Tips for Buyers & Sellers
Buyer's Tips (Click here to obtain some helpful Sellers Tips!)
Before you start looking for a home you should ask yourself a few questions. Where do you want to live? Do you want to be close to schools, shopping, or work? What kind of house would you like (need)? Are you looking for a particular style? How many bedrooms and bathrooms do you want? Do you want a yard? How much house can you afford? Have you consulted a REALTOR or mortgage lender to determine the size of the mortgage you would qualify for? Here are a few tips to help you get organized:
Simply put, you can afford a house that costs as much as the largest monthly mortgage payment you qualify for. A quick way to estimate the size of mortgage you qualify for is to take your gross monthly income (that's before taxes and other deductions) and multiply it by .28. This works out to just over 1/4 of your gross income. Mortgage companies use something called qualifying ratios to determine how much they'll lend you. Most mortgage companies use either a 28/36 ratio or a 25/33 ratio. The first number in each pair is the percentage of your gross income that the lender would consider acceptable as a monthly mortgage payment (i.e. if you make $3,000 per month, 28% of that is $840 per month). The second number in each pair is used when all debt payments are considered, not just the mortgage. (i.e. if you make $3,000 per month, but also have a $250 a month car payment, 36% of $3,000 is $1,080, minus the $250 car payment equals $830). As you can see, in this example the numbers work out to be almost the same. Obviously if you have more debt you would qualify for less. » Return to the top of this page Why you should work with a REALTOR Working with a professional REALTOR to buy your home is a good idea for several reasons:
Choosing a REALTOR Searching for your dream home can be a time consuming experience. Working with a professional REALTOR will make the process much more efficient. Since most people spend a fair amount of time with their REALTOR, it's important to choose a REALTOR you feel comfortable with, and one who is responsive to your needs. The following questions will help you decide if a particular REALTOR is right for you:
If you find yourself answering "no" to many of these questions, or to any individual questions that are important to you, you should keep looking until you find a REALTOR you feel comfortable with. Find someone you feel comfortable with. If you don't feel you can ask questions or go to your Realtor, you have the wrong Realtor. Your Realtor should show you research to back up any recommendations. This includes information about recent sales, current listings and recent expired listings in your neighborhood. Choose a local Realtor. He or she will know your area better than an outsider, will be seen as a source for people looking to relocate in your neighborhood, and will get better co-operation from other agents. It is likely that any amount you might save by having a friend or relative from outside the area serve as your Realtor, will be lost in their lack of knowledge about the very specific local market. Ask for references from the Realtor. He or she should be willing to give you names of previous clients. Ask your friends and acquaintances for recommendations, but make your final choice based on your needs. Ask the Realtor to show you what will be done to market your home. Consider the office and company support available to him or her as well as the initiative and professionalism shown by the individual. » Return to the top of this page Home Buying Glossary Agent - A person acting on behalf of another, called the principal. Appraisal - An expert judgment or estimate of the quality or value of real estate as of a given date. Assessed Value - The valuation placed upon property by a public tax assessor as the basis for taxes. Bill of Sale - An instrument which transfers title to personal property (chattels); a "Deed" transfers' real property. CC& R's: Covenants, conditions and restrictions - A document that controls the use, requirements and restrictions of a property. Certificate of Reasonable Value (CRV) - A document that establishes the maximum value and loan amount for a VA guaranteed mortgage. Certificate of Title - A document signed by a title examiner or attorney stating that the seller has a good marketable and insurable title. Closing Statement (Settlement) - The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the real estate and seller's net proceeds. Also, "settlement sheets," "HUD-1." Commission - Payment to a real estate broker for services performed. Condominium - A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries. Contingency - A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing. Deed - A formal written instrument by which title to real property is transferred from one owner to another. Also, "conveyance". Deed of Trust - Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument; the borrower, the trustee, and the lender (or beneficiary). Due-On-Sale Clause - An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership. Earnest Money - The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith. Equity - The interest or value which owner has in real estate over and above the debts against it. (Sales Price - Mortgage Balance - Equity). Escrow - A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties' instructions and assumes responsibility for handling all of the paperwork and distribution of funds. Federal National Mortgage Association (FNMA) - Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.
Fixture - What was formerly personal property, which is now permanently attached to real property and goes with the property when it is sold. Graduated Payment Mortgage - A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate. Hazard Insurance - Protects against damages caused to property by fire, windstorms, and other common hazards. Home Inspection Report - A qualified inspector's report on a property's overall condition. The report usually includes an evaluation of both the structure and mechanical systems. Home Warranty Plan - Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances. Joint Tenancy - An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property. Lien - A legal hold or claim on property as security for a debt or charge. Listing Contract - Between a home owner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also, "listing agreement". Loan Commitment - A written promise to make a loan for a specified amount on specified terms. Loan-To-Value Ratio - The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value. Market Value - The highest price which a buyer, ready, willing and able but not compelled to buy, would pay, and the lowest price a seller, ready, willing and able but, not compelled to sell, would accept. Basis for "listing price', or "asking price". Mortgage - A lien or claim against real property given by the buyer to the lender as security for money borrowed. Mortgage Life Insurance - A type of term life insurance often bought by mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by insurance proceeds. Mortgage Note - A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. Also, "deed of trust note." Negative Amortization - Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren't high enough to cover the interest. Origination Fee - A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent of FHA and VA loans. PITI - Principal, interest, taxes and insurance. Planned Unit Development (PUD) - A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial. Point - An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments. Prepayment Penalty - A fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA loans. Principal - This word has several meanings: a) to denote the most important; b) a capital sum lent on interest; c) one who appoints an agent to act on their behalf; d) either party to a contract. Private Mortgage Insurance (PMI) - Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage. Prorate - To allocate between seller and buyer their proportionate share of an obligation paid or due. For example a prorate on real property taxes, fire insurance, or condominium fee. Purchase Agreement - A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale. Realtor - A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®. Regulation Z - The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection act. Survey - A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description. Tenancy in Common - A type of joint ownership of property by two or more persons with no right of survivorship. Title Insurance - Protects lenders and homeowners against loss of their interest in property due to legal defects in title. Title Search or Examination - A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims. Transfer tax - State tax, local tax (where applicable) and tax stamps (in some areas) required by law when title passes from one owner to another. » Return to the top of this page Seller's Tips (Click here to return to the Buyer's Tips!) Pricing a home If you're planning on selling a house, you'll have to decide what price you're going to ask for the home. This is one of the most important and difficult decisions you'll have to make. Buyers select by comparison shopping, so your home will have to have a fair market price in order for it to sell. A real estate professional can help you determine the market value of your home while still obtaining the top-dollar price for your piece of property. Some of the things to consider when choosing your home price are:
Benefits of Proper Pricing Faster sale When your home sells faster, you save carrying costs, mortgage payments and other ownership costs. A quicker sale creates less inconvenience for you. If you've moved before, you know the energy it takes to prepare for showings: keeping the home clean, making child care arrangements and altering your lifestyle. Proper pricing reduces these demands on you, by helping your home sell faster. At market value your home will gain exposure to more prospects who can afford the price. Sellers who list at a high price are looking for that one buyer who will pay it. Sellers often do not realize that they have discouraged many potential buyers who could have afforded the home. The final sales price is probably one that will be affordable by more purchasers. This is because sellers many times accept a much lower price at a much later date since that one buyer willing to pay the higher price never comes. Increased salesperson response When salespeople are excited about a home and its price, they make special efforts to contact all of their potential buyers. Knowing that it is priced properly for its market, they expect it to sell soon and encourage their prospects to act quickly. Their excitement is contagious! Better response from advertising and sign calls Ad calls and sign calls to Realtors turn into showings when price is not a deterrent. Most serious prospects are well educated about asking prices in the areas they are seeking. They will not waste their time on a home they consider overpriced. Higher offers attracted Buyers fear they might lose out on a good home when it is priced right. They are less likely to make "low ball offers." Better pricing attracts multiple offers, too! Means more money to sellers If a home is priced right, the excitement of the market produces higher sale prices. You net more both in terms of actual sale price and in less carrying costs. » Return to the top of this page Making Your Home Look Its Best When you're selling your home you'll want to put forth the very best product. Buyers aren't coming for just a quick look but for a careful inspection. Keep the exterior neat by painting the trim, clipping the hedges, mowing, edging, and weeding the lawn and you may even want to plant a few flowers. Inside you'll want to lighten up the darker corners, perhaps add some fresh paint and put the clutter away to give the rooms an open feeling. Make sure there are no "stale" odors in the home. This can be especially important for remote areas such as a basement or attic. On the day of your open house, you may want to consider baking some cookies or bring in some fragrant fresh flowers. This will add a cheery and pleasant scent to your home. These little things just may help you sell your home a bit more quickly. Make a Good First Impression In today's age of consumerism, every buyer is comparative shopping. Make a small investment in time, money and effort to give your home a solid advantage over competing properties. Pay attention to detail now because first impressions count with buyers. You only have one chance and it starts with curb appeal. Create A Buying Mood
Marketing Your Home When selling your home, you must realize that it's not likely that the right buyer will simply walk through your door on their own. Generally, you have to bring your home to the buyer, and that means counting on a real estate professional to put forth a successful marketing campaign. You'll want an agent who will make the best use of television and newspaper advertising, and one who uses state-of-the-art techniques such as an interactive voice-response system, a front end MLS system and the internet. And, you'll want to have a number of open houses to expose your property to a wide variety of "window shoppers". Make sure your agent is trained not only in the financial aspect of a real estate transaction, but the marketing aspect as well. » Return to the top of this page An Offer! When you have a home for sale, eventually a prospective buyer will "make an offer." As the seller, you basically have three options: you can accept the offer, reject the offer or give a counter offer. A counter offer usually will encourage a buyer to continue their negotiations. You may also receive multiple offers. You may prefer to take slightly less for your property from someone who is willing to pay cash, versus someone who needs to sell their current home first. Contingencies, move-in dates, and financing are all things to consider when weighing an offer. If things seem a bit overwhelming, rely on your experienced real estate professional, who can go over the various points with you, and help you choose the best offer. » Return to the top of this page The Closing Once you've accepted an offer on your property there's a number of details that still need to be finished. There will probably be an inspection of your home by a professional who will determine the condition and integrity of your property for the buyer. The buyer's mortgage company may chose to send out an appraiser who will assure the lender of your property's worth. The title company will warranty that there are no liens or existing encumbrances which would inhibit a transfer of title to the buyer. Either you or the buyer may chose to be represented by an attorney. First time sellers and buyers often feel more comfortable to have the paper work reviewed prior to signing. Rest assured that you can always rely on your real estate professional to make sure the entire home selling process proceeds smoothly. » Return to the top of this page |
