Buying a Home



Buying A Home Is A Process!

Have you ever driven around, “searching” for a home, only to become overwhelmed with all the possibilities. Perhaps you found one you liked and actually called on it only to be told that it was under contract or priced far above what you had expected? Buying a home really is a process and a real estate professional is the person best equipped to help you through it.  Keep in mind that buying a home is not something most folks do everyday. Wouldn’t it be easier if you had a real estate broker that you could trust, to guide you in this process? Wouldn’t it be great if they didn’t charge you to do this? No one would seriously consider defending him or herself in court if they really needed an attorney and we certainly don’t practice medicine on ourselves for serious ailments. Buying or selling a house is simply too large and complex a transaction for you not to be professionally represented.

What’s Normal, Reasonable & Affordable anymore?

In this economic turmoil, how is one to know what is prudent?

Values are down… Interest Rates are down… And demand is down in some price points. Sounds like the “Perfect Storm” …to BUY!

But we’re scared; we’re not sure, …what if things get worse?

We all know that there are no guarantees in life. You simply make the best decision you can at the time it needs to be made. Reading through this information should help you understand the positives and negatives of home ownership. Only then can you make an informed decision about what’s best for you and your family. We hope we can be of assistance as you work through that process.

In my experience, I’ve found that there are many reasons why people buy (other than needing a place to live):
1. To build equity (Tired of paying rent, and want profit when we sell)
2. To realize a tax deduction (and savings)
3. To provide stability to lifestyle for family and friends
4. To choose the location we live in and enjoy our life
5. For convenience to schools or to be closer to work
6. Because we need additional room (or less room)
7. It is the financially responsible thing to do

How I work:

Initially, I like to find out as much as possible about your “likes” and “dislikes” towards different styles of homes and their features. Do we need a garage? How large should the lot be? Are schools important? What location will be best and of course price. If we’re going shopping we must know how much we’re able to spend! Along these lines, it is critical that we discuss our purchase with a mortgage banker to begin the “approval” process, even before we start looking for a home.

New Tax Law Benefits

Interest paid on mortgage loans is tax deductible. That’s not exactly new, however; here’s how it works: Let’s assume your family income is $50,000 per year. For most folks, that will put you into what’s called a “marginal tax bracket” of about 28% (or more). If you have $100,000 financed on a mortgage loan @5% interest, there is about $5,000 per year being paid in interest at the beginning of your loan. That amount, ($5,000), is entered as a tax deduction on your tax return. That means that although you earned $50,000 you pay taxes only on $45,000 of income. The “28%” tax portion of that $5,000 amounts to $1,400, ….a gift from the IRS to you! You literally save approximately $1,400 per year in federal taxes. That means that the government just “subsidized” or paid $117.00 of each month’s mortgage payment for you! The result: A renter who pays $800.00 per month could afford a $917.00 per month house payment because the government’s giving you back $117.00 per month in tax savings because you’re buying instead of renting. The good news is you don’t have to wait to file your tax return to realize that savings. There’s a way to receive those funds in your monthly paycheck now!

The IRS also allows your property taxes to be deducted from your income, creating further tax savings for the homeowner. State tax deductions add even more savings!
(This is an “over-simplification” for illustration purposes. You do have a personal deduction that duplicates some of these savings and you will have savings on your NC state tax return that also have been ignored in this example-Consult a tax professional for further details)

Another great change in the tax law concerns “profit” when you sell. Previously, there were capital gains taxes to be paid. Now there are none, assuming your profit is no more than $250,000 ($500,000 if you file jointly), and you’ve lived in the house for 2 of the last 5 years. Let’s assume you bought a home today for $100,000 and lived in it for 5 or 6 years. If you sold it for $125,000, the $25,000 of “profit” is tax-free! If you had to pay capital gains tax (as previously was the case) you might have $5,000 in taxes to pay!

I cannot over emphasize these two main tax savings examples. In the examples above the $1,400 saved each year in federal tax, the one timesaving of $5,000 at the time when you might sell as well as state and other deductions, could easily total more than $15,000 in tax savings in just 5 years! The benefit to you, the homeowner, is tremendous!

Home Search Information

Searching for a home can be done in a variety of ways. Perhaps you’ve searched the internet or in the newspapers and driven through neighborhoods to near exhaustion and ultimately frustration. There really is an easier way. The quickest and most efficient manner, and the one I most prefer, is searching through the MLS (multiple listing service) database. (There is valuable data that I have access to that is not on the internet!) Our multiple listing service provides photos and detailed facts about each listing in our area, no matter which company has the listing. In this way we can search for a particular home with the amenities you want (3 bedrooms, 2 baths, etc.), in a certain area of town and a particular price range. The amount of time this saves is invaluable and the ones that are already under contract or sold, but still have signs in the yard, are eliminated so your time is not wasted.

MLS (Multiple Listing Service)

The multiple listing system works so well for everyone’s benefit that it’s difficult to imagine being in this business without utilizing it. By cooperating together, real estate companies place their listings into one database so that every other agent can access them. In this way, I have access to all the properties for sale, regardless of which company represents the owner. Time is not wasted looking at properties that are already sold. More often than most people realize, there are properties for sale that have no sign. I understand how to select, through our mls system, properties that meet your needs both in price, area, amenities, and design.

FSBO (For Sale By Owner)

You may discover a property that is “For Sale By Owner”. If so, it is critical that you call your broker immediately. More often than not, a good broker can negotiate the terms of sale well beyond the amount of commission thought to be “saved”. If you’ve come this far and feel that the representation of a professional is beneficial to you, please don’t fall into the trap of “going it alone” at this critical step. There is simply not enough space here to outline all that could go wrong with a transaction drafted between a buyer and a “For Sale By Owner” seller. (I could probably write a book on this one!).

New Construction

Working with a builder before or during the construction of a new home can be tricky. So many things can be overlooked that may come back to cost extra in the end. It is critical that your broker be involved as early as possible in order to assure you get what you expect and to protect your interests.

Buyer Qualification Guidelines

Different lenders use different criteria to evaluate your creditworthiness and decide if you get your loan or not, however; many of these variables are common among most lenders. Assigning a certain percentage of your gross monthly income for mortgage payments is fairly standard, however; there can be exceptions. Allowing your broker to be involved with the mortgage loan process can save you many dollars. Most lenders are very credible, however; in the event something doesn’t look right, I’ll advise you and we can work through it together.

Financial Information and Adjustable vs. Fixed Rates

Don’t let multiple mortgage companies obtain your credit as you shop for a loan. It will lower your credit score and could cost you extra on your ultimate interest rate. Interest rates are subject to change daily, sometimes more than once a day! In deciding whether to go with a fixed rate or a variable rate many factors should be considered. Your individual situation may change. Trying to decide how long you may own a particular property (and keep that loan) opposed to the differential in the interest rate can be complex. This is an area that we need to sit down and discuss so that you feel confident and comfortable about the decisions you have to make.

Advantage of Pre-Approval Programs and Letters

Let’s assume that just the right property is located, an offer is made and presented to the seller. Unknown by us, another offer is also made on the same property on perhaps the same day. The seller has a decision to make, knowing that whichever offer he accepts, the other he will have to reject. (When the seller accepts an offer, the property will effectively be taken off the market until closing.) One offer has an approval letter from a reputable lender. The other offer notes that the buyer plans to seek financing once the offer is accepted. If you were the seller, which offer would be more attractive to you? Having at least a pre-approval letter and preferably an approval letter prior to making an offer significantly improves your negotiating ability and ultimately your cost for almost any property purchase.

Items needed for Credit Application

Property Inspection

All buyers inspect any property they are considering buying, however; the most prudent course to take is to hire a professional home inspector. They will “crawl under”, “climb over” and write a report on their findings (usually with photos). As licensed professionals their “findings” become points of fact and often can help you from buying someone else’s “problem” or help us negotiate further cost savings than our contract already provides. Should structural problems be discovered or other serious problems surface, that the seller refuses to repair, we may be able to void the contract so as to not be obligated to buy a “lemon”.

Home Protection Plans

Nothing takes the excitement out of a home purchase faster than something breaking just after you’ve moved in. But we must remember that equipment and machines do break occasionally, in spite of our best efforts to examine them beforehand. Home warranties, although not insurance policies, are most beneficial when that air conditioner compressor or hot water heater goes out 6 months after you just bought your dream home. For a modest deductible, usually $50 to $75, the warranty company will cover the cost of repairing or replacing many of the systems in your home, for a period of one year from the date of purchase. Often we can get the seller to pay for this coverage in the original contract, …if we ask for it. It’s something I usually request for my buyers to have, and it does help.

Exclusive Services

I provide referrals to other real estate companies in other parts of the country. Through our nationwide relocation network I can help you find the top agents and firms in almost any city in the country, or around the world, to assist you when there are properties to buy or sell out of our area.

Agency/Brokerage Relationships

Agency Relationships (or Who Represents Whom) has become increasingly important over the last few years. There are many variations. The most important point is to understand how it works and feel comfortable with whom you are working with and to know whom else they may be working for. Keep in mind that when you call the name on the sign that you are primarily calling the agent the seller has hired to sell their property for them. That agent is usually responsible for obtaining the highest price possible for their seller. If you are the buyer, is this who you want to represent you? Find an agent you trust and always call your own agent first on any property you see that you may be interested in.

Mutual Agreement

A buyer agency agreement is a mutual agreement between a potential buyer and their agent. Each is promising to work with the other for their mutual benefit. Trust should be the key ingredient for this relationship to work properly. You will be given a booklet entitled “Working With Real Estate Agents” on your first substantial contact toward looking at property together.

Samples of Purchase Agreement

Reviewing a sample of the “Offer To Purchase Agreement” will allow us to discuss any concerns or questions over wording and some material facts prior to locating and making our offer on a particular property. As you read through this document circle areas you are unclear on so we may discuss them.

Five Items To Negotiate

Why just these? Because some things are simply not negotiable. There are many other important factors used when selecting a property, however; location, room sizes and layout usually aren’t going to be amendable.

Checklist

Once we have a property “under contract” and the buyer and seller are all in agreement, there are many things that have to be attended to prior to closing and settlement or the actual transfer of ownership. A loan usually must be obtained. Appraisals must be completed and hazard insurance obtained. Surveys, home inspections and termite reports are just a few of the many other activities that go on “behind the scene” as we approach the settlement date or “closing”. I will keep you posted and may give you a checklist outlining a few items such as utilities, change of address and school reassignments that must be taken care of prior to closing.

Change of Address Kits

They are available through any local post office and may be completed prior to closing. I recommend they be completed a couple of weeks in advance of closing since they have an “effective date” for the actual change of your mail delivery.

Questions To Ask Your Realtor

Definition of Terminology

Broker vs. Agent: A broker carries an advanced degree of training and licensing and is able to work totally independent. A sales person, however; has a more limited license and must work under the supervision of a broker. The letters “GRI” and “CRS”, after a broker’s name indicate advanced training designations well above that required to hold a real estate license. (In fact, only 4% of all agents hold both!)

Closing or Settlement: The final “transfer” of ownership. This is a day when the deed transfers ownership, money changes hands and you get the keys.

Commission: A predetermined amount of money offered by the seller for the sell of his/her property. The buyer almost “Never” pays it. (This is why “hiring” a buyer’s agent to work for you, the buyer, is so advantageous and it’s free!)

Concessions: All other considerations agreed upon by the buyer and seller.

Deed: The legal document that conveys or transfers ownership of property from one person to another. It is prepared by an attorney and recorded in the courthouse records.

Deed of Trust: The document or security instrument a bank or mortgage company uses to perfect its lien on the property you are buying with its money. It is recorded right after the deed in the courthouse records at the time of closing.

Escrow: An amount of money “set aside” each month by the lender, customarily used to pay taxes and insurance each year. Each month 1/12 of the year’s taxes and insurance premiums are collected (it’s incorporated into your monthly payment), and held until those payments for insurance and taxes are due. The lender pays the annual insurance premium and the taxes from your account, each year. This pays the lump sums for taxes and insurance for the owner each year. 

Note (or promissory note): The document you sign, when borrowing money, that “promises to repay the money” to the lender. It spells out your interest rate, the term of the loan (how long), and many other terms of the agreement including the monthly payment amount.

Offer To Purchase: This is a contract between a buyer and seller that outlines all the terms of the transaction including, but not limited to, the price, the date to close the transaction, and the date of possession. 

Survey: Indicates the boundary lines for your property. This can be done on paper only or with stakes on the ground as well. Often the “footprint” of buildings, fences, and other fixed items are shown on the survey. Ask for the brochure I have for many other terms and an explanation of what they mean to you.

Importance of Choosing a Good Realtor

Let’s face it; …this may very well be one of the largest and most important financial (and personal) transactions of your life. Can you really afford to trust this to someone who is not qualified and experienced? The degree of trust you place in the person representing you can have tremendous results on the transaction you end up with. When you need a doctor or lawyer would you consider anything less than these same attributes? Why would you now? Please choose a full time professional broker who is trained and qualified who can fairly and honestly represent you and your best interests.

Utility List

Ask me for a special booklet I have that gives most of the utility companies and their phone numbers. Plan well in advance for telephone, power, and water & sewer, etc.

School Information

School districts are constantly changing and the only accurate way to know where your child may attend school is to call the Board of Education. I encourage you not to rely on any information regarding placement except from the school board office!

Homeowners Insurance 

When a home is purchased it is prudent to have hazard/fire insurance the moment we close. (It also will be required if you are obtaining a loan to purchase the property) Planning ahead and doing a little shopping may save money, as premiums and types of coverage tend to vary. Check with your regular insurance agent but check with a couple of others also. You may be surprised at the savings a few phone calls can make!

Associations/Restrictive Covenants

Do you happen to like horses or maybe a pet for your new home? Well, some subdivisions don’t! A review of the restrictive covenants can tell us what’s allowed, and what isn’t. This is an important issue, prior to making an offer, when there is a question about a specific activity!

Three Most Important Factors You Want or Need In A Home

  1. Security and Safety for you and/or your family
  2. Sound investment. One that may grow in value over the years
  3. Location, in an area you will enjoy living in both now and in the future

Buyer Agency

Agency laws change from time to time, however; the best general advice along this subject is to simply ask yourself, “Is my agent working for me and in my best interests”? Ask about and understand the responsibilities and obligations of your broker. (I’ll give you a brochure)

Demographics (Know Your Neighborhood)

I hope this information has been helpful for you. When you’re ready for the services of an experienced professional, I hope you’ll keep my name in mind. It would be my privilege to serve you.