When is the best time to buy?
Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are anxious to buy so they can move during summer vacation, before the new school year begins.
The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.
How long should I look before buying a home?
You should look until you find the home that is right for you. This could take a week or a year depending on your personal needs and the state of the real estate market. Ideally, you would like to find a home after you have looked long enough to know what you like and what you do not like. You need time to educate yourself about the housing inventory.
How many times should I look at a house before I make an offer?
You will no doubt want to take a second or third look at a house that interests you. Your agent can arrange this; you should not call the sellers directly for access. But you should drive or walk by the house to get a better feel for the neighborhood. Return several times, at least once during rush hour, to see if the street is busy or congested. Drive a few blocks away from the house to see if the neighborhood holds up to your expectations. A map is a handy house-hunting aid.
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How long does it take to buy a house?
Buying a house can take from a few days to a few years. In most cases, the process will take several months of diligent effort.
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How do you choose a good agent?
Kari Leon and Lucinda Speer are on the Victor Valley Realtors Association Board overseeing the education for realtors. They stay ahead of the times and make sure their agents do too. This is why choosing an AGIO agent would benefit you. They bring knowledge of the industry, the area, and their own personalities to help you find a home.
You don't usually pay for your agent's services (in the form of a commission, or percentage of the sales price of the home). The seller usually pays all agents in a transaction from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it's legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer's brokers, whose legal obligation is exclusively to you.
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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, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. 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.
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What do all of those real estate acronyms in ads mean?
If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:
* assum. fin. -- assumable financing
* dk -- deck
* gar -- garage (garden is usually abbreviated "gard")
* expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.
* fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views
* FDR -- formal dining room (not the former president)
* frplc, fplc, FP -- fireplace
* grmet kit -- gourmet kitchen
* HDW, HWF, Hdwd -- hardwood floors
* hi ceils -- high ceilings
* In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.
* large E-2 plan -- this is one of several floor plans available in a specific building
* lsd pkg. -- leased parking area, may come with an additional cost
* lo dues -- find out just how low these homeowner's dues are, and in comparison to what?
* nr bst schls -- near the best schools
* pvt -- private
* pwdr rm -- powder room, or half- bath
* upr- upper floor
* vw, vu, vws, vus -- view(s)
* Wow! -- better check this one out.
Resources: "Real Estate's Ambiguous Language You Oughtta Understand," Glennon H. Neubauer, Ethos Group Publishing, Diamond Bar, CA; 1993.
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How is a home's value determined?
You have several ways to determine the value of a home.
An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.
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What is the difference between market value and appraised value?
The appraised value of a house 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 to. 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. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
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What standards do appraisers use to est. value?
Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at:
550 W. Van Buren St, Suite 1000
Chicago, IL 60607;
(312) 335-4100.
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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.
For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying. Your local builders association probably gets this report.
If not, the housing research firm is located in Canton, Mich.;
call (800) 755-6269 for information; the firm also maintains an Internet site.
Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 495-4700.
The census bureau also maintains a site on the Internet.
The Chicago Title Company also has published a pamphlet, "Who's Buying Homes in America." Ask your AGIO agent for a copy.
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How do I figure out how much to offer?
Learn as much about market values as you can. Look at comparable properties. Ask your agent to prepare a comparative market evaluation of the property that will tell you recent selling prices of comparable properties. When market values are rising, there is a bit of guesswork involved in pricing. You may need to be a trendsetter and pay a bit more than recent comparable sales to be the successful bidder. Find out all you can about the property before writing an offer.
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Do sellers have to disclose the terms of other offers?
Sellers are not legally obligated to disclose the terms of other offers to prospective buyers.
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How do I get the real scoop on the homes I am looking at?
Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
* In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
* Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.
* The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
* Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
* Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.
* The type of water heater, water supply, sewer system or septic tank also should be disclosed.
Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions.
It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
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What are the "standard" contingencies?
Most purchase 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. As a buyer, you could forfeit your 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 seller's 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.
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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 seller’s 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.
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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 low 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.
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Are low-ball offers advisable?
A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price. While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected. You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.
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How do mortgages work?
A mortgage is basically a long-term loan that you arrange through a bank or other financial institution, or even through the seller of the property. The house and/or property serve as collateral for the loan.
A home mortgage is most likely the largest debt you will assume. You typically pay off that debt in monthly payments over a long period of time, most often 15 to 30 years.
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What is in a mortgage payment?
A monthly mortgage payment typically includes the following, known as PITI:
* Principal
* Interest
* Real estate Taxes
* Property Insurance and, often, private mortgage insurance, known as PMI.
PMI gives the lender protection if the homeowner should default on the loan. The mortgage company charges insurance if the down payment is less than 20 percent of the sale price or appraised value. PMI usually can be eliminated once the principal balance of the mortgage reaches 80 percent of the sale price or appraised value, which is known as the loan-to-value (LTV) ratio.
The process of paying the principal takes years because mortgages are based on a repayment plan called amortization. During the years of the mortgage, a homeowner pays a lot of money toward interest in order to have manageable monthly payments on the huge house debt. During the first few years, most of the mortgage payments will be applied toward the interest. During the final years of the loan, the payments will be applied primarily to the remaining principal.
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What are the types of fixed rate mortgages?
Most lenders offer several types of mortgages; the most common are the fixed-rate mortgages for 30 years or 15 years. 30-year fixed rate
This mortgage is an industry standard, as total payments are spread over so many years that your monthly payments are lower than they would be on a shorter-term loan. The interest rate, which is set, or locked in, at the time of obtaining the mortgage, remains the same throughout the life of the loan. Check out the latest bankrate.com survey of interest rates on 30-year fixed mortgages.
On a 30-year loan, you end up paying thousands of dollars more in interest compared with a shorter-term obligation, but this interest is 100-percent tax deductible, which reduces your after-tax cost. 15-year fixed rate
This mortgage also is becoming a common loan because borrowers pay a lower interest rate in exchange for larger monthly payments. Note, however, that a smaller portion of your monthly payment goes for interest and therefore the tax deduction is smaller.
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What are the types of adjustable rate mortgages?
With a 15-year mortgage you could get an interest rate that is typically one-quarter to one-half percent lower than a 30-year mortgage. The shorter the term, generally the lower the interest. Yet, the main advantage is the fortune in interest you will be saving during the life of the loan. Check out the latest bankrate.com survey of interest rates on 15-year fixed mortgages.
Adjustable-rate mortgages, known as ARMs, differ from fixed-rate mortgages in that the interest rate moves up or down. ARMs are tied to a number of indexes, which usually are published interest rates. The margin is the amount a lender adds to the index , usually two percentage points or four percentage points, to set the actual interest rate of the ARM.
The most common index for ARM adjustments is the one-year U.S. Treasury bill. The one-year bill has a yield very near that offered by the 30-year Treasury bond, which is used to set rates on 30-year fixed mortgages.
The initial ARM rate is generally lower than the fixed mortgage rate, though in the current economy the one-year ARM rate has been only slightly lower, about one-quarter to one-third of a percentage point. Check out the latest bankrate.com survey of ARM interest rates.
Some ARMs adjust the interest rate every year, while others have an initial fixed rate period of 3, 5, 7 or even 10 years, after which the rate adjusts on an annual basis.
The more short term the index that your ARM is tied to, the more volatile your payments will be. That's good if interest rates fall, but it can cause trouble if interest rates rise.
Most ARMS offer built-in caps to protect against enormous increases in payments:
Lifetime cap - Limits how much the interest rate can rise during the life of the loan.
Periodic rate cap - Limits how much your payments can rise at one time.
Payment cap - Offered in some ARMs, it limits the amount the payment can rise over the life of the loan. So if the underlying index rises, your payment would increase only to the limit of the payment cap.
Keep in mind that rate caps work when the rates rise and when they fall. To get a better understanding of how ARMS work, we compare adjustable and fixed-rate mortgages in the next section.
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What other costs are associated with purchasing a home?
In addition to the down payment, there are many other typical closing costs. You need to have enough cash to cover these basic costs plus your down payment. Lenders estimate 3 percent to 6 percent of the loan amount in closing costs.
On a $100,000 mortgage that would be $3,000 to $6,000.
Closing costs could include:
* Loan application fees and credit report
* Title search and insurance fees
* Lender's attorney fees
* Property appraisal
* Inspections
* Survey
* Recording fees
* Transfer taxes
* Buyer's attorney
* Documentary stamps on new note
* Origination fees on mortgage
* Condominium application fee
* Escrow account balances/prepaids (for taxes, insurance)*
Real estate closing practices vary widely from state to state and even county to county. Where you live will determine exactly what you will have to pay. Even if you are not required to escrow money for taxes, you may want to set aside this amount to assure that you will be able to pay those tax bills when they fall due. You can get a good idea of what applies where you are buying by checking with a few real estate agents and lenders or title agents.
For more on closing costs, ask for the "Consumer's Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415) 974-2163.
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How can owning a home cut my income taxes?
Owners are entitled to write off mortgage interest and property taxes. However, you can only take these deductions if you switch from the standard deduction, which all taxpayers are entitled to, to itemized deductions. If your itemized deductions, including mortgage interest and property taxes, do not exceed the standard deduction amount, you are better off taking the standard deduction. Not all owners get a tax break from owning their homes.
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Are property taxes deductible?
Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes. • back to top
How do property taxes work?
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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What is an impound account?
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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Where can I learn about appealing my property taxes?
Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal process, which begin with an appeal filed with the appropriate assessment appeals board.
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Are seller-paid points deductible?
As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.
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Are taxes on second homes deductible?
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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What home-buying costs are deductible?
Any points you or the seller pay for your home loan are deductible for that year. Property taxes and interest are deductible every year.
But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees.
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Where do I get information on IRS publications?
The Internal Revenue Service publishes a number of real estate publications. They are listed by number:
*521 "Moving Expenses"
*523 "Selling Your Home"
*527 "Residential Rental Property"
*534 "Depreciation"
*541 "Tax Information on Partnerships"
*551 "Basis of Assets"
*555 "Federal Tax Information on Community Property"
*561 "Determining the Value of Donated Property"
*590 "Individual Retirement Arrangements"
*908 "Bankruptcy and Other Debt Cancellation"
*936 "Home Mortgage Interest Deduction"
Order by calling 1-800-TAX-FORM. To call the Internal Revenue Service about general questions, call (800) TAX-1040.
