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Take the Stress Out of Buying a Home
Buying a home should be fun, not stressful! As you look for your dream home, keep in mind these tips for making the process as peaceful as possible.
1. Find a real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the REALTOR® you chose is both highly skilled and a good fit with your personality.
2. Remember, there’s no “right” time to buy, just as there’s no perfect time to sell. If you find a home now, don’t try to second-guess interest rates or the housing market by waiting longer — you risk losing out on the home of your dreams. The housing market usually doesn’t change fast enough to make that much difference in price, and a good home won’t stay on the market long.
3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas from too many people will make it much harder to make a decision. Focus on the wants and needs of your immediate family — the people who will be living in the home.
4. Accept that no house is ever perfect. If it’s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Let the minor ones go.
5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price or by refusing to budge on your offer may cost you the home you love. Negotiation is give and take.
6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself — room size, kitchen, etc. — that you forget about important issues as noise level, location to amenities, and other aspects that also have a big impact on your quality of life.
7. Plan ahead. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate home insurance, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.
8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be costs. Don’t leave yourself short and let your home deteriorate.
9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big financial commitment. But it also yields big benefits. Don’t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.
10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually over from 1998 to 2002, a home’s most important role is to serve as a comfortable, safe place to live.
Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.
Questions to Ask Your Lender & What You Need for a Mortgage
Checklist: What You Need for a Mortgage
□ W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every person signing the loan.
□ Copies of at least one pay stub for each person signing the loan.
□ Account numbers of all your credit cards and the amounts for any outstanding balances.
□ Copies of two to four months of bank or credit union statements for both checking and savings accounts.
□ Lender, loan number, and amount owed on other installment loans, such as student loans and car loans.
□ Addresses where you’ve lived for the last five to seven years, with names of landlords if appropriate.
□ Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
□ Copies of your most recent 401(k) or other retirement account statement.
□ Documentation to verify additional income, such as child support or a pension.
□ Copies of personal tax forms for the last two to three years.
Questions to Ask Your Lender
1. What are the most popular mortgages you offer? Why are they so popular?
2. Which type of mortgage plan do you think would be best for me? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so, how much will it cost, and how long will it be required?
(NOTE: Private mortgage insurance is usually required if your down payment is less than 20 percent. However, most lenders will let you discontinue PMI when you’ve acquired a certain amount of equity by paying down the loan.)
5. Who will service the loan — your bank or another company?
6. What escrow requirements do you have?
7. How long will this loan be in a lock-in period (in other words, the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if it drops during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
Used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com.
Your Closing: Costs & Tips
You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount for:
• Down payment
• Loan origination
• Points, or loan discount fees, which you pay to receive a lower interest rate
• Home inspection
• Credit report
• Private mortgage insurance premium
• Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
• Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in
escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
• Deed recording
• Title insurance policy premiums
• Land survey
• Notary fees
• Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
Sources: Credit Union National Association; Mortgage Bankers Association; Home-Buyer’s Guide (Real Estate
Center at Texas A&M.
Insurance: Homeowner's & Title Insurance Tips
5 Things to Know About Title Insurance
Title insurance protects the holder from any losses sustained from defects in the title. It’s required by most mortgage lenders. Here are five other things you should know about title insurance.
1. It protects your ownership right to your home, both from fraudulent claims against your ownership and from mistakes made in earlier sales, such as mistake in the spelling of a person’s name or an inaccurate description of the property.
2. It’s a one-time cost usually based on the price of the property.
3. It’s usually paid for by the sellers, although this can vary depending on your state and local customs.
4. There are both lender title policies, which protect the lender, and owner title policies, which protect you. The lenderwill probably require a lender policy.
5. Discounts on premiums are sometimes available if the home has been bought within only a few years since not as much work is required to check the title. Ask the title company if this discount is available.
5 Things to Know About Homeowner’s Insurance
1. Know about exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These types of coverage must be bought separately.
2. Know about dollar limitations on claims. Even if you are covered for a risk, there may be a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.
3. Know the replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
4. Know the actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
5. Know the liability. Generally your homeowner’s insurance covers you for accidents that happen to other peopleon your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
Please take advantage of our experience by reading the advice and tips below:
Why Do You Need a Realtor to Sell Your Home?
Reasons Why You Should Work With a REALTOR®
1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports,mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools,and more. They’ll also be able to provide objective information about each property. They can provide invaluable tools, such as property valuations and CMA's (Comprehensive Market Analysis) to help you make an informed decision on pricing your property.
3. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
4. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family.
5. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
6. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
7. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Becauseof this, homebuying and selling can be an emotional undertaking. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
Preparing for Sale: What to Do Before Listing Your Home
“What should I fix, replace, or change in my home before I put it on the market?”
Chances are there are a couple of minor repairs and slight improvements you should do before we place a For Sale sign on your lawn. There are many ‘no-cost’ and ‘low-cost’ changes you can make.
The use of your home changes when you decide to put it on the market. Instead of that “lived in” look that we all have, the home needs to send a different message. You know what I am saying. I love my bright red guest room/office, but it’s not about me. It’s about the next owner of the home. A fresh coat of neutral colored paint will attract the buyer’s eye. This type of project is low cost and not overly time consuming.
In keeping with changing the use of the home from ‘yours’ to ‘theirs’, it is a very smart idea to begin packing. I know it may seem silly, but I am talking about packing any items you don’t use that often. Clearing out extras in your cabinets, closets and drawers gives a spacious organized look to your home. Make several piles. Donate, Storage and Toss. Now, GET MOVING. Taking down some of the keepsakes and family photos is also a good idea. Again these are no cost or low cost changes that can lead to a quick sale.
Some sellers ask, should I just disclose an issue that needs repair and let the buyers take care of it? Or should I fix it? In making that decision, you need to keep in mind that making the repair ahead of the sale may result in a higher sales price of the home. Buyers love to hear the words “recently updated” and/or “new” as they tour a home. Whether it’s a new appliance, energy efficient window, etc., this gives the impression that the home has been cared for.
Most home buyers are requiring a home inspection prior to closing. This clause in a purchase and sales contract, if worded properly, can allow the buyer to terminate the contract if the home inspection is not satisfactory to the buyer. Issues found in a home inspection can also cause buyers to ask for price reduction. Why chance it? If your home needs a few minor repairs (cracked window pane, leaky pipe, noisy bathroom fan) take care of it ahead of time.
Sellers have an obligation to repair or disclose any issues regarding health or safety.
By: Lauri Bessey
Setting Your Selling Price
How to Set Your Selling Price: Being overpriced is a bad start
By Michele Dawson
If you're selling your house, one of the first steps you'll take is setting an asking price, a maneuver that requires the ability to find the perfect balance between attracting solid offers and ultimately receiving top dollar.
If you're working with a Realtor or other industry professional, you'll probably hear talk of fair market value, which typically means the highest value an educated buyer will pay. Fair market value is usually not the asking price.
Many agents will begin by conducting a competitive market analysis of your house and give you an estimate of the fair market value of your home, which is a range that will fluctuate depending on the housing market in your area and how much similar homes in your neighborhood are selling for.
While overpricing to some degree can be beneficial, you'll still want to be careful and avoid pricing your home too high, which almost always is nonproductive. As you work with your agent and set your price, you'll want to recognize the factors that may prompt you to raise your asking price too much when it isn't warranted. Some of those factors include:
• Upgrades have been added. While many home improvements will help you recoup a good chunk of your investment, it won't give you 100 percent of what you paid. Also, the more personal the improvement—a swimming pool, a sunroom, purple floors—the less likely it will be viewed favorably by potential buyers.
• The need for money.
• You're moving to a higher-priced area.
• The original purchase price was too high.
• The seller lacks factual comparable sales to prove what the market value is.
• The seller wants bargaining room (listing more than 1-3 percent above market value actually reduces bargaining power).
• An unnecessary move, so you're not motivated.
On the other hand, if you're in a buyer's market,, you'll really need to be cautious in setting your price.
Generally, the asking price—the price advertised when it goes on the market—is set slightly higher than market value, usually 1 to 3 percent above market value.
You should assume that negotiation will be necessary to reach an agreement with the buyer. If you price your home too much above market value, you'll get fewer showings and offers in which the potential buyer is fishing to determine how low you'll go.
You'll want to establish your priority list: Are you more concerned with selling quickly or getting the most money possible? You'll also want to contemplate whether you think the agent's suggested price is reasonable and whether you'd pay that amount if you were a buyer.
Your agent, as well as friends, relatives, and neighbors, will help you point out your house's advantages and disadvantages that you may not have thought about because you're too close to the house and not as objective as others.
A third party will help you think of your house as a commodity—something with positive and negative selling points. At that point you can decide on a price that you deem competitive and in line what other houses in your area have sold for.
Copyright © by Realty Times
Advice for Better Home Showings
1. Remove clutter and clear off counters. Throw out stacks of newspapers and magazines and stow away most of your small decorative items. Put excess furniture in storage, and remove out-of-season clothing items that are cramping closet space. Don’t forget to clean out the garage, too.
2. Wash your windows and screens. This will help get more light into the interior of the home.
3. Keep everything extra clean. A clean house will make a strong first impression and send a message to buyers that the home has been well-cared for. Wash fingerprints from light switch plates, mop and wax floors, and clean the stove and refrigerator. Polish your doorknobs and address numbers. It’s worth hiring a cleaning service if you can afford it.
4. Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows to air out the house. Potpourri or scented candles will help.
5. Brighten your rooms. Put higher wattage bulbs in light fixtures to brighten up rooms and basements. Replace any burned-out bulbs in closets. Clean the walls, or better yet, brush on a fresh coat of neutral color paint.
6. Don’t disregard minor repairs. Small problems such as sticky doors, torn screens, cracked caulking, or a dripping faucet may seem trivial, but they’ll give buyers the impression that the house isn’t well-maintained.
7. Tidy your yard. Cut the grass, rake the leaves, add new mulch, trim the bushes, edge the walkways, and clean the gutters. For added curb appeal, place a pot of bright flowers near the entryway.
8. Patch holes. Repair any holes in your driveway and reapply sealant, if applicable.
9. Add a touch of color in the living room. A colored afghan or throw on the couch will jazz up a dull room. Buy new accent pillows for the sofa.
10. Buy a flowering plant and put it near a window you pass by frequently.
11. Make centerpieces for your tables. Use brightly colored fruit or flowers.
12. Set the scene. Set the table with fancy dishes and candles, and create other vignettes throughout the home to help buyers picture living there. For example, in the basement you might display a chess game in progress.
13. Replace heavy curtains with sheer ones that let in more light. Show off the view if you have one.
14. Accentuate the fireplace. Lay fresh logs in the fireplace or put a basket of flowers there if it’s not in use.
15. Make the bathrooms feel luxurious. Put away those old towels and toothbrushes. When buyers enter your bathroom, they should feel pampered. Add a new shower curtain, new towels, and fancy guest soaps. Make sure your personal toiletry items are out of sight.
16. Send your pets to a neighbor or take them outside. If that’s not possible, crate them or confine them to one room (ideally in the basement), and let the real estate practitioner know where they’ll be to eliminate surprises.
17. Lock up valuables, jewelry, and money. While a real estate salesperson will be on site during the showing or open house, it’s impossible to watch everyone all the time.
18. Leave the home. It’s usually best if the sellers are not at home. It’s awkward for prospective buyers to look in your closets and express their opinions of your home with you there.
Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.
Understanding Capital Gains Tax
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of purchase: including transfer fees, attorney fees, and inspections, but not points you paid on
• Cost of sale: including inspections, attorney fees, real estate commission, and money you spent to fix up
your home just prior to sale.
• Cost of improvements: including room additions, deck, etc. Note here that improvements do not include
repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical
Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.