Buyers

Most first-time home buyers are eager to have their very own home but it has to be at a price they can afford. Smaller homes, fixer-uppers and cheaper commutes to work are the best options to look into.

The problem is, most firt-time home buyers expect more than what they can actually afford in a home. Coldwell Banker conducted an online survey with 150 of its brokers. The result of the survey yielded a strange trend among first-time home buyers.

Almost of the survey respondents said affordability was their top concern first time buyers. Yet, 81 percent are looking for move-in conditions. Only 7 percent are considering fixer-upper homes. The real estate company suggests looking into fixer-upper homes if you want affordability.

“In the past, first-time home buyers were willing to purchase older, more basic houses in an effort to save money and bhttp://www.doctilo.com/article_writing/index.php?e=33reak into homeownership,” said Jim Gillespie, president and chief executive officer, Coldwell Banker Real Estate, LLC. He adds, “It is important for first-time homebuyers to remember that by considering a fixer-upper for their first home purchase, they can build equity over time and later move up and into their second-stage home that better reflects their expectations.”

Buyers who choose to go with fixer-ups homes should have the house inspected by a professional home inspector. Buyers need to find out how much it will cost you on repairs. You might end up spending more than what you saved. Homes that need basic fixing or improvement can give already give you a lot of savings but you can even save more on houses that need major work. Again, buyers need professional help so you can determine if your savings on the house is more than the cost of repairs.

Another surprising discovery was that most first-time buyers wanted affordability yet they looked for bigger houses within the metro. The survey shows that 71 percent of first-time buyers wanted bigger houses than they were 10 years ago. A smaller home is less expensive because of smaller footprint and square footage. 41 percent were considering proximity. They were looking for a house near their workplace so they could save on gas. However, houses around economic centers are expensive. These properties bank on the value of convenience. Those who live in areas like this can save on travel time and gas money.

A good alternative to this is finding an affordable place far from economic centers but near a transit oriented development (TOD) or low-cost public transit. There is also the option for carpooling or car-sharing communities.

The survey also showed that most of these first-time buyers looked at five to ten homes before they decided on a house. But if you want to get the most for your money, invest more time in looking at houses. More houses, more opportunities for savings. Look at at least 10 houses. You can usually find big discounts from these: houses that had been on the market for at least 90 days; houses being sold by long-time homeowners; houses for sale from flipping investors who got unlucky; and houses from we-want-to-sell-real-estate banks.

Their major responsibility is to protect your interest as a buyer and as their client. Their main roles are the following:

• Educates you about your market.
• Negotiates on your behalf
• Analyzes your wants and needs.
• Guides you to homes that fit your criteria.
• Coordinates the work of other needed professionals.
• Checks and double-checks paperwork and deadlines.
• Solves any problem that may arise.

Buyers are now in a better position when it comes to buying a house. Gone are the days when real estate is a hot market and you need to make an upfront offer as soon as a property is put up for sale.

Competition has mellowed down in most areas. This gives buyers an opportunity to be able to deliberate on what is available and take advantage of the best deals. How do you determine the climate of your market? According to economists, real estate is directly related to employment. So if there is a rise in employment, you can say that the value of your property is also looking up. In the Midwest real estate is not doing as good as auto manufacturing. Prices are low and is not expected to rise anytime soon. It might take a while until the market rebounds.

Things buyers can keep in mind to get the best deal in the market:

• Do your homework and negotiate fairly.

  In a changing market, the biggest problem is human nature. Market value can drop or stagnate. But sellers often refuse to believe this. To them, the price of their home is based on how dear it is to their heart regardless of its actual market value. On the other hand, buyers take advantage of a market slump and make unrealistically low offers. Before you make an offer, research and think about important things like the features of the home that you want to be in the home, the size of the home and the going rate of properties in the area.

• Research on comparable sales.

  Find out how much the last one in the area sold. According to Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., “See what’s going on out there.’’ Don’t insult the seller by making a very low offer. You’ll drive them away. Your goal is to make them consider your offer.

• Why is the seller putting it up for sale?

  Find out as much as you can about this. Is it because of retirement, job-related, divorce, they need to relocate, or they simply want to sell to the highest bidder.  This information is crucial. If a buyer knows this, they can either negotiate better or decide to look elsewhere.

• Check the MLS (Multiple Listing Service).

  They usually state what the seller owes. Or your agent can provide this information for you.With this information, you could negotiate accordingly.

• Timing.

  According to Durham, “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through.’’ After this period the seller will be anxiouse to sell their house.

• Go for newer or well-maintained houses.

  It will cost you time, effort and money to fix damages.

  Even in a tight market, it’s okay to ask the seller to add the closing costs to the price of the house. It’s better to pay 20% downpayment and roll the closing costs into the loan than pay 15% downpayment and pay upfront for the closing costs.

• Be reasonable

  when you ask for extras.You can also ask for new kitchen appliances or washer and dryer. Durham said you can even ask the seller to pay for the first year of homeowner association dues. But don’t ask them for things that involve workmanship. Durham said, “Don’t ask them to paint.’’“They won’t do it the way you want. They’ll do a lousy job.’’

  When you consider buying a home, think about staying there for atleast five years. Remember your goal as a buyer is to get the home that you want; not to outsmart the seller.

Are you looking to finance a new home? Or are you finding the best mortgage rate to refinance your home?

The first step is to shop around. But what does that really mean? Research and prepare. Take time to think and analyze different mortgage plans. You could save a lot by doing this. Take this for example: on a 30-year mortgage for a $300,000 house, a homeowner would pay approximately $1,520 each month at a 4.5 percent rate. But if the homeowner chooses a slightly higher rate of 5.10 percent, it would increase the monthly mortgage payments to $1,633, which would make a difference of $40,680 in 30 years. (Figures were calculated on a 20 percent down payment.)

The best thing you should do is retrieve your credit scores. If lenders retreive them multiple times, it can lower your score. 

If you’re looking for a lender, look into their track record. Ask family and friends about them and when you’ve narrowed down your options to two or three lenders, compare their rates.

Before you compare rates, establish a budget. Think about how much maximum you can afford to pay every month.

The lender should be able to give you a comparison of loan terms with conventional methods of financingso you can make an informed decision. Don’t just jump into a plan with low rates. Make sure you understand all the costs with it.  Rate lock is a contract with the lender that ensures the interest rate will not change. But you will need to get the loan within a certain period of time; usually 60 days. If the rate increases, you will not be affected. Using a mortgage calculator , compute the monthly payment at different interest rates. If you find a rate that is lower than your limit, lock in to that rate.

When you see rates that are lower than your limit, act fast. Don’t miss out on good deals and offers.Some lenders offer a “float down.” This means that even if you’re already locked in on a low rate, you can get even lower rates. Specific contracts may vary depending on lenders.

When you look for a lender, don’t just consider one. Look into other lenders as well. Different lenders offer different products. Understand the products. Some products for example have low rates for new homebuyers but not for those who want to refinance.

It’s a good idea to try different institutions from a direct lender, credit union or a community bank. Once you’ve made up your mind on a lender, ask what other fees are added to the loan. You might choose a plan with a low rate but have a lot of additonal charges. Before closing the deal, make sure you know the total amount of the loan.

Once this is settled, decide when you want to close the deal. Discuss your intended date with the lender. Ask about the charges for loan lock periods. Lock in for the best rate and the right amount of time.

People have different goals and principles when it comes to investments. But here are vital tips that every investor needs to know to ensure success.

• Compare property rates.
  The best way to assess the value of a property is to find out the sale value of other properties in the vicinity. This is also how you determine the rental fee. Rental fees should be reasonable. Otherwise, potential tenants will think about purchasing a property instead.
• Keep tax laws in mind
  Bear in mind that tax laws could change over the years. When investing, make sure that they won’t be affected even if tax laws will change.
• Focus on a market you’re familiar with
  Determine a market you’re good at – be it condominiums, apartments, starter homes, low-cost houses, fixer-uppers or foreclosures and start with that product.
• Know the costs involved
  You should be knowledgeable about the costs and expenses like financial statements, operating expenses, loan payments, taxes, cash flow, vacancy costs. You must have a clear understanding of these things before you commit to an investment.
• Find out where the tenants came from
  If the rent went up just recently, the tenants are probably thinking about moving. If they have a short-term contract with, there is a chance that they are living there to get buyers. Don’t forget to get their security deposit.
• Study the taxes involved
  Taxes play a very important role in investments. Oftentimes, they spell the difference between a positive and negative cash flow. You might want to seek help from a tax advisor. You should find out how you can use the tax situation to your advantage.
• Learn about insurance coverage
  If the seller’s coverage is lower than the current replacement value, you might incur higher insurance cost. 
• Verify the cost of utilities
  Ask local utility companies of the current charges especially if utilities are included in the rental fee.
• Find a good accountant
  One of the things that make a succesful real estate investment is taxation. Find an account who is good with tax codes and reliable.
• Inspect the property
  Carefully inspect the property before buying it. You might need to hire experts to assess the property.

• Aim for pre-approval versus pre-qualification

  If you are looking to get the best house at the most reasonable rate, you need to show them that you are in a good negotiating position. There are several factors involved in a transaction. Price is one of them but not necessarily the most important. What matters more are facotrs like the length of escrow and the buyer’s buying power.

  I used to suggest that buyers get pre-qualified by a lender. To be pre-qualified, a lender will ask you a few questions. Based on your answers, the lender will declare that you are pre-qualified. You are then issued a certificate stating this which you can show to the seller. The problem is, sellers won’t buy this.Because they know that your answers were not validated. Some problems are eventually discovered like problems with alimony, a bad credit report, or other negative legal reports.

  So the more credible way to show your worth is through getting pre approved. You can achieve this after all the information you gave out had been verified. When the process is done, this means you are approved for the loan. It can take days or weeks to process. Once you’re pre-approved, you have established a strong negotiating position.

• Sell before making a purchase

  If you’re trying to sell a property so you could afford to buy another property, sell the property first. It is better to have cash in hand or clear funding rather than going into contingency sale. Why? Because you’ll end up paying more for the property you want and will give you pressure to sell your current property. Think about this: You found a house you want to buy. You make try to make a deal with the seller. Most likely they will agree to sell you the house. But since they are making a big risk by reserving the property for you even if you don’t have the money yet, the seller will let you pay full price and you’ll be pressured to sell your property before the deadline. If there are no potential buyers in sight, you’ll be persuaded to sell your property for a low price just to lure buyers and make the deadline for your new property.

  If you’re worried that there is no prospective house for you, take time to look around. Think about a location you’d want to live in or look at houses so you’ll have an idea on the kind of house that you want. When you do put up your house for sale, add this phrase: `”subject to seller finding suitable housing”. This gives the buyer a picture of what’s hoing on and those interested will know that this is part of the deal. This gives you time to look for a new house. If you don’t find a new house that you want, don’t sell your current house.

• Play the game of nines

  Before you start looking for a new house, think about the things that you want and don’t want in a house. Take this list with you everytime you see a new house. Use this list to evaluate each potential new house. This list will be very helpful when you’re having a hard time deciding which house to purchase. When evaluating a house, make a clear distinction between style and substance. Substance refers to things that cannot be changed, like the location, the neighborhood, popular landmarks, lot size and floor plan. Style means elements in the house that can be removed or changed. So this could be curtains, furnitures, paint, wallpaper and carpet. Since based on our description, it’s sound to say that you should make a decision based on substance and not style. You may not like the current style of the house but remember, they are something you can adjust to your liking. I always tell the buyers to imagine that the house is empty. Do not forgo a good deal just because you don’t like the former owner’s taste.

• Don’t buy a house just because you feel pressured

  A good agent will show you properties that meet your requirements. Do not settle on a house until you’ve thought about all your viable options. Ten years ago, houses were easily sold. So deals had to be made fast. If their client wanted a house, they were advised to make an offer right away. But that is no longer applicable today. There is no urgency requiring fast deals.

  It’s also a good idea to check school districts in the area of the house you’re looking into. All the information you’ll want such as class size, SAT scores, achievements should be available in the school. You cuold also get this information online.

• Do not fall for ads

  More often than not, ads leave out the unpleasant parts Their sole purpose is to lure people. They are paid for by the seller and therefore they will only look after their advantage. Your best protection is to hire an agent. They can check the property thoroughly. They know things that you don’t and they are there to look after your interests. Choose an agent that you’re comfortable with. As their client, you will have access to all the rights and privileges that they have to offer. As buyer your options will no longer be limited to those that are publicly advertised. When they hear of a great deal, they notify their clients. Being their client, you have access to great deals that is usually not advertised.

  If you want to get the best property for your money, I strongly suggest you get an agent to help you.

Are you excited to purchase a new house for the first time? Here are useful tips that are sure to help you in your new venture. 

• Do a research on how much comparable properties cost in the same area. There are websites where you can do this. Websites like National Association of Realtors allow you to search actual MLS listings in your area. Websites like Zillow and Homegain gives you an estimate of how much it will cost you.
• Use a mortgage calculator to see how much it will cost you and see which properties you can afford. MSN Real Estate’s home affordability calculator can give you a good idea of how much you’ll need to prepare.
• Find out what is the maximum cost you will have to pay every month for the house (including staxes and insurance). MSN Real Estate’s home affordability calculator can help you do that. According to the Insurance Information Institute, annual premiums can range from ($477 in Utah) to $1,372 (in Texas). Where you live influence your cost. In some states, taxes and insurance costsare so high, they can increase your mortgage payment by almost 100%. To get a good estimate of how much insurance will cost, call an insurance agent in the area you’re interested in. Getting a quote does not oblige you to get insurance from them. With regards to taxes, you can go to Zillow. There you can find property-tax information for homes across the country. Keep in mind that there may be exemptions and irregularities in local tax law that could cause rates to differ.
• Keep in mind closing costs. This is one of the things required to purchase a property but oftentimes overlooked. It needs to be paid upfront. The fee is estimated by the lender. It will include other fees like origination fees, taxes, settlement fees and prepaid fees. If you want to know the average closing cost in your area, check Bankrate.com’s annual closing cost survey.
• Study your finances and see if it can still accomodate payment for a house. According to Fannie Mae (FNMA), you should not spend more than more than 28% of your budget on housing fees. If you do, you risk becoming house poor.
• Get insights from reputable real estate agents in your area. Get their forecast on the real estate market and gauge if they think it’s looking up or if it’s not doing so well.
• Think about this: Can you really afford a new house? It may need major repairs soon. Can you handle the costs?

Buying a new house is a good investment. But you need to be sure you’re ready for it because it’s also a big responsibility.

• The higher interest rates, the more it’s going to cost you

  If it’s your first time to invest in real estate and you don’t know much about interest rates, here’s something you should always remember: the higher the interest rate, the more it’s going to cost you. When you borrow money, this means that you have to pay a lot higher than what you borrowed. Another good tip is to use an adjustable rate mortgage. This can make the property more affordable for you. You can choose from many price range depending on the financing plan you choose.

• No one knows for sure

  No one can predict interest rates – not even the Feds. Mortgage interest rates are influenced by political, economic and social events that are unpredicatable. Experts will try to predict this but no one can be certain. When you make financial decisions look at the real estate climate. Consider your budget, expenses and future plans.

• Lock in for low interest

  Once you’ve decided to lock in at a certain interest rate, complete your loan application and send it to your lender in the soonest possible time. This ensures that your commitment doesn’t expire before your loan is approved. Check ton make sure that all the necessary documentation is there. Get a property appraisal through your loan agent as soon as possible. This usually costs $300.

• Don’t wait too long

  Some buyers wait hoping for lower interest rates. But this isn’t always the best idea. You may actually end up paying more. In the event that interest rates go down, you can think about refinancing.

For most people, the process of purchasing a house starts with finding what you can afford, finding a lender, finding a real estate manager, making a list of your requirements, checking out properties – a lot of them, making an offer, securing your mortgage and sealing the deal. Visiting and inspecting properties is time-consuming but a very important part of the process. Most people are keen about checking out the houses that no matter how busy they are, they do not want to skip this process. But not all buyers think this way.

Yes, believe it or not, there is an increase in sight-unseen real estate purchases. Some buyers just look up properties in MLS (multiple listing service) or look at the pictures, descriptions and virtual tours online. Some investors are in a hurry to close what they see as great deals online that they are willing to skip inspecting the property. Some properties are also worth the risk to some buyers because they are at a good location that if they wait longer, it might no longer be in the market. But this type of deal is very risky. You may get lucky but it can also be a big problem. You need to study all the risks involved before going into this kind of transaction.

• Distressed Properties

  Distressed properties are properties that are damaged, in poor condition, about to be foreclosed, or advertised as for sale. Banks are in a hurry to get rid of them because they cost so much for them to keep. They would need to pay property taxes, maintenance and legal fees. It can cost them $1,000 per day. So banks often try to sell them for a lot less. Buyers and sellers have an opportunity to make a transaction below market rates.

• Tight Market

  In areas with limited properties, buyers are often driven to buy properties even if they haven’t seen them yet. Though they are sight unseen, prices of such properties are based on market value or even higher. In areas like Boston or New York City, bids can be very competitive and this drives prices high. Investors who bid for proerties in tight markets usually have not seen the property but are willing to take the risk because they know the market value of properties in that area is promising.

• Pre-construction Properties

  Some properties are sold on the market even before the project is done or even started. This allows buyers to purchase them for significantly lower rates than they will be when it has been completed. It also works to the advantage of the seller because they can use the money from the buyers to complete the project. Buyers who invested before the construction can sell the property at a much higher value in the near future.

• Competition

  Buyers’ tough competition in landing a great deal are flippers. Flippers are big-time investors, wholesalers or large companies that buy prime lots for as low as possible and later sell them at a lot higher price. Flippers look for low-priced properties, make necessary repairs and sell them after a short period of time for a much higher price. When they see a distressed property, they assess the property’s After Repair Value (ARV). This means the market value of the property after the cost of repair had been taken out. They estimate their profit by subtracting the purchase price and other fees from the ARV. Other fees include carrying costs or the cost while keeping the property such as property taxes, insurance and utilities. Some flippers do not purchase sight unseen properties when there seems to be more risk than profit. Others like purchasing properties they can get at very low rates despite the damage and odds involved. And they bank on auctions or other opportunities where they could resell the property to buyers who cannot view the it prior to the sale.

  Real estate wholesalers also buy properties and sell them in a short period of time. But unlike flippers, they don’t spend time fixing or improving the property. They buy properties and draft a contract with contingencies so they could cancel the contract if necessary. Then they sell the property to other investors. They profit by selling the property at a higher rate than they originally got it. Wholesalers are like middlemen that scout good deals and hand over the properties to other investors.

  Institutional investors have the capacity to buy many distressed properties all at the same time and sell them with the most profit. They are the toughest competition especially when it comes to good deals. They can get all of the good deals in their target market.

  Some individuals are compelled to purchase sight unseen properties usually out of necessity. Oftentimes, it’s because they need to move to a new location, making it difficult for them to scout for a new place. They usually contact a local agent and trust them to find a good property that match their requirements. They settle for the pictures, virtual tours and information that are sent to them or which they can access on the internet. If you’re looking to buy sight unseen properties, it is important to be specific about what you want. It should not be limited to the house but the area or neighborhood you want as well.

• Risks

  Buying sight unseen properties is very risky. There are many things you cannot see on the surface and cannot be captured by cameras. Structural damage, infestation, molds and water damage (among others) can be hidden from cameras. Some of these damages were caused by the previous owner’s neglect. They probably didn’t have the time, knowledge and resources to take care of the house. But in some cases, the damages were intentionally made. Some people resort to damaging the property so the bank will have a hard time finding a new buyer for it. Or the sale value will be a lot less. In other cases, it’s a matter of practicality. They bring with them all that they could from the structure so they could still use it. Furnitures, appliances and some fixtures are usually among the things that they take with them.

  Another important aspect of the property that you cannot see from pictures or virtual tours is the environment in the neighborhood like the noise, pollution, traffic, unpleasant odor or a troublesome neighbor. Unless you actually visit the property, you won’t be able to see these things and decide if you are okay with them.

  Time is another risk that flippers, wholesalers and institutional investors face. The longer time they hold on to a property, the more money they lose. While they keep a property, they incur carrying costs. Their object is to buy and sell the properties in the soonest time. Aside from carrying costs, they can also end up paying for more necessary repairs.

• Protect Yourself

  Adding a contingency clause is the best way to protect yourself in buying sight unseen properties. A contingency is a condition that needs to be honored so the deal can push through. An inspection contingency allows the buyer a certain period of time, like 5 to 7 days to inspect the property. A professional home inspector checks the house’s internal and external structure including  the electrical, plumbing and ventilation. The buyer can still make negotiations or cancel the deal if necessary. This contingency allows the buyer to:

  • Accept the report of the professional home inspector and push through with the deal
  • Back out of the deal based on the report
  • Ask for more time to make further inspection
  • Request for repairs or concessions

Buyers can also include a walkthrough contingency. This clause allows you to do a waltkthrough before pushing through with the contract. Keep in mind though that sellers are not obliged to accept any contingency that the buyer set. They can also make the price go higher because of the risk that a contingency brings. The deal can not push through because of a contingency.

Hiring a professional real estate agent can give both buyer and seller extra protection. It should be clear that your agent is on your side protecting your interest. Your agent has a fiduciary responsibility to you and should protect your propety and money. So it’s important that you can find a reputable agent whom you can trust.

Buying sight unseen properties is very risky. You might get a property that’s not actually worth your investment. But to some it is unavoidable because the deal sounds too good to pass up or the buyer is not able to check the property before purchasing it. What’s important is you protect yourself with a good real estate agent and make use of contingency clauses. Having a good real estate agent can help you with this.

Being a homeowner has its perks and a lot of responsibilities. So before you commit to years of paying for a house, make sure you understand what you’re getting into.

First, think about the costs. There are many costs associated with owning a house. You need to pay a downpayment, home insurance, and other fees needed to close the contract. When you move into a new house, you will also need to spend on moving, buying furnites, appliances, fixtures and landscaping. And there is always a possibility that the property you purchased will depreciate.

If you’re used to calling the landlord whenever there’s a problem like a leaky faucet or a broken cupboard, that won’t be the case anymore. As a homeowner you will now be responsible for all the damage incurred from plumbing, appliances, paint job, roofing and so on. And all these cost money. You can expect to spend more on repairs and maintenance if you purchase an old house.

If you want to find out if you’re ready to become a homeowner, try to do the following:

• Find out the property value of homes that you’re interested in. Your real estate agent can help you with this. The property value can be determined by comparing the value of properties in the area that are of comparable size.
• Study different mortgage loan types. Take note of the downpayment required and compare it with the money you have. Downpayments usually range from 3 to 20 percent of the property value. They vary depending on the value of the property or the type of mortgage you chose. Then there’s private mortgage insurance (PMI). This insurance helps mortgage lenders recover if a borrower fails to fully repay a loan. The lowest downpayment is three percent. The lower the downpayment, the higher the PMI. Usually, they cost  between $40 and $125 a month.
• Estimate your closing costs. This includes points, taxes, recording, inspections, prepaid loan interest, title insurance, and financing costs from your mortgage lender or a real estate agent. All these fees will add to the property value by 2-7 percent.
• Add the cost of the downpayment and the closing costs to know how much money you’ll need upfront. But the expense doesn’t stop there. In fact you’re just getting started.
• On the actual move, you’ll need to spend on movers. The more stuff you have, the more it will cost you.
• As a homeowner, part of your responsibility is to pay property taxes. Most lenders usually require an impound account that pays for both tax (and usually with insurance) and mortgage. The average yearly tax rate is about 1.5 percent of the purchase price of the house.
• House repairs and maintenance. According to HouseMaster, a home inspection company with 300 franchises nationwide, based on a study that evaluated 2,000 inspection reports, these are usually the costs of major repairs:
• Roofing: $1,500 to $5,000
• Electrical systems: $20 to $1,500
• Plumbing systems: $300 to $5,000
• Central cooling: $800 to $2,500
• Central heating: $1,500 to $3,000
• Insulation: $800 to $1,500
• Structural systems: $3,000 to $1,500
• Water seepage: $600 to $5,000

If after you’ve considered these and you realize you don’t have enough funds to own a house, don’t lose hope. You can also turn to lenders or think of creative ways to come up with a financial source.

Don’t overlook home insurance. Factors like the kind of house you have, the age of your house, your credit and insurance record, and new cases like toxic mold cases can increase insurance rates.

According to a report by the National Association of Insurance Commissioners, in 2007 homeowners spent an average of $822 on home insurance.

But despite the financial woes, there are also financial benefits of owning a house. Mortgage payments are more consistent than rental fees that can increase anytime. There are also tax benefits and the likelihood that your property value will increase as ayears go by. And most of all, it feels good to have your very own home.