The Truth About Appraisals

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of homes that have actually closed escrow.

Sell Your Home - Part 4 - Fix the Exterior

Most real estate advice tells you to work on the outside of the house first, but unless there is a major project involved, we believe it is best to do it last. There are two main reasons for this. First, the first steps in preparing the interior of the house are easier. They also help develop the proper mind set required for selling - beginning to think of your "home" as a marketable commodity. Second, the exterior is the most important. A homebuyer’s first impression is based on his or her view of the house from the real estate agent’s car.

So take a walk across the street and take a good look at your house. Look at nearby houses, too, and see how yours compares.

Landscaping

Is your landscaping at least average for the neighborhood? If it is not, buy a few bushes and plant them. Do not put in trees. Mature trees are expensive, and you will not get back your investment. Also, immature trees do not really add much to the appearance value of the home.

If you have an area for flowers, buy mature colorful flowers and plant them. They add a splash of vibrancy and color, creating a favorable first impression. Do not buy bulbs or seeds and plant them. They will not mature fast enough to create the desired effect and you certainly don’t want a patch of brown earth for homebuyers to view.

Your lawn should be evenly cut, freshly edged, well watered, and free of brown spots. If there are problems with your lawn, you should probably take care of them before working on the inside of your home. This is because certain areas may need re-soding, and you want to give it a chance to grow so that re-sod areas are not immediately apparent. Plus, you might want to give fertilizer enough time to be effective.

Always rake up loose leaves and grass cuttings.

House Exterior

The big decision is whether to paint or not to paint. When you look at your house from across the street, does it look tired and faded? If so, a paint job may be in order. It is often a very good investment and really spruces up the appearance of a house, adding dollars to offers from potential homebuyers.

When choosing a color, it should not be something garish and unusual, but a color that fits well in your neighborhood. Of course, the color also depends on the style of your house, too. For some reason, different shades of yellow seem to elicit the best response in homebuyers, whether it is in the trim or the basic color of the house.

As for the roof, if you know your house has an old leaky roof, replace it. If you do not replace a leaky roof, you are going to have to disclose it and the buyer will want a new roof, anyway. Otherwise, wait and see what the home inspector says. Why spend money unnecessarily?

The Back Yard

The back yard should be tidy. If you have a pool or spa, keep it freshly maintained and constantly cleaned. For those that have dogs, be sure to constantly keep the area clear of "debris." If you have swing sets or anything elaborate for your kids, it probably makes more sense to remove them than to leave them in place. They take up room, and you want your back yard to appear as spacious as possible, especially in newer homes where the yards are not as large.

The Front Door & Entryway

The front door should be especially sharp, since it is the entryway into the house. Polish the door fixture so it gleams. If the door needs refinishing or repainting, make sure to get that done.

If you have a cute little plaque or shingle with your family name on it, remove it. Even if it is just on the mailbox. You can always put it up again once you move. Get a new plush door mat, too. This is something else you can take with you once you move.

Make sure the lock works easily and the key fits properly. When a homebuyer comes to visit your home, the agent uses the key from the lock box to unlock the door. If there is trouble working the lock while everyone else stands around twiddling their thumbs, this sends a negative first impression to prospective homebuyers.

Sell Your Home - Part 3 - Interior Home Repair

Plumbing and Fixtures

All your sink fixtures should look shiny and new. If this cannot be accomplished by cleaning, buy new ones where needed. If you don’t buy something fancy, this can be accomplished inexpensively and they are fairly easy to install. Make sure all the hot and cold water knobs are easy to turn and that the faucets do not leak. If they do, replace the washers. It is not difficult at all.

Check to make sure you have good water pressure and that there are no stains on any of the porcelain. If you have a difficult stain to remove, one trick is to hire a cleaning crew to go through and clean your home on a one-time basis. They seem to be wonderful at making stains go away.

Ceilings, Walls and Painting

Check all the ceilings for water stains. Sometimes old leaks leave stains, even after you have repaired the leak. Of course, if you do have a leak, you will have to get it repaired, whether it is a plumbing problem or the roof leaks.

You should do the same for walls, looking for not only stains, but also areas where dirt has accumulated and you just may not have noticed. Plus, you may have an outdated color scheme.

Painting can be your best investment when selling your home. It is not a very expensive operation and often you can do it yourself. Do not choose colors based on your own preferences, but based on what would appeal to the widest possible number of buyers. You should almost always choose an off-white color because white helps your rooms appear bright and spacious.

Carpet and Flooring

Unless your carpet appears old and worn, or it is definitely an outdated style or color, you probably should do nothing more than hire a good carpet cleaner. If you do choose to replace it, do so with something inexpensive in a fairly neutral color.

Repair or replace broken floor tiles, but do not spend a lot of money on anything. Remember, you are not fixing up the place for yourself. You want to move. Your goal is simply to have as few negative impressions upon those who may want to purchase your property.

Windows and Doors

Check all of your windows to make sure they open and close easily. If not, a spray of WD40 often helps. Make sure there are no cracked or broken windowpanes. If there are, replace them before you begin showing your home.

Do the same things with the doors – make sure they open and close properly, without creaking. If they do, a shot of WD40 on the hinges usually makes the creak go away. Be sure the doorknobs turn easily, and that they are cleaned and polished to look sharp. As buyers go from room to room, someone opens each door and you want to do everything necessary to create a positive impression.

Odor Control

For those who smoke, you might want to minimize smoking indoors while trying to sell your home. You could also purchase an ozone spray that helps to remove odors without creating a masking odor.

Pets of all kinds create odors that you may have become used to, but are immediately noticeable to those with more finely tuned olfactory senses. For those with cats, be sure to empty kitty litter boxes daily. There are also products that you can sprinkle in a layer below the kitty litter that helps to control odor. For those with dogs, keep the dog outdoors as much as possible. You might also try sprinkling carpet freshener on the carpet on a periodic basis.

Costs of Repairs

Do not do anything expensive, such as remodeling. If possible, use savings to pay for any repairs and improvements – do not go charging up credit cards or obtaining new loans. Remember that part of selling a house is also preparing to buy your next home. You do not want to do anything that will affect your credit scores or hurt your ability to qualify for your next mortgage.

Sell Your Home - Part 2 - Remove the Clutter!

This is the hardest thing for most people to do because they are emotionally attached to everything in the house. After years of living in the same home, clutter collects in such a way that may not be evident to the homeowner. However, it does affect the way buyers see the home, even if you do not realize it. Clutter collects on shelves, counter tops, drawers, closets, garages, attics, and basements.

Take a step back and pretend you are a buyer. Let a friend help point out areas of clutter, as long as you can accept their views without getting defensive. Let your agent help you, too.

Kitchen Clutter

The kitchen is a good place to start removing clutter, because it is an easy place to start. First, get everything off the counters. Everything. Even the toaster. Put the toaster in a cabinet and take it out when you use it. Find a place where you can store everything in cabinets and drawers. Of course, you may notice that you do not have cabinet space to put everything. Clean them out. The dishes, pots and pans that rarely get used? Put them in a box and put that box in storage, too.

You see, homebuyers will open all your cabinets and drawers, especially in the kitchen. They want to be sure there is enough room for their "stuff." If your kitchen cabinets, pantries, and drawers look jammed full, it sends a negative message to the buyer and does not promote an image of plentiful storage space. The best way to do that is to have as much "empty space" as possible.

For that reason, if you have a "junk drawer," get rid of the junk. If you have a rarely used crock pot, put it in storage. Do this with every cabinet and drawer. Create open space.

If you have a large amount of foodstuffs crammed into the shelves or pantry, begin using them – especially canned goods. Canned goods are heavy and you don’t want to be lugging them to a new house, anyway – or paying a mover to do so. Let what you have on the shelves determine your menus and use up as much as you can.

Beneath the sink is very critical, too. Make sure the area beneath the sink is as empty as possible, removing all extra cleaning supplies. You should scrub the area down as well, and determine if there are any tell-tale signs of water leaks that may cause a homebuyer to hesitate in buying your home.

Closet Clutter

Closets are great for accumulating clutter, though you may not think of it as clutter. We are talking about extra clothes and shoes – things you rarely wear but cannot bear to be without. Do without these items for a couple of months by putting them in a box, because these items can make your closets look "crammed full." Sometimes there are shoeboxes full of "stuff" or other accumulated personal items, too.

Furniture Clutter

Many people have too much furniture in certain rooms – not too much for your own personal living needs – but too much to give the illusion of space that a homebuyer would like to see. You may want to tour some builders’ models to see how they place furniture in the model homes. Observe how they place furniture in the models so you get some ideas on what to remove and what to leave in your house.

Storage Area Clutter

Basements, garages, attics, and sheds accumulate not only clutter, but junk. These areas should be as empty as possible so that buyers can imagine what they would do with the space. Remove anything that is not essential and take it to the storage area.

Or have a garage sale.

Sell Your Home - Part 1 - Depersonalization

When conversing with real estate agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a "home." Yet if you are selling property, they will often refer to it as a "house." There is a reason for this. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.

You need to think of your house as a marketable commodity. Property. Real estate. Your goal is to get others to see it as their potential home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.

The first step in getting your home ready to sell is to "de-personalize"

The reason you want to "de-personalize" your home is because you want buyers to view it as their potential home. When a potential homebuyer sees your family photos hanging on the wall, it puts your own brand on the home and momentarily shatters their illusions about owning the house. Therefore, put away family photos, sports trophies, collectible items, knick-knacks, and souvenirs. Put them in a box. Rent a storage area for a few months and put the box in the storage unit.

Do not just put the box in the attic, basement, garage or a closet. Part of preparing a house for sale is to remove "clutter," and that is the next step in preparing your house for sale.

8 Secrets For Saving Thousands When Finding, Buying And Financing Your Next Home

“You Don’t Make Money When You Sell Real Estate, You Make Money When You BUY It!”

Dear Home Buyer,

Do you see the statement above? Someone once told me it was written backwards…that you only make money when you SELL real estate. “How on earth could you make money when you buy it?” he said.

But that statement IS accurate. You see, you might receive your sales proceeds when you sell your home, but it’s how well you BOUGHT your home that will determine HOW MUCH your proceeds will be.

But the story doesn’t end there. Finding the right home, and making a prudent financial investment is more involved than just “buying right.” You also need to FINANCE it right.
Even Experienced Homeowners Make Costly Mistakes When Buying And Financing Their Home

It’s no surprise that borrowing $100,000…$200,000 or more is a lot of money. And how to FIND the right home…how much to PAY for the home…how much to BORROW…and on what FINANCIAL TERMS can literally mean tens of thousands of dollars MORE or LESS in your pocket!

If you’re like most people, the decision to buy a home involves a number of stresses and strains. For about 80% of buyers, it’s the single largest financial transaction of their lives. Mistakes in any part of the buying process can cost you thousands.

Here are 8 strategies (I call them “secrets” because so many homebuyers disregard them when buying) you should consider when buying your next home…

Secret #1: Understand What You NEED In Your Next Home.

Two things you need to consider here: Your NEEDS…and your WANTS. They’re two very different things.

You may need 4 bedrooms because of your children, or need a 3 car garage because of your 3 cars…

What you’ll find is your needs are fairly basic. It’s the “wants” that take a little more time to clarify. Here is a list of needs you should consider BEFORE looking for your home:

1. General price range of home – we’ll cover this ahead when discussing financing options and the amount of home you can afford.
2. Approximate size of home (in sq. footage) – make a reasonable range
3. General location, area, or subdivision
4. Number of bedrooms required (don’t forget to include any home offices or guestrooms).
5. Number of bathrooms you need – frequently determined by the number of children you have.
6. Style and layout of home: Do you want a more formal plan, or a contemporary plan with great room designs, etc.
7. School requirements or districts

Secret #2: Understand What You WANT In Your Next Home.

A great way to get a handle on your wants is to take a good look at your present home. What do you like about it? Do you like it’s open floor plan? Do you like the kitchen and eating areas? Do you like the common area layout?

List out everything you like about your present home, or homes you’ve visited.
Now, let’s take a look at what you don’t like about your home. Do you hate the flat roof? Do you hate the master bedroom layout? Are the bedrooms too small? Is the kitchen too far from the garage?

If you dislike something with your present home, you’re going to dislike it with your new home. So the better you can identify these items, the more likely you are to avoid them.
Here’s a good suggestion: Take out a piece of paper and draw a vertical line down the middle. In the left column, write down everything you like about your present home. In the right column, write down everything you dislike about your present home. It’s also important you understand WHY you dislike something.

Now, from your list of “likes,” let’s compile a list of features you want for your new home. Now, here’s an important tip that will help you really narrow your focus.
Take out another sheet of paper and put two columns on it. On the left hand side, you will be listing out the features of your home. And on the right hand side, you’ll be listing out the benefits. For each feature, you want to list the benefit of that feature.

Features tell you what something IS: 3 bedroom, 2 bath, 3 car garage, etc. Benefits tell you what something DOES. Benefits fulfill desires.

For example, a great room concept (feature) will be ideal for entertaining friends and family at special times (benefit). So on the left hand side, you would put “great room.” And on the right hand side, list out all the benefits (or reasons) for the “great room” design: Family entertaining, business entertaining, Thanksgiving holidays with the family, etc.

Understand What Each Other Is Looking for, And WHY

If you’re a husband and wife looking for a home, this exercise will eliminate many disagreements down the road. You will both understand what the other wants, and WHY they want it.

I recommend you RANK each feature in terms of its importance to you and your spouse. You’re both going to live in the home, so you better understand what the other is looking for.

For example, a well designed gourmet kitchen (remember, list ALL the features of the kitchen you’re looking for) may rank high with a woman, while having a workshop may rank high with a man. Try to understand each other’s priorities.

Most People Have More Dreams than Money

Ranking will also show you areas you may need to eliminate because of price constraints. And by having each person rank the importance of the features they want, you won’t be eliminating a high priority item and putting additional stress on an already stressful time.


Secret #3: Understand How Much Home You Can Afford.

Like it or not, there are 2 guidelines bankers and mortgage lenders use to determine how much loan you can afford.

The first guideline is the Payment to Income Ratio. This guideline compares your income – or your total household income – to the amount of mortgage payment you’re considering.

To calculate the “payment” part of the formula, the lender will take the mortgage payment (principal + interest) and add to it Property Taxes and Insurance. Hence the term “PITI” (principal, interest, taxes, and insurance).

Usually lenders will loan up to 28% of your total household income.

But before you think you’re home free, there’s something else you need to know…

It’s called the Debt to Income Ratio. Debt refers to ALL the major monthly payments other than your mortgage payment (PITI). To arrive at this amount, the lender will consider…

Your car payment…
Your credit card debt and payments…
Any IRS liens or payments due…
Any other payments and debts you have (boat, 2nd home, etc.)

Then, they’ll compare your total debt to your ability to make current payments with your new home loan added into the equation.

Now, here’s the “stickler.” Each mortgage company sets different limits on your Debt to Income ratio. Which is why it’s critically important to find a MOTIVATED LENDER.

Don’t follow the “canned” financial advice like you see on TV. Most of that advice is “rule of thumb,” and designed for the lowest credit rating and highest interest rates.

Think about this…

If you spend 2 or 3 days to find a loan that saves you $40,000 to $150,000 over it’s term, your time is WELL WORTH SPENT! Doing a little homework on your own will literally save you thousands over the term of your loan.

Secret #4: Save A Bundle When Financing.

Your ability to afford a home will be related to a number of items. They are…
1. The PRICE of the home;
2. Your DOWN PAYMENT on your home, and thus the amount financed;
3. The INTEREST RATE and POINTS of your loan – the amount a bank charges you for the money;
4. The TERM of your loan: 10 year, 15 year, or 30 year.
5. The overall TYPE of your loan: Most common is fixed vs. variable rates. But there are hundreds of loan packages to choose from.

And just in case you were looking for a specific “rule of thumb,” for financing your home, you should know that…

There is NO General Rule of Thumb About Financing Your Home.

Each case is different, and your personal financial circumstances will have an impact on how much home you can afford.

However, you MUST understand the relationship and impact interest rates, term of loan, points, and type of loan can have on your overall financial picture.

Let’s start with the “amount financed” first. Many people often pay cash or put 20% or more down as equity. The reasons they do this are…

“The bank required us to…”
“We’ve just always put down this amount…”
“We wanted a lower payment.”

Problem is, these reasons could cost you thousands of dollars.
The answer for how much you can put down on your home is different for most people. However, I have learned over time that…

Many People Put Down More Cash On Their Home Than They Need To,
And Could Have Received A Better Return On Investment Had
They Invested the Money Instead Of Putting It Into Their Home

Here’s a simple and fast way to “ballpark” the actual annual return on investment you get from the money you put down on your home:

1. Take a look at the homes in your area. How much have they appreciated, each year on average, over the past 5 years? For example, you might find that values have increased an average of 1.5% a year.

2. Now, take the total cost of your home, multiply that value times 1.5% (the average expected annual appreciation of your home). For example, a $150,000 home increasing value at 1.5% for the first year. Thus, the home will be worth $2,250 more a year from now.

3. Now, divide the amount of increase in your home ($2,250 in the example) by the total amount of Down Payment you put into the home. For example, if you put down 20% (or $30,000), then $2,250/$30,000 = 7.5%.

Now 7.5% sounds like a fair investment. But the question you need to ask is this: Can you make more than 7.5% elsewhere?

And did you notice something else here? Had you put down just $15,000, your return on your Down Payment would be 15%!

The moral of the story: Putting more money into your home may make your banker happy, because it lowers the risk of getting his money out if you default.

And it may make your overall payment a little lower…

But it may be a wiser decision to put less into your home, IF you can locate an alternate investment that will pay greater interest on your hard-earned equity.

Now, let’s shift gears a little and talk about the impact Term and Interest rate will have on your overall financial picture…

How INTEREST RATE and TERM can make or COST you thousands.

Mortgage lenders toss around interest rate numbers as if they didn’t matter.
They DO!

And to illustrate the impact interest rates can have on your overall financial picture, I’ve presented a table below showing the interest you pay over the term of a 30 year, $150,000 loan at 8%, 7% and 6%.

And here’s the clincher: Just ONE percentage point on a $150,000 loan can cost you almost $37,000 over the term of the loan! TWO percentage points will cost you over $72,000!!

Your banker might tell you his “slightly higher rate” is only a matter of $103 a month in payment. But YOU should know better!

That’s money taken out of your pocket if you don’t look for good rates!

Here’s How To Instantly Know How Many Points You Should Pay…

Another consideration in the formula is the amount of POINTS your lender will charge you to initiate your loan. And what you’ll notice is there’s a GAME being played with you.

And if you don’t know the rules of the game, YOU LOSE!

Sitting across from a banker while he throws obscure numbers at you like you’re a human dartboard can be pretty overwhelming. And frequently you’ll hear terms like “7.5% with 1.5 points,” or “7.25 with 1 point.”

All-the-while you’re thinking to yourself, “I have no idea what the financial impact of this guy’s blabbering means to me.” And quite frankly, your banker knows…

The Less You Know About What You’re Paying The Better For HIM!

So hopefully this little “ballpark” example will help you quickly determine the best points-to-interest rate for you. How many points should you pay, and what formula is best for you? Here’s a little help…

If a banker is giving you several options of interest rates and points, you need to sort out the financial consequences so you don’t lose money. Say, for example, you were considering 2 loans. Both are for $150,000, and both are 30-year amortization.

DEAL #1: One loan he offers you is 7.5% with 0 points for origination…

DEAL #2: Another loan he offers you is 7%, but he wants 2 points to originate the loan.
What’s the ONE factor that will determine which loan is better?

How LONG You Keep the Loan!

The first thing you need to think about is how long you’re going to live in that home. The average homeowner spends about 5.5 years in their home before selling for whatever reason.

So, for example sake, let’s say you plan to live in the home 5 years. Here’s how you determine which deal is better…

1. Take the difference in monthly payments (principal and interest only) of EACH loan…
2. Multiply that amount by 12 months to get the annual amount of difference…
3. DIVIDE that amount into the $$ amount of points you pay to determine the number of years at which you recover the points paid up front. If the number of years is LESS than your anticipated time in your home, you’ll be better off paying the points and getting the lower rate. If it’s higher than you plan to spend in the home, opt for the lower points.

1. The difference in monthly payments is $51 a month ($1049 - $998 = $51).

2. $51 x 12 months is a savings on (approximate) interest of $612 per year.

3. Total Cost Of Points divided by $612 is 6.13 years ($3,750/$612 = 6.13).
The result? If you stay in your home for 5 years, you will NOT recoup the points you paid up front with the savings in a lower interest rate. Recoup time is about 6 years and 2 months to breakeven.

So your best bet would be to select loan #1.

If, however, you planned to keep your home beyond 6 years and 2 months, you’d be better off with loan #2 (i.e. the overall savings in interest rate will exceed the amount you paid in points – not considering the time value of money).

Are you starting to see how important it is to understand your home’s financing? How important it is to shop for the best rates, terms, and points?

Good! Now, let’s move on to another important secret for buying your home…

Secret #5: How You Evaluate Homes Will Save You Thousands and Heartaches!

One of the biggest mistakes people make when buying homes is they rely solely on “local neighborhood market analysis information” to determine the right price to pay for a home.

Before you buy or refinance your home, INSIST on seeing a “total market overview” of exactly what is going on in the ENTIRE market. Then narrow your analysis to local market information.

Why do I say this? Because you want to know 2 things: 1) What is the ENTIRE market doing with values? Are they going up? And by how much? 2) What is the specific area doing with market values? How does it compare to what the total market is doing? Are the growth rates the same, lower, or higher than the overall market?

Understanding these parameters will save you thousands of dollars when you make an offer on a home. I frequently perform both of these analyses for my buyers, in an easy to understand format, so you know EXACTLY what you’re buying!

OK, so let’s say you’re now pre-qualified with financing, and you’ve also found a number of homes to preview.

The Way You Inspect A Home For Sale Can Save You
Enormous Amounts Of Money And Time

It’s now time to find not only a home that fits your needs, but also a home that will be a good investment. What are some of the things you should look for?

Well, the first thing I always look for is what I call “siting.” Siting involves evaluating 3 areas: Location, Lot siting, and Home siting.

The general location of the home you’re considering could determine how happy you’ll be living there, and what kind of an investment you’re buying. Here’s an important tip that will almost always make you money…

Buy the Midrange Home In The Best Neighborhood You Can Afford

Why do I say this? Because the better the neighborhood, the better the appreciation for you over time. And if you buy the midrange home, the home will “generally” appreciate faster and greater than a higher priced home in the same area.

Plus, you will most certainly spend money updating or decorating your new home, and you don’t want to get “upside down” on your homes value after spending money for improvements. So remember…

NEVER Buy the Top Of The Market!

Now the second area you need to consider is Lot siting. Lot siting has to do with WHERE your particular lot is located in the subdivision you’re considering. Ask your agent for a plat map of the entire subdivision. Now take a look at where your home’s lot is located in the subdivision.
Is it near a common area? Does it capture better views than other lots in the area? Is it more private, or shaped better than other lots? Is it near a loud street?

Lot siting in a neighborhood will give you a basis for knowing how well the home will appreciate vs. other homes in the neighborhood (assuming the home is reasonable).

Finally, you want to look at the Home siting. How well did the builder take advantage of all the amenities the LOT offers a home? Are the views great? How’s the curb appeal? Is there a balance between front and back yards? Do you see any drainage problems because of where the home has been located on the lot?

Think through these things as you visit each home.

Now, as you approach your home, there are other things you want to keep in mind…

1. What is your initial reaction of the home as you approach it from the street? This is called “curb appeal,” and it has a great impact on the value of the home. Is the home sited right on the lot? Notice the areas around the home? Are they well maintained? Is the landscaping groomed?

2. Take a look at the structure of the home? As you go through the home, windows and doors should be square, and they should close correctly. Look around windows and doors for cracks. Check corners of rooms for sloping or tile/wood cracks. These may reveal foundation or water problems.

3. Now think about the floor plan of the home. Is it functional? Do the common areas flow the way you want them to? Are the halls narrow and long, or are they open? How far will you have to carry the groceries from the garage? Are the rooms the right size and height for your desires? If there have been any additions, were they done professionally? Do they fit with the flow and style of the home?
4. Now, check the roof and ceilings. Is the roof the type you prefer? Is it in good condition? When
was the last time the home was roofed?

5. Now make a basic check of the plumbing, mechanical, and electrical systems. Do drains and toilets work correctly? Is the property connected to sewer, or will you have to deal with a septic system? Is the electrical wiring up to code? And are the mechanical systems working properly? Make sure you get these systems inspected by a licensed contractor or inspector BEFORE you close any deals.

Secret #6: Save Thousands Writing Your Offer And Negotiating Your Deal

Years ago a real estate expert told me that the party who is less motivated almost always gets the better deal. The ONE single element that will determine how well you negotiate your offer is…

How MOTIVATED Is The Seller,
And How MOTIVATED Are YOU?

If the home has been on the market for over a year, perhaps it’s because the seller hasn’t been motivated enough to sell. Or perhaps the home hasn’t sold and he/she is very motivated.

And if you’ve been looking for 4 months, your kids are late for starting school this year because you haven’t found a home yet, and you now have found the right home, YOU may be very motivated to buy!

Nevertheless, here’s a tip you MUST bring to any real estate transaction

Move Heaven And Earth To AVOID Emotional Attachment
To The Home You’re Considering

If you’re all giddy about the home. If you can’t hold back your emotions when around the home, then you’re going to get clobbered when negotiating the purchase.

And that’s ONE reason why you need a Realtor representing you during any transaction. The middle person alone will help save you money.

So let’s say you have a Realtor representing you (make sure it’s a BUYERS agent, or you could lose a bundle!), and you’re ready to write an offer.

What’s the single best piece of information you can have?

It’s the comparable sales and market data for the entire market, and the area. Ask your Realtor to print out both for you to use. Now, here’s what you want to do…

You want to take a look at 4 important “market tell-tale signs:”

1. Take a look at the currently active (for sale) listings in the area. Was the home you’re considering priced within reason to other homes? If so, you know you’re at a reasonable starting point.

2. Now, take a look at what the average selling price is compared to the listing price. You may notice that most homes are selling for about 3 or 4 percent less than their offer price. If that’s the case, you know the original offers were LESS than this amount. Take this into consideration when making your offer. And leave plenty of room for negotiating.

3. Now, make sure you visit several of the other listings in the area. How does your home compare to the other homes? Is the home you’re considering in similar shape? Is it better sited? Is it bigger, smaller, better style, better landscaping, etc.? These factors will help you determine how much you should pay for your home vs. how much others paid for similar homes in the neighborhood.

4. Now, take a look at the average market times for homes in the area. If they’re long (evaluated on a market by market basis), the market may be soft, and you might have more negotiating room with your offer.

You’re now ready to make your offer. At this point, I highly recommend you work closely with a BUYERS AGENT to structure your offer. They will talk about strategies such as 1) should you offer a high price and ask the owner to throw in all kinds of extras, or 2) offer a low price and skim your way into the neighborhood?

The correct answer depends on your personal situation. And you need to work closely with your Realtor to strategize your offer.

Secret #7: Be Financially Prepared – Ahead Of Time!

Many people go about the home finding process backwards. They go through the entire process of searching, evaluating, and writing an offer on their home, WITHOUT being financially prepared.

And it usually costs them money. Big money!

Doing a few things up front, BEFORE you go searching, will save you a lot of money, time, and hassles. What are those things?

Here are 3 of them.

First, find a MOTIVATED lender. No, don’t just go down to your local bank where you’ll likely to be slowly tortured by some bureaucratic “vice president” who makes his bonuses and gets promoted according to how much paperwork he creates (at YOUR expense) and how many DECLINES he produced.

You see, the only quota a banker has to live by is: “How many BAD loans did you originate?”

They don’t get measured by their production…

They don’t get measured by their service…

They only get measured by the MISTAKES THEY AVOID!

Now, I know if your local banker sees this, he’s going to blow a cork, and start reciting all the ad campaign jargon most banks are spouting these days. But the truth is…

There Is Absolutely NO Incentive For A Traditional Banker To
Serve Your Interests In Any Way

What you want to do is find a mortgage lender who is MOTIVATED to take your loan. One who represents many different products, and can offer you many options for making your loan most affordable.

Here’s an important tip: Ask your Realtor to refer one or two lenders to you. Why? Because Realtors have power over lenders, because they send lots of clients. It’s not just YOU alone talking to them.

If they don’t give you first class service, the Realtor who sent you will refer (ALL) their clients to someone else. So they’re motivated to SERVE YOU. And the minute you have a problem with your loan, you can turn to your Realtor…who has much more influence and leverage over the lender than you alone.

After all, your Realtor and lender both want to see the transaction close. There’s power in numbers and influence. Use it to your advantage.

Now, the second thing you want to do is GET PRE-QUALIFIED with a lender. Better yet, try to get PRE-APPROVED.

Why?

Because the first question any home seller will ask when an offer is presented is “Is your buyer approved for a mortgage?”

And rightfully so! The seller doesn’t want the deal to fall through because you couldn’t get financing. When they accept your offer, their home comes OFF the active market. If you fall through, it costs them time and money.

Plus, there’s one more reason to get pre-qualified or approved…

You Will Have Much More Power To Negotiate
Price And Terms When You’re Financially Qualified!

When you have money behind you, the seller knows your serious. And a serious buyer ALWAYS has more influence to negotiate. So do yourself a favor, GET PRE-QUALIFIED or PRE-APPROVED!

Now, the third way to become financially prepared is to have deposit funds available immediately. One way to do this is to write a check in the amount of 3% of the highest price you’ve been qualified for financing.

Make the check out to the Brokers Trust Account, or the Title Agency you will use. The broker or Title Company are trustworthy fiduciaries by law, and will hold the check un-cashed until you make an offer that’s accepted.

Now I know what you’re saying… “It’ll be a cold day in Hell before I write a check before we’ve even located a home.” I understand.

But you may want to consider this…

Jim and Susan were buyers from outside their immediate area. Because of their distance, they could only get together with their agent with 2 days notice. And the market was pretty good.

Three homes came on the market, and were sold before they could get together to visit them.

Twice, they lost other deals because of bidding wars.

Finally, out of frustration, they placed an un-cashed deposit with their broker.

When they finally found the right home, they decided to write an offer…

And because they placed an un-cashed check on deposit, their agent could enter negotiations with verbal authority to make the offer. And because the agent could demonstrate that he had earnest funds, the buyers were able to sign a faxed copy of the offer, and their deal was secured.

And it’s a good thing! The very next day, 3 more offers came in on the home they just put into escrow!

Secret #8: Use A BUYERS REPRESENTATIVE!

There’s a huge difference between a Buyers Representative and other agents. First and foremost, if you don’t have a specific agreement to be represented by your agent…
Chances Are, YOUR Agent Represents The SELLER!

Yes, it’s true. And the question you have to ask yourself is… “Is this person going to represent MY interests?”

Think about this: If you had to go to court, would you use the same attorney the opposing side was using?

I think you know the answer! But did you know that by creating a “buyer representation” with your agent, you not only get someone representing you, but…

> A buyer representative doesn’t cost you a nickel more than any other agent. Even though they represent you, they’re still paid out of the standard commission…

> Buyer representation is easy to enter into, and will support ONLY your interests. This includes finding your home, helping with financing, and negotiating the best possible deal for YOU...

> A buyer representative will keep everything about you and your deal CONFIDENTIAL!
OK, so you know the difference between any agent and creating a “buyer representation.” But did you know what a good agent can do for you?

> A good agent knows the area you want to buy in because he/she is out constantly looking at homes…

> A good agent can spot trouble for you. He or she will be experienced at looking at homes and will see things you might not see.

> A good agent will greatly simplify the buying process…

> A good agent will give you MOTIVATED, reliable financing sources and options…

> A good agent will refer you to proven inspectors, title and escrow officers, and other service providers you’ll need.

Happy Hunting

49 Essential Tips Every Home Buyer Should Know

Dear Friend,

It’s true. Even savvy home buyers lose thousands of dollars…even tens of thousands of dollars they could have “pocketed” had they know about the important “secrets” that make up a successful purchase of a great home.

They don’t lose money because someone took advantage of them. And they don’t lose money because of the economy. The problem is…“Most People Don’t Plan To Fail, But Fail To Plan.”

If you’re in the market to buy a home anytime soon, and you want to find the perfect home at the best possible price, terms and financing, there are THREE things you need to do up front:

First, understand and get control of your personal emotions about the purchase of your home Second, get the most valuable, important information available so you make a prudent and educated decision. And third, become informed about the very best financial resources and products to fit YOUR needs…NOW, not later.

After all, buying your home is very different from any other financial transaction. It isn’t just a “home,” it’s a transaction that affects your monthly overhead expenses…your ultimate net worth…your retirement…your kids education…and much more.

So it’s no surprise that buying your home may involve a bit of fear, anxiety, frustration…or even excitement for that next move in your life.

The secret is…try not to let these emotions get in the way of a prudent purchase. The tips and information in this report will help you have a better understanding of most, if not all, aspects
involved with the purchase of your next home.

So, let’s examine some of the critical questions you might have with your next home purchase…

1. What is an "as is" sale?
An "as is" property is sold without a warranty as to condition, repairs, or structure. With an "as is" sale, the buyer is on notice that the seller makes no promises regarding the property's physical status. With an "as is" sale, it is extremely difficult to make a claim against a seller if something is found to be wrong with the property after closing. "As is" clauses should be seen as an absolute requirement to make the transaction contingent on a professional inspection "satisfactory" to you. With a properly written sale agreement contingency, if you are not satisfied, then the deal is dead and you can get back your deposit in full.


2. How long must I live in a house once I buy?
When you apply for a loan a lender will ask if you intend to use the property as a prime residence. If the answer is "yes," then it is expected that you will physically move into the property and live there for some time. There
does not seem to be a set definition in the term "some time," but what lenders are getting at is this: They do not want to make residential loans with low rates and little down to investors.
Thus, if someone gets a residential mortgage, instantly moves out, and quickly rents the place, lenders will be more than unhappy - they may call the loan. They may also review the loan application to see if fraud was involved. Lenders do not want borrowers to move in and then rapidly move out, but they will look at the "facts and circumstances" if such an event occurs. For instance, a sudden job change not known in advance might be a valid reason for a move after several months of occupancy. What lenders do not want are situations where a "residential" borrower is actually adisguised investor. Given that most homes are occupied for 8-10 years, a move after several months or a year is likely to set off bells.


3. Can I buy real estate with no money down?
Yes. Millions of people have bought real estate with no money down through the VA loan program.
If you mean, can you buy real estate at a discount of 20 or 25% with no cash or credit, and then instantly sell or rent the place at a profit, then the answer is probably not. Why "probably" instead of "absolutely" not? Because in a marketplace with millions of transactions each year, somebody somewhere has made a deal with no money down and rented or sold at a profit. But it is also true that somebody somewhere got hit by lightening. The problem is that the term "no money down" is sometimes in the worst cases a code expression for a deal where someone without cash or credit wishes to buy property from someone who is needy, unsophisticated, desperate, in mourning, etc. Under the guise of "helping" the owner, buyers offer to purchase property at 20% off, or more, and with subordination and substitution clauses. Of course, if purchasers really meant to be helpful, they would surely pay full market values... Let's be clear. If no-money-down schemes are so wonderful, why do folks who engage in such investments have a need for "partners" with cash?
Rather than get-rich-quick tapes and seminars, prospective investors are best served by taking a basic real estate license class in your state. This will explain much about financing, marketing, title, and other issues. It will also allow an individual to take the entry-level real estate exam and qualify for a license.

4. We made an offer on a home that was about 5% below the asking price. Our offer was rejected.
What can we do to make the owners more reasonable?
Who says the owners aren't reasonable? They have established a market price for their home. If they can get that price within a reasonable time frame, then they have logically priced their home. If the price cannot be obtained, either they will lower the price or the property will be withdrawn from the market. Because your experience in a different market made selling at a loss acceptable, that does not mean the same logic applies in other markets, or that your choice should in any way impact the sellers. Perhaps it would make sense to restructure your offer - maybe raise your price but seek better terms.

5. Where can I get more information regarding accessible housing options?
Try the following sources:
• State architectural associations.
• Local builders.
• State and local builder organizations.
• Hardware and building supply outlets
• University architectural schools.
• The library of the National Association of Home Builders in Washington, DC.
• Local public housing agencies.
• Local chapters of associations that serve those with special needs.

6. We are handy and want to buy a house using sweat equity for a down payment. Will lenders go for this?
From time to time you hear about lenders that allow the use of sweat equity as a credit toward a down payment, but not all of it. Most lenders, however, are not thrilled with this concept.
The problem is valuing labor. If a professional paints a house there is work completed to a given standard (that helps maintain the value of the home, the lender's security if the loan is defaulted) and there is a bill for labor and expenses (paint, caulk, etc.).
With sweat equity, there can be a cost for supplies, but then how is labor to be valued? At the same rate as for a professional? A discount? And what about workmanship?
The best approach is to speak with as many lenders as possible to see if they have a program that allows the use of sweat equity. Ask about the maximum sweat equity contribution allowed, total cash needed to close, rates, points, etc.

7. Can I discount the sale price to create a down payment?
No.
Lenders provide financing on the basis of the sale price or the appraised value, whatever is less.
In the case of a "discounted" price, say selling a home worth $150,000 for $140,000, the sale price is $140,000. Lenders do not recognize a discount.
A better approach is to pay full market value but to make the transaction dependent on a "seller contribution" at closing. The effect is the same, but the accounting makes more sense to lenders.

8. What is a “due-on-sale” clause?
When a home is financed, the borrower agrees to make regular monthly payments. However, if those payments are not made, if they are late, or if the lender's security is reduced (by not making payments, damaging the property, not maintaining insurance, not paying property taxes, selling the property, selling a part of the property by placing someone else on the title, etc.), then the lender has the right to call for the complete and immediate (say within 30 days) repayment of the loan. The mortgage language outlining the lender's rights is generally called a "due-on-sale" or "acceleration" clause. One effect of a due-on-sale clause is that it effectively prevents a loan from being assumed.
Borrowers should note that state and federal law might limit the ability of lenders to enforce a due-on-sale clause. For instance, a title change in the event of an estate situation may be allowed.

9. What is a "land contract?"
A "land contract" or "contract for deed" or "agreement for sale" is an installment sale you buy today but only get title after some or all of the payments are made. If you miss a payment, you could lose some or all your equity. Because title has not been transferred, there is nothing to foreclose. Some states, however, have special provisions protecting those who buy property with a land contract.
Be careful in a land contract situation to look at the proposed financing. Is lender approval required? If yes, and such approval is not received, the loan could be called.
State rules regarding land contracts vary extensively and such arrangements should be reviewed by an attorney or legal clinic before acceptance.

10. What are the pros and cons of a land contract?
A land contract may allow a buyer to obtain real estate even if he or she is not able to obtain financing through regular loan channels. A land contract may allow a seller to market a property when interest rates are high.
If a buyer with limited financial capacity purchases with a land contract, then a seller may have problems collecting monthly payments. However, since a buyer with a land contract does not have title until all conditions are met, it is often possible for the seller to get the property back with a "forfeiture" rather than a "foreclosure." The attraction of forfeiture is that it is much quicker to obtain than a foreclosure. It is also a complex undertaking that should only be done with an attorney.
If a land contract involves the use of existing financing that cannot be assumed, that could set off a due-on-sale clause. Both buyers and sellers could lose the property if the loan cannot be repaid.
Or, suppose Seller Jones sells a property to Buyer Smith using a land contract. Title will remain in Jones' name until Smith makes a certain number of payments. But, suppose that Jones goes bankrupt. What rights does Smith have to the property? Or, suppose Jones does not pay the property taxes? If the local government forecloses, what rights does Smith have?
Also, what happens if Seller Jones goes off to Tahiti? How does Buyer Smith get title?
Land contracts should be seen as complex arrangements. Both buyers and sellers should consult an attorney or legal clinic (separately) to assure that all aspects of the transaction are fully understood.

11. What is a "seller contribution?"
A sale agreement typically includes both a purchase price for the property as well as terms and conditions. It sometimes happens that a buyer will make an offer subject to certain terms: I'll buy your house but I want to keep the washer and dryer (for example).
One possible condition concerns "seller contributions." For example, I'll buy your house if you will pay the first $x of my closing costs. Lenders will generally accept seller contributions as part of a transaction providing they are written into the sale agreement, fully disclosed and only represent a limited fraction of the sale price. Different loan programs have different contribution caps. Lenders and brokers can provide specific advice.
A seller contribution can be a useful bargaining chip in slow markets - buy my house and you can have a credit of $x at closing. It's a thought that goes a long way with cash-strapped buyers.

12. Can I rent out a room to help me qualify for a loan?
Generally, no. Lenders have no assurance that such income will be regular and continuing.

13. Can we use private financing to buy real estate?
In theory, yes. In practice, not really. The odds against private financing are substantial. In 1997, according to the NATIONAL ASSOCIATION OF REALTORS®, 74% of all first-time buyers obtained financing from mortgage companies, 19 percent from commercial banks, 1% from S&Ls, 1% from "other" sources, 1% from credit unions, and 1% from private investors.

14. We have stock that has significant value and we think its price will increase. How can we come up with a down payment without selling our shares?
This is an increasingly-common, and delightful, problem. A home purchase typically requires either a sizable down payment, say 20%, or some form of backing by a third party, perhaps the FHA, VA, or a private mortgage insurance (PMI) company to buy with less down. With a third party, loans with 15, 10, 5, 3 and even nothing
down are possible. So, one choice is to look for financing with as little down as possible. A second choice is to look at RAM financing - a reserve account mortgage.
With a RAM loan you might get 100% financing. At the same time, you would deposit an asset with the lender, say the stock you do not want to sell. The lender then holds onto the stock until the property has a certain level of equity caused loan amortization (reducing the size of the loan through payments) and, hopefully, increasing property values. The borrower has 100% financing.
RAM financing raises important questions: Who gets the interest on the account? What if the value of the securities declines? How is the new value for the property determined? What is the monthly payment? Is all interest deductible? Mortgage lenders and securities brokers can provide additional information.

15. What is "MCC" financing?
Because states have better credit than people have, they can borrow money at low rates. Under Mortgage Credit Certificate (MCC) programs, a state lends money to first-time buyers and low-income buyers (usually) at below-market rates (but at rates that cover the interest cost of floating bond issues) and with little down (say 1% to 5%).
MCC’s allow you to borrow money and to then write off a portion of the interest, up to 20%, as a tax credit. The remaining interest deduction is just a write off.
For example, suppose your interest cost for a year is $5,000 and that 20% can be used as a tax credit. On your federal taxes, you would deduct $4,000 as an itemized expense, and you would deduct $1,000 (20% of $5,000) from your tax bill. See a tax pro for details.
Speak with local lenders to see if MCC financing is now available - because funding is limited these programs often run out of money quickly.

16. How quickly must I apply for a loan?
Many sale agreements require buyers to apply for a mortgage within a specific time period, say 7 days after the contract is signed. This is a negotiable item, however, and can be any period agreeable to both parties.
This is an important matter because if an application is not made, then a buyer may be in violation the sale agreement. A violation of the sale agreement, in turn, could be grounds to forfeit the deposit. Thus, buyers should go through the sale agreement with great care before signing to assure that all obligations are known and understood. Work with an appropriate professional such as a buyer broker when reviewing a sale agreement.
When you meet with a lender, be certain to obtain a letter stating that you met and showing when. Immediately provide this letter to the seller's broker in the manner required by the sale agreement.

17. Can I buy a house with an award from a lawsuit?
Sure - if the money is there. But, until the matter is finally resolved, appeals run out, and a check is cashed, how does anyone know that there will be money available for a realty purchase?
What if someone contracts to buy a home today with $20,000 in cash due at closing, in 60 days with money generated from the settlement of a suit. What happens if the suit is delayed? Money at closing is still required and if the buyer does not close there could be substantial damages - and maybe another suit....

18. I am getting married in two months. I have lousy credit, but my spouse-to-be has excellent credit. Can a home be bought by my future spouse individually?
Yes. However, he or she can only borrow on the basis of one income and his or her credit standing. Together you might have far more income. Lenders, incidentally, will probably want both parties on the property title even if you are not on the mortgage; this removes a barrier should foreclosure be required.

19. What rules prohibit discrimination in real estate sales and financing?
The Fair Housing Act is the major legislation prohibiting discrimination in real estate. It provides that there can be no offer to sell, rent, buy, or exchange property that contains any preference, limitation, or discrimination based on race, color, religion, sex, national origin, handicap, or familial status, or an intention to make such preference, limitation or discrimination.
This federal law applies to the sale and rental of housing, residential lots, advertising the sale or rental of housing, real estate financing, the provision of realty services, and the appraisal of real property. It also prohibits the practice of "blockbusting."
Other federal laws that offer protection include:
• The Civil Rights Act of 1866
• The Civil Rights Act of 1968
• The Americans with Disabilities Act
• The Equal Credit Opportunity Act
State and local laws may also identify additional discriminatory factors that are prohibited.
Brokers, lenders, and attorneys can explain such matters in detail.

20. If the appraised value and the sale price of a home are different, what will lenders use when granting a mortgage?
Whatever is lower.
Lenders want as little risk as possible, so they will look at both the sale price and the appraised value and then make a loan based on the lower of the two numbers.

21. What is "buyer's remorse?"
With some frequency it happens that buyers often have a sense of remorse after contracting to buy a home. Why?
A home is a very large purchase. Not just in terms of dollars, but also in the sense of status, ego, and commitment. And because it is such a transforming event, it naturally and reasonably causes some concern.
But, not to worry. Buyer's remorse typically passes in quick order.

22. Can I buy a house after a bankruptcy?
Yes. There are two issues to consider.
First, lenders like to see two years of good credit after a bankruptcy is resolved. However, there are instances where lenders will finance with a year of good credit.
Second, lenders want to know why you have gone bankrupt. There is a substantial difference between a bankruptcy that is caused by reckless financial habits and simple financial disasters a car wreck, medical costs, the plant closed after 30 years, the town was underwater for three weeks, etc. In other words, not every bankruptcy is a by-product of financial negligence.

23. What is a "stigmatized" property?
There are properties that are in flawless physical condition but may nevertheless present unusual marketing issues. For instance, homes that have been the site of murders, suicides, or that are reportedly inhabited by ghosts are known as "stigmatized" properties. This is a home with a condition that is psychological in nature rather than a matter of bricks and mortar.
The subject of stigmatized houses is complex. While some people may want a house with a ghost, others do not. The subject gets tangled even further when one is asked whether murders and suicides at a property must be disclosed.
The rules on this matter vary by state some say a given condition must be disclosed, others say "no," some say disclosure is not necessary after so many years, and some states say nothing one way or the other. For specifics, please speak with a broker or real estate attorney in your community.

24. What is the difference between a co-op and a condo?
In general terms, a co-op is a corporation that owns real estate. If you belong to a co-op, you own stock in the corporation and the exclusive right to a given unit. There is usually an underlying mortgage on the property and your co-op fee includes some or all mortgage payments as well as other costs.
With a condo, you own real estate and you have access to certain common facilities. The condo is typically responsible for exterior maintenance and you pay a monthly condo fee. You have your own title and mortgage, so mortgage costs are not part of the condo fee.
25. What are some of the basic questions to ask when looking at a co-op?
Co-op ownership raises a number of issues that should be of concern:
1. What is the value per unit of the underlying mortgage?
2. What is the voting scheme - one vote per unit or voting based on unit size?
3. Is there a reserve fund for repairs? If so, is it adequate?
4. Are major repairs anticipated in the next two years? If so, how will they be funded?
5. Is the co-op now facing or likely to face a lawsuit for any reason? If yes, what are the possible damages?
6. What pricing trends are associated with the co-op? Are prices rising? Falling? Can you review all sales for the past year?
7. Is a property tax rise known or expected?

26. We are considering the purchase of a condo in a complex that has an interesting pet rule: You can only have a dog or cat that can be carried into the building. Is this fair?
The obvious intent is to limit larger dogs since most adults can readily carry domesticated cats. The real test here is the strength of the owner rather than the size of the animal.
Not all animals make good pets, regardless of size. Venomous creatures, wild animals, and endangered species are certainly inappropriate.
A more difficult question concerns larger dogs. There are noise and sanitation issues, and there are special questions regarding breeds with a history of attacks. It may well be that Rover is the best of his breed, but if Rover has a bad day and mauls a child the liability could be substantial.
The condo association, for the protection of unit owners, raises a valid issue. However, a better approach would be to speak with insurance carriers to determine how pet coverage is handled, exclude animals not covered, evolve a more precise pet standard, and make certain that owners understand both the condo policy and their personal liability.

27. What is a broker's "trust" account?
In terms of a real estate sales agreement, a "trust" account is typically an account operated by a real estate broker that is used to hold buyer deposits until closing.
Example: Buyer Smith makes an offer to purchase a home. With the offer is a $10,000 deposit. That deposit is held by Broker Smith in a trust account. The money in a broker's trust account is typically a credit to the buyer at closing. If the sale does not close, however, then several alternatives are possible.
First, buyer and seller may agree to return the trust money to the purchaser. Second, buyer and seller may agree to give the money to the seller to resolve claims that the buyer did not perform as agreed under the sales contract. Third, buyer and seller may dispute how the funds should be distributed. In this situation, the money is usually turned over to a court or, in at least one jurisdiction, the state real estate commission.

28. What is a lender's escrow account?
When homes are bought with 80% or more financing from a single lender, the lender generally requires the borrower to make monthly payments to a lender "escrow" (trust) account.
The purpose of the lender escrow account is to accumulate money to assure that the borrower's property taxes and property insurance are paid (and thus reduce the lender's risk).
Lenders typically collect 1/12th of the annual costs for property insurance and taxes each month. They are allowed to keep as much as one full year's worth of tax and insurance payments in the account, plus a two-month safety margin, plus $50. The only time the account is likely to have 12 monthly payments plus the two-month cushion is just before property taxes or insurance are due.
Lenders must account to borrowers annually with a statement showing how much is in the account, whether monthly payments will rise or fall in the coming year, and whether any surplus or shortage appears in the account. If the surplus is more than $50, the excess must be returned to the borrower. Note that some states require lenders to pay interest on escrow accounts, others do not.

29. How are escrow accounts used at closing?
It sometimes happens that not all agreed promises found in a sale agreement can be fulfilled at closing. For instance, if closing takes place in January in a cold climate it may not be possible to test the air conditioning system.
How does the buyer know the system works? It is best to wait until warmer weather to test the system. But, what if something is wrong with the system? To resolve buyer concerns, an "escrow" account can be created at closing. In this situation, money from the seller is held in reserve to pay for needed repairs as defined in the escrow agreement. If repairs are not required, or if the cost is less than the amount of money set aside, the difference is returned to the sellers.

30. What is 3/2 financing?
There are a number of loan programs directed toward first-time buyers that allow the purchase of property with as little as 3% down.
The way they work is that a purchaser puts up 3% of the sale price and another party puts up 2%. Who puts up the additional 2%? Programs differ, but some choices include:
• A friend or relative providing a gift.
• A friend or relative providing a loan.
• An employer providing a loan.
• An employer proving a loan that does not have to be repaid if the individual stays with the company for a certain amount of time.
• A community group providing a loan or grant.
• A government agency providing a loan or grant.
• Amazingly enough, a lender who provides both 95% financing and a 2% loan.
For details, please contact local lenders and real estate brokers.

31. How can I buy real estate with my children using "shared equity?"
Shared equity is generally seen as a way that families can buy real estate together. The kids live on the property and get the benefits of property usage and ownership tax advantages while Mom and Dad get an investment write off equal to their proportional interest. (Shared equity arrangements, incidentally, can also be among friends, relatives, or business partners.)
Under a shared-equity arrangement, if you own half and the kids own half, you must pay half the mortgage, taxes etc. The kids must pay their half, plus they must pay a market-rate rent for your half of the property in order for you to have a deduction. Of course, once they have paid, you can also give them a gift equal to some portion, or maybe all, their rent.
You will need to work out an equity-sharing arrangement with the help of a local attorney and CPA. A broker can find an appropriate property. Both you and your children will need wills, living wills, and a proper equity-sharing agreement. You will need to understand what happens if your kids are laid off (you are responsible for the mortgage), or if you and your children become estranged. You will also have to consider the interests of any other children you may have.

32. How can our family buy real estate together?
There are a number of choices, including equity-sharing deals. These have potential for everyone if a home in poor condition is purchased and the adult child will put in the sweat equity required to fix it up. Partnerships. Family partnerships are common but everyone has to understand their obligations.
A corporation could be formed, with shares for everyone. The problem here is selling shares in a small entity if someone wants out. All familial arrangements should be based on a written agreement developed by an attorney, wills and living wills for everyone, and advice from a tax professional for each party. Also, speak with lenders before making a final arrangement. Some approaches may be easier to finance than others.

33. We are buying a home and have a copy of the seller's disclosure form. Should we also get a home inspection?
Most states have a mandated seller disclosure form that must be used for most properties, but not all. This form provides an opportunity for the seller to answer certain questions regarding the property's condition. Just ask the broker or the owner for a copy.
But, a seller disclosure form is not a substitute for an independent examination by a professional home inspector. A seller may well complete a form to the best of his or her ability, but without knowledge of home construction that ability may be limited. And, a state-written form may not ask the questions you want answered. For example, when was the owner last in the attic to check for leaks? When was the furnace last examined? Does the home have aluminum wiring?

34. What is a "CMA?"
When owners offer a home for sale they logically want the best possible price and terms for their property. A "comparative market analysis" or "CMA" is an estimate of value prepared by a real estate broker or salesperson that shows recent past sales for like properties and suggests a possible asking price for the owner's property.

35. What is the difference between a "warranty" and an "inspection?"
A warranty and an inspection are different creations. An inspection shows the condition of a home at a particular time. A warranty provides compensation if an approved repair is required during the warranty period. Not all warranties are alike. Some cover repairs only above a certain minimum (that is reasonable). Some have defect lists - but the standards for each list vary (some lists are vastly more liberal than others). Some warranty programs charge an inspection fee for each item.

36. What is a contract "contingency?"
A sale agreement between buyer and seller typically outlines a series of obligations for each party. Also, usually, a sale agreement has one or more clauses that make the transaction dependent on certain events. Such contract language is a "contingency" and the agreement itself can be seen as a "contingent" arrangement.
For example, you will buy the Smith house if you can get a mortgage at not more than 8% and 1 point. If such financing is not available, if the contingency has not been met, then a contingency may provide that the deal will fall through and your deposit will be returned in full.
The words used in a sale agreement outline important rights and terms and should be written and reviewed with great care.

37. What stays with a home and what goes?
In general terms, items that are physically attached to and intended to be part of a home are expected to stay. Example, if there were a built-in dishwasher it should stay - if the sellers take it there would be a large hole in the kitchen cabinets.
Items that stay are called "fixtures" but it is sometimes difficult to determine what is or is not a fixture. Moreover, one can "create" a fixture in a purchase offer by saying that as a condition of the deal, the backyard swing set (or whatever) will stay.
The best approach to fixtures is to list what stays in the purchase offer. For details, speak with a broker as appropriate.

38. What is a lease option?
It sometimes happens that a buyer does not want to purchase, or cannot purchase, immediately, and a seller does not want to sell, or cannot sell, immediately. In this situation, both parties may want a "lease option" arrangement.
In general terms, a lease option is an arrangement where a prospective buyer moves into a property as a tenant. The buyer has the right to buy the property for a specific price during the option period. The monthly rent is
equal to the fair market rental rate plus an additional sum. The additional sum is credited to the buyer at closing, should the buyer exercise the option to purchase. If the buyer does not buy the property, then the additional monthly payments go to the owner.
Real estate brokers can locate lease option properties. Lease option contracts should be reviewed by attorneys for each party to the transaction before signing. Also, before entering into a lease option arrangement, speak with lenders to review current financing requirements.

39. Can all the rent paid in a lease purchase be credited toward a down payment?
If the purchase is being financing by a commercial lender, the lender will want to know the fair market rental for the property. Anything above the fair market rental can be considered a credit toward the purchase; anything below a fair market rental represents a discounted sale price. A lower price, in turn, means the lender will not provide as much financing as buyer and seller may have wanted. Speak with lenders for details.

40. What is a seller "take-back” or “carry-back?"
A seller "take-back" works like this. A home is worth $100,000 and has an assumable $60,000 mortgage. You assume the mortgage. Instead of taking $40,000 in cash from YOU, the seller instead takes back a note, secured by the property. For example, the seller might take-back a note for $30,000 if you will put up $10,000 in cash.
A seller take-back is just like a loan from any lender. It must be repaid according to the terms and conditions outlined in the note. If not repaid, the property can be foreclosed. The rules that apply generally to mortgages may not apply to seller take-backs. For example, some attorneys argue that a seller take-back is not subject to state usury rules (interest rate caps) because a seller take-back is NOT a loan, no money changed hands.

41. Is an owner "take-back" a good way to finance a home?
Such financing is fine as long as it meets the usual standards you would expect with a loan - a competitive interest rate, no short-term balloon note, the right to prepay in whole or in part without penalty, a deed of trust rather than a "mortgage," (so there is a trustee to accept a pay-off in case the owner is not available), etc.
But, since a commercial lender is not involved, you will want many of the protections lenders require such as a title search, title insurance, termite inspection, survey, a proper deed, etc.

42. Does it make sense to buy real estate for cash?
Probably the best answer works like this: Is there a better place to put your money? Is there an alternative investment that will produce like returns with equal risk? Is it simply more comfortable as a matter of personal preference to pay cash? The decision to pay cash or not pay cash includes both economic considerations and personal choices. Many people simply prefer a home that is free and clear of all debt. There are several advantages the can be obtained by paying all cash. There is no mortgage application and no need for private mortgage insurance. There is also no mortgage interest to write off.
However, if you elect to pay all cash, be sure to insist on the protections that a lender would want - a title inspection, title insurance, survey, termite inspection, appraisal, etc.
It may be worthwhile to sit down with a tax professional or a fee-only financial planner to review the consequences of paying all cash or financing.

43. What is a "cash-back" transaction?
It is sometimes claimed that it is possible to buy a home and receive both the house and a substantial amount of cash at closing.
For example, a home will be "sold" for $100,000. The deal will be financing with a 95% loan-to-value mortgage. However, the seller will provide a $15,000 certificate of deposit to the buyer at closing.
On the surface, we have a deal with a $100,000 purchase price, $5,000 down, $95,000 in financing, and a $15,000 TD. Alas, $100,000 was never paid for the house. There was a "sales price" of $100,000, but then as part of the deal the seller provided a $15,000 rebate in the form of a CD. Since a CD is a certificate of deposit that presumably is worth $15,000 in this example, this property was sold at discount - the real price is $85,000. This is a classic "cash plus" deal where the amount financed is greater than the debt to the owner.
The surplus would be returned to the buyer at closing, if there were a closing. Lenders will decline this transaction because the amount of financing sought is greater than the discounted value of the property. Even if this property appraises at $100,000, lenders will value the deal at the appraised value or the true sale price ($85,000), whatever is less. Worse, if the lender is not told, in writing, in the loan application and in the sale agreement about the CD, there may well be grounds to consider charges involving fraud.
Bottom line: Should someone propose a cash-plus deal, sign nothing until you have spoken with an attorney.

44. Why does closing cost so much?
State and local governments have discovered that real estate transfers are wondrous opportunities to tax with little political responsibility. If a politician says that taxes should be raised, the individual may well be out of work when elections next roll around. But, if real estate transfer taxes are raised, the game changes because many of those impacted by the higher tax will move elsewhere -and thus they cannot vote against the politician.
The result is that transfer taxes and "stamps" often amount to thousands of dollars per transaction - income that is enormously profitable to states and local communities.

45. Must I physically attend closing?
Check with your closing provider, but in most jurisdictions - if not all - the answer seems to be "no."
The purpose of closing is to assure that all requirements of the sale agreement have been met. The closing papers need to be signed by all parties to the transaction, and often notarized or witnessed.
However, the signing process need not be done at the closing table. Documents can be reviewed and signed away from the closing table and sent to the closing provider by overnight delivery.

46. What is a "walk-through?"
When you purchase an existing home you enter into a sale agreement at one point but only close on the sale some weeks later. To assure that the property is in substantially the same condition as when the sale agreement was signed, a buyer will "walk through" the property just before closing.
If you are a buyer, be sure to allocate enough time for a thorough walk-through.
In the case of a new home, the situation is a little different. Typically there is a walk-through with the builder's representative. Items not completed, or not properly completed, are entered onto a "punch list." The punch-list items are then detailed at closing and the builder is obligated to make required repairs and completions.
When going through a new home, buyers should make their own punch list and compare it with the builder's representative to assure that nothing is missed by accident.

47. Must real estate brokers disclose the fact that they are licensed when they buy or sell for themselves.
All states license the practice of real estate brokerage. A common provision of such laws is that real estate licensees must disclose their license status when they buy or sell a property for themselves, for a spouse, or for an immediate member of the family such as a parent or child.
The reasoning behind such disclosure rules is that brokers and salespeople, by virtue of the fact that they are licensed, are presumed to have a marketplace advantage over those who have not studied real estate, passed various tests, and obtained a license. To have a fair playing field, brokers and salespeople must disclose the fact that they are licensed so that consumers know about such training and experience. Speak with brokers regarding specific requirements in your state.

48. Can a real estate broker assist me in the purchase or sale of a business?
In some states there traditionally were "business chance" brokers, individuals specifically licensed to buy and sell businesses for another and for a fee. Such licenses in many states have been combined with real estate licenses, meaning that a real estate broker is allowed to buy and sell a business for another. Please speak with local brokers for specifics related to your state.

49. Do people really make millions of dollars buying with no money down?
It's a big country and you can be sure that each year someone will win the lottery, someone will get hit by lightening, and someone will buy a home at a steep discount, with predatory terms, and no money down. The odds in every case are grim.

The essential issue is NOT buying property with no money down, it is buying property that can produce a positive cash flow and/or be sold at a profit. Unless one or both of these conditions can be met, then the economics of buying a home with no-money-down are unlikely to make sense.
Those buying under the VA program can buy with no money down, and residential financing with 5% down or less is widely available, especially for first-time home buyers. However, all of these programs require appropriate credit and income.

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Don't forget do your research online check out homes for sale and view our other posts on real estate. Searching homes in your area can give you an estimate as to how much your home could go for.