My stomach dropped! I was a first time homebuyer and I attended my first homeowners association (HOA) meeting over 20 years only to find out that the community I just purchased in was involved in a major lawsuit!!! Here I was the new owner on the block excited to meet my new neighbors as they all gawked at me with the expression, "you poor thing". You can only imagine how upset I was with my realtor. My thoughts raging of how I had been duped! The reality it had my agent ordered a resale certificate back then I would have been better prepared to make a better decision about the property I owned for seven years. Back then this document was not a mandatory step. According to a recent article I found on ainsleylaw.com/pdf/Texas-HOA-Changes-2011.pdf the legislation amended the Texas Property Code to require the Seller’s disclosure form to include a specific statement concerning the purchaser’s right to receive various documents and a resale certificate from the property owners association if the home is located within a mandatory membership association. The revised resale certificate now requires that the HOA disclose all lawsuits to which it is a party (rather than just those in which it was a defendant as required under the existing law).
My Make No Mistakes system (www.MakeNoMistakes.com) always included this step but now in Texas its the law! Please call me today to see how you can get yourself a copy of the Make No Mistakes Home Buyers Checklist!
Real Estate Mistakes to Avoid
(281) 679-1074
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5773 Woodway #137, Houston, TX 77057
Phone: (281) 679-1074 Fax: (281) 715-2170
As an Investor, Real Estate Broker and author of Make No Mistakes About Buying Real Estate, I've seen COSTLY MISTAKES made by buyers and sellers, alike. Over the years, I've developed a system designed to ensure that my clients Make No Mistakes™.
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Taken from the book entitled, Make No Mistakes About Buying Real Estate.
When the borrower makes a mortgage payment to the lender, the principal and interest go directly to the lender to pay off the note. The taxes and insurance segments go into an account known as an “escrow” or “reserve account” until the property tax and insurance bills are due. These bills are typically due annually or semi-annually. At that time, the escrow agency simply deducts the appropriate amount of money from the escrow account and pays the bill. This way, the borrower doesn’t have to come up with a large sum of money to pay real estate taxes and the insurance bill. Mortgage escrow accounts are a good idea for most borrowers. Fortunately, in many cases, they’re mandatory. These escrow accounts decrease the number of foreclosures due to unpaid taxes and insurance. Homeowners who choose not to escrow often get into trouble – if they are not honest with themselves, and do not save aside the money for the taxes and insurance.
To assure that there will always be enough money in the account, lenders ask for more than they actually need as a cushion, or “reserve.” If the taxing authority or the insurance provider raises the rates, the lender doesn’t have to come to the borrower for the difference. The lender simply dips into the reserves, which is the extra money sitting in the account to pay your taxes and insurance bill for the year. At closing, lenders typically require two to four months’ equivalent of taxes and insurance to set up this escrow account. They are collected from the borrower at closing in the form of prepaids.
Can You Avoid Paying into Escrow?
Yes. Here’s how:
Contribute 20% as your down payment
Find a second lender who will take on a second note to reduce the risk for the primary lender
It’s important to consider, however, all the ramifications of not paying into escrow. For one thing, borrowers usually pay ¼ to ¾ points higher interest rates if they don’t pay into this monthly escrow account.
There are two big advantages we see to not escrowing:
You pay less at closing because you don’t have to pay the required prepaids, i.e., the two to four months of taxes and insurance premiums
You pay less every month because you only pay the principle and interest to your lender
Borrowers who choose not to escrow now have one or two big tax payments during the year that they must pay on their own. This usually means saving money each month to make these big payments when they’re due. For some people, that’s not a problem. A borrower can also make separate arrangements to pay his or her insurance premiums directly to the insurance carrier, often on a monthly basis once the first year has been paid in advance. If you’re an expert saver, choosing to not escrow might work for you.
The downside to all of this is we’ve seen too many people with good intentions not have the money to pay their taxes on time. The annual or semi-annual tax payment is usually due toward the end of the year, often during the holidays, which is an expensive time of year anyway. Not paying a tax bill is serious business. Interest and fines accrue on unpaid tax bills, and eventually a tax lien could be placed on the property. Everyday, borrowers lose their property in auction sales for as little as the back taxes due. A mortgage escrow account is an easy, worry free way to manage your tax payments and insurance premiums.
I love this recent article found on http://finance.yahoo.com/banking-budgeting/article/112954/confessions-extreme-penny-pinchers-cnnmoney?mod=bb-budgeting
What a great idea! So many kids today tend to have this entitlement attitude because their parents worked hard to give them so much! So when they grow up they feel as though people owe them things just because. I think this is a great way parents can teach their kids about the appreciation of the dollar early in life. Plus it placed on a smile on my face!
I Make My Kids Pay for Dinner
Name: John Snyder
Hometown: Boyne City, Mich.
On a recent family vacation, my wife and I decided that -- after the first night of eating out -- the rest of the nights each kid would pay half the bill.
The child whose turn it was to pay would also be able to choose the restaurant. So after a tab of $73 the first night (for a family of five), we moved on to Chick-fil-A the next night ($26 total), and pizza the night after that ($32, after using the coupon that my daughter found).
It was funny watching the kids act out, and say to each other, "You guys can share!" or "No, you're getting water!" -- the things I'm usually thinking while biting my tongue.
As parents you always hate to be the ogre saying: "You don't need that." So you just sit there and spend your money, but this made them do it themselves and it was fun for them, because it turned into kind of a game -- with all of them looking for coupons and special deals when it was their turn to pay.
Because of these discounts and how much pressure the kids put on each other to save money, we potentially saved at least $50 a night. A couple of our younger kids had to take out a loan from us for some of the dinners, but they'll be paying that back.
We'll continue doing this on vacations. We're going to a wedding in Wisconsin in July, and my five-year old got off free on the last vacation, so he probably owes us one.
Special warranty deeds are becoming more common. A general warranty deed is a promise to the buyer that the seller will warranty any prior problems with title, not just during the seller's ownership, but back along the chain of ownership.
A special warranty deed, on the other hand, limits the seller's promise -- or warranty -- to title problems that come up while the seller owned the property, but gives no warranty for problems prior to that point. For example, builders often give special warranty deeds. They only owned the property long enough to build the homes. They aren't sticking their necks out to warranty buyers against something that happened to cloud title when the subdivision was still a pig farm. Foreclosure property is another example where you often see special warranty deeds. The bank, like the builder, has no close relationship to the property and won't bend over backwards to promise anything about the condition of title before they acquired the property through foreclosure.
These days, title insurance is the buyer's best friend. Title insurance insures the buyer against past ownership problems, old liens, boundary issues, and so on. There may be exceptions in the title insurance policy, and owners should know what their exceptions are. For example, without a survey, a title company won't insure against problems that a survey would have made known -- encroachments, for example. That's an exception and they won't pay for problems that would have shown up with a survey. But unless there's a specific exception, any other past title problems are covered.
Copied from Answers.com
http://activerain.com/blogsview/2002145/projects-around-the-house-caulking
Homeowners can improve their homes in any of a million ways. When doing so, they should always consider a few things. Following this list of common sense steps can help make any project a proud project.
REMEMBER, WHEN DONE WITH ANY HOME-IMPROVEMENT PROJECT, THE HOUSE SHOULD LOOK LIKE IT WAS ALWAYS THAT WAY! IT SHOULD BE THAT HARD TO TELL.
1. Decide what project you want to do or what part of the house you want to improve.
2. Do research! Learn proper techniques, which materials will get the final result you want. When caulking, you only want to put the caulking where it should be put!
3. Be sure to use the proper material for the job at hand. Some caulks are not made for some places! Matching colors is important to the final product when you are done!
4. Practice first! Be sure you have the knowledge and skill to accomplish the task(s) at hand.
5. If not, or if it is a project that requires skills you do not have, hire the right professional to do the job for you!
6. When hiring anybody, AGAIN, do your research! Get references! See what this contractor has done before!
7. If doing the job yourself, be certain you have all the materials you need to FINISH the task! Nothing drags on longer or deflates egos more than unfinished home-improvement projects!
8. Then go, and do, that voodoo that you do so well!
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It is no secret that access to what is available is no longer exclusively in the hands of the real estate professional. The Internet has changed that, and there is probably no "going back" from this position. People "find out" about real estate they may wish to purchase in a much shorter time period than in the past, and they find out by themselves.
So, why do they need the services of a Realtor, or in my home sate,Massachusetts, where I have practiced for more than 42 years, a real estate attorney? To me, the answer to this question is clear. They may have some idea of what they want, maybe even a clear idea and a focused target, but they really do not know how to get to the "spot" that permits them to achieve their goal of owning the property in question. In other words, it is our knowledge, and experience and commitment to enthusiastic service which makes us integral parties in getting to the finish line. Many consumers are aware of such terms as Offer, Inscpection, Appraisal, Counter-Offer, or Purchase and Sale Agreement. Most, however, need guidance in their timing, their presentation and their willingness to let us step in to assist them. In my mind, Buyer's Agency has changed the landscape radically. I can clearly remember closings when I first started out practicing where the Buyer would say to me, "We need to wait for my real estate agent before we can begin". I was quick to explain to the Buyer that the Realtor is question was NOT their agent, but another person working for the Seller. That has all changed, and Realtors can really "represent" Buyers. That ability gives the Buyer some real support, and the capable Buyer's Agent cannot only provide technical and practical information, but also assist in negotiations and assist in finding appropriate price points. In effect, we are in a new era of in the real estate profession. We advance because we have knowledge and experience and a network of people with whom we have worked and who believe in us. As I have said in many prior posts, the "T" word, TRUST, is still pretty important, too. |
http://activerain.com/blogsview/2002176/what-to-do-and-when-reasons-a-consumer-needs-a-real-estate-professional
What to do, and When!!!---Reasons a Consumer Needs a Real Estate Professional
Recent article on Bank of America discusses how Bank of America is delaying foreclosures in 23 states as
it examines whether it rushed the foreclosure process for thousands of
homeowners without reading the documents. Its been difficult to find a list of the states. I am particularly concerned if Texas made the list. From what I can gather the states below require judicial foreclosure, which means Bank of America would have have to sue the homeowner in court to initiate a foreclosure. Texas is not one of those states. In Texas, the foreclosure process is accomplished by simply sending a couple of default notices to the borrower, then scheduling a foreclosure auction.
The 23 states affected are:
Connecticut
Delaware
Florida
Hawaii
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Nebraska
New Jersey
New Mexico
New York
North Dakota
Ohio
Oklahoma
Pennsylvania
South Carolina
South Dakota
Vermont
Wisconsin
Mistake # 21: Buying property based on “I Love You”
Let’s talk about these two important points now. This topic, difficult though it may be, needs to be covered. We have seen many unmarried couples who, based on their plans to get married or move in together, purchase real estate together. This can sometimes be a huge mistake! People in love and planning to get married don’t like to think about what seems impossible – that they won’t actually get married. Yet so many things can get in the way of a couple actually walking down the aisle. This is just too big of a problem to sort out if the wedding doesn’t happen. The real problem is when the marriage doesn’t happen and only one person has signed his or her name on the mortgage loan, yet both people have legal ownership in the property.
Real Story (name changed to protect the innocent :-)) Henry and Sharon were in love and were planning their wedding. Neither of them could imagine one without the other. They found the perfect home, and because Henry had the stronger income and better credit score, they took out the mortgage loan in his name. Sharon wasn’t working at the time and couldn’t contribute financially. Henry paid the down payment and all closing costs, yet the ownership title was in both their names.
Before they married, Henry decided he preferred life as a bachelor. He broke up with Sharon, who was – naturally – upset. Henry wanted to sell the house. Sharon was upset about the break up and told him he could sell it only if he agreed to pay her $20,000 from the profits and equity of the property. Henry needed her signature in order to sell it, so he agreed.
Consequently, Henry has spent $20,000 (the amount he paid Sharon), the down payment, and the closing costs on the loan when he purchased the property. We can only hope that the property gained value while he owned it, and he was able to sell it at a price high enough to recoup the money he put into it. Sharon, on the other hand, has a broken heart – and $20,000 in cash.
Real estate is a serious commitment and investment. You should view it in terms of a business arrangement. Do not allow emotions to interfere with your decisions unless you have money to lose. Better yet, decide upfront how you will handle the sale of the property if the marriage does not take place. To read more on the various forms of ownership you should consider go to www.MakeNoMistakes.com or contact Melissa Walters for more information.
Let’s talk about these two important points now. This topic, difficult though it may be, needs to be covered. We have seen many unmarried couples who, based on their plans to get married or move in together, purchase real estate together. This can sometimes be a huge mistake! People in love and planning to get married don’t like to think about what seems impossible – that they won’t actually get married. Yet so many things can get in the way of a couple actually walking down the aisle. This is just too big of a problem to sort out if the wedding doesn’t happen. The real problem is when the marriage doesn’t happen and only one person has signed his or her name on the mortgage loan, yet both people have legal ownership in the property.
Real Story (name changed to protect the innocent :-)) Henry and Sharon were in love and were planning their wedding. Neither of them could imagine one without the other. They found the perfect home, and because Henry had the stronger income and better credit score, they took out the mortgage loan in his name. Sharon wasn’t working at the time and couldn’t contribute financially. Henry paid the down payment and all closing costs, yet the ownership title was in both their names.
Before they married, Henry decided he preferred life as a bachelor. He broke up with Sharon, who was – naturally – upset. Henry wanted to sell the house. Sharon was upset about the break up and told him he could sell it only if he agreed to pay her $20,000 from the profits and equity of the property. Henry needed her signature in order to sell it, so he agreed.
Consequently, Henry has spent $20,000 (the amount he paid Sharon), the down payment, and the closing costs on the loan when he purchased the property. We can only hope that the property gained value while he owned it, and he was able to sell it at a price high enough to recoup the money he put into it. Sharon, on the other hand, has a broken heart – and $20,000 in cash.
Real estate is a serious commitment and investment. You should view it in terms of a business arrangement. Do not allow emotions to interfere with your decisions unless you have money to lose. Better yet, decide upfront how you will handle the sale of the property if the marriage does not take place. To read more on the various forms of ownership you should consider go to www.MakeNoMistakes.com or contact Melissa Walters for more information.
A good real estate agent meets all your realty needs. A “good” agent should have access to attorneys, title companies, inspectors, specialty inspectors, repairmen, insurance companies, banks, anything and anyone related to fixing or renovating a home and closing your real estate transaction.
The process of buying the right home or property encompasses an enormous amount of details. Occasionally a buyer will feel a real estate agent did not do much. When that happens, you can bet the buyer must not have noticed many of the agent’s day-to-day activities, especially if the agent found the buyer’s perfect home quickly. What that buyer failed to realize is the agent’s experience – gained over many years – shielded the buyer from many of the details occurring in the background. A good agent does not become good by just reading books. Agents become “good” through experience, education, trials, tribulations, understanding their roles, and knowing when it’s time to make the moves which best serve their clients.
Years ago, a reputable friend referred a client to us. As a result of our established relationship with this friend, we made several exceptions when we took this referral. One exception was failing to discuss the new client’s financial position in detail. In fact, when we brought up the subject, he told us we didn’t need to concern ourselves with his finances because he worked for the financial institution funding the loan. Under normal circumstances, this type of attitude and conduct would not have been acceptable to us, but because of his association with our friend, we made the exception. Nonetheless, we continued to search for the right property.
As our client got off work one evening, he came across a property that interested him. The price was more than he wanted to spend, but he insisted this was the one. As his real estate agents, we reviewed the criteria he initially set, and tried to make sure he would be comfortable at this price. He assured us he could handle it. We proceeded to put together the offer and negotiate the terms.
He called one evening and said because he had found the house, he felt we weren’t entitled to our full commission. In fact, he wanted to use part of our commission toward his closing costs. His actions indicated he didn’t value what we did for a living, and his words were condescending.
Our immediate reaction, of course, was “the nerve of this guy!” However, we remained calm and reminded him it was our efforts of showing him properties for more than six weeks which helped him fine tune his criteria. Finding the actual house is just one part of the broad scope of work a real estate agent handles. In other words, he was not entitled to any portion of our commissionable dollars. He became upset, ignored our advice and recommendations, and moved forward anyway.
On closing day, we kept our part of the agreement to represent him by showing up at the signing. When we got there, we found that his deal, which he chose to handle himself near the end, cost him dearly. The cost included unresolved repair items and an additional outlay of cash at closing due to his inability to rewrite the contract to cover his costs. He paid a high price for being a know-it-all and having the wrong attitude.
For more information go to www.MakeNoMistakes.com and order your copy of Make No Mistakes About Buying Real Estate
Exercise caution if you call a number on a street corner or yard sign that reads something like this:
Avoid Foreclosure
We Buy Houses
Stop Foreclosure
The people behind these signs may be legitimate, but how do you properly check them out before you do business with them? In most cases, you only have a phone number and a sign that claims they are real estate investors or something similar. You would not call any other professional based on a street corner or yard sign, so why would you risk calling someone you can’t check out when your home is at stake? We realize it’s tempting when you’re desperate to keep your house. The carrot they offer is to help you avoid losing your home to foreclosure. If you still can’t resist calling, here are indications you’re speaking with a scammer:
If they urge you to not talk with anybody else about what they have offered you. This should be your first sign to run. The only reason they’re asking you to keep it a secret is because they don’t want anyone to tell you the truth. And if they were making money legitimately, what kind of company doesn’t want word-of-mouth advertising? An illegal one.
If they ask you to pay money up front, this is a huge red flag.
If anyone asks you to sign documents but doesn’t give you the necessary time to read them or to have them reviewed by someone else, this is another red flag. The reasons for the rush may sound legitimate, so don’t be taken in.
If the deal “has to be done today," walk away from it. For more information go to www.MakeNoMistakes.com
Now that you understand the components of your total mortgage payment its time to calculate the proposed mortgage payment that makes sense for you! We have created a tool known as the loan calculation table located on the same sheet as the Budget Spreadsheet. This table will allow you to run various what if scenarios as it pertains to your proposed mortgage payment. Simply enter the variables, such as offer amount, down payment, interest rate being offered to you and the term of loan. Be sure to also enter such variable information as your tax rate, monthly insurance and PMI amount, which you can get from your realtor, insurance agent and loan officer, respectively. Once you finish entering these variables into the spreadsheet, you can then play with the offer amount to determine how much house you can afford, being careful to take into account your down payment, the interest rate currently offered and the number of years you plan to borrow. The results will show you a proposed monthly mortgage payment. Your goal here is to focus on the monthly mortgage payment amount to determine the maximum offer amount or sales price of your affordable home. (Note: As you run your what if scenarios these numbers will automatically populate the monthly mortgage payment both in your loan calculation table and in the monthly planned expenses table.)
Excerpt from Make No Mistakes About Buying Real Estate
New construction may not be an option in the area where you want to live, but if it’s any consolation, we are not big proponents of new construction. Why? Resale values on established homes, in established neighborhoods, are already established! You can check the resale sales history of your home or others in the neighborhood. If your neighbor doesn’t cut his lawn, more than likely that is not going to change too much – unless they sell to someone who will. Though neighborhoods can change, there is enough information you could gather from the internet, a neighborhood newsletter, by driving around and from a nearby police station. Let’s not forget about the nosy neighbors who can give you great insight as to the ins and outs of a neighborhood. You could attend a homeowners’ association meeting to hear the homeowners’ issues and complaints. Another good website to check is www.familywatchdog.us, which will let you know if there are sexual offenders in or around the neighborhood.
New construction is like investing in a business you don’t know much about. Let’s begin by dispelling some of the myths. The first and foremost myth is: new does not mean ‘no problems.’ Any home built by man has the potential to have problems. Also, new construction can quickly deplete much of your cash. Items such as blinds, gutters, sod in the backyard, and a refrigerator are a few items which may not necessarily come with your new home. A home that’s not newly-built will probably have most of these items already, and you can live with them until you are financially able to upgrade. These days, builders are making efforts to become more competitive with resales (i.e., homes already built) by offering very creative incentives to buyers. Many items are negotiable.
The other downside to new construction is buying too soon into a subdivision. Builders sometimes reduce the prices of their homes partway through the sales process, which means the early buyers ended up paying more than others did. Then again, if the neighborhood turns out to be a success you may have made a great decision. The risk is up to you.
New construction, as with anything else, just requires buyers to do their research. Understanding how builders work is crucial to making a wise purchase. We have seen buyers who, in the beginning, say they don’t want the cost of their homes to go past a certain limit. Yet time and again, after dealing with the builder or the design center, buyers walk out tens of thousands dollars over budget because they chose expensive upgrades.
Also, beware of many builders who change their names frequently or who have reputations that are not always first-rate. The best way to learn more about a builder is to ask your real estate agent to get a list of referrals of homes the builder constructed in the past. Call these homeowners and ask questions about their business dealings with the builder. Or find other real estate agents who have sold the builder’s property while representing the buyers. These agents will be happy to share their buyers’ experience, both before and after the buyers moved in. You can easily find these real estate agents by searching the MLS historical records. Focus your questions around quality, service and warranty issues. To find a list of the questions to ask go to www.MakeNoMistakes.com or contact Melissa Walters for a "Good" Realtor Referral.
It's a myth that the new health care bill (HR 4872 Health Care and Education Reconciliation Act of 2010) contains a 4% transfer tax on home sales. The truth is the bill imposes a 3.8% Medicare tax for some high income households that have a net investment income of $500,000 or more ($250,000 for individuals). The tax, which goes into effect in 2013, applies only to households with adjusted gross incomes of more than $250,000 ($200,000 for individuals). Simply stated, this means the capital gains exclusion was left alone! No taxes on profits of $250,000 or less for individuals and $500,000 for married couples. Very few individuals will be affected by this new ruling. Go to www.MakeNoMistakes.com
Our beliefs about money and wealth are often passed down from our parents to us at a very young age, and then influenced by our experiences, friendships and media.
In our business, we encounter many people of all races and financial backgrounds. Yet we notice one thing common to everyone. When our clients bring their children with them while searching for real estate, the children all take an interest! From the 4-year-old who insists on finding his or her new room to the 14-year-old who has a comment about the offer price. All children know what they like and whether or not that home makes sense for their family.
Yet so many parents leave their children at home because they view it as adult business and the kids will only slow down the process. When, in fact, one of the most important gifts parents can give their children is teaching them the process of buying real estate and what it takes to own a home.
Ask children to point out homes they would love to live in and they all will answer with enthusiasm. Would this not be a great time to discuss what this dream home would cost and what they would have to do in life to get it? As parents, we want to teach responsibility to our children and how to become self sufficient in life. However, as parents, many of us are limited to the knowledge and experiences our parents passed on to us.
Almost everywhere you turn, you can find books, articles, lectures, blogs, workshops and courses on real estate. Never before have we had such a variety of resources available to us in real estate. But at the same time, many parents have neglected to “Pass the Knowledge On” to their children. The question is, why? To learn more about buying real estate and how to give children the knowledge that will help prevent future real estate mistakes go to www.MakeNoMistakes.com.
Pass The Knowledge On®!
Only a small percentage of people in any profession will ever strive to perfect their skills. The rest are happy just learning enough to get by. Please understand this: It does not take much to get licensed. For example, in Florida if you are a high school graduate or have your GED and want to earn your real estate license, you are required to take only 63 hours of classes. You can easily accomplish this by going to class for only one week, from 8:00 a.m. to 6:00 p.m., Monday through Sunday. Most real estate students’ goals are to simply get through the boring class, pass the state test, and earn their licenses. Consequently, newly-licensed real estate agents don’t have any practical experience until they find clients to be guinea pigs. All the class training in the world doesn’t compare to actually going through a hundred real transactions with real experiences.
You may ask, “What about the national real estate companies touting how great and knowledgeable their agents are?” The answer is they’re not all great and knowledgeable. As often as these large real estate offices apparently offer training, it is usually an individual agent’s choice to participate in any of the training classes or programs the real estate brokers offer. No matter what size company your agent is affiliated with, ask him or her about her recent continuing-education classes.
Most agents are contracted, not employed. A real estate broker typically owns the agency and holds the active licenses of the real estate agents in that office.
The goals and objectives of a real estate broker and a real estate agent are different. The broker’s goal is to bring on board as many agents as possible to help grow the company’s business. A real estate agent’s goal is to bring in as many buyers and sellers as possible to grow his or her individual business.
Although it is in the best interest of the broker to place well-trained agents in the field, the broker’s No. 1 objective is to attract as many agents as possible. Brokers charge monthly fees to their agents; brokers also expect to receive a portion of each agent’s commissions.
Consequently, there are many real estate agents who are just winging it. They’re trying to run their businesses with virtually no business experience. Little of this is taught in real estate schools. This lack of experience is difficult to overcome. Most busy real estate agents don’t make time to help each other. Many view it as helping their competition so they’re not interested in sharing trade secrets. As a result, agents often learn by trial and error – by making mistakes that cost you money.
Also, real estate is a straight commission business: no sales, no income! As a result, many real estate agents start trying to work the business part-time on the weekends. They’re not committed to working the business full-time. This increases the risk of making mistakes because real estate is so detail oriented. There are countless small pieces which need to come together in the right order and in a timely fashion. This can be very difficult to do if you’re working only part-time. Years of practice makes perfect, and you need a lot of practice to become good – let alone perfect.
For more information or a list of mistakes and characteristics which should immediately disqualify a real estate agent from being your coach or representative go to www.MakeNoMistakes.com
When you meet with loan officers, they’ll review your initial application, and calculate your income and revolving liabilities. They do this to come up with a number that indicates how much house you can afford. In other words, how much house you qualify to buy. That number is your MAXIMUM limit. We strongly suggest that, on reviewing and analyzing your Budget Spreadsheet, you should be prepared to tell the loan officer the monthly mortgage payment that you’re comfortable with! It’s dangerous to borrow at your maximum limit because it can force you to live from paycheck to paycheck or, worse yet, cause you to get behind on your bills. Should something unexpected happen in your financial life and you can’t make your house payment, you’ll be in a very bad position. When you buy property, it’s always best to prepare for the unexpected: Have a back-up plan and a little nest egg set aside for emergencies, and do not borrow at your maximum limit! Hopefully, you’re not in the same predicament as our example couple.
Lay out everything on this or a similar spreadsheet so you’ll understand how your income arrives and leaves your household. Once you have accounted for everything, take the time to discuss what expenses you can look to reduce or just do without in order to own your home. The spreadsheet is set up for you to do as many what if scenarios as you like. Taking a serious and realistic look at this information will motivate you to improve your financial well-being.
The Make No Mistakes™ concept began for us years ago in our daily interaction with our clients and the people who came to our seminars. We found that most people had enough real estate knowledge to be dangerous. Or they relied heavily on their friends and loved ones for advice to help them through a process that they knew very little about. Most people insisted on diving head first into uncharted waters with unknown obstacles which they had no knowledge or expertise to effectively deal with. As a result, they made costly mistakes during their real estate transactions.
Knowing a bit about real estate is not enough. Most people don’t deal with real estate transactions on a regular basis or don’t know which experts to turn to when they know they need more help. We have also witnessed people deciding to take short cuts, or tossing aside experts’ advice – only to regret their choices when the outcomes were stressful, expensive or avoidable.
We believe having the right knowledge and putting it into action will make the real estate process an enjoyable one and – most importantly – one that does not cost unnecessary dollars. In fact, this knowledge will save people money. And in today’s market, every penny counts!
Our goal in writing this reference guide was to pass necessary knowledge on to you by providing the information, tools and checklists which will properly drive this process to a successful and profitable conclusion.
It all starts with you. While many people are involved throughout the real estate process, you are the most important one. In reality, YOU are the only one who can truly look out for your best interest. And when the transaction is complete, you are the one who is ultimately responsible for the property and for paying the mortgage loan! So do your homework and make decisions that meet your needs. Use this information wisely and don’t be intimidated by the complexity of the real estate business or the amount of information presented. Remember, buying real estate can be an emotional purchase and you may find yourself making compromises or decisions under pressure, which leads to costly mistakes. This reference guide will arm you with information, knowledge and checklists to help you. Don’t end up like millions of people who have lost their homes – or never had one to start with – due to lack of knowledge!
This is the third edition of our Make No Mistakes™ About ... Buying Real Estate guide. Our series of Make No Mistakes™ guides are designed to help and inspire you on a variety of topics to learn and profit from other people’s mistakes. We wrote this particular reference guide, About ...Buying Real Estate, because we truly love the “game” of real estate. Together, we have more than 40 years of practical experience. As investors, owners of a real estate company and a mortgage brokerage firm, we see other people’s successes and failures every day. In this reference guide, we share our mistakes, stories, inside secrets and tricks of the trade. Most importantly, we hope to encourage you to take action, to educate you along the way, to give you the insight to avoid the pitfalls and to achieve huge success!
No matter how useful it is, however, this reference guide is only a vehicle for people who are interested in real estate, successful transactions and personal growth. We ask you to join us in our belief that sharing important knowledge will help everyone achieve more and improve the quality of their lives. We do this by passing our knowledge on, and believing it spreads outward from there. If you “Pass The Knowledge On,” you’ll accomplish a great deal since little is truly accomplished without others moving to the next level with you.
Use this information to begin your journey. Make No Mistakes™ About ... Buying Real Estate, and then Pass The Knowledge On®!
The Role of the Underwriter
The broker, banker, loan officer (the “originator”) and processor, in
most cases, do not have the authority to approve your loan. Their roles
are to put together a compelling package for the lender’s underwriting
department to review and approve. Specifically, the role of the loan
officer is to sell you on the rate and terms of the loan. The
processor’s role is to sell the file on paper to the underwriter, who
then determines the level of risk the lending company is willing to
take.
Mistake # 49: Believing you have an approval without a “Clear to Close”
However, there are times when both the originator and the processor have
to be able to verbally sell your file. They must be able to articulate
well enough to convince the underwriter to look at a situation from
different perspectives, if need be. That is, they must be able to
overcome any objections the underwriter might have, based on the
guidelines he or she has to follow.
Even though you may have followed all of our advice from the “Things Not
to Do While Applying for a Mortgage Checklist,” you might still receive
a list of conditions from the underwriter to fulfill in order to get a
final loan approval. In terms of approving or denying your loan, the
underwriter will make one of the following decisions:
Approve the loan
Approve the loan with conditions
Application returned for additional documentation and resubmission
Deny the loan
If the underwriter decides to approve your loan, he or she will package
the paperwork in preparation for selling the loan on the secondary
market. However, if the underwriter approves the loan with conditions,
don’t freak out; this is common. Just get busy and get it done.
Depending on how busy the underwriting department is and how quickly you
can give them the information they need, it could take up to four
additional days to complete your loan.
To help you be better prepared, here are a few more examples of conditions:
Buyer must prove that child support payments are up to date
Buyer must show proof and source of funds for the down payment
Survey of the land needs to be done
Property must be insured by a title policy
Buyer must show a copy of the discharge papers from a bankruptcy
Buyer must subscribe to private mortgage insurance
Buyer must supply hazard insurance
Buyer must payoff certain debt
Approval value must meet or exceed sales price
If the underwriting department needs additional information, they will
contact the processor with the list of conditions that need to be met
before the borrower receives a “Clear to Close.” This process can go in
circles for a long time if the borrower and the processor are unable to
present the information the way the underwriter wants to see it. Often,
this part of the process causes everyone a lot of stress. The additional
information the underwriter requests might be perceived as trivial or
inconsequential in the whole scheme of the loan. But keep in mind the
underwriter’s guidelines require this information; his hands are as tied
as yours. It can be very frustrating if you cannot readily get your
hands on the information and you are supposed to close within days. The
best attitude to have during these trying days is an understanding one
and make sure through all of your preparing to move you still can
readily access your important papers.
What Happens to Your Reserve Account When Taxes or Insurance Increase?
Beware! Anytime your insurance premiums or real estate taxes increase – which could be once a year – your lender can ask you to put more money in your reserve account. There are typically two ways to accomplish this.
Pay a lump sum to cover the additional costs
Increase your monthly payment to include the additional costs
Lenders don’t usually give you a long time to make this decision and then to pay the additional money; 60 days or less. Keep in mind that if you choose to ignore the lender’s request, and continue to make your same monthly payment, the lender will return your check to you. At that point, it’s considered late, and will appear as a late payment on your credit report.
For more information go to www.MakeNoMistakes.com
Beware! Anytime your insurance premiums or real estate taxes increase – which could be once a year – your lender can ask you to put more money in your reserve account. There are typically two ways to accomplish this.
Pay a lump sum to cover the additional costs
Increase your monthly payment to include the additional costs
Lenders don’t usually give you a long time to make this decision and then to pay the additional money; 60 days or less. Keep in mind that if you choose to ignore the lender’s request, and continue to make your same monthly payment, the lender will return your check to you. At that point, it’s considered late, and will appear as a late payment on your credit report.
For more information go to www.MakeNoMistakes.com
Tips on How to Improve Your Credit Scores
Here are a few tips to improve your credit scores before you start looking for that new house:
Pay your bills on time, and pay at least the minimum amount due.
Contact your creditors immediately if you miss a payment, and work out a payment plan before they report you to the credit bureaus.
Do not close credit card accounts in good standing. These accounts show you have a record of managing your debt responsibly. Someone with no history of credit is seen as a higher risk.
Avoid charging to the limit on your credit cards. It is better to spread out your charges on two or more cards than to max out one card.
Ask creditors to raise your credit limit so you do not appear over-extended.
Do not open new accounts, which imply you’re acquiring new debt. This will lower your score.
Aim for a rich mix of credit; for example, revolving credit (credit cards, department store credit cards) and installment debt (car loans, student loans).
Correct errors on your credit report.
If you suspect your creditor should be reporting positive information to the bureaus but isn’t, contact the creditor or the bureaus directly to set the record straight.
Do not assume that a high salary guarantees a good credit score. Find out the key factors dragging down your score so you can fix them. Once you are comfortable with where you stand in regards to your credit report the next phase will be to fill out the loan application.
For more information on this subject go to www.MakeNoMistakes.com
Here are a few tips to improve your credit scores before you start looking for that new house:
Pay your bills on time, and pay at least the minimum amount due.
Contact your creditors immediately if you miss a payment, and work out a payment plan before they report you to the credit bureaus.
Do not close credit card accounts in good standing. These accounts show you have a record of managing your debt responsibly. Someone with no history of credit is seen as a higher risk.
Avoid charging to the limit on your credit cards. It is better to spread out your charges on two or more cards than to max out one card.
Ask creditors to raise your credit limit so you do not appear over-extended.
Do not open new accounts, which imply you’re acquiring new debt. This will lower your score.
Aim for a rich mix of credit; for example, revolving credit (credit cards, department store credit cards) and installment debt (car loans, student loans).
Correct errors on your credit report.
If you suspect your creditor should be reporting positive information to the bureaus but isn’t, contact the creditor or the bureaus directly to set the record straight.
Do not assume that a high salary guarantees a good credit score. Find out the key factors dragging down your score so you can fix them. Once you are comfortable with where you stand in regards to your credit report the next phase will be to fill out the loan application.
For more information on this subject go to www.MakeNoMistakes.com
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