Buying & Selling Tips
Buying Real Estate with No Money Down
Advertisements constantly hammer us with the fact that anybody can qualify for a mortgage with no money down. Buying real estate can and should be a quality financial investment. Purchasing a piece of real estate, whether as the primary residence or as an investment property with zero money down can be either a very smart move or a very dumb move depending on how the real estate investment is handled.
Almost everybody has seen the infomercials where they promise incredible riches free. The only catch is that you must frequently spend an exorbitant amount to purchase their product to tell you how it is done. The recent surge in real estate, financing and mortgages, have made these programs almost obsolete. The main difference here is that these offers are frequently "no money down" offers for brand new homes.
These mortgages are sometimes known as "One Tens" or even "One Twenty's" because they allow the real estate investor to literally finance one hundred and ten percent or even occasionally to finance one hundred and twenty percent of the total value of the home. This additional money is sufficient to cover closing costs, escrow accounts, appraisals and other expenses commonly associated with real estate investments.
If the real estate investor is purchasing the home as a primary residence, these loans can frequently make the whole process easier. These loans are rarely a good idea for the real estate investor who is looking for a safer and more secure financial investment portfolio however.
The very fact that an amount greater than the total value of the home should be the first clue that this type of mortgage or loan needs to be more closely examined. Financing a home or any piece of real estate for more than the actual value results in the real estate investor being "upside-down" with the loan. Very simply this means that the mortgage holder now owes more on the real estate than the fair market value would allow the property to be sold for.
If someone has had difficulty being financed in the past, these loans can often be a good way to overcome that. Home financing has always been a difficult proposition, even with the best mortgage brokers and lending institutions. This solution is best suited to someone who will be purchasing a home as a primary residence. It is wise for them to inspect the terms of the mortgage closely however, as most of these mortgages are variable rate loans. This means that as the interest rates fluctuate, so will the mortgage payments. Care should be taken that the real estate investor will be capable of making the payments consistently for the length or life of the mortgage.
For the real estate investor who is looking to purchase a home as an investment, whether as a rental property or for a quick sale, these types of mortgages are not a good idea. The resulting upside-down payments will make it impossible for the investor to quickly turn around and sell the property for anything other than a financial loss. The high costs of the mortgage and subsequent interest from having such a large loan will prevent the real estate investor from renting the property for any profit at all. The end result for the real estate investor is going to be an annual tax write-off of some proportion.
Buying a home with no money down can be a very wise investment. As with any financial investment of this magnitude, care should be taken to make sure that the loan or mortgage on the property are within the financial means of the real estate investor
How Much Home Can You Afford?
Many real estate investors who are purchasing a home for the first time have no idea exactly how to figure out how much house is enough, and how much is too much. There are some key points to take into consideration when purchasing a home. The first time investor will need to examine their budgets, their finances and the potential real estate assets closely in order to be able to make an informed investment decision.
People make careers out of writing books to tell us how to budget our money, how to manage our finances and how to get the most bang for our buck. There is one major problem with all of them however. They do not include any "real-world" variables. Not everybody is a whiz with finances, able to live off very little money and spend only what is necessary while dutifully saving the rest.
Then there are the minor inconveniences, which are so frequent in the real world and so seemingly unimportant to the authors of those books. The car breaks down, the kids braces need to be replaced; the other child has broken the neighbor's bay window playing baseball in the yard. All of these factors force the investor and potential homeowner to face the very real fact that they have to spend a lot of money just to survive.
When we are renting our homes, we do not freely associate many costs with home ownership. If the garbage disposal breaks at two in the morning, all we have to do is call the property owner or the maintenance person and they fix it. When the real estate investor or homeowner has a problem, the costs multiply rapidly. Throw that in on top of the normal costs of life itself, and it should be easy to see that the potential homeowner needs to look beyond what they pay for rent as a basis to decide how much home they can or cannot afford.
For over ninety percent of the population, a home purchase will be the single largest financial investment of their life. Care should be taken so that investment lasts for a lifetime and not foreclosed or lost due to poor financial planning.
Ideally, the homeowner should be able to pay all of their most basic bills including the mortgage, electric, phone, car payment and so forth with one paycheck. Not very many people live in an ideal world however.
A more realistic approach is that all of the major bills can be paid with what the primary financial investor earns in two weeks. If all of the bills can comfortably be paid with the pay that is earned in three weeks, it is still viable, but there will not be many luxuries available to the homeowner until such a time as the mortgage is paid off.
If you are looking to purchase a home, especially for the first time, make sure that all of the bills can be paid at the very least with three weeks earnings. There will always be unforeseen circumstances which arise as a part of every day life. Financial planning must be completed in such a manner as to allow the real estate investor to have a way and a means of paying all of the bills, no matter what eventuality arises. Careful budgeting and financial planning before purchasing the home is imperative to being a successful real estate investor.
How Financing Affects The Real Estate Market
Financing is a key factor in real estate investments. Mortgage rates, prime interest rates and other factors regarding the mortgage or home loan will all help to decide whether or not the potential real estate investor is capable of obtaining a property, whether for their primary residence or as a rental investment. All of these investment variables are directly related to financing.
No matter what the economic indicators reflect, people will always need housing. Some people will invariably rent their homes, while others will want to buy a house of their own. Frequently, the only difference between a renter and a homeowner is a little matter of financing.
If you do not have great credit, financing is going to be an issue, but it may not prevent you from purchasing a home. With enough money as a down payment just about anybody can get home financing. Conversely, if you have great credit, but no cash on hand, than financing may still be difficult or almost impossible to obtain, preventing the possibility of real estate investments.
There are many different aspects of real estate financing that the financial institutions must evaluate when approving or denying a home loan or mortgage. Credit is only one of those issues. Cash on hand is always an important fact that will be looked at as well, since it will likely reflect the ability of the real estate investor to save and their ability to live within the constraints of a budget. Discretionary disposable income or the amount of cash a potential real estate investor has left after paying the monthly bills weighs heavily in the realm of real estate investment financing. When all of these economic variables are formulated and put in their proper perspective, it allows the lending institution to mathematically formulate who is eligible for home financing.
When all of the financial risks are evaluated, available mortgage packages, interest rates and other deciding factors are reduced to their lowest common denominator in order to figure out just who can purchase how much real estate. Perhaps, instead of asking how finance affects the real estate market, we should be asking how the real estate market, affects the mortgages and home financing.
Factors That Determine Loan Approval
A FICO score is a credit score developed by Fair Isaac & Company to help lenders determine the risk involved in lending money to any person applying for a loan. It is widely accepted by lenders as one of the most important components helping determine eligibility as well as specific amounts, rates and terms that can be offered. FICO scores range from 300-850. The higher your score, the less risk involved in lending to you. There are approximately 30 factors that influence your credit rating. Some of these factors, such as your payment history, weigh more heavily on eligibility than others. Every factor’s importance varies by person and can change individually as your credit history lengthens. Also keep in mind your score can change daily as new credit is established or paid down/off. All factors can be grouped into 5 main categories:
Payment History – Do you make your payments on time? Since this determines (on average) 35% of your score, it is certainly in your best interest to make any and all payments on time! Your payment history includes credit cards, car payments, mortgages, student loans and other loan types. Other public records on file, such as a bankruptcy, will be calculated in this group as well. If you have been late on payments bits of additional info, such as how recently these payments were made and how much time elapsed between the due date and pay date, will also factor into your score.
Outstanding Debt – Most people over the age of 18 have debt. The question is how much? All outstanding balances for credit cards, car loans, mortgages, etc. will determine (on average) about 30% of your score. How many of these accounts have balances? For example, if you can possible pay down significantly or pay off credit card debt, you’ll be in much better shape during loan approval. Eliminating some avenues of credit can demonstrate your willingness and ability to responsibly pay back new loans.
Credit History – How long have you been establishing your credit? Specifically, how long have your current accounts been opened and how long as it been since you used each of them? This usually determines approximately 15% of your score. If no credit history exists, you should begin by establishing credit accounts and be sure to keep them spotless. The less history that exists, the less the loan amount you’ll likely be able to obtain.
Pursuit of New Credit – Each time you apply for credit, there is an inquiry into your current credit score. How many inquiries into your credit score are there and how recent were they made? If you recently applied for a VISA card, Nordstrom account and car loan, you may want to hold off applying for a home loan for a few months. Each inquiry may slightly reduce your FICO score and may portray you as someone overindulging in credit. This usually accounts for approximately 10% of your total score.
Types of Credit in Use – How many types of accounts are reported for ATM cards, car loans, credit cards, travel accounts, or any other type of account where payments are being made? This will usually determine approximately 10% of your final score as well.
Once your bank is aware of your FICO score they may or may not choose to share this information with you. Assuming they do share your score with you, it is important to remember the higher the score, the more likely you are to obtain a loan. Also, a higher score directly translates to lower interest rates. Over time with home loans, lower interest rates can play a significant role in the total amount you end of SAVING! See two examples of home loans below and the amount of money you can potentially save while boasting a great FICO score.
| Example of a 30 Year Fixed Rate Loan for $150,000 |
||||||
| FICO Score |
|
Rate |
|
Monthly Payment |
|
Payment Over 30 Yrs |
| 760-850 |
5.71 |
$871 |
$313,560 |
|||
| 700-759 |
5.93 |
$892 |
$321,120 |
|||
| 680-699 |
6.1 |
$909 |
$327,240 |
|||
| 660-679 |
6.32 |
$930 |
$334,800 |
|||
| 640-659 |
6.75 |
$973 |
$350,280 |
|||
| 620-639 |
7.29 |
$1028 |
$370,080 |
|||
As you can see, over a long period of time you would save much money if you have a good credit rating upon loan application. For this particular loan, you have the potential to save $56,520 over 30 years. That’s money that could potentially be invested into your retirement, used for vacations, a new car or two, etc. etc. It pays to keep your credit score as high as you are able. For larger loans, the savings potential climbs substantially!
| Example of a 30 Year Fixed Rate Loan for $500,000 |
||||||
| FICO Score |
|
Rate |
|
Monthly Payment |
|
Payment Over 30 Yrs |
| 760-850 |
5.71 |
$2905 |
$1,045,800 |
|||
| 700-759 |
5.93 |
$2975 |
$1,071,000 |
|||
| 680-699 |
6.1 |
$3030 |
$1,090,800 |
|||
| 660-679 |
6.32 |
$3101 |
$1,116,360 |
|||
| 640-659 |
6.75 |
$3243 |
$1,167,480 |
|||
| 620-639 |
7.29 |
$3424 |
$1,232,640 |
|||
In this situation, over 30 years, you have the potential to save a whopping $186,840!!! It pays to be dependable! With the money you could save on this loan the possibilities are endless.
Now, a great FICO score will not be the only determining factor in loan approval. There are additional factors that figure into the approval process as well. Some examples include:
Income – Your current income will also be a significant determining factor in loan approval. Pay stubs for the previous two months as well as W-2 forms for the previous year will be requested to help determine your ability to repay the loan amount.
Employment History – Your employment history can tell a lender much about your stability. If you’re constantly switching jobs it could raise a red flag. However, as their may be other factors influencing your employment length (such as a spouse in the military), lenders may choose to ignore this factor.
Down Payment – Do you have a down payment? How much? Being able to provide a down payment can be extremely useful in the loan approval process. It means the amount borrowed will be less than the total cost to purchase the home. In some cases, depending on the amount of the down payment, your monthly payments can significantly drop.
The important thing to remember is that no matter what your FICO score, employment history or income levels are there are things you can do to help improve your chances of obtaining loan approval. Get referrals to local credit counselors or financial advisors to help optimize your resources fully.
Getting Pre-Approval Gives You a Stronger Negotiating Angle
Most of us have spent a great deal of time imagining our dream home; the yard full of roses encased by a white picket fence, the elegant staircase climbing around and around, the large kitchen with marble countertops, the master bath with it’s Jacuzzi tub surrounded by candles, and the waterfall pouring gracefully into the marvelous clear blue pool.
After a couple hundred hours searching far and wide for this perfect treasure, you find it! It’s everything you hoped and dreamed of for so long. After scrounging up the courage to make an offer you head to the bank to obtain your loan.
After the bank processes your application, they call. Your loan application has been denied.
Your dream just turned into a *nightmare*! How could this have happened? What could you have done to prevent this from wrecking havoc in your life? If ONLY you had gotten pre-approval from a bank before beginning the search for your dream home.
Getting pre-approval from a bank or other financial institution is imperative before beginning the search for a home. It is important to understand the price range you’re able to afford and specific aspects of your financial situation that may determine your eligibility. When you make an offer on any property a pre-approval or pre-qualification letter also gives you more opportunity to negotiate the price with the seller.
Below are explanations of two different types of “pre” letters that can be obtained from a bank or other financial institution:
Pre-Qualification letters are given as informal and tentative approvals for buyers. The financial institution issuing the letter would have taken information regarding the buyers’ financial situation in order to determine eligibility; however, they would have NOT verified the accuracy of the information. Since the financial institution would not perform a credit check of the buyer at this point they are in a position to withdraw their approval if additional financial (or other significant) factors are later uncovered. There is no charge to obtain Pre-qual letters.
Pre-Approval letters are formal agreements and offer buyers’ a guarantee of loan approval for a specific amount. The financial institution issuing such a letter may or may not charge for this service. They will verify credit history, employment status, assets and liabilities to help determine the amount of credit they are able to offer. If you are a serious buyer, this is the suggested “pre” letter to obtain. Keep in mind that even with a pre-approval letter, your bank may deny the loan on the specific house you wish to purchase. As one example, banks will deny the loan for a specific property if the appraisal is significantly less than the sale price.
Finding the right Realtor
Purchasing a home is going to be the single largest financial investment for over ninety percent of all people today. Surprisingly, many real estate investors go in blindly, accepting as truth, every story which is told to them by every homeowner and salesperson they talk to. Finding the right realtor can be instrumental in making sure that the financial capital invested in real properties is not only well spent, but will produce the desired results as well.
A good real estate agent should be able to make the whole process of real estate investment a pleasing and rewarding experience. It is important to remember that the real estate agent is a sales person, and as such, some of them will try and push certain properties which they know will be more personally and financially rewarding for them. A very simple process can weed out real estate agents of this nature. Actively communicating with the agent and discussing what housing options are available that suit the needs of the individual. If the agent is unwilling to listen carefully to the needs of the real estate investor and will not discuss specific options, than another real estate agent should be on the priority list before any deals are completed.
The real estate agent should be very specific with questions and answers. This does not mean that they should not be friendly; on the contrary, being friendly is part of their job. It just simply means that if the real estate investor is looking for a home less than two blocks away from an elementary school, the real estate agent should not be showing them homes in a neighborhood that has no elementary schools.
Qualifying the real estate agent is just as important to the real estate investor as qualifying the buyer is to the real estate agent. Even for the first time homebuyer, there should be no fear of asking questions. Whether the real estate investor is looking at purchasing a home for the primary residence or looking at capital investments in order to establish a financial portfolio, finding the proper real estate agent can make the whole process much easier. Finding a real estate agent who can answer with specifics will most often result in finding a real estate agent who can provide for specifics.
Flat Rate or Commission?
When deciding how to select a real estate agent, many homebuyers and home sellers rely solely on one or two rudimentary facts. The two most common forms of referral for a real estate agent are by word of mouth from a friend and pricing. Pricing however, is by far, the most common means that real estate investors will use to grade a quality realtor.
While "You get what you pay for" is an old adage and has its merits, it is not altogether true in this instance. Conversely, finding the most successful agent in the country who charges what would otherwise be exorbitant fees is not necessary either. How then, does the average homeowner or homebuyer find a quality real estate agent based on price?
While flat fee services do offer package deals for the real estate investor at what usually seems to be a reduced price, care must be taken to make sure that the contract is read in its entirety. This real estate contract will define exactly what is and what is not included in the terms and the conditions of the financial transaction. If the price seems to be too good to be true, chances are that there is a reason for this.
Even a real estate agent who works on a strictly commission basis needs to be looked at closely regarding any financial transactions however. Some realtors will include all costs in their one low price. Many other fees are often not associated directly with the sale of the real property however, so they will still be reverted to the fiscal responsibility of the homeowner or homebuyer. The money may still be coming out of the pocket of the one using these services no matter whom they choose.
Ultimately, while the price of a real estate agent and the inclusions and exclusions of any listing or sales contract for a home should all be examined very closely, the bottom line price is still a deceiving number in the big picture of real estate investments. For most homeowners trying to sell their house or homebuyers looking to purchase a primary residence or even investment properties, finding the proper realtor is more than just finding the proper price.
Choosing a REALTOR®
You’ve decided to enlist the help of a professional to help you find and buy a home. Here are some tips to help you find a real estate agent.
1. Find at least three real estate agent’s to interview.
Ask friends, family and even neighbor’s for recommendations. Who did they use when purchasing their home? Would they use that same agent in another real estate transaction? Did they feel safe and trust the agent they used throughout the search and during the buying process
Use the internet. The internet is a great way to find professionals. Increasing numbers of agents have web sites readily available for you to evaluate before you even pick up the phone to arrange an interview. Simply go to your favorite search engine and conduct a search for real estate in the city you hope to buy. Try different variations like “City real estate”, “City REALTOR” or even “City home for sale”.
Check out the agent’s web site to see if they include a page that discusses their own achievements, experience and years in the industry. If you have special needs such as relocation from a different state, you may want to consider an agent that specializes in relocation needs. Or, if you are a senior looking for retirement property, you may want to consider hiring a Senior Specialist.
Don’t discount an agent simply because they are new and don’t have much experience. Generally, new agents have more time to help you and are eager to please.
2. Interview the top agents you’ve found yourself or were recommended to you by others. You should be prepared to ask relevant questions to help you determine if the agent will be a good match for you.
Are you a REALTOR®?
It is usually in a buyer’s best interest to find a REALTOR®, not just a real estate agent. REALTORS® generally work full time, are committed financially to their business and have been extensively trained to serve your needs. They are also members of the National Association of REALTORS®.
Are you a full time REALTOR®?
Part time agents might miss your dream house as it hits the market. If the market is hot, you risk losing your dream home. Full time agents are better options.
How often will you inform me of new listings that match my criteria?
If an agent is not ready, willing and able to inform you of new listings matching your criteria the same day they hit the market you may want to consider a different agent. In hot markets homes sell quickly.
How long have you worked the real estate market in this area?
Experience can certainly play an important role in helping you find and buy the perfect home. New agents may not know how to deal with certain situations that occur during the transaction. An agent capable of handling difficult transactions can be the key to closing the deal.
However, remember new agents generally have much time on their hands. They may be more vigorous in your home search than an agent currently working with many other buyers. In addition, they have extensive backing from their Broker during situations they may not be familiar with. Don’t discount new agents simply because they are new. Take into consideration whether the other agents you interview already have full plates.
How quickly will you return my phone calls? Do you have a call back policy?
Some agents return phone calls during specific times each day while others will call you back as soon as they receive the message. Make sure the agent gives you one good phone number that you’ll be able to reach them with at all times.
Don’t conduct your interview as a question/answer interview. Have a real conversation. You need to get a feel for the agent’s personality as well.
Agents that answer your questions stating yes or no are probably not someone you want to deal with. Find an agent that will happily answer your questions extensively so you understand the details of your relationship from the beginning. This will help you avoid any problems down the road.
If you have special needs such as relocation, first time home buying, or any others, tell the agent and ask if they have any experience and training with buyers like you.
3. Ask the agent for references and testimonials from past clients. If they’ve been in the business long enough, they are bound to have quite a few. This can help you weed out an agent that may not be well liked. Don’t just look at the testimonials… READ THEM! How enthusiastic do the buyers sound? Were they ecstatic with the agent’s service? Have they used the agent more than once?
4. Compare the agents you interviewed to make the final decision of whom to hire. What do you like and not like about each? Make a list and discuss it with family and friends that have been through the process. They may have valuable tips to help you make the right decision.
Why You Need a Realtor
The integration of real estate into the internet has revolutionized the way in which home buyers think. It has become easier for buyers to find a home on the internet in the past few years. Today, buyers often ask the question, “Why do I need an agent?”
Home buying is not something someone typically does often. It’s not an every day event or even a yearly event. It can be emotional and stressful, especially when you don’t know real estate and understand the laws, rules and regulations involved in transactions. You’ll need someone with knowledge to spell out the details of the transaction. Remember, this is one of the biggest purchasing decisions you will likely make. It is not something to take lightly.
REALTORS® deal with real estate issues and concerns on a daily basis. They have been educated extensively on the laws and regulations that influence the market. By law agents are required to get continued education to renew their license ensuring they are always up-to-date on the latest real estate news and laws. Further, as Professionals, they have access to tools and an endless array of contacts in the industry to help YOU find the perfect home.
The good news for buyers’ is that lenders will never lend more money than a home is worth. So, you can rest easy knowing that you will never overpay. But there are other problems that can haunt you if you’re not careful. For example, REALTORS® are trained to ensure all necessary disclosures are given completely and in a timely manner. There are many disclosures differing within each state. Some disclosures may include: natural hazards, mello-roos and bonds, smoke detector, lead-based paint, mold, wildfire zones, inundation zones, and Megan’s Law. Do you know all the required disclosures for your state? It can be difficult to keep up with the ever growing list of disclosures! Laws change regularly and if you’re not involved in the real estate market on a regular basis you may fall short of providing yourself ideal representation.
Other potential problems that buyers’ may encounter in the buying process involve homeowner association rules and regulations. For example, you’re a dog lover and have three but you just purchased a condo that doesn’t allow pets. What can you do? Nothing! You can sell the condo but that’s about it. You’re legally bound by your agreement with the association and you’re unlikely to change their rules as a new member.
Be smart: Know that as much as you think you know… there is always more to know. Trust that you’ll likely forget something in the process. Hiring a real estate agent will save you the trouble in your attempt to research every problem you may run into during the home buying process. You’ll not only save yourself time researching but help your family avoid potential risks.
Further, real estate professionals are trained and experienced in helping people find homes to suit their needs and their budget. While you may want to move to a certain area, you may not have the budget to do so. Or it could be the other way around. Perhaps you don’t realize you can afford to buy in a particular area. Hiring a REALTOR® to help you determine your ability to buy in certain areas will save you valuable time. Once you’ve been pre-approved for a loan your agent can begin the task of finding the perfect home for you. They will tailor your search criteria based upon different factors including, but not limited to:
1. Price range you’ve been pre-approved for 2. Number of bedrooms desired 3. Number of bathrooms desired 4. Areas and communities of interest to you 5. Special features such as pool, yard, garage, main floor bedroom, etc.
Your REALTOR® will then sift through all the results of homes matching your criteria to find the best homes to show. If there are many homes matching your criteria and in your price range, it can be grueling to look through them all yourself.
Once you’ve decided to hire an agent to assist you in the buying process, you’ll need to find an agent that will be able to understand YOUR needs. Not every agent will be the right agent for you.
Who is the Realtor Really Working For?
For the real estate investor who may be thinking about purchasing a new home, especially if this is their first time being involved with the real estate market, it is imperative to find a quality real estate agent. Knowing what questions to ask of the realtor is the only way to fully qualify them and find out whether or not they are someone who would be good to work with in the real estate transaction. However, for whom is the realtor working? Is the real estate agent looking out for the best interests of the seller or the buyer?
One of the most common misconceptions among both homeowners and homebuyers is that the realtor will be working solely for only the buyer or only the seller. This is actually not the case, so forget about even asking for whom the realtor is working. The real estate agent does not make any money unless the buyer and seller of the real estate reach mutually agreeable terms and finalize a contract.
The realtor's commission is only paid after a successful sale, the sale is only successful when both parties are satisfied enough to sign. While it may be true that the real estate broker will always have a personal interest and may even be prejudiced to a degree, it will always be in their best interest to find common ground between the buyer and the seller of the property.
If the homeowner is asking too much money for a piece of real estate, the realtor is going to have a difficult time selling it. Even if they could make a better commission, they will waste more time than it is worth showing a piece of property to people they know are not going to pay the asking price. It is not in their benefit to waste large amounts of time trying to put together a deal that is never going to work.
Conversely, if a potential real estate investor is making an offer that would not even entice a novice to accept it, the realtor would once again be wasting everyone's time including their own. By keeping everything above board and reasonable for everyone involved in the real estate market, the real estate broker is going to be able to provide better opportunities for everyone involved and ultimately will make more money. No matter which side of the real estate transaction the real estate marketer is on, the realtor is going to work equally hard to please them.
Common Buyers Mistakes
Too much home, too little home, and waiting for the final word on financing can be easily avoided!
For the first time homeowner, the whole prospect of investing in a home of their very own can be very exciting, and very intimidating. Knowing some of the more common mistakes that real estate investors have made in the past can keep the new homebuyer from repeating these errors. Purchasing a home is the largest investment that over ninety percent of homeowners will ever make in their lives.
A very common mistake made by many real estate investors is actually not so very severe. It will however, cost them valuable time and many headaches which could otherwise be easily avoided. Most potential homeowners want to run right out and find their dream house before they worry about financing. While the emotional effects can be devastating to some people, the actual financial repercussions are not so severe. Still, sleeping in an apartment dreaming of a home that an investor may or may not ever be able to purchase is something many people would prefer to avoid.
When seeking out opportunities for real estate investment, whether for a primary residence or a secondary investment property, the real estate investor should always seek financing before looking for a new home. Unless the investor has a substantial financial holdings at hand and excellent credit, it is not likely that they will be pre-approved for any set amount. However, this will give the potential homeowner a better idea of how much home they can afford and let them seek out the best value for their money.
While the home that you have found may be the home of your dreams, why would you want to set yourself up for failure or disappointment? Knowing the approximate amount that you can feasibly receive financing for will allow you to narrow down your search to homes that will fit into your allotted budget and houses that you can be certain you are able to purchase.
On the other side of the aisle, what if the potential real estate investor is seeking only a modest home, believing that it will be easier to obtain good mortgage rates and financing for a smaller house. After having spent so much money on escrow, closing, appraisals and the other costs of investing in real property, they then discover that they could have purchased the home that they really wanted if only they would have known.
The wise real estate investor will find out at least an approximation of how much they can spend before they do any actual spending or investing. Knowing how much home can be afforded will set the homebuyer up to succeed more easily and be less likely to be faced with harsh, unexpected realities and difficulties in regards to home financing. Real estate investment is a great means of building up personal assets and a viable means to provide additional income. Knowing how to invest your finances properly in the real estate market is going to be a determining factor in the success or failure of your financial portfolio.
Buyers Questions
When someone is considering purchasing a new home, the idea of a real estate transaction may seem simple enough at first. In reality, an investment in real property is much more difficult than it may seem. It is always a good idea to utilize the services of a licensed real estate agent when considering an investment in a home.
Using a licensed real estate agent will allow the buyer to remain informed about exactly what must be done at every step during the home buying process. The question now becomes; how does a homebuyer qualify the real estate agent? What questions should the real estate investor ask to find out about the realtor and their qualifications?
The real estate agent is hired to do a job. Anytime someone is hired, it is necessary to ask certain questions in order to find the best person for the job. A good place to start is by getting references. While the real estate agent will only use satisfied customers as references, those people will still be able to give the real estate investor an idea of what exactly the realtor did or did not do to their complete satisfaction. Careful examination of references will usually provide both the strengths and weaknesses of a real estate agent.
The seller will pay for most of the fees, especially those incurred by the real estate agent. It is still necessary for the homebuyer to ask about any fees that may result in out of pocket expenses. Frequently, the buyer pays for a home appraisal. Asking the realtor about the fees which the buyer will be expected to pay before hand, will give insight as to how much cash on hand must be available to complete the home purchase.
It is very important that the realtor is familiar with the areas where the homes are. Knowledge of the neighborhoods is important to the homebuyer so that they will know that their specific needs can be met with the real estate transaction. This is an especially important qualifying question if the home being purchased will be used as a primary residence for the homebuyer.
Carefully qualifying the real estate agent is an important part of any real estate investment. The effects of a miscommunication or a problem will often be lifelong or a difficulty for at least the fifteen to thirty year life of the mortgage. Finding a qualified realtor can bring about a lifetime of joy and happiness from a new home purchase.
Buying Vs Renting
When it comes to real estate investments, just as in all aspects of life, there are always going to be people who are comfortable in different positions of life. Many people are very happy as renters and do not wish to have the responsibility of purchasing their own home. Many people have not only a primary residence, but also actively invest in real estate as a secure financial investment and providing much needed housing for the renters. In short, there are good aspects in regards to both renting and purchasing a home.
When renting a home, there is little responsibility to the renter as far as upkeep and maintenance of the investment property. If things go wrong or there is a problem, they are free to call the property owner and the problems will be fixed. For the homeowner, the problem is a little bit more involved. The problem must be diagnosed to discover what the problem was, what caused the problem and then they are still responsible for the repairs and costs associated with that maintenance and upkeep.
For the renter, packing up and moving may still be a difficult task. They still have all of the same possessions as most homeowners, but they do not have a thirty year mortgage keeping them in place. With proper notice being given, the renter is able to move freely wherever and whenever they would like. For the real estate investor, it is a little more difficult, as there is often a mortgage to be considered, as well as other factors which only the homeowner can truly comprehend.
The homeowner also has something else that the renter does not. Whether it is real or imagined, being able to return home to someplace that is actually your very own, is a satisfying experience. When the home is owned, there is nobody who can say what modifications to the real estate can or cannot be made. The freedom that owning your own home allows you to do as you please, within reason of course is a feeling that is very comforting to most people.
While not everyone is going to want to accept the responsibilities that come with home ownership and a real estate investment, most people would agree that the benefits are well worth the cost. Investing wisely in a home is a good idea for anybody who truly wishes to understand what that feeling is. The cash value of a good real estate investment is secondary to the rest of the home ownership experience.
Deciding Where to Buy
For whatever reasons, many people are selling their homes every day. Some people are selling because of a job promotion or a new job. Some people are selling because they have new needs for their primary residence. Many of these people are selling their primary homes so that they can purchase a new piece of real estate. Purchasing a new home can be a difficult affair. This is often made worse when the homebuyer does not know the area they are moving to. They must trust someone else's judgment about where is a good place to live, or must they?
Certainly, they will need to find someone who knows the area where they will be moving. That should be understood, but it frequently is not. Not only is a quality realtor going to be familiar with all of the different aspects of the law in regards to real estate transactions and investments in real property, but they will also usually know all of the neighborhoods and general statistics about those areas as well.
If the potential real estate investor has done their homework and has already checked with loan officers or mortgage brokers, they already know about how much home they can afford. This will keep them from wasting either their time or the time of the realtor looking for housing that is unobtainable for them financially.
That in itself will narrow down the search considerably. Other factors such as crime, conveniences, location and the needs of the potential homebuyer individually all must be factored in. When these ideas are effectively communicate with the real estate agent, the realtor is then able to narrow the search down even further. It is important to look at all of the requirements and needs of the buyer in order to properly decide where to move.
Factors such as crime rates become even more important if there are children or families involved. How close the schools are or how far away they are will be information that has a substantial impact on the every day life of the new homeowner. How much time is going to be needed to get to the grocery store? Multiply that by two or three times a week times fifteen or more likely, thirty years over the life of the mortgage, and it becomes easy to see why these are deciding factors.
Getting the right and relevant information before purchasing the home will allow the homeowner to avoid any unpleasant surprises after the home purchase. If nothing is known until then, it is too late to do anything about it. If the real estate investor is well informed before purchasing a new property, the whole experience will be greater.
Using a qualified real estate agent, the potential real estate investor can get all of the relevant questions answered before it is too late to do anything about it. While an investment in real property is a major financial affair, it is also about lives and living. Decisions should only be made once all of the information is available for review. Finding a good realtor who can make that happen will make everything a lot better.
Ensuring a Smooth Home Purchase
Whether you are a first time homebuyer or a hardened and experienced real estate investor who knows all of the details about a purchasing real property for your investment portfolio, there are steps that should be taken in order to assure the buyer that the home buying experience would be a smooth and uneventful transaction.
For the potential homebuyer, nothing is more important for the first step than arranging proper financing. This can be done through either a regular bank or lending institution or even a mortgage broker. The reason financing is so important is the same principle as preparing your budget before you go shopping. How will you know how much money you have to spend if you do not properly calculate the amount first?
The second crucial step when purchasing real estate is going to be looking at what areas you want to live in. Whether the real estate will be purchased where the home buyer has lived all of their life or in a city entirely unknown to them, deciding which part of town they wish to live in will not only shorten their search, but make their experience as homeowners a much more pleasant one.
The third step is going to be finding affordable housing for sale in the desired neighborhood or those areas where the homebuyer has decided they would like to live. By narrowing the field down from all of the available real estate to a few select homes, costs can be cut and the whole process of buying a home will become shorter and less taxing.
When real estate for sale has been found in the areas where you wish to live, then arrangements can be made with the realtors of record for those listings to show you the homes in more detail. This fourth step is frequently attempted first by many new homebuyers. Unfortunately, if they set themselves up to look at houses that they may or may not be able to afford in areas, which they may or may not want to live in, they are going to make the whole tedious process of home sales a trying and expensive proposition for everybody involved.
By completing these steps one at a time in the order that they are listed here, the potential homebuyer will be able to be ready for each subsequent step in the real estate purchase. They will not be wasting the time of the realtor or the banks loan officer trying to buy more house than they can afford. The homebuyer will not be settling for less than what they want or need when it comes to buying their new home. In this manner, the real estate investor is more likely to get exactly what they want without all of the tribulations that they do not need when buying a home or property.
First Step for First Time Buyers
Many people use real estate investments as a means to generate income and provide a viable tax shelter while still providing financial benefits to the investor. The first time home purchaser is more likely to be buying a new house for a primary residence rather than for a real estate investment. While the primary residence is still a major investment in real property, the start to finish method is a little different than it is for the investor.
The first time buyer should always start the search for their dream home with a recognized lending agent. Whether this means the loan officer at their personal bank or a more formal mortgage broker in a larger financial institution, this is the place where everything begins in the process of real estate investments.
A good mortgage broker will be able to explain all of the necessary details about the process of real estate investment. They will also be more fully qualified to look at the individual situations of the prospective homeowner and give them a more complete analysis of what financing options are available and which types of loans or mortgages will best suit the individual needs of the real estate investor.
Sometimes an option on a piece of real property will include the ability to lease to own or rent to own the property. This option is often a good idea for people who do not have a substantial amount of capital to invest as a down payment in a real estate venture. Rent to own, or lease to own will also be beneficial to many people who may have very good credit, but for whatever reasons, do have some discerning commentary in their recent financial credit reports.
Other options which may be viable are large down payments for someone who has the capital to invest, but does not have the credit. Some mortgage lenders offer very enticing deals to first time buyers, which include benefits that may not be available to other parties who are purchasing real property as an actual investment instead of buying a primary residence.
Still other mortgage and financing options include the use of zero down loans for real estate investors. These loans will usually cover all of the closing costs when buying a house as a primary residence.
Real estate investment is a major expense, and as such, it is important to know how much the homeowner has to spend before going out and trying to spend it. There are so many loan and mortgage options available to the real estate investor that it is imperative to start any home or property purchase with a lengthy discussion with the loan officer or mortgage broker in order to make sure that all of the proper options can be readily explored.
Preparing to Buy a Home
1. Plan to Buy a Home in an Area You Intend to Stay.
Make sure you can commit to remaining in one place for at least a few years. When looking at areas of interest take into consideration your job and commute time, school district, distance from loved ones and any other factors that are important to you.
2. Check Your Credit.
Since you are likely to need a mortgage to buy a house, make sure your credit history is as clean as possible. Ask for a copy of your credit report and correct any inaccuracies before you begin house hunting.
3. Calculate your Finances.
Aim for a house you can afford. The rule of thumb is that you can pay for a house that is two-and-one-half times your annual salary.
Getting pre-approved by a lender will ensure that you are looking at houses in the right price range.
4. Hire a Professional.
You can use the internet to find real estate agents in your area.
Also, it is best to ask for recommendations from people who have used agents when buying their home. Ask them what their experience was like and if they would use the same agent again. Interview several agents before determining the one you want to work with.
5. Do your Homework.
When making an offer on a house, your opening bid should be based on the sales trend of other homes in the neighborhood. Use a Comparable Market Analysis of homes sold in the last three months. If homes are selling five percent below the asking price, then make your offer five to ten percent below the listing price.
6. Hire an Inspector.
Even though your lender will require a home appraisal in order to determine the worth of the property, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. This will establish if there are any problems that would require costly repairs.
The Wrong Way to Invest in Real Estate
While most people may consider buying a home simply for the sake of having a personal residence of their own, real estate is a viable alternative to those difficult to understand and costly investment funds and retirement accounts. As with any financial investment, there are things to do and things not to do when making an investment in the real estate market.
Any investment should be examined closely before any money is actually spent. No financial investment comes with a one hundred percent guarantee of a "return of investment" or ROI. If somebody is promising you a double-digit return on your real estate investment, they are probably lying to you.
While real estate sales persons will usually have good information about the homes, the surrounding neighborhoods and other general information, care should be taken if they are offering you financial advice. While this is not a common practice and is not reflective of all sales people, some people are the proverbial salespeople. Listen closely to what they say. It could very well be that they have sound analysis and are quite correct in their conclusions. However, it is never a good idea to trust the words of one single individual with any financial investment, much less any major investment such as one in real estate.
Knowing what the costs will be on an investment property is something that is often overlooked. Lately, purchasing condominiums as an answer to the dwindling rental market has become a popular real estate investment in many US cities. The assumption upon investment was that the rental market would allow for easily renting the property and creating a self-sustaining investment. Such factors as regular and routine home maintenance, association fees, homeowners insurance and other expensive fees associated with homeownership are not taken into consideration. The end result is an expensive parasite that will slowly deplete the financial resources of the real estate investor.
A very large number of people are commonly approached with offers of full and complete mortgage financing which will even cover pre-purchase expenses such as property appraisals, escrow funds and other pre-investment expenses which may initially seem like a viable investment alternative to the real estate broker. These easy to obtain loans and mortgages are frequently a poor investment however. Most of them are established on variable rate mortgage payment plans. This means that as interest rates fluctuate, so will the house payments required of the real estate investor.
These loans also frequently artificially inflate the value of the home resulting in the real estate investor being "upside down" in their mortgage payments for upwards of twenty years into a thirty-year loan. Not only will this result in a substantial financial loss to the real estate investor, but it will also frequently leave the homeowner with no other choice but to file bankruptcy or allow a foreclosure on the property as the only way out of the real estate investment. The end result of a poorly informed decision in real estate investments will only be to the detriment of the buyer and not help anyone to retire.
Real Estate Glossary
Addendum - Something added. A list or other material added to a document, letter, contractural agreement, escrow instructions, etc. (See also: Amendment)
Amendment - A change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.
Appraisal - An opinion of value based upon factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.
Annual Percentage Ratge (A.P.R.) - The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.
Assumption of Mortgage - Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) from liability.
Beneficiary - (1) One for whose benefit a trust is created. (2) In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.
Close of Escrow- The date that title passes from seller to buyer and documents are recorded.
CC&R's - Covenants, Conditions, and Restrictions. A term used to describe the restrictive limitations which may be placed on a property.
Chain of Title - The chronological order of conveyance of a parcel of land from the original owner (usually the government) to the present owner.
Cloud of Title - An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. The cloud may be removed by quitclaim deed, or, if necessary, by court action.
Comparable Sales - Sales of properties used as comparisons to determine the value of a specific property.
Conveyance - Transfer of title to a property. Includes most instruments by which an interest in real estate is created, mortgaged or assigned.
Counter-Offer - An offer (instead of acceptance) in response to an offer. For example: A offers to buy B's house for X dollars. B, in response, offers to sell to A at a higher price. B's offer to A is a counter offer.
Deed - Actually, any one of many conveyance or financing instruments, but generally a conveyancing instrument given to pass fee title to property upon sale.
Deed of Trust - An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.
Disclosure - To make something known. All disclosures should in writing when dealing with real estate interests and real property.
Discount Points - The amount paid to increase the yield. Discount points are up-front interest charges to reduce the interest reate on the loan over the term of the loan. Each point equals one percent of the face value of the loan.
Due on Sale Clause - An acceleration clause that required full payment of a mortgage or deed of trust balance when the secured property changes ownership.
Earnest Money - Money given by the buyer with an offer to purchase. Shows good faith.
Easement - A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of the land (appurtenant), such as the right to cross A to get to B, or "in gross", such as a public utility easement.
Escrow - Delivery of a deed by a Grantor to a third party for delivery to the Grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a neutral third party with instructions as to their use.
Fair Market Value - Price that probably would be negotiated between a willing seller and a willing buyer in a reasonable time. Usually arrived at by the comparable sales in the area.
Hazard Insurance - Real Estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Homeowners Association - An association of people who own real property in a given area, formed for the purpose of improving or maintaining the quality of the area. Also an association formed by the builder of condominiums or planned developments, and required by the statute in some states. The builder's participation as well as the duties of the association are controlled by statute.
Homestead Exemption - Every person the age of 18 or over, married or single, who resides within Arizona, is entitled to a homestead. A.R.S. 33-1101(A). This homestead is an exemption that precludes most creditors from reaching the first $100,000 of equity in a person's residence. The homestead exemption does not apply to a consensual lien, such as a mortgage or deed of trust. A.R.S. 33-1103. Homeowners do not need to take any action to assert the homestead because the exemption attaches by operation of law. A.R.S. 33-1102. The homestead also attaches automatically to a person's interest in identifiable cash proceeds from the voluntary or involuntary sale of the homestead property. Each person or married couple may hold only one homestead. A.R.S. 33-1101 (B). Therefore, if a person has more than one property, a creditor may require the person to designate which property is protected by the homestead exemption. A.R.S. 33-1102 (A)
Impounds- Account held by lender for payment of taxes, insurance and other periodic debts against real property required to protect their security.
Lien - An encumbrance against a property for the repayment of a debt. Examples include judgements, taxes, mortgages and deeds of trust.
Mortgage - The instrument by which real estate is pledged as security for the repayment of a loan.
Mortgage Insurance - Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender a higher percentage of the sales price.
PITI - Payment that combines the principal, interest, taxes and insurance.
Power of Attorney - An authority by which one person (principal) enables another (attorney in fact) to act for him.
Public Report - A report given to prospective purchasers in a new subdivision, stating the conditions of the area and development (cost of common facilities, utility providers, availability of schools, proximity to airports and freeways, etc.) issued by the Department of Real Estate.
Purchase Agreement - An agreement between a buyer and seller of real property, setting forth the price and terms of the sale.
Quitclaim Deed - A deed operating as a release; intended to pass any title, interest, or claim which the Grantor may have in the property , but not containing any warranty of a valid interest or title by the Grantor.
Realtor - A designation given to a real estate broker or sales associate who is a member of a board associated with the National Association of Realtors or with the National Association of Real Estate Boards.
Recording - Filing documents affecting real property with the County Recorder as a matter of public record.
Subdivision - The division of one parcel of land into smaller parcels (lots) created by filing a subdivision plat with the governmental authority (city or county) and receiving approval from the governmental authority.
Title - The evidence one has of right to possession of land.
Warranty Deed - A deed that conveys fee title to real property from the Grantor (usually the Seller) to the Grantee (usually the buyer).
1031 Exchange - A tax deferred or 1031 exchange is a transactions involving the transfer of investment or income property and the receipt of like-kind property which will be used as income or investment property. When certain criteria are met, as set forth in section 1031 of the Internal Revenue Code, the income taxes on any gain realized from the sale of the relinquished property are deferred.
How to price a home
Many real estate investors buy and sell real property as a means to generate a positive cash flow. This can be a lucrative addition to any financial portfolio, but as with any investments, there are risks involved. One of the more difficult choices is deciding how much to try and sell the home for, or how to devise an accurate listing price for the real estate that is being sold.
The first thing that comes to many minds is the county tax appraisal. While this appraisal may seem as good a place as any to discover the cash value of a real estate investment, it will not always give an accurate picture of current trends in the local real estate market. The property taxes often reflect only general amounts and will not give a clear view of what type of real estate pricing the local market will withstand.
Another popular option is the property appraisal. While most lending institutions require the homebuyer to get a property appraisal, it is rarely necessary for the current homeowner to spend the money in order to get this appraisal done. While this is a viable option, it is an added expense in the already costly field of real estate investments.
Allowing a qualified realtor to make set the listing price may or may not be a good idea when selling a home. If the realtor is intelligent, has great information and is highly qualified and honest, then they may indeed be able to offer good insight into the listing price of the house for sale. Many times, the realtor may not be so well informed however, or they may be among those who will put their personal interests above the needs of the client or seller.
Checking out the prices of other real estate values in the same general area is always a good indicator of what is available on the local market and the price ranges that are likely to be paid for a house by a real estate investor. There may still be unforeseen circumstances that the homeowner is unaware of resulting in inaccurate listing prices being published, which will ultimately be detrimental to a quick and easy real estate sale.
When most, or even all of these factors are considered equally for a prime piece of real estate, a more accurate understanding of what exactly mandates the fair local market value of a home will result. This will allow the homeowner to objectively look at all of the relevant information and come up with an asking price that is both fair and reasonable.
Real estate investment is a financial transaction much the same as any other for any portfolio. The only difference is in the physical existence of the real property instead of an intangible stock or bond. As with any financial investments, it is necessary to look at all of the facts that are available in order to be able to make sound investment decisions whether it is for buying or selling the investment in question.
Setting the Price
When pricing your home, you may consider the price you originally paid, add a substantial markup and presume you’re done. This would be a grave mistake; one that could wind up costing you thousands or end in no sale at all. In order to price your home to sell there are many things that should be considered:
Obtain A Few CMA’s (Comparative Market Analysis):
When interviewing agents, you should obtain CMA’s from each agent offering an idea of the price your home should sell. A CMA details the prices of similar homes recently sold, on-the-market homes as well as homes that simply did not sell in your area.
Be wary of agents attempting to “buy” your listing. An agent practicing this technique will often sweet-talk you with their elevated price recommendation waiting only a few weeks to insist on a price reduction. Be mindful: a home on the market for extended periods become less saleable. People begin to wonder if there are significant defects with the property or whether the seller is truly motivated.
Some agents suggest under pricing your home hoping to start bidding wars amongst hungry home buyers. While this technique may work to an extent in some markets, it is often a wiser decision to market your home at an appropriate price from day one.
Calculate the Price per Square Foot
The average square feet of homes in your area can be considerable help in determining a proper listing price for your home. However, it is not recommended you rely on this tidbit of information solely.
Evaluate Market Trends
How quickly are homes selling in your area? Are prices increasing or decreasing? Are you in prime selling season (typically during spring) or attempting to sell in the drooping winter season? How many offers are sellers typically receiving once on the market? These are only a few of many questions that your agent can help answer.
What Major or Minor Problems Exist Within Your Home?
If you’re in a sellers market you may not need to worry about fixing most problems in your house. Buyers are much more open to problematic homes when they are having a tough time finding one in the first place. However, if you’re in a buyers market it would be wise to fix as many problems in the house as you’re financial able to.
Either way, a home with problems will not generate as much value as a home in almost perfect condition (no home is perfect!). An advisable solution would be to evaluate the potential cost of repairs. Determine whether these costs could be recouped during the sale of your property. It is certainly worthwhile to consult your agent as well as other professionals for matters such as these.
Jazz Up the Deal
Often, buyers come to the table with terms that some sellers are not open to accept. Some include quick sales, lease-options, or asking that closing costs be paid by the seller. If you are motivated to sell offer something up front to attract buyers that may be interested in such terms.
Reaching a listing price can be tricky; however, using reliable information with personal feelings aside, you can reach an acceptable agreement.
Determining the Market Value of Your Home
It is essential to list your home at the right price and it is important to get it right the first time. The pricing of a house is a major component in ensuring that your home sells quickly. There are several ways to determine the market value of your home, including an Automated Valuation Model, Comparable Market Analysis and Appraisal.
An Automated Valuation Model is an electronic appraiser that provides a Homes Sales Valuation Report by entering your property address. A Comparable Market Analysis is generated by your local real estate agent by comparing prices of similar properties in your area that have recently sold, are currently on-the-market or were taken off the market unsold. Unlike a Comparable Market Analysis, which is often obtained at no cost, an Appraisal is completed by a professional appraiser specifically for your home and costs between $200 and $300.
After inspection, the appraiser will determine the value of your home based on its condition, location and a Comparable Market Analysis of sold properties in your area.
Methods of Setting the Price:
1. Abandon your Personal Bias.
In order to determine the market value of your home, you must objectively establish what someone else would pay for your house.
This means setting aside your emotional attachment to the many wonderful memories you have shared in your home. Some things to consider when determining the price of your home: total square footage, floor plan, construction quality, condition, amenities, lot size, topography, view, landscaping and neighborhood.
2. Educate Yourself.
Visit local open houses and compare the location, condition, size and amenities of these houses to your own as objectively as possible. If your house is located in a neighborhood that is highly in demand, you will be able to get a higher price than you can for the same house in a less desirable area. A house that has been well-maintained will show better and, therefore, is likely to sell more promptly and for a higher price than one that needs work. When a house offers amenities that are currently popular in the marketplace, it will invite a higher price.
3. Get Comparable Market Analysis from Several Agents.
Schedule appointments with several agents to visit your home and give their suggested listing price.
4. Calculate the Price per Square Foot.
Using homes from the Comparable Market Analysis, divide the list price by the total square footage. This will establish a baseline value per square foot of homes in your area. Multiply this number by the total square footage of your house and adjust based on amenities.
5. Consider Market Conditions.
How is the economy? Interest rates? Local job market? What season is it? Homes tend to sell more quickly in the Spring and Summer months than in the Winter because people prefer to move during the longer warmer days and between school years. Are prices of homes in your neighborhood on the rise? Are they selling quickly? Check your Comparative Market Analysis to determine the Days on the Market for each comparable house sold. When real estate is booming, houses may sell in a few days. Ask your local real estate agent if it is a buyer’s or seller’s market. The Unsold Inventory Index, which indicates the pace of the market, is calculated by measuring how long it would take for all the homes currently on the market to be sold at the current rate of sales. A smaller index signifies a seller’s market, whereas a higher index suggests a buyer’s market. The Price Discount is the percentage difference between the seller's initial asking price and what the house actually sold for. A small percentage means the market favors sellers, while a large average discount signals a buyer's market.
6. Offer Incentives.
Be creative and flexible in meeting the buyer’s needs. For example, offering a short escrow will attract buyers who want to move immediately. You might propose paying the buyer’s closing costs to seal the deal. Cash incentives will help first-time buyers who need assistance with their down payment.
Advantages of Using a REALTOR® to Sell Your Home
As the real estate industry evolves it seemingly becomes easier to market your house without the use of a professional. Knowing whether to use a REALTOR® or sell privately (FSBO) can be difficult to determine. It is important to understand what a good agent will bring to the table. Some of the main advantages of using a professional include: emotional objectivity, knowledge and marketing reach.
Before you decide to take on the job of selling your house privately ask yourself a few key questions:
1. Am I ready to emotionally detach myself from my house?
Sellers generally become attached to their home. Most consider their home a sanctuary where they create an environment of relaxation and exhibit their own style. It is difficult to let go of something that has become a part of you over the years.
A home becomes your canvas; a painting of your life. Albums are filled with photos from 10 years of holiday family events: Christmas mornings, Easter egg hunts and 4th of July barbeques with hamburgers, hotdogs and fireworks. Walking across the floor you instinctively know what boards will creak, how to get the toilet to stop running and how to open the screen door in a second flat when no one else seems to have a clue. While some things may have once seemed like an annoyance they are now a part of what makes a home your own.
Additionally, it can be difficult to maintain objectivity as buyers critique your home. Something you find endearing, that make it so special to you, may be the opposite for a buyer. It is important to listen to buyer criticisms and to be open to suggestions for improvement. A REALTOR® will serve as an emotional bridge helping you maintain an air of calm during the selling experience.
2. Do I have the proper knowledge to price my house appropriately?
The first step is reaching a listing price. Some sellers have an unrealistic idea of the price their house may sell. Whether your idea is low or high, your agent will play a crucial role in helping come to a sensible price range. After completing a comparative market analysis (CMA) and examining other data, they will offer their respectful suggestion as to the price range you’ll be able to obtain. Once the listing price has been settled the marketing of your house begins.
3. Am I able to market my home effectively?
The initial marketing of your house is the most important aspect of the marketing process. You’re not just selling a house, you’re selling the intimacy and peace a home should make one feel. Once your agent has viewed your house, he or she writes engaging ads focused on the key elements of your house that make it saleable. These ads may be placed in newspapers, magazines and the local MLS and are crucial to successfully selling your house. While you may be particularly fond of the 1970’s feel of your rust-colored carpet, a modern REALTOR® understands that today’s home buyer will be less fond of this characteristic. Instead they may focus on the uniquely large size of secondary bedrooms, the proximity of your home to parks and schools or significantly lower taxes. Even if you’re able to detach yourself from your house and market it appropriately, will you be able to tackle problems presented during escrow?
4. Can I anticipate and respond to problems quickly?
REALTORS® are trained to anticipate and avoid problems or respond to difficult situations quickly. They’ve likely handled countless transactions and run into near deal breakers throughout their careers. The ability to quickly handle problems during escrow can be the difference between a closed deal and one that falls through. Real property vs. personal property can present issues during the closing process. For example, if you are selling your home FSBO and do not stipulate your expensive, antique chandelier will be moving with you, you could run into trouble. An accomplished agent would ensure any questionable items be listed in the Bill of Sale.
5. Do you have time to show your home to buyers and will you make yourself scarce?
Most often FSBO homes do not offer access to their home via a lockbox. This cripples the ability for agents to show your home to potential buyers while you are at work. Further, home buyers generally feel intimidated by the presence of the seller during their visit. They rush through the house and tell you how wonderful it is even if they hate it. They feel uncomfortable looking through every nook and cranny even though this is one of the most important avenues a buyer must travel to make the decision to purchase your house. Hence, your presence hinders the sale of your house.
These are but a few of the issues sellers can run into during the selling process. Depending on your personal situation, knowledge and availability, it may be in your best interest to enlist the help and expertise of a professional real estate agent. In doing so you should interview multiple agents prior to signing a contract to ensure you find the agent that is best able to serve you.
Choosing a REALTOR® to Sell Your Home
You’ve decided to enlist the help of a professional to help you sell your home. Here are some tips to help you find a real estate agent that will serve your needs best.
1. Find at least three real estate agent’s to interview.
Ask friends, family and even neighbor’s for recommendations. Who did they use when sold their home? Would they use that same agent in another real estate transaction? Did they feel safe and trust the agent they used throughout the selling process?
Use the internet. Buyers are using the internet in increasing numbers to find homes. An agent with a website near the top of a search engine for competitive phrases will likely hold an edge over an agent that doesn’t. Further, it is a great way to evaluate an agent before you even pick up the phone to arrange an interview. Simply go to your favorite search engine and conduct a search. Try different variations like “Your City real estate”, “Your City REALTOR” or even “Your City home for sale”.
Check out the agent’s web site to see if they include a page that discusses their own achievements, experience and years in the industry. However, it would be wise to not discount an agent simply because they are new and don’t have experience. Generally, new agents have more time to help you and are eager to please.
2. Interview the top agents you’ve found yourself or were recommended to you by others.
You should be prepared to ask relevant questions to help you determine if the agent will be a good match for you.
Are you a REALTOR®?
It is usually in a seller’s best interest to find a REALTOR®, not just a real estate agent. REALTORS® generally work full time, are committed financially to their business and have been extensively trained to serve your needs. They are also members of the National Association of REALTORS®.
How long have you worked the real estate market in this area?
Experience can certainly play an important role in helping you sell your house. New agents may not know how to deal with certain situations that occur during the transaction. An agent capable of handling difficult transactions can be the key to closing the deal.
However, remember new agents generally more time on their hands. They may be more vigorous in their mission to sell your house. In addition, they have extensive backing from their Broker during situations they may not be familiar with. Don’t discount new agents simply because they are new. Take into consideration whether the other agents you interview already have full plates.
How quickly will you return my phone calls? Do you have a call back policy?
Some agents return phone calls during specific times each day while others will call you back as soon as they receive the message. Make sure the agent gives you one good phone number that you’ll be able to reach them with at all times.
Don’t conduct your interview as a question/answer interview. Have a real conversation. You need to get a feel for the agent’s personality as well.
Agents that answer your questions stating yes or no are probably not someone you want to deal with. Find an agent that will happily answer your questions extensively so you understand the details of your relationship from the beginning. This will help you avoid any problems down the road.
3. Ask the agent for references and testimonials from past clients.
If they’ve been in the business long enough, they are bound to have quite a few. This can help you weed out an agent that may not be well liked. Don’t just look at the testimonials… READ THEM! How enthusiastic do the sellers sound? Were they ecstatic with the agent’s service? Have they used the agent more than once?
4. Compare the agents you interviewed to make the final decision of whom to hire.
What do you like and not like about each? Make a list and discuss it with family and friends that have been through the process. They may have valuable tips to help you make the right decision.
Who is the Realtor Really Working For?
For the real estate investor who may be thinking about purchasing a new home, especially if this is their first time being involved with the real estate market, it is imperative to find a quality real estate agent. Knowing what questions to ask of the realtor is the only way to fully qualify them and find out whether or not they are someone who would be good to work with in the real estate transaction. However, for whom is the realtor working? Is the real estate agent looking out for the best interests of the seller or the buyer?
One of the most common misconceptions among both homeowners and homebuyers is that the realtor will be working solely for only the buyer or only the seller. This is actually not the case, so forget about even asking for whom the realtor is working. The real estate agent does not make any money unless the buyer and seller of the real estate reach mutually agreeable terms and finalize a contract.
The realtor's commission is only paid after a successful sale, the sale is only successful when both parties are satisfied enough to sign. While it may be true that the real estate broker will always have a personal interest and may even be prejudiced to a degree, it will always be in their best interest to find common ground between the buyer and the seller of the property.
If the homeowner is asking too much money for a piece of real estate, the realtor is going to have a difficult time selling it. Even if they could make a better commission, they will waste more time than it is worth showing a piece of property to people they know are not going to pay the asking price. It is not in their benefit to waste large amounts of time trying to put together a deal that is never going to work.
Conversely, if a potential real estate investor is making an offer that would not even entice a novice to accept it, the realtor would once again be wasting everyone's time including their own. By keeping everything above board and reasonable for everyone involved in the real estate market, the real estate broker is going to be able to provide better opportunities for everyone involved and ultimately will make more money. No matter which side of the real estate transaction the real estate marketer is on, the realtor is going to work equally hard to please them.
Preparing your home for a sale
Whether the real estate that is for sale is a primary residence or one that has been used as an actual investment to generate positive cash flow, there are some steps that will need to be taken before the house is ready for the local real estate market. While the real estate can be prepared to whatever extent the current homeowner wishes, better prepping will often lead to faster home sales for more money.
While home improvements are an important part of any real estate sale, it is not recommended that the homeowner mortgage the house in order to fix it up and sell it. Basic improvements in the appearance of the real estate are always a good idea however. If there are any defects in the home or problems that may prevent a sale, they should also be repaired before listing the house with a realtor.
Any problems that may be considered major will often prevent the home from being sold at all. If there are leaks under the home or in buried plumbing that may not be immediately seen by a potential real estate investor, they should still be repaired. Many states have lemon laws for homes similar to those for used cars. If problems are discovered, the financial burdens will be placed on the seller, not the purchaser of the home.
The home should be aesthetically appealing to the buyer in order to better facilitate a rapid sale of the real estate in question. While it may not be necessary to hire a landscaping crew to fully manicure every inch of the lawn, care should be taken that the outer appearance of the home is pleasing to the eyes. Broken windows, missing shingles and anything else which distracts from the beauty of the property for sale will result in many less offers at much lower prices for the home.
Similar care should be taken inside the home to make it appealing to potential home buyers as well. Clean carpets, appliances and an overall appearance of neatness will give the buyer a higher level of confidence that the home has been properly maintained and cared for. This will not leave the buyer to wonder what else may be wrong with the house and dissuade them from wanting to purchase it.
The two most important factors in home preparation before selling any piece of real estate are functionality and aesthetics. The home must be safe, secure and appealing to the real estate investor if it is ever to be sold. The more appealing it is, and the more comfortable people are there, the quicker it will sell ... and for a much better price.
Creating an Effective Home Marketing Plan
While some agents may put an ad of your home in the local paper and list it in the Multiple Listing Service (MLS), there are many additional steps that should be taken to effectively market your home enabling a quick sale at the best price. A devoted REALTOR® will actively market your house using at least a few of the following methods:
1. Advertising in the MLS
Advertising your listing in the Multiple Listing Service (MLS) is imperative in any marketing plan! It is typically the first place your agent will begin marketing your house and most often directly responsible for the sale of your house. Years ago, it was used as a medium for agents to market homes to buyers agents, however, with the internet evolving it is now available for buyers to search themselves on many real estate websites.
2. For Sale Sign in Yard with Brochure Box
For sale signs with professionally designed brochures displayed in a brochure box in your front yard is also essential. This is an inexpensive way to ensure all passersby’s get a chance to notice your house.
3. Prominent Advertising on Your Agent’s Website
While the MLS is available for buyers to search it is of utmost importance your house also be prominently featured within your agent’s website. While your house is not likely the only listing your agent features you may want to kindly suggest they rotate each listing from the “featured properties” page to the homepage. The added exposure just may help you sell more quickly and your agent will likely appreciate your interest to help.
4. Advertising in Local and/or National Newspapers
Advertising in newspapers is considered traditional advertising and continues to provide REALTORS® an opportunity to market listings. The downside is the potential cost, especially on Sundays, and rarely results in a sale. It is advisable to request your agent put more effort into other marketing avenues instead.
5. Advertising in Real Estate Magazines
Many specialty real estate magazines exist for the purpose of marketing listings as well. Most often, these publications feature high end homes. However, just as with newspaper ads they rarely produce qualified leads or end in a sale. While you may like seeing your house marketed in this manner a better option would be to opt for additional website marketing.
6. Holding Open Houses
There are two types of open houses. One if for the public and generally are held on Sunday afternoons. The other is for agents.
Ordinarily, public open houses don’t result in the sale of a house either. Part of the reason public open houses have failed to lead to sales in the past is the lack of visitors. There are two things that can and should be done to promote the open house and persuade buyers to actually visit.
The first of these is website and search engine marketing. Your agent could easily display an invitation to the open house on the homepage of their website a week prior to the event. Additionally, using online ad programs such as Yahoo! Search Marketing and Google AdWords to further advertise the open house will help draw people at a fraction of the cost of most newspaper ads.
An ad by itself is not likely to draw in a large crowd but the promise of something special to eat will always win over a discerning buyer. This is the second way to increase visitors at your open house. Help your agent prepare a menu of items to attract larger crowds of people.
However, having a public open house is not as likely to bring in many serious buyers as a Broker open house. Broker open houses are held for agents instead of the general public. Since agents viewing your home during a Broker open house already have pre-qualified buyers your chances of selling are heightened.
7. Providing Buyer Feedback
While this is not technically marketing it is a valuable tool to use to help make your home more marketable. Most agents will leave their business card on a kitchen counter or table after a showing to offer buyer feedback to your agent. Your agent will then gather all cards from you at least once each week. After calling each buyers agent your REALTOR® may provide suggestions to help improve your homes appearance. Discerning buyers will likely disclose their likes and dislikes about your home. These details are infinitely important to the sale of your house.
Ensuring a Smooth Home Sale
Selling a home for the first time can be just as troubling and just as difficult as purchasing a new home. While the experienced real estate investor may or may not have a regular realtor and enough experience to make the process easier to live with, it is never actually easy. For anybody who does not buy and sell real estate on a regular basis, care should be taken not to fall into any common traps.
The first step when selling a home should be to make a complete and honest listing of everything about the home. This should not be an inventory, but a list of all of the good points and bad points about the home. If there are unsightly shingles missing on the garage roof, it should be noted. If there are countless gardens that have been meticulously manicured and cared for, they should be noted. A complete list of all of the selling points and an inclusion of anything that may in any way cause someone to object to buying the house. This home list can always be updates and should be kept handy in case any revisions are required about the real estate for sale.
The second step for anyone selling a home or real estate of any kind should be to find a licensed and qualified realtor. The real estate agent will know all of the applicable laws in regards to selling a home. Selling a piece of property or a home is not as simple as signing a piece of paper and getting a check. If the real estate investor is to be truly successful, a good real estate agent will be not only beneficial, but almost a necessity in real estate transactions.
The real estate agent will be better able to answer questions about the local real estate market. A quality realtor will know what the local housing market will bear for prices, what the neighborhood has for homeowners benefits and other factors that are not normally thought about by the average homeowner on a daily basis.
The property seller should maintain a constant stream of communications with the realtor. It is not necessary to call them on a daily basis to see if the home has been sold, they will readily inform the seller of any event of that magnitude. Communications should be kept open in order to answer any possible questions by potential real estate investors and homebuyers. A quality real estate agent will be able to maintain a position as a liaison between homeowners and sellers in order to more deftly handle all of the different and trying aspects of a real estate transaction.
Preparing Your House for Showings
1. Inspect Your House.
Make sure that your house is safe. Fix any loose rails, steps, etc.
Check electrical items, faucets, toilets and windows for correct operation. Make certain that all built-in appliances are functioning properly. Consider a professional whole house inspection, which will indicate to buyers that you are a responsible seller and uncover any major defects before they can cause trouble.
2. Know What You Can Change about Your House.
Discuss with your agent about what is necessary to change in order to sell the house. Keep a record of all home improvements you have made.
3. Get Rid of Clutter.
If an item is not necessary for your everyday life, then store, sell, donate or toss it. Have a garage/yard sale before you list your home.
This will encourage you to go through and get rid of all the things you don’t need. If curio cabinets, shelves and tables are overflowing with books and knick-knacks, remove some of them.
4. Remove Your Imprint.
It is acceptable to have a few personal pictures around the house.
However, if your home is a shrine of your loved ones, take steps to depersonalize it. Buyers must be able to envision themselves in the house, which is impossible if everywhere they turn they are staring at you.
5. Have a Plan.
Give each family member assigned jobs that will go into action when a short-notice showing is scheduled. Checklist for Showings
1. Make the House Spotless.
Pay particular attention to the bathrooms and kitchen. Scrub baths, showers and sinks. Towels should be washed. Make sure all dishes are put away and counters are freshly cleaned.
2. Make the House Light and Bright.
Open window coverings, such as blinds, curtains, drapes and shutters, to let in maximum sunlight. Turn on lights.
3. Make the House Smell Good.
Air out the house to get rid pet and cooking odors. Light candles or bake cookies to make the house smell yummy just before the buyers arrive. (Make sure you turn off the oven and blow out the candles before you leave!)
4. Set the Thermostat to a Comfortable Temperature.
Make certain the house is not too hot or too cold. A home that is too hot or too cold can make for a bad experience and the protential buyer may leave prematurely.
5. Keep Fact Sheets Easily Accessible.
Ask your agent where to place the flyers for showings and who will be responsible for restocking them.
6. Keep Pets Out-of-Sight.
Remove pets from the house or keep them outside. If your pet must stay at home, put them in a particular room and shut the door. Make sure the agent knows where the animals are.
7. Leave.
It is best for the sellers to be away from the house during a showing so that the potential buyers can cruise through the house at their own pace and talk openly about their feelings with each other and the agent. Take the opportunity to get out of the house and enjoy the day. Do errands or take pleasure in a favorite pastime.
Staging your home
For the average real estate investor, selling a home can be a difficult task at best. Even when the home to be sold is aesthetically pleasing, everything that needed to be fixed and repaired is now working properly. Still, there is a desire to make the real estate even more appealing. Some homeowners do this by actually staging their home for an open house or for other showings.
One company in Arizona recently even resorted to hiring actors to portray the all-American family enjoying the comforts of their new home by that company. While the results are not yet in on how well the experiment worked as far as new home sales, it does exemplify what is meant by staging your home for selling.
While some experts may claim that staging the house for sale to look like the set from a nineteen fifties sitcom with the perfect wife and the perfect family, not everybody lives in a perfect and pristine bubble. It really is proven more effective for the home to have a lived-in and comfortable appearance to it.
This does not mean there is no need to dust or to pick up after the kids, or even wiping the fingerprints off the wall. The house should always appear neat and clean to give a sense of psychological comfort to the potential real estate investor.
If there are children playing on the floor in the family room, do not be so quick to chase them outside. The sounds of laughter and happiness fill a home nicely and make it warm and appealing to the buyer. If someone is in the kitchen making a snack, do not try and chase them off before they are seen and hide the one dirty plate somewhere. When the people who are viewing the house for sale can see that it is lived in, they will relate those little things to what their life will be like in that home.
By making sure that the house for sale is aesthetically pleasing to behold, the potential home buyer will be happy to find some place that they will feel good about coming home to at night. By making sure that everything is in proper working order, the real estate investor can be allowed to roam freely as they are want to do anyhow. By filling the home with a lived-in and comfortable feel, you are giving positive reinforcement to the idea that the new homeowners will be just as happy in the home as you have been.
When all of these factors are combined together by the seller in order to stage the home for a sale, the offers will likely increase in volume as well as in price. Real estate may be a major financial investment, but it is an investment that everybody from the realtor to the homeowner know is ultimately about finding a place that will be home, in every sense of the word.
Common mistakes when selling a home
For the person who is selling a home for the first time, the experience can be almost as troubling as their first purchase of real estate. There are many pitfalls and many traps for the first time seller. Having the proper knowledge will help to make the sale go smoothly. Trying to sell real estate without the proper knowledge is detrimental at best and costly at worst. Real estate investments are called investments for a reason. Just as with any business, there are applicable laws that must be adhered to.
Many homeowners mistakenly believe that selling real estate is as simple as selling a used car. Just slap a couple of classified ads in the local paper and wait for the phone to ring and all they will have to do is cash the check. Unfortunately, nothing is that simple, especially when it comes to real estate investments.
The laws regarding real estate sales are there for a reason. Since an investment in real property is a major expense for anyone, the laws offer protection, mostly to the buyer. It is very important to know each one of the laws that are applicable wherever the home is to be sold. While this may seem a daunting task to many people, some may find it easier than others may.
If there is any doubt about any of the laws or requirements for selling a home, a qualified realtor should be used for the sale of the real property in question. While this may cost a little extra and decrease the profits marginally, the homeowner who is selling the property is given a great value for their investment dollar when they do use a good real estate agent.
Real estate agents actually do earn their commissions, perhaps unbelievably. They are responsible for knowing all of the laws in any communities where they are licensed. If there are any difficulties with the sale, the realtor is qualified, certified and trained to handle them quickly and efficiently so that they do not interfere with the sale of the property.
Real estate agents are familiar with all of the aspects of home sales from the beginning until the very end where the homeowner and seller can actually cash the check from the sale of their house. From the time an offer is made on the home, processes such as escrow, closing, financing and many other hidden aspects may rear their ugly head and catch the seller off guard. A quality real estate agent will be aware of every step and be able to guide the homebuyer as well as the real estate investor closely, so that every aspect of the sale goes well for all of the individuals involved.
While selling the house may seem like a simple process, just remember what it was like when you purchased your first home. There is a lot of information necessary for the real estate investors and qualified and licensed real estate agents will know all of the answers. Hiring the real estate agent can be seen as an investment as well; and a worthy investment in any real estate transaction.
Sellers Questions
For the person selling a home for the first time, the whole process can be just as problematic as or maybe even more so than purchasing a home for the first time. One key component that will make the experience much simpler and more financially rewarding will be finding the proper realtor. With so many realtors available, it can often be difficult to find the right one. While many of them may be very well qualified, that does not mean that just picking a real estate broker at random will work for every real estate transaction.
One key to help the seller in finding the right real estate agent, is knowing some of the proper questions to ask, so that the realtor can be rightfully qualified or even disqualified in some rare cases. While this list is not exclusive, it will give anyone who is considering selling a house enough information to find a realtor who is well qualified to meet their personal needs.
Since most of the fees are going to be paid by the seller, one of the first questions should always be what fees are going to have to be paid before the sale is completed. This will give the seller an opportunity to find out how much cash on hand they need in order to complete the home sale quickly and efficiently with no drawbacks or unforeseen difficulties.
Does the realtor in question have any references who may be able to give insight into their abilities, skills and any other information that may be relevant in the sale of a piece of real property? If there is a problem with references, that is a major red flag and should make the seller wary of doing business with that real estate agent in particular.
Is the realtor familiar with the surrounding neighborhood? A real estate agent who is trying to sell something in a neighborhood they are not familiar with will have a difficult time explaining any advantages of living in that neighborhood to the real estate investor looking to buy the home.
Figuring out where the real estate broker will be advertising the home and what means they have available to them will often be a deciding factor in how quickly the home is sold. While it may be said that more is better, more advertising where nobody will see it or at least, where no qualified buyers will see it, is not going to be any improvement over a more limited marketing campaign that will direct the advertising to those people who are more likely to buy a new home.
With a little bit of planned questioning, the skills and ability of the real estate agent will be beyond question. While most real estate agents are actually very well qualified, there are always going to be some who are not. There is good and bad in every field or endeavor. Real estate investment is no different from any other business. For the person selling a home, finding a qualified realtor should be the very first step.
Buy or Sell First
There are many instances when someone is purchasing a second home. Sometimes the real estate investor is purchasing a second home as an investment property but many times the homeowner is buying the second house as their new primary residence. When this is the case, it is important to figure out whether to buy the new property or sell the old real estate first.
Many times a change in careers or even a promotion will force someone to move in order to keep their job or improve their lot in life. If the person is already a homeowner, they will be forced to sell one home and will likely buy another piece of real estate in their new hometown.
If this is the case, most companies or corporations will provide some type of housing assistance. While it may not be enough to purchase a brand new home right away, it will at least make provisions for the homeowner to be able to survive until a new property can be located.
If the current real estate investor does have the financial capital to invest in a new home, it may be a wise choice simply due to the increased deductions and savings on taxes at the end of the year. Not everyone is going to be in a financial position where they are capable of maintaining all of the financial responsibilities of owning two households at the same time.
Listing the current home with a qualified realtor will often produce better results for the average person. By selling the current home, they are released from any mortgage payments or other financial obligations in respect to that house. They will also come out ahead financially if they have managed to build up any equity in the value of the home. This added boost to their discretionary disposable income is known as a capital gains income. There is usually a two-year period in which they can reinvest that money without being penalized on their taxes at the end of the year. That additional money can then be used to assist with the cost of living in a rental unit while the real estate investor seeks out a new ideal piece of real property where they can safely reinvest their capital gains.
Whether to buy a new home or sell the old home is going to depend on the financial portfolio of the individual real estate investor. As a general rule, if the financial means are available, then purchasing a new home first is often the best choice. Since that kind of financial freedom is not available to everyone, the reality of the situation is that for most real estate investors, it will be wise to find a good realtor and sell the old property before purchasing a new home.
Buyer Resources
- Real Estate Financing Information
- Buying Real Estate with No Money Down
- How Much Home Can You Afford
- How Financing Affects the Real Estate Market
- Factors that Determine Loan Approval
- Getting Pre-Approved
- REALTOR Information
- Finding the Right Realtor
- Flat Rate or Commission
- Choosing a Realtor
- Why You Need a Realtor
- Who is the Realtor Really Working For?
- Real Estate Pricing Information
- How to Price a Home
- Setting the Price
- Determining the Market Value of Your Home
- REALTOR Information
- Advantages of Using a REALTOR® to Sell Your Home
- Choosing a REALTOR® to Sell Your Home
- Who is the Realtor Really Working For?
- Home Selling Preparation
- Preparing your Home for a Sale
- Creating an Effective Home Marketing Plan
- Ensuring a Smooth Home Sale
- Showing Your Home
- Prepare your House for a Showing
- Staging your home
- Sellers Helpful Tips
- Common mistakes when selling a home
- Sellers Questions
- Buy or Sell First