Keys to Home Buying Success
#1 The Key to Discovery! Want to find a maintenance-free home with a wonderful mortgage? It can be like finding a needle in a haystack! Only by researching available materials, talking to friends and family, and spending time working with your realtor, looking at different homes, schools, and neighborhoods will you end up with your American dream.
Trust your realtor to guide you through this process!
#2: Get Pre-Qualified! Loan pre-qualifying helps you determine the home price you can afford and presents you as a genuine prospect to the seller. Getting pre-qualified will allow you to take advantage of opportunities as well as save both time and money!.Today, you can apply for a loan over the Internet or use a mortgage broker to shop for your loan with hundreds of lenders. Create a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker). If this will be your first home or a "transitional home" -- one you plan to own for a short time, an ARM may be the best type of loan. If it's going to be your dream home or one you plan to raise a family in, then you may want the stability of a fixed rate mortgage. If you choose an ARM, the index should be based on the Cost of Funds Index if rates are increasing, and Treasury Bills if they are decreasing. The COFI's are less volatile over time than T-Bills; make sure the teaser rate is understood and what the real rate would be. Make sure that you scrutinize all the closing costs receive a good faith estimate from the lender. Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract.
#3: Value, Value, Value Or Location, Location, Location! The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. Stay focused on the long-term importance of the neighborhood, schools, shopping, community, etc.
#4: Create A Top 10 List! List the features (fireplace, fenced-in yard, bedrooms, etc.) that are most important to you. Establishing "your must have criteria" early on will save time shopping for inappropriate. Remember, your top reason for buying a home should be the value you are getting and some of these amenities should logically be sacrificed if an incredible value is available.
#5: Sign A Contract That Protects You! Make sure that the contract you put on a house allows you to arrange financing, inspect the home and negotiate any problems that you uncover..
#6: Put yourself in the Seller's Position! Take time to understand the reasons the seller bought the home, their reasons for selling, and the home improvements they have or have not made. You'll be in a better position to evaluate the home and negotiate a better deal. A closer look at the seller may help you in deciding whether and for how much to buy a particular home.
#7: Get A Quality Home Inspection! Paying for a qualified home inspection before you buy a home is absolutely essential for anyone who doesn't want to spend thousands of dollars for repairs.
#8: Peace of Mind: Home Protection Plans! A home warranty is a service contract, normally for one year, which protects homeowners against the cost of unexpected repairs or replacement on their major systems and appliances that break down due to normal wear and tear. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage, for example: if a hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall
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Capital Gains: Exemptions
If you owned and lived in your home for two years, the law is clear: you can exclude from profit up to $250,000 if you are single or $500,000 if you are married and file a joint return. But what if you have made a profit on your house, but sell it before the magic two years spelled out in the tax law?
In l997, when Congress enacted this favorable legislation, it had absolutely no inkling that the real estate market would be so hot, and that so many homeowners would make such large profits on their home sales -- even if they did not own their property for the full two years. However, Congress did provide reduced exclusions if prior to holding the property for the full two years, the homeowner had to sell due to a change in employment, health reasons or “unforseen circumstances”.
Effective December 24, 2002, the IRS issued temporary regulations, dealing with home sales within the two year period. According to the IRS, they have established certain “safe harbors”. If the taxpayer falls within one of these safety zones, they will automatically be entitled to the appropriate exclusion of gain. Here are some of the new, but temporary, “safe harbors”:
Employment: here, the temporary regulations are quite clear. If the new place of employment is at least 50 miles father from the residence sold than was the former place of employment, the homeowner who sells his/her home in order to be closer to the job can take a proportionate exclusion of gain. For example, if the homeowner owned the home for only one year, that homeowner would be entitled to exclude half of either the $250,000 or the $500,000 exclusion, depending on the marital and tax filing status of the taxpayer. According to the regulations, employment is defined as “the commencement of employment with a new employer, the continuation of employment with the same employer, or the commencement or continuation of self-employment.”
Health: if a doctor recommends a change of residence for reasons of health, this will be a safe harbor under the new temporary regulations. What determines “health”? According to the IRS, “if the taxpayer's primary reason for the sale is (l) to obtain,provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury... or (2) to obtain or provide medical or personal care for a qualified individual suffering from a disease, illness or injury.” It should be noted that “qualified individuals” includes family members who are in need of medical assistance away from the principal residence. The IRS made it clear, however, that a sale of the family home merely because it is beneficial to the general health or well-being of the the
taxpayer will not fall within the safe harbor.
Unforseen circumstances: Congress passed to the IRS to come up with definitions -- safe harbors -- under this category. The IRS provided that the following events would be considered “safe harbors”, on the condition that these events involve the taxpayer, his/her spouse, co-owner or a member of the taxpayer's household: death; being terminated from employment and thus eligible for unemployment compensation; a change in job status that results in the taxpayer being unable to pay the mortgage and reasonable basic living expenses for the taxpayer's household;
divorce or legal separation; multiple births resulting from the same pregnancy;
Involuntary conversion of the property -- such as a condemnation by a governmental authority, and destruction of the property because of a man-made disaster, an act or war or terrorism. Additionally, the IRS kept the safe harbor door open by allowing the IRS
Commissioner the right to expand these seven items should the need arise –either generally
or in response to a particular situation involving a specific taxpayer.
These regulations can be applied retroactively. Even if you sold your home after May 7, 1997 and have already filed a tax return for the year in which the sale took place, you have the right to file an amended tax return (using IRS Form 1040X). The temporary regulations provide that the IRS “will not challenge a taxpayer's position that a sale before the effective date of the regulations (December 24, 2003) but on or after May 7, 1997, qualifies for the reduced maximum exclusion .. .if the taxpayer has made a reasonable, good faith effort to comply with the requirements of (the law) and if the sale... otherwise qualifies under (the tax law).” Taxpayers who believe that they are entitled to claim an exemption because they fall into one of these safe harbors should immediately consult their tax advisors.
Stay tuned, however; these are only temporary regulations and may -- in the future -- be change
Improvements Pay Back
Some remodeling projects may improve your home without significantly increasing your home's value. Find out which ones pay back. Find a Contractor
Recouping your remodeling investment may be your goal when you sell your house. But when it comes to resale value, all home improvements are not created equal. As a rule, kitchen remodeling projects and bathroom additions almost always pay back 90 percent or more of their costs. However, finishing a basement usually pays back less than 50 percent. Other improvements fall somewhere in between.
Consider these payback estimates* for the most typical home improvement projects:
| Project |
Cost |
Payback |
| Add a new heating or air conditioning system |
$2,000 to $4,500 |
100% for heating;
75% for air conditioning |
| Minor kitchen remodeling |
$2,000 to $8,500 |
94% to 102% |
| Major kitchen remodeling |
$9,000 to $25,000 |
90% |
| Add bathroom |
$5,000 to $12,000 |
92% |
| Add a family room |
$30,000 |
86% |
| Remodel Bathroom |
$8,500 |
77% |
| Add a Fireplace |
$1,500 - $3,000 |
75% |
| Build a Deck |
$6,000 |
73% |
| Replace Windows |
$6,000 |
68% - 74% |
| Build a Pool |
$10,000 and up |
44% |
| Install or Upgrade Landscaping |
$1,500 - $15,000+ |
30%-60% |
*Compiled from several published surveys
Understanding payback value
Payback value depends heavily on the real estate market and prevailing property values. If the market is slow, expect to see less payback than you would in a fast market. Also, consider the neighborhood: If you remodel your house to twice the size of the other homes on the block, it is unlikely that you will be able to sell at double the price. Issues that can influence payback value include:
Type of improvement:Kitchen and bathroom remodeling projects consistently return the most in resale value and almost always help sell a house. Converting a basement into a family room yields the smallest return on the investment.
Scope of improvement:Projects can be large or small. Sometimes, the cumulative effect of small projects can pay back more in resale value than that of larger projects. Small projects tend to be cosmetic in nature: fresh paint, new doors, garden windows, and ceiling fans. Large improvements involve adding or upgrading living space.
Desirability: Today's fad may be tomorrow's standard. Backyard decks, for example, were difficult to find 30 years ago; now they are common. Decks may not have paid back very much in resale value decades ago, but as decks have become more desirable, their resale value has increased.
Cost: The price of home improvements fluctuates depending on economic conditions and region. If remodeling costs are particularly high in your area (or home sale prices particularly low), you may not recoup as much on your investment as you would if costs were in sync with sales prices.
TIP: If you are financing your home improvements, the best time to apply for a loan is when interest rates are low. The less you pay to borrow money, the less the total cost of the renovations.
GETTING YOUR HOME READY FOR SALE
1. Take a New Look!Your home looks good to you, but you will need to take a fresh look at your home... First, consider what's called "curb appeal". The outside of your home is the first to be seen. Does it need painting? Does the driveway need repair work? Is the roof in good shape? How about the driveway? Is the yard neat and trimmed? What about the view from the front yard? Be very critical; your buyer will be. Then, walk inside and size up the interior as though seeing it for the first time; Imagine your home in a Virtual Tour and what a real estate agent might say about each room. Llook into cabinets, open doors, check out the bathroom. Make a list of the things that might put off potential buyers, along with another list of the things that first attracted you to the dwelling and upgrades/ improvements you have made. Remember, the home's become a great place for you, but a new buyer will see things that you don't.
2. Clear Out the Clutter!!!!Before putting your home on the market, get rid of clutter in every area -- closets, attic storage, kitchen cabinets, drawers, bath vanities, shelves – everywhere. You will pack up when you move anyway so just think of it as starting early. Potential buyers are seriously put off by clutter. Don't forget the furniture when getting rid of clutter – Bulky furniture and too much furniture makes rooms look too small, which makes a prospect think your home is too small. Have a moving sale! If you just can't bear to part with some possessions, store them in the attic or some other place that's out of sight to a potential buyer.
3. Clean, Clean, Clean! Clean everything - carpets professionally cleaned, scour the bathrooms, go over the laundry room, polish the furniture, wash the cabinets, windows and coverings, ceiling fans and kitchen appliances. Don't forget the exterior; paint or pressure wash everything that needs the work.
4. Repairs Pay Off ! Do what your home needs before the first buyer appears at you door! Patch the roof, touch up the paint, repair the screens, mow the lawn, trim the edges, weed and water. Inside, regrout in the bathrooms and on tile floors, patch & repair scratches or holes in the walls, and be sure to fix any plumbing problems..It's a good idea to do this before listing the home, but if in doubt as to what is important call your agent early to help you make the important decisions and avoid costly mistakes. An "as-is" sale can save you from all this work, but a buyer will probably assess about twice the price you would have paid for the repairs and deduct that amount from your asking price.
5. Show It to Sell It To attract buyers, follow some simple tips. Open the blinds and turn on the lights. Open all the interior doors, light the fireplace, play soft music, keep cat litter clean, and if possible remove your self, kids and pets. A potential buyer needs to see the home without distractions. Make sure your home is available to be seen with as little notice as possible. This can be hard as agents often show up with very little notice, so be prepared. If possible avoid appointment only as you will miss a very large percentage of potential buyers.
6. Get a Sense of the Market Before you put your home on the market, have your realtor prepare a home market evaluation. This will tell you what homes have been selling for with similar prices and in similar neighborhoods. It is also helpful to tour open homes in your neighborhood to get a sense of the competition. Remember, you don't have to go out and buy new furniture just to look like a beautiful new model -- what you want is the feel of that new model -- clean, uncluttered, and fresh. Ask your realtor about Home Staging. This can be an inexpensive way of giving your home a new look without buying new furnishings.After location, the most important item a buyer is a well-maintained home. Many flaws can be overlooked if the buyer knows he can move in without a lot of trouble and expense.
7. Time your sale! The best selling season is Spring! Summer is the next best time. The hot summer months help sell homes with pools. Many buyers with school age children will want to settle in their new homes early in the summer to give thier children time to get used to the change before school starts. By early fall many buyers have left the market.Often we will see a resurgence in October and November but mostly this is the best time to buy a home! Many homes will be reduced in this time period so don't let this happen to you. Always sell based on supply and demand: When there are more buyers than homes for sale (sellers market), sellers are able to obtain better prices and terms; when there are more homes for sale than there are buyers, sellers may have to reduce their price and perhaps make other concessions to sell their home. Also, keep in mind that it is easier to sell in a low interest rate environment when more buyers can qualify for a home loan
PRICING YOUR HOME RIGHT!
Pricing your home is an art. Ask too little you will sell fast but feel that you may have been able to get more. Ask too much and your home may stay on the market for a longer time and eventually give buyers the imperssion that it is undesirable. Buyers may wonder why the home couldn't attract any interest, a possible sign that something is wrong with the house. Buyers today are very sophisticated and have more tools than ever to gather market information, including home listing web sites that allow them to research the marketplace at the click of the mouse! They almost know better than the brokers what the homes should be priced at! When your home is priced right you will be much more likely to attract interest from more than one buyer.However, if your home is overpriced or reduced, it may sit on the market for a longer time and may give the appearance of being undesirable. Much of the time these homes will eventually sell for less than their value!
The key question is: How do you set the price anyway?
One good way is to rely on your real estate broker! There will be a comparable market analysis which compares recent sales prices of similar homes in the neighborhood to get a feel for what the market will bear. Agents can also bring other knowledge including a sense of how many similar properties are currently on the market. Also compare the amenities of the homes previously sold. . If there are many homes available you will want to make sure yours will stand out! Either by making your price more competitive or following the tips I have listed above. If your home is lacking comparables due to a lack of sales in your area or uniqueness you could get your home appraised.This could take several days or weeks and cost between $200 and $500. It may be a good investment if there is little data to determine a price. In the end, make sure you base your sales price on some real information about the current marketplace, and make sure it's in line with what the market will bear. If not, selling your home could turn out to be a much bigger headache!
The five most common mistakes sellers make when choosing a price:
1.Not choosing the right price when a property is first listed. In other words, thinking "we can always come down."
2.Putting the property on the market at an unrealistic price. A property must be priced on a comparative basis to other similar properties.
3.Not relating marketing time to price. Generally, the quicker you want to sell, the less you should be willing to take.
4.Calculating brokerage fees on top of the sales price. A home is worth what it's worth, with or without a commission.
5.Thinking that buyers aren't comparing your home, on a dollar-for-dollar basis, with every other home on the market.
Financing Your Home
Getting Pre-Qualified for a home loan:
Before you start looking for a home to purchase, you should find out what you qualify for. If this will be your first home or a "transitional home" -- one you plan to own for a short time, an ARM may be the best type of loan. If it's going to be your dream home or one you plan to raise a family in, then you may want the stability of a fixed rate mortgage. If you choose an ARM, the index should be based on the Cost of Funds Index if rates are increasing, and Treasury Bills if they are decreasing. The COFI's are less volatile over time than T-Bills; make sure the teaser rate is understood and what the real rate would be. Make sure that you scrutinize all the closing costs receive a good faith estimate from the lender. Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract. The price range of the homes you look at will depend on this. As a local lending professional, I can guide you through the pre-qualification process, discuss your options and make you aware of any special loan programs you may be eligible for which exist in this area. After getting pre-qualified, the most important thing you can do is to go ahead with the loan process and get fully pre-approved before you decide or extend an offer on a home. This will give you advantages when you are in the negotiating process. I can arrange to get you pre-approved for that home purchase.
Too Early / Late to Refinance?
Given the continued slide in interest rates and with the 30-year fixed-rate mortgage (FRM) averaged 5.87 percent, this is the still the lowest the 30-year FRM has been since Freddie Mac began tracking it in 1971.
"Is it too late to refinance? A absolutely not, as long as it's appropriate for you to refinance, While almost everyone with a high rate has already refinanced, most people who will benefit from refinancing now have had something happen to make refinancing now appropriate. Maybe a divorce, needing money for a cabin or education, maybe getting credit cards under control, maybe an old ARM or balloon loan that they'd rather fix at current low rates. Maybe you have a 3-, 5-, 7-, or 10-year loan, thinking you would move before it changed and now your not so sure about the move. There is a never-ending supply of reasons for people to refinance, and for those people, rates are great now! Timing is less a factor than common reasons financially savvy home owners refinance -- to lower monthly mortgage payments, to shorten loan terms, to pay off more expensive and non-tax deductible debt and for capital improvements or investments likely to give you a better return on your money that the mortgage. Given any one of those situations, it's almost always a good time to refinance, as long as the interest cost is deductible
Whatever the reason, the fundamentals still apply -- refinancing homeowners need to stay put long enough for the new mortgage to pay off in terms of covering the up front cost of the refinance.
That means adding all the costs of refinancing (points, fees, settlement charges, application fees, appraisal fees, credit report fees, recording fees, title insurance, underwriting fees -- all of them -- and then determining how long it'll take savings from the new mortgage to payoff the refinancing costs. If you'll be in the house for at least a few years, it's worth t to crunch the numbers. Even if you missed rock bottom lowest interest rates.
To determine the payoff duration in months, divide the total refinance cost -- all costs -- by the expected per-month savings. It is also compelling if the refinance rate of a new no cost mortgage (you pay nothing at closing and nothing is added to the loan balance) mortgage is lower than your present rate.
Working with a professional Real Estate Agent
There are many advantages to working with a professional real estate agent when you are selling your home. Mary has been serving the needs of home sellers in this community for years. You can trust our proven team to service your real estate needs, whatever they may be.
Call Mary today for Current Interest Rates
