WHAT HOME BUYERS ASK THE MOST

Go to Credit Report Page for FAQ's concerning credit related questions.

CAN "PERSONAL PROPERTY" BE INCLUDED IN THE RESIDENTIAL SALES AGREEMENT?

Determining how to treat personal property listed on the sales contract varies depending on the type of loan being obtained. Some types of personal property can be included in the sale without impacting the purchase price of the home. While others are viewed as a type of sales concession or inducement to purchase and require the appraised value of the subject property to be reduced.

FHA Loans:

Replacement of existing personal property items listed below are not considered an inducement to purchase, provided the replacement is made prior to settlement and no cash allowance is given to the Borrower. The inclusion of the items below in the sales agreement is also not considered an inducement to purchase if inclusion of the item is customary for the area:

• Range
• Refrigerator
• Dishwasher
• Washer
• Dryer
• Carpeting
• Window treatment
• Other items determined appropriate by the Homeownership Center

Any item not on the list is treated as an inducement to purchase and will result in a dollar-for-dollar reduction to the Adjusted Value of the property before applying the appropriate Loan-to-Value percentage.

Conventional Loans:

Acceptable Items:

Most built-in appliances (such as stoves, refrigerators or dishwashers), window treatments/coverings, carpeting, or other custom-made items that are affixed to/convey with the property, are considered to be fixtures and no downward adjustment to the purchase price is required.
Personal property items left for convenience (i.e., pool cleaning equipment or covers, lawn mowers, picnic tables and/or patio sets). (As a general rule, if the personal property is less than 2% of the value of the subject property or has a value of less than $500, it is not considered an interested party contribution.)

The appraiser must note ALL personal property included in the sales contract and determine the aggregate value, if any, of the items. With regards to the above, it would be sufficient for the Appraiser, to site the items in the report as personal property, which he has given $0.00 value to.

SHOULD I HIRE A REAL ESTATE AGENT TO BUY MY HOME?

Some people, for their own reasons, don't trust real estate agents and don't really understand what an agent brings to the table that they can't do for themselves. It's an understandable reaction. When you're buying your home (which is more than an investment, it's your "home") you have to be a "deal maker" unfortunately, and as you know requires a "level-head." How you handle yourself can make or break the deal. You and you alone will be in a “personally vested" emotional state which you absolutely should be in when you are buying "your home" (not a house to rent out) layered with all the complexities and nuances that every real estate deal involves. Rarely, one might see an easy transaction and proceed alone, but I have seen many easy ones unravel to problematic ones.

And even if you're confident in your abilities, you may always wonder whether you paid too much or missed out on an item in the contract that may have been open for negotiation.

If you want to work with an agent to buy, get with a "buyer's agent." Otherwise the agent involved will always by law (and in reality) represent the seller. Done correctly, a buyer's agent's job is to put the your interests ahead of the theirs, to disclose all material facts and keep your information confidential.

When you go to the seller's agent for put together the transaction you lose these privileges. Also, the sales commission that would have otherwise gone to your buyer's agent paid by the seller, will now move entirely to the seller's agent. You should point to this fact when negotiating terms.

See "How to Hire an Agent."

See "How to Fire an Agent."

SHOULD I HIRE A REAL ESTATE AGENT TO SELL MY HOME?

For every reason you may find for hiring an agent to represent you in buying a home, you might find at least three reasons when selling your home. In some cases your listing (selling) agent will also represent you when you buy the new home.

WHAT IS THE EARNEST MONEY DEPOSIT?

Earnest Money is a deposit a home buyer submits with the real estate purchase offer. This deposit gives the home seller the assurance that the home buyer is serious about the purchase of the home.

Home buyers who are interested in making an offer on a particular home normally writes an earnest money check
Submits it with the real estate purchase contract to the seller
There is no minimum amount of deposit a home buyer needs to submit
Sometimes a buyer writes an earnest money check for $500
While other times check can be $10,000
Earnest Money is refundable during the home buying process contingency period
The higher the deposit, the more likely it is that the seller will accept the offer
Large earnest money shows strength and the seriousness of the purchase offer
Earnest money is used towards the down payment of the home purchase
Gets applied from the cash to close the borrower needs to bring at closing
The earnest money is deducted from the down payment required by lenders

WHAT ARE CONTINGENCIES ON PURCHASE CONTRACT?

Contingencies listed on a real estate purchase contract is a clause that allows the buyers of the home to back out of the deal and get a full refund on their earnest money deposit

Typical Contingencies:

Home inspection
Mortgage contingency
Appraisal contingency
Closing terms contingency
Other contingencies will be listed on the real estate purchase contract
For each of these contingencies, there is a time period.
A home buyer has a certain amount of time to do their due diligence on the subject home
Can cancel the real estate purchase contract during this time period with no questions asked.
The earnest money is held in an escrow account of a realtor, attorney, or title company.
For example, if a home buyer enters into a real estate purchase contract and has a ten day home inspection contingency, the home buyer has ten days of getting the subject property inspected.
If the home inspector finds many defaults with the subject property and the home buyer decides to cancel the real estate transaction, they may do so and the full earnest money needs to be returned by law.
Or both the buyers and sellers can go back to the drawing table and renegotiate the purchase contract.
The seller will give a certain amount of time to the home buyer to cancel the home purchase.
After a certain date, the earnest money can become non-refundable.
For example, there is a mortgage contingency date on a real estate purchase contract for mortgage loan commitment, appraisal, home inspection, and closing.
If the mortgage contingency date passes and the home buyer does not ask for an extension, then the earnest money can become non-refundable.

WHAT ARE THE ESSENTIAL DETAILS OF A REAL ESTATE SALES CONTRACT?

Names of buyer and seller
Stated agreement to sell and buy
Description of property to be bought and sold
Purchase price
Terms of payment (your mortgage)
amount and disposition of earnest money paid by purchaser
Date of closing
Statement of "Time is of the Essence"
List of any conditions before closing
Signatures

WHAT IS MEANT BY "TIME IS OF THE ESSENCE?"

There are time limits set forth in the contract which are enforceable under this provision. Without it, courts will not enforce any time but only reasonable time limits. Because desired dates for performance are critical, most parties to contracts in real estate insist on "Time is of the Essence" provision.

IF GIVEN THE OPPORTUNITY, SHOULD I TRY TO INTERACT WITH THE SELLER?

The seller will be the ultimate decider of whom to sell the home to. Interacting with them could benefit you especially if you share common interests such as children of the same ages or being an animal lover.

WHAT ARE POTENTIAL WAYS FOR RETIREES TO CONVERT EQUITY IN THEIR HOMES INTO MONEY?

Home equity loan – This makes sense if you have to make several modifications at once and need an upfront lump sum to pay for them.

Home equity line of credit, or HELOC This works like a revolving line of credit that lets you withdraw on the line as often (or as little) as you need it for improvements in stages.

A Cash-Out Refinance (first trust mortgage) - This option should be analyzed against the other options. This will have the least risky terms and will contain least the cost of funds in most cases.

VA financing – Many older veterans who served in the military mistakenly think their VA benefits expire, but that’s not true. The VA offers cash-out refinancing, typically with no down payment requirement, to pay for home improvements. The VA also provides special grants for veterans with a service-connected disability. The grants help pay for a remodel or the purchase/building of a new home that accommodates their disability.

Reverse mortgages – A federally insured Home Equity Conversion Mortgage, or HECM, is the most common type of reverse mortgage. Insured by the Federal Housing Administration, HECMs allow people who are 62 or older to tap a portion of their home equity without having to move. You also can use a HECM to buy a home..

ARE THERE NO DOC LOANS?

Not anymore. All lenders who lend to consumers on a dwelling must, by law, assess the owner's ability to repay.

ARE THEIR ALTERNATIVE DOCUMENTATION LOANS FOR CONSUMERS?

Yes, and they are becoming more numerous as I write this (Fall of 2018). However, to obtain maximum financing for the purchase or refinance of a dwelling for a consumer, funding is conditioned upon traditional income and asset 3rd party verification.

While still assessing the borrower's ability with 3rd party verification, higher down payments will allow for alternative underwriting standards.

WHAT IS THE LOCK PERIOD AND WHAT DOES LOCKING THE LOAN MEAN?

The lock period is the period during which the lender guarantees the rate and points. If your mortgage application is locked at 5.50% with 1 point for 30-days, for example, the lender is committed to make the loan at that price anytime within the following 30 days. This is regardless if rates go up to 6% with 1 point in those 30 days. Locks for longer periods are priced a little higher. Expect to pay another 1/8 point for each additional 15 days.

If the loan has not closed by the end of the lock period, it expires; the lender is no longer committed. If prices have not increased during the period, the lender will usually be willing to extend the lock for a small additional fee. If prices have increased, however, any lock extension will be at the new higher prices. This is a risk you want to avoid.

On a home purchase, select a period long enough to include the expected closing date, plus a safety buffer of 15 days. On a refinance, the required lock period depends on how long it takes the broker or lender to process your loan. You get that period from them, then add 15 days just in case.

If you barely qualify at today’s rates, lock as soon as possible. You are in no position to risk an increase in rates.

DO I HAVE TO ESCROW PAYMENTS FOR TAXES AND INSURANCE?

Lenders generally require borrowers to include taxes and insurance premiums in their monthly mortgage payments, which are placed in escrow until the payment date when the amount due is paid by the lender. Mortgages are priced on that assumption. But you can waive these on many conventional loans, but there may be a slight increase in your closing costs.

When I had a mortgage I welcomed the escrow arrangement, because it simplified our budgeting and our life. It was a small price to pay, I felt, for the interest on the escrow account, earned by the lender rather than by me.

Other borrowers feel differently, however, and want to control the payment of taxes and insurance themselves.

QUICK TIPS FOR NEGOTIATING?

Unless the home is hot and freshly listed, you never want to make a full price offer (unless you're getting a near maximum contribution to your closing costs). You also don't want write "low ball" offers as you risk offending them. Speak with your realtor about comps and present a reasonable offer. This process can go back and forth until a compromise is made.