Purchasing a home may be the single most important investment of your life, and possibly the largest purchase you will ever make. When you are dealing with hundreds of thousands of dollars, it may be a good idea to use a Realtor with experience, a fine knowledge of the area, education, and aggressiveness. An aggressive Realtor that knows how to negotiate the price of the home with you effectively may be the single most important factor when getting a good price on a home.
The first thing you want to do when purchasing a home in Arizona is to get pre-qualified for a home loan. This step does not take long, but is extremely necessary. In Arizona, you can not get into a contract with out getting pre-qualified for a loan. When you get pre-qualified for a loan, the lender the pre-qualifies you will produce a document called an LSR. Once you have a loan status report, you are able to write an offer on a home.
When purchasing a home, it is usually a good idea to see what has sold recently in the area. When you find the home that you want to purchase, a good Realtor will give you a comparative market analysis. This report will show you recently sold properties in your neighborhood. This will give you an indication of the market conditions in the area you are planning on buying in. You will be able to see if prices have been falling, rising, or remaining steady. This may or may not be an issue, but I do not believe anyone wants to over pay for a home.
Once your have made on offer on your home with your Realtor and the contract has been accepted by the seller, you move in to the inspection period. Generally, you have ten days to conduct inspections. It is a very good idea to have the home inspected by a professional home inspector. If you do not know one your Realtor should be able to recommend one. A home inspection will cost anywhere between three hundred dollars and five hundred dollars depending on the size of the home. This is money well spent because you will know exactly what is wrong with the home.
The inspectors will inspect the electric system, plumbing, roof, flooring, pool equipment, appliances, doors, showers, and several other items. After the inspections have been completed you then ask the seller to make repairs with a document called the Buyers Inspection Notice and Sellers Response. It is a contract within the contract. The buyer and the seller negotiate the terms of what is going to be fixed and what is not. The Realtors will quarterback the process, but again, it is imperative you have a Realtor that is aggressive so that you get more items fixed during the inspection period.
After the terms of the Buyers Inspection Notice and Sellers Response have been negotiated and agreed upon, it is usually smooth sailing until you go into the title company to sign your final loan documents. After the inspection period, you will want to obtain home owners insurance, and make sure all your utilities will be turned on in your name upon move in. Make sure you work with your lender so that there are no hiccups at the end of the escrow. The lenders job at the end of escrow is to deliver the loan documents to the title company so you can sign the documents. Once the documents have been signed the, title company will deliver the signed documents back to the lender so that they can fund your loan. Once the loan has been funded and recorded, you may now move in to your new home.
Again, it is of paramount importance to use a Realtor that knows what they are doing, that has ample experience, and makes sure you best interests are priority. Please visit the link below to get in contact with a professional, experienced, educated, and aggressive Realtor. You will get the quality representation you deserve.
Nick McConnell
Executive Sales Associate for Coldwell Banker Residential Brokerage in Scottsdale, Arizona. Lived in Arizona all his life, Graduated from Northern Arizona State University and has been a Realtor ever since.
http://ezinearticles.com/?Scottsdale,-Arizona-Real-Estate-Home-Buying-Tips&id=650742
Monday, July 30, 2007
5 Home Buying Essentials
Purchasing a home involves certain important, even essential, steps that every buyer should take before closing on a purchase. Let’s examine these “essentials” which, if properly implemented, can help you save valuable time and aggravation.
1. Determine What You Can Borrow. Sure, if you know your interest rate and the length of the loan you can pretty much determine your monthly payments, right? No! You must include your property taxes, homeowners insurance, and association or maintenance fees, if applicable. These “added” costs can significantly contribute to higher monthly payments. No lender will give you a loan without figuring these costs in.
2. Know Your Fees. Closing costs can add up to the tune of several thousand dollars. Title searches, realtor fees, loan applications, attorney fees, and legal fees must be taken into consideration. Many states require lenders to give to borrowers a ballpark figure of what these costs will be.
3. Shop For A Loan. The longer you plan on staying in your home, the more likely you will want a fixed rate mortgage. If you are planning on a short stay, a variable rate mortgage may work best for you. Consider an interest free mortgage if you basically plan on “flipping” the home in one or two years. Of course, you had better hope that your home appreciates significantly in that time otherwise you may find yourself owing more than what you originally paid for the house!
4. Get Pre Approved. Realtors and sellers will take you seriously if you are pre-approved for a loan. In some cases the pre-approval will not only swing a deal your way, but you could find the sellers are more receptive to lowering their price if they believe you are a serious shopper.
5. Negotiate. You may not be able to get the seller to drop the price of their home, but you may be able to get them to sweeten the deal by including certain extras. Air conditioners, refrigerators, washers, dryers, ceiling fixtures, and window treatments are some of the things that add value to your purchase. If extra items are included in the sale, then your later pay out for these items will disappear.
In all, if you are a thoughtful and savvy shopper you should be able to save money on the purchase of your home by following these five essentials.
Matthew Keegan is The Article Writer who covers topics from business to health to mortgages. You can view samples of his work at http://www.thearticlewriter.com
http://ezinearticles.com/?5-Home-Buying-Essentials&id=58466
1. Determine What You Can Borrow. Sure, if you know your interest rate and the length of the loan you can pretty much determine your monthly payments, right? No! You must include your property taxes, homeowners insurance, and association or maintenance fees, if applicable. These “added” costs can significantly contribute to higher monthly payments. No lender will give you a loan without figuring these costs in.
2. Know Your Fees. Closing costs can add up to the tune of several thousand dollars. Title searches, realtor fees, loan applications, attorney fees, and legal fees must be taken into consideration. Many states require lenders to give to borrowers a ballpark figure of what these costs will be.
3. Shop For A Loan. The longer you plan on staying in your home, the more likely you will want a fixed rate mortgage. If you are planning on a short stay, a variable rate mortgage may work best for you. Consider an interest free mortgage if you basically plan on “flipping” the home in one or two years. Of course, you had better hope that your home appreciates significantly in that time otherwise you may find yourself owing more than what you originally paid for the house!
4. Get Pre Approved. Realtors and sellers will take you seriously if you are pre-approved for a loan. In some cases the pre-approval will not only swing a deal your way, but you could find the sellers are more receptive to lowering their price if they believe you are a serious shopper.
5. Negotiate. You may not be able to get the seller to drop the price of their home, but you may be able to get them to sweeten the deal by including certain extras. Air conditioners, refrigerators, washers, dryers, ceiling fixtures, and window treatments are some of the things that add value to your purchase. If extra items are included in the sale, then your later pay out for these items will disappear.
In all, if you are a thoughtful and savvy shopper you should be able to save money on the purchase of your home by following these five essentials.
Matthew Keegan is The Article Writer who covers topics from business to health to mortgages. You can view samples of his work at http://www.thearticlewriter.com
http://ezinearticles.com/?5-Home-Buying-Essentials&id=58466
Saturday, July 28, 2007
What to Do Before You Start Shopping for a Home
Looking for a home can be stressful and daunting. But there are things you can do to decrease your stress level and make the home buying process easier.
Before you even think about what kind of home you want, you have to decide on what kind of home you need. Doing this will narrow down the number of houses you look at and will save you valuable time. At the same time, you should make a list of things you don't want in a home so that you don't waste time looking at houses that don't fit your needs or your budget.
To set your priorities, ask yourself these questions.
Where do you want to live?
Location is one of the most important elements to choosing the right home. So, not only are you looking for the right home, you're looking for the right neighborhood. Among all your decisions, you should consider things like: how far or near do you want to live to your other family members? If you have your own family, what kind of schools you want your children to go to? How important is it to you to be close to the highway or public transportation, shopping, work, hospitals, entertainment, community amenities?
How long do you expect to live in your new home?
Most people end up moving within seven to nine years of living in a home and move for several reasons: job transfers, starting a family, needing a bigger home, don't like the area, etc. If you plan on living in your new home for only a few years, or if you don't have children, then proximity to schools may not be an issue, but resale value may be. On the other hand, if you have a family and plan on staying in the home for ten years or more, schools, as well as size of the home, will be priorities. How long you expect to stay in your home can have a large impact on which home you choose as well as what type of mortgage you choose.
Consider your lifestyle
Power Buyer - Get more bargaining leverage than a pre-approval!
As you make a list of your wants and needs (as well as what you don't want), it may also be important to consider the type of lifestyle you have. If you like to entertain a lot, then you'll want a spacious home that lends itself to that. If you work from home, or have your own business that you run out of your home, you'll need space for a home office. If you're a gardener, then lot size may be your priority.
Put these items on your list in order of importance. For instance, a large kitchen may be more important to you than a fireplace. Remember, your list should be somewhat flexible in case you can't find a home in your price range with all the amenities you need or want.
How much home can you afford?
Few things are more frustrating than falling in love with a home only to discover it's out of your price range. But, how do you figure out what you can afford? You should consider two major factors when determining how much home you can afford:
1. Your Credit Score
Your credit report determines your credit score, which is needed for qualifying for a home loan. Your credit score can help you qualify for a bigger loan amount and/or better interest rate .
It's important to check your credit report carefully for discrepancies and errors. You can order your credit report from the three major credit bureaus, Experian, TransUnion and Equifax. There are many other ways you can improve your credit score to get the best loan possible including paying your bills on time, paying off debt and keeping credit card balances low.
2. Mortgage Payment
It's possible you may qualify for a loan amount that would require a higher monthly mortgage payment, but you may not want to stretch yourself too far financially. If that's the case, you should calculate how much you'd be comfortable paying for your mortgage payment. Use the Quicken Loans Home Affordability Calculator to give you an idea of your potential monthly mortgage payment, and how much you'll be able to borrow.
Mortgage Basics
Once you've figured out what you want in a home, how long you plan on living there, and what you're comfortable paying each month, you need to shop for a mortgage.
A mortgage is a legal document by which real property (your house) is pledged as security for the repayment of a mortgage loan. You can think of a mortgage loan like an auto loan, but instead of getting a loan to finance the purchase of a car, you're getting a loan to finance the purchase of a home. It's a legal contract stating that you promise to pay back the loan on a monthly basis over a certain amount of time. Your monthly payment typically goes toward the loan principal , interest , taxes and insurance . Although there are hundreds of loan options, you only need to know a few basics to understand how they work:
* Fixed-rate mortgages have a fixed interest rate over the term of the loan. Most people opt for 30-year terms, but 15- and 20-year terms are available. The biggest advantage of a fixed-rate mortgage is that your interest rate and monthly payment do not change over the term of the loan. However, if interest rates happen to fall below your current fixed rate, you may be "locked in" to a higher rate and should consider refinancing .
* Adjustable-rate mortgages (ARMs) usually start with a lower interest rate than a fixed-rate mortgage for an introductory period—typically one, three, five or seven years. After that initial introductory period, the rate adjusts—usually annually—based on a pre-determined index . As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. An interest rate cap limits the amount by which the interest rate can change. An ARM is a good choice if you're expecting to live in your home for seven years or less and it may also allow you to borrow a larger loan amount.
* The down payment is the amount you plan to pay up front, in cash, when you buy a home. It is typically the difference between how much you borrow and the purchase price of your home. To avoid paying private mortgage insurance (PMI), a 20 percent down payment is usually required. However, lenders like Quicken Loans offer many low and no down payment loans.
https://www.quickenloans.com/mortgage/articles/home_loans_before.html?cm_ref=/mortgage/articles/smooth_home_purchase.html
Before you even think about what kind of home you want, you have to decide on what kind of home you need. Doing this will narrow down the number of houses you look at and will save you valuable time. At the same time, you should make a list of things you don't want in a home so that you don't waste time looking at houses that don't fit your needs or your budget.
To set your priorities, ask yourself these questions.
Where do you want to live?
Location is one of the most important elements to choosing the right home. So, not only are you looking for the right home, you're looking for the right neighborhood. Among all your decisions, you should consider things like: how far or near do you want to live to your other family members? If you have your own family, what kind of schools you want your children to go to? How important is it to you to be close to the highway or public transportation, shopping, work, hospitals, entertainment, community amenities?
How long do you expect to live in your new home?
Most people end up moving within seven to nine years of living in a home and move for several reasons: job transfers, starting a family, needing a bigger home, don't like the area, etc. If you plan on living in your new home for only a few years, or if you don't have children, then proximity to schools may not be an issue, but resale value may be. On the other hand, if you have a family and plan on staying in the home for ten years or more, schools, as well as size of the home, will be priorities. How long you expect to stay in your home can have a large impact on which home you choose as well as what type of mortgage you choose.
Consider your lifestyle
Power Buyer - Get more bargaining leverage than a pre-approval!
As you make a list of your wants and needs (as well as what you don't want), it may also be important to consider the type of lifestyle you have. If you like to entertain a lot, then you'll want a spacious home that lends itself to that. If you work from home, or have your own business that you run out of your home, you'll need space for a home office. If you're a gardener, then lot size may be your priority.
Put these items on your list in order of importance. For instance, a large kitchen may be more important to you than a fireplace. Remember, your list should be somewhat flexible in case you can't find a home in your price range with all the amenities you need or want.
How much home can you afford?
Few things are more frustrating than falling in love with a home only to discover it's out of your price range. But, how do you figure out what you can afford? You should consider two major factors when determining how much home you can afford:
1. Your Credit Score
Your credit report determines your credit score, which is needed for qualifying for a home loan. Your credit score can help you qualify for a bigger loan amount and/or better interest rate .
It's important to check your credit report carefully for discrepancies and errors. You can order your credit report from the three major credit bureaus, Experian, TransUnion and Equifax. There are many other ways you can improve your credit score to get the best loan possible including paying your bills on time, paying off debt and keeping credit card balances low.
2. Mortgage Payment
It's possible you may qualify for a loan amount that would require a higher monthly mortgage payment, but you may not want to stretch yourself too far financially. If that's the case, you should calculate how much you'd be comfortable paying for your mortgage payment. Use the Quicken Loans Home Affordability Calculator to give you an idea of your potential monthly mortgage payment, and how much you'll be able to borrow.
Mortgage Basics
Once you've figured out what you want in a home, how long you plan on living there, and what you're comfortable paying each month, you need to shop for a mortgage.
A mortgage is a legal document by which real property (your house) is pledged as security for the repayment of a mortgage loan. You can think of a mortgage loan like an auto loan, but instead of getting a loan to finance the purchase of a car, you're getting a loan to finance the purchase of a home. It's a legal contract stating that you promise to pay back the loan on a monthly basis over a certain amount of time. Your monthly payment typically goes toward the loan principal , interest , taxes and insurance . Although there are hundreds of loan options, you only need to know a few basics to understand how they work:
* Fixed-rate mortgages have a fixed interest rate over the term of the loan. Most people opt for 30-year terms, but 15- and 20-year terms are available. The biggest advantage of a fixed-rate mortgage is that your interest rate and monthly payment do not change over the term of the loan. However, if interest rates happen to fall below your current fixed rate, you may be "locked in" to a higher rate and should consider refinancing .
* Adjustable-rate mortgages (ARMs) usually start with a lower interest rate than a fixed-rate mortgage for an introductory period—typically one, three, five or seven years. After that initial introductory period, the rate adjusts—usually annually—based on a pre-determined index . As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. An interest rate cap limits the amount by which the interest rate can change. An ARM is a good choice if you're expecting to live in your home for seven years or less and it may also allow you to borrow a larger loan amount.
* The down payment is the amount you plan to pay up front, in cash, when you buy a home. It is typically the difference between how much you borrow and the purchase price of your home. To avoid paying private mortgage insurance (PMI), a 20 percent down payment is usually required. However, lenders like Quicken Loans offer many low and no down payment loans.
https://www.quickenloans.com/mortgage/articles/home_loans_before.html?cm_ref=/mortgage/articles/smooth_home_purchase.html
Tuesday, July 24, 2007
Buying a Home With Resale Value
There are many things that should be considered when buying a home. Since most homebuyers expect to buy a bigger and better home someday in the future, resale value is an important factor in decision-making. You use the proceeds from selling one home to buy the next one.
While no one can guarantee that your home will grow in value, there are steps you can take that maximize your potential gain.
"Location, Location, Location"
"Location, location, location," is a common and almost hackneyed phrase in real estate literature. Your agent may even throw it at you when you ask for advice about buying a home. However, what does "location, location, location," actually mean? Why repeat it three times?
Mostly, "location" is repeated to emphasize that it is extremely important to the resale value of your home. The idea is to buy a house that will appeal to the largest number of potential future homebuyers. A careful choice of location can minimize potential negative influences on future resale value, and maximize positive influences.
Focusing on resale value requires you to make several different "location" choices. The first choice you have to make is "which community?" At the very least, you should narrow your choice down to just a few local communities.
http://www.realestateabc.com/homebuying/resale.htm
While no one can guarantee that your home will grow in value, there are steps you can take that maximize your potential gain.
"Location, Location, Location"
"Location, location, location," is a common and almost hackneyed phrase in real estate literature. Your agent may even throw it at you when you ask for advice about buying a home. However, what does "location, location, location," actually mean? Why repeat it three times?
Mostly, "location" is repeated to emphasize that it is extremely important to the resale value of your home. The idea is to buy a house that will appeal to the largest number of potential future homebuyers. A careful choice of location can minimize potential negative influences on future resale value, and maximize positive influences.
Focusing on resale value requires you to make several different "location" choices. The first choice you have to make is "which community?" At the very least, you should narrow your choice down to just a few local communities.
http://www.realestateabc.com/homebuying/resale.htm
Monday, July 23, 2007
Scottsdale, Arizona Real Estate Home Buying Tips
Purchasing a home may be the single most important investment of your life, and possibly the largest purchase you will ever make. When you are dealing with hundreds of thousands of dollars, it may be a good idea to use a Realtor with experience, a fine knowledge of the area, education, and aggressiveness. An aggressive Realtor that knows how to negotiate the price of the home with you effectively may be the single most important factor when getting a good price on a home.
The first thing you want to do when purchasing a home in Arizona is to get pre-qualified for a home loan. This step does not take long, but is extremely necessary. In Arizona, you can not get into a contract with out getting pre-qualified for a loan. When you get pre-qualified for a loan, the lender the pre-qualifies you will produce a document called an LSR. Once you have a loan status report, you are able to write an offer on a home.
When purchasing a home, it is usually a good idea to see what has sold recently in the area. When you find the home that you want to purchase, a good Realtor will give you a comparative market analysis. This report will show you recently sold properties in your neighborhood. This will give you an indication of the market conditions in the area you are planning on buying in. You will be able to see if prices have been falling, rising, or remaining steady. This may or may not be an issue, but I do not believe anyone wants to over pay for a home.
Once your have made on offer on your home with your Realtor and the contract has been accepted by the seller, you move in to the inspection period. Generally, you have ten days to conduct inspections. It is a very good idea to have the home inspected by a professional home inspector. If you do not know one your Realtor should be able to recommend one. A home inspection will cost anywhere between three hundred dollars and five hundred dollars depending on the size of the home. This is money well spent because you will know exactly what is wrong with the home.
The inspectors will inspect the electric system, plumbing, roof, flooring, pool equipment, appliances, doors, showers, and several other items. After the inspections have been completed you then ask the seller to make repairs with a document called the Buyers Inspection Notice and Sellers Response. It is a contract within the contract. The buyer and the seller negotiate the terms of what is going to be fixed and what is not. The Realtors will quarterback the process, but again, it is imperative you have a Realtor that is aggressive so that you get more items fixed during the inspection period.
After the terms of the Buyers Inspection Notice and Sellers Response have been negotiated and agreed upon, it is usually smooth sailing until you go into the title company to sign your final loan documents. After the inspection period, you will want to obtain home owners insurance, and make sure all your utilities will be turned on in your name upon move in. Make sure you work with your lender so that there are no hiccups at the end of the escrow. The lenders job at the end of escrow is to deliver the loan documents to the title company so you can sign the documents. Once the documents have been signed the, title company will deliver the signed documents back to the lender so that they can fund your loan. Once the loan has been funded and recorded, you may now move in to your new home.
Again, it is of paramount importance to use a Realtor that knows what they are doing, that has ample experience, and makes sure you best interests are priority. Please visit the link below to get in contact with a professional, experienced, educated, and aggressive Realtor. You will get the quality representation you deserve.
Nick McConnell
Executive Sales Associate for Coldwell Banker Residential Brokerage in Scottsdale, Arizona. Lived in Arizona all his life, Graduated from Northern Arizona State University and has been a Realtor ever since.
http://ezinearticles.com/?Scottsdale,-Arizona-Real-Estate-Home-Buying-Tips&id=650742
The first thing you want to do when purchasing a home in Arizona is to get pre-qualified for a home loan. This step does not take long, but is extremely necessary. In Arizona, you can not get into a contract with out getting pre-qualified for a loan. When you get pre-qualified for a loan, the lender the pre-qualifies you will produce a document called an LSR. Once you have a loan status report, you are able to write an offer on a home.
When purchasing a home, it is usually a good idea to see what has sold recently in the area. When you find the home that you want to purchase, a good Realtor will give you a comparative market analysis. This report will show you recently sold properties in your neighborhood. This will give you an indication of the market conditions in the area you are planning on buying in. You will be able to see if prices have been falling, rising, or remaining steady. This may or may not be an issue, but I do not believe anyone wants to over pay for a home.
Once your have made on offer on your home with your Realtor and the contract has been accepted by the seller, you move in to the inspection period. Generally, you have ten days to conduct inspections. It is a very good idea to have the home inspected by a professional home inspector. If you do not know one your Realtor should be able to recommend one. A home inspection will cost anywhere between three hundred dollars and five hundred dollars depending on the size of the home. This is money well spent because you will know exactly what is wrong with the home.
The inspectors will inspect the electric system, plumbing, roof, flooring, pool equipment, appliances, doors, showers, and several other items. After the inspections have been completed you then ask the seller to make repairs with a document called the Buyers Inspection Notice and Sellers Response. It is a contract within the contract. The buyer and the seller negotiate the terms of what is going to be fixed and what is not. The Realtors will quarterback the process, but again, it is imperative you have a Realtor that is aggressive so that you get more items fixed during the inspection period.
After the terms of the Buyers Inspection Notice and Sellers Response have been negotiated and agreed upon, it is usually smooth sailing until you go into the title company to sign your final loan documents. After the inspection period, you will want to obtain home owners insurance, and make sure all your utilities will be turned on in your name upon move in. Make sure you work with your lender so that there are no hiccups at the end of the escrow. The lenders job at the end of escrow is to deliver the loan documents to the title company so you can sign the documents. Once the documents have been signed the, title company will deliver the signed documents back to the lender so that they can fund your loan. Once the loan has been funded and recorded, you may now move in to your new home.
Again, it is of paramount importance to use a Realtor that knows what they are doing, that has ample experience, and makes sure you best interests are priority. Please visit the link below to get in contact with a professional, experienced, educated, and aggressive Realtor. You will get the quality representation you deserve.
Nick McConnell
Executive Sales Associate for Coldwell Banker Residential Brokerage in Scottsdale, Arizona. Lived in Arizona all his life, Graduated from Northern Arizona State University and has been a Realtor ever since.
http://ezinearticles.com/?Scottsdale,-Arizona-Real-Estate-Home-Buying-Tips&id=650742
Thursday, July 19, 2007
Credit is Key to Home Buying
Early on in the home buying process, you should review your credit situation. That way, if you need to improve your credit score, you can start right away.
Improving a credit score takes time, so you want to find out where you stand by (A) obtaining your credit report and score, (B) comparing yourself to the national average, and (C) working to improve your credit score if necessary.
Here are some resources to get you started:
10 Ways to Boost Your Credit Score
This excellent article is written by a mortgage expert, and it provides specific advice on how to improve your credit score in advance of buying a home.
Improving a Credit Score
Here we have gathered advice from BankRate.com, CNN Money, and a wealth of other expert sources.
All About Your Credit Report
Your credit report is different from your credit score. Banks use your credit report to create your credit score, which determines how likely they are to loan you money. This article explains the credit report in more detail, also providing instructions on how to request and review your credit report.
Remember, the better your credit score, the better your chances of qualifying for a mortgage at a good interest rate. So be proactive in maintaining good credit. Start early and focus on the long-term.
Happy home buying!
http://homebuyingtips.statesmanblogs.com/
Improving a credit score takes time, so you want to find out where you stand by (A) obtaining your credit report and score, (B) comparing yourself to the national average, and (C) working to improve your credit score if necessary.
Here are some resources to get you started:
10 Ways to Boost Your Credit Score
This excellent article is written by a mortgage expert, and it provides specific advice on how to improve your credit score in advance of buying a home.
Improving a Credit Score
Here we have gathered advice from BankRate.com, CNN Money, and a wealth of other expert sources.
All About Your Credit Report
Your credit report is different from your credit score. Banks use your credit report to create your credit score, which determines how likely they are to loan you money. This article explains the credit report in more detail, also providing instructions on how to request and review your credit report.
Remember, the better your credit score, the better your chances of qualifying for a mortgage at a good interest rate. So be proactive in maintaining good credit. Start early and focus on the long-term.
Happy home buying!
http://homebuyingtips.statesmanblogs.com/
Subprime Mortgage Loans - A Borrower's Guide
Subprime mortgage lending and loans have certainly been in the news a lot lately. They usually tag along with a news story about the current spike in home foreclosures. In fact, I saw a story about it just a few days ago on KVUE.
There are many reasons that people default on mortgage loans and go into foreclosure. So it's not really possible to blame any one factor. But one thing is perfectly clear -- there is a connection between subprime mortgage lending and the number of foreclosures in the Austin area (and beyond).
Adjustable rate mortgages (ARMs) are aother piece of the puzzle. I call it the subprime-ARM-foreclosure triangle, and it's partially responsible for the current spike in home foreclosures.
So what are subprime mortgage loans, and how do they relate to foreclosures? And if you find yourself in a subprime lending situation, how can you protect yourself from becoming another foreclosure statistic?
http://homebuyingtips.statesmanblogs.com/
There are many reasons that people default on mortgage loans and go into foreclosure. So it's not really possible to blame any one factor. But one thing is perfectly clear -- there is a connection between subprime mortgage lending and the number of foreclosures in the Austin area (and beyond).
Adjustable rate mortgages (ARMs) are aother piece of the puzzle. I call it the subprime-ARM-foreclosure triangle, and it's partially responsible for the current spike in home foreclosures.
So what are subprime mortgage loans, and how do they relate to foreclosures? And if you find yourself in a subprime lending situation, how can you protect yourself from becoming another foreclosure statistic?
http://homebuyingtips.statesmanblogs.com/
Home Foreclosures Still Rising
In a previous post, we talked about buying a foreclosed home in Austin. But as foreclosures continue to rise (according to the latest news from Bloomberg), I feel I should shift gears and talk about some of the leading causes of foreclosure ... in the hopes it will help prevent a few folks from becoming yet another statistic.
Definition of Foreclosure
Most of you probably know this, but we will start with the basics anyway. Basically, foreclosure is what happens when you can't pay your home mortgage loan and the bank takes over the property. It is a legal process in which the mortgage property is sold to pay the loan of the defaulting (non-paying) borrower.
Common Causes of Foreclosure
Obviously, the root cause of foreclosure is always the same. For one reason or another, the homeowner(s) is no longer able to pay the mortgage. But there are other common factors that lead to this, which we will discuss.
But how can somebody qualify for a mortgage and then be unable to make payments?
This is a common question, for which there are two common answers: either (A) the person's income or debt situation changed after obtaining the mortgage loan, or (B) the lender qualified the person for a subprime mortgage loan with risky conditions associated with it.
Sure, there are more causes than these two. But both the federal government and the mortgage industry have conceded that subprime lending is a big factor in the current spike of foreclosures.
To learn more about this, read my tutorial on the subprime adjustable-rate mortgage.
The best thing you can do to avoid a possible foreclosure situation is to buy within your financial means. Use a free mortgage calculator to break the sale price down into monthly payments, then compare those payments to your budget, your current expenses, etc. Don't overstretch yourself, and don't make the common mistake of thinking, "Well, I plan to make more money soon, so I can get by."
If you can't afford a certain level of mortgage today, you shouldn't plan on being able to in the future. There's too much uncertainty and risk in that line of thinking.
http://homebuyingtips.statesmanblogs.com/
Definition of Foreclosure
Most of you probably know this, but we will start with the basics anyway. Basically, foreclosure is what happens when you can't pay your home mortgage loan and the bank takes over the property. It is a legal process in which the mortgage property is sold to pay the loan of the defaulting (non-paying) borrower.
Common Causes of Foreclosure
Obviously, the root cause of foreclosure is always the same. For one reason or another, the homeowner(s) is no longer able to pay the mortgage. But there are other common factors that lead to this, which we will discuss.
But how can somebody qualify for a mortgage and then be unable to make payments?
This is a common question, for which there are two common answers: either (A) the person's income or debt situation changed after obtaining the mortgage loan, or (B) the lender qualified the person for a subprime mortgage loan with risky conditions associated with it.
Sure, there are more causes than these two. But both the federal government and the mortgage industry have conceded that subprime lending is a big factor in the current spike of foreclosures.
To learn more about this, read my tutorial on the subprime adjustable-rate mortgage.
The best thing you can do to avoid a possible foreclosure situation is to buy within your financial means. Use a free mortgage calculator to break the sale price down into monthly payments, then compare those payments to your budget, your current expenses, etc. Don't overstretch yourself, and don't make the common mistake of thinking, "Well, I plan to make more money soon, so I can get by."
If you can't afford a certain level of mortgage today, you shouldn't plan on being able to in the future. There's too much uncertainty and risk in that line of thinking.
http://homebuyingtips.statesmanblogs.com/
Wednesday, July 18, 2007
Capital Gains Tax: Is 'A' House, One House?
The villain causing the confusion is the article ‘a’ used before ‘residential house’. The word seems to imply that the exemption would be available only against purchase of one residential house and not two, or more. In other words, when an assessee invests the capital gains u/s 54 or the net sale proceeds u/s 54F in purchasing or constructing two residential houses, only one of these, as opted for by the assessee, will be allowed for the tax concession.
Now, under this background, one can’t help but wonder whether it was plain English usage that led to the use of the article “a” or did the lawmakers really intend the exemption only for one house. For example consider the following sentences ---
“The constitution bestows upon a citizen the following rights.” --- Does this mean only one citizen or all citizens?
“A man should stand by his rights and duties.” --- Does this pertain only for one man or more than one man?
“A person who comes to the rescue of another person in difficulty is a good Samaritan.” --- Does this include all those persons who help the one or more in difficulties or only one of them?
My feeling is that “a” is used as an article to precede a noun. The other two articles “an” or “the” could not be used for grammatical reasons; therefore “a” had to be used.
Adopting the meaning of the article “a” as “only one” is against the very spirit, purpose and intent of the legislation which desires to give a boost to the housing sector. No wonder, this ambiguity has given rise to conflicting case laws.
In the case of Fulwanti C Rathod v ITO, ITAT Mumbai Bench ‘E’ (ITA 1092/Mum./1995), dt 3.5.02, the learned judge observed, “The word ‘a’ can be equivalent to the word ‘any’. Also as per the General Clauses Act, singular includes plural.” The judge referred to the principle of interpretation that when there was a doubt as to its meaning, it had to be understood in the same sense it harmonised with the objective of the enactment. Referring to the Wealth-tax Act and the Estate Duty Act, the words used therein were, ‘one house’ as against the words ‘a house’ used in the Income-tax Act.
On the other hand, in the case of Mrs. Gulshanbanoo R. Mukhi v Joint CIT Appeal #3369 (BOM) of 2000 [AY 96-97] dt 16.1.02 ITD 649 (Mum) ITAT Mumbai Bench ‘C’, it was held that ‘a’ can be ‘any’ but ‘any’ cannot be ‘many’.
Allahabad High Court in the case of Shiv Narain Chaudhari v CWT (108ITR104) held that if the two flats of the building are situated in same compound and within common boundaries and have unity of structure, then they could be regarded as constituting one house.
In spite of such contradictory decisions arising out of ambiguity, CBDT has not issued any clarification in spite of requests from many quarters, including yours sincerely. We have been given to understand that some of the ITOs have been sticking to the literal meaning of ‘a’ as ‘one’, if they do not like your face; not otherwise.
A difficulty
If the stand that ‘a’ is not two is accepted, then it can be claimed that ‘a’ is also not half. Consequently, if an assessee reinvests an amount in a residential property, jointly held with another individual, say his wife, the related exemptions either u/s 54 or u/s 54F would not be available. Yes, this appears to be preposterous, but we have very strong reasons, backed up by a case law, ITO vs Rasiklal N. Satra (280ITR243 dt 19.9.05).
Here the assessee declared capital gains of Rs. 6,68,698 on sale of shares and claimed exemption u/s 54F by investing the same in purchase of residential flats at Vashi, Navi Mumbai. The Assessing Officer noticed that the assessee was co-owner of a flat in Sion (West), Mumbai. Accordingly, the assessee was asked to explain as to why exemption u/s 54F be not denied. In reply, the assessee contended that he was not an independent owner of the house and exemption can be denied only where the assessee is the absolute owner of the house. He also filed details of purchase of the house which showed that he along with his wife had purchased the house on April 13, 1994, for a total consideration of Rs. 3,05,000 out of which the assessee had invested Rs. 1,60,000 and the balance amount was invested by his wife. However, the Assessing Officer did not accept the contention of the assessee since in his view, the assessee could be said to be the owner of house at Sion (Mumbai) on the date of sale of the original asset.
The learned judge observed, “We proceed on the basis of the language employed by the Legislature. The word ‘residence’, as per Strand's Judicial Dictionary, means a place where an individual or his family eat, drink and sleep. So a residential house would mean a building or part of the building where one can eat, drink and sleep. Here, we may clarify that house is not being equated with a building since a building may comprise of many houses. So house means an independent unit where one can eat, drink and sleep. In view of this definition, we hold that the flat at Sion, Mumbai, was a residential house since the assessee along with his family was living in that house.
“The only question remains as to whether the assessee can be said to be the owner of that residential house. The Legislature has used the word ‘a’ before the words ‘residential house’. In our opinion, it must mean a complete residential house and would not include a shared interest in a residential house. Where the property is owned by more than one person, it cannot be said that any one of them is the owner of the property. In such case, no individual person on his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of a residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the honourable Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166ITR783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act. Because of this judgment, the Legislature had to amend the provisions of Sec. 32 w.e.f. 1.4.97, by using the expression ‘owned wholly or partly’. So, the word ‘own’ would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After this judgment the Legislature could also amend the provisions of section 54F so as to include part ownership. Since the Legislature has not amended the provisions of Sec. 54F, it has to be held that the word ‘own’ in Sec. 54F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by the assessee and his wife. It is nobody's case that the wife is a benami of the assessee. Therefore, the said house was jointly owned by the assessee and his spouse. In view of the discussions made above, it has to be held that the assessee was not the owner of a residential house on the date of transfer of the original asset. Consequently, the exemption under section 54F could not be denied to the assessee.”
Finally
All said and done, all this is theory. In practice, the Department normally grants the exemption on tax on long-term capital gains u/s 54 or 54F only against one house where the assessee has purchased or constructed two or more houses in his own name. However, the exemption is granted even if such a house is held jointly.
Yes, this is the normal practice. But the ITOs are reported to take advantage of the ambiguity depending upon their whims and fancies.
To Conclude
If ‘a’ is one and not two or more, ‘a’ cannot be anything less than one. Clarification from CBDT is imminently required not only to enable the assessees take correct actions and a litigations, but also to ward off rent seeking, if any, by the ITOs.
http://news.moneycontrol.com/india/news/propertyexpert/capitalgainshouseproperty/capitalgainstaxisahouseonehouse/14/38/article/210927
Now, under this background, one can’t help but wonder whether it was plain English usage that led to the use of the article “a” or did the lawmakers really intend the exemption only for one house. For example consider the following sentences ---
“The constitution bestows upon a citizen the following rights.” --- Does this mean only one citizen or all citizens?
“A man should stand by his rights and duties.” --- Does this pertain only for one man or more than one man?
“A person who comes to the rescue of another person in difficulty is a good Samaritan.” --- Does this include all those persons who help the one or more in difficulties or only one of them?
My feeling is that “a” is used as an article to precede a noun. The other two articles “an” or “the” could not be used for grammatical reasons; therefore “a” had to be used.
Adopting the meaning of the article “a” as “only one” is against the very spirit, purpose and intent of the legislation which desires to give a boost to the housing sector. No wonder, this ambiguity has given rise to conflicting case laws.
In the case of Fulwanti C Rathod v ITO, ITAT Mumbai Bench ‘E’ (ITA 1092/Mum./1995), dt 3.5.02, the learned judge observed, “The word ‘a’ can be equivalent to the word ‘any’. Also as per the General Clauses Act, singular includes plural.” The judge referred to the principle of interpretation that when there was a doubt as to its meaning, it had to be understood in the same sense it harmonised with the objective of the enactment. Referring to the Wealth-tax Act and the Estate Duty Act, the words used therein were, ‘one house’ as against the words ‘a house’ used in the Income-tax Act.
On the other hand, in the case of Mrs. Gulshanbanoo R. Mukhi v Joint CIT Appeal #3369 (BOM) of 2000 [AY 96-97] dt 16.1.02 ITD 649 (Mum) ITAT Mumbai Bench ‘C’, it was held that ‘a’ can be ‘any’ but ‘any’ cannot be ‘many’.
Allahabad High Court in the case of Shiv Narain Chaudhari v CWT (108ITR104) held that if the two flats of the building are situated in same compound and within common boundaries and have unity of structure, then they could be regarded as constituting one house.
In spite of such contradictory decisions arising out of ambiguity, CBDT has not issued any clarification in spite of requests from many quarters, including yours sincerely. We have been given to understand that some of the ITOs have been sticking to the literal meaning of ‘a’ as ‘one’, if they do not like your face; not otherwise.
A difficulty
If the stand that ‘a’ is not two is accepted, then it can be claimed that ‘a’ is also not half. Consequently, if an assessee reinvests an amount in a residential property, jointly held with another individual, say his wife, the related exemptions either u/s 54 or u/s 54F would not be available. Yes, this appears to be preposterous, but we have very strong reasons, backed up by a case law, ITO vs Rasiklal N. Satra (280ITR243 dt 19.9.05).
Here the assessee declared capital gains of Rs. 6,68,698 on sale of shares and claimed exemption u/s 54F by investing the same in purchase of residential flats at Vashi, Navi Mumbai. The Assessing Officer noticed that the assessee was co-owner of a flat in Sion (West), Mumbai. Accordingly, the assessee was asked to explain as to why exemption u/s 54F be not denied. In reply, the assessee contended that he was not an independent owner of the house and exemption can be denied only where the assessee is the absolute owner of the house. He also filed details of purchase of the house which showed that he along with his wife had purchased the house on April 13, 1994, for a total consideration of Rs. 3,05,000 out of which the assessee had invested Rs. 1,60,000 and the balance amount was invested by his wife. However, the Assessing Officer did not accept the contention of the assessee since in his view, the assessee could be said to be the owner of house at Sion (Mumbai) on the date of sale of the original asset.
The learned judge observed, “We proceed on the basis of the language employed by the Legislature. The word ‘residence’, as per Strand's Judicial Dictionary, means a place where an individual or his family eat, drink and sleep. So a residential house would mean a building or part of the building where one can eat, drink and sleep. Here, we may clarify that house is not being equated with a building since a building may comprise of many houses. So house means an independent unit where one can eat, drink and sleep. In view of this definition, we hold that the flat at Sion, Mumbai, was a residential house since the assessee along with his family was living in that house.
“The only question remains as to whether the assessee can be said to be the owner of that residential house. The Legislature has used the word ‘a’ before the words ‘residential house’. In our opinion, it must mean a complete residential house and would not include a shared interest in a residential house. Where the property is owned by more than one person, it cannot be said that any one of them is the owner of the property. In such case, no individual person on his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of a residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the honourable Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166ITR783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act. Because of this judgment, the Legislature had to amend the provisions of Sec. 32 w.e.f. 1.4.97, by using the expression ‘owned wholly or partly’. So, the word ‘own’ would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After this judgment the Legislature could also amend the provisions of section 54F so as to include part ownership. Since the Legislature has not amended the provisions of Sec. 54F, it has to be held that the word ‘own’ in Sec. 54F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by the assessee and his wife. It is nobody's case that the wife is a benami of the assessee. Therefore, the said house was jointly owned by the assessee and his spouse. In view of the discussions made above, it has to be held that the assessee was not the owner of a residential house on the date of transfer of the original asset. Consequently, the exemption under section 54F could not be denied to the assessee.”
Finally
All said and done, all this is theory. In practice, the Department normally grants the exemption on tax on long-term capital gains u/s 54 or 54F only against one house where the assessee has purchased or constructed two or more houses in his own name. However, the exemption is granted even if such a house is held jointly.
Yes, this is the normal practice. But the ITOs are reported to take advantage of the ambiguity depending upon their whims and fancies.
To Conclude
If ‘a’ is one and not two or more, ‘a’ cannot be anything less than one. Clarification from CBDT is imminently required not only to enable the assessees take correct actions and a litigations, but also to ward off rent seeking, if any, by the ITOs.
http://news.moneycontrol.com/india/news/propertyexpert/capitalgainshouseproperty/capitalgainstaxisahouseonehouse/14/38/article/210927
New trend: Warranty on property
A warranty is a contractual promise. An individual making a promise is regarded as undertaking contractual liability, therefore, where a warranty exists, the maker undertakes strict liability for what he asserts. In simple words, it is an agreement between a buyer and a seller, detailing the conditions under which the seller will make repairs or fix problems without cost to the buyer.
Also, a warranty is an assurance by the seller of the property to the buyer that a property is as represented or will be as promised and the seller insures the buyer that the insurance risk or all the terms and conditions specified in the contract would be fulfilled as stated to keep the contract effective.
Indian developers are not providing any warranty on properties. The contract or the development agreement details the agreed price, payment and construction schedule, apartment plans, delivery date and the developer’s liability in case of delay in handing over possession and the developer bears no liability after he has handed over possession to the buyer of the property.
The builders are now recognising the need to commit themselves to quality construction to safeguard the interest of the investors and some developers have started offering a warranty on the building and construction material. However, this new trend was introduced for the first time in the history of real estate development by Pune-based Gera Developments, which is now being followed by other real estate developers.
The five-year warranty that is now being provided by some of the developers in India ensures that the property remains in premium condition and covers three main areas: preventive maintenance in the areas of carpentry, electrical diagnostic works, plumbing and bathroom tiles; repairs as a result of improper installation or supply from company’s end, and re-paint of the exteriors of the building to make it look new before the end of five years, which also maintains the prime real estate value of the property.
In this regard, the Government of India should introduce a new legislation that should make it mandatory for all the real estate developers to offer warranty plans to its investors, as it would build an environment of trust and transparency, which is lacking in the real estate sector at present. This will surely help the sellers in getting a better commercial value of the property and the buyers will have a peace of mind while buying such a property. The quality standards in terms of service delivery and construction are not yet up to the mark and the introduction of such legislation would automatically improve it to international level.
http://news.moneycontrol.com/india/news/propertyexpert/null/newtrendwarrantyproperty/14/38/article/187166
Also, a warranty is an assurance by the seller of the property to the buyer that a property is as represented or will be as promised and the seller insures the buyer that the insurance risk or all the terms and conditions specified in the contract would be fulfilled as stated to keep the contract effective.
Indian developers are not providing any warranty on properties. The contract or the development agreement details the agreed price, payment and construction schedule, apartment plans, delivery date and the developer’s liability in case of delay in handing over possession and the developer bears no liability after he has handed over possession to the buyer of the property.
The builders are now recognising the need to commit themselves to quality construction to safeguard the interest of the investors and some developers have started offering a warranty on the building and construction material. However, this new trend was introduced for the first time in the history of real estate development by Pune-based Gera Developments, which is now being followed by other real estate developers.
The five-year warranty that is now being provided by some of the developers in India ensures that the property remains in premium condition and covers three main areas: preventive maintenance in the areas of carpentry, electrical diagnostic works, plumbing and bathroom tiles; repairs as a result of improper installation or supply from company’s end, and re-paint of the exteriors of the building to make it look new before the end of five years, which also maintains the prime real estate value of the property.
In this regard, the Government of India should introduce a new legislation that should make it mandatory for all the real estate developers to offer warranty plans to its investors, as it would build an environment of trust and transparency, which is lacking in the real estate sector at present. This will surely help the sellers in getting a better commercial value of the property and the buyers will have a peace of mind while buying such a property. The quality standards in terms of service delivery and construction are not yet up to the mark and the introduction of such legislation would automatically improve it to international level.
http://news.moneycontrol.com/india/news/propertyexpert/null/newtrendwarrantyproperty/14/38/article/187166
Be legally right while buying property
A few years ago, owning a home was a mere dream for many. But recently, a handful of benefits like tax sops and cheap loans have been a blessing for millions of Indians who are now seeing that dream turn to a reality. In fact more people are buying homes now than ever before and they are buying it very early on in life.
Pallavi and Kartik Iyer are a young couple in Pune who are planning to buy their first home. They've done their research on area and location but have no clue about what documents need to be looked at before signing the agreement. Says Iyer, "We did a lot of research, scanned many websites. They all give out a list of more than 25 documents that we need to look into. It would just be easier if we would know which documents are most vulnerable to tampering"
With real estate being far from transparent, with nothing in clear black and white, Moneycontrol tries to help Iyer and many more like him by handing out a check list of 'grey areas' to watch out for.
Get your papers right!
Who owns the land?
You must verify whether the land is freehold (land owned by the builder) or leasehold (land leased out to the builder from someone else). This becomes important because in case of leasehold land, the owner of the land prescribes his own set of terms and conditions so far as use of the land is concerned. For instance, in case the lease has to be renewed after some years, the owner may charge a premium, which may come as a cost you hadn't planned for.
Builders usually possess the land of construction under their names or hold development agreements with the owners of the land. Says Anuj Puri, MD, Chesterton Meghraj Property Consultants Pvt. Ltd, "In both the cases, the purchaser of the flat must enquire and find out whether the builder is legally permitted to carry out construction on the land on which he proposes to construct the building. In many cases it may be necessary to seek the assistance of a professional to find out whether the builder or developer has good title to the land."
Are all approvals in place?
In the recent past, buildings in several metros faced the threat of being razed to the ground - the reasons - authorities clamped down on them for not complying with approvals. The only other way out is to pay a large fine and get the approval. By then, the builder may already have got off the hook by transferring the property to the co-operative society and residents will have to bear the brunt.
Therefore, as a buyer, you should check whether the builders have all the necessary approvals.
Plan approval, Intimation of Disapproval (IOD) and commencement certificate - key issues
A person in Mumbai (name withheld) booked an apartment on the seventh floor of a building. He had asked the builder for the plan approval and commencement certificate but never got around to seeing it. In the meantime, he did not want to lose out on time and therefore enquired with other buyers about this approval. Most other buyers had seen this approval and hence, he went ahead and booked the apartment. It was only when his bank rejected his loan did he realise that the builder had approval to construct only a six storey building and the seventh floor was a modification, approval for which was still to be taken. His builder convinced him that he would pull strings with the necessary authorities and get the approval, but the entire situation seemed too risky and he pulled out from the deal.
Documents like these are vital to a chaos at a later stage. Likewise, the IOD specifies the conditions subject to which the building should be constructed by the builder. "IOD is issued for one year and if the construction is not completed within one year, it should be re-validated. The purchaser of the flat must verify whether the IOD is issued and if it is issued, the terms and conditions stipulated by the local authorities," says Puri.
The commencement certificate permits the builder to carry out construction of the building and is valid for a year, after which it has to be re-validated. Rajiv Sabharwal, Head, ICICI Home Loans, says, "The customer should ensure that builder has requisite FSI - he should have the commencement certificate issued by Municipal Council and approved plans up to the floor where he is buying a flat."
Agreement of Sale - The fine print
Once you have verified documents, as a buyer, you must enter in to an agreement with the builder or the developer. You have to ensure that the conditions are spelt out clearly, to a problems arising out of ambiguity, in future. Puri elaborates, "Such an agreement should specifically mention flat number, wing, and floor of the building, amenities provided in the flat, terms of payment, date on which the possession of the flat will be given etc."
"Check the carpet area (which is the actual area you get) in addition to built-up or super built-up area," advises Sabharwal. Once the agreement is finalized, stamp duty must be paid on the agreement. Insist on getting an Occupation Certificate (OC) before occupying the flat, to eliminate any problems.
Small but significant
Apart from these larger issues, there are certain areas that may seem minor but are really a must-do.
Hidden costs
Buying a house means talking in terms of lakhs of rupees. Of course, you need to pay attention to the big costs, but in the process do not ignore the smaller costs. Warns Sabharwal, "The buyer should look out for hidden costs - like water connection, electric meter, development charges, clubhouse charges, etc. These should be added to the agreement to sale."
Keep records
Talking of documents, of course, insist on getting all the original ones but equally important, retain photocopies of them as well. Cautions Puri, "Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate."
What details do you look out for in these? "Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared," says Puri.
http://news.moneycontrol.com/india/news/propertyexpert/realestatebuilders/belegallyrightwhilebuyingproperty/14/38/article/168912
Pallavi and Kartik Iyer are a young couple in Pune who are planning to buy their first home. They've done their research on area and location but have no clue about what documents need to be looked at before signing the agreement. Says Iyer, "We did a lot of research, scanned many websites. They all give out a list of more than 25 documents that we need to look into. It would just be easier if we would know which documents are most vulnerable to tampering"
With real estate being far from transparent, with nothing in clear black and white, Moneycontrol tries to help Iyer and many more like him by handing out a check list of 'grey areas' to watch out for.
Get your papers right!
Who owns the land?
You must verify whether the land is freehold (land owned by the builder) or leasehold (land leased out to the builder from someone else). This becomes important because in case of leasehold land, the owner of the land prescribes his own set of terms and conditions so far as use of the land is concerned. For instance, in case the lease has to be renewed after some years, the owner may charge a premium, which may come as a cost you hadn't planned for.
Builders usually possess the land of construction under their names or hold development agreements with the owners of the land. Says Anuj Puri, MD, Chesterton Meghraj Property Consultants Pvt. Ltd, "In both the cases, the purchaser of the flat must enquire and find out whether the builder is legally permitted to carry out construction on the land on which he proposes to construct the building. In many cases it may be necessary to seek the assistance of a professional to find out whether the builder or developer has good title to the land."
Are all approvals in place?
In the recent past, buildings in several metros faced the threat of being razed to the ground - the reasons - authorities clamped down on them for not complying with approvals. The only other way out is to pay a large fine and get the approval. By then, the builder may already have got off the hook by transferring the property to the co-operative society and residents will have to bear the brunt.
Therefore, as a buyer, you should check whether the builders have all the necessary approvals.
Plan approval, Intimation of Disapproval (IOD) and commencement certificate - key issues
A person in Mumbai (name withheld) booked an apartment on the seventh floor of a building. He had asked the builder for the plan approval and commencement certificate but never got around to seeing it. In the meantime, he did not want to lose out on time and therefore enquired with other buyers about this approval. Most other buyers had seen this approval and hence, he went ahead and booked the apartment. It was only when his bank rejected his loan did he realise that the builder had approval to construct only a six storey building and the seventh floor was a modification, approval for which was still to be taken. His builder convinced him that he would pull strings with the necessary authorities and get the approval, but the entire situation seemed too risky and he pulled out from the deal.
Documents like these are vital to a chaos at a later stage. Likewise, the IOD specifies the conditions subject to which the building should be constructed by the builder. "IOD is issued for one year and if the construction is not completed within one year, it should be re-validated. The purchaser of the flat must verify whether the IOD is issued and if it is issued, the terms and conditions stipulated by the local authorities," says Puri.
The commencement certificate permits the builder to carry out construction of the building and is valid for a year, after which it has to be re-validated. Rajiv Sabharwal, Head, ICICI Home Loans, says, "The customer should ensure that builder has requisite FSI - he should have the commencement certificate issued by Municipal Council and approved plans up to the floor where he is buying a flat."
Agreement of Sale - The fine print
Once you have verified documents, as a buyer, you must enter in to an agreement with the builder or the developer. You have to ensure that the conditions are spelt out clearly, to a problems arising out of ambiguity, in future. Puri elaborates, "Such an agreement should specifically mention flat number, wing, and floor of the building, amenities provided in the flat, terms of payment, date on which the possession of the flat will be given etc."
"Check the carpet area (which is the actual area you get) in addition to built-up or super built-up area," advises Sabharwal. Once the agreement is finalized, stamp duty must be paid on the agreement. Insist on getting an Occupation Certificate (OC) before occupying the flat, to eliminate any problems.
Small but significant
Apart from these larger issues, there are certain areas that may seem minor but are really a must-do.
Hidden costs
Buying a house means talking in terms of lakhs of rupees. Of course, you need to pay attention to the big costs, but in the process do not ignore the smaller costs. Warns Sabharwal, "The buyer should look out for hidden costs - like water connection, electric meter, development charges, clubhouse charges, etc. These should be added to the agreement to sale."
Keep records
Talking of documents, of course, insist on getting all the original ones but equally important, retain photocopies of them as well. Cautions Puri, "Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate."
What details do you look out for in these? "Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared," says Puri.
http://news.moneycontrol.com/india/news/propertyexpert/realestatebuilders/belegallyrightwhilebuyingproperty/14/38/article/168912
Documents you need to buy that dream home
Q: What are the documents needed for transfer of allotment of flat in case of death?
A: The papers to be submitted are
(a) affidavits about the surviving legal heirs from the transferee made on non-judicial stamp paper of Rs. 10,
(b) relinquishment deed on Rs. 100 non-judicial stamp paper duly registered,(c) undertaking from the transferee on non-judicial stamp paper of Rs. 10,
(d) indemnity bond from the tranferee on Rs. 100 non-judicial stamp paper,
(e) original death certificate,
(f) no-objection certificate from the employer/government or loan-giving agency if advance for house building has been obtained,
(g) documentary evidence of relationship i.e., attested photocopy of school leaving certificate or passport and ration card duly attested by a gazetted officer; and photograph of the transferee with three signatures duly attested by a gazetted officer.
Q: Which are documents required for executing a conveyance deed?
A: The documents for this purpose consist of a photocopy of possession slip indicating the date on which the allottee took possession, NOC from the office/bank/ financial Institution if loan has been taken and if not, an affidavit to the effect that no loan has been taken from any such organization, photocopy of the treasury challan for having deposited the stamp duty to the Delhi government, and names and addresses of two witnesses, along with their identification (electoral card/ration card, PAN or passport) along with four unattested passport-size photographs.
Q: What is the benefit of getting the property mutated?
A: Mutation is beneficial because otherwise the local authorities do not recognize the purchaser of the immovable property as the new owner. All the property tax bills and payment thereof would continue to be in the name of the previous owner. Further, if the new owner intends to sell the property, it would be difficult for him to do so if the property does not stand mutated in his name.
Q: What are the documents necessary for mutation of property as I am having GPA in my name?
A: Generally the documents needed in this case are copies of the power of attorney and the Will, receipt of payment duly registered by the sub-registrar, application for mutation with Rs. 3 court fee stamp affixed on it, indemnity bond on a Rs. 100 stamp paper, affidavit on Rs. 10 stamp paper and clearance of the latest property tax.
Q: Is any permission required if I undertake additions and alterations in my flat?
A: For minor additions or alterations, which do not require structural changes, no permission is needed. But if you are planning any major transformation that necessitates structural changes, you have to contact the DDA or the MCD and secure permission from them.
http://news.moneycontrol.com/india/news/property/propertypurchasedocumentsvijaychawla/documentsyouneedtobuythatdreamhome/14/27/article/202019
A: The papers to be submitted are
(a) affidavits about the surviving legal heirs from the transferee made on non-judicial stamp paper of Rs. 10,
(b) relinquishment deed on Rs. 100 non-judicial stamp paper duly registered,(c) undertaking from the transferee on non-judicial stamp paper of Rs. 10,
(d) indemnity bond from the tranferee on Rs. 100 non-judicial stamp paper,
(e) original death certificate,
(f) no-objection certificate from the employer/government or loan-giving agency if advance for house building has been obtained,
(g) documentary evidence of relationship i.e., attested photocopy of school leaving certificate or passport and ration card duly attested by a gazetted officer; and photograph of the transferee with three signatures duly attested by a gazetted officer.
Q: Which are documents required for executing a conveyance deed?
A: The documents for this purpose consist of a photocopy of possession slip indicating the date on which the allottee took possession, NOC from the office/bank/ financial Institution if loan has been taken and if not, an affidavit to the effect that no loan has been taken from any such organization, photocopy of the treasury challan for having deposited the stamp duty to the Delhi government, and names and addresses of two witnesses, along with their identification (electoral card/ration card, PAN or passport) along with four unattested passport-size photographs.
Q: What is the benefit of getting the property mutated?
A: Mutation is beneficial because otherwise the local authorities do not recognize the purchaser of the immovable property as the new owner. All the property tax bills and payment thereof would continue to be in the name of the previous owner. Further, if the new owner intends to sell the property, it would be difficult for him to do so if the property does not stand mutated in his name.
Q: What are the documents necessary for mutation of property as I am having GPA in my name?
A: Generally the documents needed in this case are copies of the power of attorney and the Will, receipt of payment duly registered by the sub-registrar, application for mutation with Rs. 3 court fee stamp affixed on it, indemnity bond on a Rs. 100 stamp paper, affidavit on Rs. 10 stamp paper and clearance of the latest property tax.
Q: Is any permission required if I undertake additions and alterations in my flat?
A: For minor additions or alterations, which do not require structural changes, no permission is needed. But if you are planning any major transformation that necessitates structural changes, you have to contact the DDA or the MCD and secure permission from them.
http://news.moneycontrol.com/india/news/property/propertypurchasedocumentsvijaychawla/documentsyouneedtobuythatdreamhome/14/27/article/202019
Take a loan or buy out of own funds
If you want to buy a house, you have two options. Either take a loan or use your own funds. Most of us obviously would not be able to afford an outright purchase (without availing of any loan whatsoever). However, even those fortunate few who have the wherewithal to buy a house off the shelf, should avail themselves of a loan. Let us see why.
Well, for starters, interest outgo on the loan up to Rs. 1,50,000 is tax deductible. Moreover, the capital repayments are eligible for Sec80C deduction up to Rs. 1,00,000. Now, if one were to use one’s own funds, these benefits are forgone. There are absolutely no tax benefits available for someone who wants to buy his property outright without taking a loan! This does seem a bit unfair, but that’s the way the law is.
Now taking a step further. How much loan should you opt for? If you take a loan, you pay a higher rate of interest than what you earn on your own funds. So should you use your funds for buying the house? In that case, you lose the tax advantage.
Therefore, you have to weigh the benefit of the tax advantage of taking a loan against the loss due to higher interest outflow. Obviously, there is a break-even point which can help you in arriving at the optimal mix. The answer would of course depend upon variable parameters like the interest rate on the loan and what your own funds earn outside.
Let us try and find out what it is with an example.
We assume that one Mr. Mistry has taken a housing loan of Rs. 20 lakh @9% p.a., whereas his owned funds earn just 6.34% p.a.. The reason why I have chosen this curious figure of 6.34% will become clear in a while.
Anyway, coming back to Mr. Mistry, it is assumed that he is in the 30% bracket. (These figures are for ease of understanding and computations, in reality, the numbers would differ depending upon the interest rates in the economy. However, the principle would remain the same.)
The premise of the calculation is one’s own funds are freed up to the extent of the loan taken. In other words, if Mr. Mistry were to take a loan of Rs. 20 lakhs, it basically means that his personal funds to the extent of Rs. 20 lakh are available to be invested elsewhere which otherwise would not have been. The comparison is done based on these figures. Now look at the Table. Its essentially in two parts. The first part deals with the loan cashflows whereas the second part is regarding Mr. Mistry’s personal cashflows including that from investment.
It is assumed that the loan availed of is Rs. 20 lakh. The term is for 15 years. At an interest rate of 9% p.a., the EMI works out to Rs. 2,48,118. For simplicity, annual figures are taken. In actual practice, EMIs are paid monthly. The total interest paid out for the first year is Rs. 1,80,000. The closing balance for the first year is Rs. 20 lakhs less the capital repaid during the year.
Now coming to the second part of the table. As already discussed, since a loan of Rs. 20 lakhs is taken, Mr. Mistry can invest a similar amount of personal funds as he pleases. These funds (it is assumed) earn an pre-tax interest of 6.34% p.a. Therefore, the interest received for the first year would be Rs. 1,26,884.
What about the tax break on the EMIs? Taxes saved is money not paid i.e. it is money earned. Readers would know that housing loan interest is deductible to the extent of Rs. 1,50,000 per annum. Therefore, at a 30% tax rate, the advantage works out to Rs. 45,000 and so on. Similarly, the principal repayments are deductible under sec. 80C subject to the overall limit of Rs. 1,00,000. In the first year, Mr. Mistry repays capital to the extent of Rs. 68,118 and @30% the tax advantage is Rs. 20,435. The rest of the table is self explanatory.
Amount Rs. 2,000,000 ------Interest Rates-----
Loan Period 15 years On Loan 9.00% p.a
EMI (annual) Rs. 248,118 On Own Funds 6.34% p.a
Tax Zone 30%
Year Loan Taken Interest Capital Closing
Paid Repayment Balance
A B C D E=B-D
1 2,000,000 180,000 68,118 1,931,882
2 1,931,882 173,869 74,248 1,857,634
3 1,857,634 167,187 80,931 1,776,703
4 1,776,703 159,903 88,214 1,688,489
5 1,688,489 151,964 96,154 1,592,335
6 1,592,335 143,310 104,808 1,487,527
7 1,487,527 133,877 114,240 1,373,287
8 1,373,287 123,596 124,522 1,248,765
9 1,248,765 112,389 135,729 1,113,036
10 1,113,036 100,173 147,945 965,092
11 965,092 86,858 161,260 803,832
12 803,832 72,345 175,773 628,059
13 628,059 56,525 191,592 436,467
14 436,467 39,282 208,836 227,631
15 227,631 20,487 227,631 0
Own Funds Interest Tax Tax Tax Closing
Received Paid Saved Saved Balance
F G on I on P
2,000,000 126,844 38,053 45,000 20,435 1,906,109
1,906,109 120,890 36,267 45,000 22,275 1,809,888
1,809,888 114,787 34,436 45,000 24,279 1,711,400
1,711,400 108,541 32,562 45,000 26,464 1,610,725
1,610,725 102,156 30,647 45,000 28,846 1,507,963
1,507,963 95,638 28,691 42,993 30,000 1,399,785
1,399,785 88,777 26,633 40,163 30,000 1,283,974
1,283,974 81,432 24,430 37,079 30,000 1,159,938
1,159,938 73,566 22,070 33,717 30,000 1,027,033
1,027,033 65,137 19,541 30,052 30,000 884,563
884,563 56,101 16,830 26,057 30,000 731,773
731,773 46,411 13,923 21,703 30,000 567,846
567,846 36,014 10,804 16,958 30,000 391,896
391,896 24,855 7,456 11,785 30,000 202,961
202,961 12,872 3,862 6,146 30,000 0
The last column of the table is basically Mr. Mistry’s personal cashflow. The inflows are the interest earned and the tax saving on the interest and principal paid, whereas the outflows are the interest paid itself as well as the capital repayment.
In other words, because Mr. Mistry has taken the loan, his capital that he would have otherwise used for buying the house can earn some interest over the 15 year period. Similarly, all throughout, he will also get tax breaks on interest and principal. On the flip side, he will pay EMIs for the 15 years. Now, if after accounting for the above inflows and outflows, over 15 years, if Mr. Mistry were to end up with a zero balance, he would be indifferent to buying the house outright now or taking a loan. But if he were to end up having a positive bank balance, then he should take the loan and vice versa.
The above table throws up this indifference point. Putting it differently, were Mr. Mistry able to earn just 6.34% p.a. pre tax from his funds, it would make no difference to him whether he uses his own money for the property or whether he takes a loan. In other words, the break-even point in this case is 6.34% p.a.
What if instead of 6.34%, Mr. Mistry were able to earn 8% p.a. on his funds? Then it behooves him to go in for the loan by all means. If the revised numbers are plugged in the spreadsheet, one finds that Mr. Mistry would benefit by about Rs. 3.50 lakhs by opting for the loan.
Conversely, what if he were able to earn just 3% p.a.? In this case, by taking a loan, he would lose around Rs. 5.14 lakhs. So you see, this is a very powerful tool for every potential homeowner to determine the extent he should leverage himself.
Mr. Mistry happened to be in the 30% tax zone. If he were in the 20% tax zone, he would need to earn 7.51% p.a. and if he were in the 10% tax zone, his funds would need to earn 8.36% p.a. to break-even.
Basically, what these calculations throw up is nothing new. It is just restating the obvious but in terms of cold numbers. The greatest advantage of taking a loan emanates out of the tax breaks. It is in the interest of the investor to maximise these tax breaks. Using own funds results in foregoing the tax advantage.
Also note that the ceiling of Rs. 1,50,000 on interest is only in the case of self-occupied property. In the case of let out property, there is no ceiling on the interest deduction i.e. full interest paid is deductible. In this case, obviously, taking a loan would be advantageous. There is no question of using one’s own funds.
To Sum
If you are not in a position to use your own resources, then by all means avail of a loan. Interest rates though on the upswing lately are still very attractive and there is no better time to avail of a housing loan than the present. But if you do have the wherewithal to fund your own house, then remember to carry out the above analysis first.
http://news.moneycontrol.com/india/news/loans/sandeepshanbhag/takeloanorbuyoutownfunds/14/29/article/210707
Well, for starters, interest outgo on the loan up to Rs. 1,50,000 is tax deductible. Moreover, the capital repayments are eligible for Sec80C deduction up to Rs. 1,00,000. Now, if one were to use one’s own funds, these benefits are forgone. There are absolutely no tax benefits available for someone who wants to buy his property outright without taking a loan! This does seem a bit unfair, but that’s the way the law is.
Now taking a step further. How much loan should you opt for? If you take a loan, you pay a higher rate of interest than what you earn on your own funds. So should you use your funds for buying the house? In that case, you lose the tax advantage.
Therefore, you have to weigh the benefit of the tax advantage of taking a loan against the loss due to higher interest outflow. Obviously, there is a break-even point which can help you in arriving at the optimal mix. The answer would of course depend upon variable parameters like the interest rate on the loan and what your own funds earn outside.
Let us try and find out what it is with an example.
We assume that one Mr. Mistry has taken a housing loan of Rs. 20 lakh @9% p.a., whereas his owned funds earn just 6.34% p.a.. The reason why I have chosen this curious figure of 6.34% will become clear in a while.
Anyway, coming back to Mr. Mistry, it is assumed that he is in the 30% bracket. (These figures are for ease of understanding and computations, in reality, the numbers would differ depending upon the interest rates in the economy. However, the principle would remain the same.)
The premise of the calculation is one’s own funds are freed up to the extent of the loan taken. In other words, if Mr. Mistry were to take a loan of Rs. 20 lakhs, it basically means that his personal funds to the extent of Rs. 20 lakh are available to be invested elsewhere which otherwise would not have been. The comparison is done based on these figures. Now look at the Table. Its essentially in two parts. The first part deals with the loan cashflows whereas the second part is regarding Mr. Mistry’s personal cashflows including that from investment.
It is assumed that the loan availed of is Rs. 20 lakh. The term is for 15 years. At an interest rate of 9% p.a., the EMI works out to Rs. 2,48,118. For simplicity, annual figures are taken. In actual practice, EMIs are paid monthly. The total interest paid out for the first year is Rs. 1,80,000. The closing balance for the first year is Rs. 20 lakhs less the capital repaid during the year.
Now coming to the second part of the table. As already discussed, since a loan of Rs. 20 lakhs is taken, Mr. Mistry can invest a similar amount of personal funds as he pleases. These funds (it is assumed) earn an pre-tax interest of 6.34% p.a. Therefore, the interest received for the first year would be Rs. 1,26,884.
What about the tax break on the EMIs? Taxes saved is money not paid i.e. it is money earned. Readers would know that housing loan interest is deductible to the extent of Rs. 1,50,000 per annum. Therefore, at a 30% tax rate, the advantage works out to Rs. 45,000 and so on. Similarly, the principal repayments are deductible under sec. 80C subject to the overall limit of Rs. 1,00,000. In the first year, Mr. Mistry repays capital to the extent of Rs. 68,118 and @30% the tax advantage is Rs. 20,435. The rest of the table is self explanatory.
Amount Rs. 2,000,000 ------Interest Rates-----
Loan Period 15 years On Loan 9.00% p.a
EMI (annual) Rs. 248,118 On Own Funds 6.34% p.a
Tax Zone 30%
Year Loan Taken Interest Capital Closing
Paid Repayment Balance
A B C D E=B-D
1 2,000,000 180,000 68,118 1,931,882
2 1,931,882 173,869 74,248 1,857,634
3 1,857,634 167,187 80,931 1,776,703
4 1,776,703 159,903 88,214 1,688,489
5 1,688,489 151,964 96,154 1,592,335
6 1,592,335 143,310 104,808 1,487,527
7 1,487,527 133,877 114,240 1,373,287
8 1,373,287 123,596 124,522 1,248,765
9 1,248,765 112,389 135,729 1,113,036
10 1,113,036 100,173 147,945 965,092
11 965,092 86,858 161,260 803,832
12 803,832 72,345 175,773 628,059
13 628,059 56,525 191,592 436,467
14 436,467 39,282 208,836 227,631
15 227,631 20,487 227,631 0
Own Funds Interest Tax Tax Tax Closing
Received Paid Saved Saved Balance
F G on I on P
2,000,000 126,844 38,053 45,000 20,435 1,906,109
1,906,109 120,890 36,267 45,000 22,275 1,809,888
1,809,888 114,787 34,436 45,000 24,279 1,711,400
1,711,400 108,541 32,562 45,000 26,464 1,610,725
1,610,725 102,156 30,647 45,000 28,846 1,507,963
1,507,963 95,638 28,691 42,993 30,000 1,399,785
1,399,785 88,777 26,633 40,163 30,000 1,283,974
1,283,974 81,432 24,430 37,079 30,000 1,159,938
1,159,938 73,566 22,070 33,717 30,000 1,027,033
1,027,033 65,137 19,541 30,052 30,000 884,563
884,563 56,101 16,830 26,057 30,000 731,773
731,773 46,411 13,923 21,703 30,000 567,846
567,846 36,014 10,804 16,958 30,000 391,896
391,896 24,855 7,456 11,785 30,000 202,961
202,961 12,872 3,862 6,146 30,000 0
The last column of the table is basically Mr. Mistry’s personal cashflow. The inflows are the interest earned and the tax saving on the interest and principal paid, whereas the outflows are the interest paid itself as well as the capital repayment.
In other words, because Mr. Mistry has taken the loan, his capital that he would have otherwise used for buying the house can earn some interest over the 15 year period. Similarly, all throughout, he will also get tax breaks on interest and principal. On the flip side, he will pay EMIs for the 15 years. Now, if after accounting for the above inflows and outflows, over 15 years, if Mr. Mistry were to end up with a zero balance, he would be indifferent to buying the house outright now or taking a loan. But if he were to end up having a positive bank balance, then he should take the loan and vice versa.
The above table throws up this indifference point. Putting it differently, were Mr. Mistry able to earn just 6.34% p.a. pre tax from his funds, it would make no difference to him whether he uses his own money for the property or whether he takes a loan. In other words, the break-even point in this case is 6.34% p.a.
What if instead of 6.34%, Mr. Mistry were able to earn 8% p.a. on his funds? Then it behooves him to go in for the loan by all means. If the revised numbers are plugged in the spreadsheet, one finds that Mr. Mistry would benefit by about Rs. 3.50 lakhs by opting for the loan.
Conversely, what if he were able to earn just 3% p.a.? In this case, by taking a loan, he would lose around Rs. 5.14 lakhs. So you see, this is a very powerful tool for every potential homeowner to determine the extent he should leverage himself.
Mr. Mistry happened to be in the 30% tax zone. If he were in the 20% tax zone, he would need to earn 7.51% p.a. and if he were in the 10% tax zone, his funds would need to earn 8.36% p.a. to break-even.
Basically, what these calculations throw up is nothing new. It is just restating the obvious but in terms of cold numbers. The greatest advantage of taking a loan emanates out of the tax breaks. It is in the interest of the investor to maximise these tax breaks. Using own funds results in foregoing the tax advantage.
Also note that the ceiling of Rs. 1,50,000 on interest is only in the case of self-occupied property. In the case of let out property, there is no ceiling on the interest deduction i.e. full interest paid is deductible. In this case, obviously, taking a loan would be advantageous. There is no question of using one’s own funds.
To Sum
If you are not in a position to use your own resources, then by all means avail of a loan. Interest rates though on the upswing lately are still very attractive and there is no better time to avail of a housing loan than the present. But if you do have the wherewithal to fund your own house, then remember to carry out the above analysis first.
http://news.moneycontrol.com/india/news/loans/sandeepshanbhag/takeloanorbuyoutownfunds/14/29/article/210707
Home loan rates on the climb again
RBI turn on the heat
The credit policy has brought in selective controls for the housing sector. The requirement of increased provisioning by banks i.e. setting aside a portion of profits to cover possible defaults, residential housing loans along with commercial real estate loans will make them costlier. “RBI has noted the rapid increase in loans to the real estate sector and as much to the housing loan industry. As we are aware there was a 84% increase in credit offtake and this is what RBI wants to slow down until normalcy is reached”, opines Pritam Chivukula, Head Agency, Colliers International.
How will affect the home loan interest rates?
The banks expectedly are going to pass on the cost to the consumer but the rate increase is likely to be selective. “With the provisioning norms being hiked from 0.4% to 1% and with existing liquidity issues, banks will be forced to hike interest rates for home loans esp. for loans over 20 lacs. There is an expected increase between 25-50 basis points”, says Pritam Chivukula.
Banks have not yet jumped into the bandwagon of increasing rates though it seems that they are waiting for each other to break the still waters. Pankaj Desai, Head Retail Assets, Kotak Bank is cautious in his approach, “It is too early. There has not been any change in rates so far but we expect the rates to go up in near future.”
What should be your strategy?
If you are a loan seeker or have a floating rate loan under Rs 20 lacs
You are least likely to be affected. We do not expect home loan rates to increase in this pocket. The rates should remain stable here as the increase in this segment has already taken place and the banks would be not be inclined to touch this bracket.
If you a loan seeker or have a floating rate loan over Rs 20 lacs
Bad news for you. The rates are moving up for this segment however the hike should be about 50 basis point. With RBI asking the banks to slow the credit offtake in this segment the high-end segment is going to be the first where the breaks will be applied.
What experts are saying
Pritam Chivukula, Head Agency
Colliers International
Home loans seekers generally run a home loan for an average of 8-10 years. Thus short term increase in rates should not distract consumers from going for variable rates because over the tenor of the loan the rate will average out in favour of the consumer as India aligns itself to rates prevailing in the developed markets.
Pankaj Desai, Head Retail Assets
Kotak Bank
There are not many options available for fixed rate. We believe that floating rate is a better option since the customer will get benefit of lower rate if rates go down in future. Also, the fixed option will be expensive and there is no sense in committing oneself to higher rate for the entire tenor of the loan.
http://news.moneycontrol.com/india/news/loans/creditpolicyhomeloan/homeloanratesclimbagain/14/29/article/211253
The credit policy has brought in selective controls for the housing sector. The requirement of increased provisioning by banks i.e. setting aside a portion of profits to cover possible defaults, residential housing loans along with commercial real estate loans will make them costlier. “RBI has noted the rapid increase in loans to the real estate sector and as much to the housing loan industry. As we are aware there was a 84% increase in credit offtake and this is what RBI wants to slow down until normalcy is reached”, opines Pritam Chivukula, Head Agency, Colliers International.
How will affect the home loan interest rates?
The banks expectedly are going to pass on the cost to the consumer but the rate increase is likely to be selective. “With the provisioning norms being hiked from 0.4% to 1% and with existing liquidity issues, banks will be forced to hike interest rates for home loans esp. for loans over 20 lacs. There is an expected increase between 25-50 basis points”, says Pritam Chivukula.
Banks have not yet jumped into the bandwagon of increasing rates though it seems that they are waiting for each other to break the still waters. Pankaj Desai, Head Retail Assets, Kotak Bank is cautious in his approach, “It is too early. There has not been any change in rates so far but we expect the rates to go up in near future.”
What should be your strategy?
If you are a loan seeker or have a floating rate loan under Rs 20 lacs
You are least likely to be affected. We do not expect home loan rates to increase in this pocket. The rates should remain stable here as the increase in this segment has already taken place and the banks would be not be inclined to touch this bracket.
If you a loan seeker or have a floating rate loan over Rs 20 lacs
Bad news for you. The rates are moving up for this segment however the hike should be about 50 basis point. With RBI asking the banks to slow the credit offtake in this segment the high-end segment is going to be the first where the breaks will be applied.
What experts are saying
Pritam Chivukula, Head Agency
Colliers International
Home loans seekers generally run a home loan for an average of 8-10 years. Thus short term increase in rates should not distract consumers from going for variable rates because over the tenor of the loan the rate will average out in favour of the consumer as India aligns itself to rates prevailing in the developed markets.
Pankaj Desai, Head Retail Assets
Kotak Bank
There are not many options available for fixed rate. We believe that floating rate is a better option since the customer will get benefit of lower rate if rates go down in future. Also, the fixed option will be expensive and there is no sense in committing oneself to higher rate for the entire tenor of the loan.
http://news.moneycontrol.com/india/news/loans/creditpolicyhomeloan/homeloanratesclimbagain/14/29/article/211253
Tuesday, July 17, 2007
Buy your first home at 25
You’ve got the whole world in your hands. You are young and on the upswing. Earning more than Rs. 20K. Maybe just about married or thinking about it. You want to live the your life to the fullest. Your colleague who joined the company after you and is a year younger has put a down an initial payment in an upcoming construction. It makes you sit up and look around. Three months ago, so did your old school chum. Is this a good time to buy a home? Are you ready to take on the responsibilities of home ownership, including regular maintenance?
Should the swingers put down roots?
Young professional are mobile geographically. They move as their job requires. You may not want to buy a home where you are currently based but may want to buy it in your hometown or a city of your choice. “Most young, well-educated professionals are likely to be doing short stints in several cities. The most important parameter when buying the first home should be ‘Is this the city I want to live in?’” advices Devang Shah, MBA (IIM Ahmedabad), CFPR (U.S.A. & India) Right Returns Financial Planning.
Harsh Roongta, CEO, Apna Loan.com comments, “Do not buy a home until you want to live in it. For a young person, the hassles or renting out a home are too many. For investment purposes there are many more attractive avenues”
Yeh hi hai right choice
Once you have decided on joining the breed of home owners, the next step is to decide on what home should own you…oops should you own. Some factors to keep in mind:
· How much house can you buy? Being young means you are (hopefully) not at your peak income-earning level and you have not had much time to save. So, if a dream house is out of the question right now, what is affordable? “He should be looking at a property in the range of Rs.11-15 lacs with a loan component of about Rs.10 lacs” says, Pankaj Desai, Head – Retail Assets, Kotak Mahindra Bank.
· Remember the three ‘L’s of choosing a home – location location location. Do you purchase that newer, larger and more aesthetically-pleasing home that requires a longer commute, or do you opt for something which is perhaps smaller but closer to a metro core? Gaurav Mashruwala, financial consultant says, “Stretch yourself. A home is a long term purchase and it should fulfil your requirement for the next 7-8 years. So do not scrimp on the money”
· Do not go by the logic of rent v/s buy. The comparison between renting and buying is often done on faulty assumptions. If you rent, you do not mind a small cramped apartment, you do not spend on furniture and you do not pay stamp duty. If you buy, you want to buy something that atleast takes care of your near future needs and often end up paying a price for a specific location because you are not going to be able to change your home often. That rarely happens with rented property. So choose carefully.
Raising the finances
You may think you know quite a lot about financing your home from the dipstick survey you have done but here is what the experts have to say … so pay heed.
ü The development of a household budget is a desirable activity before you buy a house. By preparing a budget while you are looking at homes, you can better focus on loan payment goals and how the new house will affect your total expenses. “When budgeting for your purchase, even if you are taking a loan you will have to consider payments such as your own contribution, the fees charged by all the financial institutions, the amount required to be paid upfront, broker’s fees, new furniture etc.” says Rajiv Sabharwal, COO ICICI home Finance Ltd
ü Assuming you are one of the self-righteous individual who will not want to dip into his father’s money for buying a home, you will take a housing finance loan. Most financiers lend upto 85% of the property value for the rest you can beg borrow and save. “Given a ‘ball park’ figure of Rs. 800/- per lac as equated monthly installments towards repayment of loans (varying with the tenure of loan), its for the individual to take a calculated budgetary decision” says, Jaideep De, Sr. Business Development Manager `Narains Corp' - Property Consultants & Realtors.
ü You budget for buying your home should be based on your household budget and how much money you can afford put in an EMI of the loan. Mashruwala advises, “For a single person, the EMIs should not exceed 60-65% of your net income and for a married person, EMIs should not exceed 35-40% of your joint income”
ü A few financiers have products that assume a certain level of salary increases every year and arrives at a higher eligibility. It could be an amount higher by 30%.
ü Enhance your eligibility to get the maximum loan amount. This will give you leg room to manoeuvre and choose your home from a wider range. “To increase the loan amount that you can get, take a loan jointly with your spouse so that both the incomes are clubbed to determine the gross repayment capacity. Generally, an HFC will permit up to 35 to 55 per cent of the gross monthly income to form the monthly repayment amount. Another option - opt for a longer repayment tenure so that the EMI amount gets reduced. I.e. opting for a 20 year loan compared to a 15 year loan will make you eligible for a higher loan amount”, advices Sabharwal.
ü A step-up loan is a great idea. Here you will make lower repayments in the initial years and higher ones as your income increases. This, of course is available to a professionally qualified person. It gives you the advantage of making lower EMI payment initially and higher ones as your income increases.
ü Just when your budgeting looks like it has been beaten into shape, you are hit by the unforeseen costs. Stamp duties, transfer charges, parking charges, clubhouse membership, interiors, etc. Get the best out of your loan by combining cost with your property cost for the purpose of taking a loan. The good news is that banks are now offering to cover at least some of these costs. You should check with your bank if they can finance the extra costs too.
ü Which bring me to the next important piece of advice – compare loans. Do not go by the bank your best friend took a loan from. Take quotes from several banks, do your maths and narrow it down to the two best quotes and take a sanction from both of them. This way you will have a back up plan if there might be some additional administrative cost thrown up by the financer which could mess up your interest calculation
There is life after buying the home
Hope that your search for your home goes well. After buying a home some more loose ends have to be tied up so that you can sleep in your new bed peacefully.
Buy term insurance: It would be irresponsible to leave your loved ones with a liability if God forbid you are no more. Most insurance companies will give you term insurance which will stagger down as the amount of the loan decreases.
Buy a householder’s policy: A general insurer will sell you a basic householder policy which is a must. After the devastating Mumbai flood surely we should wake up to the benefits of insurance.
Keep a check: Keep a regular check on your home loan account. Request for a monthly/quarterly statement and develop a friendly relationship with your account manager.
Take the tax breaks: If the principal component on your housing loan is Rs 1 lakh and you make no other investments; you will get the full advantage of it. You may end up getting a double benefit; a deduction of up to Rs 1 lakh on the principal amount and Rs 1.5 lakh on the interest component.
Conservative V/s Aggressive
Choosing between an aggressive and conservative repayment plan can be tough. Here are some pointers.
Conservative
Aggressive
Pros of being conservative
Low burden to repay EMI. Even under tough circumstances, one will be able to pay EMI.
Additional disposable income in case of excess earnings can be used to make part-prepayment with no additional fees for pre-payment.
Pros of being Aggressive
Higher loan amount, hence one can buy a better house
Shorter loan tenure, hence one can repay faster
Cons of being Conservative
Lower loan amount
One could have bought a better house with a more aggressive budget
Longer loan tenure
Cons of being Aggressive
Under tough circumstances, it can become tough to repay EMI leading to defaults
Poor credit history due to default might affect other bank offerings
http://news.moneycontrol.com/india/news/property/homeloan/buyyourfirsthomeat25/14/27/article/180567
Should the swingers put down roots?
Young professional are mobile geographically. They move as their job requires. You may not want to buy a home where you are currently based but may want to buy it in your hometown or a city of your choice. “Most young, well-educated professionals are likely to be doing short stints in several cities. The most important parameter when buying the first home should be ‘Is this the city I want to live in?’” advices Devang Shah, MBA (IIM Ahmedabad), CFPR (U.S.A. & India) Right Returns Financial Planning.
Harsh Roongta, CEO, Apna Loan.com comments, “Do not buy a home until you want to live in it. For a young person, the hassles or renting out a home are too many. For investment purposes there are many more attractive avenues”
Yeh hi hai right choice
Once you have decided on joining the breed of home owners, the next step is to decide on what home should own you…oops should you own. Some factors to keep in mind:
· How much house can you buy? Being young means you are (hopefully) not at your peak income-earning level and you have not had much time to save. So, if a dream house is out of the question right now, what is affordable? “He should be looking at a property in the range of Rs.11-15 lacs with a loan component of about Rs.10 lacs” says, Pankaj Desai, Head – Retail Assets, Kotak Mahindra Bank.
· Remember the three ‘L’s of choosing a home – location location location. Do you purchase that newer, larger and more aesthetically-pleasing home that requires a longer commute, or do you opt for something which is perhaps smaller but closer to a metro core? Gaurav Mashruwala, financial consultant says, “Stretch yourself. A home is a long term purchase and it should fulfil your requirement for the next 7-8 years. So do not scrimp on the money”
· Do not go by the logic of rent v/s buy. The comparison between renting and buying is often done on faulty assumptions. If you rent, you do not mind a small cramped apartment, you do not spend on furniture and you do not pay stamp duty. If you buy, you want to buy something that atleast takes care of your near future needs and often end up paying a price for a specific location because you are not going to be able to change your home often. That rarely happens with rented property. So choose carefully.
Raising the finances
You may think you know quite a lot about financing your home from the dipstick survey you have done but here is what the experts have to say … so pay heed.
ü The development of a household budget is a desirable activity before you buy a house. By preparing a budget while you are looking at homes, you can better focus on loan payment goals and how the new house will affect your total expenses. “When budgeting for your purchase, even if you are taking a loan you will have to consider payments such as your own contribution, the fees charged by all the financial institutions, the amount required to be paid upfront, broker’s fees, new furniture etc.” says Rajiv Sabharwal, COO ICICI home Finance Ltd
ü Assuming you are one of the self-righteous individual who will not want to dip into his father’s money for buying a home, you will take a housing finance loan. Most financiers lend upto 85% of the property value for the rest you can beg borrow and save. “Given a ‘ball park’ figure of Rs. 800/- per lac as equated monthly installments towards repayment of loans (varying with the tenure of loan), its for the individual to take a calculated budgetary decision” says, Jaideep De, Sr. Business Development Manager `Narains Corp' - Property Consultants & Realtors.
ü You budget for buying your home should be based on your household budget and how much money you can afford put in an EMI of the loan. Mashruwala advises, “For a single person, the EMIs should not exceed 60-65% of your net income and for a married person, EMIs should not exceed 35-40% of your joint income”
ü A few financiers have products that assume a certain level of salary increases every year and arrives at a higher eligibility. It could be an amount higher by 30%.
ü Enhance your eligibility to get the maximum loan amount. This will give you leg room to manoeuvre and choose your home from a wider range. “To increase the loan amount that you can get, take a loan jointly with your spouse so that both the incomes are clubbed to determine the gross repayment capacity. Generally, an HFC will permit up to 35 to 55 per cent of the gross monthly income to form the monthly repayment amount. Another option - opt for a longer repayment tenure so that the EMI amount gets reduced. I.e. opting for a 20 year loan compared to a 15 year loan will make you eligible for a higher loan amount”, advices Sabharwal.
ü A step-up loan is a great idea. Here you will make lower repayments in the initial years and higher ones as your income increases. This, of course is available to a professionally qualified person. It gives you the advantage of making lower EMI payment initially and higher ones as your income increases.
ü Just when your budgeting looks like it has been beaten into shape, you are hit by the unforeseen costs. Stamp duties, transfer charges, parking charges, clubhouse membership, interiors, etc. Get the best out of your loan by combining cost with your property cost for the purpose of taking a loan. The good news is that banks are now offering to cover at least some of these costs. You should check with your bank if they can finance the extra costs too.
ü Which bring me to the next important piece of advice – compare loans. Do not go by the bank your best friend took a loan from. Take quotes from several banks, do your maths and narrow it down to the two best quotes and take a sanction from both of them. This way you will have a back up plan if there might be some additional administrative cost thrown up by the financer which could mess up your interest calculation
There is life after buying the home
Hope that your search for your home goes well. After buying a home some more loose ends have to be tied up so that you can sleep in your new bed peacefully.
Buy term insurance: It would be irresponsible to leave your loved ones with a liability if God forbid you are no more. Most insurance companies will give you term insurance which will stagger down as the amount of the loan decreases.
Buy a householder’s policy: A general insurer will sell you a basic householder policy which is a must. After the devastating Mumbai flood surely we should wake up to the benefits of insurance.
Keep a check: Keep a regular check on your home loan account. Request for a monthly/quarterly statement and develop a friendly relationship with your account manager.
Take the tax breaks: If the principal component on your housing loan is Rs 1 lakh and you make no other investments; you will get the full advantage of it. You may end up getting a double benefit; a deduction of up to Rs 1 lakh on the principal amount and Rs 1.5 lakh on the interest component.
Conservative V/s Aggressive
Choosing between an aggressive and conservative repayment plan can be tough. Here are some pointers.
Conservative
Aggressive
Pros of being conservative
Low burden to repay EMI. Even under tough circumstances, one will be able to pay EMI.
Additional disposable income in case of excess earnings can be used to make part-prepayment with no additional fees for pre-payment.
Pros of being Aggressive
Higher loan amount, hence one can buy a better house
Shorter loan tenure, hence one can repay faster
Cons of being Conservative
Lower loan amount
One could have bought a better house with a more aggressive budget
Longer loan tenure
Cons of being Aggressive
Under tough circumstances, it can become tough to repay EMI leading to defaults
Poor credit history due to default might affect other bank offerings
http://news.moneycontrol.com/india/news/property/homeloan/buyyourfirsthomeat25/14/27/article/180567
Buy the same house for less: Bargaining tips
Property prices in India are on fire. Prices are moving up faster than ever before. In such times, how does one identify the right price for a property? What are the checks to ensure that the property is not overpriced? Moneycontrol spoke to Ramesh Nair, Associate Director with global real estate advisory firm Jones Lang LaSalle to find answers.
Q. How does a person who is planning to buy a house be sure that it is not overpriced?
The success (in identifying the right price) lies in identifying at least two hours in a week to analyze the various opportunities by driving around the neighborhood, learning market values, checking competing projects and making appropriate offers. It will also be worthwhile for the investor to review relevant articles and gather information on deals in the market at regular intervals.
Q. Is there any thumb rule, which can be used to arrive at a ‘reasonable’ price of the house?
Typically the annual investment yield should be 5% to 7% for residential properties in India. The formula to calculate investment yield is:
Investment yield = Expected net annual rent
Total Purchase price
The buyer should deduct property tax from the annual rent to arrive at the net annual rent and add stamp duty and registration charges to the purchase price to arrive at the Total Purchase price.
Q. Are property rates negotiable? How should a person go about bargaining?
In most property transactions, prices are negotiable. A buyer should never feel uneasy to make an offer on the property. If he has spent enough time pre-qualifying the property and looking at it, then he should go ahead and make the offer, even if the seller is asking much more than what the buyer wants to pay. He should never feel concerned of the seller being offended by the price or terms quoted. He should let the seller know why the offer is what it is, highlight if the property needs any refurbishment, prices of competing projects or that it is located in a bad area etc.
Q. Under what circumstances is a rate higher than market rates justified?
If the builder or developer is providing any of the following extra amenities, then a slightly higher price is justified:
· Swimming Pool
· Fire fighting and detection
· Unique view
· Air-conditioned lobbies
· Clubhouses
* Gymnasium
* Intercom services
* Back up generators
* Videophone
* The quality of tiles
Q. How does one equate carpet area to built up and super built up areas?
Carpet area is usually 75-85% of super built up area. That means, if the super built up area were 1,000 square feet, the carpet area would be around 750-850 square feet.
Q. While buying a second hand flat, how does one know if its owner has factored in the price of any renovations/repairs to the cost?
The buyer should preferably take an architect to analyse the refurbishment/repair cost. The architect should analyse the structural aspect the building, interior fit outs, electrical fittings, plumbing and woodwork to work out the refurbishment charges. The buyer should then make an offer to the seller after keeping in mind the refurbishment costs.
http://messageboard.moneycontrol.com/mccode/news/article/news_article.php?autono=190359
Q. How does a person who is planning to buy a house be sure that it is not overpriced?
The success (in identifying the right price) lies in identifying at least two hours in a week to analyze the various opportunities by driving around the neighborhood, learning market values, checking competing projects and making appropriate offers. It will also be worthwhile for the investor to review relevant articles and gather information on deals in the market at regular intervals.
Q. Is there any thumb rule, which can be used to arrive at a ‘reasonable’ price of the house?
Typically the annual investment yield should be 5% to 7% for residential properties in India. The formula to calculate investment yield is:
Investment yield = Expected net annual rent
Total Purchase price
The buyer should deduct property tax from the annual rent to arrive at the net annual rent and add stamp duty and registration charges to the purchase price to arrive at the Total Purchase price.
Q. Are property rates negotiable? How should a person go about bargaining?
In most property transactions, prices are negotiable. A buyer should never feel uneasy to make an offer on the property. If he has spent enough time pre-qualifying the property and looking at it, then he should go ahead and make the offer, even if the seller is asking much more than what the buyer wants to pay. He should never feel concerned of the seller being offended by the price or terms quoted. He should let the seller know why the offer is what it is, highlight if the property needs any refurbishment, prices of competing projects or that it is located in a bad area etc.
Q. Under what circumstances is a rate higher than market rates justified?
If the builder or developer is providing any of the following extra amenities, then a slightly higher price is justified:
· Swimming Pool
· Fire fighting and detection
· Unique view
· Air-conditioned lobbies
· Clubhouses
* Gymnasium
* Intercom services
* Back up generators
* Videophone
* The quality of tiles
Q. How does one equate carpet area to built up and super built up areas?
Carpet area is usually 75-85% of super built up area. That means, if the super built up area were 1,000 square feet, the carpet area would be around 750-850 square feet.
Q. While buying a second hand flat, how does one know if its owner has factored in the price of any renovations/repairs to the cost?
The buyer should preferably take an architect to analyse the refurbishment/repair cost. The architect should analyse the structural aspect the building, interior fit outs, electrical fittings, plumbing and woodwork to work out the refurbishment charges. The buyer should then make an offer to the seller after keeping in mind the refurbishment costs.
http://messageboard.moneycontrol.com/mccode/news/article/news_article.php?autono=190359
Home buying guide
Till about 4-5 years back owning a home was a dream for many of us. The real estate prices were fairly steep as compared to our income levels. Finance, though available, was both cumbersome to avail and quite expensive.
Since then and at least till last year, the scene in the real estate and home loans have been nothing short of dramatic. While the real estate prices were subdued, the average income levels rose sharply, making purchase of a home quite affordable. And, so called adding fuel to the fire, was the home loan bonanza - sharp drop in the interest rates, increased tax benefits and easy availability. This has resulted in a huge growth in the purchase of property.
But the scenario seems to be changing. In last one year or so, while the real estate prices have gone up quite appreciably, the home loans interest rates are also rising. Therefore, the situation today warrants exercising caution.
Real estate
The supply of housing has not kept pace with the demand. Also, in the interim the prices of steel, cement etc. have also increased leading to higher construction costs. This has resulted in a jump in real estate prices from anything between 20-100%.
The question one is, therefore, forced to ask is – Is this a bubble? Will it burst soon? Where are the real estate prices headed?
While the local factors – city to city, location to location - will be important to look at, it can reasonably be assumed that with the continued good economic growth, the demand is likely to remain strong. But the prices have already run-up sharply, which can affect the demand. Hence, while it may be difficult to comment on how much further the real estate prices can go up, the likelihood of any significant reduction in prices look doubtful.
To a getting caught on the wrong foot, we need to first decide on the need for investment in real estate – Is it for personal use or is it an investment?
In case the home is to be purchased for personal use then it is more important to look at whether you can afford it or not. Since the prices in the near future do not seem likely to come down, the decision to buy or not will be more governed by ‘need’ and ‘affordability’, rather than the future price trend. As long as one has to stay in a particular house, it doesn’t really matter if its’ price is Rs.1 lakh or Rs.1 crore.
However, if the purchase is purely from the point of view of investment, it is important to do a thorough analysis. Have the prices in the area already increased appreciably? Is any development expected in the future which may increase/sustain the demand and hence the prices? Etc. This analysis becomes more critical if home loan is being taken to finance the purchase. Fall in real estate prices, together with increasing home loan rates, could put one in a spot of trouble. It is important not to be tempted by the past price increases or overextend oneself on the home loan.
Home Loans
And how does the interest rate scenario on the home loans look like? Should one go in for a floating or fixed interest rate? How much loan should one avail?
Is it still cheap?
While the home loan interests have started moving up, they still are quite affordable. And the tax benefits make it still more attractive. Further, though the monetary situation today indicates that the interest rates may move up, the increase is not likely to be very steep.
Fixed or floating?
It is difficult to take a call on the interest rate scenario beyond a year or so. But on the other hand a home loan is of typically 15-20 years tenure. Therefore, it will not be correct to base one’s decision to go in for a fixed or floating option, solely on the developments of the last 6 months to 1 year.
Let us decide on the issue from a slightly different perspective. The fixed interest rates today are around 8-9%. In a best case it could go down to say 5-6% depending on how the monetary situation pans out over the next 10-15 years. But, if things go bad, it could increase to say 12%, may be even 15%. Who knows? Therefore, while the benefit from the downside movement seems limited, the upside movement in interest rates can prove disastrous.
Hence, a person should opt for a floating rate interest if (a) his financial position is such that he can afford to bear the interest rate volatility and (b) he is in a position to prepay the loan out of his investments if the interest rates become too high.
If you are a fairly affluent person then you could go in for a floating rate home loan and invest your own funds in options where you can earn much better returns. This way one is in a net surplus situation. The day this situation reverses, one can pay off the loans.
But, on the other hand, if someone is not in a position to pay higher interest charges and not comfortable with the interest rate fluctuations, he may be better off locking himself in a fixed rate option.
How much is enough?
As regards the maximum loan amount one should avail, financial prudence suggests that the annual EMIs + Property Tax + other costs should not exceed 30% of the annual income, even though one may be eligible for a higher amount.
Today, there is no one solution applicable to all and each one of us has to weigh the pros and cons very carefully and see how it meets one’s individual profile.
http://messageboard.moneycontrol.com/mccode/news/article/news_article.php?autono=202251
Since then and at least till last year, the scene in the real estate and home loans have been nothing short of dramatic. While the real estate prices were subdued, the average income levels rose sharply, making purchase of a home quite affordable. And, so called adding fuel to the fire, was the home loan bonanza - sharp drop in the interest rates, increased tax benefits and easy availability. This has resulted in a huge growth in the purchase of property.
But the scenario seems to be changing. In last one year or so, while the real estate prices have gone up quite appreciably, the home loans interest rates are also rising. Therefore, the situation today warrants exercising caution.
Real estate
The supply of housing has not kept pace with the demand. Also, in the interim the prices of steel, cement etc. have also increased leading to higher construction costs. This has resulted in a jump in real estate prices from anything between 20-100%.
The question one is, therefore, forced to ask is – Is this a bubble? Will it burst soon? Where are the real estate prices headed?
While the local factors – city to city, location to location - will be important to look at, it can reasonably be assumed that with the continued good economic growth, the demand is likely to remain strong. But the prices have already run-up sharply, which can affect the demand. Hence, while it may be difficult to comment on how much further the real estate prices can go up, the likelihood of any significant reduction in prices look doubtful.
To a getting caught on the wrong foot, we need to first decide on the need for investment in real estate – Is it for personal use or is it an investment?
In case the home is to be purchased for personal use then it is more important to look at whether you can afford it or not. Since the prices in the near future do not seem likely to come down, the decision to buy or not will be more governed by ‘need’ and ‘affordability’, rather than the future price trend. As long as one has to stay in a particular house, it doesn’t really matter if its’ price is Rs.1 lakh or Rs.1 crore.
However, if the purchase is purely from the point of view of investment, it is important to do a thorough analysis. Have the prices in the area already increased appreciably? Is any development expected in the future which may increase/sustain the demand and hence the prices? Etc. This analysis becomes more critical if home loan is being taken to finance the purchase. Fall in real estate prices, together with increasing home loan rates, could put one in a spot of trouble. It is important not to be tempted by the past price increases or overextend oneself on the home loan.
Home Loans
And how does the interest rate scenario on the home loans look like? Should one go in for a floating or fixed interest rate? How much loan should one avail?
Is it still cheap?
While the home loan interests have started moving up, they still are quite affordable. And the tax benefits make it still more attractive. Further, though the monetary situation today indicates that the interest rates may move up, the increase is not likely to be very steep.
Fixed or floating?
It is difficult to take a call on the interest rate scenario beyond a year or so. But on the other hand a home loan is of typically 15-20 years tenure. Therefore, it will not be correct to base one’s decision to go in for a fixed or floating option, solely on the developments of the last 6 months to 1 year.
Let us decide on the issue from a slightly different perspective. The fixed interest rates today are around 8-9%. In a best case it could go down to say 5-6% depending on how the monetary situation pans out over the next 10-15 years. But, if things go bad, it could increase to say 12%, may be even 15%. Who knows? Therefore, while the benefit from the downside movement seems limited, the upside movement in interest rates can prove disastrous.
Hence, a person should opt for a floating rate interest if (a) his financial position is such that he can afford to bear the interest rate volatility and (b) he is in a position to prepay the loan out of his investments if the interest rates become too high.
If you are a fairly affluent person then you could go in for a floating rate home loan and invest your own funds in options where you can earn much better returns. This way one is in a net surplus situation. The day this situation reverses, one can pay off the loans.
But, on the other hand, if someone is not in a position to pay higher interest charges and not comfortable with the interest rate fluctuations, he may be better off locking himself in a fixed rate option.
How much is enough?
As regards the maximum loan amount one should avail, financial prudence suggests that the annual EMIs + Property Tax + other costs should not exceed 30% of the annual income, even though one may be eligible for a higher amount.
Today, there is no one solution applicable to all and each one of us has to weigh the pros and cons very carefully and see how it meets one’s individual profile.
http://messageboard.moneycontrol.com/mccode/news/article/news_article.php?autono=202251
Location Location Location! Get the Scoop On Neighborhoods Before You Buy
Location, Location, Location! The Jones’ family found their dream home and moved into it with all of the excitement and enthusiasm of a kid on Christmas morning. After a long and hectic day of unpacking, they collapsed into bed anticipating a good night’s rest. Unfortunately, they were shocked and dismayed when they began to hear the very obvious noise of trucks roaring along the inter-state highway situated less than a half mile to the rear of their home. Too late!
This unfortunate situation exemplifies the need to focus on location when contemplating the purchase of a home. A ten million dollar mansion isn’t worth a dime if it’s sitting next to a toxic waste dump. This example is far-fetched and outrageous, but it makes the point that finding the right location is certainly as important as finding the right house.
How do you investigate a potential neighborhood? There are a number of factors and issues to be considered in your evaluation. Some of them can be covered merely through visual observation; others will have to be explored with the assistance of community and government organizations.
One of your first and most significant concerns should be the crime rate. If every other house on the block is being burglarized every other month, you might want to look elsewhere. Talk to a spokesperson of the local law enforcement agency. Ask for a listing of their monthly crime stats and a copy of their year ending report.
When talking to the spokesperson about crime rates, ask about their response times in your area. If it’s over five minutes, ask why. If the community has a neighborhood watch group or a neighborhood citizens’ security patrol, attend one of their meetings or speak with their group representatives.
How far is your new neighborhood from your place of employment? How far is too far? Bottom line: check the driving time and traffic patterns, both coming and going, by driving the route you’ll take. Are there any activities or facilities in the area that will make the trip more unpleasant or time consuming on specific days of the week? As an example, is there a bridge that backs up on Friday afternoons as people rush to their weekend retreats?
If you have children, or anticipate having them, you’ll want to check out the schools in the area. Visit the schools and talk to the Principals or school counselors. Ask about class sizes, bus service, curriculum and even school menus. If your child is a gifted student, you’ll want to inquire about accelerated courses. If your child needs special Ed opportunities, ask about them. Knowing about your child’s school is one of your primary responsibilities as a parent.
This may sound a bit picky, but you should visit and evaluate your local markets, shops and restaurants. Do they sell quality products? Is there a convenient place to purchase daily necessities such as milk, luncheon items, coffee, etc.? Do the local restaurants suit your taste? The answers to these questions may not factor substantially into your moving decision, but they are part of the equation and should at least be recognized and considered.
Availability of community services should not be overlooked. Is there a good hospital in the immediate vicinity? Do they have an emergency room? How about parks and a library?
You should visit the neighborhood at various times of the day and night to check for sounds, smells, heavy traffic and the presence of any activities that you might find offensive as a resident. Sometimes the complexion of a neighborhood changes at night. Drive around after dark and look for the presence of undesirables lounging about in public places. Try to get a sense and feeling of the neighborhood.
Finally, you will want to find out if the community has a community association. If so, visit the association and ask about membership dues, restrictions and covenants. If the representative is forthcoming, ask if there are any problems in the area that you as a prospective new resident should consider.
You are about to make one of the biggest financial decisions of your life. Don’t be timid. Ask questions, make notes and weigh all the pro’s and con’s before deciding.
http://www.real-estate-marketing-talk.com/location-location-location.html
This unfortunate situation exemplifies the need to focus on location when contemplating the purchase of a home. A ten million dollar mansion isn’t worth a dime if it’s sitting next to a toxic waste dump. This example is far-fetched and outrageous, but it makes the point that finding the right location is certainly as important as finding the right house.
How do you investigate a potential neighborhood? There are a number of factors and issues to be considered in your evaluation. Some of them can be covered merely through visual observation; others will have to be explored with the assistance of community and government organizations.
One of your first and most significant concerns should be the crime rate. If every other house on the block is being burglarized every other month, you might want to look elsewhere. Talk to a spokesperson of the local law enforcement agency. Ask for a listing of their monthly crime stats and a copy of their year ending report.
When talking to the spokesperson about crime rates, ask about their response times in your area. If it’s over five minutes, ask why. If the community has a neighborhood watch group or a neighborhood citizens’ security patrol, attend one of their meetings or speak with their group representatives.
How far is your new neighborhood from your place of employment? How far is too far? Bottom line: check the driving time and traffic patterns, both coming and going, by driving the route you’ll take. Are there any activities or facilities in the area that will make the trip more unpleasant or time consuming on specific days of the week? As an example, is there a bridge that backs up on Friday afternoons as people rush to their weekend retreats?
If you have children, or anticipate having them, you’ll want to check out the schools in the area. Visit the schools and talk to the Principals or school counselors. Ask about class sizes, bus service, curriculum and even school menus. If your child is a gifted student, you’ll want to inquire about accelerated courses. If your child needs special Ed opportunities, ask about them. Knowing about your child’s school is one of your primary responsibilities as a parent.
This may sound a bit picky, but you should visit and evaluate your local markets, shops and restaurants. Do they sell quality products? Is there a convenient place to purchase daily necessities such as milk, luncheon items, coffee, etc.? Do the local restaurants suit your taste? The answers to these questions may not factor substantially into your moving decision, but they are part of the equation and should at least be recognized and considered.
Availability of community services should not be overlooked. Is there a good hospital in the immediate vicinity? Do they have an emergency room? How about parks and a library?
You should visit the neighborhood at various times of the day and night to check for sounds, smells, heavy traffic and the presence of any activities that you might find offensive as a resident. Sometimes the complexion of a neighborhood changes at night. Drive around after dark and look for the presence of undesirables lounging about in public places. Try to get a sense and feeling of the neighborhood.
Finally, you will want to find out if the community has a community association. If so, visit the association and ask about membership dues, restrictions and covenants. If the representative is forthcoming, ask if there are any problems in the area that you as a prospective new resident should consider.
You are about to make one of the biggest financial decisions of your life. Don’t be timid. Ask questions, make notes and weigh all the pro’s and con’s before deciding.
http://www.real-estate-marketing-talk.com/location-location-location.html
House Hunting
House Hunting. It has been said that moving and divorce are the two of the most stressful events a person or family can experience. Divorce is a subject for another time, but for now let's consider the event of moving and look at some ways to make your house hunting trip less stressful and more effective.
Location is the first factor to consider when planning a move. If you have children, or are planning a family, you will want to know about the schools in the area. How about shopping centers, medical facilities, recreational opportunities and of course how far will you be from your place of employment.
If you require public transportation, is there any within walking distance of your prospective new home. What about the crime rate? A check with the local law enforcement agency can either put your mind at ease or give you reason to look elsewhere.
And finally, try to assess the quality and character of the people who live in the area. This is obviously difficult to do without interviewing them, but you can get a rough impression from the condition of their homes and properties and from the activities you might observe.
As an example, if your prospective neighbor has discarded appliances all over the front yard and their son is roaring around the neighborhood on a mini-bike with no muffler, you might want to take all that into consideration. And remember, a poor location will definitely be a negative factor when and if you attempt to resell the home at some later date.
Once you've zeroed in on your preferred location, you can start to think seriously about searching for your dream home. Rather than spin your wheels by looking at houses randomly, you should determine what you really want in a house and let those things help you focus your search.
Make a list and start with the obvious: how many bedrooms do you need; do you want a garage; must you have a single story home due to your inability to climb stairs; is a fenced yard an absolute necessity?
After listing the absolute "must haves", think about the things you like and dislike about your current residence and factor those things into your wish list. Making a list will not only save you time, it will be a big help to your realtor in planning your viewings.
Most people don't really know how much house they can afford. Affordability is based upon income, credit status, interest rates, down payment, closing costs and the type of loan selected.
By getting pre-qualified by a lending institution, you will know what you can afford to spend. Often, that figure is quite a surprise to prospective home buyers. In any case, pre-qualification will save you time and trouble by establishing your price range.
Typically, house hunting involves seeing as many homes as possible in a short period of time. Both the house hunter and the assisting realtor have busy schedules and want to tour fast and furious. However, after the first two or three houses, they all start to run together. You need to make notes after each viewing.
One effective means of qualifying each home is to make multiple copies of your list of priorities and use it as a checklist to grade each home visited. This little tip will eliminate confusion when trying to make mental comparisons at the end of the day.
Regard your hunt as an excursion. If you were going to the zoo for the day and contemplated a lot of walking, you would dress comfortably and wear comfortable shoes.
House hunting is no different; you'll be walking, climbing stairs, quite possibly going into basements and attics and constantly getting in and out of cars. Dressing to impress homeowners or your realtor should not be your top priority. Dress clean and neat of course, but comfortable is the name of the hunting game.
And last but not least, use your own realtor. When you call the realtor on a "house for sale" sign you're speaking to the seller's agent. Keep in mind that he or she represents the seller and will be looking after the seller's interests. You need your own realtor; someone who is working for you and is looking out for your interests.
House hunting can actually be an enjoyable experience if you take your
http://www.real-estate-marketing-talk.com/house-hunting.html
Location is the first factor to consider when planning a move. If you have children, or are planning a family, you will want to know about the schools in the area. How about shopping centers, medical facilities, recreational opportunities and of course how far will you be from your place of employment.
If you require public transportation, is there any within walking distance of your prospective new home. What about the crime rate? A check with the local law enforcement agency can either put your mind at ease or give you reason to look elsewhere.
And finally, try to assess the quality and character of the people who live in the area. This is obviously difficult to do without interviewing them, but you can get a rough impression from the condition of their homes and properties and from the activities you might observe.
As an example, if your prospective neighbor has discarded appliances all over the front yard and their son is roaring around the neighborhood on a mini-bike with no muffler, you might want to take all that into consideration. And remember, a poor location will definitely be a negative factor when and if you attempt to resell the home at some later date.
Once you've zeroed in on your preferred location, you can start to think seriously about searching for your dream home. Rather than spin your wheels by looking at houses randomly, you should determine what you really want in a house and let those things help you focus your search.
Make a list and start with the obvious: how many bedrooms do you need; do you want a garage; must you have a single story home due to your inability to climb stairs; is a fenced yard an absolute necessity?
After listing the absolute "must haves", think about the things you like and dislike about your current residence and factor those things into your wish list. Making a list will not only save you time, it will be a big help to your realtor in planning your viewings.
Most people don't really know how much house they can afford. Affordability is based upon income, credit status, interest rates, down payment, closing costs and the type of loan selected.
By getting pre-qualified by a lending institution, you will know what you can afford to spend. Often, that figure is quite a surprise to prospective home buyers. In any case, pre-qualification will save you time and trouble by establishing your price range.
Typically, house hunting involves seeing as many homes as possible in a short period of time. Both the house hunter and the assisting realtor have busy schedules and want to tour fast and furious. However, after the first two or three houses, they all start to run together. You need to make notes after each viewing.
One effective means of qualifying each home is to make multiple copies of your list of priorities and use it as a checklist to grade each home visited. This little tip will eliminate confusion when trying to make mental comparisons at the end of the day.
Regard your hunt as an excursion. If you were going to the zoo for the day and contemplated a lot of walking, you would dress comfortably and wear comfortable shoes.
House hunting is no different; you'll be walking, climbing stairs, quite possibly going into basements and attics and constantly getting in and out of cars. Dressing to impress homeowners or your realtor should not be your top priority. Dress clean and neat of course, but comfortable is the name of the hunting game.
And last but not least, use your own realtor. When you call the realtor on a "house for sale" sign you're speaking to the seller's agent. Keep in mind that he or she represents the seller and will be looking after the seller's interests. You need your own realtor; someone who is working for you and is looking out for your interests.
House hunting can actually be an enjoyable experience if you take your
http://www.real-estate-marketing-talk.com/house-hunting.html
Real Estate Appraisals Protect Lenders; Not Buyers and Sellers
Real Estate Appraisals are a necessary step in the home buying process. There is a lot of confusion out there regarding the truth about appraisals. Realtors, Buyers, Sellers and Investors are often confused about their purpose think of them as home inspections; but they aren't!
Sellers often think that a low appraisal for their home is the kiss of death, but that's not necessarily true. The more you learn about real estate appraisals beforehand, the better prepared you'll be to head off problems before they occur.
For example, I always made it a point to be on the premises whenever appraisals for my real estate transactions occured. I discovered that I could influence the appraisal price in subtle, but hugely profitable ways.
Here's what I mean! If I was selling a "fixer upper" and hadn't made any improvements yet I'd walk through with the appraisers and point out the things I was going to do to improve the properties to get maximum value before closing. They would in turn come back with a value that was "subject to the improvements being made", which was sometimes tens of thousands of dollars more than the "as is" value was!
Since very few people have the ability to pay for a house with cash, the appraisal is going to be necessary. A loan is never going to go through without an appraisal. The purpose of the appraisal is to establish the home's market value. The sales price will be based on the market value.
The main goal of the appraiser is to protect the lender. Lenders don't want to be stuck with property that is not worth its price tag, so the appraisal must be completed before the lender will approve the loan. The information contained in Real Estate Appraisals is invaluable to the lender. The lender will study the details of the appraisal before reaching a final decision.
The lender will often dictate the choice of appraiser. It might have one in house or through a contract with an independent appraiser. If you go with your own choice for appraiser, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual appraisal reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The appraiser will then list any issues that he or she feels might diminish the property's value.
The next component is a list of any serious problems like bad roofs or weak foundations. The appraiser then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property.
It is important to note that the real estate appraisal is not the same thing as an inspection. The appraiser might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender. A home inspection is a different process altogether.
Real estate appraisals only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
Everyone fears the possibility of a low appraisal. It happens all of the time, usually during closing. There are some things you can do to remedy this common but stressful situation. The buyer can make a larger down payment. If this is not feasible, the seller and buyer can negotiate the price some more. Additionally, the appraisal can always be disputed.
What all goes into an appraisal? Appraisers are looking at the condition and size of the house, its proximity to good schools, and the size of the lot. Appraisers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don't work.
Real Estate Appraisals are not being conducted by just anyone off the street. Real estate appraisers are trained professionals licensed by the state in which they work. They are qualified for the work they do by completing state certification requirements like exams and continuing education courses. This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
Get the appraisal thing right and you can close profitable, hassle free transactions. But if you get it wrong a good deal can go bad...fast!
http://www.real-estate-marketing-talk.com/real-estate-appraisals.html
Sellers often think that a low appraisal for their home is the kiss of death, but that's not necessarily true. The more you learn about real estate appraisals beforehand, the better prepared you'll be to head off problems before they occur.
For example, I always made it a point to be on the premises whenever appraisals for my real estate transactions occured. I discovered that I could influence the appraisal price in subtle, but hugely profitable ways.
Here's what I mean! If I was selling a "fixer upper" and hadn't made any improvements yet I'd walk through with the appraisers and point out the things I was going to do to improve the properties to get maximum value before closing. They would in turn come back with a value that was "subject to the improvements being made", which was sometimes tens of thousands of dollars more than the "as is" value was!
Since very few people have the ability to pay for a house with cash, the appraisal is going to be necessary. A loan is never going to go through without an appraisal. The purpose of the appraisal is to establish the home's market value. The sales price will be based on the market value.
The main goal of the appraiser is to protect the lender. Lenders don't want to be stuck with property that is not worth its price tag, so the appraisal must be completed before the lender will approve the loan. The information contained in Real Estate Appraisals is invaluable to the lender. The lender will study the details of the appraisal before reaching a final decision.
The lender will often dictate the choice of appraiser. It might have one in house or through a contract with an independent appraiser. If you go with your own choice for appraiser, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual appraisal reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The appraiser will then list any issues that he or she feels might diminish the property's value.
The next component is a list of any serious problems like bad roofs or weak foundations. The appraiser then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property.
It is important to note that the real estate appraisal is not the same thing as an inspection. The appraiser might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender. A home inspection is a different process altogether.
Real estate appraisals only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
Everyone fears the possibility of a low appraisal. It happens all of the time, usually during closing. There are some things you can do to remedy this common but stressful situation. The buyer can make a larger down payment. If this is not feasible, the seller and buyer can negotiate the price some more. Additionally, the appraisal can always be disputed.
What all goes into an appraisal? Appraisers are looking at the condition and size of the house, its proximity to good schools, and the size of the lot. Appraisers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don't work.
Real Estate Appraisals are not being conducted by just anyone off the street. Real estate appraisers are trained professionals licensed by the state in which they work. They are qualified for the work they do by completing state certification requirements like exams and continuing education courses. This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
Get the appraisal thing right and you can close profitable, hassle free transactions. But if you get it wrong a good deal can go bad...fast!
http://www.real-estate-marketing-talk.com/real-estate-appraisals.html
Buying Your Home Online
Buying Your Home Online
Online Auctions; Buying Your Home Online
Ecommerce is rapidly expanding to the real estate market. Sellers are looking to auction off down payments, lease agreements, or selling the home outright. Individual homeowners and real estate agents are turning to the Internet as an avenue for sales.
Buying your home online can be a risky venture. On the flipside, there are some great deals out there. If you decide to take this path, you should be aware of the challenges associated with buying a home site unseen. The more educated you are, the better.
First of all, the home could have major structural issues not evident in an online picture. Pictures don't always tell the whole story. It has also become much easier to doctor photographs.
You have to consider the possibility that some sellers might not be as truthful as they should be. After all, they are trying to sell the property, so the sales description is going to emphasize the positives and downplay the negatives.
Getting a fixer upper is one thing. Living in a house that is structurally unsound is a completely different matter.
Secondly, when buying your home online you must make sure that you know your property rights. If you are buying land, you must make sure that you can have the utilities you want.
There might be restrictions that are not specified on the auction site. There would be nothing worse than buying the property for your dream home and then discovering that you cannot have utilities.
Another potential hazard to buying your home online is not knowing anything about the area. It would be well worth your time to do some investigating. Is the property in an area that is prone to flooding? Is the property accessible by car? These are things that the seller might not mention in their ad.
Also, it is easy to become a victim of online fraud. There is really no way to regulate the online auctions. The auction companies have their own guidelines in place to circumvent illegal activity, but with the high volumes of online business activity every day, it is hard to police every transaction.
The government may eventually step in and try to pass laws that will protect online consumers. Time will only tell, so until then you have to keep your guard up.
On the positive side of buying a home online, it is important to note that online auctions are not legally binding. The companies are not actually licensed to sell real estate; therefore, they are not true auction houses.
The service that they offer is advertising to potential buyers. It gives buyers and sellers the opportunity to communicate with one another online and work out a legally binding contract after bidding ends.
When placing an eBay bid online, you should be aware that there are two types of bids: "Binding" and "non-binding". The term binding is not entirely accurate because it does not result in a legally binding contract.
A Binding real estate auction means that you have placed a bid with intent to buy. If you don't live up to your end of the transaction, you will receive negative feedback. It won't result in legal problems, but it can hurt your business potential on EBay.
Everyone looks at the feedback and most people won't do business with someone if they have a lot of negative feedback. A non-binding bid simply means that you cannot receive negative feedback if you fail to complete the transaction.
Always take the time to review the auction companies' policies and procedures. There should be a link to them on the main page. If you have trouble locating them, contact the company directly.
You should be able to email them any questions that you may have and they should respond to your inquiries quickly. Try to talk to people that have a lot of experience with doing business online.
It seems like just about everyone has some experience with online auctions. They may have some horror stories, but don't let that discourage you. You can learn a lot from the mistakes of others.
If you prefer reading to chatting, there are also several books about the subject. Visit the technology section of your favorite bookstore and you are bound to see a possible resource.
Take all of the advice and use common sense when entering into an online real estate deal. You will emerge as the winner and have a fabulous home to show for it.
http://www.real-estate-marketing-talk.com/buying-your-home-online.html
Online Auctions; Buying Your Home Online
Ecommerce is rapidly expanding to the real estate market. Sellers are looking to auction off down payments, lease agreements, or selling the home outright. Individual homeowners and real estate agents are turning to the Internet as an avenue for sales.
Buying your home online can be a risky venture. On the flipside, there are some great deals out there. If you decide to take this path, you should be aware of the challenges associated with buying a home site unseen. The more educated you are, the better.
First of all, the home could have major structural issues not evident in an online picture. Pictures don't always tell the whole story. It has also become much easier to doctor photographs.
You have to consider the possibility that some sellers might not be as truthful as they should be. After all, they are trying to sell the property, so the sales description is going to emphasize the positives and downplay the negatives.
Getting a fixer upper is one thing. Living in a house that is structurally unsound is a completely different matter.
Secondly, when buying your home online you must make sure that you know your property rights. If you are buying land, you must make sure that you can have the utilities you want.
There might be restrictions that are not specified on the auction site. There would be nothing worse than buying the property for your dream home and then discovering that you cannot have utilities.
Another potential hazard to buying your home online is not knowing anything about the area. It would be well worth your time to do some investigating. Is the property in an area that is prone to flooding? Is the property accessible by car? These are things that the seller might not mention in their ad.
Also, it is easy to become a victim of online fraud. There is really no way to regulate the online auctions. The auction companies have their own guidelines in place to circumvent illegal activity, but with the high volumes of online business activity every day, it is hard to police every transaction.
The government may eventually step in and try to pass laws that will protect online consumers. Time will only tell, so until then you have to keep your guard up.
On the positive side of buying a home online, it is important to note that online auctions are not legally binding. The companies are not actually licensed to sell real estate; therefore, they are not true auction houses.
The service that they offer is advertising to potential buyers. It gives buyers and sellers the opportunity to communicate with one another online and work out a legally binding contract after bidding ends.
When placing an eBay bid online, you should be aware that there are two types of bids: "Binding" and "non-binding". The term binding is not entirely accurate because it does not result in a legally binding contract.
A Binding real estate auction means that you have placed a bid with intent to buy. If you don't live up to your end of the transaction, you will receive negative feedback. It won't result in legal problems, but it can hurt your business potential on EBay.
Everyone looks at the feedback and most people won't do business with someone if they have a lot of negative feedback. A non-binding bid simply means that you cannot receive negative feedback if you fail to complete the transaction.
Always take the time to review the auction companies' policies and procedures. There should be a link to them on the main page. If you have trouble locating them, contact the company directly.
You should be able to email them any questions that you may have and they should respond to your inquiries quickly. Try to talk to people that have a lot of experience with doing business online.
It seems like just about everyone has some experience with online auctions. They may have some horror stories, but don't let that discourage you. You can learn a lot from the mistakes of others.
If you prefer reading to chatting, there are also several books about the subject. Visit the technology section of your favorite bookstore and you are bound to see a possible resource.
Take all of the advice and use common sense when entering into an online real estate deal. You will emerge as the winner and have a fabulous home to show for it.
http://www.real-estate-marketing-talk.com/buying-your-home-online.html
Buying a HUD Home from the U.S. Government
Buying a HUD Home listed through the Department of Housing and Urban Development (HUD) is an exciting proposition. Although HUD homes are typically purchased by low to moderate income people anybody can buy them.
However, HUD has special purchase programs for educators and law enforcement officers. Teachers, police officers and others are offered special housing incentives, and receive additional incentives to enter purchase homes in specific neighborhoods and communities.
Yep, if you’re a savvy buyer you can get an outstanding deal on a HUD foreclosure.
Don't have perfect credit? Don't worry about it, as HUD homes are not limited to buyers with perfect credit. In fact, you may be able to purchase a home with government assistance even if you have fallen on hard times or have less than stellar credit.
Let's take a quick peek at HUD homes available in your area, which you can do by clicking on the following link. Then, search by state, county, city, zip code, etc. Here's the link;
Available HUD Homes
Now, when you find a home you're interested in pursuing find a HUD approved real estate office to show you the property. The link above will also point you to lists of approved offices.
When you meet with an agent the process for finding a HUD home is the same as for any home. Meet with an agent, and then tell them what you want in a home. The agent will then get to work looking for one that meets your needs. It's that simple!
A HUD property becomes available when a homeowner with a HUD insured mortgage cannot make payments. At that point it is foreclosed on.
Next, HUD pays the lender for what is owed on the property and takes ownership of the home. The homes are then auctioned off, and are sometimes auctioned off for less than the appraised market value. This is why such great deals can be found on HUD homes.
The auction is considered the “offer period”. Everyone places their bids and the highest bidder gets the house. You can submit a bid at any time if the house isn’t sold in the offer period. If HUD approves your bid, your agent will be contacted within 48 hours.
In the event that your bid wins, your agent will help you with the paperwork. Your settlement date will usually fall within 30-60 days of your winning bid. It is important to remember that you cannot finance a home through HUD.
So, you need to have your own financing arrangements. Have everything ready to go at the time you place your bid. If your bid wins, but you do not close, you may lose your deposit.
If the home is in need of repairs, the responsibility falls on you - the buyer. HUD homes are sold “as is” and do not come with a warranty, nor will HUD make any repairs. However, the price of the home is always adjusted downward to reflect the cost of repairs.
Never consider buying a HUD home unless you are willing to absorb the cost of repairs. However, in many instances the repairs might be minor, so don’t turn down a good home because it needs a little work.
Before looking for homes, you should determine what you are willing to spend in repairs and stick to it. Consequently, it is important to have the home inspected prior to making an offer so that you can figure the cost of repairs into your bid.
If you are purchasing a HUD home as a real estate investment you cannot bid during the initial offering period, because families in need of housing take priority. Therefore, the initial offering is only available to buyers with the intent to live in the home. If no one bids on the home, investors can then bid on it.
Finally, if foreclosure HUD home listings cannot be sold within 6 months, HUD will then sell them to charities or agencies for the purpose of providing housing for needy families. Ultimately, the homes are likely going to end up with those individuals needing them the most.
http://www.real-estate-marketing-talk.com/hud-home.html
However, HUD has special purchase programs for educators and law enforcement officers. Teachers, police officers and others are offered special housing incentives, and receive additional incentives to enter purchase homes in specific neighborhoods and communities.
Yep, if you’re a savvy buyer you can get an outstanding deal on a HUD foreclosure.
Don't have perfect credit? Don't worry about it, as HUD homes are not limited to buyers with perfect credit. In fact, you may be able to purchase a home with government assistance even if you have fallen on hard times or have less than stellar credit.
Let's take a quick peek at HUD homes available in your area, which you can do by clicking on the following link. Then, search by state, county, city, zip code, etc. Here's the link;
Available HUD Homes
Now, when you find a home you're interested in pursuing find a HUD approved real estate office to show you the property. The link above will also point you to lists of approved offices.
When you meet with an agent the process for finding a HUD home is the same as for any home. Meet with an agent, and then tell them what you want in a home. The agent will then get to work looking for one that meets your needs. It's that simple!
A HUD property becomes available when a homeowner with a HUD insured mortgage cannot make payments. At that point it is foreclosed on.
Next, HUD pays the lender for what is owed on the property and takes ownership of the home. The homes are then auctioned off, and are sometimes auctioned off for less than the appraised market value. This is why such great deals can be found on HUD homes.
The auction is considered the “offer period”. Everyone places their bids and the highest bidder gets the house. You can submit a bid at any time if the house isn’t sold in the offer period. If HUD approves your bid, your agent will be contacted within 48 hours.
In the event that your bid wins, your agent will help you with the paperwork. Your settlement date will usually fall within 30-60 days of your winning bid. It is important to remember that you cannot finance a home through HUD.
So, you need to have your own financing arrangements. Have everything ready to go at the time you place your bid. If your bid wins, but you do not close, you may lose your deposit.
If the home is in need of repairs, the responsibility falls on you - the buyer. HUD homes are sold “as is” and do not come with a warranty, nor will HUD make any repairs. However, the price of the home is always adjusted downward to reflect the cost of repairs.
Never consider buying a HUD home unless you are willing to absorb the cost of repairs. However, in many instances the repairs might be minor, so don’t turn down a good home because it needs a little work.
Before looking for homes, you should determine what you are willing to spend in repairs and stick to it. Consequently, it is important to have the home inspected prior to making an offer so that you can figure the cost of repairs into your bid.
If you are purchasing a HUD home as a real estate investment you cannot bid during the initial offering period, because families in need of housing take priority. Therefore, the initial offering is only available to buyers with the intent to live in the home. If no one bids on the home, investors can then bid on it.
Finally, if foreclosure HUD home listings cannot be sold within 6 months, HUD will then sell them to charities or agencies for the purpose of providing housing for needy families. Ultimately, the homes are likely going to end up with those individuals needing them the most.
http://www.real-estate-marketing-talk.com/hud-home.html
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