What every Buyer is looking for in a HOME SWEET HOME!
by RUSSE Parvin
Yes in the world of short sales you do not hear the words short sale and smoothly go together very often. In this deal it did.
Not only was the buyer, seller and Broker on the same page but the lender communicated very clear and concise throughout the whole deal.
There is a lot of follow through and jumping threw the hoops when the bank needs the information, but surprisingly enough this deal went together smooth, easy and with no real hic-ups to speak of…Yeah, the banks are getting the hang of it.
This year in Colorado Springs I checked with the public trustees office. There are more foreclosures starts then last year but less final foreclosures because the homes are getting bought in a short sale or regular sale now that values are growing and there is enough equities for sellers to sell their home without having to come to table with money they don’t have. Times are looking UP!
HOW TO BUY A HOME SERIES!
Part 1: Informal interview of each other
Open house is a productive way for real estate agents, buyers and sellers to informally interview each other in a comfortable neutral environment. It is a nice way to meet a potential future client.
Part 2: Select a Real Estate Agent
The bottom line, hire someone you get along with, and feel you can trust they will do a GREAT job. Interview agents, sit down and talk to them for an hour, and decide if you would like to work with that person or not. After I talk to someone for an hour, I know, if I feel comfortable with them, to know if they are knowledgeable about what ever I am considering to hire them for, an attorney, accountant, or plumber or babysitter. I ask the obvious qualifying questions, to see if they know what they are doing for a living, and if I feel confident they will cover MY interest (what ever that maybe) on my purchase of service or asset. Don’t be shy..interview 2 or more agents and tell them that is what you are doing. The reality is..as an agent myself..when I talk to people about buying or selling a home…I too, am interviewing them, to see if I really want to work with them as well. I personally watch out for people who are litigious, arrogant, and vindictive. I only like to work with people that are NICE, HONEST, and STRAIGHT FORWARD.
Part 3: How do Real Estate Agents get Paid?
People have the impression that real estate agent/brokers get paid big bucks..Well YES we do and NO we don’t. The truth of the matter is, all that a good real estate agent does for you is worth EVERY PENNY PLUS! What people DON’T know, is the behind the scenes work that takes place, besides open house, showing homes, and listing property. Real Estate Professionals go to several meetings weekly, to collaborate with each other in order to get deals done. The weekly classes we attend in order to keep up with lending, how a home is built, disclosures, and what we have to disclose, and learn about, such as mold, termites, earthquakes flooding, radon, etc…on and on, we have to learn what ever could or will happen to a home. We also need to keep abreast of the energy solar, inefficiency of homes to the tax structure of the write off that you receive, when you own a home as a owner occupant, or a investor. Don’t forget the 1031 exchange information that is critical for people on their home investment. The agent keeps there ear to the ground and is aware of the local and global market to keep track of the housing market. So when a agent sells you a home…there is a LOT of knowledge besides the 30 to 100 pieces of legal paperwork and jargon they are required to understand, explain to the buyer/seller and deliver, as you buy or sell a home.
Also we as agents/brokers have to keep up with technology that can deliver with ease and speed, information to the client, when and what they need in order to educate the client to be able to have clients feel comfortable to buy or sell a home. Agents/brokers are on call 24/7 when they are working with people in the trenches of making an offer or negotiating an offer or looking for a home that may pop up for sale that would fit the buyer perfectly. YES once you get into the flow of the job and in a niche of the arena you decide to work in…you will make good money as an agent or broker, it takes a lot to get at that point. You DESERVE to get paid the big bucks because there is sooooo much involved when buying and selling a home, that people are not aware of. MOST people can not stay being and agent/broker for more then 10 years because it is too much work that is VERY demanding and precise that it wares you down. Personally as an broker for 28 years, I like it, because I make it a lifestyle, not a job. Yes the agent/broker we EARN every dime of the commission, as far as I am concerned I charge a reasonable hourly rate and commission, and not just commission.
BY THE WAY!
The government is making buying and selling brick and mortar so difficult through the lending process and disclosures, and tax changes it seems that the government just wants large corporate banks to sell homes and not your friend or neighbor that is a agent/broker.
Part 4: How to buy a home: Agency–What is it all about?
There are several agency roles an agent can play while working with you during a purchase or sale of a home. It can vary a little bit from state to state, ask your agent who they represent, when you are buying a home or selling your home. Agency is a required disclosure, All real estate agents need to explain to a buyer or seller what capacity they are working.
Buyer Agency is when the real estate agent represents you as a buyer.
Seller agency is when a real estate agent is representing the seller.
Sub agency is when a real estate agent is working with the buyer but is representing the seller.
Duel agency is when the real estate agent is working with both the buyer and the seller and representing both sides of the deal.
Transaction broker (not in all state) is when the broker is not representing either party but is working with both the buyer and seller and is putting the deal together. They do the paperwork, disclose everything they know on the deal and communicate with both parties to make everything go easy and smooth without too much frustration or stress for either party.
Commercial #1: CASH BUYERS IN THE PROCESS!
I have been working with these buyers for several months on their purchase of their home. We found a home that works for them, in a neighborhood they like. The home needs a lot of work but the price reflects that. We were competing against several other contracts. I believe the reason why we were the winning bidder on the home is because the buyer was willing to put up the same amount of the earnest money as what the purchase price was. He represented that not only is he a cash buyer, but he is also a VERY serious buyer. He puts his money where his mouth is. After the inspections such as home inspection, permits, scoping the main sewer line, termite inspection, contractors, and along with getting bids for the repairs, the buyers are excited, stressed, but feel comfortable with the purchase. Once we get a few more questions answered they will make their final decision on going forward with the sale or backing out, because the cost is too high to put the house back together and functional.
If they decide to back out..yes… they get the full amount of the earnest money back, but if they decide to go forward and remove all contingencies then paperwork goes through the process and we close escrow in a couple of weeks.. All is looking good. WE shall SEE!
Part 5 How do you buy a home: Fica Score:
First of all, if you are not paying cash for a home, you will need to get a loan. When you talk to a lender they will ask you if you have a down payment? a job? and credit? Credit involves a fica score..Sooooo what the heck is a fica score?
It is a program that was developed to evaluate people of their lifestyle, and what kind of risk they would be because of their lifestyle. The credit report will show if you pay your bills on time which is a big part of fica score or do you have a lot of no pay or disputes on your credit. They also give or take a point or two knowing if you have been divorced or not, golf, move a lot, job history, etc. etc. The computers through your social security pretty much has the whole story on you, showing if you are credit worthy and stable or not, and that will give you a fica score. It can range from 0 (no credit) phantom person not in the system to 800 plus. 650 is considered alright. Graded by A,B,C 650 I believe is a B paper loan, 680 is a B+ paper loan and 720 is a A loan.
If you are late on a credit card payment you will be dinged on your fica score. This means that your fica score will go down. Sometimes you will see on your credit report that someone said you did not pay them even if you did pay them. Mistakes happen. All you have to do is write the credit agency a letter of explanation preferably with proof of cancelled check, receipt, etc. and say you dispute this credit issue. They will check into it and if the place of the dispute does not respond it will fall off your credit report and your credit fica score will go up and issue will be gone. I hope this helps you with how a fica score works and how it can effect your credit for the good or the bad. One thing I KNOW for sure is NEVER, NEVER be late on your house payment after you do have the loan. That is one of the worst dings there are besides a back child support, student loan or a felony.
Commercial #2 CASH BUYER
Bobby Ryan with Power Plumbing at plumbpower.com came out to the home that my buyer’s are buying and scoped or color videoed the main sewer line in order to figure why the sewer was backing up a couple times a year (which the seller disclosed to us). Videoing a sewer line was interesting. They take a camera that is at a end of a electrical extension and put it down the sewer pipe. On the other end of the eletrical extension camera it is hooked up to a small T.V. that shows you right then and there the sewer line. Techy… Techy… What we discovered was not only were there roots in the line where the bush was growing in the front yard, but that the material used for the main line was a cheap cardboard material that really needed to be replaced years ago to prevent the growth happening into the sewer line. Also the sewer had standing water in areas where the sewer was not evenly sloping towards the street but sunken down deeper creating standing water in parts of the sewer line. So the conclusion was the main sewer line needs to be replaced in order for the home to function correctly and have no more sewer backup on the property.
The color video scope cost $150.00 and the bid for replacing the main sewer line up to the sidewalk was approx. $4,500. I felt both were very reasonable.
Part 6: How to buy a home: Pre-Qualification VS. Pre-Approval Letter from the Bank
Pre-qualification is when a lender pulls a credit report on you and run your numbers of how much you earn and what you spend to determine what loan amount you can afford. The pre-qualification letter they will provide to you when you are putting an offer in to purchase a home… basically states that they have checked your credit and ran the numbers you gave them and if everything is accurate they will give you a loan.
A pre-approval with a lender is when the lender takes a full loan application from you and they will have you provide 2 year tax returns, pay stubs, bank statements, etc. and put a package together to give to an underwriter that works for the bank that will evaluate the package to determine that YES they will give you a loan condition upon appraisal of the property. So a Pre-approval letter is almost as strong as being a cash buyer. When you have pre-approval you are prepared to purchase a home.
Part 7: How to Buy a Home: The different Types of Loans:
There are several types of loans, and off the top of my head I can tell you there is VA…for the veteran FHA for minimum down buyer, Bond, CHAFA and Rural loan. The Chafa, Bond and Rural loans are for first time buyers. All 5 of these loans are Governmental Loans. Meaning the Government will insure or guarantee the loan for the bank in case of any default on the loan from the owner.
There is a conventional loan, which is usually a minimum of 10% down or more. These loans can be a ARM loan or 30 year fixed loan or conventional 20 year commercial loan. These loans are a created product that the bank or investor puts together to accommodate different needs and wants of a buyer.
There is Cash to loan, (CTL) You assume the sellers existing loan and take over there payments by giving the seller the difference between the purchase price and loan amount.
There is Owner Carry Loan, this is when the owner has a home paid off and plays as a lender and loans you the money using the home as collateral for the loan they allowed you to have. No bank is involved with this loan.
There is a Wrap loan, this loan is when there is an existing loan on the property and the owner carries back or wraps a additional loan on top of the first loan. For example the first loan is in the amount of $100k 5% interest rate, 30 year loan, that has been paid into for 10 years with a remaining 20 years to go.
You purchase the home for 200k and put 50k down payment towards the purchase leaving 150k balance. The owner then carries back or wraps the loan around their first mortgage (which remains in their name) giving you a loan for 150k, 30 year, at 6% interest. The advantage of this for the seller is he sells his home without you getting a loan, makes 6% on 50k and 1% on the remaining 100k for 30 years although the loan has been paid into for 20. The buyer’s advantage is they do not have to qualify for a loan, and or jump through the hoops to get a new mortgage and relieves them of high closing costs. Usually a wrap has a ballon period of 5 years. This means that the buyer will have to refi with in a 5 year period in order to pay off the 1st and 2cd on the property. This loan is created when the seller wants to really sell, and the buyer can not get a loan on the property because of credit issues, or lack of track record of work but they have a really good paying job. It also is created when the property is hard to lend on because maybe it is a 100 year old cabin in the middle of the woods and traditional lender at present moment will not lend on property even though the property has a mortgage on the dwelling already. Also this loan takes place when the 1st mortgage is un assumable. You do need to be aware of any due on sale clause. Usually, the buyer re-fiances with in the time allowed once they are in a position to do so.
Pre-paids and Closing costs are paid in addition to your down payment on a loan. When obtaining a loan for a home the closing costs consist of the 1% origination fee, underwriting fee, recording fees, processing fee, closing fee etc. These fees can add up to $3000 to $10,000 depending what your loan amount is and what points you may decide to pay. Now pre-paids are totally separate from closing costs, what pre-paids are is the starting escrow amount for your taxes and insurance that is paid as a reserve for the bank at all times in case of default. Usually it is 2 months of taxes and 14 months of insurance.
When you pay less then 20% towards your down payment the bank not only collects from you the principle and interest for your loan, the bank also collect 1 months tax and 1 month insurance within your monthly mortgage payment. The bank indicates this on your mortgage statement as P.I.T.I. (principle, interest, tax, insurance). Upon putting 20% or more towards your down payment, the bank will allow you to just pay the principle and interest payment, and you would be responsible for the taxes and insurance. Regardless what amount you decide to put down on your property purchase, they will collect the pre-paids for reserve.
Pre-paids are always refunded back to you after you sell your home and or pay off the loan.
What ever loan program you decide to obtain, pay attention to the assumabilty of the loan, and if there is any pre-paid penalty clause. These two points may or may not be a concern for you, but if they are, you will be glad you asked.
Part 8 & Part 9: How to Buy a Home:
Loans! Loans! Loans!
Sean Schuur with Sure Mortgage Solutions (805)489-1257 Knows his loans.When you go to the loan application at the lender that you selected to use there are a few items that you will want to bring along.
1. Last 2 years of tax returns.
2. 2 months of your bank statements
3. 1 month of all your pay stubs from work.
4. Phone number of your employer and address.
5. All your credit card payment paperwork from billing.
6. Drivers License.
The lender may ask for a few more things, they will make a list for you. As Sean says he can get pre-approval with in an hour of taking your application. It is called desk top approval. When you are at the loan application, they will pull a credit report, and have you sign paperwork allowing the lender to get verification of employment, landlord info, etc.
They will put everything into the computer and wala….if all is accurate and the lender provides enough information on you they will get the pre-approval letter that you will need when you submit a contract to purchase a home. The lender will also provide you with a good faith estimate showing what interest rate and APR that will be charged along with the closing costs, pre-paids, and a guesstamit of taxes and insurance. A complete loan application will give you a ball park figure of how much money it will take for you to purchase a home including down payment, closing costs and pre-paids. They will also provide you with what your payment will be with the going interest rate of the day. This information can change depending on how much you purchase the home for and what the rate will be once you close on a property.
Sean Schuur with Sure Mortgage Solutions (805)489-1257 Knows his loans.
Part 10:How to Buy a Home: Pay attention!
When you are going out to shop for a home, ask yourself…will I be living here long term or short term? I find when you do this it does effect how you shop for a home.
If you are interested in a home ask yourself…can I rent it out for what the mortgage will be or close to it? Will it appreciate better because it has a nice park in the back or Views to knock your socks off then a house that does not have this. I always think resale, resale, resale when I take buyers out looking at homes. I look and listen for the positives and the negatives on a home. If the buyer likes the home I will have a conversation with them telling them what I notice about the house and where it is situated. I look for wires close to the home, or the way the sun shines in the home..will it be too hot, or too cold? Does the Floor plan flow when walking into the house every day, what does that look like for a person carrying grocery, baby or just a brief case and a set of keys. The main thing is Make sure the home FEELS good to you when you are shopping and not just looks good. Happy shopping!
Part 11: How to Buy a home: Shopping!
This is the FUN part…GO SHOPPING
Part 12: How to Buy a Home: Write the Contract!
Congradulations! You are ready to write the contract. Yeah! When you have found a house you like and want to put an offer together the real estate agent you are working with will walk you through the whole process of the contract. The agent is there to help and explain the whole process of buying a home and prepare the paperwork for you. The questions that come to mind, is what do you want to offer? Well, that depends if there are any other offers coming in on the property or is your offer the only one that is coming into the seller. Your agent will find out this answer for you along with when would be a good time for both parties to close. You will also want to have a list of solds and pending for
comparables to the property that you are putting an offer in. This also helps you determine a starting point of negotiation of price for the property.
Earnest money is important. If there are other offers coming in, then I suggest you make the earnest money healthy, if the house is on the market for some time and your offer is the only one coming into the seller, then be reasonable with the amount of earnest money. (usually 1% of the purchase price). Get the contract in, it will be condition upon inspection and appraisal, and clear title along with your ability to obtain the loan. So go for it, get the paperwork done! You can get an answer, and go to the next step to your purchase of home sweet home.!
How to Buy a Home: Home Warranty: Part 13
I have heard a lot more good feed back on one year warranties then I have heard bad in my 28 years of selling real estate. Good stories most of the time. Cheap insurance for a large investment, great peace of mind.
Part 14: How to buy a Home: ESCROW..UNDER CONTRACT!
When you are in escrow or under contract that means you have a home that is pending and waiting to close. The buyer is going through the inspection timelines and arranging the financing on the property, while the seller gets any and all title issues out of the way. The copy of the signed contract from both parties go to the title company and the lender that the buyer is working with in order to obtain the loan. The lender will order the appraisal, the title company will get the title insurance out to all parties showing any liens or encumbrances on the property. It will also show any special assessments, tax information, judgement s etc. You the buyer at this point, will need to order the inspection that you decide to get completed on the property. Your agent will help you with that. You are half way through now on your purchase of buying your home. Hang in there. Now is the time for investigation on the home and for you the buyer to get the paperwork into the lender in order to get the loan.
How to buy a home: Title
You ALWAYS want to read through the title insurance policy to see what they will and will not insure over. If you have ANY questions about ANY exceptions on the title and or assessments ask your agent to explain or the title person that you received the title commitment, or prelim from. (contact information is usually on the front page). Feel Free to ask questions if you have them. Most title commitments are simple, but always read through them, just in case there is an exception or assessment you have a question about.
How to buy a Home: Title Insurance and Escrow.
What is the difference between the two. Title work clears the title of any liens and encumbrances off the title in order for the new buyer to receive a clear title. They clear off
the first mortgage, any taxes that may be due, judgments, any special assessments…for example a sidewalk assessment, or an assessment created to pay for paving the gravel road. They search the title to and provide the title insurance. Insurance to make sure the title is clear. The escrow department actually pays off the taxes, assessments, mortgage and etc. and disburses the proceeds to the seller. Once they record the deed and the new first deed of trust (if there is a new loan) then they disburse the funds and paperwork and the buyer has bought the home. YEAH!
The title work will show you what the taxes are on the property along with any tax assessment. But it doesn’t hurt to call the assessor and ask them how and what the assessments are on the property. The property tax has become a lot more complicated through the years.
Wow, DID YOU KNOW… that if someone who owns real estate passes on the heirs are to call the assessor A.S.A.P. to inform the assessor of the death in order to keep all interested parties abreast of the basis and the changes to the basis that will accrue, upon transferring the title to someone else, whoever that maybe. DID YOU KNOW….when you purchase property in California there usually is a subsequent tax…
DID YOU KNOW….There are helpful advantages for people over 55 and disabled citizens who own real property is given to you from the assessors…and DID YOU KNOW….Upon a divorce in California, the couple owning the property that may get sold because of the divorce, you SHOULD negotiate within your divorce degree you who gets to claim the basis of the home…..Yes there is a LOT of complicated details in your property tax whenever the people who own the home has a change in title, one way or the other CALL the Assessor, the assessor is there to Help you and educate you on the responsibility of your real estate taxes.
THE ASSESSOR # is (805) 781-5643
Helpful Tax Sources
www.leginfo.ca.gov, www.boe.ca.gov/proptaxes/Itacont.htm, ccr.oal.ca.gov, www.boe.ca.gov/protaxes/annocont.htm
Part 15: HOW TO BUY A HOME: HOME INSPECTIONS Everyone needs to get a home inspection even if you are buying a new home. Not only is a good time to really get to know what you are getting into, it is also a good time to get a peace of mind that the house is what your really want. Follow that home inspection person around the house when you get the inspection. They are there to educate you on the home. They don’t mind. That is what they are there for.
Commercial 3: CASH BUYERS
Chris Sanchez Contractor Bid (805)904-7221
We already had the home inspected by a home inspector. We found that the home needs a whole rewire, roof,
plumbing, and sewer line. They will be knocking a wall down, replacing the windows and getting a termite fumigation done along with new flooring, paint, dishwasher etc… No surprises, we knew that before writing the contract. We have a couple of contractors bid out the project before and after the inspection timeline for the purchase. It is within the budget…so they are going to close and get to work putting the house back together. YEAH!
Bruce Severance is a person who is getting the word out about health and efficiency of a home.
When you purchase a vehicle most people ask about how safe is the car? How many miles per gallon does a car get? Why would you not ask how efficient and healthy (safe) is this home before you buy it? It truly is the question to ask. This is relatively new information for me and I think the rest of the world too!
We the public are just really learning about the health of a home. Between the leaks of air that we breath in the home, and the chemicals from cleaning, we need to be aware of our lungs..
From what I learned from Bruce today, not only will I encourage my home buyers that I work with to ask the questions, I will keep my windows open in my dwelling as much as I can to get the fresh air.
Bruce has been in green product development since 1988 and is a trained industrial designer.
Nick McClure (805)462-2282 www.msdpe.comNick was the speaker at our Friday morning Real Estate meeting that we have here in the Central Coast of California Pismo Beach. He knows engineering and what you should look for when you are buying a home or selling a home and want to be prepared to do so. Nick will eliminate any surprises that could come up prior to selling the home. The most common cause of structural issues in a home is drainage. Keep the water away from the foundation. Also he mentioned cracks in the bricks created by an earthquake should be pointed and tucked prior to another earthquake. You just call a masonry and have them re-grout the cracks. Simple, easy, and inexpensive solution to prevent any major damage prior to another earthquake. The bricks could possibly crumble if they don’t get re-grouted (or glued together again) upon another earthquake taking place. Nicks cost for a verbal report which takes about 45 minuets to an hour is $125.00 and for a written report ranges from $200 to $350
Commercial 4: CASH BUYERS
Paul Leininger was the listing agent( representing the seller) on the cash buyer’s sale. I was the selling agent or buyer’s agent (representing the buyer) He said he had multiple offers on the home in a 7 day listing time of the home. It is real clear to the real estate agents out there that the market is heating up. Before I wrote the contract I call the listing agent to see if there has been any other offer on the home and if so how many? I also ask him questions in reference to the home, like any issues about the home and what does he know about them? He was very open and honest and let me know everything he knew about the home. He also did say he received several offers. With that information we wrote the contract as is, over full price, and made the earnest money the same amount as the purchase price. We wanted to let the seller’s know we were serious cash buyer’s and wanted to make it clear… we wanted the house. I believe the $251,000 earnest money check got their attention and that is why our contract was picked over the other contracts even if they were cash too.
HOW TO BUY YOUR A HOME: Part 16: Final Details the close the escrow!
Well, the inspection and title work are all done…you need to jump through a few more hoops in order to get final loan approval and then they will fund the loan.
It is the last stretch and you are almost there. Have a walk through the property as close to signing the paperwork as possible. There are two types of closing,. Close in escrow as they do in California. The title company will call you and tell you what exact certified funds you will need to close. You meet with the escrow agent and they go through the paperwork with you. Step by Step. Your agent will be with you if you would like. It really is your choice. The other type of closing in other state such as Colorado is closing at the table. Same paperwork, title and loan, but everyone meets and closes the deal at the same stime. Buyer, seller, loan officer, and title company closer. Yes..both the buyer’s and seller’s agent is present also. A small event, usually fun and it takes about an hour. All is good. So Good Luck and Happy Moving after you close on your home. There is nothing like owning your own HOME SWEET HOME!
Commercial 5: CASH BUYERS:
These buyers have looked at soooo many homes is the past year or so before finally purchasing this home that will be there HOME SWEET HOME! They made a great purchase and I believe they will be very happy in there home
The buyer and the seller went through a whole year of jumping through every hoop you could imagine to get this short sale reverse mortgage closed. The lender and the title company also did a great job. This was the toughest deal I have ever gone through in my career. Yeah it did get completed and the buyer and seller are as happy as can be. Sometimes when you are putting a deal together and the buyer is getting a real good deal…I always say..I can get it done but you may not be paying in money but you will pay in brain damage. No matter what you do…you will pay one way or the other. So if you are getting a good deal, people usually have to make quick decisions, and jump through hoops, to get the deal done. In this case it was a hurry up and wait situation too because of the short sale process.
This was not only the longest deal, the most complicated deal, and one of the most rewarding deals that I have witnessed and participated in. The seller was an elderly lady that sold her home to her daughter as the buyer. The reverse mortgage on this deal was a mess. Some how, some way, with all of us working together, including the short sale lender we gotter done…YEAH!
Closing on a cash deal in California and I am sure almost anywhere else in the good ol’ U.S. there are so many disclosures that the paperwork gets a little hectic. It is all about avoiding the lawsuit. I call it sewage myself. Closing on the deal that was a short sale reverse mortgage was a long drawn out process but we gotter done. The lender for the seller which was B of A actually was not too bad when we dealt with them. The lending process for the buyer was disclose…. go forward, disclose..go forward..disclose…go forward..we finally jumped through the last hoop and closed. WOW, it truely was the hardest and most complicated deal I have ever been a part of. All is happy. WIN WIN WIN WIN situation for all the bank, the buyer, the seller, and of course me the lowly real estate agent who puts in hours and hours and hours of work hoping to get paid. We real estate agents have a LOT of faith.