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Always ask for the exact terms you want. If the seller turns you down, at least they know they’re dealing with a savvy negotiator. However, the fewer hoops the seller has to jump through, the greater your chance of being accepted. Consider whether you are in a buyer’s or seller’s market before setting contingencies.
1. Fill in the names of the buyer(s) and seller(s). Include the phrase “and/or Assignee” to allow for a co-owner to be added later.
2. Fill in the exact address, legal description, parcel number or any other necessary description. Attaching an addendum stating a precise location is always a safe bet. Add the words “subject to buyer’s approval of a survey” Confirm both the exact city/jurisdiction and the school district of the property.
3. Your agent will help you determine the appropriate amount of earnest money to include with your offer.
If you are making a low offer, include more earnest money. A deposit is not required, but sellers expect one. One percent of the selling price or $1,000 is usually acceptable. Promising to raise the deposit to 5% when the contingencies are eliminated is a good tactic.
Don’t actually give the deposit to the seller until your offer is accepted. Have a neutral third party, such as an escrow company, hold it. You also have control over where the money is held until closing.
4. Your offer should state “contingent on mortgage approval.” Describe the terms of the mortgage you are seeking: “15 year adjustable $300,000 mortgage with an interest rate no higher than 7%, and maximum monthly payment of $900.00.”
5. Outline requested seller financing in detail: “seller to carry back first mortgage.”
6. Include a detailed list of every item you want included, but don’t just say “stove.”
Say “black Wolf range model #X50.” This prevents substitutions by the seller.
7. Prevent “shopping” of your offer by specifying a short acceptance time—24 hours is standard.
8. Make your offer contingent upon your authorization of the seller’s disclosure of defects (if required by your state).
9. Stipulate that the seller will pay for the repair of major defects uncovered in the inspection, and that your deposit will be refunded if they refuse.
10. It’s smart to set a maximum liability amount in case you have to back out of the deal.
11. Don’t sign an arbitration clause. You can determine later the proper arena for handling disputes.
12. If you or your agent feels it’s necessarily, include a “weasel” clause. “This contract and offer are conditional upon legal counsel’s review within 7 business days.”
13. Don’t include a clause that says “All cash to seller” if you’re waiting on loan approval.
]]>Why should you refinance to remodel? You probably know that many home improvements (except for pools) increase the value of your home.
When should you refinance, before or after the remodel? In the past, the process was a huge hassle, sometimes necessitating a construction loan for more than your house is worth. Enter the combo loan.
It refinances your home at a lower rate, with enough left over for your remodel.
Best of all, the post-remodel value of your home is used to figure how much you can borrow.
Link to Fannie Mae
http://www.freddiemac.com/corporate/buyown/english/owning/refinance.html
Here are some specific types of combo loans:
A Purchase/Rehab loan combines home buying and rehabilitation in one loan.
It allows you to fix or improve your new home at lower rates than a second mortgage. Fannie Mae offers this type of loan.
A Refinance/Remodel loan combines refinancing and renovation your home at low first mortgage interest rates.
Or more conventionally, do a "Cash-Out" Refinance to get additional cash for any purpose. You can also take out a second mortgage, which is riskier than simply refinancing because it adds extra debt.
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First, decide how much house you can comfortably afford and what you’re looking for in a home. Drive neighborhoods (at least two) and make note of asking prices. Then go online and follow those homes and see what they sold for. MSN is a frontrunner among such sites.
Don’t try to time a buyer’s market by waiting for prices to go lower. No one knows how long if will last.
Next, get a buyer’s agent and find out which homes in your desired neighborhoods have been on the market for more than 3 months. There will be more motivated sellers in this group.
Remember that you hold most of the cards, so take your time. You’ll have the most leverage with favorable credit and some down payment cash. And compare, compare, compare—locations, features, commute distances, asking prices. You may get more of your “nice to have” features than you expected if you do your homework.
Absolutely everything in a home purchase negotiation is…well, negotiable. Before you make an offer, figure out how much you’d like the seller to pay at closing or refund to you after closing. Try to arrange for this perk, especially if the inspection reveals a feature the house needs right way, like a furnace. Your loan may restrict the amount the seller can give you.
Take advantage of freebies and incentives offered by sellers to get you in the door—within reason. And make sure that you’re dealing with a flexible, realistic seller. Some sellers will yank their homes off the market if they don’t sell right away.
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Personal freedom, value and tax advantages are some of the top reasons why people own their homes.
Link to Why Buy a Home (ours)
Where should I start my search?
On the information superhighway, of course. Check out asking prices (to compare later to selling prices), take virtual tours, look at crime statistics for neighborhoods. Compare features so that you can discuss your “must have” list with your agent.
How long will the search for my dream house take?
If you have a good agent who’s been thoroughly briefed on your needs, you may find your perfect house within a couple of weeks. If your idea of heaven does not include a Sunday afternoon of house hunting, ask your agent to preview home before showing them to you.
Have a carbohydrate-rich, sugar-free meal before you go house hunting, and bring your digital camera. Take a picture of the home address first at each house to avoid confusion. Take notes on every detail. They will add meaning to the photos. Grade each house A through F.
How many houses should I look at in one day?
Somewhere between 3 and 7, unless you are on a very tight deadline. When you find one that seems perfect, make an offer as soon as possible. You can always include an “out” clause.
Identify the semifinalists
Narrow the field to three, and go over them top to bottom. Have your agent find out as much as possible about the seller’s circumstances. Remember that your agent is legally required to show you any defects.
What are you waiting for? Pick the winner and make an offer the seller can take seriously.
]]>Buy a building containing less than 5 units, and this HUD-insured program will base your loan on the post-renovation value of the premises. You can expand a one-unit building or reduce a 2-4 unit building. You can even rehabilitate a mixed-use property.
You must live in the building yourself. Loans are subject to property appraisal and approval of your credit.
This program not only gives buyers a leg up, but also spurs community restoration all over the country. You can apply through any FHA-sanctioned lender.
Link to: www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm
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Women buy homes for the same reasons as men and couples—pride of ownership, economic security, needing a larger or smaller space. They make up about one quarter of the U.S. housing market.
Women tend to buy near city centers at the lower end of the housing market—under $200K. They tend to be choosy about their physical location, and prefer condos to single-family homes. Naturally, security is a big concern.
Mortgage lenders have become savvy about this huge market, and are making it easier to women to become homeowners. Here are a few incentives offered to women:
Leniency on establishment of credit history
Divorcees have first-time homebuyer status, with all of the accompanying perks.
Child support counts as income, which helps them qualify for a loan
Link to first-time homebuyer tax rules: www.fairmark.com/rothira/first.htm
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A bank is the obvious choice, but their criteria are the most stringent. How will your credit score measure up? Are you steadily employed with a substantial paycheck?
If you get turned down by a bank, be sure you know exactly what you need to do to qualify in the future.
Do you belong to a credit union through your church, job or alumni association? Their rates tend to be lower than bank rates.
Mortgage institutions (not brokers) front your loan and then contract with a third party to fund it. Advantages over banks are lower interest rates and a wider variety of choices.
Mortgage brokers are middle men, who tend to charge higher points than other sources. A referral from a trusted source is doubly important when choosing one.
Link to “Top 10 Questions to Ask Your Mortgage Broker
]]>If you have a checkered credit history, you have plenty of company—about 1/3 of American consumers. Some lenders specialize in lending to people with less-than-perfect credit. It’s a simple idea—charge higher interest in exchange for the perceived risk. Some subprime lenders, including industry leader Ameriquest, have been accused of shady practices—extravagant loan prices, excessively high interest, etc.
In the current slowed real estate market, a number of these companies have gone out of business, including Ameriquest. This is bad news for some low income and minority borrowers, for whom borrowing at “subprime” rates has made the dream of homeownership attainable.
The main risks of saddling a consumer who has already had problems paying their bills are default and foreclosure. Creative financing that accompanies subprime loans often involves ARM’s (adjustable rate mortgages), which are very tricky in an economy with rising interest rates.
You do need to be more cautious when using this avenue, and thoroughly investigate your provider. If your credit score is between 620 and 640, beware. You are a prime target for unscrupulous subprime marketers. Shop around, and apply for a conventional home loan first.
Link to first-ever large scale study of subprime lenders:
http://www.consumeraffairs.com/news04/2006/12/crl_foreclosures.html
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Habitat homes feature volunteer labor, economical building techniques, energy efficiency and interest-free loans. Your mortgage is calculated based on 1/3 of your after-tax income. You are expected to work with the Habitat organization to accrue up to 500 hours of ‘sweat equity.’
Your house will probably be wood frame, with Gypsum board interior walls, vinyl siding and an asphalt shingle roof. Alternate building materials are adobe and hay bales.
Expect your house to be on the small side. The average size of a 3 bedroom Habitat house is 1,050 square feet.
The biggest downside is that once approved, you could wait up to five years for a home.
Call (800) 422-4828, x 2551 for more information.
Link to http://www.habitat.org
]]>That’s right. The best season to bargain house hunt is winter, and the best day of the whole year to make an offer on a house is Christmas. And guess which month has the lowest home prices? December.
Why?
If someone has listed a home over the holiday, they are definitely a motivated seller.
Holiday cheer may spill over onto your offer.
There is pressure from the seller’s family to be generous, and also to get back to family doings.
Similarly, Easter Sunday is a good day to buy in a busy spring real estate season. And the advantage over Christmas is that there is more housing stock to choose from. Easter Sunday falls between March 22nd and April 25th.
In each case, have your agent print out a list of the most likely homes you’ll write offers on a few days before the holiday. You might even want to alert the seller’s agent that an offer will be coming in and find out where the seller will be on the actual holiday.
You’ll need an ambitious go-getter of an agent, who’s willing to work the holiday and not be shy about presenting the offer.
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