ARE YOU READY TO BUY?
DON'T HAVE AN INSIDE TRACK?
IT'S TIME TO CONSULT A PROFESSIONAL . . .
Are you about to take one of the most important steps of a lifetime, the selection and purchase of some kind of real estate? If you are like thousands of others, you are seeking something in the country or in a small town. You see, more and more Americans are moving to small towns or in the country to establish a lifestyle away from the big city or suburbs.
If you have decided to make this move, finding what you want might appear impossible. But this decision doesn’t have to be overwhelming, so if you don’t have an inside track about what’s for sale and where, it is time to consult a professional. What’s the first thing to do? Find free real estate publications that have properties in the areas where you want to buy. Or, use the internet to select the area and type of properties you are interested in. This will also guide you in finding a licensed real estate professional that can assist you in finding a property quickly and efficiently.
Remember, many small town or country real estate companies serve a large surrounding area. Once you have selected a realty professional, discuss with him/her the type of property that is suitable for your needs. To do this, you must ask yourself some questions:
— Is my family still growing?
— What are their needs?
— Are schools a factor?
— Do I want minimum grounds upkeep? Maybe just a garden?
— Do I plan to own horses or several animals?
— Do I need to be within commuting distance of a certain town for job possibilities?
— Am I a fixer-upper, or a total zilch with a hammer?
— Will I be using it as a second home?
— Will I keep the property to use for retirement or as investment?
— What is most important about the lifestyle I want to accomplish?
— Next, provide information to the salesperson about what you can afford. This way, he/she has the tools to assist you, including how much a bank may lend you, and on what basis it is calculated. Once a price range is established, the salesperson will have the information to help you find the right property within your guidelines.
— As you inspect properties, your salesperson will get a real sense of what you like or dislike.
— Sometimes it takes a few trips to various properties for you to establish the parameters that are appropriate for you and your family. In a sense, you are establishing a relationship with your realty expert that will help both of you in this exciting time.
— Once you are ready to make an offer, your realty professional will act as an intermediary between you and the seller. He/she will help negotiate price, down payment, contingencies, closing dates and anything else needed to bring the sale to a satisfactory conclusion. Select an agent that will be your guide, your diplomat, and your trusted advisor, as you pursue your property ownership objectives.
HOW TO SELECT AN AGENT
ALL AGENTS HAVE DIFFERENT PERSONALITIES & PHILOSOPHIES . . .
As with other professionals, when you select a real estate agent, demand high standards. Make sure that trust and integrity are not just a spoken claim but granted by deserved reputation in the community that the agent serves.
Determine if the agent has established a strong record of consistently fulfilling promises and providing customer satisfaction. Consider the agent’s educational training.
Is it appropriate? Does it enhance the skills?
Request a summary of the agent’s experience and review the track record. Agents all have different personalities and philosophies.
Try to select one with a philosophy and personality that you find agreeable and who you can communicate with easily.
SELECTING YOUR AGENT
You should have confidence that the person you select will be a trusted advisor. It is imperative that you work with an agent who you feel has your best interests in mind.
Excellent communication skills are a must. Select an agent that you feel will have the ability to work cooperatively with sellers and other agents during the entire process of purchasing your property.
A good agent can be the foundation of your real estate team. An agent can help you find a home that meets your needs, negotiate for that home on your behalf, supervise property inspections, and coordinate the closing. Agents often have useful leads for mortgage loans. A good agent’s negotiating skills and knowledge of property values can save you thousands of dollars.
REAL ESTATE TERMS YOU SHOULD KNOW
GET FAMILIAR WITH COMMONLY USED TERMS IN THE REAL ESTATE INDUSTRY . . .
If you are involved in buying or selling real estate. Or, just for your general knowledge. There are numerous terms, commonly used jargon, in the real estate industry that make up a peculiar language all its own, which would be beneficial for you to learn.
This jargon isn’t difficult to master, but there is real danger of hearing and using words you don’t fully understand.
Following are some basic terms that are often misunderstood:
MLS(Multiple Listing Service) —An organization that collects, compiles, and distributes information about properties listed for sale by its members, who are real estate brokers. Membership isn’t open to the general public, although selected MLS data may be sold to real estate listing websites. MLS’s can be local or regional. There is no “one” MLS covering the entire nation.
PITI—Principle, interest, taxes and insurance (PITI) are the four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing the money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
CMA—Comparative Market Analysis. A CMA is a report that shows prices of properties that are comparable to a subject property and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.
Closing Costs —The entire package of miscellaneous expenses paid by the buyer and seller when the transaction closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney’s charges, recording fees, title insurance, etc. Closing costs generally are paid through escrow.
Contingency —provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One common example is a buyer’s contractual right to obtain a professional home inspection before purchasing the home.
Title Insurance—An insurance policy that protects a lender’s or owner’s interest in real property from assorted types of unexpected or fraudulent claims of ownership. It’s customary for the buyer to pay for the lender’s title insurance policy.
HELPING THE KIDS TO BUY A HOUSE
AN EQUITY SHARING ARRANGEMENT MIGHT BE THE ANSWER . . .
Parents helping their children invest in their first home is certainly not a new idea. We see a variety of choices being made in the marketplace. Some elect to co-sign on the mortgage with the children. It doesn’t cost Mom and Dad any money, but it may help the children qualify for a loan. Others either give or lend money for the down payment. A few even decide to put enough money to “buy down” the mortgage interest rate, allowing for the rate to be lower in the first few years, making it easier to qualify for the loan by lowering the monthly payment.
The concept of equity sharing, although used by builders and real estate investors, may also be one of the best methods for helping the kids buy a house. Shared equity allows the children to feel less indebted than with an outright loan, and at the same time gives parents an added tax advantage.
An equity sharing arrangement might work like this:
The young homebuyers purchase a home jointly with their parents, they split the down payment and ownership costs including monthly payments, and the children rent the parent’s share of the home. The benefits to the young homebuyers include affording a larger home for less money, having lower down payment and ownership costs, ease of qualifying for the loan, and the beginning of building an investment portfolio.
The benefits to the parents include helping the children to afford a home, receipt of rental income, financial and tax benefits, increasing their investment portfolio, and having a reliable tenant.
When the home is sold, perhaps after a specified period of time, the parents get back their initial investment, and the additional proceeds are shared in proportion to each one’s investment.
While shared equity can be arranged between perfect strangers, the beauty of this agreement is seeing a family investing wisely together, with both parents and their children gaining benefits they may not otherwise obtain alone.
Both parties should exercise due diligence by receiving counsel from experts in the areas of accounting, financial planning, and legal.
TITLE INSURANCE – IS IT REALLY NECESSARY
OFTEN REQUIRED TO PROTECT THE LENDER . . .
Many of us often refer to a person who has “bought or sold” real estate. Even in newspapers we see advertised real estate for sale, yet it is only the “title” to real estate which can be bought or sold. Title is sometimes defined as the means whereby an owner is enabled to maintain or assert his possession in enjoyment of property. Another definition is that title is the evidence of right which a person has to the possession of property. As applied to the investigation of titles, the word “title” has acquired the sense of history. Therefore, searching the title, investigating the title, and giving an opinion of title all refer to the compilation and the interpretation of the history of the title, a service performed by the title company. The conclusions of his study into the history of real property are summarized on a policy of title insurance.
It should be remembered that title is synonymous with the words “right”, “interests,” “estate.” Such words are used to denote the degree, quantity, nature and extent to which a person may have an interest in real estate
An insurance policy that is written on title to real estate differs from every other form of insurance in its degree to indemnify an insured in the event of a loss by reason of a defect or flaw of title PRIOR to the date of policy. All other forms of insurance agree to indemnify the insured in the EVENT OF LOSS due to a FUTURE event and after the date of the policy
Basically, title insurance is the company’s opinion concerning the ownership and marketability of title to a particular parcel of real property. This can only be ascertained after a thorough and complete search of all the records affecting title to the parcel insured. A title company is a service organization and performs a service for those interested in buying, selling, or loaning money on real estate. When you purchase a title insurance policy, you are buying the services of experts. The company is willing to back the opinion of these experts with the additional feature of insurance.
Title insurance, in effect, insures marketable title which is, in essence, title that a prudent man, well advised as to the fact in law, would be willing to accept.
Title insurance policies, however, do not insure against several major areas which are either too difficult or too expensive to cover, including defects in title known to the insured, easements and liens not shown by the public records, interest of parties in possession, or matters requiring an accurate survey.
When dealing with real property, title of the seller cannot be assumed. We must ascertain and then be assured that what we bargain for is in fact owned by the seller. A purchaser of real property is not satisfied with assurance that he will not be dispossessed of his property or that no adverse claim may appear to harass his quiet enjoyment of the property. Every person, when purchasing real property, wants to know that he will be able to sell, lease, or mortgage the property freely. Because there are as many interests in land as there are leaves on a tree, a purchaser wants to be assured that his title to the land is marketable.
Title insurance is often required to protect the lender against loss if a flaw in title is not found by the title search made when the house is purchased. You may also get an owner’s policy to protect yourself. Also, attorneys provide title insurance as part of their services in examining title and providing a title opinion.
It is important to remember that a title insurance policy issued only to the lender does not protect you. Similarly, the policy issued to a prior owner, such as the person from whom you are purchasing the property, does not protect you. To protect yourself from loss because of a mistake made by the title searcher, or because of a legal defect which does not appear on the public records, you will need an owner’s policy. Such a mistake rarely occurs, but, when it does it can be financially devastating to the uninsured. When you buy an owner’s policy it is usually much less expensive if purchased simultaneously with a lender’s policy. In addition, if you are buying a home which has changed hands within the last several years, inquire at the title company that issued the previous title insurance about a “reissue rate” which could be a lower charge than the cost of a new policy.
PREPARE FOR THE CLOSING
ADDITIONAL ITEMS MAY BE NEEDED AT THE CLOSING . . .
Listed below are many of the items to attend to prior to the closing. It is important to review these items and discuss them with your agent:
FINANCING —Arrange for financing. Obtain a final approval and review lender requirements.
TITLE INSURANCE —Make arrangements for obtaining title insurance. Review with attorney/accountant how to hold title to property regarding estate planning/tax implications.
MOVING ARRANGEMENTS —Obtain estimates for moving companies and coordinate estimated moving date.
PROPERTY INSURANCE —Make arrangements for insurance coverage regarding real property, personal property, and personal liability.
CONTINGENCIES —Follow-up to ensure that any contingencies (i.e., property repairs, termite inspection, and other requirements) have been completed.
UTILITIES/ADDRESS CHANGE —Arrange to have utilities transferred and change address with post office, family, friends, relatives, and employers.
FINAL WALK -THROUGH—Arrange for final walk-through of property to inspect for utility functions, repairs completed, personal property and garbage removal, etc. Obtain all operating instructions and warranties from Seller. Obtain Homeowners Association rules, regulations, and covenants if applicable.
AT THE CLOSING —Confirm the method of payment for paying the balance of the down payment and closing costs. Also confirm identification necessary at time of document signing. Obtain keys, garage openers, and alarm codes at time of possession.
TIPS FOR A SMOOTH MOVE
PLANNING IS THE KEY . . .
Even if your move is within the same general area, there are several actions that can expedite the procedure.
— If you intend to use a moving company, make arrangements as soon as possible.
— A month before the move, fill out change of address forms for the post office, the IRS and any others that need to be
notified, including families and friends.
— Don’t wait to tell your children about the move. The sooner they know the better. Children need time to adjust to the
idea. Provide plenty of affirmation that the move is for the best.
— Notify doctors, dentists, veterinarian, and insurance agents. Obtain copies of important records. Fill prescriptions
— Contact utilities, phone, and cable services regarding discontinuing services. Arrange for new services at new location.
— Make necessary financial arrangements, including transfer of accounts (checking, savings, other).
— Take inventory of your belongings before they’re packed in the event you need to file an insurance claim later.
If possible, take pictures or videotape your belongings.
— Secure valuables, jewelry, safe deposit box items, and important documents to take with you.
— Empty fluids from lawn equipment, hoses, etc.
— Dispose of anything flammable, including gas cans, paint cans, chemicals, etc.
— If necessary, make special arrangements for transporting pets. You can take cats and dogs in your car, but remember to
put down newspapers or sheets to keep your car clean. Animals can get carsick and may require stops along the way, so
take along a leash, food and water. Other small pets, such as birds and hamsters, can easily be taken in the car. Cover
their cages to help keep them calm. It can be risky to move fish. Better get recommendations from your local pet store or
other expert on how to move your type of fish.
— Plants also need special care. You should prune your plants a couple of weeks before the move to facilitate packing. Place
the plants in cardboard containers with packing material to hold them in place. Use paper to cushion the leaves and place
a wet paper on top to keep them moist. Mark the boxes and punch air holes in the top before loading into your car.
Unpack the plants as soon as possible when you arrive. Remove plants through the bottom of the box to avoid breaking
— Pack for your personal move; clothing, linens, personal affects and items needed upon move-in.
— Empty refrigerator, clean and place baking soda inside to keep it smelling fresh.