefore your first step is an easy one. You find a lender and get pre-approved. (This is something you...

Trapexpect Dirt And Minor Damage

Don't expect the property to look as clean as it did when you first saw it. If the seller was living in the property when you first saw it, carpets and furniture hid a lot of marks and scuffing. Once the furniture and carpeting are removed, these stand out like sore thumbs. Dark scratch marks on walls and scrapes on floors are common. Indentations in carpeting where heavy furniture stood are also common, as is some slight discoloration. (Most of this carpet indentation will tend to disappear...

Trapits Not Time To Renegotiate The Deal

It's important to understand that a final walk-through is not supposed to be an opportunity for you to reconsider your purchase or reopen negotiations. It is just supposed to be a chance for you to examine the property to see that it's as it was when you originally made your offer. Most savvy sellers will include a clause stating that if something of consequence is found wrong, the sellers have the right to correct it that the final walk-through is not intended to be a new beginning in...

Trapput Your Best Foot Forward When Buying A Coop

When buying into a co-op, expect to have a meeting before the board in which you will have to show why you would be financially capable of being a good owner. Although discrimination based on gender, race, ethnic background, medical problems, or other similar concerns is prohibited, nonetheless, some boards have discriminated. Thus buying and later reselling your unit is potentially made harder. Further, in some parts of the country, such as west of the Mississippi, getting financing to buy a...

Traptenant Agreements Can Lead To Problems

Let's say the sellers want to stay after the close of escrow, after ownership transfers to you. They then become tenants with all the rights that tenants have. They might not move as agreed. They might leave the property a mess. You can somewhat reduce these problems by having the sellers sign a strong tenant's agreement, along with rent sufficient to make your monthly payment, and a hefty security deposit to cover breakage and cleaning. However, if they refuse to move as agreed, you might...