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Home Buyers Guide - a series of articles on the various steps of the home buying process you will encounter.

Municipalities and The Mortgage Crisis
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Real Estate Terms to Know

Fri Jun 24, 2011 1:16 pm
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Commitment Fee is a charge made by the lender at the time of a loan application to lock in or guaranty specific terms.

Commitment Letter is an official notification to the borrower which generally specifies the terms of the loan and a date for the closing by the lender or an intent to grant a loan.

Common Area is the entire common interest in a subdivision except for its separately owned interests.

Comparables the properties which are commonly called comps that are used in the appraisal process that have recently sold which have substantially similar/equivalent characteristics and are situated in a similar market as the subject property which are used for value analysis to determine the selling price/s of the subject properties.

Comparative Market Analysis CMA is a comparison of recently sold homes that are substantially equivalent to each other in terms of selling price, location, style and amenities. Also known as a comparative marketing analysis.

Concentric Circle Hypothesis a belief that transportation is the central force in community growth, thus producing the highest land values where mobility is the greatest.

Conforming Loan is a mortgage that is eligible to be purchased by FNMA Federal National Mortgage Association or FHLMC Federal Home Loan Mortgage Corporation.

Construction Loan a loan that is made to finance the actual construction of improvements on land and the funds are usually dispersed in three payments as the construction progresses.

Contingency a contractual clause that calls for an uncertain future event to be done or to occur in order for the contract to be binding.

Contract a written or oral agreement to do or not to do certain obligations which has four essential elements. 1- parties that have the capacity or legal ability to contract 2- consent of the parties 3- consideration and 4- a lawful object. A contract for the sale of real property must also be in writing and be signed by the party or parties who have agreed to perform to be enforceable.

Credit Report an evaluation of a persons history or capacity of debt repayment which is generally available for individuals from one of the three retail credit associations.

Cul-de-Sac a dead end street with a widened circular area at the end enabling a car to make a u-turn.

Customer a third party for whom an agent provides some level of informational service.

Curtesy the right a husband has in his wife's real estate as of her death. 

Real Estate Terms To Have at the Ready

Fri Jun 24, 2011 1:16 pm
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Deposit the money commonly used with sales contracts and leases that is paid in good faith to assure performance of a contract. If the party who put the deposit fails to perform, the deposit is forfeited, unless conditions in the contract allow a refund. Brokers are to put deposits in a sepaprate checking account pending completion of the contract.

Developer a party who prepares land for income production by making improvements to land and by selling completed projects.

Development the process of creating improvements on or to a parcel of land which may include subdividing, access, sewer and drainage lines, utilities, buildings and any combination of these elements......also a real estate project where improvements are or have been made.

Disclosure Statement a statement required by law in which the sellers of specific types of real property or under certain circumstances must reveal specified information to potential buyers.

Discount Points an amount of money called points where 1 point equals 1 percent of the original principal loan amount which a borrower or seller must pay to a lender in order to get a loan at a stated lower interest rate.

Down Payment an initial partial payment of the total selling price.

Due Diligence the making of every reasonable effort to perform one's contractual obligations. Example 1- a prospective buyer signed a sales contract contingent on the sale of her current residence. She is expected to use due diligence in marketing her current house. 2- the making of every reasonable effort to provide accurate complete information.

Dwelling a place where people live such as apartments, hotels, mobile homes, nursing homes and single family houses.

Steps Through the Real Estate Buying Process

Fri Jun 24, 2011 11:09 am
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Real Estate Buying Process

There are various factors that go into preparing for the process of buying real estate. The order in which you complete each step is important for ensuring a successful outcome.

Many people want to own a home, but begin without a plan or understanding of what they are getting themselves into. In this article we will examine and explain each step. We will start with the initial desire to purchase a home, although the process applies equally to the purchase of acreage, investment property or condominiums.

The First Step in any Real Estate Purchase

Buying real estate is not a game, it is a process that can be daunting if you don't have a plan. Therefore it is important to have a well organized plan and stay with that plan throughout the process beginning to end.

The first thing to do is to have a candid discussion with your spouse relevant to the big question. Why are we doing this and do we really want to do this, whether it is buying a home or land?

Some of the questions that need to happen in that discussion include: can we afford to buy a home and do we understand that our lifestyle will change dramatically? - read more of this article - The Decision to Purchase Real Estate

After you have decided to move forward in the process the next step is to understand the roles that Attorneys and Buyers Agents play in the process.

Who To Contact to Purchase Real Estate

Once an individual or couple has decided to purchase property the second decision is who should be contacted before actually looking at any real estate.

Mortgage Options

Check with your local financial institution to find out if they provide mortgage loans and second the terms they would offer. Be wary of anything you find on the web. Some web sources are great and others are questionable. Again, doing your homework is essential to the decision process. read more of this article – Real Estate Attorney and Buyers Agent

Once you have set up a meeting with a lender you need to ask the right questions. This is a crucial step to having things move smoothly and to limit the surprises that may come up.

The Questions Buyers Need to Ask the Lender

Once a Buyer(s) have made the decision to make a real estate purchase, and have begun the process of looking for a lender, attorney and a Realtor, there are some relevant questions to ask.
First questions to a lender.

Can we lock into a rate?
Will we be able to get the lower rate at closing, should the rate go down, if we have already locked in a rate?

read more of this article - Questions to ask a Lender

Having a real estate attorney is a way to protect yourself and limit your exposure to predatory lenders, while preserving your rights in the process of purchasing real estate.

Questions for Buyers to Their Real Estate Attorney

I have repeatedly stressed the importance of securing the services of a competent real estate attorney for any real estate transaction.

Never accept the word of a Realtor or lender telling you "oh, why get an attorney and pay the extra cost". The cost of an attorney is minuscule when compared to the peace of mind from an attorney's knowledge and guidance. - read more of this article - Involving a Real Estate Attorney in the Purchasing Process

The next step is to find a Realtor to meet your needs. You have to be comfortable with this person and be able to rely on the expertise through the searching and closing process.

Finding A Real Estate Agent

See also - How to Find A Real Estate Agent

Once you have been through the process of finding the best lender, and a competent Real Estate Attorney the next step is to find the right Real Estate Agent for your needs.

Lenders and Attorneys are two of the three key people necessary in a home purchase. The third component of the buying process is to secure the services of a Buyers Agent/Real Estate Agent. Just how to do this is sometimes more of knowing the right process than the actual decision of who to choose. The choice of an agent will come naturally through the search process. You will know the right Buyers Agent once you have had time to ask the right questions. - read more of this article - Finding A Real Estate Agent

Questions Buyers Should Ask

Questions, information, analysis, and decisions are all a part any real estate purchase. How a buyer goes about navigating through the process of buying a home is subject to the "group" that you/they have assembled ahead of time.

Attorney, Lender & Realtor – Creating Your Real Estate Team

This group includes your Lender, Attorney and Realtor. Think of this group as though they were all in a canoe with you. What would happen to the canoe if everyone did not row in unison. Well, if each member of you team were to row in opposite directions the likelihood is the canoe would turn over and you would be left floundering in the water. Not what you want to happen to you. - read more of this article – Questions Buyers Should Ask

The concept of Buyers Remorse is understandable to anyone who agonizes over a purchase, only to find out they are not happy with what they receive. This is a process that needs to be well thought out and taken seriously to avoid potential problems that may arise.

The Unintended Consequences of Poor Decisions

In any real estate transaction there are consequences and unintended consequences that result from "performing" or "not performing" on a "ratified" purchase agreement/contract. Potential Buyers and Sellers try hard to avoid those unintended consequences.

When ratified, a purchase agreement/contract has been signed/initialed and reviewed by both Purchaser and Seller.

Performing on a ratified real estate contract/purchase agreement essentially means that both seller and buyer will do (perform) as the contract has stated.

To not perform on a ratified contract would be considered to be in violation of the contract and therefore non-performing. - read more of this article - Real Estate Contract Law

The Home Inspection Process

The process of purchasing a home, new or resale, is not for the lazy or faint of heart. A home purchase is, for most people, the single largest purchase they will make in their lifetimes.

A part of the buying process that is key to not having any regrets after the fact is the "Home Inspection". An experienced home inspector is worth every penny they will charge. By the way, most home inspections fall in the range of $250-$500 depending on the square footage. Larger homes will be appropriately more than $500. - read more of this article - The Home Inspection Process

Prepaid Items and Home Closings

If all of the conditions are ultimately met buy a buyer in the home purchase contract process then that buyer will need to understand the cost of prepaid items relating to any house closing/settlement.

Prepaid items include some substantial cost items such as: typically one year extra in advance the cost of a hazard/home owners policy, up to six months taxes, up to six months interest and any other item deemed required by the lender. One of the other items that, if the property being bought is designated on flood maps, could be very costly is Flood Insurance. - read more of this article - Prepaid Items and Home Closings

Property Taxes at Home Closing

Property taxes are a part of all home closings/settlements. In most cases property taxes are paid by means of an escrow account through the lender to the government agency (City, County) twice a year, usually in June and December of each calendar year.

The previous owner (seller) or builder (if new construction) will have most likely paid some of the taxes in advance of their due date. In that case there is a proration of taxes by the closing attorney. The seller will have a Credit Due to them and the buyer will need to compensate the amount due at the closing. - read more of this article - Property Taxes at Home Closing

Preparing for the Closing Process

Having been through the process of finding the home of your dreams, and working through the conditions as set forth in the terms of your real estate purchase agreement/sales contract, the day for settlement/closing is fast approaching.

What must you do to prepare for your day of settlement? First if your attorney, lender and Realtor have been actively engaged in the process, as they should be, you will have all the information necessary.

Your Realtor will probably join you at the day of closing. It is customary that the best Realtors will take the time to be present at the closing table along with your Attorney. I would encourage any buyer to ask, at the time you engage a Realtors' services if they will in fact do this service for you. - read more of this article – Preparing for Closing on a Home

The last step in the process is moving in.

Moving into Your New Home

Once you have received the keys to your new home the move-in process is your next challenge. If you elected to be your own moving company then you will have found out that securing the correct size moving vehicle and having enough friends/family to help is a must. - read more of this article – Moving into Your New Home

These are the basic steps you should look forward to when beginning the process of buying a home. There are always issues that were unforeseen, and that is why assembling the correct team and understanding the process completely can make this a much easier endeavor.

Real Estate Will Continue in the Doldrums in Most Markets Nationally

Wed Aug 25, 2010 7:45 am
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The Real Estate sector is what many so called experts see as the cash cow for the national economy. The meteoric rise in home values in the 90's continuing through to about 2007 was a train wreck waiting to happen. No one will ever convince me that there were many individuals in the home building/lending community that did not see the folly of thinking that home values would continue inexorably upward.

Local Governments loved the fact that they could count on assessments rising exponentially thus filling tax coffers. The point here is that literally every local, state and federal entity were choking on  tax dollars and could not take a gasp of air to realize that the bubble was about to burst. Worse those same tax dollars were burning a hole in the pockets of most local Governments to spend, spend and spend some more.

People were moving into homes with no documentation of assests, jobs or tax returns. Imagine just signing on the dotted line and taking the keys to a house that was doomed to be foreclosed on in the end.

Greed is good so said Michael Douglas in the infamous movie "Wall Street". Ignorance may be one step beyond greed. People who moved into homes that they should never have been able to purchase had the tacit approval of the federal Government. The game was to increase the percentage of home ownership, dam the financial facts/condition of the buyer.

So here we are about three years into this real estate conundrum. How will home sales rise, home prices stabilize and buyers acquire mortgage funding? Not by looking at a crystal ball and thinking the answer is return to the same methodology that got us into this mess!

What needs to happen is not an easy realization to comprehend for most folks. The shadow inventory of foreclosed homes has never really been examined closely. Banks have been furtive to not act on the real number of foreclosures on their books. This was foolish thinking, by bankers and the Fed's, that by leaking out only so many foreclosures to the market, at any given period would help hold steady home prices/values. 

The pain will be more tolerable when home values seek their own level by virtue of the "markets". When this happens prices will fall dramatically initially and then return to a level that will be decided upon by the buyers and the markets. Mortgage rates are at all time lows, why then are so many people not purchasing a home? 

Maybe at least part of the answer to this lack of buyers/funding is that when the paradigm for home sales is reset then mortgage rates will conceivably rise to about 7% and buyers may then find owning a home a choice they are willing to take even with a higher interest rate.

Why Builders Will Not Reduce The Sales Price of New Construction

Mon Jul 26, 2010 7:15 am
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New home builders have had a difficult time over the past three years selling new construction. A decade ago builders were making a healthy profit on the upgrades buyers were willing to spend thousands of dollars on over and above the original purchase price of new construction.

In todays new home market few buyers have the cash to spend lavishly on upgrades. Builders are using all sorts of strategies to induce buyers to purchase new construction. New home inventory is reported to be at the lowest level since 1968. There is a reason for this. The number of buyers has been reduced significantly due to the loss of jobs, problems with mortgage financing and the overall economy.

Builders will give incentives to purchase new construction including assistance with closing costs, free upgrades maybe even help with obtaining a lower interest rate. Why will builders not simply reduce the price of the new home?

The answer to this question is obvious but sometimes not to the buyer who is often not thinking of anything but seeing themselves in that new home. Builders are forever looking for the next "base line" to price the next group of homes they will be building. Maintaining assessments at a high level is also important to local taxing authorities.

Revenues are important to finance local schools and run local police, fire etc.. If builders simply reduced the price of new home inventory they would in fact be creating a potential deflationary spiral.

I realize that this thinking may not be accepted by the "expert analysts" in the housing market. The hype that is communicated to the public on programs like CNBC is sometimes almost comical. 

The best point to suggest that "liars cannot figure and figures do not lie" is that sales numbers for June 2010 jumped about 26% while the numbers for May 2010 were revised downard to a low of 267,000.

If you are in the market to purchase new construction of for that matter any home make certain you do your homework. Maybe even tell a builder the price you are willing to pay. It may be interesting to see how that goes.

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