Posts Tagged ‘Buyers’

If you’re a first-time home buyer, it’s almost a given that you’ve heard about something called the $8,000 Home Buyer Tax Credit. You know, the little government program that puts $8,000 in your pocket if you haven’t owned a home in the past 3 years and decide to buy. For you current homeowners that have lived in your home for the past 5 years or so, there’s also a little matter of a $6,500 tax credit waiting for you if you decide to buy now as opposed to waiting for another time.

Anyway, in regards to THAT tax credit, you’re running out of time to use it. You have until the end of April to write up a contract (that must close prior to July 1st, 2010) and qualify for the credit.

How Do You Claim the Credit?

At closing, you’re provided with a document called the HUD-1 or Settlement Statement. This is your Golden Ticket. Provide this to your accountant and you’re ready to go.

How Long Will it Take to Get My Money?

It depends. When do you want it? If you want the money ASAP, you can file an amended return to your 2009 taxes. You’ll get the money whenever the government gets around to it. It may take a while right now being the heart of tax season. Alternatively, you can file the credit for your 2010 taxes and get a nice little chunk of change to start off 2011. The choice is yours.

Will They Extend the Tax Credit Again?

I have no clue. All indications point to “NO”, but there’s no way to be sure. They shouldn’t. I think it’s time to give it up. It was enacted as a measure to boost home sales, and it served its purpose the first time around. The extension didn’t provide anywhere near the response the government or real estate market was looking for. A second extension would probably provide a similarly underwhelming response.

Should You Rush a Purchase to Get in Before the Deadline?

This is a question that only you and your family can answer. I’d be the last person in the world to rush anyone to do anything with a decision like this.

In Closing

If this is all too much, we’re here to help. We’ve helped lots of first-time home buyers, we can help you too. Good Luck!

Disclaimer: I hate these damn things, but I have to do it. My goal is to be as accurate as possible, but there actually is a chance that I could be wrong about something I’ve written above. All tax information in this post should be discussed with your tax professional. I’m not one. Please don’t base any tax decisions on this post because Level Ten Realty, LLC. and Seth Parker are not responsible for them. Carry on.

There are apparently some new financial guidelines coming down the pipeline that you may want to be aware of, specifically dealing with the Truth in Lending disclosure that you would receive from your lender. I’ll get more in detail soon when I learn more about it, but below are the basics that I was told by a loan officer a day or two ago.

One of the most confusing documents for buyers in their closing package is the Truth in Lending Disclosure. In a nutshell, this disclosure breaks down your mortgage into specific financial terms. It lays out the amount your mortgage is for, the total amount you would end up paying if you kept the loan for it’s entirety (a number you don’t want to look at  ), and an Annual Percentage Rate, or APR. Seven out of ten people that look at the APR immediately think something is wrong.

For example, you may have a loan with an interest rate of 5.25%. Your APR, on the other hand, may be something like 5.5% or 5.375%. Don’t worry when you see this number, it’s not your interest rate. Your APR is a number expressed as  percentage that takes into account closing fees, lender fees, the interest rate, and any other things that can contribute to how much a house actually costs to buy. This is the best way to compare mortgages. So, if mortgage A has an APR  of 5.5% and mortgage B has an APR of 5.25%, you’ll know that mortgage B is the better loan. Basically, don’t freak out when you see that the APR is higher than your interest rate. Your interest rate will stay the same.

What do the new guidelines have to do with the Truth in Lending?

The new guidelines would state that if the APR changes at any time during the loan process (from application to closing) by more than 1/8 of a percent, the purchaser must have 7 days advance knowledge prior to closing. It’s actually not a terrible new guideline. I can see that it would be very helpful in some situations. I just don’t know how well the real world application of this will work.

What are the problems with this?

Forget about quick closings. Once an official APR has been established, it will take 7 days from that point to close. If it ever changes by more than 0.00125%, higher OR lower, that 7 day clock starts again. Also, with the fact in mind that most fees aren’t gathered, compiled, etc. until a day or two before closing, this could throw a wrench in a lot of operations.

Again, I don’t know as much as I should about all of this just yet, like when or if it will take effect, but I will learn more soon.

A few thoughts about appraisals.

You have a house under contract. Congratulations! Now the real fun begins!

There are pitfalls that can ruin a home purchase at just about every turn. In this section, we’ll go over some of these, as well as get you to the closing table.

After Contract, Step 1, the Home Inspection

Home inspections are optional, but they should really be a requirement to purchasing a home. Always, ALWAYS get a home inspection. It’s the best $250-$400 you will EVER spend. I get asked the question all the time, “What about new homes? Surely I don’t need one on a new home!” First, I say “Don’t call me Shirley” (kudos if you know where that’s from), then I say “ESPECIALLY on a new home.” There are several good reasons why, but those are for another post. In my seven years selling real estate and HUNDREDS of home inspections, I have NEVER, NOT ONCE, seen a spotless home inspection. New house or old house, it doesn’t matter. The home inspector boogeyman will get you for something.

As far as the inspection is concerned, the buyer only has to worry about setting it up. You are free to choose any company you like. I can recommend several companies that have performed very well for me, but I can’t choose a specific one for you. Once you select the inspector, I coordinate the rest. I let the inspector in the home, get the report, discuss repairs with the buyer, set up the request for repairs, negotiate the repairs, and help you keep a check on them to make sure that they get done and get done correctly.

Our standard board contracts are written to protect the buyer when it comes to a home inspection. If there are any major health, structural, or safety issues associated with the home, you have two options. 1. Have the seller repair them or 2. Walk away from the contract, and take your earnest money with you. The home inspector provides a report within a day or so detailing all of the issues with the home, and he usually has them labeled as to how urgent they are. Cosmetic issues will be noted in the home inspection, but the seller is not required to make cosmetic repairs and you are not allowed to walk away from the sale over cosmetic issues.

Not coincidentally, the rest of the loan process is predicated on the home inspection results. The lender usually won’t even send out the appraiser until after a satisfactory home inspection or satisfactory repairs are agreed upon. The home inspection is one of the main reasons for issues buying a home. If you make it past the home inspection unscathed, you’re well on your way.

After Contract, Step 2, the Appraisal

The appraisal, as far as importance is concerned, ranks right of there with the home inspection and getting approved for a loan when it comes to buying a home. Like I mentioned above, after the inspection is complete and repairs are agreed upon, the lender will send the appraiser out. Government backed loans, like FHA or VA, require that the home appraise for AT LEAST the sales price or you have the option to walk away. In the Huntsville area, we’re fortunate that we don’t have very many appraisal issues with value, but that doesn’t mean it never happens.

One more thing to keep in mind about appraisals: If you think you’ve just found the best deal in the land way below market value, you make it through the inspection, and the appraisal comes in $5,000 over the sales price while you were expecting $25,000 over the sales price, don’t panic. It’s normal. Appraisers HATE to appraise a home for much more than the sales price. On average, not matter if the home is worth much more, you’ll generally see appraisals come in from $1,000 to $5,000 over the sales price. It’s VERY rare to see more than that.

After Contract, Step 3, the Wait

When steps one and two are complete, the buyer’s job is pretty much complete until the day or so before closing. There’s usually a quiet period here where not much goes on. The attorney is working on the title search, the lender is waiting for the appraiser to submit his findings, the seller is getting their affairs in order, the agent is helping coordinate the previous things, and the buyer just kind of waits. It’s normal. Just be patient 

After Contract, Step 4, the Final Walkthrough

If you’ve gotten this far, there’s a 95% chance everything is going to work out. We usually do what’s called a final walkthrough the day of, or the night before closing. The purpose of this is to walk the property, make sure all repairs were completed, make sure the owners didn’t create any problems prior to leaving, and make sure all of the major systems of the home are still in working order. This usually takes 15-20 minutes and there are rarely any problems.

After Contract, Step 5, the Closing

It’s the day you’ve been waiting on for 2-4 weeks. By the end of the day, you will own a new home….hopefully! Even this far into the process, things can go wrong. Discrepancies in interest rates, fees, documentation, verification of employment, and many other things could potentially complicate the closing or postpone it. If, after you look over all the fees and costs, everything looks good, you start signing!

Closings generally take between 30 minutes and an hour. A lot of it depends on the buyer. Some like to read EVERY document in the package and a closing can take four hours. While it’s their right to do so, all of the documentation is pretty standard and the attorney gives you a summary of each page as he hands it to you.

After signing your name 100 times or so, you finally own the home!!!! Go move in!!!

See, that wasn’t so bad, was it?

Just a few random thoughts on my way out of a home inspection in Athens.

In Part I of this series, we discussed the very beginning stages of finding a home. Now, we’re going to talk a little more about the actual looking process along with dipping into contracts.

Looking at Homes

Between and your Realtor (if you decide to use one), you’ll be able to find a list of homes that you want to take a look at. When you get to each home, DON’T BE SHY. Open closets, crawl under the house, climb in the attic, look in the tub, look in the pantry, it’s all normal. Everybody does it.

Take everything into consideration when you’re looking at a home, not just the price. Keep mental, or physical for that matter, notes of additional costs and repairs that may have to be made. How long does the roof have left on it? How old is the central unit? Is the floor plan functional? Don’t forget to think about resale either. It’s a rarity to stay in a home longer than 6 or 7 years, so be prepared to make decisions based on changes in the future. A great Realtor should be able to help you with all of these questions (Like me  ).

You’ve found the perfect house! Now what?

There are two pieces of advice I can give about deciding on a home:

• 1. IF you have found the perfect home, do not, I repeat, DO NOT, hesitate. I don’t know what it is, or why it’s like this, but I’ve seen NUMEROUS clients lose out on THE home because they weren’t prepared to make a decision and someone else was. I can give you an example that happened a couple of weeks ago that I was fortunate enough be on the good side of. After looking at several homes with some buyers, they decided on one. We submitted an offer and got everything squared away and verbally agreed upon. That same day, another offer came in JUST after we reached an agreement. It was from another buyer that had looked at the property 4 times over a week and a half span. It was their dream house. They took their family to look at the home twice. It was THE ONE. Unfortunately, because they weren’t prepared to make a decision at the right time, they’ll now have to find something else. Don’t let that happen to you. It sucks. Really.
• 2. Don’t submit a “low-ball” offer on a good home. The only thing you do is piss the sellers off and make them more difficult to work and negotiate with. For example, if a good home is listed for $100,000 and you’re willing to pay $93,000, don’t start off at $70,000. The seller immediately discards you as inconsiderate and insincere in your attempt to buy a home and you’ll be lucky to even get a counter-offer. This isn’t Michigan, Florida, or parts of California where the real estate market is in such terrible shape that sellers just can’t wait to see ANY offer. Locally, homes still sell for about 97% of the list price, which is very good. Using the example above, on average, you could expect to get a $100,000 home for $97,000. On the other hand, if the home needs $30,000 worth of work, feel free to low-ball!

The Contract

OK. You’ve picked a home. You’ve decided on a price. Now, the fun begins. As members of the Huntsville Association of Realtors, we all use standardized contracts. The two most important things that you may notice about these contracts are that they are much easier than those of other states and that they are written to protect the buyers and sellers very well. Here are a few good things to know about our contracts:

• 1. Most importantly, if you fail to qualify for financing, you are released from obligation to the contract. No harm, no foul. Your earnest money is even returned to you.
• 2. You have the option of obtaining a home inspection. If the home inspector finds any major health, safety, or structural issues with the home, the seller is required to fix it or you may opt to walk away from the home.
• 3. If the seller defaults on his/her contractual obligations, they are liable to the purchaser for damages.
• 4. Due to Title Examination and Title Insurance policies provided for in the contract, you are given clear title to the property. In the unlikely event the attorney missed something, the title insurance policy will cover any title issues prior to the date of sale.

Negotiation

In theory, the concept of negotiation should be an easy one. Buyer and seller agree on terms of sale. Period. In reality, it’s never that easy. There are tons of other factors and variables to consider. When can the seller move out? When can the buyer move in? When do we close? Who’s paying the purchaser’s closing costs? How much? Will possession be given at closing? How much earnest money? Are they leaving the refrigerator? What appliances stay? What doesn’t stay? Do repairs have to be made? Will the seller give an allowance or have them done? Oh yeah, and PRICE. Buyers and sellers are two naturally opposing forces. The seller wants to walk away from the closing table with the most amount of money possible, while the purchasers want to walk away from the closing table with the most amount of money left in their pockets as possible.

Part III will focus on the world that begins after negotiation of contract.

In every home purchase/sale, no matter how different they are or can be, there are always two constants. Buyers and sellers. These two constants are the basis for any purchase, not just real estate. So, let’s take a deeper look into what it takes to get from looking at homes, to moving in them from a buyer’s perspective.

Looking for a Home

The entire process, obviously, starts by looking for a home. Without a doubt, the best place to start looking is the MLS or Multiple Listing Service. The MLS carries all homes listed by any real estate company that is a member of the MLS, which includes almost every company. Home magazines are usually out of date before they’re ever even published and the Real Estate section in the newspapers are full of errors.

Start with an MLS website. This could include the main MLS site or a Realtor’s website that is connected to the MLS through a RETS (Real Estate Transaction Standard) or IDX (Internet Data Exchange) feed. These sites have access to the entire MLS database, but every site is not created equal! IDX feed sites are updated much less frequently than a RETS feed site (like level10realty.com).

Alternatively, there is an entire For Sale by Owner (FSBO) market that is not listed in the MLS. There’s nothing wrong with buying a FSBO, just be safe during the process. If you’ve never bought a FSBO, hire an agent, an attorney, or someone else that can look over the paperwork and make sure that your interests are protected. Realtor Association Members use a standardized contract that is written for the protection of all parties involved with remedies in the event of a bad home inspection, failure to qualify for financing, default, etc.

Realtor or No Realtor?

If you decide to look at any home listed in the MLS, there’s no way to avoid a Realtor. The best piece of advice I can give here is to choose a Realtor FIRST. Don’t get “stuck” with a Realtor just because you called a sign. Like Realtor websites, all Realtors are not created equal. A great Realtor is worth their weight in gold. I’m not kidding. Speak to several Realtors. Interview them. Look for specialists for your unique situation. Choose the one that’s in tune with your needs. Any Realtor member of the MLS can show any home listed in the MLS. It doesn’t matter if the home’s listed with another company or in another area, or listed with another Realtor. So, Bob with Big B Realty can show any house, even Diane’s listing at Big D Realty and Jane’s listing at Big J Realty. Here’s another tip. If you choose a Realtor to work with, and tell any other Realtor that fact, you won’t be bothered. Trust me.

Like I alluded to above, if you choose to look at FSBOs, you don’t have to have a Realtor. That’s a decision you would have to make based on your experience in buying property. For a first-timer, I would recommend getting a Realtor to help. On the other hand, I’ve seen some buyers with the experience and negotiation skills that would make some Realtors shake in their boots.

Part II will focus on actually looking at homes and the contract process.