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Buyer’s Resources for Miami Properties

Field Guide to Buy­ing vs. Renting

Miami Beach Realtor
  • (Updated July 2012)
  • Is it bet­ter to buy or rent? Whether rent­ing is bet­ter than buy­ing depends on many fac­tors. The infor­ma­tion listed here will assist you in help­ing answer this ques­tion. Included are sta­tis­tics and stud­ies on home own­ers and renters as well as financ­ing options and tips.

Buy vs. Rent Comparison

  • The chart below shows a cost com­par­i­son for a renter and a home­owner over a seven year period.
  • The renter starts out pay­ing $800 per month with annual increases of 5% The home­owner pur­chases a home for $110,000 and pays a monthly mort­gage of $1,000
  • After 6 years, the homeowner’s pay­ment is lower than the renter’s monthly payment
  • With the tax sav­ings of home­own­er­ship, the homeowner’s pay­ment is less than the rental pay­ment after 3 years
  • Source: Gin­nie Mae, (ginniemae.gov).

 

10 Ways to Pre­pare for Homeownership

  • Decide what you can afford. Gen­er­ally, you can afford a home equal in value to between two and three times your gross income.
  • Develop your home wish list. Then, pri­or­i­tize the fea­tures on your list.
  • Select where you want to live. Com­pile a list of three or four neigh­bor­hoods you’d like to live in, tak­ing into account items such as schools, recre­ational facil­i­ties, area expan­sion plans, and safety.
  • Start sav­ing. Do you have enough money saved to qual­ify for a mort­gage and cover your down pay­ment? Ide­ally, you should have 20 per­cent of the pur­chase price saved as a down pay­ment. Also, don’t for­get to fac­tor in clos­ing costs. Clos­ing costs — includ­ing taxes, attorney’s fee, and trans­fer fees — aver­age between 2 and 7 per­cent of the home price.
  • Get your credit in order. Obtain a copy of your credit report to make sure it is accu­rate and to cor­rect any errors imme­di­ately. A credit report pro­vides a his­tory of your credit, bad debts, and any late payments.
  • Deter­mine your mort­gage qual­i­fi­ca­tions. How large of mort­gage do you qual­ify for? Also, explore dif­fer­ent loan options — such as 30-year or 15-year fixed mort­gages or ARMs — and decide what’s best for you.
  • Get preap­proved. Orga­nize all the doc­u­men­ta­tion a lender will need to preap­prove you for a loan. You might need W-2 forms, copies of at least one pay stub, account num­bers, and copies of two to four months of bank or credit union statements.
  • Weigh other sources of help with a down pay­ment. Do you qual­ify for any spe­cial mort­gage or down pay­ment assis­tance pro­grams? Check with your state and local gov­ern­ment on down pay­ment assis­tance pro­grams for first-time buyer’s. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home with­out pay­ing a penalty for early withdrawal.
  • Cal­cu­late the costs of home­own­er­ship. This should include prop­erty taxes, insur­ance, main­te­nance and util­i­ties, and asso­ci­a­tion fees, if applicable.
  • Con­tact a REALTOR®. Find an expe­ri­enced REALTOR® who can help guide you through the process.

 

® 1995–20132012 NATIONAL ASSOCIATION OF REALTORS® All rights reserved.

 

Why You Should Work With a REALTOR®

Coconut Grove Real Estate Agent
Not all real estate prac­ti­tion­ers are REALTORS®. The term REALTOR® is a reg­is­tered trade­mark that iden­ti­fies a real estate pro­fes­sional who is a mem­ber of the NATIONAL ASSOCIATION of REALTORS® and sub­scribes to its strict Code of Ethics. Here are five rea­sons why it pays to work with a REALTOR®.

 

  • You’ll have an expert to guide you through the process. Buy­ing or sell­ing a home usu­ally requires dis­clo­sure forms, inspec­tion reports, mort­gage doc­u­ments, insur­ance poli­cies, deeds, and multi-page set­tle­ment state­ments. A knowl­edge­able expert will help you pre­pare the best deal, and avoid delays or costly mistakes.
  • Get objec­tive infor­ma­tion and opin­ions. REALTORS® can pro­vide local com­mu­nity infor­ma­tion on util­i­ties, zon­ing, schools, and more. They’ll also be able to pro­vide objec­tive infor­ma­tion about each prop­erty. A pro­fes­sional will be able to help you answer these two impor­tant ques­tions: 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?
  • Find the best prop­erty out there. Some­times the prop­erty you are seek­ing is avail­able but not actively adver­tised in the mar­ket, and it will take some inves­ti­ga­tion by your REALTOR® to find all avail­able properties.
  • Ben­e­fit from their nego­ti­at­ing expe­ri­ence. There are many nego­ti­at­ing fac­tors, includ­ing but not lim­ited to price, financ­ing, terms, date of pos­ses­sion, and inclu­sion or exclu­sion of repairs, fur­nish­ings, or equip­ment. In addi­tion, 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.
  • Prop­erty mar­ket­ing power. Real estate doesn’t sell due to adver­tis­ing alone. In fact, a large share of real estate sales comes as the result of a practitioner’s con­tacts through pre­vi­ous clients, refer­rals, friends, and fam­ily. When a prop­erty is mar­keted with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will gen­er­ally pre­screen and accom­pany qual­i­fied prospects through your property.
  • Real estate has its own lan­guage. If you don’t know a CMA from a PUD, you can under­stand why it’s impor­tant to work with a pro­fes­sional who is immersed in the indus­try and knows the real estate language.
  • REALTORS® have done it before. Most peo­ple buy and sell only a few homes in a life­time, usu­ally with quite a few years in between each pur­chase. And even if you’ve done it before, laws and reg­u­la­tions change. REALTORS®, on the other hand, han­dle hun­dreds of real estate trans­ac­tions over the course of their career. Hav­ing an expert on your side is critical.
  • Buy­ing and sell­ing is emo­tional. A home often sym­bol­izes fam­ily, rest, and secu­rity — it’s not just four walls and a roof. Because of this, home buy­ing and sell­ing can be an emo­tional under­tak­ing. And for most peo­ple, a home is the biggest pur­chase they’ll ever make. Hav­ing a con­cerned, but objec­tive, third party helps you stay focused on both the emo­tional and finan­cial issues most impor­tant to you.
  • Eth­i­cal treat­ment. Every mem­ber of the NATIONAL ASSOCIATION of REALTORS® makes a com­mit­ment to adhere to a strict Code of Ethics, which is based on pro­fes­sion­al­ism and pro­tec­tion of the pub­lic. As a cus­tomer of a REALTOR®, you can expect hon­est and eth­i­cal treat­ment in all transaction-related mat­ters. It is manda­tory for REALTORS® to take the Code of Ethics ori­en­ta­tion and they are also required to com­plete a refresher course every four years.

® 1995–20132012 NATIONAL ASSOCIATION OF REALTORS® All rights reserved.

 

Cal­cu­late Your Income Vs. Debt

Miami Realty

Most lenders don’t want you to take out a loan that will over­load your abil­ity to repay every­body you owe.
By John Adams

As you think about apply­ing for a home loan, you need to con­sider your per­sonal finances. How much you earn ver­sus how much you owe will likely deter­mine how much a lender will allow you to bor­row.
First, deter­mine your gross monthly income. This will include any reg­u­lar and recur­ring income that you can doc­u­ment. Unfor­tu­nately, if you can’t doc­u­ment the income or it doesn’t show up on your tax return, then you can’t use it to qual­ify for a loan. How­ever, you can use unearned sources of income such as alimony or lot­tery pay­offs. And if you own income-producing assets such as real estate or stocks, the income from those can be esti­mated and used in this cal­cu­la­tion. If you have ques­tions about your spe­cific sit­u­a­tion, any good loan offi­cer can review the rules.

 

Next, cal­cu­late your monthly debt load. This includes all monthly debt oblig­a­tions like credit cards, install­ment loans, car loans, per­sonal debts or any other ongo­ing monthly oblig­a­tion like alimony or child sup­port. If it is revolv­ing debt like a credit card, use the min­i­mum monthly pay­ment for this cal­cu­la­tion. If it is install­ment debt, use the cur­rent monthly pay­ment to cal­cu­late your debt load. And you don’t have to con­sider a debt at all if it is sched­uled to be paid off in less than six months. Add all this up and it is a fig­ure we’ll call your monthly debt service.

In a nut­shell, most lenders don’t want you to take out a loan that will over­load your abil­ity to repay every­body you owe. Although every lender has slightly dif­fer­ent for­mu­las, here is a rough idea of how they look at the num­bers.
Typ­i­cally, your monthly hous­ing expense, includ­ing monthly pay­ments for taxes and insur­ance, should not exceed about 28% of your gross monthly income. If you don’t know what your tax and insur­ance expense will be, you can esti­mate that about 15% of your pay­ment will go toward this expense. The remain­der can be used for prin­ci­pal and inter­est repay­ment.
In addi­tion, your pro­posed monthly hous­ing expense and your total monthly debt ser­vice com­bined can­not exceed about 36% of your gross monthly income. If it does, your appli­ca­tion may exceed the lender’s under­writ­ing guide­lines and your loan may not be approved.

Depend­ing on your indi­vid­ual sit­u­a­tion, there may be more or less flex­i­bil­ity in the 28% and 36% guide­lines. For exam­ple, if you are able to buy the home while bor­row­ing less than 80% of the home’s value by mak­ing a large cash down pay­ment, the qual­i­fy­ing ratios become less crit­i­cal. Like­wise, if Bill Gates or a rich uncle is will­ing to cosign on the loan with you, lenders will be much less focused on the guide­lines dis­cussed here.

Remem­ber that there are hun­dreds of loan pro­grams avail­able in today’s lend­ing mar­ket and every one of them has dif­fer­ent guide­lines. So don’t be dis­cour­aged if your dream home seems out of reach.
In addi­tion, there are a num­ber of fac­tors within your con­trol which affect your monthly pay­ment. For exam­ple, you might choose to apply for an adjustable rate loan which has a lower ini­tial pay­ment than a fixed rate pro­gram. Like­wise, a larger down pay­ment has the effect of low­er­ing your pro­jected monthly payment.

Just plan on con­tact­ing and inves­ti­gat­ing a num­ber of lenders to find a loan pro­gram that meets your needs.

® 1995–20132012 NATIONAL ASSOCIATION OF REALTORS® All rights reserved.

5 Fac­tors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 con­sid­ered desir­able for obtain­ing a mort­gage. The fol­low­ing fac­tors affect your score:

 

  1. Your pay­ment his­tory. Did you pay your credit card oblig­a­tions on time? If they were late, then how late? Bank­ruptcy fil­ing, liens, and col­lec­tion activ­ity also impact your history.
  2. How much you owe. If you owe a great deal of money on numer­ous accounts, it can indi­cate that you are overex­tended. How­ever, it’s a good thing if you have a good pro­por­tion of bal­ances to total credit limits.
  3. The length of your credit his­tory. In gen­eral, the longer you have had accounts opened, the bet­ter. The aver­age consumer’s old­est oblig­a­tion is 14 years old, indi­cat­ing that he or she has been man­ag­ing credit for some time, accord­ing to Fair Isaac Corp., and only one in 20 con­sumers have credit his­to­ries shorter than 2 years.
  4. How much new credit you have. New credit, either install­ment pay­ments or new credit cards, are con­sid­ered more risky, even if you pay them promptly.
  5. The types of credit you use. Gen­er­ally, it’s desir­able to have more than one type of credit — install­ment loans, credit cards, and a mort­gage, for example.

For more on eval­u­at­ing and under­stand­ing your credit score, visit www.myfico.com.
Daily Real Estate News  |  July 20, 2007  |  

 

6 Ways to Quickly Boost Credit Scores

As lenders tighten their under­writ­ing guide­lines, bor­row­ers are wise to raise their credit scores to qual­ify for loans, secure bet­ter loan terms, and receive lower inter­est rates.

Indi­vid­u­als can pos­i­tively affect their credit scores in as lit­tle as three weeks,” says Edward Jami­son, a Los Angeles-based credit attor­ney. “It’s just a mat­ter of get­ting edu­cated and focused on the best, fastest, and most reli­able course of action.”

Jami­son, who you may know as a credit expert on the NBC show, “Starting Over,© offers these six tips for improv­ing credit strength quickly.

1. Know your lim­its. Bor­row­ers should first check their credit lim­its and evenly dis­trib­ute the bal­ances they’re car­ry­ing to help increase their credit scores, or bet­ter yet, pay them off in full to get the high­est score increase. “Make sure your max­i­mum limit is reported,” Jami­son says. “When no limit is reported, credit scor­ing soft­ware pre­sumes the account is maxed out.”

2. Bring the bal­ances near zero. The credit scor­ing soft­ware scores more favor­ably to those with a closer bal­ance to zero. Bal­ances over 70 per­cent dam­age credit the most, fol­lowed by the next tier of 50 per­cent and then 30 per­cent of the max­i­mum credit limit. “Rather than car­ry­ing a large bal­ance in an unfa­vor­able tier, redis­trib­ute out­stand­ing bal­ances over sev­eral credit cards,” advises Jamison.

3. Don’t can­cel your cards. “Clos­ing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards,” Jami­son says. Fair Isaac’s credit scor­ing soft­ware assumes that peo­ple who have had credit for a longer time are at less risk of default­ing on payments.

4. Elim­i­nate late pay­ments (but ask nice). Get rid of late pay­ments listed on the credit report. “Con­tact the cred­i­tors that report late pay­ments and request a good faith adjust­ment that removes the late pay­ments reported on your account,” Jami­son says. The cred­i­tor may work with you, but it may require more than one phone call; patience is required. Your odds of suc­cess will dwin­dle if you’re rude or unclear about your request, he adds.

5. Get rid of col­lec­tion accounts. But only if the col­lec­tion agency agrees to delete them in return. Pay­ing them off can oth­er­wise actu­ally lead to a decreased credit score due to the date of last activ­ity get­ting updated to the cur­rent date when you pay. The con­sumer should con­tact the col­lec­tor and request a let­ter explic­itly stat­ing the agree­ment to delete the account upon receipt or clear­ance of the pay­ment, Jami­son says. Not all col­lec­tion agen­cies will delete report­ing, but it’s cer­tainly worth the effort.

6. Pay off past due amounts on accounts that are not in charge-off sta­tus. After that, Jami­son advises get­ting rid of charge-offs and liens that are less than two years old. “Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months,” says Jami­son. “But if they’re newer than 24 months, they can seri­ously dam­age your credit.” If you have both charge-offs and col­lec­tion accounts, but have lim­ited funds, pay off the past due bal­ances first, then pay col­lec­tion accounts as long as the col­lec­tors agree to remove all ref­er­ences to credit bureaus.

REALTOR® Mag­a­zine Online

 

How Much Do I Have to Save to Buy A Home?

Palmetto Bay Realtor

The first thing to under­stand about buy­ing a house is that you don’t have to have all the cash saved up in order to make your purchase.

By John Adams

The good news is that there are lots of folks out there who are very inter­ested in lend­ing you as much as 95% of the pur­chase price of your home, at very favor­able inter­est rates. Fur­ther­more, they are will­ing to spread out the pay­ments over a long period of time so that you can afford the house you want.

Just to cover the basics, let’s elab­o­rate on the points in the last para­graph:
If you have a steady job and a rea­son­able credit his­tory, there is a good chance that you can find a home lender who will lend you most of the pur­chase price of your new house. Home loans are also called “mort­gages,” which comes from a Latin phrase mean­ing “pledge unto death.” While lenders don’t take your promise to pay quite that seri­ously, they DO expect to get repaid on time. Just to make sure you remem­ber, lenders take an own­er­ship inter­est in your house until the loan is paid in full.

Home loans typ­i­cally are offered in amounts of 80%, 90% and 95% of the price you are pay­ing for the house. You are expected to pay the remain­ing amount in cash from your own sav­ings. As you might imag­ine, the lower per­cent­age loans are some­what eas­ier to qual­ify for.

The rea­son the lender is will­ing to lend you up to 95% of the value of your house is that his­tory has shown real estate to be such an excel­lent invest­ment. Lenders expect that your home will be worth more in the future than it is today — so their invest­ment in your home is con­sid­ered very safe.

That’s also why the inter­est rate you can obtain on a home loan is one of the best around. Con­sider that America’s largest and strongest cor­po­ra­tions bor­row at what is called the “prime rate,” and that today you can bor­row a home loan — fixed at the same rate for many years — at sub­stan­tially less than the prime rate. Lenders have found that home loans tend to be excel­lent invest­ments, and you ben­e­fit every month when you make your loan payment.

Finally, home loans are avail­able to be repaid over terms of usu­ally 15 or 30 years. The shorter term loan offers a slightly low­ered inter­est rate, so if you can afford the higher monthly pay­ments, you’ll save in inter­est costs by choos­ing the 15 year loan. At today’s inter­est rates, a 15 year loan costs about 27% more than a 30 year loan in terms of your monthly pay­ment. But the amaz­ing thing is that lenders are even will­ing to offer a fixed rate loan for that time period. It’s bet­ter financ­ing than you can get on just about any other investment.

 

The Basics of Mak­ing an Offer

Pinecrest Realty

A writ­ten pro­posal is the foun­da­tion of a real estate transaction.

 

Oral promises are not legally enforce­able when it comes to the sale of real estate. There­fore, you need to enter into a writ­ten con­tract, which starts with your writ­ten pro­posal. This pro­posal not only spec­i­fies price, but all the terms and con­di­tions of the pur­chase. For exam­ple, if the sell­ers said they’d help with $2,000 toward your clos­ing costs, be sure that’s included in your writ­ten offer and in the final com­pleted con­tract, or you won’t have grounds for col­lect­ing it later.

REALTORS® usu­ally have a vari­ety of stan­dard forms (includ­ing Res­i­den­tial Pur­chase Agree­ments) that are kept up to date with the chang­ing laws. When you use a REALTOR® these forms will be avail­able to you. In addi­tion, REALTORS® cover the ques­tions that need to be answered dur­ing the process. In many states cer­tain dis­clo­sure laws must be com­plied with by the seller, and the REALTOR® will ensure that this takes place.

If you are not work­ing with a REALTOR®, keep in mind that you must draw up a pur­chase offer or con­tract that con­forms to state and local laws and that incor­po­rates all of the key items. State laws vary, and cer­tain pro­vi­sions may be required in your area.

After the offer is drawn up and signed, it will usu­ally be pre­sented to the seller by your REALTOR®, by the seller’s REALTOR® if that’s a dif­fer­ent agent, or often by the two together. In a few areas, sales con­tracts are typ­i­cally drawn up by the par­ties’ lawyers.

What the offer contains

The pur­chase offer you sub­mit, if accepted as it stands, will become a bind­ing sales con­tract (known in some areas as a pur­chase agree­ment, earnest money agree­ment or deposit receipt). It’s impor­tant, there­fore, that it con­tains all the items that will serve as a “blue­print for the final sale.” These pur­chase offer items include such things as:

  • Address and some­times a legal descrip­tion of the property
  • Sale price
  • Terms — for exam­ple, all cash or sub­ject to your obtain­ing a mort­gage for a given amount
  • Seller’s promise to pro­vide clear title (ownership)
  • Tar­get date for clos­ing (the actual sale)
  • Amount of earnest money deposit accom­pa­ny­ing the offer, and whether it’s a check, cash or promis­sory note, and how it’s to be returned to you if the offer is rejected — or kept as dam­ages if you later back out for no good reason
  • Method by which real estate taxes, rents, fuel, water bills and util­i­ties are to be adjusted (pro­rated) between buyer and seller
  • Pro­vi­sions about who will pay for title insur­ance, sur­vey, ter­mite inspec­tions and the like
  • Type of deed to be given
  • Other require­ments spe­cific to your state, which might include a chance for attor­ney review of the con­tract, dis­clo­sure of spe­cific envi­ron­men­tal haz­ards or other state-specific clauses
  • A pro­vi­sion that the buyer may make a last-minute walk-through inspec­tion of the prop­erty just before the closing
  • A time limit (prefer­ably short) after which the offer will expire
  • Con­tin­gen­cies, which are an extremely impor­tant mat­ter and dis­cussed in detail below

 

 

Con­tin­gen­cies

Miami Dade Real Estate

If your offer says “this offer is con­tin­gent upon (or sub­ject to) a cer­tain event,” you’re say­ing that you will only go through with the pur­chase if that event occurs. The fol­low­ing are two com­mon con­tin­gen­cies con­tained in a pur­chase order:

 

  • The buyer obtain­ing spe­cific financ­ing from a lend­ing insti­tu­tion. If the loan can’t be found, the buyer won’t be bound by the contract.
  • A sat­is­fac­tory report by a home inspec­tor “within 10 days (for exam­ple) after accep­tance of the offer.” The seller must wait 10 days to see if the inspec­tor sub­mits a report that sat­is­fies you. If not, the con­tract would become void. Again, make sure that all the details are nailed down in the writ­ten contract.

Nego­ti­at­ing tips
You’re in a strong bar­gain­ing posi­tion — mean­ing, you look par­tic­u­larly wel­come to a seller — if:

  • You’re an all-cash buyer; or
  • You’re already pre-approved for a mort­gage; and
  • You don’t have a present house that has to be sold before you can afford to buy.

In those cir­cum­stances, you may be able to nego­ti­ate some dis­count from the listed price. On the other hand, in a “hot” seller’s mar­ket, if the per­fect house comes on the mar­ket, you may want to offer the list price (or more) to beat out other early offers.

It’s very help­ful to find out why the house is being sold and whether the seller is under pres­sure. Keep these con­sid­er­a­tions in mind:

  • Every month a vacant house remains unsold rep­re­sents con­sid­er­able extra expense for the seller;
  • If the sell­ers are divorc­ing, they may just want out quickly; and
  • Estate sales often yield a bar­gain in return for a prompt deal.

Earnest money
This is a deposit that you give when mak­ing an offer on a house. A seller is under­stand­ably sus­pi­cious of a writ­ten offer that is not accom­pa­nied by a cash deposit to show “good faith.” A REALTOR® or an attor­ney usu­ally holds the deposit, the amount of which varies from com­mu­nity to com­mu­nity. This will become part of your down pay­ment.

Buyer’s: the seller’s response to your offer

You will have a bind­ing con­tract if the seller, upon receiv­ing your writ­ten offer, signs an accep­tance just as it stands, uncon­di­tion­ally. The offer becomes a firm con­tract as soon as you are noti­fied of accep­tance. If the offer is rejected, that’s that, and the sell­ers could not later change their minds and hold you to it.

If the seller likes every­thing except the sale price, or the pro­posed clos­ing date, or the base­ment pool table you want left with the prop­erty, you may receive a writ­ten coun­terof­fer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own coun­terof­fer. For exam­ple, “We accept the coun­terof­fer with the higher price, except that we still insist on hav­ing the pool table.”

Each time either party makes any change in the terms, the other side is free to accept or reject it, or counter again. The doc­u­ment becomes a bind­ing con­tract only when one party finally signs an uncon­di­tional accep­tance of the other side’s pro­posal.

With­draw­ing an offer

Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven’t yet been noti­fied of accep­tance. If you do want to revoke your offer, be sure to do so only after con­sult­ing a lawyer who is expe­ri­enced in real estate mat­ters. You don’t want to lose your earnest money deposit, or find your­self being sued for dam­ages the seller may have suf­fered by rely­ing on your actions.

For sell­ers: cal­cu­lat­ing your net pro­ceeds
When an offer comes in, you can accept it exactly as it stands, refuse it (sel­dom a use­ful response), or make a coun­terof­fer to the buyer’s with the changes you want. In eval­u­at­ing a pur­chase offer, you should esti­mate the amount of cash you’ll walk away with when the trans­ac­tion is com­plete. For exam­ple, when you’re pre­sented with two offers at once, you may dis­cover you’re bet­ter off accept­ing the one with the lower sale price if the other asks you to pay points to the buyer’s lend­ing insti­tu­tion. Once you have a spe­cific pro­posal before you, cal­cu­lat­ing net pro­ceeds becomes sim­ple. From the pro­posed pur­chase price you can subtract:

  • Pay­off amount on present mortgage;
  • Any other liens (equity loan, judgments);
  • Broker’s com­mis­sion;
  • Legal costs of sell­ing (attor­ney, escrow agent);
  • Trans­fer taxes;
  • Unpaid prop­erty taxes and water bills;
  • If required by the con­tract: cost of sur­vey, ter­mite inspec­tion, buyer’s clos­ing costs, repairs, etc.

Your present mort­gage lender may main­tain an escrow account into which you deposit money to be used for prop­erty tax bills and homeowner’s insur­ance pre­mi­ums. In that case, remem­ber that you will receive a refund of money left in that account, which will add to your pro­ceeds.

For sell­ers: coun­terof­fers

When you receive a pur­chase offer from a would-be buyer, remem­ber that unless you accept it exactly as it stands, uncon­di­tion­ally, the buyer will be free to walk away. Any change you make in a coun­terof­fer puts you at risk of los­ing that chance to sell. Who pays for what items is often deter­mined by local cus­tom. You can, how­ever, arrive at any agree­ment you and the buy­ers want about who pays for:

  • Ter­mite inspection;
  • Sur­vey;
  • Buyer’s clos­ing costs;
  • Points to the buyer’s lender;
  • Buyer’s bro­ker;
  • Repairs required by the lender; and
  • Home Pro­tec­tion Policy.

You may feel some of these costs are none of your busi­ness, but many buy­ers — par­tic­u­larly first-timers — are short of cash. Help­ing them may be the best way to get your home sold.

® 1995–20132012 NATIONAL ASSOCIATION OF REALTORS® All rights reserved.

 

A gift for buy­ers: Real-estate pros stuff your stock­ing with advice

Decem­ber Buy­ing Advice: Here are the best tips for mak­ing a smart home pur­chase, from agents, investors and other experts.


By Melinda Ful­mer of MSN Real Estate

® Moodboard/Corbis

Sound advice is always a smart gift. In this hol­i­day edi­tion of Buy­ing Advice, we’ve asked real-estate agents, investors and other hous­ing pros around the coun­try to give us their best tips for mak­ing a smart home pur­chase, and we’ve included a cou­ple of our own favorites. We’ll also review the lat­est hous­ing sta­tis­tics and what they mean for the fledg­ling real-estate recov­ery and look at 10 sur­pris­ing fac­tors that could cause your mort­gage appli­ca­tion to be rejected.

 

The top 10 buy­ing tips

Miami Realty

1. Cre­ate â and keep — a good credit score. All lenders use a credit score to help them under­stand what kind of risk you would be as a bor­rower. Pull a copy of your credit his­tory and FICO score. The bet­ter the score, the bet­ter the inter­est rate you will be offered. To get the best mort­gage deals, you need a score above 760, says Ilyce R. Glink, pub­lisher of ThinkGlink.com and author of “Buy, Close, Move In!” Once you have it there, don’t jeop­ar­dize it with bad finan­cial deci­sions. (For more on this, keep read­ing.)

2. Find a good agent.
Don’t just use a friend or fam­ily mem­ber, or some­one you run into reg­u­larly at your kid’s school. Do some research, says Melissa Ander­son, an agent with Cold­well Banker Home­stead Group in Har­ris­burg, Pa.
“The best advice is to look for a highly respected buy­ers agent,” she says. Ask your fam­ily and friends for rec­om­men­da­tions and then meet with sev­eral agents. “Find some­one that you feel com­fort­able with, feel you can trust and that has expe­ri­ence in the areas you are search­ing for your home.“
Ali­cia Trevino, pres­i­dent and CEO of Cen­tury 21 Fine Homes & Estates in Dal­las, also advises work­ing with an agent who has a lot of expe­ri­ence with dis­tressed prop­er­ties, includ­ing short sales, as they make up a good por­tion of avail­able homes.

Just be sure the agent sells real estate full time, so he can respond quickly. Ask the agent for the names of buy­ers he has helped in the past six months, Ander­son says. If the agent can’t come up with sev­eral, you should keep look­ing.

3.  Set a bud­get and get preap­proved by a lender.
“It is impor­tant to know what you can afford and what a com­fort­able monthly pay­ment would be,” says Dal­las Croft of ERA Oakcrest Realty in Win­ches­ter, Va. Some home­buy­ers learn the hard way that they can qual­ify for more than they can com­fort­ably afford to pay, says Amber Arwine, an online mort­gage bro­ker with Guar­an­teed Rate in Chicago. “Get­ting a preap­proval before start­ing shop­ping for a home is also a must,” she adds. That way, when you see a house you like, you’re ready. And we do mean preap­proved, which means sub­mit­ting pay stubs and tax returns, not pre­qual­i­fied, which is more of a cur­sory esti­mate.

4. Check out the neigh­bor­hood just as care­fully as you check out the house.
“Once you find a house that you really like, drive by that house at sev­eral times dur­ing the day and dur­ing dif­fer­ent days of the week to really gauge the type of neigh­bor­hood you are buy­ing into,” says Jen­nifer Darby Met­zger, of ERA Justin Realty in Ruther­ford, N.J.

5. Be ready to pull the trig­ger when you see the per­fect home.
The sup­ply of for-sale hous­ing is lim­ited in many parts of the coun­try, and that means good houses go quickly.
Buy­ers need to be ready to sign when they see a keeper, which means hav­ing their financ­ing in order, says Tony Geraci of Cen­tury 21 Home­S­tar in High­land Heights, Ohio. Like­wise, don’t “overne­go­ti­ate.“
“Some­times we’re so busy wor­ry­ing about get­ting a ‘good deal’ or nego­ti­at­ing small deal points that we miss the oppor­tu­nity to buy the house we want,” says Bill Lublin of Cen­tury 21 Advan­tage Gold in Philadel­phia.

6. Don’t be penny-wise and pound-foolish.
Spend the money on any and all inspec­tions that are sug­gested in the pri­mary home inspec­tion — and for heaven’s sake, don’t for­get to get an inspec­tion before you buy. Some buy­ers skip this step, because the house looks OK and because they fig­ure they are get­ting a home war­ranty, so why worry? But often this doesn’t cover all of the property’s prob­lems. “The amount you could end up spend­ing in the long run because of a defect you didn’t know about is far greater than the expense of hav­ing a pro­fes­sional come out and take a look before you buy,” says Ray­lene Lewis of Cen­tury 21 Beal in Col­lege Sta­tion, Texas.

7.  Buy the cake, not the icing.
You can change the paint, paper, car­pet and fix­tures fairly eas­ily, but you can’t read­ily change the home’s lay­out, size of the rooms or loca­tion. Look past the cos­met­ics to the bones of the house. And think about resale. While a one-bedroom home may fit you just fine, how easy will it be to sell five years from now? Like­wise, will that extremely busy street be a turn-off for oth­ers?

8.  Get on the same page with your spouse.
So many times, cou­ples have a hard time agree­ing on a house because they’re not exactly sure what they want, says Jes­sica Rif­fle Edwards of Cold­well Banker Sea Coast Advan­tage in Wilm­ing­ton, N.C. “Know your must-haves and would-like-to-haves early in the process,” she says. Both spouses should sit down and make their own lists and then get together and see what they agree on and where they dif­fer and talk this through. This will save a lot of time and argu­ments down the road.

9. Know the land­scape.
Once a home that looks inter­est­ing comes up on the mul­ti­ple list­ing ser­vice, you and your agent need to do some research. How many homes are on the mar­ket in the blocks around it? How long have they been on the mar­ket? What con­di­tion are they in? What’s in escrow? What have houses nearby sold for in the past 90 days? These ques­tions will help buy­ers rec­og­nize a good deal when they see it, says Doug Clark of SpikeTV’s real­ity show “Flip Men.©

10. Don’t get emo­tional.
Don’t stretch your bud­get just because you love a home. Think like an investor and tell your­self, “There will be oth­ers out there for me.” It’s kind of like dat­ing, Clark says: You need to know what else is avail­able, rather than falling in love with the first one.

Why You Need a Lawyer When You Buy or Sell a House

Pinecrest Homes for Sale

Buy­ing a home will prob­a­bly be the largest and most sig­nif­i­cant pur­chase you will make in your life. It also involves the law of real prop­erty, which is unique and raises spe­cial issues of prac­tice, and prob­lems not present in other trans­ac­tions. A real estate lawyer is trained to deal with these prob­lems and has the most expe­ri­ence to deal with them. Some states cer­tify lawyers as “Real Prop­erty Spe­cial­ists” as a result.

In the typ­i­cal home pur­chase, the seller enters into a bro­ker­age con­tract with a real estate agent, usu­ally in writ­ing. When the bro­ker finds a poten­tial buyer, nego­ti­a­tions are con­ducted through the bro­ker, who most often acts as an inter­me­di­ary. Once an infor­mal agree­ment is reached, buyer and seller enter into a for­mal writ­ten con­tract for the sale, the pur­chase agree­ment. The buyer then obtains a com­mit­ment for financ­ing. Title is searched to sat­isfy the lender and the buyer. Finally, the prop­erty is trans­ferred from the seller to the buyer, and the seller receives the pur­chase price bar­gained for in the con­tract. This seems sim­ple, but with­out a lawyer, the con­se­quences may be more dis­as­trous than pur­chas­ing a car that turns out to be a lemon, or a stock invest­ment that was unwise.

A lawyer can help you avoid some com­mon prob­lems with a home pur­chase or sale. For exam­ple, a seller may sign a bro­ker­age agree­ment that does not deal with a num­ber of legal prob­lems. This hap­pens quite often; real­tors often use stan­dard forms, expect­ing that they will cover all cir­cum­stances or will be eas­ily cus­tomiz­able for unusual circumstances.

In the absence of an agree­ment to the con­trary, the seller may become liable to pay a bro­ker­age com­mis­sion even if a sale does not occur, or to pay more than one bro­ker­age com­mis­sion. If the agree­ment allows the seller the right to nego­ti­ate on his or her own behalf, for exam­ple, you may avoid this prob­lem. A lawyer can explain the effect of mul­ti­ple list­ings. He or she can nego­ti­ate the realtor’s rights if the seller with­draws the prop­erty from the mar­ket, or can’t deliver good mar­ketable title.

The seller should have the advice and guid­ance of an attor­ney with respect to a bro­ker­age agree­ment. Even if the agree­ment is a stan­dard form, its terms should be explained to the seller and revised, if nec­es­sary. An attor­ney should also deter­mine if the agree­ment was prop­erly signed.

Even if a lawyer is not needed dur­ing the course of nego­ti­a­tions, the buyer and seller each may have to con­sult with a lawyer to answer impor­tant ques­tions, such as the tax con­se­quences of the trans­ac­tion. To a seller, the tax con­se­quences may be of crit­i­cal impor­tance. For exam­ple, the income tax con­se­quences of a sale, par­tic­u­larly if the seller makes a large profit, may be con­sid­er­able. An attor­ney can advise whether the seller can take advan­tage of tax pro­vi­sions allow­ing for exclu­sion of cap­i­tal gains in cer­tain circumstances.

The pur­chase agree­ment is the sin­gle most impor­tant doc­u­ment in the trans­ac­tion. Although stan­dard printed forms are use­ful, a lawyer is help­ful in explain­ing the form and mak­ing changes and addi­tions to reflect the buyer’s and the seller’s desires. There are many issues that may need to be addressed in the pur­chase agree­ment; below are some com­mon examples:

 

 

  • If the prop­erty has been altered or there has been an addi­tion to the prop­erty, was it done lawfully?
  • If the buyer has plans to change the prop­erty, may what is planned for the prop­erty be done lawfully?
  • What hap­pens if a buyer has an engi­neer or archi­tect inspect the prop­erty and ter­mites, asbestos, radon, or lead-based paint is found?
  • What if the prop­erty is found to con­tain haz­ardous waste?
  • What are the legal con­se­quences if the clos­ing does not take place, and what hap­pens to the down pay­ment? This ques­tion raises related ques­tions: Will the down pay­ment be held in escrow by a lawyer in accor­dance with appro­pri­ately worded escrow instruc­tions? How is pay­ment to be made? Is the clos­ing appro­pri­ately con­di­tioned upon the buyer obtain­ing financing?

Most buy­ers finance a sub­stan­tial por­tion of the pur­chase price for a home with a mort­gage loan from a lend­ing insti­tu­tion. The pur­chase agree­ment should con­tain a care­fully worded pro­vi­sion that it is sub­ject to the buyer’s obtain­ing a com­mit­ment for financing.

Again, it is impor­tant to remem­ber that printed con­tract forms are gen­er­ally inad­e­quate to incor­po­rate the real under­stand­ing of the buyer and seller with­out sig­nif­i­cant changes. In addi­tion, there are many kinds of mort­gages that may be avail­able. Mort­gage loan com­mit­ments and mort­gage loan doc­u­ments are com­plex. Lawyers can review and explain the impor­tance of these var­i­ous documents.

After the pur­chase agree­ment is signed, it is nec­es­sary to estab­lish the state of the seller’s title to the prop­erty to the buyer’s — and the finance institution’s — sat­is­fac­tion. Gen­er­ally, a title search is ordered from an abstract or title insur­ance com­pany. In some states, and in out­ly­ing areas of oth­ers, title insur­ance is not typ­i­cal. In such cases an attor­ney is essen­tial to review the sta­tus of title and ren­der an opin­ion of title in lieu of a title policy.

Assum­ing you are in an area where title insur­ance is cus­tom­ary, an attor­ney can help review the title search and explain the title excep­tions as to what is not insured, and deter­mine whether the legal descrip­tion is cor­rect and whether there are prob­lems with adjoin­ing own­ers or prior own­ers. He or she can also explain the effect of ease­ments and agree­ments or restric­tions imposed by a prior owner, and whether there are any legal restric­tions which will impair your abil­ity to sell the property.

The title search does not tell the buyer or seller any­thing about exist­ing and prospec­tive zon­ing. A lawyer can explain whether zon­ing pro­hibits a two-family home, or whether planned improve­ments vio­late zon­ing ordi­nances.
The clos­ing is the most impor­tant event in the pur­chase and sale trans­ac­tion. The deed and other clos­ing papers must be pre­pared. Title passes from seller to buyer, who pays the bal­ance of the pur­chase price. Fre­quently, this bal­ance is paid in part from the pro­ceeds of a mort­gage loan. A clos­ing state­ment should be pre­pared prior to the clos­ing indi­cat­ing the deb­its and cred­its to the buyer and seller. An attor­ney is help­ful in explain­ing the nature, amount, and fair­ness of clos­ing costs. The deed and mort­gage instru­ments are signed, and an attor­ney can be assure that these doc­u­ments are appro­pri­ately exe­cuted and explained to the var­i­ous parties.

The clos­ing process can be con­fus­ing and com­plex to the buyer and seller. Those present at the clos­ing often include the buyer and seller, their respec­tive attor­neys, the title closer (rep­re­sen­ta­tive of the title com­pany), an attor­ney for any lend­ing insti­tu­tion, and the real estate bro­ker. There may also be last minute dis­putes about deliv­er­ing pos­ses­sion and per­sonal prop­erty or the adjust­ment of var­i­ous costs, such as fuel and taxes. If you are the only per­son there with­out a lawyer, your rights may be at risk.

Per­haps the most impor­tant rea­son to be rep­re­sented by an attor­ney is con­flict­ing inter­ests of the par­ties. Through­out the process, the buyer’s and seller’s inter­ests can be at odds with each other, and even with those of pro­fes­sion­als involved in the sale. The bro­ker gen­er­ally serves the seller, and the lender is obtained by the buyer. Both want to see the deal go through, since that is how they will get paid. Nei­ther can pro­vide legal coun­sel. The respec­tive lawyers for the buyer and seller will serve only their own clients’ best inter­ests. Seek­ing the advice of a lawyer is a very good idea from the time you decide to sell or to buy a home until the actual closing.

Copy­right ® 2012 Find­Law, a Thom­son Reuters busi­ness. All rights reserved.

10 Ques­tions to Ask Home Inspectors

Cutler Bay Real Estate

Before you make your final buy­ing or sell­ing deci­sion, you should have the home inspected by a pro­fes­sional. An inspec­tion can alert you to poten­tial prob­lems with a prop­erty and allow you to make an informed deci­sion. Ask these ques­tions to prospec­tive home inspectors:

 

  • Will your inspec­tion meet rec­og­nized stan­dards? Ask whether the inspec­tion and the inspec­tion report will meet all state require­ments and com­ply with a well-recognized stan­dard of prac­tice and code of ethics, such as the one adopted by the Amer­i­can Soci­ety of Home Inspec­tors or the National Asso­ci­a­tion of Home Inspec­tors. Cus­tomers can view each group’s stan­dards of prac­tice and code of ethics online at www.ashi.org or www.nahi.org. ASHI’s Web site also pro­vides a data­base of state regulations.
  • Do you belong to a pro­fes­sional home inspec­tor asso­ci­a­tion? There are many state and national asso­ci­a­tions for home inspec­tors, includ­ing the two groups men­tioned in No. 1. Unfor­tu­nately, some groups con­fer ques­tion­able cre­den­tials or cer­ti­fi­ca­tions in return for noth­ing more than a fee. Insist on mem­bers of rep­utable, non­profit trade orga­ni­za­tions; request to see a mem­ber­ship ID.
  • How expe­ri­enced are you? Ask how long inspec­tors have been in the pro­fes­sion and how many inspec­tions they’ve com­pleted. They should pro­vide cus­tomer refer­rals on request. New inspec­tors also may be highly qual­i­fied, but they should describe their train­ing and let you know whether they plan to work with a more expe­ri­enced partner.
  • How do you keep your exper­tise up to date? Inspec­tors’ com­mit­ment to con­tin­u­ing edu­ca­tion is a good mea­sure of their pro­fes­sion­al­ism and ser­vice. Advanced knowl­edge is espe­cially impor­tant in cases in which a home is older or includes unique ele­ments requir­ing addi­tional or updated training.
  • Do you focus on res­i­den­tial inspec­tion? Make sure the inspec­tor has train­ing and expe­ri­ence in the unique dis­ci­pline of home inspec­tion, which is very dif­fer­ent from inspect­ing com­mer­cial build­ings or a con­struc­tion site. If your cus­tomers are buy­ing a unique prop­erty, such as a his­toric home, they may want to ask whether the inspec­tor has expe­ri­ence with that type of prop­erty in particular.
  • Will you offer to do repairs or improve­ments? Some state laws and trade asso­ci­a­tions allow the inspec­tor to pro­vide repair work on prob­lems uncov­ered dur­ing the inspec­tion. How­ever, other states and asso­ci­a­tions for­bid it as a con­flict of inter­est. Con­tact your local ASHI chap­ter to learn about the rules in your state.
  • How long will the inspec­tion take? On aver­age, an inspec­tor work­ing alone inspects a typ­i­cal single-family house in two to three hours; any­thing sig­nif­i­cantly less may not be thor­ough. If your cus­tomers are pur­chas­ing an espe­cially large prop­erty, they may want to ask whether addi­tional inspec­tors will be brought in.
  • What’s the cost? Costs can vary dra­mat­i­cally, depend­ing on your region, the size and age of the house, and the scope of ser­vices. The national aver­age for single-family homes is about $320, but cus­tomers with large homes can expect to pay more. Cus­tomers should be wary of deals that seem too good to be true.
  • What type of inspec­tion report do you pro­vide? Ask to see sam­ples to deter­mine whether you will under­stand the inspector’s report­ing style. Also, most inspec­tors pro­vide their full report within 24 hours of the inspection.
  • Will I be able to attend the inspec­tion? The answer should be yes. A home inspec­tion is a valu­able edu­ca­tional oppor­tu­nity for the buyer. An inspector’s refusal to let the buyer attend should raise a red flag.


Source: Rob Paterkiewicz, exec­u­tive direc­tor, Amer­i­can Soci­ety of Home Inspec­tors, Des Plaines, Ill.,
www.ashi.org

 

Nego­ti­at­ing to Yes

These tips can help you turn a nego­ti­a­tion into a win-win agreement.

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.
Copy­right ® 2000 Mar­cie Geffner. All rights reserved.

 

The Bot­tom Line on Con­tract Negotiation

Ask these ques­tions before you decide to go ahead with a con­tract.
By Mar­cie Geffner

South Miami Realtor

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.

Copy­right ® 2000 Mar­cie Geffner. All rights reserved.

 

 

Fan­nie to Tighten Loan Cri­te­ria for Con­dos, Refis

Daily Real Estate News | Tues­day, Octo­ber 02, 2012

Start­ing on Oct. 20, Fan­nie Mae will be tight­en­ing some of its under­writ­ing stan­dards for condo buy­ers and home own­ers want­ing to refi­nance. The changes have some in the indus­try con­cerned, Realty Times reports.

The new guide­lines are aimed at reduc­ing Fan­nie Mae’s risk as well as forc­ing more bor­row­ers to shop around for mortgages.

Among the changes com­ing Oct. 20 to Fannie-backed loans:

- Condo buy­ers who have less than a 20 per­cent down pay­ment will have to com­plete a two-page condo ques­tion­naire about the home­owner association’s finance goals as well as pro­vide addi­tional doc­u­ments, such as a reserve study, by-laws, and a copy of the mas­ter insur­ance pol­icy. Cur­rently, only condo buy­ers who put down less than 10 per­cent are required to pro­duce the extra paper­work. Some ana­lysts pre­dict that the extra paper­work could lead to more chances of loans being denied from Fannie’s strict condo loan under­writ­ing cri­te­ria.- Fan­nie announced it will end dis­cre­tionary approvals or “Expanded Approvals© for all Fan­nie Mae refi­nances, except for Fan­nie Mae’s Refi Plus Pro­gram loans or HARP loans. EAs were believed to help bor­der­line bor­row­ers qual­ify for a mort­gage when they didn’t have a per­fect combo of loan-to-value and debt-to-income ratios, cred­it­wor­thi­ness, and finan­cial reserves, Realty Times reports.- Self-employed bor­row­ers also may face more hur­dles in qual­i­fy­ing for a Fannie-backed mort­gage. Fan­nie will require self-employed bor­row­ers to pro­vide two con­sec­u­tive years of fed­eral tax returns, instead of one, the cur­rent stan­dard. Under­writ­ers will base income on an aver­age from the last two years of tax returns, Realty Timesreports.

Because of the new two-year aver­age approach, one bad year out of two could sink a self-employed home owner’s appli­ca­tion even if the most recent year would have qual­i­fied him or her under the old rules,© San Jose, Calif., mort­gage lender Shashank Shekhar writes for Realty Times.

 

 

Appraisals Remain Big Hur­dle, Agents Say

Daily Real Estate News | Mon­day, Octo­ber 15, 2012

Miami Real Estate

Appraisals have been blamed on derail­ing a lot of sales in recent years. In fact, more than one-third of REALTORS® recently reported that deals were can­celed, delayed, or rene­go­ti­ated to a lower price due to a low appraisal.

The National Asso­ci­a­tion of REALTORS® has spo­ken out against faulty appraisals, blam­ing it on hold­ing back the hous­ing recovery.

More real estate pro­fes­sion­als are start­ing to include appraisal con­tin­gen­cies in their con­tracts. These con­tin­gen­cies spec­ify how much a buyer would be will­ing to pay in cash in case the appraisal comes in lower than the agreed upon sales price.

Apprais­ers have been crit­i­cized for using fore­clo­sures as com­pa­ra­ble homes in their val­u­a­tions and for fail­ing to take into account mar­ket con­di­tions like the low inven­tory and bid­ding wars in many areas, accord­ing to NAR’s report. NAR also has crit­i­cized many banks for increas­ing their require­ments to six com­pa­ra­ble sales instead of three, par­tic­u­larly at a time with low inventories.

It’s hold­ing sell­ers off the mar­ket, Jed Smith, NAR’s man­ag­ing direc­tor of quan­ti­ta­tive research, told The New York Times. Sales vol­ume could prob­a­bly be an addi­tional 10 to 15 per­cent higher if we had nor­mal lend­ing prac­tices and if we had nor­mal appraisal practices.©

Apprais­ers say they’re not mak­ing val­u­a­tions lower but they’re reflect­ing the cur­rent value of homes.

Apprais­ers don’t set the mar­ket, they reflect what’s hap­pen­ing in the mar­ket,© Ken Chitester, a spokesman for the Appraisal Insti­tute, told The New York Times. So don’t shoot the mes­sen­ger. Blam­ing the appraiser for a bad hous­ing mar­ket is like blam­ing the weath­er­man because you don’t like the weather.©

Apprais­ers don’t always make adjust­ments if they use bank-owned homes in com­pa­ra­bles because not all REOs sell at a dis­count and not all are in bad con­di­tion, says Dan McK­in­non, who oper­ates an appraisal com­pany in Phoenix. When neigh­bor­hoods are dom­i­nated by REOs, those homes need to be fac­tored in to help deter­mine the value of homes, he adds.

If that prop­erty is in sim­i­lar con­di­tion to your sub­ject, it is direct com­pe­ti­tion,© McK­in­non says.


Source:
Scrutiny for Home Apprais­ers as the Mar­ket Strug­gles,© The New York Times (Oct. 12, 2012)