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10 Home-Buying Costs You Need to Know About

10 Home-Buying Costs You Need to Know About

By: Craig Donofrio

If you’re a first-time home buyer, you might get a little queasy when the last line of yourgood-faith estimate comes in at several thousand dollars. And after the color returns to your face, you might also be a little more than perplexed by some of those fees.

Knowing what you’re paying for—like these 10 common costs—can ease that check-writing pain.

1. Earnest money

To prove you’re “earnest” in your purchase commitment, expect to plunk down 1% to 2% of the total purchase price as an earnest money deposit. This amount can change depending on market factors. If demand in your area is high, a seller could expect a larger deposit. If the market is cold, a seller could be happy with less than 1%.Other governing factors like state limitations and rules can cap how much earnest money a seller can ask for.

2. Escrow account

An escrow account is basically a way for your mortgage company to make sure you have enough money to cover related taxes and mortgage insurance. The amount you need to pay varies by location, lender, and loan type. It could cover costs for a few months to a year.Escrow accounts are common for loans with less than a 20% down payment and mandatory for FHA loans, but it’s not required for VA loans.

3. Origination

The origination fee is a hefty one. It’s the price you pay the loan officer or broker for completing the loan, and it includes underwriting, originating, and processing costs.The origination fee is a small percentage of the total loan. A typical origination fee is about 1%, but it can vary. Use your good-faith estimate to shop around.

4. Inspection

You want to be assured your new home is structurally sound and free of surprises such as leaks or pests living in the walls. Those assurances come with a price.

  • Home inspection: This is critical for home buyers. A good inspector will be able to notify you of structural problems, flooding issues, and other potentially serious problems. Expect to pay $300 to $500 for a home inspection, although cost varies by location.
  • Radon inspection: An EPA-recommended step, this inspection will determine whether your prospective home has elevated levels of the cancer-causing agent radon. A professional radon inspection can cost several hundred dollars.
  • Pest inspections: Roaches are one thing. Termites are a whole different story. Expect to pay up to $150 for a termite inspection.

5. Attorney

Some states, such as Georgia, require an attorney to be present at closing. In some other areas, this is optional. If you use a lawyer, expect to cover the costs, which vary by area and lawyer.It’s typical for mortgage companies to have a lawyer on their end, although they should cover the bill.

6. Credit check

Just because you can get your credit report for free doesn’t mean your lender can (and it will actually pull all three). You have to reimburse the lender, usually around $30.

7. Extra insurance

If you live in a hazard-prone area, you might need to purchase extra insurance, like for flood.

8. Appraisal

Your lender won’t loan you money for a home without knowing what its fair market value is. An appraisal will cost $200 to $400, depending on location and property size.

9. Title company

You pay this to the title company to make sure the property’s title is free and clear. Your lender will recommend a title company, but you can also shop around for one.

10. Survey

It’s not required in all instances, but your lender may require a professional surveyor to determine exactly where your property lines are drawn. Prices vary widely, but expect to pay at least $100.Remember: You have bargaining power. Shop around to get a feel for what rates and fees apply in your area. If you aren’t sure what a lender is charging, ask for an explanation—the charge might not be set in stone. If you’re unhappy with a charge, negotiate.

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Couldn’t Sell Your Home Last Season? Here’s How to Relist It So It’ll Move

Couldn’t Sell Your Home Last Season? Here’s How to Relist It So It’ll Move

If a home lingers on the market too long, it begins to acquire, well, a reputation. Deserved or not, the home may be perceived by buyers as flawed or overpriced. So in the interest of avoiding a bad rep—or becoming the real estate equivalent of the last kid picked for kickball at recess—some sellers pull their listing from the market and take some time to reassess and, eventually, relist.

Of course, it’s not as easy as pulling the home one day and relisting the next. Even if you take a home off the market and start over with a new agent, it won’t necessarily appear as a new listing. Your local multiple listing service has rules that determine what qualifies as new.

In Chicago, for example, you’ll need to have your home off the market for as long as six months before it can count as new. In Jacksonville, FL, you only have to wait 45 days. Since the rules vary from city to city, make sure to check with a local broker about how long your home must be off the market before it can be “new” again.

In the Washington, DC, metro area, your home has to be off the market for at least 90 days to reset the “days on market” ticker to zero, says Sue Goodhart with McEnearney Associates in Alexandria, VA. She added that it’s not a total reset, because the property record will still indicate the home’s previous exposure to the market.

Property sales and listing history are easy for any prospective buyer to find, says Rhonda Duffy, broker/owner of Duffy Realty of Atlanta. While a lingering listing might be giving your home a bad rep, she thinks marketing plays an important role in getting your home sold.

“Getting a new MLS number is much less important than what I call ‘juicing’ a listing with something new that will grab the attention of buyers,” Duffy said.

The first thing an agent can do is analyze why your home didn’t sell and then address that issue, Goodhart says.

“Sometimes it’s the price, but often it’s the way the home shows in person or online, or a lack of targeted marketing,” she said. “Sometimes it’s as simple as realizing that the photos were taken on a cloudy day and it makes the rooms look too dark.”

Photos more crucial than price

Goodhart relisted an affordable condo that had been on the market for 157 days but should have sold much faster. She says they cleaned it and took new photos, and it sold in four days.

"You want to have a freshened listing re-sent with new photos and new lighting to entice buyers" Duffy said.

"It's especially important to send seasonlly appropriate photos," she added. "If it's spring, you don't want to start off with a photo that shows fall leaves or piles of snow, because that's an instant tipoff that the home has been sitting on the market."

It’s also important to take new photos if the home has been staged or updated in any way. At the same time, Duffy stressed that only attractive photos should be displayed with the listing. Some agents upload dozens of photos just to meet a quota rather than showcase only the most enticing photos of a home, she said.

Price changes that work

A small price change may serve to trigger an email alert to buyers who have set up a home search based on their price range. For example, if your home is priced at $255,000, you’re not reaching buyers who’ve set their search for homes priced between $225,000 and $250,000. Reducing the price to $249,900 will draw new attention to the property without a deep price cut.

“The key is that even if you juice the listing with a price change, you also need to change the photos so that buyers stop and look at it and wonder if they’ve seen the property before,” Duffy said.

Staging and timing crucial to sale

One of Goodhart’s relistings was reduced from $864,900 to $859,900, but she believes staging the home was more important than the price change. She replaced antique furniture with with Pottery Barn-style furniture that would appeal to older millennials.livingroom

New photos showcased the new look, and the home sold in six days.

“Shopping online makes a huge difference,” Goodhart said. “Buyers today are looking at 15 to 20 properties every night, so your photos have to be perfect to make your home stand out.”

Whether it’s staging, photos, or a new agent, avoiding the dreaded rep of a lingering listing is something every seller must consider.

By: Michele Lerner

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A Plain English Guide to Avoiding the Most Common Mortgage Scams

A Plain English Guide to Avoiding the Most Common Mortgage Scams

Last month, the Consumer Financial Protection Bureau called out the six most common deceptions and errors made by mortgage lenders, and it’s useful reading for any would-be home buyer. Or, it would be useful reading if anyone could make any sense of it. Luckily, you’ve got us to do that for you. Let’s translate the report into plain English!

1. Watch out for kickbacks

What it says: “Regulation Z prohibits a loan originator from receiving compensation based, directly or indirectly, on the terms of a consumer credit transaction secured by a dwelling.”

What it means: Your mortgage broker or loan officer isn’t allowed to make money by sending you to an affiliate, like a title company or home inspector, or for getting you to agree to a higher interest rate or other costly loan terms.

What you can do: Do your research! Check out any third party your lender recommends to make sure there are no conflicts of interest. Ask friends and family for other suggestions.

2. Beware the bait and switch

What it says: “Regulation X requires that a loan originator be bound, within the applicable tolerances, to the settlement charges and terms listed on the Good Faith Estimate (GFE) provided to the borrower, unless a revised GFE is provided prior to settlement.”

What it means: After you apply for a loan, the lender has to give you a GFE, which estimates your closing costs and loan terms. If anything changes, the lender has to clue you in by giving you an updated estimate. Then, just before closing, you’ll get a final version, called the HUD-1.

However … both the GFE and HUD-1 are going to be replaced Aug. 1, 2015. Instead of a GFE, you will receive an official loan estimate no more than three days after applying for a mortgage. Instead of the HUD-1, you’ll get a closing disclosure form no fewer than three days before closing. The principle remains the same: Your final loan information should be the same as your estimate, unless your lender informed you of any changes.

Bad lenders may change the documents on closing day—usually by tacking on fees or increasing costs—hoping that you’ll be too invested to walk away. Some fees can change, but the big ones can’t—check out CFPB’s specific regulations for more info.

What you can do: Tell your lender you need a revised estimate and an explanation of any changes. If your lender refuses, don’t enter into the loan (and consider reporting it to the CFPB).

3. Don’t trust a slowpoke

What it says: “Regulation X requires that a lender provide a GFE not later than three business days after it receives an application, or information sufficient to complete an application.”

What it means: This one’s straightforward. If it’s been more than three days since you applied for a loan, and you haven’t received a GFE or loan estimate, the lender is violating a Truth in Lending rule.

Plus, you can’t be charged anything other than a credit check fee for getting a loan estimate, so watch out for that trick, too.

What you can do: You may want to switch lenders (hint, hint). Dealing with a lender that isn’t observing the new Dodd-Frank regulations can be a sign the company has internal problems, even if it’s just being slow. If it’s charging you fees just to get a loan estimate, leave and don’t look back.

4. Don’t believe the hype

What it says: “Regulation Z requires advertisements to include disclosures when certain triggering terms are advertised. Examiners found in one or more institutions that social media advertising was not subject to monitoring or compliance audit, which are components of an effective compliance management system. Loan originators created their own advertisements and content.”

What it means: Basically, a lender can’t advertise a loan with the following “triggering” terms—unless the ad also clearly states where the consumer can get full information on the conditions of the loan:

  • The amount or percentage of any down payment
  • The number of payments or period of repayment
  • The amount of any payment
  • The amount of any finance charge
  • There are other specific requirements, but at its core, this regulation is there to protect consumers from getting into a loan that is unfavorably different from what was advertised.
What you can do: Do your homework. Have your lender or mortgage broker give you all the specifics. Don’t just go on the info you see in an ad on a social media site like Facebook or Twitter. (Seriously, don’t get a mortgage based solely on a tweet!) Always shop around.

5. Patience has its limits

What it says: “Regulation B requires a lender to notify an applicant of action taken within 30 days after receiving a completed application regarding the creditor’s adverse action on the application.”

What it means: Your lender has 30 days to approve or deny your loan. If it denies your loan, the lender has to state why.

What you can do: Unfortunately, if the lender has kept you waiting more than 30 days, you can’t do much short of reporting it to the CFPB. But if you have been denied a mortgage, it’s time to get your credit rating in shape and become a stronger candidate for the next go-round.

6. Trust wisely

What it says: “A sound and robust compliance management system is essential to ensuring compliance with Federal consumer financial law and preventing associated risks of harm to consumers. As noted in previous issues of Supervisory Highlights, an effective compliance management system includes board and management oversight, a compliance program, a consumer complaint management program, and a compliance audit program.”

What it means: A good lender will have a system in place to make sure its practices are complying with regulations at every step. This means having a trained and knowledgeable staff.

What you can do: Pick a reputable lender. Ask your family, friends, and real estate agent for recommendations on trusted institutions that are known to follow regulations and do honest work.

By: Craig Donofrio

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This Part of the Home-Buying Paperwork Is Everything, So Make Sure You Get It Right

This Part of the Home-Buying 

Paperwork Is Everything, 

So Make Sure You Get It Right

The prime home-buying season is upon us, and with it, mounds of paperwork. And, let’s be honest—a chunk of that paperwork will be devoted to the real estate purchase contract.

Here’s how you can sign on the dotted line without losing your mind.

What it is

A real estate purchase contract is a legally binding document that details the sale of the property. Details range from the basics (e.g., how much the property costs) to the specifics ( e.g., what furniture or appliances stay in the house).

How to prepare

Before you even go near the contract, do a walk-through of the property with a professional land surveyor, engineer, or experienced landowner. Call in an inspector to search for anything that might end up costing you extra money: broken gutters or gates, inadequate electrical circuits, outdated plumbing pipes, and more. Get it all down in writing and attach all building and land inspection forms to the contract.

Review the contract

Once all the paperwork is gathered and reviewed, a real estate purchase contract will be drawn up. The following are common items that appear in traditional contracts:

  • Buyer’s and seller’s list
  • Legal description of the property, including zoning information
  • Purchase price and terms of the sale
  • Down payment to be held in escrow and future payment structure
  • Closing date
  • Response time frame before the contract is void
  • Any items included in the sale such as appliances, furniture, and flooring
  • Disclosure of lead paint (for buildings built before 1978) and other defects
  • Home and appliance warrantees
  • Pest and environmental inspection results
  • Home inspection results
  • Title insurance
  • Contingency clauses (for example, you can buy this house only if your other home sells, or certain repairs need to be made)
  • Commissions, if any
  • Signatures

Signing the contract

When you sign this contract—that’s pretty much it. If you come back to the seller and ask for anything else not in the purchase agreement, she or he doesn’t have to do it—and probably won’t. The contract states everything you’re getting and not getting in your new home, so get a real estate lawyer to go over all the details. Ask the seller for clarification on anything you don’t understand, and sign only when you’re certain you understand the agreement.

After signing

Store the contract in a secure area such as a safe-deposit box. Also store the deed and any other documents registered in the local registry office.

By: Craig Donofrio

Updated from an earlier version by Cina Coren

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How to Win the Bidding War on the Home You Want

If you are buying a home at the height of a citywide seller’s market or simply want a sought-after house in a neighborhood with limited turnover, you may find yourself in the midst of a real estate bidding war.

Competing against faceless prospective buyers may bring out the warrior in you, but before you decide to go all out in your battle, you need to step back and decide how much you really want that particular home.

Should You Compete in a Bidding War?

In the thick of competition you may forget your end goal is a home you love and can afford to own. If your offers have been turned down by several sellers because of competing buyers, then you may feel pushed to make an aggressive offer for the next home you like.

You should stop yourself from competing just because you think the time is right to become a homeowner or to move up into a new place. Instead, think about whether you really want the particular house enough to fight for it.

To guard against making an emotion-fueled offer for a house, take a hard look at your finances. While it may feel good at first to beat out other buyers and to purchase a property, it won’t feel so great in a year or two when you are struggling to make the payments on a house beyond your means. Know your limits before you begin to bid.

Prep for Battle

Your first step before entering a bidding war should be to consult with a lender to understand the maximum amount you can borrow, to evaluate how much cash you have to spend while keeping enough money in a reserve fund.

Next, make sure you hire an experienced REALTOR® who can share information about local market conditions and communicate with the seller’s agent. You should rely on your REALTOR® for advice about how to handle a bidding war, but be sure to do your own research: visit a lot of homes in the area where you want to buy so you understand the value of various properties before you make an offer.

Bidding War Strategies

Your REALTOR® should work with you to craft an attractive offer based on the list price for the home, a comparative market analysis of similar homes, and knowledge gained from the sellers’ agent about the sellers’ motivations and preferences.

In a bidding war, it’s important to work with a REALTOR® who will move quickly to present your offer and any counteroffer, one who is easy to communicate with during the transaction.

While you may assume money is the motivator that steers sellers to one buyer over another, there are other ways to make your offer attractive, such as these ideas:

  • Solid financing: You may be competing against cash buyers, so make sure your loan pre-approval is in place and you have completed all required documentation other than identifying a specific property.
  • Eliminate contingencies—carefully: If you own a home now, you may want to offer to buy another home without making your contract contingent on the sale of your current home. You take the risk of carrying two mortgages for a while, so make sure you can safely handle the payments. You can also decide to have an “information only” home inspection rather than making your offer contingent on the outcome of the inspection.
  • Make the settlement date convenient for the sellers: Rather than negotiating on a closing date convenient to all sides, you can tell the sellers you will work with their schedule or rent back the property to them after the closing.
  • Offer to pay all closing costs: You can reduce the sellers’ out-of-pocket expenses by offering to pay their share of the settlement fees, but before you do this get an accurate estimate of what those costs will be and make sure you have the funds available to pay them.
  • Personalize the transaction: Sometimes the tipping point for sellers who receive multiple offers is something emotional rather than financial. A personal letter describing your love of their home may tilt the scale in your favor.
  • Try an escalation clause: Money talks, too, so you can add an escalation clause to your offer that increases your bid by a certain amount above other offers. Just make sure you set a limit on how high your offer will go.
  • Control yourself: Remember that any offer is subject to an appraisal (unless you waive that contingency, but that’s not recommended unless you have plenty of cash), so be careful not to bid above the market value of any property.


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Find the Perfect Neighborhood How to scout out the best place to call home

Once you've become pre-qualified for a loan, you should be ready to put your house-hunting efforts into full gear. But don't skip the important step of scouting out neighborhoods before you start your search for the perfect house.
The neighborhood in which you live will heavily dictate your whole way of life—things like walking to a nearby park with your kids, knowing your kids are attending good schools, feeling safe when your children play outdoors, being close to restaurants and shopping, enjoying a short commute, and knowing your home will appreciate at a healthy rate.
Of course one way to get started in your neighborhood search is to get in your car and explore, especially if you're unfamiliar with the area. Get an idea about the neighborhoods by driving around and seeing which areas appeal to you. Walk around, explore, and talk to some of the residents.
Take note of the general appearance of the homes. Are they well maintained? Are they nicely landscaped?
If you have children, you might be looking for a neighborhood with plenty of children around, as opposed to neighborhoods that attract more seniors or young singles.
Other factors you'll want to consider are the schools, crime, your family's specific needs, and appreciation - as in how much the value of the home is likely to increase.
A good Realtor will be very familiar with all the neighborhoods in the area and should be able to tell you about the strengths and weaknesses of the specific neighborhoods you're eyeing.
The school district

Even if you don't have school-aged children, buying a home in a district with good schools will be in your best interest. When and if you sell the home at some point in the future, future buyers with children will likely consider good schools their top priority. And neighborhoods with good schools typically attract more buyers.
There are several sites on the Web in which school reports are just a few mouse clicks away. Basically all you do is enter a geographical area or zip code and it will display ratings for the school system. Also:
  • Ask your Realtor about information on schools in the area.
  • Talk to people in the neighborhood, especially people with children.
  • Standardized test scores are also available on the Internet.
  • Visit the schools and take a tour if you have children. It's important that your decision isn't based purely through facts gathered online. Get a true feeling for what the school is like.
Crime statistics

No one wants to live in a neighborhood where break-ins and burglary are the norm. There are web sites that can provide you with statistics on crime and other information pertinent to your search.
In addition to school information, Homestore lets you enter a city or zip code and provides you with crime data for the area you choose. It also compares crime statistics with other cities (such as the city from which you are moving).
In researching a neighborhood, you must first determine your area. The suburbs may have lower crime statistics, but may be farther from your work. Cities may have more crime, but may have other qualities that you consider more attractive, such as convenience and cultural activities.
Use the following tips to help you learn about crime statistics in a neighborhood:
  • Talk to neighbors.
  • Take note if there are bars on the windows and doors of homes.
  • Talk to the police or sheriff's department.
  • Check for gang graffiti on walls and walkways.
  • Keep in mind that if you're looking in-town, you may not be able to get away from everything you consider unappealing (such as noise and traffic).
Keep your family in mind

A home isn't just an investment when you have a family to think of. You'll need to consider more than just the number of bedrooms or whether it has an attached garage. You'll need to consider the community first and foremost. Do you want schools that are in walking distance? Do you want to be close to your place of employment? Do you want to be close to shopping, restaurants, and other services?
You'll also want to research property values before you find a home in the neighborhood that you like; property values reflect a community's overall health.
And when you do your research, find out what houses sell for now versus a decade ago, five years ago, and three years ago. Also, find out how much property taxes have gone up.
by Michele Dawson, Realty Times

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