Selling Your Home

Appraisals & Market Value

Are there standard ways to determine how much a home is worth?

Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value. Your real estate agent can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpricing your home or underestimating its value. A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home. You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home’s potential worth.

How do you determine how much a home is worth?

The short answer: a home is ultimately worth what is paid for it. Everything else is really an estimate of value. Take, for example, a hot seller’s market when demand for housing is high but the inventory of available homes for sale is low. During this time, homes can sell above and beyond the asking price as buyers bid up the price. The fair market value, or worth, is established when “a meeting of the minds” between you and the buyer takes place.

What about appraised value and market value?

A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors. Market value is the price the house will bring at a given point in time, once you and the buyer establish a “meeting of the minds” on price.

What is the difference between list price and sale price?

The list price is your advertised price, or asking price, for a home. It is a rough estimate of what you want to complete a home sale. A good way to determine if the list price is a fair one is to look at the sale prices of similar homes that have recently sold in the area. The sale price is the actual amount the home sells for.

Disclosure

Are agents responsible for disclosing material facts?

They can certainly be held accountable, particularly if they had prior knowledge of a material fact or should have known about it. For example, if the seller has to use pans to collect water after a heavy rain, it is the agent’s responsibility to question the seller about the integrity of the roof, and then relay this information to potential buyers. However, if the seller deliberately hides a defect from the agent for which the agent had no prior knowledge, then the agent is not accountable. Experts say agents are not home inspectors, but they are expected to use their best judgment when something appears suspicious.

Do I have to disclose information about my home?

Disclosure could protect you from a lawsuit. Today, home sellers in most states must now fill out a form disclosing material facts about their homes. Material facts are details about the home’s condition or legal status, as well as the age of various components. If your state does not require a written disclosure, the real estate laws probably require sellers to disclose any known problems with the home they are selling.

What kinds of things are considered material facts?

The following examples include details that would qualify as material facts that must be revealed by sellers about their homes: Damage from wood boring insects Mold or mildew in the home Leaks in the roof or foundation walls Amount of property taxes paid annually Problems with sewer or septic systems Age of shingles and other roof components A buried oil tank Details about any individual who claims to have an interest in the property Information about a structure on the property that overlaps an adjacent property Some things are not material facts and do not have to be disclosed. They include personal information about the seller and the seller’s reason for moving. Among those things that may or may not be material facts: whether a death took place in the home or whether a home is considered haunted.

Negotiating

Any advice on negotiating?

Be patient, know your home’s worth, adopt a positive attitude, and do not let emotions – anger, pride, greed, or prejudice – get in the way of negotiating the best deal. Your home obviously means a lot to you, but you have already made the decision to move on, so begin to think of your home as “the house” or “the condo,” instead of “my home.” When reasonable offers come along, take them seriously. You can always counter any offer made by the buyer that comes near your asking price. Do not spoil a good deal over a few hundred dollars.

Can the seller also include contingencies in a contract?

Yes. For example, if you decide to sell your existing home first before buying another one, you can make the sale of your home contingent on finding a replacement home. Some sellers opt for this contingency to avoid a double move, such as moving to a hotel or rental until a new home is found and made available. However, there is one problem with this type of contingency: it can inconvenience the buyer, particularly if his own home is in escrow. He may not be willing to wait for you to move. This strategy has a better chance of working when the market is relatively strong, your home is a rare find, the price and terms of the transaction are very favorable for the buyer, or the buyer is in no hurry to move.

Do I have to consider contingencies made by the buyer?

You can reject, accept, or counter any offer that is presented to you. Most offers include contingencies, which protect the buyer in case something goes wrong. The two most common contingencies deal with financing, which makes the sale dependent on the buyer’s ability to obtain a loan commitment from a lender within a stated time period, and an inspection, which allows the buyer to have a professional inspect the property to their satisfaction. There really is no reason not to consider these contingencies because they are quite reasonable and standard. However, think twice about a contingency that is predicated on you making expensive home repairs, such as a kitchen renovation. Now, if the roof is caving in, that is an entirely different story. You may need to spend money to replace it or lower the asking price of the home.

How do I respond to a low-ball offer?

Let your agent know it is too low to warrant a counteroffer and that you are willing to negotiate but only once a more reasonable offer is made. Ask the agent if the buyer was shown comparable market values of similar homes that have recently sold in your area; and ask if the buyer was ever properly qualified. You do not have to settle for less if you are realistic about your chances of getting more.

Getting Started

Are there tips for selling a vacant home?

Yes. Once furniture is removed from the home, you will notice all kinds of imperfections you never paid attention to before – rips in the carpet, holes in the walls, and dinginess. In an empty house, everything stands out. What you see is what potential buyers will also see. So you may need to paint, tear up old carpet, and replace the kitchen floor. To get rid of the “empty house” feeling, leave a few pieces of furniture behind – simple things like a lamp, chairs, and a table will do. Pay special attention to maintenance. Someone will need to dust and vacuum, leaves will need to be raked, and the grass cut. In the winter, consider having the heating system shut down and drained to save money. But keep the electricity running because lights will be needed to show the house. Watch out for that musty smell, particularly during the summer months, that settles in from having the windows sealed and locked. And beware of pests such as mice, squirrels, ants and bats.

Do I need an attorney to sell a home?

Although most sellers can handle routine real estate purchase contracts, some experts say it is a good idea to be represented by an attorney, particularly if you are selling on your own. You should choose one with expertise in real estate transactions. Before hiring someone discuss all the details of the transaction, including all legal costs you will incur. A good attorney will assist you in completing the deal swiftly and with confidence.

How can I get a quick sale, particularly in a slow market?

One of the most important things to consider is price. You may want to reduce the price of your home or, at the very beginning, set it at a low price that will generate more buyer interest. Cash is often an incentive, both for the buyer as well as the agent. You could offer the buyer a $1,000 to $2,000 decorating rebate upon closing the deal. It is also not uncommon to offer the selling agent a $500 bonus. However, some brokers – who supervise agents and run real estate offices – may prohibit such incentives, as do some Realtor boards. Check to find out. Other common incentives: paying for the property inspection and warranty policy and getting your home preliminarily approved for FHA and VA loans, thereby making it more attractive to a larger number of buyers. Contact a lender who writes FHA-insured and VA-guaranteed loans.

Should I sell my home first or wait until I have bought another home?

This is a tough decision, but the answer will depend on your personal situation, as well as the condition of the local housing market. If you put your home on the market first, you may have to scramble to find another one before settlement, which could cause you to buy a home that does not meet all your requirements. If you cannot find another home, you may need to move twice, temporarily staying with relatives or in a hotel. On the other hand, if you make an offer to buy first, you may be tempted to sell your existing home quickly, even at a lower price. The advantage of buying first is you can shop carefully for the right home and feel comfortable with your decision before putting the existing home on the market. On the flip side, the advantage of selling your existing home first is that it maximizes your negotiating position because you are under no pressure to sell quickly. It also eliminates the need to carry two mortgages at once. Talk with your agent for advice. Discuss the pros and of each and whether certain contingencies written into the contract can ease some of the pressures.

What are some costs associated with buying a new home?

Basically, the costs are no different from when you purchased your existing home. They include moving expenses, loan costs, the down payment, a home inspection, title work and policy, and paying for a new hazard insurance policy. Your lender can give you a disclosure of estimated costs when you apply to be pre-approved for a home loan.

What are some costs associated with selling my home?

Besides the costs related to making repairs and improving the overall appearance of the home, as the seller you will also need to pay the following: A real estate commission, if you use an agency to sell. Advertising costs, marketing materials, and other fees if you sell the home yourself. Attorney, closing, or other professional fees. Title insurance Excise tax for the sale. Prorated costs for your share of annual expenses, such as property taxes, homeowner association fees, and fuel tank rentals. Any other fees normally paid by sellers in your area, including points, survey, and appraisal fees. To get a better handle on all costs, ask a real estate agent. Agents deal with this information daily and can give you a pretty good estimate of the closing costs you can expect to pay.

What else should I know?

Once your home is available to be shown strive to keep it in tip-top shape. This will require a lot of effort on your part, but you want buyers to feel welcomed and not turned off by unmade beds, cluttered floors, and grungy bathrooms. Realize, too, that your life will be temporarily inconvenienced. When an agent – yours as well as others – calls wishing to bring a buyer to see the home at the last minute or on the same day, respond favorably. Remember your goal is to get the home sold, and that can only be accomplished if people get to see it. Flexibility is the key to a quick sale. Plan not to be present when buyers pass through. It is awkward and unsettling for them to have the owners present. If you cannot leave, sit in the backyard. But do not attempt to have conversations with the buyer. Speak only when spoken to; be brief and polite. Finally, pay special attention to pets, particularly dogs. They can be intimidating. Put them on a leash and in the backyard. Better yet, when possible, take them with you. And be keen to pet odors. They can turn buyers away.

What should I do to prepare my home for sale?

Start by finding out its worth. Contact a real estate agent for a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Or get a certified appraiser to provide an appraisal. Next, get busy working on the home’s appearance. You want to make sure it is in the best condition possible for showing to prospective buyers so that you can get top dollar. This means fixing or sprucing up any trouble spots that could deter a buyer, such as squeaky doors, a leaky roof, dirty carpet and walls, and broken windows. The “curb appeal” of your home is extremely important. In fact, it is the first impression that buyers form of your property as they drive or walk up. So make sure the lawn is pristine – the grass cut, debris removed, garden beds free of weeds, and hedges trimmed. The trick is not to overspend on pre-sale repairs and fix-ups, especially if there are few homes on the market but many buyers competing for them. On the other hand, making such repairs may be the only way to sell your home in a down market.

When is the best time to sell a home?

The best time to sell is when you are ready, or when you must. That is, when you have outgrown the space in your current home, or you prefer to trade down to something smaller. Perhaps your martial status has changed, which necessitates a move, or you need to relocate for a job. Market conditions also play a role, as do seasonal conditions. For example, your chances of getting top dollar for your home are more likely in a seller’s market, when demand outweighs supply, than in a buyer’s market. Local and national economic factors also may dictate when to sell.

Working with a Real Estate Agent

Do I really need an agent?

Most home sellers hire real estate agents to list and sell their homes. Most of those who do not are known as For Sale By Owners, or FSBOs. They market and sell their homes themselves. However, a small number of people sell without marketing their homes. They include homeowners who transfer property to family members or landlords who directly offer tenants the first right to purchase property before they place it for sale on the market. In the end, most FSBOs eventually hire an agent because the agent will handle all the details of a successful home sale – including the contract, forms, and disclosure statements – and expose the home to the widest range of prospective buyers through the local Multiple Listing Service (MLS).

How do I find the right agent for me?

To begin with, think local. Select someone who is very familiar with your neighborhood and the properties for sale in it. Then, if you are selling, say, a condominium, choose an agent with expertise selling apartments to potential homeowners. Because you will want the widest possible exposure for your home, you also will want a real estate firm that works with other agencies to get your property sold. The Multiple Listing Service (MLS) used by REALTORS® , licensed members of the NATIONAL ASSOCIATION OF REALTORS®, is still the most common and effective form of cooperation used today. Beyond these parameters, select an agent who is competent, efficient, and ethical. Perhaps the agent who first sold you your home would be a perfect candidate. If not, ask family, friends, and neighbors for recommendations, or choose a firm headed by an individual who is known in your community.

Is the commission negotiable?

Yes. There is no standard commission. They are not set by law and vary depending on service, customer needs, and company policy. In general, agents charge between 4 percent and 8 percent for full service. Some agents prefer not to offer sellers the option of paying a fee for an individual service. If you insist on overpricing your home, an agent may well insist on a higher commission to cover the added marketing expenses and time that are needed to sell it. Think of a commission as a point you must negotiate and evaluate.

What if I am not happy with the listing agent and want to terminate the contract?

Experts say unhappiness is not a legal reason to terminate a valid home sale-listing contract. Legally, to cancel a listing, you must be able to prove the agent's lack of "due diligence." This means the agent isn't taking the normal steps to properly market your home, such as putting your listing into the Multiple Listing Service (MLS), advertising on the Internet and in local newspapers, and posting a for-sale sign on the property. If your home is overpriced, perhaps you need to consider reducing the price to spark buyer interest. Otherwise, you may need to meet with the listing agent and his or her supervising broker to discuss the problem.

What is the most common type of contract for listing properties?

The exclusive right to sell. It gives the real estate broker the exclusive right to sell your home during the term of the listing. If a sale occurs – even if you sell the home yourself – the broker gets a commission. The broker may share the listing with other brokers on the Multiple Listing Service (MLS) to get the widest possible exposure for your home. If you request that the property not be listed on a multiple basis, only the broker named in the contract and his or her sales agents can market and show it.

What questions should I ask an agent interested in selling my home?

Interview at least three local agents who sell homes in your community. Ask them about the following: The worth of your home. The agents should inspect the home and prepare a written comparative market analysis. Marketing plans. These are a must. Make sure to ask about regular newspaper ads, the local Multiple Listing Service (MLS) – which gives your home maximum exposure to all local agents – and Internet marketing through the agent’s Web site. Length of the listing agreement. Ask each agent what the typical time for a listing agreement is, and how the current market affects the length of the listing agreement. Number of listings. Find out how many listings the agent now has and how many he or she normally sells. Get references. Ask for the names and phone numbers of recent home sellers. Call them and ask if they were satisfied with the level of service delivered by the agent.

I Have More Questions

Buying Your Home

Appraisals & Market Value

Are there standard ways to determine how much a home is worth?

Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value. Your real estate agent can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpaying. A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home. Lenders normally require an appraisal – which runs between $200 to $300 – before they will approve a mortgage loan. This protects the lender by ensuring the home is worth the money you want to borrow. You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home’s potential worth.

How do you determine how much a home is worth?

The short answer: a home is ultimately worth what is paid for it. Everything else is really an estimate of value. Take, for example, a hot seller’s market when demand for housing is high but the inventory of available homes for sale is low. During this time, homes can sell above and beyond the asking price as buyers bid up the price. The fair market value, or worth, is established when “a meeting of the minds” between the buyer and the seller takes place.

What about appraised value and market value?

A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors. Market value is the price the house will bring at a given point in time, once the buyer and seller establish a “meeting of the minds” on price.

What is the difference between list price and sales price?

The list price is a seller's advertised price, or asking price, for a home. It is a rough estimate of what the seller wants to complete a home sale. A seller can price high, low – (which seldom happens), or very close to the amount they want to get. A good way to determine if the list price is a fair one is to look at the sales prices of similar homes that have recently sold in the area. The sales price is the actual amount a home sells for.

Getting Started

How do you decide whether to add on to an existing home or purchase a new one?

There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important: your emotional attachment to the existing home. As designer and builder Philip S. Wenz, the author of Adding to a House: Planning, Design & Construction, notes, an addition is much cheaper than building a new home and can offer a “new” home without the heartache of moving. Other considerations: Can you finance the home improvement with your own cash or will you need a loan? How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements. Is it feasible to expand the current space for an addition? What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements. Are there affordable properties for sale that would satisfy your changing housing needs? Explore your options. Make sure your decision is one you can live with – either under the same roof or under a different one.

How much can I afford?

The general rule is that you can buy a home that costs about two-and-one-half times your annual salary. A good real estate agent or lender can determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses. Your real estate agent can help you to figure out now how your income, debts, and expenses can affect what you can afford, and how much you may be able to borrow to purchase a home, and even prepare an estimated settlement sheet for homes you like.

Is it best to save for the ultimate dream home or begin with a less expensive starter home?

It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon. Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years. If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

What are the advantages of owning a home?

There are many. Among the most appealing: you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the buildup of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a second home, or make home improvements. The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.

What is the first step to buying a home?

Make sure you are ready – psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit? A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer “yes” to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

Insurance

Is private mortgage insurance necessary?

Lenders require private mortgage insurance (PMI) on most conventional loans with less than a 20 percent down payment. They believe there is a correlation between borrower equity and default. They have found that the less money borrowers put down, the more likely they are to default on a loan. PMI guarantees the lender will not lose money if this happens and a foreclosure is necessary. The buyer pays this insurance, usually a small fee at the outset and a percentage of the face amount of the loan that is added to the monthly payment. What most homeowners do not realize is that the insurance is usually no longer necessary after enough equity has built up in the property. Contact your lender if you meet this requirement. A precaution: do not confuse PMI with mortgage life insurance. The latter pays all, or a portion, of your mortgage in the event of your death.

What about title insurance?

Title insurance protects the lender against unclear title to the property you are buying. It is almost always a requirement for closing on a home. If you desire coverage as well, buy an owner’s policy, which will protect you against any title-search errors and losses that arise from disputes over property ownership. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

What does homeowners’ insurance cover?

It protects against disasters – whether natural, manmade or mechanical. A standard policy insures the home, as well as your possessions. Because this insurance is packaged, it covers liability for any harm, loss, and property damage that you or your family members cause others. And it includes additional living expenses in case you are temporarily displaced because of damage from a fire or other insured disaster. While you are not legally required to purchase homeowners' insurance, mortgage lenders require you to do so." or "mortgage lenders stipulate that you must. If your mortgage is paid up - or you never had one - it is still a good idea to have homeowners’ insurance to protect your home and your belongings.

What is condo and co-op insurance?

This insurance protects your investment and personal belongings from most disasters. As an owner, you will need two insurance policies – your own to cover liability, living expenses, your belongings and structural improvements, and a master policy provided by the condo or co-op board. The master policy covers the common areas that you share with others in the building. It is paid for using the monthly condo fee that you and other owners pay.

What kind of home insurance should I get?

A standard policy will do in most instances. It protects against several natural disasters and catastrophic events. However, it will not guard against earthquakes, floods, war, and nuclear accidents. The policy can be expanded to include these disasters as well as coverage for such things as workers' compensation. In fact, the lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes. You also can increase coverage beyond the depreciated value of personal property such as televisions and furniture by purchasing a replacement-cost endorsement. Home-based business-coverage, once overlooked, is an ever-increasing popular rider. It does not cover liability associated with the business but rather contents such as home office equipment and general liability to cover injuries to clients and employees. Other considerations: an inflation rider, which increases coverage as the home’s value rises, and getting insurance that is equal to the full replacement value of the home. Insurance companies usually require an amount equal to at least 80 percent of the full replacement value. Otherwise, only a portion of the loss would be covered.

Negotiating & Closing the Best Deal

Are low-ball offers a good idea?

Any offer can be presented, but a low-ball one that is substantially less than the asking price can dampen a prospective sale and prevent the seller from negotiating at all. Unless the home is overpriced to begin with the offer will probably be rejected. Do your homework before making an offer. Compare prices of recently sold homes and new listings in the neighborhood. It also helps to know something about the seller’s motivation. A lower price with a speedy closing, for example, might motivate a seller who must move, has another house under contract, or must sell quickly for other reasons. Also recognize that while your low offer in a normal market might be rejected at once, it might motivate the seller in a buyer’s market to either accept it or make a counter-offer.

Can you negotiate interest rates?

A few lenders will negotiate the mortgage rate and number of points on a loan. However, this is more the exception than the rule with established lenders. As always, shop around and know the market before you enter a lender’s office. Rates are often published in local newspapers and on Internet Web sites. You may have more luck when dealing directly with a seller who has agreed to finance your loan. He is likely to be more open to negotiation, particularly when motivated to make a quick sale.

Do I need an attorney to buy a home?

A lot depends on the state where the property is located. Some require an attorney; others do not. Most homebuyers can generally handle routine real estate purchase contracts as long as they read the fine print and understand all the terms. But pay close attention to any clauses, contingencies, and other special considerations that will allow you or the seller to back out of the contract. When in doubt, consult an attorney. Ask relatives and friends, or your real estate agent, for recommendations. Call to inquire about their fees and to check their level of experience. Expect that more seasoned attorneys will cost more.

Does the seller take the furnishings once the home is sold?

Normally. This is because the fixtures – personal property that is permanently attached to a home, such as built-in bookcases or a furnace – automatically stay with the house unless noted otherwise in the sales contract. Anything that is not nailed down is negotiable, including appliances that are not built in, such as washers and dryers.

Is it possible to buy a home below market price?

Certainly, but do not hold your breath. It takes a lot of determination and time to find a real bargain. But if you are adamant, here are some likely targets to pursue: foreclosed property a fixer-upper hard-to-sell new homes in a housing development tenant-in-common partnerships. With the latter, you may be able to buy a partial interest in this form of title to property owned by two or more individuals because the partners often sell at a discount. However, bargains are easier to come by in a soft real estate market, when the economy is in a recession, and when homeowners, and builders and sponsors of condominium conversions, are desperate to move unsold units.

What are some negotiating tips?

Know the seller's motivation to sell. This will enhance your negotiating position. Sellers who must move quickly due to a job transfer, divorce, or contract on another home, are more inclined to accept a lower price to speed the process along. Remember, too, that the listing, or asking, price is what the seller would like to receive for the home. It is not necessarily what the seller will settle for. So know value. Before you make an offer, check recent sales and listing prices of comparable neighborhood homes and compare them to the seller's asking price. Other tips: Be flexible. Never say, “take it or leave it.” That can sour negotiations and ruin the deal. Never show your hand or reveal your next step. Each time you increase your offering price ask for something in return, such as repairs, appliances, even lawn furniture. If you plan to pay cash or have a tentative commitment for a loan, use your strong financial position as a negotiating tool. Don’t let emotions such as pride, fear, love, and anger get in the way of negotiating the best deal. Leave irrational feelings at home.

What contingencies should appear in the offer?

When you look to purchase a home, anticipate potential problems. But protect against them so that if something does go wrong, you can cancel the contract without penalty. This is what contingencies allow you to do. They should be included in any offer you present to buy a home. Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on your ability to obtain a loan commitment from a lender, and an inspection contingency, which allows you to have a professional inspect the property. Without contingencies, a buyer could forfeit his deposit under certain circumstances if he backs out of a deal. The purchase contract also should include the seller's responsibilities, such as passing clear title, maintaining the property in its present condition until closing, and making any agreed-upon repairs.

Closing Costs

Is it possible to save on closing costs?

Certainly, once you get past the sticker shock. Closing costs are expensive. They can average between 5 to 6 percent of the total home purchase price. But here are a few ways to save: Haggle with the seller. He may pay all or part of the closing costs. Nab a no-point loan. You may have to pay a higher interest rate, but if you are strapped for cash and can qualify for a higher interest rate, you may find this type of loan can significantly reduce your closing costs. Grab a no-fee loan. Although the fee is usually wrapped into a higher rate loan, it does offer one advantage – you get to save on the amount of cash you would need up-front. Secure seller financing. These loans typically avoid the traditional fees or charges imposed by lenders. Shop ‘til you drop for the best deal. Every lender has its own unique fee structure; you are bound to find one that works for you.

Is there anything I should know about closing day?

Yes. The following to-do list can help save you a few headaches and keep the closing on track: Keep extra money in your account. Something unexpected can pop up during the closing that will require more money out of your pocket. Take your checkbook. Even better, find out how much you will need to pay and write a certified check for the total amount. Take your loan commitment letter. Use it to verify loan approval in case of a mistake or misunderstanding with the lender. Take your contract to purchase. Pull it out if something a little suspicious comes up. Take your personal ID. A driver’s license or other personal identification will do. Do a before-closing inspection. It is always a good idea, when possible, to walk through the property to make a list of any problems. Utilities. Arrange in advance to have the water and electric meters read on closing day and the service switched to your name to prevent interrupted service. The same applies for the fuel tank.

What are closing costs?

Closing, or settlement, costs are expenses over and above the price of the property. Both the buyer and seller incur some of these expenses when transferring ownership of a property. Who actually pays, however, often depends on local custom and what the buyer or seller negotiates. Closing costs normally include title insurance, loan points, escrow or closing day charges, property taxes, and document fees. The lender provides an estimate of closing costs for prospective homebuyers.

Working with a Real Estate Agent

Are buyers protected against housing discrimination?

By law, real estate agents may not discriminate on the basis of race, color, religion, sex, disability, familial status, or national origin. They also cannot follow spoken or implied directives from the home seller to discriminate. If you suspect you have been discriminated against, a complaint may be filed with the local Department of Housing and Urban Development (HUD) office nearest you. You may call HUD’s toll-free number, 1-800-669-9777, or visit its web site at www.hud.gov/complaints/housediscrim.cfm.

Can I use an agent to purchase a newly built home?

Yes. In fact, some builders pay agents to find prospective buyers. But you also can use a buyer’s agent to help negotiate the price and upgrades on a new home. An agent can be particularly valuable directing you to newly built developments that match your needs, as well as helping you select reputable builders who are financially sound and respond promptly to buyers’ concerns. Builders normally require an agent to be present on your first visit to the site. This is a sensible procedure that allows the agent to be paid a commission should you decide to buy. Otherwise, if you find a development on your own, make a first visit without the agent, and later make a purchase, the builder may refuse to pay the commission – even if, at some point, the agent became involved in the process.

What can I expect from a good real estate agent?

Competence, efficiency, and ethics. According to the All America’s Real Estate Book by Carolyn Janik and Ruth Rejnis, good agents take the time to qualify buyers and show properties in their price range. They plan showing routes carefully and have pre-inspected most properties. They have a thorough knowledge of financing options, are up on the latest housing trends, and share with prospective buyers data on the local housing market and home sales. Good agents also adhere to a strict code of ethics. They avoid high-pressure sales tactics, refrain from showing properties that do not fit your needs or goals, and alert you to problems about the condition of the property. And they show respect for other agents and real estate firms by not “bad mouthing” them.

What is the best way to find a real estate agent?

Begin by asking someone that you know. Friends, relatives, co-workers, or neighbors who have recently purchased a home can give you a firsthand account and attest to the agent’s professional abilities. Sometimes an agent you contact will refer you to another one who works more closely with buyers and sellers in your neighborhood. Once you have a list of names, interview at least three agents and ask questions about their community knowledge, professional experience, and commitment – some agents work full time; others only work at nights and on the weekends.

Why do I need an agent if I can find a home by myself on the Internet?

While more buyers now use the Internet to gain access to listings, or available properties for sale, it is still a good idea to use an agent. The agent brings value to the entire process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction.

Home Inspections

Do I need to be at the inspection?

No, but it is a very good idea to be there. Following the check-over, the home inspector can answer your questions and discuss problem areas with you. This is also an opportune time to get an objective opinion about the home from someone who does not have emotional or financial ties to the property.

How do I select a home inspector?

Begin by only hiring one who is qualified and experienced, someone who belongs to an industry trade group, such as the American Society of Home Inspectors (ASHI). This organization has developed formal inspection guidelines and a professional code of ethics for its members. Also, membership in ASHI is not automatic; members must have demonstrated field experience and technical knowledge about structures and their various systems.

Should I hire a home inspector?

By all means. Buying a home without getting expert advice is risky. Once a home inspector uncovers major plumbing and electrical problems, for example, you may decide you do not want to spend several thousand dollars on repairs. Always include an inspection clause in your written offer. This clause gives you an “out” from buying if serious problems are detected. It also gives you another chance to negotiate the purchase price if repairs are needed. The clause can even specify that the sellers fix any problem that is uncovered before you settle, or close, on the home. You also may want to consider hiring experts to inspect the home for a number of health-related risks like radon gas, asbestos, or possible problems with the water or waste disposal system.

What does a home inspector do?

A home inspector is a paid professional – often a contractor or an engineer – who checks the safety of a home. Home inspectors search for defects or other problems that could become your worst nightmare later on. They focus particularly on the home’s structure, construction, and mechanical systems. It is not the inspector’s job to determine whether you are getting good value for your money. He does not establish value, only whether the home might collapse in a storm or if the roof might cave in. A home inspection typically takes place after a purchase contract between the buyer and seller has been signed.

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Where & What to Buy

Condominiums & Townhomes

Are condos good investments?

They are a good way to enter into homeownership. The high price of single-family homes and the influx into the housing market of more single homebuyers have made condos relatively hot national investments. They have held their value as an investment despite economic downturns and problems with some associations. Condominium associations have also worked hard in recent years to clean up their image. Disputes and lawsuits were once rampant. But now associations have become savvier about property management and have taken steps to prevent legal problems and disputes.

How do townhouses differ from condominiums?

While most condominiums are apartments, a townhouse is attached to one or more houses and can run the gamut from duplexes and triplexes to communities with hundreds of homes. Buyers separately own their homes and the land on which the houses sit. With a condominium, the unit owners jointly own the land and this common interest cannot be separated from the others. Townhouses can be structured in many ways. Some, particularly huge communities, have common areas – such as swimming pools – that are similar to condominiums.

How do you choose a good condo?

Seek ownership in a well-maintained building, and pay special attention to the financial health of the condo association. Lax maintenance may be a sign of financial trouble, which could result in higher maintenance fees and problems trying to resale the property later. Things to consider: Get a copy of the latest financial statement from the condo association. Ask the board of directors – which is elected by the unit owners from among themselves – if major repairs or improvements are imminent. If so, find out how much they will cost and whether there is enough money in the reserve to cover them. Check the by-laws, rules and the covenants, codes and restrictions (CC&Rs). You may find, among other things, that they prohibit or restrict pets and the renting of units. Some may require that the board have the right of first refusal on the sale of any unit. Learn everything you can about the homeowners association, including legal disputes and conflicts. Start by reading the minutes of the association meetings. Find out the owner-to-tenant ratio. Because many condominiums are often purchased as investments, there could be a high percentage of tenants in the building.

What are the pros and cons of owning a townhouse?

On the plus side, exterior maintenance and repairs are minimal; there are no neighbors above or below the home like in an apartment; and because the homes are attached, they may offer a greater sense of security. As for the disadvantages, if there is a homeowner’s association, buyers will have to pay a homeowner’s fee. There is also less privacy than with a detached single-family home. And there are limits on how you can make exterior changes to the home.

What is a condominium?

Condominiums are buildings in which individuals separately own the air space inside the interior walls, floors and ceilings of their unit, but they jointly own an interest in the common areas that they share – such as the land, lobby, hallways, swimming pool, and parking lot. In addition to paying a mortgage, each owner is responsible for paying a monthly fee to the condo association, which is made up of the unit owners. The fee covers maintenance, repairs, and building insurance. Most housing condominiums are apartments, although there are mobile home condominiums as well.

Why buy a condo?

They are an appealing way to enter the housing market if the cost of a single-family home is out of your reach. Condos are especially popular among single homebuyers, empty nesters, and first-time buyers in high-priced housing markets. Unlike a house, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. Many condominium communities also offer amenities such as exercise rooms, tennis courts, and swimming pools that you might otherwise be unable to afford if you purchased a single-family home.

Where to Buy

Why is location so important?

Location remains the single most important factor when choosing a home. It can make or break the value and desirability of a home. Because everyone’s preferences vary, your lifestyle will determine the best place for you to live. Some people prefer the suburbs while others thrive on downtown living. If you favor city living, find out what part of the city suits you best – a fast-paced neighborhood or one slightly more subdued. Talk with the neighbors and keenly observe such things as traffic patterns, lifestyles, and even sounds and smells. When choosing a town, take property taxes, schools, accessibility to work, services, recreation, and the character of the community into consideration.

New Homes & Vacation Homes

Can you negotiate the price of a new home?

In real estate, almost everything is negotiable, so it is certainly worth a try. Now, this does not mean the builder will fall down and roll over. It is very common for builders to claim that their prices are based on fixed construction costs. Perhaps, but timing is everything. A builder is more likely to be flexible on price at the very beginning and end of a project. Early on, most developers want to move people in quickly so the project builds momentum. In the end, they may be more inclined to accept lower offers when only a few units are left. If you are unable to negotiate on price, negotiate for a better lot location or amenities, such as a carpet upgrade or light fixtures. A developer will rarely pass up a deal over a few hundred dollars' worth of carpeting.

Do builders provide financing?

Many builders offer financing incentives to help move more buyers into a project. In fact, major building companies often have their own mortgage brokerage subsidiaries, while many other builders routinely refer buyers to "preferred" local lenders. If it is a buyer's market in your area, you can be sure developers will offer incentives such as low-down-payment financing or interest rate subsidies.

Should I buy a vacation home?

The second home market has more ebbs and flows than the primary home market. Sales are iffy in a bad economy except, perhaps, on the high-end. That said, there is a growing trend toward the purchase of vacation homes. They are being bought for investment purposes, enjoyment, and/or retirement. In the latter instance, some people are buying with the idea of turning a vacation home into a permanent retirement haven down the road, a move that puts them ahead of the game now. Some of the tax benefits mirror those for a primary residence. Mortgage interest and property taxes are deductible, which helps to offset the cost of the home payment. And if you treat your second home as a rental property, you can fully depreciate it as well. But you are only allowed to occupy it for two weeks a year, or 10 percent of the total rented time, whichever is less. Before taking the leap, ask yourself if you can afford to carry two mortgages, maintain two households, and pay the extra utilities and maintenance costs. Also, learn about financing requirements and options, which can differ slightly from those on a primary residence.

Should I hire a home inspector for a new home?

You would think not since it is new and the developer has to adhere to local construction guidelines. However, err on the side of caution – always hire an inspector, whether the home is old or new. You can ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review. The inspector should either be a professional home inspector, an engineer, an architect or a contractor. When hiring a professional inspector, look for one who belongs to a home inspection trade organization, such as the American Society of Home Inspectors (ASHI). This group has developed formal inspection guidelines and a professional code of ethics for its members. Membership in ASHI is not automatic. Proven field experience and technical knowledge about structures and their various systems and appliances are required. As for rates, they vary greatly. Many inspectors charge about $400, but costs increase based on the scope of the inspection.

What about a vacation home as an investment?

Like any investment, it can be risky. Location and current market conditions are extremely important when deciding whether to buy. Other things to consider: Will you be able to afford repairs, maintenance, insurance, and utilities? What about fees to pay agents who rent the property for you? If you live several miles away from your vacation home, who will clean up between tenants and take an inventory of household items once the tenants leave? What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage?

What else should I take into account when buying a new home?

You can find out more about an existing property and neighborhood before you buy than you can a new home in a newly developed community. When the home is on the outskirts of town, ask the developer about future access to public transit, entertainment venues, shopping centers, churches, and schools. Also review local zoning ordinances. A remote area can quickly turn into a fast food haven. You want to ensure the neighborhood will not spiral out of control and lose its residential appeal. Other things to consider: Ask homeowners already living in a development about the builder. If none currently live there, find out where the builder has previously built and speak to those owners to find out if the builder followed through on promises and needed repairs. Ability to make changes. Most homes in a development resemble each other. But the developer may impose restrictions on house color, landscaping, renovations, and other items that a homeowner may want to alter. Do not buy into the glamorous images created by marketing experts. Form your own opinions about a property and only buy where you feel comfortable. After all, you are the one who will be living there.

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