Buyers

According to HouseMaster, a major home inspection company with offices in more than 390 cities in the United States and Canada, 40 percent of previously-owned homes have atleast one damage. Kathleen Kuhn, CEO and president of HouseMaster says, “Virtually every ‘used’ home needs some repair or improvement.” “That’s to be expected. But with today’s high prices, you want to make sure that you are aware of any major problems in a house you are considering purchasing, and what it will take to remedy the situation.”

From over one million home inspections, they’ve concluded that these are the most serious home defects to look out for:

• 1. Cracked heater exchange
• 2. Failing air-conditioning compressor
• 3. Environmental hazards including radon, water contamination, asbestos, lead paint, and underground storage tanks
• 4. Moisture in the basement
• 5. Defective roofing and/or flashings
• 6. Insect infestation — termites or carpenter ants
• 7. Mixed plumbing
• 8. Aluminum wiring
• 9. Horizontal foundation cracks
• 10. Major house settlement
• 11. Undersized electrical system
• 12. Chimney settling or separation

As per Kuhn, most of these damage can be repaired. But, depending on the gravity of the problem, it might cost you a lot especially if the problem is part of a major system. This is something that needs to be thought of before buying a house.

Roof repairs or a new roof could cost you at least thousands of dollars. A new air conditioning compressor could cost up to $1,200. To repair a basement will cost about $5,000. If you are already in the negotiating process, your agent should advise you to present a provision for renegotiating or backing out of the contract in the event that the inspector finds serious problems.

“If the property inspectors find that little or no corrective work is required, you have little or nothing to negotiate,” say Eric Tyson and Ray Brown in their book, Homebuying for Dummies. “Suppose, however, that your inspectors discover the $200,000 house you want to buy needs $20,000 of corrective work for termite and dry-rot damage, foundation repairs, and a new roof. Big corrective work bills can be deal killers.”

If however you are really bent on buying the house despite the problems, they offer these advises:

• The sellers can leave enough money in escrow to cover the cost of repairs, with instructions for the escrow officer to pay the contractors as the work is completed.
• The lender can withhold part of the full loan amount in a passbook savings account until the work has been done.
• The sellers may give a credit for the work. Lenders may disapprove of this last alternative because there aren’t assurances that the repairs will be made.

Get a qualified inspector. Their service costs between $250 and $400. If you want to ensure his credibility, ask for referrals from groups like organizations like the American Society of Home Inspectors or the American Association of Home Inspectors. New members are certified before they could join the group. You can also ask referrals from friends who has had to go through the same experience. But don’t leave everything to the home inspector. Invest a few hours with them asking them to explain the problem (if there are), what to look out for, how to keep your house well-maintained.

As Kuhn of HouseMasters say, “A pre-purchase inspection is your best protection against buying a home based more on emotions, rather than as a sound investment.”

Being a homeowner has its perks and privileges but it also comes with a lot of responsibilities which all involve money. You need to think of repairs, taxes, insurance and maintenance. Not to mention city maintenance and repairs for streets, sewers, curbs and sidewalks near your home. If your house is in the corner of the block, these costs are doubled. 

But don’t let these costs discourage you from becoming a homeowner. If you have the desire and enough funding to purchase a home, you should also have a good understanding of government policies so your house becomes a good investment. Consider it as a business with the city and state financial departments so your chances of making a promising investment is high.

Know what it takes to become a homeowner. Learn the ropes from completing and filing paperwork and getting in touch with necessary agencies. All the hassle involved in the process can be confusing and discouraging.

Your role is an investor. Your responsibility is to own and maintain your property. But you are not expected to know everything including the business side of owning a home. You need to team up with people you can trust who can help you ensure your house’s value will increase. This team should be able to guide you in making prompt payments, tax assessments, insurance, maintenance,( H.O.A. requirements, when applicable), upgrades and necessary repairs or maintenance. If these sounds all too overwhelming for you, you ight as well stick to renting.

Through renting you are giving business to the owners. Being a renter, you don’t need to come up with a large amount of money and no need for taxes.

Think about these things:

• How much is my income?
• How much is my rent?
• What is your credit rating?
• How much do you spend and how much do you save?
• How well do you handle your money?

You need to think about these things to determine if you’re ready to be a homeowner. You should also consider the economy. Do you know the current market climate? Do you believe it’s looking up? Are you knowledgeable when it comes to government regulations.

So ff you want to buy a property and work towards increasing the value, you as homeowner needs to be knowledgeable about finances, real estate, taxes, government policies and regulation, city building codes and restrictions and have good credit rating. If you know these things, you can make your investment grow and start other investments for your family’s future.

After some time, the value of the home you invested in will increase. This is the measure of your success as a financial wizard. You were able to take advantage of the government tax system and policies and borrowed against it. The money you borrowed is tax free and your earnings from it is tax-deductible.

People who used this method was able to finance other things like school tuition, payment for a new home or a new investment.

If you bought a home for $600,000 and you sell that same home for  $1,000,000, you can have the gain tax-free for up to $500,000 for a married couple. Real estate transactions like this is the only one that have a no tax income advantage. You may want to consider them for your retirement fund.

When it comes to investing, no time is better than now. But don’t do it in haste. Careful planning is required. And do it with a team of professionals who can help you with financial and legal matters.

A real estate agency is really a team that lead you to good investments and they teach you how you could maximize your earnings – tax free.

Renting versus Buying

Renting	Buying
no tax deduction	tax write -off
rental fee can go up anytime	house expensie will not go up
not free to make changes	you can make physical changes as you please
you can be evicted	home value increases over time
temporary	your home for as long as you want

Readines when it comes to buying a home takes more than just money. There are other factors involved – factors not involoving money but can be as important. People make decisions not just based on financial issues but on other things as well like your personality, abilities and values.

Probably one of the most important consideration you’ll have is the environment. What kind of place or neighborhood do I want to live in?

• City Versus Suburbs

  Your personality influences your choice of where to live. Do you want to live in a quite neighborhood? Or do you prefer livnig in a busy city? Are you looking for a place near malls, the night life or are you looking for a place away from all these? Do you want to live within walking distance from your office or your children’s school? or you prefer to take the subway or ride the train? The environment you choose, spells the quality of life you will have. If your preferences go with properties that are too mch for your budget, consider these options: postpone buying a house until you can afford your dream house in your ideal neighborhood or pursue having your own home now and just compromise on your preferences?

• Amenities Versus Customization

  If you buy a home with amenities like a tennis court, basketball court, gym, olympic-sized swimming pool, you’ll be paying a lot for it. Your mortgage rate will be very expensive compared to renting a house with these amenities. There are many apartments in cities that have these amenities available but you don’t have to pay as much. Another option you could consider is to find an affordable house and just customize it according to your preference.

• Flexibility Versus Stability

  Renting allows you to leave anytime without much ado. Of course there is a contract but the problem can be fixed by paying up to what is agreed. But as a homeowner, if you want to move, you’ll need to face the hassle of selling your house and finding a good buyer. And while you are waiting for a buyer, you need to continue paying your mortgage and keep the house well-maintained. This process will take months or even years. Unless money is not an issue and you could afford to move without having to sell your old house. However as a tenenant, there is always the possibility that your landlord will raise your rental fee or ask you to move anytime even when you don’t plan to move anytime soon. As a homeowner, you can live in your house for as long as you want.

• Personalized Aesthetics Versus Less Work

  Owning a house gives you the freedom to customize the look of the house according to your liking. But this privilege also comes with the responsibility of takiing care of maintenance and repairs. If you think you are not the type to spend time and effort into fixing a leaky faucet or cutting grass, you might not be ready to own a home yet. Unless you can afford to simply pay someone to take care of this for you.

  A tenant on the other hand, does not have control over the aestheitcs of the place but you also have liberty from dealing with maintenance or damages from poor construction. What you can do though is change the furniture and interior decorations to suit your liking. If there is a leaky faucet, just call your landlord.

• Emotional Satisfaction Versus Less Worry

  Having your very own home is considered the “American dream”. This means growing roots and being involved in the community. If you’re the kind of person who only wants a place to stay and is out most of the time, renting may be a better choice for you.

Deliberating about your readiness to own a home is something that only you can answer. What you can afford to buy can be done by online calculators but when it comes to intangible things like your personality, values and priorities can only be determined by you. Take time to think about considerations listed above before you make any decision regarding home ownership.

When you turn to lenders to acquire a house, they determine how much you can borrow based on computations. But do they really know your financial capacity? They can count your income and concrete expense but they don’t know exactly how much you’re regularly spending? You’re the only one who knows if your income can support your lifestyle. Do you have enough to fund housing costs? And don’t forget to leave room for new furniture’s, appliances, landscaping, repairs and maintenance.

Banks have been using the 28/36 ratio in determining how much they should let you borrow. The approved housing loan should be no more than 28 percent of the borrower’s gross monthly income. 36 percent should be the maximum total debt load of the buyer. This includes credit card payments, loans, car payments.

Canada uses a similar formula. Buyers can borrow up to 32 percent of their gross monthly income. And their total debt load should not be more than 40 percent.

But due to rising rates lenders are willing to stretch the housing loan to as much as 50 percent of the gross monthly income. But before you commit to this loan, think and rethink if you can really afford it.

Evaluate your spending habits. Think if there are areas where you can save so you can sustain the mortgage and keep a well-maintained house. After all it’s not just a matter of keeping your house. It’s also about having peace of mind.

One of the keys to finding a good home without hassle is through a good agent. More than a good resume, they need to have a good track record and a good reputation. They should be effective as an agent. Here are eight good questions to ask an agent before hiring their services. 

• Why compelled you to become a real estate agent?
• Why would I want to work with you?
• What sets you apart from other real estate agents?
• What are the things you will do in order for me to find the home that I want?
• What are the common problems encountered in real estate transactions and what will you do to avoid or fix them?
• What are the common mistakes that people do in buying their first house?
• What other professionals do you suggest we work with?
• Are you able to provide me testimonials from your previous clients?

• 1 – Decide to purchase.

  There are many good reasons why it’s beneficial to buy a home. Wealth building is one of them; perhaps the most important. It is often considered an accidental investment. But it is actually a good intentional investment if it is done correctly. The financaial benefits of owning a home are: value appreciation, equity buildup, and tax benefits. Before you decide to buy a house, think about these things. Make your decision based on facts, not hopes or fears.

  • If you are currently paying rent, you are also financially capable of paying for a house of your own.
  • Don’t wait for a perfect timing. There is never a bad time to buy a good house. What you need to do to prepare is to find a good deal and ensure that you have a steady source to keep on paying for the house.
  • Do not lose hope if you do not have enough cash for downpayment.
  • Don’t worry if your credit score is not perfect. It won’t stop you from buying your home.
  • The first step towards owning your dream house is to purchase it now.
  • Buying a new house should not give you trouble. There are professional agents who can help you.
• 2 – Hire a professional agent.

  In the process of looking for a house, inspecting it, applying for a loan and closing the deal, you will need the help of several professionals – insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and probably more. Coordinating with all these professionals is one of the tasks of your real estate agent. Their major responsibility is to protect your interest as a buyer and as their client.  Their main roles are the following:

  • Educates you about your market.
  • Negotiates on your behalf
  • Analyzes your wants and needs.
  • Guides you to homes that fit your criteria.
  • Coordinates the work of other needed professionals.
  • Checks and double-checks paperwork and deadlines.

  • Solves any problems that may arise.

  One of the keys to finding a good home without hassle is through a good agent. More than a good resume, they need to have a good track record and a good reputation. They should be effective as an agent. Here are eight good questions to ask an agent before hiring their servit aces. 

  • What compelled you to become a real estate agent?
  • Why would I want to work with you?
  • What sets you apart from other real estate agents?
  • What are the things you will do in order for me to find the home that I want?
  • What are the common problems encountered in real estate transactions and what will you do to avoid or fix them?
  • What are the common mistakes that people do in buying their first house?
  • What other professionals do you suggest we work with?
  • Are you able to provide me testimonials from your previous clients?
• 3 – Secure financing.

  Thinking about owning a home is exciting. But when you continue with the process and think about the financial aspect, you will start to feel nervous. The thought of taking on a mortgage can be intimidating. It can be confusing and it’s a long-term commitment. Here are 6 steps that can help you understand the procedure.

  • Choose a loan officer (or mortgage specialist).
  • Make a loan application and get preapproved.
  • Think of what you want to pay and choose a loan option.
  • Submit to the lender an accepted purchase offer contract.
  • Get an appraisal and title commitment.
  • Receive funding at closing.
• 4 – Finding your home.

  Most people think that this part of the process starts with looking around. A lot of people will agree that this is the most exciting part of the journey. However if you have been doing this for quite a long time, the excitement will start to wane. To avoid unnecessary dissapointments and wasted time, start by thinking about these things – the things you value, things you need and things you want; now and in the future. As you ponder on these things, you can use these questions as a guides

  • What do I want my home to be near to?
  • How big do I want my house to be?
  • Which is more improtant for me? location or size?
  • Am I interested in a fixer-upper?
  • How important is the property’s potential value appreciation for me?
  • Is a good neighborhood important for me?
  • Am I interested in a condo?
  • Do I want a new home construction?
  • What features and amenities do I require?
• 5 – Make an offer.

  Making an offer should be done with a cool head and a realistic understanding of your market. There are three basic components in making an offer: price, terms, and contingencies (or “conditions” in Canada).

  • Price – When you make an offer, the true market value of the property should be considered. Your agent should be able to educate you on this.
  • Terms – they refer to financial and timing factors that can be involved in the offer. These terms can be:
  • Schedule – a schedule of events that has to happen before closing.
  • Conveyances – the items that stay with the house when the sellers leave.
  • Commission – the real estate commission or fee, for both the agent who works with the seller and the agents who works with the buyer.
  • Closing costs – it’s standard for buyers to pay their closing costs, but if you want the costs to be included into the loan, you need to write that into the contract.
  • Home warranty – this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
  • Earnest money – this protects the sellers from the possibility that the buyer might cancel the deal and makes a statement about the sincerity of your offer.
• 6 – Perform due diligence.

  Once you buy a property, you can’t simply return it if something is damaged. Property inspections and a good home insurance is very important. If you’re covered under a home insurance, it can protect you in case of loss or damage on the property. And it can protect you financially against liability in case people got injured while they were on your property.

  Property inspection can detect problems that you might not see. A thorough inspection can expose damage that are not readily seen. Your biggest concern should be strucural damage. Minor damages can be repaired. If through the inspection a potentially serious problem, ask a specialist to check on it. Depending on the gravity of the problem, you might not want to push through with the sale. 

• 7 – Closing the sale.

  The last stage of the home buying process is the lender’s confirmation of the property’s value and legal statue, and your continued credit-worthiness.This involves survey, appraisal, title search, and a final check of your credit and finance. You have nothing much to do during this stage. Your agent will inform you of updates. But here are a few things you can do:

  • Stay in control of your finances.

  • Return all phone calls and paperwork promptly.

  • Communicate with your agent regularly.
  • Several days before closing, double check with your agent that all your documentation is in place and in order.
  • Acquire certified funds for closing.
  • Conduct a final walk-through.
• 8 – Protect your Investment.

  After the deal is closed you might think there is no more need to keep in touch with your agent. But your agent can still help you with the following:

  • Find professionals you might need for home repairs and maintenance.
  • Take care of your first tax return as a homeowner.
  • Monitor the market value of your home.
  • Help your friends search and buy properties.

  Taking care of your house means taking care of a good investment. A property that is well maintained adds to the value of your property. If you fix damages before they get worse will save you money in the future.

Buying a home is expensive. A lot of people want to have a home of their own but do not have enough cash or can’t get enough funding to afford a mortgage. On the other hand some people are looking for ways to be able to take advantage of tax benefits from being a home owner. So they turn to co-buying.

“Neither of us had a big enough chunk of money to put down for a home in a desirable neighborhood,” Brian Free told the U.S. News & World Report about his decision to purchase a home with his friend. “However, aggregating our resources allowed us to find a home that suited our needs.”

However, co-owning anything with a friend or relative comes with risks. But there are things you can do to reduce the risk of running into problems. Careful delibiration and planning is a must.

• Think about how you will hold title

  The decision on how to hold title will affect your say in legal documents. Unmarried co-buyers can share a title as TIC (tenants in common) or as JTWROS (joint tenants with right of survivorship). Co-owners who are married can take title via community property or tenancy by the entirety.

• TIC versus JTWROS

  With JTWROS both owners have equal shares in a home. When a co-owner has passed away, his share will go to the other owners. Consequently this means that the last surviving owner gets all the shares. In a TIC, the shares may or may not be equal. Each co-owner has its own title. Right of survivorship doesn’t work in TICs. When a co-owner dies, his share will not go to surviving co-owners. Each co-owner can pass their share to their family members or whoever they want to will it to. TICs can be dissolved if a co-owner buys out the share of the other co-owner/s. Or to sell the home, one co-owner can file a partition action.

• The similarities of a TIC and JTWROS

  In both ownership arrangements, owners have rights to the property. If it is rented or sold, co-owners each receive each will receive a part of the money that is according to their shares.

• Secure a co-ownership agreement

  It is important to lay the ground rules and protect your share. It is wise to make things clear for all parties involved before problems arise. No matter how close you are with the co-owners, there is always a possibility that ownership issues will be challenged. A co-ownership agreement can help resolve the issue.

• What are the ownership percentages?

  Joint tenants have equal shares. Co-owners in a TIC agreement can divide the shares based on the amount that each has put in for the downpayment.

• How are ongoing costs divided?

  They refer to ongoing costs like mortgage payments, property taxes, insurance, utilities and maintenance. The division of expenses like this should be part of the co-ownership agreement. Co-owners may divide this according to their shares or according to the amount of time each co-owner will put in in maintaining or improving the property. You may want to open a joint checking account so each co-owner can withdraw from this account to pay for ongoing expenses.

• What if a co-owner wants to sell?

  The co-owner who wants to sell does not need to get the approval of the other co-owner as to whom they could sell it to. However, the other co-owner can object to the sale because of their right of first refusal.

Their major responsibility is to protect your interest as a buyer and as their client. Their main roles are the following:

• Educates you about your market.
• Negotiates on your behalf
• Analyzes your wants and needs.
• Guides you to homes that fit your criteria.
• Coordinates the work of other needed professionals.
• Checks and double-checks paperwork and deadlines.
• Solves any problem that may arise.

Buyers are now in a better position when it comes to buying a house. Gone are the days when real estate is a hot market and you need to make an upfront offer as soon as a property is put up for sale.

Competition has mellowed down in most areas. This gives buyers an opportunity to be able to deliberate on what is available and take advantage of the best deals. How do you determine the climate of your market? According to economists, real estate is directly related to employment. So if there is a rise in employment, you can say that the value of your property is also looking up. In the Midwest real estate is not doing as good as auto manufacturing. Prices are low and is not expected to rise anytime soon. It might take a while until the market rebounds.

Things buyers can keep in mind to get the best deal in the market:

• Do your homework and negotiate fairly.

  In a changing market, the biggest problem is human nature. Market value can drop or stagnate. But sellers often refuse to believe this. To them, the price of their home is based on how dear it is to their heart regardless of its actual market value. On the other hand, buyers take advantage of a market slump and make unrealistically low offers. Before you make an offer, research and think about important things like the features of the home that you want to be in the home, the size of the home and the going rate of properties in the area.

• Research on comparable sales.

  Find out how much the last one in the area sold. According to Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., “See what’s going on out there.’’ Don’t insult the seller by making a very low offer. You’ll drive them away. Your goal is to make them consider your offer.

• Why is the seller putting it up for sale?

  Find out as much as you can about this. Is it because of retirement, job-related, divorce, they need to relocate, or they simply want to sell to the highest bidder.  This information is crucial. If a buyer knows this, they can either negotiate better or decide to look elsewhere.

• Check the MLS (Multiple Listing Service).

  They usually state what the seller owes. Or your agent can provide this information for you.With this information, you could negotiate accordingly.

• Timing.

  According to Durham, “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through.’’ After this period the seller will be anxiouse to sell their house.

• Go for newer or well-maintained houses.

  It will cost you time, effort and money to fix damages.

  Even in a tight market, it’s okay to ask the seller to add the closing costs to the price of the house. It’s better to pay 20% downpayment and roll the closing costs into the loan than pay 15% downpayment and pay upfront for the closing costs.

• Be reasonable

  when you ask for extras.You can also ask for new kitchen appliances or washer and dryer. Durham said you can even ask the seller to pay for the first year of homeowner association dues. But don’t ask them for things that involve workmanship. Durham said, “Don’t ask them to paint.’’“They won’t do it the way you want. They’ll do a lousy job.’’

  When you consider buying a home, think about staying there for atleast five years. Remember your goal as a buyer is to get the home that you want; not to outsmart the seller.

Are you looking to finance a new home? Or are you finding the best mortgage rate to refinance your home?

The first step is to shop around. But what does that really mean? Research and prepare. Take time to think and analyze different mortgage plans. You could save a lot by doing this. Take this for example: on a 30-year mortgage for a $300,000 house, a homeowner would pay approximately $1,520 each month at a 4.5 percent rate. But if the homeowner chooses a slightly higher rate of 5.10 percent, it would increase the monthly mortgage payments to $1,633, which would make a difference of $40,680 in 30 years. (Figures were calculated on a 20 percent down payment.)

The best thing you should do is retrieve your credit scores. If lenders retreive them multiple times, it can lower your score. 

If you’re looking for a lender, look into their track record. Ask family and friends about them and when you’ve narrowed down your options to two or three lenders, compare their rates.

Before you compare rates, establish a budget. Think about how much maximum you can afford to pay every month.

The lender should be able to give you a comparison of loan terms with conventional methods of financingso you can make an informed decision. Don’t just jump into a plan with low rates. Make sure you understand all the costs with it.  Rate lock is a contract with the lender that ensures the interest rate will not change. But you will need to get the loan within a certain period of time; usually 60 days. If the rate increases, you will not be affected. Using a mortgage calculator , compute the monthly payment at different interest rates. If you find a rate that is lower than your limit, lock in to that rate.

When you see rates that are lower than your limit, act fast. Don’t miss out on good deals and offers.Some lenders offer a “float down.” This means that even if you’re already locked in on a low rate, you can get even lower rates. Specific contracts may vary depending on lenders.

When you look for a lender, don’t just consider one. Look into other lenders as well. Different lenders offer different products. Understand the products. Some products for example have low rates for new homebuyers but not for those who want to refinance.

It’s a good idea to try different institutions from a direct lender, credit union or a community bank. Once you’ve made up your mind on a lender, ask what other fees are added to the loan. You might choose a plan with a low rate but have a lot of additonal charges. Before closing the deal, make sure you know the total amount of the loan.

Once this is settled, decide when you want to close the deal. Discuss your intended date with the lender. Ask about the charges for loan lock periods. Lock in for the best rate and the right amount of time.