6 Things to Consider When Choosing a Lot!

When building a new home, selecting the lot is one of the key decisions a buyer must make. Here are six things that builders and architects say buyers must consider before making their final choice:

1. Size. The larger the lot the more it costs. Consider initial price, taxes, and even lawn care. From a purely investment point of view, architect and land planner Quincy Johnson says pick the smaller lot in a neighborhood of larger ones. All things equal, houses on small lots tend to appreciate more rapidly than small houses on larger lots in the same subdivision.

2. Orientation. This can be a big deal for your energy bills. Facing the home in the correct way makes an enormous difference in heating and cooling costs.

3. Terrain. An uphill lot provides better drainage and displays the home more effectively. "Psychological studies have shown that people feel more secure when they look down at the street rather than up," says Johnson.

4. View. Make sure the buyer knows what he or she is really getting. When the area is completely developed, that stretch of meadow on the other side of the road may be a shopping center or a gas station.

5. Location. People who need to make a fast getaway in the morning should consider a lot near the entrance of their new community. Those with small children who are concerned about traffic should go for one toward the rear.

6. Shape. Sites come in many configurations – square, rectangular, irregular and pipe stem, or flag-shaped. Flag lots are increasingly popular near water or in a rural setting. But in a typical suburban location, they could mean sharing a driveway with one or more neighbors or the house could be sitting directly behind a neighbor’s house.

Source: United Feature Syndicate, Lew Sichelman (10/21/2007)

Sanity-Saving Rules for New Landlords

Thinking of becoming a landlord? It's not as easy as you might think, experts say. Here are six rules that will help you find good tenants and make money.

Rule 1: Don’t be deluded about the market. Joseph Cooper, vice president of Massachusetts-based Monument Mortgage, cites "underestimating the cost in time and the cost in money of actually owning property" as the biggest mistake investors make. To overcome that weakness, he and others suggest studying local vacancy rates, getting a good appraisal and gathering information about any construction in the area that could change the status quo.

Rule 2: Get out your calculator. To get a good estimate of the initial rate of return: Take the first-year revenue minus estimated first-year expenses (including some value placed on your time) divided by the full cost of the property when purchased (essentially price plus transaction costs minus mortgage). To calculate the rate of return in later years, divide by estimated equity in the property (what you could sell it for after deducting transaction costs and the remaining mortgage), taking into account price appreciation or depreciation. It’s also wise to consult an accountant on how much of a tax and cash-flow benefit depreciation will provide.

Rule 3: Choose tenants carefully. Prospective tenants who respond promptly and conscientiously to calls or e-mails and who show up on time to see units likely will be responsible when it comes to paying rent and taking care of the property. And be careful to observe discrimination laws. Landlords can choose among prospective tenants for economic reasons that arise after credit, employment, and reference checks. Set financial standards for prospective tenants that make you comfortable that they can cover the monthly rent.

Rule 4: Avoid getting sued. An aspect of the landlord-tenant relationship that can lead to litigation include mishandling of security deposits. If a tenant pays a security deposit, in many states several conditions must be satisfied, including placement of the money in an interest-bearing account and inspection of the property. Other issues include lead paint levels and failure to provide a minimum standard of habitability.

Rule 5: Get Expert Help. Keep an electrician on speed-dial — as well as a plumber and handyman. It also helps for landlords to know a good lawyer, financial adviser, mortgage broker, and real estate professional.

Rule 6: Forget about flipping. "Anybody who buys something and says to you, 'I'm going to make a ton of money in two years and sell this thing' isn't being realistic," says mortgage banker Joseph Cooper. "That does happen, but it's extremely rare. You should be buying real estate with the idea that you're going to hold it for five to 10 years. That will take you through a cycle of up and down."

Source: Boston Globe, Shira Springer (10/21/07)

6 Common Housing Problems that Spook Buyers!

Potential home buyers with lots of homes to choose from can be easily spooked by disclosures and the results of property inspections — even when the shortcomings are typical for homes of a certain age.

In a jittery market such as this one, it’s critical to give buyers tools and knowledge so they can decide which problems are serious.

Judi Seip, an associate with Coldwell Banker in Southern California, tells her clients to accompany the inspector so they can put the problems in perspective. Anything a handyman or an electrician could fix in a few hours isn’t worth worrying about, she says.

Here are six common issues that trouble buyers and some factors to weigh:

1. Water damage. Evidence of water damage frightens buyers, but all water damage isn’t serious. Minor leaks generally cost no more than a few hundred to repair. Get an estimate.

2. Missing permits. Ask the home inspector if the work was done well and meets code requirements, even though a permit wasn’t issued.

3. Code violations. How expensive is the repair? Ungrounded electrical outlets are common in old houses and easily fixed.

4. Cracks in the garage floor. Ask the inspector whether these cracks suggest other related problems. Generally these don’t affect the structure of a home.

5. Termites. Termites and termite damage are very common in many parts of the country. It’s important to get rid of them and to get a clear sense of how bad the damage is.

6. Foundation cracks and other foundation issues. Older homes often have cracks in the foundation. Get an expert to inspect the problem and estimate — what if anything — needs to be done.

Source: The Mercury News, Margaret Steen (10/19/07)

Why Use a REALTOR®?

All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.

But if you're still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one:

1. Your REALTOR® can help you determine your buying power -- that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.

6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.

7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.

8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

11. Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

Source - realtor.com

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Builders Sweeten the Deal With Incentives!

The latest survey taken by the National Association of Home Builders indicates that 56 percent of builders are now offering incentives, up from about 45 percent a year ago.

As home builders juice up their efforts to unload inventories, the most common incentives they're offering include paying two years of property taxes and insurance or several months of mortgage payments. Other popular incentives include basement and garage upgrades and the addition of pools. Plus, 15 to 20 percent off the purchase price is being given in many areas.

Builders generally try to avoid outright price markdowns, in part because it angers prior home buyers who don't want prices in their subdivisions forced down.

Getting a Good Deal Here are some tips for getting the best deals from builders:

• Buy a finished home: Builders want these off their books.
• Get a pre-approval letter: This shows a builder that the buyer has financing already in place.
• Close quickly: Wrap up a purchase within 30 days; builders want to sell before the next bank payment is due.
• Avoid contingencies: Don't make a purchase contingent on selling a home or finding financing.

Source: The Wall Street Journal, Jeff D. Opdyke (08/09/07)

Adding Curb Appeal: 6 Ways to Spruce Up the Yard!

When a house for sale looks good outside, buyers are more likely to want to come inside, says Barb Schwarz, founder of the International Association of Home Staging Professionals.

Here are some of Schwarz’s suggestions for tidying up the yard.

• Make it neat and clutter-free. Get rid of children’s toys and limit the number of hanging flower baskets and yard art. "It's far better to have fewer bigger pots than the clutter of smaller hanging pots," Schwarz says. "They just weigh down the house."
  
• Mow, weed and edge. “If the yard doesn't look well-manicured, then [potential buyers] feel the home hasn't been well maintained," Schwarz says. If the dog urinated on the yard and killed a portion of it, Schwarz recommends painting it.
  
• Trim the greenery. Trim trees from the bottom so they create a canopy but don’t block the view. Trim foundation plantings from the top, so they don’t impede views of the windows.
  
• Add color. If there’s no color in the yard, plant something like brightly blooming impatiens along the walkway.
  
• In winter, place two small potted evergreen trees on either side of the door to brighten up the entrance. Also, make sure the walkways are clear of ice and snow.
  
• Buy a new welcome doormat to dress up the front door.

Source: Newsday, Jessica Damiano (07/27/07)

Rent-to-Own Deals: Smart Questions to Ask!

Sellers who can’t unload their properties through a conventional sale are proposing rent-to-own deals more frequently these days.
For sellers, the advantage of rent-to-own is the likelihood that the renter will eventually permanently take the property off their hands. For buyers, rent-to-own can provide the credit-challenged or cash-strapped a route to homeownership.
But for buyers and sellers, there are also many potential drawbacks. If your customers are considering a rent-to-own deal, here are some smart questions they should consider.

For Sellers:

• Who will tend to the property and pay for routine maintenance?
• Who pays for major repairs?
• What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
• Will you manage the property yourself, or hire an agent?
• What if the renters change their minds? Who keeps the money in the escrow account?
• If the buyers change their minds, what will be required to put the property back on the market?

For Buyers:

• How much of the rent is going to the down payment?
• How locked in are you if change your mind? What will it cost you to get out of the deal?
• How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?
• What happens if you don’t qualify for a mortgage by the specified deadline? Can you continue to rent?
• Who will be responsible for routine maintenance?
• Who will pay for major repairs?
• Do you hope to strengthen your credit rating by paying rent on time? If so, will the owner report your good habits to credit bureaus?

Source: Milwaukee Journal Sentinel, Joanne Cleaver (09/22/07)

Tips for Buying a Fixer-Upper!

Buying a basically sound house and updating the cosmetics is a profitable thing to do in almost any market. But be careful what you buy or it may end up costing you later on.

Here are 10 things to consider when selecting a fixer-upper:

1. Purchase homes that are at least 30 percent below the market value of comparable nearby homes.
2. Choose a location with a low crime rate, good schools, and quiet streets. There isn’t anything you can do to cure a poor location.
3. Choose a house with three or four bedrooms. Smaller homes are unlikely to have enough buyer appeal.
4. Avoid homes that need major unprofitable repairs, include wiring, major plumbing, foundation repairs, major kitchen and bathroom renovation, room additions, and/or a new room. Spending money on these basics doesn’t add value. Buyers expect them.
5. Find a home that needs profitable cosmetic improvements like fresh paint inside and out, new light fixtures, new carpets and flooring, and fresh landscaping.
6. Look for affordable, low down-payment financing, such as taking over an existing mortgage, lease with option to buy, seller carry-back financing, or a combination.
7. Avoid obtaining new bank financing until the fix-up work is completed and the home’s market value has increased.
8. Don’t buy a fixer-upper that is more than 60 minutes from your current residence because it is important to visit everyday while the renovation work is being done.
9. Make sure that the seller or tenants will vacate immediately upon transfer of title.
10. Look for sellers who are motivated to sell and who want to make the sale happen.Source:

Inman News, Robert J. Bruss (09/01/07)

Harder for self-employed borrowers to qualify for mortgage!

It is growing increasingly difficult for the self-employed to get a mortgage. Some lenders that specialized in home loans to self-employed workers and small-business owners have gone out of business. And many lenders that still offer such loans have tightened their standards, making it harder for self-employed borrowers to qualify.Here's what self-employed borrowers need in order to qualify for a mortgage in this new environment, according to Marc Savitt, president of the National Association of Mortgage Brokers.

• More documentation. Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements, and proof that they've been in business for at least two years. A letter from their accountant probably won’t be good enough.
  
• Fewer tax deductions. Savitt says self-employed workers who plan to buy a home in the next year or two might want to forgo some deductions. "Make sure you can show as much income as possible," he says.
  
• Larger down payments. An old-fashioned 20 percent down is very persuasive.
  
• Excellent credit. A credit score of 720 or higher will give self-employed borrowers some choices.
  
• Patience. Even for well-off business owners, qualifying for a mortgage is "not that smooth, easy no-brainer like it used to be," Savitt says. "If you want it to be quick, you're paying a higher price.

"Source: USA Today, Sandra Block (10/02/07)