For info On Mortgage Terminology, please see Mortgage Glossary Terminology.
Home Advice can help you find the answers to all your home buying questions. Simply choose from one of the categories below to display frequently asked questions and answers. Contact me and I will be pleased to answer questions and provide you all the details on the services I provide to buyers. Property TaxesQuestion: How do property taxes work?
Answer: Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate. These annual local assessments by county or local authorities help pay for schools and public services.
Question: Are property taxes deductible?
Answer: Property taxes on real estate, including those levied by state and local governments and school districts, are usually fully deductible against current income taxes. Check with your tax professional.
Question: What is an impound account?
Answer: An impound account is a trust account established by the lender to hold money to pay for real estate property tax, homeowners hazard insurance premiums, and Private Mortgage Insurance (PMI) as they are received each month. When you make a monthly mortgage payment, you also make a monthly impound payment which goes toward your property taxes and insurance.
Question: Do all loans require impound accounts?
Answer: If you are taking out a loan, the lender can require an impound account to pay real estate property taxes and homeowners hazard insurance premiums, as with a standard loan. Most conventional loans do not require an impound account.
Question: Are taxes on second homes deductible?
Answer: Interest and property taxes may be deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.
Question: Where can I learn more about appealing my property tax?
Answer: Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal process, which begins with an appeal filed with the appropriate assessment appeals board.
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Homeowners InsuranceQuestion: What kind of home owners insurance should I get?
Answer: Standard homeowners policies are all-risk policies, which cover everything except earthquakes, floods, war and nuclear accidents.
Such a standard homeowner insurance policy protects against fire, lightning, wind, storms, hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke, vandalism, theft, breaking glass, falling objects, weight of snow or sleet, collapsing buildings, freezing of plumbing fixtures, electrical damage and water damage from plumbing, heating or air conditioning systems.
A basic policy can be expanded to include additional coverage, such as for floods and earthquakes and even workers' compensation for servants or contractors. Home-based business-coverage, an increasingly popular rider, does not cover liability associated with the business.
Insurance experts recommend that home owner obtain insurance equal to the full replacement value of the home.
For personal items, homeowners can increase their coverage beyond the depreciated value of items such as televisions or furniture by purchasing a "replacement-cost endorsement" on personal property.
Some experts recommend an inflation rider, which increases coverage as the home increases in value.
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Making An Offer To BuyQuestion: What is the difference between list price, sales price and appraised value?
Answer: The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount of money you as a buyer would pay for a property.
The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.
Question: What are some tips on negotiation when I make an offer?
Answer: The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, a seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called motivated sellers include people going through a divorce or who have already purchased another home.
Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.
Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.
Question: What contingencies should be put in an offer?
Answer: Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction.
A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.
The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
Question: Who gets the furnishings when a home is sold?
Answer: Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace), automatically stay with the house unless specified otherwise in the sales contract.
But you can consider anything that is not nailed down negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano.
Question: Are low-ball offers advisable?
Answer: A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price.
While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected.
You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.
While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer.
Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:
Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even a full price offer, may not be as attractive as an offer without that condition.
Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
Question: Can I buy homes below market?
Answer: While a typical buyer may look at five to 10 homes before making an offer, investors who make bargain buys usually go through many more. Most experts agree it takes a lot of determination to find a real "bargain." There are a number of ways to buy a bargain property:
* Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price.
* Buy a foreclosure property (after doing your research carefully).
* Buy a Short Sale.
* Buy a leftover house in a new-home development.
Question: How do I find out the value of a troubled property?
Answer: Buyers considering a foreclosure property should obtain as much information as possible from the lender about the range of bids being sought.
It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition.
It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder's and assessor's offices, or through Internet sites specializing in property records.
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Home InspectionsQuestion: What is a home inspection?
Answer: A home inspection is when a paid professional inspector inspects the home, searching for defects or other problems that might plague the owner later on.
They usually represent the buyer and are paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed. The buyer normally tours the home with the inspector for about two hours.
Most offers to buy include an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction.
Question: Do I need a home inspection?
Answer: Yes. Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.
Question: How do I find a home inspector?
Answer: The American Society of Home Inspectors (ASHI) has developed formal inspection guidelines and a professional code of ethics for its members. Membership to ASHI is not automatic; proven field experience and technical knowledge of structures and their various systems and appliances are a prerequisite.
One can usually find an inspector by looking in the phone book or by inquiring at a real estate office or sometimes at an area Realtor® association.
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Closing CostsQuestion: What are closing costs?
Answer: Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Question: Who pays the closing costs?
Answer: Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates.
Question: How can I save on closing costs?
Answer: Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:
* Negotiate with the seller to pay all or part of the closing costs. If the seller agrees and is paying part, the lender must agree to this as well as the seller.
* Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
* Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront.
* Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
* Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.
Question: Why do I need a title report?
Answer: As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property.
A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you.
When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is fee simple or fee which is the highest type of interest an owner can have in land.
Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report.
You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase.
A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as any laws governing building and zoning.
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Short Sales and ForeclosuresQuestion: Can a home owner sell a home for less than the amount the owner owes?
Answer: Yes. This situation is known as a short sale. The owner finds a buyer for a reduced price that is below the mortgage amount and gets the owner's lender to agree to the reduction.
The term short does not mean the new buyer will possess the home in a short period of time. The opposite is true. Buyers of Short Sales can buy their Pocono home at a lower price, but must be prepared to wait 1, 2 or 3 extra months for the current owner's bank to agree to the reduced sale price. Sellers who have no equity and are forced to sell because of financial considerations could discuss a short sale.
Question: How does a home go into foreclosure?
Answer: Foreclosure proceedings usually begin after a borrower has skipped mortgage payments. The lender will record a notice of default against the property. Unless the debt is satisfied, the lender will foreclose on the mortgage and proceed to set up a trustee sale.
Question: When does foreclosure begin?
Answer: Lenders will initiate foreclosure proceedings when homeowners become delinquent in their mortgage obligations. Foreclosures are a result of hardships for sellers. But, buyers may be able to buy a good home at a lower price.
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