A real estate agent is engaged and performs a valuable service in bringing prospective buyers to the house and facilitating the purchase. Given the extensive ‘’multiple listing service'’ network real estate brokers maintain and the energy agents put into the art of selling, a house usually can be sold quickly and painlessly this way.

It costs, however.

For that work, an estate agent receives 4 to 7 percent of the sale price of the house. Usually the homeowner simply builds the real estate commission into the selling price, so that the agent’s fee is covered. Right there, however, one should stop - at least to question whether the agent’s fee is really worth the effort.

Most of the time it is. On a $100,000 house, you are talking about $4,000 to $7,000 for perhaps a few weeks’ work by the real estate agent. On a $500,000 house, you are talking $20,000 to $35,000! Even if you grant that (1) real estate agents perform valuable and unique services in facilitating the actual sale of the house, and that (2) you could perhaps jack up the price of your house - still, that kind of money might be better spent.

You, the seller, could get the money. Or you, the buyer, could benefit in the form of a price reduction. Or the two of you could split the difference.

When should you consider selling a house without an agent?

If you’re confident your property is desirable and you’ll have little trouble drawing the buying public to it, you might go it alone. If the buyer is already known to you - a neighbor, family member, current tenant - a sale could be an easy affair. If your house has appreciated so little that the amount that goes to the real estate agent’s commission would eat into your initial investment, you might want to save the agent’s fee.

A word of caution: You should not attempt to circumvent a real estate agent when a listing contract is in effect. This is unfair and the agent could well sue for recovery of the commission.

OK. If you are still ready to go it alone, these are some points that real estate agents, lawyers, how-to authors, and veterans of the for-sale-by-owner experience advise that you keep in mind:

First determine your price. Real estate agents usually help you with this. Without an agent, you might want to call an appraiser in the Yellow Pages.
Prepare a spec sheet on the house also, listing price, property taxes, energy costs, square footage, number of bedrooms and bathrooms, type of heating and cooling, and the age and type of furnace, water heater, kitchen appliances, roof, etc.

Now determine how best to advertise. A ‘’for sale by owner'’ yard sign is usually a good idea. A well-worded advertisement in the Sunday newspaper is smart also.

Without working against your own interests, be frank about drawbacks with the house or the neighborhood.

Be prepared - just as you would if you had a real estate agent bring prospective offers to you - to negotiate on the price. If the buyer is alert he or she will know that you are saving the commission and might be inclined to ask you at least to split the difference.

Retain an attorney to examine any purchase and sale agreement (contract of sale) or other contractual matters and act as a liaison between you and the buyer if need be.

Don’t accept clauses that allow the purchase to be contingent on factors such as the sale by the buyer of another piece of property or any arrangement that prolongs the transaction and locks the house off the market.

Before you accept a sales contract and take it to your attorney, you should attempt to determine whether the buyer qualifies for the financing.

Get a list of the buyer’s employer’s name and address, gross annual earnings, gross annual income, outstanding debts.

After all that, you can decide for yourself whether saving several thousand dollars is worth it - or whether you have a new appreciation for the efforts of real estate professionals.

Technorati Tags: real estate, investing, real estate profits

- Shop for home financing first. Many home buyers begin by looking at homes they can’t afford, thus wasting the time of real estate agents and home sellers. A better approach is first to talk to several mortgage lenders to learn the maximum mortgage for which you can qualify. Inquire about both fixed rate and adjustable rate mortgages. Of course, after you have a home tied up on a purchase contract, you can shop further to see if the mortgage terms can be improved.

Mortgage lenders are especially eager to make loans today, because their business volume is down, but their vaults are bulging with mortgage money to loan. Home buyers should be aware mortgage lenders need borrowers as much as borrowers need lenders. Don’t be intimidated. If a mortgage company isn’t responsive and cooperative, there are dozens of other lenders who are.

- Become the neighborhood expert. Before making an offer to buy a home, inspect as many houses as possible in the neighborhood. Weekend open houses are an excellent time to inspect many homes in a short time period. After you inspect about 20 houses you will know more about an area’s homes than do most real estate agents.

This understanding is critical to a successful home purchase. Home buyers should be careful what they tell the salesperson, because that agent legally represents the home seller and is obligated to tell the seller every material fact known about the buyer.

- Before making an offer bid, ask for a competitive market analysis. Just to be certain you are not overpaying for a home. Before making a purchase offer bid, be sure to ask the realty agent for a written competitive market analysis. This form shows recent sales prices of similar nearby comparable homes, as well as asking prices of neighborhood homes currently for sale. By adding and subtracting market value for the pros and cons of the home you want to buy, you can make an offer that is neither too high nor too low.

- Insist on mortgage and inspection contingency clauses. There are two contingency clauses your home purchase offer bid should contain to protect against unexpected but often encountered problems.

The first is the mortgage contingency clause. No matter how certain you are of obtaining a home loan, be sure to include a simple finance contingency. Such a clause might read: “This purchase offer is contingent upon property and buyer qualifying for a first mortgage of at least $80,000 at a fixed interest rate not exceeding 10.5 percent for at least 30 years with a 2 point maximum loan fee and a maximum $731.79 monthly payment.” If the specified loan cannot be obtained, then you need not proceed and your good faith deposit must be refunded.

In addition to a termite inspection, if customary in your area, the other important contingency clause to consider involves a physical inspection. Such a clause might read: “This purchase offer contingent upon buyer obtaining at his expense within 10 days a satisfactory professional inspection report on the property; buyer to notify the seller if such report is unsatisfactory and this sale shall then be cancelled with the buyer’s earnest money deposit promptly refunded.”

Home buying can be an enjoyable experience for buyers who understand the process. By knowing what price home you can afford, inspecting many neighborhood homes before making a purchase offer, understanding who the agent represents, insisting upon a competitive market analysis before making a purchase offer and including finance and inspection contingencies, home buying will be a pleasurable purchase of your best investment.

Technorati Tags: real estate investing

Under the terms of RESPA, home buyers are entitled to receive certain disclosures during the course of a real estate transaction. The law also prohibits kickbacks and referral fees that unnecessarily inflate the cost of settlement services and therefore falsely driving up the cost buying a home. RESPA provisions apply to loans secured with a mortgage on residential properties designed to house one to four families. Examples of the types of loans covered by RESPA include:

Purchase loans

Assumptions

Refinancing loans or measures

Property improvement loans

Lines of credit based on equity

An office within HUD, called RESPA and Interstate Land Sales enforces the RESPA statute. Buyers may contact the office directly if they think the terms of closing and settlement in their house deal do not respect RESPA provisions.

RESPA stipulates that certain disclosures be made at particular times during the real estate transaction process. When a buyer goes to apply for a mortgage loan, his or her broker or lender must provide either at the time of the application or by mail within three days a Special Information Booklet, a Good Faith Estimate (GFE) of potential settlement fees, and a Mortgage Servicing Disclosure Statement.

The Special Information is required for home purchases only, and contains details about different kinds of real estate settlement services. The GFE outlines the type and amount of settlement costs the buyer will likely encounter when his or her house deal closes, as well as whether the broker or lender requires the buyer to use a particular settlement services vendor. The figures in the GFE are estimates, but they should be relatively close to the actual settlement costs at closing. Finally, the Mortgage Servicing Disclosure Statement reveals whether the broker or lender will handle the buyer s loan or whether it will be transferred to another lender. The Mortgage Servicing Disclosure Statement should also have a section dedicated to options the buyer may employ to resolve any complaints.

If the buyer decides to go ahead with the transaction after securing appropriate financing, the next RESPA-required disclosure is an Affiliated Business Arrangement disclosure (AfBA), which is used if a settlement service vendor or provider refers the buyer to another provider that is affiliated with the original service provider. The affiliation can be part or full ownership of any other beneficial interest. The AfBA disclosure must be made before or at the time the referral is made, and it must give a full description of the relationship that exists between the two companies as well as a reasonable estimate of the fees of the second settlement service provider. In most cases, the buyer is not obligated to accept the services offered by the second service provider, but he or she may choose to do so.

One day before the settlement (or closing) date, the borrower may see the HUD-1 Settlement form, which details all settlement charges imposed on borrowers and sellers. All parties receive a complete copy of this form, showing all of the actual settlement costs, at the time of settlement, or in the mail shortly thereafter.

Another disclosure that is made at the time of settlement is the Initial Escrow Statement, which lists the estimates of charges that are expected to be paid from the escrow account during the first year of the loan. Charges may include taxes and insurance premiums. After the first year, loan servicers must provide borrowers with an updated annual escrow, which lists all deposits and payments, as well as any relevant shortages or surpluses related to the account.

If, at some point after the settlement occurs, the loan servicer reassigns the loan to another servicer, the borrower must be notified 15 days in advance by means of a Servicing Transfer Statement.

While RESPA does not set out particular penalties for non-disclosure of the above mentioned items, kickbacks and referral fees that violate Section 8 of the law are subject to fines of up to $10,000 and imprisonment for up to one year.

Settlement or closing fees cost Americans about $55 billion each year. HUD has initiated a RESPA reform process that the department hopes will simplify the costs involved with buying a home to better reflect the Bush administration s goal of helping to build an ownership society in which all Americans can own their own home. The reform process has not been completed, and for now, the rules remain as they have been for the past three decades.

Technorati Tags: real estate investing, real estate, home sales, investment property

Losers in the real-estate wars are often the agents who can’t match clients up with the right piece of property, the seller who loses money while his property sits unsold, and the buyer who can’t determine which property is the best investment for the future. The fact that the microcomputer can solve the problems of all three parties makes it “a sleeping giant that is about to wake up,” according to one real-estate-software developer.

The National Association of Realtors (NAR) in Chicago is bringing out the big guns with its Insite microcomputer system — a repackaged Digital Equipment Corporation (DEC) Professional 325 or 350 computer with bundled software and a laser printer.

The DEC-written software will provide standard word processing and list processing to facilitate mass mailings by real-estate brokers. With these two applications, the salesperson can keep a list of people who are interested in, for instance, a two-bedroom house with one acre of land. When a piece of property fitting that description comes on the market, the salesperson can merge a letter with the list of buyers and immediately notify a number of prospective buyers. In this case, both the needs of the potential buyers and the seller are served.

Packages such as Real Estate Strategy allow the buyer, seller, or agent to build a model of a real-estate deal and determine the best price and terms. The model takes into account the down payment, current interest rates, and desired cash flow. The package becomes even more useful when comparing more than one real-estate deal.

Another package that allows analyses of real-estate investments is available from HowardSoft of LaJolla, California, the company responsible for the best-selling Tax Preparer software package. HowardSoft’s Real Estate Analyzer for the IBM PC or Apple II allows investors to compare as many as ten loans and calculate the monthly payments on each. Unlike simpler programs that can perform this basic arithmetic task, Real Estate Analyzer calculates the tricky adjustable interest rate and balloon mortgages based on estimates of future economic conditions.

The HowardSoft package compares five factors of inflation and, drawing on the company’s tax background, includes the latest tax laws for depreciation, recapture, and capital gains. The Real Estate Analyzer also allows investors to maintain records on renters.

But not all agents are as eager to use a microcomputer. Pointing out that the currently used remote-terminal-based multiple-listing service is only as good as the people that use it, Steven Carlitz, a broker with Taylor Properties of Palo Alto, California, says, “I don’t think we’re ready for it yet.”

Carlitz says he doesn’t need a sophisticated record-keeping microcomputer to keep up with his current customer load. “If I had 200 clients of my own, it might be good to have a computer [to keep track of them], because I’ve made the most money when I’ve followed up a lot with people,” he says.

So though some agents are jumping on the microcomputer bandwagon, there is still some resistance.

There are a number of existing real-estate networks that are commonly known as multiple-listing services (MLSs). The large minicomputer databases maintained by MLSs are now reached by real-estate agents through dedicated dumb terminals. Agents list their properties on the network and, in exchange, get a crack at selling property placed on the network by other agents. The database can usually be searched for specific characteristics such as price range and number of rooms.

One idea that seems to be universally rejected by real-estate professionals is that of hooking a microcomputer to a videodisc or videotape to call up an image of the property.

Technorati Tags: real estate investing

In short, the nature of the business has changed significantly, affecting a wide range of business activities, including: competitive strategies, relationships with buyers and suppliers; methods of marketing and development; systems for control, coordination and motivation; product development; financial management; human resource development and management.

How various real estate organizations respond to these changes will directly affect their future success.

Strategic planning in the real estate business involves a variety of disciplines — organization analysis, tax planning, market analysis, deal-structuring, investment planning and financial analysis, to name but a few.

Corporate Strategies

While strategic planning can benefit many organizations, much of the demand for strategic planning comes from three corporate types, Diversified conglomerates with substantial, and often undervalued, real estate holdings are one type. Such entities often wish to upgrade their properties for overall corporate purposes and/or use the real estate in financial restructuring or simply to provide earnings.

A second type of corporate entity may be looking for a way to enter the real estate industry anew. A good example would be a regulated public utility trying to establish nonregulated real estate subsidiaries. A third corporate type involves real estate firms looking to reposition themselves in their market or expand into other markets or areas. To accomplish these goals, they also may need to restructure themselves organizationally or financially.

Situational Analysis

The purpose of the situational analysis is to establish common goals and objectives, and to document key variables affecting an organization’s business plans. Hopefully, these activities will lead to the ultimate goal of establishing a consensus among participants in the overall strategy.

Situational analysis involves a number of issues, starting with a determination of a company’s organizational structure and its overall business goals or objectives. It also may include an analysis of overall business trends and local market conditions, an inventory of current real estate holdings, and a review of any external conditions affecting a business — such as regulatory constraints, tax position, capital structure, etc.

An effective situational analysis includes interviews with key executives in the organization, review of important documents, property and site inspections, and the definition of short- and long-term goals. This process may require additional input from other non-real estate specialists, such as organizational, tax, or accounting advisors.

Once the situational analysis is complete, key executives convene in a special workshop to review results. This workshop is critical to the overall success of the engagement for three important reasons.

First, it establishes consensus between and outside consultant and the client regarding the focus of the process. Second, it provides a mechanism for department heads in the organization to participate in the strategic planning process. Finally, it provides a common basis of understanding of “what is,” reach the goal of “what is to be.”

Final Strategy

In the final step of the strategic planning process, all decisions are documented into a final strategic business plan. Naturally, the format of the final document will tend to reflect the organization’s own preferences, but a convenient summary can emphasize major points of the plan.

Once the documentation is finished, strategic planners conduct a final workshop to bring together any remaining details in the decision-making process. One major focus of this process is assigning implementation responsibility for various components of the plan to specific individuals. In addition, it is important to establish specific monitoring procedures.

In the long run, strategic planning can be of immense benefit to many types of organizations, especially in the often turbulent real estate industry.

Historically, the real estate community has consisted of independent, aggressive, dealmaking individuals who were in business to make money. Today, however, the real estate industry is maturing, primarily due to increased competition and market saturation.

The bottom line — real estate companies today must be concerned about business strategies for the real estate industry as a whole - not just individual projects.

Technorati Tags: real estate investing, real estate, home sales, investment property

Consider your intentions when you go looking for a new or new-to-you home. Are you searching for your dream home, a place you hope to hang your coat for a long time? Or perhaps you are looking for smaller, lower-maintenance place to ease you into retirement? Maybe you ve spotted a hot market and are hoping to turn a profit with a fast buy and a fast sell sometime in the near future. Your plans for your new house and how long you intend to stay there can affect its re-sale potential. For example, the trendy new neighborhood where your house is located may not be so trendy and popular ten years from now.

Regardless of your intentions, there are several other factors that will affect the re-sale potential of your home. First among these is location. You ve probably seen house-for-sale advertisements boasting about a home s location, and it s true, location is very important. Today s preferred location may not be the same five or ten years from now, but many of the elements that make it desirable will be the same. Large lots, mature trees, wide sidewalks, proximity to schools, shopping and public transit are all features that increase an area s lasting appeal and will therefore fetch higher re-sale prices than homes in areas that do not offer the same advantages. When thinking about location, you should also consider the population and economic growth trends in your city or town, and in which direction growth appears to be moving.

Demographics can also come into play when it comes to home re-sale value. With baby boomers heading into retirement and their golden years , one-level homes with wide passage ways and rooms large enough to accommodate wheelchairs may become more popular in certain areas, while suburbs filled with young families may put more of an emphasis on large yards and ample public green space and playground facilities. Try to learn about a town or city s population before you purchase a home there.

Be aware of the features that sell. Peruse local real estate advertising to find out the most desirable attributes in the area in which you want to buy. You may notice that homes with one bathroom sell for less than homes that have more bathrooms, or that homes with old, inefficient windows sell for less than those with newer, vinyl-clad windows and energy-efficient panes. The same can be said about a variety of features including closets, number of bedrooms, fireplaces, swimming pools and kitchen functionality. Don t despair, however, if a dated or less desirable home is all you can afford: outdated houses present an opportunity for renovations and upgrades that can vastly increase their value and re-sale potential. With a small investment and a little work, you can turn a fixer-upper into cash in your bank account. The profit margin increase can be significant enough to justify enlisting the help of a professional to help with major projects.

A residential building inspector can also help you identify the shelf life of a home you are considering buying. A thorough inspection report will give estimates on the lifespan of major home components such as the roof, furnace and driveway. If several of these components are reaching maturity at or near the time you want to sell, the re-sale potential of the home could be devalued as a result of the impending repairs. Take these timelines into consideration if you plan on moving in the near future, or if your cash flow will be compromised during the same period in which upgrades will become necessary.

Buying a house should be about meeting your needs and desires, but a little forward-thinking can mean an easier sell, and even a profit, a few years in the future if your needs change or you want to move on. A purchase designed to meet your current needs while accommodating future re-sale potential is a smart investment that will help you fund a bigger, better house when the time comes, or to create a little nest egg for future investments or retirement. Considering the re-sale value of a home before you buy it takes little effort but produces great routines all in all, a logical thing to do.

Technorati Tags: real estate, home purchase, real estate investing, property advice

Most states in the US require that if you re selling your home whether through a real estate agent or as a FSBO (For Sale by Owner) you must give to a potential home buyer a Seller Disclosure of Property Conditions form. This form discloses information about your property that would affect the living conditions or the resale able value of the home. Disclosure of property conditions includes any past or current problems with the property. Check out the different categories of property disclosure, and make sure that you list the necessary information required under each one. This list may or may not include issues that you would need to be concerned about, so make sure to check with your state and local agencies for complete information.

House Systems Includes areas such as plumbing, electrical, appliances, doors and windows, security system, pool, sprinklers, sump pumps, cooling and heating.

Foundations/Structures/ Basements Includes leaking and repair issues and drainage problems surrounding the house.

Roof Includes age, leaking and repair issues, second and new roof installation, time frame of roof repairs, and when or how often the roof leaks.

Land/Drainage Includes soil permeability issues such as drainage or flooding problems, or are there any other water sources such as a lake, spring or creek.

Boundaries Includes survey issues such as boundaries of property line, markage of known property lines by what means, such as moveable property stakes as rocks or trees. The allowable property easements for your area, as well as any other obstructions to property such as encroachments by other property owners.

Water Includes source of water and water pressure issues, and purification systems and tests conducted on water quality.

Sewer System Includes how property is serviced for sewage waste, such as septic, public utilities or cess pool. Dates of inspection and known sewer problems.

Construction/Remolding - Includes information on any new buildings or remolding to existing structure, and the necessary building permits.

Homeowner s Association Includes information of any homeowner s association rules and guidelines.

Miscellaneous Includes many areas to numerous to list, but some areas of information encompasses testing for radon gases, termite damage, abandoned under ground storage areas such as septic tanks or cisterns. Issues such as warranties, legal actions, or weather related damage such as tornadoes.

Just as important as you re state and local laws is the federal laws that regulate selling your home. Two issues of primary importance are disclosing lead paint and the conformity to the fair housing laws. According to federal law you must disclose if your home was built or remodeled before 1978. This law was passed and is now enforced by the EPA (Environmental Protection Agency) because of test results that show that lead based paints can cause detrimental affects on human health, especially in babies and small children. Lagging mental function and stunted growth can occur if sufficient amounts of lead based paints are consumed or particles inhaled. Disclosure of test results and the opportunity to test is federal law. Also, fair housing laws require adherence to the selling of your house, although if selling as FSBO the regulations are a bit more lax. The Fair Housing Act, under the Civil Rights Act of 1968, requires that sellers may not discriminate when selling a property. Discrimination is not allowed based on race, color, national origin, religion, sex, familiar or handicapped status.

Another area to consider before you advertise your house for sale is how to weed out the lookers among the potential serious buyers for your home. Many FSBOs can request that buyers become pre-approved by a financial institution before a bid will be accepted. During the home tour you can set parameters too by inquiring on the buyer s ability to quickly obtain financing. You might not want to wait while they must sell their house first in order to buy your house in a timely manner.

Sticky decisions concerning the contract should fully spell out the conditions of the sale, such as any deposits that are required and the ability of the buyer to have their deposit returned. Protection is provided to both when a contract is clearly written for both parties, as for example the ability of you to keep any monies from a buyer that backs out because of an unjust cause. Always make sure to consult an attorney when writing up your contract to sell your home. Remember too that laws fluctuate from state to state and being prepared is the best defense against an unsold home.

Technorati Tags: real estate, home purchase, real estate investing, property advice

Seeking out a smaller house on a smaller lot is one alternative. But it is not easy. Bedrooms are usually upstairs, which can be a problem for an older person. Moreover, few small houses are geared to just a couple or a single person. And often the so-called adult communities of the Northeast - condominiums or homeowner associations restricted to older residents - offer primarily attached units, which many find unacceptable.

Brenda and Theodore Schofield, for example, faced a typical problem. For 24 years they had lived in a five-bedroom colonial house on one and a half acres in Holmdel, N.J. After their three children had grown up the property was clearly too much for them.

‘’But there was no way I was going to move into something where I would have families on either side of me,'’ Mr. Schofield said. ‘’I get claustrophobia just visiting my mother in her apartment in New York City. There’s also a lot to be said for your own backyard even if it’s small. I don’t want to be told it’s common ground.'’

The developers of the age-restricted communities, as it happens, are increasingly seeking to appeal to people with these views.

We found that when prices were comparable, the detached units outsold the attached ones every time. The single-level detached houses are in communities designed and operated primarily as homeowner associations. This style of living frees older people from their former maintenance and security worries, eliminates those staircases and yet offers the sense of home ownership on a private lot.

Currently on the market is Greenbriar North, a development of 700 such houses on 60-by-105-foot lots being built by U.S. Homes in Marlboro Township in Monmouth County, N.J. About half have been completed and sold.

In another development, the Union Valley Corporation is beginning construction on Whiting Station, a 322-house community on 50-by-100-foot lots in Whiting, N.J., in Ocean County.

The two architectural designs show how closely both developers are adhering to the desires of those leaving the large home. Greenbriar North offers detached homes on either one or two levels. And even those on two levels are designed so that the occupants can live entirely on the first floor, using the upper level as a guest suite or for optional activities.

The detached setting gives them that opportunity. The homeowner association takes care of their lawn. The aluminum siding is virtually maintenance-free. And they have the advantage of the recreational facilities common to community association living - in this case a clubhouse with a woodworking and a ceramics shop, tennis courts and a shuffle board court.

Technorati Tags: real estate investing, leverage, home valuations

Learning about a home and its surrounding areas, disclosing all factors affecting a home’s value and obtaining a thorough inspection as well as a warranty plan are among the steps which can help reduce potential law suits.

Real estate professionals and home sellers should be aware of a neighborhood’s zoning — one of the factors which can affect a home’s value in the future.

It is important to be informed about certain residential properties which can also be zoned for other uses such as commercial or multifamily housing. In a residential neighborhood for example, an adjacent lot which is later converted into an automobile body repair shop will most likely lower the value of surrounding single-family homes.

Other factors which can affect a home’s value include nearby projects in the planning stages and environmental hazards. Real estate professionals should check with local officials about future projects such as a new freeway or re-routing of streets which can increase traffic and noise.

‘Real estate professionals and sellers should always disclose to the buyer this type of information about the area as well as any known environmental hazards such as a nearby landfill.

At the time a seller lists a home for sale, the real estate professional should be thoroughly aware of its condition and any problems to avoid future surprises during negotiations or after the close of the sale.

Termite and home inspection should be used in every transaction. A home inspection not only reveals defects in a home that can be addressed before closing the sale, but it can give buyers a comfort level, knowing what they’re getting and reinforcing their decision to buy.

Another important tool to help reduce after-the-sale problems is a home warranty plan. Home warranties are a good perk and give real estate professionals an opportunity to follow up with the homeowner who has had a positive experience and is usually happy.

Most litigation arises from anger caused by resentment building up from smaller problems. Home warranties help keep anger down, so if a larger problem occurs, the home buyer is more likely to call the seller and real estate professional to discuss the problem rather than file a lawsuit.

Before home warranties, most real estate professionals and sellers received calls within the first six months about broken dishwashers, disposals, water heaters and leaking roofs on rainy days. Now, however, most calls are regarding problems about zoning issues and non-permitted add-on rooms.

The following points which are perhaps more important than price when selecting a home warranty company and plan:

1. Consider the financial stability of the company.

2. Read the contract carefully and note what items are covered.

3. Check how fast the company services calls.

4. Check how the company handles claims which are in dispute.

Be knowledgeable about the condition of the property, disclose any known problems to the buyer and provide a warranty plan for unexpected mechanical breakdowns after the close of escrow. Taking these necessary steps will prevent after-the-sale problems and help limit future liability.

Technorati Tags: real estate investing, home buying, mortgages

Equity is the difference between your home’s market value and the total owed on its mortgages.

Most homeowners think it is a good idea to have a substantial equity in their residences. In fact, many homeowners have paid off their mortgages and own their homes free and clear with 100 percent equity.

But Uncle Sam now rewards those homeowners who leverage their homes with big mortgages and small equities. In the 1997 Tax Act, adopted in late 1997, the tax deduction rules for home mortgage interest were radically changed to encourage small down payments.

The new rule, effective for 1998 federal tax returns, allows homeowners to deduct mortgage interest for debt used to acquire or substantially improve principal residences. In addition, homeowners may deduct interest on home-equity loans up to $ 100,000 no matter how the proceeds are used. Existing home loans recorded as of Oct. 17, 1997, are “grandfathered” and are considered acquisition financing.

The definition of leverage is using borrowed OPM (other people’s money) to control property and enjoy its benefits. The most extreme example of 100 percent leverage with no cash down payment is a VA home loan. The opposite zero leverage situation is a homeowner who has no mortgage and owns the home free and clear.

Suppose you buy a $100,000 home with a $100,000 VA mortgage. Of course you will be able to deduct all your interest payments on your federal tax returns, thus substantially reducing your after-tax net interest cost. In addition, you will be maximizing your leverage profits. If the home appreciates 10 percent in market value to $110,000 during the next year, what percent is that $10,000 profit? The correct answer is infinite since you made a zero down payment.

Now imagine instead that you buy the same $100,000 home for $10,000 cash down payment and obtain a $90,000 mortgage. Again the house appreciates 10 percent to a $110,000 value in a year. Now your $10,000 profit is a mere 100 percent return on your $10,000 down payment investment.

Finally, let’s pretend you bought this $ 100,000 house for $ 100,000 cash and own it free and clear with no mortgage. If it again goes up in value to $110,000 in a year, your $10,000 profit is a mere 10 percent return on your $100,000 investment. I think you get the point that the lower your cash down payment, the higher your profit per dollar invested.

Most people think that high leverage, meaning a low down payment, is risky. However, just the opposite is true. Ask the nice folks in Texas, Oklahoma and Louisiana who lost much or all of their equity due to the recent decline in home values there because of the collapse of the oil industry.

When home values decline, those who suffer the most in lost equity dollars are those owners with big equities. To illustrate, suppose our three $100,000 example homes above decline in value to $75,000. The owner who bought with a $100,000 VA home loan lost nothing. The buyer who made a $10,000 down payment lost his $10,000 equity. But the free and clear owner who paid $100,000 for the house lost $25,000.

The morals to be gained from these examples are: The more equity you have in your home, the more you have to lose in a declining market.

The lower your equity, the bigger your profit percentage in a rising market.

Another way of stating these leverage principles is that, if you think property values will go up, high leverage with small equity will be profitable. But if you expect property values to decline, don’t buy.

Technorati Tags: financing home, real estate

The most obvious task is cleaning. The house should be spotless, including appliances. If you work full time and don t have the time to get the house cleaned, hire a house cleaning service. The money spent is well worth it if you are able to sell quickly. It might be hard to keep it clean if you are still living there, but you must make a concentrated effort to try. Your home presentation must be impeccable.

Keep foul and mysterious odors away. The first thing a potential buyer will notice is an offensive odor and you will probably never see them again. Regularly inspect your home for potential odor sources and keep a steady supply of candles and air fresheners on hand. If you have an indoor cat, keep the litter box out of sight and scooped out daily.

Clutter is a major turnoff to potential buyers. It just isn t comforting to see piles of clutter everywhere. Keep small appliances stored instead of out on the countertops. Remove photographs and knick-knacks. You want people to envision their belongings in the house. Clean out and organize the closets. If there is no reason for something to be displayed, get rid of it.

If you can, remove non-essential furniture to make the rooms appear larger. Spacious rooms are more appealing to the eyes. Keep your boxes of junk stored out of sight. It is a good idea to start figuring out what you need and what you can live without. It would be a good idea to have a garage sale before you put the house on the market. If you can t bear to part with anything, rent a temporary storage unit.

You cannot ignore the outside of the house either. The outside presentation has a major impact on the buyer. Clean the leaves out of the drain gutter, don t let garden hoses or other tools pile up outside. Pick them up and store them elsewhere. Make the effort to beautify the front entry. If the door handle is rusty or the whole door looks junky, get a new one. Keep the flower beds neat and free from weeds.

Look at the walls and try to put yourself in the buyers shoes. How would you look at the walls in someone else s house? Is the paint chipping or is the color outdated? It would be well worth your time to give the walls a fresh coat of paint. Nothing makes a room come alive more than a fresh coat of paint. Give the rooms a little bit of a makeover with new d cor that compliments the wall colors. If you have a garden, bring in some fresh flowers and put them in attractive vases.

Establish a pleasant atmosphere by baking bread or cookies. Candles add a nice touch along with background music. Classical or jazz music are both good choices. You want to convey style and elegance to your audience. First impressions go a long way.

When trying to sell your house, you should be prepared for a showing at any time. Last minute requests are very common and can turn into offers. You have the option to request 24 hours notice before a showing, but in doing so you limit your home s exposure. Try to be as flexible as possible. Accommodating the hectic schedules of a potential buyer will make you and your home look that much better.

It is a good idea to not be present for the showing. Buyers might not feel comfortable in your presence or they might be afraid to ask a particular question for fear of offending you. If they can t view the house fully, they will probably just move on to the next one. You don t want that. They are supposed to fall in love with your house.

Technorati Tags: real estate investing, real estate, home sales, investment property

Take a notepad with you to each house and make a note of the address of the homes you visit. Jot down things you like and dislike about each house. This will help you keep track of which house is which. Make note of nearby schools, the general neighborhood, how close is freeway access, where are the shopping malls, and any other information that will help you decide on your choice of home. The commute to work is a vital piece of information. Many forget to consider how far away the job is. The last thing a person wants to do is spend too much time on the road instead of with the family. When attending an open house, remember that the neighborhood surroundings are an important aspect to purchasing a house.

Check the condition of the house, the road and the yard. Is it suitable of children or pets? Who will take care of the yard or can you hire a gardener? Whatever you desire, be sure to think of everything and take plenty of notes. A poloroid camera is well worth taking. Clip instant snapshots to your notebook to help you remember specific houses. Buying a house is an important step, so make sure you know what to look for. Check everything. Notice cabinets, appliances, doors and even views out of the windows. Listen to noises that could be bothersome, such as a train that passes near by or a freeway. Make sure there is plenty of living space or room to add more if you desire. Most people forget to ensure there is enough closet and storage room. Write down vital pieces of information which should include anything that will help you with your decision.

At the open house, an owner or broker is likely to be present. If there is one in attendance, ask questions. Find out all the little secrets about the house. Granted they will not always be straightforward. Have a memo of each inquiry. Put in writing all the answers. When you make the choice on a house you can add these questions into the sales contact and re-ask the query. If these replies differ in the writing stage you may not want to do business with these people after all. All homes have concealed facts. Some are not real terrible but others can be horrendous. Interrogating the owner or broker is an ideal way to find out things that are not visible. Do not be shy about wanting to know how your dream home is really shaped.

Many times, several brokers, lenders or agents frequent open houses. They want your business as soon as you step foot onto the property. Do not sign anything. Even if this were the house you would like to purchase. On sight people have one agenda, to sell you something. Usually the brokers who visit many different open houses will try and get you to view other properties. Which is fine, however they do not know anything about your wishes of the home you want. The mortgage lenders may try to sell you a different house at a better rate. However, in the end it is more likely you will end up paying more. At the stage of an open house it is most probable you are playing the field.

Going to an open house is a time-honored tradition. Open houses are for looking and sometimes even buying. With an important and expensive decision to make, it is better to research and look at all of your options. When venturing upon an open house, understand all the choices offered. Try not to be persuaded in making rash decisions. You have the option of looking, taking those important notes, returning to look some more, and even moving on if this house is not for you.

Technorati Tags: real estate investing

First of all, the home could have major structural issues not evident in an online picture. Pictures don t always tell the whole story. It has also become much easier to doctor photographs. You have to consider the possibility that some sellers might not be as truthful as they should be. After all, they are trying to sell the property, so the sales description is going to emphasize the positives and downplay the negatives. Getting a fixer upper is one thing. Living in a house that is structurally unsound is a completely different matter.

Secondly, you must make sure that you know your property rights. If you are buying land, you must make sure that you can have the utilities you want. There might be restrictions that are not specified on the auction site. There would be nothing worse than buying the property for your dream home and then discovering that you cannot have utilities.

Another potential hazard to buying your home online is not knowing anything about the area. It would be well worth your time to do some investigating. Is the property in an area that is prone to flooding? Is the property accessible by car? These are things that the seller might not mention in their ad.

Also, it is easy to become a victim of online fraud. There is really no way to regulate the online auctions. The auction companies have their own guidelines in place to circumvent illegal activity, but with the high volumes of online business activity every day, it is hard to police every transaction. The government may eventually step in and try to pass laws that will protect online consumers. Time will only tell, so until then you have to keep your guard up.

On the positive side, it is important to note that online auctions are not legally binding. The companies are not actually licensed to sell real estate; therefore, they are not true auction houses. The service that they offer is advertising to potential buyers. It gives buyers and sellers the opportunity to communicate with one another online and work out a legally binding contract after bidding ends.

When placing an ebay bid online, you should be aware that there are two types of bids: Binding and non-binding . The term binding is not entirely accurate because it does not result in a legally binding contract. A Binding real estate auction means that you have placed a bid with intent to buy. If you don t live up to your end of the transaction, you will receive negative feedback. It won t result in legal problems, but it can hurt your business potential on Ebay. Everyone looks at the feedback and most people won t do business with someone if they have a lot of negative feedback. A non-binding bid simply means that you cannot receive negative feedback if you fail to complete the transaction.

Always take the time to review the auction companies policies and procedures. There should be a link to them on the main page. If you have trouble locating them, contact the company directly. You should be able to email them any questions that you may have and they should respond to your inquiries quickly. Try to talk to people that have a lot of experience with doing business online. It seems like just about everyone has some experience with online auctions. They may have some horror stories, but don t let that discourage you. You can learn a lot from the mistakes of others. If you prefer reading to chatting, there are also several books about the subject. Visit the technology section of your favorite bookstore and you are bound to see a possible resource. Take all of the advice and use common sense when entering into an online real estate deal. You will emerge as the winner and have a fabulous home to show for it.

Technorati Tags: financing home, real estate

And you probably didn’t know it.

You will have negotiated hard on the house, getting the concessions you had to have and maybe you even got the price down to a steal. Then, when you got to the mortgage company, you missed something small — as small as a quarter or a half a percent on the discount points.

If that quarter or half a point was there when you signed the papers, you just gave the loan officer a multi-hundred dollar bonus.

What you paid was a ‘’gain,'’ money that many mortgage companies allow their branch managers to charge — if they can get away with it - to borrowers seeking home loans.

And it is money that goes right into the loan officer’s pocket.

The practice of allowing gains is not illegal and has been going on for years. It is a practice that is defined by ‘let the buyer beware.’

In his book ‘’A Practical and Simple Guide to a Home Mortgage,'’ Bass outlines bank procedures in establishing the loan levels for their branch offices. Every day, he says, the home office calls each branch to give them the latest money rates — which fluctuate daily in reaction to national and even international market changes.

‘’A mortgage loan rate-quote is made up of three components: an interest rate, discount points and an origination fee,'’ Bass says.

For instance, on a 30-year, fixed-rate loan the numbers may look like this: 10 — 1 — 1.

The ‘’10′’ is the interest rate and affects your monthly payment.

The ‘’1 ‘’ is the number of discount points, which primarily are to even out loan yields. (When interest rates go up, discount points normally go down. When rates go down, discount points often go up.)

The final ‘’1′’ is the loan origination fee, which is almost always 1 point, or 1 percent of the total loan. The loan officer usually gets a cut of the origination fee as his commission.

But, loan officers can up their commission if they can get the customer to pay another quarter or half a point that is tacked onto the discount points.

Not all mortgage companies allow branch officers to try for ‘’gains,'’ but enough companies do allow them to make the practice worth scrutiny.

First of all, not that many people shop and compare rates from one mortgage company to another, or even one branch to another. Plus, there is no obligation by the loan officer to disclose that the rate he is charging you is above what even his own home office is quoting.

But over and above all that, says Bass, is the ‘’emotion, nervousness and intimidation'’ of the whole process of buying a house and getting a loan.

To avoid paying gains, Bass recommends that consumers take a little time to familiarize themselves with mortgage practices and some of the language of the mortgage industry.

He also urges:

-Comparison shop. And if a mortgage company has more than one branch in town, call a couple of others to get their rates.

-Ask each lender what time of day they received new quotes from their home office. That way you can compare each one fairly.

-Ask the person quoting the rates if the rates and points are the same as quoted by the home office. Then ask the branch manager if the rates are the same for each loan officer or whether loan officers are allowed quote gains.

In the current market, rates should be fairly static on a day to day basis. But they can change — drastically.

Technorati Tags: real estate, investing, real estate profits

The overall production of modular homes is a unique process. However, design begins as with most floor plans; with an architectural engineer using a CAD (Computer Aided Design) program, and is approved by structural engineers for durability and safety. There are benefits to having your home constructed in the fashion of a modular home. The construction of the modular home sections begins on an enclosed factory floor. Quality control is strictly adhered too for each section of the house. Your home during the building phase is never subjected to inclement weather conditions, and usually the home can be ordered and delivered on site with in two weeks. Also, during this phase your contractor can set a pre - made foundation, and ensure that all necessary permits and grading work is completed in time for your modular home delivery. Finishing work such as crown molding, carpeting and appliance installation is completed once the home is joined and all utilities are hooked up. During this phase you can begin to pack and schedule your date for move in. Note worthy too is the fact that many modular homes can be special ordered from any standard house design on the market.

Other beneficial considerations of modular home purchasing are that because they meet state and local home building requirements, and are inspected by a certified inspector they usually exceed existing building codes, which makes obtaining financing easier. Banks and other types of mortgage lenders consider modular homes on par with the traditional on site stick built homes for varied reasons such as meeting state codes, and the use of a permanent foundation. Insurance rates for your home is in line and competitive with the traditionally constructed home too. Over all these factors influence two very important aspects of your home its appreciation in value and the equity. If you ever decide to sell your home you will find few if any problems with anyone obtaining financing, or questioning the value of the home as compared to other stick built homes.

In a comparison between modular and manufactured homes the differences are clearly amplified, and the benefits of owning a modular home clarified too. When comparing them, the potential home owner must think in terms of the long run. Its true manufactured housing does have short term benefits, but over the long haul it might be wise to invest a little more money into a modular home. Take a glance at a few important comparisons below.

Modular Homes Appreciate in value, manufactured homes depreciate.

Modular Homes Set on a permanent home foundation, manufactured homes set on a block pier making financing harder if not impossible to obtain.

Modular Homes Meet state and local building requirements and are inspected, manufactured homes don t, and structural reliability can be faulty.

Modular Homes Meet federal, state and local regulations, while manufactured housing must meet only HUD (Housing and Urban Development) requirements.

Modular Homes- Are accepted into most communities of stick built homes, but restrictive covenants exist on where a manufactured house may be placed.

Modular Homes Are in comparison just as energy saving in heating and cooling as any stick built home.

Other benefits of modular housing are that many contractor groups specialize in not only assembly of the home, but also in the other facets associated with home site development. For example, larger firms can help you finance your new home. Also, site excavation, site preparation and the installation of the foundations for the home and garage can easily be done. Not only will this eliminate any unnecessary headaches for you, in the end it will save your hard earned dollars. Modular homes are fast becoming the housing choice for the future, but whatever housing option you choose make sure it s a decision you can live with.

Technorati Tags: real estate investing, leverage, home valuations