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Archive for the ‘Selling’ Category

85bears-1.jpgBuying a home is a complicated financial transaction.  Unlike any other purchase you make, there are a host of other parties that will be involved each with their own responsibilities and agendas. It is important that each one of the parties listed are experienced and professional because any mistakes by one individual can cause the whole transaction to come to a halt. Here is a list of the people you need to know and what their general responsibilities are in the transaction.

Real Estate Agents: It is the real estate agents job to facilitate the transaction between the buyer and the seller. The agents sell the property.  Their role varies from marketing a particular property for a seller to finding homes for buyers.  Generally, there are usually two real estate agents involved in a purchase transaction.  It is important you know which one you are dealing with.

  • Listing Agents: These are the agents that are hired by the seller to sell their home. It is this agent’s job to market the home to other agents and interested properties. Their goal is to get the highest price for the seller. 
  • Selling Agent (Buyer’s Agent): This agent represents the buyer in the transaction. It is this agent’s job to find a buyer a home. This agent will help the buyer negotiate an acceptable price from the seller, structure the offer, and guide their buyers through the transaction.

Loan Officer/Mortgage Broker/Banker:  The loan officer is the person that brings the music to the dance. Unless you are rich, you will need to get a mortgage when purchasing a home.  Your loan officer’s job is to educate you on the various mortgages available to you and counsel you on the appropriate financing for your purchase.  They ensure that on the day of closing, you will have financing available to purchase the home.

Seller’s Attorney:  This attorney represents the seller in all legal matters in the transaction.  The seller’s attorney reviews contracts and makes sure that the terms are favorable to the seller.

Buyer’s Attorney:  This attorney represent the buyer in all legal matters in the transaction.  The buyer’s attorney reviews contracts and makes sure that the terms are favorable to the buyer.

Title Company:  The title company coordinates the closing between the buyer and the seller.  They also provide title insurance coverage which ensures that the home being purchased has no other claims of ownership or liens against the property.

Inspector:  Hired by the buyer, the inspector’s job is to point out all of the warts on a particular home. If there are any issues with the property, they will need to be fixed by the seller or the new home owner should be made aware of potential future repairs.  You would be a first class fool to buy a home without an inspector.

Appraiser:  Hired by the lender, it is the appraisers job to place a value on the home.  The lender wants to ensure that the home you are buying is in fact worth what you are paying since it is the home that is securing the money they are lending to you.

Underwriter:  Underwriters work for the mortgage lender.   Consumers never deal directly with the underwriter.  However, you are likely to hear the term “underwriting” or “the underwriter” thrown around a lot, especially by the loan officer, so I felt they warranted inclusion.  The underwriter’s job is to approve or deny your mortgage.  The bottomline is that when it comes to mortgages, underwriters have God status.   Loan officers CANNOT approve mortgages because it would be a conflict of interest.  The underwriter essentially double checks all of the work of the loan officer to make sure the mortgage fits the lenders guidelines and the loan isn’t fraudulent.  Truth be told, it is rare that the mortgage of a good loan officer gets denied because most good loan officers know ahead of time if the loan will get approved.  However, we don’t have the authority to actually make the approval decision.

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Prepare YourselfDetach yourself emotionally from your home and start viewing it as a commodity for sale.  This can be difficult for many sellers, whose identities are reflected in the presentation of their homes.   Be candid with yourself about how your home should look when it goes on the market.  Don’t take it personal, selling your home is a business transaction!

Prepare your Home:  Property appearance and condition play a key role – buyers pay a premium for homes that are in move-in condition.   Remove all clutter.   Pack unnecessary items and store them in a basement, storage area or a separate storage facility to give potential buyers and ideal picture of your home.

Determine your selling price:  Price depends on factors including the number of buyers in the market looking for homes like yours, the number of similar homes on the market, and the condition of your home relative to your competition.   Price your home realistically.   Just because you think your home is worth x, does not necessarily mean buyers agree.

Hire a professional:  While some attempt to sell homes on their own, real estate agents are experts when it comes to knowing what improvement projects are necessary and most lucractive for your sale.   Ideally, you should meet with an agent months before the anticipated move.   Walk through your home with your agent and compile a “to-do” list.   If the list is lengthy and your budget is limited, work with your agent to priortize the list – and focus your resources on the most important items.

Make minor improvements:  Consider a home equity line of credit to provide you with extra money needed for decorating and minor home improvements.   This can be a great short-term flexible solution – you only pay interest for the portion of the line you access.

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Money PitMy wife is addicted to the shows Property Ladder and Flip This House.  If you haven’t seen these shows, they are about real estate investors purchasing homes, fixing them up, and then selling them for a profit.   As I was watching one of the shows the other day, it dawned on me that the shows are a great case study as to why you should get the home you want to buy inspected.

While these shows are entertaining, what I find interesting about the shows is how they detail how the investors have to make short cuts in the quality of work being completed or how they use new paint to hide obvious defects in the homes. Most times the work is done by the investor’s fraternity brothers.  I can’t recall one show where the investor actually got permits to do major renovations judging by how quickly the work is being completed.  By the time the end of the show is over, I am left feeling sorry for the sucker who might come along and buy one of these houses.

When you purchase your new home, your contract will likely call out that you have five to ten days to get the home inspected.  This means that you can hire a licensed inspector to come in a point out all of the warts on the home. Inspectors basically will look past the granite and stainless steel to see if there are any major issues that you should be concerned with that are going to wind up costing you a lot of money in the future.  If the inspector finds something you don’t like, this gives you ammunition for negotiating with the seller for a lower price or having the problem fixed. It also gives you a way out of the purchase contract.

Home inspections usually cost about $300 dollars.  Sometimes more depending on the property. Inspectors crawl up in to the attic, around in the basement, look behind walls, check for mold, leaks, etc.  It is money well spent.

Often times, I have had clients question the need for an inspector because they are buying new construction. If anything, you probably need one more on new construction.  Existing homes have been tested and the kinks have usually been worked out or corrected by the previous owners.  There is some truth to the old adage, they don’t build them like they used to. Developers are notorious for cutting corners, shoddy workmanship and all around piss poor jobs. Ask any of your friends or co-workers about their experience in dealing with new construction.  Trust me, it all won’t be roses and peppermint.

When you find the place of your dreams, make sure you get an inspector to check it out to make sure it won’t be a nightmare.

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