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Frequently Asked Questions

Below we have listed some of your most frequently asked questions. If you have any additional questions or comments please contact us. FAQ Categories:

Appraisals & Market Value. Buying Real Estate Condominiums & Townhomes  Escrow & Closing Costs. First Time Buyers.Home Inspections. Leveraging Your Money. Making an Offer.Mortgages & Financing.New Homes & Vacation Homes.New Home Construction.Pre-construction Condominiums.Selling Real Estate.What can I afford?

Appraisals & Market Value

What is the difference between list price, sales price and appraised value?

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 one, be sure to consult comparable sales prices in the area. 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.

What is the difference between market value and appraised value?

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 is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker.

Buying Real Estate


Do we dig deep and buy a dream home or settle for a starter home?

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: * Are the surrounding neighborhood or the home itself the most important consideration? * Is each of the neighborhoods safe? * Is quality of the schools an issue? * Do any of the areas seem to attract more families with children or adult residents? And where do you fit in? As for the return on your investment, home-price appreciation is hard to predict. In the late 1980s, the more expensive move-up housing appreciated wildly. But during the recession that followed, smaller homes tended to hold their value better than more expensive ones.

How do you choose between buying and renting?

Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property. There also are a number of economic considerations. Unlike renters, home owners 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.

Condominiums & Townhomes

While condos never had the kind of appreciation experienced by single-family homes in the go-go 1980s, most ultimately have not lost value, say some experts. And with high prices in many urban markets and more single home buyers in the market than ever before, the market for condos is strong. As with any home purchase, you should do your homework about the neighborhood or development before you buy. In the case of condominiums, it is important to read the past six months of homeowners association minutes to see how effective the board is and to learn about any possibly detracting issues (such as protracted litigation with the developer). The condominium community has worked hard in the last few years to overcome image problems brought on by disputes and lawsuits. Associations are becoming more sophisticated about property management and taking steps to prevent legal problems and disputes.

How do you choose between condos and single-family homes?

Using appreciation as a measure, condominiums in some areas have been as profitable an investment as single-family homes in the last five years. And in some markets, condos appreciated even more, according to some experts. While single-family homes have been the preferred investment by home buyers, changing demographics are helping make condos more popular, especially among single home buyers, empty nesters and first-time buyers in high-priced markets. Also, the condominium community has worked hard in the last few years to overcome image problems brought on by homeowners association and developer disputes as well as all too frequent construction-defect litigation.

Escrow & Closing Costs

What are closing costs?

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.

Who pays the closing costs?

Closing costs are either paid by the home seller or home buyer. Please review your sales contract to see what charges the seller or the buyer is responsible for.

Why do I need a title report?

As much as you as a 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 your 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 interests of others excluded from title coverage will be listed numerically as exceptions in the report. You also may 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 section includes items the buyer may want to investigate further, such as any laws governing building and zoning.

First Time Buyers

How do you choose between buying and renting?

Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property. There also are a number of economic considerations. Unlike renters, home owners 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.

Home Inspections

Do I need a home inspection?

Yes. Buying a home 'as is' is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.

How do I find a home inspector?

Your realtor is one source. Inspectors are listed in the yellow pages. You can ask for referrals from friends. Ask for their credentials, such as contractor's license or engineering certificate. Also, check out their references.

What's a home inspection?

A home inspection is when a paid professional inspector--often a contractor or an engineer--inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and are paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.

Leveraging Your Money

What is leveraging your money in Real Estate all about?


One of the greatest financial aspects of buying a home is the ability to leverage your money. Simply put, leverage allows you to use a small down payment and financing to purchase a larger investment. For example, if you bought a $200,000 home with 10 percent down, you leveraged the $20,000 down payment to purchase an asset worth 10 times that amount!

Making an Offer

Is a low offer a good idea?

While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved: * Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a high offer, even at full price, may not be as attractive as an offer without that condition. * Is the offer made on the house 'as is', or does the buyer want the seller to make some repairs or lower the price instead? * Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

What are some tips on negotiation?

The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, a seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy closing. Other so-called 'motivated sellers' include people going through a divorce or who have already purchased another home. Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

What contingencies should be put in an offer?

Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers' responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

What is the difference between list price, sales price and appraised value?

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 one, be sure to consult comparable sales prices in the area. 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.

Mortgages & Financing

Are interest rates negotiable?

Some lenders are willing to negotiate on both the loan rate and the number of points but this isn't typical among established lenders who set their rates like large corporations set the prices on their goods. Nevertheless, it pays to shop around for loan rates and know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible. The interest rate is much more open to negotiation on purchases that involve seller financing. These usually are based on market rates but some flexibility exists. When shopping for rates look for published rates in local newspapers or check the growing number of Internet sites that publish such information.

How do adjustable-rate loans change?

Adjustable-rate mortgages go up and down with interest rates, based on several money market indexes which cause the cost of funds for lenders to vary. Several popular indexes include Treasury Securities, Certificates of Deposit, and Libor (London inter-bank offered rate). Most big city newspapers publish ARM index rates. The interest rate and payment adjustments do not always coincide. There is usually a lag. There are a variety of consumer protections built into these loans. But consumers need to beware of advertising and other claims made by lenders.

How do you choose between fixed and adjustable rates?

There is risk involved in selecting an adjustable rate mortgage, or ARMs, because rates may go up. On the other hand, a fixed-rate loan offers good protection against rising interest rates but the borrower is stuck with the initial rate if interest rates drop. Statistics show that home buyers who have chosen ARMs since 1981 have saved thousands of dollars. For a period, the percentage of home buyers applying for ARMs rose substantially, then buyers and homeowners began flocking to fixed-rate loans. Whether to opt for a fixed or adjustable rate mortgage is a matter of personal choice. The first route offers stable payments; the second offers lower initial payments. Another consideration is the length of time a buyer plans to own the home. If you're planning on moving within three or four years, an ARM makes sense even if rates do nothing but rise during that period of time.

What are the most popular ARM indices?

Among the most common indexes Treasury Securities (T-Bills), Certificates of Deposit (CDs), and Libor (London inter-bank offered rate). Most metropolitan newspapers publish current ARM index rates.

What is the value of a mortgage lock-in?

Locking in a mortgage rate with a lender is one way to ensure that same rate still will be available when you need it. Lock-ins make sense when borrowers expect rates to rise during the next 30 to 60 days, which is the usual length of time lock-ins are available. A lock-in given at the time of application is useful because it may take the lender several weeks or longer to prepare a loan application (though automated loan practices are cutting this time dramatically). However, some lenders require borrowers to pay lock-in fees to assure particular rates and terms. Be sure to check that the rates and points are guaranteed and that your lock-in period is long enough. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points. Lenders may have preprinted forms that set out the exact terms of the lock-in agreement. Others may only make an oral lock-in promise on the telephone or at the time of application.

Where are interest rates headed?

No one knows for sure where rates are headed. Beyond public policies put in place by the Federal Reserve Board, there are no laws that govern mortgage rates. Historically, usury laws were used to prevent lenders from charging sky-high interest rates when lending money. But in some states where there are usury laws, banks, thrifts and a number of other financial institutions are exempt from the law. Today, interest rates are governed solely by the financial markets and by Federal Reserve Board action, neither of which can be predicted with absolute certainty.

New Homes & Vacation Homes

Can you negotiate the price on new homes?

It can be difficult to negotiate the sales price with a developer because they may claim their prices are based on fixed construction costs. But it doesn't hurt to try. Experts say builders are more likely to be flexible on price at the very beginning and the very end of a development project. Early on, most developers want to move people in quickly so the project picks up momentum. Later, developers may be more inclined to accept lower offers when only a few units remain. If negotiating the price doesn't work, buyers commonly negotiate for better amenities (upgrade carpet, light fixtures, etc.) or lot location. Experts say a developer will rarely pass up a deal over a couple hundred dollars' worth of carpeting, for example.

Should I buy a vacation home?

Today a vacation home can be purchased for investment purposes as well as enjoyment. And yes, there are tax benefits. Some people buy a vacation home with the idea of turning it into a permanent retirement home down the road, which puts them ahead on their payments. Another benefit is that the interest and property taxes are tax deductible, which helps to offset the cost of paying for a second home. A vacation home also can be depreciated if you live in it less than 14 days a year.

New Home Construction

Should I hire a home inspector for a new home?

Most experts recommend having a home inspected, new or old. For a new home, ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review. Your inspector should either be a professional home inspector, an engineer, an architect or a contractor.

Pre-construction condominiums

What are the advantages in purchasing your property pre-construction?

Historically purchasing your property pre-construction in South Florida has been very attractive for homebuyers and investors. With the fast population growth in the state and the diminishing availability of buildable residential land, prices are rising at an astronomical pace. Today with a volatile stock market, real estate is a highly attractive investment opportunity. It's a tangible investment, and you can leverage your cash with the attractive financing programs available. When you purchase your property pre-construction, you can reserve the property at today's price until the closing date (often 1 - 3 years). If you buy at the beginning you typically can select a prime location and take advantage of builder incentives! The most important factor is to know which development is offering the best value at the time you are ready to purchase. This is where an experienced broker in pre-construction sales can guide you in making the right buying decision. They are constantly monitoring the market, seeking out the very best opportunities for their customers.

How can I find out about Pre-construction projects prior to public offering?

You need to be in contact with a broker that specializes in the pre-construction sales market.

What down payment is required to reserve a property pre-construction?

If you are looking to buy a condo, the developers normally require 10% at the reservation contract and another 10% at start of construction. If you are looking for a single family home or townhome, the builder normally requires only 10% at contract.

Selling Real Estate

How do you prepare a house to sell?

Doing whatever you can to put your house's best face forward is very important if you want to get close to your asking price or sell as quickly as possible. Short of spending a lot of money, there are several steps people can take to make their home show better:

  • Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard.
  • Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. And speaking of paint, if your home was built before 1978, new federal law gives a buyer the right to request a lead inspection. If you think you might have some problems, do the inspection yourself beforehand and make any fixes you can.
  • Be sure that the doorbell works.
  • Clean and spruce up all rooms, furnishings, floors, walls and ceilings. It's especially important that the bathroom and kitchen are spotless.
  • Organize closets.
  • Make sure the basic appliances and fixtures work. Get rid of leaky faucets and frayed cords.
  • Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter.
  • Put vases of fresh flowers throughout the house.
  • Having pleasant background music playing in the background also will help set your stage.

How does someone sell a slow mover?

Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home. The first step is to lower the price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired. Secondly, home sellers should make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the multiple listing service (MLS). Another option is to pull the home off the market and wait for the market to improve. Finally, frustrated sellers who have no equity and are forced to sell because of a divorce or financial considerations could discuss a short sale or a deed in lieu of a foreclosure with the mortgage lender. A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender. In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. But these would be considered more radical options than lowering the price.

How is the price set?

It's very important to price your home appropriately relative to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. A comparative market analysis provides the background data on which to base your list-price decision. Study the comparable sales material presented to you by the different agents you interviewed initially. If the analyses are more than two or three months old, have your agent update the report for you. If all agents agreed on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.

What are the standard ways of finding out what a house is valued at?

A comparative market analysis and an appraisal are the standard ways consumers, lenders and Realtors determine what a home is worth. Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. You also can research 'the comps' yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet. An appraisal, which generally cost $300 to $400 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

What are the two most important factors when selling a home?

Even in a down market, real estate experts say price and condition are the two most important factors in selling a home. So, the first step is to lower the price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired. Home sellers should make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the local multiple listing service. If the seller is using a real estate agent and the property isn't getting proper exposure, find another agent.

What is the difference between list and sales prices?

The list price is the price tag put on a house in a real estate listing; it usually is only an estimate of what the seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions. A seller may need to adjust the listing price if there have been no offers within the first few months of the property's listing period.

Where do I get information on housing market stats?

A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards.

What Can I Afford?

How long do bankruptcies and foreclosures stay on a credit report?

Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. Some lenders will consider a borrower earlier if they have re-established good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

 

What can I afford?

Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don't want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts. It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and pre-qualify you for a loan. The price you can afford to pay for a home will depend on six factors: 1. Gross income 2. The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender 3. Your outstanding debts 4. Your credit history 5. The type of mortgage you select 6. Current interest rates. Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI. This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range.

 

 

 

 

 

 

 

 

 

 

 



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