Real Estate Red Flags

Provided By Financially Fit

As potential homebuyers begin wading back into a battered real estate market, it's helpful to know how to evaluate properties, especially foreclosures and houses that may have stood abandoned. Is that fixer-upper really such a bargain?

Dwight Martin, a master homebuilder and the owner of DK Martin Custom Homes emphasizes hiring a home inspector, because whether the home is new or old not all problems can be spotted by the untrained eye — or even a relatively trained one. When his daughter bought a home, he inspected it but also called a friend, who requested the furnace number and the model. The house's furnace had been recalled due to a carbon monoxide issue. "That was something I never would have known so we had the seller test the furnace," says Martin.

"Often times the cost of the home inspection won't be as much as the benefit you'll get from the seller in fixing something they found. When people say, 'I can't afford an inspector,' what if he finds your furnace needs to be replaced?"

But before you even get an inspector involved, there can still be warning signs that a house is a questionable choice. If you see numerous "for sale" signs throughout one neighborhood, it's best to find out the reason for the mass exodus. Notice if the house smells either bad or too artificially good (this could be an indicator of an air freshener being used to cover up a moldy smell). Make an effort to notice those little things that could mean a lot, such as rodent droppings in the cabinets.

There's one former red flag that may no longer apply. Before, a house lingering a long time on the market was often considered a bad sign, but now it can just be a sign of the economic times.

Lack of Maintenance

Home inspector Reggie Marsten, owner of the D.C.-based REM Home Inspections says his number-one red flag is a lack of maintenance.

"When I first pull up to a home, even before I get out of my vehicle, I'm scanning the house for a sense of what I'm getting into. "I'm looking at the roof—what condition is it in? Is there vegetation growing in the gutters from not being cleaned, does the house need paint, is there damaged or missing trim and siding? Are the shrubs in front neatly trimmed or do they look wild, has the grass been cut? Chances are if the exterior of the house looks somewhat rundown and unkempt then the interior is also in the same condition."

Water Damage

"When I think of big problems in houses, I think of water, or too much moisture in the house," says Martin, adding that one indicator of that danger is when the ground around the house is sloped toward the house instead of away, which can lead to a flooded basement. He also cautions to make sure the bathrooms have adequate ventilation, and checking the attic or crawlspace to make sure there's no mold or mildew.

Regional Concerns

Martin, who builds homes in the Puget Sound region, notes that houses situated on water are more exposed to the weather and have different storage needs, and buyers there have to consider whether houses are raised high enough.

Other locations bring different key home features into play, and it's good to know regulations specific to your region. In areas that get extreme heat or cold temperatures, energy efficiency takes on more importance. If it's an older house, it might not be well insulated, and it may have single pane glass. Because of new technologies and energy codes, new homes are much better at keeping the heat in winter and keeping it out in summer.

Structurally, homes are being built much stronger, such as with seismic design and construction, notes Martin. "On the West Coast, we have very strict rules so the homes will hold up much better in earthquakes. In the Gulf States, they're much stronger for hurricanes."

House Age and Period-Specific Issues

There are positives and negatives for both new and old houses. Older homes might show quality craftsmanship on a more consistent basis, but might need to be adapted for today's lifestyles, such as installing modern sound systems or upgrading the kitchen to current preferences.

For Marsten, the age of a house can be his red flag number two. "Age itself is not a problem with a home if it's been maintained and upgraded. All components of a home have a life expectancy; 20 years for a standard asphalt shingle, 12 years for a hot water heater, 15 years for an air conditioner. If I'm in a house that's 22 years old and find the original roof, hot water heater, furnace and air conditioner and kitchen appliances then I have to inform my client that they will need to budget to replace all the components that are past life expectancy."

Homes built in different eras have different hidden potential dangers characteristic of their period, Marsten said. "In our quest to build houses quicker and cheaper over the years, products were used that didn't receive adequate testing, or at the time they were used the long term exposure ramifications weren't known.

He cites the following examples:

• Homes built in the early 1900s used lead water lines.

• Homes built from the 1920s until the 1970s utilized lead- and asbestos- containing products.

• Homes built in the 1960s to the present contain products that give off volatile gases (hurricane Katrina HUD trailers for example).

• Some homes that were built from the mid 1970s to the present utilized defective water lines that fail.

Avoid Raising Flags

Marsten advises that purchasers do as he does: "Just take a few minutes, stand across the street from the house their looking at and just scan the exterior looking at the roof, gutters, siding, trim and shrubbery looking for anything that doesn't look normal or out of place."

Compare the home to others in the area, he says. Does the home look better than the others, the same, or worse? Keep in mind everything that needs to be painted, repaired, adjusted, tweaked, or replaced has a dollar sign attached to it and those dollars can add up very quickly, Marsten says.

"You can also tell when the owner let the house run down and then slapped a coat of paint on it to sell it, the, "lipstick on a pig" syndrome. Lack of maintenance can't be hidden."

"Well-built is an indication of professionalism and craftsmanship, unfortunately two traits that are rapidly disappearing with today's builders and replaced with speed and profit," says Marsten "I call it 'good bones' if the house has been constructed structurally sound, that is; square, plumb and level that's 75% of a well built house, the remaining 25% is maintenance."

To find the perfect home for you and your family call the professionals at 972-772-7000 or email us at rockwall@kw.com.

Types of Lenders

Provided By Yahoo! Real Estate

Today's choices include banks, mortgage brokers, home builders, and Internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.

Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The most common source of home lending is a retail financial institution or credit union. They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers.

Mortgage brokers, on the other hand, act as the middleman and don't fund the loans themselves, but handle the mortgage financing for the borrower. Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both. Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.

Home builder financing is common in new developments where there is a single builder. The builder carries the construction costs until the homes are built. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn't make mortgage payments until the property is finished.

The popularity of finding a mortgage on the Internet mortgage has grown in recent years. Many lenders offer competitive rates and the convenience of tracking your application through the approval process. Some can save you a significant amount in closing costs, since everything is automated and the time to get approved can be shortened.

Do you have questions about a new home loan? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

Best Times to Buy

Provided By Yahoo! Real Estate

A Conventional wisdom says that you need to stay in a home a minimum of five years to ensure that you recoup your purchasing costs. But with some markets soaring, this advice doesn't always apply.

It's All About the Market

Market conditions play a huge part in any decision about when to buy. Housing market values have varied widely from region to region in recent years. While the Florida market has seen meteoric rises in home values, Ohio has seen its real estate prices go into negative territory in the last year.

Do not buy high and sell low - if your market is softening or has hit its peak and is heading south, you may want to wait on your purchase.

The magazine Smart Money has created a worksheet to compare the costs of renting vs. buying using market appreciation calculations to determine at what point you come out ahead. Plugging in the price, down payment, your income bracket, interest rate, and current market appreciation rates, the worksheet will break out what you will gain.

For example, say you were to buy a $400,000 house in Boulder, Colorado and you estimate the market will soften from the current 11% appreciation to about 9 percent annually. If you stayed in the house three years, you would recover $88,750 in equity at the end of that period; if you stayed five years, you'd realize
$120,360.

It's All About You

The top three reasons people file for bankruptcy are change of job status, divorce, and unforeseen health expenses. If you face any of these challenges and don't have a financial cushion, this may negatively impact your ability to pay a mortgage. Big life events dictate your readiness to buy now or to wait for a little more stability.

Signs you should not buy right now:

•Will you be moving within the next five years?

•Will you be having kids soon?

•Will you be making a job change?

•Have you recently filed for bankruptcy or is your credit score below 630?

If you answered yes to any of these questions, or you are experiencing other life-changing events like illness, marriage, divorce, or breakup, you may want to wait.

Your Financial Future

Aside from life events contributing to your decision, getting your financial house in order before you begin your home search is key. Even with all the programs available for buyers with a low-or-no down payment, if your debts are growing steadily and you don't foresee an increase in your income, you are putting yourself in greater financial risk by taking on a mortgage.

With only a few exceptions, many loans for people who are still repairing their credit or recovering from bankruptcy carry higher rates than those available once your credit is in better shape. So the question comes down to this: Do you buy now, before prices appreciate higher than you can afford, but do so with an expensive loan? Or do you wait and repair your credit, then get a favorable loan, and pay more for your home?

That's the sort of analysis you need to go over with a financial counselor or mortgage broker before you start hitting open houses.

Ways to Cushion the Blow

On the other hand, if you are willing to buy a home that needs a bit of work and, over time, you can afford to get it done, your home could appreciate faster, strengthening your financial position. If you are willing to take on a roommate or renter, you can also soften the expense of a mortgage, which almost always costs more than rent. Buying a home is a risk, and it's worth asking yourself hard questions about what you're willing to do to protect yourself from getting in over your head.

If you answered "no" the life-change questions, and have the down payment or equity from your current home, you still need to look at interest rates and at how buying affects your taxes. You can't time the stock market, but you can time interest rate hikes, as they are a little easier to predict. If they are going up fast, you can jump in before they rise too far; if they are already high, you will have to calculate how refinancing in the future affects your budget.

What to Do First

If you are anxious to get moving, be patient. You have a few things to do first:

1.Go to open houses - get the lay of the land

2.Talk to a mortgage broker to get pre-approved

3.Interview agents (You may want to find an agent at the same time as you look for a mortgage broker - a good agent can recommend reputable brokers and help you make sense of the terms of the loan)

4.Review credit report and scores with mortgage broker to determine if any repairs are needed

If you are ready to purchase a home and need an experienced real estate agent, give us a call at 972-772-7000 or email us at rockwall@kw.com.

Down Payment Options

Provided By iforma Research Services
Source Yahoo! Real Estate

One of the components a lender uses to help determine what loan amount to approve is your down payment. A down payment not only serves as a commitment on a borrower.s behalf to make good on a loan, but acts as a lender.s guarantee to minimize risk in case a borrower defaults on a loan. The more of your own cash that you can put down for a loan, the easier it is to qualify for a higher loan amount or a lower mortgage payment.

Alternative sources of funding

Since most borrowers do not have large cash reserves on-hand for a down payment, there are other alternative sources for funding. Besides tapping into your own savings accounts, other resources may include friends, relatives, 401(k) plans, proceeds from stock sales, appraised assets, even a co-signer.

Many cities, looking to expand their communities, even offer their own down payment subsidy programs for cash-strapped buyers. It.s not uncommon to be gifted $5,000 to $10,000 without expectation of re-payment.

Loan-to-value ratio

A down payment is always expressed as a percent of the sales price and often referred to by lenders at the .loan-to-value ratio. or LTV. For instance, a $250,000 mortgage with an LTV of 80 percent would require 20 percent down or $50,000. Using a down payment calculator can help you see what influence a different down payment can have on your monthly mortgage.

Other down payment options

Some banks even offer zero-down percentage loans which require no down payment. These types of loans are typically directed at first-time buyers with good credit who are qualified to make the monthly payment but cannot come up with a down payment. However, without a down payment the buyer has no equity in the house and the lender is at greater risk, so the interest rate could be higher.

Another alternative to buying a home without committing to a down payment is to consider a lease option to buy. As a renter, you have an option anytime during the term of the lease, to buy the property at an agreed upon price from the owner. In some instances, the money you.ve put toward rent can be fully or partially applied toward the down payment.

Sellers can also assist buyers with their down payment. By offering a carry-back mortgage, sellers can sell their house faster in a competitive market and buyers can purchase a home they otherwise might not be able to afford.

Do you have questions about all your down payment options? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

Why Buy a Home?

Provided By Yahoo!

The past few years of rocky real estate markets has left some people wondering, why buy a home? If you find that thought running through your mind consider these things.

A recent survey commissioned by the National Association of Home Builders found that 72 percent of its respondents opposed any effort to get rid of the homeowners' mortgage interest deduction. That's despite the fact that doing so could help ease the nation's budget deficit.

Gil Gross host of Real Estate Today Radio reported that, "The survey cut across partisan lines, and even across homeowner status. 76 percent of Republicans and 64 percent of Democrats oppose eliminating the deduction, as do 75 percent of owners and even 55 percent of renters. They all recognize the importance of homeownership to the nation's economy."

But why when you hear the horror stories of markets crashing, housing underwater and homeowners facing foreclosure, would you want to buy a home?

The first reason, we just addressed. When you buy a home there are tax advantages. Effectively, homeownership provides an excellent tax shelter. But there are more reasons to trade your rent payment for a mortgage. Buying a home for this tax advantage isn't how you should look at it. Rather, think of it this way. You need a place to live. Receiving a tax advantage for the place that you choose to live in, is a nice bonus.

When carefully used, a home equity loan (line of credit that allows you to borrow against your home) can be a better way to carry credit. That's because home equity lines can have lower interest rates and are also deductible whereas typical credit card interest is not.

Owning your own home gives you more freedom and the opportunity to create a living environment exactly how you want it. There's no consulting with landlords to see if you can do something to the home or who will pay for the change. Of course, that means when you buy a home you should consider what additional changes you plan to make, so that you can appropriately budget. Also, keep in mind that with homeownership come unexpected expenses for repairs and maintenance. While that may sound like a reason not to buy, it shouldn't be. Think about owning a car. There are maintenance issues and expenses but most people still like to own their own vehicle.

Homeownership provides a sense of stability and security. Instead of wondering when the landlord might decide to sell the home, you are in control of that decision. Additionally, homeownership provides immeasurable values of belonging to a social community. Also, as a homeowner, you'll have a greater influence on community affairs. Renters, being usually more transient, have less influence on policymakers.

What it comes down to is how long you plan on staying in a particular home and area and what you can afford. Owning your home weds you to a property which some people feel limits them. However, many others see a home as their life and the legacy they'll leave behind... a place where they raise children, enjoy company, experience life's ups and downs, and eventually pass on their home to loved ones.

If you are interested in buying a home give us a call at 972-772-7000 or email us at rockwall@kw.com.

Understanding Points, Rates and Fees

Provided By Quicken Loans
Source Yahoo!

Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.

Purchase Points

Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.

How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.

Interest Rate

When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.

Mortgage interest rates change constantly.daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender.locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.

Fees

There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).

Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs.you may or may not be able to afford to pay more at closing and are willing to pay more over the long term.

Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.

If you have questions about buying a home, call the realtors who know the answers at 972-772-7000 or email us at rockwall@kw.com.

Increasing Seller's Property Value

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Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price.

Some tips to achieve a positive impact on value are:

1.Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.

2.Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.

3.Cosmetics are important.

•Fresh paint will always add more value than it costs.

•Clean or new carpet/flooring adds more value than it costs.

•Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.

•If you can, add some colorful flowers and new sod.

4.Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.

5.Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.

6.If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.

7.Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.
 
Have questions about the process of selling your home? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

Choosing The Best Lender

Published By Yahoo! Real Estate

You're shopping for a mortgage and you've received four offers from four lenders. How do you choose? The first factor most people consider is the interest rate and other costs, but that's only the beginning. You'll also want to think about the lenders themselves, not simply the numbers they're tossing your way.

Here are five steps to follow when determining which lender is right for you:

1. Compare fees as well as interest rates

Comparing loans based on their annual percentage rate (APR) is a good place to start, but it's not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal "good faith estimate" of all the fees you'll incur with your loan -- this is a standard form lenders must provide you that is more detailed than the overview you'll get with an offer. Also, ask about potential charges that may not appear on that list, such as prepayment penalties. You're not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don't use a lender that you feel is evading your questions.

2. Consider your individual circumstances

Bigger lenders aren't necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.

3. Look at the range of loan types available

There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that's right for your financial situation and risk tolerance.

4. Evaluate the level of customer service

When you're comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. Also, ask them to amend one of the terms (such as a payment cap) and see how willingly they agree. You're looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different, such as an interest-only loan. If you're not getting good service from a lender who is competing for your business, you're not likely to get it after you've agreed to work with them.

5. Check out the lender's reputation

Word of mouth is important in every business, including the loan market. If you've never worked with a particular lender, you'll want to find out the opinion of people who have.

Do you need help with your home mortgage? Give us a call at 972-772-7000 or email us at rockwall@kw.com.