Lancaster PA Luxury Real Estate

   

During the real estate boom years it was fairly common for a home warranty program to be included with a home purchase.   Many brokers would use them as listing tools and also to provide an incentive for home buyers to feel more comfortable with their purchase.  Now, with home sales down and agents needing to cut costs, the inclusion of a home warranty as part of the sale has become less prevalent.

When counseling new home buyers, I encourage them to consider a home warranty plan as part of their purchasing strategy. 

What is a Home Warranty?

As with any type of insurance, a home warranty provides the buyer with some peace of mind.

Not to be confused with a builder's warranty, a home warranty is actually a service contract and is typically purchased for existing homes.  For an annual fee, which ranges from $400 - $600, a warranty will cover major mechanical systems and appliances such as furnaces, air conditioning, plumbing and electrical items.

Types of Coverage

Since companies differ, you will want to find out specifically what is covered.  There is usually a basic plan with upgrades available. 

A basic plan usually covers:

• Heating systems
• Water heaters
• Plumbing systems
• Garbage disposals
• Dishwashers
• Ovens
• Ceiling fans
• Ductwork

Upgraded plans are available to cover items like your refrigerator, central air conditioning, clothes washer/dryer and swimming pool.

How Do They Work?

When something breaks down, you call the warranty company and they will send out a local contractor to diagnose the problem.  You then pay the contractor a flat fee, typically $50 to $100 for the service call.  Then, the warranty company covers the cost of the repair or replacement of the covered item.

When Should You Buy a Plan?

It's best to purchase a home warranty during the actual real estate transaction.  Some companies do not offer plans after the purchase and the ones that are offered after the sale are usually inferior. 

Before buying you should check to make sure that the company is licensed in the state and confirm that the company is real.  An experienced buyer broker will be familiar with the various warranty companies and should be able to provide you with the guidance necessary to make the right decision.

 Related Posts:

Property Disclosure - Who Has the Burden of Proof?

Real Property vs. Personal Property - What is Included in a Home Purchase?

Assessing the Value of a Home

Courtesy, Claudette Millette, Broker, TheBuyersCounsel.com, 800-392-1446, E-mail 

You have found the home of your dreams and you are ready to put an offer on it.  Before you sign the contract make sure you know which items will convey with the house and which will be excluded.  There can be some confusion about this, particularly if the listing is vague on the matter.

 Real Property vs. Personal Property

For the purpose of selling real estate, property is divided into two categories:

Real Property is the land and everything that is attached to it, including the ground to the core of the Earth and up to the sky.  This would encompass the building, landscaping, trees and anything which is appurtenant to land or which is considered immovable by law.  

Another way to think of it is what realtors call fixtures.  Examples of fixtures are:  wall-to-wall carpeting, attached lighting, built-in ovens, stoves, microwaves and ceiling fans.  That is to say every item that is physically attached to the property, including, but not limited to the furnace and the kitchen sink.  All of these items will be included in the purchase unless they are mentioned as exclusions in the listing.

Personal Property is that which is not attached, such as furnishing, scatter rugs, free-standing lamps, refrigerators, washers, dryers and the grand piano.  These are all considered personal to the owner and can sometimes be used as bargaining chips when negotiating a price on a house. 

On the listing sheet there often be inclusions and exclusions.  If the refrigerator, washer and dryer are not mentioned, they are not included in the purchase price.  If a chandelier is mentioned as an exclusion, the sellers are taking it with them even though it is attached to the property.

Some sellers may even be attached to a particular tree or shrub in their yard and want to bring it to their new home.  In that case, the tree would be an exclusion in the listing and the seller would dig it up and remove it prior to the closing.  In this situation, be sure to have your attorney put wording in the purchase and sale agreement to specify that the landscaping will be back in good order after the tree is removed and not be left with a gaping hole.  Likewise, a chandelier should be replaced with a standard chandelier, lighting fixture, or, at the very least, an electrical cover to hide the exposed wiring. 

Window treatments can present as an interesting opportunity in the sale of a home because:

1. They are often custom-made or tailored to the specific decor of the home and, therefore, have limited value to the seller, and,
2. Since custom-made window treatments can be an expensive undertaking, they can be a good value for the buyer.

If window treatments are to be left this needs to be spelled out in the offer to purchase. 

The best way to avoid confusion on any of these items is make a list of all personal property that will be included in the sale, attach it to the offer and make certain that it is included in the final purchase and sale agreement.  This will help to ensure that you have a smooth transfer of ownership of the home and everything that goes with it.

   

Let's first define "First-Time Homebuyer".  Actually, let's define what the heck I'm addressing in the first place.  It's the First-Time Homebuyer Tax Credit.  I trust you've at least heard about it and if not... no biggie... I will give you some of the talking points and the direct address to the site momentarily.

The whole concept of "First-Time Homebuyer" can be a tad misleading for some of you.  You are considered a first-time homebuyer (under this tax credit) if you have not owned another home at any point in time during the three years prior to the date of purchase. 

So what is this Tax Credit all about?

• It acts like an interest free loan because it must be repaid over a 15-year time frame.  If you die, don't worry about it as long as you filed your taxes individually.  If you filed a joint return, it's up to wifey or hubby to pay this interest free loan.  Death, like life & love, can cost money:)
• This only applies to primary residences in the United States of America.  Sorry, the vacation house in Greenwich, Connecticut doesn't qualify.  As far as that Villa in Italy, count that out as well.  Feel free to drop me a bottle of Chianti in the mail, though.  It's got to be your home... the very roof over your head.  On a personal note, I do believe we'd be better off if when buying a home... we'd consider it more than an "investment".  It's where you live folks!  Investments, for most of us, happen over time.  I ain't (love that word) no day trader or speculator.  And I never will be. 
• What's the time frame?  You buy the home after April 8th, 2008 and before July 1st, 2009.  Let's face it, we have low interest rates and a large inventory and considering it is a buyers market in a lot of areas... it may be a damn good time to go ahead and buy that home.  Historians may look back to this period of time and wonder what the fuss was with not wanting to committ, waiting for a more opportune time.  There may be NO more opportune time than now.  Of note, the preceding is a sales pitch delivered by folks to increase business and consumer confidence.   The same can be written about all the bad news flying around.  Don't think that news organizations aren't rolling in dollars about how much "bad news" is being reported.
• How much is the credit?  Quite simply, 10% of the purchase of the home, a maximum available credit of $7500.00 worth of dead presidents.
• How will the IRS know if someone sells their residence before the 15 years are up?  I gotta laugh at this question, though it isn't a stupid one.  In my mind, the only stupid question is one not asked.  To answer this, the website says the following: "Through both self reporting and third-party information."  Right, how ripe.  Without imposing political beliefs upon the masses, they will know.  While I believe in conspiracies, this isn't one in my book.  This is intelligence, the right kind.  I know folks who blatantly took advantage of the system, good for you.  Just don't bitch because we are all in a bundle.  YOU were just as responsible...
• It's repaid, but how?  After the second year of claiming the credit, you must repay that interest free loan.  From what I've read, you will be repaying as an additional tax on your returns for the next 15 years.... $500.00 a pop.

One more thing, before I present the second thing which will end up "lastly".  Real Estate Investors have been stifled because of all these happenings in the Mortgage World.  Personally, I think that is a mistake.  They say you can only own so many properties and your credit score has to be this and your mother has to a direct decendent of Henry the freaking 8th?   Some folks invest in Real Estate for a living, don't ignore them.  Keep that in mind PMI Companies and Credit Scoring Agencies, because I bet ya that you won't be running this industry much longer.

Lastly, and my English Teacher hated starting a sentence like that which is one of the reasons I just did... it's a buyer's market.  That doesn't mean it is right for you, yet it is most certainly something to explore.  In a few years, if you didn't pounce on this, you may just be making someone else a lot of money... who owns your home. 

Direct website @ http://www.irs.gov/newsroom/article/0,,id=186831,00.html

Have some fun @ http://www.youtube.com/watch?v=tfBoMV-HIP4

 

Sardi

 

1^st time buyers should take advantage of this $7,500 15-year interest free loan from the government, especially to pay off high interest debt.

EXPIRES JUNE 30, 2009

Who is eligible?

First-time homebuyers or any homebuyers who have not owned a principal residence in the last three years

How does it work? Eligible purchasers can claim the $7,500 credit on their annual tax return form.

Amount of credit: 10% of cost of home or a maximum of $7,500

Repayment:

• Two years after the credit is claimed, the homebuyer will have to start paying it back.
• 15 equal annual installments will have to be paid back to the IRS every year.

 6.67% of the borrowed amount or a maximum of $502

1.  
   • If home is sold before 15 years, the remainder of the loan will have to be repaid to the IRS upon the sale.

Part of the liability can be forgiven if the gain on the sale is less than the amount of the loan.

Restrictions:

1.  
   • Home purchase time limit: Homes purchased on or after April 9, 2008 and before July 1, 2009
   • Home must be a single family residence (including condos, coops) that will be used as a principal residence.
   • Home must be located in the United States.
   • Home cannot be financed through mortgage revenue bonds.

Income restriction:

To qualify for full $7,500 credit, the taxpayer must make no more than

• $75,000 for single returns
• $150,000 for joint returns

To still qualify for credit but at a lesser amount, the following income caps apply

• $95,000 for single returns
• $170,000 for joint returns

 

For more information on the tax credit go to www.SmartGirlsOwn.com

This post is intended to assist you with familiarizing yourself as a buyer with the types of sales we are seeing in the marketplace today.  Read separate posts on Short Sales * REOs * Auctions for more detail.

Traditional Sales

If the prices are right, these are the best transactions!  The contract is more "normal" in nature, allowing reasonable negotiations between the parties.  Each party genuinely hopes for the sale to be completed and therefore works together to meet deadlines and ensure everything is resolved to the mutual satisfaction of all parties.  These contracts are generally more predictable. 

Considerations

• Generally, private homeowners can not compete with the aggressive pricing strategies of a bank.
• Properties are often in better condition, requiring less fix up.  Owners may also complete some repairs.
• Private owners generally do not consider a cash offer more valuable than common financing terms.

 Short Sales

In these sales, the Seller must negotiate with their lender(s) for approval.  They may be asking for full or partial debt forgiveness or a note payable for any deficit.  Banks agreement to these sales are dependent on the ability of the family to repay the debt, and the circumstances that have changed since the loan was originally approved.  This process can take several months, and sometimes does not result in a closing.

Considerations:

• How many lenders are involved?
• What is the hardship/ability of the owners to repay?
• Will they be asking for debt forgiveness or a note payable?
• Who is negotiating with the bank and what is their experience level?
• Which bank is it; what is their process and has it been started?

Contract considerations:

• Longer contract periods with floating deadlines, all based on the approval timeline of the bank.
• Banks generally will not agree to a below market sale - this is determined based on an independent appraisal they conduct.
• While owners may consider doing some repairs, generally contracts are "AS IS".
• Inspections are usually OK, but buyer can not ask for any repairs; their only choice is to terminate the contract.
• Cash offers are considered favorably, but not to the extent they are with bank owned properties.

Bank Owned (Post Foreclosure) Properties:

These tend to be some of the best deals available in today's market. 

Contract considerations:

• Banks are pricing aggressively, and when they do, often there are multiple competing offers for properties.  You may consider submitting an escalation addendum in these cases, although some banks will not consider escalation addendums during negotiations and simply come back and ask for "best and final", or accept an alternative offer.
• Cash is king!  Banks realize the struggles and risks involved in some buyers obtaining financing.  In addition, they are aware of property condition guidelines from FHA or other types of loans, which might REQUIRE repairs prior to closing... and they want to avoid this. 
• By targeting homes which might not qualify for government financing, and making cash offers, you may be able to buy at a more reduced rate. 
• Often properties are in "fixer upper" condition, and properties are sold strictly AS IS.
• Inspections are usually OK, but buyer's only recourse is contract termination.
• Banks require that you agree to the terms in their addenda, with NO CHANGES.
• Some banks require certified funds as deposit and/or specify who will hold the deposit.

Banks are like the military - it's "hurry up and wait".  The timeline looks something like this:

Offer Submission

3-10 days later, Offer "Acceptance" (verbal or email)

1-2 days later, Counter Offer sent w/bank addendum

Within 1 day - resubmit offer w/ acceptance of bank terms

3-10 days later, Ratified Contract

Closing is as specified in the counter offer, which is generally a fixed date.  Challenges here become getting utilities turned on to complete the home inspection; completing title searches; & obtaining HOA docs within the time frame permitted by the contract.

Banks will close AFTER you, and you will not get possession until they've signed off on everything.  This can cause delays, I have seen more than 1 take over 2 weeks.  I suggest attempting to negotiate a penalty to the banks should this occur.

Auctions:

Public Auctions/Courthouse Steps:  These are the foreclosure auctions.  The vast majority of these are purchased by the bank who owns the mortgage/lien, which is generally more than the current market value.  There are some opportunities here, but they are more limited than many expect.  There are also more challenges in these transactions.

Private Auctions/Ballrooms or at property:  These are often done by banks (or other parties) and most commonly are done with a RESERVE.  Again, there are sporadic opportunities here.  Terms are very similar to those by any Bank Owned Homes

Buying your first home can be a satisfying and rewarding experience however, you need to determine if you are ready to take that exciting leap into home ownership.

Are You Financially Ready?

• Find out how much you really can afford. There are mortgage calculators available online that can give you an idea of what mortgage payments will be. However, these often don't include other expenses of home ownership like property taxes, maintenance and insurance.
• Save as much as you can for a down payment and closing costs. Standard mortgages require between 5-10% down. The more you have down the less your monthly mortgage payment will be.
• Think about saving for your down payment longer. For 6 months try putting aside what you think your monthly mortgage payment, insurance and property taxes will be. This can show you if you are financially able to afford a home. If you can't afford this, don't get discourage and keep saving for a larger down payment!
• Contact a few mortgage professionals and get pre-qualified. Getting pre-qualified for a loan gives you an idea of how much you can afford as well as loan programs that are available. This takes very little time, is of great value and can generally be done of the phone or at an initial meeting with a loan officer.
• Consider what closing costs might be. There are associated fees when getting a mortgage including lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or HOA fees.

Start Researching

• Check prices of homes online. There are plenty of sites that offer home prices and the capability to look at homes currently on the market. You might also want to start looking for a real estate agent to help with your search.
• Consider smaller homes including townhouses, condominiums and manufactured homes. These are usually the most affordable in most areas and might be only slightly higher payments than what you could be paying in rent. If your rent is $900 per month, with a 6% rental increase per year, you will pay $133,560 in rent over a 10 year period!
• Weigh your wants versus your needs. What are your needs now and what will they be in the next 5-10 years. How long do you see yourself living in this property? Make a list of important features and areas you are interested in. In your list include items you "need to have" and are "nice to have".
• Look at a homes potential. Remember that you can re do anything you don't like down the road. Look for a good core in a house, you can always paint, put new carpet in or redo a bathroom. If you find a property that you like but it has a few items you would like to change, get a bid from professionals to see what it would cost to get those items changed.
• Look at other surrounding areas and neighborhoods. This might take some compromising but looking outside of neighborhoods you primarily thought you wanted to live in can open more opportunities for homes in your price range or with the features you are looking for.

Reasons to Buy a Home

• Pride of Ownership
• Quality of Life (No Landlord!)
• Mortgage Interest Deductions
• Property Tax Deductions
• Appreciation (Historically housing has appreciated over the years)
• Deferred Gain and Capital Gain Exclusions
• Build Equity
• Investment Leverage (where else can you buy this size of an investment with 5-10% down?)
• Real Cost of Renting

You're Neighborhood Realtor© When looking to buy and or/sell, or know of anyone that is in the market, "Let Our Family Help Yours!"

I was recently asked by a buyer, "I have heard that a realtor fee is built into the cost of the home purchase. Can you tell me what the Realtor actually does for the buyer in this situation?"

Buyer Agent Benefits

Why use a buyer's agent for a new home? Because the builder's agent's job is to get the best possible price and terms for the builder and your buyer's agent's job is to get the best possible price and terms for their client, you! That is the number one reason. And, your agent has usually been through this process many more times than you and knows from experience what the pitfalls are and where to look for them.

Other than this, here are some reasons to use a buyer agent and some services you should expect.

As a Buyer's Agent, I provide these additional services:

• Have you pre-qualified even before you walk into the subdivision office so that your negotiating position is as strong as possible.
• Know the builder's history and reputation particularly with post sales service and warranty because even the best constructed home will have problems that will only show up after you've lived there a while.
• Do comparative market analysis in the local area around the subdivision so you will have a good concept of the home's value before you sign a contract.
• Know about any problems with the subdivision or the area that may not be known or mentioned up front by the builder's representative.
• Know about resales of homes in nearby or even in the same subdivision that will affect your negotiating position.
• Know about special incentives such as upgrades that may be available but won't be offered without negotiation.
• Know if the builder may stand to benefit by closing out a particular segment by the end of the current quarter or if there are other time constraints that might strengthen your negotiating position.
• Review all the bonds and assessments on the home you select.
• Review the contract to make sure there are no misunderstood provisions.
• Follow the transaction through escrow, assuring that everything is being done according to the contract, in a timely manner.
• Assist in watching over the construction if you are absent or out of town.
• Be with you when you select your upgrades. (It might be better for you to spend upgrade allowances on Landscaping, Escrow Costs, etc. rather than inflated builder upgrades). With the money saved you can shop for items such as carpet, drapes, etc. on the open market.

William "Art" Sexton
Sexton@Raleigh-Real-Estate.biz
www.Raleigh-Real-Estate.biz

As foreclosure rates hit record levels and property values have decreased in many areas, more sellers are turning to short sales as a way to avoid foreclosure. So, what is a short sale and how does it work? In a short sale, the seller arranges with their mortgage lender to accept a price that's less than the amount they owe on the property. As part of this arrangement, the lender may agree to forgive the rest of the loan. As a result, the seller doesn't have to go though a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of foreclosing and marketing the property.

The Lender 
A short sale typically is executed to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. The mortgage lender will want to know the circumstances that caused the buyer to fall behind on mortgage payments and what future financial prospects for repayment may be. They will also do their own assessment of whether it is more profitable to approve the short sale or foreclose and put the home on the market themselves. Although most mortgage companies are helpful, their goal is to make money so they can ultimately decide to proceed with foreclosure.

The Seller
For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure.  Sounds good right? Well, sellers need to know that a short sale may damage their credit, though probably not as much as a foreclosure. Also, lenders generally will only agree to a short sale if the seller is many payments behind and has received a default notice.

Two increasingly common factors create the circumstances for a short sale:

1. Homeowners have no equity or negative equity. Generally that's because they bought with 100 percent financing (or took out extra loans after buying) and the house is worth less than they paid for it.  This can also happen because the value of the home has depreciated.
2. The homeowner can't make the payments. This may be caused by an adjustable-rate mortgage that has reset at a higher rate, perhaps adding hundreds of dollars onto the monthly payment.

The Buyer
Buyers may get a great property at a discount, but they also will need to go through some extra paperwork too.  Buyers need to be aware that buying a home on a short sale is not as simple as many would advertise. Purchasing a short sale home is very time consuming and sometimes frustrating. This is because offers must be accepted by the seller and then approved by the seller's mortgage lender.  Very few properties ever close in 30 days. 60 to 90 days is more realistic. Frequently, the lender demands the right to continue to market the property and reserves the right to accept a higher offer. So, while buyers area obligated to wait for the lender's decision, the deal can fall through if the lender receives a better offer or just decides to foreclose instead.

Should you decide to buy or sell in a short sale situation in Raleigh, Durham, or the surrounding communities, allow me to represent you.  With my experience, I can handle any short sale and work with you as a buyer or seller to shorten the process.

William "Art" Sexton
Sexton@RERNC.com
www.Raleigh-Real-Estate.biz