8 Tips to Guide You for Your Home Search

1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you would be willing to spend each month for housing.

2. Be realistic. It is OK to be picky, but do not be unrealistic with your expectations. There is no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get pre-qualified for a mortgage. This will save you the heartache later of falling in love with a house you cannot afford.

4. Do not ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own.

5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? All of these factors will help you determine when you should move.

6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period? This decision may dictate what type of home you  will buy as well as the type of mortgage terms that will best suit you.

7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.

8. Get help from a REALTORS®. Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer's representative is working only for you. Buyer's reps are usually paid out of the seller's commission payment.


     
     
     
     

5 Things to do Before Putting Your Home on the Market

1. Have a pre-sale home inspection. Be proactive by arranging for a pre-sale home inspection. An inspector will be able to give you a good indication of the trouble areas that will stand out to potential buyers, and you will be able to make repairs before open houses begin.

2. Organize and clean. Pare down clutter and pack up your least-used items, such as large blenders and other kitchen tools, out-of-season clothes, toys, and exercise equipment. Store items off-site or in boxes neatly arranged in the garage or basement. Clean the windows, carpets, walls, lighting fixtures, and baseboards to make the house shine.

3. Get replacement estimates. Do you have big-ticket items that are worn our or will need to be replaced soon, such your roof or carpeting? Get estimates on how much it would cost to replace them, even if you do not plan to do it yourself. The figures will help buyers determine if they can afford the home, and will be handy when negotiations begin.

4. Find your warranties. Gather up the warranties, guarantees, and user manuals for the furnace, washer and dryer, dishwasher, and any other items that will remain with the house.

5. Spruce up the curb appeal. Pretend you are a buyer and stand outside of your home. As you approach the front door, what is your impression of the property? Do the lawn and bushes look neatly manicured? Is the address clearly visible? Are pretty flowers or plants framing the entrance? Is the walkway free from cracks and impediments?
     
     
     
     
     
     

First-Time Home Buyers: Why Buy Now?
 
Are you new to the home buying process?  Buying your first home is one of the most important purchases you will make in your life.  Therefore, it is extremely important that you understand why now is the time to buy. 

Many pundits and people may be telling you to "buy now," but why?  Why are the primary differences between buying your first home now relative to purchasing a home in the past?  There are three primary reasons that make purchasing a home now more attractive than during any other time in the past few decades: 

1)      Availability of a First Time Buyer Tax Credit
2)      Low Interest Rates
3)      Depressed Real Estate Prices 

First-Time Buyer Tax Credit
The Federal Government offers first-time home buyers a tax credit of up to $8,000.  What this means is that when you file your tax return, you will receive up to an additional $8,000 from the government for simply purchasing your first home. A tax credit is a dollar-for-dollar reduction in what you owe for your taxes. This is not a loan; it is free money from the government!  This $8,000 tax credit expires soon.  To qualify: you must be under contract by April 30, 2010 and close by June 30, 2010. For more information on this first-time home buyer credit visit: http://www.federalhousingtaxcredit.com/home.html.   
 
Interest Rates
Interest Rates are at historical lows (see chart below).  The lower the interest rate, the lower your monthly payment will be.  Mortgage rates fluctuate weekly. Today's interest rate for a 30 year fixed mortgage is approximately 5%.  In March 1995, a 30-Year fixed mortgage averaged at 8.68% interest.  In March 2005, a 30-Year fixed mortgage averaged at 6.02%.  Mortgage rates have a direct correlation with your monthly payment.  The good news is that interest rates for mortgages are the lowest in several decades, and you can get a lot more house for your money.   For example: if you mortgage $300,000 on a property, below is an estimate of your monthly mortgage payment based on the following interest rates:

5%- $1610.46             5.5%- $1703.37
6%- $1798.65             6.5%- $1896.2
7%- $1995.91             7.5%- $2097.64 

     

  

     

Real Estate Prices
Like interest rates, there has also been a decline in real estate prices.  For example, many buyers are paying less for a property in 2010 than the previous owners paid for that same property back in 2004.  Real estate home prices continue to drop.  There are more homes for sale on the market right now than there are buyers seeking to purchase properties (i.e. buyer's market).  Currently, many sellers are desperate to get out of their home/property, and continue to lower their asking prices, hoping to attract new buyers.  Sellers are also competing with foreclosures, short sales, and bank owned properties in this market (for explanations of these terms, see blog entry dated 3/1/2010).  At Diplomat Realty, most of the properties that our agents have sold in 2009/2010 were 30-50% less than what those same properties were worth three to five years ago.  Once one property in a neighborhood sells for a discounted price, it tends to lower the values of comparable properties in that neighborhood.  To remain competitive sellers of other properties must keep their prices low.   These cycles result in overall decreases in housing prices within  a neighborhood, and are extremely beneficial to buyers searching for good deals.  This situation is particularly attractive to first-time buyers!  First-time buyers do not need to sell a property to buy something new.  Consequently, first-time buyers have a huge advantage when purchasing a home in the market that we are experiencing today.    
 
Real Estate Agent
Using a real estate agent is essential when buying your first home.  The best part is that using a real estate agent is FREE for buyers!  Yes, you do not pay a real estate agent anything.    Below are some of the benefits of using a real estate agent.  A real estate agent will:

     

     
• Identify properties listed on the multiple listing service (MLS) that meet your specifications relating to location, price, features, and amenities.
       
• Arrange for viewings of properties that you might be interested in.
       
• Advise you as to pricing of comparable properties.  Conduct comprehensive comparative market analysis.
       
• Assist you in skillful negotiation of the contract.
       
• Guide you through the entire process, from beginning to end.
       
• Safeguard any confidential information that you disclose.    

 
If you are a first-time buyer, NOW is the time to buy.  With interest rates at all-time lows, and housing prices continuing to decline, you will be able to the biggest bang for your hard-earned dollar.  And, if you decide to take advantage right away, you can also qualify for the first time buyer tax credit of $8,000.  For more fist time buyer information, visit our website at www.diplomatrealy.com.  For more specific questions, please contact Kim at (773) 550.7899 or Shari (847) 606-6077.

Blog entry #1- February 25, 2010

Short Sales vs. Foreclosures: Understanding distressed properties 

With so many distressed properties on the market, it is critical to understand the differences between how distressed properties can be purchased.  In this article we will cover what the differences are between short sales and foreclosures, and what each of these purchasing mechanisms entail. 

Properties become distressed for a variety of reasons, ranging from death, divorce, bankruptcy, to abandonment of mortgage obligations.  “Distressed” properties range from being in excellent condition to dilapidation.  It is very important to do your due diligence so that you are fully aware of what you are purchasing.  Due diligence includes: hiring an independent, licensed home inspector, performing financial calculations to insure that you can afford the property, collecting rent rolls for multi-unit dwellings, scrutinizing all documents associated with condominium buildings, etc. 

There are three basic types of distressed properties: short sales, foreclosures, and real estate owned properties. 

Short Sales
There are a lot of short sales on the market right now.  Most of them are priced very well, and may seem like really amazing deals.  Why are short sale properties priced lower than the competition?  A short sale is a sale in real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.  Short sales have to be approved by the lender and can take several months to complete.  Generally in a short sale, all liens and clouds on the title are removed prior to the sale.   Your realtor and real estate attorney should check your contract to insure that all of the liens and financial obligations of the seller are reconciled at closing.

Example of short sale situation: Let’s say that you purchased a two bedroom condo for $200,000 in 2007.  Your neighbor just sold the same condo for $180,000 in 2010.  You can no longer afford your condo, and you need to sell.  A buyer offers you $180,000 for your condo, but you cannot afford to bring $20,000 to closing to cover the difference.  You talk to your lender and they agree to cover the difference to avoid the costly process of foreclosure.  The buyer purchases the property for $180,000, and the bank agrees to assume the $20,000 loss. 

The above illustrates a simple example of a short sale, a situation that is common in today’s real estate market.  There maybe many more variables in the short sale process than this example illustrates.  Be sure to discuss your potential purchase or short sale with your realtor and attorney, respectively.  If you are purchasing a short sale, patience is a virtue.  When submitting an offer to purchase a short sale, it can take several months before you find out if your offer is accepted by the seller’s bank.  Nothing is guaranteed until you have an accepted contract that has been signed by all parties. 

Foreclosures
A foreclosure is another type of sales mechanism for a distressed property.  A foreclosure is the legal proceeding initiated by a lender to repossess the property for a loan that is in default.  In simpler terms, a foreclosure occurs when the owner of a property continuously fails to pay their monthly mortgage payment owed to the lender.  The lender, of course, is expecting their monthly payments from the property owner.  If the lender does not receive these payments, the property owner will default on their loan.   In order for the lender to recover these losses from the property owner, the property will go to public auction. At auction, the foreclosing lender sets the opening bid.  The lender may set the starting price as the remaining balance on the mortgage loan.  However, there are many variables that can affect pricing.  In this real estate market, many properties are worth less than what is owned on the mortgage.  In this case, the lender may expect to take a loss on what is owed.  Purchasing a foreclosure at an auction is a much quicker process than the purchasing a short sale.  At a foreclosure auction, the buyer takes on the property as-is, without title insurance or warranty.  Defects or liens on the title may remain on the property and transfer to the buyer. 

Pre-foreclosure
What about a pre-foreclosure?  A pre-foreclosure is the period between when the Notice of Default is recorded at the County Recorder’s office and Notice of Sale.  Within this timeframe is the reinstatement period, during which the property owner has the opportunity to repay the lender for missed payments.  This is also the period where a property owner might try to sell the property to avoid foreclosure.  In a pre-foreclosure you deal directly with the current property owner.  The property owner is still in full control of the property and makes all decisions.   This can usually be a good time for a buyer to get a great deal on a property.  It depends on what remains owed on the property.  If the current owner owes more on the property than it is worth, it might be hard to avoid foreclosure.  This is where short sales tend to be initiated.  In the instances that the property owner owes more than the property is worth, a short sale is sometimes in the lenders best interest to avoid foreclosure. 

Real Estate Owned Properties (REO)
Real Estate Owned (REO) properties - also known as Bank Owned properties- are properties owned by the lender (owner of mortgage).  An REO property is one that went through the foreclosure process and failed to attract any acceptable bids.   In auction, the property either did not sell, or the balance of the loan was much higher than what was offered to the lender. In these situations, the lender will try to sell the property through traditional real estate channels.  This is usually a quick process, and the title is clean and free of defect. 

We hope this helps you better understand the process.  If you have more specific questions, please email us at info@diplomatrealty.com.