Buyer

The Great Divide: Should You Buy A Single-Family House Or A Condo?

For many first-time home buyers, it could be a real struggle to decide which type of residence is best to purchase. You may find yourself debating whether to buy your “dream house”, or own a condo unit and enjoy its inclusive perks and amenities. Too bad there is no such thing as a “one size fits all” when it comes to any of these two home options.

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While detached single-family homes continue to be the most common home type for many buyers (83% in the 2017 NAR Report), there are still those who choose to buy condos or townhomes. According to the National Association of Realtors 2018 Home Buyer and Seller Generational Trends study, a detached single-family home is the primary type of property purchased by most Gen X and millennial buyers. Meanwhile, at least two percent of millennial buyers bought a condo over the past year.

Aside from price, here are the key factors and considerations you need to discuss when contemplating which type of residence you should purchase:

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1. Location and your lifestyle

In the question of whether you should buy a single-family house or a condo also comes another dilemma: choosing between suburban or city/urban living. If you love city living and also enjoy the nightlife, there’s no doubt that a condo suits you. But it also depends if you are willing to sacrifice space over lifestyle and convenient location, especially if you want to be within walking distance of cinemas, restaurants, malls and shops, and other activities that can be found in large metro areas. It’s a common situation that is applicable to many young professionals and newlywed couples.

But if having extra bedrooms, bathrooms, and a big yard have more appeal to you, buying a home that is commonly located in the suburbs is likely your best choice.

 
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2. Space and privacy

You might want to evaluate how much square footage and storage space you will need in the next three to five years. A two-bedroom condo might work great if you’re only living by yourself or with your significant other. But if you’re looking to grow your family in the next few years, a house will be a great purchase since it will offer more room for storage and other stuff, especially if kids will be in the picture. Condo developments may have shared storage units, but you will have to deal with the limited space.

However, despite the lack of private space, most condos provide neighborhood amenities such as a pool, gym and jogging paths, recreation centers, among others. Purchasing a condo is a good choice if you can overlook the limited storage space to enjoy such amenities.

Aside from the limited storage space, privacy can be compromised. Sounds can travel through shared walls, floors, and ceilings in a development. So choosing between a single-family house or a condo may also depend on the amount of privacy you want. Consider whether you don’t mind the possibility of being overheard or hearing your neighbors having a heated argument, or if you like it better when it’s more peaceful and quiet.

 
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3. Home maintenance

For many first-time home buyers, handling the upkeep of a single-family home can be very overwhelming. This is also one of the main reasons why many aspiring homeowners are seeing condominiums as an attractive option. They are often newer and the HOA usually hires contractors to handle maintenance and other responsibilities such as landscaping, lawn maintenance, and snow plowing. You will just have to share the costs with all homeowners in the development. Condos are also a convenient option for those who are too busy with work and other activities, as well as those who travel a lot. You can save time and effort in exchange for paying HOA fees (which will be discussed later).

If you’re looking to buy a single-family home, consider whether you will have the time and ability to take care of the yard, mend the fence, clean the gutters, and handle other responsibilities. Or else, you will have to hire a contractor to do those things for you. Those tasks (and costs!) can be very daunting, especially if you’re a first-time homeowner.

 
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4. Pets

It’s important to factor in your pets in your home purchase, especially if you consider their welfare. If you’re one of the many pet owners who dreams of having a home with bigger backyard for Fido or any of their furbabies, there’s no way you wouldn’t go for a single-family house. Still, remember that each city has its own local pet laws and restrictions. When it comes to condos, HOA commonly impose strict rules and permits around pets. Whether you choose a home or a condo, do your research to determine how you’ll be limited or restricted when it comes to pets.

 
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5. Parking

Parking can be a major dilemma if the building or development doesn’t have a designated garage or if their parking areas are on a first-come-first-serve basis. Some developments also offer exclusive parking for residents for an extra fee. If you prefer to have a private garage to shelter your vehicle, a single-family house better suits you. However, if it’s no big deal for you to park in an open area or an underground structure, a condo might do.

 
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6. HOA fees and rules

While many condo developments are governed by a homeowners association, there are also single-family homes that are within the jurisdiction of an HOA (depending on the city or location). So aside from the monthly mortgage payments, you may also have to pay for association fees or “membership dues” that could go towards overall maintenance and repairs. However, some people opt to buy a single-family home because they may find an HOA to be too restrictive. HOAs can limit guest stays, impose strict pet rules, tell residents where to park and limit the type and number of vehicles they can have on the property.

 
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7. Independence and control

And speaking of restrictions, there’s no denying that single-family homeowners have more control over their properties. They can renovate their homes whenever and however they like. They can paint their walls and exterior in any color and add any features they like—something that can’t be done by many condo owners. You may need consent or permission from the association before you can do any changes to your condo.

 
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8. Home loan and the type of mortgage you’d get

If you’re planning to put less than 20% down payment on your home purchase, keep in mind that most government-backed loans and programs (such as an FHA or USDA loans) only approve loans for single-family homes. When it comes to purchasing a condo unit, it can be quite difficult to find a condo development or a condo community that is FHA-approved. FHA loans for condos are available and insured through the FHA Section 234(c). Likewise, there are specific restrictions for the development to be approved for the loans. Also, note that lenders usually charge higher interest rates for a condo purchase compared to what they charge for single-family homes.

 

Bottom Line

Regardless of what type of dwelling you choose to purchase, it’s important to do your research on the pros and cons, as well as the costs that may come on top of mortgage and taxes. Aside from the given considerations, there is nothing more important than your comfort and happiness. Will you be happier spending your days in a single-family home in the quiet suburbs? Or do you prefer the convenience of living in a condo, which is mostly within walking distance of many urban hot spots? Whatever you choose, don’t settle for something that you will likely regret and won’t find yourself enjoying.

4 Reasons Why Homeowners Decide To Sell Their Homes “As Is”

For starters, what exactly is “as is home”?

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Selling a home “as is” means sellers put up their homes on the market without doing any repairs to improve its current condition. Rather than putting tons of money, time, and effort to fix the issues in their home, they put it up for listing as is, often for a lower asking price to attract multiple offers.

Maybe you’re thinking, “Why would anyone sell their home as is?” After all, there’s no better way to increase a home’s value and sell for top dollars than making repairs and staging your home nicely.

Here we explain some of the most common reasons why sellers might have to do it:

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1. They’re in a tight financial situation so they couldn’t afford to do any repairs.

Sometimes homeowners would like to sell, but they don’t have the funds to make any repairs or tackle home improvement projects to increase their home’s value. In this situation, they may have no other choice but to sell as-is. There are also instances where a homeowner might have finished doing maintenance work on the home’s exterior but have no money left to spend on interior improvements. There are also those who, well, just want to save tons of money on repairs.

Since making repairs and staging are just some costs associated with putting a home for sale, it’s easier to sell as is for those who are in a tough financial situation because they can skip those processes.


2. They want a cash offer.

Many people sell their houses as is because they want to attract cash buyers. Many of these buyers are local investors and flipping companies who purchase fixer-uppers or ugly homes and renovate them. Likewise, sellers generally love a cash offer because it helps expedite the home sale process. They get paid faster and use the quick cash to settle debts or spend it on other expenses.

Investment companies help distressed owners sell as is by purchasing with cash. The only downside is that you cannot expect them to pay anywhere close to a home’s market value.


3. They want to avoid a lot of stress after inheriting a property or going through a divorce.

One option for people to offload a house they’ve inherited after a parent or loved one passed away is to sell it as is. It might make sense if you need to sell with your siblings and all of you live far away to oversee any home improvements before putting it on the market. It can also help prevent a major headache since they only have to split the profits from the home sale, avoiding a family feud.

Another common scenario is if someone had just “won” a house after a painful divorce but found out they couldn’t afford to pay for taxes, utilities, and upkeep costs anymore and would rather spend the money somewhere else. In this situation, it’s better to sell the property in its current condition, especially if it can help with moving on into a new life.


4. They want to sell quickly.

Making repairs and doing home improvements may sound great, but the truth is they are also too time-consuming to deal with. It takes time to fix every minor issue, make some updates, and even to stage your home. They can prolong the time you have to wait before you can put your house up for sale. Homeowners who want to sell their homes quickly put it up on the market as is. It also helps speed up the transaction if they get a cash buyer or work with a reputable investment company.

 

A few things to remember when selling a home in its current condition:

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  • You still need to disclose known issues and defects. Selling a property as is does not exclude you from disclosing known defects and issues. It remains your legal obligation to talk about the home’s existing problems and truthfully answer any question from a buyer. The only exception is if you’ve inherited the property and you aren’t aware of its general condition.

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  • It doesn’t mean that the buyer will skip the home inspection. Although you clearly stated your intentions when selling the home, it doesn’t mean that a typical buyer won’t request a home inspection that will uncover any issues. Regardless, most mortgage lenders will require a home to be free from any health or safety issues before they can lend money to it.

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  • Make sure you’ve explored all other options before coming up with this decision. Putting your home up for sale can put a lot of stress and pressure on any homeowner. If you are considering selling as is, you may want to get help from a realtor who has experience in this kind of transaction before making a final decision. Maybe you can still come up with other ways to continue with the home sale without selling as is or adopt a creative sales plan that will suit your situation.

Top Qualities To Look For in A Short Sales Agent

When searching for a real estate agent that would help you purchase your first property on a short sale, it's best to remember the three main qualities they should have: Experience, Good Reputation, and Local Expertise.

The short sale process could take as much as four to five times the amount of work compared to a regular sale. That’s why it is very important to make sure that your agent would know the ins and outs of the processes and how to make it easier for you to go through it.

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Experienced Short Sale Agent

Short sale agents are specialized real estate professionals that could help sell your home with the least amount of hassle possible. Understanding how to close short sales quickly and successfully is one of the traits that an experienced short sale agent should have. One transaction will not be the same as another, which is the case not only in the short sale but also in the real estate world. Issues requiring expertise could include properties having both a first and second mortgage, HOA liens, mechanics liens, and unpaid taxes. Without an expert short sale agent, getting these types of properties to successfully close with a clean title would be extremely difficult.

It is important to work with a short sale agent that understands various expectations from banks. Knowing the exact package to put together for each bank involved in the transaction decreases the amount of time that needs to be spent in closing a short sale. For example, expectations from Chase or Wells Fargo could be very different than what Bank of America would require. With the number of details involved, it’s usually a bad idea for a homeowner to do the negotiations for their own deal. Homeowners and buyers or investors alike should be open to hiring a professional short sale negotiator to avoid frustrations in going through the processes. Certifications for short sale agents are relatively high level compared to other industry designations. However, it’s best to look for a streetwise agent that has a higher percentage of closing short sales on top of having the actual certifications.

 

An Agent with a Good Reputation

An agent who values his reputation should make a personal commitment to giving the short sale industry a good name in serving the best interests of the buyers and sellers. Look for a short sale agent who is dedicated to his craft and looking to do more short sale business while maintaining a high rate of sales closed. Before seeking help from an agent, it’s best if you check on the client reviews, sales success rates, and experiences of previous clients.

The duration of the short sale process would depend on the strategy that your short sale agent would use. Take note that you would be spending time with your agent throughout this process so it’s best to hire someone who would always keep you in the loop throughout the process, answers your queries from time to time, and would give you the best experience in closing this short sale.

 

Local Expertise

Maintaining a good local reputation also gives authority to short sale agents because they know the ins and outs of the local communities and real estate market, making it easier for potential buyers and sellers alike to know the competition, bank expectations, and the processes that would lead to a quick short sale completion. Knowing that you’re dealing with an agent whose focus is on specific locations will give you the assurance in getting the deal done on top of insider information on what to expect within the community once you’ve purchased a property on short sale. You might even be provided with better options within the neighborhood courtesy of your trusted local short sale agent.

Thinking of Buying A Home With Cash? Here are the Pros and Cons

Can you imagine your life as a homeowner without a mortgage? It’s entirely possible if you buy a home with cash!

That’s right. You don’t have to be a millionaire or a retiree to purchase with cash. In fact, these deals are surprisingly common and provide certain advantages over those who would rely on a mortgage. 

A recent report from ATTOM Data Solutions revealed that “all-cash sales made up 29% of single-family home and condo sales in 2017.” More buyers are now opting to pay all cash for their residential real estate, especially in hot housing markets. These all-cash sales are a sign of a stronger economy since there will also be fewer foreclosures.

Likewise, according to the REALTORS® Confidence Index (January 2017), “buyers of homes for investment purposes, distressed sales, and second homes are also more likely to pay cash.”

There are plenty of situations where buyers may find paying for a home in cash is a good option: they might have a large sum of savings at hand, could have just won the lottery, or could be flush with equity as already long-term homeowners.

If you’ve ever seriously considered purchasing a home in cash, it’s a good idea to make sure you understand all the pros and cons before you sign on the dotted line.

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PROS

1. It’s a Smart Strategy in a Tough Seller’s Market

In a Redfin study, an all-cash offer ranked as the most effective strategy for winning a bidding war. It improves a competitive offer’s chances of success by 97%, proving that buying a home with cash can help buyers cut through the competition. In a luxury market, it also increases a buyer’s likelihood of success by over 400%. Yep, that’s fourfold. It can also be an advantage since it typically comes with shorter escrow periods and fewer contingencies. In hot markets where bidding wars occur, cash is truly king! 

 

2. It’s a Money Saver

Purchasing a home with cash can help you save money on many of the expenses that are loan-related, including closing costs, lender’s title insurance, and other fees that lenders usually charge to take out a mortgage. Sure, there are expenses you need to deal with, such as processing and filing fees and title insurance, but these will considerably be lower compared to when you get a mortgage. 

Since closing costs can equal to about 2-5% of the purchase price of a home, a buyer who pays with cash can avoid many of these expenses. 

 

3. Save up on Mortgage Interest

And speaking of savings, not getting a mortgage loan means you won’t have to pay mortgage interest for the next 15 or 30 years. Even if the current interest rates are low, paying interest tied up to the loan can cost homeowners thousands of dollars. A cash purchase can save you this additional cost, and you can add up the money you saved into your savings, retirement fund, or other investments later on.

 

4. Streamlining the Sales Process

Because a lot can get in the way when a buyer is getting a mortgage, an all-cash purchase tends to close sooner or faster because there’s lesser paperwork and no lender involved. Buyers and sellers will avoid encountering any delays related to a subpar credit score, mortgage approval, or even a poor home appraisal. It can assure both parties that there will be fewer things that can go wrong with the deal. 

 

5. Can Provide You Extra Peace of Mind

Without a mortgage, you can live your life without worrying about monthly payments. For many home buyers who gave an all-cash offer, this reason alone is enough because it gives them security and peace of mind. 

Even if you lose your job or things turn bad financially, you’re assured that you won’t foreclosed on because you already own your home. Also, all you need to pay on a monthly basis are the property taxes and homeowners’ insurance. 

 

6. Get Around Bad Credit History

Getting approved for financing can be quite a challenge for buyers who have less-than-stellar credit but otherwise have a steady income and a considerable amount of savings. Paying a house using your hard-earned cash can save you from the hassle of the mortgage process and the need to worry about your credit history.


CONS

There are, however, some disadvantages to an all-cash offer:

 

1. Limited Liquidity

Buying a house with cash could seriously limit your liquidity since you’ll be paying a huge amount of money upfront. This is why home buyers are only recommended to give an all-cash offer if they will still have money left for emergencies. 

 

2. Possibly Limiting Your Investment Opportunities

If an all-cash home purchase means tying the majority of your money into just one asset, then this is another important thing to factor into your purchase consideration. 

Even billionaires, including Facebook founder Mark Zuckerberg, prefer the mortgage route when they are more than capable of paying for their house upfront. They understand the value of a diversified investment portfolio.

 

3. Say Goodbye to Mortgage Interest Tax Deductions

One of the most popular financial incentives that attract buyers to is the major tax deduction from mortgage interest. But if you’ve paid your home with cash, you won’t be eligible for this tax benefit. A home paid for in cash becomes ineligible for this advantage. However, by the same token, not paying for mortgage interest is already a huge advantage.

 

4. It Takes Two to Tango to Streamline The Purchase Process

Because cash offers can close faster due to fewer contingencies and no mortgage delays, it can be a challenge if the seller is not yet ready to completely move out or they still haven’t found their next place. It can put the seller in an awkward position if their home sells faster than they initially thought. 

 

5. An All-Cash Home Purchase Won’t Contribute To Your Credit Score

Despite the hassle that comes from making mortgage payments psychologically and financially, your personal credit can actually benefit from these contributions. Having a long history of timely payments can positively impact your credit score — one thing you can’t get if you’ve paid your home with cash.

 

No matter the climate of your housing market, always consider the following before making your investment: What is our financial situation? What are our long-term investment strategies? Can we really afford to tie up so much money into one asset?

Buying a home can be your biggest financial commitment — more so if you’re paying with cash upfront. Aside from the home purchase itself, it’s smart to consider the other costs associated with homeownership and how exactly this will affect your finances.

Should You Hire A Realtor When Buying New Construction Home?

There are unmistakably unique allures built into every newly constructed home: the window for personal customization sits open, wide as it ever will. A bevy of brand new appliances, amenities and of-the-moment upgrades come ready for you and your family to experience. Lest we forget the most fundamental pull—there’s the personal privilege to christen it yours, first.

If you’re wondering whether you can employ a real estate agent for a newly-built home purchase, the answer is an unequivocal “YES!” While the developer’s agent will be always ready to assist potential buyers, you're definitely going to want an expert of your own ready to represent your side of the deal. Suffice to say purchasing new vs. purchasing resale is a whole other ballgame, one requiring a buyer’s agent to successfully navigate complex headwinds, and protect your involvement at every step. Let’s break this down for a closer look.

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The Builder’s Agent vs Your Real Estate Agent

The Builder’s:

It’s important to identify who’s on what side of the transaction, along with the roles each person plays. In this situation the builder plays a dual role also functioning as the “seller.” The agent representing the builders sales office functions as that builder/sellers agent. It should go without saying the primary duty of this agent is to generate sales for their builder. Consequently, the agent's attention won’t be devoted to your best interests, but that of the builder. 

While price negotiations with this agent (especially without your own agent) are bound to produce some spirited discussions, you can in fact rely on them for some valuable information. Builder agents can be a wealth of knowledge on things such as background details on home construction and housing development in regards to a newly built home.

Your Agent

Your realtor is your personal advocate. Not only will they ensure you’re aware of your rights at the table, securing the most value out of your budget is of top mind. These benefits and more all come together making for a relatively painless purchasing process. 

Should you decide to move forward on a new home purchase working with an agent, make sure to disclose this detail to the selling party on your initial visit to the model home. It’s ideal to clarify upfront that you will have a representative, and that the builder agrees to this. This is good to remember because most builders require a serious buyer to be accompanied by a real estate agent on their first visit.

 

Here are some of the biggest reasons why you should hire a real estate agent to represent you:

A real estate agent will round out your knowledge of the builder, the home and its construction quality.

While the builder’s agent is unquestionably knowledgeable there’s a risk in relying solely on their word. You may likely be getting just a narrow, potentially biased perspective of a fuller picture. It isn’t for lack of insight, but more-so about what can sometimes get lost in a property breakdown. An experienced real estate agent will be well familiar with every major area builder and their work quality, cluing you in on things that may have been omitted from the seller agent. If you’re at all unsure of where to buy, a qualified realtor can recommend the right builder and neighborhood for you.


They will help you make the right choices according to your budget.

Especially if you’re a first time home buyer, purchasing new construction can not only be overwhelming, but expensive to boot. Considering the endless array of upfront upgrades and modifications to choose from your agent can help guide you through the personalization process, delivering the best options for your budget. From floor plans to the latest amenities, you can think of your realtor as your personal shopper here. They can make informed considerations on items better to install at present, versus items that are easier to improve upon in the future. An added bonus: if you’re thinking about selling your property a couple of years down the line, your realtor can appraise you on the features and amenities likely to attract future buyers in the long-term.


They're your negotiator.

An experienced agent will come into talks knowing prior what “is” and “isn’t” on the table for discussion. In this approach, your realtor can better broker on things such as paint color, style of utilities and even closing costs. This is especially valuable since builders are far more likely to negotiate on fees or upgrades than they are on the purchase price of the home. It’s important to note, varying builder by builder, whether or not one is even willing to negotiate. Your agent will act as your guide through all of this, additionally making you aware of any “builder promotions” available to take advantage of. 


No realtor fees on your end.

That’s right. Hiring a realtor to buy new construction comes at no cost to you since the builder will be the one paying your agent’s commission. Builders rely on outside agents to bring clients to them. As such, they view commissions as part of their cost of doing business, usually adding it into the marketing budgets of the homes. However, this doesn’t mean the builder would credit you the commission should you forego a realtor; they would much rather dole it out to an agent on your behalf. Builders are also unlikely to reduce the price of the home because it sets the comparison price for future home sales in that neighborhood.


Your realtor will help you set and oversee a home inspection.

You may be thinking, “Why do I need a home inspection if it’s a newly built home?” Well, even with the best construction, using only the best materials, contractors, etc., new homes can still have their fair share of defects just the same as resale homes. The builder’s agent is unlikely to push for or offer up an inspection, likely because the builder doesn’t necessarily want to inspect it themselves. You may be thinking you  can depend on a new home warranty to cover unaccounted for issues despite this, but let’s just say we wouldn’t hold our breath on that.

It’s up to you and your real estate agent to set up a home inspection. An excellent realtor has connections to multiple independent inspectors who will work in your best interest. Your agent will help you set up an appointment then review the inspection report to identify potential areas of negotiation with the builder. Also, it’s best to attend the walkthrough with your agent so they can help spot errors on the new home. 


What you see is NOT what you get.

You might be amazed when you tour the model home and see top tier granite countertops, upgraded appliances, crown molding, rough-in plumbing—you name it. However, it’s prudent to remember that the model you visited is not necessarily the home you’ll end up purchasing. That model is worth more than the base price being advertised precisely because of all those amenities. In this case, keep that old adage in mind. Like buying a new car, your home could feel distinctly different from what you see on the showroom floor. 

With the help of your realtor, you can differentiate between base price and whatever comes at the cost of an upgrade. With this you can accurately price compare between a model brimming with every possible bell and whistle, and a more sensible option, possibly with a little less flash, but a healthy amount nonetheless.


Your realtor is also your contract and paperwork guru.

Be honest, how familiar are you with real estate contracts? Unfortunately, every real estate purchase involves some level of exhaustive paperwork that can not only be confusing but also very intimidating. When buying new construction, you will have to sign a builder’s standard contract, which covers all the pertinent details of a new-home purchase. Your agent, being an expert in the industry, will review any contracts you sign to ensure everything is in order, and most importantly, that you are protected. They will guarantee your comfort and understanding pertaining to every aspect of the agreement. Whatever has been agreed upon by you and the builder (fees, timelines, upgrades) a realtor is going to ensure it is incorporated into the contract. Moreover, they will make sure that all other paperwork is reviewed and filed correctly for a smooth transaction.


They can recommend financing.

A builder will typically have a preferred lender and will even offer incentives to ensure a buyer works with that lender. This reassures them that the buyer is a good credit risk. However, the smartest thing you can do is to shop around and find the best loan that works for you and your situation. Your agent can help you with your search by exercising their rolodex of connections, partnering you with only the most reputable of lenders and letting you compare rates. At the end of the day, you will need to find the best loan for you and not for the builder—an agent is a great resource to rely on.

Turning Foreclosure Homes Into Profit

Do you find yourself attending open houses or looking in the classified ads when you're thinking of upgrading to a new house? You might even have a real estate agent's number handy so you could have them show you new homes. But have you ever considered checking on foreclosure listings? Rather than paying the market price of a new home, you can opt to buy a foreclosure that just needs a little TLC. You might even get a good bargain on the house, ending up with a home that would be worth much more than what you paid for it.

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If you've been following the real estate market trend then you’ve observed the rise in foreclosure inventories. An increase in foreclosures is an opportunity—that is if you're willing to put money and time into purchasing foreclosures to have it rented out or flipped—buying and selling in a short period of time without actually living in the home. Now is a great time to invest in foreclosures, however, just like any type of investment you must do your research and consult an expert before you dive in.

Take note that not every foreclosed property would be a great deal. Profiting from foreclosures can't be guaranteed and if you want to get into the business you must approach the process carefully and always know when to drop the sale. The time that you have to retain the ownership on the purchased foreclosure may vary by the demand for houses in the location. Learning how to profit from a foreclosure requires you to determine how to add value to a property and effectively budget the purchase price and repair to maximize your profit.

There are four things that you should check out before diving into the process of profiting on a foreclosure. First, you should have a list of foreclosed property or properties that have potential. Next, research the area pricing and the demand for real estate properties in the market. Of course, you have to consider your budget from purchasing the foreclosed property to renovating it. Lastly, you have to find a reliable contractor that would take care of all the renovations and ensure that the foreclosed property could be listed back to the market.

Once you've decided to try out profiting from foreclosure properties, here are five things that you need to keep in mind throughout the process:

1. Start Now, Revisit Later

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Even if you're not yet ready to start investing in foreclosures, it's best to prepare ahead of time. Start tracking distressed properties now to give you a practical idea about the workings of the foreclosure process. You can attend foreclosure auctions to see how the buying process works. In these auctions, you can also get a chance to talk to other investors to discover how they have profited from buying and selling foreclosures as well. It may get too overwhelming so you might want to consider finding a knowledgeable local real estate broker who specializes in foreclosures. Some brokers work with banks that have foreclosed homes in their inventories. They could help you find repossessed homes a little more easily than just waiting for another auction.


2. Get Local

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Take advantage of being in the know of foreclosed properties in your area and start preparing before other real estate investigators get wind of the distressed property. Foreclosure properties which have been mentioned in public records, advertisements, and real estate listings attract investors into diving head first to get the deal. Being a resident of the area, you could get dibs on the property, review the price that the investor bought the home for, how long he held the property, the amount it sold for and when it was sold, long before the information becomes available in the county clerk's or country assessor's office.


3. Rent or Sell

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Check out the foreclosure property if it has been vacant for a long time. Chances are, damages may have worsened over time or it was vandalized by the former owners if they have been forced out. Depending on the location of the property, you should find out if the home has been winterized causing bad pipes and other problems. After assessing scopes for fixtures, decide whether you want to buy and rent out the property or repair and sell it as quickly as possible.


4. Calculate for Repairs

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Before the foreclosure sale, it's high time to contact the homeowner of the distressed property. While there is not much competition to deal with at this stage, going with this strategy would have the homeowner give in and get rid of his debt in whatever way he can before the tedious foreclosure process begins. Advanced assessment of the property would allow you to budget for repairs up to a certain degree of cosmetic touch-ups. Take into consideration the hiring of contractors when you plan for repairs.


5. Set Your Limits

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You might get carried away in winning your first bidding war leading to spending more than what you had intended to. Always consider at least 20% in profit when setting a price after bidding and repairs costing estimate. Also, since you're still a beginner, focus on one property at a time and learn to test the waters before venturing on the next opportunity.

 

Foreclosure investments are a fast-paced environment and may make you feel that you have to move quickly to not lose the opportunity. However, if you're just trying out foreclosure investment as your new venture, it would be best to be cautious with your steps to not incur substantial losses on your first try.

Millennials and Young Homeowners: Here’s Your Guide To Building Home Equity

Owning a house and having good credit at the same time? In this economy?

What if we tell you it’s possible? It’s common for young people—those who are below 35 years old (also known as millennials)—to complain about not having money. And typically, they attribute their woes to a poor economy.

What people don’t know is that they can actually create wealth through homeownership! How? It isn’t exactly free money, but it’s almost just as easy. You’ll just have to build your home equity.

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Home Equi-what?

Equity, specifically home equity, pertains to how much of the property you actually own. This is usually expressed in percentages, and is basically how much of the property’s selling price you’ve already paid for.

If you just bought a home, for example, you’ve probably made a down payment. If this down payment is 5% of the seller’s price, your current home equity automatically becomes 5%.

If you’ve owned the property for a while, you may calculate home equity by subtracting any outstanding home loans you have from the property’s current market value.

So where’s the additional wealth? After paying your down payment, you still have to pay off the property’s outstanding balance. This means that you have time to increase the value of your property, and even improve your credit while doing so.

 

How to Grow Equity

Unlike debt and other expenses, as a homeowner, an increase in home equity is a good thing. Why? Because you are improving your credit through the home’s market value, your diligence is paying for your mortgage, and you’re gaining true ownership of your home.

Here are some ways that home ownership can create wealth for you:

1. Appreciate Your Home

And we’re not just talking about your sentiments towards your home. This refers to ways you can increase your property’s worth.

Like they say, buying a home is an investment in itself.

a.   Rising Home Prices

Before you even buy a home, check the surroundings. Is it accessible? Are there upcoming developments in the area? Is the market doing well? These factors can increase your home’s market value effortlessly, consequently affecting your home equity.

b.    Home Improvements

If you can, try upgrading areas of your property! Consider adding a shower in the downstairs bathroom, installing a newer stove and fridge, or maybe even planting some trees on your property line.

While these improvements may cost you some, they benefit you by increasing your home’s property value.

c.     Home Maintenance

This simply means preserving the home’s livable condition, as you normally would.

A few tips include having regular repair checks on the house and around your property, and preserving unique features, like outdoor decks.

 

2. Mortgage Payments

Mortgage payments are no fun, but this expense can ultimately help you create wealth.

For starters, it is important to know that the larger your outstanding loan balance is, the greater amount of interest you pay on it. However, don’t worry; we’ve listed a few ways you can avoid this.

a. Make a Larger Down Payment

Even before you can call a property yours, you can start creating wealth by preparing a bigger down payment.

Home property down payments can be as low as 3%. But as previously mentioned, a higher loan balance means more money paid towards interest in the end. It’s also important to note that once you hold 20% equity in your home, you start saving on the cost of private mortgage insurance.

This can be an attainable goal for you, but you don’t have to pay for the whole 20% right away. Just consider a slightly higher down payment.

For example, saving for a 5% down payment instead of a 3% one gets you that much closer to that 20% home equity target.

b. Shorter Mortgage Terms

This is tricky because this requires higher payments compared to a long-term mortgage. But if you budget wisely, this is a sure way to build home equity quickly.

c. Bi-weekly Payments

If the above is too taxing, look into making mortgage payments every two weeks, rather than once a month.

The difference? This can result in your 30-year mortgage transforming into a 25-year mortgage. This is because your 12 monthly payments paid annually turns into 13 monthly payments per annum.

d. Regular Payments

If your budget won’t allow for this, then simply make sure to pay your mortgage on time. This will keep your credit positive, and you’ll gain equity in your home with every payment.

 

In fulfilling these kinds of commitments, it is up to you to strike a balance between your monthly budget and savings. See what works best for you, so that you can create wealth as a homeowner, by making the most of your home equity.

Why Do Home Sales Fall Through? 5 Common Reasons Why The Seller or Buyer Walk Away

Why do home sales fall through? Why is it that sometimes, the buyer or the seller walk away from a home sale, causing it to fall apart and for the home to return to the market?

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Let’s rewind: You’ve put your home on the market and have been doing everything to prepare your home for upcoming showings. An offer (or even multiple offers) comes in and you accept it. Both parties sign a real estate purchase contract and hope everything goes as planned. You’re definitely a step closer to a closed sale.

But then, life throws a curveball — an issue comes up that turns out to be a major deal-breaker, causing the sale to fall through. Here are some examples:

 
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An inspection could reveal serious flaws affecting the home sale. If major defects, like structural issues, wet basements, leaky roofs, high radon levels, or mold were discovered in the home, it could be a major deal-breaker for the buyer.

These issues could cause the buyer to panic and open further negotiation on the price, or they could ask for a credit or relief from the seller as compensation. If the buyer included a home inspection contingency in their offer, it also allows them to renegotiate the price or walk away due to those issues.

The seller, in return, has three options: 1.) They can fix the problems by hiring contractors; 2.) They can credit  the buyer so they can make the fixes themselves; or, 3.) They can reduce the selling price of the property.

The problem comes if the seller refuses to do any of these. The buyer can then cancel the home sale and simply walk away, although they may lose the earnest deposit they made when signing the contract.

How to prevent this:

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Sellers should never underestimate the power of a home inspection. Especially for older homes, they should hire a home inspector prior to placing their house on the market. The “pre-listing inspection” will help them address any issues the house may have and give them time to fix them. Once you put your property on the market, and potential buyers order an inspection, you will know what to expect and be able to negotiate more easily.

 
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There are cases where a buyer puts in an offer with the condition that they need to sell their current home before they can purchase a new one. They may include it as a home sale contingency, which makes the contract contingent upon the success of selling their own home within a specific time frame. Not all people can afford to handle two mortgage payments at once. The contingent offer will give them a set number of days to sell their current home.

However, if for any reason, their home doesn’t sell within the timeframe, it could cause delays with your home sale or cause it to fall apart. You may be left searching for another buyer or having to proceed with a backup offer and begin a new transaction all over again.

How to prevent this:

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Home sale contingencies can be very risky for you as a seller as it can cause the home sale to fall apart. You can avoid this by prioritizing buyers who don’t need to rely on the sale of their current home to proceed with the transaction. If possible, reject an offer with a home sale contingency and choose another buyer who loves your home and doesn’t need a contingency in order to make the purchase.

 
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Your buyer has been pre-approved; you’ve agreed on a final purchase price; you’ve both signed the contract. So far, everything is going great—until the buyer just gets rejected for a mortgage.

Keep in mind that a mortgage is not guaranteed until the buyer has signed a final agreement with the lender. While waiting for the mortgage to close, buyers should avoid making significant financial changes, such as taking out a new loan for a car, changing or losing a job, etc. These changes could affect their debt-to-income ratio, which may make them ineligible for the mortgage loan for which they originally applied. Once the buyer’s financing falls through, the pending home sale will go back to active and the transaction falls out of escrow.

How to prevent this:

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To ensure that the sale won’t experience any hurdles related to the buyer’s financing, it’s best to accept offers from buyers who already have a mortgage pre-approval. If they are pre-approved, they are less likely to be rejected for a mortgage loan. This means they can get the financing they need to close on the home.

With the help of your listing agent, you can request that buyers be pre-approved and only enter into a contract with a serious and qualified buyer. The only exception is when the buyer wants to make a cash purchase. In this case, there won’t be any financing contingency to deal with.

 
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Buyers who apply for a mortgage will be asked by their lender to pay for an appraisal of the property. Unfortunately, sometimes the home appraisal comes in at less than the asking price. This can be a huge deal breaker to buyers because banks will only lend them the appraised value of the home, and not all buyers can afford to pay the difference. This situation is common in a seller’s market where there’s limited housing inventory and the rampant bidding wars cause prices to go beyond the normal home value.

If this situation occurs, the buyer and seller have a few options. The buyer can order another appraisal from a new professional. If not, they will have to pay the difference in cash. However, not all buyers have the extra amount to bring to the table. They may also ask the seller to reduce the sale price so it’s more in line with the appraisal. Sellers need to be prepared for this negotiation.  The seller can attempt to justify their own appraisal, with comparables in the area, to prove their higher asking price.

However, if both parties cannot reach an agreeable solution, the buyer can walk away, and the pending sale will most likely fall through.

How to prevent this:

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To avoid this situation, it’s best to list your home with a fair and accurate asking price. Consult with your real estate agent so you can come up with an asking price based on comparable home sales in your neighborhood.  

 
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Buyer’s remorse or “cold feet” is real. It’s when the buyer backs out of a deal at the last minute after they realize that they don’t want to buy the home. It happens to both first-time and repeat buyers. After all, buying a home is a huge financial decision and is far from simple.

Once a buyer places an offer, he or she is legally bound. However, buyers can get scared or overwhelmed with the difficulties of the process. Once they realize they don’t want to continue with their purchase, they will do anything they can to get out of it, whether it be contingencies stated in their offer or loopholes in the contract.  

When this happens, the seller is left in a bad position. This is why the earnest deposit is important. This deposit, which is typically 1 percent of the home’s final sale price, is made when the buyer signs the purchase contract. It serves as protection for the seller in case the buyer changes their mind. If the buyer chooses to walk away from the deal due to a change of heart, they will lose their deposit money to the seller.

However, it’s still a heart-breaking situation for the seller because they now need to put their home back on the market and start from scratch.

How to prevent this:

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While this issue depends entirely on the buyer and there isn’t much you can do as the seller, there are ways you can avoid it. With the help of your agent, make sure that there are no undisclosed points in the contract that a buyer can use to make their offer null and void. Also, in the case of multiple offers, favor a buyer whose offer has fewer contingencies and is confident enough to proceed with the purchase.

For buyers, especially first-time home buyers, get the help of an experienced real estate agent who can walk you through the real estate process and eliminate any misconceptions you have about buying a home. Realtors can also provide counseling if they notice any signs of cold feet from their client.

 

Of course, there are other reasons a home sale could fall through that are out of the seller’s control. Regardless, it can be very frustrating and time-consuming when you have to start from square one and put your house back on the market. Whether you are the seller or the buyer, it’s important to know and understand these deal-breakers so you can actively prepare and attempt to avoid them as much as possible.

The 5 Biggest Challenges of Buying A Home When You Have Student Loans

What’s the biggest barrier to purchasing a home that requires a mortgage? For millions of college graduates — both older and younger millennials — it isn’t their credit card debt. Rather, it’s their student loans that are preventing them from fulfilling their dream of homeownership.

To explain it further, here’s the summary of the latest student loan debt statistics:

Statistics from personal finance site Make Lemonade reported that over 44 million people carry a collective debt of $1.5 trillion.

  • According to Student Loan Debt and Housing Report 2017: When Debt Holds You Back by the National Association of Realtors (NAR), 17% of borrowers owe more than $100,000 in student loans.

  • More than 7 in 10 student loan borrowers believe their debt has impacted their ability to purchase a home.

  • Student loan debt has now become the second highest consumer debt category - second only to mortgages.

Moreover, paying off their student loans isn’t the only challenge they encounter when qualifying for a mortgage.

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Nonetheless, if you’re a student loan borrower, there are steps you can take to overcome these hurdles. Homeownership doesn’t happen overnight, but anyone can make it happen with ample planning and preparation.

Challenge #1: Debt-to-income ratio (DTI)

According to the NAR report, 52% of younger millennials don’t qualify for mortgages due to their debt-to-income ratios, which includes student loan debt. It’s one of the main things that delays a home purchase.

Your DTI ratio is simply what you owe compared to how much you make or the amount of recurring debt you have versus your monthly income. Most of the time, lenders focus on this ratio, more than your credit score, or even how much you have set aside for a down payment. They assess whether you can still balance your living expenses while paying off your debt obligations. As a rule of thumb, they want to see a low DTI, with a ratio, ideally, falling below 36%.

Your lender will also calculate both your front-end and back-end DTI to determine if you qualify for a mortgage loan. The front-end DTI is known as the housing ratio, which is the amount of monthly gross income spent on housing expenses. On the other hand, the back-end ratio includes all of your debt obligations, such as student debt, car payments, and credit card bills.

Pro tip: Control and reduce your DTI.

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Before house-hunting, try to reduce your DTI by paying existing debt and/or increasing your income. If you have credit card debt, remember that most lenders will use the minimum payment balance when calculating your ratio. With that said, it’s ideal to pay off your debt every month to reduce the amount of money paid in interest.

 

Challenge #2: Credit score

While a high percentage of student loan borrowers are denied mortgages because of steep DTI ratios, your credit score plays a role as well. Your ranking affects whether you get a low mortgage interest rate, although only 8% of millennials were denied because of a low credit score.

The average FICO credit score is 700. A credit score of 750 or higher is considered excellent while a score of 649 below is considered poor.

Pro tip: Build up your credit score—the higher, the better!

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If you’re hoping to get a mortgage, paying your debts on time will help boost your credit score. Keep your score healthy by not skipping or missing any of your payments. Check your credit report every year and if you find any errors, take the necessary steps to resolve them.

 

Challenge #3: Establishing a good record of paying bills on time

The most important factor in your credit score is your payment history. It must show that you are not only financially capable but also responsible when making payments. Lenders prefer to lend their money to a borrower who has a solid financial reputation.

Pro tip: Avoid skipping any payments and always pay on time.

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To avoid being late, you can set up auto-pay for all your accounts to ensure you’ll make full and on-time payments. If you have a delinquent payment, pay the balance so you don’t damage your credit score and can start to build a good payment history.

 

Challenge #4: Credit utilization

Aside from your credit score and DTI, lenders will also evaluate your credit card utilization. It is your monthly credit card spending as a percentage of your credit limit, which should be less than 30%.

Pro tip: Keep it low.

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The ideal way to manage your credit utilization is by using as little of your available credit as possible. For example, if you have a $3,000 credit limit and you spent $1,000 in one month, your credit utilization is 30%. It’s even better if you can keep your utilization at less than 10%. You can set up automatic balance alerts to monitor your credit utilization and pay off your balance multiple times a month to reduce it.

 

Challenge #5: Saving for a down payment

Whether you’re a student loan borrower or not, it’s understandable that the biggest challenge of purchasing a home is saving for a down payment. At least 85% of non-homeowners say their inability to save for a down payment has delayed their ability to buy a home.

Pro tip: Look for down payment assistance and other ways of saving.

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Look out for government assistance programs available to first-time buyers and student loan borrowers. Federal programs, such as the FHA or USDA loans, will allow you to purchase a home with less than 3.5% down. Likewise, there are existing local programs where you might qualify. Don’t be afraid to check out their eligibility requirements or talk to a mortgage lender to help you understand the process.

Another thing you can do is to look for creative ways to save for a down payment. Even if that means delaying your dream of homeownership for a few years, try saving all “found” money that comes down your way. To achieve this, you can save any money you got from bonuses, overtime pay, and cash gifts from relatives and friends or even allocate income tax refunds to be used specifically for your down payment and closing costs when it comes time for you to buy a home.

 

Bottom Line

To get a lower monthly payment so you can manage your finances better, see if you can refinance or consolidate your student loans. However, it still depends on your circumstances and if you’re confident in handling your monthly payments. Before you start house-hunting, just remember to set a realistic budget and focus on your financial goals to finally achieve the American Dream.

Don’t Make These 7 Mistakes When You Buy Your First Home

It’s easy to fall in love with your dream house (and the idea of finally buying one)! However, your judgment may be easily clouded when you are enamored with an amazing home and feeling the pressure to pull the trigger. Stakes are high when you’re purchasing a house, so here’s a list of major mistakes you should avoid at all costs:

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1. Underestimating (or forgetting) the added costs.

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Buying a house entails many additional expenses on top of the price of the house itself. There are loan application costs, mortgage insurance, and closing costs, just to name a few. You may also need to spend on renovations once you move in. One tip: a quarter (or better, half) of the price of the house should be stashed in your account in order to cover for these expenses.

 

2. Not getting a buyer’s agent.

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Securing your own buyer’s agent allows for a critical eye over deals and transactions. Negotiating solely with a seller’s agent who’s legally obligated to work for their client’s interests can be a mistake.

 

3. Falling prey to “too good to be true” home values.

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These advertised low rates are all over the internet, and online home valuation sites can set unrealistic payment expectations. It’s good to have an experienced real estate agent explain the rationale on market prices by conducting a comparative market analysis based on internal industry data.

 

4. Not doing research on the neighborhood.

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You might have found the house of your dreams, but, it doesn’t exist in a bubble. It’s best to know about the status of the location of the house in terms of the ease of transport around the area, crime levels, the presence of earthquake fault lines, proximity to schools, hospitals, and police stations, etc. After all, location is key.

 

5. Going house hunting without a pre-approved mortgage.

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Getting pre-approved for a mortgage plan requires a professional evaluation of your credit report and credit score. This can help you evaluate your finances—how much can you borrow and how much can you realistically afford to pay.

 

6. Skipping a home inspection.

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A house may look like it’s in top shape, but there may be hidden defects lurking out of sight. A certified home inspector with a trained eye can easily spot problems which you may have missed, like termite infestations and gas leaks. If significant issues are detected, you may be able to negotiate with the buyer to lower the price.

 

7. Failing to see it as a long-term investment.

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It may be appealing to you to own a great house, but there are a lot of things to consider. Ask yourself: can I live and work around this location for more than 3 years? Can my family live a peaceful and thriving life in this neighborhood? If the answer is no, you may want to reconsider, as homes need time to appreciate in value and you may be throwing away your hard-earned money if you need to move too quickly after purchase.