Sharing home buying deeds
Are you thinking about buying a home with someone unrelated to you? Before you sign anything, experts say, there are certain precautions you'll need to take to keep the roof from caving in on your dream.
Pooling resources with friends, lovers or partners to come up with a down payment or the purchase price of a home is increasingly popular today. But now that you have the money, you and any partners face some tough decisions, starting with the deed.
First decide what kind of deed to have. If nothing to the contrary is stated on the deed, the property is owned as by tenants in common. With this kind of deed, there can be multiple partners, each owning a different percentage of the property. Partners can also transfer their portion of the property to anyone at any point, without the permission of the other owners.
In reality, however, if the partners disagree, it's hard to sell part ownership in a home to a third party. Few people want to buy a home if they don't have complete control of it. More likely to happen is that if one partner won't buy the other out, a partition action is filed in court. A judge then orders a sale, which usually nets the partners less than the home's market value.
If the deed is tenants in common, problems can also occur when a partner dies. The deceased's share goes to the person or persons designated in the partner's will.
But if there is no will, the share goes to the deceased's relatives, who are entitled to the estate under New York State law. This can result in an original partner owning a home with a stranger or even multiple new partners.
If a partner wants his or her share in a property to go to the surviving partner in case of death, the deed should be written as joint tenancy. Then, no matter what a will says, the surviving partner or partners receive the deceased's share.
Even after you decide what kind of deed to draw up, partners purchasing property together should also draw up a formal agreement, spelling out such things as how much interest each has in the property, who pays what expenses connected with the house and what happens if one partner is unable to pay their share. In the latter case, for example, the agreement might call for the delinquent payer's proceeds to be reduced in the event of a sale, she says.
Many people, of course, never plan for problems, so they leap into the purchase "without looking at all the angles". But if everything is examined, potential problems can be addressed in the agreement. Here are some examples:
One way some partners who own the property as tenants in common have solved the problem of transfer in case of a death is for each to take a term life insurance policy for half the value of the home. If one partner dies, the deceased's heirs are left the property's value in cash.
Engaged couples purchasing a home prior to marriage should have a prenuptual agreement, spelling out who put up what money to buy the home and what happens to the house if the engagement is broken.
Such agreements may seem cold-hearted, "But when love goes sour, it can be a nightmare." Even if one partner moves out, both are still liable for the outstanding mortgage balance when both names appear on the note. Sort of like the sound of a roof caving in on a dream.
http://www.ezilon.com/information/article_15461.shtml
Thursday, September 6, 2007
Getting over home-buying jitters
To a free seminar offered by the St. Lucie County Cooperative Extension Service for new and potential homebuyers. The workshop, designed to help renters find buy and keep their homes, will address mortgage options, property taxes and insurance costs, as well as offer cost-saving energy reduction strategies and more.
"We'll deal with a lot of issues that people may be reading about these days," said Jeffrey P. Gellermann, a growth management agent with the extension service, "including the end of the 'subprime' interest rates, vacant houses and the boom in foreclosures."
A part of the workshop will be leading would-be homeowners through the minefield of lending options.
"We'll talk about the housing market situation today," said Carol Alberts, an extension service manager specializing in finance education. "There are so many houses on the market, but the fact is that you've got to have good credit to get one because some of the lending options that used to be out there just aren't anymore."
In short, she said, the market is going back to the future.
"Traditional lending products are still available to people with good credit and good income," Alberts said. "Basically, things are back to the way they used to be. Adjustable (interest) rates are still out there, but do you really want one? It can be a risk; but if you're only planning to stay in a house three or four years, maybe it's best for you. Unfortunately, you still can get enough rope to hang yourself."
If the rash of foreclosures has taught us anything, Gellermann said, it's that "in the long run, it's better to not get a home before you're really ready than to jump into one when you're not. There's money out there for qualified buyers; and if you're not qualified, don't be dismayed. You can work toward that."
These days more than ever, Alberts said, insurance costs figure in to whether a home is in or out of your price range.
The workshop will cover comparing policies and coverages, options on deductibles, the differences in deductibles for regular damages and windstorm damages and whether a home requires flood insurance.
Karla Lenfesty, an extension service windstorm mitigation specialist, said would-be home buyers usually don't find out what a house's energy costs will be; adding that it's smart to ask for the previous homeowner's energy bills for the last year and to have an energy audit — in which a power company inspects the house for ways to cut down on utility expenses — before you buy.
"You're going to want to know how much it's going to cost to air-condition that cathedral ceiling," she said.
The three-hour workshop, Gellermann said, "is going to go real fast. We've got a lot of information to share and not a lot of time.
http://www.tcpalm.com/news/2007/aug/19/30getting-over-home-buying-jitters/
"We'll deal with a lot of issues that people may be reading about these days," said Jeffrey P. Gellermann, a growth management agent with the extension service, "including the end of the 'subprime' interest rates, vacant houses and the boom in foreclosures."
A part of the workshop will be leading would-be homeowners through the minefield of lending options.
"We'll talk about the housing market situation today," said Carol Alberts, an extension service manager specializing in finance education. "There are so many houses on the market, but the fact is that you've got to have good credit to get one because some of the lending options that used to be out there just aren't anymore."
In short, she said, the market is going back to the future.
"Traditional lending products are still available to people with good credit and good income," Alberts said. "Basically, things are back to the way they used to be. Adjustable (interest) rates are still out there, but do you really want one? It can be a risk; but if you're only planning to stay in a house three or four years, maybe it's best for you. Unfortunately, you still can get enough rope to hang yourself."
If the rash of foreclosures has taught us anything, Gellermann said, it's that "in the long run, it's better to not get a home before you're really ready than to jump into one when you're not. There's money out there for qualified buyers; and if you're not qualified, don't be dismayed. You can work toward that."
These days more than ever, Alberts said, insurance costs figure in to whether a home is in or out of your price range.
The workshop will cover comparing policies and coverages, options on deductibles, the differences in deductibles for regular damages and windstorm damages and whether a home requires flood insurance.
Karla Lenfesty, an extension service windstorm mitigation specialist, said would-be home buyers usually don't find out what a house's energy costs will be; adding that it's smart to ask for the previous homeowner's energy bills for the last year and to have an energy audit — in which a power company inspects the house for ways to cut down on utility expenses — before you buy.
"You're going to want to know how much it's going to cost to air-condition that cathedral ceiling," she said.
The three-hour workshop, Gellermann said, "is going to go real fast. We've got a lot of information to share and not a lot of time.
http://www.tcpalm.com/news/2007/aug/19/30getting-over-home-buying-jitters/
Ten Tips on Home Buying and Selling
There is a lot to know before putting your home up for sale or starting your search for a new home.
Take the following into consideration if you are a buyer:
1. Work with qualified lenders: Before you start working with a bank, mortgage banker, mortgage broker
or credit union, get as much information as you can. Check their backgrounds carefully. Also, get an estimate of all possible fees.
2. Get pre-approved: If there is a problem getting pre-approval because of your credit rating, get copies of your credit reports and determine if anything on the report is inaccurate or over seven years old, which means it must be removed.
3. Look for a neighborhood first: A great home in an undesirable neighborhood (for any of several reasons) is not very worthwhile from a quality of life or from a home value perspective. Learn as much as you can about the neighborhood (online, from visits or at local libraries) and make sure your needs are met.
4. Make a wish list: Whether you are going to open houses on your own or using a real estate broker, make up a list of what you would most like in a new home and prioritize it so you can determine what is most important and which items you are comfortable sacrificing.
5. Have an inspection done: Have an engineer or independent home inspector inspect the home, including the roof, basement, grounds, heating, pipes, and so on. Make your offer contingent on an inspection.
http://www.allbusiness.com/personal-finance/real-estate/2465-1.html
Take the following into consideration if you are a buyer:
1. Work with qualified lenders: Before you start working with a bank, mortgage banker, mortgage broker
or credit union, get as much information as you can. Check their backgrounds carefully. Also, get an estimate of all possible fees.
2. Get pre-approved: If there is a problem getting pre-approval because of your credit rating, get copies of your credit reports and determine if anything on the report is inaccurate or over seven years old, which means it must be removed.
3. Look for a neighborhood first: A great home in an undesirable neighborhood (for any of several reasons) is not very worthwhile from a quality of life or from a home value perspective. Learn as much as you can about the neighborhood (online, from visits or at local libraries) and make sure your needs are met.
4. Make a wish list: Whether you are going to open houses on your own or using a real estate broker, make up a list of what you would most like in a new home and prioritize it so you can determine what is most important and which items you are comfortable sacrificing.
5. Have an inspection done: Have an engineer or independent home inspector inspect the home, including the roof, basement, grounds, heating, pipes, and so on. Make your offer contingent on an inspection.
http://www.allbusiness.com/personal-finance/real-estate/2465-1.html
Rules for purchasing a home without buying trouble
Rules for purchasing a home without buying trouble
Home buying should be a pleasant experience. There's no reason it won't be if you know how to avoid the possible pitfalls. Following just a few simple rules will make the process painless and even enjoyable.
- Shop for home financing first. Many home buyers begin by looking at homes they can't afford, thus w
asting the time of real estate agents and home sellers. A better approach is first to talk to several mortgage lenders to learn the maximum mortgage for which you can qualify. Inquire about both fixed rate and adjustable rate mortgages. Of course, after you have a home tied up on a purchase contract, you can shop further to see if the mortgage terms can be improved.
Mortgage lenders are especially eager to make loans today, because their business volume is down, but their vaults are bulging with mortgage money to loan. Home buyers should be aware mortgage lenders need borrowers as much as borrowers need lenders. Don't be intimidated. If a mortgage company isn't responsive and cooperative, there are dozens of other lenders who are.
- Become the neighborhood expert. Before making an offer to buy a home, inspect as many houses as possible in the neighborhood. Weekend open houses are an excellent time to inspect many homes in a short time period. After you inspect about 20 houses you will know more about an area's homes than do most real estate agents.
This understanding is critical to a successful home purchase. Home buyers should be careful what they tell the salesperson, because that agent legally represents the home seller and is obligated to tell the seller every material fact known about the buyer.
- Before making an offer bid, ask for a competitive market analysis. Just to be certain you are not overpaying for a home. Before making a purchase offer bid, be sure to ask the realty agent for a written competitive market analysis. This form shows recent sales prices of similar nearby comparable homes, as well as asking prices of neighborhood homes currently for sale. By adding and subtracting market value for the pros and cons of the home you want to buy, you can make an offer that is neither too high nor too low.
- Insist on mortgage and inspection contingency clauses. There are two contingency clauses your home purchase offer bid should contain to protect against unexpected but often encountered problems.
The first is the mortgage contingency clause. No matter how certain you are of obtaining a home loan, be sure to include a simple finance contingency. Such a clause might read: "This purchase offer is contingent upon property and buyer qualifying for a first mortgage of at least $80,000 at a fixed interest rate not exceeding 10.5 percent for at least 30 years with a 2 point maximum loan fee and a maximum $731.79 monthly payment." If the specified loan cannot be obtained, then you need not proceed and your good faith deposit must be refunded.
In addition to a termite inspection, if customary in your area, the other important contingency clause to consider involves a physical inspection. Such a clause might read: "This purchase offer contingent upon buyer obtaining at his expense within 10 days a satisfactory professional inspection report on the property; buyer to notify the seller if such report is unsatisfactory and this sale shall then be cancelled with the buyer's earnest money deposit promptly refunded."
Home buying can be an enjoyable experience for buyers who understand the process. By knowing what price home you can afford, inspecting many neighborhood homes before making a purchase offer, understanding who the agent represents, insisting upon a competitive market analysis before making a purchase offer and including finance and inspection contingencies, home buying will be a pleasurable purchase of your best investment.
http://www.ezilon.com/information/article_15457.shtml
Home buying should be a pleasant experience. There's no reason it won't be if you know how to avoid the possible pitfalls. Following just a few simple rules will make the process painless and even enjoyable.
- Shop for home financing first. Many home buyers begin by looking at homes they can't afford, thus w
asting the time of real estate agents and home sellers. A better approach is first to talk to several mortgage lenders to learn the maximum mortgage for which you can qualify. Inquire about both fixed rate and adjustable rate mortgages. Of course, after you have a home tied up on a purchase contract, you can shop further to see if the mortgage terms can be improved.
Mortgage lenders are especially eager to make loans today, because their business volume is down, but their vaults are bulging with mortgage money to loan. Home buyers should be aware mortgage lenders need borrowers as much as borrowers need lenders. Don't be intimidated. If a mortgage company isn't responsive and cooperative, there are dozens of other lenders who are.
- Become the neighborhood expert. Before making an offer to buy a home, inspect as many houses as possible in the neighborhood. Weekend open houses are an excellent time to inspect many homes in a short time period. After you inspect about 20 houses you will know more about an area's homes than do most real estate agents.
This understanding is critical to a successful home purchase. Home buyers should be careful what they tell the salesperson, because that agent legally represents the home seller and is obligated to tell the seller every material fact known about the buyer.
- Before making an offer bid, ask for a competitive market analysis. Just to be certain you are not overpaying for a home. Before making a purchase offer bid, be sure to ask the realty agent for a written competitive market analysis. This form shows recent sales prices of similar nearby comparable homes, as well as asking prices of neighborhood homes currently for sale. By adding and subtracting market value for the pros and cons of the home you want to buy, you can make an offer that is neither too high nor too low.
- Insist on mortgage and inspection contingency clauses. There are two contingency clauses your home purchase offer bid should contain to protect against unexpected but often encountered problems.
The first is the mortgage contingency clause. No matter how certain you are of obtaining a home loan, be sure to include a simple finance contingency. Such a clause might read: "This purchase offer is contingent upon property and buyer qualifying for a first mortgage of at least $80,000 at a fixed interest rate not exceeding 10.5 percent for at least 30 years with a 2 point maximum loan fee and a maximum $731.79 monthly payment." If the specified loan cannot be obtained, then you need not proceed and your good faith deposit must be refunded.
In addition to a termite inspection, if customary in your area, the other important contingency clause to consider involves a physical inspection. Such a clause might read: "This purchase offer contingent upon buyer obtaining at his expense within 10 days a satisfactory professional inspection report on the property; buyer to notify the seller if such report is unsatisfactory and this sale shall then be cancelled with the buyer's earnest money deposit promptly refunded."
Home buying can be an enjoyable experience for buyers who understand the process. By knowing what price home you can afford, inspecting many neighborhood homes before making a purchase offer, understanding who the agent represents, insisting upon a competitive market analysis before making a purchase offer and including finance and inspection contingencies, home buying will be a pleasurable purchase of your best investment.
http://www.ezilon.com/information/article_15457.shtml
Negotiating to buy a home
Understanding the dynamics of negotiation
While every real estate transaction is different, buyers and sellers often fall back on standard negotiating techniques to get to a signed contract both can live with. Understanding the dynamics of negotiation can help you stay focused and emotionally detached during a sometimes anxious process.
After price, there are literally hundreds of terms that can be negotiated in a real estate transaction. Most likely you'll be dealing with just a handful, such as the standard financing and home inspection contingencies, when making your offer.
But most purchase contracts, especially if they are standard documents, are replete with boilerplate language that may not fit your situation and may in fact be unfavorable to you. These are areas you want to negotiate carefully. And the more you know about the language and art of negotiation, the better a deal you can make for yourself, saving yourself hundreds if not thousands of dollars in the process.
The Art of the Deal: Negotiating strategies
* Start low and move up: Works best for properties that are overpriced in slow markets; Some possible outcomes are that the seller rejects outright or counters to get you to increase offer. You move up and agree on a price that comes close to what you ultimately wanted to pay.
* Offer close to asking price: Works best for properties that are priced well in active markets; Some possible outcomes are that the seller may accept outright or counter to get you to increase offer slightly.
* Offer the top price you can afford: Works best in slow markets; Some possible outcomes are that the seller may reject and you may have to walk away.
* Save terms to bargain: Works best in market or situation where seller is highly motivated; Some possible outcomes are that the seller may trade price concessions for quick closing date or your taking charge of repairs after the inspection.
* Give up something to get something: Works in most situations; Seller ends up taking something you really don’t want but you ask for initially to gain a lower price or other concession.
* Move in small increments: Works best for overpriced properties in slow markets; Seller may agree to lower price if given time to adjust to idea.
* Focus on issues you can resolve to keep momentum going: Works best after several rounds of negotiation; Seller and buyer come to terms after resolving easiest issue first.
* Be unpredictable: Works best after several rounds of negotiation; Seller accepts our offer after you suddenly make sizeable change.
* Make an either/or offer: Works best after several rounds of negotiation; Seller accepts one of two scenarios you offer.
* Split the difference: Works best after several rounds of negotiation; Seller and buyer settle on price exactly between asking and offering price.
* Set deadlines for action: Works best in any situation; Seller and buyer will act more quickly and decisively if given a time limit.
Tips for making the trade
If you've done your research on the market, comparable recent sales, the neighborhood and the seller, you have probably put together what you think is your best offer. Beware of being wed too strongly to your initial offer, however good you think it is. Every term in a purchase contract is negotiable, not just the price, and most sellers don't accept initial offers. Remember, you and the seller have different goals: You want the most for the least money and the seller wants to give you the least for the most money. Keep the top price you can afford to pay to yourself and stay flexible. But be prepared to walk away from a deal that would force you to overpay or accede to a highly undesirable term, such as no home inspection.
Get it in writing
It may seem cumbersome, but do all of your negotiating in writing. There are absolutely no guarantees with verbal agreements or commitments, so avoid any such interaction with the seller or the seller's agent while your offer is on the table. The dance of the paperwork begins with your purchase offer. You, your agent or lawyer will probably use a standard purchase contract, which will not contain all of the terms and conditions you want.
Make sure that any additions or amendments that you make to the purchase offer are clearly typed or written into the contract with your initials beside them. The seller should also respond in writing, either with a new purchase contract countering your proposal or a counteroffer penciled in on the back of your offer. Some sellers will return the offer merely with revisions marked up and initialed on the document. All are valid forms of communication during negotiations. If negotiations go back and forth again, and the original document is heavily marked up, take the time to prepare a fresh one incorporating the penciled-in revisions to avoid any misunderstandings. The contract is ratified, or official, when you and the seller sign on the dotted line.
http://www.bestformortgage.com/articles.aspx?id=8
While every real estate transaction is different, buyers and sellers often fall back on standard negotiating techniques to get to a signed contract both can live with. Understanding the dynamics of negotiation can help you stay focused and emotionally detached during a sometimes anxious process.
After price, there are literally hundreds of terms that can be negotiated in a real estate transaction. Most likely you'll be dealing with just a handful, such as the standard financing and home inspection contingencies, when making your offer.
But most purchase contracts, especially if they are standard documents, are replete with boilerplate language that may not fit your situation and may in fact be unfavorable to you. These are areas you want to negotiate carefully. And the more you know about the language and art of negotiation, the better a deal you can make for yourself, saving yourself hundreds if not thousands of dollars in the process.
The Art of the Deal: Negotiating strategies
* Start low and move up: Works best for properties that are overpriced in slow markets; Some possible outcomes are that the seller rejects outright or counters to get you to increase offer. You move up and agree on a price that comes close to what you ultimately wanted to pay.
* Offer close to asking price: Works best for properties that are priced well in active markets; Some possible outcomes are that the seller may accept outright or counter to get you to increase offer slightly.
* Offer the top price you can afford: Works best in slow markets; Some possible outcomes are that the seller may reject and you may have to walk away.
* Save terms to bargain: Works best in market or situation where seller is highly motivated; Some possible outcomes are that the seller may trade price concessions for quick closing date or your taking charge of repairs after the inspection.
* Give up something to get something: Works in most situations; Seller ends up taking something you really don’t want but you ask for initially to gain a lower price or other concession.
* Move in small increments: Works best for overpriced properties in slow markets; Seller may agree to lower price if given time to adjust to idea.
* Focus on issues you can resolve to keep momentum going: Works best after several rounds of negotiation; Seller and buyer come to terms after resolving easiest issue first.
* Be unpredictable: Works best after several rounds of negotiation; Seller accepts our offer after you suddenly make sizeable change.
* Make an either/or offer: Works best after several rounds of negotiation; Seller accepts one of two scenarios you offer.
* Split the difference: Works best after several rounds of negotiation; Seller and buyer settle on price exactly between asking and offering price.
* Set deadlines for action: Works best in any situation; Seller and buyer will act more quickly and decisively if given a time limit.
Tips for making the trade
If you've done your research on the market, comparable recent sales, the neighborhood and the seller, you have probably put together what you think is your best offer. Beware of being wed too strongly to your initial offer, however good you think it is. Every term in a purchase contract is negotiable, not just the price, and most sellers don't accept initial offers. Remember, you and the seller have different goals: You want the most for the least money and the seller wants to give you the least for the most money. Keep the top price you can afford to pay to yourself and stay flexible. But be prepared to walk away from a deal that would force you to overpay or accede to a highly undesirable term, such as no home inspection.
Get it in writing
It may seem cumbersome, but do all of your negotiating in writing. There are absolutely no guarantees with verbal agreements or commitments, so avoid any such interaction with the seller or the seller's agent while your offer is on the table. The dance of the paperwork begins with your purchase offer. You, your agent or lawyer will probably use a standard purchase contract, which will not contain all of the terms and conditions you want.
Make sure that any additions or amendments that you make to the purchase offer are clearly typed or written into the contract with your initials beside them. The seller should also respond in writing, either with a new purchase contract countering your proposal or a counteroffer penciled in on the back of your offer. Some sellers will return the offer merely with revisions marked up and initialed on the document. All are valid forms of communication during negotiations. If negotiations go back and forth again, and the original document is heavily marked up, take the time to prepare a fresh one incorporating the penciled-in revisions to avoid any misunderstandings. The contract is ratified, or official, when you and the seller sign on the dotted line.
http://www.bestformortgage.com/articles.aspx?id=8
Understanding the purchase contract
There may be no such thing as a perfect real estate purchase contract
There may be no such thing as a perfect real estate purchase contract, but getting this legally binding document right will save you money, time and heartache.
There are no stupid questions when it comes to buying real estate. An important time to ask them is when you are drafting the terms and conditions of your offer in the purchase contract, whether you are doing it yourself or with an agent or attorney. Curious about contingencies? Ask. Fuzzy about fixtures? Ask again. You don't have to become an expert in real estate jargon and practice to craft a perfect contract. The more you know about how a contract works, however, the more effectively you can tailor it to your desired specifications. You'll also be a much savvier negotiator when the seller comes back with a counteroffer.
Read the fine preprint
Many residential purchase contracts are crafted with standard real estate boilerplate. Many firms, in fact, use preprinted forms. While preprinted or computer-stored forms have improved the efficiency of the home-buying process, it can be at the expense of the buyer. So it pays to get a copy early on of the contract you're likely to use. Read it and don't hesitate to rewrite or toss out what you don't like. If you'll be working with a pre-print, get a copy when you first start looking for a house and highlight terms or conditions you like or may want to modify when you're ready to make an offer. Circle what you dislike, too; it's a good way to catch buyer-unfriendly fine print. After that, you're ready to sit down and write an offer you hope the seller won't refuse.
What every contract should have
Whether you're writing your own contract or using a preprinted form, every contract should have between 10 and 20 basic elements. These include the address of the property, contingencies, financing terms, purchase price, closing date and others.
Other musts include:
* Time to respond: Specific amount of time for seller to answer your offer. Contingencies also should set time limits.
* Seller’s responsibilities: Include passing clear title to the property, maintaining the property in its present condition until closing, making any agreed-upon repairs and delivering the property clean and free of personal possessions and debris.
* Disposition of deposit: Who gets your good-faith deposit if contract is terminated. Varies with circumstances, such as failure to get loan approval (seller would get deposit) or unsatisfactory home inspection (buyer would get deposit).
* What stays: What fixtures and personal property is included in the sale. Make your list detailed; any verbal agreements are not binding.
* Terms of withdrawal: What conditions allow you or the seller to withdraw from the agreement. You might not think you'll need them, but it's good protection.
* Final walk-through: Your chance to make sure the house is in order shortly before closing. Contract should specify seller's responsibility should walk-through be unsatisfactory.
Problem solving
As much as possible, your purchase contract should help you and the seller resolve any issues that crop up. For example, your interest rate is only good for 60 days and the seller indicates they may not be able to close in that time. One solution would be to include a provision in your contract that sets a firm closing date and allows the sellers to rent back to you at a cost equal to your monthly payment. Despite your best efforts, you may find yourself in court--for example, if you or the seller withdraws from the contract for a reason not in the contract. The seller might be able to sue you and you probably would lose your deposit. You also could sue the seller, either for damages or for specific performance. If you win a suit for specific performance, the court will require the sellers to abide by the purchase contract.
Protect yourself from defects
Defects that surface after closing can be a problem. Most real estate purchase contracts include a seller warranty clause. Although the clauses vary, they usually require the seller to deliver the property to the buyer with a watertight roof and with the operating systems of the house (plumbing, electrical, heating, cooling, built-in appliances) in working condition. The clause also may require the seller to disclose known defects.
Never a remorseful buyer be
Do not enter into a binding contract to buy a property unless you are sure you want to buy it. Even though contingencies are included in a purchase contract to protect you, your deposit could be at risk if you fail to complete the purchase. Few sellers will be willing to include a contingency that permits the buyers to back out risk-free if they are simply suffering from buyer's remorse.
A seller's out button
An escape clause, also called a release or kick-out clause, is a provision in a purchase contract that gives the sellers the opportunity to cancel the contract under certain conditions. Escape clauses are most common in purchase contracts contingent on the sale of the buyer's property.
http://www.bestformortgage.com/articles.aspx?id=9
There may be no such thing as a perfect real estate purchase contract, but getting this legally binding document right will save you money, time and heartache.
There are no stupid questions when it comes to buying real estate. An important time to ask them is when you are drafting the terms and conditions of your offer in the purchase contract, whether you are doing it yourself or with an agent or attorney. Curious about contingencies? Ask. Fuzzy about fixtures? Ask again. You don't have to become an expert in real estate jargon and practice to craft a perfect contract. The more you know about how a contract works, however, the more effectively you can tailor it to your desired specifications. You'll also be a much savvier negotiator when the seller comes back with a counteroffer.
Read the fine preprint
Many residential purchase contracts are crafted with standard real estate boilerplate. Many firms, in fact, use preprinted forms. While preprinted or computer-stored forms have improved the efficiency of the home-buying process, it can be at the expense of the buyer. So it pays to get a copy early on of the contract you're likely to use. Read it and don't hesitate to rewrite or toss out what you don't like. If you'll be working with a pre-print, get a copy when you first start looking for a house and highlight terms or conditions you like or may want to modify when you're ready to make an offer. Circle what you dislike, too; it's a good way to catch buyer-unfriendly fine print. After that, you're ready to sit down and write an offer you hope the seller won't refuse.
What every contract should have
Whether you're writing your own contract or using a preprinted form, every contract should have between 10 and 20 basic elements. These include the address of the property, contingencies, financing terms, purchase price, closing date and others.
Other musts include:
* Time to respond: Specific amount of time for seller to answer your offer. Contingencies also should set time limits.
* Seller’s responsibilities: Include passing clear title to the property, maintaining the property in its present condition until closing, making any agreed-upon repairs and delivering the property clean and free of personal possessions and debris.
* Disposition of deposit: Who gets your good-faith deposit if contract is terminated. Varies with circumstances, such as failure to get loan approval (seller would get deposit) or unsatisfactory home inspection (buyer would get deposit).
* What stays: What fixtures and personal property is included in the sale. Make your list detailed; any verbal agreements are not binding.
* Terms of withdrawal: What conditions allow you or the seller to withdraw from the agreement. You might not think you'll need them, but it's good protection.
* Final walk-through: Your chance to make sure the house is in order shortly before closing. Contract should specify seller's responsibility should walk-through be unsatisfactory.
Problem solving
As much as possible, your purchase contract should help you and the seller resolve any issues that crop up. For example, your interest rate is only good for 60 days and the seller indicates they may not be able to close in that time. One solution would be to include a provision in your contract that sets a firm closing date and allows the sellers to rent back to you at a cost equal to your monthly payment. Despite your best efforts, you may find yourself in court--for example, if you or the seller withdraws from the contract for a reason not in the contract. The seller might be able to sue you and you probably would lose your deposit. You also could sue the seller, either for damages or for specific performance. If you win a suit for specific performance, the court will require the sellers to abide by the purchase contract.
Protect yourself from defects
Defects that surface after closing can be a problem. Most real estate purchase contracts include a seller warranty clause. Although the clauses vary, they usually require the seller to deliver the property to the buyer with a watertight roof and with the operating systems of the house (plumbing, electrical, heating, cooling, built-in appliances) in working condition. The clause also may require the seller to disclose known defects.
Never a remorseful buyer be
Do not enter into a binding contract to buy a property unless you are sure you want to buy it. Even though contingencies are included in a purchase contract to protect you, your deposit could be at risk if you fail to complete the purchase. Few sellers will be willing to include a contingency that permits the buyers to back out risk-free if they are simply suffering from buyer's remorse.
A seller's out button
An escape clause, also called a release or kick-out clause, is a provision in a purchase contract that gives the sellers the opportunity to cancel the contract under certain conditions. Escape clauses are most common in purchase contracts contingent on the sale of the buyer's property.
http://www.bestformortgage.com/articles.aspx?id=9
Choosing A Loan That’s Best For You
What loan is right for you? Figuring out your current needs as well as future goals will help you make that decision
What loan is right for you? Figuring out your current needs as well as future goals will help you make that decision. A few questions to ask yourself before heading into the process: What�s your current financial situation? Do you expect it to change or to remain constant? Do you plan to keep your job? Is your employment stable, or do you imagine you�ll have to look for new work sometime soon?
There are other factors to keep in mind. Are you committed to your geographical area, or do you envision selling your home and moving in the future? How about your family structure? If you plan on adding to your household -- having children, or another family member moving in -- you should have that in mind before seeking out a loan.
Finally, would you prefer a mortgage payment that remains consistent or that may fluctuate with time? The answers to these questions will drive the rest of your loan-seeking process.
The State of Rates
With apologies to Bob Dylan: The rates they are a-changing. Federal Reserve chairman Alan Greenspan cut rates 13 times between January 2001 and May 2003, driving its benchmarks federal funds rate to a nearly half-century low of 1 percent. But with rising economic tides spurring fears of inflation, Greenspan is taking a more aggressive stance by raising rates for the first time since March 2000.
What does this mean for borrowers? The upshot is that they�ll be feeling the pinch, particularly when opting for variable-rate mortgages. Though short-term rates are projected to stay relatively low even with the hikes -- analysts say the Fed funds rate should hit 2.25 by Christmas 2004 -- rising rates are something to remember as you ponder your options.
Fixed-Rate or Adjustable?
Fixed-rate loans are the most common loan program. You can opt for terms of 30 years, 20 years, 15 years, or 10 years. The most common are 30- and 15-year loans. Fixed-rate loans break down into two types: long-term and short-term. Long-term fixed-rate loans have unchanging interest rates. Therefore, when you lock in an interest rate, it�s yours for the life of the loan. Your payments and interest will be consistent, but over time you�ll be paying a higher rate and more interest. Long-term fixed mortgages generally also require higher down payments. Ultimately, you�re paying for predictability.
Short-term fixed mortgages also translate to consistent payments and interest, but you�ll be getting a lower interest rate and less total interest paid. These loans also offer a more rapid payoff timetable. However, they also require a higher monthly payment, and it�s tougher to qualify.
Fixed mortgages may best suit borrowers who want to lock in a low current rate, make lower monthly payments, or are looking to stay in their home long-term. Those interested in Veterans Administration (VA) loans or with little or no down payment should also consider fixed-rate programs.
Adjustable-rate mortgages (ARMs) have rates that closely follow federal funds percentages. These types of loans vary, so it�s best to ask individual lenders what they offer. In general, however, borrowers who plan to stay in their home short-term (five years or less), believe that interest rates will decrease, and are comfortable with a varying mortgage payment should keep their minds on ARMs.
Choices of ARMs include 6-month certificate of deposit (CDs), 1-year treasury spot, 6-month treasury average, and 12-month treasury average. The 6-month CD is considered most volatile, while the 12-month treasury is most stable.
Specific Loan Programs
If you�re looking for a program that doesn�t require a large down payment, a Federal Housing Administration mortgage might be for you. These FDA-insured loans require an annual fee and hefty initial mortgage-insurance premium upon closing. However, these costs can also be incorporated as part of the loan. Loan caps vary depending on the borrower�s county of residence. FDA also offers specific loans for incorporating energy-efficient improvements into the purchase of a new home, as well as reverse mortgages which enable borrowers 62 and older to borrow against the equity in their home either as a loan or a line of credit.
Conventional loans may be another avenue. These loans are backed by government-sponsored entities, the most well-known of which are Fannie Mae and Freddie Mac. Borrowers can top conventional-loan sources to purchase or refinance homes with first or second mortgages. Currently Fannie Mae and Freddie Mac offer loans up to $333,700 for first mortgages on single-family homes. Private investors also offer conventional loans for higher amounts, but these so-called jumbo loans carry higher interest rates since they�re not federally sponsored.
Bad Credit Loans
Borrowers with less-than-perfect credit may not qualify for standard loans. People who fall into this category may consider the subprime market -- but use caution and do their homework as there are predatory lenders waiting to pounce. To counterbalance the higher risks presented by borrowers with bruised credit, the subprime market typically offers loans that require higher down payments and steeper rates.
This relatively new market has emerged within the last 15 years to serve buyers who otherwise wouldn�t be able to finance their home purchases. Experts caution that subprime loans should be used as short-term (two to four years) solutions only. During that time, it�s best to work toward bettering your credit so that you can refinance into a loan with more optimal terms.
Getting the Best Terms
Getting a lock on the best loan program for you also depends on what you bring to the table. The best-qualified buyers have good credit and payment history, a sizable down payment, and/or a low debt-to-income ratio. The ability to pay all or most closing costs will also lower your interest rate.
Remember, you can always refinance if your situation or needs change. Still, doing your homework beforehand will save you the hassles of having to backtrack. Check your financial picture, assess your needs, talk to lenders, collect references, and make sure you�re committing to what you want before signing on the dotted line.
http://www.bestformortgage.com/articles.aspx?id=11
What loan is right for you? Figuring out your current needs as well as future goals will help you make that decision. A few questions to ask yourself before heading into the process: What�s your current financial situation? Do you expect it to change or to remain constant? Do you plan to keep your job? Is your employment stable, or do you imagine you�ll have to look for new work sometime soon?
There are other factors to keep in mind. Are you committed to your geographical area, or do you envision selling your home and moving in the future? How about your family structure? If you plan on adding to your household -- having children, or another family member moving in -- you should have that in mind before seeking out a loan.
Finally, would you prefer a mortgage payment that remains consistent or that may fluctuate with time? The answers to these questions will drive the rest of your loan-seeking process.
The State of Rates
With apologies to Bob Dylan: The rates they are a-changing. Federal Reserve chairman Alan Greenspan cut rates 13 times between January 2001 and May 2003, driving its benchmarks federal funds rate to a nearly half-century low of 1 percent. But with rising economic tides spurring fears of inflation, Greenspan is taking a more aggressive stance by raising rates for the first time since March 2000.
What does this mean for borrowers? The upshot is that they�ll be feeling the pinch, particularly when opting for variable-rate mortgages. Though short-term rates are projected to stay relatively low even with the hikes -- analysts say the Fed funds rate should hit 2.25 by Christmas 2004 -- rising rates are something to remember as you ponder your options.
Fixed-Rate or Adjustable?
Fixed-rate loans are the most common loan program. You can opt for terms of 30 years, 20 years, 15 years, or 10 years. The most common are 30- and 15-year loans. Fixed-rate loans break down into two types: long-term and short-term. Long-term fixed-rate loans have unchanging interest rates. Therefore, when you lock in an interest rate, it�s yours for the life of the loan. Your payments and interest will be consistent, but over time you�ll be paying a higher rate and more interest. Long-term fixed mortgages generally also require higher down payments. Ultimately, you�re paying for predictability.
Short-term fixed mortgages also translate to consistent payments and interest, but you�ll be getting a lower interest rate and less total interest paid. These loans also offer a more rapid payoff timetable. However, they also require a higher monthly payment, and it�s tougher to qualify.
Fixed mortgages may best suit borrowers who want to lock in a low current rate, make lower monthly payments, or are looking to stay in their home long-term. Those interested in Veterans Administration (VA) loans or with little or no down payment should also consider fixed-rate programs.
Adjustable-rate mortgages (ARMs) have rates that closely follow federal funds percentages. These types of loans vary, so it�s best to ask individual lenders what they offer. In general, however, borrowers who plan to stay in their home short-term (five years or less), believe that interest rates will decrease, and are comfortable with a varying mortgage payment should keep their minds on ARMs.
Choices of ARMs include 6-month certificate of deposit (CDs), 1-year treasury spot, 6-month treasury average, and 12-month treasury average. The 6-month CD is considered most volatile, while the 12-month treasury is most stable.
Specific Loan Programs
If you�re looking for a program that doesn�t require a large down payment, a Federal Housing Administration mortgage might be for you. These FDA-insured loans require an annual fee and hefty initial mortgage-insurance premium upon closing. However, these costs can also be incorporated as part of the loan. Loan caps vary depending on the borrower�s county of residence. FDA also offers specific loans for incorporating energy-efficient improvements into the purchase of a new home, as well as reverse mortgages which enable borrowers 62 and older to borrow against the equity in their home either as a loan or a line of credit.
Conventional loans may be another avenue. These loans are backed by government-sponsored entities, the most well-known of which are Fannie Mae and Freddie Mac. Borrowers can top conventional-loan sources to purchase or refinance homes with first or second mortgages. Currently Fannie Mae and Freddie Mac offer loans up to $333,700 for first mortgages on single-family homes. Private investors also offer conventional loans for higher amounts, but these so-called jumbo loans carry higher interest rates since they�re not federally sponsored.
Bad Credit Loans
Borrowers with less-than-perfect credit may not qualify for standard loans. People who fall into this category may consider the subprime market -- but use caution and do their homework as there are predatory lenders waiting to pounce. To counterbalance the higher risks presented by borrowers with bruised credit, the subprime market typically offers loans that require higher down payments and steeper rates.
This relatively new market has emerged within the last 15 years to serve buyers who otherwise wouldn�t be able to finance their home purchases. Experts caution that subprime loans should be used as short-term (two to four years) solutions only. During that time, it�s best to work toward bettering your credit so that you can refinance into a loan with more optimal terms.
Getting the Best Terms
Getting a lock on the best loan program for you also depends on what you bring to the table. The best-qualified buyers have good credit and payment history, a sizable down payment, and/or a low debt-to-income ratio. The ability to pay all or most closing costs will also lower your interest rate.
Remember, you can always refinance if your situation or needs change. Still, doing your homework beforehand will save you the hassles of having to backtrack. Check your financial picture, assess your needs, talk to lenders, collect references, and make sure you�re committing to what you want before signing on the dotted line.
http://www.bestformortgage.com/articles.aspx?id=11
Home Appreciation
Learn how to handle it
Appreciating Appreciation
When property values go up, homeowners cheer and home buyers are forced to dig deeper into savings to buy. But appreciation is an unpredictable thing. Learn how to handle it!
Think of appreciation, an increase in home values, as the paper profits in real estate. Paper profits exist only on paper--in this case your deed--until you actually sell the house. If you buy a house in a rapidly appreciating area, there is no guarantee that property values will be the same or greater when it comes time to sell whether you live there five years or 30. The economy could sour or your neighborhood may lose its luster. Furthermore, if you buy at the height of an upswing, when demand ratchets up prices, you may overpay. Just like in the stock market, the flip side of a boom is a bust, or at least a correction. If you overpay, and prices settle out 10 percent lower down the road, you may not recoup all of your investment. The lesson in all this: Appreciation is a nice thing to have, but not something to bank on when you buy a house.
TIP: If you're buying in the middle of a big price run-up, try to avoid overpaying by making your offer more favorable in ways other than price, such as closing early or reducing the number of contingencies. Also be prepared to give houses a more rigorous look the first time around so that if you must submit an offer quickly, you're comfortable with what you've seen.
What affects appreciation
Almost every aspect of the national economy affects real estate appreciation: employment levels, healthy businesses, housing supply and demand, affordability and, of course, interest rates. A healthy economy and low interest rates drive demand, which pushes up prices and appreciation. Regional economic changes come into play as well, at times whipsawing housing prices up and down.
But demographics play a significant role, too. In the 1980s, housing demand soared as the huge number of people born in the 1940s and '50s hit the market. Prices went up and many areas experienced appreciation that was greater than the rate of inflation, making real estate not only an investment in shelter but a profitable investment as well. As this group has settled into homeownership, lower demand has slowed appreciation to below inflation, making real estate less profitable than, say, mutual funds.
This doesn't mean you shouldn't buy a house, but you should understand how appreciation is playing in your market and in the neighborhood where you want to buy:
* Look at recent sales: Do a comparative market analysis or go through public records at the tax assessor's office. You should be able to get a feel for sales volume, price direction and whether final sales prices are exceeding asking prices (a sure sign of a hot and appreciating market).
* Pay attention to local business news: Monitor reported real estate trends, but also find out about new industries coming to your area or other economic changes that could dramatically affect the supply and demand of housing.
* Know the neighborhood: Find out the recent appreciation history of the area where you want to move. Have prices steadily risen, bounced up and down, or been stable over the years? Is the neighborhood historically been a desirable one, either because of its amenities or its affordability?
* Is there a lot of new development nearby? A sudden glut in the supply of new housing can lower property values in existing areas.
Buying on the upswing
If you are going to buy in a rapidly appreciating area, weigh your decision carefully, Compare the after-tax costs of renting with the after-tax cost of owning over five years: Renting may pencil out as the better bargain for now. Rent costs should include rent, insurance and utilities. On the ownership side, tally up your loan payment, property taxes, insurance, utilities and estimated maintenance costs against deductions for mortgage interest and property taxes. If you decide to buy:
* Buy as much house as you need, not what you can afford: The bigger the house, the greater the proportion you'll possibly overpay. If you have down payment left over, invest it elsewhere.
* Avoid a low-down-payment mortgage: Should property values drop, and you have to sell for some reason, you may not have enough equity in the house to pay off the mortgage and the costs of selling the house, much less walk away with any cash yourself.
Risky business
Many homeowners use appreciation as a way to draw on the equity in their house. If you bought a $125,000 house that's now worth $150,000, you could borrow much more than what you have invested so far when you take out a home equity loan. But beware. If property values plunge, you could end up owning more on the house than it's worth, which could be a real problem if you had to suddenly sell.
The bottom line
Consider appreciation a surprise, not a sure thing, many experts advise. Buy a reasonably priced house in a stable and likeable neighborhood, invest in home improvements that add value (not eccentricity), and you are much more likely to get your money back when you sell. You may even make a profit, especially if you avoid buying when the market is overheated. Just don’t plan to retire on your home's nest egg.
http://www.bestformortgage.com/articles.aspx?id=3
Appreciating Appreciation
When property values go up, homeowners cheer and home buyers are forced to dig deeper into savings to buy. But appreciation is an unpredictable thing. Learn how to handle it!
Think of appreciation, an increase in home values, as the paper profits in real estate. Paper profits exist only on paper--in this case your deed--until you actually sell the house. If you buy a house in a rapidly appreciating area, there is no guarantee that property values will be the same or greater when it comes time to sell whether you live there five years or 30. The economy could sour or your neighborhood may lose its luster. Furthermore, if you buy at the height of an upswing, when demand ratchets up prices, you may overpay. Just like in the stock market, the flip side of a boom is a bust, or at least a correction. If you overpay, and prices settle out 10 percent lower down the road, you may not recoup all of your investment. The lesson in all this: Appreciation is a nice thing to have, but not something to bank on when you buy a house.
TIP: If you're buying in the middle of a big price run-up, try to avoid overpaying by making your offer more favorable in ways other than price, such as closing early or reducing the number of contingencies. Also be prepared to give houses a more rigorous look the first time around so that if you must submit an offer quickly, you're comfortable with what you've seen.
What affects appreciation
Almost every aspect of the national economy affects real estate appreciation: employment levels, healthy businesses, housing supply and demand, affordability and, of course, interest rates. A healthy economy and low interest rates drive demand, which pushes up prices and appreciation. Regional economic changes come into play as well, at times whipsawing housing prices up and down.
But demographics play a significant role, too. In the 1980s, housing demand soared as the huge number of people born in the 1940s and '50s hit the market. Prices went up and many areas experienced appreciation that was greater than the rate of inflation, making real estate not only an investment in shelter but a profitable investment as well. As this group has settled into homeownership, lower demand has slowed appreciation to below inflation, making real estate less profitable than, say, mutual funds.
This doesn't mean you shouldn't buy a house, but you should understand how appreciation is playing in your market and in the neighborhood where you want to buy:
* Look at recent sales: Do a comparative market analysis or go through public records at the tax assessor's office. You should be able to get a feel for sales volume, price direction and whether final sales prices are exceeding asking prices (a sure sign of a hot and appreciating market).
* Pay attention to local business news: Monitor reported real estate trends, but also find out about new industries coming to your area or other economic changes that could dramatically affect the supply and demand of housing.
* Know the neighborhood: Find out the recent appreciation history of the area where you want to move. Have prices steadily risen, bounced up and down, or been stable over the years? Is the neighborhood historically been a desirable one, either because of its amenities or its affordability?
* Is there a lot of new development nearby? A sudden glut in the supply of new housing can lower property values in existing areas.
Buying on the upswing
If you are going to buy in a rapidly appreciating area, weigh your decision carefully, Compare the after-tax costs of renting with the after-tax cost of owning over five years: Renting may pencil out as the better bargain for now. Rent costs should include rent, insurance and utilities. On the ownership side, tally up your loan payment, property taxes, insurance, utilities and estimated maintenance costs against deductions for mortgage interest and property taxes. If you decide to buy:
* Buy as much house as you need, not what you can afford: The bigger the house, the greater the proportion you'll possibly overpay. If you have down payment left over, invest it elsewhere.
* Avoid a low-down-payment mortgage: Should property values drop, and you have to sell for some reason, you may not have enough equity in the house to pay off the mortgage and the costs of selling the house, much less walk away with any cash yourself.
Risky business
Many homeowners use appreciation as a way to draw on the equity in their house. If you bought a $125,000 house that's now worth $150,000, you could borrow much more than what you have invested so far when you take out a home equity loan. But beware. If property values plunge, you could end up owning more on the house than it's worth, which could be a real problem if you had to suddenly sell.
The bottom line
Consider appreciation a surprise, not a sure thing, many experts advise. Buy a reasonably priced house in a stable and likeable neighborhood, invest in home improvements that add value (not eccentricity), and you are much more likely to get your money back when you sell. You may even make a profit, especially if you avoid buying when the market is overheated. Just don’t plan to retire on your home's nest egg.
http://www.bestformortgage.com/articles.aspx?id=3
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