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Buying Advice

Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future.

Below are some articles that you might find useful in the home buying process. Please feel free to click on one of the links below to read more.

Buyer Articles

  • HGTV’s Biggest Real Estate Mistakes
  • Short Sales, Long Waits
  • How to Negotiate with Sellers
  • Types of Mortgages
  • Getting the Best Mortgage Rates Online
  • Surviving Escrows
  • Advice for First-Time Buyers

  • HGTV’s Biggest Real Estate Mistakes

    HGTV’s 25 Biggest Real Estate Mistakes ???Get insider secrets to avoid costly blunders on the most important investment of your life. ??HGTV has brought together some of the top real estate experts to compile the definitive list of the biggest mistakes we all make when buying and selling our homes.

    25. Buying a House for its Decor Remember that you are buying the house, not the stuff inside of it, so make sure you see beyond the decorations and look at the bones of the home. Focus on the floor plan and the square footage. You also might want to measure the dimensions and graph out how that’s going to work with your current belongings.

    24. Not Providing Easy Access for Showings Make your house easily accessible to potential buyers. If there’s nowhere to park or it’s difficult to get into, buyers may just skip it and look at someone else’s property instead.

    23. Not Researching the Neighborhood It’s absolutely critical that you research the neighborhood before you buy. Check out the area, amenities and the school system to be sure that your address corresponds with the correct school district. Also attend a community meeting, if possible. You’re not just buying a house, you’re buying a piece of that real estate and the land around it.

    22. Losing Money With Auctions While the starting bidding price for a house on auction might be a good deal, it doesn’t mean the final price will be. Make sure that you are very strict with your budget when you are bidding — do not go over your final price because you got wrapped up in the excitement of a bidding war. Another thing to keep in mind is that when you buy a property at auction, you aren’t able to get any of the warrantees or guarantees, and you are not able to do a home inspection. Find out if the auctioneer is going to put those charges on top of the sale price as well as if there are any liens on the property. You could be responsible for paying the property taxes on that house you just bought, which could make what looks like a good deal into a really bad deal.

    21. Trying to Make the “Hard Sell” While Showing If you are selling your house, you really shouldn’t be around at the open house. You might want to try and sell the place on all the reasons you think the house is great, but that might not translate to the buyer. If you leave, you allow the buyers to really give unbiased objective feedback to the agent, which is only going to help you in the end. ???You don’t have to wait until the weather is nice to put your home on the market. That’s a common real estate myth.

    20. Waiting Until Spring to Sell Your House Spring is the time of heaviest real estate activity, but that does not mean that people don’t buy houses 365 days of the year. That doesn’t mean you can’t emphasize your home’s seasonal amenities.

    19. Treating Real Estate Like the Stock Market When the real estate market is really hot and is appreciating really fast, people tend to look at it like it’s the stock market. But playing real estate is nothing like the stock market — when you invest in real estate, you really need to take a long-term approach.

    18. Failing to Market Your Home in Different Ways Don’t market your home with just a for-sale sign. Explore other marketing tools as well. Talk to your real estate agent about the marketing that they will do. It’s something that should be set up from the initial signing of a contract with an agent. Some homes have virtual tours and photographs online. If you choose to go that route, don’t forget to include the floor plans. That way, people can see the layout of your home and know that if it it’s right for them.

    17. Not Thinking About Resale ??When you are decorating and renovating your home You need to think about what is going to appeal to a broad section of buyers when it comes time to sell it. Buying houses and being in the real estate market is like chess, you always want to look two or three steps ahead in the game.

    16. Buying Without Actually Seeing the Property It’s really easy to buy a house without seeing it because of the Internet and virtual tours, but virtual tours can be deceiving. Plus, it’s really hard to actually get a sense and feel of a home by only looking at it online. You need to actually walk through the place yourself. If that’s just not possible, hire an inspector to go look at the property and provide you with an assessment.

    15. Trusting Everything a Real Estate Advertisement Says Don’t assume every ad is fact. Learn to decipher real estate lingo. For example, cozy means small, and as-is means it’s a fixer-upper. If there are a lot of exclamation points in an ad, it means they are there just to take up room because there is so little to say about the place. Follow the old adage: If it sounds too good to be true, it probably is.

    14. Picking the Wrong Agent Treat meetings with agents like a job interview because that’s really how it works — that person is going to be working for you. Talk to your friends who’ve sold houses and had a good experience with their agent, and go to open houses and observe how that agent interacts with other people. It’s also a good idea to meet with the agent in their office. It allows you to see how organized they are, what kind of environment they work in and whether that’s conducive for them being able to do a good job for you.

    13. Not Hiring an Agent There’s a lot more to selling a house than just putting a sign on the front lawn. If you don’t have an agent, you will not get on the multiple-listing service (MLS). That means that other agents are not going to know that your property is for sale. Another thing to consider is if you are willing to show the house each time someone wants to come by and look at it? If you do plan to sell your house on your own, always have a lawyer present at a closing. It’s really important to have someone on your side who understands all the complexities.

    12. Buying the Most Expensive Home on the Block The most expensive house will only depreciate in value over time, rather than appreciate, which is what you want. Also, those houses are often not the first house to sell because they are usually overbuilt to the neighborhood. It’s absolutely critical that you research the neighborhood before you buy to find out what the price point should be.

    11. Not Setting a Realistic Budget Just because the bank pre-qualifies you for a loan amount of $400,000 doesn’t mean you can afford to make that payment every month. Before hitting the streets for a house hunt, you should sit down and make a monthly budget of what you spend every month. Come up with a number that you are comfortable spending on your mortgage payment, aside from those other expenditures. An easy way to do this is to take a third of your gross income and have that figure be the number you spend on the house. It is also a good idea to have six to nine months of mortgage payments in the bank, plus a little extra if you have any repairs that you might need to do.

    10. Visiting the House Only Once It’s important to visit a house more than once because the neighborhood itself may be very different, depending on the day of the week and the time of day. It’s also a good idea to go home and think about it, even sleep on it, before you go back again.

    9. Not Being Pro-Active at Closing The best thing to do when going into a closing is to get all the paperwork ahead of time. All that information should come from a mortgage broker or banker. They have what they call a HUD (Housing and Urban Development) One form that lists out all the charges, and you can legally get it in your hands 24 hours before closing. Schedule the closing for in the morning, so you have a fresh mind and plenty of time to go over everything and ask questions. The final walk-through is another imperative part of the process. You may want to have a home inspector accompany you. ???Don’t feel like you have to tackle major renovations before placing your home on the market. Just touch-ups here and there — especially outside the home — typically do the trick.

    8. Doing Major Renovations/Remodeling Before Selling Minor upgrades usually have a higher return on your money than tackling major renovations before placing a home on the market. The main reason? Huge construction projects always cost more than you think they will, and they also take longer than you expect. The best place to spend money is outside. Research shows that increasing the curb appeal often returns the most value on your money. It’s what gets buyers inside the house, after all.

    7. Skipping the Loan Pre-Approval Step When you are pre-approved, the bank is saying, “we will give you a mortgage of up to this amount, so now all you have to do is find your home.” Some sellers only allow realtors to show their house if someone has a pre-approved letter. That indicates that the shopper really is serious about buying a home.

    6. Falling in Love With the First Property You See Many homebuyers, particularly first time homebuyers, fall into the trap of falling in love with the very first house that they see. You need to at least look at three more houses in the area to get an idea of what the comparables are in that price range. You want your realtor now to show you homes comparable to what you saw. At the end of the day, re-evaluate. ???Be sure to hire a home inspector to thoroughly check out a house you are interested in purchasing.

    5. Buying a Home Without a Professional Inspection There are a lot of things a home inspection can reveal about a property that are not visible to the naked eye. Be sure to hire someone that comes with a good referral basis, that’s been in the business a while and knows what to look for. Look up the American Society of Home Inspectors and get a list of qualified home inspectors in your area. Once you find an inspector, insist that they compile a written report, complete with photos. Photographs are important because there are areas a home inspector will go that you might not look at.

    4. Overlooking the Extra and Hidden Costs Buying a home is not just about the money that you spend up front; it’s about all the rest of the money you have to spend beyond that. Find out what the property taxes are, what your water bill might be and what a standard electric bill is in that home, especially if you have electric heat vs. gas heat. You also need to factor in furnishings you may need to purchase before you can move in.

    3. Buying What You Want, Not What You Need Look at the space that you are already living in. It will help you to realize what you have been missing and what you need in your next home. Make a list those of needs and then ask your agent to start shopping these needs. On average, Americans live in a house for about nine years. Remember, you can always trade up a few times before you find the ultimate home.

    2. Setting Too High of a Sale Price As a seller its really important to do your research, and in order to come up with your sale price, look up what comparable homes in your neighborhood have sold for. Figure out what the going price is and try to put yours at or below that, unless you have something extra special to offer. It is always better to price a home sharply than to start too high and have to reduce. Once you reduce, it always looks like something is wrong with the home.

    1. Failing to Showcase Your Home and Make Small Cosmetic Changes When you are selling your house, you have to really look at it objectively and think about it from the viewpoint of the house hunter. Make minor enhancements to the house and maybe hire a professional stager to come and arrange your furniture. Staging is about decorating your house for the buyers’ taste, not yours. A great place to start is with the front of the home and the main entryway. Home staging is designed to increase the potential selling price and reduce the amount of time the house stays on the market.

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    Advice for First-Time Buyers

       

    • Pre-Qualification: Meet with a mortgage broker and find out how much you can afford to pay for a home.
    • Pre-Approval: While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You’ll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you’re interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre-approval are generally nominal and lenders will usually permit you to pay them when you close your loan.
    • List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (pool, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for.
    • Representation by a Professional: Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller.
    • Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include:
      1. One or more detailed maps with your areas of interest highlighted.
      2. A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper.
      3. Paper and pen, for taking notes as you search.
      4. Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings.
      5. Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area?
    • Visualize the house empty & with your decor: Are the rooms laid out to fit your needs? Is there enough light?
    • Be Objective: Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don’t make a hurried decision that you may regret later.
    • Be Thorough: A few extra dollars well spent now may save you big expenses in the long run. Don’t forget such essentials as:
      1. Include inspection & mortgage contingencies in your written offer.
      2. Have the property inspected by a professional inspector.
      3. Request a second walk-through to take place within 24 hours of closing.
      4. You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light).

       

    • All the above may seem rather overwhelming. That is why having a professional represent you and keep track of all the details for you is highly recommended. Please email me or call me directly to discuss any of these matters in further detail.

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    Short Sales, Long Waits

    Short sales, long waits: Buyers and sellers find process frustrating

    By Greta Guest, Detroit Free Press

    Updated 7/24/2011

    — Short sales are among the most arduous real estate transactions, often taking six months or more to close — if they get done at all.

     

    They can be a life raft for distressed homeowners who owe more on their houses than what they’re worth, but the experience depends on a variety of factors, such as the number of lenders involved and whether there’s a hardship, mortgage insurance attached or whether the buyer has the patience to stay with the process.

    A short sale occurs when a lender agrees to accept less than what the homeowner owes. The transaction requires that the homeowner has a financial hardship.

    Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services’ loss mitigation division in Birmingham, Mich. A growing reason short sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.

    Unlike private mortgage insurance required for sellers who put less than 20 percent down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased.

    Premiums are paid by the lender or investor and the homeowner isn’t aware of it.

    When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.

    “That’s a mess. They are the worst,” Mahoney said. “It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive.”

    Often, the bank holding the first mortgage isn’t made aware that the second mortgage had been insured until the end of the process, even if both loans are with the same lender. If the mortgage insurance company doesn’t sign off on the deal, the process starts over again.

    These kinds of delays mean buyers walk away because of the time and frustration involved.

    Brian Pannebecker, 52, of Shelby Township, Mich., made an offer on a home in his neighborhood only to have the bank reject it.

    “I would never ever look at a short sale. I would go right to a foreclosure, which I eventually did. It was much, much easier.”

    Instead of buying in Michigan, Pannebecker bought a two-bedroom condo in Ft. Myers, Fla., near where his father retired. He made an offer that was accepted within 24 hours during the holidays. The whole deal closed in six weeks.

    Buyers don’t typically ask to see short sales unless they have the luxury of waiting for an undetermined length of time to move, said Renee Reyer, a Realtor with Clients First Realtors in Canton, Mich.

    Reyer does her homework on short sales. She checks the property history and finds how many mortgages the seller has to determine how difficult the deal might be to close. Based on that information, she works out the percentage of risk that the property won’t close and presents that to her clients.

    Banks say they’ve been working harder to make the short sale process easier, but they acknowledge the delays.

    At Chase the average response is 30 days from request to approval, said spokeswoman Mary Kay Bean in Detroit. Chase has completed 120,000 short sales using its own process nationwide since June 2009 and is now averaging 5,000 a month.

    Pitfalls abound

    The federal government’s program to streamline short sales — know as the Home Affordable Foreclosure Alternatives Program — has yet to gain traction because it doesn’t allow the lender to collect on the home’s deficiency.

    The program was launched in April 2010, and through May of this year, only 8,541 short sales were completed nationally through the HAFA.

    Klorinda Hibbert, a real estate agent at Re/Max in the Hills, has noticed changes in the past year — and they aren’t for the better.

    “The banks are willing to go into foreclosure rather than do a short sale,” Hibbert said. “They want to get paid in full.”

    One reason Hibbert said she thinks lenders are allowing short sales to go into foreclosure is that if the mortgage is insured, lenders and investors can submit a claim to recover some of the money.

    In a short sale transaction where mortgage insurance is involved, the mortgage insurance company gets a say in the sale price of the home or asks the seller to agree to repay part of the loss over time, and that can create more delays.

    “The mortgage insurance companies are making them almost impossible. That’s a whole different animal,” Hibbert said. “We can have the bank approval and then the mortgage insurance company stalls for two months, and they want more money.”

    Alan Goldberg, director of strategic loss mitigation activities for Genworth Financial, a Richmond, Va.-based company that specializes in mortgage insurance, said investors can buy additional coverage if their analysis of a pool of loans indicates more risk than they are comfortable with.

    Short sale shy

    Many Realtors avoid short sales because they can be so difficult, including Michelle Chappell, an agent with Real Living John Burt Realty in Oxford. She sold a home this spring that took eight months to complete. She represented the third offer.

    “This was the last one I sold. I said no more. I won’t do it,” she said. “They are just heart-wrenching for these buyers.”

    Chappell said the buyers looked at 80 houses before seeing “the one.”

    “Whatever bad could happen in this deal, happened,” Chappell said. “I don’t see any change in short sales. I don’t understand that. There should be some kind of general process that everyone goes through. It just differs from bank to bank. It’s almost as if they are throwing curves in there.”

    Qualifying for a short sale

    What you will need to qualify in terms of paperwork and forms can vary by lender. Here are three key things a homeowner would need to qualify for a short sale, according to the Certified Distressed Property Expert website:

    Financial hardship: There is a situation causing you to have trouble affording your mortgage.

    Monthly income shortfall: A lender will want to see that you cannot afford, or soon will not be able to afford, your mortgage.

    Insolvency: The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

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    How to Negotiate with Sellers

    Buying a home is one of the most important purchases most people will make. In order to make the right decision the first time, potential buyers need to be prepared. Consider the following before starting negotiations:

    • Be prepared Research the housing market in the target area. Once you have information about the general area, focus on the particular property and seller. Look for answers to questions such as:
      1. Why is the homeowner selling? (If they’re moving because they find the area undesirable, you might want to consider this issue.)
      2. How long has the home been on the market? (If it has been on the market for a long time, perhaps there are negative facts about the property that you need to know.)
      3. How much did the seller pay for the home compared to the current asking price? (If the seller paid more, find out why. Was it a general real estate trend, or did property values in that particular neighborhood go down?)
      4. What is the seller’s time frame for selling and moving? Does it fit within your needs?
      5. Are there any defects in the home or problems with the surrounding neighborhood? (For example, is the roof so old that it will likely leak during the next storm? Is there a new construction project in the area that will lead to major traffic congestion?)

    As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
    Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.

    • Establish a Timeline Find out if the seller needs to have the sale closed sooner rather than later. If the seller is feeling pressured to sell, use that to your advantage in negotiating. Even if you, the buyer, are the one with the deadline for purchasing a home, don’t let yourself be rushed into making concessions or a purchase you may regret later.

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    Types of Mortgages

    Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won’t qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.

    Fixed Rate Mortgages

    Consider a fixed rate mortgage if either of the following describes you:

    • You plan on living in your new home for many years, and/or
    • You are not a risk-taker and prefer the stability of knowing how much your payment will be each month.Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner.This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you’ll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you’ll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:

      15-Year Fixed-Rate:

      • Pay off the loan in half the time of a 30-year loan.
      • Equity builds up more quickly than in a 30-year loan.
      • Payments are higher (which may be a problem if you lose your job or become unable to work).

      20-Year Fixed-Rate:

      • Pay off the loan in 2/3 the time of a 30-year loan.
      • The overall interest paid is considerably less than for a 30-year loan.

      30-Year Fixed-Rate:

      • The most common choice, especially for first-time homebuyers, as it’s the easiest of the fixed-rate loans to qualify for.
      • Monthly payments are lower than for 15-year and 20-year loans. This can prove especially helpful if you do not have a lot of “padding” between the amount you can afford to spend and the monthly payment for your desired property.
      • More desirable if you plan on staying in the same home for years, since equity builds more slowly than for shorter-term loans.
      • For income tax purposes, this term provides the maximum interest deduction.

      Adjustable-Rate Mortgages (ARMs)

      If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.

      Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.

      Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.

      Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.

      Fortunately, the amount an ARM can increase is limited. There are “caps” on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you’ll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.

      Convertible ARMs

      If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.

      Government Loans

      Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.

      • VA Loans: Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.
      • FHA Loans: The Federal Housing Association offers loans to lower-income Americans. Look for the phrase “FHA approved” when looking at ads for homes.

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      Getting the Best Rates for Your Mortgage

      Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well.

      A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one.

      You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker.

      Do-It-Yourself

      With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need.

      Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate.

      Some sources for interest rates on the Internet include:

      Bank Rate Monitor (http://www.bankrate.com)

      E-Loan (http://www.eloan.com)

      When comparing loans, make sure that you’re comparing loans of the same type. For example, you find that “Loan A” for a 30-year loan has a much lower interest rate than “Loan B” (also for 30 years). Upon further inspection, you find that “Loan A” is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization, but becomes due through either payment or refinancing at the end of 5 or 7 years. These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both said “30-year”, they are not the same type of loan.

      Ask the lender for a statement detailing all fees associated with the loan. Factors such as “points” (loan fee), interest rate and “garbage fees” (extra fees which some lenders charge) can vary greatly from one lender to another.

      Mortgage Broker

      If you do not have the time or experience to “do it yourself,” look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You’ll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind.

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      You’ve Opened Escrow, Now What?

      Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your realtor’s advice) so that escrow and settlement with go as smooth as possible.

      Title Insurance – Where Does Your Dollar Go?
      Title Insurance: As a homebuyer, the term is probably familiar — but is it understood? What is your dollar actually paying for when you purchase a title policy? ??Title Insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination. Title companies spend a high percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights others may have in your property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title. Before closing your transaction, the title company will proceed to “clear” those encumbrances which you do not wish to assume. ??This theory is different from that of most other insurance where, for example, rates and anticipated losses are based on actuarial studies and premiums are pooled on the assumption that a certain number of claims will be made. The distinction is important: title insurance premiums are paid to identify and eliminate potential risks and claims before they happen. Medical and casualty insurance premiums, for example, are paid to insure against an unpredictable future event, knowing that risks exist and claims will occur. Furthermore, title insurance involves a one-time premium, paid when you close the real estate transaction, while property, casualty and medical insurance require regular renewal premiums. ??The goal of title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, this is impossible — we live in an imperfect world, where human error and changing legal interpretations make 100 percent risk elimination impossible. When claims arise, professional claims personnel are assigned to handle them according to the terms of the title insurance policy. ??As in all competitive business environments, rates vary from company to company, so you should make comparisons before deciding on a particular title company. Your real estate professional can help you do this. In addition, there are many helpful customer services provided by title companies which you and your real estate professional may find helpful to your transaction. ??The issuance of a title insurance policy is highly labor-intensive. It is based upon the maintenance of a title “plant,” or library of title records, in many cases dating back over a hundred years. Each day, recorded documents affecting real property and property owners are posted to these title plants so that when a title search on a particular parcel is requested, the information is already organized for rapid and accurate retrieval. This investment in skilled personnel and advanced data processing represents a major part of the title insurance premium dollar. ?.

      Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.

      Secure homeowner’s insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.

      Contact local utility companies to schedule to have service turned on when you close escrow.

      Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a “permanently attached” chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.

      You’ve made it! Once the sale has closed, you’re the proud owner of a new home. Congratulations!

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