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Buyers and Sellers

Buying and Selling a Home in East Texas by the Allman Company

Buyers and Sellers Articles

Buyers Articles

Sellers Articles


Buyers Articles

Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future. When buying a home – you’re bound to have many questions. For example, “In what area can I find a home that suits my needs?”, “How much money will I need to afford the monthly payments?” and “How long will the home buying process take?” Below are some articles that you might find useful in the home buying process. Please feel free to click on one of the links below to read more.

Buyers Articles


Advice for First-Time Buyers

  • Pre-Qualification: Meet with a mortgage broker and find outhow much you can afford to pay for a home.
  • Pre-Approval: While knowing how much you can afford is thefirst step, sellers will be much more receptive to potential buyers who have been

    pre-approved. You’ll also avoid being disappointed when going after homes that are out

    of your price range. With Pre-Approval, the buyer actually applies for a mortgage and

    receives a commitment in writing from a lender. This way, assuming the home you’re

    interested in is at or under the amount you are pre-qualified for, the seller knows

    immediately that you are a serious buyer for that property. Costs for pre-approval are

    generally nominal and lenders will usually permit you to pay them when you close your

    loan.

  • List of Needs & Wants: Make 2 lists. The first shouldinclude items you must have (i.e., the number of bedrooms you need for the size of your

    family, a one-story house if accessibility is a factor, etc.). The second list is your

    wishes, things you would like to have (pool, den, etc.) but that are not absolutely

    necessary. Realistically for first-time buyers, you probably will not get everything on

    your wish list, but it will keep you on track for what you are looking for.

  • Representation by a Professional: Consider hiring your ownreal estate agent, one who is working for you, the buyer, not the seller.
  • Focus & Organization: In a convenient location, keephandy the items that will assist you in maximizing your home search efforts. Such items

    may include:

    1. One or more detailed maps with your areas of interest highlighted.
    2. A file of the properties that your agent has shown to you, along with adsyou have cut out from the newspaper.
    3. Paper and pen, for taking notes as you search.
    4. Instant or video camera to help refresh your memory on individualproperties, especially if you are attending a series of showings.
    5. Location: Look at a potential property as if you are the seller. Would aprospective buyer find it attractive based on school district, crime rate, proximity to

      positive (shopping, parks, freeway access) and negative (abandoned properties, garbage

      dump, source of noise) features of the area?

  • Visualize the house empty & with your decor: Are therooms laid out to fit your needs? Is there enough light?
  • Be Objective: Instead of thinking with your heart when youfind a home, think with your head. Does this home really meet your needs? There are many

    houses on the market, so don’t make a hurried decision that you may regret later.

  • Be Thorough: A few extra dollars well spent now may saveyou big expenses in the long run. Don’t forget such essentials as:
    1. Include inspection & mortgage contingencies in your written offer.
    2. Have the property inspected by a professional inspector.
    3. Request a second walk-through to take place within 24 hours of closing.
    4. You want to check to see that no changes have been made that were not agreedon (i.e., a nice chandelier that you assumed came with the sale having been replaced by

      a cheap ceiling light).

  • All the above may seem rather overwhelming. That is why having aprofessional represent you and keep track of all the details for you is highly

    recommended. Please email me or call me directly to discuss any of these matters in

    further detail.

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How to Negotiate with Sellers

Buying a home is one of the most important purchases most people will make. In order to

make the right decision the first time, potential buyers need to be prepared. Consider

the following before starting negotiations:

Be prepared. Research the housing market in the target area. Once you

have information about the general area, focus on the particular property and seller.

Look for answers to questions such as:

  1. Why is the homeowner selling? (If they’re moving because they find the areaundesirable, you might want to consider this issue.)
  2. How long has the home been on the market? (If it has been on the market fora long time, perhaps there are negative facts about the property that you need to

    know.)

  3. How much did the seller pay for the home compared to the current askingprice? (If the seller paid more, find out why. Was it a general real estate trend, or

    did property values in that particular neighborhood go down?)

  4. What is the seller’s time frame for selling and moving? Does it fit withinyour needs?
  5. Are there any defects in the home or problems with the surroundingneighborhood? (For example, is the roof so old that it will likely leak during the next

    storm? Is there a new construction project in the area that will lead to major traffic

    congestion?)

As the potential buyer, you want the advantage. While you want answers to all your

questions to the seller, reveal very little about your circumstances.

Do not give the seller personal information such as your income, the maximum you are

able to pay for a down payment or the home, or when you want to move.

Make sure that your agent knows not to reveal any such information to the seller or

his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate

or overly enthusiastic, the seller then has the stronger bargaining position. When

meeting with the seller or listing agent, keep your emotions in check.

Establish a Timeline. Find out if the seller needs to have the sale

closed sooner rather than later. If the seller is feeling pressured to sell, use that to

your advantage in negotiating. Even if you, the buyer, are the one with the deadline for

purchasing a home, don’t let yourself be rushed into making concessions or a purchase

you may regret later.

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Types of Mortgages

Fortunately for buyers, there are a variety of mortgages to choose from. It is in your

best interest to investigate each of them to determine which is the best for your

situation. You probably won’t qualify for all of them. In fact, you may only qualify for

one. But if you do qualify for more than one, you may save yourself money (and worry) in

the long run if you do your homework before signing on the dotted line.

Fixed Rate Mortgages

Consider a fixed rate mortgage if either of the following describes you:

  • You plan on living in your new home for many years, and/or
  • You are not a risk-taker and prefer the stability of knowing how much yourpayment will be each month.

Since most home loans are for a period of 30 years, if you want a payment you can count

on for that long of a period of time, a fixed rate mortgage may be what works best for

you.

Once your loan amount and interest rate are calculated and locked in, a fixed rate

mortgage will guarantee that you will have the same payment over the life of the loan.

Making extra payments to principal will allow you to pay your loan off sooner.

This may not always be the best choice, however. If interest rates are very high at the

time you take out your loan, with a fixed rate mortgage you’ll be stuck with that high

interest for the life of the loan (unless you choose to refinance).

Conversely, if interest rates are very low, you’ll come out the winner with interest

rates that will stay low no matter how high interest rates go in the future.

The following are the advantages and disadvantages of the varying lengths and terms of

fixed-rate mortgages:
15-Year Fixed-Rate:

  • Pay off the loan in half the time of a 30-year loan.
  • Equity builds up more quickly than in a 30-year loan.
  • Payments are higher (which may be a problem if you lose your job or becomeunable to work).

20-Year Fixed-Rate:

  • Pay off the loan in 2/3 the time of a 30-year loan.
  • The overall interest paid is considerably less than for a 30-year loan.

30-Year Fixed-Rate:

  • The most common choice, especially for first-time homebuyers, as it’s theeasiest of the fixed-rate loans to qualify for.
  • Monthly payments are lower than for 15-year and 20-year loans. This canprove especially helpful if you do not have a lot of “padding” between the amount you

    can afford to spend and the monthly payment for your desired property.

  • More desirable if you plan on staying in the same home for years, sinceequity builds more slowly than for shorter-term loans.
  • For income tax purposes, this term provides the maximum interestdeduction.

Adjustable-Rate Mortgages (ARMs)

If you are more comfortable in taking a risk with your money or if interest rates are

very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be

the solution for you. You might also choose this type of loan if your planned ownership

of the property is short-term or if you expect your income to increase to cover any

potential rise in the interest rate.

Generally, the interest rate when you take out your loan will be lower than a fixed-rate

mortgage. Please note that this is true initially, not necessarily long-term.

Since an ARM rate rises and falls depending on the prevailing interest rate, your

mortgage payment will rise and fall accordingly. If your income is not sufficient to

cover the highest possible payments, then this option is not for you. On the positive

side, the lower initial payments will allow you to qualify for a larger loan than if you

choose a fixed-rate. The downside is that your payments will increase if/when the rates

go up.

Typically, ARM interest rates are tied to a specific financial index (such as

Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or

COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the

index your lender uses plus a margin, generally of two to three points. Get the formula

used by your lender in writing and make sure you understand what it means.

Fortunately, the amount an ARM can increase is limited. There are “caps” on how much

your lender can increase your rate, both for a period of one year and for the life of

the loan. Plan ahead, and have your lender calculate what the maximum payment would be

if your rate went to the highest amount allowed by the cap for your particular mortgage.

If you are not confident you’ll be able to pay that amount on a monthly basis, perhaps

you should reconsider this type of loan.

Convertible ARMs

If neither the fixed-rate nor the adjustable-rate mortgage seems like the best option,

perhaps the convertible ARM will be right for you. This alternative combines the initial

advantage of an ARM with a fixed rate after a predetermined number of years. Obviously,

this type of mortgage has more advantages when the initial interest rate is low and the

future rate is not guaranteed.

Government Loans

Another mortgage option available to some people is a government loan, providing that

you meet the qualifications for these loans.

  • VA Loans: Veterans may qualify for a loan from the VeteransAdministration. There is a limit on the amount you can borrow, so this

option works best for those buying a lower priced home.
FHA Loans: The Federal Housing Association offers loans to lower-income

Americans. Look for the phrase “FHA approved” when looking at ads for homes.

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Getting the Best Rates for Your Mortgage

Naturally, you want to get the best deal for the least amount of money. This holds true

for mortgage rates as well.

A lower interest rate means a lower monthly mortgage payment, which can save you money

in the long run. Also, it is easier to qualify for a lower payment

than a higher one.

You basically have two routes to finding the best rate. The first is to do all the

research on your own. The second is to use a mortgage broker.

Do-It-Yourself

With the advent of the Internet, much of this information is readily available online.

Once you have educated yourself sufficiently about real estate loans, all it takes is

the time and energy to sift through online resources to find the information you need.

Rates change quickly. That great rate you find today might not be there tomorrow. Once

you find the rate you are looking for, submit a loan application and lock in that rate.

Some sources for interest rates on the Internet include:

Bank Rate Monitor

(http://www.bankrate.com)

E-Loan

(http://www.eloan.com)

When comparing loans, make sure that you’re comparing loans of the same type. For

example, you find that “Loan A” for a 30-year loan has a much lower interest rate than

“Loan B” (also for 30 years).

Upon further inspection, you find that “Loan A” is technically an adjustable rate

mortgage. Its payment is based on a 30-year amortization, but becomes due through either

payment or refinancing at the end of 5 or 7 years.

These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both

said “30-year”, they are not the same type of loan.

Ask the lender for a statement detailing all fees associated with the loan. Factors such

as “points” (loan fee), interest rate and “garbage fees” (extra fees which some lenders

charge) can vary greatly from one lender to another.

Mortgage Broker

If you do not have the time or experience to “do it yourself,” look for a qualified

mortgage broker that can assist in finding the right mortgage for

you. Ask friends and associates who have refinanced or purchased recently if they have a

broker they can recommend. You’ll want to find a broker who is

energetic, flexible and knowledgeable about finance and loans and someone who has your

best interests in mind.

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You’ve Opened Escrow, Now What?

Congratulations, you are on your way to owning your very own home! Follow these

suggestions (and your realtor’s advice) so that escrow and settlement will go as smooth

as possible.

You will be asked for a down payment on the home you are purchasing. You can choose to

put down as much or as little as you want (depending on your mortgage), but remember,

the more you put down toward the total price of your home, the less time it will take

you to pay off and the less your mortgage payments will be every month.

During this period of purchasing your home, you are going to need an escrow or

settlement company to act as an independent third party so that you know when and who to

give your money to get the deed to your new home. The escrow or settlement company will

hold your deposit and coordinate much of the activity that goes on during the escrow

period. This deposit check may also be held by an attorney or in the broker’s trust

account. Make sure that there are sufficient funds in your account to cover this check.

The deposit check will be cashed. Assuming the sale goes through, this money will be

applied to the purchase price of the home. If for any reason the sale is not

consummated, you may be entitled to receive all of your deposit back, less standard

cancellation fees. In certain instances, the seller may be able to retain this money as

liquidated damages. Prior to executing a purchase contract, it would be wise to speak

with your counsel regarding whether or not it is your best interest to have a liquidated

damages clause as part of the contract.

The period that you are “in escrow” is often 30 days, but may be longer or shorter.

During this time, each item specified in the contract must be completed satisfactorily.

By the time you have opened escrow, you have come to an agreement with the seller on the

closing date and the contingencies. Each contract is different, but most include the

following:

  • Inspection contingency: this should be completed as soon aspossible after the contract to purchase is signed as unsatisfactory results of the

    inspection may mean that you will want to cancel the contract.

  • Financing contingency: once the contract is signed, youhave a period of time to secure funding. If, for any reason, you are unable to secure

    funding during the period of time granted to you by the contract (and the seller will

    not provide a written extension of time), you must decide whether you want to remove the

    contingency and take your chances on getting a loan. You may choose to cancel the

    purchase contract.

  • A requirement that the seller must provide marketable title.

With an attorney or title officer, review the title report. The title must be “clear” to

ensure that you do not have legal issues regarding your ownership.

Check into local and state ordinances regarding property transfer and make sure that you

and/or the seller have complied with them.

Secure homeowner’s insurance. This will probably be required before you can close the

sale. Due to such requirements as special fire and earthquake insurance, obtaining this

insurance may require a lengthy period of time. It would be in your best interest to

apply for insurance as soon as possible after the contract is signed.

Contact local utility companies to schedule to have service turned on when you close

escrow.

Schedule the final walk-through inspection. At this time, you should make sure that the

property is exactly as the contract says it should be. What you thought to be a

“permanently attached” chandelier that would come with the property might have been

removed by the seller and replaced with a different fixture entirely.

You’ve made it! Once the sale has closed, you’re the proud owner of a new home.

Congratulations!

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Sellers Articles

The appearance of your home, a buyer’s first impression, and other considerations can

also affect the sale of your home. Have you considered that home prices in your

neighborhood and the value of your property are also factors used for pricing your home?

When selling your home, there are no guarantees that a buyer will simply walk through

the front door. In many cases you may have to bring your home to the buyer. Effective

marketing will help ensure that your property receives maximum exposure to attract a

ready, willing and able buyer.

Below are some articles that you might find useful in the home selling process. Please

feel free to click on one the links to read more.

Seller Articles


Risks of Remodeling Without a Permit

Most cities require that homeowners obtain a building permit before making modifications

to their residence. Which modifications require a permit vary by city. Also, some cities

are more vigilant than others in enforcing permit laws.

In order for the homeowner to receive a permit, the homeowner or his/her designee are

required to file plans and pay fees to the city. In addition, the improvements are given

a value. If they increase the value of the property, this may result in an increase in

property taxes. Inspections are often required, and this means having to schedule and

then wait for inspectors to approve the work to be done. This process can be time

consuming and inconvenient in the short run. It is for this reason that some homeowners

skip the permit process.

If a permit is needed and you fail to get one, the city may discover this at some time

in the future and getting a permit retroactively can frequently be significantly more

expensive and much more problematic than having obtained the permit before work

commenced. If work is not done in accordance with city procedures or if the inspector is

unable to determine if the work has been done properly, the homeowner could be required

to open walls, tear up floors, so that the inspection may take place. In addition, by

law, work not permitted where a permit was required must be disclosed to any prospective

purchaser. This may cause the owner to discount their sale price or perform costly or

time-consuming repairs before title can be transferred.

For prospective buyers of a property, save yourself the future hassle and loss of money

by researching whether all work on the premises has been done according to code and with

the proper permits. You may obtain these permits by going directly to Building &

Safety in the municipality in which the property is located or by hiring a “permit

puller” who will research the permits for you.

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Traversing the Pitfalls of Home Inspections

June and Fred Smith were diligent about getting their home ready for sale. They ordered

a pre-sale termite inspection report. The report revealed that their large rear deck was

dry-rot infested, so they replaced it before putting their home on the market.

The Smiths also called a reputable roofer to examine the roof and issue a report on its

condition. The roofer felt that the roof was on its last legs and that it should be

replaced. The Smith’s didn’t want buyers to be put off by a bad roof, so they had the

roof replaced and the exterior painted before they marketed the home.

The Smith’s home was attractive, well-maintained and priced right for the market. It

received multiple offers the first week it was listed for sale.

But the buyers’ inspection report indicated that the house was in serious need of

drainage work. According to a drainage contractor, the job would cost in excess of

$20,000. Fred Smith was particularly distraught because he’d paid to have corrective

drainage work done several years ago.

First-Time Tip: If you get an alarming inspection report on a home

you’re buying or selling, don’t panic. Until you see the whole picture clearly, you’re

not in a position to determine whether you have a major problem to deal with or not.

What happened to the Smiths is typical of what can happen over time with older homes.

The drainage work that was completed years ago was probably adequate at the time. But

since then, there had been unprecedented rains in the area, which caused flooding in

many basements. Drainage technology had advanced. New technology can be more expensive

but often does a better job.

The Smiths considered calling in other drainage experts to see if the work could be done

for less. After studying the buyers’ inspection report, the contractor’s proposal and

the buyers’ offer to split the cost of the drainage work 50-50 with the sellers, the

Smiths concluded that they had a fair deal.

The solution is not always this easy, especially when contractors can’t agree. Keep in

mind that there is an element of subjectivity involved in the inspection process. For

example, two contractors might disagree on the remedy for a dry-rotted window: one

calling for repair and the other for replacement.

Recently, one roofer recommended a total roof replacement for a cost of $6,000. A second

roofer disagreed. His report said that the roof should last another three to four years

if the owner did $800 of maintenance work. Based on the two reports, the buyers and

sellers were able to negotiate a satisfactory monetary solution to the problem for an

amount that was between the two estimates.

It’s problematic when inspectors are wrong. But it happens. Inspectors are only human.

Here is another example: A home inspector looked at a house and issued a report

condemning the furnace, which he said needed to be replaced.

The sellers called in a heating contractor who declared that the furnace was fit and

that it did not need to be replaced.

The buyers were unsure about the furnace, given the difference of opinions. The seller

called in a representative from the local gas company. The buyers knew that the gas

company representative would have to shut the furnace down if it was dangerous. He found

nothing wrong with the furnace, and the buyers were satisfied.

In Closing: Sometimes finding the right expert to give an opinion on a

suspected house problem is the answer, but it is always good to get two opinions.

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What is a CMA and Why Do You Need One?

CMA is real estate shorthand for “Comparative Market Analysis”. A CMA is a report

prepared by a real estate agent providing data comparing your property to similar

properties in the marketplace.

The first thing an agent will need to do to provide you with a CMA is to inspect your

property. Generally, this inspection won’t be overly detailed (she or he is not going to

crawl under the house to examine the foundation), nor does the house need to be totally

cleaned up and ready for an open house. It should be in such a condition that the agent

will be able to make an accurate assessment of its condition and worth. If you plan to

make changes before selling, inform the agent at this time.

The next step is for the agent to obtain data on comparable properties. This data is

usually available through MLS (Multiple Listing Service), but a qualified agent will

also know of properties that are on the market or have sold without being part of the

MLS. This will give the agent an idea how much your property is worth in the current

market. Please note that the CMA is not an appraisal. An appraisal must be performed by

a licensed appraiser.

The CMA process takes place before your home is listed for sale. This is a good

assessment of what your house could potentially sell for.

CMAs are not only for prospective sellers. Buyers should consider requesting a CMA for

properties they are seriously looking at to determine whether the asking price is a true

reflection of the current market. Owners who are upgrading or remodeling can benefit

from a CMA when it’s used to see if the intended changes will “over-improve” their

property compared to others in the neighborhood.

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The Home Sale: Securing the Deal

Ready to close the deal? Maybe not.

Sometimes unforeseeable issues arise just prior to closing the sale. Hopefully, with

negotiation, most of these have a workable solution. Unfortunately, this is not always

the case. But don’t panic. Another buyer might still be found who is willing to accept

the house as is.

Imagine that your prospective buyers are a couple with young children. They envision

your unused attic as the perfect playroom for the kids but, before closing the deal,

they request an inspection to see if it’s safe and also if they will be able to install

a skylight to provide natural light to the new space.

This inspection reveals that under the shingles that are in good condition is a roof

that will only last another year or two. The prospective buyers immediately balk, not

wanting to incur the time and cost of replacing the roof. Their plans were to move in

and only have to spend time and money renovating the attic. The additional cost of the

new roof, they say, is just too much.

At this point, you sit down with the prospective buyers and calmly discuss the situation

and how it can be solved to the benefit of all. First, you agree to get another

professional opinion on what really needs to be done. Inspectors are only human, and are

not infallible. Once the extent of the damage is agreed upon, you can jointly decide

what to do about it. While the buyers hadn’t planned on that expense, you show them that

instead of a limited roof life that they would get with most existing homes, they’ll

have a new worry-free roof that won’t cost them in repairs for the next decade or so.

Since the roof wasn’t in as good shape as you had thought, you agree to lower the

purchase price to help offset the cost of the new roof.

By negotiating calmly and looking at all possibilities, what could have been a “deal

breaker” can be turned into a win-win situation for both the buying and selling parties.

In other cases, the most workable agreement for both parties might be for the deal to be

called off. The seller can always find another buyer and the buyer can always find

another home.

To protect yourself against last minute “buyer’s remorse,” make sure the purchase

contract anticipates and closes as many loopholes as possible after all known defects

have been fully disclosed.

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