FAQ

Q?

Checklist for Home Buyers

A.

Know Your Rights as a Homebuyer
Before you start, there are many laws that protect you from scams, unnecessary expenses, and discrimination in the process of homebuying. Know your rights!

Find out How Much Mortgage Can You Afford
You can save yourself a lot of wheel-spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you'll be able to afford. Follow our tips and use these simple calculators to see how much you can afford in a mortgage payment.

Create Your "Wishlist"
Make your Wish Lst. Focus on the features you want in a home: 2 bedrooms or 3? 1 bath or 2? Garage or no garage? Knowing what you're looking for will help you focus your search. And it will help your real estate broker, too.

Find a Real Estate Broker
You'll want to start searching for a broker as soon as you decide to buy a home. Talk to several and find someone you think you'll be comfortable working closely with. Many of your friends and relatives have probably bought and sold their homes through brokers. Ask them who they used and what their experiences were. You can find out which brokers specialize in the kind of home or the area you want by looking in the Yellow Pages or your local newspaper's classified real estate ads. Or drive through neighborhoods and note the names of brokers on "for sale" signs. When you talk to prospective brokers, ask questions about the areas and types of homes in which you're interested. Do they seem knowledgeable? Most important, is their personal style a good fit with your own?

Mortgages and Homebuying Programs
Many different kinds of mortgages are available to you. Read about them, and make sure you understand the pros and cons of each. Your real estate broker can help you. HUD offers some special homebuying programs. Also, many local governments offer special homebuying programs to help low-income homebuyers. Shop around - you may be surprised at all your options!

Q?

Buy vs Rent

A.

Why should I buy, instead of rent?
Answer: You'll love the feeling of having something that's all yours - a home where your own personal style will tell the world who you are. A thriving vegetable garden in the backyard, a tiled entryway, a yellow kitchen...when you own, you can do it all your way! But there's more to owning a home than personal satisfaction. You can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes, too. And interest will compose nearly all of your monthly payment , for over half the number of years you'll be paying your mortgage. This adds up to hefty savings at the end of each year. And you're also allowed to deduct the property taxes you pay as a homeowner. If you rent, you write your monthly check and it's gone forever. Another financial plus in owning a home is the possibility its value will go up through the years.

(more…)

Q?

Home Ownership : How To

A.

You probably started the home buying process in one of two ways: you saw a home you were interested in buying or you consulted a lender to figure out how much money you could borrow before you found a home (sometimes called pre-qualifying). The next step is to sign an agreement of sale with the seller, followed by applying for a loan to purchase your new home. The final step is called ´´settlement´´ or ´´closing,´´ where the legal title to the property is transferred to you.

At each of these steps you often have the opportunity to negotiate the terms, conditions and costs to your advantage. These pages will highlight such opportunities. You will also need to shop carefully to get the best value for your money. There is no standard home buying process used in all localities. Your actual experience may vary from those described here. These pages takes you through the general steps to buying a home, to eliminate, as much as possible, the mysteries of the settlement process.

Buying and Financing A Home
The real estate broker: frequently, the first person you consult about buying a home is a real estate agent or broker. The most common practice is for the seller to hire the broker to find someone who will be willing to buy the home on terms and conditions that are acceptable to the seller. Therefore, the real estate broker you are dealing with may also represent the seller. However, you can hire your own real estate broker, known as a buyer’s broker, to represent your interests. Also, in some states, agents and brokers are allowed to represent both buyer and seller.

Even if the real estate broker represents the seller, state real estate licensing laws usually require that the broker treat you fairly. If you have any questions concerning the behavior of an agent or broker, you should contact your State’s Real Estate Commission or licensing department.

Sometimes, the real estate broker will offer to help you obtain a mortgage loan. He or she may also recommend that you deal with a particular lender, title company, attorney or settlement/closing agent. You are not required to follow the real estate broker’s recommendation. You should compare the costs and services offered by other providers with those recommended by the real estate broker.

Selecting an Attorney
Before you sign an agreement of sale, you might consider asking an attorney to look it over and tell you if it protects your interests. If you have already signed your agreement of sale, you might still consider having an attorney review it. An attorney can also help you prepare for the settlement. In some areas attorneys act as settlement/closing agents or as escrow agents to handle the settlement. An attorney who does this will not solely represent your interests, since, as settlement/closing agent, he or she may also be representing the seller, the lender and others as well.

If choosing an attorney, you should shop around and ask what services will be performed for what fee. Find out whether the attorney is experienced in representing home buyers. You may wish to ask the attorney questions such as:

What is the charge for negotiating the agreement of sale, reviewing documents and giving advice concerning those documents, for being present at the settlement, or for reviewing instructions to the escrow agent or company? Will the attorney represent anyone other than you in the transaction? Will the attorney be paid by anyone other than you in the transaction? Please note, in many areas of the country attorneys are not normally involved in the home sale. For example, escrow agents or escrow companies in western states handle the paperwork to transfer title without any attorney involvement.

Q?

Buying an Affordable Home

A.

Home loans can be available from several types of lenders--thrift institutions, mortgage companies, commercial banks, and credit unions. Various lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker. Brokers set up transactions rather than lending money directly; in other words, they will find a lender for you. The broker’s contacts to several lenders can mean a bigger selection of loan products and terms from which you can choose.

There are many factors to consider when looking for a home

Types of homes - There are many different types of homes: single family, condominium, townhouse, and duplex. Additionally, the type of home you select may impact your buying power.

New or existing home - Consider whether you want to move into a new home or an existing home. In general, new homes are more costly than existing homes. However, the condition of an existing home can significantly increase your maintenance requirements.

Quality of home - Examine the condition of the home. Carefully inspect the structure, interior and exterior of the house for defects. The additional renovation costs may add up over time and exceed your maintenance estimates. Will the house need a lot of repairs? How old are the appliances? The purchase of the home is one step, but the renovations and repairs are added costs that need to be considered. Would you prefer to purchase a newer, costlier home or would you prefer to invest additional time and money into renovations and repairs for an older, less expensive home?

Features - Consider the features of the home. Does it have gas or electric heating? How many bathrooms does it have? How many bedrooms do you need? All of these characteristics will influence the price of the home and your monthly housing expenses. HUD's Wish List worksheet (A PDF Reader is necessary to view this file. PDF reader options for the visually impaired.) can help you identify and prioritize the features you are looking for in a home.

Location - Would you rather live in the city, the country, or the suburbs? Do you want to be near parks or the library? What about a shopping center? Is it important for you to be near major highways or public transportation? Get a feel for the surrounding area by exploring the neighborhood and talking to residents.

Crime rate - Look into the safety of the neighborhood. Does the neighborhood have a high crime rate? Has there been an increase in crimes committed in the area? If so, how will this influence the future property value of your home?

School system - The quality of the school system in a particular area is not only important to families with children but can influence the property value of your home.

Economic stability of area - The economic growth and stability of the area surrounding a home can influence its future property value.

Property tax - Examine the annual amount of real estate taxes and other assessments levied on homes in the neighborhood you are considering.

Brokers will generally make contact with several lenders regarding your application, but they do not have to find the best deal for you unless they are contracted with you to be your personal agent. You should also consider contacting more than one broker, just as you would with banks or thrift institutions.

Knowing if you are dealing with a lender or a broker may not always be cut and dry. Some financial institutions work as both lenders and brokers. And most brokers’ advertisements do not use the word "broker." So be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s origination or other fees. A broker’s compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.

Q?

Home Ownership: Are You Prepared?

A.

You can find out by asking yourself some questions:

  • Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
  • Do I have a good record of paying my bills?
  • Do I have few outstanding long-term debts, like car payments?
  • Do I have money saved for a down payment?
  • Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer "yes" to these questions, you are probably ready to buy your own home.

Q?

Young Buyer

A.

Buying your first home can be scary, but if you follow these tips, you will do just fine!

Look at as many homes as possible to get a better feel for ones available in your price range. Keep track of what you like and dislike about each home that you visit by printing and using our Home Visits Worksheet.

Also consider the market value of the home, any special circumstances surrounding the sale of the home, how much you can afford to pay for the home, and the condition of the home when determining whether the home is right for you.

When you find a home in your price range and you want to buy it, visit the neighborhood at various times to get a more complete understanding of its activity. Talk with your prospective neighbors about what it's like to live in the area. Take a day and commute to your job from the area. And look at the home more critically -- you may discover flaws you hadn't noticed during your first visit.

Another aspect to consider is the financing you will use to purchase the home. For example, the seller may help pay closing costs such as transfer taxes or points on a mortgage. If this is the case, you may be more willing to accept the seller's asking price. Your real estate sales professional can offer some assistance regarding how much you should offer, but the final decision is yours.

Q?

Ownership Advice

A.

Know Your Rights as a Homebuyer
Before you start, there are many laws that protect you from scams, unnecessary expenses, and discrimination in the process of homebuying. Know your rights!

Find out How Much Mortgage Can You Afford
You can save yourself a lot of wheel-spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you'll be able to afford. Follow our tips and use these simple calculators to see how much you can afford in a mortgage payment.

Create Your "Wishlist"
Make your wish list. Focus on the features you want in a home: 2 bedrooms or 3? 1 bath or 2? Garage or no garage? Knowing what you're looking for will help you focus your search. And it will help your real estate broker, too.

Find a Real Estate Agent or Broker
You'll want to start searching for a broker as soon as you decide to buy a home. Talk to several and find someone you think you'll be comfortable working closely with. Many of your friends and relatives have probably bought and sold their homes through brokers. Ask them who they used and what their experiences were. You can find out which brokers specialize in the kind of home or the area you want by looking in the Yellow Pages or your local newspaper's classified real estate ads. Or drive through neighborhoods and note the names of brokers on "for sale" signs. When you talk to prospective brokers, ask questions about the areas and types of homes in which you're interested. Do they seem knowledgeable? Most important, is their personal style a good fit with your own?

Mortgages and Homebuying Programs
Many different kinds of mortgages are available to you. Read about them, and make sure you understand the pros and cons of each. Your real estate broker can help you. HUD offers some special homebuying programs. Also, many local governments offer special homebuying programs to help low-income homebuyers. Shop around - you may be surprised at all your options!

Q?

Confidence and Experience

A.

Start by thinking about your situation.

Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.

Buying is almost always better than renting!

The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

By using an experienced real estate agent, you leverage their confidence and experience.

This can be especially important if you are attempting to purchase a house under market value or if things become 'sticky', as a seasoned veteran agent will have probably encountered a similar situation previously..

Q?

A REALTOR Can Help

A.

Using a real estate agent is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more.

He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.

Q?

Find your Dream

A.

Almost everybody has a dream home. A place they like to wander through in their thoughts, choosing imaginary wallpaper and putting in imaginary skylights. But for too many people, dream homes remain just that--dreams. The reality of owning their own home never seems to become theirs.Once you have figured out what kind of home are looking for, the next thing to do is to search for the best possible deal. Although this is the toughest part of the whole home buying process, doing your homework certainly does help. There are two ways of doing this. Searching on your own or by hiring a real estate agent and letting them do the hard work for you! Leverage their experience!

In case you are looking to do it yourself, here are a few tips that would certainly help.

Research, Research and Research!
The easiest way to do this is the Internet! The best way to find what you should expect for your hard earned money is to surf all the real estate sites and see what is available in your price range! Make a Short list of all the houses that meet most of your (written down) requirements.

 Searching Tip
Searching for real estate over the net is so much easier than browsing a newspaper because you can key in your personal search criteria and don’t have to be bothered with the vast number of listings that aren’t for you. Internet real estate sites offer customized search options that allow you to zero in on your key requirements.

Local newspapers would be a better bet in case you are looking to buy a house in the same locality. Sunday newspapers generally have a number of good listings.

 Make appointments to look at all the short listed houses
Make sure that you visit each and every house short listed. Call the landlord well in advance and set up an appointment. Don’t shy away from taking as many inspections as you want.

Q?

Your Wish List

A.

Creating a Wish List on paper will help you decide which home you should buy! There are many things to consider when thinking of your new home and making a wish list. You can create check boxes to help you weed out the less than satisfactory homes. Be sure to prioritize your list so that each item will not count as much as other items.

A few Things To Consider:

Community
Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.

Schools
You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.

Resale Value
Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a REALTOR, they may have access to comparable sales maintained on a database. You should consider new developments and if the community is growing in a fashion that will increase the value of your home in the years to come.

Price
It is always advisable to purchase a home within your means. Use one of our calculators to be confident that your new home purchase is within your budget!

Q?

House Search

A.

Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment ? How much space do you need? What areas of town do you like? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities - things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a 'wish list." Minimum requirements are things that a house must have for you to consider it, while a "wish list" covers things that you'd like to have but aren't essential.

Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.

Q?

Real Estate Ads

A.

4B/2B -- four bedrooms and two bathrooms. "Bedroom" usually means a sleeping area with a window and a closet, but the definition varies in different places. A "full bathroom" is a room with a toilet, a sink and a bathtub. A "three-quarter bathroom" has a toilet, a sink and a shower. A "half bathroom" or powder room has only a toilet and a sink.

assum. fin. -- assumable financing

Closing Costs: This has different meanings in different states, in some states a real estate transaction is not consider "closed" until the documents record at the local recorder which is the public official who keeps records of transactions that affect real property in the area, sometimes known as a "registrar of deeds" or "county clerk," s office, in others, the "closing" is a meeting where all of the documents are signed and money changes hands, costs -- the entire package of miscellaneous expenses paid by the buyer and the seller when the real estate deal closes. These costs include the brokerage commission, mortgage which is a legal document that pledges a property to the lender as security, that is, the property that will be pledged as collateral for a loan, for payment of a debt, instead of mortgages, some states use first trust deeds,-related fees, escrow or attorney's settlement charges, transfer tax which is state or local tax payable when title passes from one owner to another, is, recording fees, title insurance and so on. Closing costs are generally paid through escrow.

CMA -- comparative market analysis or competitive market analysis. A CMA is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.

Contingency -- a provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One example is a buyer's contract which is an oral or written agreement to do or not to do a certain thing, dual right to obtain a professional home inspection before purchasing the home.

dk -- Most often refers to a deck

Expansion pot'l -- expansion potential mean that there's extra space on the lot or the possibility of adding a room or even an upper level, subject to local zoning restrictions.

Fab Pentrm -- fabulous pentroom, a room on top (but under the roof) that has great views

FDR -- formal dining room

Fixture -- anything of value that is permanently attached to or a part of real property which is land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof, . (Real estate is legally called "real property," while movables are called "personal property.") Examples of fixtures include installed wall-to-wall carpeting, light fixtures, window coverings, landscape, that is, adjustable rate mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount, those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps," some arms, although they may have a life cap, that is, for an adjustable-rate mortgage (arm), a limit on the amount that the interest rate can increase or decrease over the life of the mortgage, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year, there is a limit on how much that payment can change each year, and that limit is also referred to as a cap and so on. Fixtures are a frequent subject of buyer and seller disputes. When in doubt, get it in writing.

Frplc, fplc, FP -- fireplace

Gar -- garage (garden is usually abbreviated as "gard.")

Grmet kit -- gourmet kitchen

HDW, HWF, Hdwd -- hardwood floors

Hi ceils -- high ceilings

In-law potential -- potential for a separate apartment, subject to local zoning restrictions

Large E-2 plan -- this is one of several floor plans available in a specific building

Listing -- an agreement between a real estate broker and a home owner that allows the broker to market and arrange for the sale of the owner's home. The word "listing" is also used to refer to the for-sale home itself. A home being sold by the owner without a real estate agent, that is, a person licensed to negotiate and transact the sale of real estate, isn't a "listing."

Lo dues -- low homeowner's association dues. But find out how "low" the dues are compared to other dues in the area.

Lock box -- locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent

Lsd pkg. -- lease which is a written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time parking area. May come with additional cost.

MLS -- Multiple Listing Service. An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. Membership isn't open to the general public, although selected MLS data may be sold to real estate listings Web sites. MLSs are local or regional. There is no MLS covering the whole country.

Nr bst schls -- near the best schools

Pot'l -- potential

Pvt -- private

Pwdr rm -- half bathroom or powder room

Title Insurance -- an insurance policy that protects a lender, that is, a term which can refer to the institution making the loan or to the individual representing the firm, for example, loan officer which is also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others, the loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution’s are often referred to as "lenders" or owner's interest in real property from assorted types of unexpected or fraudulent claims of ownership. It's customary for the buyer to pay for the lender's title insurance policy.

Q?

Approval Letters

A.

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be 'pre-qualified' over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.Pre-approval is a lender's actual commitment to lend to you. It involves assembling the financial records mentioned in Question 47 (Without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

Find Out About Your Credit History

There are three major credit reporting companies: Equifax, Experian, and Trans Union. Obtaining your credit report is as easy as calling and requesting one. Once you receive the report, it's important to verify its accuracy. Double check the "high credit limit,"'total loan," and 'past due" columns. It's a good idea to get copies from all three companies to assure there are no mistakes since any of the three could be providing a report to your lender. Fees, ranging from $5-$20, are usually charged to issue credit reports but some states permit citizens to acquire a free one. Contact the reporting companies at the numbers listed for more information. CREDIT REPORTING COMPANIES Company Name Phone Number Experian 1-888-524-3666 Equifax 1-800-685-1111 Trans Union 1-800-916-8800

Q?

Home Hunt

A.

Every neighborhood is different. It is strongly recommended that you research the neighborhood you plan on living in before buying your home. It is even advisable that you park nearby and walk to neighborhood after the normal work day is done to see what the area is really like! Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others: quality of schools property values traffic crime rate future construction proximity to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural activities such as museums, concerts and theaters.

Q?

Home Selection

A.

HOW CAN I KEEP TRACK OF ALL THE HOMES I SEE?
If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don't hesitate to return for a second look. Use the HUD Home Scorecard to organize your photos and notes for each house.

HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?
There isn't a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you're looking for. It will help avoid wasting your time.

Before you start shopping for a home, you need to know what kind of home to shop for. To determine that , of course, you've got to figure out how much you can afford to pay each month.

Fortunately, there's a pretty simple formula for coming up with this number. It's the Federal Housing Administration (FHA) formula that many mortgage lenders use. The FHA has found that most people can afford to budget 29% of their gross monthly income to housing expenses, depending on total debt. Buyers with no debt can budget as much as 41% of monthly income to housing.

Once you have figured out what kind of home are looking for, the next thing to do is to search for the best possible deal. Although this is the toughest part of the whole home buying process, doing your homework certainly does help. There are two ways of doing this. Searching on your own or by hiring a real estate agent and letting them do the hard work for you! Leverage their experience!

In case you are looking to do it yourself, here are a few tips that would certainly help.

Research, Research and Research!
The easiest way to do this is the Internet! The best way to find what you should expect for your hard earned money is to surf all the real estate sites and see what is available in your price range! Make a Short list of all the houses that meet most of your (written down) requirements.

Searching Tip
Searching for real estate over the net is so much easier than browsing a newspaper because you can key in your personal search criteria and don’t have to be bothered with the vast number of listings that aren’t for you. Internet real estate sites offer customized search options that allow you to zero in on your key requirements.

Local newspapers would be a better bet in case you are looking to buy a house in the same locality. Sunday newspapers generally have a number of good listings.

Make appointments to look at all the short listed houses
Make sure that you visit each and every house short listed. Call the landlord well in advance and set up an appointment. Don’t shy away from taking as many inspections as you want.

Q?

Comparison Shopping

A.

Print out this worksheet and make notes about the homes you visit.


Features
House #1 House #2 House #3

Address

Price

Location

# Bedrooms

# Baths

Square Feet

# Garages

Family Room

Air Conditioning

Formal Dining Room

Pool

Spa/Jacuzzi

Lot Size

Landscaping

Kitchen

Floor Plan

Storage Space

Condition

Extras (specify)

Curb Appeal

Commute Time
Neighborhood Features

Neighborhood
House #1 House #2 House #3

Crime Rate

Quality of Schools

Traffic

Proximity to:
House #1 House #2 House #3

Schools

Hospitals

Shops

Transportation

Cultural Activities
Overall Opinion
House #1 House #2 House #3
Overall Opinion

 

Q?

Mental Control

A.

One tip that may be effective, is to take a deep breath!

If this doesn't work, remember that there are more homes! A home seller can smell anxiety and excitement, so keep calm and find several houses that you wish to buy. Don't buy into the 'dream home' mentality. Find several homes that fit your needs and ultimately purchase the home where your offer is accepted!

One tip to control your excitement is to focus on the negative! While you should not let this persuade your ultimate decision, you should always remember, that there are more homes available!

Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller's or real estate agent's answers are clear and complete. Ask questions until you understand all of the information they've given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. The HUD Home Scorecard can help you develop your question list.

Q?

Effective Offer Writing

A.

-HOW DO I MAKE AN OFFER?
Your real estate agent will assist you in making an offer, which will include the following information:

  • Complete legal description of the property
    Amount of earnest money
    Down payment and financing details
    Proposed move-in date
    Price you are offering
    Proposed closing date
    Length of time the offer is valid
    Details of the deal

Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just Making an offer.

Other ways to lower ins-insurance costs include insuring your home and car(s) with the same company, increasing home security, and seeking group coverage through alumni or business associations. Insurance costs are always lowered by raising your deductibles, but this exposes you to a higher out-of-pocket cost if you have to file a claim.
-HOW DO I DETERMINE THE INITIAL OFFER?
Unless you have a buyer's agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent's advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home's condition, how long it's been on the market, financing terms, and the seller's situation. By the time you're ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

Q?

Mortgage Loan

A.

Just as there is more than one kind of home, there is more than one way to finance it. Mortgage lenders have come up with many different methods of helping you pay for a home--each one with its own advantages and disadvantages.First of all, you should know that HUD itself does not provide financing. You can obtain financing through a bank or mortgage lender. And since many HUD Homes are eligible for FHA-insured mortgage loans, this often makes financing easier to obtain. However, you are not required to get an FHA loan to buy a HUD Home.

Fixed-Rate Mortgage.With a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which is usually 30 years. Your principal and interest payment remains stable, making it easier to plan a monthly budget. However, initial interest rates tend to be higher than with other types of loans.

Adjustable-Rate Mortgage. With an ARM, your interest rate and monthly payments start out lower than with a fixed-rate, but your rate and payments can change either up or down, depending on where interest rates in general are going. (If they're going up, your monthly payments will probably go up as well, sometimes significantly.)

FHA-Insured Mortgage. In this type of loan, the Federal Government insures the lender against loss in case the home buyer defaults on the loan. This program was set up so that Americans who can't afford the 10% to 20% down payment required by most lenders can still buy a home. Many HUD Homes can bought with FHA-insured mortgages, which allow you to purchase the home with as little as 3% down. You do not have to be a first-time buyer in order to qualify for an FHA loan.

VA Loan. Under this program, the Department of Veterans Affairs guarantees the lender against loss. HUD Homes may be purchased with a VA loan or any other loan.

Assumable or Non-Assumable. You may find a home with a mortgage loan you can "assume" from the previous owner. This means that the lender is willing to transfer the old loan on the home to you. These loans can be wonderful bargains, and the paperwork is usually not very complicated.

Before you decide which loan is right for you, talk to your loan officer. You'll get information that will help you figure out which option best suits your needs.

Q?

Basic Mortgage

A.

Generally speaking, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.

Also Consider LOAN TO VALUE (LTV) H
The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: With a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay,$2,500 as a down payment.

The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance policy.

WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
Fixed Rate Mortgages: Payments remain the same for the the life of the loan

Types

15-year
30-year

Advantages

Predictable
Housing cost remains unaffected by interest rate changes and inflation.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits

Types

Balloon Mortgage- Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is clue or refinanced (though not automatically)
Two-Step Mortgage- Interest rate adjusts only once and remains the same for the life of the loan ARMS linked to a specific index or margin

Advantages

Generally offer lower initial interest rates
Monthly payments can be lower
May allow borrower to qualify for a larger loan amount
WHEN DO ARMS MAKE SENSE?
An ARM may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS?

30-Year:

In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions. As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15-year:

Loan is usually made at a lower interest rate.
Equity is built faster because early payments pay more principal.
CAN I PAY OFF MY LOAN AHEAD OF SCHEDULE?
Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment, though you may have to pay a prepayment penalty to do so. Ask your lender for details.

Q?

Mortgage Alternatives

A.

WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
Fixed Rate Mortgages: Payments remain the same for the the life of the loan

Types

15-year
30-year

Advantages

Predictable
Housing cost remains unaffected by interest rate changes and inflation.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits

Types
Balloon Mortgage- Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is clue or refinanced (though not automatically)
Two-Step Mortgage- Interest rate adjusts only once and remains the same for the life of the loan ARMS linked to a specific index or margin

Advantages

Generally offer lower initial interest rates
Monthly payments can be lower
May allow borrower to qualify for a larger loan amount
WHEN DO ARMS MAKE SENSE?
An ARM may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS?

30-Year:

In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions. As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15-year:

Loan is usually made at a lower interest rate.
Equity is built faster because early payments pay more principal.

Q?

Select a Mortgage

A.

WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
Fixed Rate Mortgages: Payments remain the same for the the life of the loan

Types

15-year
30-year

Advantages

Predictable
Housing cost remains unaffected by interest rate changes and inflation.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits

Types

Balloon Mortgage- Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is clue or refinanced (though not automatically)
Two-Step Mortgage- Interest rate adjusts only once and remains the same for the life of the loan ARMS linked to a specific index or margin

Advantages

Generally offer lower initial interest rates
Monthly payments can be lower
May allow borrower to qualify for a larger loan amount
WHEN DO ARMS MAKE SENSE?
An ARM may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS?

30-Year:

In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions. As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15-year:

Loan is usually made at a lower interest rate.
Equity is built faster because early payments pay more principal.

Q?

Apply for a Mortgage

A.

To ensure you won't fall victim to loan fraud, be sure to follow all of these steps as you apply for a loan:

  • Be sure to read and understand everything before you sign.
  • Refuse to sign any blank documents.
  • Do not buy property for someone else.
  • Do not overstate your income.
  • Do not overstate how long you have been employed.
  • Do not overstate your assets.
  • Accurately report your debts.
  • Do not change your income tax returns for any reason.
  • Be truthful about your credit problems, past and present.
  • Be honest about your intention to occupy the house
  • Do not provide false supporting documents.

WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN?
It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you'll be able to move into your new home.

Q?

Your Loan

A.

There are several things you need to think about before you apply for your loan!

Example..How much money will I have to come up with to buy a home?
Answer: Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to HUD's FHA for help. FHA loans require only 3% down - and sometimes less.

Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise.

Q?

Debt To Income Ratio

A.

The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

Q?

Home Inspection

A.

Once you've found the home of your dreams, it's time to make an offer to buy it. Before deciding how much to offer, HUD urges you to get a professional inspection. It can also be helpful to find out how long the home has been on the market-if it's been for sale a while, the seller may be more willing to bargain.After you and the agent have prepared your offer, he or she will present it to the seller. It may be accepted or rejected, or the seller may counter your offer by asking for a higher price or by making changes in the sales contract.

-WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?
An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs,that are needed.The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an 'out" on buying the house if serious problems are found,or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

-DO I NEED TO BE THERE FOR THE INSPECTION?
It's not required, but it's a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you'd I like to purchase and it is a good time to ask general, maintenance questions.

-ARE OTHER TYPES OF INSPECTIONS REQUIRED?
If your home inspector discovers a serious problem a more specific Inspection may be recommended. It's a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas asbestos, or possible problems with the water or waste disposal system.

-HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?
If the house you're considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based point. It's important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips and seal damaged areas will fix the problem permanently.

-ARE POWER LINES A HEALTH HAZARD?
There are no definitive research findings that indicate exposure to power lines results in greater instances of disease or illness.

Q?

Home Insurance

A.

DO I REALLY NEED HOMEOWNER'S INSURANCE?
Yes. A paid homeowner's insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.

WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER'S INSURANCE COSTS?
Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Choose a home with a fire hydrant or a fire department nearby.

IS THE HOME LOCATED IN A FLOOD PLAIN?
Your real estate agent or lender can help you answer this question. If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.

WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME?
Always check to see if the house is in a low-lying area, in a high-risk area for natural disasters (like earthquakes, hurricanes, tornadoes, etc.), or in a hazardous materials area. Be sure the house meets building codes. Also consider local zoning laws, which could affect remodeling or making an addition in the future. Your real estate agent should be able to help you with these questions.

Q?

Home Inspector Worksheet

A.

Though a final assessment can be made by an inspection service company, this checklist can serve as a reminder of some things to consider to make wise buying decisions.

  • Check the foundation, floors, walls and poured concrete.
  • Make sure there's no evidence of water seepage or moisture problems.
  • Minor settling cracks are usually not structurally significant.
  • Make sure there's drainage.
  • If necessary, make sure there's a sump pump for sanitary and foundation draining.
  • Check to see if the crawl space is dry.
  • Inspection by qualified exterminator is necessary for existing and potential problems related to wood rot and termites.
  • Check the condition of flooring, whether plank or plywood.
  • Check for solid construction of bridging and joists.
  • Check walls, whether drywall or plaster. Make sure there are no water marks.
  • Make sure the attic is sufficiently insulated and ventilated.
  • Check that the fireplace damper is in working order, and flues to the chimney are clear.
  • On heating and air-conditioning systems, check what minor periodic maintenance is required, such as oil fan motor, lubricate bearings, clean humidifier, replace filters, etc.
  • Check the hot water system -- type and gallon capacity. How long has the present unit been in service?
  • Check the electricity to make sure that the standard house current, number of circuits, outlets and fuses or circuit breakers are sufficient for everyday needs, and the condition of wiring is good.
  • Check for good water pressure throughout house and that the tie-in to local water supply facilities, etc. are all in working order.
  • Bathroom and kitchen fixtures should be in good shape. Make sure the range, refrigerator, dishwater/disposal, laundry facilities, etc. are all in working order.
  • Check exterior lot and landscaping. Is it properly graded or contoured? Are trees and shrubs sufficient for your needs?
  • Check that fences, walls, patio and driveway are in good condition.
  • Be sure exterior walls are suitable to weather conditions. Check doors and windows. Are they easy to open and close (or replace) for storm/screen removal or installation?
  • Are the roof, gutters and downspouts in good condition?
  • Is the garage door or opener in good working order? Is there sufficient electrical and heating access in the garage?

Q?

Safety Inspection

A.

Before you buy a home, you'll want to know exactly what it is you're getting. An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs,that are needed.

The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an 'out" on buying the house if serious problems are found,or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

If the house you're considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based paint. It's important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips and seal damaged areas will fix the problem permanently.

Q?

Property Negotiation

A.

A seasoned real estate agent can help you with all three of these items. They're experienced negotiators and have written hundreds (thousands?) of offers on all types of property. They are also familar with the market and neighborhood so can be of some assistance when it comes to shooting for a low price!Unless you have a buyer's agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent's advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home's condition, how long it's been on the market, financing terms, and the seller's situation. By the time you're ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price. If you're buying a HUD Home, you're required to use a real estate agent. While purchasing a HUD Home may be easier than many private real estate transactions, there are still some requirements which must be met, certain forms that must be used, and procedures that must be followed. But these requirements are clearly stated in advance, and the real estate agent will be there to help you through it all. There are no negotiations between buyer and seller when you buy a HUD Home. This can be a real advantage. There's no haggling about price--everything is spelled out in black and white. In some areas, HUD may accept a counter-offer from you, but if your counter-offer is not accepted, the home goes back on the market. What's more, HUD responds promptly to your offer, and if it's accepted, closing on the home will usually occur within 30 to 60 days. Finding a HUD broker is not difficult, especially since so many real estate brokers are happy to sell HUD Homes. All you need to do is to call a few brokers who work in the area you're interested in and you'll find someone willing and experienced. Some brokers specifically advertise their desire to sell HUD Homes in the real estate sections of newspapers. Best of all, the valuable help you'll receive from the real estate agent is usually free! In most instances, agents get their sales commission from the home seller, not you, the buyer. Even if you're buying a HUD Home, HUD will pay the broker's commission.

Q?

Negotiating Tips

A.

These tips will help you get the very best deal and write the best possible offer:

  • Have the home inspected - You can deal off any flaws!
  • Learn which financing options can benefit the buyer.
  • Ask for advice!

A seasoned real estate agent can help you with all three of these items. They're experienced negotiators and have written hundreds (thousands?) of offers on all types of property. They are also familar with the market and neighborhood so can be of some assistance when it comes to shooting for a low price!

Unless you have a buyer's agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent's advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home's condition, how long it's been on the market, financing terms, and the seller's situation. By the time you're ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

Q?

Credit History

A.

The FHA is generally more flexible than conventional lenders in its qualifying guidelines. In fact, the FHA allows you to re-establish credit if:

  • two years have passed since a bankruptcy has been discharged
  • all judgments have been paid
  • any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue
  • three years have passed since a foreclosure or a deed-in-lieu has been resolved

Q?

After The Loan

A.

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you'll be able to move into your new home.

Q?

Closing a Home

A.

This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.

Q?

Review A Closing

A.

This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.

Q?

Closing Costs

A.

HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

HOW LARGE OF A DOWN PAYMENT DO I NEED?
There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you'll also need money for closing costs, moving expenses, and - possibly -repairs and decorating.

WHAT CAN I USE TO PAY THE DOWN PAYMENT AND CLOSING COSTS OF AN FHA LOAN?
Besides your own funds, you may use cash gifts or money from a private savings club. If you can do certain repairs and improvements yourself, your labor may be used as part of a down 8 payment (called -sweat equity"). If you are doing a lease purchase, paying extra rent to the seller may also be considered the same as accumulating cash.

Q?

Home Loans

A.

You can save yourself a lot of wheel-spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you'll be able to afford. Follow our tips and use these simple calculators to see how much you can afford in a mortgage payment.

How Much Can YOU Afford?

Q?

Escrow Advice

A.

Escrow - A neutral third party holds documents and money for a real estate transaction and ensures that all conditions of a sale are met. Also refers to a special account that a lender uses to hold a borrower's monthly payments on property taxes and insurance.The amount of money that you will be required to come up with at escrow depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to HUD's FHA for help. FHA loans require only 3% down - and sometimes less.

Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. If you buy a HUD home, HUD may pay many of your closing costs.

Q?

Loan Closing Advice

A.

WHAT MAKES UP CLOSING COST?
There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:

  • Attorney's or escrow fees (Yours and your lender's if applicable)
  • Property taxes (to cover tax period to date)
  • Interest (paid from date of closing to 30 days before first monthly payment)
  • Loan Origination fee (covers lenders administrative cost)
  • Recording fees
  • Survey fee
  • First premium of mortgage Insurance (if applicable)
  • Title Insurance (yours and lender's)
  • Loan discount points
  • First payment to escrow account for future real estate taxes and insurance
  • Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
  • Any documentation preparation fees

WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You'll pay the lender's agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

WHAT MAKES UP CLOSING COST?

  • Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
  • Truth-in-Lending Statement
  • Mortgage Note
  • Mortgage or Deed of Trust
  • Binding Sales Contract (prepared by the seller; your lawyer should review it)
  • Keys to your new home

Q?

Real Estate Tax Benefits

A.

The purchase - The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment.

Mortgage interest - In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid.

The sale - Because your home is considered a capitol gain, there is no tax on the sale of your home.. (up to $500k for married, $250k for single)

If you have a gain from the sale or exchange of your main home in 2003, you may be able to exclude from income up to $250,000 of the gain ($500,000, for certain married taxpayers filing a joint return). The exclusion may be allowed each time you sell or exchange your main home, but generally no more frequently than once every two years. You cannot deduct a loss from the sale of your main home.

If you sold your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an "installment sale." Refer to Topic 705 for more information.

To be eligible for an exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. You can meet the ownership and the use tests during different two year periods. However, both tests must be met during the five–year period ending on the date of the sale or exchange. If you and your spouse file a joint return for the year of the sale or exchange, you can exclude up to $250,000 of gain if only one of you qualified for the exclusion.

If you did not meet the ownership and use tests or if during the 2–year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if:

You sold or exchanged your home due to a change in health or place of employment or due to unforeseen circumstances

A qualified real estate professional can give you more details on other tax benefits and liabilities! Consult a professional for more information about the tax benefits of owning a home!

Q?

Real Estate Tax Shelter(s)

A.

You May Be Able To Shelter Up to $500,000 In Your Home!

If you have a gain from the sale or exchange of your main home in 2003, you may be able to exclude from income up to $250,000 of the gain ($500,000, for certain married taxpayers filing a joint return). The exclusion may be allowed each time you sell or exchange your main home, but generally no more frequently than once every two years. You cannot deduct a loss from the sale of your main home.

If you sold your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an "installment sale." Refer to Topic 705 for more information.

To be eligible for an exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. You can meet the ownership and the use tests during different two year periods. However, both tests must be met during the five–year period ending on the date of the sale or exchange. If you and your spouse file a joint return for the year of the sale or exchange, you can exclude up to $250,000 of gain if only one of you qualified for the exclusion.

If you did not meet the ownership and use tests or if during the 2–year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if:

You sold or exchanged your home due to a change in health or place of employment or due to unforeseen circumstances

A qualified real estate professional can give you more details on other tax benefits and liabilities! Consult a professional for more information about the tax benefits of owning a home!

You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.

Ownership and Use Tests

To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test) Lived in the home as your main home for at least 2 years (the use test) Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

If you can exclude all of the gain, you do not need to report the sale on your tax return If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040) Loss

You cannot deduct a loss from the sale of your main home.

Worksheets

Worksheets are included in Publication 523, Selling Your Home to help you figure the:

Adjusted basis of the home you sold
Gain (or loss) on the sale
Gain that you can exclude
Reporting the Sale

Do not report the sale of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).

More Than One Home

If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One:

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example Two:

You own a house, but you live in another house that you rent. The rented house is your main home.

Business Use or Rental of Home

You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. But you must meet the ownership and use tests.

Example:

On May 30, 1997, Amy bought a house. She moved in on that date and lived in it until May 31, 1999, when she moved out of the house and put it up for rent. The house was rented from June 1, 1999, to March 31, 2001. Amy moved back into the house on April 1, 2001, and lived there until she sold it on January 31, 2003. During the 5-year period ending on the date of the sale (February 1, 1998 - January 31, 2003), Amy owned and lived in the house for more than 2 years.

Amy can exclude gain up to $250,000. However, she cannot exclude the part of the gain equal to the depreciation she claimed for renting the house.

Q?

Real Estate Appraisal

A.

You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn't mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don't want to worry initially about upkeep and repairs.Only an appraiser can give a real home value, but one thing your real estate agent can help you with, is determining the 'sold' value of homes around the area. This is especially important when writing an offer!

Q?

Real Estate FSBO Advice

A.

Granted, some people are able to sell their own homes without the services of a real estate agent. Some of these successful do-it-yourselfers are very experienced home sellers. Others are transferring ownership of their home to a child, a coworker or a tenant who's already living in the home. These circumstances are the exception, not the norm, however. For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards. Here are five reasons why.

1. FSBOs can't list their home in the MLS. FSBOs aren't permitted to put their home in the multiple listing service (MLS) because these industry membership organizations are open only to licensed real estate brokers and agents. FSBOs are also locked out of many home search engines and Web sites, including this site. Sure, a determined FSBO can put a for-sale sign in his or her front yard and run a tiny advertisement in the local newspaper, but the home won't receive nearly as much exposure as it would through the MLS.

2. Agents won't show FSBO homes. In a typical home sale, the buyer's agent receives a percentage of the commission that the seller pays the listing agent. Without a listing agreement, there's no guarantee that the buyer's agent will be compensated for his or her services, unless the buyer has signed a buyer's brokerage agreement that specifically provides for such compensation. Even if a FSBO offers to pay the buyer's side of the commission, most agents won't want to go through a transaction with an unsophisticated self-represented seller across the table. That means the pool of potential buyers for FSBO homes is limited primarily to un-represented and probably unqualified prospects.

3. FSBOs usually overprice their home. Like most homeowners, most FSBOs honestly believe their own home is worth more than comparable homes in the same neighborhood. Usually, they're wrong. A real estate agent can provide an update on market conditions, an assessment of the likely selling price of the home and tips for improving the home's buyer appeal. Overpricing a for-sale home is a sure way to deter potential buyers.

4. Buyers will feel intimidated. Potential buyers will spend less time in a for-sale home if the owner is present during the showing, and they'll be shy about discussing its pluses and minuses with their own agent if the owner is within earshot. Buyers will also be less inclined to make an offer if they know they'll be negotiating directly with the seller. Having an agent on each side creates an effective emotional buffer between the seller and buyer.

5. FSBOs are likely to stumble into legal trouble. Real estate transactions are fraught with potential liability for unwary sellers, particularly in states that have extensive disclosure requirements (e.g., California). A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.

Q?

Real Estate Agent

A.

One of the most complex and important financial events in peoples’ lives is the purchase or sale of a home or investment property. Because of this complexity and importance, people usually seek the help of real estate brokers and sales agents when buying or selling real estate.

Real estate brokers and sales agents have a thorough knowledge of the real estate market in their community. They know which neighborhoods will best fit clients’ needs and budgets. They are familiar with local zoning and tax laws and know where to obtain financing. Agents and brokers also act as intermediaries in price negotiations between buyers and sellers.

Real estate agents usually are independent sales workers who provide their services to a licensed real estate broker on a contract basis. In return, the broker pays the agent a portion of the commission earned from the agent’s sale of the property. Brokers are independent businesspeople who sell real estate owned by others; they also may rent or manage properties for a fee. When selling real estate, brokers arrange for title searches and for meetings between buyers and sellers wherein details of the transactions are agreed upon and the new owners take possession of the property. A broker may help to arrange favorable financing from a lender for the prospective buyer; often, this makes the difference between success and failure in closing a sale. In some cases, brokers and agents assume primary responsibility for closing sales; in others, lawyers or lenders do so. Brokers supervise agents who may have many of the same job duties. Brokers also manage their own offices, advertise properties, and handle other business matters. Some combine other types of work, such as selling insurance or practicing law, with their real estate business.

Besides making sales, agents and brokers must have properties to sell. Consequently, they spend a significant amount of time obtaining listings—agreements by owners to place properties for sale with the firm. When listing a property for sale, agents and brokers compare the listed property with similar properties that recently sold, in order to determine a competitive market price for the property. Once the property is sold, the agent who sold it and the agent who obtained the listing both receive a portion of the commission. Thus, agents who sell a property that they themselves have listed can increase their commission.

Most real estate brokers and sales agents sell residential property. A small number, usually employed in large or specialized firms, sell commercial, industrial, agricultural, or other types of real estate. Every specialty requires knowledge of that particular type of property and clientele. Selling or leasing business property requires an understanding of leasing practices, business trends, and the location of the property. Agents who sell or lease industrial properties must know about the region’s transportation, utilities, and labor supply. Whatever the type of property, the agent or broker must know how to meet the client’s particular requirements.

Before showing residential properties to potential buyers, agents meet with them to get a feeling for the type of home the buyers would like. In this prequalifying phase, the agent determines how much the buyers can afford to spend. In addition, the agent and the buyer usually sign a loyalty contract which states the agent will be the only one to show houses to the buyers. An agent or broker uses a computer to generate lists of properties for sale, their location and description, and available sources of financing. In some cases, agents and brokers use computers to give buyers a virtual tour of properties in which they are interested. With a computer, buyers can view interior and exterior images or floor plans without leaving the real estate office.

Agents may meet several times with prospective buyers to discuss and visit available properties. Agents identify and emphasize the most pertinent selling points. To a young family looking for a house, they may emphasize the convenient floor plan, the area’s low crime rate, and the proximity to schools and shopping centers. To a potential investor, they may point out the tax advantages of owning a rental property and the ease of finding a renter. If bargaining over price becomes necessary, agents must follow their client’s instructions carefully and may have to present counteroffers in order to get the best possible price.

Once both parties have signed the contract, the real estate broker or agent must make sure that all special terms of the contract are met before the closing date. For example, the agent must make sure that the mandated and agreed-upon inspections, including that of the home and termite and radon inspections, take place. Also, if the seller agrees to any repairs, the broker or agent must see that they are made. Increasingly, brokers and agents are handling environmental problems as well, by making sure that the properties they sell meet environmental regulations. For example, they may be responsible for dealing with lead paint on the walls. While loan officers, attorneys, or other persons handle many details, the agent must ensure that they are completed.

Q?

More Tax Advice

A.

You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.Ownership and Use Tests

To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test) Lived in the home as your main home for at least 2 years (the use test) Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

If you can exclude all of the gain, you do not need to report the sale on your tax return If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040) Loss

You cannot deduct a loss from the sale of your main home.

Worksheets

Worksheets are included in Publication 523, Selling Your Home to help you figure the:

Adjusted basis of the home you sold
Gain (or loss) on the sale
Gain that you can exclude
Reporting the Sale

Do not report the sale of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).

More Than One Home

If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One:

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example Two:

You own a house, but you live in another house that you rent. The rented house is your main home.

Business Use or Rental of Home

You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. But you must meet the ownership and use tests.

Example:

On May 30, 1997, Amy bought a house. She moved in on that date and lived in it until May 31, 1999, when she moved out of the house and put it up for rent. The house was rented from June 1, 1999, to March 31, 2001. Amy moved back into the house on April 1, 2001, and lived there until she sold it on January 31, 2003. During the 5-year period ending on the date of the sale (February 1, 1998 - January 31, 2003), Amy owned and lived in the house for more than 2 years.

Amy can exclude gain up to $250,000. However, she cannot exclude the part of the gain equal to the depreciation she claimed for renting the house.

Q?

Real Estate Appraisal Info

A.

The appraisal process is often considered to be the process of analyzing collecting and reconciling data that relates to any home or property being appraised. This data is then formatted in an order that can lead the reader of the report to the same conclusions as the appraiser.You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn't mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don't want to worry initially about upkeep and repairs.

Only an appraiser can give a real home value, but one thing your real estate agent can help you with, is determining the 'sold' value of homes around the area. This is especially important when writing an offer!

Q?

Property Appraisal

A.

The preparation of any appraisal begins with an interior and exterior inspection of any given home, building or property. The appraiser then looks for assets and any and all detriments that the real estate will offer by viewing the property with an objective perspective.Some of the more important items in the property is gross living area, condition, and quality of construction. Additionally, location, layout, number of bedrooms and bathrooms and lot size are also considered. The appraiser will also note the amenities such as central a/c, landscaping, fireplaces, decks, and all recent renovations including pool, fencing, kitchens and baths etc. It is important for the home owner to point out all the amenities, or improvements that may not be completely obvious to any appraiser in a normal and considerate walk through of the property.

The appraiser will also make an assessment of the neighborhood and surrounding areas, noting any location of amenities which could be important to a home owner and/or buyer. In many cases these same items may be considered a detriment to the property based on there distance to the subject. Oftne, residential properties that are too close to a non residential property may be viewed as less desirable by a purchaser, and reflected as such in any appraisal report.

Q?

Pricing Your Property

A.

If you have decided to sell your home, chances are,  you are caught up in a host of emotions. You may be looking forward to moving up to a new dream house or facing the uncertainty of a major move across country. You may be reluctant to leave your memories behind or eager to start new adventures. Whatever turbulent feelings you´re experiencing right now, there are plenty of practical matters that need your attention. Keep in mind the following considerations to help the whole process go more smoothly.It´s a good idea to place your home on the market as far in advance as possible of purchasing a new one. If you find a new home first and then try to sell your present home, you may wind up with two mortgages. If this does happen, ask your real estate agent or banker about a bridge loan to help you make the double payments. Lenders use the same criteria for offering bridge loans as they use for mortgages. Should you choose to accept a bridge loan, beware of the expense; during the term of the loan you must continue to pay both mortgages. Shop around for the best terms.

Keep in mind that when people move, sell and buy, there usually is a domino effect. Closing and moving dates have to be coordinated, and the more firmly everyone commits to a window of dates and sticks to them, the better for all involved. Put all agreements about dates in writing, and protect yourself by negotiating financial penalties for failure to comply.

A home that´s visually appealing and in good condition will attract potential buyers driving down the street. Use this checklist to view your property through an outsider´s eyes.

  • Are the lawn and shrubs well maintained?
  • Are there cracks in the foundation or walkways?
  • Does the driveway need resurfacing?
  • Are the gutters, chimney and walls in good condition?
  • Do the window casings, shutters, siding or doors need painting?
  • Are garbage and debris stored out of sight?

Strong curb appeal will lure potential buyers inside, where you have to live up to their expectations. Fortunately, there are plenty of easy improvements you can make to your home´s interior without spending a lot of money. Cleaning is No. 1. Your windows, floors and bathroom tiles should sparkle. Make sure you have clean heating and air conditioning filters. Shampoo dirty carpets, repair dripping faucets and oil squeaky doors. It may not seem fair, but a peek in the oven may be the hallmark by which a buyer judges how well you have kept up your home.

Remove unnecessary clutter from the garage, basement, attic and closets. If your home is crowded with too much furniture, consider putting some things into storage. If a room needs a fresh coat of paint, use a neutral off-white. Think, too, about how your home smells. You may be used to the smell of a pet or cigarettes, but such odors can be a strong turn-off to others. Finally, set a mood for the buyer. Make your house homey with live flowers and fresh guest towels in the bathroom. Place scented potpourri around the house or, on the day you are expecting a potential buyer, pop a batch of frozen cinnamon rolls into the oven for a welcoming aroma.

Remember, cosmetic changes do not have to be expensive. In fact, costly home improvements do not necessarily offer a good return on your investment when you sell. It is attention to the basics -- anything that says "this home has been carefully maintained" -- that will help you get the price you want.

Q?

Housing Market Info

A.

Homeowners have a seemingly insatiable appetite for information about the housing markets. "Are prices going up? How's the market? Is now a good time to sell?" they ask. Research reports and newspaper articles provide useful answers, but the information is usually buried in economic jargon. What is a "median price" anyway? What does "seasonally adjusted" mean? Does anyone understand "unsold inventory index?"

To help you follow the numbers, here are some helpful definitions:

Median price. An oft-cited indicator of the strength and direction of a housing market, a median price is the midpoint of all the prices of homes sold in a given area during a specified period. Midpoint means half the homes sold for higher prices and half the homes sold for lower prices. The median isn't the same as the average, which would be calculated by totaling all the prices and dividing by the number of prices. The median price can be affected over time by the characteristics and sizes of homes sold as well as price trends. For example, if the market shifts from starter homes to luxury mansions, the median price will increase even if homes are not appreciating in value.

Seasonally adjusted. Housing markets are naturally more active in the spring and summer months because people prefer to move during the longer warmer days and between school years. That pattern means it's difficult to make meaningful comparisons between results for different months or quarters of the same year. To overcome this hazard, economists statistically tweak the reported number of homes sold during various periods to reflect seasonal variations. The tweaked numbers are denoted as "seasonally adjusted."

Price discount. The "price discount" is the percentage difference between the seller's initial asking price and the actual purchase price of the same home. For example, if a home were priced at $200,000 and sold for $190,000, the discount would be 5 percent. Price discounts are usually reported as an average for a set of home sale transactions. A small percentage, on average, means the market favors sellers, while a large average discount signals a buyer's market.

Unsold inventory index. This index, which indicates the pace of the market, is calculated by measuring how long it would take for all the homes currently on the market to be sold at the current rate of sales. A smaller index is a positive sign for sellers, while a higher number is good news for buyers.

Affordability index. An affordability index measures whether a typical family can qualify for a standard mortgage to purchase a typical home. A "typical" family is defined as one that earns the median income in a given area, and a "typical" home is defined as a median-priced single-family house in the same area. An index value of 100 means a median-income family has exactly the amount of income needed to purchase a median-priced home. A number higher than 100 means the family's income is more than adequate, while a number less than 100 means the typical family can't afford to buy the typical home.

Q?

Real Estate List Price

A.

An agent can help you set your best list price because they have access to data you may not! Consider the free home evaluation tool. This is but a small taste of the data at the fingertips of of your real estate agent!Consider these things when deciding whether or not to work with a listing agent to sell your home. If you're buying a home, think about working with a buyer's agent.

If You Work with an Agent

  • You sign a listing contract, which is a legally binding agreement that typically gives the agent the exclusive right to sell your property within a certain period of time (usually 60 to 90 days).
  • The agent researches the market in order to determine your home's market value and reach a sales price in consultation with you.
  • The agent prepares a written marketing plan that includes a schedule for listing, showing, and advertising your property.
  • The agent advises you on how best to prepare your home for sale and helps arrange for pre-sale tasks such as a home inspection.
  • The agent transmits any offers to you, negotiates the purchase based on your recommendations, and moves all the paperwork through the transaction.
  • You pay for the listing agent's services, either as a percentage commission (usually 4 to 6 percent) or a flat fee, as specified in your listing contract. The buyer's agent is paid out of that fee.

If You Work Alone

  • You are in charge of the transaction, including marketing your property, negotiating the purchase, and handling the paperwork. Educate yourself on relevant federal laws and state regulations governing real estate sales.
  • You do your own market research (including possibly hiring an appraiser) to determine your home's value.
  • You create your own marketing plan and decide how you will handle inquiries from prospective buyers or their agents.
  • You decide how to prepare your home for sale, including arranging for pre-sale repairs, inspections, or other necessary services.
  • You field all buyer inquiries, show the house yourself, handle all negotiations, and move the paperwork through the transaction.
  • You pay for the buyer's agent's services, unless the buyer is also working alone or has hired the agent for a set fee. You may also pay for services you require during the transaction, such as legal advice or help negotiating the contract. Discount brokers offer individual services for flat rates.

Q?

Getting Real Estate Ready

A.

From experience, realtors also know that a "well-polished" house appeals to more buyers and will sell faster and for a higher price. Additionally, buyers feel more comfortable purchasing a well-cared for home because if what they can see is maintained, what they can't see has probably also been maintained. In readying your house for sale, consider:

  • how much should you spend
  • exterior and curb appeal
  • preparing the interior

How much should you spend
In preparing your home for the market, spend as little money as possible. Buyers will be impressed by a brand new roof, but they aren't likely to give you enough extra money to pay for it. There is a big difference between making minor and inexpensive "polishes" and "touch-ups" to your house, such as putting new knobs on cabinets and a fresh coat of neutral paint in the living room, and doing extensive and costly renovations, like installing a new kitchen. Your realtor, who is familiar with buyers' expectations in your neighborhood, can advise you specifically on what improvements need to be made. Don't hesitate to ask for advice.

Maximizing exterior and curb appeal
Before putting your house on the market, take as much time as necessary (and as little money as possible) to maximize its exterior and interior appeal. Tips to enhance your home’s exterior and curb appeal:

  • Keep the lawn edged, cut and watered regularly.
  • Trim hedges, weed lawns and flowerbeds, and prune trees regularly.
  • Check the foundation, steps, walkways, walls and patios for cracks and crumbling.
  • Inspect doors and windows for peeling paint.
  • Clean and align gutters.
  • Inspect and clean the chimney.
  • Repair and replace loose or damaged roof shingles.
  • Repair and repaint loose siding and caulking.
  • In Northern winters, keep walks neatly cleared of snow and ice.
  • During spring and summer months consider adding a few showy annuals, perhaps in pots, near your front entrance.
  • Re-seal an asphalt driveway.
  • Keep your garage door closed.
  • Store RVs or old and beaten up cars elsewhere while the house is on the market.
  • Apply a fresh coat of paint to the front door.

Maximizing interior appeal
Enhance your home’s interior by:

  • Giving every room in the house a thorough cleaning, as well as removing all clutter. This alone will make your house appear bigger and brighter. Some homeowners with crowded rooms have actually rented storage garages and moved half their furniture out, creating a sleeker, more spacious look.
  • Hiring a professional cleaning service, once every few weeks while the house is on the market. This may be a good investment for owners who are busy elsewhere.
  • Removing the less frequently used, even daily used items from kitchen counters, closets, and attics, making these areas much more inviting. Since you're anticipating a move anyhow, holding a garage sale at this point is a great idea.
  • If necessary, repainting dingy, soiled or strongly colored walls with a neutral shade of paint, such as off-white or beige. The same neutral scheme can be applied to carpets and linoleum.
  • Checking for cracks, leaks and signs of dampness in the attic and basement.
  • Repairing cracks, holes or damage to plaster, wallboard, wallpaper, paint, and tiles.
  • Replacing broken or cracked windowpanes, moldings, and other woodwork.
  • Inspecting and repairing the plumbing, heating , cooling, and alarm systems.
  • Repairing dripping faucets and showerheads. Buying showy new towels for the bathroom, to be brought out only when prospective buyers are on the way.
  • Sprucing up a kitchen in need of more major remodeling by investing in new cabinet knobs, new curtains, or a coat of neutral paint.

Q?

Multiple Offers

A.

A "seller's market," in one in which competition for houses gives a seller the advantage! It is the result of all kinds of things we do not have control over, from the economy to the sudden and amazing popularity of any given city or neighborhood.

When this happens, home prices tend to rise with the demand, and home buyers are much more likely to meet or even exceed your asking price! They may even throw in bonuses, or eve offer their firstborn baby - I think you get the picture! When the market is hot, you're hot, and the chances are very good that you will be faced with multiple offers.

If you have a listing agent, this will be one of those times when you will be glad you do, as he or she will be able to lead the process and handle all the finer points of the negotiating! The other most important tool that you can bring into a multiple-offer scenario is an awareness of the legal land mines, and of course a sense of ethics, and lets not forget negotiating etiquette!

Q?

Selling My Property

A.

Making a good first impression can mean the difference between receiving serious offers for your home or being subjected to months of lookie-loos dropping by but never buying.

How can you ensure that your home will make the best impression possible? Here are six tips for savvy home sellers:

1. Focus on curb appeal. The outside of your house can be the source of a very good first impression. Keep the grass well-watered and mowed. Have your trees trimmed. Cut back overgrowth. Plant some blooming flowers. Store toys, bicycles, roller-skates, gardening equipment and the like out of sight. Have at least the front of your house and the trim painted, if necessary. Sweep the porch and the front walkway. After dark, turn on your front porch light and any other exterior lighting.

2. Clear out the clutter. Real estate agents say buyers won't purchase a home they can't see. If your home has too much furniture, overflowing closets, crowded kitchen and bathroom countertops or lots of family photos or collectibles on display, potential buyers won't be able to see your home. Get rid of anything you don't need or use. Fill up your garage or rent some off-site storage space if that's what it takes to clear out your home.

3. Use your nose. Many people are oblivious to scents, but others are extremely sensitive to offensive odors. To eliminate bad smells, bathe your pets, freshen the cat litter box frequently, shampoo your carpets, dry clean your drapes, and empty trash cans, recycling bins and ash trays. Place open boxes of baking soda in smell-prone areas, and refrain from cooking fish or strong-smelling foods. Introduce pleasing smells by placing flowers or potpourri in your home and using air fresheners. Baking a fresh or frozen pie or some other fragrant treat is another common tactic.

4. Make all necessary repairs. Buyers expect everything in their new home to operate safely and properly. Picky buyers definitely will notice-and likely magnify -- minor maintenance problems you've ignored for months or even years. Leaky faucets, burned-out light bulbs, painted-shut or broken windows, inoperable appliances and the like should be fixed before you put your home on the market. These repairs may seem small, but left undone they can lead buyers to question whether you've taken good care of your home.

5. Introduce lifestyle accessories and make your home as comfortable and attractive as possible. Set the dining room table with your best dishes. Put out your only-for-company towels. Make up the spare bed. Hang some fresh curtains. Put some logs in the fireplace. Use your imagination.

6. Get a buyer's-eye view. Walk up to your home and pretend you've never seen it before. What do you notice? How do you feel about what you see? Does the home seem inviting? Well-maintained? Would you want to buy this home? Your answer should be an enthusiastic yes!

Q?

Listing Real Estate

A.

Realtors and buyers often work together without a written contract, but the opposite is true for realtors and sellers. On the listing side, written contracts are overwhelmingly the rule, not the exception. A listing agreement is a binding legal contract that shouldn't be taken lightly. The necessity of reading the contract carefully and understanding what it means before you sign it can't be overstated. If you need legal advice, consult an attorney.

Listing contracts vary considerably from place to place. However, most realtors use established listing agreement forms that are the de facto industry standard in their area or are dictated by their brokerage company. Everything on these preprinted forms is negotiable.

Here are some basic terms to consider:

1. Term of the Agreement. A longer agreement benefits the agent because it allows him or her more time to find a buyer for your home. In a weak market, that's okay, but if homes are selling quickly, you don't want to be committed to one agent for more than a few months. If the home doesn't sell within the initial period and you're satisfied with the agent's efforts, you can offer to extend the term of the agreement before it expires.

2. Commission. Although commissions are negotiable, most areas have a standard percentage that agents expect to receive. This amount usually is 6 percent of the sales price, but you will find agents who accept 5 percent and agents who ask for 7 percent. Whether you want to pay the percentage that's typical in your area or negotiate a lower rate is up to you. A lower commission will save you money. A higher commission will give the agent more incentive to invest in marketing your home. Other agents can find out how much commission is offered on your home through the MLS. The agent's commission technically shouldn't be renegotiated as part of the purchase agreement between the seller and the buyer, but some agents will give a little to close a price gap between the seller and buyer, consequently making the transaction viable.

3. MLS. A listing agreement typically authorizes your agent to post your home in the Multiple Listing Service (MLS). Unless you're selling a very exclusive property or have serious personal privacy concerns, the MLS is a no-brainer because it helps the agent market your home to the widest possible group of potential buyers. Today, most MLS databases are accessible by consumers on the Internet. The public does not have access to commission information on the listings.

4. Lockbox. A lockbox is a tiny key-holding safe that can be inconspicuously attached to the front of your property. Any agent who has the means of accessing the lockbox (e.g., the key or combination) can retrieve the keys to your home, unlock your door and show your home to prospective buyers even when neither you nor your agent is present. If you're concerned about strangers entering your home alone, don't authorize a lockbox. If your home is vacant, located in a low-crime area or if you've removed your valuables and are willing to take the risk, a lockbox might be reasonable. The more people who see the property, the better chance you'll have of selling it for a favorable price.

Q?

Marketing Info

A.

Your home should be listed, whenever possible, in the local Multiple Listing Service and on my site, which has a huge online database of homes and virtually 100% of potential buyers who look for property on the Internet.

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Q?

Your Open House

A.

The weekend open house is a time-honored tradition in real estate sales, but has it outlived its effectiveness? Quite possibly, according to a new survey conducted by the Real Estate Center at Texas A&M University. The survey results hint at the notion that public open houses may be more beneficial for the agents themselves than for the home sellers.

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Q?

Open House Expectations

A.

Your agent is closing up shop in your home after a weekend open house. You cleared out early, as instructed, but now you've returned home and are bursting with curiosity about the day's event. Here are some questions you might want to ask:

1. How many people stopped by and who were they? If the turnout was disappointing, you may want to quiz your agent about his or her efforts to attract people to the event. Was the open house listed in the newspaper? Mentioned around the agent's office? Did any of your neighbors drop by?

2. When and how will the agent follow-up with prospective purchasers or their agents? Hot prospects who seem well-qualified should be contacted as soon as possible after the event and asked whether they're interested in seeing the home again, have any questions or concerns about the home or are planning to make an offer to purchase it.

3. What positive and negative feedback did the agent receive about the home? You'll certainly want to know what people are saying about your home, but don't take minor criticisms too personally or overreact to any one person's comments. Do pay attention to repeated criticism of one or more specific aspects of your home. You can disregard one person who dislikes your taste in wallpaper, but if six or seven people make the same comment, you might want to have that offensive pattern stripped off.

4. Did any problems or mishaps occur during the open house? Many open houses attract only a handful of visitors, but it's also entirely possible for 15 or 20 people to traipse through your home in a couple of hours. If there were any problems -- someone injured a knee on your glass -- topped coffee table or slipped and fell on the wet grass in your backyard-you'll want to know about it.

5. What's next? Now that the open house is over, what else is your agent planning to do to find a buyer for your home? Does the agent intend to continue with the existing marketing tactics or will some new plans be put into action? Would another open house be worthwhile?

TIP: Unless open houses are particularly well-attended in your neighborhood, you might want to forgo these events altogether or just hold one open house the first or second weekend after your home is listed. Some surveys suggest that open houses are more beneficial for the agent than the home seller and that only a tiny percentage of homes are sold as the direct result of an open house.

Q?

Pick An Offer

A.

In many of today's strong real estate markets, home sellers can expect to receive multiple offers for their home. Multiple offers are a classic example of economic realities because they appear when the supply of homes for sale is limited and the demand for good-condition homes is strong. Sellers love multiple offers because they push up home prices and create an opportunity to spark a bidding war. Knowing how to respond to multiple offers can help you get the best price and terms for the sale of your home.

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Q?

Property Inspection

A.

A pre-sale evaluation from a qualified home inspector can save both money and heartache. You'll end up with a list of repairs you can address before you sell. The last thing you want is a surprise during the buyer's home inspection that will force you to lower the price or make costly, last-minute repairs before closing.Once you've found the home of your dreams, it's time to make an offer to buy it. Before deciding how much to offer, HUD urges you to get a professional inspection. It can also be helpful to find out how long the home has been on the market-if it's been for sale a while, the seller may be more willing to bargain.

After you and the agent have prepared your offer, he or she will present it to the seller. It may be accepted or rejected, or the seller may counter your offer by asking for a higher price or by making changes in the sales contract.

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Q?

Real Estate Tax Advice

A.

You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.Ownership and Use Tests.

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Q?

Sell Your Home Fast

A.

Don't waste time.
The longer a house sits on the market, the less likely you are to get the best price. Put your house on the market during the spring or fall, when the most buyers are looking; avoid the seasonal slow periods of mid-summer and mid-winter. Remember, you're paying property tax, insurance, and other costs while you're selling. If you've already bought your next home, expenses can quickly add up.

Q?

Dont Let It Fall Through

A.

The following represents the most common reasons why deals fall through.

Moving too fast.
It can be tempting to push negotiations through quickly, especially if you need to sell for financial or relocation reasons, or if the market is fast (if there are many buyers but few listings). Take the time to read offers carefully. If a buyer makes a low offer because the house needs repairs, make sure the buyer's estimate of the cost of those repairs is accurate. It may be better to make the repairs yourself before selling, rather than accept a big price cut.

Letting emotions rule.
Remember that the house you are selling is a commodity. Don't take offense at comments about the landscaping or decor, especially when the buyer makes a lower offer based on those factors. If the market is not in your favor, you may have to offer a decorating allowance or accept a lower price. If you're in a seller's market, counter with a full-price offer. In any case, don't avoid dealing with a buyer who has insulted you.

Reluctance to counter.
Countering an offer is a time-honored tradition in real estate. Countering means that you come back at the buyer with a different price or different terms. Remember that negotiating to sell a house is a give-and-take process. If you fail to counter offers, you may end up accepting a lower price for your home. Make all counteroffers in writing to avoid misunderstandings.

Bad-faith bargaining.
This means that one or both parties is not bargaining seriously or with the intention of actually completing the transaction. Bad-faith bargaining not only can result in a failed sale but also possible legal action. If you aren't serious about selling your property—that is, you won't accept anything but an overpriced offer—you probably shouldn't be in the market. If you're a serious seller, watch out for the bad-faith buyer who will waste your time by making unacceptably low offers or engaging in endless negotiations. Even worse are bad-faith buyers who misrepresent their ability to purchase your home and take you off the market for several weeks before their failure to secure financing nullifies the contract. If you have any qualms about a buyer's means, ask for a pre-approval letter from a lender.

Q?

Real Estate Negotiation

A.

When writing a purchase contract, avoid expensive terminology such as paying a buyer's closing costs, and of course you should watch out for all the contingencies that could cost you time with your home off the market. If the buyer wants to close on the sale contingent with the selling of his or her house, include a kick-out clause that will allow you to back out of the contract within seventy two hours if you receive an offer that does not contain contingencies.

Buyers vs. Sellers Market
The first job before making a contractual offer is understanding the housing market that is working in your local area. This will help you determine how quickly you need to buy when looking at homes.

If you happen to be in the buyer's market, you will of course have plenty of time to find and search out several homes in different areas and price ranges before you negotiate best possible price.

If you happen to be in a seller's market, things are different, you may have a very short time to make and write an offer before your house slips away!

Buyers Market - The real estate market has more sellers than it has buyers and time is on your side! You will find plenty of homes that you can visit, and even revisit again for comparisons, before you negotiate favorable contract terms.

It would be very advisable to run a CNA, or comparable neighborhood analysis on homes that you have visited before making your offer.

Items you should compare include:

  • The age and the condition of similar homes in the same neighborhood
  • The homes that are sold within the last six months in the same area.

Q?

Negotiating a Contract

A.

When writing a purchase contract, avoid expensive terminology such as paying a buyer's closing costs, and of course you should watch out for all the contingencies that could cost you time with your home off the market. If the buyer wants to close on the sale contingent with the selling of his or her house, include a kick-out clause that will allow you to back out of the contract within seventy two hours if you receive an offer that does not contain contingencies.

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Q?

Property Trust(s)

A.

An REIT is a company dedicated to owning and, in most cases, operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. Some REITs also are engaged in financing real estate. Most importantly, to be a REIT a company is legally required to pay virtually all of its taxable income (90 percent) to its shareholders every year.

An REIT may deduct the dividends paid to the shareholders from its corporate tax bill so long as —

  • the company's assets are primarily composed of real estate held for the long term,
  • the company's income is mainly derived from real estate, and
  • the company pays out at least 90 percent of its taxable income to shareholders.

The main benefit of being a REIT: one level of taxation.

The main limitation of being a REIT: a restriction on earnings retained by the company.

For a REIT to grow, capital must come from money raised in the investment marketplace as well as money generated internally. REITs, like other stocks, are carefully monitored by others, including the SEC, each REIT's independent directors, independent auditors, and the business and financial media.

Q?

Property Rights

A.

You have a right to do with the land as you please, subject to restrictions imposed by law. When you own land, you can do many things with it, such as:

  • use it
  • rent or lease it to others
  • sell or transfer it
  • give it away
  • use it as collateral for a loan
  • bequeath it to intended beneficiaries (by will or trust upon your death)
  • let it sit where it is without doing anything to it
    (although this could create problems due to restrictions imposed by law.)

Q?

Real Property Definition

A.

Real property is generally defined as land and the things permanently attached to the land. Things that are permanently attached to the land, also can be referred to as improvements, include homes, garages, and buildings.

Substances that are beneath the land (such as gas, oil, minerals) are also considered permanently attached. Other items which can be attached to the land, such as mobile homes and tool sheds, are not considered to be real property

Q?

Property Investment

A.

If that's the question that keeps you up at night, welcome to the club. Many investors are wondering where to park their cash. And with the stock market in the dumps and real estate going gangbusters, who hasn't wondered if becoming the next Donald Trump is where it's at?

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Q?

Fico Scores Effect Purchasing

A.

FICO® scores were developed by Fair Isaac & Company, Inc. for each of the credit repositories. The scores are: (Equifax) Beacon®, (Experian formerly TRW) Experian/FICO and (TransUnion) Empirica®. They are simply repository scores meaning they only consider the information contained in a person's credit file; they do not consider a persons income, savings or amount of a down payment for a mortgage.

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