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Real Estate Faqs

  1. Buying Your Home - Making an Offer[+]

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    Can you buy homes below market?
    While a typical buyer may look at five to 10 homes before making an offer, an investor who makes bargain buys usually goes through many more. Most experts agree it takes a lot of determination to find a real "bargain." There are a number of ways to buy a bargain property:

    * Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price.

    * Buy a foreclosure property (after doing your research carefully).

    * Buy a house due to be torn down and move it to a new lot.

    * Buy a partial interest in a piece of real estate, such as part of a tenants- in-common partnership.

    * Buy a leftover house in a new-home development.

    What is the difference between list and sales prices?
    The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions. If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property's listing period.

    Are low-ball offers advisable?
    A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price. While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected. You should always do your homework about comparable prices in the neighborhood before making an y offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.

    What is the difference between list price, sales price and appraised value?
    The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area. The sales price is the amount of money you as a buyer would pay for a property. The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.

    Is a low offer a good idea?
    While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:

    * Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.

    * Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?

    * Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

    What contingencies should be put in an offer?
    Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

    Who gets the furnishings when a home is sold?
    It depends. Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano.

    Whose obligation is it to disclose pertinent information about a property?
    In most states, it is the seller, but obligations to disclose information about a property vary. Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you. This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property; and any restrictions on the use of the property, such as zoning ordinances or association rules. It is wise to check your state's disclosure rules prior to a home purchase.

    How do you determine the value of a troubled property?
    Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition. It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder's and assessor's offices, or through Internet sites specializing in property records.

    What are some tips on negotiation?
    The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home.

    Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

    Do I need an attorney when I buy a house?
    In some states, you do need an attorney to complete a real estate transaction, but in others you do not. Most home buyers are capable of handling routine real estate purchase contracts as long as they make certain they read the fine print and understand all the terms of the contract. In particular, you should be clear on the terms of any contingency clauses that will allow them to back out of the contract. If you have any questions at all, it may be advisable to consult an attorney to avoid future legal hassles. In looking for an attorney, ask friends for recommendations or ask your real estate agent to recommend several. Call to inquire about fees and to check on their experience. In general, more experienced attorneys will cost more, but real estate fees as a rule are small relative to the cost of the property you are buying.

    What are the standard contingencies?
    Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
  2. Buying Your Home - Home Inspections & Warranties[+]

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    Do I need a home inspection?
    Yes. Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.

    How do I find a home inspector?
    Your realty agent is one source. But keeping them independent from the agent may be a good idea. Inspectors are listed in the yellow pages. You can ask for referrals from friends. Ask for their credentials, such as contractor's license or engineering certificate. Also, check out their references.

    How do I find a home inspector?
    In order to find a home inspector, look for someone with demonstrable qualifications. "Ideally, the general inspector you select should be either an engineer, an architect, or a contractor. When possible, hire an inspector who belongs to one of the home inspection trade organizations."

    The American Society of Home Inspectors (ASHI) has developed formal inspection guidelines and a professional code of ethics for its members. Membership to ASHI is not automatic; proven field experience and technical knowledge of structures and their various systems and appliances are a prerequisite. One can usually find an inspector by looking in the phone book or by inquiring at a real estate office or sometimes at an area Realtor association. Rates for the service vary greatly. Many inspectors charge about $400, but costs go up with the scope of the inspection.

    What's a home inspection?
    A home inspection is when a paid professional inspector -- often a contractor or an engineer -- inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and or paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.
  3. Buying Your Home - Foreclosures[+]

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    Do you have to buy HUD homes through a realty agent?
    You can only purchase a U.S. Department of Housing and Urban Development property through a licensed real estate broker. HUD will pay the broker's commission up to 6 percent of the sales price.

    Are foreclosures an option?
    A foreclosure property is a home that has been repossessed by the lender because the owners failed to pay the mortgage. Thousands of homes end up in foreclosure every year. Economic conditions affect the number of foreclosures, too. Many people lose their homes due to job loss, credit problems or unexpected expenses. It is wise to be cautious when considering a foreclosure. Many experts, in fact, advise inexperienced buyers to hire an expert to take them through the process. It is important to have the house thoroughly inspected and to be sure that any liens, undisclosed mortgages or court judgments are cleared or at least disclosed.

    What types of foreclosure are there?
    Judicial foreclosure action is a proceeding in which a mortgagee, a trustee or another lienholder on property requests a court- supervised sale of the property to cover the unpaid balance of a delinquent debt. Nonjudicial foreclosure is the process of selling real property under a power of sale in a mortgage or deed of trust that is in default. In such a foreclosure, however, the lender is unable to obtain a deficiency judgment, which makes some title insurance companies reluctant to issue a policy.

    How do you find government-repossessed homes?
    The U.S. Department of Housing and Urban Development acquires properties from lenders who foreclose on mortgages insured by HUD. These properties are available for sale to both homeowner-occupants and investors. You can only purchase HUD-owned properties through a licensed real estate broker. HUD will pay the broker's commission up to 6 percent of the sales price. Down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range from the conventional market's 5 to 20 percent. One caution. HUD homes are sold "as is," meaning limited repairs have been made made but no structural or mechanical warranties are implied.

    Can I get a HUD home for as little as $100 down?
    If you are strapped for cash and looking for a bargain, you may be able to buy a foreclosure property acquired by the U.S. Department of Housing and Urban Development for as little as $100 down. With HUD foreclosures, down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range from 5 to 20 percent. But when the property is FHA-insured, the down payment can go much lower. Each offer must be accompanied by an "earnest money" deposit equal to 5 percent of the bid price, not to exceed $2,000 but not less than $500. The U.S. Department of Veterans Affairs also offers foreclosure properties which can be purchased directly from the VA often well below market value and with a down payment amount as low as 2 percent for owner-occupants. Investors may be required to pay up to 10 percent of the purchase price as a down payment. This is because the VA guarantees home loans and often ends up owning the property if the veteran defaults.

    Where can you find foreclosures?
    In most states, a foreclosure notice must be published in the legal notices section of a local newspaper where the property is located or in the nearest city. Also, foreclosure notices are usually posted on the property itself and somewhere in the city where the sale is to take place. When a homeowner is late on three payments, the bank will record a notice of default against the property. When the owner fails to pay up, a trustee sale is held, and the property is sold to the highest bidder. The financial institution that has initiated foreclosure proceedings usually will set the bid price at the loan amount. Despite these seemingly straightforward rules, buying foreclosures is not easy as it may sound. Sophisticated investors use the technique so novices may find themselves among stiff competition.

    What happens at a trustee sale?
    Trustee sales are advertised in advance and require an all-cash bid. The sale is usually conducted by a sheriff, a constable or lawyer acting as trustee. This kind of sale, which usually attracts savvy investors, is not for the novice. In a trustee sale, the lender who holds the first loan on the property starts the bidding at the amount of the loan being foreclosed. Successful bidders receive a trustee's deed.

    Where do I learn about HUD foreclosures?
    One good source is their Web page www.HUD.com

    What are problems buying foreclosures?
    Buying directly at a legal foreclosure sale is risky and dangerous. It is strictly caveat emptor ("Let the buyer beware"). The process has many disadvantages. There is no financing; you need cash and lots of it. The title needs to be checked before the purchase or the buyer could buy a seriously deficient title. The property's condition is not well known and an interior inspection of the property may not be possible before the sale. In addition, only estate (probate) and foreclosure sales are exempt from some states disclosure laws. In both cases, the law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.

    What about buying a foreclosure "as is"?
    Buying a foreclosure property can be risky, especially for the novice. Usually, you buy a foreclosure property as is, which means there is no warranty implied for the condition of the property (in other words, you can't go back to the seller for repairs). The condition of foreclosure properties is usually not known because an inspection of the interior of the house is not possible before the sale. In addition, there may be problems with the title, though that is something you can check out before the purchase.

    How do you get financing for a foreclosure?
    One reason there are few bidders at foreclosure sales is that it is next to impossible to get financing for such a property. You generally need to show up with cash and lots of it, or a line of credit with your bank upon which you can draw cashier's checks.
  4. Buying Your Home - Finding the Right Home[+]

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    What are the pros and cons of adding on or buying new?
    Before making a choice between adding on to an existing home or buying a larger one, consider these questions:

    * How much money is available, either from cash reserves or through a home improvement loan, to remodel your current house?

    * How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?

    * What do local zoning and building ordinances permit?

    * How much equity already exists in the property?

    * Are there affordable properties for sale that would satisfy your changing housing needs?

    Do we dig deep and buy a dream home or settle for a starter home?
    Choosing between a smaller house in an affluent neighborhood, an older, bigger house in a more working-class community or a brand-new home is not easy. If you're in this situation, start by examining your priorities and asking the following questions:

    * Is the surrounding neighborhood or the home itself the most important consideration?

    * Is each of the neighborhoods safe?

    * Is quality of the schools an issue?

    * Do any of the areas seem to attract more families with children or adult residents? And where do you fit in?

    As for the return on your investment, home-price appreciation is hard to predict. In the late 1980s, and again 10 years later, the more expensive move-up housing appreciated wildly. But during the recession that followed, smaller homes tended to hold their value better than more expensive ones.

    How do you choose between buying and renting?
    Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property. There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially. Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

    How do I get the real scoop on homes I am looking at?
    Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:

    * In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor.

    * Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.

    * The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.

    * Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.

    * Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.

    * The type of water heater, water supply, sewer system or septic tank also should be disclosed.

    Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.

    Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.

    People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown

    What do all of those real estate acronyms in the ads mean?
    If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:

    * assum. fin. -- assumable financing

    * dk -- deck

    * gar -- garage (garden is usually abbreviated "gard")

    * expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.

    * fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views

    * FDR -- formal dining room (not the former president)

    * frplc, fplc, FP -- fireplace

    * grmet kit -- gourmet kitchen

    * HDW, HWF, Hdwd -- hardwood floors

    * hi ceils -- high ceilings

    * In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.

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

    * lsd pkg. -- leased parking area, may come with an additional cost

    * lo dues -- find out just how low these homeowner's dues are, and in comparison to what?

    * nr bst schls -- near the best schools

    * pvt -- private

    * pwdr rm -- powder room, or half-bath

    * upr- upper floor

    * vw, vu, vws, vus -- view(s)

    * Wow! -- better check this one out.
  5. Buying Your Home - Appraisals & Market Value[+]

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    What is the return on new versus previously owned homes?
    Buying into a new-home community may seem riskier than purchasing a house in an established neighborhood, but any increase in home value depends upon the same factors: quality of the neighborhood, growth in the local housing market and the state of the overall economy. One survey by the National Association of Realtors shows that resale homes do have an edge over new homes.

    What's a house worth?
    A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis. An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about $300. A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.

    What standards do appraisers use to estimate value?
    Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at 875 N. Michigan Ave., Suite 2400, Chicago, IL 60611-1980; (312) 335-4458.

    Can I find out the value of my home through the Internet?
    You can get some idea of your home's value by searching the Internet. A number of Web sites and services crunch the numbers from historic public records of home sales to produce the statistics. Some services offer an actual estimate of value based on acceptable software appraisal standards. They also depend on historic home sales records to calculate the estimate. Neither of these services produce official appraisals. They also don't factor in market nuances or other issues a certified appraiser or real estate professional might in assessing the value of your home.

    What is the difference between list price, sales price and appraised value?
    The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area. The sales price is the amount of money you as a buyer would pay for a property. The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.

    What are the standard ways of finding out how much a home is worth?
    A comparative market analysis and an appraisal are the standard methods for determining a home's value. Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet. An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

    How do you determine the value of a troubled property?
    Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition. It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder's and assessor's offices, or through Internet sites specializing in property records.

    What is the difference between market value and appraised value?
    The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
  6. Buying Your Home - Escrow & Closing Costs[+]

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    How can I save on closing costs?
    Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:

    * Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this as well as the seller.

    * Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.

    * Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront.

    * Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.

    * Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.

    * Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.

    Who pays the closing costs?
    Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates.

    What are closing costs?
    Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.

    Where do I get information about closing costs?
    For more on closing costs, ask for the "Consumers Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415) 974-2163.

    Why do I need a title report?
    As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property. A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you. When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is "fee simple" or "fee," which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as any laws governing building and zoning.
  7. Buying Your Home - Working With a Real Estate Agent[+]

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    Can I use an agent for a new home?
    Yes, however buyers should be aware of the differences inherent in working with sales agents who are employed by the developer, rather than traditional real estate agents.

    Builders commonly require that an outside agent be present, and sign in, the first time a prospective purchaser visits a site before payment of commission even is discussed. At times when buyers use an advertisement to find the development themselves first, builders can refuse to pay any commission regardless of how helpful an agent may become later in the process. It is advisable to call the development first and inquire about their policy on compensating real estate agents if you are using one.

    How do I find a real estate agent?
    Getting a recommendation from a friend or work colleague is an excellent way to find a good agent. Be sure to ask if they would use the agent again. You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood. In any case, whether you are a buyer or a seller, you should interview at least three agents to give yourself a choice. A good agent typically works full-time and has several years of experience. If you are a seller, you should expect to review a comparative market analysis, which includes recent home sale prices in your area, when you talk to a prospective agent.

    What about a buyer's agent?
    In many states, it's now common for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. More and more buyers are going a step further, hiring and paying for their own agent, referred to as buyers brokers.

    How do you find a good agent?
    Getting a recommendation from a friend or work colleague is an excellent way to find a good agent, whether you are a buyer or a seller. Be sure to ask if they would use the agent again. You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood.

    A good agent typically works full-time and has several years of experience at minimum. If you are a buyer, you don't usually pay for your agent's services (in the form of a commission, or percentage of the sales price of the home). All agents in a transaction usually are paid by the seller from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it's legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer's brokers, whose legal obligation is exclusively to you. If you are a seller, you should interview at least three agents, all of whom should make a sales presentation including a comparative market analysis of local home prices in your area. The best choice isn't always the agent with the highest asking price for your home. Be sure to evaluate all aspects of the agent's marketing plan and how well you think you can work with the individual.

    How much does my real estate agent need to know?
    Real estate agents would say that the more you tell them, the better they can negotiate on your behalf. However, the degree of trust you have with an agent may depend upon their legal obligation. Agents working for buyers have three possible choices: They can represent the buyer exclusively, called single agency, or represent the seller exclusively, called sub- agency, or represent both the buyer and seller in a dual-agency situation. Some states require agents to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:

    * In a traditional relationship, real estate agents and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub- broker, who brings the ready, willing and able buyer to the table.

    * Dual agency exists if two agents working for the same broker represent the buyer and seller in a transaction. A potential conflict of interest is created if the listing agent has advance knowledge of another buyer's offer. Therefore, the law states that a dual agent shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.

    * A buyer also can hire his or her own agent who will represent the buyer's interests exclusively. A buyer's agent usually must be paid out of the buyer's own pocket but the buyer can trust them with financial information, knowing it will not be transmitted to the other broker and ultimately to the seller.
  8. Buying Your Home - Tax Considerations[+]

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    Where do I get information on IRS publications?
    The Internal Revenue Service publishes a number of real estate publications. They are listed by number:

    * 521 "Moving Expenses"

    * 523 "Selling Your Home"

    * 527 "Residential Rental Property"

    * 534 "Depreciation"

    * 541 "Tax Information on Partnerships"

    * 551 "Basis of Assets"

    * 555 "Federal Tax Information on Community Property"

    * 561 "Determining the Value of Donated Property"

    * 590 "Individual Retirement Arrangements"

    * 908 "Bankruptcy and Other Debt Cancellation"

    * 936 "Home Mortgage Interest Deduction"

    Order by calling 1-800- TAX-FORM.

    Are seller-paid points deductible?
    As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.

    When is the best time to buy?
    Here are some frequently cited reasons for buying a house:

    * You need a tax break. The mortgage interest deduction can make home ownership very appealing.

    * You are not counting on price appreciation in the short term.

    * You can afford the monthly payments.

    * You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10 percent of the sales price.

    * You prefer to be an owner rather than a renter.

    * You can handle the maintenance expenses and headaches.

    * You are not greatly concerned by dips in home values.

    What home-buying costs are deductible?
    Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year. But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan.

    What is the Mortgage Credit Certificate program?
    The Mortgage Credit Certificate program allows first-time home buyers to take advantage of a special federal income tax credit. This program allows buyers credit in qualifying for the tax advantage they'll receive after they purchase the home. The amount of the credit is tied to a local formula that every city with an MCC program must follow. A MCC credit, which can total $2,000 or more, reduces the borrower's federal tax liability by an amount tied to how much one pays in annual mortgage interest. Both the borrower's income and the purchase price of the home must fall within established guidelines. To see if your community has an MCC program, call your local housing or redevelopment agency. You also may inquire with your real estate broker or the local association of Realtors.

    What are the rules for mortgage credit certificates?
    To qualify for a mortgage credit certificate, both your income and the purchase price of the home must fall within established city guidelines. These guidelines vary by city but generally only permit people who earn an average income or slightly higher than average income. A limited number of cities have authorized the MCC program. Contact your municipal housing department for more information.

    Should I buy a vacation home?
    Today a vacation home can be purchased for investment purposes as well as enjoyment. And yes, there are tax benefits. Some people buy a vacation home with the idea of turning it into a permanent retirement home down the road, which puts them ahead on their payments. Another benefit is that the interest and property taxes are tax deductible, which helps to offset the cost of paying for a second home. A vacation home also can be depreciated if you live in it fewer than 14 days a year, or 10 percent of the rented days - whichever is greater.

    Resources:

    * "Real Estate Investing From A to Z," William Pivar, Probus Publishing, Chicago; 1993.

    * "The Ultimate Language of Real Estate,'' John Reilly, Dearborn Financial

    How do I save on taxes?
    Here are some ways to save money on taxes:

    * Mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build or improve your principal residence plus a second home.

    * Points, or loan origination fees, also are deductible no matter who pays them, the buyer or the seller.

    * Most homeowners, except the wealthy and those living in high-priced markets, no longer need to worry about capital gains taxes. The exemption has been raised to $500,000 for married couples and $250,000 for single owners. It can be taken every two years. Homeowners should always keep all receipts of permanent home improvements and of mortgage closing costs. If you do have to pay capital gains taxes, these costs can be added to your adjusted cost basis. Consult your tax adviser for more information.

    Resources:

    * "Tax Information for First-Time Homeowners," IRS Publication 530, and "Selling Your Home," IRS Publication 523. Call (800) TAX-FORM to order.

    Are taxes on second homes deductible?
    Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

    Are points deductible?
    If you are a buyer, and you or the seller pays points, they are deductible for the year in which they are paid only. You also can deduct any points you pay when you refinance your home, but you must do so ratably over the life of the loan. Consult your tax or financial advisor.

    How do you choose between buying and renting?
    Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property. There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially. Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

    Are there tax credits for first-time home buyers?
    Many city and county governments offer Mortgage Credit Certificate programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier. Requirements vary from program to program. People wanting to apply should contact their local housing or community development office. Here is a list of four general requirements to keep in mind:

    * Some credit may be claimed only on your owner- occupied principal residence.

    *There are maximum income limits, which vary by locality and family size.

    * You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.

    * Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.

    Explain the home mortgage deduction . .
    The mortgage interest deduction entitles you to completely deduct the interest on your home loan for the year in which you paid it. Mortgage interest is not a dollar-for-dollar tax cut; it reduces taxable income. You must itemize deductions in order to do this, which means your total deductions must exceed the IRS's standard deduction. Another point to remember is that the amount of interest on your loan goes down each year you pay on your mortgage (all standard home-loan formulas pay off interest first before significantly paying into principal). That's why paying extra on your principal every year can help you pay off your loan early.

    How are fees and assessments figured in a homeowners association?
    Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis. Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold. For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner's cost basis only if they lived directly underneath it. Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.

    To find out more about how the IRS views condo association fees, look to IRS Publication 17, "Your Federal Income Tax," which includes a section on condos. Order a free copy by calling (800) TAX-FORM.

    How do I reach the IRS?
    To reach the Internal Revenue Service, call (800) TAX-1040.
  9. Buying Your Home - Property Taxes[+]

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    Are taxes on second homes deductible?
    Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

    Do all loans require impound accounts?
    If you are taking out a FHA or VA loan, the lender can require an impound account to pay real estate taxes and hazard insurance premiums, as with a standard loan. Most conventional loans do not require an impound account.

    Are property taxes deductible?
    Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.

    Where can I learn more about appealing my property taxes?
    Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal processes, which begin with an appeal filed with the appropriate assessment appeals board.

    How do property taxes work?
    Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property's current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas.

    What is an impound account?
    An impound account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month.

    How is a home's value determined?
    You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.
  10. How Can We Help You Buy a House?[+]

    Establish a Relationship!
    The law requires that before we can begin our relationship, and that is what we will have, we need to review several forms. These forms explain who represents the seller, who represents the buyer, and what happens if the house is for sale with Peters & Associates, Inc. The forms are standard in the industry and were created by the NC Bar Association and the NC Real Estate Commission. Our agents will explain & simplify these forms.

    Let's Get Started in the Right Direction!
    We will complete a buyer survey form which will determine what you are looking for and where you want to be. Another item that we will discuss at this time is financing. When a real estate transaction is not completed, chances are it fell through because of the financing. For this reason, we will make sure that you have been properly pre-qualified and feel comfortable with a lender. We will walk you through this process and always be there to help you.

    Let's See a House!
    House hunting can be fun, but it can also be a very tiresome and time consuming task! Our job, as your Buyer’s Agent, is to show you only the homes that meet your needs. We do the leg work. This saves you the task of looking through countless websites and spending your free time driving around aimlessly. Instead, we will search the Carolina Multiple Listing Service, which contains thousands of homes that are for sale in the area, then present you with the homes that match your criteria.

    We Found the House!
    The time will come when we find the perfect house. At this point, We will provide you helpful background information on the home and guide you in presenting an offer. The process is usually a series of offers and counter-offers. We will handle the preparation and the delivery of the offers. The only person you have to deal with is your Realtor.

    We Have a Contract!
    At this point, many real estate agents feel that they have done their job. Unfortunately, this is where the real work begins. We will begin the task of coordinating your transaction. Again, our agent will be your contact person. We will keep you updated on the numerous items that have to take place before a closing occurs. Some examples are: the survey, termite inspection, home inspection, radon inspection, sewer/water inspection, appraisal, lender, homeowners insurance, and closing attorney. Our top priority will be to insure that you have a painless closing.

    Closing!
    Have your pen handy! Our agent will meet at the attorney’s office and review all of the documentation before you sign. We will be there to answer any questions and share in the excitement of your new home. CONGRATULATIONS!


Caution! Read Before Buying

  1. Things Not to Do Before Purchasing a Home[+]

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    No Major Purchase of Any Kind
    Review the article titled, "Don’t Buy a Car," and apply it to any major purchase that would create debt of any kind. This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings…

    …and automobiles, of course.

    Don’t Move Money Around
    When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

    If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.

    The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

    Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

    So leave your money where it is until you talk to a loan officer.

    Oh…don’t change banks, either.
  2. Reasons to Delay Buying a Home[+]

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    Reasons to Delay Buying a Home
    Assuming you have the financial resources and the desire to eventually own your own home, there are very few good reasons to put off the purchase. You can miss out on years of appreciation if you do.

    The main thing you want to avoid when
    buying a home is being put in a position where you will have to sell it too soon. If you have to sell a home before it has appreciated enough to cover the costs and commissions of selling, you could find yourself in a financial bind. This is especially true for those who buy a home with a down payment of ten percent or less.

    Real Estate commissions traditionally run around six percent of a home’s sales price. The seller’s closing costs generally come to about one and a half percent. You can see how this can easily exceed the first year’s appreciation. If you made a minimal down payment, you could actually have to come up with cash out of pocket to sell your home.

    New to the Area
    A very good to reason to delay
    buying a home is if you have just moved to an unfamiliar area or region of the country. It makes sense to rent for a number of months before deciding on exactly where you want to live. Often when people buy a home immediately they find that they might have made a better decision if they had waited awhile.

    Uncertain Job Future
    You could be right out of college or expecting a promotion and a transfer. Or your company has announced an impending "restructuring." If any of these apply, it might be best to wait to
    buy a home. When you have a more accurate picture of what your next few years will be like, that will be the time to buy.

    Marital Problems
    Real estate agents see a lot of life unfold before their eyes. One of the saddest occurs when former clients divorce and are forced to sell a recently purchased house. It happens all too often when a family in turmoil decides that buying a new home may help resolve their problems. Perhaps it is inevitable that such problems occur, but selling a home before it appreciates can create an additional financial burden in an already difficult situation.
  3. Wait! Are You Buying the Right House?[+]

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    Anyone who has ever bought a home remembers the wonderful feeling of finding the right property and falling in love with it. It's an indescribable mixture of comfort, excitement and dreams about to come true. "Can we afford it? Will the sellers accept our offer? How soon can we pick up the keys?" the excited buyers ask. Great vibes are undoubtedly a good sign in deciding to purchase a home. But you shouldn't let your emotions overrule a reasonable assessment of whether a particular home really meets your needs.

    Here are a few of the many rational questions you'll want to ask yourself before you rush into a commitment to buy.

    Price
    Your lender says you can afford to buy the home you adore, but are you comfortable with the monthly payments you'll be obligated to make? Is the down payment within your means? Will you have enough cash to pay transaction costs and moving expenses? If the house needs major repairs, remodeling or redecorating can you save the necessary funds within a reasonable time period?

    Condition
    Along with price, the condition of the
    home should be a top consideration. Does the home need a new roof? Extensive upgrading of the electrical wiring? New plumbing? Is the home disaster-ready (e.g., bolted to the foundation in earthquake country)? A fixer-upper home with lots of potential can be a great find or a money pit. Will you be able to meet the financial challenges and live with the mess and inconvenience while the home is being brought up to your expectations?

    Size and configuration
    Is the house the right size for your needs and does it have the right combination of bedrooms, bathrooms and other living areas? Is that small den really big enough for your child's bedroom? Is one bathroom adequate and if not, what are the real costs and headaches of adding a second one? Does the kitchen have enough cupboard and countertop space? Is the garage wide enough and deep enough for your vehicles? Will your piano really fit in that alcove near the staircase?

    Comfort
    Does the house have a central heating system? A central air-conditioning system? Are those climate controls important to you? Are the windows large enough and positioned to create cross ventilation? If the house has two stories, are you comfortable with the idea of walking up and down stairs every day? Is there a downstairs bathroom (and bedroom, if needed) for guests who can't navigate the stairs?

    Style
    Is the design and architecture of the house too modern or too traditional for your preferences in furniture and home furnishings?

    Resale potential
    People move to a new home every seven years, on average. If you wanted to sell your home or were forced by unexpected circumstances to sell it, how easy would it be to find a ready, willing and able buyer?

    Features
    Some buyers fall in love with pricey home amenities that seem attractive and desirable at the time, but later prove to be more headache and less pleasure than the buyers anticipated. Do you really want a swimming pool? High-maintenance ornamental trees? Commercial-grade built-in kitchen appliances? Expensive hardwood floors? Some homes are easier to visit than they are to own. Article provided by Realtor.com


Why Buying a Home is a Good Idea

  1. The Best Investment[+]

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    The Best Investment
    As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood.

    Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.

    But take a second look…

    Presumably, if you bought a $200,000
    house, you did not pay cash for the home. You got a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.

    At an appreciation rate of 5% annually, a $200,000
    home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.

    Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your
    home purchase.

    Your rate of return when buying a
    home is higher than most any other investment you could make.
  2. Income Tax Savings[+]

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    Income Tax Savings
    Because of income tax deductions, the government is subsidizing your purchase of a home. All of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income.

    For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would be almost $10,000 less – due to the IRS interest rate deduction.

    Property taxes are deductible, too. Whatever property taxes you pay in a given year may also be deducted from your gross income, lowering your tax obligation.

    Stable Monthly Housing Costs
    When you rent a place to live, you can certainly expect your rent to increase each year – or even more often. If you get a fixed rate mortgage when you buy a home, you have the same monthly payment amount for thirty years. Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage – and interest rates aren’t as volatile now as they were in the late seventies and early eighties.

    Imagine how much
    rent might be ten, fifteen, or even thirty years from now? Which makes more sense?

    Forced Savings
    Some people are bad at saving money, and a house is an automatic savings account. You accumulate savings in two ways. Every month, a portion of your payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not much. Over time, however, it accelerates.

    Second, your
    home appreciates. Average appreciation on a home is approximately five percent, though it will vary from year to year, and in some years may even depreciate.. Over time, history has shown that owning a home is one of the very best financial investments.
  3. Tax Benefits of Home Ownership Are Almost Too Good to Be True[+]

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    1. The purchase
    When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding.

    The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.

    Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.

    2. 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. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction.

    In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "
    Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.

    3. The sale
    This is the best. In fact, I can hardly believe this myself. Here's how it works:

    If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that
    house and pay no federal income tax whatsoever. That's assuming you are married - singles get up to $250,000 tax free. And here comes the kicker:

    You can do this as often as every two years for the rest of your life.

    This is as good an excuse for getting married as I have ever heard. Buy a fixer-upper in an up and coming neighborhood, work on it nights and weekends for two years, then sell it at a nice profit and pocket the cash, totally free of federal taxes. And most states recognize the federal exclusion, so you put the cash away totally tax free. You don't have to re-invest, you don't have to be age 55, and you can do this every two years forever. No, I'm not kidding.

    The one restriction is that you MUST own and occupy the house as your principal residence, so don't try this on a rental property by pretending you live there when you don't. And there are some unclear rules about how you can take a partial exclusion if you live there less than two years, but we don't really know what they mean yet, so I recommend you stay there two years.

    Many of these benefits came into being with the 1997 tax law, but lots of folks are just finding out about them now, so buy and sell to your heart's content. Just don't plan on staying forever! Article provided by
    Realtor.com
  4. Freedom & Individualism[+]

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    Freedom & Individualism
    When you rent, you are normally limited on what you can do to improve your home. You have to get permission to make certain types of improvements. Nor does it make sense to spend thousand of dollars painting, putting in carpet, tile or window coverings when the main person who benefits is the landlord and not you.

    Since your landlord wants to keep his expenses to a minimum, he or she will probably not be spending much to improve the place, either.

    When you
    own a home, however, you can do pretty much whatever you want. You get the benefits of any improvements you make, plus you get to live in an environment you have created.

    More Space
    Both indoors and outdoors, you will probably have more space if you own your own home. Even moving to a condominium from an apartment, you are likely to find you have much more room available - your own laundry and storage area, and bigger rooms. Apartment complexes are more interested in creating the maximum number of income - producing units than they are in creating space for each of the tenants.

    If you are moving to a
    home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff."
  5. Recession and Expansion[+]

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    Recession and Expansion
    There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and…

    …They buy
    houses.

    Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.

    During such a time, fewer people are
    buying homes. Even so, some homeowners find themselves in a situation where they must sell. Families grow beyond the capacity of the home, employees get relocated, and some may even find themselves unable to make their mortgage payment - perhaps because of a layoff in the family.

    In the business cycle of
    real estate, there are buyers' markets and sellers' markets...and some markets in between. It is all based on supply and/or demand.


Why You Need a Realtor

  1. Why Use a Realtor[+]

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    1. Your REALTOR® can help you determine your buying power that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

    2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

    3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

    4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

    5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.

    6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.

    7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.

    8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

    9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

    10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

    11. Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

    12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).
  2. What a Realtor Can Do for You[+]

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    The REALTOR® you work with could be one of your most valuable resources. Unlike many real estate agents who are simply licensed by their state to do business, REALTORS® have taken additional steps to become members of the local board of REALTORS® and have agreed to act under and adhere to a strict Code of Ethics. Plus...

    * A REALTOR® can help you determine how much home you can afford. Often a REALTOR® can suggest ways to accrue the down payment and explain alternative financing methods.

    * REALTOR®, in addition to knowing the local money market, also can tell you what personal and financial data to bring with you when you apply for a loan.

    * A REALTOR® is already familiar with current real estate values, taxes, utility costs, municipal services and facilities, and may be aware of local zoning changes that could affect your decision to buy.

    * A REALTOR® can usually research your housing needs in advance through a Multiple Listing Service--even if you are relocating from another city. 

    * A REALTOR® can show you only those homes best suited to your needs--size, style, features, location, accessibility to schools, transportation, shopping and other personal preferences.

    * A REALTOR® often can suggest simple, imaginative changes that make a home more suitable for you and improve its utility and value.

    * A REALTOR® is sensitive to the importance you place on this major commitment you are about to make. Look for a real estate professional to facilitate negotiation of a win-win agreement that will satisfy both you and the seller.
  3. Finding Your Realtor by "Accident"[+]

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    Finding Your Realtor by "Accident"
    When someone decides it is time to sell their home, they interview several Realtors from different companies to determine which one is best for them. They want someone who will represent them and someone they feel will do an effective job at marketing their home.

    However, when someone decides to buy a
    home, they usually end up with their Realtor through sheer accident. Why don't home buyers search for a Realtor the same way that home sellers do?

    Instead,
    homebuyers usually end up with a Realtor as a result of answering an advertisement. The advertisement will give a brief summary of a home available for sale along with the price, but it says nothing at all about the Realtor.

    So...

    ...does it really make a difference?
    Yes it does.

    Listing Agents and Selling Agents
    You see, there are two "sides" to every sale. The listing side and the selling side. Most deals have an agent representing each side, so there are generally two agents involved. The seller's side is represented by the listing agent. The buyer's side is represented by the selling agent (also known as the buyer's agent).

    Agents can deal with both buyers and sellers, this is known as dual agency.

    So what should you do?

    We simply recommend that you take as much care to hire a
    real estate agent as you would for any other professional. Ask questions. Ask about education, experience, and focus.

    After all, buying your next
    house is probably the biggest purchase you've ever made in your life. Does it make more sense to find your agent by accident...or by design?
  4. Do You Make an Offer With the Listing Agent?[+]

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    Do You Make an Offer With the Listing Agent?
    For argument's sake, suppose you see a property that is "just perfect" and you don't have an agent yet? Do you make an offer with the listing agent?

    Well, most deals have two agents involved. The
    listing agent markets the house and represents the seller. The selling agent represents the buyer. The seller pays the real estate commissions to both agents.

    When you make an offer directly to the
    listing agent, there is only one agent involved instead of two - so things work a little differently.

    Agency and Disclosure
    When you make an offer directly with the listing agent, the agent will disclose the possible working relationships that exist - whether they are going to represent both you and the seller, or just represent the seller. There will be a document you sign called an "agency disclosure" that spells out the relationship.

    When representing both sides, the agent becomes a
    dual agent. In effect, they are not an actual advocate of either party but mostly an information provider and communication conduit.

    The agent will convey offers and counter-offers back and forth, but won't provide opinions to one party or the other on how "negotiable" the other party might be. In addition, they will answer questions, explain things as the transaction progresses, make suggestions about whether getting inspections is a good idea, etc., but they won't be your advocate for either party.

    If the agent discloses that they are acting just for the seller, then they are the advocate of the seller - and you are on your own.

    Road Bumps & Conclusion?
    Most real estate transactions go fine, but almost every one has a challenge or two. These challenges are often routine, but sometimes not. One party may come out on top in a dispute and the other may feel that they did not.

    When there is only one agent, the buyer may sometimes feel that the agent took the seller's side in a dispute. Often the criticism is not merited, but human nature being what it is - it happens.

    In the end, make an informed decision. If you are considering making an offer directly to the
    listing agent, ask questions. What are you giving up by not having your own agent? What will you gain by presenting an offer via the listing agent? When you get your answers, make your decision on what you want to do.
  5. Why Listing Agents Advertise?[+]

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    Why Listing Agents Advertise?
    Listing agents place ads for several reasons. First, they need to show the seller that they are doing something to sell their home. Second, by showing how much they advertise, they can also attract other individuals who are thinking of selling their homes.

    They point to their ads to show their clients that they are aggressively marketing the property. When other
    home sellers constantly see ads from a particular Realtor, they are inclined to want to list with that Realtor, too. So even though the ads look like they are directed toward home buyers, they often have another purpose. To attract home sellers.

    What sellers don’t normally realize is that a
    listing agent’s true marketing emphasis is directed toward other Realtors, not the general public. Their main goal is to convince the selling agents (buyer's agents) to find buyers and make offers. This is a good thing because if you are selling a home, you want as many Realtors as possible bringing buyers around to take a look. Most of a listing agent's marketing efforts toward other Realtors are invisible to the general public, but it is where an effective listing agent does a home seller the most good.

    Additionally, many
    listing agents now have "teams."

    Selling agents (buyer's agents) do advertise homes for sale in order to attract buyers. Although the ads do market a specific property, they are mostly intended to attract buyers in general - not a buyer for that specific property. The agent would be happy if you did buy the property you called on, but it happens so rarely that they do not expect it.

    What happens when you call on a
    real estate ad is that you often schedule an appointment to go look at the advertised home. While you are out looking at that home, you will probably want to look at others - so the agent will show you a few other homes, too. Eventually, you and the Realtor will zero in on what you need and like in the proper price range and you will make an offer.

    That is how most buyers find their
    Realtor.
  6. Finding and Using Your Own Realtor[+]

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    Finding and Using Your Own Realtor
    Actually, the best thing for you to do when you see an advertisement in the paper is to call your own Realtor and tell them about the ad. Since addresses usually do not appear in advertisements, your Realtor will call the listing agent and find out the MLS number for the property. If the listing is on the internet, it probably already provides the MLS number.

    The
    MLS number allows the agent to access the listing directly on the Multiple Listing Service computer. That reveals a lot more information than what is available to you on the web.

    The house may turn out to be a great home for you, but it may also be a property the
    Realtor has already disregarded because it backed up to a busy noisy street and you have told your Realtor you wanted a quiet neighborhood.

    You Have to Find an Agent. How do you do that?
    If you're reading this, you're probably on the Internet. One key to a successful relationship between a real estate agent and their client is that, in addition to representing your interests competently, they educate you about the process as it unfolds. So don't simply look for property on the web - look for an agent that informs you about the process.

    Referrals are always a good way to go. Perhaps a friend, co-worker, or family member recently bought a
    house in the same community and had a good experience. However, if they bought a house twenty miles from where you want to move, it may not be a good idea to use the same Realtor.

    You want an agent who knows the area in detail and has already previewed many of the
    homes available for sale in that community. Community knowledge should be important to you because you are not just buying a house. You are buying a home in a local neighborhood in a specific community.

    Every
    Realtor can show you every property available for sale in the Multiple Listing Service. Since that is true, you can call any real estate office and find a Realtor willing to show you houses for sale. The problem is that you do not know if you are talking to an excellent Realtor or a lazy inactive one.
  7. Shopping for an Agent[+]

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    Shopping for an Agent
    Your first step should be to shop for a Realtor, not to shop for property. Shop for a Realtor the way you would shop for a good attorney, accountant, mechanic, plumber, doctor, financial advisor, or other professional.

    Now that we have the Internet, you have more information at your fingertips than buyers from the past.  The web is a good place to start. There are lots of directories that list agents, plus search engines, too.  Peruse the sites. If an agent has lots of information on their site and seems genuinely concerned about informing
    homebuyers, that's probably a better choice than someone whose web site only talks about how good they are.

    The client should be the focus, not the agent. At the same time, agents have to market themselves aggressively - or else you won't notice them.

    If Automobiles were Houses
    Imagine that automobiles are sold like real estate, with no more car lots or dealerships. Both new and used cars are just parked on the street. So if you want a Ford, there are no more Ford dealerships. No more Lexus dealerships or any other kind of dealerships, either. If you want to look for a car on your own, you just drive around and see what you can find. Even then, you can only look at the outside, because you don't have the keys.

    There are some people that have the keys. They also have a computer that tells them where all the cars are parked, what model and year they are, what size engine they have, and how many miles are on the odometer. They get paid a commission for selling the cars.

    Some of these commissioned agents just sit around and look at the computer, waiting for the phone to ring. Some of them go out and locate the new cars, physically inspect the interior and exterior, and flip on the ignition to listen to the sound of the engine. They are interested in finding the best cars so their customers refer future clients to them.

    Who would you rather call?
  8. How to Conduct the Search for a Good Realtor[+]

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    How to Conduct the Search for a Good Realtor
    One way to find candidates to interview is to talk to professionals from real estate related professions and ask their opinion. If you know someone who is employed as an escrow officer, title representative, homeowners insurance salesman, or loan officer, they will be able to recommend Realtors from the area they work in.

    If you talk to a loan officer, be sure it is someone who deals primarily with purchase money first trust deeds and mortgages instead of refinances, second trust deeds, or finance companies. Since the latter do not deal with
    Realtors on a regular basis, they will not know who to recommend.

    You could just make phone calls to
    real estate offices and ask questions. Ask the manager to recommend someone or ask a Realtor who he/she would recommend from another office. This will be a little tricky because the Realtor you ask will be "giving away" a commission, but you will find out who they respect as a competitor.

    A new alternative to finding a
    Realtor is the internet. Look for Realtors who advertise themselves, not property. That way you have a pretty good idea you are getting a "buyer's" agent instead of a listing agent. Look to see if their web page offers something to you in the way of information or other services instead of just telling you they are "number one." You want someone of value to represent you, not someone who is full of it.

    Interviewing a Good Realtor
    When you interview Realtors for the job, you want someone who will be concerned about you and will take care of your interests. You want someone who demonstrates ready knowledge of homes available for sale and does not have to call you back after they "check on the computer." This ready knowledge demonstrates they have actually been out previewing homes and don’t just sit around waiting for the phone to ring.

    You also want someone sharp enough to ask you questions as well, including your financial and debt information. By asking these questions, a good
    Realtor will be able to determine the proper price range you should be looking in. By asking about your family, an agent will be able to tell if what you need in a home is something available in your price range. You want a Realtor who is bold enough to talk straight with you instead of always telling you what you want to hear.

    When a Realtor Asks to Meet With You
    Finally, any decent agent will always ask for an appointment to meet with you, too. It is only natural, since they earn their living by commissions. However, Realtors are also supposed to act as your agent, looking out for your interests before their own. You want a Realtor who takes that responsibility very seriously. If someone seems too much like simply a salesman, then maybe you should look a little further.


First Time Home Buyer

  1. Ready to Buy Your First Home?[+]

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    Is the time right to buy your first home?

    To help
    first-time buyers know if they’re ready to look for the home of their dreams as we head into this year’s home buying season, the experts at Move provide a ‘reality checklist’ designed to help them decide if the time is right.

    "Today’s housing market, especially for
    first-time buyers, makes it almost impossible not to think about the possibilities."

    Get your financial house in order
    Before you decide to buy a home, it’s essential to make sure your credit is in good shape and repair any damage previously done. Know your credit score: 35% of successful buyers recently reported they didn’t know their credit score when they went house shopping, according to a national survey fielded for MortgageMatch.com. Having enough money set aside for a down payment is a key component to making sure you are ready to purchase a home. Also, it’s important to not put all of your money in the down payment as other fees or unexpected expenses often arise after closing.

    Don't fall in love with a house you can't buy
    Find out how much you can afford: establishing your purchase power upfront, including how much money will be required for a down payment and closing costs, is a must for first-time buyers. Look for special loans available from FHA and government sponsored loans for first-time home buyers that reduce the amount of money required to get into a home.

    Learn the lingo
    Since first-time buyers are new to the market and will finance a significant portion of their purchase, it’s important to get familiar with the processes and terminology associated with home buying.

    Here is a link with
    Real Estate Lingo. 

    Check rates and find the right mortgage
    “Buyers who prepare themselves financially before they start looking for a home will have a better chance of succeeding.” “If you want to land the best mortgage that fits your needs, start early, educate yourself on your financial situation, get your documentation together and find a lender you trust."

    Find a Realtor and go shopping
    Finding a licensed real estate professional in your area will make the process smoother and easier to understand. Once you find an agent, share your realistic budget and what you’re looking for in a home.

    Not ready now? Here's how to prepare
    If now isn’t the right time to buy a home, make a plan with a target date for when you expect to be ready. Improving your credit, paying down debt, stabilizing your work history, and calculating exactly how much you can afford , are the best ways to prepare for your future home purchase. It’s also important to refrain from making any new large purchases or applying for new credit. Article provided by Realtor.com
  2. Home Buying for Young People: Plan Ahead[+]

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    Granted, few young people spend much time day-dreaming about buying their first home. They're naturally preoccupied with academics, athletics, parties, dating and future career possibilities. Nonetheless, there are a number of good reasons to start learning early in life about the costs of buying a home and the responsibilities of homeownership. For example, a college student's misuse or abuse of credit cards can preclude his or her buying a home later on.

    Here are five recommendations for young people who want to position themselves for
    homeownership:

    1. Establish good credit habits and a favorable credit history. Get a credit card and use it responsibly. Apply for an automobile loan and make your payments on time every month. If you're renting an apartment, put your own name on the lease and the utility bills and make sure the rent and the bills are paid every month. If you're already struggling with credit card debt or have large student loans, take a free workshop from the non-profit Consumer Credit Counseling Service. Call (800) 388-2227 for information.

    2. Start saving for a down payment and closing costs. It's possible to purchase a first home in many parts of the country without much in the way of savings. But in high-cost housing areas, starting to save early can be enormously beneficial because you'll get the advantage of compounding interest and have a longer period of time to grow your investments. Open a savings account or a stock brokerage investment account and make regular deposits.

    3. Read some books. Your local library and bookstore probably have at least a few shelves of books about financial management and buying a home. Take notes. Make a financial plan for yourself. You can learn a lot about real estate, budgeting and credit on REALTOR.com® too.

    4. Research where you'd like to live. Many young people assume they'll continue living in their own home town when they get older, but people are more mobile than ever and chances are good you'll one day live in another city or even another state. Again, the library, bookstore and Web can be excellent resources for information about housing costs and homeownership opportunities around the country.

    5. Tap your real estate agent relatives for advice. Parents, grandparents, aunts, uncles or older cousins in the real estate business can give you good information about the cost of housing in the area where you want to live and what it takes to buy a home. Questions to ask: Is housing affordable in this area? How much money would I need to save in order to buy a home? What advice would you give me about planning my financial future? Would you recommend some books that I might like to read about buying a home? Don't be shy. If you have a question, ask someone in a position to know the answer. Article provided by Realtor.com


Location Matters

  1. How to Choose a Home[+]

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    Once you've settled on a couple of neighborhoods for your search, it's time to pick out a few homes to view. Your wish list can remind you which features are absolute requirements and which amenities you'd like to have if possible. When narrowing down your home search, consider:

    * Types of
    homes
    *
    Home purchase considerations
    *
    Home comparison chart
    * What to do when you’ve found the right
    home for you

    Types of homes
    In addition to single family homes (one home per lot), there are other forms of home ownership:

    Multifamily homes: Some buyers, particularly first-timers, start with multiple family dwellings, so they'll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.

    Condominiums: With a condo, you own "from the plaster in" just as you would a single family house. You also own a certain percentage of the "common elements" -- staircases, sidewalks, roofs and the like. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowners association administers the development.

    Co-ops: In a few cities, cooperative apartments are common. With those, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own apartment. A board of directors supervises management. Monthly charges include your share of an overall mortgage on the building.

    Home purchase considerations
    Most buyers' first consideration, after neighborhoods are chosen, is the number of bedrooms. As you begin to view homes, keep the following purchase and resale considerations in mind:

    * Weigh your needs, budget and personal tastes in deciding whether you want a
    home that’s a newly constructed home, an older home or a home that requires some work -- a "fixer-upper."

    * One-bedroom
    condos are more difficult to resell than two-bedroom ones.

    * Two-bedroom/one-bath
    single family houses generally have less appeal than houses with three or more bedrooms, and therefore less appreciation potential.

    *
    Homes with "curb appeal" (a well-maintained, attractive, and charming view-from-the-street appearance) are the easiest to resell.

    * When resale is a possibility, don't buy the most expensive
    house on the street, or anything that is unusual or unique. The best investment potential is traditionally found in a less expensive, more moderately sized home on the street. Article provided by Realtor.com
  2. Local Community, Town or City[+]

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    Local Community, Town or City
    Before you can actually pick out a house, you need to choose what cities or communities you would like to live in. There are many factors you should pay attention to, not only for yourself, but because you intend to eventually sell the home to someone else. Carefully choosing your community is the first step in "location, location, location" and can help maximize your future potential resale value.

    Economic Stability
    When choosing a community for your purchase, it makes the most sense to buy in a city with a viable and stable economy. Five, ten, or even fifteen years from now – when you want to sell your home - you can have a reasonable expectation that your community will still be a desirable place to live.

    In addition to residential neighborhoods, there should be a healthy mixture of commercial and business districts. These not only provide jobs to the local residents, but also add an income source that the city can use to upgrade and maintain roads and city services.

    In fact, you should take a drive and see how well the community is maintained. You have probably heard of "pride of ownership" when referring to an individual home or an automobile. Look to live in a city that demonstrates community pride, as well.

    Local Government Services
    In addition to community pride, check on the services provided by local government. One example would be the local library system. Are there several library branches? Do they stock a good selection of books, including recent best sellers?

    You should also look into local crime statistics and see how the city compares to the national average and other local communities. Is the police force effective and responsive to community needs? Are fire stations located strategically around the community so that they also can respond quickly in an emergency?

    Another area of inquiry is community services. Does the city sponsor youth sports and have well maintained athletic facilities and parks? Do they sponsor community events, such as an annual parade? Are there activities available for children, teenagers and senior citizens?

    Your local agent, if they are a good one, will have amassed a wealth of information on these subjects of inquiry. It is also another reason to always use a local agent.

    Schools
    Even if you do not have school-age children and do not intend to have children, you must pay attention to the local school system. That is because when you sell the property, many of your potential buyers will have concerns of this nature.

    You will want to know if the local schools are overcrowded. Take a drive around and see if there are auxiliary trailers outside the local schools. Call up the local school district and see if elementary aged children always attend the school closest to their home. If not, ask why. Are there enough schools to support the local population? If not, are there plans to build new schools? How will building new schools affect local property taxes?

    You should also check to see how local students score on the standardized tests. You can ask your agent about these things, but you should also get the local phone numbers so you can ask yourself.

    There are also school reports available for free on the Internet.

    Property Taxes
    Property taxes may be higher in one town than another nearby city. This can sometimes affect whether potential homebuyers view a community as a desirable place to live. Often, they will choose not to purchase in a community with higher taxes, though this decision is not always justified. Higher property taxes often mean newer and more modern schools, well-maintained roads, and bountiful community services.

    In addition, you will often find that the "cost per square foot" of homes is lower in cities that have higher property taxes. This means you can buy a bigger house for less money. Since the mortgage payment may be lower, but the property taxes a bit higher, the monthly housing costs may be approximately the same in each city.

    However, many agents and prospective buyers have a bias against a community with higher property taxes. If resale value is important to you, make property taxes a consideration when choosing the location of your
    new home.
  3. Location - The Local Neighborhood[+]

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    Location – The Local Neighborhood
    The term "local neighborhood" refers to an area wide enough to cover your residential area plus nearby stores such as the "neighborhood grocery store."

    You want to be sure all essential shops and services are located nearby. This would include grocery stores, gas stations, dry cleaners, and convenience stores. There should also be fairly convenient access to local highways, major traffic routes, and mass transit.

    One thing you should look out for, though. If your local shopping center is in decline, it could be an indicator that the local neighborhood is in decline, too. Check to see if a lot of storefronts in your local center are vacant or available for lease. If they are, you might want to consider moving your purchase a few blocks.

    Location – The Residential Neighborhood
    Within your residential neighborhood, you want the nearby properties to be fairly alike in style, size, and structure. This does not mean they should all be exactly the same, either. Owners will put their own unique stamp on their
    homes.

    Your future
    home should be located as close to the center of this neighborhood as possible. Avoid the edges. In short, you do not want your property to back or side to a busy street. If you are buying a single family home, you do not want your property to border a condominium, apartment complex, business, school, or even a park.

    You also want to make sure the street you buy on is not used as a shortcut between two busier streets. Nor do you want to
    buy a house on a corner lot, as those tend to attract more street traffic and are not as safe for children. Buy in the middle of the block or on a cul de sac.

    Like we said before, you want your home to be neatly tucked away in the center of your residential neighborhood.


Home Buying Resources

  1. House-Hunting Tips[+]

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    1. Location counts. You've probably heard the old real estate joke about "location, location, location," but the point still bears repeating. Location is crucial. How far are you really willing to commute to your place of employment? How good are the local schools, shopping centers, public transportation, seniors services and other public amenities? Will your new home be next to a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it's in an undesirable location, and a poor-location home can be a particularly bad choice if you anticipate reselling the home within a few years.

    2. Make a list. Do you (and your spouse, if you're married) really know what you need and want in your home? You'll save yourself many hours of shopping (and potentially arguing) if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don't want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn't suit your needs. Tip: Start compiling your wish list by thinking about what you like and dislike about your current home.

    3. Do your homework. Not long ago, consumers had very little access to information about recent home sales prices, market trends, homes on the market, neighborhood statistics and the home-buying process. Today, all this information and more is available on the Web. Go surfing. Get educated. Become empowered.

    4. Get pre approved for a mortgage. Your top-dollar home price is a function of your household income, your creditworthiness, interest rates, the type of loan you select and how much ready cash you have for the down payment and closing costs, among other factors. Rather than guessing or estimating how much you can afford to spend, ask a lender or mortgage broker to give you a full assessment and a letter stating how much you're qualified to borrow. The true amount may be much more or much less than you think.

    5. Use a checklist. Touring multiple homes is a confusing experience for most people. Rather than relying on memory, make notes about the homes you visit. Turn your priorities into a personalized home-shopping checklist and use it track the features of each home.

    6. Wear comfortable clothing and sturdy shoes. House-hunting can be tiring, especially if you're relocating to a distant community and want to see a dozen homes in one day. There's no sense in torturing your feet unnecessarily.

    7. Be prepared to make an offer. House-hunting can also be frustrating, especially if you know in your heart you're not really emotionally or financially ready to buy a home. If you're not ready, don't put yourself through the exercise. If you are ready, go through a blank purchase contract ahead of time so you'll know what decisions you'll face when you make an offer.

    8. Relax. Granted, buying a home is a major life-altering event. But it's not worth making yourself insanely crazy or super-duper stressed. Save time at the end of your house-hunting expedition to unwind, calm your thoughts and emotions and keep the whole experience in perspective. Article provided by Realtor.com
  2. 10 Steps to Home Ownership[+]

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    Step 1: Are You Ready?

    10 Steps to Home Ownership
    Knowledge and experience are the keys to successful real estate transactions. REALTOR.com® contains an enormous amount of valuable information, and such data -- combined with the expertise, experience and training of local REALTORS® -- can be the essential keys to your success.

    One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you'll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process.

    Do You Know What You Want?
    Whether you are a first-time home buyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing timeframe?

    Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals. As an interesting exercise, it can be worthwhile to look at the questions above and to then discuss them in detail when meeting with local REALTORS®.

    Do You Have The Money? Homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with nothing down.

    In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.

    Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage payments, so most home buyers choose to buy with some cash up front.
    As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses. Speak with local REALTORS® for details.

    Is Your Financial House in Order?
    Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.


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    Step 2: Get a Realtor

    10 Steps to Home Ownership
    More than 2 million people in the United States have earned real estate licenses. However, real estate is a tough business with a steep dropout rate, and the result is that only a small percentage of those with licenses actively help buyers and sellers.

    The National Association of REALTORS® (NAR) includes 1 million brokers and salespeople, individuals bound together with a strong Code of Ethics, extensive training opportunities and a wealth of community information. NAR members are routinely active in PTAs, local government committees and a variety of neighborhood organizations. Being actively involved in community affairs provides REALTORS® with a better understanding of the area in which they are selling.

    Why?
    Buying and selling real estate is a complex matter. At first it might seem that by checking local picture books or online sites you could quickly find the right home at the right price.

    But a basic rule in real estate is that all properties are unique. No two properties -- even two identical models on the same street -- are precisely and exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two transactions are alike.

    In this maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with professionals who know the community and much more. Those professionals are the local REALTORS® who serve your area.

    How do you choose?
    In every community you're likely to find a number of realty brokerages. Because there is heated competition, local REALTORS® must fight hard to succeed in your community.

    The best place to find a local REALTOR® is from REALTOR.com's® extensive listing of community professionals and properties. Other sources include open houses, local advertising, Web sites, referrals from other REALTORS®, recommendations from neighbors and suggestions from lenders, attorneys, financial planners and CPAs. The experiences and recommendations of past clients can be invaluable.

    In many cases buyers will interview several REALTORS® before selecting one professional with whom to work. These interviews represent a good opportunity to consider such issues as training, experience, representation and professional certifications.

    What should you expect when you work with a REALTOR®?
    Once you select a REALTOR® you will want to establish a proper business relationship. You likely know that some REALTORS® represent sellers while others represent buyers. Each REALTOR® will explain the options available, describe how he or she typically works with individuals and provide you with complete agency disclosures (the ins and outs of your relationship with the agent) as required in your state.

    Once hired for the job, the REALTOR® will provide you with information detailing current market conditions, financing options and negotiating issues that might apply to a given situation. Remember: Because market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information should not be set in stone. During your time in the marketplace REALTORS® will keep you updated and alert you to each step in the transaction process.


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    Step 3: Get Loan Pre approval

    10 Steps to Home Ownership
    Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers -- especially first-time purchasers -- required a loan.

    The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.

    REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the sources of money) and programs, for example, are available right here in the finance section of Realtor.com as well as through recommendations from local REALTORS®. By meeting with lenders -- either online or face to face -- and looking at loan options, you will find which programs best meet your needs and how much you can afford.

    REALTORS® also recommend pre approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.

    What is it?
    "Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.

    Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.

    How do you get pre-approval?
    Real estate financing is available from numerous sources, including lenders here in the finance section of Realtor.com, mortgage companies that have worked with local REALTORS® and in some cases, individual REALTORS® themselves. Based on his or her experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.

    The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.


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    Step 4: Look at Homes

    10 Steps to Home Ownership
    Millions of new and existing homes are sold each year. There's no shortage of housing options, but with so many choices the challenge becomes finding the property which best meets your needs.

    The housing market is complicated because the stock of homes for sale is always in flux. If it were possible to have a complete list of every home for sale at this very moment in a given community, such a list would become obsolete within seconds as new homes become available and properties now for sale are put under contract.

    In effect, buyers are looking at a moving target in a marketplace that is never static. Because of this, it is important to know as much as possible about the choices in preferred markets, and the way to do that is by working closely with a local REALTOR® who has a good lay of the land.

    What are you looking for?
    A home is more than just a collection of bedrooms and bathrooms. Several properties -- each with four bedrooms, three baths, and the same price -- may well represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and exterior finishes.

    Each of us is different and so it's important to list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).

    Next, it's important to consider your priorities. If you can't get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?

    Lastly, consider your needs in several years. If you'll need a larger home, maybe now is the time to buy a bigger house rather than moving or expanding in the future. If you expect your income to increase, perhaps you should consider a more expensive home financed with a loan program where monthly payments increase in the future.

    Where should you look?
    All neighborhoods and communities have a special nature that gives them identity and value. One community may be well known for historic homes while another offers both suburban living as well as easy access to downtown office areas.

    REALTOR.com® offers millions of homes online. By any standard, it's the largest source for property information, online or off. You can look at homes to contact listing brokers, and you can also search Realtor.com® to find brokers who offer buyer representation services.

    How do you find a house?
    Some buyers like to search REALTOR.com® by looking at listings on the basis of location or price; others prefer to have local REALTORS® suggest properties; and many buyers prefer both approaches.
    Regardless of your choice, it's important to target your search. By using basic measures such as general location and affordability, you can refine your search and focus on homes that offer the most desirable features.

    As a guide, you should maintain a file with information on each of the homes you like. You can print out listing pages from REALTOR.com® and then make notes for each one -- what you like, questions, REALTOR® contact data, etc.


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    Step 5: Choose a Home

    10 Steps to Home Ownership
    There's no doubt that choosing a home is a big decision and you want to do it right.

    As a buyer, here's what actually happens. A home has been placed on the market for which the seller has established an asking price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller's offer and create a contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller may accept, reject or make a counter-offer.

    No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.

    Is it THE house?
    A house is shelter, but a home is far more. It's where you live, relax, entertain friends, raise families, and work. A home is where you spend much of your life, and so choosing a house is an enormous decision.

    How do you know if a house is THE one? Probably the best approach is to look at as many homes as possible, something made easy by Realtor.com, where you can quickly and easily view huge numbers of homes, check prices, take video tours and view extensive neighborhood information. Once your choices have been narrowed, you can then contact a local REALTOR® to find specific information and options.

    Can you really afford it?
    Remember Step 2 - the pre-approval process? Getting pre-approved means you have a very good idea of how much you can borrow, what loan programs will most likely work best in your situation and how much home you can afford.

    How reliable is a pre-approval? While pre-approval is not a loan commitment, it's still necessary for lenders to check such items as appraisals and the latest credit reports. Despite fluctuating interest rates, pre-approval nonetheless provides a reasoned, careful analysis of what you can afford. After all, loan officers are routinely paid only when loans are originated. It doesn't make much sense for loan officers to suggest high loan limits that later can't be delivered.


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    Step 6: Get Funding

    10 Steps to Home Ownership
    Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.

    Realtor.com® provides consumers with extensive mortgage information as well as a variety of loan calculators. Local REALTORS® can provide mortgage information, discuss financing options and recommend loan sources. In addition, some REALTORS® also originate loans.

    What kind of loan?
    There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be determined by at least several key factors:

    How much down? Loans with 5 percent down or less are available -- in fact, loans from major lenders with no money down have appeared in recent years.

    If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.

    How's your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.

    Are you a first-time buyer? It might seem that "first-time buyer" means someone who has never owned property before, but under most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer programs often feature smaller downpayments and below-market interest rates. For details, speak with your local REALTOR®.

    How do you get a loan?
    To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, the loan officer will describe the type of paperwork required.

    Where do you get a loan?
    Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies. A growing number of REALTORS® can also arrange financing.


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    Step 7: Make an Offer

    10 Steps to Home Ownership
    REALTOR® groups, working with legal counsel, have developed forms that are appropriate for realty transactions in specific communities. Such documents include numerous sale conditions and their wording should be carefully reviewed to assure that they reflect the terms you want to offer. REALTORS® can explain the general contracting process in your community as well as his or her role.

    While much attention is spent on offering prices, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value for buyers -- or additional costs. Terms are extremely important and should be carefully reviewed.

    How much?
    You sometimes hear that the amount of your offer should be x percent below the seller's asking price or y percent less than you're really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.

    How do you make an offer?
    The process of making offers varies around the country. In a typical situation, you will complete an offer that the REALTOR® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.

    Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.

    How many inspections?
    A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections.

    Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property's mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through.


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    Step 8: Get Insurance

    10 Steps to Home Ownership
    No one would drive a car without insurance, so it figures that no homeowner should be without insurance.
    The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.

    What kind and how much?
    There are various forms of insurance associated with home ownership, including these major types:
    Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.

    Homeowners' insurance: Homeowner's insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.

    Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which locations require such coverage.

    Home warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?

    Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.

    Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
    Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with REALTORS®, insurance brokers and home builders.

    Where to look.
    REALTORS® often provide home insurance and such policies are also available from insurance brokers.

    How do you get insurance?
    The time to obtain insurance and warranty coverage is at closing, so speak with a REALTOR® or insurance broker prior to closing. Be sure to ask about limitations, costs, deductibles and "endorsements" (additional forms of coverage that may be available).


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    Step 9: Closing

    10 Steps to Home Ownership
    Go to any local courthouse and you can find property records detailing real estate ownership in your community -- sometimes records that date back hundreds of years.

    These records are important because they provide today's owners with proof that they have good, marketable and insurable title to the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they sell.

    The closing process, which in different parts of the country is also known as "settlement" or "escrow," is increasingly computerized and automated. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery.

    In practice, closings bring together a variety of parties who are part of the "transaction" process. For example, while the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself, thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.

    What to expect
    Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.

    Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.

    What you need to do
    One of the best parts of settlement is that buyers and sellers need to do very little.

    Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.


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    Step 10: What's Next?

    10 Steps to Home Ownership
    You've done it. You've looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Is there any more to the home buying process?

    Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take.

    Those papers you received at settlement are extremely valuable, so hold on to them! In the short-term they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.

    Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by owners as of closing and you also want services transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORS® can provide contact numbers and related information.

    About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.

    Moving in
    It is generally understood that sellers will leave homes "broom clean" when moving out. This expression does not mean "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.

    Your home, your money
    For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.

    Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.

    You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.

    Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that home ownership should be a wonderful experience. Enjoy!
  3. Buying a Home with Resale Value[+]

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    Buying a Home With a View
    Homes with a pleasant view of the horizon often sell at a premium above similar homes without the view. However, if a view is important to you, buy it mostly for your own pleasure and not as an investment. Though you may place a considerable dollar value on the view, future buyers may not be so like-minded. It may take you longer to find a buyer when it comes time to resell the house. Or you may end up dropping your price to more nearly match other sales prices in the neighborhood.

    In short, if you are buying a house with a view, try to pay as little extra as possible. Otherwise, you might not get your money back.

    Lot and Landscaping
    Even though most real estate value is usually concentrated in the building, the lot is important, too. Obviously, it should be as level as possible. Assuming the property is in a typical neighborhood, the lot should be rectangular - no odd shaped lots or oddly situated lots.

    Yard sizes are smaller in modern
    homes than in older homes, but there should still be a decently sized front and back yard. Do not buy a house where the entire back yard is taken up by a swimming pool, for example.

    Do not purchase an over-landscaped property, either. You would normally pay a premium for that, which you may not be able to recover when you sell. You will get your best value if the
    house is moderately landscaped or under-landscaped for the area. You can always improve the landscaping during your ownership by improving the grass and adding bushes and trees. Just do not spend too much.

    House Size
    In each residential neighborhood, houses will vary in size and rooms, but they should not be too different. If resale value is an important consideration, you should not buy the largest home in the neighborhood. When determining market value, the homes nearest to yours are most important. If most of the nearby houses are smaller than your house, they can act as a drag on appreciation.

    On the other hand, if you buy a small or medium
    house for the neighborhood, the larger homes can help pull up your value. This is one of those times where determining your "wants" versus your "needs" can be extremely important. Buying what you need in a more prestigious neighborhood may provide more financial reward than getting what you want in a less desirable neighborhood.

    Bedrooms and Bathrooms
    Three and four bedroom houses are the most popular among homebuyers, so if you can stick in that range you will have more potential buyers when it comes time to resell. Five is okay, too, as long as you do not have to pay too much extra for the additional bedroom.

    There should always be at least two bathrooms in a house, preferably at least two and a half. One bathroom with a place to wash up for day-to-day visitors, one for the master bedroom, and at least one to be shared by the other bedrooms.

    Closets, Garages, and Laundry
    Walk-in closets are extremely desirable for the master bedroom. For the rest of the house, just be sure there is plenty of closet space. Don’t forget space for linens and towels.

    Garages add to the resale value and you should always make sure to get at least a two-car garage. Lately, three-car garages have become desirable.

    The laundry facilities should be located somewhere convenient on the main floor of the
    house, but not in a place it will create an eyesore. Think about whether you want to walk up and down stairs when carrying loads of laundry.

    The Kitchen
    Family activity centers around the kitchen, so this is the most important room of the house. Larger kitchens are better, and they should be provided with modern appliances. Obviously, the dining room and breakfast nook should be located adjacent to the kitchen. In newer houses, the family room should also be extremely close to the kitchen.

    There should be easy access to the back yard, as there will be occasions for barbecues and outdoor entertaining. In addition, it should be a short trek between the garage to the kitchen so hauling groceries in from the car does not become a horrendous chore.

    Fireplaces
    The only room where you absolutely have to have a fireplace is the family room. A fireplace in the living room may be nice, but you pay extra for it and will probably rarely use it. At best, it serves as a focal point of the living room, but does not add much in real value.

    Swimming Pools
    Swimming pools do not provide as much added value as they once did. Safety issues about families with younger children have become more publicized than in the past, so families with small children tend to avoid homes with pools. As a result, having a pool may actually reduce the number of potential homebuyers when you try to resell the home.

    Buy a home with a pool for your own enjoyment, not as an investment.

    Since we are on the subject of swimming pools, here is a word of advice: If you want a pool, buy a home that already has a pool. Paying a contractor to install one for you is like throwing money away. You will never get a dollar-for-dollar return on your investment.
  4. How to Choose a Neighborhood[+]

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    When evaluating a neighborhood you should investigate local conditions. 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.

    Neighborhood search strategies
    If you’re a first time-buyer with limited financial resources, it's wise to buy a home that meets your primary needs in the best neighborhood that fits within your price range. You can maximize your home purchase location by incorporating some of the following strategies into your neighborhood search:

    * Look for communities that are likely to become "hot neighborhoods" in the coming years. They can often be discovered on the periphery of the most continuously desirable areas. Look for a home in a good neighborhood that is a bit farther out of the city. If commuting is a concern, purchase a home that is close to public transportation.

    * Look at the neighborhood demand by asking your Realtor whether multiple offers are being made, whether the gap between the list price and sale price is decreasing, and whether there is active community involvement. You can also drive around neighborhoods and see how many "sale pending" and "sold" signs there are in a particular area.

    * Look into purchasing a condominium or co-op, rather than a house, in a desirable neighborhood. This way you still may be able to purchase in a prime area that you otherwise could not afford. Article provided by Realtor.com
  5. Take Charge When Buying a Home[+]

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    Approaching the task of buying your next home can be overwhelming. There's so much to consider.

    How much
    house can I afford, and how can I find the best loan? Where will I come up with a down payment, and how much will I need? Should I buy a new or resale home, and which will go up in value? Should I use an agent or look at homes on my own?

    And these questions are just the beginning.
    Buying a home is one of the largest financial transactions in your lifetime, yet we don't teach about it in school. You're just supposed to pick it up along the way.

    Well, as you start down this road, let me give you a little advice. Here are the two most important things to remember no matter where you are on the road to ownership:

    1. You can and should understand everything that is happening in the
    home buying process. There is nothing, and I mean nothing, that is so complex that it can't be easily explained to anyone with average intelligence, and you've got more than that. Just because we don't apply for a thirty year mortgage once a week doesn't mean we have to take the first one that comes along. You'll need to learn some new terms, apply some new concepts and take the time to understand what you're getting into. If anything happens at any point in the process that doesn't make sense to you, simply demand a full and complete explanation. If it still doesn't make sense, seek help from someone you trust like your CPA, your banker or real estate agent.

    2. In the world of
    real estate sales, YOU are the most important person in the entire process. It's easy to think that everyone else carries more weight than you. The agent talks fast and has an answer for everything. The lender may decline your loan application, and on and on. But the truth is that you, the buyer, are the one person in this transaction that makes it all happen. If you decide to not buy, the entire process comes to a grinding halt. So flex your consumer muscle and take command of this process. Surround yourself with a team of professionals that you have confidence in and make them work for you.

    If you plan from the beginning to approach the
    home buying process intelligently and with confidence, you are much more likely to emerge at the end of the day with a house you'll be proud to call home, and the knowledge that you made the right decision. Article provided by Realtor.com


Contracts & Negotiations

  1. Writing an Offer to Purchase Real Estate[+]

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    Writing an Offer to Purchase Real Estate
    Once you find the home you want to buy, the next step is to write an offer - which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller’s shoes and imagine his or her reaction to everything you include. Your goal is to get what you want, and imagining the seller’s reactions will help you attain that goal.

    The offer is much more complicated than simply coming up with a price and saying, "This is what I’ll pay." Because of the huge dollar amounts involved, especially in today’s litigious society, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk.

    In an offer to purchase
    real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.

    It is certainly more involved than buying a car. And more important.

    Buying a home is a major event for both the buyer and seller. It will affect your finances more than any other previous purchase or investment. The seller makes plans based on your offer that affect his finances, too. However, it is more important than just money. In the half-hour it takes to write an offer you are making decisions that affect how you live for the next several years, if not the rest of your life. The seller is going to review your offer carefully, because it also affects how he or she lives the rest of their life.

    That sounds dramatic. It sounds like a cliché. Every real estate book or article you read says the same thing.

    They all say it because it is true.

    Contingencies in an Offer to Purchase Real Estate
    In most purchase transactions there may be a slight challenge or two, but most things will go quite smoothly. However, you want to anticipate potential problems so that if something does go wrong, you can cancel the contract without penalty (excluding due diligence). These are called "contingencies" and you must be sure to include them when you offer to buy a home.

    For example, some "move-up" buyers often agree to
    purchase a home before selling their previous home. Even if the home is already sold, it is probably a "pending sale" and has not closed. Therefore, you should make closing your own sale a condition of your offer. If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one.

    There are other common contingencies you should include in your offer. Since you probably need a mortgage to buy the
    home, a condition of your offer should be that you successfully obtain suitable financing. Another condition should be that the property appraises for at least what you agreed to pay for it. During the escrow period you are likely to require certain inspections, and another contingency should be that it pass those inspections.

    Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to
    buy a home. If you cancel a contract without having built-in conditions and contingencies, you could find yourself forfeiting your earnest money deposit.

    Or worse.

    Earnest Money Deposit in an Offer to Purchase Real Estate
    After you have come up with an offer price, the next step is to determine how large a deposit you want to make with your offer. You want the "earnest money deposit" to be large enough to show the seller you are serious, but not so large you are placing significant funds at risk.

    One recommendation is to make sure your deposit is less than two percent of your offered price. The reason for this is that if your deposit is larger than that, the lender will pay particular attention to how you came up with the funds. You might have to provide a copy of a canceled check along with a bank statement showing you had the money to begin with. Normally, this is not a problem, but if you have a short escrow period or are barely coming up with your down payment, it could pose an inconvenience.

    Another reason to limit your deposit is "just in case." Although significant problems are the exception and not the rule, they do occur. "Just in case" there is a nasty or prolonged dispute between you and the seller, the less money you have tied up in a deposit, the fewer funds you have placed at risk.

    As with practically everything in
    real estate, there are exceptions to this rule, too. During a hot market there may be multiple offers on the property that interests you. A large deposit may impress a seller enough so they will accept your offer instead of someone else’s, even when your unknown competitor is offering the same price or slightly higher.

    Since large deposits do impress sellers, you may also find that by making a large deposit you can convince the seller to accept a lower offer. More money up front may save you money later.

    Condition of the Property
    The last thing you want when you assume possession of your new home is to find it in a total mess. Therefore, you should make it clear in your offer that certain minimum standards are required. If you do not, you might find out the seller or neighbors have begun using the back yard as a trash dump, or something worse – and you would not be able to do anything about it.

    Some of the requirements you might want to include in your offer are that the roof does not leak, the appliances work, the plumbing does not leak, that there are no broken or cracked windows, the yard has been kept up, and any debris has been cleared away.

    Home Inspections
    Besides appraisal and the termite inspection, you should also have a professional go through the house and seek out potential problems. Of course, you will have inspected the home, but you are not used to looking at some things that a professional will find. Even if they are not things the seller is expected to repair, at least you will have foreknowledge of any potential problems.

    The seller will want this inspection performed quickly, so that you can approve the results and move forward with the purchase. Once you receive the inspection, you will want to allow yourself sufficient time to review and approve the report. If you do not approve the report, you may negotiate with the sellers on which repairs should be performed and who should pay for those repairs. Otherwise, you can cancel the purchase without penalty, provided you have included timetables in your offer.

    Allow a maximum of ten to fifteen days to receive the report and five days to review it.

    Final Walk-Through Inspection
    Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect that any required repairs have been performed. You should do this no sooner than five days before you intend to close. Make sure this right to do a final inspection is included in your offer to purchase the home.
  2. The Bottom Line on Contract Negotiation[+]

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    The natural focal point of a real estate purchase contract is the selling price of the home, but the price isn't the only factor that determines the net bottom line for both the buyer and the seller. Is a bargain for the buyer really a bargain if he or she is paying all the transaction costs? Is a top price for the seller really a top price if the buyer wants all the furniture to be included in the purchase price? Or if the buyer they can't come up with the downpayment or qualify for a mortgage?

    Before you decide to go ahead with a great price, here are five other bottom-line points to consider:

    1. What are the estimated transaction costs and who will pay for what? Typical costs include the brokers' commission, a home inspection, a termite inspection, escrow or attorney's fees, a title search, an owner's title insurance policy, transfer taxes and recording fees. The price tags on these items vary greatly around the country. Who pays for what is a matter of both local custom and negotiation.

    2. How much money is the buyer putting into escrow and how soon? A big deposit -- called "earnest money" -- and a substantial down payment are generally seen as a sign that the buyer is serious about completing the transaction. From the seller's point of view, the more money the buyer places in escrow and the sooner the money is transferred, the better.

    3. Is there a mortgage financing contingency and how specific is it? The mortgage escape clause is a must for buyers, unless they're paying all cash for the home. Without this contingency, buyers can be legally obligated to purchase the home even if they can't obtain financing. Further, an open-ended statement that says the buyer will obtain a loan "at the prevailing rate of interest" leaves the buyer completely exposed to interest rate fluctuations. A statement that says the loan must be at an interest rate "not to exceed xx percent" and on specified terms is preferable.

    4. What furniture, fixtures and appliances, if any, are being sold with the property? Technically, anything that's permanently affixed to or installed in the home is real property. Everything else is the seller's personal property. This distinction is a narrow one and it naturally leads to a fair amount of confusion. Are built-in appliances real property or personal property? What about a shelving system? A chandelier? Window coverings? Potted plants in the backyard? Sellers who intend to remove anything that's attached to the home should have that spelled out in the contract. And the same goes for buyers who expect to acquire any of the furniture or other movables.

    5. What will happen if either side breaches the contract? Unless an unmet contingency triggers the abandonment of the contract, it's a binding legal document. Buyers who fail to perform can lose their deposit money. Sellers who try to back out can be sued for "specific performance," which forces the sale of the home to the buyer. Many contracts also specify that disputes must be brought in small-claims court or presented for arbitration or mediation.

    Tip: Ask your
    real estate agent to go over the standard contract with you before you receive or make a purchase offer. That way, you'll know what to expect and be prepared to negotiate the best deal you can get. Article provided by Realtor.com
  3. Comparable Sales and Your Offer Price[+]

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    Determining Your Offer Price
    When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?

    Determining your offer price is a three-step process.
    First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your "fair" price and come up with what you want to put in your offer.

    Comparable Sales
    The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called "comparable sales." Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.

    If the home you are interested in is part of a tract of
    homes, then you will most likely find some exact model matches to compare against one another.

    There are three main sources of information on comparable sales, all of which are easily accessed by a
    real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
  4. How to Win the Bidding Wars[+]

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    In today's real estate market, home buyers can expect to face multiple offer situations on select homes. 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. Buyers hate multiple offers because they push up home prices and create an extremely stressful home-buying experience. Knowing a few tricks of the trade can make the difference between walking away disappointed and purchasing the home of your dreams at a fair price.

    How can I make my offer more attractive to the sellers?
    Offer the highest price you can. Get pre-approved, not just pre-qualified, for your mortgage and attach a copy of the pre-approval letter to your offer. Make as large a downpayment as you can and provide documentation showing the source of your downpayment (e.g., a bank statement). If your current home is in escrow, provide information about that transaction. Avoid unnecessary contingencies. (Waiving your inspection or financing contingency can make your offer attractive, but it's foolish.)

    My offer didn't prevail in a multiple offer situation. Can I find out why?
    Neither the sellers nor their agent is obligated to reveal any information about the decision. As a courtesy, agents frequently will point out shortcomings of a rejected offer, but without disclosing details of the accepted offer. "Until a transaction is closed, it's crucial that everything remain unknown in case that property has to come back on the market."

    Can I submit an offer on a home in escrow?
    Yes, but agents say you would be wiser to move on to another home, particularly if there are formal back-up offers. Even if your offer tops the accepted agreement, the sellers would have great difficulty canceling the escrow.

    My agent says the sellers are getting multiple offers, how can we be certain my offer was considered?
    The temptation to suppress a buyer's offer arises when an in-house offer (one from a buyer who is represented by the seller's agent or another agent from the same brokerage company) is competing with an outside offer (one from a buyer represented by a different brokerage company). Even though an in-house offer nets a double commission for the brokerage (and sometimes the agent), the agent must present all outside offers to the seller as well. Failure to present an offer is a very serious ethics violation. The only exception occurs when the seller specifically declines to consider an offer, perhaps because a good offer is being negotiated or the home is already in escrow. If you suspect your offer hasn't been presented, your agent can request a written statement from the seller acknowledging your offer. If the written statement is not provided, your agent can call the seller's agent's broker or manager.

    Can I knock on the sellers' front door and tell them personally why they should accept my offer?
    If you happen to meet the sellers during a scheduled showing, go ahead and compliment whatever you like about their
    home. Resist that urge to pound on the front door, however. This tactic works occasionally, but many sellers strongly dislike having their privacy invaded.

    Should I wait outside the home while my offer is being presented, so I will be able to respond right away?
    Years ago, when a seller countered more than one offer, the buyers' agents would rush the counteroffers to the buyers, get their signature, then race back to the seller's home or the seller's agent's office. Whoever returned first with a signed document would win the race and open escrow. To improve their chances of
    purchasing the home, buyers would wait in their cars outside the home while the offers were being presented to the seller. That way, they could sign any counteroffer and be the first to return it. New provisions in most counteroffer forms have eliminated this silliness by stating that no counteroffer is in effect until it is signed by the buyer and accepted by the seller. This practice allows the seller to wait until all the counteroffers have been returned before making a decision.

    I have lost seven homes in multiple offer situations. Should I blame my agent?
    The answer depends on why your offers weren't accepted. "Buyers always jump to the conclusion that it's the agent's fault. If you're writing offers on houses in the $350,000 range, and all your offers are for $300,000, you're not going to get those houses. On the other hand, your agent needs to know how to operate in this market. Article provided by Realtor.com
  5. Negotiating to Yes[+]

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    Negotiating a purchase agreement is perhaps the trickiest aspect of any real estate transaction. Most home buyers and home sellers want to arrive at a win-win agreement, but that's not to say either side would regret getting a bigger "win" than the other. Successful negotiating is more than a matter of luck or natural talent. It also encompasses the learned ability to use certain skills and techniques to bring about those coveted win-win results.

    Here are six tips and suggestions to turn negotiation into agreement:

    1. Start with a fair price and a fair offer. There's no question that significantly overpricing your home will turn off potential buyers. Likewise, making an offer that's far lower than the asking price is practically guaranteed to alienate the sellers. Asking and offering prices should be based on recent sales prices of comparable homes.

    2. Respect the other side's priorities. Knowing what's most important to the person on the other side of the negotiating table can help you avoid pushing too hard on hot or sensitive issues. For example, a seller who won't budge on the sales price, might be willing to pay more of the transaction costs or make more repairs to the home, while a buyer with an urgent move-in date might be willing to pay a higher portion of the transaction costs or forgo some major repairs.

    3. Be prepared to compromise. "Win-win" doesn't mean both the buyer and the seller will get everything they want. It means both sides will win some and give some. Rather than approaching negotiations from an adversarial winner-take-all perspective, focus on your top priorities and don't let your emotions overrule your better judgment.

    4. Meet in the middle. Can't decide who will pay the recording fee? Can't agree on a close-of-escrow date? Arguing over cosmetic repairs? Splitting the difference is a time-honored and often successful negotiation strategy. Pay half the fee. Count off half the days. Fix half the blemishes.

    5. Leave it aside. Politicians and corporate executives are famous for their "for future discussion" agreements. If you have a major sticking point that's not material to the overall contract (e.g., the purchase of furniture or fixtures), finish the main agreement, then resolve the other difficulties in a side agreement or amendment. This technique allows both sides to recognize and solidify basic areas of agreement, then move ahead toward a fair compromise on other terms and conditions. Summarizing the points of agreement in writing is another helpful strategy.

    6. Ask for advice. Successful Realtors tend to be experienced negotiators. They've seen what works and what doesn't in countless real estate transactions, and they've established a track-record of bringing buyers and sellers together. Consult your Realtor about negotiating strategies, win-win compromises and creative alternatives. Article provided by Realtor.com
  6. Terms and Conditions in a Real Estate Purchase Agreement[+]

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    There's a lot to consider before you sign a real estate purchase agreement. If the terms and conditions of the deal aren't acceptable, you might want to pause and think twice, even if the purchase price is more than satisfactory. After all, the price will be moot if the transaction never closes. The typical residential real estate purchase contract is complicated, densely written and packed with legal jargon, but don't use that fact as an excuse for not reading the entire contract. Take your time and read slowly. Ask questions, be flexible and willing to negotiate.

    The following five points are among the many items that merit attention:

    1. What are the cutoff dates for inspections and approvals of the inspection reports? A typical contract provides an opportunity for the buyer to hire all manner of experts to check out the condition of the home. From the buyer's perspective, the more time that's allowed for these once-overs, the better. Sellers, on the other hand, usually want the inspections to be completed and signed off as soon as possible.

    2. Who is responsible for making repairs, if any, as a result of the inspections? The fact that the buyer orders one of more inspections of the home for informational purposes doesn't obligate the seller to make repairs or modifications as a result of those inspections. In practice, however, inspection reports often are used to negotiate repairs of major problems or safety or environmental hazards that may be noted. The purchase contract should provide some guidance for these negotiations.

    3. Is the seller making any representations or warranties regarding the condition of the property? In some contracts, the seller warrants that specified major components of the home (e.g., the roof or central heating or cooling system) are in good repair and working order at the close of escrow. Buyers should understand which components of the home are guaranteed and which are being sold "as-is."

    4. Will a home warranty plan be purchased? A home warranty plan is a sort of limited insurance policy covering the basic major systems and appliances in the home. It may seem like a prize for the buyers, but it's equally important for the sellers and the real estate broker representing the sellers. In fact, these warranty plans are so popular among real estate agents that many of them will pick up the tab for the program in order to insulate themselves from irate buyers.

    5. When is escrow scheduled to close? Pay attention to this date! If you're selling your home, you'll be expected to move out completely before the property changes hands. You'll want to make sure the closing date doesn't fall before you're able to move into your next residence. If you're buying a home, you'll be able to pick up the keys on the day escrow closes. You'll want to make sure you don't give up your prior residence too soon. Don't cut the dates too close. Many escrows end up closing a day or two later than the contract states--but that can happen only with the mutual agreement of the buyer and seller. Article provided by Realtor.com


Service Providers & Home-buying To Do's

  1. Service Providers When Buying a Home[+]

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    You and the Seller Must Agree
    Buying a home does not occur in a vacuum, involving only you and the seller. There are all kinds of people and services involved behind the scenes to make it happen. Since some of these services affect both you and the seller, there will have to be be agreement on which companies you will use for them.  When you make your offer, you should request your favorites for these services.  If you are unfamiliar with these service providers, you can get recommendations from your agent.

    Escrow and Settlement
    For example, you are going to need an escrow or settlement company to act as an "independent third party" between you and the seller. Without having a third party involved, how do you know that when you fork over the money, you are going to get the deed? This is the type of service provided by escrow and settlement. They will hold your deposit and coordinate much of the activity that goes on during the escrow period.

    Since this third party is very important to both you and the seller and both of you will pay fees to this company, it is important to agree on which service to use. Therefore, your choice should be part of the offer. Since you do not buy a home every other week or so, you are probably unfamiliar with companies that provide this service. Your agent will make a recommendation. You have the authority to accept this recommendation and include it in your offer, or make your own choice.

    Keep in mind that the seller will also have a preference and this may be a point of negotiation in a counter-offer. It has become customary that one side will choose the escrow/settlement agent and one side chooses the title insurance company. Even so, everything in real estate is negotiable.

    Title Insurance Company
    Title insurance is important because, by providing you with an Owners Policy, they insure that you have clear title to the property. If there are any problems later, you can always go back to the title insurance company and have them clear it up. Since it is customary for the seller to pay for the owner’s policy, they have an interest in which company is used.

    However, you are going to pay a fee to the title insurance company, too. This is for the Lender’s Policy. The lender’s policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. In other words, should you sell the property or refinance it, their mortgage gets paid first, before any other claims against the property.

    The lender’s policy is less expensive than the owner’s policy.

    Termite and Pest Inspection
    As part of your offer, you may require a termite and pest inspection. This company not only inspects for termite damage and pest infestations, but also inspects for dry rot and water damage, among other things. The company that performs the inspection is important to you as a buyer, because you want to be sure they do a good job. It is important to the seller because it is customary that they pay for the inspection and some types of repairs that may be required.

    You should determine which company you want to perform this inspection and make it a part of your offer. Otherwise the seller will choose. If you do not know which company to hire, your agent will make a recommendation.
  2. Hiring a Home Inspector[+]

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    Years ago, home inspections were unheard of in residential real estate transactions. Instead, buyers simply relied on their own impressions of the home and the representations of the seller's real estate agent. Today, the process is dramatically different. Most real estate purchase contracts give the buyer fairly broad rights to order one or more professional inspections of the home before completing the purchase.

    The right to have inspections comes with the challenge of hiring diligent and competent inspectors. Finding the right person isn't as easy as it may seem because in most states, just about anyone with an official-looking checklist and a flashlight can set up shop as a home inspector. The exception to this free-for-all is that special training is required to perform inspection or remediation work for such potentially hazardous materials as asbestos and lead-based paint.

    A good
    real estate agent should be willing and able to recommend several well-qualified home inspectors. The tricky part is selecting the best candidates among the group. Here are six of the many factors to consider:

    1. Qualifications. Ask open-ended questions about the inspector's training and experience as it relates to home inspections. The inspector should have some training in construction and building maintenance standards and a track-record of experience in the home inspection business. Depending on the location and age of the home, you may need to hire an inspector who's qualified to deal with asbestos, lead-based paint or other potentially hazardous substances. You may also need to hire a geologist or structural engineer.

    2. Scope. Ask the inspector which components of the property are -- and are not -- included in his or her inspection. Will the inspector check out the roof? How about the swimming pool? The built-in appliances?

    3. Sample report. Ask the inspector to provide a sample of his or her checklist or inspection report. Does the report include a narrative description or just check-off boxes? Is the information presented and explained clearly and completely? Does the report highlight any problems that could present a safety hazard?

    4. References. Ask the inspector for the names and telephone numbers of several homeowners who have used his or her services. Call those people and ask them whether they were satisfied with the report and other services they received. Be sure to talk to some people who have owned their home for a few months or longer. Some problems overlooked by an inspection can take a while to surface.

    5. Memberships. Many good inspectors don't belong to a national or state association of home inspectors. However, all else being equal, an association membership is often a plus. These groups provide their members with training and certification programs and up-to-date information about industry practices and inspection standards.

    6. Errors and omissions. Even top-notch inspectors are only human and can make errors or overlook problems they probably should have noticed. Ask about the company's policy in such situations. Does the company have insurance for errors and omissions? Does the company or individual inspector stand behind the report? Many companies ask customers to sign a waiver limiting the company's liability to the cost of the inspection. Article provided by Realtor.com


Homeowner's Insurance

  1. Homeowner's Insurance for Condos[+]

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    Homeowners Insurance for Condos
    Buying homeowners insurance for a condominium is slightly different than buying a policy for a single-family home. This is because condos have building associations that insure the shared features of the complex. Before you purchase your insurance coverage, it is important to know what your responsibilities are.


    What the Association Covers
    While each condo association insurance policy will be slightly different, in general, you can expect it to cover any damages to the structure of your building, the common areas, and shared amenities like the water and gas pipes. The policy should also provide liability and medical fee coverage in case one of your guests is injured the condo common areas.

    What You Need to Insure
    You will be responsible for insuring everything inside the walls of your home. This includes any fixtures like cabinets and appliances. Additionally, a standard condo homeowners insurance policy will provide for protection of your personal property against damage or theft. If you have any special collections of jewelry or other extremely valuable possessions, you may need to take out a supplemental policy.

    As a condo owner, you will be responsible for getting Additional Living Expenses coverage. In the case of major damage to your home, your policy would then pay for the expenses associated with living elsewhere while your place is repaired. Primarily this means things like hotel and food charges.

    Your policy should also include liability insurance for any injuries incurred by others while inside your condo. This would pay for the legal fees for any resulting lawsuits as well as compensation for the injured guest. Most policies will also include a guest medical protection clause that will provide for medical treatment for any such injured visitors.

    Standard
    homeowners insurance policies will protect your condo against damages due to fire, smoke, lightning, wind and hailstorms, explosion, and falling objects, but they do not cover flood or earthquake destruction. If you like live in an area affected by these issues, you will need additional policies.

    Keeping Your Costs Down
    While you are still responsible for providing adequate insurance coverage, there are plenty of ways to minimize the cost of your premiums. One way to do this is by making your apartment safer with things like fire and smoke detectors, as well as home security systems. You can also choose a higher deductible in exchange for significant premium savings. Plus, anything you do to improve your credit score will help make your insurance costs that much more affordable.
  2. Homeowner's Insurance Basics[+]

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    Homeowner’s Insurance Basics
    Homeowners insurance exists because a home is a huge investment, often one of the largest purchases many people make in their lifetimes. Naturally, people want to protect the value of their property. Homeowners insurance is a contract between a homeowner and an insurance company. As long as the owner pays the required premiums and meets the other policy requirements, the insurance company guarantees to reimburse the owner for any losses incurred due to natural disasters or human-caused damage.

    What Does It Cover?
    A basic homeowner’s insurance policy protects the owner against any property damage that results from things like fire, lightning, wind or hail storms. It will also provide for motel and food costs if you are forced to leave your home while such damages are repaired.

    A typical policy, however, does not cover flood or earthquake damage. Because these issues are usually specific to certain regions of the country and can cause extreme damage, these can be purchased as separate policies. If you live in a flood zone you may be required by your
    mortgage company to carry these protections.

    A basic policy will also cover
    homeowners against loss from theft or vandalism as well as reimbursement for personal property destroyed in natural disasters. It will also provide for something that many people may not normally associate with home protection – liability coverage for lawsuits brought against the owner by people who were injured on the property. This includes the cost of legal defense up to the allowed policy limit. Additionally, most policies will have a provision that will cover the basic medical expenses for the parties.

    Is It Required?
    Homeowners insurance is almost universally required by mortgage companies with the purchase of a home. This is because the investment is almost as big for them as it is for you. They want to make sure the property is protected from major damages so that if you are ever unable to keep up with your payments, the lender can then reclaim ownership and be able to sell it fairly easily. And even if you own your home outright, a good insurance policy is still the best way to protect the value of your home in the face of the unexpected.
  3. How Much Does Homeowners Insurance Cost?[+]

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    How Much Does Homeowners Insurance Cost?
    Homebuyers are required in almost every instance to buy a homeowners insurance policy for their desired piece of real estate. This protects the owner and the mortgage lender against losses caused by damage to the property, either from natural disasters or from human-made destruction. One of the main concerns of many homebuyers, however, is how much the insurance will cost. While there is no standard answer, understanding the factors that determine the price can help give buyers a good estimate of their premiums.

    The Size and Type of Home
    The price of your premium is partially determined by things like the amount of the homes’ square footage, age and type of building materials used in the structure. It is also important to note whether your home has been recently updated or renovated as well as if there have been any additions made to it. All of these aspects will help the insurance company figure out how much it would cost to rebuild your house in case of a disaster. The more expensive the rebuilding costs the more expensive your insurance policy will be.

    Fire Protection Accessibility
    The closer your home is to a fire hydrant and a local fire station, the more likely your home is to be saved should a fire occur. This means less damage to repair and your insurance costs will be lower if you live close to these fire protecting features.

    Regional Disaster Characteristics
    If your home is in an area that is particularly prone to hurricanes or tornadoes, your homeowners insurance costs will be higher to account for this increased risk. Remember that earthquake and flood protection are not included in a standard policy. If you need to purchase either of these, you will obviously have to pay higher insurance premiums.

    Local Crime Statistics
    Since part of a homeowners insurance policy covers the cost of damage or loss of personal property due to theft or vandalism, the local crime rates will be factored into your premium price. A home located in a crime-ridden urban area will certainly mean higher costs than one situated in a quiet, suburban neighborhood.

    Policy Extras
    There are many nice insurance features that are not necessarily included in a standard policy. These include things like guaranteed replacement cost coverage, inflation guard clauses, and building-to-code endorsements. If you plan on adding any extras to your policy, you should expect to pay higher premiums.
  4. Homeowners Insurance and Your Credit Score[+]

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    Homeowners Insurance and Your Credit Score
    Homeowners insurance is a requirement for almost any home purchase these days. Mortgage lenders want to protect their investment as much as the homebuyer does. And just as lenders determine your loan interest rate and terms largely on your credit score, insurance companies also use your score to determine how much to charge you for premiums.

    What is a Credit Score?
    A credit score is a measurement of your ability to responsibly deal with borrowed money. The most commonly used type of score is the FICO or Fair Isaac and Company score. This is based on five factors: your history of timely or untimely payments, the total of your current credit balances, how long you have had credit accounts, if you have opened any new credit accounts recently, and what types of credit you use.

    How do Insurance Companies Use My Score?
    It’s all about risk management. Homeowner’s insurance companies are in the business of risk. They try to estimate how many claims their customers will file each year on average and then charge premiums that are sufficient to cover at least that amount of liability. Studies have shown however, that those with lower credit scores (typically those who are less financially responsible) are much more likely to file an insurance claim. These are riskier clients to insure. So insurance companies develop their own rating numbers for customers based on their credit scores and those with high scores are offered the best rates and terms while those with lower scores can expect to pay more.

    How do I Get the Best Rates and Terms on My Insurance?
    Start by asking the insurance company what kind of scoring system they use. Ask if you qualify for the best rates and terms and if not, find out what you can do to qualify. Typically, anything that improves your credit score will also improve your insurance costs. This includes things like making all your payments on time and lowering or maintaining low balances on your credit cards.

    And even as you work to better your score, try asking several different insurers for rate quotes. Each company will use slightly different factors to determine your price, so shopping around can insure that you find the best available price no matter what your credit score.