Tips for Buying an Investment Property

Tips for Buying Investment Properties

Real estate is an excellent way to build wealth. It is an impermeable investment and it almost always increases in value.

While buying a home is a good way to increase your net worth, an investment property is the gift that keeps giving. You can rent out an investment property or flip it and sell it for a higher value.

Before purchasing an investment property, it’s advisable to do some research to make sure you are getting a good return on investment (ROI). Here are some tips that will help you get the most for your money.

Are You Cut Out to Be a Landlord?

If you’re considering renting out your properties, you should be prepared to be a landlord. That means you may end up dealing with late payments and other tenant needs. Be ready to make any necessary repairs which could mean calling in a contractor or making repairs yourself.

Do You Have Debt?

If you are carrying debt, be conscious of the increased debt burden your new investment will bring. Make sure you are not overleveraged in case something unexpected happens with your property like costly repairs or high vacancy.  

Make Sure You Have Enough for a Down Payment

Down payments on an investment property tend to be more expensive than down payments on other types of property. Usually they are around 20% or more. Make sure you have enough to cover a down payment before signing any paperwork.  

Find A Good Location

You can fix up a property all you want but you will never be able to change its location.

When looking for a property, make sure it’s in a neighborhood with a low crime rate, access to public transportation and a growing job market. Investing in an ‘up and coming’ area is a way to get fast appreciation.

Beware of High Interest Rates

Interest rates on investment properties tend to be higher as compared to owner occupied rates. Secure the lowest rate possible so it won’t eat into your profits.

Know What to Charge

If you are going to be renting your property, make sure you can get enough to cover your expenses and yield a profit. Consider that you will have to cover maintenance costs, homeowner’s insurance, possible HOA fees, pest control, landscaping and more.

Fixer Upper

Although many investors are able to build wealth by flipping properties, this may be difficult if you are just starting out. This can work well if you know a cheap contractor or are able to take on remodeling yourself. It’s easy to get in over your head when it comes to renovation expenses.

If you decide to take this route, invest in a house that is priced just under market value and needs minor repairs instead of taking on a major remodel.  

An investment property is a good way to earn extra income, but you need to know what you are doing before taking the plunge. These tips provide excellent guidelines for what you should be looking out for.

Pros and Cons of Buying a Fixer

When is Buying a Fixer Upper Worth it?

When shopping for homes, you may come across a few that are exceptionally low priced. Then you find out why.

Extensive repairs may be needed to make the home livable much less turn it into an attractive piece of property.

But still… the low price is enticing.

This is the type of situation one encounters when buying a fixer upper. Buyers have the option of buying the house at a low price and fixing it up so it becomes more valuable.

This can be a smart move, but only if you end up making money on your investment.

This article will take a look at what’s involved in buying a fixer upper so you can determine whether or not it’s worth it.

Buying a Fixer Upper is a Good Idea If…

Buying a fixer upper comes with its share of benefits. It may be the right decision if the following circumstances apply.

You Want to Design Your Own Home

Buying a fixer upper gives you a lot of creative options. Being that the home will probably need an extensive remodel, you will be able to make a lot of choices in the reconstruction process. Just make sure all your alterations are up to code and properly permitted.

You Have the Money for Renovations

Your budget should include the costs involved in buying your home while giving you enough left over for renovations. This should be carefully considered before finalizing your purchase.

You’re Getting a Great Deal

If the price you’re paying on the home, along with the renovations still leaves you with a total that is lower than the current market value, you may want to jump on the deal.

Buying a Fixer Upper is a Bad Idea If…

You’re on a Fixed Budget

If you’re on a fixed budget, you may be better off with a home that does not need many renovations. In this case, you will know exactly how much you are spending, and you won’t have to worry about reconstruction costs going over budget as they often do.

You Don’t Know a Lot About Design

When you rebuild, you will have to make a lot of decisions about design and layout. If you don’t know much about these aspects of building, or you think you may not be qualified to make the right decision, you may end up with a home that does not live up to its full potential.

You Need to Move in Right Away

Reconstruction is a long process that often runs over the estimated time you were originally quoted. During reconstruction, your home may be unlivable. If you need to get into your home right away, opt for one that’s move in ready. 

Buying a fixer upper can get you a great deal in today’s market. It’s important to consider the time and money to get your home up to the standards you expect.

Tips for Buying a Condo

Tips for Buying a Condo

If you are looking to buy real estate, a condominium could be the way to go. Condos are basically individually owned apartments. Buyers like them because they provide them with the advantages of owning appreciable real estate that is not as expensive as a house.

Condos are located in a buildings managed by the Homeowner’s Association. The association takes care of all repairs for a monthly fee and makes decisions for the collective. This eliminates the need for homeowners to take care of costly repairs, but some monthly fees can be quite expensive.

Condo living is not for everyone, but some home buyers see them as a great way to start building real estate wealth. If you are shopping for a condo, here are some things to keep in mind.

Work with an Agent with Condo Experience

If you are looking for a condo, it’s advisable to work with an agent with condo buying experience. He or she will help you address specialized concerns and assist you in reviewing condo association documents. Your agent will also be able to tell you if the HOA has a history of issues or if there are any structural problems with the building.

Find a Condo That’s FHA Approved

Mortgages for condos may be more complicated than other types of mortgages because, in addition to the condo, the building the condo is in also plays into the equation. The Federal Housing Association (FHA) has a list of condo approved buildings on their web site. Lenders may also have requirements similar to those of the FHA. An experienced mortgage professional will help you find recommended properties that suit your needs.  

Research the Property Management Company

The property management company will be in charge of all repairs on the condo and in the building. When checking out the condo, it’s a good idea to ask questions about who is responsible for maintenance and how responsive they are to issues that may occur. You can also do your own online research to find out what residents have to say about the building’s management.

Review Fees and Regulations

During the purchasing process, you will want to find out how much the association charges. This monthly fee can range in price. Make sure you can afford the rate before agreeing to the purchase. Also check if there are any ‘special assessments’ on the horizon for bigger projects.

HOA’s may also have rules and regulations regarding everything from how much noise you can make in the condo to what color you can paint the walls. Make sure you can live with these rules before signing on the dotted line.

Consider Amenities

Like an apartment building, a condo building may come with amenities like a gym, parking, a swimming pool, a rec room and more. Be sure to find out what each building offers and factor them into your purchasing decision.

Condo living is a lower cost way to get in the real estate market. However, there are special considerations that must be made. The tips in this article will serve as valuable guidelines on your journey.

Types of Mortgages: What's Right for You?

Types of Mortgages: Find What’s Right for You

If you are in the market for a home, improving your credit score will be a priority. If your credit score is too low, you may end up with a high interest loan or you may not get approved at all.

You will always be able to find a lender that will approve you, but that doesn’t mean you will be getting the best rates or terms possible. Applying for the right loan will help ensure this.

This article will take a look at how credit scores affect the mortgage you get and the low credit loans that may be right for you.

FHA Loans

FHA or Federal Housing Administration loans are a good option for buyers who have low credit scores. They require lower down payments and lower credit scores than many conventional loans.

Currently, you can borrow up to 96.5% of the value of your home with an FHA loan. This means you will only need to make a 3.5% down payment. To qualify, you will need a credit score of 580. If your credit score falls between 500 and 579, you can still get an FHA loan, but you will need to make a 10% down payment.

FHA loans typically come with rates that are .125% to .25% higher than conventional loans.

VA Loans

VA or Veterans Affairs loans are a good option for military borrowers. They require $0 down and are backed by the Department of Veterans Affairs. The agency guarantees a quarter of the amount making lenders feel more confident making loans despite low credit scores and no down payment. They usually have lower interest rates than conventional loans.

USDA Loan

USDA or United States Department of Agriculture loans are designed for low income families who may not have access to proper housing. Applicants should have a credit score of 640 or above. Those with a lower credit score may be subject to more stringent underwriting requirements.

Because the USDA backs the loan, homeowners do not need to make a down payment. It also yields lower interest rates.

Fannie Mae Loans

The Federal National Mortgage Association (FNMA) or Fannie Mae loan is designed to stimulate the housing market by making mortgages available to low income borrowers. The organization does not provide the mortgages, but it purchases and guarantees them through the secondary mortgage market. Borrowers are able to make low down payments of 3%.

The loan is available to those with low credit scores although those with credit scores of 620 or more will get better pricing. Interest rates on these loans tend to be low.

Freddie Mac Loans

Freddie Mac is similar to Fannie Mae and it is another option worth looking into if you would like to buy a home with low credit. The main difference is that Fannie Mae purchases home loans from big banks whereas Freddie Mac works with small banks and lenders.

Fannie Mae and Freddie Mac are the two biggest mortgage ‘investors’, buying on the secondary market. They demand strict loan criteria in order for the loan to qualify. If you don’t fit into one of their programs, you will need to look into other options.

If you are thinking of buying a home, getting your credit in shape is a priority. However, the options in this article make homeownership possible if your credit isn’t quite where you would like it to be or you have other financial restrictions.

Buying New Construction

Buying a New Construction Home

When buying a new construction home, you may think it’s all smooth sailing. With all new features and a new foundation, you may assume you have nothing to worry about; but that’s exactly the reason why so many new construction homeowners encounter problems early on in their home ownership.

This article will provide valuable tips that will ensure you don’t hit any bumps in the road with your new construction home.

Get Everything in Writing

When buying a new construction home, you may be buying something that doesn’t exist yet. For instance, the home may not be built, or it may be incomplete. That’s why it’s so important to get everything in writing.

The contracts and documents you receive should include everything from a completion date to the details of what you can expect when your house is completed regarding appliances, features and so one. The colors used, the upgrades and amenities and even the costs can change during the construction process. Make sure to get everything in writing so you don’t end up with any surprises.

Get a Home Inspection

Because everything in the home is new, some buyers think they do not need a home inspection.

During a home inspection, an inspector can find things the builder has forgotten to do as well as potential problems that can be caused down the road. The inspector will make you aware of those problems so you can get the necessary repairs or use them as leverage in the bargaining process.

Know What’s Included in the Home Warranty

The coverage provided in a home warranty will vary and the different contractors may include varying services and repairs. Whatever the situation may be, it’s important to talk to the contractors you’re working with in advance to make sure your warranty is comprehensive.

Research the Builders

It’s advisable to research builders before even starting the search for your new construction home. Get familiar with who’s out there and the quality of service they provide. Then try to limit your search to reputable builders only.

Team Up with a Realtor

Many home buyers try to get around hiring a realtor because they think this will save them money. However, a realtor will be worth more than his weight in gold. What’s more, often times the builder will pay the agent’s fee.

The realtor will familiarize you with the new construction home buying process and help you negotiate deals that can save you money in the long run.

Shop for Lenders Early On

It’s important for buyers to talk to lenders early on in the home buying process. This will give you an idea of what’s out there in terms of mortgages and interest rates and it will help them find the lender that’s right for them.

A lender can also preapprove you for a loan so both builders and buyers can be sure they are not wasting their time on a sale that might fall through.

Buying a new construction home is a smart move to make. But even in this process, buyers can encounter unexpected circumstances. These tips will ensure that your buying experience goes as smoothly as possible.

How to Make Sellers an Offer They Can't Refuse

How to Make an Offer Sellers Can’t Refuse

So, you finally found your dream house. Now you’re ready to make an offer. But remember, sellers don’t have to accept your offer. In fact, if they are getting a lot of offers on their house, yours may not get accepted.

However, there are things you can do to make your offer more attractive. Here are some tips for making an offer that sellers can’t refuse.

Offer to Pay Cash

This may not be a viable offer for all buyers but if you can pay cash, do it. Sellers like cash offers because it means the deal is less likely to fall through.

Get Pre-Approved

If you can’t pay cash, you will need to get a mortgage. Getting pre-approved shows the seller that it’s likely you will be able to get a loan. It also shows that you are serious about making a purchase.

High Price

If there’s a lot of competition for the home, making a high offer will put you ahead of other prospective buyers. Of course, you don’t want to leave yourself with a mortgage you can’t afford so think carefully when deciding what you’re offer amount is going to be.

Add an Escalator Clause

An escalator clause means that you agree to increase your offer if another buyer comes in with a higher bid. In a way, it protects you from negotiating against yourself and ‘paying too much’.

Include a Letter

Many potential buyers include letters with their offers. These letters tell sellers a bit about themselves and why they would make a good buyer. You may be surprised to find out how far this personal touch can go in helping buyers get the home of their dreams.

Agree to Pay for Extras Yourself

There are certain ‘extras’ that can be paid by the buyer or the seller. These include closing costs, HOA fees that may be due in advance or a home warranty. Offering to pay for these extras will reduce the seller’s expenses making your offer more attractive.

Be Patient

In some cases, sellers might want to stay in the home after closing. In these situations, you can work out a ‘lease back’ or ‘rent back’ agreement. Essentially, this means that you’ll be their temporary landlord until they are ready to move. It may take some other arranging, but putting this option in your offer could make your bid a favorite.

Work with Contingencies

While you can’t give up contingencies give you necessary protections, there are ways to make them easier for the seller to deal with. For instance, a financing contingency can be offset by preapproval and a strong earnest money deposit. You can use cash to get around the appraisal contingency by offering to split the difference if comes to it. You can make the home inspection contingency easier to deal with by offering to cover the cost of repairs. If all of this becomes too expensive, you can always out of the deal.

A home is a major purchase. Making the right offer will increase the chances of you getting into the home you really want. What do you recommend including in an offer to make sure you nail that deal?

How to Improve Your Credit Score for Getting a Mortgage

How to Improve Your Credit Score for Getting a Mortgage

If you are thinking of buying a home, getting your credit in good shape should be a priority. The better your credit is, the lower your interest rates will be. And once you’re locked in to your interest rate, you can start home hunting!

Fortunately, there are many things you can do to improve your credit score and increase your chances of getting good rates on your mortgage. Here are some solutions you should be looking into.

Dispute Mistakes

It takes time to build a good credit rating and, if you’re thinking of buying a home, you really should start taking steps to improve your credit years in advance. However, if you find yourself in a situation where buying a home suddenly becomes a priority, disputing mistakes on your credit report is one of the fastest ways to boost your score.  

To take this step, check your credit reports at all three credit bureaus (Trans Union, Equifax and Experian) and look for any inaccuracies. There may be old debts on your report that have since been paid off or you may be listed as the owner of a high balance account when you’re just an authorized user.

If you find errors, follow the steps to file a formal dispute with the agency. Most issues are resolved within 30 days.

Pay Your Bills on Time

The best way to maintain good credit is to pay your bills on time. If you have a history of being delinquent on bills, it may take a while before reversing this trend boosts your credit, but in time you will see those numbers begin to rise.

Keep Balances Low on Credit Cards

Credit card debt plays a major role in your overall credit score. However, having some credit card debt is not necessarily bad, as long as you are keeping up with your payments to keep your credit utilization ration low.

Your credit utilization ratio is determined by looking at your credit limit across all your cards and comparing it to your average amount owed. For instance, if you usually charge $2,000 each month and your credit limit across all your cards is $10,000, your ratio is 20%.

Lenders typically like to see a ratio of 30% or less.

You maintain low ratios by keeping up on your credit card payments. Becoming an authorized on another person’s account will also help, as long as that person uses credit responsibly.

Also, if you have unused credit cards that are not costing you anything in annual fees, leave the accounts open. This will counter your debt to make your credit utilization ratio lower.

Don’t Apply for New Credit

Every time you apply for new credit, it will result in an inquiry on your account.  Each inquiry will negatively affect your credit score. Before applying for new credit, think carefully to decide if doing so is really necessary. You want to be especially careful if you are thinking of buying a house or making any other major purchase.

Buying a house takes a lot of preparation. Raising your credit score is one of the most important steps you can take. Use these tips to get your credit in the best shape possible so you can enjoy low interest rates for years to come.

When Should I Refinance My Mortgage

When Should I Refinance My Mortgage?

Refinancing a mortgage can be a good way to save money. People often refinance to get lower interest rates. They can also shorten the term of the loan making for less payments that will result in less interest. Homeowners may also choose to refinance to tap into equity to consolidate debt or to switch from a fixed rate mortgage to an adjustable one.

While many of these options have advantages for homeowners, it is not always advisable to refinance. It is a decision that should be considered carefully in advance.

This article will provide some information on refinancing so you can decide when to make a move.

Lower Interest Rates

If you have a high interest mortgage, refinancing is a good way to get a lower rate. Experts say that even being able to save 1% is a good reason to refinance. In addition to saving on interest, it also increases the rate at which you build equity in your home.

Shorten the Loan’s Term

If you are able to find a lower rate mortgage, or if interest rates fall, you may consider refinancing your existing loan for another loan with a shorter term. In these situations, you can make close to the same monthly payments you were making on your original mortgage, but you can pay it off quicker to reduce interest overall.

Switching to an Adjustable or Fixed Rate Mortgage

ARM’s typically start at lower rates than fixed rate, but as rates increase over time, you may want to switch to a fixed rate mortgage. On the other hand, some homeowners will switch from a fixed rate to an adjustable mortgage for the lower payments.

In general, adjustable rate mortgages are advantageous to homeowners who don’t plan to stay in their home for long. They can take advantage of the lower payments without having to worry about interest rates that may rise in the future.

Tapping Equity and Consolidating Debt

Refinancing is also a way for homeowners to get out of debt. They can access the equity in their homes to cover major expenses. This can be a good financial move if the interest they are paying on their mortgage is lower than the interest charged for paying off the other expenses. It’s also smart because unlike other expenses, mortgage payments are tax deductible.

However, refinancing to get out of debt is not always a good move. It’s a good idea if the refinancing helps to get you out of debt on a permanent basis. However, if you are unable to stay out of debt, you will have spent a lot of time and money on the refinancing process only to find yourself back in the hole.

Refinancing is a good option for those who find a more attractive loan and it can also be a short term debt solution. However, it is important to think carefully before determining if this move is right for you.

Home Warranty

Benefits of a Home Warranty

When you buy a home, it may come with a home warranty or you may have to buy one. If the home comes with one, it will most likely be good for a year. From then on, you will need to make the decision of whether or not you want to keep making payments on it.

Either way, at some point you will need to ask yourself, “Is a home warranty right for me?”

This article will discuss what a home warranty is and the benefits it can offer helping you make an informed decision.

What is a Home Warranty?

A home warranty is a warranty that covers your home’s systems. It typically covers kitchen appliances, water heaters, plumbing, heating and electrical systems, sump pumps, whirlpool tubs and ceiling and exhaust fans and costs $350 to $500 a year.

Extended plans can include things like a washer and dryer, an air conditioner system, a refrigerator, garage doors, pools and septic systems. This will add $100 to $300 to the premium.

Insurance will not fully cover the cost of the repair. Homeowners are likely to pay a service fee of $50 to $75, but for the most part, it will still be worth it considering it will cover an otherwise expensive repair.

Benefits of a Home Warranty

A home warranty provides several benefits. Beyond saving buyers a considerable amount of money on repair expenses, it also saves them the time and hassle of finding a reliable repair person. The insurance company takes care of that.

The service provided also tends to be round the clock and flexible to work around the homeowner’s schedule.

Beyond benefitting the buyer, a home warranty can also benefit the seller. A seller can include the warranty in the purchase to make the home look more attractive. The buyer will feel like they are getting more of a deal and they will feel confident knowing the home has been taken care of.

The insurance will also cover any repairs that may come up during the process of the sale. This way, new damage will not postpone the sale or reduce the asking price. This makes the sale run more smoothly overall making the buyer’s and seller’s agents happy as well.

Cons of a Home Warranty

For the most part, a home warranty is beneficial. However, there are some things a homeowner will want to be aware of.

For instance, there may be circumstances where the insurance company may decide the warranty doesn’t cover damage. They may try to say the appliance wasn’t properly maintained, wasn’t installed correctly or is just too old to qualify for service.

Homeowners may also want to hold off on a warranty if they have newer appliances that are not likely to break down and are still covered by their manufacturer’s warranty.

A home warranty isn’t perfect but it’s a good option for most people, especially those buying older homes.

Rates of Return: On Your Home Improvement Projects

Home Improvement Rates of Return

When you are living in your home, there are many reasons you will want to make improvements. You may want to replace items that are outdated or damaged. You may want to improve your living experience and the aesthetic of your home or you may want to increase your home’s value.

If you are focused on boosting your home’s value, there are some improvements that will pay off more than others. This article will take a look at some of the improvements that will produce the highest rates of return.

Kitchen and Bathrooms

When it comes to improvements that make your home more sellable, kitchens and bathrooms are the way to go. It’s pretty easy to tell if money has been spent for improvements in a kitchen or bathroom so updated renovations will be obvious to potential buyers. What’s more, repairing kitchens and bathrooms are the places where people spend a good amount of time.

Statistics show that kitchen and bathroom improvements can recoup 150% of what homeowners spent.

Home Improvement

Some homeowners may be so invested in making improvements to their home, they neglect the basics. For instance, there have been homeowners who are focused on remodeling kitchens when their roof needs to be replaced or there is water in the basement.

Neglecting necessary remodels can put homeowners in a position where it is difficult for them to sell their homes at all. On the other hand, investing in a new roof can produce varying profits. Homeowners have recouped anywhere from 7% to 96% of their expenses upon selling.

Curb Appeal

Curb appeal also factors heavily into the whether or not a homeowner is able to make a sale. If potential buyers see a home that doesn’t look good from the outside, they may not even walk inside. A patio and new siding are both improvements that can rank highly when considering the cost to value ratio.

More Space

Homeowners can also update their homes to make them more spacious by adding rooms or even doubling the size of their homes. According to a 2005 study conducted by the National Association of Realtors, every 1000 square feet you add to a home will increase its value by 30%.

When considering what renovations to make when adding space, bathrooms will have the biggest payoff with owners getting returns that average 86%.

Those who add bedrooms, sunrooms and family rooms can expect to see returns of 70- 80%. However, homeowners should be careful not to add on so much space that they price themselves out of their own neighborhoods.

When you own a home, there are several things you can do to improve your living experience while boosting the value of your property.

Pros and Cons of HOA

Pros and Cons of HOA’s

When you are shopping for a home, it’s likely you will find some HOA properties.

HOA’s, or Home Owner’s Associations are governing structures for a planned community such as a development of single family homes, townhouses or condominiums. They are kind of like a landlord or property manager in that they provide repair and maintenance services, only unlike a landlord, the services are not included in the rent. It comes with an additional fee.

There are several pros and cons that come with owning a property that is governed by an HOA. This article will review the advantages and disadvantages so you can find out if an HOA  property is right for you.

Pros

Less Maintenance

One of the best things about and HOA is, they take maintenance costs and responsibilities off your hands. Of course, this does come at a price, but it could be worth it if a major repair is needed.

Higher Resale Values

HOA homes tend to sell for more than non-HOA homes. This may be because they are better maintained while residents are living there.

They’re Good for Recreation

Many HOA’s provide swimming pools, tennis courts, golf courses, playgrounds and gyms. Tenants can enjoy these amenities while hanging out with friends and the HOA provides full maintenance for these facilities.

Cuts Down on Bills

In addition to providing maintenance, HOA fees also include certain utilities. Not only does this cut down on expenses, it also eliminates the need to keep track of all your bills.

Conflict Resolution

Just like a landlord, your HOA will be responsible for conflict resolution. Therefore, if you’re having a problem with a neighbor, in addition to confronting them, you can use the HOA as a mediator.

Cons

Fees

The biggest disadvantage of having an HOA is the fees. Research shows that HOA generally save residents money with every dollar bringing in $1.19 in return.

Still, fees can be costly, sometimes as much as $10,000 a year. When added to a mortgage, this can discourage some potential buyers. If there are expensive repair for the entire building the HOA may have a special assessment in addition to the planned fees.

Increased Risk of Lien of Foreclosure

Your HOA fees are considered a part of your mortgage payment and not paying them can lead to a foreclosure or a lien on your property. It should also be noted that these do accrue late fees if they are not paid on time.

Rules and Regulations

HOA’s have several rules and regulations regarding how you maintain your property. This can come into play in several situations including everything from the color you paint your living room to how high your grass should stand. If you don’t like to live by the rules, an HOA may not be for you.

Possible Poor Management

Some HOA’s are very reliable and professional, others…not so much. Some neglect to take care of maintenance needs. Others may mismanage money and if they don’t have enough in reserve, they can increase their dues.

When buying a home, you must consider if a HOA property is right for you. You should also review the HOA’s master deed, CC&Rs and latest board meeting minutes to find out how the HOA is run and what the financial standing is.

We wish you luck finding a property that’s right for you.

House Appraisal

How Appraisers Determine a Home’s Value

To get a loan on a house the lender needs to verify that the collateral for their loan (the house) is worth what you’re paying for it and hence what the bank is backing financially. To do so, the lender gets a third party appraisal to determine the value.

There are several factors that are considered by an appraiser when he or she determines the value of your home. These are as follows.

Location

The neighborhood where the home is located plays a big role in your home’s value. Here are some elements that make for a great location.

·        Low crime

·        Good schools

·        Walkability

·        Well maintained streets and nearby properties

·        Close to a hospital, police station and/or fire station

·        Located in a suburban neighborhood near to a city

·        Located on a quiet street

·        Nearby houses are occupied and there are not a lot of foreclosures in the neighborhood

Structure

Homes with updated structural elements such as electrical, roofing, doors, windows and siding tend to be appraised for higher values. Solar panels and finished basement can also contribute to the home’s value.

Age of the Home

The age of your home is a major factor in determining its value, but new homes won’t necessarily appraise higher than older homes. While a home that was built in the last 10 to 20 years may appraise higher due to the fact that there’s less chance of damage, a historic home that’s in great condition will also be in demand.

Curb Appeal

A home that looks great from the outside will get a higher appraisal value. Consider painting the exterior, improving the landscaping and adding other outdoor amenities to raise your home’s value.

Number of Bedrooms and Bathrooms

It should come as no surprise that homes with more bedrooms and bathrooms will sell for more money. However, if a house has more bedrooms than most families need, and this contributes to a higher selling price, it may be hard for sellers to find buyers.  

Square Footage

Once again, the general rule here is, the bigger the better. However, sellers should be aware that not all the space in their home will be considered in determining its square footage. This will only apply to the property that is usable.

Heat and Air

Homes with central heat and air will appraise higher than homes that have individual units. Outdated heating systems that aren’t as energy efficient can bring down a home’s value.

Storage Space and Garages

The amount of storage space in your home will also increase the value. Homes with plenty of closets, usable basements and attics will appraise highly. A garage that has room for several cars is another asset.

Home Renovations

If your home was renovated since its last appraisal, it may help to increase the value. New doors, windows and flooring can be especially beneficial.

The Real Estate Market

The real estate market will also affect your home’s value. If your home is appraised when it’s a seller’s market that is saturated with buyers and not enough property to meet the demand, the home will appraise higher. On the other hand, if it is a buyer’s market with tons of sellers and not enough buyers interested, the home will appraise for less.

Earnest Money

Earnest Money

When you make an offer on a home, you want to show the seller you are serious. That way they will be more likely to accept your offer over other buyers who don’t seem as committed.

One way to do this is by including earnest money in your offer. Also, known as a ‘good faith deposit’, earnest money is an amount of money the buyer puts down to show they are serious about moving forward with the offer.

Read on to find out more about earnest money and how much is enough to show a seller you are serious.

What is Earnest Money?

When a buyer and seller enter a contract, the seller takes the home off the market as the transaction moves forward. If the deal falls through, the seller has to relist the home and start the process all over again. This can result in a major financial hit.

Earnest money can be used by the seller to cover financial damages in these situations.

How Much Earnest Money Should You Pay?

Earnest money is typically 1-5% of the sale price. The amount you end up spending will depend on the real estate market you are buying in to. If the market is slow, you may not need as much earnest money. If the market is hot, a higher amount will make your offer seem more attractive.

Your real estate agent will give you an idea of how much earnest money you should be depositing.

Will I Get My Earnest Money Back?

If the deal goes through successfully, the earnest money is deducted from the down payment or closing costs.

You can also get your money back if the deal falls through due to the seller’s actions. For example, if the house fails the home inspection, the buyer may be able to get their money back.

You can also get your money back if the home’s appraisal reveals the home has been overvalued.

If you weren’t preapproved for your mortgage and you don’t end up getting approved after you put your money down, you may be able to get your earnest money back as long as this contingency was in the agreement.

You may also have a contingency for selling your existing home. This means that if you are unable to sell your home, you can back out of the deal and get your money back. Once again, this contingency would have to be stipulated in the agreement in order for it to be honored.

Protect Your Money

Buyers and Sellers should do what they can to protect their earnest money. Here are some tips:

·        Keep it in an escrow account as opposed to giving it directly to a real estate agent or seller.

·        Be aware of the contingencies so you know what actions you can take if the deal falls through.

·        Stay on track with your closing responsibilities. Missing certain deadlines can cause you to lose your earnest money, and the home.

·        Put everything in writing. Make sure there is a written document in place that states how much money was given, all contingencies that apply and any updates that may have been made along the way.

Earnest money is not necessary, but it is a good way to build trust that you are a serious buyer. Good luck!

For Sale By Owner (FSBO)

Pros and Cons of For Sale by Owner

When selling a home, some sellers will choose to go the For Sale by Owner (FSBO) route. In this process, no agent is involved so it saves both the buyer and seller a considerable amount of money in commission fees. While this sounds like an excellent option, it does have its downsides. An inexperienced seller that doesn’t know what they’re doing it may actually end up losing you money.

Read on to find out more about the FSBO process and the pros and cons that come with it.

Pros

Lower Commission Fees: Most people choose the no agent route to save money. When selling a home with an agent, you can expect to pay a 6% commission fee, a 3% fee to your listing agent and a 3% fee to the buyer’s agent. If you decide to go the no-agent route, you will only be responsible for your buyer’s agent’s fees.

More Control Over the Sale: When you sell your home, you have control over every aspect of the sale. This includes the listing price, the improvements made and who you are showing and selling it to. However, with great power comes great responsibility and complete control can also mean a lot of stress in the selling process.

Insider Knowledge: No one knows your home as well as you do. Therefore, you can provide your sellers with information about the home to add a sense of transparency while bringing out its selling points.

Cons

Pricing: Without an agent you won’t have access to the market data you need to accurately assess your home’s value. An under- assessment can cause you to lose a considerable amount of money. If you over assess it, you may have difficulty selling it.

A Biased Opinion: An agent will give you unbiased tips that will get your home ready to sell. For instance, they may tell you your bright green living room needs a neutral paint job while you might think it looks great. Your agent will always give you an honest opinion of what your home needs to make it attractive to buyers.

Trouble Attracting Buyers: An agent has access to the MLS, the number one web site that people go to when it comes to buying a house. They also have other connections that can help get interested buyers in the door. Without these connections, you may have trouble selling your home.

Lack of Real Estate Knowledge: A lack of real estate knowledge could become an issue when you are dealing with advanced technical jargon, contracts and more.

It’s Stressful and Time Consuming: The biggest reason most homeowners will not want to sell their own home is because they simply don’t have the time to deal with it. When you consider how stressful the process is, hiring an agent just might be the simplest thing.

An agent is a good way to save money when selling your home, this is what they do day in- day out.  

Real Estate Scams

How to Avoid Real Estate Scams

Real estate is such a precious commodity. When there is a good deal, people can get desperate. Scammers play on this vulnerability and, as a result, there are plenty of real estate scams. Anyone can fall prey to a real estate scam but if you know what to look out for, you’re a lot more likely to stay safe. Here are some common scams and tips on how you can keep yourself protected.

Transferring Money to the Wrong Person

During a real estate transaction, you may be asked to email someone your banking information. While this is a convenient way to pass on information, it also comes with the chance that your money gets into the wrong person’s hands. To avoid this, make sure you are sending the money to your real estate agent or another person you can trust and don’t accept last minute changes to banking details.

Renting Property that Isn’t Real

Have you ever seen a great deal on a property that seems too good to be true? But when you try to check out the property you find that you can’t actually access it. There is probably some story attached like ‘the landlord is out of town’ or something clever like that. You might even be taken to check out the exterior of the property, but you can’t get inside. If this sounds a little fishy to you, it probably is. In scams like these, you will often end up paying a deposit only to find out the property was never available in the first place.

If you are dealing with an agent that seems less than honest, here’s how you can tell whether the property is imaginary or not.

·        Check the records to find out who the owner is and make sure that is the same person you are dealing with. The records will also tell you if the home is in foreclosure.

·        Talk to the current tenants or neighbors in the area to see if you can get any information on the home.

Title Fraud

Title fraud happens when a third party produces fraudulent home ownership documents in your name. Then they go to the bank and take out a new mortgage on the property. Once they have the cash from the transaction, they disappear leaving you with the payments. The only way to avoid this is to keep your personal records safe. Make sure no one has access to your information and be careful when you are making credit card transactions and large money transfers. Title insurance can also protect you from title fraud.

Sellers Withhold Information

This is a common scam that can occur in a legitimate sale. It involves sellers withholding information from you concerning the property’s condition. After you move in, you may be faced with expensive repairs on damage you didn’t know about. To keep this from happening, ask as many questions about the property as you think necessary. View homes with an experienced agent who will make you aware of any issues. If the home is being sold in ‘as is’ condition, certain things will need to be disclosed before the sale is made final. Being aware of scams and knowing how to avoid them can help protect you.

Home Staging

Staging a Home and Why It’s Important

When you are selling a home there are a few approaches you can take. You can sell your home while you are living in it, you can sell your home when it’s empty after you’ve moved out, and you can stage it.

Staging a home involves filling it with furniture to make it appear lived in. This can be a beneficial step in selling your home. Read on to find out why homeowners that are selling may want to go this route.

It Will Make Your Photos Stand Out

When you advertise your home on the internet, posting attractive photos can be extremely beneficial in getting it sold. Staging your home so that it looks its best will allow you to take great looking photos that will help your home attract more buyers and sell quickly.

It Will Help People Imagine Living in Your Home

When people see an empty home, it can be difficult for them to imagine living in it. When you add the right furnishings, they can get decorating ideas that will allow them to see your home as a place they can move into and enjoy. It can also forge an emotional connection that can motivate them to make an offer.

It Will Allow Buyers to See Your Home’s Potential

A good staging will help people discover your home’s potential. For instance, if you have a storage space, they might think it could make a good third bedroom. But if you actually stage that space to be a third bedroom, you can greatly increase the sell-ability factor.

It Can Make the Home Look Bigger

If you stage your home well, you can make the space look bigger. Spacing properly, opening windows and doors and producing an uncluttered look will work to make for a more spacious appearance. A bigger space is more likely to sell than one that looks small and cramped.

How Do I Stage My Home?

Most people will hire a professional to stage their home. Staging professionals will bring in all the furniture and arrange it to make your house look its best.

The cost of staging will vary according to the size of your home, where you are located and what you need done. However, in general, you can expect to pay anywhere from few hundreds to several thousands of dollars.

The cost of staging can add to expenses that you already have while selling but will help you achieve a higher purchase price. For this reason, staging is definitely something to consider.

We wish you the best of luck getting the most out of your home’s sale.

Short Sales and Foreclosures

It happens more often than we would like. A homeowner starts off making payments on their house with the best of intentions. But over time, they find out that they can no longer keep up with their mortgage.

When homeowners are unable to pay their mortgage, they can end up going through a short sale or a foreclosure.

What exactly is a short sale and a foreclosure and how do they differ from one another? Read on to find out.

Short Sales vs. Foreclosures

Short sales and foreclosures are last-resort options for homeowners that can no longer afford to pay their mortgages. A short sale is a bank approved sale while a foreclosure is the bank repossessing the collateral of their loan (the house). Here are some differences between them.

Process: Short sales are when lenders allow homeowners to sell their houses for less than the amount owed on the house. Foreclosures are when the lender repossesses the house.

Timing: A short sale is much longer than a foreclosure. The process can last up to a year. Foreclosures are faster because the lender is anxious to recoup the money they are owed.

Credit Damage: Short sales and foreclosures will damage your credit but a short sale will do a lot less damage than a foreclosure will. If you went through a short sale, it is likely you will be able to turn around and buy another home, although getting a second mortgage can be difficult.

Foreclosure, on the other hand, will stay on your record seven years and it will be five years before you are able to buy another house.

Should I Buy a Home That is in Foreclosure or Being Sold in a Short Sale?

Buyers who buy houses in a foreclosure or short sale will be getting quite a bargain, but these options could come with a headache as well.

In a short sale in particular, the main setback is the amount of time a buyer will have to wait until the sale actually goes through.

The sales can take 3-4 months or more. This is because the lenders won’t approve the sale unless sellers agree to pay for things like wire transfers, repairs and closing costs.

Because the bank is stuck with the bill, it will try to negotiate with the buyer to get them to absorb some of these expenses.

Foreclosures come with a faster and easier selling process. However, buyers will need to buy the homes in cash. They will not be able to get a loan so they can pay for the house over time. They will need to do a “refinance” after the purchase.

Also, when buying a foreclosed house, buyers agree to buy in ‘as-is’ condition. The home is not inspected for damage and if there is damage existing in the home it will be the owner’s responsibility to repair it.

Short sales and foreclosures are not pleasant for homeowners but they do happen. On the bright side, they provide a way for buyers to get great deals on their homes.

Get Your Home Ready to Sell

Eight Tips That Will Get Your Home Ready to Sell

You’ve finally decided to move on and sell your home. Your next step is putting it on the market…but not so fast.

To ensure your home sells quickly, and for top dollar, you want to get it in the best condition possible. You also want to make sure you’re getting a fair price.

With that in mind, here are some things you will want to do to get your house ready to sell.

Research the Housing Market

Start by researching your local housing market. This will give you an idea of what homes in your area are selling for. Find homes with similar square footage and numbers of baths and bedrooms. This will give you an idea of what your home should be selling for.

Find a Listing Agent

I highly recommend using Uri Chotzen. Your agent will lay out a plan for how to sell your house and use his expertise to bring in prospective buyers.

Declutter

A house that has a lot of clutter in it is not inviting. More than that, clutter makes the house look smaller. Get your home ready for open houses by eliminating as much clutter as possible. You may consider renting a storage unit to hold your stuff until the house is sold.

Deep Clean Your Home

A clean home will make a great first impression on prospective buyers. Clean every nook and cranny. You might even want to get a professional cleaner in.

Call a Handy Man

A handy man will be able to take care of little repairs that need to be done in your home. A broken closet door or doorknob can make potential buyers think the house is in disrepair in general. Little fixes can make all the difference when it comes to getting your house sold quickly.

Get a Paint Job

A good paint job will do a world of good in making your interior look its best. When painting, go for a light, neutral color. This way, buyers will feel that they have an open palette that they can use to do whatever they want. They will also know that they won’t have a problem painting over the walls if they choose to do so.

Pay Attention to the Outside

Curb appeal is another important factor. Make sure your home looks good from the outside too. Trim the grass and hedges and see to it that exterior repairs are taken care off.

Hire a Professional Photographer

When you list your home on a web site, you want it to look as attractive as possible. A professional photographer will take pictures that put your home in the best light. This will get people interested so more potential buyers come to check out your home.

If you are in the process of getting your home on the market, it’s important to get it looking its best. These tips and tricks will be extremely useful in ensuring your home sells quickly. We wish you the best of luck.

Title Insurance

Explaining Title Insurance

Most people understand what a title is. It’s a claim to ownership. Owning your own home means you have rights to the property and you can modify it as you see fit.

What is a Title?

A title is a document given to the owner of a house. It shows the property legally belongs to the owner and there are no outstanding claims or liens on it or any fraud or error in the history of the ownership. It also shows any non-ownership rights, like easements for example. Common easements are those put in place for utilities (company access) or driveways (neighbor access).   

What is Title Insurance?

Title insurance comes with the title of the house. It is a way to protect yourself from financial loss and related expenses if there is a defect in the title that is covered by the policy.

Title insurance differs from other types of insurance in that there are no monthly payments required. There is just a one time premium that’s paid at closing.

There are several ways title insurance can help you.

For one, if work is done on the house and the homeowner refuses to pay the contractor and then sells the home, the new owner may now be liable to pay for the work. However, if the new owner has the title insurance to prove they now own the house, the contractor will be unable to come after them for the debt.

Title insurance also proves you own the home no matter what. Some sellers are not entirely honest and may try to sell the property to someone else even after it has been sold to you. When someone comes to the door with a deed saying they own your home, you will have no recourse, unless you have the insurance to back it up.

Or say you buy a home whose last owner is now deceased. You think all is well and good so you don’t bother with title insurance. Then you find out that the deceased actually left the home to a relative and they would like to claim it. You will have trouble holding on to the home unless you have the insurance.

Different Types of Policies

There are two different types of title insurance policies and it’s a good idea to know the difference between them. Real estate agents can even get confused so knowing the difference as a homeowner can help things run more smoothly.

One type of title insurance is a lender’s policy. This policy only covers mortgage lenders from unforeseen liens, defects and frauds. It does not cover homeowners.

The owner’s policy is the one that will protect the buyer if an issue occurs.

The seller or buyer will pick which insurance company they use depending on who pays for the policy.

Title insurance is not necessary but paying this one time fee can go a long way when it comes to protecting your property rights.

Escrow

Explaining Escrow

If you are at all familiar with the homebuying process, it is likely you have heard the term ‘escrow’ being used often. But it can be difficult to grasp this term until you go through it yourself, and even then it may be quite confusing!

Well, this article will give you an explanation of what escrow means in simple terms anyone can understand.

Escrow is the neutral third party assigned with the role of holding funds and distributing them in accordance with the contract. If there is a breach in contract, funds can be frozen in escrow until the dispute is resolved.  

Escrow Before You Buy Your Home

Once your offer is accepted, you are required to come up with earnest money. This is money that is deposited into the escrow account to show you are serious about buying. It is usually 1-5% of the home’s purchase price.

Once the deal closes, the earnest money is returned to the buyer. It is then typically applied toward the down payment.

If the deal falls through because the buyer changes their mind, the seller gets to keep the earnest money. If the deal falls through due to a seller not coming through on repairs or damage that is found during inspection, the buyer will get their money back.

Escrow After You Buy Your Home

After you buy your home and get your earnest money back, a second escrow account is opened. This will be used through the life of your loan.

The amount of money put into this account will be calculated by the lender based on the money required to maintain your mortgage. The lender will dip into this fund to pay property taxes and home insurance premiums to ensure you don’t get a lien on your home.

Despite the loan, you will still have to make some upfront payments. For instance, you may have to pay for your first year of insurance. Then your lender will take all subsequent payments from the account.

You also may have to make a few property tax payments up front. After that the escrow account will take over.

The amount you pay into your escrow account will depend on your insurance and property tax rates. For instance, if you are paying a total of $7200 a year on property tax and insurance, you will have to pay $600 a month into your account to cover these payments.

Because rates can fluctuate, your lender will do an annual escrow analysis to make sure you’re paying the right amount. In some cases, your payments may increase. In other cases, they may decrease.

If your payment amount decreases, the lender may keep an amount equal to two extra payments plus $50 in your account. The rest will be refunded to you.

This sums up escrow and will hopefully make your home buying experience go as smoothly as possible.