Chapter 10 - Getting Your Financing Set

Once you are set on the purchase of your home and the contract has been approved by the seller, you must then forward the contract to your lender who will schedule an appraisal of the house. The appraisal usually does not take a long time and will determine the value of the house based on comparisons in the area.

You should also schedule your home inspection. If you are using a real estate agent, ask them to do this for you.

Your responsibility is to schedule the real estate inspection and get your financing situation. It is the responsibility of the lender to schedule the appraisal.

The seller will have the responsibility of ordering a title commitment and a survey. If the property is a condominium, no survey is required. You are entitled to a copy of the title commitment and survey prior to closing for review. If you are using an attorney, your attorney will get the title commitment and be able to review it for you.

Your real estate agent cannot act as your attorney and review title. Neither can your lender. When you go to the closing (usually held at a title company) , the escrow officer who facilitates your closing cannot give you any legal advice or explain any documents to you. If you are unsure about signing documents, you should hire an attorney.

You should be aware, however, that if you are getting a mortgage, your lender will review the title commitment and survey and make sure that everything is in good shape before proceeding. Your lender has just as much on the line as you do when it comes to the deal. In some cases, they may have more.

To get your financing set, you will need to provide your lender with documentation about the money that you are planning to use for a down payment. This entails a bank statement. If the money is a loan from a family member, you need to provide a gift letter stating that the money is a gift and they do not want to be paid back.

You are also going to need two yearfs worth of tax returns and recent pay stubs for any and all income you are claiming towards your loan. In other words, you have to prove that you can afford to buy the house and pay for it.

You will also need employment verification. This means a letter from your employer stating that you work at the company and should be there for the next 12 months. This is a pre-set form that your employer completes and faxes back to the loan company.

Depending on the lender, you will need three to six months worth of bank statements. A computer print out is fine. This should reflect your income and bills.

If you are going gno doch this means you will not need employment verification, bank statements or tax returns. The lender will still run a credit check. If you have items on your credit report that need explanations, you will have to provide the lender with written letters or documentation. If there is something on your credit that does not belong to you, you will have to sign an affidavit that states this is not your item and show proof of a dispute with the credit bureau.

If you just deposited $10,000 in your bank account, the lender is going to want to know where that money came from. Lenders are getting very strict, especially when it comes to large sums of cash being deposited into a bank account. This is partly due to new regulation passed with the Patriot Act.

Once the lender has all of the paperwork, they will submit your file to underwriting and you will get a formal approval. If you have been pre-approved, this means that you have submitted all of the paperwork and they only need the appraisal, title commitment and contract before they will issue a formal approval. Once you have been formally approved by the lender, you are ready to close.

Chapter 9 - The Real Estate Contract

There are a few things you need to know about the real estate contract. This is generally a form that gets filled in by the real estate agent. You will have to name a price that you wish to offer and the amount of money that you plan to borrow. The earnest money is usually a small percentage of the amount of the contract and, when making an ordinary offer, it paid upon acceptance of the contract. If paid on a foreclosure, it is due at the time the contract is presented.

There are usually two contingencies that a real estate contract will require. One is that the home appraisal meets the price of the home. This is usually built in to the real estate contract but you will want to be sure that it is added into your contract if it is not already there.

There is also a contingency for title insurance. This means that the seller must provide the buyer with a title insurance policy that will insure that the seller is able to sell the house and that the buyer purchased the correct property.

Other contingencies that exist with a contract are those for financing. This is usually filled in on a contract and gives the buyer 30 days or so to get approved for financing. If you have a pre-approval letter, you can skip the financing contingency, although you are always better off to have this as part of the contract in case you want an gout.h

You should also have a contingency for a home inspection. This is important even if you are buying a new home. The house should pass the home inspection and show no significant structural damage. This can be worded in the contract. It also gives you an gouth if you want to get out of the contract for some reason. Housing inspections are rarely perfect, if ever, and there is bound to be some fault with the home, such as the faucet leeks. If your contract is contingent on passing the home inspection, you can ask that the seller fix every little thing on the inspectorfs report or get out the of the contract.

Another contingency you may want is the attorney review contingency. This gives your attorney some time (usually three days) to review the signed contract. This does not go into effect until the contract is signed by both parties. The attorney cannot adjust the price.

Other aspects of the real estate contract include the items that are being sold with the house as well as tax prorations and closing costs. There will also be a time element involved in the contract so that you cannot linger forever upon closing. The seller gets to pick the place where the title insurance will be purchased and where the closing will take place.

Another contingency that is sometimes seen in real estate contracts is a gcontingent on saleh or gcontingent on close.h If a buyer has another house to sell or is waiting for their house to close, a rider is attached that gives the buyer a certain amount of time (usually 90 days) to sell or close (usually 30 days) on a house.

As the buyer, you will be the first to sign the real estate contract and then your agent will present it to the agent of the seller. If approved, the seller will sign it and you will each get a copy (the contracts are usually signed in duplicate).

The seller has three choices when presented with your contract. He or she can refuse the offer by simply not signing the contract, they can counter-offer at a higher price by crossing off your price, adding their own and initially, while signing the contract, or they can accept the contract as is and sign it. They can also make any other changes in the contract as long as they initial the changes. The contract then comes back to you. You can either accept the changes, tell them the deal is off, or make further changes, initial and sign again. In some cases, the contract goes back and forth a few times before it is fully negotiated between the buyer and seller. Rare is the case when a contract is not amended in any way.

Once the deal is set, you are then ready to start the closing process.

Chapter 8 - Making An Offer

Once you have found the home that you want and are ready to make an offer, you should consider the following:

ｷHow long has the home been on the market?

ｷWhy is the seller moving?

ｷHow many other homes like this are also on the market?

All three of the above criteria are important because the affect the price that you can offer the seller. Let’s take them one step at a time and see why they are so important:

How long has the home been on the market?

If the home has just been listed, chances are that the seller is going to want to wait it out a bit to see if someone will come in with a good offer. They are not likely to take the first offer that comes along if it is lower than the asking price. And in this market, you want to be able to offer significantly lower than the asking price.

If the home has been on the market for a long time (in this market, that is greater than 9 months) than chances are that there is something wrong with the property (such as structural damage) or that they just won’t budge off their asking price. You can try to make an offer, but chances are that you are not the first to do so and that they will not take a low offer. In today’s market, you should take at least 10 percent off of the asking price in your offer.

Why is the seller moving?

If the seller has already vacated the house, and it has been vacant for a while, it may be that the seller has already relocated and is not in a hurry to sell. If the seller is still living in the house, you should note why the seller is selling.

There are a number of different reasons why a seller decides to sell a house. They should all have the following significance to you:

Empty nesters. Their children are grown and they are downsizing. This means that they can afford to wait it out a bit and you’re probably not going to get the deal of the century. They’ve probably paid off the mortgage and want the biggest profit they can get.

Transferred. This means that they have to get out within a certain period of time. They are more apt to make a deal.

Divorce. Either the court decreed that they have to sell or they are selling to pay their lawyers. Look for potential cosmetic damage when they finally leave as they will be unhappy about leaving their home. You can, however, get a good deal when there is a divorce going on. You may have to wait a bit longer for an answer as the two attorneys for the couple duke it out.

Bought their dream house. This means that they are motivated and dying to get rid of their home so that they can move. This is an excellent opportunity and this house, unlike the divorce house, will have good karma - if you believe in that sort of thing. It’s always nice to get a bargain off of someone’s good fortune (similar to the empty nesters) than someone’s misery (as in the divorce).

Foreclosure or about to be foreclosed upon. If they are in the process of foreclosure, then you can offer significantly less for the home. If the house has already been foreclosed upon, it will be vacant. There might be cosmetic problems with the house such as a mess all over the place, light fixtures removed and holes punched in walls. People are not happy about getting tossed out of their homes. These are usually just cosmetic damages, however, and can easily be repaired. If they are in the process of foreclosure, they will be glad to have you buy the house before the bank takes it to save their credit. Even if it means that they have to bring a check to closing. You can make an offer of about 20 percent less than the listing price. You can always come up, you can’t go down.

How many other homes like this are on the market?

If you are looking for a home in a coveted area and this is the only one for sale, guess what? Youfre going to pay a lot more than if you are looking for a home in an area where every other house on the block has a gfor saleh in front of it. The more supply, the less money the home is worth. Remember that when you make your offer.

When it comes to making an offer, you need to have two things:

ｷA contract

ｷEarnest money

Both of these prove that youfre serious about making a deal. The contract can be a real estate form contract that is used in your state, a George E. Cole legal form or a contract prepared by an attorney. Unless you have sufficient knowledge about real estate contract law in your state, you should have the real estate agent prepare the contract for you or your attorney.

If you are buying a foreclosure, you will need a contract as well as a cashierfs check for the earnest money and a pre-approval letter from your lender. It will take longer for this process as the bank reviews all bids and selects the best one.

If you are making an offer for a gfor sale by ownerh property, then you will need an attorney to draw up the contract, unless you understand real estate law in your state. An attorney will usually charge a few hundred dollars to facilitate the purchase of your home and will give you a peace of mind that everything was done correctly. If you are unfamiliar with real estate law, get an attorney.

If you are using a real estate agent, he or she can draft the real estate contract for you. This is one aspect of real estate law that they can practice and they will also be able to explain the contract terms to you. Again, do not allow the real estate agent to dictate the price to you. Come up with a price that you feel comfortable with so that you can get a bargain.

Chapter 7 - Things To Stay Away From When Buying A Home

There are a few things you should stay far away from when buying a new home. They include the following:

Mobile homes. A total waste of money. You might as well live in your car. Mobile homes depreciate in value just like a car and you never really own it because you have to pay a fee for the lot. The only exception to the mobile home rule is if you are planning on living in a retirement community that is all prefabricated homes (these are more stationary than true mobile homes) or if you own a lot of land and want to construct housing that can be removed at a later date. Other than that, you are better off renting. At least if something goes wrong in the home, someone will fix it.

Blighted neighborhoods. Areas where there is a lot of gang graffiti are not a good investment. There was an American television show that broadcast in the late 1970s about a couple who decide to sell their home in an upscale neighborhood and buy a run down home in the gang infested area where the father grew up. It was about the kids assimilating themselves with their new “culture.” This was a fabrication and even the public wouldn’t buy it because the show only ran one season. People want to move out of neighborhoods that are crime ridden and gang infested because they fear for their safety. Stay away from blighted areas.

Unsightly Menaces. This can be anything from the air raid siren sitting in the back yard to a water tower in the back yard. Also stay away from homes backing up to electrical wiring. These homes might be cheap, but there’s a reason why they’re cheap. And that’s because no one wants to live in them. Stay away from homes that have unsightly menaces or, are themselves, an unsightly menace. If the home is covered with different colored stones that would be impossible to remove, or has two different color brick or something else that is permanent and makes it look unsightly, you are better off to stay away from such a house because it will be tough to unload.

Toxic mold and structural defects. When you are buying a home, get a home inspection. If the inspection reveals that the home is sitting on a cracked foundation or has toxic mold, pass it up. Unless you are prepared to tear down the structure and rebuild, leave this to someone else. Toxic mold can make you and your entire family very sick. It is not worth living in a house that is overrun by toxic mold even if it’s free. A house that has severe structural defects will end up costing you a lot more money than it’s worth. Make sure that the house is structurally sound and that you can afford anything that is seriously wrong with the property.

No land. There are some homes that have no backyard and a large front yard or virtually no yard. They usually sit awkwardly on a corner lot and were built before the property values increased and the municipality had a chance to make some rules about how much ground each house should have. If all the homes in the area have backyards and the one you are considering does not have a backyard, you should consider a different home. Even if you have no children or pets, you should think about resale value.

Flood plain. Do yourself a favor and stay away from houses that are in a flood plain. You need special insurance for these houses and unless you’re a duck, you probably won’t like the idea of having water in your house every time it rains. Houses located in a flood plain may also have toxic mold as mold needs moisture to grow.

Houses on a busy street. Stay away from houses that are located smack dab on busy streets. These do not sell as well as those located on quiet streets and generally are priced below the market. If you want to make a good investment, choose a home that is on a quiet, residential street.

Try to look for a home in a nice, quiet neighborhood that does not fall into the categories above. Remember to look for resale value when you are buying your home. Even if you are planning on staying in your home forever, you should realize that times and circumstances change and that you might, at one time, have to sell. You do not want to be sitting on the property for a long time because it is not up to par with the other houses in the area.