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...

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 Afford to Buy a Home

Once the decision to investigate buying has been broached, it becomes a matter of determining what you can afford. To find out, most prospective home buyers usually begin the traditional task of putting together a budget of their income and expenses. Their two big questions are, How much money will I have to put toward a monthly payment How much money do I need for a down payment and closing costs Unfortunately, this is like putting the cart in front of the horse. My suggestion is to stop, take...

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 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...

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...

Credit Bureaus and Organizations

Consumer Data Industry Associations http www.cdiaonlme.org Information on credit reports and credit laws Fair Isaac (credit scores) www.fairisaac.com Main credit scoring organization Federal Trade Commission www.ftc.gov Handles credit reporting complaints Trans Union www.transunion.com National credit reporting agency

Do I Understand Prorations

Typically there are always some items that are prorated, such as taxes, fire insurance, or interest on a mortgage you might be assuming. This means they are adjusted based on who owes them. For example, a fire insurance policy is typically written and paid for at least one year in advance. However, the house may be sold after the policy has been in effect for only three months. You, the buyer, may be taking over the policy. In this case the seller will undoubtedly want to prorate the cost of...

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...

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).

Government Agencies

Housing and Urban Development www.hud.gov Information on government programs, including those involving settlement closing procedures Federal Housing Administration Information on FHA loan insurance and housing programs Information on VA loan guarantees and housing programs

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 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 Find an Active Agent in an Active Office

If you walk in off the street and into an active real estate office (see above), chances are actually against your getting an active agent. The reason is that all agents pull floor time. This is time they are expected to sit in the office and pick up potential clients who come in across the transom. You walk in and you get the current floor agent or, if there's a receptionist, the next agent who is up. You'll immediately know this person. How While other people in the office smile at you, this...

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 Negotiate in Real Estate

Which brings us back to buying a home. Here, everything is nego-tiable the most important items usually being the price and the terms. If you're a good negotiator, you may end up paying 5 to 30 percent or more below what the seller is asking. Negotiation is an inherent part of buying real estate and if you're going to participate, you should plan on learning the basic skills. At this point, I'm sure some readers are saying, Hold on. I worked with an agent when I bought my last home. The agent...

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 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 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...

How to Get a Good Deal in Rising or Falling Markets

There are good and bad times of the year to buy, and there are good markets and bad markets. If you can, probably the best time of the year to buy your home is in December, preferably during the last two weeks of the month when everyone is fussing about the holidays. Historically, there are fewer home sales between Thanksgiving and New Year's (by a wide margin) than any other time of the year, simply because fewer buyers are out looking. Most buyers get involved with the holidays and put off...

How to Get a Lender to Put Up All or Most of the Money

Nothing-down financing does it really exist Or is it just a buzzword used by real estate gurus selling you a seat in a seminar or a tape on late-night TV Today, it really does exist, for some buyers. And that's a good thing, too. Most people who want to buy a home often find that the biggest roadblock is coming up with the cash down payment. (So if you're feeling the pinch, rest assured you're not alone ) Let's face it we live in a credit society. A family with a 100,000 annual income can...

Info

How to Lowball Sellers and Get Your Offer Accepted I've never heard of a buyer who boasted about paying too much for a home. We all want to get the lowest price we can, a price that we feel makes the property a good value at the least, a bargain at best. But how do we achieve that If you ask your agent, you may meet resistance. Most agents would prefer an easy negotiation, which means that you come in at close to full value. (Remember, an agent doesn't normally get paid unless there's a sale.)...

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...

Mortgage Closing Costs Fees Checklist

Assumption Fee If you're assuming an existing mortgage, you will undoubtedly have to pay a fee. It's typically in the 100 or less range. However, most loans today are not assumable. Document Preparation Fee A garbage fee paid to the lender for preparing the loan documents. Since the lender is making the loan and since it takes only a few taps on a computer keyboard to spit out the documents, in this author's opinion it's absurd to charge a high fee for it. Points A point is equal to 1 percent...

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

Should I Agree to an Arbitration Clause

Some sales agreements contain arbitration clauses. Typically these refer only to the deposit, but in some cases they may refer to other areas. Basically what they say is that if there is a disagreement, you will submit it to binding arbitration you will go along with whatever an arbitrator says. Keep in mind that you could be giving up significant rights if you sign an arbitration agreement. If the seller refuses to go through with the deal after you've made all sorts of commitments (from...

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...

Should I Write in Personal Property That Goes with the Sale

When you purchase a home, you are basically buying real property. Loosely defined, real property is the land, the house, and anything that's permanently attached to it. For example, the windows in the house are real property. Personal property, on the other hand, is everything else. Furniture is personal property, as are dishes, clothes, and most things that you can take with you. For most things the definition of what's personal and what's real property is easily grasped and readily agreed to....

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 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...

Technique 9Hang onto Old Credit Card Accounts

Lenders want to know that you've been successfully borrowing for a long time. That tells them that you're a good money manager. To determine this they look at your oldest trade lines (credit cards). The older the better. I've had credit cards for over 20 years. When I recently applied for credit, it was noted that I didn't have long-term cards. Long term meant 30 years or more Hang onto your old credit cards. Keep a credit card that you've had for years, even if a new credit company offers you...

The Big Problem with Flipping

Almost all sellers have a kind of personal relationship with the buyer. They want to know who's buying their property. (This is even the case with lenders, which almost always insist on knowing exactly whom they're dealing with.) When you assign the purchase agreement, you break that bond. Many sellers, nevertheless, are willing to go along provided the deal concludes in a reasonable fashion. After all, they're still getting a sale out of it. Many lenders will not, so your rebuyer may have...

The Effects of Dealing with a Sellers Agent

Unless the seller has authorized it, your seller's agent can't disclose how much less than the selling price the seller might take, even if the agent knows of a specific figure (This isn't to say that many agents don't hint at the lower figure, but they aren't supposed to come right out and tell you, for example, that the seller said, My price is 100,000, but I'm so desperate to sell I'd take 75,000, but don't you dare tell that to any buyer ) The agent can't disclose that the seller might...

Tip 12Know When to Stop Countering

Sometimes you and the sellers are so far off on price or terms that it becomes obvious that there is no real room for compromise. For example, the best offer you can make is 212,000 and the best counter the seller can make is 250,000. Sometimes you have to accept the fact that not all deals can be made. Refusing to counter can also be a bargaining tool. After several counteroffers you're still apart on price or terms. Instead of accepting the sellers' most recent counter, you do a walkaway and...

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 6Pay Attention to Timing

When you make an offer to a seller, it is open ended. That means that you've written down the price, the terms, and any other conditions that you want, and that you agree to be bound by them. If the seller accepts and communicates that acceptance to you, you're on the hook. However, things change. The house you're in love with today may not be so appealing tomorrow. Yet another home may come along that really turns you on next week. Your financial condition could change. Therefore, you don't...

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...

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...

Tipits Not Simply Cosmetic

My wife and I have a running battle over what constitutes a fixer. She feels that if the paint isn't new and there are one or two cracked counter tiles, it's a fixer. I, on the other hand, maintain that the property has to have a big enough problem that no one will pay full price for it obsolete kitchen bath, broken doors in interior, cracked foundation, and so on. Her complaint is that no one will come down on the price for what she considers a fixer. Mine is that they often won't come down...

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...

Tipthe Best Attorney Price In Town

On the East Coast, the usual price for having a real estate attorney handle all the paperwork in a typical transaction is between 750 and 1500 (depending on what's involved). Today the many new fee-for-service agents charge similar amounts (see Chapter 6). Keep in mind, however, that while attorneys that handle real estate transactions are found all over the East Coast, they are seldom found in other parts of the country. Fee-forservice agents, however, are cropping up everywhere. If the seller...

Tiptrade Closing Costs For Cash

Remember, the closing costs are cash. However, sometimes they can be financed. You offer the seller a good price (assuming the property appraises out) and get a big loan, sometimes for the full value of the home (see Chapter 4). In return, the seller pays your cash closing costs. Of course, some buyers who are very tough negotiators argue for it all good price, good terms, and seller pays closing costs As I said, in a bad market where houses just aren't selling, sometimes desperate sellers will...

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...

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 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...

Trapdont Count On The Inspectors

Don't count on the local building inspector to ensure that everything is done right. Building inspectors can't watch everything all the time. If you don't know how it should be built, hire someone who does to supervise the job. Plan on spending more time than you first estimate. Workers don't show up on time. Building materials are delayed getting to the site. The weather turns against you. To be perfectly safe, use a rule of two. It takes twice as long to do anything as you think it will....

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 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...

Trapdont Waive Your Rights

As part of the warranty, some builders have the buyers sign a statement that they waive all implied warranties. In the states that permit this, if you sign such a statement, you may give up more rights than you get, since the implied warranties may be stronger than the builder's specific warranties. If a builder insists you sign a waiver statement, you may want to consider a different builder and house. At least check it over with your attorney. Under a builder's warranty, you have to go back...

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...

Trapwhen Interest Rates Are Low Lock Them In

Variable interest rate mortgages always offer lower rates. But the variable rate will rise when the interest rate mar-ketgoes up. It's usually better to lock in a fixed-rate mortgage when the interest rate market is low, rather than to try for an extra point or so by getting a variable rate. There are also numerous online lenders such as eloan.com and mortgage.com that post their current interest rates. These are very easy to check simply by going to their Web site. Major online services such...

Trapwhose Title Company Is It Anyway

There are lots of title insurance companies. Sometimes the agent will prefer a specific company. That may be because the title company is giving them perks or because the real estate agency owns the title company. (Perks might be something as innocuous as free stationery.) The relationship between the title company and the agent should be disclosed to you and you should be given the option of going elsewhere. Since for practical purposes one title company is usually as good as another, it...

Trapyou Pay For It

Expect to pay for your home inspection, probably around 250 to 350. And usually the inspector wants to be paid at the time the inspection is completed, sometimes in cash Make sure to arrange for how you'll pay in advance so you don't get a nasty surprise. The time to insist on a home inspection is when you make your initial offer. Write it into the sales agreement. Make sure that it's a contingency of the purchase. (See Chapter 10 for a description of contingency clauses.) Sellers are almost...

Trust Deed

A three-party lending arrangement that includes a borrower, or trustor an independent third-party stakeholder, or trustee (usually a title insurance company) and a lender, or beneficiary so-called because the lender stands to benefit if the trustee turns the deed over in case the borrower fails to make payments. The advantage of the trust deed over the mortgage is that foreclosure can be accomplished without court action or deficiency judgment against the borrower. (In other words, if the...

What About Arranging for Inspections and Getting Repairs Done

No agent Then it's up to you or the seller. It's a good idea to get an initial understanding between yourself and the seller on the delegation of responsibilities. The last thing you want is to think that the seller is doing something while, in reality, he or she thinks you're handling it. Your fee-for-service agent, your attorney, or your escrow officer can come up with a good list of things that need to be done in order to close escrow. Then delegate who will do...

What About Biweekly Payments

Popular a few years ago, some biweekly mortgages are still around. Here, instead of paying your mortgage each month, you pay half the monthly amount every other week. The result is that you actually pay an extra month each year. (There are 12 months, but 52 weeks in a year, meaning you would make 26 biweekly payments which equals 13 months.) Over the long haul, that extra month means you end up paying more in principal each year, which means much less interest down the road. This works for...

What About Buying a New Home When the Markets

A hot market can be the most difficult time to buy a home. Hot markets have occurred on both coasts at various times over the past 50 years, the most recent starting around 1998 or 1999, depending on your area of the country. What happens in a hot market is that there are more buyers than there are homes available for sale, both resales and new. (Part of the reason is that prices are perceived to be going up, and speculators enter the market. Also, there may be a shortage of homes in your area...

What About FHA or VA Loans

The government, except in some rare instances, does not lend mortgage money directly to consumers. It does, however, insure or guarantee lenders, who thus are willing to give you a mortgage, oftentimes at better than conventional nongovernment rates. FHA mortgages are insured by the government and are offered through most lenders, such as banks. Generally the down payment is low, under 5 percent. The interest rate, however, is usually competitive with conventional loans. The big problem with...

What Are ARM Indices

Adjustable-rate mortgages are all tied to an independent (of the lender) interest rate index. These indices rise and fall along with other interest rates and, accordingly, so does the rate on your mortgage. Ideally, most borrowers want an interest rate that has the least volatility so your mortgage payment won't bounce around too much. On the other hand, lenders want a more volatile interest rate that more closely corresponds to changes in the market place. Libor index (London Interbranch rate)...

What Are Contingencies

A contingency clause is essentially any clause in a contract that says the offer depends or hinges on some other event or action. For example, wording that would say, This offer is contingent upon the buyer winning the state lottery is a kind of contingency clause, one that obviously no sane seller would accept. I once knew a builder whose advice was, No matter what the contract, always be sure that somewhere in it, it says, 'subject to.' I don't care what comes after the 'subject to,' just as...

What Are Discount Prepayment Mortgages

More recently entering the market are discount prepayment loans. These typically offer you a discount on the interest rate or in the form of cash back if you agree not to pay off (prepay) the mortgage for a set period of time. For example, the lender may offer you a 1000 discount provided you won't prepay within three years. If, however, for whatever reason you must prepay before the time limit, you are subject to a hefty penalty, sometimes six months' worth of interest. To many people this...

What Are Mortgage Fees

These can be almost any amount, from nothing (where the fees are absorbed into a higher loan amount or higher interest rate) to many thousands of dollars. While some lenders are very up front about telling you what these fees are, some sneak them in at the last moment. When the loan fees are actual costs, such as for an appraisal or credit report, they are considered justified. However, when they are simply added on to give the lender a better yield (total return on...

What Are Other Terms

There are a host of other common terms in a real estate transaction, almost all of which are negotiable. For example, you may agree to pay full price for a property if the seller agrees to pay your closing costs. Or you'll buy only if the seller agrees to pay for a special mold and mildew inspection (offered by some termite and fungus infestation removal companies) as well as any repair work removing black mold. Unfortunately, throughout all of this bargaining you're going to have to pretty...

What If Its No Ones Fault but the Deal Just Cant Be Made

There are a lot of reasons that a deal might not go through. You may not be able to secure adequate financing. The title to the property may not be clear. There could be extensive termite damage. It could turn out that the house is in the middle of a flood plain. The reasons are endless, and they crop up in a good many deals. In most cases there's a way to work them out. Other financing is secured. The seller clears the title. The termite damage is fixed. You agree to accept the risk of flood...

What If the Deal Falls Through

What must be obvious by now is that putting up a deposit is sometimes a tricky thing that can have significant consequences. How do you get the deposit back, for example, if the deal doesn't go through There are at least two considerations here First, why didn't the deal go through If it's your fault, you may not be entitled to a return of the deposit. Second, if you are entitled to a return, how do you get the funds transferred back to you Operating on the principle that the time to consult an...

What If the Seller Accepts and Then Later On the Deal Falls Through Because of Me

There are many reasons the deal might fall through because of your fault. For example, you could be counting on Aunt Harriet to give you the money for the down payment. You get the seller to sign an offer, secure financing, and poor Aunt Harriet has a heart attack and dies. Her money will be tied up in probate for years. Sure, you didn't do anything intentionally to quash the deal, but you don't have the expected money to perform. As far as the seller is concerned, it's your fault. Or you get...

What If the Seller Counteroffers

It's a better sign if the seller accepts your original offer. But a counter means the seller is willing to dicker with you. After a seller counters at a significantly lower price (but not as low as you've originally offered), you've really got only three alternatives 1. Accept the seller's counter, if you think it's low enough. 2. Counter at a price compromising halfway between your original offer and the seller's first counter-offer. (You can't both accept and counter....

What If the Seller Not You Fails to Go Through with the Deal

Why would a seller fail to go through with a deal, once signed Simple. You offer 150,000 for a house and the seller accepts. Two days later another buyer comes in with an offer of 175,000. Wouldn't it be wonderful if the seller could get out of your deal and accept the new one The seller would stand to make an additional 25,000. That's plenty of reason to default. In these circumstances you are fully justified in demanding the return of your deposit. In addition, you may want to sue the seller...

Where Can I Find a Fixer

Fixers abound in all communities and in every part of the country. They come about because some people simply never maintain or repair their home. They let it run down until it's time to sell . . . and then it's a fixer. Other times it's a case where you have an older home and or an older owner. The older the home, the more maintenance and repair. The older the owner, the less likely the person is to do this. In some cases the owners die and their property is then disposed of through probate....

Why Do I Have to Pay for Hazard Insurance

As the buyer of a home (new or resale) you will want to carry fire insurance. This insures you, and the lender, that in the event of a catastrophe, the home can be rebuilt. Don't think you can save money by just taking a chance and not insuring the property. The lender will demand that you carry minimum fire insurance as a condition of the financing. If you don't, the lender will put its own, usually more expensive policy on the property and bill you for it. If you refuse to pay, you could be...

Why Do I Have to Pay Taxes on My Purchase

It's the only thing that's certain, besides death You do not have to pay sales tax (at least not yet ) in any area of the country that I know of, although some states do charge a usually nominal transfer tax. But you do have to pay property taxes. The escrow company prorates your share of the year's taxes. Proration simply means that if the sellers have already paid taxes in advance, you pay them back for that portion of time that you own the property. If you are getting a new loan that has a...

Will a Liquidated Damages Clause Protect Me

Basically these clauses state that if you and the seller agree in advance, the deposit (or a portion of it) will constitute the entire damages the seller is entitled to in the event of your default. In other words, if the deal doesn't go through and it's clearly your fault, you agree in advance that the seller can keep the deposit, provided she or he agrees not to sue you for additional damages or specific performance. Many states put limitations on liquidated damages. In order to keep more,...

Will a New Home or a Resale Appreciate Faster

A question frequently asked by buyers is Where will I get the greatest appreciation in a new home or in a resale (Or in a bad market, which home holds up its value the best ) To put it another way If I had a choice between two houses, a brand new one and a resale each worth 200,000 and both in similar neighborhoods, which house would make me the most money or cost me the least money over the next five years In the distant past the answer was generally the resale. The existing house had...

Will I Get My Deposit Back

At this point, I'm sure some readers are wondering, What's the big deal, anyway Why not put up a bigger deposit Too often buyers simply assume that everything is bound to turn out okay. If the deal sours, they'll get their money back. In most cases, this in fact is the way it does turn out. But not always. Sometimes when things go bad, they can go bad very quickly and very badly, particularly in terms of the deposit. There are at least two problem areasyou should know about 1.)Who gets the...

Will I Need Mortgage Insurance for Low DownPayment Loans

Unless you go with a VA loan, the answer is yes. All FHA loans have it. And all conforming loans where the loan amount is greater than 80 percent require it. In other words, on a 100,000 house, if you put less than 20 percent down, you're probably stuck with paying mortgage insurance. Mortgage insurance does not protect you. It protects the lender. If you don't make your payments and the lender has to foreclose on you, the insurance picks up a substantial portion of any loss the lender may...

Your Reality Check

Take home pay (after increasing for mortgage interest and property tax deductions) __ Monthly payment (including taxes and insurance) as determined by the lender __ Few people want to radically change their lifestyle in order to buy a home. Those with long memories will recall families in the 1970s who bought homes and then sat on the floor inside because they couldn't afford furniture. Nobody wants to be in that position. So be realistic with the numbers. Take a few minutes to determine what...

What Do I Do with the Termite Report

When you get a new loan, the lender almost always requires a termite clearance. This is a report from a registered termite company that states that the house is free of infestation. It's important to understand that the report is of limited value. In areas where termites are endemic, there will almost always be some infestation. (The report usually states the house to be clear of termites for 60 to 180 days the inspectors know that after that the termites likely will be back.) In order to get a...