Today, buying or selling a home is
one of the largest projects many people will take on
in their lifetime. The complicated process can be made
easeir with the help from our staff.
When shopping for a new home we advise
that you prepare yourself before starting the search.
Money and valuable time are not to be wasted and following
our guide will make your home search experience more
pleasurable. You don’t need to spend any money
until you're ready, and some will find that home ownership
is not right for them.
Once you are informed, we suggest implementing
your real estate search, and eventually the mortgage
process, with the help of a professional assistant.
The small cost of working with professionals will payoff
in the end as you won’t suffer the mistakes and
errors of a first time home buyer.
You Rent or Buy a Home?
a Real Estate Agent
for Negotiating with the Seller
of Financing a New Home
You Rent or Buy a Home?
The advantages of buying a home compared
to renting a home are abundant:
Owning a house, as opposed to renting,
is not only benefitting financially, but it also gives
you a place to really call home. Obviously, it presents
you with the responsibility to maintain your own property,
but it also gives you the freedom to do as you wish
with the property.
In most cases, the money a landlord
spends on rent can deferentiate depending upon the amount
a homeowner spends on a mortgage. However these elements
seem incomparable when you consider tax deductions,
the many benefits you receive when owning your own home,
and the real savings offered.
A monthly mortgage payment in many
cases is fixed during the life of the loan, while your
monthly rent may increase at your landlords will or
at minimum along with inflation.
New home buyers should also consider
appreciation (the dollar value increases your home value
over time). Over the life of your home ownership, your
new home may appreciate tens of thousands of dollars
which will eventually become yours when you sell it!
Landlords take a percentage of your
monthly rent payment to pay for their own mortgage along
with the other expenses that they incur while maintaining
the rental. Don't forget they rent the property in order
to make a profit, including eventual property appreciation
they will gain when they resell the home or apartment.
If you purchase a home you pay the
expenses incurred to maintain your home, and also gain
the in tax savings and property appreciation.
Whether to rent or to buy a home is
a difficult question. The rewards are more benefitting
if you are ready to own your own home.
The Internal Revenue Service allows
home owners to deduct mortgage interests, property taxes
and some of the other expenses incurred in owning your
home when filling out their annual tax returns. Home
owners also have a tax benefit when they sell their
homes: the current tax law allows, in certain cases,
the exclusion from taxable income of up to $250,000/person
in capital gained from the sale or exchange of the property
used as a primary residence.
you currently own a home you should consider selling
it first. When you get to the negotiating table for
your new home you will be in a stronger position if
the new purchase is not contingent on the sale of your
your residency may become stressful, and in order to
avoid the pressure and the rush of having to purchase
a home you may want to consider renting for a short
period of time.
were your down payment will be coming from. Savings
account, sale of current home, or a gift as a source
of payment. Don't forget that conventional lenders will
only allow you to use 5% of the down payment from a
gift. Lenders verify the aging of your deposits to insure
that your down payment is not composed of more than
5% gift funding.
consider getting yourself pre-approved for a mortgage.
Most home sellers will take an offer more seriously
if they know you have already been pre-approved for
a mortgage. In fact many realtors won't begin to show
you homes until you have a pre-qualification letter
from a lender.
a Real Estate Agent
estate agents can offer considerable amount of advantages
to your home search. They have access to the Multiple
Listing Service (MLS) which lists all of the homes for
sale in your area. They may also have some homes available
in their agency which have not yet been added to the
With time and money a factor, a real
estate agent's experience should be valuable to both.
Real estate agents knowing the local market values of
other homes that have been recently sold in the area,
and the advantages and disadvantages of the home you're
selecting will improve your position when negotiating.
at no cost to you the real estate agents commission
is built in to the price of the home and paid for from
the eventual sale. In the event that you search for
a home without an agent, in most cases, you will not
save the cost of the agents commission as normally since
it's built in to the selling price of the home.
can be costly and having your own real estate agent
can prevent them!
are three types of real estate agents:
Seller's Agents - who represent the seller
Buyer's Agents - who represent the buyer
Dual Agents - represent both buyer and seller
real estate commissions range between 5% and 7% and
perhaps higher for raw land and commercial properties.
some time in selecting your real estate agent. Visiting
open houses or, asking your friends and relatives if
they know of someone they would refer you to are all
ways to seek a suitable agent. If you have already selected
the area you prefer, you may find that one realtor has
a stronger presence in this area compared to another
you have targeted a specific agent, ask the real estate
agent what area of town they specialize in? How much
experience do they have? How many homes they have sold
in the last year in your price range? Are they a Realtor?
Realtors are members of the National Association of
Realtors and have agreed to conform to their code of
ethics. Try to find someone you can be open with, as
you will need to tell them all of your likes and dislikes
when viewing prospective homes.
& Where To Search for Your New Home
look their best in the spring and summer therefore prices
may be a bit higher. However in the fall and winter
when leaves have fallen and gardens are no longer in
bloom sellers are generally more flexible when negotiating
since they know they will have to wait until spring
for their home to look its best.
think they should wait for mortgage interest rates to
drop. However, this plan doesn't always work because
home sellers also follow the interest rates and may
ask a higher price when they know the lending market
is advantageous to the buyer.
Remember the more open you are to the areas and plans
in a given town this will better your chances to find
what you're looking for.
your agent research the Multiple Listing Service (MLS)
based on the specifications you've outlined for your
new home. Take a look in real estate books found at
the supermarket, the classified ads of the local newspaper,
and the internet as many realtors list homes for sale
on their websites.
a map and select your preferred area of town you're
interested in. Look in these areas first and then expand
these areas in the event you don't find what you want.
time by speaking to your agent or the seller before
visiting prospective homes. Simple conversation may
save you a visit to an inappropriate home. Have your
agent give you the addresses of the prospective homes
they have found on the MLS and do a drive by. A visual
is worth a thousand words and you may save time once
you've seen the outside. Viewing the outside may decide
whether you are interested enough to tour the inside
along with your real estate agent.
Express your likes and dislikes to your real estate
agent that way they can focus better on your real desires
before going forward.
If you pay multiple visits to the same
home try to go at different times of the day. Things
may seem different in the daylight then they would in
the evening and vise versa. Try to visit during the
week and again on the weekend to see the changing character
of the neighborhood. Pay particular attention to noise
in the area and don't forget traffic on the street front.
And After Negotiating
beginning negotiations you need to know the local market.
Know the selling price for every comparable home in
the area over the preceding year, and ask your realtor
to prepare a list for you.
tell the seller more than you have to! Why you're looking
and when you need to move in by can be big negotiating
advantages to the seller. This information can be easily
given away to the seller by casual friendly conversation.
Find out why the home is for sale. How long has it been
on the market? How long has the current owner owned
the home? How much did they pay for the home? Have they
made any improvements? How much does the current owner
owe on their mortgage? Who built the home and
what is their reputation?
Make note of any flaws the home may have and have your
realtor insure that they will be remedied. Once the
purchase process begins appraisers will visit the home
and may point out anything that you may have missed
which the seller must remedy prior to the actual sale.
of The Home
prices are different from prices of almost everything
else. Many things are factored into the eventual selling
price, and the final price is determined by the home
seller and buyer. Appraisers can give an estimate of
a homes value however, the final price can only be determined
by you and the seller.
sellers asking price may not be a good indicator of
a homes real value. Some sellers are realistic about
the value of their homes and others are not. Some need
to sell quickly while others can wait
can make a low offer if you think the selling price
is out of line, however you should be prepared to site
examples of similar homes which sold for the price you're
offering to support your bid.
the other hand if the home is priced low, move quickly
before another buyer has an opportunity to put a sales
agreement in place.
you have a sales contract for the home in place the
seller is legally bound to sell you the property for
the contracted price. However, you aren't bound to pay
this price until all of the contract contingencies have
been removed. The seller isn't obligated to reduce the
price if problems are found during subsequent inspections
but you are free to walk away from the deal.
Have as many professional inspections
done as reasonably possible. The cost of inspections
is relatively inexpensive when compared to the savings
you may realize by having problems corrected prior to
the sale or by reducing the selling price.
When buying a home you can negotiate more than just
the price. You can include any conditions you consider
important, these conditions are called contingencies.
Be careful to be reasonable. If your not, the seller
may decide not to sell you the home.
In your offer you should specify
exactly what is being purchased, the home, the fixtures,
and the appliances should all be documented in the
offer. Specify the amount of your deposit, which is
normally refundable if your conditions are not met
and the sale does not go through.
A financing contingency must be included if you will
be getting a loan. Also you should specify that you
have the right to perform all reasonable inspections
and finally the closing date.
liquidated damages clause allows the seller to keep
your deposit in the event you default on the purchase
agreement. It doesn't mean the seller can keep your
deposit in the event inspections find something that
you want corrected, but the seller is unwilling to
pay for the correction.
duration of your offer should be for one day maximum
two. This prevents the seller from shopping your offer
to other potential buyers.
a home warranty in order to cover any problems you
may find after the fact. It's worth the money so you
can sleep soundly.
unusual conditions that make your offer less attractive.
Often sellers will be accepting of your conditions
in the beginning of negotiations, however after the
agreement is made they tend to fight over small issue.
for Negotiating with the Seller
your home will exercise your patience and will often
payoff if you can muster it. If you sense the seller
needs to move quickly don't rush. Allow the house
to be on the market for a while.
longer the home goes unsold the more pleased the seller
will be to finally receive an offer. Be aware though
if the house is a great deal it may not stay on the
market long and you risk potentially losing the home
to another buyer.
can also make your offer immediately. If you move
quickly the seller may not have been made other offers
that they would consider in conjunction with yours.
negotiating strength lies in how long the home has
been on the market, how quickly the seller needs to
sell, and how willing you are to walk away from the
home if your offer is not accepted.
forget that the seller may likely make a counter offer
to your offer if they consider it unacceptable. You
can always challenge their counter offer with what
you think would be another suitable price. For example,
you could ask to have some appliances included if
you accept their new price.
a signed agreement prior to performing any of your
inspections in order to avoid spending money on a
house you may never purchase.
Basics of Financing a New Home
funds used to purchase a home come from two sources,
you and your lender
lenders have two limits on the amount of money they
(LTV) limit. This is the amount of money the investor
will lend expressed as a percentage of the house's
value. LTV varies depending on your credit and employment
history, the loan program.
Amount Limit. Conforming loans can not be higher
than $333,700. Loans higher than this amount are
called Jumbo loans and have different programs available
than conforming loans. Conforming loans are favored
by lenders as they are easily sold on the secondary
interest rates usually follow the bond market and
you should not find large variances in interest
rates between one lender and another. Variances
appear in the total cost of the loan which includes
all of the fees added to the closing cost of the
loan. Fees like origination fees, document review
fees, and processing fees may vary widely from one
lender to the next. In order to properly compare
one loan offer to another you will need to have
"Good Faith Estimates" from both lenders.
This is the only way to compare apples to apples.
Lenders prefer borrowers that have a large down
payment, income sufficient to make the monthly mortgage
payments, a good credit history and credit score,
and sufficient cash reserves in the event you fall
on hard times.
use two ratios to evaluate your borrowing power. Your
front end ratio and your back end ratio.
front end ratio is the percentage of your income to
be used for housing expenses.
back end ratio is the percentage of your income used
to pay all of you monthly reoccurring debts (like
car loans, credit cards) including housing expenses.
Every lender has different ratios
which they consider acceptable.
Conforming loans have the guidelines of 28% front
end ratio and 36% back end ratio. These ratios are
only exceeded when the individual lender considers
other factors which may outweigh the exceeded ratio
and they believe the loan will be able to be sold
on the secondary mortgage market.
can make money from borrowers in three different ways.
Origination fees are fees lenders charge to setup
the loan. Interest rate spread is the difference between
the interest rate the lender offers you, the borrower,
and the actual cost of the funds. The lender may also
service the loan, in which case they earn a fixed
monthly fee for sending notices and collecting payments
related to the mortgage.
many lenders you may be able to negotiate on the origination
fee and interest rate spread. For example, you may
be able get a loan with a 6% interest rate and pay
one percentage point origination fee or get a 5.5%
loan for two percentage points origination fee.