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Not Getting Pre-Approved & Not Protecting Your Credit Score

• What you think you can afford and what the bank is willing to lend you may not match up, especially if you had some credit issues or unstable income in the past, so make sure to get pre-approved for a loan before you even start shopping for homes. If you don't know what you can afford you will be wasting your and your agent's time looking at homes out of your price range which will only cause you hardache and disappointment.
   
• A seller will almost always expect your pre-approval with any offer you may place. It shows the sellers that you are a serious and viable buyer. Offers without a pre-approval letter (if you plan to finance all or part of the purchase price with a loan/mortgage) or proof of funds letter (in case of an all cash offer) will not be taken seriously especially if there are other offers on the table.
   
• Having your pre-approval in your pocket avoids any delays in making your offer once you find a home that you really want. Being prepared helps in many ways!
   
• Please be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like buying and financing a car and/or any other major financed purchase for that matter. If the deal falls apart because of something you caused, you may have to forfeit any deposit you put up when you entered into contract.

Failing To Consider Additional Expenses

• Property insurance, taxes, homeowners association dues, common charges, maintenance, higher heating, cooling, gas, electric and water bills are some of the costs that first-time home buyers tend to overlook or minimize when shopping for a place. Be realistic about such add-on costs and factor them in to make sure you are not making yourself house-poor.

Being To Picky

• Yes, just go ahead and put anything and everything you can think of on your new home wish list, but don't become inflexible and end up continuing to rent for significantly longer than you really want to. Keep in mind no house is ever perfect and has all of the bells and whistles you are looking for, and you'll even outgrow the ones you built yourself.
   
• As a first-time homebuyer you will often have to compromise on something because your funds may be limited or that dream home just does not exist. You may have to live on a busy street, accept outdated décor, make some repairs and updates to the home, forgo that attached double car garage or extra bedroom and bathroom.
   
• Please keep in mind, there is no such thing as the perfect home. Even brand new ones are not perfect. But there are many homes that are close to perfect, meaning they do address the major requirements you have and they may even offer opportunities to address the minor ones. Don't pass up on a house that comes close to what you are looking for just because you may think the next one is going to be it. You'll end up waiting forever!

Lacking Vision

• Even if you can't afford right now to replace the hideous wallpaper and cracked floor tile in the bathroom, it might be well worth it to live with the ugliness for a while in exchange for getting into a house you can afford and has many of the features you need and want. If the home otherwise meets your needs in terms of the big things that are actually difficult to change, such as location and size, don't let physical imperfections turn you away. Ugly or worn paint and wallpaper can be changed or removed in no time.
   
• Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done some of the work for you. In addition, you get to do it the way you like it done and the value of the home will go up as you continue to improve it.

Being Swept Away

• Minor upgrades and cosmetic fixes are inexpensive tricks that are a seller's dream for playing on your emotions and eliciting a much higher price tag. Sellers may pay a couple of thousand for minimal upgrades or pay several thousand dollars on staging. If you're on a budget, look for homes whose full potential has yet to be realized. Also, first-time homebuyers should always seek a house they can add value to, as this ensures a bump in equity to help you up the property ladder.

Compromising On The Important Things

• Don't get a two-bedroom home when you know you're planning to have kids and will need three bedrooms. By the same token, don't buy a condo just because it's cheaper than a house... if one of the main reasons you're over apartment life is because you hate sharing walls with neighbors. It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain on you.

Neglegting To Inspect & To Attend Inspection

• It's tempting to think that you're a homeowner the moment you go into escrow, but not so fast... before you close on the sale, you need to know what kind of shape the house is in. You don't want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. Keeping your feelings in check until you have a full picture of the house's physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.
   
• Make sure to attend the home inpspection, follow the inspector around, ask him to explain right then and there what he is looking for and what his findings are. He or she will tell you what are minor and/or major issues and why. Of course, you will also receive a written report from your inspector but these reports tend to be very technical and filled with verbiage protecting the home inspector from liabilty and can make even minor issues with the home sound very dramatic.

Not Hiring A Buyers Agent & Using The Sellers Agent

• Once you're seriously shopping for a home you should secure the help of a buyers agent. It does not cost you anything, belive it or not. Buyer's agents get reimbursed by the seller's broker for bringing a viable buyer to the table but always only act in the buyers best interest. And please, when walking into an open house without your agent always tell the seller's agent that you are already working with a buyers agent. It simply prevents pitfalls and misunderstandings.  
   
• All agents are held to the ethical rule that they must treat both the seller and the buyer parties' fairly, but you can see how that might not work in your best interest if you start dealing with the seller's agent directly and/or before getting yourself a buyers agent.
   
• A buyers agent always and only has your best interest at heart and by law his/her fiduciary responsibility is to you only, the buyer. Think about it this way: If you were getting sued, would you hire the same attorney as the person suing you? Of course not. You need someone who will diligently represent and fight for your interests and rights. When shopping for a home make sure to find yourself a good buyers agent!
   
• In real estate, buyers are faced with a series of big decisions involving at times unknown territory like mortgages, downpayments, negotiations, real estate law, inspections, contracts, and also life choices. Fear of making “The Wrong Decision” regarding any one or all of these issues is a common reaction. Buyers agents work very hard to navigate these issues with their buyers and minimize or eliminate regrets and fears... if buyers allow their real estate agent to help.

Not Thinking About The Future

• Nobody has a magic crystal ball that can perfectly predict the future of your chosen neighborhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road. Please keep also in mind that while you can improve a home itself you will be selling it down the road with all of it's positives and negatives if it comes to location and some other unchangeable attributes. Some questions you should ask about your prospective property include:

1. Are there development plans in the works for your neighborhood in the future?
2. Is your street likely to become a major street or a popular rush-hour shortcut?
3. What are the zoning laws in your area?
4. If there is a lot of undeveloped land? What is likely to get built there?
5. Have home values in the neighborhood been declining or rising?

 What are the advantages of owning a home?There are many. Among the most appealing: you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the build up of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a second home, or make home improvements.The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.

What is the first step to buying a home?Make sure you are ready - psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit?A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer "yes" to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

How much can I afford?The general rule of thumb is that you can buy a home that costs about two-and-one-half times your annual salary. A good REALTOR® or lender can determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses.

Is it best to save for the ultimate dream home or begin with a less expensive starter home?It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon.Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years.If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

How do you decide whether to add on to an existing home or purchase a new one?There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important: your emotional attachment to the existing home. As designer and builder Philip S. Wenz, the author of Adding to a House: Planning, Design & Construction, notes, an addition is much cheaper than building a new home and can offer a "new" home without the heartache of moving.Other considerations:

• Can you finance the home improvement with your own cash or will you need a loan?
• How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements.
• Is it feasible to expand the current space for an addition?
• What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements.
• Are there affordable properties for sale that would satisfy your changing housing needs?

Explore your options. Make sure your decision is one you can live with - either under the same roof or under a different one.

What is the best way to find a REALTOR®?Begin by asking someone that you know. Friends, relatives, co-workers, or neighbors who have recently purchased a home can give you a firsthand account and attest to the agent's professional abilities. Sometimes an agent you contact will refer you to another one who works more closely with buyers and sellers in your neighborhood. Once you have a list of names, interview at least three agents and ask questions about their community knowledge, professional experience, and commitment - some agents work full time; others only work at nights and on the weekends.

What can I expect from a good REALTOR®?Competence, efficiency, and ethics. According to the All America's Real Estate Book by Carolyn Janik and Ruth Rejnis, good agents take the time to qualify buyers and show properties in their price range. They plan showing routes carefully and have pre-inspected most properties. They have a thorough knowledge of financing options, are up on the latest housing trends, and share with prospective buyers data on the local housing market and home sales. Good agents also adhere to a strict code of ethics. They avoid high-pressure sales tactics, refrain from showing properties that do not fit your needs or goals, and alert you to problems about the condition of the property. And they show respect for other agents and real estate firms by not "bad mouthing" them.

Is there anything I should not tell my agent?Most definitely! Never reveal the top dollar you are willing to pay for a home. It will severely undercut your chance to negotiate the home price with the seller. While an agent may spend a lot of time showing you homes and sharing information, the reality is that she works for the seller, who ultimately pays each and every agent involved in helping to complete the home sale. The seller pays the agents in the form of a commission, a percentage of the proceeds from the home sale. The exception is hiring your own real estate professional, now commonly known as a buyer's agent or a buyer's broker.

What does a buyer's agent do?A buyer's agent represents the buyer exclusively. This means he works to protect your interests in the transaction and helps to negotiate the best purchase price and terms. More information about buyers' agents is available by contacting the National Association of Exclusive Buyer Agents at (609) 799-4382, or log on to www.naeba.org.

Can I use an agent to purchase a newly built home?Yes. In fact, some builders pay agents to find prospective buyers. But you also can use a buyer's agent to help negotiate the price and upgrades on a new home. An agent can be particularly valuable directing you to newly built developments that match your needs, as well as helping you select reputable builders who are financially sound and respond promptly to buyers' concerns.Builders normally require an agent to be present on your first visit to the site. This is a sensible procedure that allows the agent to be paid a commission should you decide to buy. Otherwise, if you find a development on your own, make a first visit without the agent, and later make a purchase, the builder may refuse to pay the commission - even if, at some point, the agent became involved in the process

Why do I need an agent if I can find a home by myself on the Internet?While more buyers now use the Internet to gain access to listings, or available properties for sale, it is still a good idea to use an agent. The agent brings value to the entire process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction.

Are buyers protected against housing discrimination?By law, REALTOR®'s may not discriminate on the basis of race, color, religion, sex, disability, familial status, or national origin. They also cannot follow spoken or implied directives from the home seller to discriminate. If you suspect you have been discriminated against, a complaint may be filed with the local Department of Housing and Urban Development (HUD) office nearest you. You may call HUD's toll-free number, 1-800-669-9777, or visit its web site at www.hud.gov/complaints/housediscrim.cfm.

How do you determine how much a home is worth?The short answer: a home is ultimately worth what is paid for it. Everything else is really an estimate of value. Take, for example, a hot seller's market when demand for housing is high but the inventory of available homes for sale is low. During this time, homes can sell above and beyond the asking price as buyers bid up the price. The fair market value, or worth, is established when "a meeting of the minds" between the buyer and the seller takes place.

Are there standard ways to determine how much a home is worth?Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value.Your REALTOR® can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpaying.A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home.Lenders normally require an appraisal - which run between $200 to $300 - before they will approve a mortgage loan. This protects the lender by ensuring the home is worth the money you want to borrow.You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home's potential worth.

What is the difference between list price and sales price?The list price is a seller's advertised price, or asking price, for a home. It is a rough estimate of what the seller wants to complete a home sale. A seller can price high, low - which does not happen very often - or very close to what they hope to get. A good way to determine if the list price is a fair one is to look at the sales prices of similar homes that have recently sold in the area. The sales price is the actual amount a home sells for.

What about appraised value and market value?A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors.Market value is the price the house will bring at a given point in time, once the buyer and seller establish a "meeting of the minds" on price.

What does a home inspector do?A home inspector is a paid professional - often a contractor or an engineer - who checks the safety of a home. Home inspectors search for defects or other problems that could become your worst nightmare later on. They focus particularly on the home's structure, construction, and mechanical systems.It is not the inspector's job to determine whether you are getting good value for your money. He does not establish value, only whether the home might collapse in a storm or if the roof might cave in.A home inspection typically takes place after a purchase contract between the buyer and seller has been signed.

Should I hire a home inspector?By all means. Buying a home without getting expert advice is risky. Once a home inspector uncovers major plumbing and electrical problems, for example, you may decide you do not want to spend several thousand dollars on repairs.Always include an inspection clause in your written offer. This clause gives you an "out" from buying if serious problems are detected. It also gives you another chance to negotiate the purchase price if repairs are needed. The clause can even specify that the sellers fix any problem that is uncovered before you settle, or close, on the home.You also may want to consider hiring experts to inspect the home for a number of health-related risks like radon gas, asbestos, or possible problems with the water or waste disposal system.

How do I select a home inspector?Begin by only hiring one who is qualified and experienced, someone who belongs to an industry trade group, such as the American Society of Home Inspectors (ASHI). This organization has developed formal inspection guidelines and a professional code of ethics for its members. Also, membership in ASHI is not automatic; members must have demonstrated field experience and technical knowledge about structures and their various systems.

Do I need to be at the inspection?No, but it is a very good idea to be there. Following the check-over, the home inspector can answer your questions and discuss problem areas with you. This is also an opportune time to get an objective opinion about the home from someone who does not have emotional or financial ties to the property.

What does homeowners' insurance cover?It protects against disasters - whether natural, manmade or mechanical. A standard policy insures the home, as well as your possessions. Because this insurance is packaged, it covers liability for any harm, loss, and property damage that you or your family members cause others. And it includes additional living expenses in case you are temporarily displaced because of damage from a fire or other insured disaster.While you are not legally required to have homeowners' insurance, mortgage lenders stipulate that you do. It protects their investment in the home in case of a natural disaster or catastrophic event.If your mortgage is paid up - or you never had one - it is still a good idea to have homeowners' insurance to protect your home and your belongings.

What kind of home insurance should I get?A standard policy will do in most instances. It protects against several natural disasters and catastrophic events. However, it will not guard against earthquakes, floods, war, and nuclear accidents. The policy can be expanded to include these disasters as well as coverage for such things as workers' compensation. In fact, the lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes.You also can increase coverage beyond the depreciated value of personal property such as televisions and furniture by purchasing a replacement-cost endorsement. Home-based business-coverage, once overlooked, is an ever-increasing popular rider. It does not cover liability associated with the business but rather contents such as home office equipment and general liability to cover injuries to clients and employees.Other considerations: an inflation rider, which increases coverage as the home's value rises, and getting insurance that is equal to the full replacement value of the home. Insurance companies usually require an amount equal to at least 80 percent of the full replacement value. Otherwise, only a portion of the loss would be covered.

What is condo and co-op insurance?This insurance protects your investment and personal belongings from most disasters. As an owner, you will need two insurance policies - your own to cover liability, living expenses, your belongings and structural improvements, and a master policy provided by the condo or co-op board. The master policy covers the common areas that you share with others in the building. It is paid for using the monthly condo fee that you and other owners pay.

What about title insurance?Title insurance protects the lender against unclear title to the property you are buying. It is almost always a requirement for closing on a home. If you desire coverage as well, buy an owner's policy, which will protect you against any title-search errors and losses that arise from disputes over property ownership. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

Is private mortgage insurance necessary?Lenders require private mortgage insurance (PMI) on most conventional loans with less than a 20 percent down payment. They believe there is a correlation between borrower equity and default. They have found that the less money borrowers put down, the more likely they are to default on a loan. PMI guarantees the lender will not lose money if this happens and a foreclosure is necessary. The buyer pays this insurance, usually a small fee at the outset and a percentage of the face amount of the loan that is added to the monthly payment. What most homeowners do not realize is that the insurance is usually no longer necessary after enough equity has built up in the property. Contact your lender if you meet this requirement and want to drop PMI.A precaution: do not confuse PMI with mortgage life insurance. The latter pays all, or a portion, of your mortgage in the event of your death.

Is it possible to buy a home below market price?Certainly, but do not hold your breath. It takes a lot of determination and time to find a real bargain. But if you are adamant, here are some likely targets to pursue:

• foreclosed property
• a fixer-upper
• hard-to-sell new homes in a housing development
• tenant-in-common partnerships.

With the latter, you may be able to buy a partial interest in this form of title to property owned by two or more individuals because the partners often sell at a discount.However, bargains are easier to come by in a soft real estate market, when the economy is in a recession, and when homeowners, and builders and sponsors of condominium conversions, are desperate to move unsold units.

Are low-ball offers a good idea?Any offer can be presented, but a low-ball one that is extremely less than the asking price can dampen a prospective sale and prevent the seller from negotiating at all. Unless the home is overpriced to begin with the offer will probably be rejected.Do your homework before making an offer. Compare prices of recently sold homes and new listings in the neighborhood. It also helps to know something about the seller's motivation. A lower price with a speedy closing, for example, might motivate a seller who must move, has another house under contract, or must sell quickly for other reasons.Also recognize that while your low offer in a normal market might be rejected at once, it might motivate the seller in a buyer's market to either accept it or make a counter-offer.

Can you negotiate interest rates?A few lenders will negotiate the mortgage rate and number of points on a loan. However, this is more the exception than the rule with established lenders. As always, shop around and know the market before you enter a lender's office. Rates are often published in local newspapers and on Internet Web sites.You may have more luck when dealing directly with a seller who has agreed to finance your loan. He is likely to be more open to negotiation, particularly when motivated to make a quick sale.

What are some negotiating tips?Know the seller's motivation to sell. This will enhance your negotiating position. Sellers who must move quickly due to a job transfer, divorce, or contract on another home, are more inclined to accept a lower price to speed the process along.Remember, too, that the listing, or asking, price is what the seller would like to receive for the home. It is not necessarily what the seller will settle for. So know value. Before you make an offer, check recent sales and listing prices of comparable neighborhood homes and compare them to the seller's asking price.Other tips:

• Be flexible. Never say, "take it or leave it." That can sour negotiations and ruin the deal.
• Never show your hand or reveal your next step.
• Each time you increase your offering price ask for something in return, such as repairs, appliances, even lawn furniture.
• If you plan to pay cash or have a tentative commitment for a loan, use your strong financial position as a negotiating tool.
• Don't let emotions such as pride, fear, love, and anger get in the way of negotiating the best deal. Leave irrational feelings at home.

What contingencies should appear in the offer?When you look to purchase a home, anticipate potential problems. But protect against them so that if something does go wrong, you can cancel the contract without penalty. This is what contingencies allow you to do. They should be included in any offer you present to buy a home.Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on your ability to obtain a loan commitment from a lender, and an inspection contingency, which allows you to have a professional inspect the property.Without contingencies, a buyer could forfeit his deposit under certain circumstances if he backs out of a deal.The purchase contract also should include the seller's responsibilities, such as passing clear title, maintaining the property in its present condition until closing, and making any agreed-upon repairs.

Does the seller take the furnishings once the home is sold?Normally. This is because the fixtures - personal property that is permanently attached to a home, such as built-in bookcases or a furnace - automatically stay with the house unless noted otherwise in the sales contract. Anything that is not nailed down is negotiable, including appliances that are not built in, such as washers and dryers.

Do I need an attorney to buy a home?A lot depends on the state where the property is located. Some require an attorney; others do not.Most homebuyers can generally handle routine real estate purchase contracts as long as they read the fine print and understand all the terms. But pay close attention to any clauses, contingencies, and other special considerations that will allow you or the seller to back out of the contract.When in doubt, consult an attorney. Ask relatives and friends, or your REALTOR®, for recommendations. Call to inquire about their fees and to check their level of experience. Expect that more seasoned attorneys will cost more.

What are closing costs?Closing, or settlement, costs are expenses over and above the price of the property. Both the buyer and seller incur some of these expenses when transferring ownership of a property. Who actually pays, however, often depends on local custom and what the buyer or seller negotiates. Closing costs normally include title insurance, loan points, escrow or closing day charges, property taxes, and document fees. The lender provides an estimate of closing costs for prospective homebuyers.

Is it possible to save on closing costs?Certainly, once you get pass the sticker shock. Closing costs are expensive. They can average between 2 to 3 percent of the total home purchase price. But here are a few ways to save:

• Haggle with the seller. He may pay all or part of the closing costs.
• Nab a no-point loan. You may have to pay a higher interest rate, but if you are strapped for cash and can qualify for a higher interest rate, you may find this type of loan can significantly reduce your closing costs.
• Grab a no-fee loan. Although the fee is usually wrapped into a higher rate loan, it does offer one advantage - you get to save on the amount of cash you would need up-front.
• Secure seller financing. These loans typically avoid the traditional fees or charges imposed by lenders.
• Shop 'til you drop for the best deal. Every lender has its own unique fee structure; you are bound to find one that works for you.

Is there anything I should know about closing day?Yes. The following to-do list can help save you a few headaches and keep the closing on track:

• Keep extra money in your account. Something unexpected can pop up during the closing that will require more money out of your pocket. Take your checkbook. Even better, find out how much you will need to pay and write a certified check for the total amount.
• Take your loan commitment letter. Use it to verify loan approval in case of a mistake or misunderstanding with the lender.
• Take your contract to purchase. Pull it out if something a little suspicious comes up.
• Take your personal ID. A driver's license or other personal identification will due.
• Do a before-closing inspection. It is always a good idea, when possible, to walk through the property to make a list of any problems.
• Utilities. Arrange in advance to have the water and electric meters read on closing day and the service switched to your name to prevent interrupted service. The same applies for the fuel tank.

How can owning a home pay off at tax time?A home provides many tax benefits, literally from the time you buy to the time you sell. The mortgage interest paid on a home loan up to $1 million for a primary residence or second home is tax deductible every year, as is the local property tax. Other mortgage costs - including late-payment charges and early-payment penalties - are also deductible. And if you use a portion of your home for business purposes, you can take a depreciation deduction as well. Many federal tax benefits are also available from local and state tax agencies. Contact your local tax agency for more information.

Are up-front fees and closing costs deductible?Many of the costs paid at closing are not immediately deductible. The exception is points you pay to purchase your home loan. They are deductible for that year. Points paid when you refinance an existing mortgage must be deducted over the life of the new loan.Some fees - including loan application, appraisal, document preparation and recording fees - that are assessed when purchasing a home can be recouped by adding them to the adjusted cost basis, the starting point for figuring a gain or less when selling the home. Significant home improvements also can be calculated into your cost basis.

Are fees and assessments owed a homeowner's association deductible?Generally not because they are considered personal living expenses. But if an association has a special assessment to make capital improvements, condo owners may be able to add the expense to their cost basis when the property is sold. Another exception may apply if you rent your condo - the monthly condo fee is deductible every year as a rental expense.

Are there tax credits for first-time homebuyers?Yes, thanks to the many city and county governments that offer Mortgage Credit Certificate (MCC) programs, which allow first-time homebuyers to take advantage of a special federal income tax write-off. The credit reduces the amount of federal taxes paid by the buyer each year, if he keeps the same loan and lives in the same house.An MCC also makes it easier for eligible buyers to qualify for a mortgage loan. The lender can reduce the housing expense ratio - the percentage of gross monthly income applied toward housing expenses - by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.Program requirements for MCCs vary, although most adhere to the following guidelines:

• The buyer must live in the home being purchased with an MCC-assisted mortgage.
• Total household income cannot exceed certain limits.
• The buyer cannot have owned a principal residence within the past three years. This restriction may be waived if a property is purchased within a certain targeted area.
• The purchase price must fall within an established limit. More information is available by calling your local housing or redevelopment agency, or contacting your REALTOR®.

Why do homeowners have to pay property taxes?Property taxes are assessed by city and county governments to generate the bulk of their operating revenues. The taxes help pay for such public services as schools, libraries, roads, and police protection.Re-valuations of the tax are often done periodically, although the time interval varies from state to state or, in some states, from town to town, and can range from annual reassessments to periods of ten years or more.

How are individual tax bills figured?Unlike the income tax and the sales tax you pay, the property tax is not based on how much money you earn or how much you spend. It is based solely on how much the property you own is worth. The real property tax is an ad valorem tax, or a tax based on the value of property. Ideally, the owners of property of equal value pay the same amount of property taxes, and the owners of more valuable property pay more in taxes than the owners of less valuable property. The tax is calculated using a variety of formulas and is based on a property's assessed value - its full market value or a percentage thereof - and the tax rate of the taxing jurisdiction, minus any property tax exemptions, such as those offered for the elderly or veterans.

Can I contest my property taxes?Many people do, mainly because determining value can often be tricky. This is especially true in a changing market when local prices either take off dramatically or plunge precipitously, like during the Texas oil bust of the 1980s. While it is up to a professional assessor to evaluate property value for tax purposes, property owners are usually allowed to contest their assessment until a certain date after they are made public.Once you contest, you will have to prove why you think your property is worth less - few homeowners contest hoping to pay more taxes! The two most popular ways for determining value are an appraisal and a comparative market analysis. With an appraisal, a professional estimates the property's market value based on recent sales of comparable properties. A comparative market analysis is an informal estimate of market value performed by a REALTOR® based on similar sales and property attributes. Most agents will offer free analyses to win your business. Contact your local tax assessor's office for procedures on appealing your property tax assessment.

What is an impound account?It is a special bank account held by the lender to collect monthly payments from the borrower to pay property taxes, mortgage insurance, and hazard insurance. These accounts also are called escrow or reserve accounts. Lenders like to set up impound accounts to ensure the property taxes and insurance will be paid on time. They typically also collect a two-month cushion for taxes and insurance at the closing. A few states require the lender to pay interest on funds held in these accounts.

Are impound accounts required for all mortgage loans?They can typically be waived on a conventional loan if the loan amount is 80 percent or less of the purchase price. But the lender might charge you an additional 1/4 point for this option to waive the escrow.One way to avoid an impound account on an owner-occupied mortgage is to raise your down payment amount slightly. The exact amount necessary to avoid the escrow will vary with the lender.In some states, lenders let buyers set up separate accounts in which they place specific funds and then pay the insurance and property taxes themselves. These are called pledge accounts, and they must be set up before you close on the home.An impound account can usually be dropped on an owner-occupied loan once the loan-to-value ratio equals 80 percent or less. But restrictions apply: payments will have to be current and your record of making on-time payments pretty solid. Contact your lender if you meet these requirements and want to drop your impound account.

Are property taxes deductible?Yes. Like the mortgage interest paid on a home loan, property taxes are fully deductible from your income. You may deduct them every year on your primary residence, second home and other investment properties.However, escrow money held for property taxes cannot be deducted until the money is actually used to pay the property taxes.

What is a condominium?Condominiums are buildings in which individuals separately own the air space inside the interior walls, floors and ceilings of their unit, but they jointly own an interest in the common areas that they share - such as the land, lobby, hallways, swimming pool, and parking lot.In addition to paying a mortgage, each owner is responsible for paying a monthly fee to the condo association, which is made up of the unit owners. The fee covers maintenance, repairs, and building insurance.Most housing condominiums are apartments, although there are mobile home condominiums as well.

Why buy a condo?They are an appealing way to enter the housing market if the cost of a single-family home is out of your reach. Condos are especially popular among single homebuyers, empty nesters, and first-time buyers in high-priced housing markets. Unlike a house, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. Many condominium communities also offer amenities such as exercise rooms, tennis courts, and swimming pools that you might otherwise be unable to afford if you purchased a single-family home.

How do you choose a good condo?Seek ownership in a well-maintained building, and pay special attention to the financial health of the condo association. Lax maintenance may be a sign of financial trouble, which could result in higher maintenance fees and problems trying to resale the property later.Things to consider:

• Get a copy of the latest financial statement from the condo association.
• Ask the board of directors - which is elected by the unit owners from among themselves - if major repairs or improvements are imminent. If so, find out how much they will cost and whether there is enough money in the reserve to cover them.
• Check the by-laws, rules and the covenants, codes and restrictions (CC&Rs). You may find, among other things, that they prohibit or restrict pets and the renting of units. Some may require that the board have the right of first refusal on the sale of any unit.
• Learn everything you can about the homeowners association, including legal disputes and conflicts. Start by reading the minutes of the association meetings.
• Find out the owner-to-tenant ratio. Because many condominiums are often purchased as investments, there could be a high percentage of tenants in the building.

Are condos good investments?They are a good way to enter into homeownership. The high price of single-family homes and the influx into the housing market of more single homebuyers have made condos relatively hot national investments. They have held their value as an investment despite economic downturns and problems with some associations. Condominium associations have also worked hard in recent years to clean up their image. Disputes and lawsuits were once rampant. But now associations have become savvier about property management and have taken steps to prevent legal problems and disputes.

How do townhouses differ from condominiums?While most condominiums are apartments, a townhouse is attached to one or more houses and can run the gamut from duplexes and triplexes to communities with hundreds of homes. Buyers separately own their homes and the land on which the houses sit. With a condominium, the unit owners jointly own the land and this common interest cannot be separated from the others.Townhouses can be structured in many ways. Some, particularly huge communities, have common areas - such as swimming pools - that are similar to condominiums.

What are the pros and cons of owning a townhouse?On the plus side, exterior maintenance and repairs are minimal; there are no neighbors above or below the home like in an apartment; and because the homes are attached, they may offer a greater sense of security.As for the disadvantages, if there is a homeowner's association, buyers will have to pay a homeowner's fee. There is also less privacy than with a detached single-family home. And there are limits on how you can make exterior changes to the home.

What are co-ops?Cooperative apartments - known as co-ops - are not really owned by people as real property. Instead, people own shares of stock in the company that owns the building in which they live. But for all practical purposes, the experts say owning a co-op is almost like owning real property. Personal loans to "buy" a co-op apartment are written almost like mortgages. And the IRS treats co-op owners much like real property owners. They can deduct interest paid on their apartment loans and on their portion of the municipal taxes and mortgage interest paid by the corporation.Shareholders in a co-op are entitled to occupy specific units, use the common areas, and have a vote in the corporation. To maintain this right, they must pay a monthly fee that covers their share of operating expenses.As for governance, a board of directors, which is elected from among the residents, runs the co-op. Under most bylaws, the board may evict any tenant/shareholder who fails to pay the monthly maintenance fee. Everyone is expected to abide by the rules, which may prohibit pets or even children under a certain age.

What are the benefits of having a co-op?In addition to being able to take advantage of tax deductions, the National Association of Housing Cooperatives (NAHC) says shareholders will find that co-ops have low turnover rates, lower real estate tax assessments, reduced maintenance costs, resident participation and control, and the ability to prevent absentee and investor ownership.Also attractive: housing cooperatives come in all shapes, sizes, and types. They include townhouses, mid-and high-rise apartments, garden apartments, single-family homes, mobile home parks, artists' cooperatives, and senior housing. For more information about co-ops contact NAHC at (202) 737-0797, or log on to www.coophousing.org.

Where can you find fixer-uppers?They are literally everywhere, even in wealthy enclaves. What sets them apart is price. They have lower market value than other houses in the immediate area because they have either been poorly maintained or abandoned.To determine if a property that interests you is a wise investment will require a lot of work. You will need to figure out what the average home in the area sells for, as well as the cost of the most desirable ones.Experts suggest that novices avoid run-down properties needing extensive work. Instead, they recommend starting with a property that only needs minor cosmetic work - one that can be completely refurbished with paint, wallpaper, new floor and window coverings, landscaping, and new appliances.Also, keep in mind that a home price that looks too good to be true probably is. Find out why before pouring your hard-earned money into it.When looking for a fixer-upper, some experts suggest you follow this basis strategy: find the least desirable home in the most desirable neighborhood. Then decide if the expense that is needed to repair the property is within your budget.

Is buying one a good idea in "bad" areas?It depends. So-called "bad" areas - often described as those that are residentially unstable or poor - have offered an affordable means of homeownership for many - particularly young, first-time buyers and low- to moderate-income families interested in a home they can call their own. Whether it is right for you to buy a fixer-upper will depend on your personal threshold for risk and your level of tolerance. That said, however, many run-down neighborhoods, particularly those close to downtown, are benefiting from a residential resurgence as an influx of newcomers jump-start what were once staid, unsafe, or depressed areas.

How do I determine the value of a distressed property?One of the best ways is to get your hands on a comparable market analyses. See what price similar properties have sold for in the past and find out the listing price of others currently on the market.It is important to examine the fixer-upper carefully and figure out how much it will cost to fix any defects or repairs. If you are unable to get in, talk with nearby neighbors about the home's condition.You can also do your own cost comparison by researching comparable properties recorded at the local county recorder's and assessor's offices, or at Internet sites specializing in property records. If the property is in foreclosure, you should get as much information as possible from the lender.

What guidelines should I use to find a contractor?Chances are you will need plenty of help making those major repairs and additions. But the last thing you will need is someone who fails to complete the job or botches it up. Finding good, responsible help is imperative. Here's what you can do:

• Avoid the Yellow Pages. Check with family, friends, neighbors and co-workers for recommendations.
• Deal only with licensed contractors. The state licensing board and local Better Business Bureau also can tell you if there are any outstanding complaints against the license holder.
• Interview each contractor, request free estimates, if possible, and ask for recent references.
• Ask for proof of worker's compensation insurance and get policy and insurance company phone numbers so you can verify the information. If the contractor is not covered, you could be liable for any work-related injury that takes place during the project. Also check to make sure the contractor has an umbrella general liability policy.
• Never hand over a deposit at the first meeting - you could end up losing your money.

What kind of return can I expect from home improvements?This will vary depending on the type of work that is done. Remodeling magazine publishes an annual "Cost vs. Value Report'' that can answer this question in more detail, based on the top 15 home improvements. A recent study it conducted says the highest remodeling paybacks have come from siding and window replacements, major kitchen remodeling, bathroom and family room additions, and mid-range master bedroom suites.An important point to remember is that remodeling not only improves a home's livability, it also enhances its curb appeal with future buyers.

How can I finance work needed on a fixer-upper?According to the Millennial Housing Commission created by Congress, few lenders are willing to administer home improvement loans. Most prefer to make home equity loans or unsecured consumer loans because they are easier to manage. Home improvement loans usually require inspections and irregular draws on the loan amount as work is completed, which requires regional or national lenders to find local partners to provide oversight.Financing repairs and improvements with home equity is okay for most homeowners, but it is difficult for many first-time buyers. They have lower-incomes, smaller savings, and have made lower down payments on their homes than first-time buyers a decade ago. So they have little equity to borrow against. Unfortunately, it is often lower cost older homes purchased by first-time buyers that need the most work.Unless you have a cash reserve, you will have to shop around for the best borrowing terms. In addition to the options listed above, you can ask relatives for a loan. Borrow against your whole life insurance policy. Refinance your existing mortgage. Get a second mortgage. Contact the government about home improvement programs. And - only as a last resort - borrow from a finance agency, which generally tend to charge high rates.

Does the federal government offer home improvement programs?Yes. Among the most popular:

• Title 1 Home Improvement Loan. HUD insures the loan up to $25,000 for a single-family home and lenders make loans for basic livability improvements - such as additions and new roofs - to eligible borrowers.
• Section 203(k) Program. HUD helps finance the major rehabilitation and repair of one- to four-family residential properties, excluding condos. Owner-occupants may use a combination loan to purchase a fixer-upper "as is" and rehabilitate it, or refinance a property plus include in the loan the cost of making the improvements. They also may use the loan solely to finance the rehabilitation.
• VA loans. Veterans can get loans from the Department of Veterans Affairs to buy, build, or improve a home, as well as refinance an existing loan at interest rates that are usually lower than that on conventional loans.
• Rural Housing Repair and Rehabilitation Loans. Funded by the Agriculture Department, these low-rate loans are available to low-income rural residents who own and occupy a home in need of repairs. Funds are available to improve or modernize a home or to remove health and safety hazards.

What about state and local governments?Just about every state now offers loans for renovation and rehabilitation at below-market interest rates through its Housing Finance Agency or a similar agency. Call your governor's office to get the name and phone number of the agency in your area.At the municipal level, many cities also have programs for special improvements to certain blocks and neighborhoods they are trying to spruce up. Call City Hall, as well as a Community Development Agency in your city.

Are special tax breaks available for historic rehabilitation?Certified historic structures now enjoy a 20 percent investment tax credit for qualified rehabilitation expenses, if they are income producing properties. A historic structure is one listed in the National Register of Historic Places or so designated by an appropriate state or local historic district that is certified by the government. The tax code does not allow deductions for the demolition or significant alteration of a historic structure. For more information, contact the National Trust for Historic Preservation at (202) 588-6000, or visit its web site at www.nationaltrust.org.Many states offer tax incentives, reductions and abatement programs for owners of residential historic homes. These programs are described on the National Trust's web site.

Can you negotiate the price of a new home?In real estate, almost everything is negotiable, so it is certainly worth a try. Now, this does not mean the builder will fall down and roll over. It is very common for builders to claim that their prices are based on fixed construction costs. Perhaps, but timing is everything.A builder is more likely to be flexible on price at the very beginning and end of a project. Early on, most developers want to move people in quickly so the project builds momentum. In the end, they may be more inclined to accept lower offers when only a few units are left.If you are unable to negotiate on price, negotiate for a better lot location or amenities, such as a carpet upgrade or light fixtures. A developer will rarely pass up a deal over a few hundred dollars' worth of carpeting.

Should I hire a home inspector for a new home?You would think not since it is new and the developer has to adhere to local construction guidelines. However, err on the side of caution - always hire an inspector, whether the home is old or new.You can ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review.The inspector should either be a professional home inspector, an engineer, an architect or a contractor. When hiring a professional inspector, look for one who belongs to a home inspection trade organization, such as the American Society of Home Inspectors (ASHI). This group has developed formal inspection guidelines and a professional code of ethics for its members. Membership in ASHI is not automatic. Proven field experience and technical knowledge about structures and their various systems and appliances are required.As for rates, they vary greatly. Many inspectors charge about $400, but costs increase based on the scope of the inspection.

What else should I take into account when buying a new home?You can find out more about an existing property and neighborhood before you buy than you can a new home in a newly developed community.When the home is on the outskirts of town, ask the developer about future access to public transit, entertainment venues, shopping centers, churches, and schools. Also review local zoning ordinances. A remote area can quickly turn into a fast food haven. You want to ensure the neighborhood will not spiral out of control and lose its residential appeal.Other things to consider:

• Ask homeowners already living in a development about the builder. If none currently live there, find out where the builder has previously built and speak to those owners to find out if the builder followed through on promises and needed repairs.
• Ability to make changes. Most homes in a development resemble each other. But the developer may impose restrictions on house color, landscaping, renovations, and other items that a homeowner may want to alter.
• Do not buy into the highfalutin images created by marketing experts. Form your own opinions about a property and only buy where you feel comfortable. After all, you are the one who will be living there.

Do builders provide financing?Many builders offer financing incentives to help move more buyers into a project. In fact, major building companies often have their own mortgage brokerage subsidiaries, while many other builders routinely refer buyers to "preferred" local lenders. If it is a buyer's market in your area, you can be sure developers will offer incentives such as low-down-payment financing or interest rate subsidies.

hould I buy a vacation home?The second home market has more ebbs and flows than the primary home market. Sales are iffy in a bad economy except, perhaps, on the high-end. That said, there is a growing trend toward the purchase of vacation homes. They are being bought for investment purposes, enjoyment, as well as retirement. In the latter instance, some people are buying with the idea of turning a vacation home into a permanent retirement haven down the road, a move that puts them ahead of the game now.Some of the tax benefits mirror those for a primary residence. Mortgage interest and property taxes are deductible, which helps to offset the cost of the home payment. And if you treat your second home as a rental property, you can fully depreciate it as well. But you are only allowed to occupy it for two weeks a year, or 10 percent of the total rented time, whichever is less. Before taking the leap, ask yourself if you can afford to carry two mortgages, maintain two households, and pay the extra utilities and maintenance costs. Also, learn about financing requirements and options, which can differ slightly from those on a primary residence.

What about a vacation home as an investment?Like any investment, it can be risky. Location and current market conditions are extremely important when deciding whether to buy. Other things to consider:

• Will you be able to afford repairs, maintenance, insurance, and utilities?
• What about fees to pay agents who rent the property for you?
• If you live several miles away from your vacation home, who will clean up between tenants and take an inventory of household items once the tenants leave?
• What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage?

What causes a foreclosure?A lender decides to foreclosure, or repossess, a property when the owner fails to pay the mortgage. Unfortunately, thousands of homes end up in foreclosure every year. Many people lose their homes due to job loss, credit problems, divorce, unexpected expenses, and during periods of economic instability. Failure to pay property taxes may also cause a homeowner to lose his home. Trouble can also arise when owners neglect to pay local water bills and home insurance premiums.

Where can I find foreclosure properties?Look in the legal notices section of your local newspaper. A notice is also usually posted on the property itself and somewhere in the city where the sale will take place.However, REALTOR®'s are the best source for information about foreclosures before they begin. Often a property will be listed and the agent will know if it is approaching foreclosure. Perhaps the best way to get the information is to have your agent put the word out that you are looking for properties with pending foreclosures.Another source can be the bank or financial institution that holds the mortgage. Of course, they generally will not give you the names of those who are facing foreclosure, but they may give the property owner your card or phone number.Buying foreclosures is not easy. Savvy investors are highly skilled at nabbing these properties. Inexperienced buyers may find themselves surrounded by pretty stiff competition. They will need to get as much information as possible, including a "foreclosure inspectionreport" and an appraisal from the lender.

What happens at a trustee sale?When a homeowner falls behind on three payments, the bank will record a notice of default against the property. When the owner fails to pay up, a trustee sale is held, and the property is sold to the highest bidder. The lender that initiated the foreclosure proceedings will usually set the bid price at the loan amount. Successful bidders receive a trustee's deed as proof of ownership. Trustee sales are advertised in advance and require all-cash bids, which can include cashiers' checks. Normally, a sheriff, constable, or lawyer conducts the sale and acts as the trustee. Because these sales typically attract savvy investors, inexperienced buyers should come extremely prepared.

What are the disadvantages of buying foreclosures?Buying directly at a legal foreclosure sale is risky. Among the disadvantages:

• There is no financing. You need cash and lots of it.
• The title needs to be checked before the purchase. If not, you risk assuming a seriously deficient title.
• It may not be possible to inspect the property's interior before the sale. So you have no idea of the property's condition.
• Foreclosures are routinely purchased "as is," which means you cannot go back to the seller for repairs.
• Also, estate and foreclosure sales are the only property sales that are exempt from some state disclosure laws. In both instances, the law protects the seller - usually the heir or financial institution - who has recently acquired the property through adverse circumstances and may have little or no direct information about it.

How do I find government-repossessed properties?The Department of Housing and Urban Development (HUD) acquires properties from lenders who foreclose on mortgages that it insures. These properties are then available for sale to potential homeowner-occupants and investors only through a licensed real estate broker. HUD will pay the broker's commission up to 6 percent of the sales price.The Department of Veterans Affairs (VA) also acquires properties as a result of foreclosures on VA guaranteed loans. These acquired properties are marketed through a property management services contract with a federal bank that then lists them for sale with local REALTOR®'s.

What are some of the guidelines for purchasing HUD foreclosures?If you have the cash or can qualify for a mortgage, you can buy a HUD home. Down payments vary depending on whether the property is eligible for FHA insurance. If so, the down payment can be lower than the 5 to 20 percent required on conventional loans. HUD requires that all accepted offers be accompanied by an earnest money deposit equal to 5 percent of the bid price, not to exceed $2,000, but not less than $500.Foreclosure properties are sold "as is," meaning limited repairs have been made but no structural or mechanical warranties are implied. If a HUD home needs to be fixed - and not all of them do - it can still be a bargain. HUD adjusts the asking price to reflect the fact that the buyer will have to invest money to make improvements. The agency also might offer special incentives such as an allowance to upgrade the property or a bonus for closing the sale early. And buyers can request that HUD pay all or a portion of the financing and closing costs. Contact your REALTOR® for more details.To learn more about HUD foreclosures, visit their web site at www.hud.gov.

What about guidelines for VA foreclosures?As with HUD, anyone can purchase a VA home. Qualified buyers also can receive the benefit of a VA loan - no money down - even if they are not veterans. If you are interested in purchasing a VA foreclosure, visit its web site, www.va.gov

Why is location so important?Location remains the single most important factor when choosing a home. It can make or break the value and desirability of a home.Because everyone's preferences vary, your lifestyle will determine the best place for you to live. Some people prefer the suburbs while others thrive on downtown living. If you favor city living, find out what part of the city suits you best - a fast-paced neighborhood or one slightly more subdued. Talk with the neighbors and keenly observe such things as traffic patterns, lifestyles, and even sounds and smells.When choosing a town, take property taxes, schools, accessibility to work, services, recreation, and the character of the community into consideration. 

A Sellable Home

• Curb-appeal is often underrated and dismissd by sellers, but it is actually the image most buyers remember the most and it can make a significant difference in the price offered for your home. For that reason alone, the exterior condition, and espcially that of your front entrance, play a crital role in the sale of your home.  Another critical piece of the puzzle is your landscaping. Therefore you really should address any shortcomings and replace anything broken or worn out. Consider a coat of paint, some new hardware, mulching your flower beds, keeping the lawn mowed, maybe invest in some new plantings. These are some improvements that make a big impact with buyers and deliver the highest returns.
   
• The overal feel of the interior of your home should enable buyers to envision themselves living there. For that reason, we often ask sellers to pack away most of their personal items, so that the house has a more "neutral" feel. Remove any clutter and check to see that all closets are cleaned out and organized. Clean windows are another factor that has a tremendous effect on how the buyers see your house and what they are willing to pay for it. Clean, unobstructed windows give the illusion of space and let in more light - something all buyers are looking for.
   
• If your walls and ceilings look drab, a fresh coat of paint can do wonders. If you have carpet that is worn, it might help to have it professionally cleaned and/or replaced. Scratched up or worn hardwood floors can be refinished to look like new. And broken or loose tile should be replaced. Any of these investments will help with the sale of your home and in most cases will result in a much higher sale price.

Pricing Your Home

• It is the list price that will play the most critical role in determining when and for how much you will sell your home. Real estate agents would love to have an easy pricing tool, or formula, to value any type of home. But coming up with an asking price is not exactly a science... it is an art. While you and your agent (hopefully you hired me) have to pay close attention to recent and past sales, current listings, as well as market conditions and trends, it is vital to postion your home price-wise so that it stands out positively from the rest of the for sale listings nearby.
   
• If you price it to high it will simply sit on the market for a long, long time because almost every buyer will be informed by their agent that it is over-priced, and eventually you'll have to lower the price, sometimes repeatedly, until it ends up where it should have been price-wise to begin with. Many times over-pricing also discourages potential buyers to even make an offer since they'll presume you are not realistic and are most likely hard to negotiate with. And the longer your house sits on the market the more buyers will think something is wrong with it.
   
• If you price it to low, three things can happen: it either receives multiple offers (highly likely), or just one offer at your asking price, or an even lower one (happens frequently). When you do receive multiple offers there is a good chance that you can get them to outbid each other by asking all of them to provide their "highest & best offer" by a set day and time. In such a scenario you can at times reach a lofty price for your home. And that is a great thing if the winning offer is all cash and there is no appraisal contingency connected to it. However, most of the time your home for sale will have to appraise because with most offers there is a mortgage involved. And the lender will send an appraiser out to make sure the buyer is not paying to much. And then there is the even lower offer where you are in danger of leaving a lot of money on the table by just accepting it or by not negotiating it correctly.
   
• A smart asking price on the other hand is the one set just a little bit under what your home should bring based on current comps. Your local Realtor can help you greatly with supplying comparables to find out what your neigborhood market is really like. Such an asking price will still attract multiple offers in most cases and prevent you from selling for to little. It also creates urgency on the part of potential buyers that really like and want your home and encourages them to make strong offers right of the bat. Such a strategy almost always shortens the time your home is on the market and usually results in a much better price above market value. 

Marketing Your Home For Sale

• The first week on the market will be your most active one. Your agent will arrange for a photographer to take professional photos of your home and a Broker Open House will be conducted. You will have worked out with your agent showing instructions and you will begin to get traffic.
   
• One of the most valuable marketing tools an agent can provide is the Multiple Listing Service (MLS). This is a professional and secure data exchange where your agent posts your property for sale and shares them with all of the participating real estate brokers and their agents. This can only be done by an agent that is a member of your local MLS. Most of your showing traffic will result from this marketing venue.
   
• The next best marketing tool is the Internet, commonly known as the Web. According to some statistics, as many as 80% of home buyers begin their search on real estate related Web sites. There are many ways your agent will leverage and utilize the Internet to market your home: IDX participation, company Web sites, his/her own agent Web site, and/or social media venues, all decked out with detailed descriptions, photo slide shows, videos, virtual tours, floor plans, and more of your home for sale.
   
• Although my company and I place great emphasis on the Internet, by no means do we intend to eliminate print advertising. We provide comprehensive multi-media solutions which take into account the portions of society who enjoy reading newspapers, magazines and direct mailings, so we continue to use these vehicles to promote properties. Ask me to elaborate on all of the tools available and used by me to market your home for sale.

The Offer

• If you have prepared your home for sale, comprehensive multi-media marketing has been done in a timely manner, and most importantly if you have priced your home correctly, you should get an offer(s) soon after you place your home on the market. All such offers should be in writing, along with a pre-approval letter from the buyer's lender, or a proof of funds statement from the buyer's bank in case of an all cash offer. Your agent will make sure to qualify the buyer so that no time is wasted. Any viable offer will be comprised of both the price and terms (closing date, financing details, inspections, other contingencies, etc.). Your agent will explain the details and advise you on negotiations.

Acceptable Offer, Inspections & Purchase Contract

• Once you and the buyer reach an agreed upon price and terms of sale, you can accept their offer. This simply means that you made a verbal agreement, but by no means does this mean you cannot entertain other offers. 
   
• After you accepted the offer inspections will most likely be scheduled and your agent will help facilitate access to your property and listen in. If there are any issues brought up by the buyer and/or his attorney you will be notified by your agent and/or attorney so you can negotiate and/or remedy them with their help. If there are no issues or the issues have been worked out to everyone's satisfaction your attorney will create the purchase contract.
• Only after the purchase contract has been approved and fully executed (signed by buyer & seller) and the agreed upon down payment has been deposited with your attorney are you in contract. Both parties are now bound by the purchase contract and you can no longer solicit and entertain other offers. Please consult with your attorney for more details on this subject.
   
• A copy of the fully executed contract will be given to the buyer's lender and an independent appraiser will visit to ascertain the market value of your home. Once the lender and their underwriter are fully satisfied the lender will provide the buyer with a final commitment letter and a closing date, time and location will be arranged. This lender approval process can take anywhere from 30 to 90 days from the day the purchase contract was fully executed.

What Else

• Soon you will be busy arranging for movers and getting prepared for the next chapter in your life. As you get closer to the closing, you should call the utility company and arrange to close your accounts on the date of the closing, and the buyer should be calling the utilities to take over as of the day of the closing. 
   
• In addition, put together the keys and any documents that pertain to the house as well as important contact info such as the gardener, landscaper, pool man, etc. to provide to the buyers at closing. If you still have any manuals/warranties for your appliances, heating & A/C equipment and/or other systems provide them as well.

Walk-Through

• There is no reason for you to be at the final walk-through. It will be conducted as close to the closing date as possible. If you agreed to be responsible for any repairs to the house during negotiations, this is the time when the buyer has the opportunity to check to be sure that everything was done. Make sure the house is empty, "broom swept" and clean. Leave only items that you agreed on leaving during negotiations.

Closing

• At the closing, you will be receiving funds and more than likely paying off a mortgage. Your other costs will be limited to attorney's fees, transfer tax, the real estate commission, and any moneys you may have agreed to paying during negotiations. A typical closing takes a few hours and will be attended by the buyers and their attorney, you and your attorney, the lender's attorney, the title person, and the real estate agents involved. Please consult with your attorney for more details on this subject.

A thorough assessment of your home's condition is crucial before you start making plans to sell it. There are of course the obvious defects and there are at times hidden ones. To avoid costly pitfalls it is a good idea to get someone qualified, such as a home inspector or engineer, to look your home over and to create a report as to it's condition. Your Seller's agent will be able to provide you with a list of reliable and trustworthy service providers in your area.

While repairing all defects is an absolute must if you want to maximize the return on your home there are other crucial steps that should be taken prior to offering your home for sale, such as painting, cleaning, de-cluttering and staging your home. Staging is actually not about decorating, but turning your home into a model, and to appeal to the broadest range of prospective buyers possible. The goal is to make people feel like they could live there, and the best way to do this is to "neutralize" the surroundings.

Again your Seller's agent can play a vital role in this and guide and help you to prepare your home inside and out for a timely and profitable sale.Once your home is ready and goes on the market, it becomes a product. Pricing this product on your own can be very difficult at times. Your Seller's agent will be an invaluable asset because he or she is not emotionally attached to your property and can see it in a more realistic light.Your Realtor will create a Comparative Market Analysis based on recent sales and currently listed for sale properties in your neighborhood. This CMA will also factor in upgrades, the age and quality of improvements and renovations, and the current market conditions and trends. With this information at hand you'll be able to set an advantageous asking price.

Well kept homes that show well and are priced sensibly will almost always attract multiple Buyers and offers and in the end sell faster and at a higher price.Overprized homes on the other hand will not draw much interest and therefore sit on the market for a long time especially if they are in poor condition or disrepair. Eventually they will require downward price adjustments, and at times several ones. In the end it leads in many instances to a lower selling price as well. 

Most sellers have an emotional connection to their home and feel it deserves top dollar when sold. Everyone naturally wants to get the most money for his or her product.

Therefore I like to offer you some practical advice for establishing a fair, competitive and marketable sale price for a home:

Square footage. Total square footage is an important consideration when establishing a home's sale price, but this is usually just a starting point for buyers who will use it to narrow down the field, but make an actual purchase decision based on many other factors.

Location within community. Quiet cul-de sacs, golf or water frontage, lots that offer privacy are value add-ons that can justify a higher sale price over other homes in a community - or be leveraged as an advantage against competing listings.

Views... or lack thereof. Whether it is the ocean, a downtown skyline, the mountains, water or some other desirable landscape, buyers are willing to pay a premium for views and a home should be priced accordingly. Just be realistic - views that can only be seen from the second story bathroom window don't count.

Upgrades and features. For a home to sell quickly and for the price desired, it must be "finished" with as many exterior and interior design upgrades as possible. Any functional or beautification enhancement to a home are key considerations in establishing a home's true value, desirability and strategic sale price.

Community amenities. Secure communities or those with amenities such as a clubhouse, playground, swimming pool or fitness center are elements that raise a home's price. When pricing a home without these benefits, know whether you are competing against other homes that do offer such value add-ons so that you can price your home as aggressively and competitively as possible.

Comparable sales. You no longer can price your home based on price per square footage of other home sales in your community which happened 3 or more months ago, as these do not offer a realistic portrayal of current market conditions and trends. Focus more on prices of just sold homes and active property listings to arrive at a competitive pricing strategy.

Professional appraisal. Want to sell the home quickly? Price it at or below the appraised value. Buyers are educated, they are shopping deals, and they will recognize your fair price and be more apt to pay it with less haggling.

Current mortgage conditions. Lenders now require higher credit scores and higher down payments, which can cash strap buyers holding out for the best deal possible. Savvy sellers will understand the mortgage industry's impact on the buyer and will price accordingly or offer even seller financing in some cases.

 Please also explore my home staging tips section for further information on how to maximize the return on your real estate sale.

When is the best time to sell a home?The best time to sell is when you are ready, or when you must. That is, when you have outgrown the space in your current home, or you prefer to trade down to something smaller. Perhaps your martial status has changed, which necessitates a move, or you need to relocate for a job.Market conditions also play a role, as do seasonal conditions. For example, your chances of getting top dollar for your home are more likely in a seller's market, when demand outweighs supply, than in a buyer's market. Local and national economic factors also may dictate when to sell. If a major employer in your area is laying off workers, it may not be a good time to put your home up for sale. People will be cautious about buying when the future seems so unpredictable or bleak.Most agents agree the best time to sell is in the spring. This is when the largest number of potential buyers hit the market. Your home is likely to sell faster and at a higher price, although sales begin to pick up as early as February and start to slack off in July, the slowest month for real estate transactions.

What should I do to prepare my home for sale?Start by finding out its worth. Contact a REALTOR® for a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Or get a certified appraiser to provide an appraisal.Next, get busy working on the home's appearance. You want to make sure it is in the best condition possible for showing to prospective buyers so that you can get top dollar. This means fixing or sprucing up any trouble spots that could deter a buyer, such as squeaky doors, a leaky roof, dirty carpet and walls, and broken windows.The "curb appeal" of your home is extremely important. In fact, it is the first impression that buyers form of your property as they drive or walk up. So make sure the lawn is pristine - the grass cut, debris removed, garden beds free of weeds, and hedges trimmed.The trick is not to overspend on pre-sale repairs and fix-ups, especially if there are few homes on the market but many buyers competing for them. On the other hand, making such repairs may be the only way to sell your home in a down market.

What else should I know?Once your home is available to be shown strive to keep it in tip-top shape. This will require a lot of effort on your part, but you want buyers to feel welcomed and not turned off by unmade beds, cluttered floors, and grungy bathrooms.Realize, too, that your life will be temporarily inconvenienced. When an agent - yours as well as others - calls wishing to bring a buyer to see the home at the last minute or on the same day, respond favorably. Remember your goal is to get the home sold, and that can only be accomplished if people get to see it. Flexibility is the key to a quick sale.Plan not to be present when buyers pass through. It is awkward and unsettling for them to have the owners present. If you cannot leave, sit in the backyard. But do not attempt to have conversations with the buyer. Speak only when spoken to; be brief and polite.Finally, pay special attention to pets, particularly dogs. They can be intimidating. Put them on a leash and in the backyard. Better yet, when possible, take them with you. And be keen to pet odors. They can turn buyers away.

Should I sell my home first or wait until I have bought another home?This is a tough decision, but the answer will depend on your personal situation, as well as the condition of the local housing market. If you put your home on the market first, you may have to scramble to find another one before settlement, which could cause you to buy a home that does not meet all your requirements. If you cannot find another home, you may need to move twice, temporarily staying with relatives or in a hotel. On the other hand, if you make an offer to buy first, you may be tempted to sell your existing home quickly, even at a lower price.The advantage of buying first is you can shop carefully for the right home and feel comfortable with your decision before putting the existing home on the market.On the flip side, the advantage of selling your existing home first is that it maximizes your negotiating position because you are under no pressure to sell quickly. It also eliminates the need to carry two mortgages at once. Talk with your agent for advice. Discuss the pros and of each and whether certain contingencies written into the contract can ease some of the pressures.

Are there tips for selling a vacant home?Yes. Once furniture is removed from the home, you will notice all kinds of imperfections you never paid attention to before - rips in the carpet, holes in the walls, and dinginess. In an empty house, everything stands out. What you see is what potential buyers will also see. So you may need to paint, tear up old carpet, and replace the kitchen floor.To get rid of the "empty house" feeling, leave a few pieces of furniture behind - simple things like a lamp, chairs, and a table will do.Pay special attention to maintenance. Someone will need to dust and vacuum, leaves will need to be raked, and the grass cut.In the winter, consider having the heating system shut down and drained to save money. But keep the electricity running because lights will be needed to show the house.Watch out for that musty smell, particularly during the summer months, that settles in from having the windows sealed and locked. And beware of pests such as mice, squirrels, ants and bats.

How can I get a quick sale, particularly in a slow market?One of the most important things to consider is price. You may want to reduce the price of your home or, at the very beginning, set it at a low price that will generate more buyer interest.Cash is often an incentive, both for the buyer as well as the agent. You could offer the buyer a $1,000 to $2,000 decorating rebate upon closing the deal. It is also not uncommon to offer the selling agent a $500 bonus. However, some brokers - who supervise agents and run real estate offices - may prohibit such incentives, as do some Realtor boards. Check to find out.Other common incentives: paying for the property inspection and warranty policy and getting your home preliminarily approved for FHA and VA loans, thereby making it more attractive to a larger number of buyers. Contact a lender who writes FHA-insured and VA-guaranteed loans.

What are some costs associated with selling my home?Besides the costs related to making repairs and improving the overall appearance of the home, as the seller you will also need to pay the following:

• A real estate commission, if you use an agency to sell.
• Advertising costs, marketing materials, and other fees if you sell the home yourself.
• Attorney, closing, or other professional fees.
• Title insurance
• Excise tax for the sale.
• Prorated costs for your share of annual expenses, such as property taxes, homeowner association fees, and fuel tank rentals.
• Any other fees normally paid by sellers in your area, including points, survey, and appraisal fees.

To get a better handle on all costs, ask a REALTOR®. Agents deal with this information daily and can give you a pretty good estimate of the closing costs you can expect to pay.

What are some costs associated with buying a new home?Basically, the costs are no different from when you purchased your existing home. They include moving expenses, loan costs, the down payment, a home inspection, title work and policy, and paying for a new hazard insurance policy. Your lender can give you a disclosure of estimated costs when you apply to be pre-approved for a home loan.

Do I need an attorney to sell a home?Although most sellers can handle routine real estate purchase contracts, some experts say it is a good idea to be represented by an attorney, particularly if you are selling on your own. You should choose one with expertise in real estate transactions. Before hiring someone discuss all the details of the transaction, including all legal costs you will incur. A good attorney will assist you in completing the deal swiftly and with confidence.

How do I find the right agent for me?To begin with, think local. Select someone who is very familiar with your neighborhood and the properties for sale in it. Then, if you are selling, say, a condominium, choose an agent with expertise selling apartments to potential homeowners.Because you will want the widest possible exposure for your home, you also will want a real estate firm that works with other agencies to get your property sold. The Multiple Listing Service (MLS) used by Realtors, licensed members of the National Association of Realtors, is still the most common and effective form of cooperation used today.Beyond these parameters, select an agent who is competent, efficient, and ethical. Perhaps the agent who first sold you your home would be a perfect candidate. If not, ask family, friends, and neighbors for recommendations, or choose a firm headed by an individual who is known in your community.

What questions should I ask an agent interested in selling my home?Interview at least three local agents who sell homes in your community. Grill them about the following:

• The worth of your home. The agents should inspect the home and prepare a written comparative market analysis.
• Marketing plans. These are a must. Make sure they include regular newspaper ads, the local Multiple Listing Service (MLS) - which gives your home maximum exposure to all local agents - and Internet marketing through the agent's Web site.
• Length of the listing agreement. A 90-day listing is reasonable for marketing your home. Experts advise against signing a listing for more than 90 days unless it contains an unconditional cancellation clause. If you like, you can always extend the contract later.
• Number of listings. Find out how many listings the agent now has and how many she normally sells. Too many listings - more than a dozen - with a low sales rate, may not be a good sign.
• Get references. Ask for the names and phone numbers of recent home sellers. Call them and ask if they were satisfied with the level of service delivered by the agent.

What is the most common type of contract for listing properties?The exclusive right to sell. It gives the real estate broker the exclusive right to sell your home during the term of the listing. If a sale occurs - even if you sell the home yourself - the broker gets a commission. The broker may share the listing with other brokers on the Multiple Listing Service (MLS) to get the widest possible exposure for your home. If you request that the property not be listed on a multiple basis, only the broker named in the contract and his or her sales agents can market and show it.

What if I am not happy with the listing agent and want to terminate the contract?Experts say unhappiness is not a legal reason to terminate a valid home sale-listing contract. Legally, to cancel a listing, you must be able to prove the agent's lack of "due diligence." This means the agent isn't taking the normal steps to properly market your home, such as putting your listing into the Multiple Listing Service (MLS), advertising on the Internet and in local newspapers, and posting a for-sale sign on the property.If your home is overpriced, perhaps you need to consider reducing the price to spark buyer interest. Otherwise, you may need to meet with the listing agent and his or her supervising broker to discuss the problem. If the agent is doing an awful job, you might suggest the listing be transferred to a more effective agent within the same brokerage firm.Remember, limit the listing contract to 90 days, in case you become unhappy and would like to get another agent after the contract expires.

Do I really need an agent?Most home sellers hire REALTOR®'s to list and sell their homes. Most of those who do not are known as For Sale By Owners, or FSBOs. They market and sell their homes themselves.However, a small number of people sell without marketing their homes. They include homeowners who transfer property to family members or landlords who directly offer tenants the first right to purchase property before they place it for sale on the market.In the end, most FSBOs eventually hire an agent because the agent will handle all the details of a successful home sale - including the contract, forms, and disclosure statements - and expose the home to the widest range of prospective buyers through the local Multiple Listing Service (MLS).

Is the commission negotiable?Yes. There is no standard commission. They are not set by law and vary depending on service, customer needs, and company policy. In general, agents charge between 4 percent and 8 percent for full service. Some agents prefer not to offer sellers' the option of paying a fee for an individual service. If you insist on overpricing your home, an agent may well insist on a higher commission to cover the added marketing expenses and time that are needed to sell it.Think of a commission as a point you must negotiate and evaluate.

How do you determine how much a home is worth?The short answer: a home is ultimately worth what is paid for it. Everything else is really an estimate of value. Take, for example, a hot seller's market when demand for housing is high but the inventory of available homes for sale is low. During this time, homes can sell above and beyond the asking price as buyers bid up the price. The fair market value, or worth, is established when "a meeting of the minds" between you and the buyer takes place.

Are there standard ways to determine how much a home is worth?Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value.Your REALTOR® can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpricing your home or underestimating its value.A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home.You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home's potential worth.

What is the difference between list price and sales price?The list price is your advertised price, or asking price, for a home. It is a rough estimate of what you want to complete a home sale. A good way to determine if the list price is a fair one is to look at the sales prices of similar homes that have recently sold in the area.The sales price is the actual amount the home sells for.

What about appraised value and market value?A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors.Market value is the price the house will bring at a given point in time, once you and the buyer establish a "meeting of the minds" on price.

Do I have to disclose information about my home?Disclosure could protect you from a lawsuit. Today, home sellers in most states must now fill out a form disclosing material facts about their homes. Material facts are details about the home's condition or legal status, as well as the age of various components.If your state does not require a written disclosure, the real estate laws probably require sellers to disclose any known problems with the home they are selling.

What kinds of things are considered material facts?The following examples include details that would qualify as material facts that must be revealed by sellers about their homes:

• Damage from wood boring insects
• Mold or mildew in the home
• Leaks in the roof or foundation walls
• Amount of property taxes paid annually
• Problems with sewer or septic systems
• Age of shingles and other roof components
• A buried oil tank
• Details about any individual who claims to have an interest in the property
• Information about a structure on the property that overlaps an adjacent property

Some things are not material facts and do not have to be disclosed. They include personal information about the seller and the seller's reason for moving.Among those things that may or may not be material facts: whether a death took place in the home or whether a home is considered haunted.

Are agents responsible for disclosing material facts?They can certainly be held accountable, particularly if they had prior knowledge of a material fact or should have known about it.For example, if the seller has to use pans to collect water after a heavy rain, it is the agent's responsibility to question the seller about the integrity of the roof, and then relay this information to potential buyers. However, if the seller duly hides a defect from the agent for which the agent had no prior knowledge, then the agent is not accountable. Experts say agents are not home inspectors, but they are expected to use their best judgement when something appears suspicious.

Any advice on negotiating?Be patient, know your home's worth, adopt a positive attitude, and do not let emotions - anger, pride, greed, or prejudice - get in the way of negotiating the best deal.Your home obviously means a lot to you, but you have already made the decision to move on, so begin to think of your home as "the house" or "the condo," instead of "my home."When reasonable offers come along, take them seriously. You can always counter any offer made by the buyer that comes near your asking price. Do not spoil a good deal over a few hundred dollars.

How do I respond to a low-ball offer?Let your agent know it is too low to warrant a counteroffer and that you are willing to negotiate but only once a more reasonable offer is made. Ask the agent if the buyer was shown comparable market values of similar homes that have recently sold in your area; and ask if the buyer was ever properly qualified. You do not have to settle for less if you are realistic about your chances of getting more.

Do I have to consider contingencies made by the buyer?You can reject, accept, or counter any offer that is presented to you. Most offers include contingencies, which protect the buyer in case something goes wrong.The two most common contingencies deal with financing, which makes the sale dependent on the buyer's ability to obtain a loan commitment from a lender within a stated time period, and an inspection, which allows the buyer to have a professional inspect the property to their satisfaction.There really is no reason not to consider these contingencies because they are quite reasonable and standard.However, think twice about a contingency that is predicated on you making expensive home repairs, such as a kitchen renovation. Now, if the roof is caving in, that is an entirely different story. You may need to spend money to replace it or lower the asking price of the home.

Can the seller also include contingencies in a contract?Yes. For example, if you decide to sell your existing home first before buying another one, you can make the sale of your home contingent on finding a replacement home. Some sellers opt for this contingency to avoid a double move, such as moving to a hotel or rental until a new home is found and made available. However, there is one problem with this type of contingency: it can inconvenience the buyer, particularly if his own home is in escrow. He may not be willing to wait for you to move.This strategy has a better chance of working when the market is relatively strong, your home is a rare find, the price and terms of the transaction are very favorable for the buyer, or the buyer is in no hurry to move.

What is a bridge loan?It is a short-term bank loan of the equity in the home you are selling. You may take out a bridge loan, or interim financing, to help with a knotty situation: closing on the home you are buying before you close on the property you are selling. This loan basically enables you to have a place to live after the closing on the old home.The key to a bridge loan is having a qualified buyer and a signed contract. Usually, the lender issuing the mortgage loan on the new home will write the interim financing as a personal note due at settlement on the property being sold.If, however, there is no buyer for the property you have up for sale, most lenders will place a lien on the property, thereby making that bridge loan a kind of second mortgage.Things to consider: interest rates are high, points are high, and there are costs and fees involved on bridge loans. It may be cheaper to borrow from your 401(K). Actually, any secured loan is acceptable to lenders for the down payment. So if you have stocks or bonds or an insurance policy, you can borrow against them as well.

What is seller financing?Also known as a purchase money mortgage, it is when the seller agrees to "lend" money to the buyer to purchase and close on the seller's home. Usually sellers do this when money is tight, interest rates are high or when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price. Seller financing differs from a traditional loan because the seller does not actually give the buyer cash to complete the purchase, as does the lender. Instead, it involves issuing a credit against the purchase price of the home. The buyer executes a promissory note or trust deed in the seller's favor. The seller may take back a second note or finance the entire purchase if he owns the home free and clear.The buyer makes a sizeable down payment and agrees to pay the seller directly every month.

What are the benefits of seller financing?Seller financing is a viable option when the seller does not immediately need the entire cash equity they have accumulated in the home. In return for providing financial assistance to the buyer, the seller receives tax benefits, attracts a larger pool of potential buyers, generally completes the sale sooner, and gets good interest earnings.As for the buyer, seller financing offers less rigid qualification requirements and cost savings by eliminating nearly all loan fees.Fear of default often makes many sellers reluctant to take back a second note or finance the entire purchase. A thorough credit check should help to dispel many of these fears, although the mortgage also allows the seller to foreclose on the property in case of default.A seller may also require the buyer to carry hazard insurance on the property and include a due-on-sale clause, a provision in the mortgage note that allows the seller to demand full repayment if the borrower sells the property. Other financing, disclosure and repayment-term requirements also will need to be met.It is a good idea to consult an attorney when putting together this kind of transaction.

How does the seller determine what rate to provide?The interest rate on a purchase money note is negotiable, as are the other terms in a seller-financed transaction. To get an idea about what to charge, sellers can check with a lender or mortgage broker to determine current rates on mortgage loans, including second mortgages.Because sellers, unlike conventional lenders, do not charge loan fees or points, seller-financed costs are generally less than those associated with conventional home loans. Interest rates are generally influenced by current Treasury bill and certificate of deposit rates.Understandably, most sellers are not open to making a loan for a lower return than could be invested at a more profitable rate of return elsewhere. So the interest rates they charge may be higher than those on conventional loans, and the length of the loan shorter, anywhere from five to 15 years.

What is a lease option?It is an agreement between a renter and a landlord in which the renter signs a lease with an option to purchase the property. The option only binds the seller; the tenant has a choice to make a purchase or not.Lease options are common among buyers who would like to own a home but do not have enough money for the down payment and closing costs. A lease option may also be attractive to tenants who are working to improve bad credit before approaching a lender for a home loan.A lease option also may be a way for the seller to move property in a slow market. Seller advantages include earning above-market rent, retaining all the property income tax deductions during the lease-option period, and attracting tenants who will care for the property as though they owed it.

How does a lease option work?A landlord agrees to give a renter an exclusive option to purchase the property. The option price is usually determined at the outset, but not always, and the agreement states when the purchase should take place - whether, say, six months, or a year or two down the road.A portion of the rent is used to make the future down payment. Most lenders will accept the down payment if the rental payments exceed the market rent and a valid lease-purchase agreement is in effect.Before you opt to do a lease option, find out as much as possible about how they work. Talk to REALTOR®s, read published materials, and, in the end, have an attorney review any paperwork before you and the tenant sign on the dotted line.

How do capital gains work when you sell your home?If you sell your primary residence, you may be able to exclude up to $250,000 of gain - $500,000 for married couples - from your federal tax return. To claim the exclusion, the IRS says your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale.You also must not have excluded gain on another home sold during the two years before the current sale. However, special rules apply for members of the armed, uniformed and foreign services and their families in calculating the 5-year period.If you do not meet the ownership and use tests, you may use a reduced maximum exclusion amount. But only if you sold your home due to health, a change in place of employment, or unforeseen circumstances.If you can exclude all the gain from the sale of your home, you do not report it on your federal tax return. If you cannot exclude all the gain, or you choose not to, you must use Schedule D of Form 1040, Capital Gains or Losses, to report the total gain and claim the exclusion you qualify for.

What if you have more than one home?For more than one home, you can exclude the gain only from the sale of your main residence. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is usually the one you live in most often

Can I deduct a loss on the sale of my home?No. A loss from the sale of personal-use property, such as a home or car, is not deductible. They are considered nondeductible personal losses, and you cannot reduce your tax bill by deducting them the way you would deduct stock and investment losses on your tax returns.

Are home selling costs deductible?If you sell your home and realize a taxable gain even after the exclusion, you can reduce your gain with selling costs.Your gain is defined as your home's selling price, minus deductible closing costs, minus your basis. The basis is the original purchase price of the home, plus improvements, less any depreciation.Real estate broker's commissions, title insurance, legal fees, administrative costs, and inspection fees are all considered to be selling costs.

Can I deduct improvements made to my home?Yes, but only after you have sold it because improvements add to the basis of your home. Remember your gain is defined as your home's selling price, minus deductible closing costs, minus your basis. The basis is the original purchase price of the home, plus improvements, less any depreciation.The IRS defines improvements as those items that "add to the value of your home, prolong its useful life, or adapt it to new uses" - such as putting in new plumbing or wiring or adding another bathroom.

What about repairs made to get the home ready for sale?If you realize a taxable gain after you sell your home, even with an exclusion, you can reduce your gain with selling costs. These selling costs may include items that are otherwise considered to be repairs - such as painting, wallpapering, even planting flowers - if you complete them within 90 days of your home sale and provided they were completed to make the home more saleable.

Are seller-paid points deductible?For the buyer, yes, but not the seller - even though the seller pays them. Since January 1, 1991, homebuyers have been able to deduct points paid by the seller whereas, previously, they could only deduct the actual points they paid on the home loans themselves

If faced with foreclosure, what are my options?Talk with your lender immediately. The lender may be able to arrange a repayment plan or the temporary reduction or suspension of your payment, particularly if your income has dropped substantially or expenses have shot up beyond your control. You also may be able to refinance the debt or extend the term of your mortgage loan. In almost every case, you will likely be able to work out some kind of deal that will avert foreclosure.If you have mortgage insurance, the insurer may also be interested in helping you. The company can temporarily pay the mortgage until you get back on your feet and are able to repay their "loan."If your money problems are long term, the lender may suggest that you sell the property, which will allow you to avoid foreclosure and protect your credit record.As a last resort, you could consider a deed-in-lieu of foreclosure. This is where you voluntarily "give back" your property to the lender. While this will not save your house, it is not as damaging to your credit rating as a foreclosure. Exhaust all other viable options before making a decision.

What types of foreclosures are there?There are two types - judicial and non-judicial. A foreclosure that results from a court action is a judicial foreclosure. The mortgage deed or trust does not have a power of sale clause, therefore the lender, trustee or another lienholder must take the borrower to court to recover the unpaid balance of a delinquent debt. By contrast, a non-judicial foreclosure is one in which a foreclosure can be completed outside the court system. Real property can be sold under a power of sale in a mortgage deed or trust that is in default, but the lender is unable to obtain a deficiency judgment.

Can a home be sold for less than its mortgage?Sometimes. But it is a complicated process and a lot will depend on the lender.This process is called a "short sale," which occurs when a lender agrees to write off the portion of a mortgage that's higher than the value of a home. But, usually, a buyer must be willing to purchase the property first. A short sale may be more complicated if the loan has been sold in the secondary market. Then the lender will need permission from Freddie Mac or Fannie Mae, the two major secondary-market players.If the loan was a low down payment mortgage with private mortgage insurance, the lender also will need to involve the mortgage insurance company that insured the low down payment loan.The short sale can keep the homeowner from landing in bankruptcy or foreclosure. But it is not an easy procedure to approve, and it involves as much, if not more, paperwork than an original mortgage application. Instead of proving your credit worthiness and financial stability, you must prove you are broke. And any remaining difference between your home's value and the balance on your mortgage is considered a forgiveness of debt, which usually means it is taxable income.

How long do bankruptcies and foreclosure stay on a credit report?They can remain on your credit record for seven to 10 years.However, a borrower who has worked hard to reestablish good credit may be shown some leniency by the lender. And the circumstances surrounding the bankruptcy may also influence a lender's decision. For example, if you went bankrupt because you were laid off from your job, the lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, it is unlikely the lender will readily give you a break. 

Not Creating a Realistic Budget

A common mistake that renters and especially first-timers often make is failing to create a realistic budget. It should include much more than the rentalprice, but also other costs, such as utilities, renters insurance, and any additional fees that may occur. Furthermore, renters need to consider moving expenses, and other start-up costs, such as buying furniture. Not having a realistic budget can lead to stress, difficulty making rent payments on time, and difficulty affording other living expenses. 

Not Doing Research on Your Landlord

It is important to do some research on the landlord and their rental units before entering into a lease agreement. Your agent can be of great help in this matter. You can also check online reviews from past tenants, if available. Exploring if they maintain their rental units properly is another prudent step.

Not Checking the Location

The most common mistake that renters make is not checking the location of the rental. This includes the surrounding neighborhood, transportation options, and proximity to shops, parks, estaurants, entertainment, and other amenities, all of which can enhance the quality of life. Additionally, consider the potential for noise and traffic.

Not Reading the Lease Carefully

Before signing any lease agreement, it is crucial to read the entire contract to ensure you understand and agree with its terms. Make sure you know what is expected of you as a renter. Familiarize yourself with the liability clauses and see how much of a renters insurance policy you need to take out. Also, explore the termination clauses or renewal dates so you can plan accordingly.

Failing to Get Renters Insurance

Getting renters insurance for yourself and your belongings is essential as a tenant. Renters or tenant insurance will cover liability claims made against you by others, as well as any damage done to your property while living at the rental unit. This type of insurance coverage is relatively inexpensive, but it still provides invaluable protection against unexpected accidents or events occurring during your tenancy period.

Not Establishing and Saving a Move In Report

Another common mistake renters make is not creating and saving a move in record detailing the condition of the rental before moving in. Before signing the lease, inspect the apartment with your agent and note any issues that need to be addressed by the landlord, such as holes, leaks, broken appliances, pest infestations and/or any other irregularities. Records can be created by taking time-stamped photos or videos of the condition of the apartment, including any damages or issues. Keep them through your rental period, and if any problems arise, use them to avoid disputes with the landlord when moving out. Without such a record, it may be difficult for the renter to prove that damages existed before they moved in, and the landlord may hold the renter responsible for those damages.

Conclusion

Rental agreements are legally binding contracts, so you need to understand all aspects before signing one. If in doubt, hire a real estate attorney to help you out. Remember the above tips when you are seeking a rental and work closely with your real estate agent. 

Download the PDF: 105 More Ways Agents Who Are REALTORS® Are Worth Every Penny of Their Compensation

Counseling Session Activities:

1. Prepare the buyer for executing a buyer representation agreement

2. Explain agency relationships to the buyer and get state required legal consent to represent, if needed

3. Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies

Building a Relationship:

4. Learn the buyer’s wants and non-negotiable needs

5. Understand the buyer’s budget and what will be needed financially

6. Help the buyer understand what property their chosen budget will buy

7. Consider having the buyer fill out a homebuyer’s checklist

8. Assist the buyer in examining how much they can afford to spend

9. Provide quality lender resources

10. Partner with the buyer to locate suitable properties for consideration

11. Match the buyer’s needs with available property

12. Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs

13. After ensuring the buyer understands what is done for them, how it is done, and the benefit to them, obtain signatures on the buyer representation agreement

14. Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it

Educating the Buyer:

15. Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies

16. Explain Federal and State Fair Housing laws

17. Explain what to look for in applicable property disclosures

18. Reassure the buyer that their personal information will remain confidential

19. Inform the buyer that you will always disclose all known material defects

20. In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood

21. Discuss available resources that the buyer can check to learn more about prospective neighborhoods

Preparing the Buyer:

22. Explain the timeline for house hunting, mortgage approval, and closing

23. Explain the local market and how it impacts the buyer

24. Show statistics on what percentage of list price sellers in the area are currently receiving

25. Inform the buyer on what home features are popular

26. Identify current average days on market

27. Share the dangers of using the price per square foot to figure home values

28. Explain the concept of absorption rate and how it impacts the buying process

29. Indicate current listing months of market inventory

30. Share estimated potential out-of-pocket costs to complete the transaction

31. Assist the buyer in analyzing the loan estimates

32. Qualify the buyer for financial ability to purchase

33. Help the buyer account for the complete costs of homeownership

34. Prepare lender for listing agent calls

35. Assist in comparing different financing options

36. Help the buyer select for viewing only those homes that fit their needs

37. Proceed in showing homes that fit the buyer’s must-haves

38. Caution the buyer on posting information to social media

39. Review the sample sales contract so the buyer is prepared when it comes time to make an offer

Showing Properties:

40. Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces

41. Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites

42. Collaborate with the buyer on properties they may have learned about through their sphere contacts

43. Research and assist on all unlisted properties the buyer wishes to see

44. Preview properties prior to showing if needed

45. Network with other agents to source properties not yet in their local MLS broker marketplaces

46. Contact homeowners in focus areas to see if they are considering selling

47. Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements

48. Arrange a tour of areas, schools, and key points of interest

49. Provide resources containing neighborhood information on municipal services, schools, etc.

50. Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value

51. Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times

52. Check applicable zoning and building restrictions

53. Help the buyer decipher public property and tax information

54. Collect and share pertinent data on values, taxes, utility costs, etc.

55. Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for

56. Help the buyer narrow the search until the buyer identifies top choices

Negotiating Offers:

57. Assist the buyer in getting the best property at the best price

58. Suggest that the buyer learn more about the neighborhood prior to making an offer

59. Prepare a comparative market analysis (CMA) in advance of making an offer

60. Prepare the buyer to have the most attractive offer in the current marketplace

61. Explain common contract contingencies and include approved protective clauses in the purchase offer

62. Ensure that the buyer receives and understands all state and federally- required disclosure forms

63. Prioritize contract negotiation goals with the buyer

64. Help create a negotiating strategy

65. Use strategies such as an escalation clause to maintain a competitive offer

66. Prepare the buyer for a multiple offer situation and develop negotiation strategies

67. Write an offer that has a reasonable chance of being accepted

68. Recommend optional contingencies and explain the pros and cons of using them

69. Provide information on purchasing incentives that may be available

70. Discuss financing alternatives

71. Negotiate the buyer’s offers to arrive at the best price and terms

72. Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer

Advocating for the Buyer and Facilitating the Closing:

73. Advocate for the buyer throughout the entire process

74. Encourage the buyer to fully investigate their options in terms of a home inspector, attorney, title company, mortgage lender, and other services as needed

75. Present a list of the types of required and optional inspections such as environmental, roofing, and mold

76. Review and discuss home inspection concerns

77. Negotiate repair requests from home inspection

78. Guide the buyer on meeting all contract deadlines

79. Assist in coordinating communications

80. Advise the buyer to review the settlement statement

81. Inform clients that they need to transfer utilities to the new residence

82. Schedule final walkthrough

83. Accompany the buyer on the walkthrough

84. Assist the buyer in questioning the appraisal report if it affects the financing

85. Confirm clear-to-close with the lender

86. Ensure all parties have all forms and information needed to close the sale

87. Remind the buyer of the location where the closing will be held

88. Confirm the closing date and time, and notify parties if there are changes

89. Gather all required forms and documents for closing

90. Explain flood insurance to the buyer

91. Explain title insurance to the buyer and refer to qualified insurance broker

92. Order any surveys needed

93. Order the appraisal

94. Order the title search

95. Confirm the status of the loan funding

96. Check addendums and alterations for agreed terms

97. Review the buyer’s closing statement to ensure accuracy

98. Explain wire fraud risks and remind clients to verify all wiring instructions before transferring funds

99. Double-check all tax, homeowners’ association dues, utility, and applicable prorations, if relevant

100. Request final closing figures from the closing agent (often an attorney or title company)

101. Receive and carefully review closing figures to ensure accuracy

102. Receive and carefully review title insurance commitment with the buyer

103. Advise the buyer to re-key their locks and to consider a one-time cleaning service or landscaping before moving day

104. Review documents with the closing agent (attorney)

105. Support the buyer in any final closing activities