Buyer

Top Things You Should Do Before Buying A Rural Home

If you’re planning to move away from the city and live a more simple life in the country, take note that it does not come without its unique set of challenges. Here are a few tips to help you when you decide to buy a rural home.

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1. Specify your needs and wants.

Before you plan to buy a home in a rural area, it’s best for you to check with yourself what your reasons for buying are. What are you going to make out of this property? Are you using it as a vacation home or a primary residence? Are you going to use the land for agricultural purposes? Do you need your lot to be arable? One way to do this is to make a list of what you need and want your living conditions to be. Include your non-negotiable conditions and nice-to-haves. What you put into this list will help you narrow down the rural areas and properties that would suit you, and would also be of useful information to your real estate agent.

 

2. Familiarize yourself with the area.

Unless you’ve lived in this area before and decided to move back, the ideal action when you’re moving to an unfamiliar location is to rent in the area first. However, time and other resources can sometimes make that impossible—leaving you with the option to simply do your research on the area. If the agent you hired happens to be from there, you can ask them to give you information but make sure to still do YOUR homework. Here are some items to cover:

  • Climate and weather

  • Prevalence of natural disasters

  • Accessibility to hospitals, fire station, police station, veterinary clinic

  • Proximity to the town proper or urban center

  • Food resources native to the area

  • Local customs of the people

 

3. Consider the costs of maintaining the property.

The cost of maintaining the property depends largely on the size of the house and the land. The more acres you have, the more you'd have to spend. You're also going to need bigger tools in place of the ones you have, or you may need ones you may not have while living in the city such as a 4-wheeler truck or a tractor. And remember that the costs are not just limited to the monetary one; you also have to include the cost of your labor in cleaning waste, mowing the lawn, etc. Under certain circumstances, you may also need to consider if you could afford an extra hand in the maintenance. Take all of these into account and deliberate if you could afford and sustain all those expenses for the next 5 years and more.

 

4. Review utilities.

Utilities in a rural area will differ greatly from those used in suburban areas. An important thing to note is that rural utilities are not tied to commercial systems. Check for each of these utilities and if anything happens to not be within your preference, negotiate with the seller (and the community) how it could be made to suit your needs.

  • Septic systems - rural areas depend on septic systems for waste disposal. If the house you’re planning to buy is hooked to a septic system, it lowers your taxes because municipalities would only bill those who are connected to a public sewer system. The catch from this is that you may have to replace the system should it break down, and that would be costly. A way to address this is to include a contingency on the septic system requirement of inspections and a septic pump on your contract with the seller.

  • Power supply - power lines in rural areas tend to be flaky due to weather disturbances

  • Well water systems - some rural homes could only utilize well water systems instead of  a public water source. The advantage to this is that you could cut down on your water bill as water from this is free, and you would only have to pay for electricity that keeps it running. But the downside to this is that it comes from groundwater, and would require tests and routine maintenance in order to make sure that the water is safe for use.

  • Heating systems - Homes in suburban areas are heated by natural gas, while those in rural areas use either oil or propane. If the house uses oil, the BTU is higher than with gas, and it usually costs less than a gas-fired furnace. But take note that it’s more costly to purchase oil instead of natural gas, and it requires more routine maintenance. Alternatively, if the house uses propane, the average life expectancy is higher than with a gas fired furnace. The drawback to it is minimal compared to the others in that its tank is a sight for eyesore. But that could easily be remedied if you opt to have the tank buried.

 

5. Clarify what’s included in the sale.

Specify in the contract what feature, building, and structure of the home you think are included in the sale because it could be taken down or away by the seller. At the minimum, and if applicable, the sale should include these:

  • Existing farm or hunting leases that give (or restrict) other people legal access to be on, farm, graze, hunt on, or camp on your property

  • Fencing and fence posts

  • Benches

  • Bridges

  • Feeders

  • Livestock panels

  • Sheds, which could either be movable or portable

  • Miscellaneous equipment such as shovels, plows, tractor, etc.

 

6. Acquaint yourself with local resources.

Ask assistance from local offices regarding issues that you need help on such as property maintenance, ecosystem conservation, etc. Here is a list that could help you with your specific needs:

  • County USDA Farm Service Agency (FSA) office - After purchasing the property, you have to take the deed to the FSA office to register it and be informed and consequently transfer any Conservation Reserve Program (CRP) or base acre payments to you. They educate rural homeowners through a variety of programs on matters regarding conservation such as erosion control, wildlife habitat, pond construction, and the likes.

  • Southern States - It’s an established farm co-operative that may help you with guiding you through your concerns regarding agriculture -- what the best feeds are, what fertilizers to use, etc. Check if Southern States has a cooperative in your location, or find another supplier if they are not within your vicinity.

  • Local rural lender - Primarily, they can give you contacts to local lawyers and other service providers such as farming managers and dozer operators. They are also equipped with vital local knowledge that may help you with your concerns.

 

7. Know your boundary lines.

The step to guarantee how many acres of land you’re buying (and will be taxed on) is to visit the county’s assessor office. They could present you information on the property with a description of its metes and bounds. Check if there is a difference from the original listing and ask the assessor to explain.

 

8. Check the title insurance.

Inspecting the title insurance lets you know of the issues associated with the property that may not have been disclosed such as the property being recorded as a toxic dump site. There are also other issues that could be attached to it such as unknown or unresolved liens. The county’s recorder can pull up this document for you as it is available to the public.

8 Of The Most Unexpected Things US Homeowners Found In Their Properties

The process of selling, buying, and moving into a new home can be very complicated and overwhelming. But on the lighter side, it is also a journey full of fun and exciting discoveries. Part of a homeowner’s discovery and realization is finding their ideal neighborhood, their dream backyard, their perfect kitchen, and a wall full of snakes... Wait, what?!

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Yes, you’ve read it right. As bizarre as it sounds, homeowners from around the world have discovered many strange and unexpected things on their properties. Some may have lived in their home for a couple of months before encountering weird things, while others already owned their home for years before finding things that are impossible to anticipate. Here we reveal some of the strangest discoveries that happened in our own backyard. Well, you may consider them to be a fun and interesting part of real estate—just don’t forget the hard-earned lessons you can pick up along the way.

1. Some serious cash

Well, the first word you can think of is: lucky, isn’t it?

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Artist Josh Ferrin discovered the treasure stashed away in the attic of his home in Bountiful, Utah. When he brought up the discovery—a total of $45,000 in cash and coins—to his family, there was some disagreement on whether they should keep it or return it to its original owners. To teach his two boys the value of honesty, Ferrin returned the money to the previous homeowners despite the thoughts of car and house payments in his head. He says it was a “teachable moment” for his kids that he would never get back again. How cool and sincere was that?

 

2. World War II love letters

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In this digital day and age, sending and receiving handwritten love letters is a practice that can really make your heart melt.

When Zac and Shannon Carter bought a renovated 1970s house in Pensacola, Florida in 2016, the home inspector informed them he discovered a stack of old letters in the original cabinetry. It wasn’t until the Carters moved in that they realized the letters, postmarked from 1948 to 1949, contained a blossoming love story between a World War II veteran and his sweetheart.

They couldn’t help but read the vintage letters and understood that the letters belonged to the original homeowner, veteran William Middleton. Middleton wrote them while he was in school in Georgia after serving in WWII and sent them to a woman named Doreen in Canada. The Carters later learned that the two eventually got married and had children, so they passed on the letters to them to let them read their parents’ wonderful blossoming story.

 

3. An old cemetery

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While the first two discoveries were pleasant surprises, not all homeowners were fortunate enough to encounter such things. This one is quite a good setting for any ghost or haunted story.

Of all the things homeowner Helen Weisensel can find in her century-old home in Jefferson County in Wisconsin, nothing can be as disturbing as unearthing a child’s skull in the basement while they were doing much-needed repairs on its foundation.

They soon found out that her home was built atop an old, long-forgotten cemetery. Archaeologists and local historians even estimated it to be among the earliest burial ground in the county, and more human remains were uncovered.

Subsequently, Weisensel’s nightmare started. She was flooded with pertinent inquiries from her neighbors asking her if she’d experienced weird things happening in her home. And since her remodeling project involved her trying to fix her house and do some serious foundation work, it all became impossible the moment her home was discovered to be an official historic burial ground.

 

4. Mammoth bones

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Unearthing something of a prehistoric significance is already a delight of its own. Well, more so if you made the discovery in your own backyard. When Iowa man John and his two sons went blackberry-picking near a creek on their property in Oskaloosa in 2010, one of his sons noticed what he believed to be a ball in the creek.

That piqued John’s curiosity and interest in archaeology when he realized that the “ball” was no toy—it was actually a 4-foot-long femur of a mammoth dating back as far as 100,000 years ago. That started a historic archaeological event as John’s backyard has become an excavation site, with the University of Iowa’s Museum of Natural History leading the search.

Besides the mammoth’s femur, they had found its feet bones and thoracic ribs. Experts say while it is not unusual to find mammoth fossils in Iowa, it’s a rare find to discover so many bones belonging to the same animal in the same place.

 

5. A wall full of snakes

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Here we have Ben and Amber Sessions, who found what seemed to be their picture-perfect five-bedroom rural home in Rexburg, Idaho. It seemed like a real deal since it was listed for just over $100,000.

Until they found a snake in their yard, which is no big deal since they help keep mice away. But soon after moving, they found dozens more every day. Ben even found over 40 snakes in his yard in a single day. Soon, they also spent sleepless nights listening to what seemed like slithering noises on the walls.

When Ben removed a panel of siding it revealed dozens of snakes living in their crawlspace. Their new dream home was in fact what’s known by locals as “The Snake House.” It was sitting atop an enormous snake hibernaculum, a kind of den where the snakes gather in large numbers to hibernate in winter. What’s more troubling is that they also found out that their tap water (which has a curious taste and smell) was infested with snake musk and feces, a good way for anyone to catch salmonella and other diseases. The Sessions also referred to their home as the “Satan’s Lair.”

The home also had a distraught history of owners leaving in haste after finding out the snaky problem. It turned out that the only way to neutralize the issue of a snake den beneath the home was to raise the entire house off its current foundation and lay down a new concrete foundation beneath it. But that job would cost a massive amount, even more than $100,000 at that time. So in 2009, the Sessionses also ended up abandoning their home and had to file for bankruptcy.

According to real estate experts, the Sessions’ story is a valuable lesson for all home buyers to give importance to due diligence when searching for your dream home.

 

6. A hidden room full of toxic black mold

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Back in 2005, young couple Jason and Kerri Brown with their 2-year-old daughter found a sweet deal in a form of a five-bedroom, two-bath house that was in foreclosure for $75,000 in the cozy town of Greenville, South Carolina.

As they started renovations on the fixer-upper, they removed bookcases in a bedroom when it revealed a passageway that led to a hidden room—a secret corridor!

Well, it can be an exciting discovery for any new homeowner especially if it looks like a passageway towards a hidden world like Narnia. However, it turned out the secret room has a serious mold problem and that the house is contaminated with toxic black mold. What seemed to be a pleasant surprise turned into a nightmare for the young couple.

Inside the room, the first thing they found was a chilling note from the previous owner saying: “You Found It! Hello. If you're reading this, then you found the secret room. I owned this house for a short while and it was discovered to have a serious mold problem. One that actually made my children very sick to the point that we had to move out." It was from George Leventis, who’d lived there for a while. After discovering the problem, since he has little money and was unwilling to take the matter to court, he stopped paying the mortgage and moved out. But not without leaving the note to serve as some warning.

The Browns have taken it very seriously and hired an environmental engineer to do further testing. The house’s toxicity levels turned out to be so high they have to permanently cancel their move-in plans and took the serious matter to court.

 

7. A live artillery shell

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There’s the story about our love letters dating back in WWII. Then there’s this real bomb scare for a family who lived in Goshen, Indiana. Wally and Linda DeForests found a live mortar round in their basement as a kind of a housewarming gift after moving into their home in 2010.

Linda initially discovered the approximately foot-long military-grade weapon sitting in a cubby space while she was hanging things on the wall. She even told her husband she found a “torpedo.”

The DeForests have had help identifying what it was from their consulted family friend and army veteran Joshua Blackenship, who kindly explained that it was either a round for a mortar or a lightweight anti-tank weapon.

The family contacted the Elkhart Police Department’s Explosive Ordnance Disposal Unit to come and take it away. Some police officers discerned the old mortar round may have been from the Korean or Vietnam War. Well, it’s a quite a unique way for the DeForests to be introduced in their new neighborhood and be welcomed in their new home.

 

8. Faberge figurine

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Since we started with finding some hard cash, let’s cap off this story with another amazing find. It’s a common thing for many homeowners to display porcelain figurines in their homes, but do you have any idea how much does one figurine cost? A particular figurine was found stashed in an attic in upstate New York of descendants of a gallery owner who bought it in 1934. The tiny statute was unlike no other because it was one of only 50 in existence and was crafted by renowned Russian jeweler Faberge. It was studded in precious jewels and diamond and was sold at an auction for a whopping $5.2 million! Dated to 1912, the particular figurine depicts a personal bodyguard to royalty and was given by Russian Czar Nicholas II to his wife.

 

Bottom Line

Let’s incorporate the lesson we mentioned in the Snake House story: remember the importance of due diligence. Home buyers should “do their homework” before buying what they’d like to be their dream home. While it can be a time-consuming process, you can ensure that you’ll get the most out of your biggest investment. Many unwanted surprises can be avoided by asking the right questions, hiring an experienced local real estate agent, and giving importance to a home inspection. Following many of those established pieces of real estate advice can help lead you to your ideal property and avoid ending up in a house full of snakes (Yikes!)

The Things You’ll Love and Hate About Living in an HOA Community

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Love: Offers a range of amenities and recreational areas

You can have access to a range of amenities being offered by the HOA, such as swimming pools, gym or workout stations, and tennis court. There are also recreational areas for residents, like walking trails, jogging paths, playing fields, and community center.

Hate: Restrictive rules and covenants

While they differ from community to community, each HOA has its own declaration of “covenants, conditions, and restrictions” or CC&Rs. These are the rules that residents have to follow while living in the community. The goals of these rules are not to meddle but to maintain the attractiveness of the neighborhood and the value of the properties. However, some homeowners may find the covenants to be too restrictive or unreasonable since it prevents them from enjoying the freedom they want to have over their home.

Love: Less work and maintenance

Living in an HOA community could mean less work for you as a homeowner. HOAs handle services such as exterior home repairs, lawn care, snow removal, and pest control. They are also responsible for the upkeep of common areas, buildings, and shared amenities.

Hate: You can’t paint, decorate, or renovate your home in the way you like it

Those CC&Rs mean the modifications you can do to your home is limited. Before you can push through with painting your home in your chosen colors, installing a play area or swing set, decorating for the holidays, or adding a new room, you may need to first seek approval from the HOA. If you don’t like someone telling you what to do with your beloved home, an HOA may not be right for you.

Love: The community’s uniform look helps keep home values

The appearance of homes within an HOA must meet the association’s standards, which helps maintain the neighborhood aesthetic and higher home prices. Those desirable amenities can also help increase your home’s value.

Hate: All those associated and mandatory fees

HOAs charge a monthly, quarterly, or annual fee that primarily goes to the maintenance and handling of the common areas and buildings. The fees vary depending on the neighborhood’s location and the amenities being offered.

Love: Handles disputes between neighbors

Rather than getting into a nasty confrontation with your neighbors about their unkempt lawn, noisy dogs or loud parties, you can ask the HOA to handle the dispute on your behalf. The HOA can send them a notice or a warning for any activity that well violates the rules and regulations.

Hate: The threat of foreclosure after missed payments

While laws vary by state, an HOA can move to foreclose on your property if you fail to pay the monthly dues or have delinquent assessments by placing a lien on your property. So make sure your budget can handle those fees so you won’t fall behind on payments and risk losing your home.

Love: The community newsletters

The regular news, tips, and reminders can keep homeowners updated and equipped with valuable information.

7 Reasons Why Buyers and Sellers Shouldn’t Ditch The Home Inspection

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The biggest mistake that both home buyers and sellers could make is skipping or waiving the home inspection due to various reasons, like during a bidding war. And while a home inspection contingency clause is almost always included in a purchase contract, some buyers agree to waive the vital inspections to win their dream home in a competitive market.

Often, sellers skip it to save time and money, not knowing it may leave them little to no time to address any important concerns before they put their home on the market. However, it’s a common ingredient for regret and unexpected costly repairs that could’ve been avoided.

Here are seven valuable reasons why both buyers and sellers shouldn’t skip the home inspection:

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Remember that there’s always more to a home than what meets the eye. It may look beautiful and something that exists in a storybook, but the truth is it’s almost impossible to know all about its details and issues. There are ugly homes with problems that are only “skin-deep,” while there are great-looking homes that have bigger problems like termite infestation and mold. These issues can be missed even after multiple showings. Even new construction homes can have issues unknown to buyers that only a home inspection can uncover.

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Even after years of living in your beloved home, a home inspection can reveal unexpected flaws that you didn’t even know existed. When did that hole in the kitchen ceiling become so big? Was my dog responsible for all those scratches on the walls? Hidden problems in the foundation, roof, or wiring you didn’t even notice as the homeowner could lead to larger issues.

 
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A home inspection ensures that there won’t be any unwanted surprises in the form of serious safety issues. Through a thorough investigation, both parties can make safety their number one priority. If serious safety issues were found, the seller can promise to make the necessary repairs to guarantee that the home is safe and habitable.

 
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The results of a home inspection can be a great tool for transparency and future planning, especially in estimating future expenses. Buyers can use the detailed findings to plan for future upgrades, calculate for repairs, and carefully prepare their budget once they become homeowners. Meanwhile, sellers can use it to plan for renovations and deal with them as soon as possible. That way, they can continue with the home sale with fewer contingencies and minimal setbacks.

 
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Having a home inspection performed can give you the power to make negotiations with the seller to offer a lower price for the home. Depending on the information gathered, you can include words in your purchase contract requesting the seller to make the repairs. Or if they are unwilling to do so, you can ask them to estimate the costs and take that amount off the final purchase price.

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You can use the home inspection report as a leverage when negotiating for a better selling price. By knowing the true condition of your property, you can deal with any problems on your own terms and fix them beforehand. You won’t have to deal with any of the buyer’s request to lower the price or arrange for repairs, which could cost you a huge amount of money or even the sale itself.

 
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While a home inspection can cost a good sum of money, it’s a significant investment that will save you from any costly repairs down the road. Things like safety hazards, pest problems, or water leakage in the basement can end up costing you a lot more money once you already own the home. And all those issues and defects could have been revealed by a home inspector if you only allowed an inspection to push through.

 
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The home inspection phase can be a huge pitfall for both parties in a real estate transaction. Sometimes a transaction doesn’t move forward because the buyer and seller couldn’t agree on the repairs requested from the inspection. A buyer may not feel entirely comfortable with the findings while the seller may refuse to accept more requests. Having a home inspection ahead of time can help expedite the process for both the buyer and seller.

Worst case scenario: a buyer can get cold feet and will not proceed anymore with the transaction if they’re not satisfied with the negotiations after the inspection.

 
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The inspection eliminates all the possible “doubts” and “what ifs” of both parties. Buyers will feel certain and satisfied with their purchase, eliminating buyer’s remorse and giving them a peace of mind. Sellers can also feel confident once the real estate transaction was completed because they can avoid the threat of any legal action due to improper disclosure. A home inspection is a great way to make both the buyer and seller feel positive that they have reached a fair deal in the transaction.

5 Sticky Situations You Can Avoid If You Have A Real Estate Title Insurance

When you buy a home, you don’t only buy the land, the house, and any other physical structures that come with it. The most important thing is that you are also buying the legal rights of ownership to the property, which is referred to as “title.”

This title is indicated in the “deed” — an official record of your rights and ownership of the property that states that it has been legally transferred to you by the previous owner. When you sell your home in the future, you will also transfer this rights to your buyer.

Before officially taking this title and completing the closing of the real estate transaction, a title search will be required to find any defects in the title. Chances are, there could be one or more issues that could emerge in the title. These title defects could cause you to lose your property, or make it impossible to you to sell when the time comes.

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This type of insurance offers protection against any defects with the title or legal ownership status of a property. It covers financial loss from these problems or from any existing property liens. Title insurance may come in a bit hefty amount, but it is a one-time expense and does not carry with it additional monthly premiums. It will also cover the homeowner until the property is sold.

Is it worth it?

Because every property has a history, any defects in the title could hinder you from enjoying your ownership rights. But having a title insurance serves as your protection against possible title problems that may surface and could cause property loss or damage. Remember, any competing claim of ownership could seriously jeopardize your financial stake on your biggest investment. Because unfortunately, these problems may be discovered even after an initial title search was done on your property.

Title insurance is vital especially in purchasing rural property, since aside from any title claim, it will also advise you if the property has previously been used for non-residential purposes.

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There are generally two types of title insurance coverage: a lender’s title insurance and the owner’s policy. Most lenders require a buyer to purchase a lender’s policy as part of investor requirements. But this policy will not protect you but covers only the lender, hence its name.

It is the owner’s insurance policy that will protect your property — your biggest financial investment — against anyone who has a claim against your home.

 

So you think you really own your property? Here are the most common title problems that could arise and dispute your rights to ownership:

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1. There’s more than one home seller (or homeowner)

At the time of your purchase, you may not know that there’s another seller or homeowner, maybe a relative or an ex-spouse. This third party may surface with a claim that they actually own all or a part of your property. They would insist that the seller had no right to sell the home to you in the first place.

In this situation, a judge could confirm and favor this third party’s claim to the house, which could leave you with a huge financial loss (and no home to live in). Fortunately, your own insurance policy could cover this loss. Your title insurance will pay for expenses such as attorney’s fees and court costs, while the lender’s insurance policy will pay for court costs incurred by the bank. The sale, on the other hand, will be deemed null and void.

2. Property liens for delinquent taxes, unpaid contractors, and other debts

There are circumstances where, unfortunately, the former homeowners were not diligent bill payers. This is worrisome because even if the debt is not your own, banks or other financing companies can place liens on your property to cover for those unpaid debts.

These property liens can slow down the closing because your title won’t be considered clear until you pay the existing debt. Sometimes, even though a tax search hadn’t tracked down any unpaid taxes on the property, it’s still possible that you would get notified for any of these delinquent taxes after closing. It’s also a common issue if the property was foreclosed on or the home was bought in an online foreclosure auction website.

Fortunately, if you have an owner’s title insurance policy, it will cover for it and will give you documentation that the indicated debts are paid.

3. Survey or boundary disputes

Conflicts concerning the boundaries of your property may arise if, despite several surveys before closing, there are other existing surveys that show different property lines. This may lead to dispute especially when a neighbor or someone will claim ownership to a part of your property.

Likewise, if your neighbor happened to put up a fence or a driveway on a portion of your new property right before closing, you can count on your title insurance to settle the dispute. The policy will pay for the cost of any legal efforts to settle the issue out of court and have any of your neighbor’s item removed from it.

4. Clerical or filling errors in public records

When it comes to homeownership rights, a simple typo can lead to devastating title claim problems. These clerical errors in public records and/or courthouse documents could affect the deed or survey of your property. And while it isn’t impossible to resolve them, it can take an emotional and financial strain to any homeowner. Your title insurance serves as a cushion for this kind of problem.  

5. Undisclosed or missing heirs to the property

Imagine this scenario: the former property owner died. So, the ownership of the home may fall to his heirs or to anyone indicated in his/her will. However, those heirs were missing or unknown at the time of his death, so the state sold the property, together with all of the assets.

When you purchase this kind of home, despite assuming the rights as the new owner, family members of the previous owner could come forward and claim ownership of the property. This claim could seriously jeopardize your rights to the home, even if it happens years after you bought the property.

Bottom Line

With these situations, the last thing any homebuyer or homeowner would want are hurdles that will cripple their ability to purchase the home and claim full ownership to it.

Even if there’s a slim chance that past owners or unpaid property tax bills might emerge, the risk is still huge considering what is at stake — your beloved home. If you are still contemplating on whether you will allot money for it, just think how you will be affected if you’re suddenly faced with any of those title-related nightmares. Remember that you are entitled to choose the title company where you will get yours, so gather recommendations from your trusted real estate agent, lender, or family.



The Tax Benefits That Homeowners Can Enjoy

Is this your first year filing your taxes as a homeowner? If yes, then you’re in for some sweet treats. There are certain deductions you are entitled to and can take advantage of to lower your tax bill. Some of these tax breaks can be a one-time deduction or recurring on the life of your mortgage.

For buyers who are still contemplating whether owning a home is worth it, this is another good reason that might help with your decision. Aside from building wealth through home equity, owning a home can pay off at tax time.

And while itemizing tax deductions can be very complicated — homeowner or not — they are worth remembering so you can avoid missing out. Here are the latest tax credits brought by homeownership after the federal tax law was signed on December 2017:

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1. Property Taxes

Back in 2017, the deductions for property taxes were unlimited. All of your property taxes are deductible so if you live in an area where the property taxes are high, you could wind up deducting thousands of dollars.

But for tax year 2018 and beyond, state and local taxes are capped at a total of $10,000 combined. This includes property, income, or sales taxes.

Likewise, this tax deduction can still be helpful for your finances, although it can be tricky in the year you bought the home. You as the buyer and new homeowner will only get to deduct the property taxes you owed for the portion of the year you owned the home. The seller gets the rest of the deduction, regardless if you offered to pay the full year of property taxes during negotiations.  

 

2. Mortgage Interest

Many homeowners can deduct the interest portion of their monthly mortgage payments each year. It remains as a deductible under the new tax plan but with a new cap. Taxpayers are now allowed to deduct mortgage interest on loans of up to only $750,000, compared to the previous $1 million. The maximum mortgage debt on which you can deduct the interest also applies to secondary or vacation homes.

 

3. Tax credits from renewable energy products and upgrades

Homeowners who have installed alternative energy upgrades in their homes may qualify for tax credits as long as the products installed are also eligible. Most of these deductions are still available through December 31, 2021, such as the credits for solar electric and solar water heating equipment.

Homeowners are allowed to take a tax credit of up to $500 total for all energy efficiency upgrades. However, that $500 is already a lifetime limit for all qualified improvements combined.

The products used must meet the ENERGY STAR requirements, which are certified to save energy, money, and help protect the environment. Upgrades may include installing energy-efficient windows, doors, skylights, and others.

 

4. Mortgage Points or Prepaid Interest Deduction

If you itemize your deductions on Schedule A of IRS Form 1040, the prepaid interest you paid when you took out your mortgage is deductible in the year you paid it. Paying the prepaid interest or points makes more sense if you plan to stay longer in your home as they can bring down the interest rate on your loan or help with origination fees. This is a one-time deduction that many homeowners can take advantage of — just remember that it is often deductible in the first year.

Typically, a point is equal to 1 percent of your loan amount or $1000 for every hundred thousand borrowed. Tip: Mortgage points can be found on the Closing Disclosure and are often labeled as “loan costs.”

The rules for this deduction will only differ if you refinance your mortgage to get a better rate or shorten the length of your mortgage, or to use the money for other things rather than for home improvements. If your situation falls under one of these conditions, you will need to deduct the points over the life of your loan.  

 

5. Deductions for certain home improvements

  • Home Office

If you are using a part of your home regularly and exclusively for business, you may qualify for some tax breaks. With the new tax law, the home office deduction remains available for independent contractors or self-employed people whose home office is their primary place of business. However, if you’re an employee who has an office to go to but occasionally works from home, this deduction has been repealed.

  • Modifications needed for medical reasons and to age in place

For older homeowners who have medical concerns and plan to age in place, their home remodeling projects could involve modifications to support these needs. The projects may vary but could include installing wheelchair ramps, non-skid floorings, adding stair lifts, widening doorways, and even putting grab bars, shower seats, and anti-slip coating in bathrooms. The good news is that the cost of these modifications can be deductible.

However, there are specific conditions for you to qualify for this sweet tax break. For an instance, you will need a letter from your doctor that will certify these improvements were medically necessary. The modifications also need to exceed at least 7.5% of your adjusted gross income.

 

6. Home Equity Loan Interest

Home equity loans or HELOC allow you to get a tax break on the interest you pay. However, the deductible is applicable only if you’re planning to use it for major home improvements, like remodeling a bathroom or renovating a fixer-upper. It also has a maximum amount for all mortgages, which is $750,000.

The tax benefits of this credit will be most significant to any homeowner for the first years of the loan since most of the payments are going towards interest.

 

7. Capital Gains Exclusion

Any homeowner who has lived in their primary residence for at least two of the five years before they sell it may qualify for this tax break. The IRS may exempt up to $250,000 if you’re single, or $500,000 if you’re married filing jointly, of that gain from your income. This is to lessen the tax hit on taxable capital gains from the sale of your property. This advantage stays the same under the new tax law, and there’s no restriction on how many times you can use it.

 

8. Moving Expense Deductions for Military Homeowners

The moving expenses you pay out of your pocket for a job relocation, especially if it’s over 50 miles farther from your house than your current job, are also deductible.

Watch Out! These Neighborhood Features Can Drag Down Your Home’s Value

While there are certain home improvements you can add to your home to boost its resale value, there are also many external factors that can devalue your greatest investment. This is why the real estate cliché saying “location, location, location” will never be debunked or even grow old. Many of the things that can dampen your home’s value can actually be found in your neighborhood.

These factors are already outside the homeowner’s control and what appraisers refer to as external obsolescence. Understanding how these external factors can influence the long-term value of your home is paramount because decreasing property value can pose a challenge when it’s time to sell your home. In the worst-case scenario, you may have to sell it for less than what you purchased it for, causing you to lose money on the table.

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Bad Schools

Proximity to good quality schools is one of the most desirable factors for most home buyers. It is because neighborhoods near top-quality school districts almost always benefit when it comes to property values. However, the disastrous opposite of this is living in a bad school where there is a slim graduation rate.

Neighborhoods near low-ranking schools are less attractive to many buyers and have lower property values. According to realtor.com, the median home price of areas with schools that received a 1 to 3 GreatSchools.org Summary Rating is only $155,000. Repeatedly, there will always be a better demand for homes in good school districts.

 

Disruptive Neighbors

Don’t be surprised if noisy and disruptive neighbors can significantly reduce nearby home values. According to The Appraisal Institute, the nation’s largest professional association of real estate appraisers, a home’s proximity to a bad neighbor can impact the rate of potential decline in property value. Those “bad neighbors” include homeowners with unkempt yards, homes with unpleasant odors and poorly maintained exteriors, or own annoying dogs that are barking at night. Living near a troublesome neighbor can devalue your home by as much as 5-10%. If you’re a home buyer, it’s important to learn what is going on in the neighborhood before you sign the dotted line.

 

Excessive noise pollution—especially if your home is near an airport, train tracks, or highway

Ah, noise pollution. While you can learn to live with it, it is not a desirable factor for most buyers. If you live near an airport, train tracks, a highway, a loud factory, or near an industrial area where there is constant noise and you need to endure it every day, it can be a negative factor when it’s time for you to sell your property. The louder the noise and the more inconvenient it is, the more negative its impact could be on your home’s resale value.

If your home is located next to train tracks, it can deter buyers from purchasing it because they have to deal with the noise at various hours of the day. You will have the same scenario if your property is located on top of a freeway. While it is ideal to live near commuting routes, homes located adjacent to major highways have lower values compared to identical homes far from freeways. Ask your local real estate agent how much of an impact those nearby transportation facilities have on reducing your home’s market value.

 

Proximity to power lines and power plants

Having a power plant in the neighborhood is generally associated with lower property prices because of safety concerns. Likewise, having power lines near your home is also not a good thing. They are vital, yes, because they bring much-needed electricity that helps us live our modern life. But they are also unattractive and imposing. The perceived negative health effects of living near power lines can also make people worry so they may not purchase a home near one.

However, if you’re still planning on buying a home near power lines, it’s best to consult with your local real estate agent to know how much impact it will have on your home’s market value. There may be a reason for the low price so think carefully if it will be a good bargain.

 

Proximity to a cemetery

A graveyard next door can make many people uncomfortable. Some may even find the prospect of living near a cemetery downright terrifying. It isn’t surprising since cemeteries represent mortality so living next to one may not be ideal to many. And while there are certain pros and cons of living in proximity to those graves (just think how quiet your neighbors are), not all people can accept that. Research by realtor.com that used a list of federal and state cemeteries operated by the Department of Veterans Affairs, they found out that the median home price in ZIP codes with a cemetery is about 12% lower than similar homes in other neighboring areas without a graveyard. Many people also find it disturbing to witness a handful of funerals each year and see the road being lined up with cars of mourners.

 

Near a shooting range

While having a gun range nearby can be beneficial to some people because they can take part in such a hobby, a shooting range right next door can actually drag down your home’s value by 3.7%. If you’re looking to buy a home, think twice about purchasing one near shooting ranges. The noise of gunfire, especially from outdoor gun ranges, can be loud and disturbing. There are also environmental and safety concerns since the lead that leached out of spent shells might poison the soil and water. If you’re considering a home near a gun range, research the shooting schedule of the place and figure out whether you can tolerate hearing gunshots now and then.

 

Billboard/s near the home

Studies have shown that billboards also impact real estate prices. In urban areas where billboards stood near residential homes, the closer the billboard is to your home, the more it can lower its value. This is why many communities are implementing a no-billboard policy or enforcing strict billboard controls to protect home values and promote higher median incomes and lower home-vacancy rates.

 

Multiple foreclosures in the area

Multiple foreclosures in your neighborhood can also affect the resale value of your home. Foreclosures imply that something is wrong with the area, so they can be eyesores that can easily drag down the average home values. And since a bank-owned home is less likely to be properly maintained, they can also translate to unsightly yards with stubborn weeds taking over the lawn and poorly maintained exteriors prone to vandalism and deterioration.

According to studies have shown that living within a quarter-mile radius of a foreclosed home can cause a 4% decline in property values. A report by The Alliance for a Just Society also found that aside from a significant decline in the value of surrounding properties, areas with foreclosures also experienced an increase in property taxes.

Understanding The Roles Of Different Real Estate Experts

There are all sorts of questions that arise when you need to start seeking the help of a real estate professional, and one of the most common is: Who does what? The real estate industry is a complex system comprised of different key players, and the role of each person can sometimes be a little challenging to tell apart--which is why you should never feel embarrassed if you get a little confused!

Though many people use the terms "agent," "Realtor," and "associate" interchangeably, these are actually different titles for real estate professionals. We hope to eliminate the confusion by explaining the different types of real estate agents and the different titles that real estate professionals may have.

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Real Estate Agent

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Real estate agents are licensed salespersons who have passed a state-administered exam in order to qualify for the profession. Real estate agents are legally allowed to sell property, but they must act under a real estate broker’s authority and are in no circumstances allowed to work independently.

Requirements for a real estate agent license vary depending on where he/she wishes to be a practicing agent, but in most countries you must be at least 18 years old and have successfully completed college-level courses in real estate. This educational prerequisite must cover the specific state’s real estate laws and practices.

Real Estate Broker

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In the industry’s professional hierarchy, a real estate broker is one level above the real estate agent. The licensure exam for real estate brokers is generally longer and more difficult than a salesperson's exam, as brokers are held to higher standards of real estate knowledge. Without a broker’s license, a person is not allowed to act as a broker, run his or her own firm, or manage a team of agents.

Real estate brokers can choose to work independently, or employ real estate salespersons to whom they could distribute tasks and assign the legwork. And because they are the ones qualified to manage the agents, they generally hold bigger responsibilities. For every firm, there is only one principal broker.

REALTOR®

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The title “REALTOR®” is given to real estate agents or brokers who belong to the National Association of REALTORS® (NAR), subscribe to its extensive Code of Ethics, and pays annual dues. NAR members also belong to state and local trade associations, which means that complaints against REALTORS® can be taken to the local board.

Listing Agent

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A listing agent (also known as a seller’s agent) is a real estate agent or broker who works exclusively with the home seller, represents him/her in negotiations with potential buyers, and operates based on the seller’s best interests.

Listing agents owe a fiduciary responsibility to the seller under a listing agreement, and must guide the seller through every step of the way--from marketing to closing.

The listing agent’s responsibilities generally include the following:
- Helping you prepare and stage your home for selling
- Listing your home in the MLS
- Being on top of the open houses and private home viewings
- Negotiating with potential home buyers

Buyer’s Agent

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A buyer’s agent is a real estate agent who works in the best interests of the buyer, and is expected to help him/her navigate the process of home buying. The duties of a buyer’s agent begin as early as in the pre-approval phase, and should be carried out until closing.

Some buyer's agents never work for sellers, and offer their services exclusively to buyers. Many agents still choose to work with both sellers and buyers, although not always in the same transaction.

The responsibilities of a buyer’s agent generally include the following:
- Helping you find the best home that fits your needs AND your budget
- Negotiating with the home seller on your behalf
- Providing reliable home inspectors
- Completing and processing the necessary paperwork

Broker Associate

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A broker associate is a licensed real estate broker who chooses to work for another real estate broker. This usually happens when a broker wants to work with a larger firm to widen his or her real estate network. Some broker associates pay a flat fee to their employing firm/broker, and others earn a share percentage from each transaction.

Dual Agent

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A dual agent is a real estate agent who represents both the buyer and the seller in the same transaction. If you decide to work with a dual agent, he or she will also represent the home seller or buyer you’re negotiating with. However, dual agency is not legal in all 50 states, so you may have to check if this is a possible option in your case.

Transaction Agent / Transaction Coordinator

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In states where dual agency is not allowed, listing agents who are left with the task of writing an offer for the buyer may choose to act as a transaction agent. This means that he or she does not represent either party but simply facilitates the transaction. They assist in processing the administrative items for a real estate transaction, including gathering and sorting out all the necessary paperwork, opening an escrow account, making sure contingencies are met and disclosure forms are properly signed and filled out, and managing timelines.

What You Need To Know About Real Estate Purchase Contracts

One of the most important documents in purchasing property is the purchase contract, also known as a purchase and sale agreement. It stipulates the agreement between the parties, and prepares the transaction for closing.

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What is a real estate purchase contract?

A real estate purchase contract enumerates the participating parties’ -- could be two or more -- responsibilities during the period the property is taken off the market. It must be signed by both parties (buyer and seller), and it’s required by the United States Statute of Frauds to be enforceable. In essence, a real estate purchase contract is a binding, bilateral agreement with legal capacity to buy, exchange or transfer real property. Take note that the contract is based on a legal consideration, meaning that consideration is a medium of exchange for the property being purchased, which in most cases is money. There are other forms of consideration such as a promise to pay, or a property in exchange.

 

What does a real estate purchase contract contain?

  • Identification of the parties and details of the real estate property (the exact address of the property and a clear legal description)

  • The agreed upon purchase price and corresponding terms

  • The amount of the deposit

  • The essential details, rights, and obligations of the contract

  • Real estate taxes and special assessments

  • The condition of the property, what is included, and what is not included

  • Closing date and costs (and who shoulders them)

  • Terms of possession and contingencies that must be met

 

What is a contingency and what should be listed in this clause?

Contingencies serve as a preparation for the possibility of operational problems. The more thorough and defined a contingency clause is, the more it minimizes the potential loss for both parties. In the case when a contract is already in the works, a settlement contingency is used. This protects the buyer if the sale fails since the property is not really sold until the settlement or closing is finalized. In most cases, this type of contingency forbids the seller from accepting other offers on the property for a specific period. If the buyer’s home closes by the specified date, the contract remains valid. If the home does not close, the contract can be terminated.

Here are the common items listed in the contingency clause:

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Mortgage - A contract will usually require that the transaction will only be finalized if the buyer’s mortgage is approved on the same terms and numbers as are identified in the contract.

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Appraisal - This may be required by the mortgage company and the deal should be contingent upon an appraisal for at least the amount of the selling price.

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Professional Inspection - There are instances when upon initial negotiation prior to the handing out of contracts, the buyer agrees to taking the property “as is,” which is common in foreclosure deals when the property has been subject to neglect, and would most likely be torn down and rebuilt after purchase. But there are also contingencies in which a professional inspection is needed to negotiate repairs with the seller. But if the damages are so bad and/or the seller refuses to shoulder repairs, the sale can fall through.

2 important tips for getting the purchase contract right:

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1. Know your terms and adapt language and terms as needed. Take note that the standard language of a contract may vary in different situations, and real estate laws vary between states--which means standard forms are not the same in every location. Given that condition, you can go over the agreement, check for changes, and adjust accordingly.

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2. Consider getting professional assistance from a real estate attorney or real estate agent. If it’s your first time to engage in this kind of transaction (or even if it isn’t), it’s advisable to get help from the professionals. They can guide you through the whole process of either making or doing the contract, and will point out important things to consider that you might miss.

How To Make The Most Of Using Your 401(k) On A Home

Raising the money for a down payment on a home could be the most challenging step towards homeownership. One way to get the amount you need is to borrow against your 401(k)--although there are numerous options you can consider depending on what’s wise for you at the moment.

But first, what’s the real deal behind borrowing against your 401(k)?

More than 50 percent of 401(k) plans include a loan provision that gives participants the option to borrow against their savings. But is it really advisable to borrow against the balance of your employer-sponsored retirement account to cover your down payment? What are the potential risks to doing so?

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In this article, we’ll answer some questions about how you can effectively pull off getting a loan from your 401(k) without future repercussions on your financial health.

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Should I borrow against my 401(k)?

Frankly, there are only a few instances in which you should consider taking this kind of loan. It works only if you are a responsible and disciplined borrower--and even then, real estate experts advise considering this option only if you’ve exhausted all your other options.

Still, it can be a wise decision as long as you know what you’re getting into. If it is the most sensible way to start living comfortably in your own home, borrowing against your retirement savings could be worth it.

 
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How does it work?

You can borrow up to half of your 401(k) balance or $50,000, whichever amount is smaller. For example, if your balance is $90,000, you are allowed to borrow up to $45,000.00; but if you have, say, $130,000, you are allowed to borrow $50,000. However, just because you can borrow up to $50,000 doesn’t mean you should. Be wise in deciding how much to borrow, and avoid borrowing more than you really need for your down payment.

Once you’ve taken out the loan, you will then have to repay the amount and its corresponding interest on a monthly or quarterly basis. A typical 401(k) loan must be repaid in five years or less, although a longer repayment period may be approved for those who are borrowing for a down payment for a primary residence.

 
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What are the advantages?

There are a lot of reasons why a lot of home buyers are attracted to the option of borrowing from their 401(k) account. For one, most buyers like the idea of owing themselves money, instead of owing someone else (in this case, banks and financial institutions).

It also possible to receive the money quicker than you could with a traditional loan from a bank, since you won’t need to undergo a credit check in order to get approved. Interest rates are also relatively lower with 401(k) loans. This makes borrowing from yourself the quickest, simplest, and cheapest way to get the cash you need for your down payment. Receiving this loan is also non-taxable unless repayment rules are violated, and it does not affect your credit rating.

The great news is, if you pay back your loan on schedule or in advance, it will have little to no effect on your retirement savings progress.This being so, the impact of a 401(k) loan on the progress of your nest egg can be minimal, neutral or even positive--although the most common scenario is for the cost to be less than that of paying "real interest" on a bank or consumer loan.

 
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What are the risks?

Now that you know the advantages of borrowing against your 401(k), it’s time to learn about the substantial risks that come with it.

If you fail to make payments for three months, the amount you borrowed will be considered a distribution from the account, which the IRS will label as taxable income. A withdrawal penalty of 10% will apply to borrowers who are aged 59 ½ and below. These dangers may be fairly easy to prevent if you have a steady stream of income, but it will be a different case if you have to leave your job for any reason. If this happens before the loan is settled, you will be required to pay the entire outstanding balance within 60 days. If you are unable to do so, the IRS will charge you with the abovementioned penalties.

And then there’s the more subtle, but more significant long-term consequence: By borrowing from your retirement savings, you’re losing out on the possibility of compounding interest on that money. To make matters worse, people who take out a 401(k) loan often decrease or even stop contributions to their retirement account during the years they’re repaying it. Those factors can have a tremendous negative impact on your savings.

Impact at retirement: Retirement money that you’ve borrowed will not accrue interest until you’ve paid it back. Depending upon the amount you’ve taken out, it can make a big dent in your fund.
Some employers will disallow new 401(k) contributions if there’s an outstanding loan, thus compromising your future retirement nest egg.

 
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When should I NOT consider borrowing against my 401(k)?

While it is a sensible answer for short-term financial needs and highly important purchases, financing a home with a 401(k) loan is not for everyone.

When you purchase a home, you will immediately be required to pay for your monthly mortgage dues--not to mention, the added costs of homeownership such as utilities, maintenance, etc. If your monthly income can barely cover THOSE, taking on a 401(k) loan can end up taking a dangerous toll on your finances. Some people may justify this with plans of making a lump sum payment, but keep in mind that you would still have to qualify based on your monthly income and ability to make regular payments.

For further guidance, it’s highly recommended to speak to your financial advisor or ask your Realtor for local referrals to loan experts who will be glad to help you!