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Things You Shouldn’t Overlook When House Hunting

Looking for a house can be an exciting time full of possibilities. You have your list of needs and wants and you are hoping to find your dream home that checks all the boxes. When you are touring potential options, whether at an open house or at a showing with your Realtor, don’t forget to look past the beautiful décor and focus on some important things that are often overlooked. When a home is on the market, the seller tries to present it in the best possible light. Hopefully, it has been well cleaned and decluttered; sometimes freshly painted and even professionally staged. It is easy to be distracted by the furniture and décor that probably won’t stay with the home anyway and forget to look at the “bones” of the property. If you are having a home inspection, many of these issues will probably be covered during the inspection. If they are visible at the time you make an offer, a home inspection is not the time to negotiate items you could already see were problems. These things should be addressed at the time you make the offer. If you aren’t having a home inspection, then you really need to pay attention to these areas before you make an offer. The first red flag during a home tour is heavy air freshener scent. Some people just like heavily scented home fragrances but it may be covering up an underlying problem. The two biggest offenders are stale cigarette smoke and pet odors. Both of which can be very hard to remove. If the problem is extensive you may have...

Renew Your Lease or Buy a Home-How Do You Know It’s Time?

It’s almost time to renew your lease and you have been watching a lot of House Hunters on HGTV. It looks easy enough on TV to buy a house and you think you are ready to take the big step, but how do you know if now is the right time? The very first thing you need to consider is your financial situation. Make an appointment with a local lender to get pre-qualified for a home loan. Resist the urge to jump on a website and get a quick pre-approval on line. This is usually not a complete pre- qualification with a credit check, but rather you plug in a few numbers and they spit a number back at you of how much house you can afford. This is seldom reliable and you certainly won’t be able to ask the questions that you need answered. Local lenders will pre- approve you free of charge and take the time to explain the different loan products that are available and how the process works. This is critical if you are serious about trying to buy a home. It will let you know how much house you can afford so you know you are looking in the correct price range. There is nothing more discouraging than finding your dream house only to discover you can’t afford it. A pre-approval letter also tells Sellers you are qualified to buy their home and puts you in a much better negotiating position. When you speak with a lender, they will look at your income, your current debt load and your credit score. Make sure you...

Earnest Money 101

What is earnest money? Earnest money is the amount of money a buyer puts down to accompany an offer to purchase real estate. Basic contract law requires “consideration” as an element of a valid contract. The earnest money deposit is that consideration when a buyer makes an offer. It is used to show the seller that the buyer is “earnest” in his desire to purchase his property. Without earnest money deposits, buyers could make offers on multiple properties leaving the sellers with little recourse if the buyers back out of the contract. The amount of the earnest money deposit is negotiated between the buyer and the seller but is usually between 2 and 5% of the offered price. Who holds the earnest money is also negotiable, but in this area it is common practice for the listing office to hold the earnest money in their trust account. The escrow or trust account is a non interest bearing account where earnest money deposits are held until the property closes or the contract is terminated. At closing, the earnest money deposit becomes a credit to the buyer for any closing costs they may have, or it is subtracted from the purchase price of the property. This process sounds easy enough but what happens when the property doesn’t close? Who gets the earnest money then? That’s where things can get sticky. Earnest money is not like a security deposit. The buyer does not automatically get their money back if the property doesn’t close. The seller doesn’t automatically get to keep the money of the property doesn’t close either. How this situation gets...

Are You Ready For A Second Home?

It’s winter in northern Illinois and you have been thinking this might be the year to start looking to buy that second home.  Whether the warmth of the Florida beaches, the Arizona golf courses or the mountains of Colorado are calling you, there are some things to consider before you take the plunge. The first item on the list should be the financial aspect of buying and owning a second home. Aside from the purchase price of the property, you need to factor in the costs of actually owning the home.  Taxes, insurance, utilities, maintenance and HOA (home owner association) fees need to be budgeted just as they would be for your primary home. Even though you may only be living there several months out of the year, remember you will have these costs 12 months out of the year. You may be able to rent out the home for the months that you are not using it which can help offset the cost. Don’t forget to consider the transportation costs to and from the property, especially if it is a great distance away from where you now live. If you will be getting a mortgage to pay for the home talk to your lender about the loan costs involved for a second home. Typically the down payment will be higher because it will not be your principle residence and there may be other additional costs as well. Property taxes and homeowner’s insurance may cost more too since you this is not your primary home. Don’t forget to talk with your accountant about how owning a second home could...

FICO Score Message From MICHAEL W ERWIN

The trend now is that if a potential buyer does not have perfect credit they are less likely to even try getting preapproved.  If you know of someone who might be in this boat please forward this communication to them to let them know, it’s ok to try!  They might get a more favorable response than what they thought… The reason there are more buyers out there right now – here is the mortgage credit availability. This is right from the MBA – the Mortgage Bankers Association. “The higher that number is, the more credit is available.” Now obviously, this number would be skyrocketing in, you know, 2004 and 2005, where anyone can get a mortgage. It’d be much higher than it is right now. But I took a look over since April 2013 all the way through this past month, and what we can see is that the availability of credit through a buyer is becoming easier and easier. Meaning even though, you know, we’re hearing things to the contrary, the actual mortgage that are available to a buyer coming in, the chance of them getting that mortgage is dramatically increasing. As a matter of fact, let’s break down some of the numbers. Here are the average FICO scores on conventional purchase loans – people bought a house – this is the average FICO score. What was the 2012 average, the 2013 average, and what was last month’s average? What this graph shows us is that the average FICO score has steadily dropped from 2012 to 2013 to just last month. That’s important. What we’re showing is that...

Tips on Buying Investment Property

Since the housing market crash has made home ownership difficult for many people, the demand for rental property has increased. If you are thinking about becoming a real estate investor there are some things you will need to consider. Before you start looking for property to purchase, you will need to get qualified for financing unless you are paying cash. If you are not going to be occupying the property yourself you will need a 20-40% down payment depending on your lender. Decide on an area where you would like to invest. If you are looking to invest in single family homes pay attention to school districts, proximity to parks, shopping and locations which would be desirable for families. If you are looking at multi unit buildings which tend to attract more singles than families, then schools and parks may not be that important. Develop a relationship with a Realtor that has experience with investors. They can keep you informed of the inventory and can help you decide which properties would be good investments. Look at as many properties as you can in your price range. That will help you determine market value for the properties you are interested in purchasing. Most properties that are priced to appeal to investors will need some rehab. Be familiar with construction and remodeling costs so you know if having to put a new roof on a house is cost effective or not. If you can do a lot of the work yourself, the costs will be much less than if you have to hire contractors. When considering properties to purchase, foundation issues,...

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