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...

Aluminum Shingle Checklist

Are there signs of peeling or fading of their color (The shingles may continue to keep the weather out, but will look terrible.) Are there any dents or separations in the shingles, indicating someone has walked on them Are there any signs of leakage in the ceiling or walls inside the house Tile Shingles. Tile roofs last indefinitely (80 years or more). However, they can easily be broken, and once broken they quickly lose their ability to keep the weather out. Don't walk on tile roofs you, 'll...

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....

Be There

You've bought the lot, had the plans drawn up, secured a builder (or hired subcontractors), and are ready to go. Once construction starts, plan on being there a great deal of the time or on having a builder or someone knowledgeable there to handle things. There are always questions that pop up. What does that little squiggle on the plans mean The plans call for a 3-foot foundation, but there's a 7-foot hole in the building site what do we do Where do you want the electrical switches And on and...

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...

Builders Qualification Checklist

Has your builder been in the business in the area of your lot for at least three years Is your builder state licensed Have you called the state licensing bureau to see if there are any complaints against your builder Have you called the local better business bureau or district attorney's office to see if there are complaints Have you visited other houses your builder has Did the prior construction look solid Did the owners voice any Did you call the local building supply company to ask if your...

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 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 Really Do This

Keep in mind that all real estate markets are regional. That means that while the market may be up in California, it could be down in Michigan. Down in Massachusetts, up in Arkansas. If you've only got one house to buy, national statistics don't make too much difference. It's only the market in your area that counts. And it's only you who can decide if now is the right time to buy. If you've got to make a housing choice, then give yourself every chance of it being an educated decision. Don't...

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...

Common Upgrades

Any changes in the basic construction plan Air conditioning (now standard on many homes) Additional mirrors or windows Better appliances (stove, oven, dishwasher, refrigerator) Better fixtures (toilets, sinks, tubs) What's interesting is that while you may have your choice of a variety of upgrades, chances are you'll only be able to choose from the builder's list at the builder's price. For example, you may have your choice of three grades of carpet and that's it. Or you can choose from six...

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...

Composition Roof Checklist

Is the color of the shingles good (Fading shingles are a sign of wear.) Are the edges of the shingles curling up (This is a sign of wear in hot climates.) Are there any bare spots on the roof Are there any signs of leakage in the ceiling or walls inside the house. Aluminum Shingles. These have a life span of 50 years or so. Generally they don't wear out unless they have been damaged.

Cosmetics versus Renovation in a Fixer

Paint will handle most of the problems New carpeting will do the trick Landscaping the front will be the finishing touch You need to put in a new kitchen and or bath There are structural problems with the roof, foundation or framing Major systems (plumbing, heating, electrical) need repair However, fixing such calamitous problems requires ingenuity, money, nerve, and stick-to-itness. Unless you have all four, plus a pretty strong background in renovation, my suggestion is that you simply stay...

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...

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...

Drainage Checklist

Is there dampness under the house (The basement should be dry as dust.) Are there footprints or ribbed patterns in the dirt under the house, indicating that when it rains, water creeps in Is there mold (black or green) on wood under the house, indicating heavy moisture (There's almost a hysteria these days about black mold check with your agent.) Does the ground outside slope away from the house (If it slopes into the house, you've got serious problems.)

Everyones Flipping Over Real Estate

A recent buzzword in real estate is flipping. It essentially means selling a property as soon as you buy it. In some cases, even before you buy it I'm sure that if you've heard the term, you've wondered if you, too, could do this. The answer is, yes, you can. But, and it's a BIG BUT, you have to find a property that will work as a flipper. What works as a flipper Simple any property that you can buy below market value. If you can find a property that's selling for less than it's worth...

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.

Finding Fixer Uppers

A fixer is short for fixer-upper (also sometimes called a handyman's special). It's a house (or condo co-op) that is in less than perfect condition, sometimes far less. Some merely need paint. Others need a complete makeover. Some even require structural repair. Whatever their deficiencies, they are typically sold at a discount. If you're having trouble finding a home you can afford to buy in the neighborhood you want, then one alternative may be to consider a fixer. Here you can sometimes...

Foundation Checklist

Do you see cracks in the foundation when you walk around the exterior of the house (Hairline cracks always occur and usually can be disregarded.) Are the cracks wider at the top than at the bottom (This indicates actual breakage, a serious problem.) Is there an actual separation in the foundation (This indicates that not enough steel reinforcement was used when the foundation was built.) In a slab house, does the floor feel uneven when you walk over it (indicating cracks hidden under carpets...

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).

Get the Best Mortgage in Town

One of the newest and most important developments in real estate lending is that now almost everyone can get financing, from the most- to the least-qualified buyers. In the past, in order to get a mortgage you had to be a premium buyer high salary, few other debts, cash in the bank, and sterling credit. Not so anymore. Lenders are taking less-qualified buyers and offering them financing with slightly higher interest rates to make up for the added risk. In other words, if you've been shy of...

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

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 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 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 Get the Seller to Pay My Closing Costs

Remember, everything in real estate is negotiable That includes closing costs. To have the seller pay yours, make it a contingency of the purchase. If the seller doesn't pay, you don't buy. The trick, of course, is getting the seller to go along. In a strong market, sellers will simply show your agent (who's presenting the deal) to the door. They won't consider it. In a weak market, however, where the sellers have been trying unsuccessfully to get out of their house for six months, it may work....

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 Know Whom My Agent is Working

Further, before you sign any documents, including a sales offer, your agent should present you with a written statement describing who that agent works for (seller, dual, or buyer). Many states now require a formal disclosure as part of their agency law. (California, for example, requires dual agents to give a signed statement to that effect to both buyer and seller.) Don't assume that just because your agent isn't the listing agent of the property he or she...

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 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 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 Do I Wrap the Closing Costs into the Mortgage

Finally, it may be possible to wrap the closing costs into the mortgage. Many lenders these days offer no cost mortgages. You could opt for one. A no cost mortgage is a misnomer. There are costs. It's just that they are hidden. For example, I recently obtained such a mortgage. At closing, the lender paid all of my NRCC (nonrecurring closing costs), which included title, escrow, and lender's fees. (It did not, of course, pay my recurring costs such as prorations and hazard insurance.) In...

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 Lowball

You may want to offer as much as 25 percent or more less than the asking price. However, that's usually just a test offer, trying to see what the water's like. In all but a very cold market, a seller's likely to simply reject it out of hand. Indeed, the seller may simply ignore the offer and not counter it, and that could mean the end of the deal for you. Often the goal of the initial lowball is to get a counter-offer from the seller. Try to offer enough to entice the seller to at least...

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...

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...

How to Recognize a Real Estate Recession

Statistics available from brokers and published in the business section of the local papers indicate that the volume of home sales is dramatically down from the previous year. The number of houses advertised for sale (both new and resale) in the newspapers is enormous. The price of homes is declining. This is usually measured by the median price. Instead of going up, statistics may suggest it's declining. Government home auctions by the FHA (Federal Housing Administration) or the VA (Veterans...

Hybrids What About a Combination Fixed and Adjustable

There are a whole bunch of hybrids out there, any one of which may be better for your situation than a straight fixed or ARM mortgage. Some ARMs may be convertible to a fixed rate, or vice versa. Many allow a conversion at a set date three or seven years, for example in the future. Just be sure the conversion is guaranteed at the lowest interest rate at the time of conversion. There are literally hundreds of types of convertible mortgages available. Some lenders will even create one just to...

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.)...

Insurance Warranted Homes

A different kind of warranty is offered by a large group of builders nationwide. This is a warranty backed not only by the builder but also by an insurance company. Typically under these policies the builder continues to warrant the house, but the insurance company backs up that warranty. In addition, it often offers a plan that changes with the years the house is in existence, offering greater protection in the first years and less in the later ones. Many insurance-backed warranties are...

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...

Knowledge Is Power

The best way to negotiate is to negotiate from strength. There is only one way to get strength through knowledge. Ultimately, how you fare when buying a home is going to be a direct result of the knowledge you have. The more you know about the condition of the house, the motivation of the seller, and the state of the market, the better a position you'll be in to negotiate from strength. How do you get that knowledge In the next chapters we'll go over much of what you need to know. We'll look at...

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...

Lot Checklist

Everyone knows that location is important in real estate, but it is doubly important in rural or vacation areas. The reason is simple. Properties here can take much longer to sell (frequently years). If you want to resell, you're going to need a prime location so you can get out relatively quickly. Does your lot have the following (in order of importance) Water Frontage (river or lake) Level building site Easy access roads Close to urban suburban area These are the features of the particular...

Mail Order Plans

Mail order is definitely the cheapest way to go, since a set of plans can be obtained for just a few hundred dollars. There are literally thousands of mail-order plans available. Be sure you check to see that they are appropriate for your area of the country and that the building materials list doesn't involve some overly expensive timbers or metal. Be careful, however, if you buy through-the-mail plans. A working set includes all elevations as well as details of all unusual construction. Some...

Making the Hard Choice

Therefore, to avoid ethical and possibly legal problems down the road, it's a good idea to let both rebuyer and seller know exactly what's happening early on in the deal. In other words, no matter how painful, lay all your cards out on the table let them know how much you're making. And get their agreement in writing in case either party should later on have a failure of memory. Of course, this is hard. Once either party knows, they may not be willing to move forward. However, it's better they...

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...

Must a Deposit Be in Cash

A deposit doesn't necessarily have to be in the form of cash. It can be a promissory note or a check that all parties agree not to cash or even personal property such as the title to a car or boat. Cash (cashier's check), however, talks the loudest when you're trying to convince a seller to accept an offer. Sometimes sellers will specify in a listing agreement that they will accept no offers with less than, for example, a 5000 cash deposit. Remember, however, everything is negotiable. You can...

New Changes to Closing Procedures

Because current closing procedures have produced so many problems and complaints, HUD has indicated it may adopt a two-tiered system (not yet in effect as of this writing). Under this plan there would be two kinds of closing costs GFE Good Faith Estimate. This is pretty much the old system where the lender can give you an estimate that may or may not prove to be accurate. GMPA Guaranteed Mortgage Package Agreement. Here the lender guarantees that the closing costs will be no more than a set...

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

Plumbing Checklist

Is the plumbing galvanized steel (Galvanized steel lasts about 30 years, sometimes less. Copper lasts virtually forever.) Are there leaks at the joints of galvanized pipes (Usually visible under the house or in the garage, leaks indicate that electrolytic action may be corroding the pipes and they could need to be replaced 5000 or more for the whole house.) Are there leaks under the sinks in any of the bathrooms or kitchen (Possibly a minor problem, but why should you have to fix it ) Is the...

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...

Real Property

This includes the land and anything appurtenant to it, including the house. Certain tests have been devised to determine whether an item is real property (goes with the land). For example, if curtains or drapes have been attached in such a way that they cannot be removed without damaging the home, they may be spoken of as real property. On the other hand, if they can easily be removed without damaging the home, they may be personal property. The purchase agreement should specify...

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...

Set Your House Hunting Parameters

How many bedrooms will you need Most houses have three or four bedrooms. You'll probably have to pay a premium for five or more bedrooms. Houses with fewer than three bedrooms are often more difficult to resell, although they may cost less initially. How many bathrooms will you need Don't buy a house with only one bathroom. It's very difficult to resell. Do you want a newer house with all the modern goodies such as better insulation, copper plumbing, high-efficiency heating and cooling,...

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 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 Rent Instead of Buy in a Falling Market

In a falling market there is negative price appreciation. Then the costs of home ownership often more than exceed the benefits. In a down market, you can often rent a home for far less than it costs monthly to buy that same home. (In some areas, a house that costs an owner 2000 a month for mortgage payment, taxes, insurance, and maintenance can be rented for just about half to three-fourths of that amount 1000 to 1500.) In short, unless your property appreciates (increases annually in value),...