Don’t Rely Excessively On Appraisals
An appraisal is a valuation of a property by an independent appraiser. The appraiser does an evaluation of the home, considers the home in comparison to others of comparable type and so on. Once completed, the appraiser then issues a written appraisal value of the home. Many homebuyers make the assumption the appraisal is the true value of the home both now and in the future. This can be a dangerous assumption.
First, appraisals are limited by something known as a moment in time. The appraisal done today, may not be entirely relevant a month or two later. If a property has been on the market for a few months, the appraisal may not reflect a slowing market. This, in turn, means the appraised value is actually higher than the current market will support. Homebuyers run into problems when this occurs because they put too much value on the appraisal. A seller will often list the home below the appraised amount and homebuyers will think they are getting a deal. In reality, they are not and may actually be paying more than a new appraisal would support. The older the appraisal, the less value you should put into it.
Most homebuyers assume an appraiser inspects the home for defects and discounts the value of the home accordingly. This is not really the case. An appraiser is not really doing a critical home inspection. In fact, the appraiser contract and/or report usually contains a long disclaimer whereby the appraiser covers his derriere by noting he assumes the property is in good condition and isn’t liable if it is not. Obviously, that should scare you. This, of course, is why you should insist on a home inspection for any property you make an offer on.
An appraisal is a solid part of the equation when considering a home purchase. It is not, however, the piece de resistance when valuing the property.
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Closing costs are often the last thing a person thinks of when buying a home. While closing is the joyous moment the home becomes yours, the costs can be surprisingly aggravating.
When you purchase a home, condo or other property, you will go through a period known as escrow. During escrow, various issues related to the property transfer are worked out. The last day of escrow is known as the closing day and you are going to be paying closing costs.
Closing costs come in many forms. Some involve significant dollars while others are relatively painless. Here’s a list of typical costs:
Escrow Fees
An escrow agent is essentially a third party that works with the seller and buyer to finalize the transaction. For this assistance, the escrow agent will charge a fee. Depending on your area and the agent, you can expect fees from a few hundred dollars to around a thousand or so. Make sure you find out the fees before picking an escrow agent.
Home Loan
Obtaining a home loan in the current market is a highly subjective event. “Points” can be a major cost associated with home loans. Points are essentially a fee you pay or have build into the loan for the privilege of being allowed to borrow money. A point usually equates to 1% of the loan. On a loan of $300,000, one point would equal $3,000. If you have excellent credit, you can shop for a loan that doesn’t require you to pay points.
Home and Title Insurance
Insurance for your home and title are a must. If you are borrowing money to purchase the home, each is mandatory. If you are using your own funds, you should still get both forms of insurance. As each name implies, they provide insurance against issues involving your home and problems with the title transferred to you. You want to have clear title.
PMI
Private Mortgage Insurance, “PMI”, is mandatory if your down payment is less than 20% of the purchase price. You can expect to pay a few hundred dollars a year in PMI. Inspections, Appraisals and Miscellaneous Fees
In the home purchase process, you are going to use a variety of services to validate the property is your dream home. These services come with fees and you can expect to pay for home inspectors, appraisers and the like. Depending upon the state you live in, many of these fees may be built into your mortgage. Nonetheless, you need to know exactly what you must pay for on closing day so you can budget accordingly.
Closing escrow should be one of the happier days in your life, particularly if it is for your first home. Make sure you know the costs associated with it so you don’t have to spend the day running around borrowing money.
You really want to find motivated sellers for real estate investing? Put a gun to their heads. That’ll give those sellers a chance to suddenly find their motivation. But, unfortunately, putting a gun to someone’s head is neither legal nor ethical way of doing it. There’s nothing like an assault with a deadly weapons charge to put a damper on your real estate investing.
So, you have to resort to legal, ethical, and moral means to find motivated sellers. Despite a slew of advertisements on the web and in pint, there is no easy answer for succeeding in real estate investing. Expect to put in long hours and hard, migraine-inducing work in order to make a profit. However, this is the best way to learn any skill.
Who Are They?
Just what makes a motivated seller (or buyer) any different from any other real estate seller or buyer? “Motivated seller” is a euphemism for someone who knows more than the average person about real estate investing. It also means they are willing to negotiate in order to sell. They are to be distinguished from the average person who is just curious what he can get on the current market, or who will only sell under strict circumstances.
A motivated seller in real estate investing could mean that they are desperate to sell, but it also means that they could be experts in negotiation, are beginning the foreclosure process or are thinking of removing the property from the listings altogether. Think of motivated sellers as really successful used car salesmen. You will not be able to pull any kind of wool over their eyes.
Why would you want to find a motivated seller when you’re into real estate investing? They are truculent, argumentative and going to give you a hard time. However, they are also the ones who will wind up eventually selling you the property you want and often at your price. They need to get rid of the property that they have.
Finding These Guys And Gals
The best way to find motivated sellers in real estate investing is to not look for them. Then, they show up like buses. What you need to do is concentrate on the property available. First off, is the property worth buying in the first place? Is it within your price range? How much fixing up does it need?
Location, Location, Location
In order to select the property that you are going to work to buy, you need to consider the location it’s in and the real estate market in that particular area. Select the area before you select an individual property to target. Once you’ve hit a target area, then you can get to specifics buy looking at real estate listings and even doing a direct mail campaign for that particular area. By using the right tools, you can also pre-qualify your properties before even sending any marketing out.
If you do a direct mail campaign, make it short and sweet. A regular (and economical postcard) with the necessary information is all people will need to see. And people can will see information on a postcard immediately as opposed to having to open an envelope. People will often not even bother to open an envelope from an unknown or unfamiliar return address, just assuming its junk mail.
When you concentrate on a location and the financial condition of the property itself, and get the word out that you are interested in buying for these properties, then the sellers will come to you like flies to rotting meat.
I told you during this article that location and the financial aspect of the property are key in finding motivated sellers, but you may be asking yourself, how do I find properties with the right financial condition so that I will effectively drive motivated sellers to me? Well, I created a video of a tool I use to accomplish this. Go here to watch the video.
How To Find The Best Real Estate Deals
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Jun
18Educated Consumers Can Save Money on Mortgages
Posted By: Ramon Rivas on June 18, 2010 at 10:09 pmNot only is owning a home an integral part of the American dream, but our home is likely the biggest purchase we will ever make and the biggest asset – or liability – we will ever have. Until about a year ago, of course, no one would have imagined that a home could be a liability. That’s when housing prices started to drop and relatively new homeowners realized that it was only a matter of time before their adjustable rate mortgages would skyrocket.
Experts agree that house values haven’t yet reached their nadir and that many homeowners are poised on the precipice. While some people might find it easier to stick their heads in the proverbial sand, smart homeowners and home buyers see the current market as an opportunity to either take a second look at their existing mortgages or to shop around for new mortgages. Either way, it’s important to learn all that you can about different ways to finance a home before you take the plunge. Here are a few scenarios that illustrate some of the choices available today.
Nine years ago, Sam and Jenny Thompson bought a home that was ten years old. They were savvy enough to buy their house just before prices went through the roof. They have well over $100,000 of equity in their home, but their home is showing signs of wear. It’s time for a new roof, a new heating and air conditioning system, and they know that they need to have some dry rot repaired and have the house painted. They don’t have much in savings, though, and want to borrow money so that they can get the repairs done.
Sam and Jenny have a few options to pay for home improvement. They can refinance their home and get cash out for the repairs, they can get a home equity line of credit, or they can get a second mortgage. Which option is best depends largely on that status of their current mortgage. If they have a low interest, fixed rate loan, it probably doesn’t make sense to refinance. If they’re planning on staggering their home improvement over the next two years, it probably doesn’t make sense to get a lump-sum second mortgage. Instead, a home equity line of credit might work best. On the other hand, if they have an adjustable rate mortgage, it might be financially prudent to refinance to a fixed rate loan and cash out part of their equity to make their home repairs.
Cynthia and Bill Williams have owned their home for five years, but are concerned that Bill might be laid off in the next six months. They have quite a bit of money in savings, but have racked up considerable credit card debt. Because they’re paying a high interest rate on their credit card debt, they may want to use a home equity line of credit for debt consolidation purposes, and to have a cushion in case Bill does lose his job.
When Rebecca Richards bought her home two years ago, she thought housing prices would continue to soar and interest rates would go down. She bought her house with an adjustable loan and is terrified that, when the loan adjusts later this year, she won’t be able to make her payments. In this scenario, Rebecca needs to meet with her lender now, rather than wait for the other shoe to drop. If possible, she should convert her adjustable rate home loan to a fixed rate loan.
The bottom line is that, whatever your circumstances, you need to learn all that you can about the options available to you. Thankfully, there are resources on the Internet that not only have a library of informative articles on mortgages, but that also provide the calculators and tools you need to find the answers to your questions. The best sites even offer a variety of loan programs and will prepare a personalized quote for the types of mortgages that you might be interested in.
