Last spring I participated in an "Ask the Experts" panel in Sarasota, Fla. Afterwards, a woman in the audience asked me to review her plans for a new beach house overlooking the Gulf of Mexico.
Designed by her builder/architect, the house was $400,000 over budget, and she wanted some suggestions for where to cut back.
As we started talking, I quickly realized that her apprehension was not just about the budget. As she described her lifestyle and her family, it was clear that much of the house in its current iteration did not make sense for her household.
Though our discussion was directed towards a specific design in Florida, we touched on many issues that confront a family planning a new house.
For example, how do you address the timeline—your family's needs now, 10 years from now when your kids are older, and 20 years from now when you're older? How much flexibility and multi-purpose "swing space" do you need?
What about resale? The day will come, but if it's 20 years or more into the future, how much or how little should it affect the look or the floor plan of the house you're building now? How accurately can anyone, even a marketing genius, predict what home buyers will want in the year 2023? When you have a great location and a compelling view, as this family did, is resale even an issue?
Can the design incorporate solutions for differing personal styles that cause conflict? Say you are messy and your partner is not?
As your architect or builder draws up the design for your new house, how much should you challenge his or her work?
Going back to the Florida homeowner's apprehensions, her first concern was the bedroom arrangement. The house had three bedrooms on a second floor, and a sprawling master suite on the first floor below. But her three kids were still young and waking up at night, and she wanted to sleep nearby.
Her hesitation to do just that was resale. In Florida where retirees form a significant portion of the buying public, first-floor master suites are the rule, and her builder/architect was pushing for one. But nothing is inviolate, even in real estate. The unthinkable is always thinkable. And, view and location will usually trump many otherwise perceived shortcomings. When your house sits on a beach overlooking the Gulf of Mexico, resale buyers will forgive a lot.
The obvious solution was to put resale concerns aside and move a scaled down master suite upstairs with the kids. This was not as radical a change as one might suspect. The second floor already had a large "bonus room" because the owners decided they didn't want a two-story space in the family room below.
Scaling back the sprawling first floor master suite to mere bedroom status would have some advantages. Using it as a home office with a sofa bed would accommodate guests but discourage long visits (a hazard of living on the beach in Florida I understand). And the owners, who were looking for ways to cut their cost, could excise the separate home office.
In 10 years when their kids will be teenagers, the parents could move downstairs, or maybe not. Many teens are uncommunicative and most conversations with parents are fleeting, occurring on the fly. If the bedrooms are in close proximity, the chances of a parent having a fleeting conversation increase dramatically.
In 20 or 25 years the parents might be ready to move downstairs and use the first floor bedroom themselves. And, down the line two master bedrooms could be a selling point if intergenerational households continue to be a growing trend.
The homeowner also had some concerns about the main living area of the house. Her husband wanted a place to entertain where toys and pets would not be under foot, so her builder/architect had included living and dining rooms on the non-beach side of the house. Nothing unusual, but it did not seem appropriate for this house because both guests and family members would gravitate to the same spot—the back of the house with its panoramic views of the water and beach.
In our brief conversation, we didn't reach any conclusions. But as I thought about it on my way home, it seemed that a more sensible solution, and one that was more in keeping with the homeowner's desire for less formality, would be to use the same space for both family activities and entertaining and build in adequate storage—plenty of cabinets and one or two good sized closets—so that toys could be scooped up and put away before the guests arrived. The storage would still be useful when the kids are older because even as teenagers they will be bringing stuff into the family room area.
Another advantage of this scheme is that the parents could jettison the formal living and dining rooms in their efforts to cut costs.
Moving beyond the overall design scheme to more specific rooms, the generously sized kitchen of this beach house as shown in the plans would be impossible to work in. The stove and sink were at opposite ends of the room, about 15 feet apart. To prepare a meal, you'd need roller blades. In a builder's model, such a shortcoming in the kitchen will be immediately apparent if you pantomime preparing a meal. When there's only a floor plan to study, you have to imagine how you would prepare a meal, but it's an important mental exercise. No matter how great the cabinets and counters look, they'll never offset a poor layout, and you don't want to make this disheartening discovery after you move in.
And then there is the personal style issue. The homeowner said that neatness was a source of tension, and she was the messy one. A few refinements here and there would definitely help keep her new house more orderly. We didn't discuss specifics, but these suggestions could be incorporated into any house.
An entry area designed to siphon off all the stuff that comes into the house before it gets strewn around makes a big difference. Hooks, a large cubby for each household member, and large closets keep jackets, coats, backpacks, umbrellas, boots, sports equipment, briefcases and laptops where they can be found in the morning rush. If the space is big enough, an alcove with a place to sort mail and a small desk and filing cabinet for household records reduces clutter by confining the mail and bill paying activities to one spot.
A second dishwasher can often reduce upsets over the condition of the kitchen. In many households, dishes pile up in the sink and on the counters because the dishwasher is still full of clean dishes from the day before. With two dishwashers, dirty ones can be loaded as they are used, and the clean ones removed during meal preparation. When entertaining, a second dishwasher is also handy.
A huge bedroom and sitting area for the master suite sounds good and looks luxurious, but a smaller bedroom area without the sitting alcove and a separate dressing area is easier to keep neat. There's no a trail of clothes worn the day before and less area for clutter to accumulate.
My last piece of advice for the Florida homeowner and anyone else planning a new house: the designer is supposed to be the expert in houses, but you're going to live there. If the design runs counter to your perceptions of what you need, don't be too intimidated to speak up.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=149
Monday, June 18, 2007
How To Save Money On Your New Home
Do you clip food coupons from your Sunday newspaper? Or do you take advantage of sales at your favorite department store? Then you will certainly appreciate BIG savings on the purchase of a new home!
Imagine clipping a coupon for a free swimming pool package; or $500 towards options; or a free washer or dryer. These and many more buying incentives are available online – and now you can easily find them on one web site.
When you visit HomePromotions.com you’ll find tons of great opportunities to save on a new home in your area. There are even special savings offers on homes that have just been built and are ready for immediate occupancy.
More and more builders are placing their Internet buying incentives on homepromotions.com. Why? Homes sold as a result of Internet advertising (which costs much, much less than newspaper advertising) represent much more profitable sales for the builder. So it makes sense for builders to offer incentives to Internet home buyers. It’s a good deal for them and a great deal for you!
Just visit HomePromotions.com and print out any of the coupons. Make sure to present the coupon on your first visit to the community. The builders will not accept them after the first visit since the coupons are intended to reward you for visiting the community as a result of finding them on the Internet.
Happy home hunting and enjoy your savings!
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=218
How to sell home without real estate agent
Have you noticed when you are on an airplane, the stranger sitting next to you will often reveal secrets he probably wouldn't tell his closest friends?
For example, a few weeks ago I was on four-hour flight from Chicago to San Francisco. I would name the airline, but the minimal service doesn't deserve praise. After the usual "what business are you in" pleasantries with my seatmate, when the young man sitting next to me learned I write about real estate, he had to tell me how he and his wife sold their house "for sale by owner" without a real estate agent.
He said his wife read several "how to sell your home without a broker" books so they felt reasonably confident. They even paid a local realty broker $985 to list their home in the local MLS (multiple listing service) so they would get exposure to buyer's agents.
My new friend proudly told me as part of the MLS service, their listing was automatically posted on the Internet at www.realtor.com. Because more than 50 percent of today's home buyers begin their quest on the Internet, he reported the Internet produced several interested buyers who phoned.
In addition, my seatmate and his wife paid to list their home at www.forsalebyowner.com, a Web site for do-it-yourself home sellers. Apparently, that didn't produce any results.
Every weekend for five weeks, my new friend continued, he ran expensive newspaper classified ads in the city newspaper and several local newspapers to advertise their Saturday and Sunday open houses.
One purchase offer eventually materialized. It was made by a buyer represented by a "buyer's agent" who insisted upon receiving a 3 percent sales commission (half of a typical home sales commission).
Then he told me after the sales contract was signed with a 3 percent commission, the buyer began a process of further price negotiation downward as the buyer demanded repair credits for alleged defects discovered by the buyer's professional home inspector.
Finally, I asked, "Would you sell without a listing agent again and how much sales commission did you save?" "Never again" was his immediate response. "I figure we saved less than $10,000 by selling without an agent," he said. "But it was a nightmare waiting to learn if the sale would close or if the buyer would keep negotiating more repair credits," my new friend added.
Then my seatmate revealed the key reason the home sale finally closed. "If it wasn't for the sharp buyer's agent who badly wanted his 3 percent sales commission, we would still be trying to sell our home," he revealed.
IF YOU WANT TO SELL YOUR HOME, DON'T MISS THE FALL SALES MARKET. Whether you want to sell your house or condo alone, without a listing agent, or you realize selling your major investment is not a do-it-yourself project and you need a professional agent, the fall season is a great time to sell a home. This is the second best time of year to sell a home (spring is the best time when the largest number of potential buyers are in the market).
But mortgage interest rates are still very affordable for home buyers. They realize interest rates might go up in the next few months and today is still a great time to buy a home. According to realty sales statistics, the home sales market is still almost as strong as it was a few months ago.
HOW TO DETERMINE IF YOU NEED A PROFESSIONAL HOME LISTING AGENT. I wish I had met my airline friend before he and his wife put their house on the market for sale. Although he thinks he saved about $10,000 sales commission, I'll bet he sold his home below market value because he didn't have a listing agent pricing the home correctly and looking out for his best interests.
Whether you are thinking of selling your home alone, or you realize you need professional help to market your home for top dollar, here are the questions to ask yourself:
1—HOW CAN I CORRECTLY SET THE ASKING PRICE FOR MY HOME? The easiest way to determine your home's market value is to invite at least three successful realty agents who sell homes in your vicinity to give you their listing presentations.
Even if you are thinking of selling "for sale by owner," the agents you interview won't mind. The reason is they know most "for sale by owner" sellers fail and, usually after 30 to 60 days, list with a professional agent, which is likely one of the agents interviewed.
Presuming your home is in tip-top condition to show to prospective listing agents, after each agent inspects your home, he or she will prepare a CMA (comparative market analysis). This form shows recent nearby sales (not asking) prices of homes like yours, the asking prices of current competitive listings, and even the asking prices of comparable neighborhood homes, which didn't sell.
Each agent you interview will then give you their opinion of the correct asking price and the probable actual sales price for your home. If you decide to list your home with one of the interviewed agents, before doing so be sure to phone their seller references to ask "Were you in any way unhappy with your listing agent and would you list a home with the same agent again?"
2—HOW CAN I EFFECTIVELY MARKET MY HOME ALONE? The next question to ask is how can you market your home without a professional agent. Of course, you will include placing newspaper classified ads, posting a "for sale by owner" lawn sign, and holding weekend open houses.
You might also want to pay to post your listing on one of the Internet "do it yourself" Web sites. Perhaps, like my airline seatmate, you might want to pay a local real estate broker to post your listing on the local MLS, which also gains access to the ultra-important www.realtor.com Web site where most home buyers today start their quest. Home sellers should bear in mind the MLS is the most effective sales tool.
3—HOW CAN I OBTAIN A LEGALLY-BINDING SALES CONTRACT AND COMPLY WITH HOME SALE THE DEFECT DISCLOSURE LAWS? If you are successful finding an interested buyer for your home, the next step is to obtain a legally-binding sales contract. If you are lucky, you know a real estate attorney who is on-call seven days a week and he or she will prepare a binding sales contract for you and the seller to sign before the seller changes their mind.
But that is highly unlikely. You might buy a printed sales form at a local stationery store. However, it probably doesn't contain all the important clauses in the forms used by professional agents.
In addition, are you up-to-date on the state-required disclosure laws, plus the other required disclosures such as for lead-based paint? Failure to provide proper defect disclosures can result in after-sale lawsuits.
4—CAN I HELP THE BUYER OBTAIN A MORTGAGE? Unless your buyer is Warren Buffett or Bill Gates, the buyer will probably need a mortgage. Can you help the buyer obtain a mortgage?
Will you be able to explain FHA, VA, PMI, and conventional adjustable or fixed-rate mortgages? Unless your buyer is already pre-approved in writing by an actual lender (not just pre-qualified by a mortgage broker), obtaining financing is a major home sale hurdle to overcome.
5—WHAT HOME SALE CONTRACT CONTINGENCY CLAUSES ARE NORMAL? Smart home buyers will insist on reasonable contingency clauses in the home sales contract, such as for a professional home inspection and mortgage financing.
If the buyer needs to sell his current home, he might insist on a contingency clause for the sale of his old residence. Are you willing to take your home off the market while the buyer tries to sell his home?
6—HOW WILL THE HOME SALE CLOSING DETAILS BE HANDLED? The final and most important home sale step is to get the sale successfully closed. This step is usually handled, depending on local custom, by an attorney, escrow, or title firm. The buyer's earnest money good faith deposit should be held by the same entity for the mutual protection of buyer and seller.
Who pays for the closing settlement costs? Which party customarily pays for the lender's and buyer's title insurance policies? Who pays the transfer taxes and recording fees? These are typical home sales closing expenses, which sellers should anticipate and provide for in the sales contract.
7—WILL THE BUYER EXPECT A PRICE REDUCTION IF NO REALTY SALES COMMISSION IS INVOLVED? Savvy home buyers understand when buying direct from a "for sale by owner" that the seller is saving the sales commission, typically 6 percent of the sales price. Buyers aren't dumb. They expect to share in that commission saving in the form of either a price reduction or seller credits at the closing.
Will you agree to discount the sales price if you don't have to pay a sales commission? This is an issue to anticipate in a do-it-yourself home sale.
CONCLUSION. Selling a home without a professional real estate agent is not easy. If it were, more than 80 percent of home sellers wouldn't hire professional agents to guide them through the maze. That's why, after 30 to 60 days of failure, most "for sale by owner" home sellers list their homes with a professional agents, usually one of the agents they interviewed when contemplating the sale of their most valuable asset.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=218
For example, a few weeks ago I was on four-hour flight from Chicago to San Francisco. I would name the airline, but the minimal service doesn't deserve praise. After the usual "what business are you in" pleasantries with my seatmate, when the young man sitting next to me learned I write about real estate, he had to tell me how he and his wife sold their house "for sale by owner" without a real estate agent.
He said his wife read several "how to sell your home without a broker" books so they felt reasonably confident. They even paid a local realty broker $985 to list their home in the local MLS (multiple listing service) so they would get exposure to buyer's agents.
My new friend proudly told me as part of the MLS service, their listing was automatically posted on the Internet at www.realtor.com. Because more than 50 percent of today's home buyers begin their quest on the Internet, he reported the Internet produced several interested buyers who phoned.
In addition, my seatmate and his wife paid to list their home at www.forsalebyowner.com, a Web site for do-it-yourself home sellers. Apparently, that didn't produce any results.
Every weekend for five weeks, my new friend continued, he ran expensive newspaper classified ads in the city newspaper and several local newspapers to advertise their Saturday and Sunday open houses.
One purchase offer eventually materialized. It was made by a buyer represented by a "buyer's agent" who insisted upon receiving a 3 percent sales commission (half of a typical home sales commission).
Then he told me after the sales contract was signed with a 3 percent commission, the buyer began a process of further price negotiation downward as the buyer demanded repair credits for alleged defects discovered by the buyer's professional home inspector.
Finally, I asked, "Would you sell without a listing agent again and how much sales commission did you save?" "Never again" was his immediate response. "I figure we saved less than $10,000 by selling without an agent," he said. "But it was a nightmare waiting to learn if the sale would close or if the buyer would keep negotiating more repair credits," my new friend added.
Then my seatmate revealed the key reason the home sale finally closed. "If it wasn't for the sharp buyer's agent who badly wanted his 3 percent sales commission, we would still be trying to sell our home," he revealed.
IF YOU WANT TO SELL YOUR HOME, DON'T MISS THE FALL SALES MARKET. Whether you want to sell your house or condo alone, without a listing agent, or you realize selling your major investment is not a do-it-yourself project and you need a professional agent, the fall season is a great time to sell a home. This is the second best time of year to sell a home (spring is the best time when the largest number of potential buyers are in the market).
But mortgage interest rates are still very affordable for home buyers. They realize interest rates might go up in the next few months and today is still a great time to buy a home. According to realty sales statistics, the home sales market is still almost as strong as it was a few months ago.
HOW TO DETERMINE IF YOU NEED A PROFESSIONAL HOME LISTING AGENT. I wish I had met my airline friend before he and his wife put their house on the market for sale. Although he thinks he saved about $10,000 sales commission, I'll bet he sold his home below market value because he didn't have a listing agent pricing the home correctly and looking out for his best interests.
Whether you are thinking of selling your home alone, or you realize you need professional help to market your home for top dollar, here are the questions to ask yourself:
1—HOW CAN I CORRECTLY SET THE ASKING PRICE FOR MY HOME? The easiest way to determine your home's market value is to invite at least three successful realty agents who sell homes in your vicinity to give you their listing presentations.
Even if you are thinking of selling "for sale by owner," the agents you interview won't mind. The reason is they know most "for sale by owner" sellers fail and, usually after 30 to 60 days, list with a professional agent, which is likely one of the agents interviewed.
Presuming your home is in tip-top condition to show to prospective listing agents, after each agent inspects your home, he or she will prepare a CMA (comparative market analysis). This form shows recent nearby sales (not asking) prices of homes like yours, the asking prices of current competitive listings, and even the asking prices of comparable neighborhood homes, which didn't sell.
Each agent you interview will then give you their opinion of the correct asking price and the probable actual sales price for your home. If you decide to list your home with one of the interviewed agents, before doing so be sure to phone their seller references to ask "Were you in any way unhappy with your listing agent and would you list a home with the same agent again?"
2—HOW CAN I EFFECTIVELY MARKET MY HOME ALONE? The next question to ask is how can you market your home without a professional agent. Of course, you will include placing newspaper classified ads, posting a "for sale by owner" lawn sign, and holding weekend open houses.
You might also want to pay to post your listing on one of the Internet "do it yourself" Web sites. Perhaps, like my airline seatmate, you might want to pay a local real estate broker to post your listing on the local MLS, which also gains access to the ultra-important www.realtor.com Web site where most home buyers today start their quest. Home sellers should bear in mind the MLS is the most effective sales tool.
3—HOW CAN I OBTAIN A LEGALLY-BINDING SALES CONTRACT AND COMPLY WITH HOME SALE THE DEFECT DISCLOSURE LAWS? If you are successful finding an interested buyer for your home, the next step is to obtain a legally-binding sales contract. If you are lucky, you know a real estate attorney who is on-call seven days a week and he or she will prepare a binding sales contract for you and the seller to sign before the seller changes their mind.
But that is highly unlikely. You might buy a printed sales form at a local stationery store. However, it probably doesn't contain all the important clauses in the forms used by professional agents.
In addition, are you up-to-date on the state-required disclosure laws, plus the other required disclosures such as for lead-based paint? Failure to provide proper defect disclosures can result in after-sale lawsuits.
4—CAN I HELP THE BUYER OBTAIN A MORTGAGE? Unless your buyer is Warren Buffett or Bill Gates, the buyer will probably need a mortgage. Can you help the buyer obtain a mortgage?
Will you be able to explain FHA, VA, PMI, and conventional adjustable or fixed-rate mortgages? Unless your buyer is already pre-approved in writing by an actual lender (not just pre-qualified by a mortgage broker), obtaining financing is a major home sale hurdle to overcome.
5—WHAT HOME SALE CONTRACT CONTINGENCY CLAUSES ARE NORMAL? Smart home buyers will insist on reasonable contingency clauses in the home sales contract, such as for a professional home inspection and mortgage financing.
If the buyer needs to sell his current home, he might insist on a contingency clause for the sale of his old residence. Are you willing to take your home off the market while the buyer tries to sell his home?
6—HOW WILL THE HOME SALE CLOSING DETAILS BE HANDLED? The final and most important home sale step is to get the sale successfully closed. This step is usually handled, depending on local custom, by an attorney, escrow, or title firm. The buyer's earnest money good faith deposit should be held by the same entity for the mutual protection of buyer and seller.
Who pays for the closing settlement costs? Which party customarily pays for the lender's and buyer's title insurance policies? Who pays the transfer taxes and recording fees? These are typical home sales closing expenses, which sellers should anticipate and provide for in the sales contract.
7—WILL THE BUYER EXPECT A PRICE REDUCTION IF NO REALTY SALES COMMISSION IS INVOLVED? Savvy home buyers understand when buying direct from a "for sale by owner" that the seller is saving the sales commission, typically 6 percent of the sales price. Buyers aren't dumb. They expect to share in that commission saving in the form of either a price reduction or seller credits at the closing.
Will you agree to discount the sales price if you don't have to pay a sales commission? This is an issue to anticipate in a do-it-yourself home sale.
CONCLUSION. Selling a home without a professional real estate agent is not easy. If it were, more than 80 percent of home sellers wouldn't hire professional agents to guide them through the maze. That's why, after 30 to 60 days of failure, most "for sale by owner" home sellers list their homes with a professional agents, usually one of the agents they interviewed when contemplating the sale of their most valuable asset.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=218
If your suburb sprawls, your gut is more likely to sprawl, too
Car-loving suburbanites pack on about six more pounds than those who live in dense cities, where people tend to keep off weight by walking more.
Studies on the issue published Thursday call on urban planners and zoning boards to consider people's health in designing neighborhoods.
''How you build things influences health in a much more pervasive way than I think most health professionals realize,'' said Dr. Richard Jackson of the Centers for Disease Control and Prevention, who helped edit the research, published in the American Journal of Public Health and the American Journal of Health Promotion.
The studies mark the first attempt to pinpoint just how much it matters that in a sprawling community, homes are far from work, stores and schools.
``Look at many new suburbs -- there are not any sidewalks at all, said John Pucher of Rutgers University.
``The result is we just don't walk.'
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=114
Studies on the issue published Thursday call on urban planners and zoning boards to consider people's health in designing neighborhoods.
''How you build things influences health in a much more pervasive way than I think most health professionals realize,'' said Dr. Richard Jackson of the Centers for Disease Control and Prevention, who helped edit the research, published in the American Journal of Public Health and the American Journal of Health Promotion.
The studies mark the first attempt to pinpoint just how much it matters that in a sprawling community, homes are far from work, stores and schools.
``Look at many new suburbs -- there are not any sidewalks at all, said John Pucher of Rutgers University.
``The result is we just don't walk.'
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=114
Is private mortgage insurance good or bad?
Unless you are involved with real estate you probably have never heard of PMI. No. It's not a serious disease. In fact, PMI can be extremely beneficial if you are a "cash challenged" home buyer without a sufficient down payment.
PMI stands for "private mortgage insurance." It has enabled millions of house and condo buyers to purchase with zero, 5 percent or 10 percent cash down payments.
Please be aware PMI is not the same as FHA home loan mortgage insurance, which is FHA-insured and has nothing to do with conventional mortgage PMI.
But PMI can be very expensive for home buyers. More irritating, when the need for PMI ceases to exist, because the home has appreciated in market value or the homeowner has added extensive home improvements, getting rid of the PMI monthly premiums can be extremely difficult, or even impossible if the lender is uncooperative.
THE MAJOR BENEFITS OF P.M.I.
Private mortgage insurance protects institutional mortgage lenders from foreclosure loss due to their risk of making home loans that exceed 80 percent of the home's market value.
To illustrate, suppose you want to buy a house or condo. But you don't have any cash down payment. Don't let that stop you. Virtually every mortgage lender in town has a loan program for you (presuming you have decent credit and an income source). Thanks to the generous Fannie Mae and Freddie Mac 103 percent mortgages, you can even finance your closing costs if the mortgage doesn't exceed $333,700.
However, buying a home without a cash down payment will be expensive. That is because your mortgage lender will require insurance protection for the top, riskiest portion of your loan that exceeds 80 percent of the home's appraised market value.
That is where PMI comes in. One of the seven nationwide PMI lenders will agree to insure your lender against foreclosure loss if you default on mortgage payments. To qualify, you must have good credit and good income.
THE DRAWBACKS OF P.M.I.
Presuming you have good credit and adequate income for your low- or nothing-down home purchase, you should be aware of the PMI drawbacks.
The extra cost to you, as a home loan borrower, will be approximately 1 percent extra on your mortgage interest rate. The exact PMI monthly premium varies according to the amount of your insured mortgage.
To illustrate, in today's mortgage market suppose you find a 6.25 percent interest rate mortgage. If you need PMI, you will be paying roughly the equivalent of 7.25 percent interest. Considering you have little or no cash invested in your home, that's still a "good deal" if you can afford the total monthly payments.
However, the PMI premium portion of your monthly payment is not tax deductible as interest.
But some mortgage lenders, instead of imposing PMI premiums, charge a higher tax-deductible interest rate. If tax deductions are important to you, shop around for high-ratio mortgages without PMI premiums.
GETTING RID OF UNNEED P.M.I. IS THE BIGGEST DRAWBACK
For some unexplained reason, the PMI industry of only seven nationwide insurers makes it extremely difficult for PMI home loan borrowers to cancel their PMI premiums when such insurance is no longer needed.
Fannie Mae and Freddie Mac, the nation's largest owners of home mortgages, have guidelines telling their loan servicers to cancel PMI premiums if the loan has been in effect at least 24 months, the borrower has an on-time payment record, and the owner's equity is at least 20 percent as determined by a new appraisal from an "approved appraiser" paid by the borrower.
That seems very fair to borrowers. But the "real world" reality is far different.
If the home loan was not purchased by Fannie or Freddie in the secondary mortgage market, the current mortgage investor-owner can set his/her own often-unreasonable rules for canceling PMI.
Their unstated reason, of course, is in the event of a foreclosure loss, the lender wants that PMI protection (even when the homeowner's equity exceeds 20 percent and risk of foreclosure loss is minimal).
In 1999, Congress enacted legislation to require lenders to cancel PMI when the homeowner's loan-to-value ratio dropped below 78 percent. But for most homeowners, this won't happen until after at least 10 years of unnecessary PMI payments.
The reason is this useless federal law only applies to home mortgage principal reduction and does not consider market value appreciation or home improvements added, as shown by a new professional appraisal of the house or condo.
HOW TO GET RID OF YOUR P.M.I.
If you are not able to convince your mortgage lender to cancel your unnecessary PMI, which is typically $50 to $200 per month wasted money after you have at least 20 percent home equity, you have several alternatives.
The easiest choice is to refinance with another mortgage lender who does not require PMI (because you have at least 20 percent home equity). However, this might be inconvenient and could result in an increased mortgage interest rate.
Another choice that many borrowers have successfully used is to always make their full monthly mortgage payment on time, including the PMI premium. But then they sue their mortgage lender each month in local Small Claims Court for a refund of the unnecessary PMI premium. After a few months of receiving default judgments for not showing up in court over small amounts, most mortgage lenders give up and cancel the unnecessary PMI premiums.
ASK FOR A REFUND WHEN YOUR P.M.I. IS CANCELLED
Whether you refinance with another mortgage lender, or use the Small Claims Court strategy to get your home loan lender to cancel your PMI, you might be entitled to a refund.
Refund checks of $100 to $1,500 or more often result. The reason is PMI is collected monthly from the borrower, but remitted annually to the PMI insurer. Consider this refund a bonus for your hard work to get your PMI premium cancelled.
FHA HOME LOANS DO NOT HAVE PMI.
However, if you have a FHA home loan, you pay MMI (mutual mortgage insurance) rather than PMI. Only if you pay off your FHA home loan in full, you might be entitled to a partial FHA mortgage insurance refund.
If you do not receive a MMI partial refund check within 45 days after paying off your FHA mortgage in full, contact HUD at 1-800-697-6967 or write to U.S. Dept. of Housing and Urban Development, PO Box 23699, Washington, D.C. 20026-3699. Or, on the Internet, go to www.hud.gov/offices/hsg/comp/refunds/index.cfm and enter your exact borrower's full name and FHA case number to learn if HUD owes you a partial MMI refund after paying off your FHA home loan.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=179
PMI stands for "private mortgage insurance." It has enabled millions of house and condo buyers to purchase with zero, 5 percent or 10 percent cash down payments.
Please be aware PMI is not the same as FHA home loan mortgage insurance, which is FHA-insured and has nothing to do with conventional mortgage PMI.
But PMI can be very expensive for home buyers. More irritating, when the need for PMI ceases to exist, because the home has appreciated in market value or the homeowner has added extensive home improvements, getting rid of the PMI monthly premiums can be extremely difficult, or even impossible if the lender is uncooperative.
THE MAJOR BENEFITS OF P.M.I.
Private mortgage insurance protects institutional mortgage lenders from foreclosure loss due to their risk of making home loans that exceed 80 percent of the home's market value.
To illustrate, suppose you want to buy a house or condo. But you don't have any cash down payment. Don't let that stop you. Virtually every mortgage lender in town has a loan program for you (presuming you have decent credit and an income source). Thanks to the generous Fannie Mae and Freddie Mac 103 percent mortgages, you can even finance your closing costs if the mortgage doesn't exceed $333,700.
However, buying a home without a cash down payment will be expensive. That is because your mortgage lender will require insurance protection for the top, riskiest portion of your loan that exceeds 80 percent of the home's appraised market value.
That is where PMI comes in. One of the seven nationwide PMI lenders will agree to insure your lender against foreclosure loss if you default on mortgage payments. To qualify, you must have good credit and good income.
THE DRAWBACKS OF P.M.I.
Presuming you have good credit and adequate income for your low- or nothing-down home purchase, you should be aware of the PMI drawbacks.
The extra cost to you, as a home loan borrower, will be approximately 1 percent extra on your mortgage interest rate. The exact PMI monthly premium varies according to the amount of your insured mortgage.
To illustrate, in today's mortgage market suppose you find a 6.25 percent interest rate mortgage. If you need PMI, you will be paying roughly the equivalent of 7.25 percent interest. Considering you have little or no cash invested in your home, that's still a "good deal" if you can afford the total monthly payments.
However, the PMI premium portion of your monthly payment is not tax deductible as interest.
But some mortgage lenders, instead of imposing PMI premiums, charge a higher tax-deductible interest rate. If tax deductions are important to you, shop around for high-ratio mortgages without PMI premiums.
GETTING RID OF UNNEED P.M.I. IS THE BIGGEST DRAWBACK
For some unexplained reason, the PMI industry of only seven nationwide insurers makes it extremely difficult for PMI home loan borrowers to cancel their PMI premiums when such insurance is no longer needed.
Fannie Mae and Freddie Mac, the nation's largest owners of home mortgages, have guidelines telling their loan servicers to cancel PMI premiums if the loan has been in effect at least 24 months, the borrower has an on-time payment record, and the owner's equity is at least 20 percent as determined by a new appraisal from an "approved appraiser" paid by the borrower.
That seems very fair to borrowers. But the "real world" reality is far different.
If the home loan was not purchased by Fannie or Freddie in the secondary mortgage market, the current mortgage investor-owner can set his/her own often-unreasonable rules for canceling PMI.
Their unstated reason, of course, is in the event of a foreclosure loss, the lender wants that PMI protection (even when the homeowner's equity exceeds 20 percent and risk of foreclosure loss is minimal).
In 1999, Congress enacted legislation to require lenders to cancel PMI when the homeowner's loan-to-value ratio dropped below 78 percent. But for most homeowners, this won't happen until after at least 10 years of unnecessary PMI payments.
The reason is this useless federal law only applies to home mortgage principal reduction and does not consider market value appreciation or home improvements added, as shown by a new professional appraisal of the house or condo.
HOW TO GET RID OF YOUR P.M.I.
If you are not able to convince your mortgage lender to cancel your unnecessary PMI, which is typically $50 to $200 per month wasted money after you have at least 20 percent home equity, you have several alternatives.
The easiest choice is to refinance with another mortgage lender who does not require PMI (because you have at least 20 percent home equity). However, this might be inconvenient and could result in an increased mortgage interest rate.
Another choice that many borrowers have successfully used is to always make their full monthly mortgage payment on time, including the PMI premium. But then they sue their mortgage lender each month in local Small Claims Court for a refund of the unnecessary PMI premium. After a few months of receiving default judgments for not showing up in court over small amounts, most mortgage lenders give up and cancel the unnecessary PMI premiums.
ASK FOR A REFUND WHEN YOUR P.M.I. IS CANCELLED
Whether you refinance with another mortgage lender, or use the Small Claims Court strategy to get your home loan lender to cancel your PMI, you might be entitled to a refund.
Refund checks of $100 to $1,500 or more often result. The reason is PMI is collected monthly from the borrower, but remitted annually to the PMI insurer. Consider this refund a bonus for your hard work to get your PMI premium cancelled.
FHA HOME LOANS DO NOT HAVE PMI.
However, if you have a FHA home loan, you pay MMI (mutual mortgage insurance) rather than PMI. Only if you pay off your FHA home loan in full, you might be entitled to a partial FHA mortgage insurance refund.
If you do not receive a MMI partial refund check within 45 days after paying off your FHA mortgage in full, contact HUD at 1-800-697-6967 or write to U.S. Dept. of Housing and Urban Development, PO Box 23699, Washington, D.C. 20026-3699. Or, on the Internet, go to www.hud.gov/offices/hsg/comp/refunds/index.cfm and enter your exact borrower's full name and FHA case number to learn if HUD owes you a partial MMI refund after paying off your FHA home loan.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=179
Is Your Dream Custom Home Out of Reach? Not Today!
When the average American thinks about a custom home he thinks of finding a builder and perhaps an architect who take his dreams and convert them into the home of his dreams. Always the fly in the ointment is cost. Can the average American afford the luxury of a custom designed home?
The answer is in today’s technology there are five ways you can afford a custom home. By way of introduction, however, let us point out that the last time you bought a washing machine or a refrigerator it wasn’t dumped in parts in your driveway for you to assemble. It was assembled ready for use under controlled conditions inside a factory. And, that is the way homes should be built - - and are being built increasingly - - today. Automated Builder magazine estimates that well over 90% of all homes built in the U.S. are produced in part or completely inside factories. Let’s look at the possibilities:
- Modular Home Manufacturers. Today there are about 200 residential modular home manufacturers in the United States. They make home sections in a factory which are 95% complete when they go out the factory door. Virtually any home you can dream up from a Santa Fe adobe to a Colonial multi-story can be produced in modular factories. These homes are considered the highest quality we build and the strongest we build. They can be customized by varying the size of the home’s sections and by stacking these sections about like a child would build with blocks. You can plan your dream and then contact the factory and/or their builder/dealers in the local area and they’ll tell you how it can be done. Last year modular factories turned out over 166,000 homes.
- HUD-Code Home Manufacturers. This is what we use to call the mobile home industry. Today they call themselves the manufactured home industry. Inside the housing industry we call it the HUD-Code industry because this is the only segment of U.S. housing that builds to a building code put together by the U.S. Department of Housing and Urban Development. These homes are also built in a factory. Erase from your mind the image of the old single section tin box set on concrete blocks in a rural area with a rusting car out in front. Those days are history. Today the HUD-Code industry can build about anything you want to design, and they too can stack their units into beautiful two-story homes. The big advantage with a HUD-Code home is that this industry prides themselves on being nickel squeezers and they can keep the cost of any kind of a custom home at rock-bottom, and they know how to do it. Again, visit the factories and/or their builder/dealers and find out what can be done and how the model you pick out can be customized to your specific desires. There are around 90 headquarters for HUD-Code home companies across the U.S. and they operate over 350 factories. What’s more, most of the large companies in this field also build modulars. Last year the HUD-Code companies built 192,000 houses.
- Production Builders. Production builders are what has evolved out of what we used to call stick-builders. Today, there really aren’t any pure stick-builders left except those who spend year to year and a half building a mansion for someone. However, virtually all of the average builders in the United States, including some of the giants like Pulte, Centex and K&B, use components in their construction of site-built homes. Because they do use components, that is major house parts such as floor trusses, wall panels and roof trusses, their homes can be customized to your specific desires. In fact, some of the larger firms have even gone into in-plant production of their own components and this apparently is going to be the wave of the future. We estimate about 7,500 large production builders in the United States and last year they built 984,000 homes.
- The Panelized Home Manufacturers. All panelizers specialize in custom homes. The days when they use to publish a catalog and tell you that you could have anything you wanted as long as it was in that catalog are long gone. Most large panelizers have literally legions of home designers sitting at computer terminals customizing homes to meet their customers’ desires. We estimate about 3,500 panelizers across the U.S. (which includes some of the major big-box stores handling building materials) and last year they produced 877,000 houses.
- The Component Manufacturers. These are independent companies which operate inside factories and make major house parts, such as roof trusses, floor trusses and wall panels primarily for production builders. However, a growing number of these component manufacturers (which you can probably find in the Yellow Pages under the word trusses or roof trusses) will work directly with consumer buyers. Those that won’t will still meet with you but will refer you to one or more builders to actually erect the components they make - - unless you happen to be a carpenter yourself. This is probably one of the most over-looked arenas for getting a custom home in America. These people design all of their components on computers which quite literally do not allow engineering mistakes to occur. Therefore, you are assured up front, as you are with all factory builders, that what you’re buying is going to be peak quality and meet all local and regional building codes. There are about 2,200 independent component manufacturers in the United States. We don’t estimate the number of homes they build because most of what they build in the plant are erected in the field by production builders.
Friday, June 15, 2007
5 Secrets to Buying the Best House for Your Money
Do you want to get the best property you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.
In years past, I always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here's why! None of the information has been verified!
Many times unknown problems can come to the surface! Some of the problems I've seen include recorded judgments, alimony payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc.
So the way to make the strongest offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.
2. Sell Your Property First, Then Buy the House
If you have a house to sell, sell it before selecting a house to buy! Contingency sales aren't nearly as strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You've found the perfect house - now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that this is a risky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do the contingency but it has to be a full price offer! You have now paid more for the house than you could have because of the contingency, and you have to sell your existing house in a hurry! Otherwise you lose the house! So to sell quickly you might take an offer that's lower than if you had more time. The bottom line is that buying before selling might cost you THOUSANDS of dollars.
If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market.
Another tactic is to make the sale ''subject to seller finding suitable housing''. Adding this phrase to the listing means that WHEN YOU DO FIND A BUYER, you will have some time to find the new place. If you don't find anything to your liking, you don't have to sell your present home.
3. Play the Game of Nines
Before house hunting, make a list of things you want in the new place. Then make a list of the things you don't want. You can use this list as a guide to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes.
When house hunting, keep in mind the difference between ''STYLE AND SUBSTANCE''. The SUBSTANCE are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The STYLE represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good SUBSTANCE, because the STYLE can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant.
Consider each house on its underlying merits, not the seller's decorating skills.
4. Don't Be Pushed Into Any House
Your agent should show you everything available that meets your requirements. Don't make a decision on a house until you feel that you've seen enough to pick the best one.
A decade ago, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn't always this urgency, unless a home is drastically underpriced, and you'll know if it is.
Don't forget to check into the SCHOOL DISTRICTS of the area you're considering. Information is available on every school; such as class sizes, % of students that go on to college, SAT scores, etc. You can get this information from this web site.
5. Stop Calling Ads!
Please note - ads are sometimes created to make the phone ring! Many of the homes have some drawback that's not mentioned in the ad, such as traffic noise, power lines, or litigation in the community. What's not mentioned in the ad is usually more important than what is.
For this reason, I want you to be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer's broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you're no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These "great deals" go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he's going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said "keep your eyes open"? So to get the best buy on a property, I always recommend that you hire your own agent and stick with him or her.
http://www.totalrealestatesolutions.com/articles/disp.cfm?aid=189&typeid=1&winpop=0&nav=1
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