Buying · Inspections · Real Estate · Selling

Don't Panic

Property inspections are common in most real estate transactions, and are recommended even in the hottest markets. The question becomes what do you do when the inspector’s report comes back with items listed in need of repair. Whether you’re the buyer or the seller, just keep a cool head and approach the repairs logically.

Focus on the major defects. Minor repairs are not the ultimate goal of the inspection. Major repairs should be handled as soon as possible, in order to avoid any delays in closing.

Once the buyers have secured quotes for repairs, they should present their requests to the sellers either for the repairs or for a reduction in the selling price. The sellers may also choose to solicit quotes, and if there is a significant difference, the two parties may negotiate.

Either party may complete the repairs, but sellers who are busy preparing to move may offer a credit to the buyers so the buyers may have the repairs completed later to their satisfaction. Once agreed to, the final terms of the arrangement should be put into writing, and then signed and dated by both parties.

Whoever accepts responsibility for the repairs should have paid receipts for all of the work done. Proper documentation of each step in this process will protect each party and help ensure a smooth and successful closing.

Note: This article was originally published on this site on March 17, 2016. It has been updated reflect the current home market.

Buying · Inspections · Real Estate

Inspection Protection

You’ve found the home of your dreams, and you’re preparing to make your offer. As you consider price and terms, be sure to include one of the most critical components of the offer – a home inspection contingency. The contract should clearly identify how any reported problems will be rectified.

By including a satisfactory inspection in the terms of the contract, you give yourself three valuable options if repairs are needed. You can either:
a.) Request that the sellers complete the repairs before closing
b.) Negotiate a price reduction if you expect to pay for the repairs yourself
c.) Withdraw your offer without penalty

That last option isn’t very appealing, especially if you really love the home. However, you must be prepared to walk away if the sellers are uncooperative or the numbers don’t add up.

While the selling market was so hot these last few years, many buyers would forgo the inspection, just so their offer looked better than others, or to get the home before prices increased again. These normal or cooler markets allow you to be more financially sensible and insist on the inspection.

If the inspection proves to be a deal breaker, don’t sweat it, because there will be other comparable homes for your consideration. Chances are, though, that repairs will be minor and the sellers will be happy to cooperate.

Buying · Financing · Real Estate

Make a Strong Offer

Here are two terms buyers should understand when making a home purchase: “down payment” and “earnest money deposit.” They both involve money, but represent two different aspects of a home purchase.

For simplicity, let’s say a home is priced at $750,000. By financing 80%, the down payment would be $150,000, payable at closing. When making such an offer, it is assumed that the buyer has funds on hand for at least the down payment.

The “earnest money deposit” is a different story. Earnest money is paid at the time a purchase contract is signed and is negotiable. The terms under which the buyer’s earnest money can be forfeited are specific to each individual contract.

If $150,000 is on hand for a down payment, the buyer could reinforce the purchase offer with a $15,000 deposit. Buyers who offer only $5,000 or $10,000 are unknowingly broadcasting a message that perhaps they are not totally committed to complete the transaction.

When buying your next home, let sellers know you mean business. The larger your earnest money deposit, the more credible your offer becomes to the property owners.

Buying · Financing · Real Estate

The Lingo of The Loan

Your real estate agent may not write your home loan, but that’s who will probably be there when you begin discussing mortgage options.  Knowing some of the nuts and bolts before you start your home search can help you find the right loan.

Factors affecting your terms are the amount, the length of the loan, and the loan-to-value ratio (how much of the home’s value you are financing).  Larger loans carry more risk to the lender, so the interest rate may be higher.

Similarly, a smaller down payment represents more risk, possibly warranting a higher interest rate.  Get the best rate by putting down as close to 20% as possible.

The difference between a 15- and 30-year loan is also critical.  Payments for a shorter term will be larger, but you’ll build equity much faster, and enjoy a slightly lower interest rate.

Also understand the workings of an adjustable rate mortgage (ARM).  You need to be fully prepared for what may happen to your payments after the first adjustment.  However, something like a 5/1 ARM (a fixed rate for five years and an adjustment each year thereafter), could be a good idea if you’re buying your first home and don’t plan to stay longer than five years.

Discuss your hopes and objectives with an agent, who can help guide you down the road to homeownership.

Buying · Credit · Financing · Real Estate

Don't Pay for Their Mistake

An important early step in purchasing a home is to get a lender’s “pre-approval” for financing. Then you’ll know how much home you can afford before you start your search. You’ll also make a strong impression on sellers, because they’ll know that your offer is solid.

Another step to take before you talk to the lender about pre-approval is to get copies of your credit report and review them thoroughly. Smart consumers shop around for the best prices, and you want the best interest rate possible. If your credit report contains errors, you jeopardize your chances for the best rate.

Lenders review reports from The Big Three – Equifax, TransUnion and Experian – and you should, too. Interest rate tiers are based on your credit score – the higher your score, the lower the rate. The lower the rate, the more home you can afford!

Get a copy of your credit report a couple months before you start looking at homes. Creditors usually have thirty days to correct errors, but give yourself some wiggle room. Verify that the debts are correct and belong to YOU (not someone else at the same address or with the same name). Your realtor will work closely with the lender to take this important step to prepare you for the home buying process.

You’ll be amazed how many doors open for you with a clean credit report and low interest rates. Now you’re ready for some happy house hunting!

Don’t Pay for Their Mistake

Note:This article was originally published on this site on June 9, 2016. It has been updated reflect the current home market.

Buying · Financing · Real Estate · Selling

Bridging The Gap

Like the question of the chicken and the egg, homeowners planning to buy a new home must ask, “Which comes first?”  Do you sell first, and then look frantically for the new home, or buy first and risk maintaining and financing two properties?

There’s more risk than just two mortgages.  If you’re rushed to sell your home to purchase a new one, you might be forced to list at, or accept, a lower price than expected.  If you’re pressed to buy a new home after selling your existing home, you may be forced into paying an unexpectedly higher price.

What is one to do?  Build a bridge!  Yes, there is a financing option called a “bridge loan,” so named because it “spans the gap” between your sale and your purchase.

One type of “bridge” lets you simultaneously pay off your existing mortgage and make a down payment on the new one.  You make payments only on the new loan, and pay off the bridge loan when your old home sells.

Another kind of “bridge” allows you to borrow against the equity in your old home to make the down payment on the new home.  Both “bridges” still mean two loans, but the costs may be offset as a result of having more time to get top dollar for the sale of your existing home.  See you on the other side!

Buying · Financing · Real Estate

It Takes Money to Save Money

Okay, you’ve found the home of your dreams. You’ve determined how much you can afford because you’ve already been pre-approved by your lender, and your offer has been accepted. But wait. If you’re financing the purchase, like almost everyone does, you’ll actually be paying more than the final sale price of the home.

Many buyers don’t stop to think about how much they’ll really be paying for their home by the time they’ve reached the final payment. It’s worth considering, and it makes it evident that you should shop around and get the best loan terms possible.

Be sure to discuss your options with a trusted local real estate agent, who can provide mortgage information, illustrate different financing options, and even recommend lenders suited to your needs. With literally hundreds, if not thousands, of options available, it’s helpful to begin with the basic facts to help you whittle down your choices.

Determine how much is available for a down payment. If you’re putting up less than 20%, you’ll need a guarantee that often comes in the form of PMI (private mortgage insurance). This will add to the overall cost of your loan, at least until you’ve paid off a significant percentage.

Again, discuss your loan options with your real estate agent before you make any offers, in order to avoid unpleasant delays and unexpected expenses.