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What
are the secrets to home purchase negotiation?
What
are the buyer’s responsibilities in the transaction?
What is the
role of the buyer’s Realtor?
What
should the buyer do to investigate and inspect the property?
What other
information might the buyer want to look for?
How can
buyers protect themselves from the cost of property defects?
Why buy
a house instead of renting?
How do I
choose between buying and renting?
Do we dig
deep and buy a dream home or settle for a starter home?
What is the
difference between market value and appraised value?
What is a
house worth?
What is the
return on new versus previously owned homes?
What is the
difference between list price, sales price and appraised value?
How can I save
on closing costs?
What are
closing costs?
Who pays
the closing costs?
Why
do I need a title report?
What kind
of home insurance should I get?
How
are fees and assessments figured in a homeowners association?
Are
taxes on second homes deductible?
How
do property taxes work?
Are
property taxes deductible?
What is
an impound account?
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Property Specific
1. How long
has the property been on the market? The length of time
a property has been on the market may indicate the seller’s
willingness to negotiate.
2. Have there been any price reductions during the listing period?
The amount of any price reduction, as it relates to the overall
purchase price, may indicate the seller’s desire to attract
an offer.
3. Have there been any other offers on the property? It
will be helpful to know what offers may have been turned down
and for what reasons.
4. What is the motivation of the seller? Motivation is
a key element in any negotiation. As an example, if the
seller has already purchased a new property, your ability to
close quickly may be an attractive element of the negotiations.
5. What
personal items are included in the sale? Anything the seller
is willing to leave behind that you won’t need to buy when
you move in has real value. Consider those items in your offer.
Neighborhood
Specific
1. What is
the price range of SOLD properties in the area? This information
is important since it will indicate the top and bottom of that
specific market.
2. What is the average time on market for properties in this
area? Short market times may indicate a seller’ market.
If this is the case, you may face competition from other buyers.
3. What is the list to sale price ratio in this area? This
information may indicate seller’ past willingness to negotiate
and by how much.
4. What is the average sales price per square foot of recent
sold properties most similar to the subject property? This
approach to establish value works best in a P.U.D. and/or where
there are similar homes, lot sizes and improvements.
5. What other known factors about the property or neighborhood
could affect value? Review the Seller’s Property Disclosure
Statement very carefully with your sales associate.
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Investigate
and inspect the property. Reasonably consider the age and
overall condition of the home. Take an active role,
ask questions. Exercise reasonable care to protect yourself.
Verify verbal statements. Get them in writing. Review
the Seller’s Property Disclosure Statement (SPDS), paying
particular attention to the date prepared and to questions answered
“unknown” or left unanswered. Hire a professional
home inspector and attend the inspection. Be aware of all
contractual obligations.
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Find properties
that meet your needs. Assist in answering your questions
of direct you to other sources for answers. Prepare the
purchase contract according to your instructions. Submit
all offers and counteroffers promptly. Coordinate inspections
and walkthroughs. Promptly communicate the status of your
transaction while in escrow.
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Tell your Realtor
what’s important to you. Your Realtor can either answer
your question or direct you to other sources that can.
Verify all important information from any source that could affect
whether you’d buy the property or how much you would pay
for it. Check nearby property uses. Conduct the necessary
inspections. At a minimum, your inspection of the property
should include: the roof, structural integrity, heating and cooling
systems, termites or other pests, electrical and plumbing, waste
disposal, square footage and property lines. Conduct a
final walkthrough to verify that the property is in substantially
the same condition as it was at acceptance and that all requested
repairs, if any, have been satisfactorily completed.
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This will depend
on your needs, plans for the property, and what’s important
to you. Ask your agent for a list of a property’s
non-physical conditions that you may wish to address.
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Get a home
inspection. The seller and the agents may not know of existing
property defects. A home inspection is critical to the
buyer as it enables a buyer to determine the condition of the
property before close of escrow and negotiate possible solutions
to any problems before electing to go forward with the transaction.
Get a home warranty. Buyers are strongly encouraged
to buy a home warranty. However, all policies are not alike.
Read your policy for possible coverage limitations or restrictions.
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You need a
tax break. The mortgage interest deduction makes home ownership
very appealing. You will also be building equity in an
asset.
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Home ownership
offers tax benefits as well as the freedom to make decisions
about your home. When renting you do not have to worry
about the maintenance and other financial obligations associated
with owning property.
There are a
number of economic considerations. Unlike renters, homeowners
who secure a fixed-rate loan can lock in their monthly housing
costs and make prudent investment plans knowing these expenses
will not increase substantially.
Home ownership
is a highly leveraged investment that can yield substantial profit
on a nominal front-end investment. However, such returns
depend on home-price appreciation.
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Choosing between
a smaller house in an affluent neighborhood, an older, bigger
house in a more working-class community or a brand-new home is
not easy. If you’re in this situation, start by examining
your priorities and asking the following questions:
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Is the surrounding
neighborhood or the home itself the most important consideration? |
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Is each of the
neighborhoods safe? |
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Is quality of
the schools an issue? |
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Do any of the
areas seem to attract more families with children or adult residents?
And where do you fit in? |
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Appraised value
is a certified appraiser’s opinion of the worth of a home
at a given point in time. Lenders require appraisals as
part of the loan application process; fees range from $200 to
$300.
Market value
is what price the house will bring at a given point in time.
A Comparative Market Analysis (CMA) is an informal estimate of
market value, based on sales of comparable properties, performed
by a real estate agent or broker.
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A home is worth
what ever someone is willing to pay for it. Everything
else is an estimate of value. To determine a property’s
value, most people turn to either an appraisal or a comparative
market analysis.
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Buying into
a new-home community may seem riskier than purchasing a house
in an established neighborhood, but any increase in home value
depends upon the same factors: quality of the neighborhood, growth
in the local housing market and the state of the overall economy.
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The list price
is a seller’s advertised price, a figure that usually is
only a rough estimate of what the seller wants to get.
Sellers can price high, low or close to what they hope to get.
To judge whether the list price is a fair on, be sure to consult
comparable sales prices in the area and your Realtor.
The sales price
is the amount of money you as a buyer would pay for a property.
The appraisal
value is a certified appraiser’s estimate of the worth of
a property, and is based on comparable sales, the condition of
the property and numerous other factors.
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Studies show
that the closing costs, which can average 2 to 3 percent of a
total.
Home purchase
price, are often more costly than many buyers expect. But
there are some ways to save:
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Negotiate with
the seller to pay all or part of the closing costs. The
lender must agree to this as well as the seller. |
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Get a no-point
loan. The trade-off is a higher interest rate on the loan
and many of these loans have prepayment penalties. But
buyers who are short on cash and can qualify for a higher interest
rate may find a no-point loan will significantly cut their closing
costs. |
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Get a no-fee loan.
Usually, though, these fees are wrapped into a higher interest
rate though it will save you on the amount of cash you need upfront. |
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Shop around
for the best loan deal. Each direct lender and each mortgage
brokerage has their own fee structure. Call around before
submitting your final loan application. |
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Closing costs
are the fees for services, taxes or special interest charges
that surround the purchase of a home. They include upfront
loan points, title insurance, escrow or closing day charges,
document fees, prepaid interest and property taxes. Unless,
these charges are rolled into the loan, they must be paid when
the home is closed.
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Closing costs
are either paid by the home seller, home buyer or both.
It often depends on local custom and what the buyer or seller
negotiates.
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As much as
you the buyer may want to believe that the home you have found
is perfect, a clear title report ensures there are no liens placed
against the prior owners or any documents that will restrict
you use of the property.
A preliminary
title report provides you with an opportunity to review any impediment
that would prevent clear title from passing to you.
When reading
a preliminary report, it is important to check the extent of
your ownership rights or interest. The most common form
of interest is “fee simple” or “fee,”
Which is the
highest type of interest an owner can have in land.
Liens, restrictions
and interest or others excluded from title coverage will be listed
numerically as exceptions in the report.
You may also
have to consider interests of any third parties, such as easements
granted by prior owners that limit use of the property.
Some buyers attempt to clear these unwanted items prior to purchase.
A list of standard
exceptions and exclusions not covered by the title insurance
policy may be attached. This sections included items the buyer
may want to investigate further, such as any laws governing building
and zoning.
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A standard
homeowners policy protects against fire, lightning, wind, storms,
hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke,
vandalism, theft, breaking glass, falling objects, weight of
snow or sleet, collapsing buildings, freezing of plumbing fixtures,
electrical damage and water damage from plumbing, heating or
air conditioning systems, according to the Insurance Information
Institute, a Washington, D.C.-based nonprofit group for the insurance
industry.
Such policies
are "all-risk" policies, which cover everything except
earthquakes, floods, war and nuclear accidents.
A basic policy
can be expanded to include additional coverage, such as for floods
and earthquakes and even workers' compensation for servants or
contractors. Home-based business-coverage, an increasingly popular
rider, does not cover liability associated with the business.
Insurance experts
recommend that homeowners obtain insurance equal to the full
replacement value of the home. On a 2,000-square-foot home, for
example, if the replacement cost is $80 per square foot, the
house should be insured for at least $160,000.
For personal
items, homeowners can increase their coverage beyond the depreciated
value of items such as televisions or furniture by purchasing
a "replacement-cost endorsement" on personal property.
Some experts
recommend an inflation rider, which increases coverage as the
home increases in value.
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Homeowner’s
association fees are considered personal living expenses and
are not tax-deductible. If, however, an association has a special
assessment to make one or more capital improvements, condo owners
may be able to add the expense to their cost basis. Cost basis
is a term for the money an owner spends for permanent improvements
throughout their time in the home and is used to reduce eventual
capital gains taxes when the property is sold. For example, if
the association puts a new roof on a building, the expense could
be considered part of a condo owner's cost basis only if they
lived directly underneath it. Overall improvements to common
areas, such as the installation of a swimming pool, need to be
considered on a case-by-case basis but most can be included in
the cost basis of any owner who can show their home directly
benefits from the work.
To find out
more about how the IRS views condo association fees, look to
IRS Publication 17, "Your Federal Income Tax," which
includes a section on condos. Order a free copy by calling (800)
TAX-FORM.
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Interest and
property taxes are deductible on a second home if you itemize.
Check with your accountant or tax adviser for specifics.
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Property taxes
are what most homeowners in the United States pay for the privilege
of owning a piece of real estate, on average 1.5 percent of the
property's current market value. These annual local assessments
by county or local authorities help pay for public services and
are calculated using a variety of formulas.
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Property taxes
on all real estate, including those levied by state and local
governments and school districts, are fully deductible against
current income taxes.
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An impound
account is a trust account established by the lender to hold
money to pay for real estate taxes, and mortgage and homeowners
insurance premiums as they are received each month.
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