Home Buying Tips & Guide

What homebuyer programs are available in my region?

2011-06-28T21:35:00.000-07:00

There are a number of homebuyer programs available at the state, regional, and community level. In southwest Florida, for example, the Pinellas County Community Development Department (PCCDD) is just one group that helps match up buyers with homes and financing. To promote home ownership in the region, the PCCDD offers the following services (see www.pinellascounty.org):
❑ Low-Interest Mortgages: The purpose of the low-interest loan program is to preserve the existing housing stock and encourage neighborhood improvement efforts. The program provides home repair loans to low-income and moderate-income home owners at interest rates ranging from 0 to 5 percent, depending on household income and family size.
❑ First-Time Homebuyer Program: The Housing Finance Authority provides financing for the rehabilitation, construction, and/or purchase of new and existing housing for moderate-, middle-, and lower-income families.
❑ Down-Payment Assistance: This program assists low- and moderateincome households to purchase homes that will serve as their principal residence. It provides financial assistance in the form of interestfree second mortgages with repayments deferred for up to five years.
❑ Special Lender Programs: Low-, moderate-, and middle-income buyers who have the desire and capacity for home ownership often lack the financial resources to purchase housing that meets their needs. According to the PCCDD, such individuals and families may be qualified for one of the programs offered by local governments or nonprofit corporations.
In Los Angeles, the Community Development Commission offers similar services, targeted at helping first-time home buyers through its Home Ownership Program (HOP), which provides loans of up to $60,000 (or 25 percent of the home purchase price) in designated target areas of the city, or $50,000 (or 20 percent of the purchase price) in nontarget areas. The loans are ‘‘shared equity loans’’ with no monthly payments and no interest. There are income guidelines to meet, and all information is on the city’s Web site at www.lacdc.org/programs/homebuyer/ownership/index.shtm.
Whether you’re looking for first-time homebuyer counseling programs, down-payment assistance, or low- to zero-interest loans, a phone call to your city or county offices should be able to get you pointed in the right direction. You can also use a search engine like Google.com to find such programs. Try combining your city or county name with words like ‘‘firsttime homebuyer program’’ or ‘‘homebuyer assistance’’ for the best results

What is a Federal Housing Administration (FHA) loan?

2011-06-28T21:32:00.000-07:00

FHA loans are a popular choice for home buyers, although the program isn’t reserved only for first-time buyers. A wholly owned government corporation, the FHA has been around since 1934, with the goal of improving housing standards and conditions and providing adequate home financing through insurance of mortgages. Its loans feature reduced down-payment standards, lower mortgage insurance charges, and an approval process that’s more relaxed than conventional mortgage loans.
The FHA loan program requires only 3 percent down and is typically more forgiving of past credit issues, but it requires that borrowers not have a bankruptcy discharged within the last two years; that they not have a foreclosure within the last three years; and that any outstanding collection amounts, judgments, or charge-offs be paid in full before closing. The advantages of using an FHA loan include the following:
❑ A lower down payment is required.
❑ FHA loans are assumable (transferable to a new buyer) with a qualified borrower.
❑ Higher qualifying ratios of 29 percent for housing and 41 percent for total indebtedness are allowed on existing construction; 31 percent for housing and 43 percent for total indebtedness are allowed on new construction.
❑ The underwriting (approval) standards are more flexible.
❑ Gift funds for down payment and closing costs are allowed.
❑ The up-front mortgage insurance premium can be financed.
❑ Less cash is required out of pocket.
❑ The down-payment requirement (as low as 3 percent and never more than 5 percent) is the lowest of any nonsubsidized financing program.
❑ Nonoccupant coborrowers are allowed for qualifying purposes.
❑ The seller is allowed to pay prepaid expenses (closing costs) and can pay up to 6 percent of the purchase price toward closing costs and discount points.
❑ Charges on conventional loans such as tax service fees, underwriting fees, copy fees, and courier fees are not allowed to be charged to the buyer.
Find out more about how FHA loans work from your lender or mortgage broker, or visit HUD’s Office of Housing Web site at www.hud.gov/ offices/hsg/index.cfm.

What is Fannie Mae’s Community Home Buyer’s Program?

2011-06-28T21:30:00.000-07:00

This is an income-based community lending model, under which mortgage insurers and Fannie Mae, the nation’s largest supplier of home mortgage funds, offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power, and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend prepurchase homebuyer education sessions. With this program, you can use a greater portion of your monthly income toward housing costs compared to other standard mortgage products.
The program also

Requires a 5 percent down payment
Does not require one month’s mortgage payment (or cash reserves) in your savings account at closing time
Provides expanded debt-to-income ratios (you can use up to 33 percent of your gross monthly income for housing expenses each month, rather than the standard 28 percent, and 38 percent for your total monthly debt expenses, instead of the standard 36 percent To be eligible for Fannie Mae’s Community Home Buyer’s Program, you must attend a homebuyer education session offered or approved by your lender.

You can’t earn more than your area’s median income (this varies by your location), and the loan can be used to buy single-family, principal residences, including condos, planned unit developments, and manufactured housing. Learn more about Fannie Mae’s program at the group’s Web site: www.fanniemae.com.

What is a Veterans Administration loan?

2011-05-31T09:48:00.000-07:00

Veterans Administration (VA) loans are available to qualified veterans, reservists, and active servicemen and women; these loans allow you to secure a mortgage up to a specified amount with no down payment and with flexible qualifying guidelines. The loans typically offer lower interest rates than you would find on any other mortgage. An application, a veteran’s certificate of eligibility, and a VA-assigned appraisal are required.
To obtain a VA loan, the law requires that:
❑ The applicant be an eligible veteran who has available entitlement
❑ The loan be for an eligible purpose (such as the purchase of a primary home)
❑ The veteran occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan
❑ The veteran be a satisfactory credit risk
❑ The income of the veteran and/or spouse be stable and sufficient to
meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support Find out more about VA loans at the VA’s Home Loan Guaranty Web site: www.homeloans.va.gov.

What government resources are available for home buyers?

2011-05-31T09:39:00.000-07:00

A number of government-sponsored and -supported organizations offer a plethora of resources, opportunities, and programs for home buyers, particularly first-time buyers and those that fall into very specific categories, like veterans, who have access to Veteran’s Administration mortgage programs. Programs developed by community development departments (at the local level) and the Department of Housing and Community Affairs (at the state level) assist home buyers with flexible lending programs; housing options; and other resources, such as counseling. At the national level, in December 2003 President George W. Bush signed into law the American Dream Downpayment Initiative, which is expected to help more Americans enjoy greater access to more housing opportunities. The legislation will provide an average of $5,000 in grants to approximately 40,000 lower-income families in 2004 and 2005 to help them pay down-payment and closing costs on their first homes. Grants are made to state and local governments through the U.S. Department of Housing and Urban Development’s HOME Investment Partnership program. The program launched in spring 2004 and information about it is available at HUD’s Web site: www.hud.gov.
Through the Fair and Accurate Credit Transactions Act of 2003, the government is also helping individuals with credit-reporting issues. Under this legislation, consumers will receive one free annual credit report; full disclosure of their numerical credit score and the factors influencing that score; notice of any negative impact on their credit score caused by multiple shopping inquiries; notification when negative information is added to their credit files; prompt investigation and correction of inaccurate credit information; and new tools to combat identity theft such as placing a fraud alert in their credit file. The legislation also calls for federal regulators to conduct a study of the effects of consumers’ credit scores and credit-based insurance scores on the availability and affordability of homeowners insurance. The three most popular homebuyer programs offered by or supported by the government are Veterans Administration Loan Program, Fannie Mae’s Community Home Buyer’s Program, and FHA loans.

What information must I give to obtain a mortgage online?

2011-05-31T09:31:00.000-07:00

Each online lender has different application requirements. A visit to Lend ingTree.com, one of the Internet’s better known lenders, for example, revealed a checklist of items to bring with you when you’re ready to sign up:
❑ Social Security Number of All Borrowers: Lenders use your social security number to access your credit record, which contains information about your income, debts, and credit payment history.
❑ Current Mailing Address and Number of Years You’ve Lived at This Address: This information will be compared against your credit record to determine if your rent or mortgage payments have been made on time each month.
❑ Property Type of the Home You Are Purchasing: Lenders need to know what type of home you are purchasing because your home becomes the collateral for your mortgage in the event that you default on the loan.
❑ Purchase Price, Down Payment Amount, and Amount You Wish to Finance: This combined information helps lenders determine the type of mortgage that may be best for your needs.
❑ Employment Information: Lenders normally like to see that you have been with the same employer for a few years, or at least in the same line of work, to demonstrate career stability.
❑ Total Monthly Income and Debt Payments: Your income and debt payments illustrate your debt-to-income ratio, which is the amount of money you owe each month compared to the amount of money you make. This ratio helps lenders understand your total financial situation.
❑ Total Liquid Assets: Lenders are interested in the amount and value of any assets you may have to help them judge your ability to make loan payments from available cash.

Can I get a mortgage online?

2011-04-30T06:24:00.000-07:00

The online lending environment has become increasingly sophisticated, thanks to Web sites like LendingTree.com, Interest.com, Eloan.com, and 4LowRates.com, all of which serve as sales channels for the originating lenders, who subsequently lend you the money and to whom you will make your mortgage payments. Most of the major lenders (Wells Fargo, Countrywide, etc.) also offer an online application process, homebuyer educational information, and other resources online.
Whether you’re using a traditional lender or an online marketplace, the loan process is fairly simple. I recently applied for and obtained a home equity line of credit from GMAC Financing. The process took about forty minutes: five minutes to fill out the online application; five minutes on the phone with a loan officer to guarantee that I was who I said I was; and about thirty minutes of gathering necessary paperwork, such as proof of homeowners insurance, and faxing it to GMAC. For a first mortgage, that means entering the required information and/or providing necessary documentation from the comfort of your own keyboard, then letting the online lender use that information to track down the right mortgage for you. After completing the application form, LendingTree.com guarantees that you will receive up to four ‘‘real’’ loan offers within hours. The company says it’s unique in that it spurs lenders to ‘‘compete’’ for your business, rather than your having to track down the lenders individually. Whether you choose to work with one of those lenders is up to you, but the process will give you a good idea of what type of mortgage product will be best for you.
With online security issues like credit card fraud and identity theft at the forefront of consumers’ minds right now, it would be wise to inquire about the online lending firm’s information protection and security processes before sending sensitive financial data (particularly social security numbers, driver’s license numbers, and other personal information) through cyberspace. Lending Tree, for example, has reserved a Web page for explaining its security process, information protection, and other privacy issues at www.lendingtree.com/stm/aboutlt/privacy/security.asp. Interest .com has a similar site at www.interest.com/privacystatement.html. Make sure your online lender has taken similar measures, and ask questions if you have any specific concerns about these issues.

How can I reduce my closing costs?

2011-04-30T06:22:00.000-07:00

Closing costs are pretty straightforward, but there are certain ways that you can reduce your out-of-pocket expenses. You can ask the home seller to cover some of the costs, for example, since lenders allow the seller to credit the buyer up to 5 percent of the purchase price for nonrecurring closing costs. These are costs that are paid on a onetime basis such as escrow, title, and transfer fees. Bear in mind that you may have to pay a bit more for the home to compensate the seller for paying your closing costs, particularly in a ‘‘hot’’ market, where the seller could easily find buyers who can cover their own closing costs.
Here are a few other strategies for reducing and/or eliminating your upfront closing costs:
❑ Ask your lender to pay your closing costs: Because lenders make a fee on each loan they make, your willingness to take out a loan at higher-than-market interest rates could convince the lender to make extra up-front fees. Those fees can be used to pay your closing costs.
❑ Finance your closing costs: Some lenders will allow you to finance (via a credit card, or by rolling them into the loan). Ask your lender up front if either or both strategies are acceptable.
❑ Secure a no-point, no-fee loan: The lower the points (see glossary), the higher the interest rate—and subsequently, the higher the payments—on a mortgage. Securing a no-point, no-fee loan will lower your closing costs, but realize that there is always a trade-off between points paid and the mortgage’s interest rate.
❑ Negotiate with the service providers: Most buyers won’t argue with a $300 title search, but what they don’t realize is that they have choices of appraiser, escrow company, and title company. Check that each of these providers’ fees are competitive before doing business with them.
❑ Defer closing costs by closing late in the month: Opt for a closing date around the end of the month and you’ll save money on upfront interest. When you close, lenders collect interest for the remainder of the month. With only a few days left in the month, you’ll end up paying just a few days of interest up front. To best educate yourself on closing costs and what’s required of you financially at settlement, check out the HUD settlement statement online at www.hud.gov/offices/hsg/sfh/res/sfhrestc.cfm (click on ‘‘Specific Settlement Costs’’). Here, HUD gives home buyers a comprehensive look at settlement costs and goes through an actual closing statement line by line. Familiarize yourself with the form, which is used on all mortgage transactions, and you’ll be well prepared when you get to the closing table.

What are closing costs?

2011-04-30T06:16:00.000-07:00

Closing costs (also known as settlement costs) are expenses above and beyond the price of the property that the buyers and sellers have to pay when transferring ownership of a property. That includes a loan origination fee, the cost of the title search (‘‘title’’ is the legal term for one’s ownership interest in land), notary fees, attorney’s fee (if applicable), taxes, and the cost of the property survey. Your total closing costs will vary depending on your location, and either the lender or the real estate agent can provide estimates of closing costs on your mortgage.
When your mortgage is finalized, you as the buyer will have to pay closing costs. Most lenders will not roll the costs into the mortgage, so they’re essentially ‘‘out-of-pocket’’ or ‘‘up-front’’ fees that will need to be covered. Along with the basic title, service, and lender fees, closing costs include payments in advance for such items as taxes, property insurance, and interest to the end of the month.
Certain closing costs, such as recording fees and taxes, title examination, and credit reports, may be paid by the seller, or they may be shared between the borrower and the seller, depending on the terms of the sales contract. The Real Estate Settlement Procedures Act (RESPA) requires that your lender give you an information booklet and a good-faith estimate on your closing costs within three days of receiving your written loan application. RESPA also requires that at closing or shortly afterward, you must receive a uniform settlement statement (USS), which is a permanent record of all the final settlement charges. You are entitled to review the settlement statement one business day before you close on your loan. Read more about RESPA in Chapter 8: The Home Buyer’s Legal Rights.

What should I keep inmind when looking for a subprime loan?

2011-03-31T08:22:00.000-07:00

If your own situation requires a subprime loan, the Virginia Housing Development Agency suggests following these ten tips.

Ask questions.
Shop around.
Be an educated consumer.
Read before you sign.
Avoid balloon payments (a loan that starts with small payments at first, then culminates into one or more significantly large payments).
Avoid prepayment penalties.
Know your rights.
Don’t be afraid to say no.
Be prepared—build your credit.
Be wary of targeted advertising.

Lastly, if you believe you’ve been victimized by predatory-lending practices, contact the Office of Consumer Affairs in your state to report the problem. You can find a state-by-state list of predatory-lending reporting bureaus at the HUD Web site: www.hud.gov/buying/localpredlend.cfm.

One issue to be aware of when you’re obtaining a mortgage

2011-03-31T08:21:00.000-07:00

One issue to be aware of when you’re obtaining a mortgage are either short on cash or dealing with a poor credit rating are subprime loans. Some of these loans have fallen under considerable scrutiny lately because of a practice known as ‘‘predatory lending.’’ Subprime involves lending to borrowers with blemished, less-than-perfect credit or insufficient credit history who typically would not qualify for loans in the conventional prime market. To offset the increased risk, the lender charges higher interest rates on these loans; legitimate subprime lenders have played an important role in allowing access to home ownership (or home improvements) for many consumers who would not have qualified otherwise.

What mortgage programs are available if I don’t have the down payment?

2011-03-31T08:18:00.000-07:00

Lenders today offer a variety of flexible mortgage programs. The most basic is the conventional mortgage, which has no security guarantees other than the value of the property. Such loans typically demand either a 20 percent down payment, or a lower amount combined with private mortgage insurance (PMI). Federal Housing Administration (FHA) loans and other programs guaranteed by the government do not require such insurance, which is offered by independent insurance companies to qualified borrowers with down payments of less than 20 percent of a purchase price. The cost of such insurance varies by lender and loan type but generally costs about seven-tenths of 1 percent of the total loan amount annually. There are many other nonconventional options available to home buyers right now. One of the country’s largest lenders, for example, offers the following programs with down payments as low as 3 percent:

No Money Down Plus Program: Lets all qualified buyers finance the entire purchase price plus up to 3 percent of the closing costs. (No income limits.)
3 Percent Solution Program: Gives all qualified buyers the opportunity of putting only 3 percent down on a primary residence and taking advantage of flexible qualifying guidelines. (No income limits.)
Easy-to-Own 3 Percent Down loan: Lets qualified low- to moderateincome borrowers put only 3 percent down and take advantage of flexible qualifying guidelines. (Limited to borrowers who fall within HUD median-income levels.)
Easy-to-Own 5 Percent Down loan with 3/2 Option: Allows lowto moderate-income buyers to use their own funds for 3 percent of the down payment and get the remaining 2 percent as a gift, grant, or from an approved Down Payment Assistance Program. (Limited to borrowers who fall within Department of Housing and Urban Development [HUD] median-income levels.)
FHA Mortgage: Allows all qualified buyers to take advantage of a low down payment with flexible qualifying guidelines, with loan limits set by area.

Alternatives to Down Payment

2011-02-28T07:36:00.000-08:00

If you don’t have a down payment to buy a home, there may be other options available to you. Lenders offer an unprecedented range of loans with 100 percent (or sometimes more) financing options with very attractive rates and flexible credit and income guidelines. Thanks to these programs, the need to come up with a hefty down payment is no longer such an issue. Still, even 100 percent financing requires some financial commitment on the part of the borrower, like covering closing costs, the cost of an appraisal, and a home inspection.
Home buyers can also use ‘‘gift’’ money for down payments—something that was not allowed just a few years ago. While some lenders may view this attempt to help (by, say, a parent) as a signal of the borrower’s indebtedness, it is becoming a more acceptable way of obtaining the funds necessary to obtain a loan. Lenders have different guidelines for accepting gift funds of less than 20 percent of the home’s purchase price, so inquire before taking this route.
If coming up with a down payment is a sticky point for you, a mortgage broker or lender can point you in the right direction, particularly if you fall into one of these categories:
❑ You have a strong source of income, but not much savings.
❑ You prefer to keep your assets in higher-yielding investments.
❑ You have low-to-moderate income and minimal cash reserves.
❑ You are a first-time home buyer with high rent costs that eat up
much of your cash.
❑ You are a move-up home buyer with minimal cash reserves.

What are my down-payment options?

2011-02-28T07:35:00.000-08:00

Generally, the down-payment requirements start at 3 percent of the purchase price and increase from there, depending on the price of the home and your own ability to come up with the cash. There are also a number of first-time homebuyer programs (designed to help buyers who haven’t purchased or owned a home within the last three years) that require no down payment, as well as ‘‘gift’’ down-payment programs available from organizations like Nehemiah and Ameridream. When calculating your down-payment needs, don’t neglect to factor any out-of-pocket closing costs (which can’t be folded into your mortgage) into your up-front expenses.
If you’re a first-time home buyer, saving up for a down payment can be a daunting task. In fact, it’s one of the biggest obstacles to home ownership in this country, since the average mortgage payment on a first-time or starter home isn’t much higher than a rental payment anyway. The good news is that lenders realize this and have made your options both flexible and extensive when it comes to offering mortgage programs that weren’t available a few years ago.

How do I improve my credit score?

2011-02-28T07:33:00.000-08:00

Because most creditors only report to the bureaus once a month, improving a credit score doesn’t happen overnight. However, there are a few steps you can take right now to start cleaning up your credit blemishes. Here they are:

Pay your bills on time. Late payments and collections can have a serious impact on your score.
Do not apply for credit frequently. Having a large number of ‘‘inquiries’’ on your credit report can worsen your score because it looks like you’re being turned down for credit and ‘‘shopping around.’’
Reduce your credit card balances. If you are ‘‘maxed out’’ on your credit cards, this will affect your credit score negatively.
If you do have any ‘‘unpaid’’ debt that you now have the ability to pay off, either do so, or try to set up a ‘‘payment plan’’ or settlement option with the debtor.If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score. (Even if you don’t like charging purchases, obtain a low-limit credit card, use it every month, and pay off the balance within thirty days.)
When you do get your mortgage, be sure to always pay it on time. Late mortgage payments are one of the most significant blemishes that you can have on your report.

What does a low credit score mean?

2011-01-27T17:50:00.000-08:00

The importance of a good credit rating really can’t be overstated during the mortgage lending process. While lenders have become more flexible with their loan programs, most still hold the credit rating as one of the key deciding factors in both lending money and determining interest rates. Credit ratings show your overall financial health. When you or a lender receives your FICO score, up to four ‘‘score reasons’’ accompany that score and help explain the top reasons why your score was not higher. According to Fair Isaac & Co., these reasons are more useful than the score itself in helping you determine how you might improve your score over time, and whether your credit report might contain errors. However, if you already have a high score (for example, in the mid-700s or higher) some of the reasons may not be very helpful, as they may reference the factors that have the least impact on your score, such as length of credit history, new credit, and types of credit in use. Here are the top ten most frequently given score reasons. (Note that the specific wording given by your lender may be different from the reasons shown in this list):

1. Serious delinquency
2. Serious delinquency, and public record or collection filed
3. Derogatory public record or collection filed
4. Time since delinquency too recent or unknown
5. Level of delinquency on accounts
6. Number of accounts with delinquency
7. Amount owed on accounts
8. Proportion of balances to credit limits on revolving accounts too high
9. Length of time accounts have been established
10. Too many accounts with balances

Five Factors that Determine Credit Record

2011-01-27T17:48:00.000-08:00

A credit score basically condenses your credit history into a single number, and while the credit bureaus don’t reveal how these scores are computed, the scores themselves are calculated by using scoring models and mathematical tables that assign points for different pieces of information that best predict future credit performance.
Credit scores analyze various aspects of borrowers’ credit history, including:
❑ Late payments
❑ The amount of time credit has been established
❑ The amount of credit used versus the amount of credit available
❑ Length of time at present residence
❑ Employment history
❑ Negative credit information (bankruptcies, credit card charge-offs,
accounts that are in collections)
According to Fair Isaac & Co., the five factors that determine your credit score are:

Payment History (approximately 35 percent of your score): The factor that has the biggest impact on your score is whether you have paid past credit accounts on time. However, an overall good credit picture can outweigh a few late payments, and late payments will continue to have less impact over time.
Amounts Owed (approximately 30 percent): Having credit accounts and owing money doesn’t mean you are a high-risk borrower. But owing a lot of money on numerous accounts can suggest that you are overextended and more likely to make some payments late or not at all. Part of the science of scoring is determining how much debt is too much for a given credit profile.
Length of Credit History (approximately 15 percent): In general, a longer credit history will improve your FICO score. Lenders want to see that you can responsibly manage your available credit over time. However, even people who have not been using credit very long may get high scores, depending on how the rest of their credit report looks.
New Credit (approximately 10 percent): People today tend to have more credit and shop for credit more frequently. But opening several credit accounts in a short period of time can represent greater risk—especially for people with short credit histories. Requests for new credit can also represent greater risk. However, FICO scores are able to distinguish between a search for many new credit accounts and rate shopping. FICO scores generally do not associate shopping for the best rate on a loan with higher risk.
Types of Credit in Use (approximately 10 percent): Your FICO score will reflect your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. While a healthy mix will improve your score, it is not necessary to have one of each, and it is not a good idea to open credit accounts you don’t intend to use. The credit mix usually won’t be a key factor in determining your score—but it will be more important if your credit report doesn’t have much other information on which to base a score.

What is a credit report?

2011-01-27T17:43:00.000-08:00

Credit ratings are very important to lenders because they show your overall financial health and package it neatly into a multipage report that reads something like a report card from grade school. Credit reports are pretty telling, but they’re also not always 100 percent accurate, so be prepared to deal with any inaccuracies that may come up during the review process. Credit-reporting agencies prepare the reports. There are three reporting agencies and they all have slightly different ways of determining your financial health although they are focused on the same task at hand. The three main reporting agencies are Equifax, Experian, and Trans Union. If you have concerns about your report and what lenders will see on it, it would be wise to order a copy of your credit report (typically for a nominal fee) via phone or on the Web from:
Once you’ve filled out your loan application, the lender will order your ‘‘score,’’ commonly known as a FICO score (for Fair Isaac & Co.), from one or more of the reporting agencies just listed. Lenders also use salary, length of employment, and other factors when making their decision, but the FICO score is one of the first places they look. Some lenders use one of the three scores while others select the ‘‘middle’’ score as a measure.

What should I ask my mortgage lender?

2010-12-30T19:06:00.000-08:00

As a borrower, you have the right to ask questions of any lender with whom you might do business. Before handing over your financials, ask the loan officer, mortgage broker, or online lender the following six questions:

1. Does the application fee include the credit report, or do I pay for that separately?

2. Approximately how much should I factor in for closing fees? (Your lender is required by law to give you a good-faith estimate when you apply for your loan, but your loan officer should also be able to provide an estimate of closing costs before you apply.)

3. How long have you been in the mortgage business? (Look for a lender with experience, who can walk you through the application process and help you work through any obstacles that might crop up.)

4. Can I get a preapproval letter to take with me on my house hunt?

5. Will I be able to lock in the interest rate at any time? (Interest rates change daily, and many lenders will give you the option of locking in a rate at any time.)

6. Will this loan have prepayment penalties? (Make sure that you can prepay your loan without incurring a penalty. There may come a time in the future when you will want to make additional payments to save money on interest.)

What are lenders looking for?

2010-12-30T19:02:00.000-08:00

Let’s just say that if there are any financial skeletons in your closet, they’ll come out during the homebuying process. When reviewing your application, lenders typically look at the ‘‘four Cs’’ of credit—capacity, credit history, capital, and collateral—so come prepared to discuss and/or show proof of everything from past bankruptcies to alimony payments to credit blemishes, and everything in between. The individual lender has its own requirements, but the process generally starts at the credit rating and works backward from there. The better your credit, the less ‘‘other’’ documentation you’ll have to show.
At a minimum, you’ll need to produce the same information you did for the preapproval, then sit back and wait while the lender sifts through it. Be prepared to come up with additional documentation, such as proof of additional income, statements that show certain accounts were ‘‘paid off’’ even though it doesn’t reflect that on your credit report, and tax returns for the last two years if you’re self-employed.

What is a loan application?

2010-11-30T09:12:00.000-08:00

The loan application is a detailed form that lenders use to evaluate whether or not they can give you a loan, and if so, the amount of money they can lend you. Lender applications vary by company, but on the application you may be asked to provide all or some of the following:
❑ Bank account balances and account numbers, as well as bank branch address
❑ Information about where you work or what sources of income you have
❑ Outstanding debts (including loans and credit cards with names and addresses of creditors)
Once this information is provided, the lender will pore over your financial situation, based on that information, and suggest programs that most closely meet your needs. If your financial situation doesn’t measure up, the lender may also suggest steps you can take (cleaning up your credit, paying down some of your monthly debt, for example) to get it into mortgageworthy shape. If this happens, bear in mind that not all lenders are alike, and that some may be more willing to extend flexible programs to first-time home buyers while others may be more stringent with their criteria. If you run into issues working directly with a bank, for example, find a good mortgage broker (unlike banks, these folks have a knack for matching lenders with borrowers who need help getting their finances in order) and have that person work on the preapproval for you.
It’s not a final loan commitment, but a preapproval letter does show that you’ve taken steps to get the ball rolling on the financing before spending time on your house hunt. It shows your financial strength and proves that you’re not just out there ‘‘kicking tires’’ but that you have the wherewithal to follow 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. It also helps you, as the home buyer, to know exactly where you stand when it comes to how much you can pay for a home when you enter into a purchasing agreement.

What is a preapproval letter?

2010-11-30T08:35:00.000-08:00

A preapproval letter tells home sellers that you have the ability to qualify for a certain mortgage amount, as judged by your lender. The process helps the lender determine the size of mortgage that you qualify for and helps you decide the price ranges to spend your time looking at. Unlike a prequalification, the preapproval process is very thorough, with the lender doing most of the review work required for a full approval, with the exception of the appraisal and title search (which can’t be completed until you’ve identified a home to buy).
Preapproval helps you to:
❑ Know how much you can borrow.
❑ Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information.
❑ Strengthen your position to make an offer on a house. (A seller will
be more willing to accept an offer if the buyer is preapproved.) To become preapproved, you’ll need to work with a mortgage lender who will review your credit history, earnings information, employment history and assets. You can get this done in person, or via telephone and/or fax and the Internet. Here are the basic items that the lender will want to see:
❑ A loan application
❑ Verification of your employment (pay stubs, W-2s, and/or tax returns if you are self-employed)
❑ Information concerning any other sources of income (such as alimony)
❑ Source of cash for your down payment and closing costs
❑ Authorization to have your credit checked

What is a prequalification letter?

2010-11-30T08:28:00.000-08:00

A lender’s prequalification process will give you a ballpark estimate of how large a mortgage you can afford. It doesn’t matter which lender you obtain this from since nearly all of them use the same criteria when determining what size monthly mortgage payments, property tax bill, and homeowners insurance you can handle. This will give you a good idea of the maximum mortgage amount you can afford and will help you focus your house search on properties within your price range.
Lenders, real estate agents, online financial Web sites, and other resources all use pretty much the same formula to figure out what priced home you can afford. You’ll want to figure this out before you start house hunting, since your budget can have a significant impact on your new home’s size, style, and age. The more amenities and square footage a home has and the newer it is, the more expensive it will be. By obtaining a mortgage prequalification letter prior to embarking on your house hunt, you’ll have a much better idea of exactly what you can afford.

Should I get a fixed-rate or an adjustable-rate mortgage?

2010-10-31T02:18:00.000-07:00

Here’s the difference between the two:

❑ Fixed-Rate Mortgage: Just what it sounds like, this option features
an interest rate that is fixed at a certain percentage throughout the life of the loan. Typically, the longer the term of the loan, the lower the monthly payments will be. With a shorter term, you will have higher monthly payments; however, you will realize a savings in the amount of interest you will pay over the life of the loan. Fixed-rate mortgages are recommended to borrowers who:

Look for predictable payments, because the payment is the same each month over the entire life of the loan
Are willing to pay a higher interest rate in return for protection against the possibility of rising interest rates
Are interested in building equity in their property through monthly principal and interest payments

❑ Adjustable-Rate Mortgages (ARM): This type of mortgage provides
an interest rate and payment that periodically adjusts based on the current interest rate environment. With an ARM, you can tap the benefits of lower interest rates and payments in a falling interest rate environment, and the initial interest rate on this type of loan is typically lower than the interest rate on a fixed-rate mortgage.
ARMs are recommended for borrowers who:

Seek extra borrowing power, based on a lower initial payment, than is typically available with a fixed-rate mortgage
Want to take advantage of a lower monthly payment to save money
Plan to refinance or sell their property in a few years

Your mortgage broker or lender can help you decide which option is best for your situation. Talk to one or more mortgage professionals, and check out the current mortgage interest rates (they’re usually published in your local newspaper, or you can check an online source like HSH Associates at www.hsh.com/today.html) to use as a comparison.

How do I determine how long the term of my mortgage should be?

2010-10-31T02:16:00.000-07:00

You can basically break down mortgages into two sections: fifteen years or thirty years. Use an online mortgage loan calculator from a Web site like QuickenLoans.com (go to mortgage calculators, then to homebuyer tools and monthly payment estimator) to figure out which will work best with your budget, based on the home price range that you’re looking at.
Here are two comparisons:
Total loan price (home price plus closing costs, less down payment):
$150,000
Length of loan: 30 years
Interest rate: 6.5 percent
Monthly payment: $949
Total loan price (home price less down payment): $150,000 Length of loan: 15 years Interest rate: 6.0 percent (shorter-term loans generally have lower interest rates)
Monthly payment: $1,266
As you can see, the fifteen-year loan increases your monthly payment by $317, but the amount of interest saved over the life of the loan is a whopping $130,800, nearly the price of another home! Low interest rates have pushed some home owners to the fifteen-year option (a choice previously unattainable due to double-digit interest rates), although many still opt for the thirty-year loans to avoid higher monthly payments. It’s a decision you’ll have to weigh once you select a home and loan option.

What is a mortgage?

2010-09-29T16:23:00.000-07:00

A mortgage is a long-term loan that you obtain from a bank, mortgage broker, online lender, thrift, or other source (sometimes even the property seller) to cover the purchase price (excluding your down payment) of your home. In exchange, the lender holds the home and land as collateral. You sign documents at the closing table that give the lender a ‘‘lien’’ against your property. If you fail to make payments as promised, the lender has the right to take the home through a process known as foreclosure. Large in size, mortgage loans are paid off over long periods, typically either fifteen or thirty years. Monthly payments chip away at the principal balance, but don’t expect to see that principal balance number go down much during your first few years as a home owner, particularly if you’re using a thirty-year mortgage. That’s because for the first few years you will be paying down your interest and not much of your principal balance. Where would we be without mortgages? For starters, there certainly wouldn’t be very many home owners. The typical individual or family isn’t able to cough up enough to cover the six-digit price tags of homes, which makes mortgages a basic necessity for home buyers. Today’s lenders offer a very wide variety of mortgage options or ‘‘products’’ (as they call them) to meet the needs of the nation’s wide and varied base of home buyers.

How much do homes cost?

2010-09-29T16:21:00.000-07:00

Existing homes run the gamut from $40,000 (or less) condominiums to $1 million-plus single-family homes. New homes are more expensive, generally running anywhere from $125,000 and up, depending on location, size and amenities. We can narrow the ranges down to a more digestible number by looking at the National Association of REALTORS’ (NAR’s) latest statistics, which reported a national median existing home price (half of the homes sold for less, half sold for more) of $169,900 in 2003, an 8 percent increase over the 2002 median home price of $158,100. The national median new-home (newly constructed) sales price was $194,500 in 2003, up about 3.7 percent over 2002. NAR forecasted the median existing-home price to grow by 4.6 percent in 2004, while new homes were expected to increase by 5.1 percent.
Using NAR’s statistics as a guide, it’s clear that home buyers have been paying more and more for the same homes over the last few years, but the group predicted that the high level of appreciation would level off in 2004. The 8 percent increase across the board in 2003 was the strongest showing since 1980, but NAR expected the percentage to decrease to 4.6 percent for existing homes and 5.1 percent for new homes in 2004, which is good news for you.
Besides consulting with your local paper or online multiple listing service, you can compare home prices across the nation via indexes created by companies like Coldwell Banker, which publishes an annual Home Price Comparison Index (HPCI). You can access more detailed information at the firm’s Web site at www.coldwellbanker.com/homepage.html—click on Home Price Comparison Index.
The cumulative national average sales price of all markets surveyed in the Coldwell Banker_ HPCI was $318,172, a 9 percent increase over 2002. The study’s most expensive market was La Jolla, California ($1,362,375), and the most affordable market was Binghamton, New York ($121,400), indicating a price difference of $1,240,975 for a similar 2,200-square-foot home. Six of the country’s ten most expensive markets were in California, two were in Connecticut, and one each was in Hawaii and Massachusetts. Geography aside, how much you pay for a home depends on the following factors:

The specific community or neighborhood you’ve selected
Size of the home
Age (in years) of the home
Amenities the home offers
How eager the home owner is to move out (sometimes urgency can create a ‘‘fast sale’’ environment, which is good for you as the buyer)
The price of ‘‘comparable’’ homes that have sold in the community/ area recently
Any other positive (or negative) features of the home or surrounding area (such as sinkholes, proximity to a large highway, or other factors)

What if I can’t find the home of my dreams?

2010-09-29T16:18:00.000-07:00

If this is your first home, don’t expect your efforts to produce the home you’ve dreamed of all your life. Even your second or third home may not meet those expectations, but that’s really just part of the process. Once acclimated to how it works, the homebuying routine does get easier, since many of the fundamentals haven’t changed in the last few decades. The first time out, for example, you may not realize just how important a good credit rating is to your getting the right loan at the right interest rate, but after owning a home for several years and making timely payments, that score will improve and the next time out you’ll be that much closer to reaching your goals.
Unless money is no object and your choice of locations is completely flexible, the odds that you’ll find the perfect home at the right price and in the right place are pretty slim. Add in that the home search can be a timeintensive process, and the idea of perfection slips a little further away. A big part of buying such a large investment—particularly one that’s already standing and that’s been lived in by someone else—is the need for concessions that result in a good purchase decision, and that don’t necessarily address your every single want and need.
According to NAR, most buyers face budget limitations when shopping for a home. Oftentimes buyers must spend more money or be forced to compromise on their vision of a ‘‘dream home.’’ In 2003, 65 percent of buyers reported compromising on at least one characteristic of their home purchase. Buyers were most likely to compromise on the size of the home they purchased (21 percent) or the lot size (18 percent). Buyers were less inclined to compromise on neighborhood quality (12 percent) and their budget for a home purchase (14 percent).
You might, for example, give up that spare bedroom in exchange for a larger backyard for your family to play in. Or, you could cross that inground pool off of your wish list and instead purchase a town home that offers a community pool for all owners (a great way to meet and mingle with new neighbors!). Instead of that lake-view condo, opt for a unit with a garden view and save a few hundred dollars a month on your mortgage payment. Avoid ‘‘keeping up with the Joneses’’ and instead balance your and/or your family’s unique wants and needs.
As you make compromises, be sure to address all of the ‘‘hot buttons’’ that you listed earlier in this chapter. Keep the list handy and maintain a record of what you’re giving up in exchange for what to determine if the concession is worth it. Who knows, you may ultimately find your own dream home in the most unlikely of places.

How much home can I afford?

2010-08-31T20:39:00.000-07:00

Just how much home you can afford relies on two factors: how much money you can borrow, and how much down payment you have available to put down on the home. Thanks to the Internet, you no longer have to sit down with a lender to get an idea of what you can afford, as there are several online resources where buyers can key in a few numbers and get an estimate of how much home they can afford.
Ginnie Mae (a corporation within HUD) has a homeownership mortgage calculator on its Web site at www.ginniemae.gov/index.asp. You key in your gross income and liabilities and the site will spit out a rough estimate of what you can afford. If you want a more detailed estimate, click on ‘‘detailed estimate’’ and key in more parameters to obtain a more precise calculation for your specific region. Bankrate Inc., an Internet consumer finance marketplace that owns and operates a portfolio of Internet-based personal finance channels, also has a good ‘‘How much house can you afford?’’ calculator online at www.bankrate.com/brm/calc/newhouse/cal culator.as.

Using the following parameters, the calculator will produce two estimates for you: affordable mortgage payment and affordable home amount.
❑ Gross Monthly Income: Wages, investments/dividends, alimony received, other income
❑ New Home Info: Down payment, loan term (use thirty years if you aren’t sure), interest rate (use 6.5 percent if you aren’t sure), homeowners insurance (estimate $800 to $2,000, depending on size of the home, location, and your own insurance record), and real estate taxes (check your local tax collector or property appraiser’s Web site for last year’s taxes assessed on a property that you might be interested in)
❑ Monthly Expenses: Car payment, alimony paid, credit card payment, other debts

A word of caution: While this process will give you an idea of what size home you can afford (provided you’re forthcoming with the numbers), don’t confuse it with a ‘‘preapproval’’. A prequalification estimate basically states that you’re qualified for a loan based on a few preliminary questions, but it doesn’t commit a mortgage lender to approve the mortgage. The mortgage lender will still have to conduct a complete review of your financial situation, including your credit report, income, and employment history. The preapproval process is very thorough, with the lender doing much of the work needed for a full-fledged approval, but without your having to identify an exact property for purchase. A lender’s prequalification process will give you a ballpark estimate of how large a mortgage you can afford. It doesn’t matter which lender you obtain this from, since nearly all of them use the same criteria when determining what size monthly mortgage payments, property tax bill, and homeowners insurance you can handle. This will give you a good idea of the maximum mortgage amount you can afford and will help you focus your house search on properties within your price range.

How do I determine whether a neighborhood is right for me?

2010-08-31T20:37:00.000-07:00

One great way to experience a neighborhood before buying is by driving through it at different times of the day. If you’re looking for evidence of other young families, for instance, drive around either after school or on weekends, when children are most likely to be out playing. If you’re concerned about noise from a nearby intersection or other neighbors, cruise through late at night, watching and listening for any signs of disturbance that might end up being a nuisance.
You can use a similar drill for condos, town homes, co-ops, and other types of detached housing, with one advantage: Because the units are usually close together—and sometimes joined by a common area—you can more easily talk to a few current owners. When doing so, don’t be afraid to ask how satisfied they are with their own home choice. Tell them that you’re thinking about buying a home in the development and ask them some or all of the following questions to get a feel for the development. If any of the answers or comments send up red flags, dig a little deeper (perhaps with another owner) to find out if the complaints are valid and worth noting:

❑ How do you like living here?
❑ Have you run into any major problems or issues in the development or surrounding community?
❑ Do the residents tend to be loud, quiet, or in between?
❑ Are there children living in the development?
❑ Does the area have any major issues with crime?
❑ Is the condo management firm or homeowners association receptive to its residents who have problems or issues?
❑ Would you recommend this development to one of your friends or family?

When shopping for a home you’ll also want to look at the positioning of the home. If you have small children, for example, then a cul-de-sac would be a perfect choice, even if the homes on that particular part of the street don’t fit your perfect home profile. Think about it: Would you rather have a fireplace or peace of mind knowing that your child is riding a bike on a street where few cars drive through? Also, if you have a large extended family that owns more than two cars, you might want to avoid a corner lot with a small driveway, since parking those cars on the grass is probably not an option.
Last but not least, talk to someone or do a bit of research on the neighborhood and surrounding community. Find out if it’s a part of the city or an unincorporated area of the county (the latter usually means lower property taxes and fewer regulations, but also fewer city services). Ask about future infrastructure projects (you don’t want to find out a month after closing that a fifty-foot-high cell phone tower is being constructed ten feet from your property line), and any such projects that your condo or homeowners association might be ready to hand out hefty assessments for, like a $5,000 per-unit assessment for new roofs. All of these issues should be factored into your choice of location and used to help make the best decision.
When choosing a location, also remember that not everyone can afford the perfect home in the perfect neighborhood, but that compromising on both ends just might find you living in a nice home in a good neighborhood. In the long run, most buyers find it better to live in a less-than-ideal home in the right location, rather than the other way around.

How important is location in the homebuying process?

2010-07-31T08:55:00.000-07:00

There’s a saying in the real estate profession: location, location, location. As a new home buyer, you’ll want to integrate those words into your search process because location will play an integral role in your selection. Going beyond the home itself, factors like area schools, neighborhoods, quality of life, surrounding businesses and developments, and roadways will also play an important part in your ultimate decision. Don’t make the mistake of falling in love with a home that’s built twenty feet away from a proposed power line, or a beautifully kept home in a neighborhood where the rest of the properties are run-down. Do your research, check out the specifics on location before making any buying decisions, and you won’t be sorry.
Where your new home is located is probably more important than the home itself, since structures can be changed but the location—and its surroundings— cannot. Start from the top down during your selection process, looking first at the city or town, then at the communities, the neighbor hoods and subdivisions, and ultimately the specific locations of the homes within those neighborhoods or subdivisions. Where your home is located can be just as important as its appearance and size. If you ignore location issues like proximity to a particular school district, a job, or a bus line, even the nicest home will lose its luster when you become dissatisfied with the surrounding neighborhood.
Once you’ve determined which city, town, or suburb you’d like to live in, you’ll want to identify one or more neighborhoods that suit your tastes. Look at factors like crime rates, school quality, commuting time to and from work, and amenities offered by the neighborhood. Do you have a family with young children? Then you’ll also want to make sure there are other children in the neighborhood. Just as you created your home ‘‘hot button’’ list, you can list all of the criteria that are important to you and focus only on neighborhoods that meet those criteria.

What should I consider when looking at starter homes?

2010-07-31T08:54:00.000-07:00

If you’re in the market for a starter home, ask yourself the following questions during your review process:

Am I generally pleased with the condition of the home?
If I had to move into the home as-is, would it be livable?
If not, can I make some repairs and upgrades (such as painting, removing or replacing wallpaper and carpeting) myself?
Do I need to hire someone to help bring the house up to speed, and if so, can I afford the extra expense?
Is the neighborhood safe?
Is my family going to fit in with the neighborhood?
Does the area offer the quality of schools that I’m looking for?
Could I live in this home comfortably for three to five years, or will I grow out of it sooner?
If a starter home isn’t the right fit, can I afford the down payments, mortgage payments, repairs, maintenance, and taxes on a larger, more suitable dwelling?

Starter homes can be a perfect ‘‘starting’’ point for first-time home owners who are willing to put some elbow grease into repairs and customizations that will make the home ready to live in, or who don’t mind sacrificing some square footage (or that two-car garage) in order to live within their means and ultimately save for a larger home sometime down the road.

What is a starter home?

2010-07-31T08:52:00.000-07:00

A starter home is a small, inexpensive home suitable for first-time home buyers. The home may be in move-in condition, or it may need some tender loving care to make it livable. Either way, these are generally single-family homes that are considered good starting points for families or individuals purchasing their first home. Find out what price points the starter homes in your region are demanding by looking through your local Sunday paper (look for adds that say things like ‘‘needs TLC’’ and ‘‘good starter home’’), searching the Internet, or consulting with a local real estate professional. The concept of the starter home is simple: You buy a small, inexpensive home (typically when you’re single or recently married) with the intent of selling it within a few years. By that time, your income will have grown (allowing you to purchase a larger home), or you’ll need more space for a growing family. The idea works well for some, who improve the home and within a few years end up making money on the sale and ‘‘moving up,’’ and not so well for others, who outgrow the starter home too soon and end up losing money if the property hasn’t appreciated.
According to 2003 NAR Profile of Home Buyers and Sellers, first-time buyers were less likely to buy a detached single-family home than were repeat buyers. Instead, they more frequently purchased lower-cost, ‘‘starter homes’’ such as townhouses, row houses, or condos. A greater proportion of new-home buyers (82 percent) than buyers of previously owned homes (78 percent) bought detached single-family homes. Starter homes run the gamut from well-kept, cozy dwellings to fixeruppers and everything in between. From modern to antiquated, some homes may need a lot of work and effort to make them livable, while others may be small, yet livable. Don’t expect a lot of bells and whistles with these homes, which are often a good match for someone who is either handy with repairs and upgrades or willing to shell out a few bucks to have someone else do the work.
Starter homes are generally priced anywhere from $40,000 to $120,000 and up, depending on where you’re located in the country. It might be hard to find a starter home under $120,000 in a city like Miami, for example, but easy to find a $65,900 three-bedroom, two-bath home in Fargo, North Dakota. Prices on most of these homes have spiked in recent years, thanks to a new demand spurred on by the low mortgage interest rates of the 2000s, but there is still a category of homes that are thought of as perfect choices for first-time home buyers.

Understanding House Equity

2010-06-29T21:04:00.001-07:00

How long you plan to stay matters because real estate investments aren’t liquid, and because they could be either easy or difficult to sell (depending on market conditions and other variables). It’s best to choose a home in a location where you’re going to stay a while. If something comes up (a family change, a job relocation, etc.), you can always put your home up for sale, but it’s best not to count on a quick sale before you even get into your new house.
The longer you own a home, the more equity you establish in your property. Studies show that most people stay in their homes for five to seven years. For the first few years, however, nearly 100 percent of your mortgage payment will go toward interest. Mortgages are ‘‘front-loaded’’ on the interest side, which means lenders use your payments primarily to pay down interest before applying it to the principal amount. This is good if you’re itemizing tax deductions, but bad if you’re counting on a quick accumulation of equity during those early years. Also remember that unexpected personal or family crises (medical emergency or a death in the family) or change in lifestyle (a new job in a new city) could force you to sell your home long before you had anticipated.

How long should I plan to live in my new home to make the investment worthwhile?

2010-06-29T19:47:00.000-07:00

The market will dictate the purchase price and length of time to sell, and if you haven’t been in the home very long, you could end up losing money on the deal in your urgency to sell. It’s something to think about before you start your house hunt, since the mobility that renting provides can be an advantage when it comes to dealing with such issues. The length of time you expect to own your home also affects your down-payment and closing strategies, as well as the type of mortgage you choose. For example, a fifteen-year mortgage will require larger monthly payments than a thirty-year loan, but you’ll see your principal loan amount reduced sooner if you take the shorter-term loan. If you plan to stay in the house five years or less, you may want to consider an adjustable-rate mortgage (ARM)—which offers lower interest rates and helps the owner start paying off the loan principal balance sooner—but if you plan to live in your home for the next ten to twenty years, you may want to lock into a fixedrate mortgage.
There are also prepayment penalties to watch out for (charged by the lender if the loan is paid off before maturity), and if you sell your home before the loan matures, you must also pay the remaining balance of the loan.

How do I start my Internet home search?

2010-06-29T19:10:00.000-07:00

A good starting place for your Internet search is a national Web site like Realtor.com, which essentially ‘‘aggregates’’ listing information from agents across the country and makes a limited amount of that information available to potential buyers. Once you’ve narrowed down a few homes, you can contact directly the agents who have listed the home, or you can put your own agent on the case by handing over the MLS numbers or listing information on the specific properties.
If you’re looking for an FSBO, try a Web site like BuyOwner.com, For SaleByOwner.com or Foxtons.com, where you can key in geographic preferences and home qualities to see what type of properties are being offered directly by owners in your region.
Realizing that home buyers are more sophisticated and accustomed to having information at their fingertips, most agents and sellers these days create Web sites that include basic information about the home (general location, asking price, square footage, number of bedrooms/baths, etc.), one or more still photos, and a virtual tour that will give you a 360-degree view of one or more rooms. Combined, these various tidbits of information can help you decide whether the home is worth seeing in person.

Can I find my home on the Internet?

2010-05-30T22:20:00.000-07:00

The Internet has become a terrific starting point for folks like you who are looking for a home. In fact, in its 2003 Profile of Home Buyers and Sellers, the NAR found that 65 percent of home buyers used the Internet to start their home search, up from 2 percent in 1995. With the advent of virtual tours (where you can view an entire home, room by room, online), digital photography (still photos of the home), and search tools like the online MLS services that many brokerages offer on their Web sites, the Internet has become a consumer-friendly tool useful for culling out undesirable homes and pinpointing those that would make good candidates. The truth is, while technology has put information and resources into the hands of more consumers, it hasn’t really made the homebuying process itself that much easier. So while you might be able to narrow your choices down to six homes by previewing them on the Internet (instead of driving around the neighborhood on a Sunday with your real estate agent), you will still need to touch, smell, and feel a home before making the ultimate buying decision. Whether that means you’ll have an agent, an attorney, or just your spouse by your side when you go into a house is your choice.

How do I choose a buyer’s agent?

2010-05-30T22:19:00.000-07:00

Choose a buyer’s agent with the ABR or EBA (Exclusive Buyer Agent) designation after his or her name; ‘‘EBA’’ means the agent doesn’t ever represent sellers. The ABR designation is awarded to real estate practitioners by the Real Estate Buyer’s Agent Council (REBAC) of the National Association of REALTORS who meet the specified educational and practical experience criteria. The National Association of Exclusive Buyer’s Agents (www.exclusivebuyersagents.com) has a ‘‘find an agent’’ section. The group says its agents provide full fiduciary services to their clients and advocate the right of consumers to be fully represented when purchasing real estate.
The National Association of Exclusive Buyer’s Agents suggests that all future home owners ask their agents the following questions before making their selection:
❑ How long have you been representing buyers as a buyer’s agent?
❑ Do you, or the company you are with, take listings? Do you practice dual agency?
❑ What percentage of your personal business and what percentage of
your company’s business is representing buyers? Is the balance of that representing sellers?
❑ Will you try to sell me one of your listed properties before you show me listings from other real estate companies?
❑ Do you have information about FSBO properties?
❑ How many buyers have you successfully represented in the last six months? Can I have the names and phone numbers of three to six of your most recent buyer clients?
❑ What training have you taken that specifically relates to being a buyer’s
agent and representing buyers? Do you have any specific buyer’s agent professional designations?
❑ Do you know the six fiduciary, client-level duties you would owe to me if I chose to hire you as my buyer’s agent? (These duties are confidentiality, accountability, reasonable skill and care, undivided loyalty, obedience to lawful instructions, and full disclosure.)
❑ What is your commission? Or do you have hourly rates or a set fee?
❑ Will there be a written contract?
❑ Do you have a list of home inspectors, insurance agents, and reputable lenders for me to consider?
❑ What clauses will you incorporate in our offer to protect me as a buyer?
❑ How will you help me save money?
❑ Specifically, how will you protect my interests, and why should I hire you rather than another agent?

How are Realtors paid?

2010-05-30T22:17:00.000-07:00

Today’s Realtors operate in a number of different ways, although most ‘‘traditional’’ agents (from companies like Coldwell Banker, Century 21, RE/MAX and ERA) work on a certain percentage (usually 6 percent or 7 percent) of the home’s sales price, paid by the seller at closing. Buyer’s agents work in the same manner (the buy-side and sell-side agents split the commission 50/50) and operate as fiduciaries or ‘‘trusted advisers’’ in the transaction.
The good news for you, the buyer, is that most Realtors turn to the seller for payment at the closing table. The transaction coordinator (see Question 56) usually does too, unless it’s the buyer who enlisted her services and therefore is the person responsible for payment

What is the difference between a buyer’s agent and a seller’s agent?

2010-04-26T19:41:00.000-07:00

Traditionally, Realtors only represented sellers in the transaction, but in the last few years a significant number of agents have become what are known as ‘‘buyer’s agents.’’ These individuals often have the initials ‘‘ABR’’ after their names (Accredited Buyer Representative) and specialize with helping buyers find the homes of their dreams.
Buyer’s agents are probably one of the best things to happen for home buyers in a long time. Many will ask you to sign a buyer’s agency agreement before they take off with your hot button list in hand to look for suitable properties. The agreement is not exclusive and typically states that the agent will work to find and secure the perfect home for you. The beauty in all of this is that the agent’s commission comes out of the seller’s pocket, so you don’t have to pay for the valuable services that they offer. If, however, you decide to purchase a ‘‘for sale by owner’’ (FSBO) property and wish to have representation on the sale, most buyer’s agents will negotiate a fee with either the seller (most commonly) or buyer. Because they don’t typically list properties for sale, most are eager to work with qualified buyers who are ready to buy now, rather than later.
Here are a few advantages of working with a buyer’s agent:

Someone in Your Corner: A buyer’s agent works on your behalf, unlike seller’s agents, who are accountable by law to the seller. Buyer’s agents can not only help you pick out a home, but can also negotiate your best interest and spot potential hurdles before they become real problems.
Benefit of Experience: An experienced agent will look objectively and carefully at a property, spot potential problems, and point out material defects as well as the positives of a property.
Negotiating Prowess: A good buyer’s agent will help you draw up an offer based on recent sales in the neighborhood or community, thus allowing you to make better-educated decisions during the negotiating phase.

How can emotions affect the homebuying process?

2010-04-26T19:40:00.000-07:00

While it’s true that you’re about to make one of the biggest financial decisions you’ll ever make in your life, it’s important not to allow emotions to get the better of you during this process. When you walk into that absolutely perfect home, for example, bottle your enthusiasm a bit and instead look at the structure as an investment instead of a place where you’ll spend the next ten or twenty years of your life.
When you see the sign go up on that home around the corner that you’ve always dreamed of living in, try to approach every home with a critical eye and examine every inch, without shame. The seller who knows that a home has you by the heartstrings could use that knowledge to ask more than a fair price and/or avoid making necessary repairs prior to closing. Once you’ve given the home a critical review, have a home inspector do the same (should you decide to make an offer and sign a purchase agreement on it). Doing so will save you both money and grief in the long run.

How do I determine my housing needs?

2010-04-26T19:38:00.000-07:00

Start by not letting yourself get overwhelmed by the choices and by not getting too emotional about the process. Look at it as an investment, and treat it as if you were making an investment in your family’s future. With that in mind, use the information gathered during your market research or from a real estate agent to see what types of homes are available in your market, then whittle down the choices based on your own preferences. For example, do you need a single-family home with a large yard? Would you prefer a lower-maintenance condominium? Do you need an extra bedroom for a home office? Do you have a preference on the number of bathrooms? Having all of these details nailed down before you start house hunting will result in a much more focused, efficient search.
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There are many variables that will come up during the homebuying process. Existing homes can be the biggest challenge, since they were built for someone else—someone who might not share your tastes. To avoid getting overwhelmed when you see the home that looks perfect on the outside but that has rooms painted purple with carpeting to match, ask yourself the following questions first:

How many bedrooms do I want?
How many bathrooms do I want?
What size kitchen would I prefer?
Do I want a new home or an existing home?
What type of home do I want? Single family? Town home? Condominium? Co-op?
How important are outdoor amenities like decks, lanais, pools, and patios? And, am I willing to add any of these if they don’t come with the existing home?
How important are indoor amenities like fireplaces, vaulted ceilings, and crown moldings?
Am I willing to do fix-up work (either myself, or by hiring someone) in the home such as painting walls, to make it right for me? (If not, then a home in ‘‘move-in condition’’ is your goal.)
How important is the home’s proximity to the following: other houses, the street or major intersections (for the noise and safety factor), my place of work, my children’s school, and our favorite activities (community pools, movie theaters, workout centers, etc.)?

Answering these nine straightforward questions should help you create a rough sketch of your desired home, and it should give you some indication of your ‘‘home hot buttons’’ (those issues of utmost importance to you, typically those that could ultimately make or break the deal). That’s not to say you can’t change your mind about wanting a pool if you find the right house with a large backyard with no pool, but it will give you some solid parameters to use when either viewing homes on your own or

How can I determine my local market conditions?

2010-03-30T02:33:00.000-07:00

Timing counts when it comes to buying a home. The last thing you want to do is get stuck in the middle of a hot seller’s market, but the good side is that real estate—like all economic forces—is cyclical. A way to find out what your market is like on your own is by flipping through the Sunday real estate section of the newspaper for a few weeks, running your finger down the list of single-family homes and attached housing options (condos, town homes, etc.) available in your targeted area. You can also log on to a local real estate brokerage’s Web site to gain access to certain parts of the MLS (multiple listing service, where all of the properties for sale in an area are compiled) system via a system known as ‘‘broker reciprocity.’’ Use the service by first finding a local real estate site, then clicking on a link that will be labeled something like, ‘‘view all local MLS listings.’’ After putting in some parameters (house size, number of bathrooms, etc.), you’ll get a listing of homes available in the area. Individual real estate offices, agents, and companies like BuyOwner.com (www. buyowner.com) also list homes for sale, searchable by geographic region.

Understanding Buyer’s and Seller’s Market

2010-03-30T02:31:00.000-07:00

A seller’s market exists because the quantity demanded by the buyers at a given market price exceeds the quantity supplied by the sellers at that price. In real estate, that means buyers are seeking out more of the goods than sellers are willing to sell, so sellers can pick and choose whom they sell to among prospective buyers. Buyers are lucky to find a desirable home at the right price in such a market.
A buyer’s market is just the opposite, and one you should be hoping for as you go out in search of a home. It exists because the quantity supplied by the sellers at a given market price exceeds the quantity demanded by the buyers at that price. In this situation, sellers are seeking to sell more of the goods than buyers are willing to buy, so buyers like you can pick and choose the goods purchased from the sellers, who are typically eager to unload their homes at a fair price.

What’s the market like for first-time home buyers?

2010-03-30T01:19:00.000-07:00

The answer to that question depends on a few different factors, like your geographic location, whether your region is experiencing a ‘‘seller’s’’ or ‘‘buyer’s’’ market right now, and what the average home sales prices are. Working in your favor are low mortgage interest rates, flexible loan programs, and a variety of homes to select from as ‘‘move up’’ buyers (those moving from starter homes to larger dwellings) also take advantage of low interest rates to upgrade their own living situations. Also in your corner is the fact that the supply of housing—including single-family, multifamily, and manufactured housing—is expected to increase by nearly 2 million units (or 1.6 percent) in 2004 alone, according to a Merrill Lynch & Co. housing report. That means more available properties to purchase, and a better selection of housing options for first-time and experienced home buyers.
Working against the first-time buyer are property appreciation rates that range from zero to a staggering 25 percent nationwide, depending on where you’re located. In some areas, that kind of appreciation has bumped up the prices of starter homes to $75,000 to $150,000 (in some metro areas that number can be much higher) while stoking a great demand for such properties. In metro areas like Houston and Miami, and throughout much of the State of California, such properties are either hard to come by or hard to purchase, since they sell within a day or two of hitting the market.

Challenges of Buying a House

2010-02-25T07:53:00.000-08:00

Any number of challenges can crop up as you move through these various stages of the homebuying process. The title company might uncover liens on the home that need to be cleared up, you and the owner may not come to terms on which repairs she will rectify prior to closing, or the home inspector may uncover an expensive structural defect like toxic mold. The key is to surround yourself with competent professionals (real estate agents, title companies, appraisal firms, lenders, and even attorneys—which are required in some states) and books like this to help you navigate the process.

Steps of Buying a House

2010-02-25T07:51:00.000-08:00

As for the homebuying process itself, it generally goes something like this:
❑ Consult with a lender or real estate professional about how much home you can afford (obtain a ‘‘prequalification’’ estimate).
❑ Select a region and/or community where you’d like to live.
❑ Decide what type of home you’d like to purchase (single family? town home? condominium? co-op?).
❑ Either work on your own (using the newspaper, Internet, and ‘‘for sale’’ yard signs) or enlist the help of a buyer’s real estate agent to see what on the market fits your criteria.
❑ Find your home and make an offer.
❑ Negotiate the price and fine points, such as repairs that need to be made by the current owner.
❑ Determine a closing date and set the wheels in motion (start packing!).
❑ Finalize your financing while home inspectors, appraisers, and other required inspections or reports are completed.
❑ On closing day, take possession of your new home and start moving your stuff in!

How difficult are the financial aspects of purchasing a home?

2010-02-25T07:50:00.000-08:00

The factors that mortgage lenders look at when doling out money are far different from the criteria landlords use to rent out a property. Let’s compare: When you rent an apartment, a decent credit rating and steady income source usually result in a lease signing and the forking over of first and last month’s rent. Within a few days, you’re in your new apartment. Home buying is not as simple. The process itself is time-consuming because there’s more at stake and because mortgages simply aren’t as easy to obtain as leases.
Still, the overall consensus is that the homebuying process is easier than it was, say, ten years ago. The fundamentals are the same: You need some cash reserve for a down payment and/or closing costs; you need the cleanest credit history you can provide (a variable that factors heavily into the interest rate that a lender will offer you); and you need a source of steady income that proves your ability to pay your monthly mortgage payment.
Everyone from mortgage lenders to real estate agents has created programs for first-time buyers like yourself, who need a bit more hand-holding during the purchase process. Still, the biggest challenge that most first-time home buyers face is the same as it was ten years ago: scraping up the money for the down payment. Most lenders offer an array of lending options. Wells Fargo of San Francisco, for example, is the nation’s top originator of residential mortgages and offers programs that include closing cost saver, down-payment assistance services, as well as 3 percent and 5 percent downpayment programs. Visit the lender online at www.wellsfargo.com/mort gage, to read more about the homebuying process, mortgage options, and getting preapproved for a mortgage. That’s the financing aspect of the purchase.

When You Should Buy a Home?

2010-01-28T06:09:00.000-08:00

Overall, home ownership can give you a feeling of accomplishment in reaching a goal while also helping you establish deep roots in your community. Unlike renters, who tend to be more transient in nature and less conscientious about their physical surroundings (they don’t own them, after all), home owners have plunked down one of the biggest investments of their lives in their communities.
The Department of Housing and Urban Development (HUD) advises first-time home buyers to ask themselves these questions before making their decision. If you can answer ‘‘yes’’ to the following questions, HUD says you’re probably ready to buy your own home:

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

On the downside, home ownership does bring with it significant responsibilities that renters generally don’t have to deal with. Once you’ve walked away from the closing table with those keys in your hand, you can no longer dial up the landlord when a pipe breaks or when the furnace stops producing heat. You are your own ‘‘go to’’ person on the chain, which means outside chores like cutting grass and cleaning roof gutters are suddenly in your lap. Owning a home also means not being as mobile as you once were, since selling a home and giving thirty days’ notice to a landlord are two completely different things.
Here’s a rule of thumb for renters wondering if ownership is right for them: In general, the longer you are likely to remain in a residence, the more advantageous it is to own rather than rent. If your career, family status, and other variables are likely to be stable for the next three to five years, then your housing needs should be equally stable. That’s not to say that a mobile professional shouldn’t buy a home (in fact, many relocating professionals never rent and simply buy and sell as they make their way around the country to different positions), but it does give you something to think about before making your decision.
For some folks, renting is going to be the right choice. For others, the positives of owning their own ‘‘home sweet home’’ will far outweigh the negatives.

Why should I buy a home?

2010-01-28T06:05:00.000-08:00

Home ownership is one of the key components of the American Dream and a universal symbol of financial stability. You may be shelling out more money per month for a great apartment, but it’s still not the same as owning a home, which is associated with stability, security, and even wealth. The National Association of Realtors_ (NAR) says first-time home buyers generally buy homes because they are (in order of importance):

1. Tired of paying rent to landlords
2. Ready to tap the tax advantages associated with home ownership
3. In need of more living space, be it indoor, outdoor, or both Of course, home ownership brings with it both positives and negatives that must be considered, particularly if this is your first time out.

Despite the challenges it presents, home ownership is undeniably one of the most sought-after dreams that Americans pursue on a daily basis.
If you’re not sure whether home ownership is the right choice for you, take out a piece of paper, draw a line vertically down the middle of it, and write the words ‘‘pros’’ and ‘‘cons’’ as headers on each column. Then, take your time comparing the good and the bad aspects of your current living situation against the pros and cons of home ownership. If things are too heavily weighted in either column, it could be time to buy a home. For starters, right now you’re probably putting money in your landlord’s pocket—and helping him pay down his own mortgage—without reaping any of the benefits of that money. You’re not building equity in a home, and you probably have little or no say in the permanent decor, landscaping, and repairs on your home, even though you live there. If the home were yours, you’d bemakingmodifications (some of which can add value to the property), enjoying your own wall paint colors, and tapping one of the best tax advantages that Uncle Sam affords Americans: deducting points paid on a home purchase, mortgage interest paid (which can be a pretty hefty sum, particularly during your first few years as an owner), and property taxes. And because properties nearly always appreciate in value, you would also be building a nest egg for yourself that can be tapped when needed (in the form of, say, a home equity line of credit) or saved for future use.
As NAR discovered in its survey, people also buy homes because their lifestyles change and families grow, which means the need for larger yards, more bathrooms, or extra bedrooms. Those who do go in search of homes often find a much better selection than their renting counterparts, since single-family homes, town homes, condominiums, and co-ops come in all shapes and sizes. Other reasons for purchasing a home include the ability to build or improve a credit history, an investment in your future, and more control of your surroundings.

Mistake _15. Not Checking Out the Homeowners Association First

2010-01-28T06:02:00.000-08:00

In most states, homeowner associations (HOAs) have broad powers to enforce the rules and collect fees and assessments. If you don’t follow the rules or pay your monthly fees, they can put a lien on your property and ultimately foreclose.
Having a strong HOA is a double-edged sword. Strict rules can keep the project looking uniform and inviting, thus maintaining its value. The opposite edge is that you may not like the rules, and changing them is not always easy.
To change HOA rules usually entails getting like-minded people together and electing a new board. If you can get a majority of the homeowners to go along with your proposals, great. If not, you can try again next election.
So you don’t end up in a project with rules you don’t like, get a copy from the association secretary and read them over carefully. Also find out what other rules have been proposed but not yet voted on. This will give you a feel for what direction the homeowners in the project are headed.

Mistake _14. Not Getting a Professional Home Inspection

2009-12-29T05:08:00.001-08:00

Steve and Tiffany were so excited to find the charming brick bungalow on a tree-lined street. It was in an area they had been looking at for several months and it had just come on the market that morning. Their enthusiasm was high as they went through the home, noting all the wood trim and spacious floor plan of a 1940s bungalow. It was exactly what they were looking for. A home where they could strip off the layers of paint and wallpaper and restore its former charm. Since Steve and Tiffany could come up with a 20 percent down payment, they opted to finance conventionally to avoid PMI costs. The deal closed three weeks later and two happy buyers moved in ready to start their renovation project.
It didn’t take long before the new homeowners discovered the problems. The gas company tagged the furnace because the service tech suspected it had a cracked chamber and the vent pipe was too near a wood joist. Other problems, typical of older homes that haven’t been upgraded, added up.
Unfortunately, the buyers had spent most of their money buying the home and didn’t have funds for the major problems they encountered. Interestingly, Steve and Tiffany felt that the bank’s appraiser would find any problems and list them on the appraisal. In reality, an appraiser is interested only in the overall value of the home as compared to others recently sold in the neighborhood. The appraiser’s job is to ensure the home is worth what the bank loans on it. So what should Steve and Tiffany have done differently? First, they should have hired a profession inspector. The inspection report would have outlined exactly what problems lurked under the rafters, joists, and in the dark spots of the basement. The buyers will know the condition of the appliances, furnace, water heater, and plumbing The buyers will have a list of problems and about how much it will cost to fix them. They’ll go into the sale with both eyes open and won’t have to max out their credit cards on unforeseen repairs.

Mistake _13. Not Getting a Buyer’s Broker Early On

2009-12-29T04:59:00.000-08:00

A good buyer’s broker on your side is the best thing you can do to find the home you’re looking for and get the best deal. These agents know the market, the best neighborhoods, and what type of loan will best fit your situation. You’ll save a lot of wheel spinning if you get an agent in the beginning. The best part is that the fee is typically paid by the sellers, who are glad to pay it to get their home sold to a qualified buyer.
Max and Andrea were first-time homebuyers who had been looking for three months and were getting frustrated. Every weekend they circled ads, toured open houses, and called on for-sale signs. The bewildering array of choices only added to the confusion. Finally, one of Andrea’s coworkers suggested they talk to Carol, an agent she knew through her school’s PTA.
The first thing Carol did when she met with Max and Andrea was to ask them if they were working with a mortgage lender. When they said no, she told them that step number one in buying a home was to find out what you could afford. She then arranged for them to meet with a mortgage lender to get the process started. A couple of hours later, the lender called Carol and told her that Max and Andrea looked pretty good. There were a couple of small credit problems he had to clear up, but that shouldn’t be too difficult, and they could go up to about $150,000.
Meeting with the buyers again, Carol quickly determined what type of home, the number of bedrooms and amenities they wanted, along with areas within a reasonable commuting distance of work. The next step was entering the information into the multiple-listing database. Since this database is updated continuously, Carol limited the search to homes that had come on the market in the last two weeks. She knew that the best homes don’t last too long, so those are the ones you want to look for first. If the first list doesn’t produce a winner, the search is extended back to, say 30–60 days and so on. The longer a home has been on the market, the greater the chances are that it’s either overpriced or a dump where the buffalo roam. In the first search, Carol pulled up 14 homes that fit the buyers’ criteria, and the search was on. The first eight homes they looked at over the next two days were nice, but didn’t quite fit. On the third day of looking, however, the tenth home on the list turned out to be a winner. It was what the buyers were looking for. Max and Andrea quickly made an offer and Carol presented it to the sellers that evening. It was accepted with a closing scheduled in three weeks.
It’s true you can find a home on your own, but why spin your wheels and go through the hassle when you can have the services of a professional who will make sure you make the right moves? So, how do you find a good broker? Ask other people you know who have bought homes if they can recommend a good agent. Excellent sources are mortgage lenders and title people. They know who are bringing in the deals and how good a job they’re doing for their clients. Once you find a good realtor, it’s in your best interests to work with her on an exclusive basis. You may be asked to sign a Buyer’s Agency Agreement. If you specify that it can be canceled by either party, you’ll have a way out if you find you can’t work with that agent.

Mistake _12. Not Being Able to Make a Decision

2009-12-29T04:53:00.000-08:00

When you’re searching for the right house, you should take your time and look at as many homes as you need to in order to get a good feel for the market. Once you’ve narrowed down your choices and decided on your dream home, then it’s time to move swiftly. Many first-time homebuyers lose a house or two they like before they realize that they have to move quickly. Indecision can cost them the home of their dreams.
Todd and Alex found this out when they were looking for their first home. After going through more than two dozen houses and not seeing anything that they liked, they were getting a little discouraged when their realtor called about a home that had just come on the market. When Todd and Alex drove by, it was the home they were looking for, an updated two-bedroom cottage with newly painted yellow siding, full basement, and a detached double car garage. It had been on the market less than a day. Their agent wanted them to put together an offer immediately, because he didn’t think it would be on the market long.
But, as much as they wanted the home, Todd and Alex hesitated. They were scared to make a commitment and wanted to wait until the weekend when their parents could go through it. Unfortunately for them, the weekend walk-through never happened. Another couple also loved the home, made an offer, and the ‘‘for sale’’ sign got a bright red diagonal ‘‘sold’’ sticker.
If you like the home, chances are other buyers will also. It’s not uncommon for a home to sit on the market for weeks with no action, and then suddenly two or three offers come in at the same time. Fear of making a mistake is usually the culprit. The best way to work through this is to talk it over with your broker, lender, or someone who has bought a house before. Once you get it out in the open, it becomes easier to deal with.
Buyer’s remorse is the industry term for this fear, and it applies to not only buying a house but also a new car, appliance, engagement ring, or whatever. Most homebuyers get it somewhere along the way. Knowing that’s it out there lurking and will probably strike when you least expect it should make it easier to deal with when it grabs you.

Mistake _11. Getting Family, Relatives, and Friends Too Involved

2009-11-24T18:20:00.001-08:00

Not involving family or friends can sometimes be difficult. If mom and dad are putting up the down payment or cosigning on the mortgage, then they’ll be a big part of the deal. Otherwise, getting too many opinions can be worse than no opinions at all. Often, those whose opinions you seek will see your enthusiasm and support your decision, even if it’s a bad one. Or people who don’t know what they’re talking about will point out problems and bad mouth a good home.
Greg and Linda found this out when they bought their first home. Naturally, they were excited and wanted to get as many friends and relatives involved as they could. Unfortunately, it didn’t work out quite as they hoped. The more friends they took through the home, the more confused they got. Some friends loved it, others didn’t. One uncle even told them they were making a big mistake by moving into that neighborhood. After a week of getting bombarded by mixed messages, Greg and Linda developed such a bad case of buyer’s remorse that they called their agent and told him they were backing out. They couldn’t stand the pressure and would gladly forfeit their $500 deposit. So how do you avoid this situation?
First, rely on your agent, who is a professional and knows the areas and pitfalls.
Second, trust your own research. You’ve undoubtedly looked at a dozen or so homes in your price range, so you should have a pretty good idea of values and neighborhoods by the time you’re ready to make a decision.
Third, when you find a home you want to make an offer on, the last thing you want to do is involve Uncle Louie or Cousin Joe, who happens to be a contractor. Now matter how good they are, builders or contractors are not professional home inspectors. They may be skilled in their particular trade, but they’re not trained to find the potential problems a professional home inspector is. Don’t make the mistake of trying to save a few hundred dollars by short cutting the inspection process. Having anyone other than a professional inspect the house and give you a written report can come back to haunt you. Going back to the seller with a written report from a pro that the roof needs to be replaced carries some weight. Going back and telling the sellers that Uncle Louie says you have a bad roof doesn’t quite cut it.
The bottom line is to go with the advice of your buyer’s agent and home inspector; they’re the pros who can help you the most. If you want to involve family, relatives, and friends, have a barbecue at your new house after they help you move in.

Mistake 10. Not Protecting Yourself When You Make an Offer

2009-11-24T18:08:00.000-08:00

Many homebuyers, in the excitement of finding their dream home and writing up an offer, forget to add contingencies that will protect them. A contingency is a clause that is added to an offer to make it subject to a certain event. Common contingencies are financing approval, house inspection, closing on a certain date, and replacing a roof. It’s true that some contingencies will weaken your offer, such as selling your house first or adding a list of repairs. But there are others that you need to add to protect yourself.
For instance, one buyer’s agent insisted on putting in a ‘‘subject to final loan approval contingency’’ in her client’s offer, even though he was approved for a mortgage. Unfortunately, two days before closing, the buyer was laid off his job due to downsizing, eliminating any chance of final loan approval. His agent saved him from losing a $1,000 deposit.
The most critical clauses you should consider adding are:
Always make your offer subject to a professional inspection. If you find problems, then you have some leverage to fix them or walk away and get your deposit back.
Making your offer subject to final loan approval will protect you from something unforeseen. For instance, should you get laid off during the loan process, you’ll lose the chance to buy the house but not your deposit.
If you’ve made an offer on a new home and your old home hasn’t closed yet, add a clause making it subject to closing the old house and funding.
You want the offer subject to the home appraising for at least the sales price. If the appraisal comes in low, you’ll have the option of negotiating the lower price or walking away. Along with final loan approval, inspection contingencies are the most important protection for a homebuyer. In one particular case, a home inspector found a cracked combustion chamber in the gas furnace. This can allow carbon monoxide to escape into the house with lethal consequences. The sellers quickly had the furnace replaced and the deal closed. Luckily, a potentially serious accident was avoided. In another case, an inspector found problems with the wiring. It was not only old, but the owner had tried to cut costs and do some rewiring himself. The wiring was not only not up to code but was dangerous, with illegal splices and unconnected hot wires in the attic. In this case the buyers simply negated the offer and got their deposit back because it was subject to a satisfactory inspection.

Mistake _9. Overextending Your Budget

2009-10-27T04:07:00.001-07:00

A lender who pre-qualified you for a loan may tell you that you’re able to buy a $150,000 house. But keep in mind that buying for the full amount you can qualify for may put you out of your comfort zone. It’s not uncommon for homebuyers to purchase the max they’re qualified for and not have the cash flow to decorate or put in the yard for a few years. Some homeowners can handle this, while others are frustrated by having no furniture or a dirt yard. For most people it works out better to go for a smaller house and be able to put in a yard or redecorate.
Now that qualifying ratios are more credit driven than in the past, lenders are approving debt ratios as high as 65 percent. That means that your house payment and all other debts equal 65 percent of your income. Some families can handle that kind of debt load, while others would go bankrupt fast. It’s up to you to look at your lifestyle and realistically determine what you can handle. However, there’s another way to look at the amount of home you can buy.
Some people claim you should buy the most home you possibly can now. As your income goes up and home values rise, you win. You not only save a move but end up with more equity and a home you’ll enjoy more.
This approach worked for many owners who bought in the last 30 years and have watched their homes’ value soar dramatically. Many of these homeowners say they struggled in the beginning, but as their incomes went up, the house payments took a smaller part of their paycheck.
Fred and Rhonda were among those homeowners who bought their home in 1979 for $32,000 and recently sold it $196,000. According to Fred, their house payment in the beginning took nearly a third of his income. By the time they sold it, it was nearly paid off and took less than 10 percent of his paycheck.
Neither way is right or wrong. It just depends on your values and priorities.

Mistake _8. Buying a Property That’s Hard to Sell

2009-10-27T04:04:00.000-07:00

This is one the biggest mistakes homebuyers make. It happens so often that you wonder what buyers are thinking when they sign the purchase agreement. The most common reason given by these homebuyers for why they bought a certain property is that it was such a good deal. It was the biggest house they could find for the price.
Typical hard-to-sell properties are:

Homes that back up to railroad tracks, freeways, industrial areas, frontage roads, etc.
Homes that have been overimproved for the area. A typical example would be a 900-square-foot bungalow with an addition on the back or side. Sometimes it’s a well-planned addition that blends in; other times it’s a tacky add-on. Neighborhoods that have become run down with a high percentage of rentals or foreclosed properties.
Homes that stray too far from the architectural mainstream of what people are buying. Typical examples are round homes, earth-covered homes, and conversions from other buildings, such as barns, silos, and sheds. They can be quaint and even be featured in a home magazine, but selling and getting back the money invested in them is not always easy. Properties that have lot or landscaping problems. Examples are a steep slope for a backyard or a gully; little or no backyard; or no privacy from neighbors. The way a house sits on a lot can also affect value. And of course the most common problem is exterior and interior colors that don’t complement or fit the house. You may love bright blue, but if you paint your house that color, you’ve just reduced its value considerably.

One instance of a homeowner making a property impossible to sell involved a buyer who spent $30,000 adding on to a small (800-square-foot) 40-year-old house. It was done professionally and did blend in. Still, the end result was an older house with an add-on. In this case, the most it would add to the house’s value was around $10,000. Unfortunately, the owners had taken out a second mortgage to do the addition, and now they couldn’t sell the home for anywhere near what they owed.
For them the worst case was that they would have to stay in the home for a few years until they paid down the loan. It could get ugly if they had to move because of a job transfer in the next few years. Another common reason buyers give for purchasing these properties is that they can fix them up or correct the problems. That may be so, but by the time they add up the costs and time, it would have been much cheaper to buy a better house or a better location. When you look at a property and see a negative but feel other features may outweigh the problems, especially price, slow down and think it through. There are red flags waving.

Mistake #7. Buying a Home on Impulse

2009-10-27T03:58:00.000-07:00

Too many new homebuyers and existing homeowners fall into the trap of going through a model home in a new subdivision, and the next thing they know they’ve committed to buy. You need to look at several new home projects and 10 to 20 existing homes before you get serious. New homes are professionally decorated and carefully arranged to push your emotional buttons. Existing homes are sometimes spruced up or staged to do the same thing. Resist the temptation to buy before you look around and know what’s available in your area. If you’re living in a one-bedroom apartment, anything over 900 square feet can look spacious. The impulse to grab the first home that tugs on an emotional string or two is strong. If it’s a new construction, check out the builder’s reputation. Talk to three or four people who bought from that builder and listen to what they have to say. This is also a great way to see what your neighbors would be like.
Mike and Linda were seriously considering buying a home in a new subdivision. They loved the style and floor plan of the models and had even talked to the builder’s lender. But before they committed, they decided to check with several homeowners on one of the first streets built in the subdivision.
They learned there were some unresolved drainage problems and that several homebuyers were considering legal action. Also, many of the callbacks took several weeks to resolve, and then only after repeated calls. It didn’t take long to realize that the builder didn’t have too good a reputation, and further checking revealed he had declared bankruptcy less than a year ago. That was enough for Mike and Linda to write that project off their list and move on. Luckily they did, because that development was featured on a local news channel a couple of months later for the problems the homeowners were having with the builder and developer.

Mistake _6. Buying the Wrong Type of House

2009-09-26T16:15:00.000-07:00

How you can buy the wrong type of house seems hard to imagine, but it’s a major reason many homeowners move. For instance, you love the picturesque look of two-story homes but find having a family room in the basement is not what you want. A ranch with an open floor plan is more what you really desire for family togetherness. Or you buy a home with the laundry room in the basement, and after awhile you find going up and down the stairs is a real pain. You need to look at how the house will function for your family. How do you really live? Do you really need a formal dining room and living room? Would you be happier with an eat-in kitchen and a great room and a den to use as a home office? The house only needs to fit one family—yours.
Sam and Becky made this mistake when they found a charming two-story house in a great neighborhood near Sam’s work. They were renting a home but wanted a place of their own. They made an appointment to see the home and immediately fell in love with the oak trim and crown molding, as well as the formal dining room and updated kitchen. The next weekend they took their three boys ages 5, 9, and 12 through the home. The kids loved the backyard with the big sycamores, but understandably they were not too happy to leave their neighborhood and school. But it was summer, so changing schools was not a problem.
An offer was made and accepted. Thirty days later the loan closed and Sam, Becky, and kids moved into their own home. They were excited and the first couple of weeks were fun. But then, the time came to register the kids for school, and Becky found out the school was two miles away, which meant the kids would have to ride the bus. She also found out that there were no families in the neighborhood with elementary school age kids for a possible car pool. It was a middleaged neighborhood that they soon found out they had little in common with.
It wasn’t long before Becky also realized that the formal floor plan of the two-story wasn’t kid friendly. They wanted to be near the kitchen where mom was, not downstairs in the family room or in the upstairs bedrooms.
About a year later Sam and Becky put the home up for sale and started house hunting again. This time they were determined to be a little wiser and do some homework before they jumped at a home with enticing curb appeal.
It’s important to put some thought into what your family lifestyle is and make a list of important things you want in a home. Don’t be swayed by a cute restored bungalow just like the one you grew up in, if a bilevel fits your family better. Every once in awhile take a deep breath and do a reality check when you’re out house shopping. Try to project what your needs will be in five to ten years from now. And don’t let awesome curb appeal sway you if the floor plan doesn’t fit your needs.

Mistake _5. Not Checking Out

2009-09-26T16:09:00.002-07:00

First-time and experienced homebuyers sometimes fall into this trap. They see a house that pulls the right strings and pushes the right emotional buttons, and they buy. Overlooked is the neighborhood. Questions that should be asked but often aren’t include, ‘‘Are there gangs?’’ ‘‘Is there a neighborhood crime watch group?’’ ‘‘What is the age makeup? ’’ ‘‘Is it a transient neighborhood with a high turnover?’’ ‘‘How are the schools, and is the home on a busy street?’’ No matter how much you like your house, if the neighborhood doesn’t fit your lifestyle, you’ll be selling before too long.
Juan and Rita found this out when they bought a cute, renovated bungalow in an older neighborhood. They soon found out that their neighborhood had several teens who liked to race up and down the street, and three of the homes on their street were rentals. The yards were not being taken care of, and obviously the area was going downhill. Unfortunately, Juan and Rita were not using a realtor when they bought the house. They had driven by the home and noticed a ‘‘for sale by owner’’ sign. The sellers were an older couple who wanted to move to a warmer climate and offered them a good deal on the home. The buyers were so focused on the home that they didn’t even think about the area. To avoid making this mistake, spend a lot of time in the neighborhood before you buy. Check out the different ways you can get to the house you’re interested in. How close are shopping, schools, and other areas of interest? And finally, how quiet is the neighborhood at different times and on weekdays as well as on the weekend?

Mistake _4. Not Having an Exit Strategy

2009-09-26T16:07:00.000-07:00

Many younger first-time homebuyers purchase one-bedroom condos, small two-bedroom homes, and PUDs. They don’t stop to think that in a few years their home will become too small when kids come along and/or their income increases. Too often, these smaller properties are hard to sell and accumulate less equity than homes with two or more bedrooms will.
Nick found this out when he bought a one-bedroom condo after he got his first job right out of college. Hearing that it’s better to own than rent, he visited a new condo project. Smitten by the amenities and lifestyle image the development offered, he bought one and lived there for two years.
After meeting his one and only, Nick got married and the couple lived in the condo for two more years; when a baby came along, suddenly, the one-bedroom became a tight fit. A bigger home soon rose to the top of their priority list and they started looking. There were some nice homes they could afford, but they would have to sell the condo first.
So Nick talked to a realtor and found out that because quite a few units were for sale, getting a buyer was going to be a slow process. To sell the condo, he would probably have to discount it close to what he owed because other owners had dropped their prices to rock bottom. The condo has been on the market a year now, and there haven’t been any offers. Nick is seriously considering renting it out if he doesn’t get an offer in another couple of months. As Nick learned the hard way, before you buy property, think about how long you intend to live there. Remember that the average homebuyer stays in the home about six years. So it’s important to do some what-if thinking before you commit.

Mistake _3. Not Getting a Preapproval Letter

2009-08-24T08:21:00.000-07:00

A branch manager at First American Title Company recently estimated that about 30 percent of the transactions at her branch fall apart or get delayed before closing. The biggest reason is that buyers don’t have their financial ducks in a row before they make an offer. Sometimes this results in lost time and embarrassment; other times earnest money is forfeited, too.
You can solve this problem by contacting a mortgage lender before you start looking at homes. Go through the complete preapproval process and get a letter from your mortgage lender stating you’re good to go for a certain dollar amount.
This preapproval letter gives you the following advantages:

You’ll know exactly how much home you can afford, how much down payment you’ll need, and what your closing costs will be.
You won’t waste your time looking at homes not in your price range.
When you do find the home of your dreams, you’ll be able to make a strong bird-in-the-hand offer that sellers will find harder to counter.

When Ryan and Brittany felt they were ready to buy their first home, they met with a lender recommended by their buyer’s agent. After a credit check and verification of their employment and source of down payment, the lender issued a preapproval letter. The next step was house hunting, and after a couple of weeks, Ryan and Brittany found their dream home. When their agent called to arrange a time to present the offer, she was told there was a competing offer the sellers would also be considering.
Both offers were presented to the sellers, and the competing offer was $1,500 higher than Ryan and Brittany’s offer. Their agent, a real pro, pointed out to the sellers that her clients were loan approved and gave them the letter from the mortgage company. She noted that her clients’ offer was a bird-in-the-hand, that they could close in three weeks or less, subject only to the appraisal. The competing buyers’ agent had not gotten his clients preapproved, and their offer was subject to mortgage approval.
The sellers chose to go with the preapproved offer over a $1,500 higher but riskier offer. Obviously, they didn’t want to take their home off the market and wait a week or two to find out if the buyers qualified. Timing and a sure-thing approach will often win out over a higher offer.

Mistake _2. Buying a Home Before You’ve Sold Your Current One

2009-08-24T08:19:00.000-07:00

If you own a home and want to move up, signing a purchase contract can be risky and cost you big bucks if your present home is not sold. Too many homeowners who want to move up write an offer or sign a construction contract before putting their home on the market. Sometimes, these homeowners feel their home will sell quickly because it’s the nicest one in the neighborhood, or they don’t stop to consider what the consequences will be if their home doesn’t sell.
These mindsets can have the following consequences:

It can be expensive if you sign a construction contract and want to wait two or three months to sell so that you don’t have a double move. You might find that the market has changed, your home may not sell, and you could end up in a squeeze play. You discount the house to sell and then find the money you planned on for your new home is much less.
Your home doesn’t sell and you end up renting it or working out a creative financing deal with risky buyers. Usually, these pressure cooker deals have a 90 percent chance of ending up in default.
You make an offer subject to your home being sold. If the sellers are on the ball, they will require a clause that if a buyer comes along, you have three days or less to perform. If you can’t, the offer is void and your time and energy are for nothing.

Sometimes, the timing will work out and you can pull it off. People win the lottery, too. But for most homebuyers, the risks outweigh the rewards.
Robert and Andrea found this out when they waited until their new home was 60 days from completion before they put their old home on the market. They hoped to sell and move into their new home and avoid a double move.
Unfortunately, their old home needed some work to make it saleable, and Robert and Andrea weren’t willing to put time or money into it because they were focused on their new home. When their new home was finished and ready to close, the old home hadn’t sold or even had an offer. So they refinanced it for the maximum possible to get money to close on the new home. Without any other options, they rented out the old house to cover the payment. After a year, the rental is still costing Robert and Andrea about $210 a month because the rent doesn’t cover the mortgage payment. The home is going downhill fast because there’s no money or desire to do the deferred maintenance, and the loan is about $20,000 more than current market value.
The best way to avoid this kind of situation is to sell your home first. Put everything you don’t immediately need into storage and rent an apartment or stay with relatives until your new home is finished or you find your dream home. In a hot seller’s market, you may not have to worry about timing as much, but in a normal or slow market, you’ll need to get your ducks in a row before you make your move.

Mistake _1. Not Planning Your Move

2009-08-24T08:16:00.000-07:00

Many first-time homebuyers who are renting get into problems with their lease. They make an offer on a home, forgetting that they still have several months left to go on their lease. Sometimes, there’s a stiff penalty when you break a lease. Other times, you just forfeit your deposit or the landlord may hold you to the balance left on the lease. In one particular situation, a young couple made an offer on a home with a $1,000 deposit that was subject to mortgage approval only. When they informed their landlord that they were moving, he politely informed them they had three months left on their lease. They could move out, but he expected a check for the three months or $2,700, or he would enforce the terms in court. In the end, the homebuyers couldn’t cover both the down payment and the remaining lease payments, so they lost both the house and their $1,000 deposit. The lesson learned is that if you’re renting, read your lease agreement carefully. If in doubt about the terms, talk to an attorney. In another similar lease situation, rather than have the deal fall through, the sellers renegotiated the purchase agreement. They paid two months of the buyers’ remaining rent and upped the price to cover the third one. It was a slow market, and the sellers felt that giving the buyers a concession would be cheaper than putting their home back on the market. Luckily, these sellers took a pragmatic approach to getting their home sold.
To avoid this problem, don’t sign a year or six-month lease and then start house hunting. Sellers are usually reluctant to take their home off the market for more than 30 days. When you’re seriously ready to buy and your lease is ready to expire, see if your landlord will extend on a month-to-month arrangement with a 30-day notice.

Retirement Subdivisions

2009-07-27T17:32:00.000-07:00

Communities that cater to retirees are usually more stable than those that attract first-time homebuyers. They normally don’t have a threeto five-year selling bubble that can depress prices. These homeowners often stay until they move into a nursing home or die. This often results in a relatively stable home market with the number of homes for sale roughly equaling the number of buyers. In some upscale communities with a big demand, there can even be buyers circling and waiting for a home to come on the market. As a result of supply and demand, homes in these areas can consistently go up in value.
Even though you’re retiring and plan on staying in a home forever, it’s still important to buy in the best area possible. You’ll enjoy the community more, and if you decide to sell the home it will have appreciated in value.
To make sure you’ll like the community, walk around the lots or homes you’re interested in. Meet the neighbors on both sides and across the street. Ask questions about the area and read the restrictions and homeowners association rules. If there are problems, you’ll hear about them fast.
The bottom line in buying a manufactured home in a retirement community is to go for the best location you can afford. If it’s a new community, look at the area closely. Make sure there’s nothing in a master plan like a freeway, airport expansion, or planned rezoning in the works that could lower values.

Entry-Level Subdivisions

2009-07-27T17:30:00.000-07:00

If you’re buying in a new subdivision that attracts entry-level buyers, chances are that when you’re ready to move up, so will others who bought at the same time. Condo projects that attract first-time home- The first five years were great for Brent and DeAnn, but as their family and income grew, so did their desire to move up to a bigger home closer to work. Three bedrooms were no longer enough, with their second baby on the way. When they decided to put their home on the market in the spring, about a dozen other ‘‘for sale’’ signs appeared around the community.
Some homeowners who were under pressure to sell because of job changes or because they had found a bigger home reduced their price. This created a downward price spiral, as realtors and appraisers priced homes based on what others had sold for the last few months. Because Brent and DeAnn had put a lot of effort into making their home attractive with good curb appeal, they were able to sell at close to a breakeven price. True, if they had been willing to stay for a few more years, they could have built up some equity. But, in their case they just wanted out so that they could move on with their life and were happy to walk away from closing with zero profit.

Site Improvement Checklist

2009-07-27T17:04:00.000-07:00

In construction lingo, the gas/propane, electrical, sewer/septic, and water lines are called laterals. The cost of these lines is determined by size, type, and length (setback) from the house to the POC (point of connection).
Always get two or three bids if possible when considering a contractor. It’s also important to check references and several past jobs before you commit. A little homework up front can save you a lot of pain and money down the road.

Gas Line
Contact the gas company for the location of the gas line and if the line is stubbed on your side of the street. If it’s on the other side, you may have extra fees. Usually, you dig the trench and the gas company runs the line and sets the meter. Get any other costs that may be involved.
If you’re going with propane, call two or three propane companies and get pricing for the fuel, set tank, run line to home, and changing appliances to propane if needed.

Electrical
Call the power company and find out what the hookup costs will be.
Get bids from two or three electricians to run overhead and/or underground lines.

Sewer/Septic
Call the city office and find out what the connection fees will be.
Get two or three bids for running the sewer line from the street to the home site.
If you’re going with a septic system, call two or three contractors and get bids for the lines, fields, tank, and installation. Check on a percolation (perk) test. Sometime a perk test can take months, so check on this before you commit to buying the lot.

Water
Call the water company for connection fees, location, and size of lines. The contractor who does the other lines may be able to include the trenching for the water lines in the bid.
Get bids from a plumber, if needed, to run the water lines and do the hookups.
If you’re going with a well, get bids with a cost breakdown sheet from two or
three drilling companies.

Resale Value of Manufactured Homes

2009-06-21T02:26:00.001-07:00

Manufactured homes can appreciate and be a good investment. If the site is chosen carefully and the landscaping is attractive, the home can go up in value similar to a neighborhood of stick-built homes. But, like other neighborhoods, the condition of your neighbors’ homes will play an important role in how well your home maintains its value. As you may have guessed, the two biggest home-buying groups buying manufactured homes are entry-level homebuyers and retirees. Each group presents a slightly different approach to shopping.

Typical Fees and building fee schedule

2009-06-21T02:24:00.000-07:00

The list of fees you’ll pay is usually called the building fee schedule. These fees vary from city to city and range from almost nothing to thousands of dollars. Some of the most common fees you’ll find are building fee, plan check fee, water connection, utilities connections, water development, sewer fees, and environmental impact fees. The list sometimes gets long and grim, with all sorts of fees before you reach the total line.
Depending on the area, lot, and site, fees can run from 50 percent to nearly equal the cost of the home. For instance, if the cost of the home is $70,000, the site work can run about $30,000 plus the cost of a lot. If the lot is $32,000, the total cost of the home will be $132,000. A similar size stick-built home in many areas would cost about $160,000, depending on land and permit fees.

Building Permit and Site Fees

2009-06-21T02:23:00.000-07:00

If you’ve hired a general contractor, getting the permits, estimates, and lining up the subcontractors will be part of the bid. But, if you’re doing your own paperwork and lining up everything for the factory site crew when the home arrives, you’ll have to get the building permits yourself. Typically, you’ll go down to your city’s building department and get a Building Permit Application packet to fill out and submit, along with a set of plans from the home manufacturer. You’ll also have to pay a nonrefundable deposit or application fee. Within a week or two (hopefully) you’ll get the paperwork back with a list of fees. In most cases, these fees will have to be paid before you’re issued a Certificate of Occupancy and can move in.

Sources of Building Lots

2009-05-24T06:13:00.000-07:00

The best and easiest way to find a building lot is to contact a realtor who works in your area of interest. Many times they will know of developers who are selling lots to builders or can check the multiple listing for what’s available. Another good source is newspaper classifieds under ‘‘building lots.’’ If you’ve exhausted these sources, you’ll need to get a little more aggressive and drive around your area of interest to look for possible lots.
Sometimes, homeowners will buy a double lot when they build and keep one for an investment or for a family member to build on in the future. But in the ebb and flow of human events, plans and circumstances can change quickly. A vacant lot that’s not for sale today may suddenly be for sale tomorrow or when a serious buyer calls offering money at an opportune time.
Randall and Sharon discovered this when they couldn’t find a lot for sale in the area they lived in. What few lots were available were tied up by builders for spec or custom home jobs, and they weren’t interested in selling.
As a last resort, Sharon started driving through neighborhoods and areas they liked, looking for vacant lots. She made a list of those that looked interesting and got the names and addresses of the owners from the county recorder’s office. It wasn’t long before she had a list of eight possibilities.
Three of the lot owners lived out of state, and from their addresses on the tax records, Sharon was able to get their phone numbers. Her next step was to contact the owners on the list and see if any were interested in selling.
Five local lot owners were not interested, but one of the out-ofstate owners expressed interest. The couple had bought the lot a few years ago, but a job transfer had changed their plans, so they kept the lot as an investment. But now that their son was going to a local university, they had been thinking of selling.
Ron and Sharon offered the lot owners the appraised value for their lot and agreed to split the cost of a certified appraisal. The sellers accepted the offer and the deal closed three weeks later. This proactive approach often works because many owners don’t think of selling until someone contacts them and starts the wheels spinning.

Tips on Buying a Building Lot

2009-05-24T06:12:00.000-07:00

The real estate truism that location is everything should guide you when you’re shopping for a building lot. You control your housing destiny more because you pick the location. And that means you’ll need to do more homework to make sure you get the best location possible.
It’s important to remember that a great house on a bad lot will not be as good an investment as a smaller house with a great location. The extra time and effort you spend finding the best location you can afford will pay bigger dividends later on.
The first step in lot shopping is to make a list of all the possible sites you’re interested in. The more lots you have to choose from, the better. Once you’ve completed the list, the next step is to start the process of elimination. The following tips will help you do that. Check with the city or county planning authority and see what’s planned for the area. If there’s a master plan, study it carefully. The secluded lot you love now may be next to an industrial park in 10 years, according to a zoning master plan. Look at the growth patterns for your area of interest. If all indications are that the area will increase in value, that’s a plus. Also, check and see if any highways, off-ramps, or access roads are planed for the area. And, of course, find out if the area is currently on the upswing or is declining in value. Get a copy of any zoning and restrictive covenants (CC&R) for the development or area. The better the area, the more restrictions on what you can build. However, that can often be a plus because restrictions tend to keep home values up.
For example, Brent and Susan found a great deal on a lot next to a newly completed golf course that the local municipality was selling as surplus property. A look at the CC & Rs revealed that homes had to be 1,200 square feet or more on the main floor along with an attached two- or three-car garage. The restrictions also limited their landscaping options and required an underground sprinkling system to keep the lawn and shrubs in good condition.
Brent and Susan were planning on putting a modular home on the property and had picked out the plan they liked. Unfortunately, it was only 1,150 square feet on the main floor and had a carport instead of a garage.
Getting in touch with the design people at the factory, the homebuyers were able to increase the square footage and enclose the carport to create a garage. This stretched the loan they could qualify for to the limit, but they felt it was worth it. Area values should increase in the years ahead and justify the additional expense. Check out the cost of utilities. A cheaper lot that costs more to run utilities into may not be as good a deal as one that has them stubbed at the property line. For instance, it’s usually more expensive to run electrical lines underground than overhead. And running water, waste, and gas lines at $10 to $20 a foot each, depending on the area, can run up site costs fast.
Make sure you have all your building site ducks in a row. Get all the necessary building permits, utilities, and hookup fees nailed down. Next get the site-work subcontractors lined up and bid prices locked in and in writing if the home dealer doesn’t handle that.

Ten Shopping Tips to Help You Make the Best Manufactured Home Choice

2009-05-24T05:13:00.000-07:00

Like most other things, higher quality costs more in the beginning but not in the long run. So go for the best built home you can qualify for. A top-of-the-line model will hold its value better when the time comes to sell and move up.
Shop around for a model that doesn’t have the mobile home silhouette, in other words, a rectangle with a flat roof. Many manufacturers have models with steeper pitched roofs, porches, and even slide-outs that get away from a boring rectangle.
Look closely at the furnishings that often come with the home. Many times they’re low end, and you would be better off buying them elsewhere.
To get a good idea of what’s available, go to regional trade shows where you can see the latest innovations from many mobile home manufacturers at one time. Any manufactured home dealer can tell you when and where they are for your area.
Visit several dealers and price similar homes. Look out for the model loaded with options that you may not want or need that are included in the price. Get a breakdown of all the costs. That way you can tell what items you don’t want and may be able to eliminate or trade for something you do.
Check on the dealer as you would a builder. Call the Better Business Bureau and see if there are any complaints. The bank that does the financing is another good source of information. Also, talk to several past customers and see if they’ve had any problems and if they would use their dealer again.
Modular home builders will usually quote you the base model price with the cheapest appliances, finishes, and fixtures. The molding, windows, floor coverings, and fixtures will often need to be upgraded a notch or two. To be realistic, plan on adding $5,000 to $10,000 to the base price to get what you really want.
Consider adding more windows or going with bigger windows that will make your home more livable and add to its value if you resell.
Upgrading the tub and shower stalls are a good investment and helps the home keep its value. Also consider upgrading fixtures. Bottom-of-the-line faucets and other fixtures lose their shine fast and will need replacing in a couple of years.
Curb appeal not only gives you pride of ownership but is important to maintaining your home’s value. Adding trim in a second color or upgrading the exterior is worth considering. It’s important to remember that sooner or later all homes sport a ‘‘for sale’’ sign. If you keep that in mind when you buy, selling will be easier and more profitable when you outgrow the house or get a job transfer.

How to Shop for a Manufactured Home

2009-04-25T05:41:00.000-07:00

After you’ve talked to two or three lenders and gotten their best deals written out on Good Faith Estimates, the next step is shopping time. Keep in mind that a good lender who is knowledgeable about manufactured homes can also help you narrow down your dealer list. She probably knows which dealers have the best reputations. Many dealers have model homes set up on site you can go through and get ideas. Others have subdivisions with both model homes and lots for sale.
Since you’ll have about the same options as a stick-built home, it’s a good idea to work up a list of wants and needs so that you can determine what style and floor plan will work for you.

Manufactured Home Money Matters

2009-04-25T05:40:00.000-07:00

Standard costs for a modular home will run $50 to $60 a square foot, with the most popular size homes in the 1,700 to 2,000 square foot range. Some builders also have high-end or luxury series that can run $80 to $100 a square foot with homes up to 5,000 square feet or more. However, a typical 3-bedroom, 2-bath, 1,800 square foot home will cost around $100,000, plus site work.
The financing options for modular and manufactured homes are the same as financing a stick-built one. FHA/VA and conventional loan programs are available from the same lenders as you would use for a typical subdivision home. Most home dealers or manufacturers have lenders they work with that can finance the total package of home, site work, and land.
But, like shopping for a single-family home or condo, it’s important to shop around and compare loans. Dealer loan packages that finance the lot, site work, and home are convenient but not always the most economical. You may save money by getting a construction loan through your bank or credit union and the 30-year loan through a mortgage company.
One financial plus of a modular or manufactured home is the shorter length of a construction loan if you take one out for the lot and site work. You pay interest for weeks instead of months. For example, if you bought a building lot for $50,000 and financed it for 6 percent interest, your monthly interest bill would be $250. Assume you spend a month or two fine tuning your house plans, getting the permits, and lining up your contractor or subcontractors. If all goes well, the construction can be completed and the home ready to move into in about six months. You’ve spent $1,500 in interest on the lot alone. If you had ordered a modular home, it’s likely you would have been moving into the home in four to six weeks. Your lot loan interest bill would be around $375, saving you more than $1,100. If you were to add in the construction interest of stick-building the home, the bill would be several thousand dollars more. The bottom line on financing is to shop around and compare at least three lenders’ rates. Don’t assume that the dealer’s deal is the best, even if he throws in inducements or extras. In fact, you should be wary whenever a dealer or builder offers extras to go with the financing. Somebody is paying for those extras, and that person is usually you.

A Manufactured Home Can Make a Great Starter Home

2009-04-25T05:38:00.000-07:00

Manufactured homes can be a good starter home for the following reasons:

The average cost of a manufactured home is roughly half that of a stick-built home.
A manufactured home can often be ordered, delivered, set up, and ready to move into in four to six weeks, and sometimes faster, if you go for a model the dealer has on hand. All manufactured homes must be built to HUD/FHA construction standards, making financing with low down and market rates possible.
You can get manufactured homes with more than 2,000 square feet of living space in two and three sections with slide-outs, garages, and other options.
Manufactured homes mounted on permanent foundations in good areas tend to hold their value and will most likely appreciate.

Owning vs. Renting Manufactured Homes

2009-03-28T05:37:00.000-07:00

Throughout the country there are attractive manufactured home developments
where you own the lot. Sometimes a homeowners association similar to those of a condo or town house project takes care of
the grounds and amenities. In the Southeast and in Sunbelt areas, some developments approach those of expensive gated communities with high-end amenities such as golf courses, clubhouses, and equestrian trails.
Buying a manufactured home can be a good investment if you buy the lot with it. If you choose an area or subdivision carefully, your home will tend to hold its value.
However, if the home is on a rented pad, you’re subject to all the reasons why you don’t want to be a tenant. Why pay a monthly pad fee when you could be building equity in your own lot? Also, if the landlord doesn’t keep up the park or the area deteriorates, you may not be able to sell. If you’ve financed most of the purchase price and values drop, you may end up owing more than the house is worth. Realtors like to call this negative or upside down equity.

Mobile Homes

2009-03-28T05:34:00.000-07:00

Forget everything you’ve heard about mobile homes, especially the Hollywood image of cheap trailers and seedy mobile home parks. New technology and improved materials are making mobile homes an attractive housing option.
In fact, the name mobile home may no longer be an accurate term. These homes are built in factory conditions using quality materials to meet federal and state codes. Unlike a modular home, mobile homes are built on a steel undercarriage. The wheels are used to transport the sections to the site where the home is slid off the carriage onto a foundation and permanently anchored.
The terms mobile and manufactured home are almost interchangeable, since both are transported in sections and joined at the site. The fine line difference is how much finish work is done on site. If you want to split hairs, you could say a mobile is completely finished at the factory and the sections joined at the site. A manufactured home may have siding or other finish work done on site to make it look more stick built.

Precut or Kit Homes

2009-03-28T05:15:00.000-07:00

As the name suggests, a kit home is just that. All the components of the home are precut at the factory and shipped to the site ready to build. It’s kind of like a model airplane or car. All you have to do is put it together, and it’ll look like the picture on the box. Many log, timber frame, and specialty homes come in kit form because of the specialized materials and hardware needed. And you can build the house or hire the dealer’s crew to put it all together. You can buy a precut or kit home in just about any size or style, from your plans or theirs. You can choose the quality and upgrades you want and can afford. You can also choose how complete you want the kit, from the structure only to a complete house with nails included and ready to build. For the do-it-yourselfer with some spare time, this can be a ticket to the most house for the least money. The biggest advantages of kit homes are that you get everything you need precut and ready to go on site. There’s no waste unless you make a mistake. Depending on the area, you should be able to get the lumber and components cheaper than if you went to the nearest Home Depot.

To see how much you would save, get a lumber list from the dealer on a home plan you’re interested in and price it at your favorite lumberyard. Also, while you’re at it, compare the hardware and appliances offered with the kit to what you can get locally. Building a kit is going to be like constructing a stick-built home with you as the general contractor. You’ll need to schedule local build-ing inspections for each phase and hire subcontractors for the installs you don’t want to tackle, like plumbing, electrical, or sheet rocking. The bottom line is that you can save quite a lot of money if you’re handy and want to do most of the work yourself. In addition, having everything on site and ready to go can save you considerable time running around as well as eliminate mistakes and waste. Financing a kit home is similar to financing a stick-built home. Most lenders will go along with the financing when there’s a contractor involved. If, for example, your brother-law isn’t a contractor and you plan on going it alone, you’ll need to convince a lender you have the background and skills to do the job. Even then, you may have to jump through a few extra hoops the lender may require to limit its liability. If you’re building a log, timber frame, geodesic, or other unusual style home you may have to shop around for a lender who specializes in these types of homes. The dealer should be able to give you a list of references.

Panel Homes

2009-02-22T12:20:00.000-08:00

Panel homes, like modular homes, come in a wide variety of styles, sizes, and plans and are built in factory conditions similar to modular homes. The biggest difference is that panel homes are shipped in panels typically 8 feet high and up to 40 feet long. Doors, windows, and wiring can be factory installed into the wall panels. The panels are shipped to the home site and connected on site. The house can be erected and enclosed in a day or two. The interior ﬁnish work is then completed, and the home is ready to move into within a week or so. The advantages of panelized homes are similar to modular homes. Quality control is usually high because the homes are built in a con-trolled environment, and they meet or exceed federal and state build-ing codes.
You can also order the kit and ﬁnish the interior yourself. If you or Uncle Joe is a ﬁnish carpenter, you can save some bucks and time by going this route. Otherwise, you can have factory site crews com-plete the interior as part of the package.
Panel homes come in many varieties from a bare bones structure for the do-it-yourselfer to a complete package with everything included to ﬁnish the home.
The main advantages of panel homes are:

The structure can be up and weather tight in a day or two.
You can get a package that allows you to do as much work as you want to take on.
In areas where contractors or good subcontractors are hard to ﬁnd, panel homes can give you a quality home for less money and a lot less construction time than a stick-built one.

Panel homes are built to federal and state building codes, so they qualify for FHA/VA and conventional 30-year ﬁnancing.

Modular Homes

2009-02-22T12:16:00.000-08:00

Sometimes called sectional houses, they are almost completely built in the factory.With construction done on an assembly line in a controlled environment, completion times are fast and quality control is high. Each step of the process is inspected, and the ﬁnal sections are tagged certifying that the home complies with all state and federal building codes. They are a far cry from the double-wide trailers most homebuy-ers think of when modular homes are mentioned.Unlike mobile and manufactured homes, modular homes do not have a permanent steel undercarriage. As the home sections come off the assembly line, they are loaded onto carriers for a ride to the home site. Because of federal and/or state highway ‘‘wide-load’’ size restrictions, sections will typically be 12 or 14 feet wide and up to 60 feet in length.
At the site a crane lifts the sections onto the foundation, where they’re connected and permanently anchored. Utilities are connected, and the home is usually ready to move into within a week or two. This is a big plus when you consider the months that would be needed to stick build the same size house. It’s a big advantage knowing up front exactly how much the home will cost, when it’ll be done, and when it’ll be delivered.
Home style options are limited only by your imagination. Several sections can be stacked to create a Cape Cod, modern two-story, multi-level, or connected horizontally for an L-shaped ranch style home. There are even condominium projects and duplexes made from modular sections.
Most manufacturers have design departments that can help you customize a ﬂoor plan to ﬁt your dream. Popular options are vaulted ceilings, upgraded kitchen cabinets, countertops, and steeper roof pitches.

The Different Kinds of Manufactured Homes

2009-02-22T12:14:00.000-08:00

There are basically four types of manufactured houses: modular, panel, precut or kit, and mobile homes. The ﬁrst three vary by how much of the home is done at the factory and how much site work is needed. Mobile homes are typically completely ﬁnished at the factory and shipped to the site in two or more sections. The sections are joined and anchored permanently on a concrete foundation.
Manufactured homes are built to a federal building code called the Manufactured Home Construction and Safety Standards (HUD code) and will display a red certiﬁcation label on each section. While this is a federal building code, each state has its own building code that usually follows the Uniform Building Code (UBC) or the newer International Building Code (IBC). These local building codes can exceed the federal code.

Buying a Manufactured, Modular, or Mobile Home

2009-01-27T06:54:00.000-08:00

Many homebuyers have the attitude that if it’s not stick built, they’re not getting a good house. That may have been true once, but with current materials and building techniques, you can get a manufactured or modular home that rivals or even surpasses stick-built construction. And you may not even be able to tell the difference once the house is set up and the landscaping in place.
Manufactured house styles and amenities have also come a long way in the past few years. You can create your dream home in a twostory, rambler, or contemporary style with customized floor plans, exterior, and colors.
According to Manufactured Homes: The Market Facts 2002 Report put out by Foremost Insurance Group, 88 percent of the manufactured homeowners surveyed said they were very or somewhat satisfied with manufactured home living. Additionally, 57 percent said they always plan to live in their current manufactured home. That’s not very good news for the resale market!
Manufactured and modular homes are built in sections under controlled conditions at the plant, then shipped to the site and assembled. This can give you better quality control and lower labor costs that translate into serious savings compared to a stick-built home. Typically, you can plan on saving about $25 or more per square foot when you go with a manufactured or modular home. On a 1,300 square foot ranch, for instance, the savings would be about $32,500 less than a comparable on-site-built home.
In rural or remote areas, where it’s difficult to find good contractors and subcontractors, a modular or manufactured home can be the best way to get the home you want with all the amenities. Plus, these homes meet all state and federal building codes and can be financed with FHA, VA, or conventional 30-year loan programs. However, like any other housing option there are pluses, minuses, and pitfalls to look out for that can cost you big time. This chapter shows you how to avoid those pitfalls and get the best deal when you buy a manufactured, modular, or mobile home.

Negotiating Tips

2009-01-27T06:50:00.000-08:00

Many people hesitate to have garage sales because they aren’t comfortable dealing with shoppers or they lack confidence in their negotiating ability. The first step in overcoming these doubts is to realize that it’s not a matter of win or lose. You want to sell and the buyer wants to buy. It’s like a friendly chat over coffee. You bat the price back and forth in a friendly way until you both agree and it’s a done deal. True, 95 percent of garage sale shoppers will want to talk you down. They’re bargain hunters, and that’s why they’re there, to get the best deal they can. You know that, so you anticipate and plan for it. One technique is to price your goods a little high so you can come down. For example, if you have a lamp that you feel will sell for $10, price it at $15 so that the buyer will feel she got a bargain by talking you down. If you reach an impasse, offer to split the difference. She offers $8, you counter with $12, and then you offer to split the difference at $10. Many shoppers will go along with that. The keys to remember are: Keep it friendly, don’t get too serious, and don’t forget it’s not a win-lose contest. That way, you’ll have a lot of profitable fun.

Preparing Your Stuff for Sale

2009-01-27T06:46:00.000-08:00

It’s a good idea to make your stuff look as good as possible. Clean, repair, and polish everything so that it looks its best. First impressions often make the difference between a sale or a reject. Also make the tables as neat and attractive as possible. This often means constant effort to keep them that way, but it’s worth it. A well-organized site gives shoppers the confidence to look a little longer and buy more.

How to Set Up the Sales Site

2009-01-27T06:36:00.000-08:00

A day or two before the sale, price tag everything so there’s no question what the prices are. Use tags or masking tape with the price written on with a black marker. A good shortcut is to put $1 items on one table, $2 items on another table, and so on.
Next, spread the goods out as much as possible. Make it easy for shoppers to walk around tables and see what you’ve got. Put the best goods in front so that drive-bys can see this is a sale worth stopping at.
Make sure clothes are clean, pressed, and on hangers. If you have a lot of kids’ clothes, bag and label several same-size items for $x a bag. Have a table up front with tools, camping gear, and fishing stuff to attract the male drive-by. Likewise, package a few toys in plastic bags to sell to the kids for 10–25 cents to keep them happy and the parents around longer.
If you have appliances, run an extension cord to a table so buyers can make sure everything works before buying. Also important is to get a supply of small bills and change, since garage sales are a cash business. Have at least 20 $1 bills, 5 $5 bills, 5 $10 bills, and 2 $20 bills. For change, get a roll of quarters, dimes, and nickels. No credit cards unless you’re set up for it and can process the transaction on the spot—and absolutely no checks—no exceptions. Finally, make sure you have enough parking. Let the neighbors know what’s happening and thank them for being cooperative afterward. Good will is always important.

Directional Signs Are a Must

2009-01-11T18:46:00.000-08:00

Another important tool for bringing in buyers is the directional sign, the more the better. These signs can be simple, with the words ‘‘Garage Sale’’ and an arrow. Many home centers sell these signs with wire frames that stick into the ground.
Put signs at all intersections within a two-block radius and roads that feed into your area. Attaching balloons or flags will make them even more visible. Realtors often use balloons tied to their open house signs to add to their visibility, and it works. Printing the garage sale information on brightly colored index cards and sticking them around the area on bulletin boards or wherever you can also help draw attention to your sale. You can also buy strings of brightly colored plastic flags in 50–100 ft. lengths that will add considerably to the visibility of your site.

How to Effectively Write Ads and Flyers

2009-01-11T18:45:00.000-08:00

The bigger the sale, the more stuff shoppers have to look at, so size is a dominant feature you’ll want to include. Phrases such as neighborhood, 15-house, multiple house, area, and other words that convey how big the sale is will catch attention. Next draw in the reader by giving a few tantalizing examples of demand items for your area. List some examples such as baby clothes, patio furniture, specific appliances, and furniture.
Also important is clear, precise directions on how to get there. Make liberal use of landmarks in your instructions, such as, ‘‘turn left at the Longmont Burger King’’ or ‘‘one block south of Middleville Safeway.’’ Also have the date and times, but no phone number. You want them to come by, not call you.

One particular ad that worked almost too well was:
Moving/Estate Sale
Nothing thrown away in 30 years
Furniture, appliances, books, tools
Kitchenware, freezer, you name it.
Everything must go including house
Sale Friday & Saturday 7 a.m. to 3 p.m.

The next morning at 7 a.m. the line was long and the people were waiting impatiently. The sales were frantic all morning and into the late afternoon, well past the advertised end.
What made this ad work so well? The words estate or moving sales are always powerful. The fact that everything was up for sale including the house was a compelling draw. And possibly, the mental image of a house full of 30 years worth of collected stuff for sale stirred bargain hunters into a feeding frenzy.
A couple of days later the house—nearly empty by now—also sold because of the publicity and activity generated by the garage sale.

How to Advertise Your Garage Sale

2009-01-11T18:41:00.000-08:00

The keys to a great garage sale are timing and advertising. To attract the most people, you need to time it so that the most people possible will come. A warm sunny day is your first choice. If you live in Seattle, that may not be possible, so you may want to consider using your garage or renting a tent to keep everything dry. The next step is to determine when most people in your area get paid. If it’s the first and fifteenth, schedule the sale as close to those dates as possible. You don’t want to have your sale around a holiday weekend. If something is happening, that will siphon off potential buyers.
The best days are Friday, Saturday, and Sunday. Friday is a good day to start because you’ll attract the buyers who work on weekends. It’s surprising how many people hit the garage sales first thing on Friday morning. Of course, Saturday and Sunday will usually attract the most shoppers. Good times to run the sale are 8 a.m. to 6 p.m. on Saturday, and to 9 a.m. to 4 p.m. on Sunday, or as long as shoppers are coming by. Check the newspapers in your area to see what times are most popular. If everyone is starting at 9 a.m., try starting at 8 or 8:30 to get them to come to your event first. Advertising your sale is critical to getting the most shoppers possible. First, determine which papers carry the most garage sale advertising and put ads in them. Don’t forget the local weeklies and the pennysaver publications with stands around the area. The bargain junkies you want to attract look at these local publications for good deals and upcoming sales. Company, religious, and other organizational newsletters are also great sources of advertising. Putting up flyers at work and around the area is effective. Start a week before the sale to get maximum effect.

How to Price Items for Sale

2009-01-11T18:39:00.000-08:00

Pricing is the second hardest task most people have in organizing their sale. The first is deciding what to sell. But, since you’re moving, the thought of paying big bucks to move an item should temper the urge to keep it. Still, it’s important not to project your sentimental attachment into the pricing of an item.
For furniture, TVs, stereos, lamps, appliances, etc., start by estimating what an item would sell for new and then discount it 75 percent. For example, the leather sofa that you bought nine years ago for $700 would get a price sticker of $175.
Assume buyers are knowledgeable and know values. The reason they come to your garage sale is to find a bargain. Remember the bargain hunter’s psychology—if you price one item too high and a buyer spots it, she will think everything is priced too high. For old stereo systems, record players, and other obsolete electronics, price way down, say, $20–$30 or less. If you don’t sell them, there’s no other market, and they’ll end up in your give-away pile in a day or two. They may even make good loss leaders to keep buyers looking around. The longer they stay, the more they buy is the sales song of veteran garage sellers.
For example, Earl and Shirley found several cases of old but still good Ivory soap bars in a corner of their basement. They put those on a small table priced at fifteen cents a bar with a ten bars per person maximum. The purpose was to get the bargain hunters’ juices flowing in anticipation of finding other good bargains. Clothing items are usually priced in the $1.50–$5.00 range, and used shoes and sandals sell best when priced less than $3.00 a pair. Don’t sell clothing that is damaged, dirty, stained, or torn; it can hurt your credibility. Hang the best quality clothing on a rack. It’s effective to call attention on the price tag to the brand or original cost. For instance, you may write: ‘‘Eddie Bauer leather jacket $250 new, now only $45.’’ For lesser value items loose on a table, an effective pricing strategy can be $3.00 each or three for $6 or $7 to increase sales volume. Another profitable pricing gambit is to sell tools, fishing tackle, or anything you can separate as single units. For example, instead of selling a toolbox full of tools, sell each tool separately, and instead of a tackle box full of lures, sell each lure for, say, 25 or 50 cents. This can up your profit considerably on high demand items.

How to Decide What to Sell?

2009-01-11T18:37:00.000-08:00

Since you’ve sold your home, the pressure is on to get rid of as much stuff as possible. Rule number one is that if you haven’t used it in the last year (some say six months), add it to the sales table. Why spend money moving it to your new home?
Next, don’t try to predict what people will buy, just add it to the sales pile. One woman who had never thrown away a pair of shoes in 20 years, put out four dozen pairs under pressure from her husband. She was amazed to sell three dozen pairs in two hours. The goal is to turn as much stuff into cash as you can. What you don’t sell you can donate to a charity the day before the moving van arrives.
Also, the more stuff you have to sell, the more people will come. So, you may want to get neighbors, friends, relatives, or anyone you can get to join in your garage sale. Perhaps you can get your neighborhood, cul-de-sac, or even the whole subdivision to join. Many subdivisions and even small towns have yearly garage sales/flea markets that attract thousands of bargain hunters.

Moneymaking Garage Sales

2008-12-28T00:12:00.000-08:00

Whether you’ve bought a home, sold a home, or both, the cold, hard reality of moving means that you have to make some hard choices, like Earl and Shirley did when they sold the home they had lived in for 27 years and bought a motor home. The only possible way they could get rid of the mountain of ‘‘stuff ’’ they had accumulated over the years was have a garage sale.
In their case it was several garage sales over three weeks. During the week they would pull stuff out of the nooks and crannies of their house, garage, and storage shed and get it ready for sale on weekends. Luckily, they had a lot of help from some accomplished garage sale veterans. Here’s how they made thousands of dollars and had a lot of fun.
The first step is to decide what you want or have to get rid off. If you’re moving into a motor home or condo, that means just about everything. To help motivate you, remember—the more you sell, the more money you make, and the less you have to pack. The less you have to move, the cheaper it is. You win two ways.

Moving-Related Tax Deductions

2008-12-28T00:11:00.000-08:00

Moving for most people is high on the list of painful activities. But, if you can squeeze a tax deduction out in the process, it may help a little. Not everyone can deduct their moving expenses. The IRS rules that guide deductions for moving expenses are complicated, so it’s important to check with a tax professional.
Generally, the IRS will allow deductions if the move is job related and is 50 miles or more away from the old employment.
If your job-related move qualifies, you could write off the moving company’s bill, packing costs, and storing household goods within 30 days of relocation. Also possible are one-way travel expenses to your new house. Travel expenses can add up to thousands of dollars, and if you qualify, you can get a hefty tax break that year.

How to Find and Work with Movers

2008-12-27T23:12:00.001-08:00

Moving is one of those ‘‘fun’’ experiences both buyers and sellers are going to have soon after closing. The moving industry has taken a lot of heat lately from the media on a few bad apples taking advantage of consumers. And the truth is that when it comes to choosing a mover, it’s definitely buyer beware.
Because moving companies generally can charge what they want, it pays to shop around for not only the best price, but also for a mover that’ll get you there in one piece.
There are several things you can do to protect yourself and not get taken. Here are seven steps that’ll help make moving easier.

Start by asking friends, coworkers, and your realtor for names of movers they’ve had a good experience with. Get a list of at least six companies. Check to see if they’re a member of the American Moving and Storage Association (AMSA), a trade group that arranges arbitration to settle disputes.
The next step is to narrow down your list to the best three. To do this, check the Better Business Bureau for complaints and eliminate any who have had more than one or two in the past year. Also ask the moving companies if they have any contracts with corporate relocation departments. Call the references to see if the contract is still active and if there have been any complaints. Finally, call the remaining movers on your list and request a walk-through and a written estimate. Ask if the bid is binding or nonbinding. A binding bid may come in higher, but it discourages a mover from jacking up the price on moving day.
Ask lots of questions and make sure you understand how the movers calculate their charges. Typically, a mover charges by weight and distance, although in-state moves are often calculated by the number of man-hours it’ll take to get the job done. Look out for other charges such as packing and buying boxes through the mover, which can run up the bill big time.
Review the bids to see if they’re charging extra for packing materials, travel time, or whatever. Don’t be bashful about negotiating these fees down. The moving business is a competitive industry, and companies want your business.
Most moving companies include standard insurance coverage as part of their bid. However, the coverage is for only 60 cents a pound. That means that if your 70-pound wide-screen HDTV flat panel you paid $2,100 for gets dropped, you’ll get paid $42 for it. That makes it almost mandatory to get additional coverage through your insurance company or the mover. Full replacement coverage gives the best protection and is also the most expensive. Of course, you’ll want to shop around and compare rates.
Many savvy consumers let their movers handle the appliances, large boxes, and furniture, and they transport the smaller valuable things themselves, even to the extent of renting a small trailer.
If there’s an insurance claim, you’ll need to show proof that the item exists and you own it. A good way to document this is keep a file of serial numbers and purchase receipts. Then photograph or videotape the items going onto the moving van. A tape or CD with images of everything important taken prior to or just after loading can back up a claim if, for example, your HDTV wide-screen gets broken.

How to Handle Multiple Offers

2008-12-27T22:57:00.000-08:00

Too much of a good thing, like several offers on your home at once, can bring on a panic attack. Actually, if you’ve got your home in top selling condition and it’s a good market, the chances are good that you can end up with several offers at the same time. Should you be so lucky, here’s how you handle this situation:

Have your realtor inform all parties that there are x number of offers on the property. If you’re selling the home on your own, then you’ll be informing all interested parties that you’ll be looking at all offers at a certain time.
If you’re working with an agent, the agent’s office would be a neutral place to meet with the buyers’ agents and go over the offers. When you’re selling your home yourself, then have the buyers drop their offers off to you by the deadline.
Go over the offers and pick out the best one. If it’s a keeper, sign it. If not, counter it with a time limit for the buyer’s acceptance. Next, take the second best offer and also counter it. But, write in that offer _2 is a backup offer and will kick in if offer _1 rejects your counter. It also has a time limit if it kicks in. Offer _3 and any other offers are handled in the same way.
If the first counter offer accepts, you’ve got the home sold on your terms. If the buyers of the first counter say no, then the second counter offer gets an opportunity to accept or reject and so on down the line. With this approach, all parties are treated fairly, and you end up with the best offer possible with the least amount of brain damage.

Handling Full Price House Offer

2008-12-27T22:49:00.000-08:00

Full price offers can sometimes be perilous also. When a full price comes quickly, sellers often wonder if they priced the home too low. If you’ve done your homework and priced it at market, it could be that you’ve gotten lucky. If your home is exactly what a buyer is looking for, a full price offer is not unusual.
In one instance, a seller got a full price offer about 45 minutes after the home went on the multiple listing. Instead of being happy, the seller was upset. He felt the home must be underpriced, the agents were getting a windfall without doing anything, and he wasn’t prepared mentally. He assumed it would take a few weeks after putting the home on the market before anything would happen. The buyer’s agent had to explain that he was working with a family who wanted to be close to parents living on the seller’s street. They happened to be checking the multiple listing when the property came up, and they acted quickly. It took a couple of days of assurances, but the seller finally accepted the offer and the deal closed. Once you decide to put your home on the market, anything can happen. There’s a constant flow of buyers and houses circulating on the market. Someone could have an eye on your neighborhood, waiting for a home to go up for sale because it’s close to family or work. One other pitfall to look out for is full price offers from unqualified buyers. Sellers sometimes get so excited with a full price offer that they don’t look at the total picture. That the buyers are not prequalified or have a house to sell first seems to get lost. If the deal falls through, months of prime selling time go down the drain. In one particular situation, homeowners selling on their own took their home off the market for six months while working with a buyer who was trying to get qualified. When the homeowners were asked why they let the buyer string them along for so long, they replied . . . ‘‘because the buyer came in with a full price offer.’’

Handling Almost, But Not Quite, Low Offers

2008-12-27T22:44:00.000-08:00

These types of offers are the hardest to work with. Obviously, the buyers want the home enough to put together an offer. It can be low because that’s all they’re qualified for, or they also have a second or third choice in mind. They may also be trying to get the best deal possible. You’re not always sure what their motivation is. If price or ego is the issue, you can sometimes sweeten the deal by throwing in the refrigerator, extending or shortening the closing, or whatever you think the buyer will go for.
In one particular example, a buyer came in with a $10,000 low offer on a home that was priced at fair market value. The sellers wanted to reject the offer and not counter, but they finally cooled down and sent back a counter adding $9,800 and throwing in the lawnmower, hoses, and garden tools. They had bought a condo and were planning on leaving or giving the tools and equipment away anyway. The buyers accepted the counter. As it turned out, they were pleased to get everything they needed to maintain the yard, but most importantly, they felt they had won in the negotiating. They happily told their friends about all the equipment they had gotten the owner to throw in to make the deal. Many times, ego and emotions drive real estate deals, not concrete, wood, and nails. It’s important to be on the lookout for this.
Many times you’ll get a low offer, not because the home is not priced right but because the buyers have to try. Their egos demand it. The best way to handle this is to structure the counter to let the buyers save face and accept your counter. Give a $500 concession or throw in the refrigerator, a washer, or dryer you don’t want to move. The key is not to get into an ego battle with a buyer, but to focus on the goal of selling the house.

Lowball Offers

2008-12-11T19:54:00.000-08:00

The key to handling an offer is to corral the emotions so they don’t get in the way. You’ll feel anger if the offer is lowball. You’ll feel the buyers are idiots. Why can’t they see all the work you’ve put into the house? The decorating and colors you spent so much time deciding on, and the memories you’ve created in this home? These feelings are natural, and all buyers go through them at offer time. Luckily, your agent stays calm and lets you vent your anger before pointing out that many buyers start out with a low offer, that it’s best to contain your emotions and decide on what’s the lowest offer you can live with. Obviously, the buyers liked something about your home or they wouldn’t go to the trouble of writing an offer. Some people start out the buying process by writing a low offer, knowing you’ll counter up to your lowest price. So, that’s what you do. You’ll have about a 50 percent chance they’ll accept your counter or come back with another counter. If you don’t counter, you’ll have zero chances.
If your counter is reasonable for the market and the buyers are serious, they’ll often take it. Sometimes bargain hunters will take a shotgun approach and write a bunch of low offers, hoping to get lucky. If this is the case, you won’t hear back from them. It was a one-shot effort, and you haven’t lost anything.

The Five Biggest Mistakes Homeowners Make Pricing Their Home

2008-12-11T19:39:00.000-08:00

Don’t price your home on the basis of what you need to get out of it. Going this route usually results in an under priced or overpriced home, and both will cost you pain and money. The house market determines what homes will sell for, and buyers get savvy on values fast after they’ve looked at a few homes.
Many sellers feel they can add the cost of upgrades to their price. Unfortunately, many upgrades don’t increase the value of the home but do make it more saleable. Other upgrades typically return from 40–80 percent depending on the market. For instance, a new roof will not add to value but will help sell the home. Adding a second or third bath can increase value in many cases. An experienced realtor can tell you what improvements will give you the best return.
Don’t list with the agent who quotes you the highest price. Go with the agent who has the best track record and experience in your area.
Depending on the average selling time for your area, if you don’t get an offer in a reasonable period, bite the bullet and lower the price. You’ve made a mistake pricing your home, and the longer your home is for sale, the lower the price you’ll get. Time is not in your favor.
If your home needs new carpets, paint, or other upgrades, get it done as soon as possible. Don’t advertise a painting or carpet allowance, or you’ll end up getting a lower offer plus the allowance. Few buyers like to paint or carpet a home before they move in. It’s easier for them to keep looking until they find a home they don’t have to do anything to.