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Real Estate

Gary Donovan

2013-03-25 13:41:18

Q-Can you provide a list of the documents and information I will need to give to my lender to get a mortgage loan on a home?

A-Here is a list of Items Generally Needed to Process a Mortgage Loan. Although not all of them may apply to you, lenders will generally require the following information: 1. Copies of 2 consecutive months of your most recent pay stubs. 2. Copies of your last 2 years of W2s and/or 1099s. 3. Copies of your most recent 2 years’ tax returns (2011 and 2012). Please include all pages. If self employed you will need all business returns including all schedules for the business. Also, your state taxes return if you have received or are expecting a refund. 4. If you receive Social Security, Disability or Pension earnings, please provide a current Award Letter along with 2 years of 1099s. 5. Copies of all pages of your most recent 2 consecutive months’ bank statements (savings, checking, Money market, CD’s, & IRA’s). Usually lenders cannot accept computer printouts that do not contain: Account number, your name and the Bank name. a. If you have any over-drafts on the bank statements, lenders will need a written explanation for them. These may cause delay or denial of your loan. Each statement needs to reflect a 30 day statement time line with no gaps in dates. b. Copies of all paper checks that are deposited into your bank account, or if cash provide a copy of the deposit slip. Lenders will require explanations of source of funds for any deposits other than your direct deposit payroll earnings. Any deposit other than direct deposit payroll will have to be verified and acceptable. PLEASE NOTE: You will not be able to complete your loan request until all funds are verified by either direct deposit information or photo copy of checks or cash deposit slips. c. If there are any transfers into your bank accounts from another account, either yours or another person’s you will need a copy of that statement as well. d. Your lender will probably require that any joint account holder that is not also applying for the loan will need to state in writing that he/she give you 100% access to the funds in your joint bank account. A hand written letter signed by this person should be acceptable. Include the bank account number in the contents of the letter. e. Make sure your name, company name of statement and account numbers are on all documents. If the document is 1 of 5 pages please include ALL pages (even blank backsides if needed). Sometimes when you go online it does not list the entire information name, account numbers, etc. f. DO NOT deposit any gift funds into your bank account prior to meeting your loan originator. Paper trail and gift fund documentation will need to be verified to meet loan guidelines. 6. Copy of most current retirement, 401(k) and investment account statements reflecting at least a 30 day line item history. Include the terms & conditions on how you can withdrawa funds from these accounts. 7. Legible copy of valid Driver’s License. 8. Insurance agent’s name and phone number for loan on current home. 9. Voided check for the appraisal fee or credit card information for the monies to be debited. Please be aware that additional fees for re-inspection appraisals may be charged. 10. A copy of the bank statement showing clearing for the earnest money as well as the appraisal money will be required prior to closing. 11. Do NOT open any new credit accounts or add to the balances of your current accounts. This can reduce the amount of your loan approval. 12. Remember that if you change current employment, or are on a leave of absence, it can delay or cancel the loan. Verification of employment will be re-verified on the day of closing. 13. If divorced, you will need a complete copy of your divorce decree, child support order/agreement and separation agreement along with verification of support payment (Child support & Alimony). 14. Has your ex-spouse missed alimony or child support payments in the last 12 months under the divorce decree? If so you will need to supply details. 15. If you ever filed for bankruptcy you will need a copy of all bankruptcy papers and discharge of debtor pages for Chapter 7 and/or 13. 16. If you own more than one home you will need the mortgage statement on all properties, homeowner’s insurance information, county tax information, and any current rental agreements. 17. Please obtain a Home Owners insurance quote and the amount of real estate taxes at your earliest convenience if purchasing a specific home. The lender will need the name of the insurance agent and their phone numbers. 18. If applying for VA loan, please provide your DD-214. 19. If you own rental properties, please provide all current insurance agent names and phone number. 20. If you own rental properties, please provide copies of current leases as they must be rented to use the income of past tax returns. 21. If you have recently sold or purchased property within the year that is not reported on your most current tax return that you have provided, please provide the HUD settlement statement. 22. If you are self employed, please explain decreasing income from one year to another, if applicable. 23. Please explain any job (employment) gaps over 30 days of your 2 year history, if applicable 24. If applying for a USDA Rural development loan, please provide household income of all people living in home- even if they are not on the note or mortgage. All income will be used to calculate that the statutory limit per county has not been exceeded. Your diligent effort in collecting the above required information will make the loan approval process go faster and smoother.

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Real Estate

Gary Donovan

2013-02-01 10:20:12

Q-What is mortgage insurance and when do I need it? Is there any way to avoid it, or reduce the cost?

A-Mortgage insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be provided by either a public or private insurer. There is a way to save a lot on mortgage insurance for a conventional loan which I will cover later in my answer. Suppose Mr. & Ms Brown decide to purchase a house which costs $120,000. They pay 10% ($12,000) down payment and take out a $108,000 ($120,000-$12,000) mortgage on the remaining 90%. Lenders will often require mortgage insurance for mortgage loans which exceed 80% of the property’s sale price. Because of their limited equity, the lender requires that Mr. & Ms Brown pay for mortgage insurance that protects the lender against their default. The mortgage insurer will charge a premium for this coverage, which may be paid by either the borrower or the lender. If the borrower defaults and the property is subsequently sold at a loss, the insurer will cover the insured loss. To obtain public mortgage insurance from the Federal Housing Administration in the United States, Ms. Smith must pay an upfront mortgage insurance premium (UFMIP) equal to 1.75 percent of the loan amount at closing. This premium is normally financed by the lender and paid to FHA on the borrower’s behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well. The United States Veterans Administration also offers insurance on mortgages. Private mortgage insurance Private mortgage insurance is typically required when down payments are below 20%. Rates can range from 0.5% to 6% of the principal of the loan per year based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable interest rate, and the borrower’s credit score. The rates may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). Tax deductible In the U.S., payments by the borrower for either private or public mortgage insurance are currently tax-deductible on homes purchased after December 31, 2006. This deduction has been extended through 2013. It will depend on Congress as to whether this will be extended again past 2013. It might be prudent income tax planning to pay the mortgage insurance up front with a “single premium” so the deduction and tax savings will all be received in 2013 (see more on this below). It is possible that payments will not be deductible after 2013. You should consult with your CPA or professional tax advisor to determine your best strategy. Borrower-paid private mortgage insurance (BPMI) BPMI or “Traditional Mortgage Insurance” is a default insurance on mortgage loans provided by private insurance companies and paid for by borrowers. BPMI allows borrowers to obtain a mortgage without having to provide 20% down payment, by covering the lender for the added risk of a high loan-to-value (LTV) mortgage. The US Homeowners Protection Act of 1998 allows for borrowers to request PMI cancellation when the amount owed is reduced to a certain level. The Act requires cancellation of borrower-paid mortgage insurance when a certain date is reached. This date is when the loan is scheduled to reach 78% of the original appraised value or sales price is reached, whichever is less, based on the original amortization schedule for fixed-rate loans and the current amortization schedule for adjustable-rate mortgages. BPMI can, under certain circumstances, be cancelled earlier by the servicer ordering a new appraisal showing that the loan balance is less than 80% of the home’s value due to appreciation. This generally requires at least two years of on-time payments. Each investor’s Loan to Value (LTV) requirements for PMI cancellation differ based on the age of the loan and current or original occupancy of the home. While the Act applies only to single family primary residences at closing, the investors Fannie Mae and Freddie Mac allow mortgage servicers to follow the same rules for secondary residences. Investment properties typically require lower LTVs. Contracts As with other insurance, an insurance policy is part of the insurance transaction. In mortgage insurance, a master policy issued to a bank or other mortgage-holding entity (the policyholder) lays out the terms and conditions of the coverage under insurance certificates. The certificates document the particular characteristics and conditions of each individual loan. The master policy includes various conditions including exclusions (conditions for denying coverage), conditions for notification of loans in default, and claims settlement. The contractual provisions in the master policy have received increased scrutiny since the subprime mortgage crisis in the United States. Master policies generally require timely notice of default include provisions on monthly reports’, time to file suit limitations, arbitration agreements, and exclusions for negligence, misrepresentation, and other conditions such as pre-existing environmental contaminants. The exclusions sometimes have “incontestability provisions” which limit the ability of the mortgage insurer to deny coverage for misrepresentations attributed to the policyholder if twelve consecutive payments are made, although these incontestability provisions generally don’t apply to outright fraud. History Mortgage insurance began in the United States in the 1880s, and the first law on it was passed in New York in 1904. The industry grew in response to the 1920s real estate bubble and was “entirely bankrupted” after the Great Depression. The bankruptcy was related to the industry’s involvement in “mortgage pools”, an early practice similar to mortgage securitization. The federal government began insuring mortgages in 1934 through the Federal Housing Administration and Veteran’s Administration, but after the Great Depression no private mortgage insurance was authorized in the United States until 1956, when Wisconsin passed a law allowing the first post-Depression insurer, Mortgage Guaranty Insurance Corporation, to be chartered. This was followed by a California law in 1961 which would become the standard for other states’ mortgage insurance laws. Eventually the National Association of Insurance Commissioners created a model law. Save with “single premium” mortgage insurance. On a conventional mortgage where the loan is greater than 80% of the purchase price a lender will require mortgage insurance. If feasible, I always recommend that the borrower consider “Single Premium” mortgage insurance when taking out the loan. This will not only save on the total premium paid, but it will lower the monthly mortgage payment. For illustrative purposes only, I recently got a quote for the $148,000 loan on a $164,444 home purchase. The loan being 90% requires mortgage insurance. Based on the loan amortization schedule there would be 65 monthly payments to get to an outstanding loan balance of 80% of the original purchase price. The monthly insurance premiums were quoted at $ 67.83, for a total insurance premium cost of $4,409. On the other hand, a single premium cost was quoted at $ 2,057. By making the single payment the borrower saves $2,352 and lowers the monthly mortgage payment by $67.83, during the months that mortgage insurance is required. Since the premiums on mortgage insurance are currently deductible, for federal income tax purposes, through 2013, there should be additional saving in reduced income taxes. The above examples are for illustrative purposes only. Actual mortgage insurance premiums are subject to a borrower’s credit score, actual purchase price of the home, the loan amount and its percentage of the purchase, other factors that affect the borrower’s monthly cash flow and the financial position. Premiums for mortgage insurance can vary by insurance company and by the lender. Your CPA, professional financial advisor, attorney or other professional should be consulted to help you make the best decisions for your specific situation.

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Real Estate

Gary Donovan

2013-01-02 13:38:32

Q-Is mortgage loan pre-approval necessary?

A-During the height of the real estate boom, getting a mortgage was as easy as picking out a new sofa for the living room. Now, home buyers have to jump through hoops before they can sign on the dotted line. The best first step in landing a home loan is obtaining a letter of prequalification. This means a mortgage lender has verified that you are approved for a mortgage of a certain amount over a fixed timeframe. Prequalification letters are prepared even before you’ve picked out your home. They remove some of the uncertainty in the home-buying process. In the current housing market, some real estate agents and sellers are reluctant to work with buyers unless they have one. With a letter in hand, buyers know exactly how much they can borrow and therefore how much house they can afford. A prequalification letter shows the seller and the seller’s agent that the buyer is capable of buying their house. For most sellers, the issue is not whether they can get an offer, but whether they can close the deal. Agents see preapproved buyers as more serious (and more valuable) because they’ve taken proactive steps to secure a prequalification. When it’s time to make an offer, a preapproved buyer will be in a better position to negotiate. Here’s what home buyers need to know about the new rules of mortgage prequalification. I got help on some of this information from Lisa Scherzer at www.smartmoney.com. Prepare your financial biography. Getting preapproved means a lender must review and verify a home buyer’s income, credit and assets to ensure he can make the necessary monthly payments on a house. In the wake of the housing bust, borrowers must be more forthcoming when it comes to their finances. Your lender should tell you precisely what you need, but be prepared to include: • W2 statements (or 1099 income statements) for the last two years • Federal tax returns for the last two years • Bank statements for the last few months • Recent pay stubs and proof of other income • Proof of investment income and assets Know you’re not obligated to one lender. Prequalification doesn’t bind you to a particular lender; it’s just a promise -- albeit, a conditional one -- that the lender is willing to make the loan. The buyer isn’t obligated to borrow from that lender. Prequalification will stipulate the loan amount or monthly payment but not necessarily the loan type or rate. When you apply, lenders use that day’s mortgage rates to estimate costs and payments. Just don’t expect them to keep the same rate they preapproved you with as the actual rate that will be available when you find a property and sign a purchase contract. Keep an eye on your credit score. Usually, a loan inquiry can ding your credit score. If you applied for a bunch of credit cards within a short period of time, for example, your FICO score might fall. (Most lenders use some version of the FICO score to determine your eligibility for credit and what interest rates and other terms they should extend to you.) But the credit-scoring models are designed to allow for mortgage loans. The score ignores mortgage, auto and student loan inquiries made during the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping, according to www.MyFico.com. Also, the score looks at your credit report for mortgage, auto and student loan inquiries more than 30 days old. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. Deal only with a reputable lender. Sellers now are looking much more closely at who the buyer’s lender is. To avoid instances in which the lender might not be able to deliver on the loan, they want to see that any prospective buyer is working with a financially sound and reputable lender. To satisfy any doubts you might have about a particular lender, visit the Better Business Bureau’s web site to find out what kind of reputation they have. Watch the clock. Prequalification letters and the documents they verify have expiration dates. Those dates vary by lender, but the letters are typically valid for 90 days. If you’re still house hunting after, say, 60 days, and you’re concerned, ask your lender to re-validate the prequalification letter. Sellers want to be sure the buyer’s financial situation hasn’t changed since the time the lender initially checked them out. If any part of your financial picture has changed your credit, job status, income or assets, for example you should notify the lender so you’re prequalification can be adjusted. It will change your prequalification status if you take on new credit obligations for an auto, furniture, clothing or other possessions. It is best to hold off on any new monthly payment obligations that might lower what the lender can ascertain as your affordable monthly payment. These new commitments may lower what you are qualified to afford and could affect your prequalification status. These types of purchases should also be voided 90 to 120 days prior to application unless they are for emergencies like having an auto to drive to work or something of this nature. An exception is if your debt to income is extremely low.

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Real Estate

Robert Cobb

2012-03-26 16:42:16

Q: My husband and I have decided to buy a home. Since it is such a significant purchase and one we will have to live with for a while, I want to be sure that we are methodical in choosing one, rather than rushing. Can you tell me what we should factor when looking for our new home and how to avoid an emotional purchase?

A: Indeed, buying a home is an emotional process and it is easy to be carried away by those emotions and end up with a home that you love but does not necessarily meet your real needs. If you would like to find a home that both stirs you emotionally and meets your needs, here are a few practical tips. 1. Make a list of non-negotiable home must haves, and prioritize the list. Understand that most homebuyers go in to the process with a long list of must-haves and whittle that list down in the process. Be objective about the things you absolutely must have from the start and you will avoid ruling out a home that may actually be the perfect fit. 2. Think long term. Even if you do not plan to be in the home for decades, think about how well the home will fit your needs five, ten, fifteen years from now. It is difficult to anticipate what the future holds so make sure the home is a good fit and adaptable to future needs. 3. Weigh the pros and cons of both new and old construction. Each come with advantages that could help you make a decision with which you will be happy for years to come. 4. Take good notes and plenty of pictures. Start with a picture of the address to keep one viewing distinguished from the next. Include pictures of the positive and negative aspects of the home. 5. Imagine yourself in the home and take yourself through the course of a busy week. Think about how well the home works and how well the spaces do their job. Personalize your evaluation by asking if each element meets your needs. Small closets and too few bathrooms can be a deal sinker, but an easy commute may help you overlook dated tile. 6. Think outside the box. A home may not be the perfect fit at first, but a home in the right price range may leave room for additions or remodels. When viewing each home, look for the possibility of the property as a whole. 7. Do not rush. You have time to find the right house Finally, while it is important to make an informed decision, do not discount the emotions entirely. I can tell you from experience that in the vast majority of cases, buyers choose the home that they connect with on an emotional level. After all, your home is where most of life’s most important moments happen and it should be one that you love.

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Real Estate

Robert Cobb

2012-02-28 10:23:45

Q: We are considering buying investment property. Our income and savings are modest, but we view a purchase as a real opportunity. We are leaning more toward residential property. What would you suggest we consider as we look at the available options?

A: An investment property can indeed be a valuable asset, and today’s market offers plenty of opportunity. However, to make the most of investment property, there are several considerations. One of the first considerations is what type of dwelling is best for your investment strategy. For example, if you intend to keep the property as a rental, would a single or multi family dwelling be best? For some, a multi-family dwelling such as a condominium or duplex is ideal as it provides two steady streams of income while occupied. However, it may also equal more time in management, upkeep, and trouble shooting. Next, consider location. Your location will greatly affect your ability to keep it rented, which is even more important if you have a multi-family dwelling. Before you buy, browse the neighborhood as if you would be moving there yourself. If you would like to have families move in, be sure to buy near schools and other amenities that families need. If you were buying a series of one-room duplexes or interested in a building filled with one-room apartments, you might want to consider nearby amenities that favor singles and couples, or college aged young adults. Also, remember that anyone living there would need the same things you would need if you were moving in. A lack of proper amenities can lead to big problems later. For example, a home with five bedrooms and one bathroom could equal plumbing problems, and small things like no parking could mean the home remains unrented for long stretches. Finally, consider the age of the home and the expected cost of upkeep. If the home would require significant renovation or ongoing repairs, this could eat into your profit. Once you have determined your needs and parameters, the fun begins- looking for your new property!

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Real Estate

Robert Cobb

2012-01-26 15:46:16

Q: We are in the process of buying our first home. Can you tell me the purpose of the final walk through and how it is handled?

A: Before the closing of your new home, typically five-seven days before closing, you will have the opportunity to do a final walk. Although some people are so anxious to get into their home that they want to forego the walk-through, there are many good reasons that you should take the opportunity to take a final look. • It is your last chance to verify sellers have upheld their side of the bargain • You still have the leverage to get agreed upon things completed The walk-through is not another home inspection, or a time to negotiate for repairs. The main purpose of your inspection is to verify that the home is being conveyed to you in the condition agreed upon in the contract. Use this Time to Assure: • The property has not been damaged since you agreed to buy it • All required repairs have been satisfactorily completed or are in the process of being done • The items that the seller agreed to leave have not been removed • All items that the seller agreed to remove are gone Here are Some Things to Consider Be sure to give the process the time it deserves and look at it from the perspective of someone less emotionally involved. Excitement can cause us to overlook many things! As you conduct your walk-through: • Refer to your purchase contract as you look at the property rather than relying on memory • Start with the outside of the property and work your way through the home from top to bottom • Check major systems and appliances to assure they are in good working order • Check attic and basements/crawl spaces, looking for discarded items and potential problem areas • Inspect walls and floors for any damage that may have occurred when the sellers moved or that may not have been obvious when you originally looked at the home • Check the condition of windows, doors, sprinklers, gutters and landscaping If you are not comfortable doing the walk through alone, consider having a home inspector or your real estate agent accompany you. Also, be sure to make a checklist of issues that still need to be resolved to meet the conditions in your contract. Bring this list to your agent’s attention so they can help facilitate remedies. Ideally, everything is done before closing, but if not, don’t worry. It is common for buyers and sellers to agree on an amount of money to be held in escrow for repairs to be completed following closing. Congratulations on your new home!

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Real Estate

Robert Cobb

2011-12-27 13:16:25

Q: I am considering taking the plunge and buying commercial property for my business. What are the main considerations? Is there a strategy I should follow?

A: There’s no one size fits all strategy for buying commercial real estate, but there are several considerations that can make the process run smoothly and assure that you are getting what you need. First, consider why you should buy. There is risk in any business venture, and that is one of the main reasons many business owners hesitate before buying commercial property. However, the advantages to owning can be significant, such as greater control over the cost of overhead and asset appreciation. Another advantage, if you ever need a serious cash influx to revive a lagging business, you have a real asset that can save you in a pinch and still have the ability to keep the business running. Second, work with professionals. Buying commercial property is not something you want to go into lightly or uninformed. Ask around a little and you’ll find there are many people that tried to go it alone and were somehow victimized in the process. A real estate agent and real estate attorney will prove invaluable. Next, invest time in researching the location. You might be considering the current “hot” location, but remember neighborhoods go through trends as well. Think about long-term practicalities like growth potential, parking, access and space. Lastly, make sure there are remedies in place to minimize risk in the buying process. Structure inspections as contingencies that must be satisfied before the sale can proceed. Make sure your investigations include a physical inspection of the property, confirming the zoning, review of environmental hazards and soil reports if you plan to add on. If the property is not developed, you’ll need at least 30 days for environmental assessments. While buying commercial property can be a very involved process, any effort you put in is well rewarded. Good luck on your exciting new venture!

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Real Estate

Robert Cobb

2011-11-21 10:12:46

Q: I am considering buying land as an investment. What things should I consider as I look at my options?

A: While buying property is a great option for many people, signing on the dotted line before you do your homework can result in owning property that you do not enjoy and property that is difficult to sell at a price that makes it worthwhile for you. However, with a little investigation, you can find the perfect plot of land that will be a pleasure to own. Purpose One of the first things you will want to consider is what type of land will fit your purposes, whether it is commercial, residential, or agricultural. You will want to consider if it is hunting land or whether the ground is farmable. Wooded versus non-wooded may also be a preference in your case. Location You know the old adage, “Location, location, location.” It may seem over used but location is one of your top considerations. For commercial properties, you will want to consider its proximity to highways, if the land is accessible, whether or not you can build on the land, and any environmental laws might affect or hinder building. Residential properties have similar concerns and include issues such as drainage issues, wells and water rights. Raw Land Vs Vacant Property Particularly in a rural setting, it is also important to know the difference between raw versus vacant property. Vacant property is likely to have access to all or most utility services. Raw land, while holding potential involves additional costs in developing the land into a ready to build site. Just a few of the additional expenses could include: property surveys, environmental impact studies, soil tests, old grave location, and Local, State, and Federal permits, regulations and requirements. Future Appeal As with any other investment, you must consider the appeal of your property to the next buyer. A well-chosen location, with broad appeal will help ensure that you reap the financial benefits when it’s time to write the next exciting chapter in the story of your life as a landowner. Finally, enlisting the help of a real estate professional to work for you can assure a smooth and successful transaction.

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Real Estate

Mark Wedman

2011-10-25 10:20:23

Q: Is there a preferable time of year to sell your home?

A: The fourth quarter of the year can cause some sellers to worry if their home hasn’t sold yet, there is still time to sell. Typically, many buyers are eager to move and get settled in before the school year and holidays begin but that doesn’t mean you should be discouraged. While the spring is considered a peak selling period, there is still time to sell your home. In fact, there are some key factors that may help sell your home. First, remember that the number of buyers may be reduced as we head closer to the holidays. Many people simply don’t want to juggle the holiday rush and house hunting. On the other hand, there will be some serious buyers looking for a very nice holiday gift for themselves. If they’re out shopping in dreary weather or nearing the holidays, it could be because they’re extremely serious about making a purchase before the end of the year. With this in mind, be sure to make the most of every showing. Don’t let things slide with the upkeep of your home because you are juggling selling a home, working, or taking care of the kids. Selling your home in the fourth quarter must be a priority and the closer to the beginning of the quarter the better. When considering how long to keep your home listed through the holidays, experts suggest looking at the rates of sales activity in your market. Some areas can be pretty bleak, but that doesn’t necessarily mean there’s no chance of selling. Remember, that some people may even have tax reasons and need to purchase before the end of the year. Expert staging of your home will suit you well. This is a time of year when homeowners bring out a lot of stuff that may be very appealing to them–pumpkins, turkeys, holiday and religious ornaments–but those things don’t always impress buyers. In fact, they can annoy them and make the house seem cluttered. This is not to say you can’t have some nice seasonally appropriate decor. However, the fourth-quarter sale requires a good strategy like using an expert stager. If there are a reduced number of buyers seeing your home, make the most of each showing by having a spectacularly staged and clutter-free house to show off. Staging provides a competitive advantage. Another reason this fourth quarter may see more buyers is that interest rates remain historically low. The potential threat of a rise in mortgage rates could have more buyers eager to lock into an excellent rate, even if it means a move during the holidays. However, you can also negotiate the sale and make arrangements so that you can still stay in your home for the holidays and make the move after the first of the year. Another effect of the holidays, buyers tend to be more emotional and may spend more during this time of year. Couple that with potentially fewer homes on the market and you may have the perfect setting for an ideal sale.

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Real Estate

Robert Cobb

2011-10-20 12:16:24

Q: Can you explain the reverse mortgage? Who is eligible? What are the risks?

A: Last month, we explained a reverse mortgage and who is eligible. This month, we will touch on the benefits and discuss some of the considerations. To recap what we discussed last month, a reverse mortgage is a loan for senior homeowners that use a portion of the home’s equity as collateral. As the country weathers what is the worst financial crisis since the Great Depression, seniors are among the most financially vulnerable population. Many seniors live on a small fixed income and face a staggering increase in cost of living expenses. For this reason, leveraging the availability of a reverse mortgage can be a huge advantage under the right circumstances. However, a reverse mortgage should be considered a loan of last resort and should be considered only after careful research. It is easy to fall prey to misleading advertising that fail to fully explain that the money is a loan or suggest that you can never loose your home. There are some risks you should consider before proceeding. While a reverse mortgage relieves a borrower of monthly mortgage bills, the borrower is still responsible for other costs such as property taxes and insurance— and failure to do so can result in foreclosure. They are also responsible for maintaining the property, including the landscaping, or risk the loss of the property. Since the home is often the main or only asset, borrowers also should keep in mind that the more cash they take out and the longer they go without making loan payments, the interest charges and other costs can use up much or all of the equity, leaving fewer and fewer assets for the borrower or heirs. And if you want to keep the house instead of selling it or give it to your heirs, the full loan amount would be due and payable from your own funds, even if its more than the value of the property. The bottom line on reverse mortgage: While they can be helpful, exhaust all of your other resources first and pursue only after counsel from a financial advisor.

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Real Estate

Robert Cobb

2011-09-29 14:35:13

Q: Can you explain the reverse mortgage? Who is eligible?

A: A reverse mortgage is a loan for senior homeowners that use a portion of the home’s equity as collateral. This type of loan was invented decades ago to help seniors facing economic hardship access the equity in their homes. More than 660,000 reverse mortgages were issued between 1990 and 2010, according to the AARP. Home equity conversion mortgages, or HECMs, are the most common reverse mortgage. The loan is federally insured and offers certain borrower protections. Seniors who own their homes or have low mortgage balances can take out reverse mortgages and convert their equity into cash as a lump sum, monthly payment or line of credit, or a combination of all three. In most cases, loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has a set amount of time, generally less than a year, to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. Since the Federal Housing Administration insures the loans, the estate is not personally liable if the home sells for less than the balance of the reverse mortgage. To be eligible, you must be 62 or older, own the home free and clear or nearly so and the home must be free of liens. There are no income or credit requirements, and the loan has no monthly payment. Instead, the lender pays the homeowner, and the reverse mortgage balance rises as a result, accruing interest and fees. Not all home types are eligible, however. Mobile homes must be three years old or newer, built on a permanent foundation, and her land must be owned. Some townhome and condominiums may also be ineligible. While the reverse mortgage can be a lifesaver for some seniors, they can also be complex and involve some risk and expense. We will cover those risks next month.

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Real Estate

Mark Wedman

2011-09-29 14:13:33

Q: Did you lose value in your portfolio in the past few years and again in the last month?

A: Most Americans did. Q: What about the Real Estate Investor? A: In many cases, the real estate investor could have made more money. Some of the largest market sell off’s in recent history have happened lately as the market continues to underperform and scare the average investor totally out of the market. I have seen the following in the last few months: • Interest rates fall again making money more affordable. • Investors continue to swiftly pick off properties that create steady and increasing income. • Land prices continue to sky- rocket in price as it follows safety like the price of gold as it hits its highest level of history. It is a prime time to invest in real estate, especially income producing properties, with these low interest rates.

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Real Estate

Mark Wedman

2011-09-23 11:30:13

Q: What sells a house in today’s market?

A: In today’s market many sellers want to know the secret to selling their homes quickly. They want to know ways to hold on to the equity they’ve built over the past decade. Unfortunately, there is no golden equation that equals the perfect sale. Yet, while there is no “sure thing” in the housing market these days, there are certain factors that affect how quickly and for how much your home sells. Here are the top ten. Consider how these apply to your own home, how that affects marketing, as well as what aspects of your home you should “play up” to elicit a better response from buyers. 1. Price 2. Location 3. Livability 4. Condition 5. Competitive Advantage 6. Curb Appeal 7. Staging 8. Kitchens 9. Agents 10. Marketing

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Real Estate

Robert Cobb

2011-07-01 08:19:00

Question: Lately, I have been receiving an incredible amount of calls about refinancing my home. I have been in my home ten years and have pretty good credit. Can you tell when it is good to refinance, and reasons you may or may not want to do so?

Answer: This is a very timely question. Refinancing is something that is on the mind of many people today, and for some, offers a great option in making finances more manageable. Refinancing replaces your current mortgage with one that is more advantageous. Typically, you can refinance if you have built up enough equity in your home, have not had any recent late payments and have a reasonable credit score. You may want to consider refinancing for many reasons: •If it allows you to save more •If it enables you to pay off the debt more quickly •If you need to consolidate a first and second mortgage •If you need extra cash to pay off other higher interest debts •You want to convert from a Adjustable Rate Mortgage for a Fixed Rate Mortgage However, refinancing is not right for every homeowner even if rates have gone down since you secured the original loan. You may not want to refinance in these situations: •You are near the end of your current loan and close to being free of the debt •You have already taken out considerable equity •Your property value has gone down Refinancing can be of huge benefit under the right circumstances. Before you take the plunge, you might want to consult a financial advisor to see if refinancing is wise in your case and how to use it to your best long-term advantage.

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Real Estate

Robert Cobb

2011-05-01 10:46:00

Question: What exactly is a short sale and what are the reasons one would choose a short sale?

Answer: Short sales are generally not the first choice of any homeowner but they do serve a useful purpose and can help a homeowner maintain good credit. A short sale is a sale where the seller’s lender agrees to allow the home to be sold for less than the owner currently owes on the loan. The goal of a short sale is to help the homeowner avoid foreclosure if for some reason they can no longer remain current on the payments and stay in the home. In many cases, the lender agrees to forgive or work out an arrangement for the balance of the loan. Ultimately, the seller avoids foreclosure, the buyer gets a home at discount and the lender avoids having an excess number of homes to sell. Not everyone is eligible and not every home needs to be in default in order to qualify. Generally, if a home is in danger of foreclosure due to such things as loss of job, divorce, or serious illness the homeowner may be eligible for a short sale. Additionally, if you owe more than the home is worth or are unable to modify your current home loan, a short sale is likely eligible. While the short sale is preferable to foreclosure, there are still some disadvantages. A short sale will certainly impact your credit, though not as dramatically as a foreclosure. On the buyer’s side, purchasing a short sale may be more involved than expected. Contrary to popular belief, a short sale is not necessarily a quick process. It is also important to know if there is more than one lender, in which case there must be some agreement between the lenders. The first loan is protected by the second lender, unless the second does not want to foreclose. If for example, the owner owes $200,000 to the first lender, and $50,000 to the second, an offer at $200,000 would leave nothing for the second lender. This means the first lender would need to make an agreement with the second lender in order for both mortgages to be released and for the short sale to proceed. There are many cases where selling or buying a short sale is very advantages. However, the process is not always as simple as you might expect, so working with a RE profession experienced in short sales is recommended.

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Real Estate

Robert Cobb

2011-04-01 10:42:00

Question: What does a realtor do to market my property that I can’t?

Answer: Generally you’re trying to sell the biggest investment you’ll ever own; so where to begin. Some basic questions might be: How will I market my property? Where’s the best place to market it? How much will it cost to advertise my property? How much is my property worth? What if someone wants to see it, and I can’t be there? How safe is it to have strangers go through my house? How long will it take me to sell my property? Lastly, do you have 112.5 hours in your schedule to sell your property yourself? (In 2007, an estimated average, a realtor spends from beginning to close of a transaction, 16 weeks, per realtor and real estate author Jim Lee in a 2007 Realty Times article). Most people think if they run an ad in the local paper, put a sign in the front yard with their phone number and put it on the internet you’ll generate instant interest from buyers. Popular “For Sale by Owner” online sites purport these are the simple steps for selling a property by yourself. Let’s look at a few marketing statistics for using these methods of selling property to give you an idea where your efforts may have the most results. The internet has come to play a very valuable role in marketing real estate, phenomenally expanding initial exposure of your property, to not only local potential buyers, but also to an international market that has never existed before in history. Per a June 9, 2010, article from Enhanced Online News (EON), 58% of U.S. online consumers begin their day interacting with companies on email, compared to 20% who start their day on search engines and 11% on Facebook. Ninety-three percent of U.S. consumers subscribe to email marketing messages. Nearly half (43%) of all online consumers are either fans or followers of at least one brand on Twitter or Facebook. Narrowing down what these statistics mean for you as a home seller: according to a 2007 NAR (National Association of Realtors) study, almost 90% of homebuyers start their home search on-line, 36% of those purchased a home they first saw online; they generally start 6-9 months in advance of contacting a realtor or starting a serious search. Eighty-seven percent of people starting their search online buy through a realtor. Here’s the rest of the breakdown for the success of these marketing techniques. Twelve percent of home buyers purchase a home they first saw due to a yard sign; 8 out of 10 of those buyers used a real estate agent to purchase the home. Two percent first saw their home in a print or newspaper ad; less than 1% a home book or magazine; 2% learned about the property directly from the sellers; 6% through a friend, neighbor or relative; and 5% through home builders. NAR research shows that in 2010, fewer than 10% of properties sold were sold as a For Sale By Owner (FSBO), of those 36% knew who their buyers were upfront, without marketing the property to the general public. So let’s see, after you digest and calculate these statistics, how large is the market scope you will need to reach to be able to target the buyer you need for your property? Where will you start? How do realtors find buyers for properties? In short, “marketing power,” and daily experience. Real estate doesn’t sell due to advertising alone. In fact, a large percentage of real estate sales come as the result of a realtor’s daily contact through previous clients, referrals, friends, family and other real estate and business professionals they have relationships with because this is their daily business and field of expertise. Realtors, like stock brokers and other professionals, observe and participate in the real estate market daily and have current familiarity with all aspects of marketing a property for the best results to benefit you. Each property is unique. Working in close relationship with the seller to discern the unique aspects of a property and formulate a custom marketing plan to reach the right, willing buyer takes knowledge of marketing resources and access to resources and relationships is often available only to industry professionals. Lastly, according to statistics drawn since 1991, homes sold by realtors sell on average for 28% more than those sold by owner. Is marketing your property yourself really as simple as you might think or have been led to believe? Are you really saving money and time marketing your home yourself? Narrowing the scope of these facts down to a local picture, what can the difference be in marketing your property yourself, or using a realtor? As an example of the power of a realtor network, let’s look at the local Century 21 office marketing power, only because I’m personally familiar with this particular network. Our website, www.cobbrealty.com, currently has over 1,000 hits a day, reaching over 1.45 million hits since it began. This is just a brief description of what comprises the value of using a realtor’s “marketing power” and expertise to assist you in marketing your property. If you do decide to use a realtor to sell your property, ask them what their marketing plan will involve. How will they get exposure for your property? What you can do to increase that marketing power even further? Hopefully, in reviewing just these few factors involved only in the marketing of real estate, you can better navigate your way through this process to maximize the results you are looking for.

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Real Estate

Robert Cobb

2011-03-01 10:26:00

Question: Is buying a home still a good investment?

Answer: Per NAR data since 1968, on an average US home prices have risen 5.5 percent annually and outpaced inflation by about 1 to 2 percent. Even with the downturn in the market, this has continued to be the case and is projected to be the case for the long term. After accounting for the money put in for property taxes, home insurance, security and maintenance, investing in a home doesn’t have the rate of return of a diversified, well-managed portfolio in stocks and bonds, but is still considered a good way to build wealth while actually receiving use of the asset you have invested in. Long term, also there is a finite amount of land that can be used for housing, which as time goes on value becomes higher. This was a factor that played greatly in the housing boom of the early 2,000’s and will always continue to cause real estate to appreciate in value as far as keeping your investment ahead of inflation. Investing in real estate has never been the “get rich quick” investment that people assumed it to be during the housing boom. Bottom line, assuming home prices continue to increase 1 to 2 percent better than inflation annually (this has been the proven investment track record for more than 40 years, a buyer needs to own the property for at least five years, with it being maintained and in good marketable condition, to break even and cover selling costs. In reality, this was the secret formula for those who did make money in the real estate market during the housing boom, and for those who have owned their property for more than 5 years. For most people, their monthly housing allowance is their largest monthly expense. Right now paying that expense out in rent is more than mortgage payments per month and you gain tax returns on that investment along with an investment that increases at the rate of 1 to 2 percent above inflation annually. So interest rates are lower than 40 years ago, prices are projected to be as low as they are going to be. A real estate investment has a utility value other forms of investment do not have – all good reasons to buy a home or investment property in the next few months. In conclusion, real estate is still a very solid investment for the long term.

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Real Estate

Robert Cobb

2011-02-01 13:40:00

Question: How does the Southeast Kansas Real Estate Market look for buyers and sellers?

Answer: According to National Association of Realtors statistics for the Southeast Kansas area in 2010 there were 1,503 active listings, with 707 of those listings coming on the market during 2010. There were 322 listings sold, with an average inventory of 4.7 months at the end of the year. The average listing price was $121,780, with the average sold price being $96,545. The average days on the market for sold properties in 2010, was 168 days. Comparatively in 2009, there were 1,432 active listings, with 621 of those being new listings in 2009. The average listing price was $119,134; average sold price was $89,406. There were 358 properties sold, with an average inventory of 4 months. The average days on the market for sold listings in 2009, was 178 days. Although there were more listings on the market for 2010, there were 36 more listings sold in 2010, then in 2009, the average sold price was $7,139 higher in 2010, then 2009, and the average days on the market was down by 10 days. So what in the world does all of this mean for the real estate market in Southeast Kansas? Let’s start by talking about what it means for Buyers. Whether wanting to buy a home or if looking for investment property, it couldn’t be a better time to buy. Here’s why. Interest rates are lower than they were in the 1960’s, but starting to rise again. The government has held interest rates at lower rates artificially for almost a year in an effort to help stimulate the market and medicate an ailing economy. As the economy begins to recover, we’re seeing interest rates beginning to rise again. Due to poor mortgage investment practices in the early 2000’s, criteria for mortgage loans are continuing to tighten, which can restrict who is eligible to be able to buy real estate. In addition, in looking at the price comparisons between 2009 and 2010, although there is a larger inventory to choose from (mainly due to the increase in foreclosed properties being put on the market) we did see an increase in sold property prices in Southeast Kansas and a decrease in the number of days those properties were on the market. If, as a buyer, you have been waiting for the lowest price or that bargain that will give you your best return on investment, the aligning of the stars are probably going to be at their best over the first three quarters of 2011. According to national economist’s projections, it is thought that we will finally see the market bottom-out by the end of the third quarter in 2011. Prices will begin to be on the incline again in the fourth quarter. We are continuing to see an increasing number of foreclosed properties come on the market, which have driven real estate prices down to an extent. This has increased the volume of properties on the market causing an unknown historical affect on the economic principal of supply and demand. With all things being equal (that is quality and desirability of available inventory) in this model and demand of these properties being down it would mean prices have to drop. However, what we have seen is the quality and desirability of the increased inventory caused by the influx of foreclosed properties not being equal to Buyer demand. It would seem that we saw this demonstrated in the 2010 market sales, where quality demand caused a slight increase in prices along with a shorter market time. What about for sellers? If you have to sell now, or for that matter at any time when selling property, pricing is the key to selling as quickly as possible. Buyers are just like you, they want the best value for their money. This means your house has to be in the best condition for the price asked. You need to get your house market ready at least two weeks before you begin showing it. Again, Realtors visit houses daily that are on the market and can define for you what is considered market ready for attaining the best price in the shortest amount of time. Remember, every month you don’t sell your property you are continuing to make mortgage payments, pay taxes and maintenance costs on the property, so consider this continuing cost compared to what you may be trying to gain in getting your property sold at the best price. Ask your Realtor what the average days on the market for properties in your area are in relation to the same price range, to help project how long it will take you to possibly sell your property. Be flexible about showings. You have a lot of competition, even though it might be inconvenient to show on the spur of the moment, the more amenable you are about letting people see your property, the sooner you’ll find a buyer. There are a lot of easy pointers, low cost or not cost, that Realtors can provide you with in making sure your property is in peak condition for the most profitable and time efficient sale for you. You’ve hired an expert in real estate sales to help you sell your property. Their guidance will help you receive the most from your investment, just as you depend on your investment adviser to best manage your financial investment portfolio, trust in the knowledge of your Realtor. In conclusion, just as with the return of the economy that we saw in 2010, we have, according to our real estate statistics for Southeast Kansas, seen an improvement in the real estate market for 2010. Like the national projections, hopefully we will see increased movement in the market, making 2011 a better year.

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Real Estate

Charlie Traffas

2010-05-01 14:25:00

Question: We are thinking of selling our home, even though we are aware that this is not the best time…however, things seem to be improving. The Realtors we have talked to tell us that to get top price the property must be in top shape and the more updated the better. We have also been told that home improvement loans up to $100,000 are not that difficult to obtain right now and are at very good rates, around 5%. Our question is, how does one know where to start and stop when updating to sell?

Answer: Over the last 25 years or so the trend in decorating walls and especially ceilings has been to stay neutral very little color some sort of shade of white or at the very most a shade of beige. The thinking was that this would please everyone a little bit and not offend any one too much. Most realtors will tell you that a freshly decorated and staged home will sell much faster and at a much better price. It is kind of like selling a muddy and dirty car. It sells better if it’s clean. That is why most new housing developments go to the trouble and expense of putting furnished model homes for you to tour. When you walk into the model it is so easy to visualize your self living in your new home. Most people who buy an existing home don’t expect it to be a new home, but the closer it seems to a new home, the more likely they are to feel comfortable and happy about their purchase. It is similar to how you feel when you find a great buy at a yard sale or bazaar. You do the time-consuming work and let a professional do the stuff that you know not to mess with. One tip is to let one of these professionals prep the area to be painted and you do the painting. You’ll save at least 50%!

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Real Estate

Rick Loveall

2009-02-01 14:22:00

Question: What are some energy saving tips for the home?

Answer: There are many. I will divide them into two categories. Things you can do that are free (or very low cost) and can begin saving immediately, and things you can do that are more long-term, but that will save substantially. This month, let me address some things you can do that are either free or very low cost that can produce savings immediately. Take Advantage of Heat from the Sun - Open the curtains on your south-facing windows during the day to allow sunlight to naturally heat your home, and close them at night to reduce the chill you may feel from cold windows. Cover Drafty Windows - Use a heavy-duty, clear plastic sheet on a frame or tape clear plastic film to the inside of your window frames during the cold winter months. Make sure the plastic is sealed tightly to the frame to help reduce infiltration. Install tight-fitting, insulating drapes or shades on windows that feel drafty after weatherizing. Find out about other window treatments and coverings that can improve energy efficiency. Adjust the Temperature - When you are home and awake, set your thermostat as low as is comfortable. When you are asleep or out of the house, turn your thermostat back 10°–15° for eight hours and save around 10% a year on your heating and cooling bills. A programmable thermostat can make it easy to adjust your temperature. Find out how to operate your thermostat for maximum energy savings. Find and Seal Leaks - Seal the air leaks around utility cut-throughs for pipes (“plumbing penetrations”), gaps around chimneys and recessed lights in insulated ceilings, and unfinished spaces behind cupboards and closets. Add caulk or weather-stripping to seal air leaks around leaky doors and windows. Maintain Your Heating Systems - Schedule service for your heating system. Find out from providers what maintenance is required to keep your heating system operating efficiently. Furnaces - Replace your furnace filter once a month or as needed. Wood- and Pellet-Burning Heaters - Clean the flue vent regularly and clean the inside of the appliance with a wire brush periodically to ensure that your home is heated efficiently. Reduce Heat Loss from the Fireplace - Keep your fireplace damper closed unless a fire is going. Keeping the damper open is like keeping a window wide open during the winter; it allows warm air to go right up the chimney. When you use the fireplace, reduce heat loss by opening dampers in the bottom of the firebox (if provided) or open the nearest window slightly—approximately 1 inch—and close doors leading into the room. Lower the thermostat setting to between 50° and 55°F. If you never use your fireplace, plug and seal the chimney flue. If you do use the fireplace, install tempered glass doors and a heat-air exchange system that blows warmed air back into the room. Check the seal on the fireplace flue damper and make it as snug as possible. Purchase grates made of C-shaped metal tubes to draw cool room air into the fireplace and circulate warm air back into the room. Add caulking around the fireplace hearth. Lower Your Water Heating Costs - Water heating can account for 14%-25% of the energy consumed in your home. Turn down the temperature of your water heater to the warm setting (120°F). You’ll not only save energy, you’ll avoid scalding your hands. Lower Your Holiday Lighting Costs – It is over for this year, but I will tell you because it should be “fresh” in your mind. Use light-emitting diode—or “LED”—holiday light strings to reduce the cost of decorating your home for the winter holidays.

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Real Estate

Rick Loveall

2009-02-01 14:22:00

Question: What will the stimulus package do for home buyers?

Answer: Our Senate and Congress passed a housing stimulus package in 2008. This, along with important changes being debated right now (and could be finalized by the time you read this), could mean that the real estate and related industries can look forward to a busy spring market. The current $7,500 tax credit is a great benefit for first home buyers (or anyone who hasn’t taken a mortgage deduction on their income taxes in the past three years), but the newest legislation could expand the benefits up to a $15,000 tax credit or 10% of the purchase price (whichever is less) and make all home buyers eligible. With low interest rates and favorable FHA financing, the current $7,500 tax credit will offer a windfall to home buyers that purchase before mid-2009. And, the proposed new legislation will be an even better deal, for even more buyers.

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Real Estate

Rick Loveall

2008-12-31 09:59:00

Question: Can you tell me about the $7,500 tax credit that is available for first-time home buyers?

Answer: First-time home buyers who purchase(d) a principal residence on or after April 9, 2008 and before July 1, 2009 are eligible for the credit. A first-time home buyer is defined as an individual who has not had an ownership interest in a principal residence in the three-year period before the date of home purchase, and someone who has never taken advantage of the first-time home buyer credit. In the case of married couples, both must be first-time home buyers. For other groups purchasing a home, the statute is less clear. Take a couple who is planning to be married in 2009. The bride-to-be and her fiancé purchased a home on June 1, 2008. She previously owned a home in 2006 while her fiancé has never owned one. The bride will not qualify for the tax credit for the 2008 purchase because she owned a home after June 1, 2005 (three years before the date of the couple’s purchase). But, since both were single when they purchased the home, the groom may qualify for the credit. He may be eligible because both of them will file tax returns as Single for 2008. (If they married in 2008, neither would be eligible). When purchasers file a joint tax return, both must be first-time buyers. Obviously there are other types of households, and in some of these cases the statute could be somewhat ambiguous. As for any major financial investment, purchasers should consult a tax advisor. There are some income restrictions with this program. Those restrictions are based on the tax filing status the purchaser claims when filing his/her income tax return. The maximum income for individuals filing as “Single” (or “Head of Household”) is $95,000; individuals filing a joint return may have income of no more than $170,000. Remember, this is not a deduction but a TAX CREDIT. The credit directly reduces the total amount of taxes owed and is refundable. When the buyer files his/her taxes, for the year he or she purchased the home (2008 or 2009), the taxpayer will be able to subtract the amount of the credit from his/her Federal income tax liability, increasing their refund or reducing the amount owed. The amount of the credit is based on the price of the home being purchased. The tax credit is equal to 10 percent of the purchase price of the home up to $7,500. The full credit is available for single buyers whose adjusted gross income is less than $75,000. If the buyer’s adjusted gross income is greater than $75,000 and his/her home purchase qualifies the buyers for the full credit, the credit phases out. For married couples filing jointly, the credit begins to phase out at an adjusted gross income of $150,000. The tax credit is not completely free money for buyers to keep. It has a payback provision that makes it similar to an interest free-loan. Two years after the credit is claimed, buyers will have to begin repaying that “loan” so that the credit is paid back in full over the course of 15 years. For first time buyers who qualify for the full credit, the payback amount is $500 per year. Those getting less than the full credit pay equally over the 15 years (which is a rate of 6.67% per year). If a qualifying home is resold before the credit is repaid, the seller will have to immediately pay the outstanding balance of the credit. If the home is sold at a loss, then nothing more is owed. All in all, this tax credit makes for the best time to buy a home in many years. In addition to the tax credit, first-time buyers purchasing a home will be able to deduct their mortgage interest payments on their taxes, as well as their property taxes. In addition, when they sell that home, those owners will be entitled to the capital gains tax exclusion. And of course, these first-time buyers will at last be able to feel the pride and security of owning their own home.

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Real Estate

Rick Loveall

2008-12-01 14:05:00

Question: What is a “green” home?

Answer: Green homes incorporate environmental considerations and resource efficiency into every step of the building and development process to minimize environmental impact. The design, construction, and operation of a home must focus on energy and water efficiency, resource efficient building design and materials, indoor environmental quality, and must take the home’s overall impact on the environment into account. However, many of the processes and technologies that go into a green home happen behind the scenes and behind the walls. What can a homebuyer look for? First, look for a builder that is a certified green builder through the National Association of Home Builders. Other key components of a green home include: Energy-Efficient Features – Many of the energy-efficient qualities of a green home are easy to spot. Appliances, windows, and water heating systems will likely have ENERGY STAR® ratings. The home should also include efficient lighting fixtures and bulbs. Water-Efficient Features – Fixtures and appliances such as low-flow shower heads, faucets, and toilets, and ENERGY STAR dishwashers and washing machines all conserve water. Resource-Efficient Features – These decisions…from home size, to orientation on the lot, to floor plan layout…are made in the design of your home and development of the lot. The house orientation and design should take advantage of natural daylight to reduce lighting needs, and should use strategies to reduce heat gain in the summer and heat loss in the winter.

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Real Estate

Michael Gonzales

2008-09-01 15:06:00

Question: Is it still true that the time to refinance is when the rate is 2 points lower than your current mortgage rate?

Answer: As with any type of planning it is never wise to just look at one variable. I would never advise anyone to refinance their home just because the market rate is 2 percentage points lower than their current interest rate. When making this type of decision you must look at the entire picture. To answer this question completely and to give my opinion I would need to know more about your financial position and your goals. A typical conventional 30-year mortgage is amortized so that in the first few years very little is paid towards the principle. The longer you pay on a mortgage the more money will be applied to the principle. Here is a most interesting note: On a 30 year mortgage it will take 20 years to pay half the principle balance off, the remaining half is paid over the last 10 years. This means it may not be wise for someone that has had their home for a few years and is paying more to theprinciple to refinance their home solely because interest rates have dropped 2 percent. Now with that being said, just because you have had your home for a while and have paid down the principle doesn’t necessary mean you shouldn’t look at refinancing as a tool to meet your specific goals. Again you have to look at the entire picture. This would include looking at things like your current debt holdings, interest rates on those debts, cash outflow each month, tax incentives, etc. The important thing is to be up front with the person helping you with this type of transaction. You will also want to make sure he or she is qualified to help answer these types of questions and are really looking at the entire puzzle and not just putting the pieces in place.

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Real Estate

Michael Gonzales

2008-07-01 15:11:00

: How can one improve his/her credit score? Answer: There are several things you can do. 1. Pay bills on time. Payment history is the single most important factor in a credit score. Any bill overdue 30 days or more shows up on your credit report. A credit-card issuer who sees a pattern of late payments on that report may raise your interest rate even on a card you’ve always paid on time. 2. Ignore any offers to skip payments on your credit-card bills, adds Greg McBride, a senior financial analyst at Bankrate.com. If you accept, you’re only doing the issuer a favor: The interest just keeps accruing on your unpaid balance. Reduce your credit-card balances. A recent survey found that 28% of consumers think maxing out a credit card improves a credit score. The opposite is true. The closer you are to your credit limit, the worse your score. If your limit is $5000, for example, carrying a $1250 balance (25% of your limit) is considered much better than carrying a $3750 balance (75% of your limit). Try to keep your balances below 30% of your available credit. If you use a high percentage of your available credit, there’s a greater risk that you’re spending beyond your means and will have trouble making payments. That lowers your score. 3. Before FICO scores, consumers were advised to close unused lines of credit before applying for a mortgage, so prospective lenders would not worry that they’d take on too much debt. That’s no longer good advice, says McBride. “If you’ll be in the market for a mortgage or a car loan within the next couple of months, I’d refrain from closing unused lines of credit. It will have a negative short-term impact on your credit score. Let’s say your total balance on credit cards is $10,000 and your total limit on all cards is $40,000. If you close unused lines of credit, you’ll increase your ratio of debt to available credit and hurt your FI

Answer: Your credit score is a three-digit number between 300 and 850. It’s called a FICO score, after its creator, the Fair Isaac Corp. Lenders use your score to determine your interest rates. The lower your score, the more you pay. A score above 700 helps you get the best rates. Lenders also use a FICO score to decide whether to approve your credit application, whether to increase your credit limit and how to treat you if you make a very late payment. There are several ways to get your credit score, most of which charge a nominal fee. One of these is to go to www.myfico.com. Their charge is $14.95. Contrary to popular belief, your FICO score isn’t determined by your age or income. It’s based on your past use of credit, as recorded by agencies like Experian, TransUnion and Equifax. But a recent survey found that 80% of all credit reports contain mistakes! To make sure your report is accurate, order a free annual copy from each agency. Go to www.annualcreditreport.com or call 1-877-322-8228 or write to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga. 30348-5281. You’ll have a chance to correct any errors. If there’s accurate negative information on your report, consider calling the creditors and asking if they’ll remove it. A creditor may agree to erase a single late payment from an otherwise pristine record. Question: How can one improve his/her credit score? Answer: There are several things you can do. 1. Pay bills on time. Payment history is the single most important factor in a credit score. Any bill overdue 30 days or more shows up on your credit report. A credit-card issuer who sees a pattern of late payments on that report may raise your interest rate even on a card you’ve always paid on time. 2. Ignore any offers to skip payments on your credit-card bills, adds Greg McBride, a senior financial analyst at Bankrate.com. If you accept, you’re only doing the issuer a favor: The interest just keeps accruing on your unpaid balance. Reduce your credit-card balances. A recent survey found that 28% of consumers think maxing out a credit card improves a credit score. The opposite is true. The closer you are to your credit limit, the worse your score. If your limit is $5000, for example, carrying a $1250 balance (25% of your limit) is considered much better than carrying a $3750 balance (75% of your limit). Try to keep your balances below 30% of your available credit. If you use a high percentage of your available credit, there’s a greater risk that you’re spending beyond your means and will have trouble making payments. That lowers your score. 3. Before FICO scores, consumers were advised to close unused lines of credit before applying for a mortgage, so prospective lenders would not worry that they’d take on too much debt. That’s no longer good advice, says McBride. “If you’ll be in the market for a mortgage or a car loan within the next couple of months, I’d refrain from closing unused lines of credit. It will have a negative short-term impact on your credit score. Let’s say your total balance on credit cards is $10,000 and your total limit on all cards is $40,000. If you close unused lines of credit, you’ll increase your ratio of debt to available credit and hurt your FICO score.” 4. Limit your credit applications. Every time you apply for credit, the prospective lender checks your credit report. Too many credit inquiries can lower your score. But FICO counts credit inquiries by different car or mortgage lenders in any 45-day period as just one credit check, so you’re not penalized for comparison shopping. 5. Build a track record. With no credit history, you have no credit score. Recent graduates should establish a history with a single credit card or gasoline company card before applying for a car loan or a mortgage. But you don’t have to carry a card balance, says McBride. FICO scores don’t distinguish between consumers who carry a balance and those who don’t. It’s always a good idea to pay your monthly balance in full if you can. Good credit has its rewards. The higher your credit score, the less you’ll pay for a mortgage. For example, take the cost of a $200,000, 30-year, fixed-rate mortgage. Here’s a snapshot of what borrowers with varying credit scores nationwide were charged, on average, for a recent typical loan: The difference in cost between the highest credit score and the lowest score eligible for that loan is a whopping $478 a month, or $5736 a year, which adds up to $172,221 over the life of the loan.

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Real Estate

Michael Gonzales

2008-07-01 15:11:00

Question: We’re in our late 70’s and could have done a better job in planning for our later years. We probably have enough, but we are thinking about a reverse mortgage to be sure. Is there anyone out there who doesn’t have some kind of hidden agenda that can give us the pros and cons?

Answer: The term ‘reverse mortgage’ is still misunderstood by most people today. Basically, a reverse mortgage is a non-recourse loan that allows senior homeowner 62 or older to extract the equity of their home and convert that into cash. This differs from a traditional mortgage or home equity loan because there is no repayment required as long as the home is used as your primary residence (you will still be responsible for paying property taxes and homeowner insurance). Once that is no longer the case the principal and accrued interest are repaid. So in a way you are ‘spending’ your home, instead of your savings or retirement. Borrowers of this type of financing can choose to receive the funds as a lump sum, monthly income for life, in a line of credit, or a combination of the three. The funds from this mortgage are tax-free (Consult Tax Advisor) and will not effect your retirement or social security. The funds are only due payable once the homeowner(s) has permanently moved out. The repayment amount can’t exceed the value of the home. The best part of this type of financing is there are many consumer protection features integrated into the process. Everyone that is interested in this type of financing must attend an educational counseling course in order to proceed with the loan. This gives the homeowner a chance to ask questions and express concerns to a non-affiliated third party. Although, this can be a great tool for seniors to eliminate a mortgage payment, debts, set up an income stream, help pay for medical cost, or renovate their house, they need to understand that this is done by taking out a new loan and they are financing it. But for those who do their research and get a clear understanding of this product, it can help them make ends meet when cash runs dry. In regards to your comment about asking for help from someone who doesn’t have a hidden agenda...I understand. It used to be that a professional in an industry would stop and offer help or advice without worrying about what he or she is going to make from doing it. I often think how great it would be great to get back to those days. Perhaps the business world is moving so fast and has become so competitive that many business people have forgotten how valuable pubic relations can be to them in their business, to stop every once in awhile and offer some free advice or counsel. That’s what I would like to do in this column. If you have any kind of questions regarding anything to do with finance, I welcome them and will be happy to related to you what I know. Until next month...

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Real Estate

Randy Vickers

2008-04-01 12:10:00

Question: What is the real estate forecast for 2008 in the Wichita area?

Answer: The year ahead for Wichita and the surrounding areas looks surprisingly good. As I have mentioned before real estate is a very local market. In this case, national trends do have an effect on our market, but we are not experiencing the market declines of many areas. Veros, which is a national consulting firm, has actually named Wichita as the top market for 2008. Veros uses 50 factors to analyze local and national trends to determine the strongest and weakest markets. Wichita is rated #1 ahead of Raleigh NC, Fargo ND, and Tulsa OK. They use many of the factors we have spoken about before, such as unemployment rates, inflation, current housing inventory, and interest rates, to forecast the coming expected trends. While Wichita is not untouched by the national mortgage and real estate problems, we are protected from some of the major forces. Our local employment situation is very strong, and expectations are good for the near and medium term future. Although the price of gas has a negative effect on everybody, Wichita also benefits from the strong economy produced by the production and refining of oil. The strong local economy has supported our local real estate. 2007 numbers show that sales are consistent and steady. Sales of new and existing homes was close to the record set in 2006, and most expect 2008 to be similar in units sold, with price appreciation in the 3-5% range. Another plus for the Wichita area is that housing is still very affordable. The average sales price for an existing home is our area is a very reasonable $117,766. This is way below the national average, and helps to make home ownership possible for everyone. Wichita has also not had the huge climb in foreclosures that has hit many markets. We have had an increase and there are some people facing challenges with mortgage payments, but not to the extent that we hear about on the national news. In my area, the mortgage market is still active, but many changes have taken place. The loans available are still very attractive and affordable, but the 100% loans to borrowers with lower credit scores have gone away. These borrowers will need to spend more time preparing for home purchase. It is more important for them to get in contact with a mortgage specialist and work out any problems ahead of when they want to purchase a home. We are fortunate that there are still low down payment programs available for first time home buyers and FHA and VA are still a valuable pathway for those with less to put down on a home purchase. Interest rates have remained at attractive levels and I expect them to stay in the 6% range. Anything in the 6% range is very affordable, and adds stability and energy to the real estate market. Theses lower rates will also help all the commercial activity in the area. You can look in any direction in Wichita and see commercial growth and development. Much of this is possible because national companies see Wichita as a strong and growing market. The office and retail market is pretty active, vacancy rates are at a pretty low level, and some new development will continue. The future also looks promising as the Arena, Waterwalk and various casino projects continue to move along.It ‘ll be great in 2008!

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Real Estate

George Cole

2008-04-01 11:13:00

Question: My wife and I have just begun investing in real estate. We both have other jobs but are thinking about doing real estate investing full time. What are some of the most common mistakes people make when just entering the business?

Answer: There are many, but some of the biggest are: • Lack of Education- You will bring in the big bucks quicker and easier. You’ll save time and lots of money when you get educated. I have been educated by some of the best that this business has to offer. And after all that education I still find myself needing to learn more. One thing I truly love about this business is that you can earn while you learn. • Lack of Planning- Some one taught me a long time ago, “If you fail to plan, then you plan to fail.” Some new investors come into this business with the attitude to just buy low and sell high. They don’t take into consideration what to buy or sell, when to buy or sell, where to buy or sell, and how to buy or sell. First you need to find out what strategies you are going to implement. • No Joy- I hear it all the time how someone hates their job. You gotta love what you do or you are not going to stick with it. Some get into real estate investing thinking of the money they are going to have without thinking of the pitfalls of land lording. That 2 AM call from the tenant telling you that a water pipe busted and the house is flooding. It could be that deal you have been working and waiting on when another driving force comes into the mix and spoils the whole arrangement. You really have to enjoy real estate investing to carry you through any difficulty you may come up against. • Not using a tried and true system- Wealthy people will always use a system to acquire their wealth. I am not talking about the late night TV real estate investing gurus. I’m talking about the system that is not advertised. While you are finding out how to get educated, you will also be researching for a system on how to acquire wealth from real estate. • Not being involved with a community of like-minded investors- New investors think they will have to stand alone and compete with other maybe even more experienced investors. That is not necessarily true. Not all real estate investors are greedy, back stabbing liars. Some are actually pleasant to be around. When you find another investor or investors that have been educated by the same people you have been, instead of competing against them you can partner up with them on some of your real estate deals creating a win/win scenario. You can both walk away with money in your pocket. • Not knowing when to walk away from a deal- No matter how you slice it or dice it, some deals are just not going to come together to make a profit. You determine what your profit should be on any given contract before you even start making arrangements. Look, if you make $10,000 on a contract with less time involved than you could on a deal that’s only going to profit you $5,000, with more time involved, gee, I’d walk away from the $5,000, deal. Did I just lose $5,000? Absolutely not, I actually gained the time to put on another deal that’s going to make me a better profit. You might let the nickel and dimes slip away, but you get to keep the dollars. Before you start into real estate investing, seek out the advice of an attorney that specializes in real estate. Your investment in time and money will be well worth it. Next month, we will talk the exact steps to follow on your very first deal.

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Real Estate

Charlie Traffas

2008-03-01 09:38:00

Question: We bought a new house last year and put seed down in the fall, but we watered with hose sprinklers, and the grass didn’t come in very well. We are going to re-seed in the spring, and we are considering having a sprinkler system put in, but won’t the installation of the system kill the grass we have now?

Answer: This is a common dilemma for homeowners attempting to establish a new lawn. Due to time and budget limitations, many homeowners decide to postpone investing in an automatic lawn sprinkler system and simply “drag hoses” to start their lawns. However, inefficient hose sprinkler dispersal, uneven coverage, and irregular watering schedules usually lead to less than satisfactory stands of grass. These first attempts to manually water in a lawn commonly result in patchiness, run-off, rutting, and general inconsistencies in the quality of the grass. Once homeowners have come to the realization that an automatic lawn sprinkler system would be the best solution for their lawn issues, another concern arises. After spending countless hours nurturing their lawns along to this point manually, they certainly don’t want their grass destroyed by the installation of a sprinkler that is supposed to save it. We’ve all seen the results of a trencher in action. Trenchers are digging machines which are, in essence, giant chain saws that cut a ditch through the ground, throwing the debris into piles on either side of the trench. The pipes are then laid in the bottom of the trench, and the dirt is mounded on top, leaving a terrible mess behind. Fortunately, most contractors use a different method of burying lines in an established lawn. The vibratory plow is a far less intrusive piece of equipment, and is commonly used to bury sprinkler lines for residential systems. If the trencher is akin to a chain saw, the vibratory plow is more like an electric carving knife. Offset weights are connected to a blade that is less than an inch thick. The pipe is then attached to the bottom of this blade, and when the weights are spun rapidly, the blade shakes, slicing through the ground without removing any dirt. The pipe is pulled along behind the blade, and damage to the lawn is very minimal. The tractors themselves are built to specifications that allow them to pass through the standard fence gate. Of course, digging must be done at the connection points and the sprinkler head locations, but even here the contractor can “sod out” the grass, laying it aside to install components, then replacing it in its original location. In most cases, any evidence of construction is gone after a few weeks of watering, especially after reseeding. The installation of an automatic lawn sprinkler system will not only take the labor and guesswork out of maintaining the correct watering schedule, but increase water efficiency and maximize results. And all without your lawn resembling a construction site.

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Real Estate

Todd Drew

2008-03-01 09:24:00

Question: Reverse Mortgage...what do we do?

Answer: As you are aware, there is a growing frustration among the retired community. With everyday costs escalating, many retired Americans are not living on a fixed income but a “broke” income. Today it is not uncommon for sons and daughters to be assisting their parents financially each month. Not only does this add strife to that household but it strikes a lethal blow to the independence of the older person(s). Fortunately for some older Americans they own their home or have a considerable amount of equity built up affording them the opportunity to do a Reverse Mortgage. While it does create a draw on the children’s inheritance, many siblings see this as a viable option as opposed to a draw on their current checking account. In addition, the child’s parents maintain their independence. Some would argue it is time for them to move, to downsize. This makes sense. The individual is having an “out of money experience” and now you want them to add an “out of home experience.” While it may alleviate the financial crisis it will only be temporary at best. With rental prices ranging from $600 to $1000 for typical apartments to $1,300 and higher for assisted living, the money acquired from the sale of the home will soon be exhausted. The forthcoming devastation will be “Then what are you going to do?” Talk about failure to plan. The Reverse Mortgage allows the homeowner to stay in their house for as long as they choose to do so. Even if they outlive the equity in their home they will not be forced to move. In the Reverse Mortgage business, education is first and foremost. Not just educating homeowners about the Reverse Mortgage, but letting the homeowners educate us about THEIR situation and THEIR needs. •Bob and Rita have a daughter dying from cancer who is a single parent of two teenage boys. •Barbara who has had homeowners insurance for years cannot pay the deductible and the difference in depreciation when her roof was destroyed by hail and high winds. •Juanita who has to make a decision every month. She has to decide which medicine to buy because there is not enough income to buy it all and eat too. •Jerry and his wife who love to travel but hate the 14% interest they pay on their RV note. •Bob who just got behind 5 years on his taxes. •Rita whose children live out of state and wish for her to have periodic home health care. •Clarence and Ileata who understand they need long term care insurance but do not know how to pay for it. •Shirley who lost her husband to Alzheimer’s two years ago, which then led immediately to losing half the household income, which then led to losing her savings over time, which then led her to get behind on her mortgage, which then led her into foreclosure. Out of Breath? So was she! We all want to live a healthy independent life, but there is no cure all. Just like one prescription drug will not cure every ailment, neither will a Reverse Mortgage cure every situation. One has to assess the situation and look at all the options. At the crossroads of the busy lives we lead, sometimes you need someone that can answer the question, “Which way?”

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Real Estate

Randy Vickers

2008-02-01 14:05:00

Is now a good time to think about buying a different house?

Answer: There are a lot of approaches to answering that question. Such as, in no particular order or importance: How long have you been in your present home? Does that home pretty well fit your family’s needs right now, and/or are those needs about to make a change one way or another? Is the home value average in your present neighborhood staying static, going up, or going down? Has your financial position changed from when you moved into your present home? Is it about to? Has there been a dramatic shift in your debt to income ratios putting you into a better position to afford a larger, or newer home? What is the interest rate on your present home mortgage? Is it a fixed rate mortgage, or is it an adjustable ARM. How long have you been on your job or in your present line of work? There are as many considerations to this question as there might be numbers of TV or radio lenders trying to tell you that you’re better off dealing with them on the phone or the internet, than dealing with someone local who actually has an office right in your city, where you can go in and sit down with him or her and visit about what you need to be doing. Start by comparing your needs and wants. Review what has happened to the market in your current area. Inspect your current house to see if any deferred maintenance needs to be finished. Put some thought into the family plans for the next 5 years to determine if your current home will meet your future needs. In most cases a person needs to own a home for at least 3 years. If your financial position has changed in a positive way, I think it makes some sense to get on out and move on up with your real estate, for no other reason that it will improve your net worth for the future. It’s a fact that more expensive housing will generally go up in value more in a given time frame than a lower valued property. So to get more of an increase in value, it’s important to buy and live in a more expensive home as you go. It’s also more fun for most folks to live in a better home in a better location. Real estate also offers the power of leverage and with rates back down below 6% this can give the financial side a powerful boost. If your current mortgage is one of those ARM’s, or adjustable rate mortgages, then now, right now today, you could get out of that situation simply by buying another home, and selling the one you now have, and that old ARM will be paid off in the process. Then make sure your new loan is a fixed rate loan. Your lender can explain the differences to you, and will be happy to point out the reasons for the ARM’s in the first place, and the advantages you’ll enjoy with a fixed rate loan. Remember this! On a mortgage loan of $100,000, at 6% interest for 30 years, the Principal and Interest portion of the monthly payment is only $599.55 per month. The total payment would include 1/12 of the annual taxes and homeowners insurance each month. So, as you’re paying your monthly payments on your house, early on in the life of your fixed rate loan, the actual monthly principle reduction on your loan is very small. So to really get on top of your home loan, just pick up an additional principle or two each month, and each month you do this, you cut one month off the length of the loan, and save one month’s interest! Interesting? I thought you’d agree! So…is the timing right for you to consider moving up in your housing? With the rates at or below 6% right now, I think it’s a perfect time to get moving on your own little piece of Heaven known as the Wichita area. As I said last month we are very fortunate to live in Wichita. Out current economic situation and real estate situation is much better than much of the US. For more information about different kinds of financing for homes, just get hold of your mortgage professional, and he or she will be more than happy to update your information vault on this subject. More next month….

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Real Estate

Randy Vickers

2008-01-01 11:17:00

What does your crystal ball tell you is in store for 2008 real estate in Wichita and the surrounding area?

I have written before about the things that will have an impact on real estate. The national economy, which we hear about every evening on the news, talks about depressed real estate markets all over the country. Prices are falling, credit is tight, and foreclosures are at all time highs. We should all count our blessings, as we are in a little slice of Heaven here, and our situation is much better than the national scene. The main force behind our stable market is our wonderful employment situation. If you are a worker looking for work, it can’t get much better. As an employer, it is tough to find and hire good workers as they are already employed. Wichita has a un-employment rate of below 3.5%, and the news from the major employers is still very encouraging, as they continue to expand and hire new workers. In all the major industries that Wichita serves, the outlook for the next 2-3 years is good. College grads that I have spoken to are encouraged by the opportunities available in Wichita and statewide. Another great part of living in Wichita is that you don’t have to be wealthy to own a home. A married couple with an average income can afford to buy a very comfortable home for their family. The Wichita area has an ample supply of very reasonably priced homes. We have had our share of foreclosures, but in general, the overall market has held its own. We have not seen the declining values that many of the larger metropolitan areas have experienced. We all wish we could be part of one of the great markets that appreciates at 20-30% in a single year. The downside to that is that it can’t go on forever, and many of those markets are now going through a contraction. We have been very busy, especially for this time of year, which bodes well for the rest of this year and next. We are still able to find great value in real estate in Wichita, for both shelter and investment. The credit market for lenders has changed considerably over the past 9 months. As a lender, we have returned to more traditional guidelines for credit and income. Because Wichita is an affordable market, not as much of the “Subprime” lending was done here, as in some of the other bigger markets. Although there are people in Wichita who are facing the challenges of refinancing to more conforming loans, the vast majority are in mortgage products that will allow them to continue to make their payments. Credit scores have become even more important, as the national mortgage providers have adjusted their guidelines, and more emphasis is being put on a borrower’s credit score. The newest programs include risk based pricing, which means your rate will be determined in large part by your credit score. Credit is still very available, mortgage rates are very attractive, and good credit has become a must. We have continued to refinance many borrowers with ARM (adjustable rate mortgage) loans, into more conservative fixed rate loans, and this will also add stability to the overall real estate market. The national markets will continue to struggle in many parts of the country in 2008. Many economists believe they will work through their problems in 2008 and stabilize later in the year. The credit markets have made aggressive adjustments to insure the availability of funds for new purchases and refinances, and this process will contine to evolve. It is very important to keep in mind that real estate is very regional, if not local in nature, so don’t be confused by the national press. We are very fortunate that our local economy is vibrant and growing, with lots of opportunity. Our employers are hiring, our city is growing and real estate is available and affordable. 2008 is looking like a great year for our little slice of Heaven, and I hope you take part in the opportunities available. More next month...

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Real Estate

Randy Vickers

2007-12-01 10:04:00

I read your article last month, and I am curious to know, “What are the steps to getting a reverse mortgage?”

You are not alone, we have had several calls asking that very question. The answer is a simple one yet the industry is currently trying to complicate it. You see, the process all hinges on the “Reverse Mortgage Counseling”. HUD requires all homeowners considering a Reverse Mortgage to complete this counseling session. Nothing can be started until the counseling is completed and a certificate of completion has been given by you to a Loan Officer. The counseling is an important step in the process. This helps in the education of the homeowner to the Reverse Mortgage programs. This concept was designed to allow the homeowner to get questions answered, gather information, and determine eligibility without being sold or required to buy anything. This is to make sure the Loan Officer has explained it thoroughly and secondly, to keep the dragons with briefcases from praying on our Moms and Dads. I believe it is important for seniors to do the counseling and loan officer interviews face to face. HUD does allow phone counseling and doesn’t require a face to face interview, but I’m sure you will agree we need to know who we’re dealing with. This education by the HUD counselors and Loan Officers is very important. I have said this many times and will say it many more, “A reverse is not for everyone but the education is.” Get your education! Geez, I sound like my father! In addition to this two-step safety net, HUD also required one of the two steps, either the filling out of the initial application or the counseling, to be done face-to-face and the other could be done over the phone or through the mail. The industry became increasingly frustrated with the time it took to get through this process and in January of this year convinced HUD to change the ruling, no longer requiring any aspect of buying a Reverse Mortgage to be done face-to-face. The face-to-face aspect is now just an option. This has opened the door for every company regardless of their location to do a Reverse Mortgage without ever having to meet the individual. These companies will visit with you on the phone and then mail out the 50+ page packet to fill out, sign and send back with no one there to explain what you are signing. I doubt you bought your home over the phone or through the mail, so why would you trust someone to do a reverse that way with your biggest asset? After the counseling is completed we begin to establish the value of the home, and determine how to structure the mortgage to best serve the needs of the homeowner. Keep in mind that income and credit are not used to qualify for a Reverse Mortgage; the equity in the home is the main factor. We still believe that education comes before the sale. Reverse Mortgage is as important tomorrow as it is today; therefore, you should know the people you are working with. The sad part is that the homeowners are mostly unaware of all this. The answer? More education. Ruth, I thank you for your question. I applaud your desire to learn and your courage to ask questions. More next month...

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Real Estate

Randy Vickers

2007-11-01 10:18:00

Do I have to have an existing mortgage to qualify for a REVERSE?

No you don’t. In fact, taking out a reverse mortgage to eliminate an existing mortgage is only one of the many reasons homeowners have taken out reverse mortgages. The reasons are as varied as the individuals themselves. Some of the reasons can be found in the following client scenarios.

Mildred was now living on just her social security. While her husband was alive, they were able to make ends meet. Now though, living on only one income and a small retirement plan, she found herself struggling financially. With no current mortgage in place on her home, she could either sell her home and cash it out, or do a reverse mortgage. Based on the fact that she had to live somewhere, selling it meant having to pack up 30 years of accumulation and acquire an additional monthly expense of somewhere else to live. Alternatively, she could stay where she was, already comfortable, by doing a reverse mortgage. After getting the facts on how it works, that’s what she opted to do…a reverse mortgage. This allowed her to stay in her home, access the much needed funds without any required monthly payment, and dispel the thought of packing and unpacking at age 76. Not to mention losing the freedom her grandchildren had always had to run around the house, as opposed to the limited space she would have had if she moved to a small apartment.

Joe, on the other hand, wanted to get into the rental business now that he was retired. He had gone to the bank to look into a small investment loan to buy a rental property. They wanted to know his income (to make sure he could make his monthly payment), his credit (to make sure he was a good risk), and they wanted his house to be put up as collateral (in case he did not make his payment). A friend told him about the possibility of doing a reverse mortgage on his home. He was overjoyed when he was informed that there were no credit or income qualifications. Nor were there any required monthly payments. Joe said, "You mean to tell me, I can take out a loan without any income or credit requirements and I won’t lose my house if my rental sets empty for several months, because I don’t have any required monthly repayment?" That’s right, there are no restrictions on what you use the money for (i.e. buying the rental property) and there are no required monthly payments for as long as you live in the primary residence. Needless to say, he liked this government program a lot.

Bob and Thelma loved to travel, and they loved their new motor home. What they didn’t love was the monthly payment, and the 12.5% interest rate. The kids had encouraged them to enjoy their retirement, which they were, but would enjoy it more if they didn’t have that monthly RV payment. Thelma had read about the Reverse Mortgage, and decided to get more details on the program. In the process of completing a new reverse mortgage for them, their monthly RV payment was eliminated, thus increasing their monthly spendable income. Then the remainder was put into a line of credit for future needs…and now Bob and Thelma are "On the Road Again"! Although reverse mortgages are not for everyone, the education about them is. Are you curious to see how they might work for you? Or for a loved one? Get in touch with a reverse mortgage lending professional today to visit about the various opportunities and positive benefits a reverse mortgage might bring to your life. More Next Month…

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Real Estate

Randy Vickers

2007-10-01 11:09:00

I keep hearing of people getting their lender to accept a “short sale” on their homes...what does that mean exactly?

Answer: In the real estate news today, there is a lot of discussion concerning foreclosures, as many families are now facing the payment adjustments from adjustable rate mortgages taken out 2 to 5 years ago. Some of these consumers are contemplating whether or not they can even afford to stay in their home with the interest rate adjusting upwards. As mentioned in some of my earlier columns, these ARM’s (adjustable rate mortgages) were ok to get families into the ownership position on their homes, but can be overwhelming when the interest rate adjustments make the payments more than they can afford. If a person finds themselves faced with this dilemma, it is very important to be pro-active. The first step is to check with a lender to see if your current mortgage can possibly be refinanced. National mortgage experts expect many millions of people to refinance these adjustable mortgages in the next year. This is the best option for most people, but it should be done before the interest and payment jump up. The next option is to try to sell the home if you don’t think you are going to be able to afford to stay in the home. This can be a good option as long as you have some equity in the home, either from the loan balance being reduced by your payments, or the market having increased enough to bring you some equity increase. A phone call to a Realtor can help you to decide if this option is one that will work for you. If a homeowner falls behind on the payments, and is actively working to sell the home, sometimes the lender will consider taking less than the full payoff on the loan in order to help the homeowner get the property sold. This helps the lender and the homeowner to stay away from foreclosure action, and will generally be better for the homeowner’s credit rating, as well as keeping the lender from adding another property to their REO (real estate owned) file through foreclosure, thus adding one more property for them to have to manage. The tricky part is determining if the homeowner really has any other options. The lender is going to request a copy of the contract for purchase, as well as other financial information to determine if the homeowner has the ability to pay the loan. Only in the situation that the lender determines that it is in their best interest financially, will they consider a “short sale”. In a short sale, the homeowner must be prepared and understand that they will not receive any money from the sale of the home. Additionally, they can also be liable for tax consequences for the amount of debt that has been forgiven by the lender. In most cases, a “short sale” is the last chance to consider before a foreclosure. The most important thing for a homeowner is to be pro-active in managing your mortgage and real estate. Keeping your property in tiptop shape and staying up on the changes in the real estate mortgage rates can help you be prepared for any risks that may come with owning real estate. Owning real estate is still one of the best ways to accumulate wealth, but like anything financial, it requires some work. The last 50 years have proven that if you have time on your side, real estate will treat you well. Real estate is still the largest financial asset for the majority of the American public. Everyone should attempt to own, at a minimum, their personal residence. But that also requires some management, including keeping up with the mortgage rates and payments required to stay current and well informed. More next month...

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Real Estate

Randy Vickers

2007-09-01 09:59:00

We have decent credit, and not much debt, but we’ve heard that it’s getting harder for people to get home loans...is that true, and what can we do to get a loan for a home?

Answer: Recently, the mortgage business has been on the front page of the newspapers nearly every day. Some of the largest lenders in the United States are having cash flow problems as they try to stabilize the credit markets. The market for ‘B’ loans, or sub prime loans, has moved into hard times, as Wall Street investors are no longer comfortable with the credit quality of these types of loans. In the past, these loans were packaged and sold as mortgage backed securities, to investors and mutual funds. However, in the last year or so, there have been larger than normal numbers of foreclosures on these types of loans, which has damaged the performance of the packages. In the past 5 years, more and more mortgage companies worked the sub-prime market, as the margins were higher, and the revenue that was generated was usually higher than on ‘A’ credit buyers with conforming loans. The good news was that more and more people were allowed the opportunity to own a home. The bad news is that many of these families cannot afford the payments on these homes as the rates are now beginning to adjust upwards, and they have no, or very limited options for refinancing those types of loans. This begins the domino effect, which depresses the housing market, tightens credit, and leads to more foreclosures. Those lenders who are, and have been, in the conforming lending market, and who deal mostly in Freddie Mac and Fannie Mae products, along with FHA and VA loans, have not seen nearly the level of problems being seen right now in the sub-prime markets. In Wichita, new and re-sale home purchases and the lending associated with them has continued to be strong, and the Wichita market appears to be in very good shape. Interest rates on conforming loans are still very affordable, currently holding pretty steady in the mid 6% range, which allows many home buyers to be able to afford to make that home purchase. Wichita lenders who have been through these types of cycles will be ready to serve homebuyers during this period of unsettled markets. As always, hindsight is always pretty good. But to many of the lenders who have been in the business for many years, witnessing these cycles in the business, a contraction such as this should have been seen on the horizon, as the mortgage industry grew and expanded at a very rapid rate for many years now. Although some of the national lenders will have some effect on the programs for some of the home buying consumers in Wichita, for the vast majority of local home buyers, there is no valid reason not to make that next home purchase with the knowledge that there are still plenty of great loan programs that will take care of their needs, and provide the financing for your next home. More next month...

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Real Estate

Randy Vickers

2007-08-01 11:27:00

Is the loan process any different for new construction?

Answer: The basics are the same, but the logistics are a little different. First we start with the appraisal. Because the home is not yet built, the appraiser has to do the appraisal from blueprints and the construction spec sheet to determine the market value. The main thing to consider at this stage is that you put as much effort and attention as possible into your initial building contract so that all additions and subtractions that you want are shown on the blue prints. In most cases, the builder will have what is called a “red-line” meeting to go over the plans, and make sure everything regarding your expectations is covered and understood by both you and him. If something has been missed, it is added or changed on the plans with a red felt tip marker, and usually each party takes a set of plans with the red marking as a guide to what is supposed to be built. The appraiser will include any changes or modification in the appraised value. If a buyer/borrower decides to add things after the home is started, it is hard on the builder and expensive for the buyer, so you want to pay close attention to what you’re doing at that “red-line” meeting. Builders usually charge $50-100 for each change order that is agreed to during the construction process. The builder takes on the added responsibility of getting the new information to his subcontractors, the people on the job site that will actually perform the work. The buyer should also make personal inspections of their own periodically to make sure the changes have been communicated to the craftsman on the job. Most building contractors will welcome the additional attention to detail, as long as you don’t try to be a micro manager on the site, thereby upsetting his subcontractors. The credit approval process is much the same as for a resale home, but sometimes things must be updated, for example, if the construction were to take longer than originally estimated, which is not uncommon. The borrower also needs to keep in mind how much they have been approved for with their financing package. If the change orders add up, and they want to include them in their new loan, the change orders need to be submitted to the mortgage loan officer so that the adjustments can be made in both the home value and the loan amount. If this can’t be done, then the items will have to be paid for by the buyer, in cash, at closing. Sometimes the builder will require these items to be paid for at the time the change order is completed, so that there will be no complications down the line. The only other big difference is the interest rate risk. In most cases, the rate quoted by a mortgage lender is for a loan closing in 30-60 days. A build job will take 120-180 days, depending on supplies and the weather. In this case the borrower needs to monitor the rates until the project is 30-60 days from completion, or alternatively, check into the option of using a long-term lock. There are a variety of different programs for this situation, details of which will take some research on the part of the buyer. Many people build new homes every year, and it should be an enjoyable and exciting experience. If it’s not, it is almost always due to changes during the construction process that don’t go well. This anxiety can be removed if all the components for the home are included upfront and included on the original set of plans and specs. More next month…

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Real Estate

Jeff Otto

2007-07-01 16:13:00

When I buy a home and the deed is recorded in a record room at the courthouse, should not that prove that I own the home I paid for?

Answer: Lots of folks have thought so…however, it is only evidence that you have taken over whatever rights the grantor had in the property. If, as an example, the deed to the grantor deeding to you was forged, and as a result, the grantor had no rights, then the grantor could not legally pass any property rights on to you. The grantor might, as another example, have made the driveway on the property a joint driveway by giving the next door neighbor the right to use it. In that case, he couldn’t pass sole ownership of the driveway to you, no matter what the deed says. The recorded deed is public notice that you have taken over whatever rights the seller may or may not have had in the property. The question has been raised as to whether title insurance is as important as fire insurance? The answer is a resounding yes, because your losses without title insurance can be lots greater than fire losses. If a house burns, the land is still there on which you may rebuild. The basement walls are normally still there from which to erect your new home. The fences, outbuildings, trees, etc. are normally still there after a fire. But, if title to the property fails, you have nothing. This is why an owner’s title insurance policy is always written to cover the value of the house and the site. Although title insurance cannot eliminate title defects any more than fire insurance eliminates fire, your title insurance policy assures you of the best possible legal defense if your title is attacked and reimburses you up to the face amount of the policy if the title, or any part of it, should fail. When you buy a home and protect it with title insurance, and in the event someone should challenge your ownership of the property five or ten years or longer after your purchase, what should you do? You notify the title insurance company and, in accordance with the terms of the policy, it undertakes, at its expense, to defend the title. If the claim reaches the courts, the title insurance company retains attorneys and bears all the expense of defending the suit. This is true regardless of your period of ownership, whether it be a day or a year, or many years…more next month…

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Real Estate

Randy Vickers

2007-07-01 16:13:00

Is real estate an investment or shelter?

Answer: What a great question that millions of people ask themselves every day, and the answer for the vast majority is, both. All of us need a place to live, sleep, gather with family, and stay sheltered on cold and rainy days, and your home will provide this for you. It also provides the largest part of financial security for most homeowners. The households of America that own their homes have a much better chance of achieving financial security. Nationwide the housing industry is one of the biggest parts of our economic growth. As much as 1/4 of the GDP is related to the housing industry, which is why the economists pay so much attention to the health and stability of the housing and construction industries. Housing is clearly a significant sector of the economy, and it is also noteworthy that the value of residential real estate has grown far more steadily than the aggregate value of corporate equities, such as stocks and bonds. Since 1959 the wealth associated with housing exceeded that of equities, except for a short period from 1997 to the 2nd quarter of 2000, when the stock market began to crash. Housing has had a much steadier climb, and as of 2003, the value of home equity exceeded the value of stock directly owned by the households by close to $3 trillion. There are some other interesting stats concerning the investment in housing. In 2001, roughly 68% of American households owned a home, but only 52% owned stocks. 1/3 of the wealth created by stocks is controlled by the top 1% of stockholders, while this same 1% only controls 13% of the equity in housing. What this means is that the average American is much more likely to have a greater part of their net worth in real estate, than in equities. In almost all cases, housing takes care of two needs for us; simple but very important as a shelter, and also as the major part of our net worth and financial security. In short, everyone that can should go buy a house...More Next Month

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Real Estate

Randy Vickers

2007-06-01 09:43:00

Is the Reverse Mortgage right for me?

Answer: I am asked this question quite often actually, and my response is always the same. “I will be honest with you…a Reverse Mortgage is not for everyone, but the education is.” Although it has been available since 1988, little is known by the general public about this Government program, and there are many misconceptions about it as well. For instance, many have been told that if a homeowner takes out a reverse mortgage, the government will take their home after they die. The truth is the ownership is transferred to their heirs upon the death of the last homeowner. Another misconception elicits the question…Do I have to have an existing mortgage to qualify for a reverse mortgage? No, this type of mortgage has been, and can be, done either way. The best answer to the question, “is the Reverse Mortgage right for me”, is to schedule a meeting with a Reverse Mortgage Specialist. Keep in mind, the Government mandates that nothing can be sold at the first appointment. This meeting is for the homeowner, to get answers to their questions, gather information, and determine their eligibility. While many Reverse Mortgage companies are now soliciting homeowners through telemarketing, many mortgage brokers still provide face-to-face interviews by appointment either at the office or in the home. Your home is one of the largest assets you have, and its security should not be handled by phone. After all, that’s more than likely not how you bought your home in the first place! To qualify you must have some equity in your home, use it as your primary residence, and be at least 62 years of age. Your current income or credit does NOT affect your qualification. Some of the benefits are that the funds are tax free; there is no repayment as long as you live in the house, you retain 100% ownership in the home, and the additional monthly income does not reduce your Social Security income. This is a very interesting program that has become more popular with the aging of the population. It is definitely worth checking into, and will be a huge source of funds used by seniors in the future to help fund their retirement and their care. More next month…

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Real Estate

Jeff Otto

2007-06-01 09:43:00

How am I protected by title insurance on real estate I buy or sell?

Answer: In order to issue title insurance, the title company must search public land records for matters affecting that title. Many search the “chain” of title back 50 years. Twenty-six percent of title searches find a title problem that is fixed before the insurance is issued. Some examples of items that can cause a problem are: deeds, wills and trust that contain improper information; outstanding judgments or tax liens against the property; and easements. Title companies fix the problems then issue the title insurance. Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after closing. Things such as mistakes in the public record, previously undisclosed heir’s claiming to own the property; or forged deeds could cloud the title. Owner’s title insurance offers financial protection against these by negotiating with third-parties, and paying claims and the legal fees involved in defending the title. Fraud and forgery are just two of the lengthy list of items covered by a title insurance policy. Let’s give you an example of this. Those involved in real estate fraud and forgery can be clever and persistent, which can spell trouble for your home purchase. In a western state, an innocent buyer purchased an attractive home site through a realty company, accepting a notarized deed from the seller. Then another couple, the trio owners of the property—who lived in another locale—suddenly appeared and initiated legal action to prove their interest in the real estate was valid. Under the owner’s title insurance policy of the innocent buyer, the title company provided a money settlement to protect against financial loss. As it turned out, the forger spent time in advance at the local court house, searching the public records to locate property with out of town owners who had been in possession for an extended period of time. The individual involved then forged and recorded a deed to a fictitious person and assumed the identity of that person before listing the property for sale to an innocent purchaser, handling moot contracts through an answering service. Also, the identity of the notary appearing on deeds was fictitious as well. Fraud and forgery are examples of hidden title hazards that can remain undetected until after a closing despite the most careful precautions. Although emphasizing risk elimination, an owner’s title insurance policy protects financially through negotiation by the insurer with third parties, payment for defending against an attack on the title as insured, and payment of valid claims. More next month...

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Real Estate

Jeff Otto

2007-05-01 16:21:00

Should I try to sell my house “by owner”?

Answer: Five years ago, Jack and Mary Wilkins bought their first home. They loved it and planned to live there about 10 or 15 years and then move out to the lake. But nearly a year ago Jack’s employer offered him a transfer to another city. Jack wasn’t given much of an option. It was either transfer now or receive no advancement in his present job. Jack’s company did not offer a buy-out provision, so the Wilkins would be responsible for the sale of their home. Jack and Mary asked three agents to perform a comparative market analysis on their home. The results were discouraging. Because they had been in the home such a short time, the Wilkins had not realized much appreciation in their home’s value, so if they sold through a Realtor they would have to pay the commission out of their own pockets. They decided to try the For-Sale-by-Owner route. Everything proceeded smoothly at first. Several lookers stopped by, but the seventh family to see the house fell in love with it and made an offer. The offer was lower than Jack and Mary had expected, but time was running out so they decided to accept it. In writing the offer, the purchasers had used a blank form they’d found in an office supply store. The Wilkins never thought to have an attorney review it. If they had, the attorney would have advised them to add a financing contingency clause, which would have let the Wilkins out of the contract if the buyers couldn’t get financing within a certain number of days. The house was to close in 90 days. When weeks passed and the Wilkins hadn’t heard from the purchasers, they began to worry. Jack finally called his buyers, who told him they’d been turned down by the first bank. Still the buyers were optimistic they could get the loan from their credit union. Later that same day a buyer dropped by because someone in the neighborhood had told him the house was for sale. This person offered the Wilkins full price in cash for their house with closing in one week. Once again, Jack called the buyers and told them he’d received another offer, but the purchasers remained adamant that they could get financing. They refused to release the Wilkins from their contract. Because there was no financing contingency, the Wilkins could do nothing but wait - 60 more days to be exact. Unfortunately the second buyer needed to find a home within two weeks. The Wilkins called the first purchasers almost daily but they wouldn’t give up on trying to get a loan. Finally the 60 days passed, but the generic contract contained an extension clause allowing the purchasers an additional 30 days if financing had not been finalized by the original closing date. Another 30 days passed and finally Jack and Mary could sell their house to the cash buyer. There was just one problem. The cash buyer had already bought a house. The Wilkins had wasted four months because they wanted to save that commission. It was now time for them to move, so they were forced to list the house anyway. It’s now been six months - that’s six months after the four wasted months - and the Wilkins still don’t have a contract on their home. They’re renting in their new city and waiting, waiting, waiting...What Jack and Mary should have done was to have a Realtor or attorney review that contract before signing it. Real estate professionals can keep you out of trouble. In this case a financing contingency clause would have permitted the Langley’s to move forward immediately when the buyers’ loan was turned down. They could then have sold their home to the cash buyer. If you’re trying to sell your own home there are more than 90 things that need to be done to get your house closed, any one of which could stop your sale cold if not performed properly. Consult a Realtor or real estate attorney before playing with the largest investment you’ll ever make. More next month…

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Real Estate

Randy Vickers

2007-05-01 13:27:00

What is the difference between a bank and a mortgage company?

Answer: The main difference between a bank and a mortgage company is that a mortgage company does not take deposits, such as checking, savings or CD’s. Most banks use a deposit base to loan money for various reasons such as car loans, business loans and home mortgages. In general, most banks do not provide long term financing with their own funds. Most participate with the large government sponsored agencies such as Fannie Mae or Freddie Mac, and then sell the mortgage loans to Wall Street investors in packages called mortgage backed securities. The banks, in most cases, don’t want the long term interest rate risk associated with 30 or even 15 year mortgages. Some banks do retain the rights to servicing the loans they originate, which means they will collect the payments, pay the hazard insurance and make sure the property taxes are paid. A smaller and smaller part of the banking community will put some of these loans into their own loan portfolio. These loans are usually those loans made to long time customers, and the loan terms are usually not fixed rate, or are for shorter terms. A mortgage company specializes in mortgage loans, does not take deposits, and usually does not service loans. They will also work through various channels to provide loans to Fannie Mae or Freddie Mac for Wall Street investors. Since a mortgage company only does mortgage loans, they offer a wider variety of options for loan programs and terms. The development of technology has allowed mortgage companies to speed the process of loan approval and closing. This has also expanded the opportunity for home ownership to more and more people. In the last 5-7 years, the mortgage brokers have increased their market share to the point that in most markets, over 60% of the home loans made are by mortgage companies. In most cases, these are made by smaller companies that depend on personal contact and excellent service to maintain and grow their business. In Wichita and the surrounding area, mortgage brokers are very active in all parts of the housing market. FHA, VA, and a growing variety of conventional loan products are available to provide many options for the potential home buyer. Many mortgage companies also offer loans for real estate investors and commercial projects. The mortgage industry can be a very up and down ride as mortgage rates and economic factors influence the amount of business available. Those that have been through these cycles have experience that is very valuable in the process of helping consumers tailor a loan to their situation. Banks compete every day for your deposits, car loans, business loans and mortgages. The mortgage company, by specializing, has broadened the possibilities and opportunities for the consumer in the quest to become a homeowner or real estate investor. Summer is almost upon us, and it is a great time to evaluate your next real estate purchase…more next month…

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Real Estate

Jeff Otto

2007-04-01 09:49:00

What does “depersonalize” mean in selling my home?

Let’s look at this as if you were a buyer. When you’re out in the market looking for a home to buy, and you’ve seen several homes and said “no, I don’t think so” to each of those you’ve seen, what was it that caused you to turn down those homes for consideration? It could be that they all had just awful floor plans or layouts, or it might be that they felt smaller than you like due to the way the walls between rooms are arranged. Or it’s quite possible that there are other things that are contributing to your viewpoint that are not as readily apparent. Let's say you walked into one of the homes and spotted a collection of bowling trophies on the mantel, a large number of family photographs, ranging from formal to outdoor playful group shots, cameo shots from your last family vacation, pictures of the family pooch, and other personal items. What happens to you and the other potential buyers when they spot these items? Well, they're distracted. They focus on the clutter and not on the layout of the home and its architectural advantages. If they've viewed several homes that day, they have trouble remembering which house was which. More importantly, buyers may have trouble imagining their own personal items in the same setting because the home is so obviously an expression of the family members lives of its present owners. But of course, personal items are still there, you say. The owners still live there, so why not? The catch is that when a home is placed on the market for sale, it's no longer the home of the present owners. It's a property to be sold. It must be depersonalized in every way…so that the prospective home buyer can see how his or her family pictures and décor items might work with the spaces available in that home. The main reason for you to depersonalize is so that potential buyers can "see" the home as it will look with their own possessions. Not yours. De-cluttering is a great word too. It means to remove all furniture and other décor items that are not actually a benefit to the needs of the family presently living there. Anything at all that will detract from the buyer seeing his/her own stuff placed in that space. The corollary advantage to this program is making the home feel so much larger than it feels when it is filled to overflowing with too much stuff. If you question whether your home is cluttered, it probably is…to the eye of a potential buyer. Don’t take it personally, just get the house unloaded and make it feel more empty. If necessary, rent yourself a storage unit nearby so that you have a place to go with the extra stuff you need to remove to accomplish your goals of de-cluttering your home. Remember, your goal is to sell that home quickly and receive the absolute best possible price and terms in the deal. The title company, the lender, the appraiser, the inspectors, or no one else has a job to do if you don’t get this part done right so that a sale is possible on your home…More next month…

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Real Estate

Randy Vickers

2007-04-01 08:09:00

What is a ‘sub-prime' loan and what is all this about?

ANSWER: In the glory days of really low interest rates and really high home appreciation, lenders began to create a second tier of loans for borrowers who couldn’t meet the standard lending guidelines. In the last 5-7 years, these programs have exploded to the point that almost everybody could buy a home. The upside to this was that housing was very strong and the percentage of Americans able to buy a house was higher than ever. The downside is that many of these second tier borrowers are not able to pay for their homes and foreclosure rates have skyrocketed. These programs were available to borrowers with marginal credit or income that could not be verified. Therefore the interest rates were generally adjustable and at higher rates than conforming loan programs. As more and more of these loans are making adjustments to higher rates, the borrowers are finding it is very hard or impossible to make the required house payments. Many of these borrowers also used programs that allowed little or no down-payment and now have no equity in the home. When these loans are made it is with the hope that the borrower can make some changes in their life to get them back into a conforming loan in the future. Better documentation of income, credit repair, and saving additional down-payment are typical things that a borrower will work on to improve their chance of a better rate and better terms. Many borrowers accomplished these things and have refinanced their ‘sub-prime’ loans into a conforming product, but those who still have the high rate adjustable loans are starting to feel the pain, which leads to loans that perform poorly. As a participant in the mortgage business for more than 18 years, the author has seen many loan programs come and go. Today there are still many very good programs that allow a person to buy a home. Some of the borrowers who could buy a home a year ago, now may have to take a little time to upgrade their application. In many cases this is mainly about repairing credit issues that are caused by a variety of situations. As has been stated before it is now more important than ever to keep track of the information on your credit report. All kinds of loans are graded or rated by your credit score, and a poor credit score will result in higher interest rates or the inability to borrow money. Last month we talked about getting pre-approved before looking at houses with your Realtor. If you have a problem on your credit report it will become apparent in this process and usually prevent an embarrassing moment. Like all major financial decisions, buying a home or refinancing a home takes some planning and research. If you are currently in a mortgage that has adjusted or is getting ready to adjust, it would be a good time to review your options with a mortgage professional. Trillions of dollars of adjustable rate mortgages are coming up this year, so don’t be the last to look into your situation and see if a better loan program is available. Until next month…

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Real Estate

Jeff Otto

2007-03-01 12:52:00

: Why Won't My Home Sell?

ANSWER: My home is very spacious, with four bedrooms, a large family room with a wood burning fireplace, a second gas log fireplace, and a three car garage. It's located just down the street from some of the best public schools in our area. There are a number of great retail stores and a pretty nice variety of recreational things to do. The residential real estate market in our area is really strong, and lots of homes are selling really quickly. So, why is it taking so long to sell mine? This is a question that is raised to most of the good agents when they’re faced with this situation by a Seller who doesn’t understand. Their answers all pretty much parallel one another. Here is a consensus of thoughts I’ve derived from them. The longer a home sits on the market the more likely its asking price will have to be reduced ... and reduced ... and reduced again, until finally, the seller is so anxious to get it sold that any offer will just about do. In the Wichita area, with today's relatively healthy long term economy, in which there certainly isn't a shortage of prospective buyers, why do some homes still sit on the market, while others are quickly snapped up? Remember that most, if not all, buyers comparison shop for that next home…which means that if your home isn’t selling while others are, there is something that is causing potential buyers to use yours as a reason to buy a different home. If buyers and agents aren't responding positively to your home...if you're getting offers well below what you're asking, or the home has remained on the market far longer than other like properties, then it's time to take another hard look at the listing price. There may have been a time when homes could be overpriced and owners might still make a sale. Overpricing a home looking for an offer is a big mistake in the current market. Except in extraordinary cases, those days of overpricing successfully are simply gone. Purchasers now have agents who know the market, and the internet search engines make it easy to be an informed buyer. Because of those things, Buyers who do their homework have little reason to be shy about making a reasonable offer with a more realistic price. If it’s too low, the Seller will, of course, counter the offer with what they will take, and then the Buyer can decide if they want to take the home, or move on. If they’re moving on in droves, something must be changed, to get a different result on your home sale. Most agents receive feedback from other agents who show your home and after a marketing period, can usually give you some accurate info on what should be done to adjust whatever it is that is preventing your home sale. The condition in which a home has been maintained directly affects its marketability. Buyers, no matter what their rehab dreams have been in the past, quickly return to reality when they realize that they don't have the time, skills or money to embark on a major, or sometimes minor, rehabilitation job. But "poor condition" does not necessarily describe homes in need of a major overhaul. Minor things can also put buyers off…such as an area of peeling paint, filthy carpeting, faucets that are corroded or leaking. In other words, if the home isn't sharp...it's a problem. None of these items is a big matter individually, but they do make buyers wonder if bigger problems are lurking behind the walls or floors. The obvious answer for a seller is that to not repair these kinds of items prior to putting the home on the market makes no sense. So, the bottom line is to clean and do the fixup repairs before placing it on the market. This will speed the sale and reduce a potential buyer’s questions and/or concerns. Good clean windows, bright lights in the fixtures, and a well manicured lawn and driveway, together with a fresh coat of paint here and there can do wonders toward helping that home to sit up and be noticed when compared to its competition on the market alongside it. Tips on how to depersonalize your home for sale next month…

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Real Estate

Randy Vickers

2007-03-01 11:38:00

Which comes first, the house or the loan?

Many real estate shoppers have this quandary. Is it best to go find a home, and then get my loan set up, or should I go to a lender before looking for houses? The truth is, either order can work, but there are some real advantages to checking in with your lender prior to writing a contract. The real estate market in Wichita is such that when an offer comes in to the seller, the first thing they want to know is whether or not the buyer can perform and close the deal. Since most buyers are not able or willing to pay cash for a house, this means the seller wants to know if financing is already set up and ready to go. Almost every time a realtor presents an offer, the seller will immediately want a “pre-approval letter” from a lender to show that the buyer is able to purchase the home. This “pre-approval” does a couple of things that will help in the negotiation of the property. If you’re the buyer, with only a little more than some basic tax documents, a pay-stub and bank/savings statements, a lender can quickly put together numbers to make sure that there is a loan program to fit the terms the buyer needs. This will include rate, term, down-payment, and credit requirements. The buyer and realtor can then make sure the houses being viewed are within the financial capabilities of the buyer, and that there is a high likelihood of closing. This also gives the buyer more time to review the available financing options, without the pressure of a contract on the line. All realtors that have spent much time in the business put a high degree of emphasis on having their buyers see a lender before driving the buyer all over town, only to find out they are not able to buy the house they want. The worst thing for a realtor and buyer is to fall in love with a property that they can’t afford. A Realtor with a workable price range in mind is much more likely to find a good fit for the buyer, and in a lot less time spent showing homes and driving around town. A buyer’s agent is also going to be more effective in negotiating a contract if they have a good feel for the financing that’s available for their buyer. The seller wants one thing out of this process, and that is to sell his house at the best possible price as quickly as possible. The idea that the buyer is ready to close in a reasonable time is usually of great value to the seller. A seller is much more likely to negotiate on price if they believe that the deal is going to close in a timely manner, as time is money to them. The pre-approval allows the lender to get a jump on the paper process, so there is less time between contract date and closing. The short answer is that meeting with a lender ahead of time is of great value to all parties in the real estate transaction. In almost all cases, having the pre-approval piece in place will help with your house hunting and your contract negotiating. The Super Bowl is over, spring is almost here, and it’s time to head out and start your house hunting process. Until next month…

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Real Estate

Randy Vickers

2007-02-01 16:23:00

QUESTION: 2007 - what is going to happen in the Wichita real estate market?

ANSWER: The current Wichita market is pretty active for this time of year. Generally there are three main forces that are at work in a local housing market. Local employment, mortgage rates, and housing affordability. Wichita and the surrounding areas are very fortunate in that all these factors are currently very favorable. Wichita unemployment is currently less than 5%, which many economists consider full employment. Basically that means there is a job for almost everyone that wants to work. The major local employers in manufacturing, healthcare, finance, and agriculture all seem to be in a strong growth period. Boeing, Spirit, Cessna, Bombardier, and Raytheon are all full of orders and most are currently hiring workers for future work. The machine shops that work with these major employers are generally also experiencing good times, with a favorable eye towards the near future. Healthcare is still a growing and dynamic industry in Wichita as the medical providers expand and specialize. Wichita has become a regional health center and should continue to see good things in this employment sector. Wichita has also grown in the finance/insurance area and continues to see regional strength in these areas. Construction for both commercial projects and residential housing are steady to growing. Large projects like the Wild West Park show that local investors and banks as well as large national companies/lenders have a good outlook for Wichita’s future. The mortgage rates are still very affordable, even though they have moved up a little this year. With more loan programs now available than ever before, money is available to finance housing for a wide range of borrowers. Rates have been very stable this year and I expect them to stay so through the near future. Nationally, the builders and mortgage bankers expect housing to slow down again this year, and in all nationwide publications you will see that there is some doom and gloom in the real estate industry. Wichita should not experience as much of a drawback as we didn’t have the same boom or increase in values as some of the other national markets. The financing options available for real estate investment are also very attractive and this part of the market should add to the growth and stability of the Wichita market. We sometimes forget what a great place Wichita is to live. It is always fun to have someone come visit and tell you that your house would cost twice as much in another city. The Wichita area still is one of the most affordable places to buy real estate. All parts of the market from the starter home to the gated communities offer great value when compared with other cities. This has become very evident as you read the business section and see the investors from California to Minnesota spending large amounts of money to invest in Wichita real estate. The reason for this is the affordability and growth prospects for the Wichita market. Like all investment decisions, it is important to have competent advisors to assist and help you find the best option for your situation, but it is much easier in a market such as Wichita that offers good value and opportunity to own real estate. 2007 will be a good year in Wichita to buy and finance real estate.

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Real Estate

Jeff Otto

2007-02-01 16:23:00

Do I have to buy title insurance if I pay cash for my new home?

If you’ve been smart enough, or in some cases, lucky enough, to be in a position to pay cash for your new home, for goodness sake, be smart enough to have the title researched by a professional before you actually “take title” to that home. It makes no difference whether you pay cash at closing, or take out a new loan, or get the money from your first cousin to make the purchase, you won’t live long enough to outlive the problems you can encounter in buying a home with hidden defects in the title. In the case of taking out a new loan, of course, the lender will not at any time, let you have the money without requiring that you purchase a title insurance policy so that the lender is protected from unknown defects in that title. If the lender will not lend without a title policy, why would you buy without a title policy? In any “cash at closing” transaction, no matter where the money comes from, you can make that purchase without anyone forcing you to buy the title insurance policy. That’s your right, but if something goes wrong, it’ll seem like “you’re left”. And you could spend tens of thousands of your dollars in the attempt to correct the defects that could arise. The defects that are possible would boggle your mind, and if you don’t believe me, just go online and do some research on title problems that folks have come up with. The ones who come out whole are the ones who have purchased a title insurance policy at closing. The ones who sometimes “lose it all” are the ones who think “well, I don’t think there will be any problems on this deal…everything looks ok to me”…and then proceed to suffer the “if only I had” blues. As I said at the outset, if you’re as smart as you generally need to be to accumulate enough cash to do the “all cash at closing purchase”, then be smart enough not to leave out the “small change” item, risking the “lose it all” possibility in the process. “If only I would have” is not a good way to begin the new year…it’s also a really bad way to end the year too. One of the most important things you can do is make sure that the biggest investment you or most folks w ill make in their lifetimes is titled to you with the knowledge that you have clear title, with no clouds, encumbrances, liens, or other defects that will turn your dream into a bad, bad nightmare. You don’t want that! More Next Month…

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Real Estate

Randy Vickers

2007-01-01 14:58:00

How can I use my home to pay for expenses?

ANSWER: In many cases a home is a family's largest asset and can be used to pay for things like vacations or Christmas. Many banks and mortgage companies now offer lines of credit that draw on the equity in your home to pay for emergencies or other financial needs. This product is usually called a HELOC or Home Equity Line of Credit. This loan is pretty easy to apply for, usually allows the interest to be tax deductible, and in most cases the interest rate is lower than that paid on credit cards. A HELOC can be a great financial tool, but can also create a tough situation if the equity is all used up and the home needs to be sold. In some cases the line of credit will go all the way to 100% of the appraised value, which is cause for concern when the costs of selling a home are included. There are other options to be considered, depending on the rates and terms of your current first mortgage. If you're current mortgage is an adjustable rate, or has a rate above 6%, it may be worthwhile to refinance and use the "cash-out" option to consolidate other credit, or be used for home improvements or investment. In the past 5 years this has become more popular because mortgage rates are the cheapest way to borrow money and the interest is tax deductible in most cases. FHA has come out with one of the most competitive programs which allow cash-out up to 95% of the property value at very competitive rates and terms. This program allows amortization periods up to 30 years, are fixed for the entire term, and have proven to be a good option for many people. The key to using any of these programs is to prudently manage your credit and don't let yourself get in over your head. Lenders have become fairly aggressive with home equity products and more and more people use this form of credit to manage their finances. It is a good idea to have a HELOC in place for emergencies or special situations. It is also ok to consolidate credit into one mortgage, but after this is complete the biggest mistake is to run revolving credit cards back up. Real estate is a great tool because it is fairly easy to finance and generally moves up in value so your equity will continue to grow. This allows great leverage while a family is moving through life and has expenses that sometimes exceed income. The real trick is to prevent yourself from using all the equity and just tapping into this fantastic asset when you really need to. As in most things in life moderation is the best way to go, so enjoy your vacations and holidays, but keep the financial burdens manageable.

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Real Estate

Jeff Otto

2007-01-01 14:37:00

How important is title insurance to me, a homebuyer?

ANSWER: At every real restate closing, the buyer is handed an inventory (a HUD-1 settlement statement or its equivalent) of items for which he is being charged. One of the line items will most assuredly be for Title Insurance. This is not your Homeowners or Hazard Insurance policy. But this insurance can be as important or more important as that hazard policy. Almost all lenders require borrowers to purchase lender's title insurance as a condition of a home mortgage. This protects the lender, up to the value of the mortgage, against "defects" in the title to the property. Meaning, those defects that existed before the transaction, but which might have been missed in the title examination. Most titles are thoroughly examined before any transfer of property, and the overwhelming numbers are clear, or require only a slight tweak to make them so. A title exam is not necessarily a legal requirement and you can probably still buy a friend's home with a handshake and a check, then mosey on over to the courthouse and record that deed yourself. In a private real estate transaction, that might still be done, inadvisable as it is. However, if a bank or mortgage company is involved, there will definitely be a title examination. Title law is a very complex branch of the legal system. Land ownership in this country goes back hundreds of years, and along the way there may have been dozens of occasions when something could have occurred to "cloud" its ownership. Records were not always meticulously maintained, deeds and claims were not always correctly recorded. Old land grants and tribal claims still occasionally surface to cause problems hundreds of years later. Now, there are many more contemporaneous defects that can cloud a title. For example, an incomplete or incorrectly exercised foreclosure or tax taking. Property rights that were not totally extinguished by a divorce or the probate of an estate. A seller, revealed, even years later, to not have actually owned the property. This may result from actual fraud or something as innocent as an expired or improperly executed Power of Attorney, and it happens way more often than one might want to know. Mistakes in recording (or failing to record) earlier documents, such as wills or probate decisions. Liens for unpaid work (mechanics liens) or for estate, income, or gift taxes. Adverse possession, which occurs when someone has openly used a portion of another's property (a path to the beach or an improperly positioned fence) for a period of time without a challenge by the land owner. Previously unnoticed rights-of-way or easements. These give a non-owner (the city, a utility, a neighbor) the right to use a piece of a property. Cities and utilities often demand or purchase easements to allow construction or repair of utility or sewer lines. A neighbor may have a right-of-way to access a land-locked parcel or construct a driveway. The failure to extinguish a lender's rights. When a mortgage is sold to another lender or paid off by the borrower, an assignment or a discharge must be recorded transferring or canceling the mortgage. One of the real nightmares of the 1980s and 1990s banking crisis were the thousands of mortgages which failed banks had not properly assigned. Without an assignment, the bank which held the mortgage could not discharge it when it was paid. RTC and FDIC, as receivers of those banks, often had no records of the old mortgages and could not know if or to whom they had been sold or whether they had been paid. Clearing these situations was both time consuming and expensive. Not all of the above instances will be covered by title insurance. First of all, there is usually a time limit (40 or 50 years prior to the current closing is common) during which defects will be covered. Policies almost always cover problems that did not show up during the title examination, were missed by the examiner, or resulted from errors in public records, but they may or may not cover problems with easements, mineral, or air rights, or some liens. Be sure to check the limits of your policy's liability. We'll continue with the importance of Title Insurance next month...

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Real Estate

Todd Woodburn

2006-12-01 15:48:00

I have seen on the T.V. commercials the term Code of Ethics that REALTORS® follow. What is the code of ethics?

ANSWER: While the Code of Ethics establishes obligations that may be higher than those mandated by law, in any instance where the Code of Ethics and the law conflict, the obligations of the law must take precedence. Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment. Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor. In recognition and appreciation of their obligations to clients, customers, the public, and each other, REALTORS® continuously strive to become and remain informed on issues affecting real estate and, as knowledgeable professionals, they willingly share the fruit of their experience and study with others. They identify and take steps, through enforcement of this Code of Ethics and by assisting appropriate regulatory bodies, to eliminate practices which may damage the public or which might discredit or bring dishonor to the real estate profession. REALTORS® having direct personal knowledge of conduct that may violate the Code of Ethics involving misappropriation of client or customer funds or property, willful discrimination, or fraud resulting in substantial economic harm, bring such matters to the attention of the appropriate Board or Association of REALTORS®. Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services, REALTORS® urge exclusive representation of clients; do not attempt to gain any unfair advantage over their competitors; and they refrain from making unsolicited comments about other practitioners. In instances where their opinion is sought, or where REALTORS® believe that comment is necessary, their opinion is offered in an objective, professional manner, uninfluenced by any personal motivation or potential advantage or gain. The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.

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Real Estate

Randy Vickers

2006-12-01 15:48:00

I'm A First Time Home Buyer...Is Fear Common?

ANSWER: It's not uncommon for a first-time home buyer to say, "Wow...just last week I called about buying a home and now I'm getting ready to close on my new home! How in the world could this have happened so fast?" The correct answer is that it didn't. First-time home buyers actually start the search for a home long before most of them even realize it. The word is, you should buy yourself a home rather than renting, where you're actually buying a house for someone else...your landlord. That's what you've been hearing from friends and family, right? So, by now you have likely already decided that home ownership is the best decision for you because of all the benefits that you can't enjoy as a renter. So the decision to buy is one major hurdle you've now passed. You are ready and certain. That's good. The first thing you should consider is stopping by a lender for the purpose of finding out just exactly what price range of home you should be considering relative to your income and expenses. The lender will prequalify you for your financing so that when you are out looking at homes, when you locate one you like, your fear of not being able to afford it will be gone...you'll already know you can, and will have a prequal letter from the lender to prove it. Almost 80% of all home searches today begin on the Internet. With just a few clicks of the mouse, home buyers can search through hundreds of online listings, view virtual tours, and sort through dozens of photographs and aerial shots of neighborhoods and homes. You've probably defined your goals and have a pretty good idea of what kind of house you want, and where you want it. By the time you reach your real estate agent's office, you're sort of firming up some things about your new home...subject to change, of course. So, how long should it take you to find your home? That can depend on how motivated you are to own your home! Some buyers will look for years, but buyers who do that aren't really motivated. A motivated buyer will find a home within two weeks. Many buyers can find a home within two days. Good real estate agents will listen to your wants and needs and arrange to show only those homes that fit your particular parameters. Depending upon time constraints, some agents will preview homes before showing them to you. By doing that, there is a risk that the agent will rule out a home and not show it to you based upon what he or she thinks you would like, and due to some special feature you didn't share with him or her, you'll miss out on that perfect home you might have bought, and it will go to someone else. Not fun... So, how many homes should we try to see in one day of looking? Independent studies show that your memory dramatically improves after the consumption of some carbohydrates and slows upon consuming sugar. So, it's best to hold off of the soft drinks, and instead, have a hearty meal of carbs before you head out to tour homes. The average number of homes that a buyer can see and have a pretty clear memory of is about seven or eight. Any more than that, and the brain goes on overload. Therefore, don't expect to see 20 or 30 homes unless you are only in town today and have to make a decision right now before you leave...even then, that's too many, and you probably will not remember specific details about very many of them. Here are some ideas that will help you remember what you've seen. 1) Bring a digital camera and begin each series of photos with a close-up of the house number to identify where each group of home photos start and end. 2) Take some notes of the more unusual features, colors and design schemes. 3) Pay attention to the neighboring houses. What type of home is next door? Is it a larger two story home that stands really tall over your single story home? 4) Do you like the neighborhood and the location? Is it close to those things your family will be doing? 5) Carry a pad with you, and keep a score on each home as you leave it...give it a 1 to 10 rating using 1 as the lowest and 10 as the highest. These things should help you maintain your sanity and achieve a good result in the process. More next month...

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Real Estate

Jeff Otto

2006-12-01 09:28:00

Is there a list of moving steps one can follow when changing homes?

ANSWER: Good question! There has been some experience with that, so let's give it a whirl and see if we can get an orderly set of steps for folks who are planning a move, whether it's right in town, or across the country. There are a whole other set of steps if you're moving to another country. First of all, if you're hiring a moving company for the move you might want to call the movers 2 or 3 months in advance so that you'll be assured of availability at the time your move needs to happen. If you're renting a UHaul truck, the same thing applies. You'll want to notify the post office of your address change so that you don't experience a delay in your mail being delivered. Call your doctor, dentist, hair stylist, and any other service providers who would want to stay in close touch with your family. Don't forget to call your HR department and/or your payroll personnel to make sure your paychecks and other employment information is taken care of. You'll want to order whatever moving supplies you think you'll need, understanding that you'll probably miscalculate on the low side at first. Sort, discard, or donate any items you don't need, or haven't seen in quite a long time...if you haven't seen them for a long time, you probably don't really have a need to keep them. Right? Some charitable organizations will even come by and pick up your unwanted items. Now, if you're hiring a mover to move you, you'll want to coordinate the day of packing so that when they arrive, you're there to give them specific instructions about how you want the packing done and boxes labeled. Use DR for Dining Room, MBR for Master Bedroom, etc. That way, when they arrive at the new home, the rooms where the boxes will be offloaded to will be obvious to you and them. About 2 weeks before moving day, you'll want to notify the Motor Vehicle Department of your move for their records. Also, don't forget to call the Telephone company, Cell phone company, Electric and Gas companies, Cable and Internet, Water, Home Security company, and the trash pickup folks. At this time, you'll want to go ahead and disassemble things like pool tables, swing sets, and other things needing to be taken apart for the move. Line up a sitter for the children on moving day to make that a little smoother and you'll be happy you did that. Don't forget to get the moving day off from work so that you can be present at your house to assist. About a week before moving day, call and confirm the date and time with your moving company or U Haul Truck Company. Give them your cell phone numbers, as well as the numbers for the new location if you have them in place. Remove fragile and loose items from all drawers and pack them carefully in smaller moving boxes that you can move easily. Mark the fragile boxes FRAGILE! All over the outside! Take down any fixtures like ceiling fans, light fixtures, pictures, mirrors, etc that you're taking with you, but don't remove anything that you've agreed to leave for the new owners in your contract. Oh, and don't forget to call newspapers, magazines and other periodicals regarding your subscriptions, so that you don't miss out on any of your favorites. About one day before moving day, you should consolidate into one area of your home all of the clearly marked boxes of those fragile items you boxed up earlier. Make sure you give your moving crew a heads up about these boxes and their fragility. Identify furniture that is fragile by nature or has been weakened by previous damage and prepare to bring it to your crew's attention on move day. Separate and put labels on those items you don't wish to take with you. Alert the crews. Put your checkbook, keys, cash, credit cards, and prescription medications in the car or on the plane with you. Clean, drain, defrost refrigerators and freezers. Remove gas and oil from mowers, snow blowers, and generators. Remove Propane tank from grill. Clear Driveways and walkways during bad weather or snowy conditions. Obviously, there's no such thing as a list that will totally and completely encompass each and every possible thing you'll want to do in preparation for your move, but this should get most anyone headed in the right direction. You're encouraged to add to this list and know that with even the most detailed list, you'll more than likely still forget some things. Human nature enters the competition, and invariably, we'll all lose. I hope this helps someone with a little bit of the brain damage that sometimes accompanies moving from one home to another. More next month...

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Real Estate

Randy Vickers

2006-11-01 16:01:00

How Much Of A Mortgage Can I Afford To Take On?

ANSWER: One of the best ways to determine how much to spend on a house is to look at your income and expenses monthly just exactly the same way a lender will do when you apply for a new loan to buy that house. It's really pretty simple. First, your credit score will be pulled online, and certain determinations will be made from that information. And if your credit score shows that you are considered "conforming", then you are showing that you are able to manage your money and indebtedness in an acceptable way to the lender. If your credit score is lower, then there are a lot of other alternatives that will usually allow you to get a loan to buy your own home rather than continuing to throw money away in the form of rent to a landlord. You should only do that if there is no other way. The lender will also show you how to fix any bad marks you may have on your credit report so that you can raise your credit score for a better rate in the not too distant future. On a conventional loan, one that is not insured by the government, your monthly housing payment including principal, interest, taxes, and insurance, should not exceed 28% of your total gross, or pre-tax income each month. Your total monthly expenses shouldn't exceed 36% of your gross income monthly. This would include the mortgage payment, car payments, utilities, credit card payments, etc. These are ideal guidelines, and there are times when exceptions are made to these parameters. Let's assume you and your wife or husband make about $50,000 per year gross income, before taxes are considered. Your total debt limit would be 36% of that, or $18,000 a year, which equals $1500 a month. Of that the most your house payment could be is about $1167 a month. If all of your other regular monthly payments were to total about $335 a month, then you would be "qualified" for a new conventional loan based upon those ratios. On the other hand, if your other monthly payments totaled about $500 a month, then you would be qualified for about a thousand dollars a month for the house payment. With a total family income of about $75,000 a month, then the 36% parameter gives you about a monthly figure of $2250 a month for all payments, and would include a $1750 monthly amount for the house payment. At $100,000 a year family income the qualifying amount to have for all monthly payments is about $3,000 a month with about $2,333 for the mortgage payment limit. As you can readily see, the 36% ratio for all debts is usually more important than the 28% ratio for just the house payment. So, if you will narrow down to a mortgage payment that you can comfortably make, then just look at homes in the price range that will give you that monthly payment, and you should have no problem being qualified by your lender. If you determine that you can make a monthly mortgage payment of $1500 a month, then just look at how big a loan that will translate into considering current interest rates, cost of homeowners hazard insurance, special assessments, and the other variable items. More next month...

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Real Estate

Jeff Otto

2006-11-01 08:56:00

I don’t understand the process of closing on a home?

ANSWER: This is the day you close on your new home! All parties will sign the papers officially closing the deal, and ownership of the property will be transferred to you. But, the day before closing, you’ll want to be sure to gather together all of the paperwork you have received throughout your home-buying process. This should include some or all of the following documents. A good faith estimate, a purchase contract, proof of title search, and, if necessary, a flood certification, as well as your proof of homeowners and private mortgage insurance, a home appraisal and your inspection reports. You may possibly need to refer to some of these documents at closing. Most home purchase contracts entitle you to a final walk-through inspection of the property 24 hours before closing. This is to ensure that the seller has vacated the property, and left it in the condition specified in the sales contract. If there are any major problems, you can ask to delay the closing long enough to get those resolved, or request that the seller deposit an amount of money into an escrow account to cover the estimated cost of the necessary repairs. At closing, your participation will be twofold: First, you’ll sign all of the legal documents required for the closing. These will fall into two categories. The agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully as you sign them, and do not sign forms with blank lines or spaces. Secondly, you’ll pay closing costs and escrow items, in the event that an escrow is required by the lender. Borrowers handle the numerous fees associated with obtaining a mortgage and transferring property ownership in one of two ways. They either roll them into the principal balance of the new loan, and pay little or nothing down, or agree to pay these out-of-pocket fees at closing. Although closing procedures vary from state to state (and even county to county), the parties generally present at the closing or settlement meeting are the closing agent, who generally works for the Title Company closing the deal…sometimes a party will want to have his or her attorney accompany them to the closing table. Sometimes the closing agent is also an attorney representing one of the parties to the closing. Both sides may have an attorney present if they desire. The title company representative will be there to provide the written evidence of the ownership, and/or chain of title to the subject property. The home seller and his/her real estate agent will be present. The borrower, which is you, your realtor, and the Mortgagee, which is the lender’s representative. The closing agent conducts the settlement meeting and makes sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed. At this point, you will receive some important documents. The HUD-1 settlement statement, which is a detailed list of all costs related to the sale of the home. Both you and the seller (who may be paying some of the closing costs) will sign it. Borrowers should compare their HUD-1 statements against their original good faith estimate to see if the actual closing costs differ significantly from the closing costs estimated by their lender earlier. The final TILA (truth-in-lending-act) statement looks familiar. You received the first version of this statement after applying for your mortgage. This final version outlines the cost of your loan and APR (annual percentage rate) and takes into account any modifications made to your rate, points, etc., between application and closing. Make sure that everything is in order. The mortgage note, which is a document that states your promise to repay the mortgage, indicates the amount and terms of the loan, and what the lender can do if you fail to make the required monthly payments in a timely manner. A Mortgage or Deed of Trust is a document that secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note. A Certificate of Occupancy is needed if you are buying a newly constructed house, because you’ll need this legal document to move in. Once you’ve reviewed and signed all closing documents, the house keys are yours and you will have successfully purchased your new home! Open the front door, and move right in! More next month…

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Real Estate

Todd Woodburn

2006-10-01 14:35:00

QUESTION: With the national market slowing down, how is our market performing?

ANSWER: Our local market is doing well. Interest rates are at the lowest point this year. At the time of this writing interest rates are at 6.25% on a 30 year fixed mortgage. However, the inventory is beginning to increase at this time and it appears that buyers are taking time to view more properties. Economic indicators look good for our projections thru the end of 2007. Manufacturing growth shows orders being placed with our major and small employers to continue the current growth cycle for another 2 to 3 years. With employment being strong in these areas it will reflect in continued growth and revenues for the services industry also. Migration of workers from outside the Wichita and surrounding areas is projected to increase to fill the job needs for these employers. This will bring additional families to our area during this continued growth cycle. As many parts of the nation see depreciation settling in, after record breaking appreciation, Wichita and surrounding communities have seen steady growth. Appreciation is projected to be at an average of 5.2% appreciation by years end. Slowing to a projected 3.9% appreciation for the end of 2007 the good news is it is still appreciation. It appears as though 2007 may be more of a buyers market than the sellers market we have experienced in the last couple of years. Thank you to South Central Kansas MLS, Wichita Area Association of Realtors, Kansas Association of Realtors, WSU Center for Real Estate, Dr. Stan Longhofer- Director , Center for Real Estate WSU, and the Sedgwick County Appraiser's office for information, projections, discussions and data.

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Real Estate

Jeff Otto

2006-10-01 11:02:00

QUESTION: Why is a correct legal description important in real estate?

ANSWER: The primary purpose of a legal description is to correctly describe a particular parcel of land in a way that uniquely describes only the subject parcel, without any ambiguity. It is also important that the legal description survive through time, or be composed in such a way that the legal description is not dependent on elements that may not be available in the future. In the United States, the most common methods used to describe land are by reference to a lot and/or block within an existing subdivision, by aliquot description, by metes and bounds, or by a combination of these. Let me illustrate in greater detail each of these methods in the following way. When a parcel of land lies within an existing platted subdivision, the legal description is usually short and straightforward because the dimensions bounding the parcel should be presented on the recorded subdivision plat. This is often the case in developed areas, such as within cities or towns. The legal description would then refer to one or more of the smaller parcels represented on the subdivision plat, such as "Lots 4 and 5, Block 3, Nackatoochee Falls Subdivision, County of Barton, State of Kansas." This would indicate that a subdivision plat is recorded in Barton County, Kansas under the name of Nackatoochee Falls Subdivision, and that the subject parcel of land is depicted on the subdivision plat as two particular lots lying within a particular block of the subdivision plat. It is apparent, therefore, that each subdivision plat accepted by the public agency having jurisdiction should have a unique name so as not to create the ambiguity of duplicate subdivision names. This is often accomplished by having names such as Nackatoochee Falls Subdivision (the original subdivision having this name within the jurisdiction), Nackatoochee Falls Subdivision Second Phase, or Nackatoochee Falls 2nd Addition (subsequent subdivision plats having similar but unique names). If a particular portion of Nackatoochee Falls Subdivision is further subdivided into smaller parcels, the new subdivision plat may have a name such as Nackatoochee Falls Subdivision, REPLAT A, indicating that it is the replat or reconfiguration of a portion of Nackatoochee Falls Subdivision Aliquot descriptions are legal descriptions using the nomenclature of the U.S. Public Land Survey System. This would include references to portions of Sections, Townships, and Ranges. Land within rural or undeveloped land is often described this way. A typical legal description of this nature would read something like "The northwest quarter of the southwest quarter of Section 20, Township 1 North, Range 70 West of the Sixth Principal Meridian" . Each occurrence of the word "quarter" indicates the division of the section (roughly one mile square) into quadrants (quarters), with each quarter being progressively divided into further quarters. Metes and bounds descriptions (metes refers to directions and distances, bounds refers to monuments, both physical and legal), describe the geometry of the perimeter of a parcel of land. A metes and bounds description is often lengthy, as it may contain bearings and distances for each line, descriptive geometry of each curve, and references to other adjacent or nearby parcels of land. Special attention should be paid to the use of prepositions in a legal description. A preposition indicates a relationship to some previously existing element, a relationship known as a call or second call. The significance of a call is that it implies the seniority, and usually the superiority, of that which it is called to. For example, a metes and bounds description may contain: "Thence North 89° 47' East 373.08 feet, more or less, to a point on the south line of that parcel described in deed . . .", which would indicate that the subject of the preposition ('that parcel described . . .') existed prior to the creation of the legal description we are reading. This would make the legal description we are reading have less seniority than 'that parcel described . . .', and the direction and distance given in the legal description we are reading give precedence to 'the south line of that parcel described . . .' The surveyor must then determine the location of the called line and adjust the bearing and/or distance given to honor the location of the senior parcel. For this reason, the phrase ''more or less" often accompanies the directions and distances when a second call appears in a legal description. Normally when you are buying a home, you’re really buying the land, and “all improvements located thereon”. A wrong legal description could mean you don't really own that land or that home you thought you owned. Hence, the importance of a correctly researched Legal Description! Some information was researched on the World Wide Web…More next month.

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Real Estate

Randy Vickers

2006-10-01 10:27:00

QUESTION: Do I really need an appraisal if I’m comfortable with the purchase price?

ANSWER: The appraisal is one of the most important parts of the package for the purchase of a new home. In almost all cases if you are asking for a loan to purchase the new home, the lender is going to require an appraisal. One is not required if you are paying cash, but can be very useful and enlightening. The appraisers do much more than just check the value. They also research availability of shopping, schools, public utilities and competing neighborhoods. The appraiser will review the type, style, age and construction of the property you are buying. They also check for any known environmental situations that may affect the future salability of the property. These are all things that a lender considers when reviewing your loan application. The main body of an appraisal will be full of information considering the details of your subject home, as well as details of recent sales in the same area or neighborhood. The description and content of the homes will be compared to validate the value you are paying for the subject property. Items such as square footage, basement size and finish, number of garages, number of bedrooms and baths, and any other amenities are used in the property comparison. In a perfect world the appraiser would be able to find the same floor plan with similar finish that sold within the last 6 months to use as a comparable sale. The reality is that the appraiser has to make a judgment as to the properties or comparables that are the closest to your subject home. The appraiser will also include an estimate of the cost to rebuild the house you are about to purchase. This will include information on current construction costs in your area to arrive at the cost to replace the home. In some cases with an older home there can be a big difference between current value and the cost to build this home with current construction costs and materials. The difference can be very important when considering your homeowners insurance, as typically a homeowner will want to insure for replacement of the home. The appraisal is even more valuable when considering a unique or rural property. In these situations it is more difficult to locate comparable properties to validate the value, as they are harder to find in or around the subject property. The appraiser is then required to expand the search and time frame to find the best comparables. In many cases these appraisals take longer to complete and require additional research to be acceptable to the lender. In almost every case that a purchaser is using borrowed money to buy their home, an appraisal will be required, and it is a good idea even if you are paying cash. In most cases the appraisal will validate the information you used to come up with an acceptable value when you wrote your purchase contract. In some cases the appraiser will disclose information that you as a buyer are not aware of that could be very important in your decision to purchase your new home. More next month...

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Real Estate

Todd Woodburn

2006-09-01 16:04:00

QUESTION: What are some tips for finding the perfect neighborhood?

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ANSWER:The neighborhood you choose can have a big impact on your lifestyle: safety, available amenities, and convenience all play their part.
Make a list of the activities, movies, health club, church you engage in regularly and stores you visit frequently. See how far you would have to travel from each neighborhood you’re considering to engage in your most common activities.
Check out the school district. The Department of Education in your town can probably provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. If you have school-age children, also consider paying a visit to schools in the neighborhoods you’re considering. Even if you don’t have children, a house in a good school district will be easier to sell in the future.
Find out if the neighborhood is safe. Ask the police department for neighborhood crime statistics. Consider not only the number of crimes but also the type—burglaries, armed robberies—and the trend of increasing or decreasing crime. Also, is crime centered in only one part of the neighborhood, such as near a retail area?
Determine if the neighborhood is economically stable. Check with your local city economic development office to see if income and property values in the neighborhood are stable or rising. What is the percentage of homes to apartments? Apartments don’t necessarily diminish value, but they do mean a more transient population. Do you see vacant businesses or homes that have been for sale for months?
See if you’ll make money. I will provide you information about price appreciation trends in the neighborhood. Although past performance is no guarantee of future results, this information may give you a sense of how good an investment your home will be. I can also inform you about planned developments or other changes in the neighborhood like a new school or highway that might affect value.
See for yourself. Once you’ve narrowed your focus to two or three neighborhoods, go there, and walk around. Are homes tidy and well maintained? Are streets quiet? Pick a warm day if you can and chat with people working or playing outside. Are they friendly? Are there children to play with your family?
  

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Real Estate

Randy Vickers

2006-09-01 16:04:00

QUESTION: My arm is broke! Is now the time to refinance my adjustable rate mortgage?

ANSWER: Over the past 5 years there have been some times where it was advantageous for borrowers to consider an Adjustable Rate Mortgage, or ARM.  These loans are typically set up with a fixed rate for 3-5 years, and annual adjustments after that. In many cases it is moving close to time for the annual adjustments to start. Because of the movement in rates the last two years, these borrowers are going to move up, some substantially.  Most ARM loans are adjusted based on one of two or three interest rate indexes that are posted daily in the Wall Street Journal, or on most financial web sites.  These indexes are all tied to short term rates, which have moved up substantially over the last two years, and therefore the new rate is going to adjust upwards.  The new interest rates will probably move up between 2 and 5 percent which could potentially add $100's of dollars to the house payments of those on these type loan programs.Currently, although long term rates have moved up, they have not moved up to the extent  of the short term rates. This makes the fixed rate mortgages more attractive and secure at this time.  In many cases a refinance to a fixed rate mortgage will be lower than the adjusted ARM loan and remove the risk associated with any future rate increases.  Most economists expect that there may be additional upward movement in short term rates, which will adversely effect the adjustments on ARM loans.  Therefore it is worth seriously considering the move to a fixed rate loan to soften the blow of rate increases, and protect against future rate increases.  This move could also allow for refinancing of Home Equity loans as the rates on these types of loans has also moved up as the national "prime rate" has increased.One other situation is this:  if a borrower used an A minus or B type loan to purchase their home, it may now be a good time to look into changing over to a lower rate conforming loan if the credit issues, etc. have been resolved.  These types of loans offer a great opportunity to purchase a home while repairing credit, or maybe income issues, but in most cases a borrower should look to refinance these loans as soon as possible.More questions and answers next month.....   

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Real Estate

Jeff Otto

2006-09-01 16:04:00

QUESTION:  Can I ever really relax when buying real property?

ANSWER: “It’s such a pretty setting. Far enough away to provide that certain amount of serenity and quietness I’ve always dreamed of owning.” “There's an old dirt road, kinda like a loggers road, into the property, so there must be access." This is the sad lament of many a prospective country property owner who didn't ask enough questions before making the decision to move “away from it all”. Legal access to your property is critically important. Without it, you are the proud owner of a piece of landlocked, inaccessible property. Absent someone giving you legal ingress and egress, you’re out of luck, unless you can work with a helicopter or some other means of getting in and out.There are many types of access, some trouble free, but some full of problems. The most trouble free access is where the property abuts or adjoins a public road. With no other properties between yours and a public road, very few problems can arise. The fun begins when you find that secluded piece of property, tucked away back on a hill or in a scenic little valley with a stream, hundreds or even thousands of feet from the main road. The access to such a piece of property will undoubtedly be made across other surrounding properties, and that's where you'll sometimes encounter access problems. To avoid such problems, verify that the property you are purchasing has deeded access. In other words, the owners of the surrounding properties, land locking yours, have signed and recorded deeds granting access to your property.If the property doesn't have deeded access, you may still have access because it can be demonstrated that the road to the property has been in continuous use for an extended period of time. This is called prescriptive access, and varies according to the laws of each state. Prescriptive access is unreliable, though, and you may find yourself in court after you purchase the property if your neighbors decide they don't want you crossing their property any longer.After you've determined that you do have legal access to the property, you need to ask yourself "Who's going to maintain the road?" Unless you are the only one who owns property on the road, you probably will need to share the road maintenance expenses with neighboring property owners. Is there a written road maintenance agreement? Or do the owners just get together and share the costs and physical work of maintaining the road? If there's a written maintenance agreement, get a copy of it and study it. Make sure that you have good information that you can rely on before you make the decision to “move away from the rat race”.  More next month…

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Real Estate

Charlie Traffas

2006-08-01 13:28:00

QUESTION: What is a reverse mortgage?

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ANSWER: According to the Administration on Aging, one-third of Americans age 65 and over depend on Social Security  for close to 90 percent of their income.  However, these senior homeowners may have an opportunity to live a more comfortable and financially independent lifestyle by securing a reverse mortgage on their home.
 A reverse mortgage allows seniors to convert their home equity into monthly income.  The borrower retains title to the home and will never owe more than the home is worth, while receiving either monthly installments or a lump sum secured by their home.  The money can be used for almost anything: medical bills, in-home care services, home repairs, or paying off other debt.  The senior homeowners also will never lose their home as long as they live in it.
Homeowners aged 62 and older are eligible for this loan.  Qualifications such as income, credit or health  are not taken into consideration.  Only the equity in the home is important and even seniors who are currently making house payments can be eligible for this program. How much income is available?  There are a number of factors to consider: homeowners age, the appraised value of the home and the amount of equity currently available.  Generally, the older the borrower is, and the higher the home value, the more equity is available as lump sum or monthly income.
Please call with additional questions as this program is really starting to grow.  More and more retired homeowners have found that a reverse mortgage allows them to live a considerably more comfortable lifestyle.

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Real Estate

Todd Woodburn

2006-08-01 09:43:00

QUESTION: What are the ten most costly mistakes made in a Real Estate transaction?

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ANSWER:
Home Buyers:
Mistake #1:Not knowing how much they can afford before they make an offer.The easiest way to avoid this mistake is to get pre-approved for a mortgage by a lender so you know in advance exactly how much you can afford.
Mistake #2: Not realizing in advance who the real estate agent represents.Most people think that the agent they are working with is working for them. But unless they are working as your buyer representative, they represent the seller or no one.
Mistake #3: Not realizing that the wrong mortgage can cost thousands of dollars in needless interest and taxes.Check with your accountant before you make your final decision on which mortgage you are going to choose. Your CPA will be able to tell you what the long-term effects will be on your income.
Mistake #4: Not discovering hidden defects before they buy a home.One of the most expensive mistakes is also one of the easiest to avoid, by having a professional pre-purchase home inspection.
Mistake #5: Not knowing how much credit can affect their ability to buy or refinance a home.Before you buy a home, many of the clouds on your credit history can be cleared up or even eliminated. Your mortgage professional can help you review and prepare your credit file in advance.
Home Sellers:
Mistake #6: Basing their asking price on needs or emotion rather than market value.Many times, people make their pricing decisions based on how much they paid or invested into their home. This can be an expensive mistake. Overpriced homes take longer to sell and eventually net the seller less money. Consult with a professional real estate agent. They can assist you in pricing your home correctly from the beginning.
Mistake #7: Failing to "showcase" their home.First impressions are the most important. Experience shows that for every $100 in repairs that your home needs, a buyer will deduct $300-$500 from their offer. Thoroughly clean and prepare your home before you put it on the market if you want top dollar.
Mistake #8: Signing a listing contract with no way out.Most traditional real estate agents want you to sign a listing contract with no way out. When you list your home with me, you can cancel your listing if your situation changes.
Mistake #9: Choosing the wrong agent or choosing them for the wrong reasons.Many homeowners list their home with the agent who works for the biggest company or the one that charges the least commission. You need to choose the agent with the best marketing plan and track record to sell your home.
Mistake #10: Not knowing all of their legal rights and obligations.Real estate law is complex. The contract that you will sign when selling your home is legally binding. Small items that are neglected in a contract can wind up costing you thousands of dollars. You need to consult a knowledgeable, professional who understands the in’s and out’s of a real estate transaction.

 

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Real Estate

Todd Woodburn

2006-07-01 09:38:00

Question: Is moving ever fun for children? 

ANSWER: Moving from one house to another is seldom easy and fun for adults but it can be especially troubling for the children. However if parents deal with their children's concerns and needs thoughtfully, much of that distress and discomfort can be avoided. Children see moves differently than their parent's do, and they benefit much less from the change in their comfortable routines, or so it seems at the time. Most often, a change in houses or communities heralds an important step forward for the adult members of the family. The family moves because Daddy or Mommy has a great new job or a promotion in reward for years of hard work. They move because financial success has allowed the purchase of a bigger and nicer house in a more costly neighborhood. They move because they can finally afford private bedrooms for each child and perhaps a pool in the back yard. In the 1990's, mobile and hard striving people typically lived in a house for about four years and then moved on as their careers or fortunes allow. That short time span is only a small percentage of the life-to-date for a 30 or 40 year old, but the same four years is half the lifetime of an 8 year old and it includes almost all the years he or she can remember. To a parent, this house may be only the place they have lived recently. They think of it as a way station on the road of life. To kids, however, it may be the only home they have ever really known. This is their house, the place they feel safe and comfortable and thoroughly at home. A house is much more than a roof and walls to a child. It is the center of his or her world. A move threatens to take that sphere away and leave something totally strange in its place. The familiar friends, schools, shops and theaters, the streets, trees and parks - all will no longer exist for them. Everything soon will be strange, and they will live in someone else's world.The impact of a move on a typical child starts about the time he or she first hears that Daddy has accepted a promotion, and often continues for about a year until the new house becomes home, and memories of the previous place fade. It's not usually necessary to announce this big change to children immediately, although they must hear about it from you before someone else breaks the news. Most teenagers see themselves as adult members of the family, and will probably feel they have been left out if they don't hear everything from the first day. But it is probably not a good idea to tell toddlers and preschoolers until they have to know. There is no point in making them worry far in advance. Be sure to announce the move in a positive way. You might say how proud you are that daddy's company has chosen him out of many other employees to manage a new office in Cleveland. Talk about what a beautiful city Cleveland is, how good the schools are and how nice the people are. Tell truthful but very positive stories about how nice the new house will be. Ask them what the favorite things are in their lives now, and then try to make them happen in the new home. If the new home is too far away to allow a visit by the entire family after it has been selected, show the children pictures of it from every angle. Videotape it, if you can. Emphasize the positive views and be sure to include pictures of each child's new room. Try to name the house with some romantic description like "Oak Hill" for the big trees and the sloping lawn. Sugar coating will help, but since children can quickly see the negative sides of most situations, every parent must plan to deal with their children's worries, fears and sorrows. The children will lose friends they may have known all their lives. They will leave behind their sports teams, their clubs and their dancing teachers. They will have to start over in a new place, making friends, becoming accepted and fitting into different groups.Younger children need protection from fear of the unknown. Listen carefully to their concerns, and respond quickly to allay their apprehensions. It would be normal, for instance, for a young child to worry that his or her toy box and shelf of stuffed animals might be left behind. Find those anxieties and correct them. Probably the best tactic is to get the children actively involved in the whole process. Don't just promise to let them decorate their own rooms, for example. Take them to the paint store and let them bring home color swatches. Let them shop with you for bed spreads, towels and new carpets. They must leave old friends behind, so find ways to make that parting almost pleasant. Plan a going-away party and let them invite their own guests. Take pictures of everyone and make a photo album. If a child is old enough, send him or her out with a roll of film in the camera and the assignment to photograph the views they will want to remember.Some relationships will be extremely difficult to break and these will demand careful, thoughtful, personalized planning by both parents. How, for instance, do you move a 17-year-old 1,000 miles from her steady boyfriend? Expect that your children may be even more distressed after the move than they were before it. Remember the new house will not be beautiful the night after the moving van leaves, or for months after. The furniture won't fit the rooms. The curtains won't be up, and every spot on the floor will be covered with half-unpacked cartons. The children won't know anyone at school and, if you move during the summer, they may have little opportunity to meet anyone their age. You may be faced with many more problems in your new community than they will, but remember that you can handle them more easily than they can. They will need your help, and you should plan to give them the support they need.After the move, give each of them a long distance telephone call allowance so they can keep in touch with the people back home who matter the most to them. Buy a stack of picture postcards that show positive views of your new community, and encourage them to write good news messages to the friends and relatives they left behind. To make new friends, make sure the children don't vegetate in front of the television. Get them outside, where neighbors pass by. Have them pass out flyers to do baby-sitting or car washing. Encourage them to participate in as many school activities as they can handle. Get them on sports teams and into clubs. If they - and you - aren't making new friends fast enough, throw a housewarming party for yourselves and invite all the adults and children on the block.If serious emotional or attitudinal problems arise, however, help is usually available and probably should be sought. Ask a teacher for help. Consider professional counseling. Don't let a serious problem slide. Remember that the newness will wear off. New friends will become old friends and best friends. This new house may become the family homestead your grandchildren will visit every holiday season. There will be discomforts, but in the long run, everything will work out fine.

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Real Estate

Randy Vickers

2006-07-01 09:38:00

: How can I buy a country dream place...and avoid the nightmare!

ANSWER: Part 2 -- Sewage Disposal  Throughout America, millions of city dwellers take for granted that they can flush the toilet and everything in it will disappear into the sewer. Country properties, however, usually dispose of sewage with a septic system, or alternatively, a lagoon system. With a septic system, and through a rather unsophisticated combination of a holding tank and perforated pipes called leach lines, the sewage is absorbed or leached into the ground. As you might imagine, there are all kinds of ways for things to go wrong with such a system. When your septic tank backs up, or your leach lines become plugged, septic tanks are no fun at all. That's why it's a good idea to make sure the septic system is working properly before you firmly commit to buying your country dream. As with the water potability tests mentioned in last month's article, your lender may require a septic system inspection and certification before lending for a mortgage on country property.A septic system inspection usually includes a visual inspection of the area around the system to look for obvious leaks. Such system failures are usually detected by visual clues of seepage and the accompanying malodorous stench. The inspection also should include pumping the contents from the tank and a visual inspection of the inside of the septic tank after the pumping is completed. This inspection should reveal any cracks or flaws in the tank itself. If the system is in good working order, you should receive a written certification stating the results of the inspection.Now, if you're thinking about buying vacant land, you should perform soils tests to determine the feasibility of a septic system on the property. Those tests vary from area to area, depending upon the requirements of the local public health officials. If the land under consideration is located in an environmentally sensitive area, such as near a year-round stream, plan to meet more even more stringent requirements. The soil tests will reveal what kind of soil you have at the depth where your septic system will be operating. For a septic system to work, the soil must be capable of absorbing the waste from your septic system. If the soil is too porous, or sandy, waste materials will pass through too quickly for nature to purify them. The opposite extreme, such as rocky soil or hardpan clay, will not permit waste materials to pass through quickly enough to be purified. A happy medium is necessary for a septic system to work effectively. Most health officials will want to see the results of a percolation test, also known as a "perc test," to verify the rate of absorption for the soils where you intend to place your septic system prior to approving a building permit. A percolation test usually consists of boring several holes with a power auger, filling them with water, and observing the elapsed time for the water to be absorbed into the ground.Some health officials also may require a soil mantle test, done by digging a deep trench with a backhoe tractor. By digging a trench several feet deep, health officials can better examine the makeup and quality of subsurface soils and decide how well your land will accommodate a septic system.Whatever you do, check local governmental requirements for sewage disposal if the property you're considering requires a septic system. To protect your own interests, make your purchase offer contingent upon obtaining satisfactory soils test results. More on your "Country Dream Place" next month...  

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Real Estate

Jeff Otto

2006-06-01 09:12:00

Question: Where ARE The property boundaries?

ANSWER: You love the building's location, and you like the wooded conditions on the lot of this home you're thinking about buying, but you can't quite determine where the property boundaries are. Is the neighbor's fence in the right place? And what about the location of his backyard building? It's amazing how many innocent-looking situations can turn into nightmares when buyers don't take the proper precautions to double-check property boundaries. So let's talk about what to look out for, what steps can be taken to protect yourself in a purchase agreement, and possible remedies for solving possible property boundary problems.Many encroachments of neighboring fences, sheds, and other buildings can be seen with the naked eye during a cursory observation. For example, one of the first things a real estate agent does when listing a property for sale is to visually inspect the property boundaries. If the agent notes any discrepancies or potential abnormalities, he might reference a plat map and the legal description, measure the property boundaries, and/or suggest that the seller contact a professional surveyor. But sometimes encumbrances are more subtle. Especially when involving bare ground, without any improvements. Surveys are often required to right wrongs or further clarify boundaries that have possibly been changed by adding fences, landscaping, or other actions sometimes caused by Mother Nature. Why would a survey be necessary? Let's say that a property boundary along a fence line was in question. Until the seller knows definitely where the property boundary lies, the real estate agent cannot know the true value of the property and/or whether or not it can be sold without potential title insurance problems. He or she also cannot represent the proper boundaries to a potential buyer. And finally, the agent cannot know if potential challenges to the title could come from the owner of the encroaching fence. So if you were to purchase this property without taking the proper precautions, you could be buying all of the seller's headaches, perhaps at a premium price. How can you best protect yourself in a purchase contract if you sense that the property boundaries need to be clarified? Your first step is to gather all the information you can about the problem. Was it created by someone maliciously trying to encroach on the property, or did it happen innocently? Is the seller aware of the problem? And if the seller agrees to provide a survey, will he or she be willing to do whatever is necessary to right the wrongs found? This is often the most time-consuming piece of untangling the problem, since it requires both the seller and the other party involved, i.e. the encroacher, to work together, hopefully in a timely fashion. Second, make sure you write the purchase agreement so that it is contingent upon receiving satisfactory, acceptable, and verifiable information about the property boundaries. This could include a survey and/or a title company interpretation, and then have that documentation reviewed by your own professional surveyor or real estate attorney before removing the contingency. If you're going to be the person the problem shifts to if it's not remedied, then make sure you're happy with the findings before you part with your leverage in this deal. What if a property boundary problem is found that can't be remedied? Although this is fairly rare, you still might choose to purchase the property. Because of the problem, the property value could have decreased and/or the seller might need to make some other concession to even out the risk. One last thing. Be sure you talk with a title company about the availability of title insurance, especially if you're planning on constructing a home on the lot. An encroachment problem hanging out there in the wind might render title insurance unavailable or available only at a premium price. It could also have a bearing on your ability to obtain a mortgage loan.

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Real Estate

Jeff Otto

2006-05-01 16:01:00

:  I sold a property in Colorado and I paid for property insurance in the closing statement.   I was recently contacted by the title company and was told not all property tax was collected at closing, and I am going to be taken to court and have legal and lawyer fees to pay as well as the property tax.   I was under the understanding that is what title insurance is for and that is why I paid it just in case mistakes like this happened.   If you have any insight into this I would appreciate it.

ANSWER:  Title insurance insures the purchaser(s) against loss due to defects in the seller(s) title that is being conveyed to the purchaser(s). Taxes no matter how unpalatable to all of us, are not defects in the title. I'm sure that the purchase contract you signed called for you to pay the real estate taxes for the time period you owned the property. If an error in the calculations occurred or if additional taxes were discovered later, that does not relieve the seller(s) from their contractual obligations to pay those taxes. Also, in most closings the seller(s) and purchaser(s) sign a document wherein they agree to work with the title company, the lender(if any)and each other to correct any clerical errors that might arise. Quite often, if the error was due to a miscalculation on the part of the title company closer, the company will offer to pay any late payment penalty or interest.

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Real Estate

Randy Vickers

2006-05-01 16:01:00

: How can I buy a country dream place…and avoid the nightmare?

ANSWER: Ever dreamed of having your own place in the country? Somewhere with fewer cars, clean air, and a few friendly people? A place where you could go for peaceful walks beneath a canopy of trees, hear the redbirds sing, and splash your feet in a cool babbling stream? If you're like most of us, you've done plenty of thinking about your country dream. But you may not have a clue about how to make a wise decision when you're finally ready to make your country dream come true.    We will cover a five point check list over the next several issues that will help you to ensure that your country dream doesn't turn into your worst nightmare. We’ll begin with water issues. Few country properties offer the convenience of being hooked up to a municipal (piped, treated) water supply. Therefore, you probably will be considering properties that depend upon a well to supply your drinking water. We take drinking water for granted in most parts of the country, but you can't automatically assume that all properties will have an adequate supply of good water. When you have a well, you have to be concerned with both the quantity and quality of water the well supplies. Both can be tested before you buy the property. To test the output, or quantity of water the well produces, you can perform a well discharge test. This is simply a test where a technician pumps water from the well for a specified amount of time, usually three to four hours. This test can be done with the existing pump in the well, or with a portable pump provided by the technician. Most experts recommend using a high capacity pump that can pump greater volumes of water than the well produces to get a true reading of the gallons per minute of well discharge. For example, if you have a fifteen gallon per minute well and use a ten gallon per minute pump for the test, you'll never know the true capacity of your well.  The quality of the water the well produces is just as important, if not more important, as the quantity. You can have two separate tests done to determine the quality of water that the well produces. The first is a potability test to verify that the water is safe for human consumption. The main purpose of this test is to verify that the well contains no contamination, and that the water is safe for human consumption. Many lenders require such a test before they will lend on country property. The second test is a mineral analysis, which provides information on iron, sulphur, acid, hardness, and other characteristics of the water. It's not uncommon to find well water that is high in acid, for example. This condition can result in damage to copper plumbing, but can be treated by installing a neutralizing filter in the water system. Hard water is also a common problem, and can be corrected with the installation of a water softener. If you're considering the purchase of a property without a proven water supply, you'll have some difficult choices to make. You can go ahead and take a chance, hoping that you'll find good water when you drill a well after completing your purchase. Or, you can drill a well before completing your purchase of the property. Many country property buyers make their purchase offers contingent upon drilling a satisfactory well, with the acceptable gallons per minute and quality of water clearly specified in the contract. If you choose this strategy, plan to spend $20 or more per foot for drilling costs in most parts of the country, with no guarantee that water will be found. Those costs are sometimes negotiable between the buyer and seller, so plan to do some bargaining. After drilling a new well, you should get a copy of the well driller's report. This document will show the types of soils encountered while drilling, the depth of the well, the depth at which water was first observed, the gallons per minute of water produced by the well, and other details. You should realize that the gallons per minute noted on the report may not be an accurate indication of the actual quantity of water your well can produce. There are several reasons for this, including the fact that most well drillers test the well discharge by blowing compressed air into the well to determine the amount of water available. This common practice can result in a distorted reading. That's why a well discharge test performed over a period of several hours will usually provide a better indication of your well's output. You also should realize that the cost of drilling the well is not the end of it. You'll still need to install a pump and pressure system to deliver the water from the well to the house. This can easily cost several thousand dollars, depending upon the complexity of the system you choose.  Some information was researched from the world wide web.

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Real Estate

Charlie Traffas

2006-04-01 13:20:00

QUESTION: How Does The Mortgage Loan Process Work?

ANSWER:  The first item is:1. Application.  As a rule, the more accurate your application is, the faster and more efficiently your loan is approved. Information that is needed for your application is as follows: • Your address for the past two years • Names and addresses of your employers for the past two years •  Your most recent pay stub • W-2 forms for the most recent two years •  Two most recent statements for savings and checking accounts • Names, addresses, and account numbers for all loan and credit accounts • Addresses and loan information for all real estate owned • Homeowner's insurance agent's name, phone number, and address • Deposit for credit report fees, appraisal, etc. 2. Employment and Income. We want to be sure that your income and future mortgage payments will be a comfortable match for you. In most cases your employment will be verified by reviewing your most recent W-2 and pay stub. If you are self-employed, own your own business, or receive other income in addition to base wages, you will be asked to provide copies of your personal and business income tax returns for the last two years. 3. Assets. To verify the source of funds for your down payment and closing costs, we review your two most recent account statements. If you have just recently moved the funds, the previous account must also be verified. Verification may also be satisfied by a copy of bank statements, stock statements, or closing papers on the sale of a previous home. 4. Credit Report. A credit report will confirm your credit balances, monthly payments, and your payment history for current loans, paid loans, and charge accounts. This can be done right from our office while you're applying. If there are large differences between this report and your application, we will contact you. In addition, the payment history of your current residence will be verified with your mortgage holder or landlord. 5. Interest Rates. Interest rates change frequently, so you'll need to decide when to "lock-in" your interest rate. This can be done at any time throughout the loan process. You can lock rates and fees for a variety of time periods, but your terms may go slightly higher if you request a rate lock for a longer time period. Your loan officer will explain your options. 6. Appraisal. The home you are financing will be appraised by one of the lender’s approved appraisers. This provides an opinion of the home's market value for use in evaluating your loan request. The appraisal is not a warranty of the absolute value or of the condition of the home. A home that appraises for less than the sales price or that needs repairs can cause delays in the financing process. 7. Title Insurance. Title insurance protects the bank against loss resulting from legal claims against the property being purchased. The title insurance company reviews public records and reports the results to us. Claims may need to be satisfied before the sale of the property and funding of your loan can be completed. 8. Loan Approval. After we receive the necessary information, your loan file is reviewed by an underwriter. The basics for approval of your loan are: • The market value of the property • The amount of your down payment applied to equity • The percent of your income used to make monthly housing and debt payments • Sufficient cash reserves to cover the unexpected in your life • The stability of your income 9. Closing. After your loan is approved, your loan goes to "closing." An escrow account is set up in your name. You will be asked to deposit your down payment and closing costs, and sign your loan documents. These documents make the purchase and transfer of the property legal. After you sign the loan documents, they are sent to the county courthouse for recording. The day these documents are signed, funds for your loan are disbursed by the lender. This is referred to as the loan's "closing date." Then  its time to move!!

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Real Estate

Randy Vickers

2006-03-30 14:20:00

: After the pre-approval process, what’s next?

ANSWER: The process of buying a home is the biggest financial decision for most families. The largest investment, one of the biggest commitments, and a reflection on you as a person and a family. As a person progresses in his adult life few things provide more pride and satisfaction than a happy home. It is a sign to the outside world that all is well with this person and the family that lives in the home. To get to your happy home a person needs a team of professionals to help along the way.In many cases this process starts with a lender and the determination of what is a reasonable payment for the family and the financial requirements for the purchase of a desired home. We have previously discussed the loan process, and how helpful it is to do this upfront to ease part of the stress of purchasing a home. The lender can also help bring together additional resources such as Realtor, appraiser, inspector and title company to complete the process. Once a pre-approval is ready, the next step is to get together with a Realtor. This professional is able to gather information on prices, schools, neighborhoods, and many more important items for a potential buyer. In most cases lenders and Realtors have a working relationship which helps the experience be an exciting and enjoyable one. The lender and Realtor will also have valuable information concerning market trends, future development, tax issues and neighborhood history. Typically your agent will ask a set of questions to determine your housing needs and requirements, and work with the lender to make sure the financing is available for the desired purchase. Lenders and real estate agents can also help with arranging for appraisers, inspectors and title companies to add a layer of comfort to the transaction.The real estate purchase process involves lots of people playing lots of roles. These are all tied together and usually the team of professionals tries very hard to make life as easy as possible for the home buyer.Next time you're thinking of moving call your lender as your starting point to put together your “Real Estate Team” for a smooth and enjoyable move.

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Real Estate

Jeff Otto

2006-03-30 14:20:00

ANSWER: Marvin had seen several "For Sale By Owner" signs as he drove around town, and thinking he himself was a pretty knowledgeable fellow, decided that he too could save himself the commission and sell his house himself. So he put a sign in the yard, and made up some flyers. He could do this, right? After Marvin's house had been on the market for five months and he hadn't gotten a single offer to purchase, he was just about to call a Realtor he knew and list the house with him, when, out of nowhere, Bruce drove up. He offered Marvin something he hadn't expected... a long-term rental agreement. Bruce was a traveling salesman and said that he needed to move to this city so as to be centrally located in the geographic middle of his sales territory. Bruce was very nicely dressed in a three piece suit, drove a really nice car, and used the language of someone who has had very professional training. Because Bruce spent so much time traveling his territory, he wanted to simplify the move for his family by paying Marvin a security deposit and six months' advance rent. What joy! He also expressed to Marvin that he would prefer to sign a three-year rental agreement, eliminating the need to keep re-signing new lease agreements.  Needless to say, Marvin was beside himself with excitement. He hadn't really wanted to sell his house in the first place, and a three-year rental agreement from such an obvious professional was an unexpected dream come true. Bruce and Marvin signed the agreement, Bruce then advanced the money and Marvin headed to the bank. That is when the real estate fairy tale ended, and the bad news story began.As soon as Bruce gained control of the house and Marvin left, Bruce placed a for sale ad in the local paper. He was advertising the home for sale at an unbelievably low price. In fact the price was so low that Bruce received several hundred calls. He scheduled dozens and dozens of showings. Each time, he would give the person the same story about how he had lost his wife and family in a car wreck the previous year. He told everyone that he was being forced to give up thousands of dollars of his equity in the family home in order to pay off his bills from the accident. He then convinced the buyer to give him a $2,000 earnest money deposit to hold the house for him. The buyer's greedy nature told him he would never find another deal like this one, and he gladly forked over the $2,000 to Bruce. As a matter of fact, 48 buyers put up $2,000 earnest money each. With $96,000 in cash, Bruce headed out of town, leaving behind 48 contracts for sale on Marvin's house. Can you imagine  the legal situations Marvin was facing when all of the buyers' attorneys tracked him down? What do you do in a situation like this? Just when you think you've heard it all! The title companies are having no fun with this one. How could you keep this kind of thing from happening to you? If you're out of your field, you're taking chances you probably shouldn't expose yourself to. Remember this, investors. If someone wants to advance you a large up-front deposit and pay the rent far in advance, be very cautious. Ask for several credit references and then check them out. Get referrals from the renter's previous landlord and verify that he is moving into the house immediately. Make sure the water and utility services are transferred into his name. Drive by your property often to inspect it. If you see a lot of unusual type activity...investigate why. And remember that if something sounds too good to be true, don't be surprised if it isn't. More next month...

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Real Estate

Jeff Otto

2006-03-01 10:52:00

QUESTION: My agent has warned me to be sure to purchase title insurance. Is this a ploy to get more money, or is this something that I really need?

ANSWER:When you buy a home, you want to be certain it's safely yours. But even the most diligent search of the public records could fail to disclose a number of title defects. Things such as a forged will or deed, a title transfer by someone under age, fraudulent impersonations, secret marriages, undisclosed heirs, invalid divorces, a married person conveying real estate without the knowledge of his or her spouse, or false affidavits are just a few of the problems that can suddenly surface. Without the protection of title insurance, you'll be in jeopardy of losing your investment. The following are just a few examples of how this could happen to anyone.An elderly lady charmed the socks off of a family called the Shanks. Impeccably mannered and speaking the language in a pretty fashion, she explained that her country cottage home had been unoccupied for some period of time, so she was letting it go at an irresistible price. The Shanks jumped at the offer, only to find out later they were the unwitting victims of a classic forgery caper. Very cunning and charming, the old woman had learned that the true owners of the sold country cottage home were living somewhere over in Europe. She forged a deed to the property,  had it recorded in her own name, and proceeded to perpetrate her scam on the first family she could find who were looking for a deal that looked too good to be true...and like usual, it wasn't true.  Her low asking price assured her a quick sale. By the time the Shanks were made aware of the scam, the charming and cunning little old lady was long gone. Thank goodness for the title insurance policy issued on the sale...the loss was mitigated to everyone's satisfaction.The homeowner was a widow lady with six sons and a couple of daughters. One of her sons was the captain of a fishing vessel, and had not been heard from for many years. Presumed lost with his boat at sea, he was declared by a court legally dead. When his mother, the widow lady, passed away, her seven remaining offspring inherited her home. It was an attractive house, and so they put it on the market at a below-market price to facilitate its sale and consequently, the settlement of the estate. Recognizing a bargain when they saw one, the Morgan family bought the property. They were delighted with their new home.  Right up until the long lost sea captain returned from the dead. It turned out that the widow's missing son had decided years ago to just leave and start a new life in a new part of the world. When the ex-sea captain eventually returned and found that the house had been sold, he promptly got a lawyer and filed a claim against the Morgan family for his rightful share of the property. His rightful share of the property? But he's been declared dead! How can...? Thank goodness for the title insurance company working through the problem and saving the day for the Morgan family. More next month...

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Real Estate

Randy Vickers

2006-03-01 10:52:00

QUESTION: Is funding and securing your own new-home, construction loan a good idea?

ANSWER:  You decide. This horror story comes right out of the Midwest!  Jim (not his real name) was going to build a house. Jim contacted a builder who seemed to have a pretty good reputation. To save some money, Jim was going to secure his own construction loan. The builder would then draw down on the construction loan as the house was being completed. Everything went fine until Jim started noticing that the builder was never on the job site and that subcontractors would come in some days, and on other days there was no sign of them. Delay after delay occurred, and then one day Jim was served notice that the builder had filed for bankruptcy. A visit to the bank showed that the builder had drawn the construction loan down more than the stage of construction would warrant. This home was valued at $400 thousand. Here's exactly what happened. The builder was a very good friend of the appraiser, responsible for inspecting the construction and reporting back to the bank. In this way, the appraiser was responsible for the amount of money the builder could draw. Since the builder was his friend, the appraiser took his word for the percentage completed, rather than inspecting the job himself. As it turns out the builder actually pulled down 35 percent more than he had completed. Now think about this. We have a $400 thousand house with a $300 thousand construction loan. The builder had completed only 25 percent of the job but had received 60 percent of the money and not paid many of the sub-contractors that had worked on the house.. To complete the house, Jim would need to take $200,000 out of his own pocket, and pay attention to this. The builder is in bankruptcy so Jim's house is tied up in litigation. It may take months to untangle this mess.How could Jim have avoided this situation? First, never give the builder the ability to draw on your construction loan.  The builder should provide a draw request to you, which allows you to inspect progress and control the flow of funds to the builder.  Also check the sub-contractors and make sure they are getting paid. If for some reason they are not, this is a red flag.  Even though you have a builder to organize and schedule the building process, you must treat this as your project. The construction lender will also send out an inspector to make sure the home is progressing to meet the draw requests for degree of completion.  Make sure the percentage of draw equals the average rate of construction. It is important to check out the builder very carefully. Get references and call each one. Ask for buyers who used the builder two years ago and one year ago, etc. Also get a reference from someone who is currently using the builder. Ask these questions: Was your building job completed on time? Were there any surprises? Did the builder respond to your problems in a timely manner? Did the builder handle any warranty work in a timely and professional manner? The main point here, and I can't stress this enough, is if you don't have the time or desire to supervise the project don't get your own construction loan.  Many builders can and will get their own construction loan if they need to, which removes some the responsibility from you as a new home buyer.

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Real Estate

Jeff Otto

2006-02-01 15:22:00

Must I notify my home owners association of everything I do?

ANSWER: John Smith (not his real name) purchased a home in a large Midwestern city. He bought the home because it was in a neighborhood he really liked, and was in close proximity to his work. Several months after moving in, he decided he wanted to build a workshop out back where he could pursue his first real love, the hobby of building furniture. John ordered a truck load of building supplies, designed and ordered roof trusses, and started building a 22 by 36 foot workshop.  He had it completed within about 90 days. He moved all of his expensive power tools into their proper places inside the new shop, and was really looking forward to designing and building some very nice, well constructed furniture for his new home.  Shortly afterward, John received a letter stating that he had built his shop without getting a review and approval of the plans and specifications by the neighborhood homeowners association. The letter further informed him that his new building was not suitable, and would have to be torn down. John was upset with this news, but he just ignored the letter, thinking it was the work of a few disgruntled, unhappy neighbors. Thinking this problem had gone away, John then received a legal summons and complaint served by the warrants office of the local sheriff's department. John would now be required to go to court to explain and argue his case. He showed up in court and pleaded his case to the presiding judge. The judge was polite but read John the specific language in the restriction covenants that prohibited John from building a workshop without getting prior written consent and approval of the association for the building project. John's workshop also did not blend in with the exteriors of the homes in the neighborhood. The judge ordered John to tear down his workshop. This was a very costly lesson for John. The workshop had cost him several thousands of dollars and he would now need to store his expensive power tools and go back to the committee for approval for another, more neighborhood pleasing workshop. His entire family now harbors terribly bad feelings for the neighborhood homeowners association, and they are even considering moving somewhere else simply because of the hard feelings, and the fact that John was not aware of the neighborhood restrictions. John should have had his real estate agent or a lawyer obtain a complete set of restrictive covenants for the subdivision, and he should have read them very thoroughly prior to writing an offer to purchase a home in that location. If he had done so, he would have known that he needed to take his workshop building plans to the neighborhood association's architectural committee for review and approval. If you ever find yourself in a similar situation, get approval in writing and then follow your plans to the letter. While they may be inconvenient at times like this, neighborhood restrictions are actually a good thing, because they help preserve the value of homes in the neighborhood. Don't become another John Smith. Research and review your restrictions and make sure that you get a building permit after the board approves your plans. More next month...

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Real Estate

Jeff Otto

2005-12-29 14:04:00

: What is the benefit of a title company?

ANSWER: So… you've decided the time has come to sell your house that you've lived in for 7 years, and make that move to a newer one with that 3 car garage and a finished basement. You contact your real estate agent who sold you the home, and the appointment is set for listing the home. With this done, the sign goes up in the yard, the lockbox is on the door, and the house is clean and spotless. The buyer is produced in about 6 weeks, and your realtor takes you out to your favorite 3 homes he's located for you while your home was being marketed. You pick out your most favorite, and sign a contract to purchase that home, with the closing date coinciding with the closing date on the home you're selling. Everyone's excited! With both transactions now proceeding very smoothly toward closing, everything appears to be alright. Your buyer is pre-qualified, you are pre-qualified, and you're getting things packed up for the move. You go to the title company at the pre-arranged time to close the sale of your present home. Done! You head over to the closing at a different title company for the closing of your new home…your attorney meets you there and tells you that a problem has come up. Yesterday, as your attorney just completed examining the title for your new home, he now says he just discovered that a number of years ago, a cousin of the Seller made a claim that the Sellers had stolen part of the land that their new home was built on, and is now demanding that he be paid off on that claim. The sellers have already moved away to another state, and have pre-signed the closing papers through their relocation company handling their sale to you.  Your attorney waiting until the last minute to examine the title?…bad deal! Your agent calls the relocation company to see if they will allow you to move into the new home on a rental basis if you sign a hold harmless agreement with them. The answer is a resounding no! You have all your furniture on a moving truck due to the fact that you had to give possession to the buyers of your home at closing. They're moving in to your previous house today! You're now homeless! What can you do…where can you go…? Friends? Relatives? Motel? What a situation. You rent a motel, pay rent on the storage of your furniture, and pray that the title problem can be resolved. Who dropped the ball here? The realtor faxed the contract to your attorney at your request immediately after execution by all parties. The attorney handling it for you didn't examine the title until the day before closing, saying that he didn't anticipate any problem with that. He apologized for waiting so long to examine the title, but that failure to examine the title promptly created a huge last minute problem that took an additional 2 weeks to correct, allowing the seller to be able to give clear title. In any real estate transaction, ask your attorney or your real estate broker to have the title examination started as soon as possible to avoid this kind of serious last minute surprise. Title Insurance companies actually begin to examine the title immediately upon receiving a copy of the contract from the office of the real estate broker. If there's a problem with the title, the sooner it is discovered, the better your chances of closing that sale on time…Fortunately, the title insurance company was able to get the title problem resolved to everyone's satisfaction, and 2 weeks later, the deal closed... more next month.

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Real Estate

Randy Vickers

2005-12-29 10:13:00

: Lately, I have heard about real estate bubbles. What are they and should we be concerned here in Wichita?

ANSWER: There has been a lot of talk in the national media about a possible Real Estate "Bubble." The theory goes that low interest rates have allowed consumers to push prices to levels that are not sustainable. In my opinion, this theory has no merit in Wichita I would first caution folks about considering real estate as a national market, like you do cars, furniture, etc. Local markets are most influenced by local factors, such as employment, unemployment, development, and public perception concerning the outlook for a specific area. Wichita is currently in a very stable employment market, a controlled development market, with an optimistic, but not exuberant outlook for the future. Wichita also has plenty of room to grow in all directions, unlike areas such as California, New York, or Florida, where the lack of lots of land causes inflation to what little is there. The cost to develop more ground is very reasonable in our area when you compare it to the land costs in these higher cost real estate markets. Homes in Wichita, and the surrounding areas have generally continued to appreciate at a 4-6% rate per year. These are not the kind of numbers that we hear about from Las Vegas, Boston, or San Francisco. This kind of growth establishes a stable investment at an affordable price, at all levels of the housing market. Wichita is still one of the most economical housing markets in the entire country, with a stable consistent number of buyers and sellers that match the supply/demand for housing in the area. Statistics from the Wichita Area Association of Realtors suggest that the growth in Wichita is consistent and stable and should continue in that manner. A person buying a home can expect real estate to be a reasonable investment, as well as providing shelter. A person here should not expect to make gains of 15-20% in short periods of time, and in most cases should expect to live in a home for at least 3 years to cover the cost of buying and selling.  The good news for Wichita is that if you already own a home, it has probably been good to the homeowner for shelter, taxes, and as an investment. If you don't currently own a home, you will have the oppor-tunity to purchase one at a value that some parts of the country can only dream about. With the help of a good Realtor and Lender to help you with the purchaseprocess, nearly everyone can feel good about owning real estate in Wichita. More next month...

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Real Estate

Jeff Otto

2005-11-01 16:19:00

: When you purchase a home, you are really purchasing the title to the property - which is the right to occupy and use the space. That title may be contested based upon past rights and claims asserted by others. These types of claims can infringe upon your purchase of the property or cause you to lose money. So…why do you need title insurance?     

ANSWER:  A home is usually the largest single investment any of us will ever make. Title insurance protects against loss of value from hazards and defects that may exist in the title. These hazards include fraud, forged signatures on deeds, unknown property heirs, adverse possession claims, liens, and documentation errors. If you were uninsured and your right to title is challenged, you could lose significant money defending yourself or you could even lose your home. Your mortgage lender will require a loan policy of title insurance to protect their interest in the value of your property and a homeowner should purchase an owner's policy for the very same reason.An owner's policy of title insurance requires the insurance provider to pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium generally paid at closing, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.  What is a closing, you ask? A closing, which is also known as "settlement" or "escrow," is the event where the title to a property is transferred from seller to buyer. Closing is typically held in an office, such as that of an attorney, title agent or title insurance company, and involves the completion of all the necessary paperwork to finalize the agreement between buyer and seller. In addition, all financial issues are settled at closing - closing costs - and once the title is successfully transferred, the necessary documents are prepared, signed, and filed with local authorities. Just FYI, closing costs are all costs required to close the real estate transaction. They can include (but are not limited to) surveying fees, property taxes, title insurance, attorney fees, agent fees, points, loan origination fees, primary mortgage insurance (PMI), and the balance of your down payment. Prior to closing, you should review your final closing statement or HUD-1 Statement (whichever is in use) to ensure that all the calculations are correct and that you have been given all the credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title, and escrow fees to make sure they are accurate. From the lender's standpoint, a refinanced mortgage is actually a brand new mortgage - complete with the same risks that may have been present originally. During the refinance process, your original mortgage is paid off - and your existing lender's title insurance policy is rendered null and void. However, if you purchased an owner's policy of title insurance at your original closing - that policy will remain in effect as long as you or your heirs own the property. More next month…

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Real Estate

Randy Vickers

2005-11-01 16:19:00

: I would like to know what happens if your credit report has no hiccups. And what are the benefits of having a clean slate?  

ANSWER: There are obvious advantages to having a great credit score. First of all, you get a bigger cup of coffee when you are sitting in the office for the credit application to buy your home... kidding.  The "conforming buyer", which you are with a good credit score, always gets the absolute best of available interest rates. Best interest rates translates to lower house payments. You have done your part and have shown the ability to manage your credit and pay on time. The approval process, either through the underwriter of the loan, or the loan committee if you were going through a conventional bank, is expedited when your credit is good. The loan approval will require less time and paperwork. You can begin making plans to move rather quickly when you know you are going to be approved, thereby not leaving the packing to the last minute. As we mentioned earlier, the buyer with "hiccups" on their credit report can still be approved for a loan to buy a home in most cases, but the interest rate is normally higher for them. Lower credit score translates into higher interest rate, but the difference is not normally high enough to make the buyer not want to buy the home. The advantages of owning a home far outweigh the small increase in rates caused by a poor credit score, in nearly every instance.  With a good credit score, it's likely that the buyer can consider buying a more expensive home. Good debt-to-income ratios, combined with the good credit score, allow the lender to go along with more expensive real estate for that buyer because his risk of loss in the deal is minimized due to these good circumstances. If a prospective buyer of a home has any doubts at all about what they can or cannot buy, a prequalification appointment with a mortgage lender is a good way to remove the doubt. Most folks who go in for a preliminary loan application appointment leave with a pre-approval letter in hand.  And there's no pain involved in the process. More next month...

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Real Estate

Jeff Otto

2005-11-01 16:19:00

: I’m thinking about selling my house as an ‘FSBO’ (for-sale-by-owner). Do you have any advice?

ANSWER: Let me tell you a story. Four years ago, Jack and Mary Stoops bought their first home. They loved it and planned to live there for about 10 or 15 years and then move out to the lake. But nearly a year ago Jack's employer offered him a transfer to another city. Jack wasn't given much of an option. It was either transfer now or receive no advancement in his present job. Jack's company did not offer a buy-out provision, so the Stoops would be responsible for the sale of their home. Jack and Mary asked three agents to perform a comparative market analysis on their home. The results were discouraging. Because they had been in the home such a short time, the Stoops had not realized much appreciation in their home's value, so if they sold through a Realtor they would have to pay the commission out of their own pockets. They decided to try the For-Sale-by-Owner route.Everything proceeded smoothly at first. Several lookers stopped by, but the seventh family to see the house fell in love with it and made an offer. The offer was lower than Jack and Mary had expected, but time was running out so they decided to accept it. In writing the offer, the purchasers had used a blank form they'd found in an office supply store. The Stoops never thought to have an attorney review it. If they had, the attorney would have advised them to add a financing contingency clause, which would have let the Stoops out of the contract if the buyers couldn't get financing within a certain number of days.The house was to close in 90 days. When weeks passed and the Stoops hadn't heard from the purchasers, they began to worry. Jack finally called his buyers, who told him they'd been turned down by the first bank. Still the buyers were optimistic they could get the loan from their credit union. Later that same day a buyer dropped by because someone in the neighborhood had told him the house was for sale. This person offered the Stoops full price in cash for their house with closing in one week. Once again, Jack called the buyers and told them he'd received another offer, but the purchasers remained adamant that they could get financing. They refused to release the Stoops from their contract. Because there was no financing contingency, the Stoops could do nothing but wait - 60 more days to be exact. Unfortunately the second buyer needed to find a home within two weeks. The Stoops called the first purchasers almost daily but they wouldn't give up on trying to get a loan. Finally the 60 days passed, but the generic contract contained an extension clause allowing the purchasers an additional 30 days if financing had not been finalized by the original closing date. Another 30 days passed and finally Jack and Mary could sell their house to the cash buyer. There was just one problem. The cash buyer had already bought a house. The Stoops had wasted four months because they wanted to save that commission. It was now time for them to move, so they were forced to list the house anyway. It's now been six months - that's six months after the four wasted months - and the Stoops still don't have a contract on their home. They're renting in their new city and waiting, waiting, waiting...What Jack and Mary should have done was to have a Realtor or attorney review that contract before signing it. Real estate professionals will keep you out of trouble. In this case a financing contingency clause would have permitted the Stoop's to move forward immediately when the buyers' loan was turned down. They could then have sold their home to the cash buyer.If you're trying to sell your own home there are a long list of things that need to be done to get your house closed, any one of which could stop your sale cold if not performed properly. Consult a Realtor or real estate attorney before playing with the largest investment you'll ever make. More next month…

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Real Estate

Randy Vickers

2005-11-01 16:19:00

: What are FHA loans and what are their benefits compared to conventional loans?

ANSWER: Anyone who meets the credit requirements, who can afford the monthly mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan. One of the benefits of an FHA loan is the fact that they are assumable at a later time by a qualified future buyer. You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, may allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can sometimes result in a lower interest rate. The application process consists basically of a credit check, and no property appraisal is required. You must demonstrate that you have enough income to support the mortgage loan, typically 30% of gross income for house payment and not more than 43% of gross in income for all debts. In this way, qualifying to assume a loan is similar to the qualification requirements for a new one.Except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan. Conventional loans exceeding 80% of the purchase price also require private mortgage insurance. The FHA requires a single, up-front mortgage insurance premium equal to 1.50% of the mortgage to be paid at closing. In most cases this amount is financed into the new loan. After closing, you will then be responsible for a monthly premium of mortgage insurance. FHA loans are often used in combination with "First Time Homebuyer" programs and down payment assistance programs. These programs keep the upfront cash requirement to a minimum.There are mortgage options now available that only require a down payment of 5% or less of the purchase price. There are even 100% loans with approved credit. There are programs that allow you to buy a home with nothing at all, or very little, out of pocket. The larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that the monthly payment is affected by  about $6/month per thousand you do, or do not, pay as down payment, for a 30 year mortgage.…More next month…

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Real Estate

Randy Vickers

2005-10-01 14:59:00

:  Is mortgage loan pre-approval necessary?

ANSWER: I get this question all the time, and the best answer includes the following information. A Buyer who has a pre-approval letter from a lender has a leg up on someone who doesn't have it. Here's why. At the time you find the right home, and decide to go ahead and write a contract on it, there could be other contracts coming in on that same home at the same time as yours. If the other buyers haven't taken the time to get pre-approved, and you have, the pre-approval letter can be presented to the Seller with your contract. Now, if a Seller has to choose between contracts with no buyer pre-approval letters, and yours with a pre-approval letter, with all other items of consideration being equal, which contract has the better chance of getting the nod from the Seller?  Also, the process of getting pre-approved for a mortgage loan is painless! No teeth are pulled, no forfeiture of first born children is involved, and it only takes about 30 minutes to get it done. Wouldn't you agree that if you have been pre-approved for a certain loan amount, it would be a lot more comfortable in your home search to know how much home you should be looking to buy? What price range, how much cash is required, and what will the payment be, can all be estimated ahead of time. And when you find that perfect home, you already know you will be able to get the loan to buy it? Doesn't that feel better? Knowing what price range of home you're able to be qualified to buy might just upgrade the neighborhood you're looking in. Lots of buyers find out through the pre-qualification process that they can be approved for a lot more home than they originally thought they could. Maybe you've had some hiccups in your payment history along the way… most folks have, so you're not alone in this. There are many ways to get your mortgage loan approved in today's lending world. In most cases, if your credit report has a few problems, those problems can be dealt with so that they don't prevent you from getting a loan to buy a home. It's just a matter of sitting down, analyzing the issues, and formulating your loan request to accommodate the situation. Don't let the unknowns keep you from getting into your own home. If you're renting, you're actually buying a home…but for someone else.  Your landlord loves it when you make the payments on his house. Consult a mortgage lender as soon as you can…as mentioned earlier, it's painless, and you might just find out that your fears about buying a home were unwarranted.  Typical items required for pre-approval include:  2 years federal taxes, recent paystub and recent banking statements.  More next month…

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Real Estate

Randy Vickers

2005-09-01 14:36:00

:  How does my credit history affect my loan being approved?

ANSWER: If you are worried about your credit history, you can take charge of your situation by getting the facts and taking the actions necessary to improve your chances for a mortgage approval. Many consumers have faced difficulties that resulted in credit problems. The good news is that a consumer is no longer banned for life from obtaining a mortgage or other new credit. The primary purpose of a credit report is to establish that a borrower has a sufficient and satisfactory credit history for the loan requested.  This is done by a credit scoring system, with each of the three major bureaus providing a score.The secondary purpose is to develop a complete summary of current debts that a consumer must pay each month. Credit reports also list any bankruptcies, foreclosures and legal judgments against a consumer.When applying for a mortgage loan, there are specific guidelines established by mortgage institutions such as Federal National Mortgage Association (FNMA) for obtaining a conventional mortgage loan. These guidelines specify, "The borrower's credit history should demonstrate his or her past willingness and ability to meet credit obligations that will show the borrower's commitment to making payments on the new mortgage that is now being considered."Underwriters are more concerned about a borrower's overall pattern of making payments than they are about a few individual occurrences. "A borrower who has made payments on outstanding or previous credit obligations according to the contractual terms will have a credit history that consists of no late payments and no adverse or derogatory information (such as bankruptcies, judgments or collections). To make sure that a borrower who has an otherwise good payment history is not penalized for an occasional late payment, we do not require perfect or spotless credit records."While usually accurate, credit reports often contain errors and mistakes. In the past, credit histories were a closely guarded secret and consumers could only guess if they were denied credit by accident or due to incorrect information. Today, consumers can obtain exact copies of their credit histories from the major credit reporting bureaus.  In most cases these can be accessed quickly with the use of the internet, and many times are free.Whenever consumers are denied credit, they can obtain a copy of their credit report to challenge and correct any errors or mistakes. For instance, if a borrower has a common surname or family members are Jr., Sr., III etc., he or she will be able to separate his or her  accounts from family members or people perhaps not even related to the consumer.A borrower should contact all three of the major credit bureaus directly to correct any errors appearing on reports from each of those credit bureaus. Each credit organization will send you a free copy if you have been denied credit. More next month…

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Real Estate

Jeff Otto

2005-09-01 07:39:00

:  We are in the process of purchasing a home and the title came up not clear. What do we do?

ANSWER: If the title to the property is not clear, there may be a number of remedies: a) The current owner may have to pay a lien, judgment, etc. in order to clear the title for sale to anyone else. b) If the current owner has an Owner's Title Policy, and the defect in title was prior to the current owner obtaining the property, the issuing agent can request of the issuing Underwriter, an Indemnification of the backtitle and the new title agent/underwriter can then insure over the defect. Example: A 20 year old mortgage shows of record. The bank has gone out of business so no Satisfaction of Mortgage can be issued. The current insurer gathered sufficient information to underwrite the lien without needing the Satisfaction filed, but this also means it will stay of record indefinitely, always being a lien against the property. The new title insurer takes the Indemnification from the current title insurer so that the lien can be insured against by the new title insurer. c) Escrows may be collected at closing and held by the title agency until the defect can be remedied. d) The property may be deemed un-insurable by the title agency and there is no remedy for the defect, making the property "un-sellable" e) The buyer may elect to accept the defect (depending on what it is) with the seller adjusting the sales price accordingly. As you can see, the Title Insurance policy is a very important part of the sale or purchase of real property. Never let yourself get involved in a sale or purchase without it. That's a mistake that could haunt you for a long, long time. More next month…

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Real Estate

Jeff Otto

2005-09-01 07:39:00

: Why has my mortgage lender insisted on title insurance?

ANSWER: After an hour in the Title Company's lobby and conference room, you've signed your name and initialed in dozens of places, and written checks for the down payment and closing fees. When they say you're finished signing documents in this "paperless society", you reach out and shake the hand of the lender, closing officer and the sellers. You've got the keys to your home of your dreams in your hand. Despite having experienced all the worries in the world, the closing has gone relatively smoothly, and so you gather up your closing papers file, thank everyone involved, and head on out the door. Outside, it dawns on you that you are now the official owner of that wonderful home you've always wanted. You're packed, and the movers are there right now! You can't stop yourself from peeking again at the paper with "Warranty Deed" in bold letters at the top. Everything looks great! The lengthy legal description of the property, the sellers' signatures on each document alongside yours, the statement in lofty language that you are the owner in fee simple, (what does that mean?) to have and to hold said premises forever and ever, amen. The document is authoritative, legalistic and reassuring. So how come your lender insisted on title insurance? Because residential real estate has often had a long history of previous owners and transactions of sale. You cannot tell by looking at the property and/or the current deed whether the title is good, like you sometimes can if it were a melon in the grocery aisle. For all you know, the people you bought the house from might have slipped out and gotten a second mortgage on the property two days before closing, or neglected to pay a brand new $5,000 special assessment for the new sewer or water line. Perhaps the swimming pool is located in such a way that it extends over into the area designated as a utility easement, or even onto a part of your lot that your neighbor now claims is his land. Maybe the prior owner decided not to tell you that her ex-husband holds an unrecorded lien that is a claim on the property for repayment of debt on the house for half the proceeds of the sale.Title insurance is like a castle wall around your property, protecting it from claimants who might creep up out of the past. The chances are good that you'll never have to file a claim, but you'll be really glad to have that title insurance policy if you do. To a large extent, title insurance policies are an exercise in preventative law. Just like health insurance companies refuse to insure people with a history of pre-existing conditions, title insurance companies refuse to insure properties with a history of legal uncertainties. Accordingly, the title examiner searches the records with an expert eye and identifies any potential problems, such as an unpaid tax assessment or a neighbor's easement for right-of-way. The examiner then issues a preliminary report called a commitment, which lists these defects and informs you of any problems that the seller must correct prior to closing. If the company isn't willing to cover a particular matter and the seller can't or won't correct it, you have a choice whether to live with the problem or bow out of the deal. If a title insurer refuses to write the policy at all, you can bet that the seller can't give you good title.But even a castle wall can't protect you from newly discovered bolts out of nowhere. Title insurance policies clearly state that they don't cover matters that arise after the effective date of the policy…more next month!

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Real Estate

Randy Vickers

2005-08-01 08:54:00

:   What if my credit report has "hiccups?"

ANSWER:  The "subprime" or "6" credit market has become a very large part of the home mortgage lending marketplace in recent years. "Subprime" lending deals with borrowers who have credit problems (hiccups) showing up on their credit report. There are many reasons why a consumer might have a credit report with ‘hiccups’... these include layoffs, divorce, and medical situations. Oftentimes those hiccups aren't a result of a borrower who doesn't pay his or her bills on time, but are due to mistakes that are entered on the credit report by credit reporting agencies. Most mortgage brokers pull an on-line credit report during the pre-qualification appointment, or the actual loan application, for the purpose of determining exactly what they will be dealing with in getting you approved for your new mortgage loan. If there are items on that report that would make getting approved for a new home loan unlikely right now, the mortgage broker will be able to make suggestions to you regarding how to get those things repaired, and the report re-issued with those negative entries off or corrected on your report. Even if the negative credit items are indeed yours, there are a number of ways to take affirmative action to get back on the right track with the 3 major credit reporting agencies. Most mortgage lenders get the consumer's credit score from each of the 3 agencies, and use the middle score for the purpose of establishing your particular loan program.Let's talk about a bankruptcy, and how it might affect your ability to get a new loan to buy a home. If the final discharge of the bankruptcy was at least 2 years ago, and you've re-established your credit in a positive way since then, and assuming your debt to income ratio is reasonably good, combined with at least 2 years of job stability with an adequate income for the desired financing, you should, in most cases be able to be approved for a new FHA or VA loan to buy your new home. Many people who have experienced a personal bankruptcy automatically assume they cannot buy a home, and many times that's just not the case. Mortgage brokers work very hard to make as many loans as they can, and only get paid when they are successful in making a loan.Lots of folks hold off buying a home until they've saved up a certain amount of money for a down payment. There are many new and different lending programs available that can get you into your new home with zero or very little money out of pocket. We'll talk about some of those loan programs in detail next month...

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Real Estate

Jeff Otto

2005-08-01 08:22:00

:   If I can find  the deed to my home in the record room at the courthouse, does that not mean that I own my home that I paid for?

ANSWER:  Lots of folks have thought so…however, it is only evidence that you have taken over whatever rights the grantor had in the property.  If, as an example, the deed to the grantor deeding to you was forged, and as a result, the grantor had no rights, then the grantor could not legally pass any property rights on to you. The grantor might, as another example, have made the driveway on the property a joint driveway by giving the next door neighbor the right to use it. In that case, he couldn't pass sole ownership of the driveway to you, no matter what the deed says. The recorded deed is public notice that you have taken over whatever rights the seller may have had in the property. Or may not have had in the property!The question has been raised as to whether title insurance as important as fire insurance? The answer is a resounding yes, because your losses without title insurance can be lots greater than fire losses. If a house burns, the land is still there on which you may rebuild. The basement walls are normally still there from which to erect your new home. The fences, outbuildings, trees, etc. are normally still there after a fire. But, if title to the property fails, you have nothing. This is why an owner's title insurance policy is always written to cover the value of the house and the site. Although title insurance cannot eliminate title defects any more than fire insurance eliminates fire, your title insurance policy assures you of the best possible legal defense if your title is attacked and reimburses you up to the face amount of the policy if the title, or any part of it, should fail.  When you buy a home and protect it with title insurance, and in the event someone should challenge your ownership of the property five or ten years after purchase, what should you do? You notify the title insurance company and, in accordance with the terms of the policy, it undertakes, at its expense, to defend the title. If the claim reaches the courts, the title insurance company retains attorneys and bears all the expense of defending the suit. This is true regardless of your period of ownership, whether it be a day or a year, or many years…more next month…

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Real Estate

Randy Vickers

2005-07-01 11:46:00

: Is A 15 Year Loan Better?

ANSWER: Whether to take out a 30 year loan or a shorter term loan is a question that has been asked for a long time. And the answer is different for everyone. It all depends on what your goals are for the repayment of the loan used to purchase your home. For example, if you take out a loan for 15 years rather than 30, more of your monthly payment will go toward the principle, and less of it for the interest. An amortization table will demonstrate this to you very clearly. Your payment is broken down into Principle, Interest, Escrow for taxes and insurance, and sometimes PMI, or private mortgage insurance. Most lenders require that the Buyer purchase and pay for this private mortgage insurance on loans exceeding 80% LTV (loan to value) which protects the lender against the Buyer's default on the loan. The monthly payment on a 15 year loan is also higher than the payment on a 30 year loan, as you might expect.There is an advantage to taking out the commonplace 30 year loan that most people don't know about. Besides the monthly required payment being lower than on a 15 year payout loan, by picking up an extra principle payment each month in addition to your regular monthly payment, you actually save that month's interest, and you also effectively cut off a month from the term of your loan. What that  means is that each month, if you were to do this extra principle payment, together with your regular payment, you would pay off your 30 year loan in 15 years or less. But you would only be obligated for the lesser payment each month rather than the higher payment on a 15 year loan. Many people have paid their home off early utilizing this method of payment. A much better plan than running up another credit card balance. More next month...

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Real Estate

Jeff Otto

2005-07-01 10:52:00

: About nine years ago, my widowed mother, then 63, thought she was dying because she felt terrible and had no energy. Her doctors couldn't find anything wrong. So, to avoid probate at her passing, she deeded her house to me, her only child. Then mom went to a new doctor who specializes in "senior citizens." He did some simple appearing tests and found out that my mom's thyroid gland wasn't working like it's supposed to. This new doctor then prescribed a little inexpensive daily pill for her thyroid. Now she feels a lot better and has more energy than I do. Mom decided that she wants to move from her house to a great, nearby  assisted-living center, where several of her long time friends live. But in order to do so, it will be necessary to sell "her house." My tax adviser says, since the house was a gift to me,  I took over mom's low $76,000 basis, which was her original purchase price. Today, the house is worth about $480,000. How can I avoid paying tax on this capital gain sale so mom can have the money to live in that assisted living center?

ANSWER: A great question, but sadly, a bad situation for you and your mother. Your mom's tax adviser appears to be correct. Deeding her house to you was a very costly mistake for you both. As the donee, you received your mother's low $76,000 adjusted cost basis. Now, when you want to sell the house for your mother's benefit, there will be a large taxable capital gain. And  because your mom is not on the title, she can't qualify for the Internal Revenue Code 121 principal residence sale $250,000 tax exemption.But I would suggest that if your father was a co-owner of the house and your mother inherited his share of the house at the time he died, then your mother became entitled to a new "stepped-up basis" of market value on the date of death. If that is the situation, be sure your mom's tax adviser is using a date of death stepped-up basis to establish your adjusted cost basis as the donee. I'll be the first to say that I'm not a tax expert, but a good tax attorney can offer you great advice on things of this nature.  More next month.

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Real Estate

Randy Vickers

2005-06-01 10:45:00

: How long will it take to process and close my home loan?

ANSWER: Most people in today's world find value in getting pre-approved by their lender, sometimes even prior to finding the home they want to buy. This pre-qualification process gives a buyer an additional tool to include with an offer to purchase, thereby giving the Seller the added comfort of knowing that the Buyer has been looked at by the Lender, and subject to standard underwriting guidelines, they will have their home sold simply by signing that offer to purchase. Removing the question of the Buyer's qualifications is a good thing, and knowing the answer to this question at the time of contract signing makes the process go along very smoothly. A good mortgage broker is always ready to take a pre-qualification application.  The process usually takes not more than an hour, sometimes less, and then the buyer knows what amount they can be approved for, and can then look for a home in a given price range with the confidence of knowing that if they see a home they like, they can buy it.  The sooner the broker is able to verify the information that you provided to him/her at the time of application, the quicker your loan can be processed and closed. The standard information that is normally required at application is: your last couple of pay stubs, W2s, Social Security numbers, tax returns for the last two years (potentially), bank account numbers, and details of your long-term debts (credit cards, auto loans, child support, etc.). If you are self-employed you may also be required to provide Profit & Loss statements for your business. Lenders will want specific information. For example, the origin of your down payment will be verified. A qualified broker or lender will work with you to determine the best loan and interest rates available to you after they review your personal information and your credit report. You will receive a list of the documentation needed to complete your loan and once you've provided those items,  your final loan papers will be signed by you and you will have a date when the loan will be closed and you can move in! More next month…

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Real Estate

Jeff Otto

2005-06-01 09:50:00

: Can you describe some common real estate terms and what they mean?

ANSWER: Abstract of Title - A condensed history or summary of all transactions affecting a particular tract of land.Deed - A written document by which the ownership of land is transferred from one person to another.Due-on-Sale Clause - A provision in a mortgage or deed of trust which requires the loan to be paid in full if a property is sold or transferred.Fixed Rate Mortgages - Mortgages with a fixed interest rate. Your payment for principal and interest will not change for the life of the loan. Your monthly payment may change if taxes or insurance rates change.Foreclosure - A legal process by which a mortgagor of real property is deprived of his interest in that property due to failure to comply with  the terms and conditions of the mortgage.Grantee - A person who acquires an interest in land by deed, grant or other written instrument is called a Grantee. Grantor - A person who, by a written instrument, transfers to another, interest in land. Hazard insurance - This is the homeowner's insurance policy.Mortgage Note - An instrument used to encumber land as security for a debt. This document gives the mortgage company "in rem" jurisdiction over the mortgagor.Mortgagee - A designation for the mortgage lender on lands. Mortgagor - A designation for the mortgage borrower on lands.Point - One percentage point. It is equal to one percent of the loan amount.Promissory Note - This is a promise to pay. The promissory note document gives the mortgage company "in personam" jurisdiction over the mortgagor.

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Real Estate

Jeff Otto

2005-05-01 09:03:00

: What is the difference between a title and a deed?

ANSWER: This can get confusing. Do not confuse the title to real estate or a deed to real estate with a Certifi0cate of Title. A Certificate of Title is issued by the state to show who owns personal property such as an automobile, a boat, a motor home, a motorcycle, etc. It will also show whether or not a lender has a lien on that personal property. Due to the unique nature of real estate, the laws governing the ownership of real estate are totally different. There is no Certificate of Title issued by the state for real property.The "title" to real estate is a little more abstract.     A deed is merely evidence of a transfer of an interest in the title to a piece of real estate. Ownership of the "title" to a piece of real estate is determined by examing all of the records at the county courthouse that affect real estate. This includes the deeds, mortgages, tax liens and other documents in the Register of Deeds office. It also includes proceedings in the District Court such as probate proceedings, mortgage foreclosures, quiet title proceedings, partition actions, divorce proceedings, condemnations, judgements, mechanic's liens and other types of actions. If there is a federal court located in the county where the real estate is situated (as we have here in Sedgwick county) we also have to check the records there for anything affecting title to the property such as bankruptcies, forfeitures, foreclosures and others. Only after looking at all of these records can it be determined who owns the "title" to a piece of real property.

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Real Estate

Jeff Otto

2005-04-01 09:21:00

: Our family has owned a piece of farmland (320 acres) out west of Wichita for nearly 80 years. It was sold by my great grandfather to my grandfather; then from grandfather to my father; then a couple of years ago from my father to me and my husband  (who is my father's son-in-law).None of these transactions ever went through a title company. The new owner always just filed things with the courthouse to get the taxes right. Are we at any risk or liability?

ANSWER: This situation happens quite often in the rural parts of the county and the state. The family farm land stays in the family passing from one family member to the next either by deed or inheritance. Generally speaking, there probably isn't any need to have a title policy issued on these transactions. The exception would be in the case of an actual sale from one family member to another family member which also involved outside institutional financing. In either case a simple search of the title to the property should be performed to make sure there a are no surprises lurking out there. Unpaid bills may end-up as a lien against the property. Documents may get recorded with improper property descriptions creating a cloud upon the title to  your property. Forged documents may get recorded purporting to convey or encumber your property. Loans that have been repaid may not have been released as to the property. The entire title to the property may not be in the name of the family member attempting to convey the property. A simple title search may reveal any of these problems. Whenever property is transferred, whether by deed or inheritance, you should retain agood real estate attorney. He or she will order the necessary title searches to make sure the transfer is properly accomplished.

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Real Estate

Jeff Otto

2005-03-01 10:09:00

: Do I need title insurance when buying a home, particularly if the seller has warranted that he is the owner of the property?

ANSWER: Buying a  home is  one of life's most gratifying experiences. As you approach the big day of closing, however, all the details can be a little overwhelming. A knowledgeable Realtor can make all of those details flow smoothly. Without this Realtor advantage, you might easily overlook the single most important step in the entire process -- the purchase of Title Insurance on that wonderful new home of yours. A title is the evidence, or right, that a person has to the ownership and possession of land. It is possible that someone other than the perceived owner has a legal right to the property. If that right can be established, this person can claim the property outright, or make demands on the owner as to its use. To avoid feeling stupid in the future, don't make a mistake regarding the purchase of Title Insurance. Ever!Title Insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim. Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden "defects" are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial amounts of your own money on a legal defense, and still result in the loss of your property.There are two types of Title Insurance . Your lender likely will require that you purchase a Lender's Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. An Owner's Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title. Is it expensive, you might ask? The one-time premium is directly related to the value of your home . Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you close the purchase of your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property.

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Real Estate

Jeff Otto

2004-12-01 09:19:00

: "I am buying a new home from a major builder. If I pay cash for this home, built in a new subdivision that has been surveyed, and there are homes on both sides of my home, why would I need to buy title insurance? If I am willing to take the risk, and there is no lender that requires title insurance protection, then why should I purchase title insurance? Is it a state law that I buy this insurance?"                                       

ANSWER: When paying cash for a new home, there are no regulatory laws providing that you MUST purchase Owner's Title Insurance. However, an Owner's Policy protects you against the acts of previous owners, mortgages, judgments, etc. filed of public record. What if one or more sub-contractors were not paid by the builder for their work, and, unbeknownst to you, these subcontractors later filed liens against your new home?  Said liens would then have to be paid off by you before you could ever sell the property. Or perhaps the builder of your new home never paid off a mechanic's lien against the property and the lien wasn't filed until 1:30 pm the day of closing and your closing was scheduled at 2 pm? It is now a lien of record, but may not have been included in the original property search or rundown. The lien goes with the property, not the previous owner. If the builder refused to pay the lien amount after the closing took place, you would have to either sue the builder (costly) or pay the lien and then sue the builder.  In either case, there is possible time, brain damage, and money out of your pocket to pursue this builder. And until the problem is resolved, you've got a serious problem.There are also many opportunities, during the releasing of lots that is on-going to builders as a sub-division is being developed, for errors to occur in the title work. If you had an Owner's Policy, the title insurance company would be required to defend the claim in court, all for the one-time fee you paid for the policy.Title Insurance is a low cost, one-time fee type of insurance that is in effect for the lifetime of your ownership, whether you own the property for just a short time or a hundred years! Since real estate is typically the largest single investment a person makes in their lifetime, the benefits of having the title insurance definitely outweighs the cost of buying the policy. The peace of mind you'll enjoy is well worth the price of the insurance. Just ask anyone who's ever had something come up on the title as a lien, cloud, or encumbrance after they've closed. They'll tell you they wouldn't think of not buying a title insurance policy when buying real property. More next month…

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Real Estate

Jeff Otto

2004-10-01 15:07:00

: I was looking at buying a home and when it all came down to the closing we found out that the title wasn’t clear. What should I do?

ANSWER: If the title to the real property is not clear, there may be a number of remedies available to the parties to the transaction…and in rare cases, there are not. a) In the event that the present owner has had liens or judgments filed against the property during his/her ownership, the current owner may have to pay the liens, judgments, etc. in order to clear the title for sale. b) If the current owner has an Owner's Title Policy and the defect in title was prior to the current owner obtaining the property, the issuing agent can request of the issuing Underwriter, an Indemnification of what is known as the backtitle and the new title agent/underwriter will then possibly insure over the defect. Example: A 17-year-old mortgage shows of record. The bank has gone out of business since originating the loan,  so no Satisfaction of Mortgage can be issued. Current insurer gathered sufficient information to underwrite the lien without needing the Satisfaction filed, but this also means it will stay as a matter of record indefinitely, thereby always being a lien against the property. The new insurer then takes the Indemnification from the current insurer, so that the lien can be insured against by new insurer. c) Sometimes, in the case of a curable defect, escrow monies may be collected at closing and held by the title insurance company in a trust account until the defect can be cured or remedied. d) The property may be deemed un-insurable by the title agency and there is no remedy for the defect, making the property "un-sellable". In this case, run, don't walk, from the purchase of this property. e) The buyer may elect to accept the defect (depending on what it is) with the seller   adjusting the sales price accordingly. This is an option when the Buyer is paying all cash for the purchase with no loan company involvement, or where the property is clear of mortgage, and the Seller is possibly doing an owner carry for the financing of the property. But it is never a good idea to let an attractive financing package overrule common sense when there's a cloud or encumbrance on the title. More next month…

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Real Estate

Jeff Otto

2004-10-01 11:05:00

: I'm buying a condominium. Do I need title insurance?

ANSWER: Yes, you should consider purchasing an owners title insurance policy when you buy a condominium. If you're taking out a new first mortgage, the lender will require a title insurance policy to be issued. If you're paying cash, you definitely want to know that the title you're accepting on that property is free of liens, encumbrances, clouds on the title, etc. For a one-time premium, an owner's policy will provide you with protection against defects in your title for as long as you own the property. Title insurance offers protection against many defects in "title" (proof of your interest in the property). Potential risks to your title include:• Forgery or impersonation by a previous    seller • Mistakes in the recording of title    documents • Liens for unpaid taxes Title insurance policies are issued as both "owners" and "lenders" policies. A lenders policy is almost universally required as a condition of getting a mortgage loan. A lenders policy covers only the lender's interest in the property for the length of the loan, while an owner's policy protects your interest as the owner. Title problems could result in a significant financial loss, should you learn of them after taking title to the property. You could be forced to hire a lawyer to defend your interest in the property. Ultimately, you could lose the use of the property and your equity in it, and still be required to pay the balance of the note! If an owner's policy is purchased, the title insurance company would be required to defend your rights to the property in court and pay for your title-related losses under the terms of the policy.Title policies are most frequently issued as standardized forms approved by the American Land Title Association (ALTA). A standard ALTA "condominium endorsement" would typically be issued with the purchase of title insurance on a condominium. The condominium endorsement covers title issues unique to condominiums, such as defects in documentation that invalidate a property's status as a condominium, and unpaid fees and assessments on the unit being purchased. More next month…

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Real Estate

Jeff Otto

2004-09-01 11:07:00

: I'm getting ready to close the purchase of my new home! Can I get a breakdown of my closing costs?

ANSWER: Federal law gives buyers the right to inspect the closing statement one business day before the closing. The closing statement (called a "HUD-1") itemizes all the costs that you will be charged at closing. Be sure to let the closer know well in advance that you want to inspect the HUD-1 the day before closing.Buyers and sellers can negotiate as to who will pay which costs. Customarily a seller's costs may include: 1) Updating Evidence of Title - between     $95.00 and $400.00, but possibly more2)  State Deed Tax - Varies from State     to State3) Recording Fees 4) Real Estate Commissions - commissions     vary depending upon what you agreed to     with your listing agent but they are     generally between 6% and 7% of the     purchase price5) Unpaid Real Estate Taxes - customarily     these are prorated as of the date of     closing; the seller pays all taxes before the     date of closing and the buyer pays all taxes     after that date6) Seller Paid Points - to be paid by seller if     obligated to do so by the purchase     agreement7) Payoff of Existing Liens - The seller will     usually be responsible for paying the    balance of any outstanding existing liens     at closing8) Clearing Title - if title defects exist the     seller may be obligated to clear these at     the seller's expense.  These costs can vary       9) Closing Fee - a closer will charge a fee for     his or her services which can range from    $175.00 to $250.00 or more  10) Attorneys' Fees - These fees can vary     based on the amount of services provided  11) Miscellaneous Costs - any other costs     that the seller agreed to pay in the     purchase agreement A buyer's closing costs typically include the cost of financing the purchase. If a buyer is giving a lender a mortgage on the home, the lender will be required to provide the buyer with a "Good Faith Estimate" of costs so that the buyer can anticipate the costs involved with the financing. In addition to these financing charges, a buyer will usually have to pay title insurance premiums, title examination costs, recording fees, mortgage registration tax, closing fees, attorneys' fees and any other costs that the buyer has agreed to pay in the purchase agreement.

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Real Estate

Jeff Otto

2004-06-01 12:23:00

:  I am sure you have covered it many times before, but what exactly is Title Insurance?

ANSWER:  Title insurance is a written guarantee that the information regarding chain of title and merchantability of title is correct, and that there are no defects in the title that are not disclosed.  Title Insurance policies typically insure a homebuyer against any title-search errors or mistakes, and against loss due to disputes over property ownership and/or defects in title. Title Insurance can additionally offer protection to the lender under similar circumstances. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount, and is normally split 50/50 between the Buyer and the Seller, with the Buyer paying an additional $100 for a Buyers policy. Before Title Insurance companies came into the picture and became the preferred way to insure title, there were abstracts of title, which were big thick records of the previous owners of record for a particular tract of real property dating sometimes all the way back to when the parcel was transferred to an individual from the US Government. I’ve seen abstracts of title dating back to Ulysses S Grant, President of the United States.  Under that process, when a property was sold or transferred, the Abstract of Title had to be “extended”, or brought up to date by the Sellers attorney. When that time consuming process was completed, the Abstract of Title was delivered to the Buyer’s attorney for his/her examination of the record of title, and an opinion of title was issued. This was that attorney’s opinion as to the legal ownership of the parcel, any defects he/she believed were there, and the merchantability of title. The buyer relied on this opinion as to whether the present owner actually owned the parcel, and could convey merchantable title to someone else. As we know, opinions of attorneys can vary. And sometimes, mistakes were made…mistakes that ended up being costly to the parties involved. With Title Insurance, the title evidence is examined by the title insurance professional, back to the most recent policy of title insurance that was issued, and then a title policy is issued, guaranteeing the information contained therein to the parties. Chain of title, owners of record, clouds, liens, or any other encumbrances to the title are among the items of information disclosed therein. If a title question or problem was to come up in the future, the title insurance company would prevent the buyer or seller from suffering a loss due to the information they relied upon.

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Real Estate

Jeff Otto

2004-02-01 15:10:00

: Can you explain the function of title insurance companies?

ANSWER: In answer to your question, here is an excellent overview of the title insurance business that I recently researched from the Internet. A title is the foundation of real property ownership. Title to real property gives the owners the right to possess and to use the property. A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the sellers' right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property. A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land. Title insurance is your policy of protection against loss if any of these problems…even a "hidden hazard"…results in a claim against your ownership.Title Insurance Companies are the people who do the research, among other things, which provides the evidence of title in a real property transfer or exchange. They provide a title commitment, and a title policy, which insures the involved parties clear title. The research will detect and disclose any item of a defect nature in the title to the property that is discoverable, as well as in the previous chain of title.Closing agents' work for Title Companies and it is their job to follow the instructions of the lender, realtor, attorney, or buy-sell agreement to complete the sale or purchase of the property. Information is gathered from many informational sources to create the final Settlement Statement, or HUD-1, as it is sometimes referred to. This information can include payoff information, tax information, deed and document preparation, and the commission amounts. At the closing, the closing officer explains all of the documents to the parties, and answers any questions they may have. During this process, the Buyer and Seller, or any other party with a legal interest to the transaction will sign the necessary paperwork, which will then be notarized. Then the documents are recorded in the County record, and this process changes the title to the new owner. Generally, the title insurance company will require the Buyer to bring Certified Funds to the closing for the required monies to close the transaction, and then the Title Company will disburse the proceeds from the sale as agreed in the Contract for Purchase and Sale. Unlike abstracts, which involve the "opinions" of attorneys hired by the buyer and the seller as to whether the Seller owned and could convey merchantable title, the title insurance policy is a written insurance policy with recourse for mistakes. Title Insurance does not rely on "opinions", which have proven to be wrong on occasion.

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Real Estate

Stacy Cole

2004-01-01 09:18:00

: I hear a lot of talk about real estate agents, what they should and shouldn't do, and whether they represent buyers or sellers. I don't hear much about the buyer’s responsibilities. Can you fill me in?

ANSWER: Home buyers do have responsibilities. A successful real estate transaction requires cooperation from everyone associated with the sale. There are things you can do to help your agent, which in the long run gets you to closing faster and with fewer hurdles along the way.  The first thing you should do if you are thinking of purchasing a home is to get pre-approved by a lending institution. You won't waste your time or the agent's time looking at houses that are out of your price range. If you find a house you like, you'll feel confident making an offer if you are already qualified for a certain amount, and you'll have a better idea of how much to expect in closing costs.Be honest with your agent. The personal information that you share with your real estate agent depends on the relationship, but regardless, be honest. This includes obvious tasks that might relate to fraud or deception. It also includes fair housing issues. Your agent must comply with fair housing laws. If you're working with multiple sellers' agents, let them know so that their efforts don't overlap. It's a waste of everyone's time. Be open minded to your agents suggestions. Don't judge listings by looking at MLS sheets. Sure, choose some of the houses you want to see, but let your agent make choices too. Use your own common sense and don't blindly follow an agent's directives. If contracts must be signed, don't let them linger. Your verbal acceptance of a counter offer might be discarded if you take your time to sign. Work with your agent to make sure everything's ready at closing time such as switching utilities, obtaining insurance binders, etc. Closings don't just happen. They happen because at least one person is following through, often on a daily basis. The road to closing is a lot smoother if everyone involved cooperates.

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Real Estate

Jeff Otto

2003-12-01 08:41:00

: I am confused by all of the different kinds of deeds... quitclaim, grant, warranty, etc. Does it matter which kind of a deed one uses?

ANSWER: There are different types of deeds. Which deed to use depends on who is issuing the deed and why it is being given. In this part of the country, the first deed from the U S government to the first landowner is called a "Patent" or sometimes a "Grant." Subsequent transfers from one owner to the next are usually by way of "Warranty" deeds. These contain language whereby the seller warrants to the buyer that the title to the property is good and free and clear of any defects or liens other than those items that might be excepted from warranty as listed in the warranty deed. If a title problem arises after the sale to the buyer, the seller must take whatever action is necessary to clear the title. A quit claim deed is used when the seller does not wish to warrant the title to the buyer. It is also used to clear some title problems. As an example: A title search for a pending sale might show that I inherited an interest in the property from an earlier owner whose interest was not properly conveyed. I may not even know about this interest being in my name. A conveyance from me to the buyer is needed. Since I do not know the history of the ownership of the land, I would only give a quit-claim deed as I would not want to "warrant" or" guarantee" the title.

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Real Estate

Stacy Cole

2003-12-01 08:41:00

: How can I  prepare my home for resale?

ANSWER: Many inexpensive things can be done to prepare your home. A buyer  first notices the yard, landscaping, and condition of the siding, windows and roof. Make sure your home has curb appeal.   First, remove any clutter. What you see as treasure may appear as trash to a prospective buyer. Anything that is not a necessity to live should be put in storage, or have a yard sale. Less is more and it makes the home appear larger. Keep it nice and open. Visualize your home through the eyes of a prospective buyer.   Personal momentos should be kept to a minimum. The house should look lived in, but be "vanilla" enough for the shoppers to envision living there with their own things. For children's bedrooms or playrooms, leave just enough to make the rooms look happy and lived in.   Paint is one of the least expensive updates, and the most important. It makes the home appear fresh and adds to the cleanliness. Clean everything thoroughly. Nobody wants to buy a dirty home. Make sure that all appliances are clean, whether they're staying or moving with you. Have the carpets professionally cleaned.   Replace any worn shower curtains, window coverings, linens, etc. Look for sales on these items. You don't have to love them; they just need to look like you do.    Complete any small repairs such as a leaky faucet, a non-working ceiling fan or built-in appliance. Replace burned out light bulbs, missing fixtures or electrical outlet covers.     If you have pets, try to have them visit a friend while showing the house. A barking dog can be an unwelcome distraction and can bring attention to any pet odors or wear and tear.   If you are planning to list your home with a professional real estate agent, contact them even if you're not ready to put your home on the market. They can furnish you with valuable tips on preparing for the sale, and be looking for just the right place for you when the sale happens.

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Real Estate

Stacy Cole

2003-11-01 14:34:00

:  I am a first time home buyer, and I am not sure what options I have with financing. What programs are out there that can help me so I can avoid having a lot of money down?

ANSWER: There are so many programs available today, which allow those who have no money down to become homeowners. Here are some of the few that may help you.   One of the programs, Single Family Mortgage Revenue Bond Program, allows up to 4% cash assistance for first time buyers. Here's how it works: The program provides mortgage loan financing at a competitive interest rate and also allows qualified homebuyers to receive a cash benefit of 4% of the loan amount. At the time of closing, this $% loan amount can be used for various expenses such as down payment, closing costs, prepaid or other loan expenses. This program is a grant and does NOT have to be paid back.  There is another program called Rural Development.  This program has no down payment, the seller can pay all costs, and there is no PMI as with FHA financing, so your payments are less than anyone else’s.  This also being a grant, does NOT have to be paid back.  One of the requirements for this program is that the property has to be in an outer lying town such as Maize, Park City, Colwich, etc. This program is a great one.   These are just a couple of the many programs available to help people like you overcome the obstacle of having a down payment. Please call a licensed real estate agent, or mortgage specialist for more information on programs such as these.

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Real Estate

Jeff Otto

2003-11-01 08:54:00

: I purchased my home a year ago. Can you explain to me why the bank needs to do a title search for a home equity loan when it was done just a year ago?

ANSWER:  The title search and title insurance policy that was issued when you bought your home a year ago reflect the status of the title as of that date. Any number of things could have happened after that date that could affect the title to the property. A creditor may have obtained a judgement against you that creates a lien on the property. You might not have paid the taxes due on the property which would result in a lien on the property. You and your spouse may have been divorced and only one of you may have been awarded ownership of the property. Documents may have been filed containing erroneous legal descriptions which cloud the title to your property. IRS may have filed a lien for unpaid income taxes. These are only a few examples of matters that might have come-up after you bought your property and which would have to be cleared before the new lender would make the new home equity loan. 

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Real Estate

Ralph Cramm

2003-07-01 13:54:00

:  We are looking to buy a home.  Thus far it has been quite an experience.  Do you have to have an agent to buy a home?  If you do not have an agent, where do find the homes?  

Ralph Cramm    Question:  We are looking to buy a home.  Thus far it has been quite an experience.  Do you have to have an agent to buy a home?  If you do not have an agent, where do find the homes?   Answer:  Many people think they have to have an agent to buy a home, however that it not true.     We will make the assumption that the 'mission' is to find the house you want, at the lowest possible price, with all of the paperwork, inspections, etc. handled in a fashion that will not make for any problems in the future.  One good way to accomplish this is by looking to the many 'For Sale By Owner' (FSBO) homes in the market, as well as homes that are owned by companies and individuals who repair them and sell them, many times below the appraised value.     Lenders are eager to finance these homes because they are one of the safest investments they can make.  Both the lender and the borrower see equity in the home more quickly.  If you are not comfortable with the aspect of inspecting a home prior to purchase, there are companies that will do that for you and advise you if there are any problems with the home and those items in need of repair (i.e. roof, floor, foundation, basement, etc.).  This way when you do purchase the home you can be confident in your choice.   After two tumultuous years of stocks, these types of homes, and real estate in general, particularly in Wichita, are looking better and better to investors.  The return has proven considerably better than returns on money markets, stocks, bonds, etc.     If this is your first home, I'm sure you will experience what my wife and I felt when we bought our first home.  It was our home.  We could do anything we wanted to improve the home without having to ask for permission from anyone.  It is one of the greatest feelings you will ever have.

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Real Estate

Ralph Cramm

2001-09-01 11:37:00

Question:  Our son and his wife are wanting to buy a home.  They have 3 children ages 4, 6 and 9.  The decision of course needs to be theirs but we were wanting to see if there were any guidelines for new home buyers that might assist them.  Can you provide anything like this?

Answer:  Thank you for your question.  Perhaps the first order of business would be to have them ask themselves the following questions.Why do you want to make a change? Are you ready to start a family, plant your own garden? Do you feel you've finally "arrived" at your company? Maybe a raise, or a bonus, or a baby on the way has made you think about living in a home of your own. Whatever the reason you are thinking about a home, there are 12 steps you will inevitably take. If you do them in the right order, you will save yourself time, frustration, and money. For example, if you start shopping for homes on the Internet without knowing how much you can spend, you will not only waste time looking at the wrong homes, but you may ultimately be disappointed at what you can actually afford. FIND OUT HOW MUCH YOU CAN SPEND The first thing you need to do is figure out what kind of home you want to buy and how much you can afford to pay in monthly installments. Keep in mind that the results of your calculations will only be an estimate. Until you have chosen a home and the type of loan you want, and communicated with a lender, you can only use the calculated amount to help you determine a price range of homes you want to preview. GET PRE-APPROVED FOR A LOAN Either go to a mortgage broker or a direct lender and find out for certain the size of mortgage for which you can qualify. The pre-approval letter the lender issues you will help you be taken more seriously by agents and sellers because they will recognize you as someone who is prepared to buy. If you want a larger mortgage or better rate, investigate the government sites such as HUD. HIRE AN AGENT, PARTICULARLY A BUYER'S AGENT Using an agent can help you in numerous ways, especially because you are already paying for those services in the purchase price of the home. Both the seller's agent and the buyer's agent are paid out of the transaction proceeds that are included in the marketing price of the home. If you don't take advantage of an agent, you are paying for services you aren't getting. If you are planning to buy a home available through foreclosure or a for-sale-by-owner (FSBO), you can still use the services of an agent. Agents will negotiate with you on their fees and the amount of service you will receive for those fees, and you can arrange for them to be paid out of the transaction, not out of your pocket. Start by narrowing the field. If you are interested in a certain neighborhood in your town, find out who the experts are in that area of town. They will be better informed and more attuned to the "grapevine," and are better positioned to network with other agents in the same area. Contrary to popular belief only 20 percent of homes are actually sold through newspaper ads. The other 80 percent are sold through networking among agents. If you are relocating to a new city, ask agents in your own town to refer you to agents in your new area. They will be happy to do so, because if you buy a home from their referral, they will receive a referral fee, so they are motivated to make certain you find the right agent to assist you in buying a home. SIGN A BUYER'S AGREEMENT Again, if you find an agent you like, go all the way and sign a buyer's representation agreement. This agreement means that you will have one agent representing you as a buyer. The agreement empowers the agent to not only search out the latest Multiple Listing Service list, but to seek alternative means of finding you a home, including searching foreclosures and homes for sale by owner. With a signed agreement, the agent becomes a fiduciary and must act, by law, in your best interests. BE AWARE OF YOUR LIKES AND DISLIKES As you shop for homes, keep in mind what you like and don't like and pass along your feelings to the agent. You should feel comfortable looking at numerous homes, but neither you nor your agent is interested in wasting time on homes that aren't appropriate. Like any relationship, your home will not be perfect. If you are finding that most of your criteria is met, it shouldn't be long before you find the right home. Think in terms of possibilities as well as what you see is what you get. Perhaps a home isn't move-in perfect, but with a little work it could be the home for you. Don't let cosmetic or minor remodeling problems discourage you. Many remodeling jobs add tremendous value to a home. If you remodel a kitchen, for example, you may receive as much as a 128 percent return on your investment. Talk with your agent, friends, relatives, and contractors and find out what it will cost to remodel the home the way you want it. WRITE A CONTRACT When you find the home you want, you will write a contract, either through your agent or your attorney, or on your own. Your offer should spell out what you are willing to pay for and what you are not, when you want to close, and when you want to take possession of the home. Your contract should be contingent upon getting an inspection and evaluating the results. If the inspection reveals a big problem, you and the seller can renegotiate the purchase price if you are still interested in buying. GET THE LOAN UNDERWAY As soon as the seller agrees to the contract, you must start following through on your loan. Take the contract to the lender and let it start the loan process in earnest. If you have been pre-approved, much of the legwork has already been done and your loan will process more quickly. THE HOME WILL BE APPRAISED The lender will arrange to have the home appraised, which may affect whether the loan is granted. But the likelihood of a home-selling for more than a lender is willing to lend is slim. The real estate industry not only keeps up with how quickly homes sell, but how much they sell for in an area. Most lenders will have a ceiling on the amount of square feet per home they will lend in a certain neighborhood. If a home is overpriced, it will quickly be obvious. You can then go back to the seller and renegotiate. THE HOME IS INSPECTED In many markets, you will have the inspection after the contract is signed, rather than before. This is a better protection for the buyer. The inspection can reveal some nasty shocks, though. Your inspector may find a major problem with the furnace or the foundation. These are problems that must be fixed or the home cannot be conveyed. The seller then has to arrange to pay for the repairs, or have the repairs paid for out of the contract proceeds via a mechanic's lien. Before you can truly set the closing date, the repairs have to be made and approved by the buyer. NEGOTIATIONS CONTINUE AS YOU GET READY TO MOVE As you find a mover, pack your things, and arrange days off a work around the closing date, you will find that things can still change. It is the most intense, nerve-wracking time of the transaction -- waiting for the other shoe to drop. You think you may have addressed all the issues and closing will proceed without any other hitches, but negotiations still continue as you reevaluate the inspection report, or find out the chandelier you thought was included is actually excluded from the contract. As you revisit the home to show your relatives, your hopes raise, even through your doubts that the home will ever be yours increase. CLOSING -- BE PREPARED FOR ANYTHING TO HAPPEN Until closing, and even during closing, anything can happen. You find out that your closing costs are higher than you thought they would be because some additional service fees have been added by the lender. A glitch could come out in your credit report that delays the sale; a problem the owner was supposed to fix wasn't repaired in time; the homeowner can decide that she or he doesn't want to pay for the home warranty after all; the appraisal may come in the day before closing and be short of the asking price of the home. If so, the buyer, seller, and their agents have to figure out how to make up the shortfall. Do they lower the price of the home? Do the agents pay for the difference out of their commissions? How will last-minute problems be handled? The negotiating table is an emotionally explosive place. That is why closings are generally held in private rooms with the buyers and sellers separated. YOU GET THE KEYS It's all over. The home is yours. Congratulations.

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Real Estate

Jeff Otto

1969-12-31 18:00:00

: I'm Not Sure I Need To Buy A Title Insurance Policy On My FSBO Purchase…Do I?                                            

ANSWER: When Jack and Alice bought their dream home with a big privacy fenced, wooded back yard and pool, they thought the title was free and clear. The seller had told them so.  The home was being offered "For Sale By Owner", (FSBO) and they were told by the seller that he had priced the home really "low" because he had no real estate commission to pay, and they were getting a good deal. They signed a contract to buy the home, and closed the sale. But the next year, when their neighbor decided to sell his home, a survey was performed, and that survey showed he owned half the land under Eric and Jill's backyard pool. Think it can't happen? Be assured, it can! Jack and Alice had to buy back the land that they thought they already owned when they purchased their "dream home". Jack and Alice had not purchased a Title Insurance policy to protect them from nightmares such as this. Fred and Doris lost their dream home completely when it was discovered that the seller had forged his wife's name on the title documents he signed at closing during their less than friendly divorce.  Fred and Doris were not protected by a Title Insurance policy, which would have made them whole as soon as this situation revealed itself.Ryan and Whitney were forced to give up a huge chunk of their front yard a few months after moving into their new home when there was discovered an undisclosed road expansion easement. It's very likely that the easement for future road expansion was filed of record and would have been revealed in a title search…which would have given them advance notice about this important item of information. The only problem was that a Title Insurance Policy was not purchased.If you're paying attention, you can see a pattern here. You are free to do as you wish on home purchases that involve no lender…but a lender is more than likely going to require a title policy to be provided before allowing the loan to close. If you do not purchase a Title Insurance policy, you're taking a huge risk of the loss of most people's biggest single financial asset in their lives. Is it worth taking that risk yourself? I think not…If you have a title policy, and there is ever a challenge to your ownership position, you will be defended free of charge by the Title Insurance company against any and all covered claims against you and your property, and the insurer will pay up to the policy amount to settle those claims, freeing your title from liens, encumbrances, and other clouds that may be on your title. More next month…

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Real Estate

Randy Vickers

1969-12-31 18:00:00

How do I make the commitment to a mortgage?

ANSWER: There is the fact that getting a mortgage can be intimidating for some. But the anxiety is much worse than the actual act of getting it done. There is more paperwork involved in getting a mortgage than there is in signing a lease. You have to reveal financial information about yourself and your job history, and you usually have to wait a little longer to be approved for a mortgage than you do for a rental agreement. You can focus on those negatives, and all that extra "commitment" and responsibility that a mortgage entails, or you can focus on what you are getting for that money. If you look at how the stock market has performed in recent years, and then compare it to many housing markets in the United States, you will see that putting your money into real estate is almost always a safer and a smarter investment. I am not telling you to stay out of the stock market. I am, however, pointing out that no matter how well Jollystick Jumpers, or any other stock, is doing, you cannot live in your stock certificates! Not even if the shares split. Twice! Nor will they keep the rain off your head and give you and your children a warm, comfortable and safe place to sleep. There is also the simple fact that despite what your stocks values  on paper are today, tomorrow or next year, you can only really benefit from them if and when they pay dividends, or when you sell them. The benefits of owning a home conversely, are always there. A friend recently told me that he would never buy a house because he refuses to go that far into debt. He can deal with the few thousand dollars he owes to various creditors, but the idea of taking out a 30-year loan for more than $100,000 and still be paying it off on his 60th birthday is just more than he can handle. It's too much debt, too much responsibility, and too long of a commitment. My friend said he just wouldn't do that to himself. But buying a house for someone else by paying rent checks every month on a house someone else owns sounds good to him? One of us is confused! Yes, $100,000 -- or whatever amount you borrow to buy a house is a lot of money to owe. Homes are not cheap. And yes, a mortgage is probably the single biggest loan you will ever take out.  And the home you buy with it is probably the single biggest investment you will ever make. As we will see later, it is also very likely the single biggest tax deduction you will ever have. My friends real problem, however, is that he is not asking himself the right question, which is: "If I am not spending money on mortgage payments, what am I spending money on in order to have a roof over my head?" The answer is simple. It's rent. Whether you write out a check to your landlord every month or to your mortgage company, you are still writing out a check every month. If you buy a home with a 30-year note, or any other term mortgage, then that means that when you send out your mortgage check you are building equity in your home. This accumulates into your share of ownership. If you stay there for the full 30 years and pay it off, you get to stop writing those mortgage checks. The home is yours for as long as you live there. You can sell it and pocket the profits, or you can will it to your children. If you pay rent for the next 30 years, at the end of those 30 years you will have to continue to pay rent if you want to keep living there, or anywhere else. The place is not yours, and you have probably paid off your landlords' mortgage, which means that your monthly rent check has paid off the home for your landlord, not for you or your family. Your landlord loves you! While it is true that you are still paying property taxes and utilities even after you pay off your mortgage, the simple fact is that you are paying property taxes and utilities when you rent. They might not be formally listed as property taxes and utilities, but they are included in your monthly rent. There are also the income tax benefits of owning a home. While some states offer a small rental credit on state taxes, it is only a tiny fraction of the federal tax break you get with a home mortgage. When you buy a home, in most cases you can deduct all of the mortgage interest you pay. Since mortgages are front-loaded, and you pay most of the interest during the first few years, you get major tax deductions in the early years of a mortgage.  And remember, you would be paying the same thing in your rent payment, but without the benefit of the tax deduction. Another issue is the down payment. It does cost money to buy a home. There are, however, numerous low or zero down payment mortgages backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). Even conventional lenders have programs that require low or no down payments. There are also special grants and other programs to help low-income earners get into their first home. Getting into an apartment is not cheap, either, with first and last months` rent, security and pet deposits required before you move in. While we can all understand "fear of commitment," it is important to remember that living with the alternative can be worse. It's a lifetime commitment if you decide to pay rent rather than owning the home for yourself. More next month...