Buying A Home
There are so many variables that there is no standard answer. Don’t believe some gurus low ball hype. There are four main key data points to consider that your can Realtor can provide. Those are the list to sold ratio, the showing activity, the days on market and history of price reductions.
If the list to sold ratio is 97%, offering 90% isn’t going to cut it. Showing activity will tell you how much competition there is in your price range and days on market and price reduction history will tell you the seller’s motivation. From there, there are many other factors like current offers, home condition, upgrades desired, type of financing involved, if any and the buyer and seller’s motivation.
Don’t forget emotional factors. If this home is perfect for you, it will be worth more! Don’t risk losing it over what will amount to a few dollars a month Every 10K in price will cost you approximately $55 a month on a 30 year loan at 5%.
There are two forms of escrow to be aware of. One is simply an account that the title company establishes in order to complete the home sale transaction. It is a holding account for the earnest money and any other funds that will be dispersed. You will be charged a small Escrow Fee for their services.
The main escrow that people talk about is an account your mortgage company establishes to pay your yearly taxes and insurance. You will be required to fund this account when you complete the purchase. Talk to you lender about their escrow requirements because it can be a substantial amount.
You can buy a home with no money down under certain circumstances like a cash offer, USDA (US Dept. of Agriculture) or with a VA (Veterans Administration) loan.
Be sure to ask your lender what is available in your area. There are numerous programs depending on property type, condition, location, price, buyer’s credit score and other factors. FHA loans are available for as little as 3.5% down while conventional loans may require 20% down..
Yes and no. You should realize that you are signing a legal contract and should live up to its obligations. If done incorrectly you could lose your earnest money, be sued for damages or forced to complete the transaction.
One of the most frequently used and legal ways to cancel a home purchase contract is to exercise your termination option. This is a negotiated amount and time period giving you the right to terminate if you have paid the option fee on time.
Another common way home purchase contracts are canceled is by notifying the seller within the proper time period that the buyer can not obtain the financing specified in the Third Party Financing Addendum..
There are other ways and reasons contracts can be cancelled. You should discuss your particular situation with your Realtor and obtain an attorneys advise.
Absolutely! You are spending thousands of dollars. Trying to save a few hundred by not having a home inspection just doesn’t make sense. From structural to safety items, you need to know it is right and there are no home inspection surprises.
Many people think when buying a newly built home they have a builders warranty so don’t need an inspection. That is not the case! Remember, that your builder is only as good as his contractors and they can take shortcuts.
This is one of the biggest items of dispute. If you have any concerns about a particular item, specify it it is included or excluded in the contract. A common dispute is over window treatments. A more recent concern is WiFi enabled doorbells, thermostats and lighting. Unless specifically excluded, those home made drapes that match your couch go with the sale.
Refrigerators commonly are included in other states but not in Texas. Washers and dryers are not included. Only permanently attached items are included. Some items like propane tanks and solar panels may be leased and will not be included.
If you are a seller, you can specify items to be excluded from the sale. Your buyer may love the concrete dog statue so be sure you exclude it if it means something to you.
The Option Period is a negotiated time and amount that gives the buyer the unconditional right to terminate. The option fee must be paid on time (known as time is of the essence) for it to be valid.
This is the time the buyer does their due diligence, inspections and any other investigation they desire. It is unconditional, meaning the buyer can wake up the next morning and terminate for ANY reason and has no requirement to state the reason.
Option periods are normally 7-10 days but can be any agreed period. Option fees can be a few hundred to thousands, again negotiable. There are strict requirements for giving proper notice so consult with your Realtor.
Selling A Home
Buyers expect that what they see is what they get. If you have specific items or family heirlooms important to you, exclude them in the listing agreement.
The best method is to just remove them prior to any showings if possible so there is no confusion. You would have to move them anyway!
Don’t go crazy excluding things. Buyers may get the impression that dealing with you will be difficult and move on. Human nature is to want what you can’t have. You may be distracted fighting over the excluded workbench and not notice some other issue in the contract.
In most cases, having furniture vs vacant is better. That is why builders models have all that nice furniture to make it warm and inviting. It can be hard to visualize how furniture placement will work when vacant.
Obviously, too much, dated or odd styles won’t be to your benefit. In home sales neutral is better. If you have 5 huge media recliners in your living room, vacant is better!
Anything that you know of that could be considered a material defect and environmental issues like prior flooding, lead paint, radon, termites, unpermitted additions or other problems should be disclosed.
You can be sure your neighbors will tell the new buyer about that roof patch you did, kitchen flood from poor plumbing or the hidden fuel tank in the back yard.
You are required on the seller’s disclosure to disclose past inspections by professionals. This can be home inspectors, termite, roof, foundation or others.
This is why agents will want you to use the Seller’s Temporary Lease. This gives you a negotiated time to stay in your home after closing.
Since the buyer in this question can’t close, the seller could have not moved any possessions until they were sure it was final. If they have moved their possessions their really is no recourse other than taking the buyer to court.
Hopefully, enough earnest money was provided in the contract to cover any costs resulting from the buyer not closing.
The title company will handle the disbursement of funds after closing. This is known as funding. On a cash transaction, it is immediate and funds are disbursed by wire of check.
However, in a purchase with a mortgage, all the closing documents must be sent back to the lender and approved. If all is as expected, they will authorize the title company to disburse the funds. Again, this will be by wire or check.
Realtors will tell you to avoid closing on a Friday, especially on the last day of a month. This is because there will be many closings across the country on those days and authorization delays are very possible.
You don’t want to be sitting in the title company parking lot with a trailer full of possessions having closed but not funded. The keys to your new home will not be released until funding as taken place.
Paying a portion or all of a buyer’s closing costs is very common and makes sense.
Buyers have to come out of pocket for many items like inspections, surveys, financing fees, ect. when purchasing your home. By paying some of the buyer’s costs it makes it easier for them to buy your home and conserve their cash.
The decision to do this is up to the seller and the amount can be limited by the type of financing or specific lender rules. In any event, if you and your neighbor both have similar homes for sale, yours is more attractive by saving the buyer’s out of pocket cost.
This is a common myth and you absolutely should NOT do it. Pricing high only helps properly priced similar homes look like a better value.
Some buyers won’t even look at your home because comparing to others, they know it is overpriced. After longer days on market, you will be forced to reduce your price to what it should be giving buyers the impression something is wrong with it.
There is only one time that pricing high is a valid strategy. That is in an extremely hot sellers market where multiple offers are common. In that situation, the market might come up to your price but remember, it still has to appraise!
A leaseback is known as Seller’s Temporary Lease and is where the seller leases back their home for a short time after closing. This is normally a few days but can be up to 90.
This allows the seller time to move their possessions after the closing or give the seller time to purchase a replacement home.
Be aware that the seller is now the tennant and the buyer is a landlord. Both parties should check with their insurance agents to ensure coverage.
Buying or Selling Land
Rollback taxes are when the county recovers property taxes levied for agricultural (AG or Open Space Exemption) use when the property use has changed.
The county appraisal district will calculate the rollback between what the land would normally be taxed at vs. the reduced agricultural use tax for (5) five years plus interest.
The person responsible for this rollback tax is the person who changed the use. So if you buy acreage with an Ag Exemption and build a home on it, you changed the use and could be subject to the tax.
For more information see this article on rollback taxes and always check with the county central appraisal department (CAD) for a current determination and rules.
An Ag Exemption is a reduced tax for having land in agricultural or open space use.
There are certain requirements like a minimum acreage size, prior Ag use for certain number of years and continued agricultural use.
Having a horse or cow doesn’t qualify. See your Central Appraisal District (CAD) for requirements. Each county can be different, especially in the minimum acreage size required for this exemption. Also be aware of rollback taxes.
It takes longer to sell land due to the reduced pool of buyers. Many people are looking for single family homes but a much smaller group of buyers is looking for acreage and experiencing the custom build process
Because of this reduced market, there are also financing issues. Not every mortgage broker will finance land. Many times a specialized land bank, cash,owner financing or community bank will be used, often requiring 20% down and 10 year payback terms.
Raw land will need a lot of work depending upon your intended use. It may need a water meter, power, fencing, septic, clearing and a driveway culvert installed. These items can add up quickly.
If you are a first time acreage buyer read this article on what you to be aware of.
Deed restrictions are strict rules that govern your use of your real estate. They can be anything from no chickens or type of vehicle thatcan be parked on site to limiting the type of structure and square footage thatyou can build or move on your property.
These restrictions are used to maintain others property value much like an HOA and are put in place by the seller. They “run with the land” meaning if you sell, they continue to be in place for the new owner.
If you have concerns about a particular use, be sure to read the restrictions and consult with an attorney. About the only restriction that can’t be used is discriminatory practices.
There is only one way to know if you can get utilities and the cost to your site. You need to contact the companies providing services in your area.
Buyers normally think of power and water but don’t forget about internet, trash and garbage or TV and cell phone signals. In the country, just because your neighbor has a water or power doesn’t mean you can get water service or power installed cheaply..
Frequently, line capacity will need to be increased or entirely new lines run. You don’t want dial up internet if you need gigabyte internet! Check closely before you buy.
You may not need a survey but your lender will require one. This could be a new survey or they might accept a previous owners survey with a T-47 Affidavit concerning any changes.
Even if paying cash, you do want a survey to be sure you are buying what you think you are and know of any flood, easement, fence placement or other land use issues.
Survey costs vary depending on the land. A property with a creek on two sidesand heavily wooded will be more expensive that the same parcel without them.
Real Estate Investment
Here is the fun answer! An investment home that is profitable will be one that you bought at the lowest possible price, had the minimum repairs and upgrades and sold or rented at the top of the market!
Realistically, the old saying that you make money when you buy holds true. Think bread and butter. You want a home that the masses will want and can afford to buy or rent.
Generally that will be at least a 3/2/2 brick home built after 1978. Brick for low maintenance, 3 bedroom is the largest pool of buyer need and after 1978 means you don’t have to worry about a lead based paint addendum or providing a lead paint disclosure pamphlet.
Stay away from pool homes or anything too out of the ordinary unless of course you get a smoking deal. The point is to reduce possible maintenance and liability issues.
Ideally, you want your rental property close by so you can keep an eye on it. While a home on a busy street is a negative for re-sale, it can be an positive for a renting out quickly.
Only you can make that decision. I once rented to a friend for 10 years without raising the rent. That wasn’t smart financially
However, if a tenant is taking good care of the property, not causing problems with neighbors or breaking the rules, there is room for slack. Obviously, don’t wait 10 years!
You need to consider the cost of a vacancy. Chances are you will have to paint and have other expenses plus the lost revenue while obtaining a new renter so weigh that into your decision.
For a good tenant you might be better off letting things slide a year but sooner or later you will need to recover taxes, insurance and escrow increases. Also be aware that the market can change so adjust accordingly.
Use a service like Smart Move by TransUnion. I don’t believe in making money off of rental applications and credit checks. Smart Move will bill the tenant directly and I just recover my costs.
Obviously you can ask for references, employer and check other forms of background information and you can require a minimum income and credit score.
There are many ways to finance rentals from a standard mortgage company investment property loan, cash, credit,private owner, owner finance, self directed retirement accounts to a hard money lender.
Regardless of how you finance, remember that time is money. The sooner you get any repairs done and rented, the sooner you start making money. Reduce your holding costs by getting the job done as quickly as possible.
You find rental property everywhere. You can find it listed on MLS, investment clubs, private parties, foreclosures, out of town owners, tax and estate sales.
You learn to train your eye when driving around to spot properties with uncut lawns, deferred maintenance or other problems.
Don’t forget to ask your neighbors as finding one in your neighborhood is perfect. Other sources might be insurance agents, home improvement contractors or cleaning services. They all come in contact with owners in particular situations that might want to sell.
General Real Estate Questions
You don’t need a Realtor anymore that you need a doctor. You can use Doctor Google or buy a home on the internet these days but you would be well advised to use a professional.
We experience and solve problems every day, we know what is happening in the market and when something is a good deal or overpriced and we know who to contact to get things done in a timely and inexpensive as possible manner. Do you like Zillow’s Zestiment? Here is why you shouldn’t.
You don’t need a Realtor to find you a home or open a door for you. You need a Realtor to advise you on the property, market conditions and what to look out for. I have personally told clients not to buy a property they wanted because I knew it wasn’t right. You want that type of person in your corner.
If you have read my testimonials you have seen these comments by Ashley and Kelly among others.. “I almost made a huge mistake but you wouldn’t let me” or “He told me when it wasn’t right”
The way to know what a property is worth is do a lot of research. Know what previous similar homes have sold for, what concessions if any were made, what outside factors may be affecting its value and evaluate the condition and potential resale.
A Realtor can provide a CMA and appropriate advise as well as an appraiser can give their opinion of value. Do not depend on AVMs like Zillow or the neighbor who knows everything.
There are a lot of nuts and bolts to determining value and it may just come down to you are willing to pay more or not willing to pay what is asked. Value is buyer dependent as much as property dependent.
I have had clients pay thousands more that an appraisal or asking price because the property was more valuable to them than others. Consult with your Realtor.
It all depends on the location. Real Estate is local and is affected by local government, job availability,transportaion, development,economic and a host of other factors. Ask your Realtor for current conditions and what future planning might affect the market. For example, large companies moving into an area might turn a buyer’s market into a seller’s market as demand for housing increases
your Realtor can explain the average days on market (DOM), supply and absorbsion rate.
Generally, for a seller the best time to sell is in the Spring when everything is green and looks its best. After school starts, sales drop off and when we get into the holiday season, only serious buyers will be in the market.
That of course means for whatever reason, if you have to sell during Christmas, you will have less buyers but buyers that both need and want to buy a home!
For buyers, there is an old saying in real estate. Buy real estate and wait, don’t wait to buy real estate. You may pay a little more in Spring but you will have more choices. If buying in winter, sellers will be in a negotiating mood. The sooner you buy, the sooner you will start building equity.
For some big box brokers, its all about control. They want you to come in for a consultation and go over every detail about how they do business.
Fathom is a virtual brokerage with independent agents. I work from my home because I don’t need a fancy office or waste your time establishing how I do business.
I will meet you at your home, my home or at a home you want to see. At some point if we click, you will be asked to sign a listing or buyers representation agreement but we need to get to know each other before getting married!