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My goals are simple -- to ensure that you're happy with the home you buy and that you get the best deal you can. This describes why owning should be less expensive than renting. My goal is to ensure that you're happy with the home you buy and that owning the home helps you accomplish your financial goals. To decide whether now's the time for you to buy a house, consider the advantages of buying. Owning may be less expensive then renting Here's a guideline that may change the way you view your monthly rent. To determine how much home you can afford to buy while having the same approximate monthly cost as your current rent, simply do the following calculation: Take your monthly rent, multiply by 200 = purchase price of home Example: $ 750 x 200 = $150,000 In the preceding example, if you were paying rent of $750 per month, you would pay approximately the same amount per month to own a $150,000 home (factoring in tax savings). The costs as a renter in the future are even more important than the costs of rent today. As a renter, you are fully exposed to increases in the cost of living, also known as inflation. A reasonable expectation for annual increases in your rent is 4 percent per year. |
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Although the cost of purchasing a home generally increases over the years, once you purchase a particular home, the bulk of your housing costs are not exposed to inflation -- if you use a fixed-rate mortgage to finance the purchase. When you're in your 20s or 30s, you may want to start thinking about your golden years. Paying $750 rent per month now is the equivalent of buying a home for $150,000. In 40 years with approximately 4 percent inflation per year, your $750 per month rent may increase up to $3,600 per month. That's like buying a house for $720,000! Once you purchase a particular home, the bulk of your housing costs are not exposed to inflation -- if you use a fixed-rate mortgage to finance the purchase. Therefore, the comparatively smaller property taxes, insurance, and maintenance expenses are the only housing costs you will have that may increase over time with inflation. In the decades ahead, you will be glad you purchased a home today because as illustrated, renting long term can expose your housing costs (rent) to inflation. |
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Over the many years that you are likely to own it, your home should become an important part of your financial net worth. This section covers tapping into your home equity and how to better understand the value of your investment. Over the many years that you own your home, it should become an important part of your financial net worth -- that is, the difference between your assets (financial items of value that you own such as bank accounts, retirement accounts, stocks, bonds, mutual funds, et cetera) and your liabilities (debts). This is because homes generally increase in value over time while you're paying down your loan (mortgage debt) used to buy the home. Home equity (which is the difference between the market value of a home and the outstanding loan on the home) will help your personal and financial situation in a number of ways. If you plan to someday retire, your home's equity can help supplement your other sources of retirement income. Tapping into equity How can you tap into your home's equity? Some people choose to trade down -- that is, to move to a less expensive home in retirement. Sell your home for $250,000, replace it with one costing $150,000, and you've freed up $100,000. Subject to certain requirements, you can sell your home and realize up to $250,000 in tax-free profits if you're single; $500,000 if married. Another way to tap your home's equity is through borrowing. Your home's equity may be an easily tapped source of cash (the interest you pay is generally tax-deductible). However, this can be a very bad decision. When you go to sell there is nothing left as you have already received and most likely spent your profits! Some retirees also consider what's called a reverse mortgage. Under this arrangement, the lender sends you a monthly check you can spend however you want. Meanwhile, a debt balance (that will be paid off when the property is finally sold) is built up against the property. |
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Determining What you Can Afford and the Pre-Approval Process With so many loan programs available, it's important to find the best fit for you. Talking to a lending professional early in the process will save you time by letting you focus on homes in your price range. Find a loan that's right for you How Much Can I Afford? With so many loan programs available, it's important to find the best fit for you. Talking to a lending professional early in the process will save you time by letting you focus on homes in your price range. Become Pre-Approved for a Home Loan: Time is a key element in your home search. By becoming pre-approved for your loan, you not only save time, you also: Can focus your search on the homes that best fit your financial picture Have confidence when making an offer to purchase a home Show the seller your offer is serious and already conditionally approved Be knowledgeable about down payments Your down payment can vary greatly depending on the type of loan you have and what your resources are. Today, many lenders have options for down payments as low as 3 percent. There are even a few programs available with a ZERO down option, allowing a buyer to finance 100 percent of the purchase price. Some will even allow you to finance up to 3 percent of the closing costs. Gifts and loans from sources other than a bank can help with your down payment. This option can't be used with all loan programs, so be sure to talk to your lender first. If you have a 401k program with your employer, you may be able to withdraw from it for a down payment. Check with a qualified tax specialist to learn about ways to utilize your retirement savings without incurring a penalty. - John L. Scott Home Buyer Guide |
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Before setting out to purchase a home, you should determine how much you will plan to put down. This covers the advantages of down payments of at least 20% of the purchase price as well as PMI (Private Mortgage Insurance). When you set out to purchase a home consider the following: How much money should you save for the down payment and closing costs for the purchase of your home? Where is your down-payment money going to come from? How should you invest this money while you're awaiting the purchase and closing? The 20 percent solution It's recommended that buyers try to accumulate a down payment that represents 20 percent of the purchase price of the property. Twenty percent down is a safe number because it provides adequate protection for lenders and allows the buyer to avoid added fees and mortgage insurance. If a buyer only puts down 10 percent, and property values drop 5 percent, the lender could be at risk. Lenders have found that they are in a safer position when a borrower has made a down payment of at least 20 percent. Less than 20 percent and private mortgage insurance (PMI) Banks and other mortgage lenders may require you to obtain private mortgage insurance (PMI) if your down payment represents less than 20 percent of the purchase price of the property. PMI protects the lender financially if the buyer defaults on the home loan. |
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On the day when a home becomes officially yours, you will have to pay fees for the services of several parties. In a typical real estate deal, closing costs total 2 to 5 percent of the purchase price of the property. This section outlines them in detail. Be sure to plan for closing costs when looking at financing your new home. Closing costs vary according to price, and these costs are in addition to down payment costs. These costs may include: Loan Fees: Charges from the lender for processing the application, getting credit reports, and loan origination fees. Escrow Fees: The costs involved in preparing the documents and handling the closing process. Homeowners Insurance: Insurance premium protecting the investment for you and your lender. Title Insurance: A one-time charge protecting you against the possibility that the seller doesn't have legal authority to sell the home. (Review your title policy). Inspections: Costs for having a professional inspector examine your new home to alert you of any potential problems. Private Mortgage Insurance: A requirement of many lenders if you put less than 20 percent down. Learn about all loan types Because financial pictures vary from buyer to buyer, there are a wide variety of loans available. Shopping for a loan is a lot like shopping for new shoes, you need to find one that fits you well. Credit history In order to strengthen your chances of an efficient loan approval, you need to be completely candid with your lender about all aspects of your financial history. Knowing what your credit looks like can help make the overall loan approval process much more efficient. - John L. Scott Home Buyer Guide |
Homeowner's Insurance Homeowner's insurance is mandatory. When you purchase a home, your mortgage lender won't allow you to close the purchase until you've demonstrated that you have proper homeowner's insurance. When you purchase a home, your mortgage lender will ask you to demonstrate that you have proper homeowner's insurance. Lenders usually insist that you pay the first year's premium on said insurance policy at the time of the closing. When you buy a home, you will want to protect your investment in the property. You should shop for insurance ahead of time. Get quotes on insuring properties as you evaluate them or ask current owners what they pay for their coverage. When shopping for insurance, explain to the insurance agent what type and cost of properties you are looking at. They should be able to give you a ballpark monthly cost estimate for insurance. Calling insurance agents now will also enable you to begin to evaluate which insurers offer the service and coverage you desire when the time comes to actually buy your home. To help minimize the cost, it's helpful to buy the most comprehensive coverage and take the highest deductible that you can afford. |
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Almost all lenders today require you to purchase private mortgage insurance (PMI) if you put down less than 20 percent of the purchase price when you buy. PMI typically adds several hundred dollars annually to the cost of your loan. If you buy the home and make a down payment of 20 percent of the purchase price, the lender is putting up the other 80 percent of the purchase price. In most states, your home is the lender's security for the loan. Almost all lenders today require you to purchase private mortgage insurance (PMI) if you put down less than 20 percent of the purchase price when you buy. PMI is not a permanent cost. Your need for PMI vanishes when you can prove that you have at least 20 percent equity (home value minus loan balance outstanding) in the property. The 20 percent can come from loan paydown, appreciation, improvements that enhance the value of the property, or any combination thereof. |
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When you buy and own a home, your local government sends you an annual, lump-sum bill for property taxes. Property taxes are typically based on the value of a property. When you buy and own a home, your local government (typically through what is called a County Tax Collector's office) sends you an annual or semi-annual, lump-sum bill for property taxes. Property taxes are typically based on the value of a property. You should investigate what the exact rate is in your area. You can call the Tax Collector's office in the town where you're contemplating buying a home and ask what the property tax rate is and what additional fees and assessments may apply. Your property taxes will probably be recalculated based upon the price you paid for your home. If you make a small down payment (typically defined as less than 20 percent of the purchase price), your lender may require property tax and insurance impound accounts. These accounts allow you to pay your property taxes and insurance to the lender each month along with your mortgage payment. |
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One of the treasures of homeownership is that the IRS and most state governments allow you to deduct, within certain limits, mortgage interest and property taxes when you file your annual income tax return. One of the treasures of homeownership is that the IRS and most state governments allow you to deduct, within certain limits, mortgage interest and property taxes when you file your annual income tax return. When you file your Federal IRS Form 1040, the mortgage interest and property taxes on your home are itemized deductions. On mortgage loans now taken out, you may deduct the interest on the first $1,000,000 of debt as well as all of the property taxes. The IRS also allows you to deduct the interest costs on a home equity loan (second mortgage) to a maximum of $100,000 borrowed. |
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When you go to sell your home someday, the IRS allows you to deduct home improvement costs from your profits before paying taxes on them. To take advantage of this, it is in your interest to track the amount that you spend on improvements. When you sell your home, the IRS allows you to deduct home improvement costs from your profits before paying taxes on them. Therefore, it is in your interest to track the amount you spend on improvements. IRS home sale tax rules also enable qualifying taxpayers to exclude from federal taxation a large chunk of profit -- up to $250,000 for single taxpayers, $500,000 for married couples filing jointly. For tax purposes, at the time of sale the IRS enables you to deduct the cost of improvements but not money spent on maintenance. What's the difference? Capital improvements are things that you do to your home that permanently increase its value and lengthen its life. Capital improvements include such things as landscaping your yard, adding a deck, purchasing new appliances (as long as you leave them when you sell), installing a new heating system or roof, remodeling and adding rooms, et cetera. Maintenance and repair expenses include those types of fix-up items that need to be done throughout your home from time to time. Maintenance and repairs include such things as fixing a leaky pipe or toilet, painting, paying someone to mow your lawn and pull weeds, et cetera. When you buy a home, it's important to keep a file folder which you can store receipts for your home improvement expenditures. If you're in doubt as to whether an expense is an improvement or a maintenance item, keep the receipt and review it with your agent when the time comes to sell your home. |
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Maintenance is difficult to budget for. You never know precisely when you may need to fix an electrical problem, patch a leaking roof, or replace the washer and dryer - until the problem rears its ugly head. Homes require maintenance over the years. As a rule of thumb, anticipate spending about 1 percent of the purchase price of your home each year on maintenance. Some years you may spend less, other years you may spend more. With some types of housing, such as condominiums, you pay monthly dues into a homeowners association, which takes care of the maintenance for the complex. In that case, you're only responsible for maintaining the interior of your unit. Check with the association in buildings where you might buy a unit to see what the dues are and whether any new assessments are planned for future repairs. |
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Getting pre-approved is a sign of your seriousness to house sellers - it places sort of a Good Borrowing Seal of Approval on you. In a multiple-offer situation, buyers who have been pre-approved for a loan have an advantage over buyers who don't. When you're under contract to buy a property it's beneficial to have your mortgage application already approved. Pre-qualification is an informal discussion between borrower and lender. The lender provides an opinion of the loan amount that you can borrow based solely on what you, the borrower, tell the lender. Pre-approval is a more rigorous process. Loan pre-approval is based on documented and verified information regarding your employment, income, liabilities, and the cash available to close on a home purchase. Going through the pre-approval process demonstrates your seriousness to house sellers -- it places a Good Borrowing Seal of Approval on the buyer. A lender's pre-approval letter is considerably stronger than a pre-qualification letter. In a multiple-offer situation, where more than one prospective buyer bids on a home at the same time, buyers who have been pre-approved for a loan have an advantage over buyers who have not yet been pre-approved. |
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Searching for a home has never been easier thanks to the services and resources that John L. Scott provides. I never underestimate the importance of spending time with my clients, exploring different homes and neighborhoods, in search of the perfect home. Modern technology has also enabled many home buyers to go onto the Internet to search for prospective properties. Communication is the key to a successful home buying experience, so I will partner with you to find a home based upon your individual needs. I Will Provide You With the Following Tools and Services to Assist You in Your Home Search: Home Driving Tour: Even with all the latest advancements in technology, many people choose to begin their home search process by driving around. Home driving tours enable you to become familiarized with different neighborhoods and housing styles, which simple photos and descriptions cannot provide. A driving tour also helps you to communicate more knowledgably with me so I can better understand what your needs are. 'New on the Market': "New on the Market" -- The John L. Scott newspaper ads feature a special section for properties new to the market. Advertisements include a unique Web address for each home which provides you with immediate access to photos and property information. ScottLine: Every John L. Scott listing is given a code to access a complete telephone audio description about the home. Simply dial 1-888-421-4214 and enter the five digit code -- you will instantly receive a description of the property, including the main features and in most cases, the price and driving directions. - John L. Scott Home Buyer Guide |
Using the Internet in Your Home Search This section contains valuable tools to aid in your home search. Home Search on www.johnlscott.com:The World Wide Web is the most efficient marketing and communication tool because it provides instant information and imagery for home buyers. The Home Search allows you to view multiple homes, including photos, audio descriptions, driving directions, virtual home tours and much more. Home Delivery on www.johnlscott.com:This personalized search tool allows prospective purchasers to enter their personal search parameters, including location and price range, and receive e-mail notification every time a new property comes onto the market that fits their criteria. Internet Property Link®:Every John L. Scott home has its own unique Web address which can be found in our ads and on most signs. To view a home, buyers simply key in the home's individual Web address and they are instantly on an online tour-complete with color photos, virtual tours, mapping, audio descriptions and more. This service earned John L. Scott a nomination for a National Internet Innovation Award. Up To The Minute Information: The Multiple Listing Service is a comprehensive resource that allows me to access detailed information about homes on the market that you are potentially interested in viewing. I also hear about homes that are about to come onto the Real Estate market, so you always have the most current, up-to-date information. - John L. Scott Home Buyer Guide |
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Good neighborhoods, like beauty, are in the eyes of the beholder. For example, being near excellent schools is important if you have young children. Personal preferences aside, all good neighborhoods have the following characteristics. Good neighborhoods are in the eyes of the beholder. For example, being near excellent schools is important if you have children. If, conversely, you're ready to retire, buying in a peaceful area with outdoor activities may appeal to you. Amenities: Amenities are special features of a neighborhood that make it an attractive, desirable place to live. Wide streets bordered by stately oak trees, lush green parks, water views, quiet cul-de-sacs, parking, and proximity to schools, churches, shopping, restaurants, transportation, playgrounds, and beaches are prime examples of amenities that add value to a neighborhood. The more of these features a neighborhood has, the more appealing it is from the perspective of most homebuyers. Quality schools: When you're ready to sell your house, many prospective buyers with children will be interested in the local school system. Pride of ownership: A home's cost has no bearing on the amount of pride its owners take in it. A drive through just about any neighborhood, posh or modest, will demonstrate whether the people who live there are proud of their homes. This can have an impact on the values of surrounding homes. |
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You're likely to end up evaluating the strengths and weaknesses of several neighborhoods while trying to decide. If you're on a budget you may have to compromise and make tradeoffs. When researching neighborhoods, you may want to examine the health of the local economy, area amenities such as parks and entertainment, school quality, and crime rates, before you buy a home. Here are some sources of information: Local resources: Check the local library. The local chamber of commerce is another excellent source of information. Talk to people who live in the neighborhoods: What do residents say about the neighborhoods you are considering? Drive or walk through the neighborhoods at various times of the day and evening. Get days-on-market (DOM) statistics from me: DOM statistics indicate how long the average house in an area takes to sell after it goes on the market. |
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Pre-Owned homes have many great features as well as disadvantages. This section covers the strengths and weaknesses of pre-owned homes to consider as you're weighing your options. Pre-owned homes have many great features: Pre-owned homes can be less expensive than new homes. Families who bought houses years ago paid less for their homes than what a developer may charge to build a new home today. Asking prices of pre-owned homes are generally much more negotiable than asking prices of new homes. Pre-owned homes are usually located in well-established, proven neighborhoods. Like with any home, you should have a pre-owned home thoroughly inspected (inside and out) by qualified professionals before you buy it. Pre-owned homes are "done" properties. When you buy a pre-owned home, you generally don't have to go through the process of buying and installing carpets, window coverings, and light fixtures. The work is already done and everything is generally included in the purchase price. Buying a pre-owned home may be the best way to get the architectural style, craftsmanship, or construction materials you want. Perhaps you want plaster walls, parquet floors, stained glass windows, or some other kind of materials or craftsmanship that could be difficult to find in new homes. The older a pre-owned home's roof, gutters, plumbing system, furnace, water heater, appliances, et cetera, the sooner you may need to repair or replace them. |
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New homes have many great features as well as disadvantages. This section covers the strengths and weaknesses of used homes to consider as you're weighing your options. New homes have some very appealing advantages: New homes generally have updated floor plans or design features like a master bedroom, multiple bathrooms, garages, adequate electrical service, and central heating or air conditioning. Choosing a new home produced by a reputable builder of high-quality properties gives you the peace of mind. Furthermore, you can rest assured that your new home complies with current federal, state, and local building, fire, safety, and environmental codes. A properly constructed new home can be cheaper than a pre-owned home to operate and maintain. Operating expenses are minimized because a new home should incorporate the latest technology in energy-efficient heating and cooling systems, modern plumbing and electrical service. And with a quality new home, your initial maintenance expenses are practically nonexistent because everything is new. New homes have enough wall and floor outlets to accommodate all your high-tech goodies. Visit several of the developer's older projects. Ask homeowners in older developments whether they'd buy another new home from the same developer. See what kinds of problems, if any, they've had with their home over the years. Inquire whether the builder closed the sale on time and honored all contractual commitments, including the completion of any unfinished construction work, on time. |
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Condos have a number of significant advantages, especially for first-time homebuyers. For example, on the basis of livable square footage, condos generally sell for at least 20 to 30 percent less than comparable detached homes. Condos increase your buying power. Compare the price of a two-bedroom condo to a two-bedroom detached single-family dwelling in the same neighborhood. On the basis of livable square footage, condos generally sell for at least 20 to 30 percent less than comparable detached homes. Owning your very own roof, foundation, and plot of land is much more expensive than sharing these costs with a bunch of other owners. For some would-be buyers, the choice is either buying a condo that meets their living-space needs or continuing to rent. Attached residences generally cost less to maintain than detached homes. Although replacing the high rise's roof, for example, costs more in absolute terms than replacing the roof of a detached single-family home, the cost per owner should be less. Attached residences have amenities that you couldn't otherwise afford. Most homeowners can't afford expensive swimming pools or tennis courts. Attached residences are ideal homes for some empty nesters. Perhaps a building with no maintenance hassles and a doorman who'll forward your mail while you're off on one of your frequent vacations might be right for you. |
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Home buying is a team sport. After you assemble a winning team, your players should give you solid advice so you can make great decisions. Here's an overview of the possible players on your team. You don't have to become an expert in property values, mortgages, tax and real estate law, title insurance, escrow, pest-control work, and construction techniques in order to buy or sell a home. Instead, you can hire people who've already mastered these skills. Home buying is a team sport. Your job is to participate with the team, not play every position. After you assemble a winning team, your players should give you solid advice so you can make well-informed decisions You need to determine which experts are necessary and which tasks you can handle yourself. You are the one who must determine how competent or challenged you feel with the various aspects of the home-buying process. The players Here's an overview of the possible players on your team: You: You are the most important player on your team. Real estate agent: Because the house that you're getting ready to buy is probably one of your largest investments, you want to protect your interests by having someone on your team who knows property values. My primary mission is to help you find your dream home, tell you what your home is worth and then negotiate on your behalf to get the best deal. Real estate brokerage: All states issue two different real estate licenses: one for salespeople (agents) and one for brokers. Real estate brokers must satisfy more stringent educational and experience standards than agents do. I have an Associate Brokers License. If your real estate agent is not an independent broker or the broker for a real estate office, the agent must be supervised by a broker who's responsible for everything that your agent does within the course and scope of the duties of a real estate sales professional. Lender: A good lender offers competitively priced loans and may even be able to help you select the best type of loan from the financial minefield of loan programs available today. Property inspectors: A house's physical condition greatly affects its value. Your home should be thoroughly inspected from roof to foundation before you purchase it to ensure that you actually get what you're buying. Closing officer: You and the seller need a neutral third party, a closing officer, who'll handle funds and paperwork related to the transaction without playing favorites. The closing officer is the home-buying game's referee. Financial and tax advisors: Before you buy a home, you should understand how the purchase will fit into the context of your overall financial situation. You should address the issues of what your financial goals are and, given those goals, how much house you can afford. Each player brings a different skill into the game. Assemble a great team, and they will guide you through any situation that may arise during your transaction. Good players act as advisors, and ultimately, the decision making is your job. |
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A good agent will be the foundation of your real estate team. A good agent's negotiating skills and knowledge of property values can save you thousands of dollars. I can help you find a home that meets your needs, negotiate for that home on your behalf, supervise property inspections, and coordinate the closing. All the best agents have certain important qualities in common: They educate you: I knows the buying process and carefully explains each step so that you understand exactly what's happening at all times. They enable you to make good decisions: I will explain what your options are so that you can make wise decisions regarding your best course of action. I will advise you if I think that you should add other experts (property inspectors, lawyers, and so on) to your team. They have contacts: Folks prefer doing business with people they know, respect, and trust. You can make use of my working relationships with local lenders, property inspectors, lawyers, title officers, insurance agents, government officials, and other real estate agents. I will have time for you. |
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Real estate agents can represent sellers or buyers, and agency is the legal definition of that relationship. This covers the basics of single agency as well as some examples of dual agency Agents are bound by certain obligations, which you are entitled to as a client: Loyalty (act in the best interest of the client) Obedience of all lawful instructions Confidentiality Accountability (for all monies) Reasonable skill and care Declaration of all material facts Honesty and fairness to all State laws clearly define the duties for each type of brokerage relationship. States have mandated agency disclosure forms and rules to provide meaningful and timely written disclosure and describe licensee's duties upon termination of a client relationship. As you start communicating with an agent, ask for a clear explanation of your state's current agency regulations. Also request a copy of your agent's company's policy regarding agency so you will know where you stand on these important matters. Seller's Agency This agent works solely for and represents the seller. A seller's agent has no fiduciary responsibility to the buyer. Buyer's Agency This agent works solely for and represents the buyer. A buyer's agent has no fiduciary responsibility to the seller even if the buyer's agent gets a portion of the commission paid by the seller. Dual Agency One agent may represent both buyer and seller in a real estate transaction, but only if both parties consent. Buyer and seller must sign a dual agency disclosure statement that describes the duties and obligations of the dual agent. A dual agent may not disclose any confidential information that would place one party at an advantage over the other party, and may not advocate or negotiate on behalf of either of the two parties. Most states permit dual agency relationships as long as the agency status is disclosed to both the sellers and the buyers in advance, and both parties agree to it. |
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Finding a great agent is worth your time. This provides a method of evaluating and selecting the right agent for you. It includes interview questions to ask an agent as well as his or her references. What's important is you! Quality customer service is the combination of personalized attention with instant information. I will do more than host open houses or take you on tours of homes, I am a trained customer service professional who is relationship focused and technologically empowered. At John L. Scott, I exemplify our company's belief that "what's important to us is you." I will listens to you, I understand the market in which you are looking, and I am able to communicate in an effective way to meet your needs. I am a trained expert in negotiation as well as transaction forms and finance options. When you're shopping for a home, access to information is valuable When you choose me as a John L. Scott agent, information is available instantly. As a John L. Scott agent I can provide industry leading technology and customer service, allowing you to get comprehensive information about homes on the market, take tours of these homes in person, and get information as new homes come onto the market. At John L. Scott, I have been proud to have been a part of the rich history of my company. John L Scott has been a part of the Northwest for over 70 years and I look forward to helping you and your family with all of your real estate needs. As a John L. Scott agent I offer: Personalized service Trusted relationships Knowledge of the market and communities Expert negotiation skills Knowledge of transaction forms and finance options Instant and continuous communication by phone and email - John L. Scott Home Buyer Guide |
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After working so hard to find a great agent, it would be a shame to inadvertently ruin the relationship. Good buyer/agent relationships are based upon pillars of mutual loyalty and trust that develop over time. I will show you every available home for sale that meets your price, neighborhood, size, and condition specifications. If none of the homes meet your personal needs, I will keep looking until the right home comes onto the market. I won’t limit my searches to homes listed by my office. I will inquire as to how much you want to spend because I need to be sure that I am showing you properties that you can afford. |
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This section covers the other important possible members of your team: house inspectors, the closing officer, financial advisors and tax advisors. Home inspectors A home's price is usually related directly to its physical condition. For example, fixer-uppers are usually priced lower because whoever buys them must spend money on repairs to improve their value. You can't know how much work a house may need just by looking at it. Invisible defects can cost a significant amount of money to repair. You don't want to inadvertently become the owner of a home with hidden problems. To avoid this, you need a property inspector on your team. None of the other players on your team are qualified to advise you about a house's physical condition or the cost of necessary corrective work-that's why you need a property inspector. Finding financial and tax advisors If you want to hire a financial or tax advisor, interview several before you select one. Check with your agent, banker, lawyer, business associates, and friends for referrals. As is the case with selecting your agent, you should get client references from each tax advisor and call the references. |
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If you really want a home and you know that other offers will be made, here's how to improve your chances of winning in a multiple-offer situation. Newly listed homes that are priced to sell often generate multiple offers in a seller's market. If you really want a home and you know that other offers will be made, here's how to improve your chances of winning in a multiple-offer situation: Set no-matter-what limits on the amount that you'll bid. Put yourself in the sellers' position. Faced with several offers, sellers select the offer that gives them the best combination of price, terms, and contingencies of sale. Find out what the sellers' needs are before making your offer. Their self-interest invariably prevails. A high purchase price isn't the only way to sweeten a deal. If you have the money, make an extra-large down payment so the sellers know that your loan will surely be approved. You could also offer to buy the home "as is" so the sellers won't have to pay for any corrective work. If you do this, however, make your offer contingent upon your approval of inspection reports so you can get out of the deal if the house needs too much work. Make your best offer initially. You may never get a second chance to make your best offer. Get pre-approved for a loan. All other things being equal, if you're pre-approved for a loan, you should prevail over buyers whose financial status is not yet determined. Don't make your offer subject to the sale of another house. If you must sell in order to buy, put your old house on the market before seriously looking for a new home. Ideally, you'll have a ratified offer on your old house before making an offer to buy a new place. |
Transaction Process and Buyer Strategies This section contains valuable tools to aid in your home search. Offer accepted Property Inspection Removal of contingencies Title search Lender Approval Escrow Transaction Close Possession of Property Transaction forms Real Estate is a form-rich industry. To help you understand the process, you can stop at any time and ask me to share some of the standard forms and paperwork with you. Understanding contingencies Contingencies are conditions that must be satisfied before completing the transaction. Usually, the buyer's offer results in contingencies upon certain things, like financing or inspection. Common Contingencies Include: Financing - even with pre-approval there may be a need for this condition. Inspection - a professional review of the condition of the improvements. Home Sale - if the buyer is also selling property, this contingency allows for the sale of the property before closing on the new home. Talk with me about what contingencies apply to you as you make the offer on your new home. - John L. Scott Home Buyer Guide |
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After you find your dream home, you're ready to make an offer to purchase. All good offers have a few traits in common, most importantly a realistic price and realistic financing terms. After you find your dream home, you're ready for the next action step in the negotiating process -- making an offer to purchase. No standard, universally accepted real estate purchase contract is used throughout the country. On the contrary, purchase contracts vary in length and terms from state to state and, within a state, from one locality to another. All good offers have three things in common: Good offers are based on a realistic offering price. Base your offering price on houses (comparable to the seller's house in age, size, condition, and location) that have sold within the past six months. Actual sale prices of comparable houses are facts. Good offers have realistic financing terms. Your mortgage's interest rate, loan-origination fee, and time allowed to obtain financing must be based upon current lending conditions. If you've been prequalified or, better yet, preapproved for a loan, I will stress that advantage when I present your offer. This proves to the sellers that you're a creditworthy buyer who's ready, willing, and financially able to purchase their house. Good offers don't ask the sellers for a blank check. At the time that your offer is initially submitted, you won't know the degree to which corrective work is needed. Under these circumstances, it's smart to use property inspection clauses that enable you to address any necessary corrective work. After the action of having your offer accepted, your property inspectors gather information. After they've determined what is actually required in the way of corrective work, you can address that with the seller. If the sellers agree with the price and terms contained in your offer, they'll sign it. Their agent should give you a signed copy of the offer immediately. When you actually receive a copy of the offer signed by the sellers, you have what's called a ratified offer (that is, a signed or accepted offer). This doesn't mean that you own the house or that it has been sold, but rather it means that a sale is pending. |
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Sometimes sellers won’t accept your offer as it's originally written. Sellers use counter offers to fine-tune the price, terms, and conditions of offers they receive. |
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Especially in a buyer's market, sellers often find that they have to give concessions in order to close the deal. The two most common concessions are for nonrecurring closing costs and corrective work. In a buyer's market, sellers often find that they have to consider seller-paid financial concessions in order to close the deal. The two most common concessions are for nonrecurring closing costs and corrective work. Nonrecurring closing costs A seller may tell you that they'll pay your nonrecurring closing costs if doing so will help put a deal together. Nonrecurring closing costs are one-time charges for such things as your appraisal, loan points, credit report, title insurance, and property inspections. Closing costs can amount to 3 to 5 percent of the purchase price. Even if the sellers don't offer to pay your nonrecurring closing costs, asking for this concession as one of the terms in your offer usually won't hurt. Two general exceptions to this rule are when it's a seller's market or when you're in a multiple-offer situation. Corrective work Typically, neither you nor the sellers know how much, if any, corrective work is needed when you submit your offer. Therefore, purchase contracts have provisions for additional negotiations regarding corrective work credits after all the necessary inspections have been completed. If the property inspectors find that little or no corrective work is required, you have little or nothing to negotiate. Suppose, however, that your inspectors discover the $200,000 house you want to buy needs $20,000 of corrective work... big corrective-work bills can have an impact on whether or not you close. |
Insurance |
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When you buy a home, most lenders require that you purchase homeowner's insurance. This covers the types of insurance protection, why they are important to consider and what to look for in a policy. Nobody likes to spend money for insurance. But if something could cause you a financial catastrophe, you should spend a relatively small amount of money to protect against losing a great deal of money. In addition, if someone were injured or killed in your home, your home can lead to a lawsuit. The following sections tell how to get the homeowners coverage that you need. The cost of rebuilding If your home is destroyed, which most frequently happens from fires, your insurance policy should pay for the cost of rebuilding your home. The portion of your policy that takes care of this loss is the dwelling coverage section of the policy. The amount of this coverage should be equal to the cost of rebuilding the home that you own. The cost to rebuild should be based on the square footage of your home. Your policy's dwelling coverage amount should not be based on what you paid for the home or the amount of your mortgage. If you're buying a condominium or cooperative apartment, examine the coverage that your building's homeowners association carries. Guaranteed replacement cost Get a policy that includes a guaranteed replacement cost provision. This provision ensures that the insurance company will rebuild the home, even if the cost of construction is more than the policy coverage. Find out how your insurance company defines guaranteed replacement cost coverage -- each insurer defines it differently. The most generous policies, for example, pay for the full replacement cost of the home, no matter how much the replacement ends up costing. Other insurers set limits -- for example, they agree to pay up to 120 percent of your policy's total dwelling coverage. Lawsuit protection Liability insurance protects you against lawsuits arising from bad things that happen to others while they are on your property. For example, suppose a litigious passerby happens to slip on something that was left on your driveway. Carry enough liability insurance to protect at least two times the value of your assets. Personal property protection The amount of personal property coverage is usually set at about 50 to 75 percent of the amount of dwelling coverage. If you are a condominium or cooperative apartment owner, however, you'll generally need to choose a specific dollar amount for the personal property coverage that you want. Some policies come with personal property replacement guarantees that pay you for the replacement cost of an item rather than for the actual value of a used item at the time that it's damaged or stolen. If this feature is not part of the standard policy sold by your insurer, you may want to purchase it as a rider (add-on provision), if such a rider is available. If you ever need to file a claim, having documentation as to what personal property you had helps. The simplest and fastest way to document your personal effects is to make a videotape of your belongings. But be sure to place any documentation somewhere outside your home in case of a fire. |
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Title insurance assures homeowners and mortgage lenders that a property has a valid title. This section covers both major kinds of owners title insurance as well as who pays for it. If, for example, someone makes a claim that threatens your ownership of the home, the title insurance company protects you and the lender against loss or damage, according to the terms and provisions of your respective title insurance policies. Most of your title insurance premium is spent on research to determine who legally owns the property that you want to buy and to find out whether there are any unpaid tax liens or judgments recorded against it. Because title companies do a good job of eliminating title risks before folks buy property, only about 10 percent of the premium goes toward indemnifying homeowners against title claims after the closing. You pay this premium only once at close, unless you refinance your mortgage. If you refinance your mortgage, you'll have to get a new title insurance policy to protect the lender from title risks (such as income tax liens or property tax liens, for example) that may have been recorded against your property between the time your previous policy was issued and the date of the refinance. If you refinance your loan, ask the title company whether you qualify for a refinance rate on the new title-insurance policy. Most title companies will give you a big premium reduction -- as much as 30 percent off their normal rates -- if you are within five years of the old policy's issuance date. Who is responsible for title insurance? Washington: Sellers typically pay for the owners title insurance policy and the buyer pays for the lender policy. |
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All the irregularities that exist in a property's past ownership can affect a property's title. Learn about some the causes of these hidden risks to titles. It's important to be aware of concerns with titles: Spouses:Sometimes a present or former spouse will file a claim against the property. Title-company representatives must know whether you're single, married, divorced, or widowed in order to keep ownership records accurate. Undisclosed heirs:When property owners die without wills, probate courts must decide who their rightful heirs are. Court decisions may not be binding on heirs who weren't notified of the proceeding. Even when there's a will, probate courts must sometimes settle questions concerning the will's interpretation. Forgery and fraud: Sellers are sometimes fraudulently impersonated. By the same token, signatures can be forged on documents. Name confusion: A lot of title problems are caused by people who have names similar (or identical) to the buyer's name or seller's name. If you have a fairly common last name, you'll probably have to fill out a Statement of Information to help the title company distinguish you from other people with names like yours. If you have an ordinary name like Brown, Chen, Garcia, Gonzalez, Johnson, Jones, Lee, Miller, Nguyen, Williams or Smith, expect to be asked to complete a Statement of Information. What type of information is requested in a Statement of Information? You (and your spouse if you're married) will have to provide your full name, Social Security number, date and year of birth, birthplace, date and place of marriage (if applicable), residence and employment information, previous marriages, and the like. This information will be used to differentiate others with names similar to yours. |
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From an accounting standpoint, the most important piece of paper is the final closing statement that you get on the day that your property actually closes. The final closing statement is like your checkbook, it records all the money related to your home purchase: Credits: Any money that you paid in advance (such as your initial deposit and down payment) appears as a credit to your account. You may also receive credits from the seller for such things as corrective work repairs and property taxes. And, of course, your loan is a credit Debits: Funds paid out in your behalf are shown as debits. Your debits include modest and not-so-modest expenses, such as what you graciously paid the seller for your dream home, loan fees, homeowners-insurance premiums, and property inspection fees. Several days before closing, you'll be given an estimated closing statement detailing what your closing costs will be if the home closes as scheduled. Check the estimated closing statement carefully to be absolutely certain that it accurately reflects your credits and debits. Ask questions to clarify any concern you have. Keep a copy of the final closing statement for your files; you'll want to refer to it when you prepare your income tax return. Some expenses (such as loan origination fees and property tax payments) are tax deductible. Furthermore, the closing statement establishes your initial tax (cost) basis in the property which is an important detail when you're ready to sell your property. |
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When you actually take possession of your home and move into it depends on the terms of your contract. There are a number of options, and this section covers the potential risks associated with each one. Property transfer day Put into simple terms, Property Transfer Day is when the buyer pays the purchase price and the seller delivers the deed. Once the title company and lender have given "clearance" to the closing agent, the appropriate documents are processed and the property is officially transferred to the new owner. It is important to keep in mind that the new owner does not take possession of the property until the documentation has been processed, which can take anywhere from one to three days after recording. Once the waiting period is over and the transaction is complete, the new owner can begin moving into their home. Home warranty protection Protect your most costly and complex home systems and appliances. John L. Scott Real Estate and American Home Shield (AHS) understand that your home is one of your largest investments. The Home Warranty Plan offered by AHS, the oldest and largest home warranty company in the nation with over 29 years of service experience, can provide solutions for systems and appliances you use everyday. The typical AHS customer uses their warranty plan an average of 2.3 times each year on costly covered repair or replacement items -- which translates into security for the homeowner. AHS has 4 service centers nationwide which process 15,000 calls each day -- that's over 5 million calls a year for service that AHS handles so home sellers don't have to! By providing home warranty protection from American Home Shield, sellers can more closely achieve their objectives and buyers are protected from unforeseen covered repair/replacement costs. - John L. Scott Home Buyer Guide Determining when you actually take possession of your home and move into it depends on the terms of your contract and may be dependant on the state in which you live: Washington: Unless otherwise addressed in the Purchase and Sale Agreement, Washington Law provides sellers 3 days after the day of closing before property possession occurs. This is something we should talk about so feel free to ask me to go over this with you again if necessary. |
Move in After a Seller Rent-back The rent-back agreement covers such things as who pays for utilities and maintenance, what happens if there's property damage, how much rent the sellers pay you, and what the penalties are if the sellers don't vacate the property on the date specified in the rent-back. Moving to a new home is an exciting experience. Comprehensive pre-planning, organization and family meetings can help establish each person's responsibilities and will go a long way in maintaining harmony and efficiency. It's not uncommon for sellers to remain in their house after closing while finishing up their move. In this case, you may sign a separate rent-back agreement with the sellers, which becomes part of your purchase contract. The rent-back agreement covers such things as who pays for utilities and maintenance, what happens if there's property damage, how much rent the sellers pay you, and what the penalties are if the sellers don't vacate the property on the date specified in the rent-back. Especially if it’s past the customary three days to vacate It's common for the sellers to pay rent equal to what you're paying for principal and interest on your mortgage, plus property taxes and insurance, so that you don't have out-of-pocket expense on what it costs you to own the house during the term of their rental. The amount equaling Principle, Interest, Taxes, and Insurance (known as PITI) is prorated on a per-day basis from closing until the sellers vacate. If the home you're buying is vacant, you may be tempted to ask for permission to start fixing the house up before closing. After all, painting or waxing floors, for example, is much easier and faster when the house is empty. Instead, allow some time to do these tasks before moving in and after the closing has taken place. Buyers will not have ownership access to property prior to recording unless some type of rental agreement has been entered into. |
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Feeling a squeeze in the budget when you buy a home is perfectly normal. After all, your housing expenses are probably higher than before. In addition to taking a lean-and-mean approach to the rest of your spending, here are some other suggestions. Mortgage lenders want to be paid on time. Many mortgages have stipulations for penalties equal to 5 percent of the amount of the mortgage payment if your payment is late. If your payment is one whole month late, a 5 percent penalty works out to an annualized interest rate in excess of 60 percent! Even being one day late can trigger this penalty. Late charges also show up on your credit report. Sign up for your mortgage lender's automatic-payment service to have your mortgage payment sent electronically from your checking account to the lender on the same day each month. John L. Scott Home Buyer Guide |
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Moving to a new home is an exciting experience. Comprehensive pre-planning, organization and family meetings can help establish each person's responsibilities and will go a long way in maintaining harmony and efficiency. Moving to a new home is an exciting experience. Comprehensive pre-planning, organization and family meetings can help establish each person's responsibilities and will go a long way in maintaining harmony and efficiency. Helping children make the move Tell them about your plans as soon as possible and give them a chance to express their concerns while sharing some of your own. Scrapbooks are a good way to preserve memories of your current home, and all of the ties that go with it. Give your child an address book for noting names and addresses of friends in their current neighborhood and remind them to leave room for their new friend's names. If possible, take your children to their new neighborhood so they can become familiarized with their surroundings. If you are moving from out of state, provide them with photographs of their new home and school. Visit or provide photographs of parks, schools, and other nearby attractions. When you have made the move, introduce them to teachers and the new neighbors. Involve them in packing up and provide them with their own "packing labels" for marking personal possessions. Have a going-away party so they can say good-bye to their friends. Involve your children in planning, arranging, and decorating their new bedrooms. Helping pets make the move It is best to transport your animal using a pet carrier. Have your current veterinarian recommend a clinic near your new home, and request that your pet's paperwork be forwarded to them. It is not unusual for pets to experience some level of anxiety during the early stages of a move, as they get used to their new environment. Some pets actually try to return to their old home directly after a move, so it's important to keep a close eye on them. - John L. Scott Home Buyer Guide |
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If home prices have dropped since you bought your home, you may be able to appeal your assessment and enjoy a reduction in the property taxes that you're required to pay. In most communities, real estate property taxes are based upon an estimate of your home's value. If home prices have dropped since you bought your home, you may be able to appeal your assessment and enjoy a reduction in the property taxes that you're required to pay. Contact your local Assessor's Office to inquire as to the local procedure for appealing your property taxes. Generally, the process involves providing comparable sales data in writing to the assessor to prove the reduced value of your home. If you need help with this exercise, contact me. |
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Keep half an eye on interest rates. If interest rates decrease from where they were when you took out your mortgage, you may be able to refinance your mortgage and save yourself some money. Refinancing means that you take out another new (lower cost) mortgage to replace your old (higher cost) one. If interest rates decrease from where they were when you took out your mortgage, you may be able to refinance your mortgage and save yourself money. If rates have dropped at least one full percentage point since you originally took out your loan, start to contemplate and assess refinancing. In some cases it's even worthwhile to consider refinancing if interest rates drop only one-half point from your current rate. You will want to speak to a mortgage representative about your individual options. To figure how much you will really reduce your mortgage cost on an after-tax basis, take your tax rate and decrease your monthly payment savings you expect from the refinance by that amount. If you're a moderate-income earner, odds are that you're in the 28 percent tax bracket. So if your mortgage payment would drop by $150, and if you were to reduce that $150 by 28 percent (to account for the lost tax savings), then (on an after-tax basis) your savings would actually be $108 per month. Stay on top of refinancing opportunities! Visit the Response Mortgage website and become a participant in Mortgage Manager. Response Mortgage will compare your existing loan to current market opportunities on a regular basis and calculate the potential monthly reduction based on real loan specifics. When it makes sense for you to refinance, we'll send you an email. We'll also let you know when "Everything looks okay, so sit tight!" Either way, you'll know just where you stand. Sign up for automatic notification (Mortgage Manager) of refinance options on the Response Mortgage website |
Keep Receipts for Improvements Sooner or later, you will spend money on your home. Some of what you spend money on should be tracked and documented for tax purposes in order to minimize the capital gain that you may owe tax on in the future. Money spent on your home should be tracked and documented for tax purposes in order to minimize the capital gain that you may owe tax on in the future. Capital gain simply means the difference between what you receive for the house when you sell it less what it cost you to buy the house -- with one important modification. The IRS allows you to add the cost of improvements to the original cost of your home in order to calculate what's known as your adjusted-cost basis. Capital Gain = Net Sale Price - (Purchase Price + Capital Improvements) For example, if you buy your home for $150,000 and, over the years, it appreciates so that (after paying the costs of selling) your net selling price is $200,000, your capital gain is $50,000. Keep in mind that the IRS allows you to add the value of the capital improvements that you make to your home to your purchase price. A capital improvement is defined as money you spend on your home that permanently increases its value and useful life. For example, putting a new roof on your house rather than just patching the existing roof. If you made $10,000 worth of improvements on the home you bought for $150,000, your capital gain would be reduced to $40,000. Money spent on maintenance, such as fixing a leaky pipe or replacing broken windows, is not added to your cost basis. Before you sell your home, be sure to understand the tax consequences of such a transaction. Many homeowners are eligible to shelter a large amount of their home's capital gain from taxation when the time comes for them to sell. |
