Buying Your First Home? First Time Buyer Rules

buying your first home

Buying Your First Home? First Time Buyer Rules

If you are a young adult moving out for the first time, you need a set of guidelines to help you with purchasing your first home. Consider these first time buyer “rules” as you begin searching for a home for sale:

Determine a budget and stick to it.

Just like an engagement ring should cost you two months’ salary, your monthly mortgage payment should cost roughly one-third of your monthly take-home pay and no more. The only exceptions are 1.) If you are moving to a metropolitan area (our audience is those seeking homes for own a home in New Orleans suburbs, which is not metropolitan), or 2.) You plan to share the home with a roommate (preferably, one that is already lined up).

Don’t make the mistake of searching for homes out of your price range, thinking that you can make up the difference in your mortgage payment by getting a roommate if the “right” house comes along. Lots of out-of-price-range homes are easy to fall in love with, but the right roommate may never come along to help you afford them. It is far better to choose a house in your price range based on your situation today, whether you are buying a home by yourself or with a committed roommate.

Many first time home buyers find themselves discouraged with the homes that fit their personal budget.  In some instances, you can purchase a condo (for the same price)  that has more amenities and features than the equivocally priced single family home.  Depending on your budget, you may even be able to look into luxury condos for the same price as a mediocre home.

Get with a qualified mortgage broker.

choose the right lenderOne of the first things you should do when buying your first home is get with a qualified mortgage broker.  The lender that you choose will make a substantial difference on how smooth your transaction goes and how much you will ultimately spend on your new home.  Although there are many mortgage lenders out there, all promising you the world, at the lowest rates, many fall short when you get close to the closing table.  Be sure to choose a lender that is local and come recommended by your REALTOR.  In most instances, your REALTOR will have intimate knowledge of the success rate and personal reputation of local lenders.  Be sure to get Pre-Approved for your mortgage before searching for homes for sale.

Decide on your must-haves

And, learn to differentiate between what you must have from what you would like to have. Here are some examples of practical “must haves” vs. “would like to haves” for the typical first time renter:

  • Decent neighborhood = must have
  • Swimming pool = would like to have
  • Near work or school = must have
  • Two bedrooms (without a roommate) = would like to have
  • Two bedrooms (with roommate) = must have
  • Major appliances = must have (for most first time renters)

Once you make a must have vs. would like to have list, you can more confidently choose which rental homes you want to put on your short list.

Use a Real Estate Agent.

Rather than scouring Craigslist or Zillow and cold calling home sellers who may or may not be experienced, trustworthy or even legitimate (Craigslist is loaded with fraudulent real estate schemes), it is better to play it safe and contact a licensed real estate agent to help you find a the perfect home. We define “real estate” as a state licensed real estate agent who has experience assists first time home buyers with purchasing their first home. The REALTOR should have intimate knowledge of the available financing options that generally assist first time home byers.  Find a real estate agent that fits that description; if you are a first time home-buyer in Lakeview or Covington, call us today for a list of homes in the area.

 

To Charge or Not to Charge – Why Have Rental Late Fees

Nobody likes to waste money… well, maybe politicians, but not the rest of us. For anyone renting a home, late fees can be a major frustration; they can snowball into big problems, and they can be entirely avoidable. So for a property manager, it’s an important decision whether to charge late fees or not, and if they do charge, how far should they go to enforce them. In this article I’ll discuss some important reasons why real estate brokers should charge late fees and why they should (almost) never waive them.

Every Month, Stuff Happens

As if a property manager’s job isn’t hard enough already, dealing with just about any issue that comes up out of routine is like throwing a monkey wrench into your engine. When repairs are needed at a rental property, it’s important to deal with it quickly, get it resolved, and make it history as soon as possible. The same goes for rent. One thing is for sure: every month, there will be at least one property that needs a repair, and at least one tenant that pays rent late. So if it’s important to the tenant for repairs to be handled quickly and conveniently, it’s equally important to the manager for the tenant to pay their rent on time.

Avoid Problems Whenever Possible

When rents are late, there is a domino effect of problems it causes. As a general rule, most landlords expect to be paid on time. When the landlord does not get paid on time, they usually complain to the property manager. Property managers are regularly bombarded with problems and complaints, so avoiding the unnecessary ones is always preferable. Trust me, property managers do not like receiving owner complaints, as this is sure to impact the owner’s perception of the manager’s competence and responsibility.

The Rent Process

For many property management companies, rents are always due on the first day of the month. Some tenants pay electronically, while others pay by check or certified funds. Few property managers accept cash, and if they do, they should stop. Having cash in the office is a bad idea and can open the door to a potential robbery. By refusing cash, that risk can be eliminated. But with electronic payments (sometimes called “direct deposit” or “ACH”), it can often take two to three business days for the payment to clear and appear in the property manager’s account. Paper payments, whether they be checks or certified funds, are even worse. Even in our current day of modern and high-speed technology, it’s still quite common for a check to take 4 to 5 business days to clear the bank. When rents are paid late, it takes the same time for the payments to clear, adding to the number of days before the manager can pay the owner.

Grace Periods

Many property managers give renters a 4 or 5 day “grace period” to pay the rent. This means, if the rent is due on the 1 st , the renter can still pay up to the 4th or the 5th without incurring late fees. Grace periods are not a right and there isn’t any legal requirement to provide them. Grace periods are give out of the kindness of your property manager’s heart and nothing else. So in consideration of the grace period, it often happens that many renters wait until the last minute to pay. So as an “almost always” rule of thumb, most renters pay after the first day of the month and as close to the grace period as possible. Therefore, if the manager has a 5 day grace period, and the tenant pays on the 5th , even if the manager is able to deposit the check the same day (which they often aren’t), there is still the standard 4 to 5 day bank-processing time-frame on the back end that the property manager has to wait before reconciling the owner’s account and sending out owner checks. So if you add the days up, simple math says that most, if not all, funds haven’t cleared the bank and aren’t available to the property manager until roughly the 10th day of the month.

The Compacted Accounting Calendar

Almost all businesses have a 30 day (or monthly) accounting cycle. This means that when they receive any monies, they have the full month to receive bills (repair bills from the plumber or handyman, taxes, insurance, etc.), make those payments, reconcile the accounts, and disburse owner payments. In the property management world, a majority of landlords want their payment as quickly as possible. This often becomes a sticking point between the needs of the property manager and the demands of the owner. So since we work for the owner, many property managers succumb to the owner’s demands to pay as early in the month as possible, usually around the 15 th . So instead of having a full 30-day accounting period, many property management companies only have a 15 day accounting period.

What About The Late Fee?

Well, when the renter pays late, inevitably the owner gets paid late. As the saying goes, “stuff rolls downhill”. Since the real estate company is sure to receive complaints from the owner, there’s plenty of good reason for the property manager to charge a late fee. Late fees generally serve two important purposes: (1) create a financial motivation for the tenant to pay on time, and (2) to compensate the owner and property manager for the additional work and frustration caused by the late payment.

To Waive Or Not To Waive?

Waiving a late fee is each property manager’s personal decision, but one that I’ve found few reasons to not enforce. In limited circumstances, especially if the tenant usually pays on time, communicates the problem clearly (and preferably ahead of time), and keeps his or her promise to make the payment on a later agreed date, it might be OK to waive the late fee… once (maybe twice). But when a tenant is routinely late, always has an excuse, and fails to keep promises to pay on the later date, the property manager should have no hesitation in charging a late fee. Bear in mind, though, late fees must be a condition of the lease and can’t just be arbitrarily determined on a whim. Also, realize that if you routinely waive late fees, your tenants will eventually catch on and it will become difficult, if not impossible, to routinely enforce them. So if you’re going to charge late fees, stick to your guns. You should also give consideration to the landlord’s preference on late fees… but as for the property manager, for whom it’s important to keep everything operating smoothly and on schedule, having and enforcing a late fee is an effective tool that can do a lot of good if used correctly.

Is This Real Estate Boom Authentic?

The Authentic Estate Boom – How Long Will It Very last?

There is a whole lot of concern about the authentic estate field. Media reports suggest that the genuine estate market is a bubble that is about to burst. But how correct is this? Under are two information that suggest there is no real estate bubble.

Truth No. 1

The genuine estate overall economy is community, not world wide

Not like the inventory industry, which is centered on the countrywide and planet financial state, the true estate sector is quite much a domestically-centered overall economy. What does this imply? This means that when the inventory sector is influenced by economic increase and slide of industry all above the country, the actual estate sector is not. True estate rates in California may possibly not affect charges in New York, andthat’s that. In serious estate, a broad analysis of what is going on all over the country does not always replicate what is taking place in your property city.

Point No. 2

When you will find a demand from customers, there is a provide

As extended as there’s a desire you can find a supply. Serious estate is about actual folks who need to have homes, and persons will often be shopping for households, mainly because persons will need to live somewhere. If you search to the upcoming, you can expect to see that there is certainly an ever raising demand from customers for actual estate. Consider, for case in point, the truth that tens of millions of migrants are arriving in the United States each individual calendar year. This movement interprets into a have to have for real estate. What’s more, it can be also considerably less complicated to get a home financial loan these days, which usually means that people today will be buying properties. Men and women also get married significantly afterwards, which usually means that they’re going to probably be purchasing a dwelling whilst however one.

House obtaining is a concrete need to have, contrary to the stock market, which is fewer concrete. In the inventory industry, obtaining and providing occurs at the snap of a finger. In true estate, economic exercise is significantly less volatile. The marketplace is inherently additional stable.

The actual estate market place will increase and slide, but in normal genuine estate rates increase in the long expression. So, if you are investing, simply just hold on to your purchase for the extensive phrase, and you’ll see that this is no bursting bubble.

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How The Internet Has Changed The REALTOR

technology changes real estate

Great Partnership or the downfall of the common REALTOR?

Real Estate professionals have spent the last 200 years in almost total control of the real estate information needed to conduct real estate transactions.  From the MLS to personal networks the timely dissemination of information has been in the REALTOR hands.  They held on to that information like gold to force prospective buyers and sellers to seek them out.

Enter the Internet

online real estateThe traditional model had the REALTOR controlling 90% of the real estate transaction.  That model has been flipped upside down and has put the consumer in charge.  Just as the travel, automotive and financial services sectors were forced to reboot, so too has the real estate industry had a major paradigm shift in the way business is transacted.

Multiple independent portals started popping up and giving the consumer all of that information the REALTOR held so tightly to their chest and more.  The Real Estate industry reacted and began putting that information in the hands of the consumer through Realtor.com.  Quickly the real estate industry regained the majority share of online consumer traffic looking for housing information.

Online Real Estate Evolves

death of the realtor?Of course, as everything else on the internet, evolution comes quickly and sites such as RealtyTrac and HomeAdvisor began providing information previously unpublished such as foreclosure listings and prescreened lists of service professionals for the use of both buyers and sellers.  Consumers’ appetite for real estate information became insatiable.  They began demanding information such as home price estimates which had generally been controlled by the REALTOR.  They wanted lists of houses that were for sale by owner.  Overnight websites such as ForSaleByOwner.com and NewHomeSource.com popped up and started providing that information.  The floodgates of real estate information were being forced open and real estate professionals needed a way to catch up and still maintain a feasible business model.

Online Real Estate Grows With New Users

The current generation of buyers, Generations X and Y, want everything available online.  Their already buying clothes, household supplies, electronics, etc. online and they will eventually want to be able to do the same with real estate.  Websites such as Auction.com have begun giving these consumers what they want.  These sites have made it possible for a buyer to get a satellite view of the property to determine proximity to important amenities; they can search for comps online, and have an offer in a real estate agents hand within two hours.  They can do all of this without getting out of their pajamas.  In the old way of doing things that process would have taken a few weeks.

Online Real Estate Resources

Many real estate brokers now take advantage of technology to assist their customers.  Sites specializing in specific real estate markets such as Lakeview Homes For Sale or Granbury Homes for Sale have found great success in providing search tools, home value tools and community information to their customers while holding a consistent branding.

What has to happen is a hybrid model; one that provides a best of both worlds approach.  By using the local REALTORS’ expertise and people skills along with the power of the internet; Real Estate agents will always play a role in the real estate buying process.  It is not about whether the internet is going to make them obsolete, but more about finding a value proposition that allows them to give consumers their expertise in a tech-driven marketplace.

Death of the REALTOR?

Most home buyers still want the one on one time with a professional.  They want to be led through their potential new home, shown the amenities, and be educated on the process.  Consumers are going to do their research online, that’s inevitable, but we all want the human touch that comes with a personal relationship with a trusted REALTOR.  By availing themselves of the extraordinary powers of the internet, REALTORS can provide their clients with the information they crave while being there on a personal level when the client is ready for it.

The old days of the MLS that only a REALTOR had access to are no longer the power of the day.  Of course, the MLS will be used and needs to be, but the days of holding on to critical data just for the sake of pretending to stay in control no longer make sense.  Open up to your clients both with information and the people skills you already do so well and our new digital age can be one of your greatest assets as opposed to your greatest nemesis.

 

Real Estate Commissions Are Built In Fair Market Value

real estate commission

You hear many people speak about how real estate agents are overpaid or dont do anything.  Although just like in any industry, there are good and bad.  Most real estate agents earn their money and work hard for it.  Many people feel that they will “save the commission” by attempting to sell their home on their own.  Although in some instances that can happen, more times than not the home either doesn’t sell or has some level of disastrous results.  Why?  Because the commission is already built into the value of your home.  If you try to remove it, it will usually bite you.

Why You Cant Save The Commission

The most common reason someone would want to sell their home without a real estate agent is to “save the commission”.  There are some challenges with that idea.  Keep in mind, 89% of all residential real estate transactions use a licensed agent.  There is only one commission.  When a FSBO lists their home they are attempting to “save” that commission.  Any home buyer, who chooses to NOT use an agent and look on their own is also looking to “save the commission”.  So what you end up with are two cheap people, both attempting to beat the system and save themselves money.  There is only one commission to be saved and both “cheap” people are fighting for it!  You can see how this setup can cause problems in a transaction that is based upon mutually agreeing on multiple aspects of the home sale.

Commission is Baked Into Fair Market Price

NAR – The National Association of REALTORS puts out a set of real estate statistics every year.  Those statistics show that 89% of sellers were assisted by a real estate agent when selling their home.  So with 89% of all residential real estate transactions including a commission, and fair market value is based off what is available for the same price, real estate commissions are baked into the price.  When an licensed appraiser does an appraisal, they look at recent sales of similar homes.   Those similar homes are called comps.  The appraiser will make adjustments to the sold price of a home in an effort to bring it as close to the subject property as possible.   For instance, if one of the comps had 2 1/2 baths but the subject only has 2 baths, they will adjust the sales price of the subject DOWN to bring it in line with what the subject is.  Keep in mind, almost every one of these “comps” have commission built in.  So when they are valuing your home, they are factoring in the value of that home being sold with the commission built in.  You may want to ask an appraiser, if a home that they use as a comp is sold without the benefit of a real estate agent, do you adjust the price accordingly? Keep in mind when you get a value of your home — the real estate commission is already built into that price.  That is why the typical home sale without an agent sold for $210,000 compared to $249,000 for agent-assisted home sales.  You cant save that commission, you can not pay it to the agent, but in most instances it will come out of the sales price of your home.

The Perils of A Real Estate Transaction

Anytime you are dealing with large amounts of money such as a real estate transaction, nice people can become not so nice very quickly.  People act differently when the largest investment of their lives is on the line.   When their children’s financial future hangs in the balance.  One of the most overlooked aspects of using a real estate agent is they keep the greed in line.  Meaning real estate agents explain to their sellers “you cant do that”.  When the home seller wants to not disclose a certain defect in the home or leverage some other aspect of the deal, its usually the real estate agent telling them they cant do that. So much for people saying that agents are the greedy ones!

Leverage Experience

Every real estate transaction brings new experience.  Things that you never would have thought of come up.  If a particular non-licensed home seller has sold 2 or 3 homes in their lives, they feel like the expert.  Most successful real estate agents have sold more homes last month than most people sell in their lives.  When an issue comes up, they have a quick answer because they have seen it before.  When home sellers think back on the real estate transaction, they probably dont remember that asinine question they asked, because of the quick response their agent provided.  What would have been the repercussions of moving forward with that? There is a lot of value in knowing that the path you are on (for your transaction) is one based upon experience.

You CAN Sell Without An Agent

You can get through a real estate transaction without an agent.  You can drive a car without full coverage insurance.  You can pull your own teeth.  A wise man once told me “everything is OK until everything is NOT OK”.  The value of an agent comes out when things get hairy in a transaction.  There is also value in making sure that things simply dont get hairy in the transaction.  Most real estate agents will tell you, very few transactions go smoothly.  Some do, but most have some type of challenge that needs to be overcome.

Use an agent.  Your homes value already has their commission built into the value of your home.  Its not worth the effort and potential disastrous results of not using an agent.

 

 

Real Estate Closing

real estate agent

What Actually Takes Place At The Real Estate Closing?

With real estate transactions being such a large purchase, the actually process of purchasing a home is called the closing. Using a notary for closing on a property is a very efficient way to get through the closing process on a new home without paying the high fees associated with a full real estate attorney.

What Happens At A Closing?

The final step in purchasing a new home is at the closing table.  Closing on a home is when all of the hard work and stress in the home buying process finally comes to fruition.  Closing on a home is when all of the final paperwork is completed and the title on the new property is transferred.

Who Are the Participants in a Closing?

When you attend a closing on a property, there are a multiple positions being represented.  They buyer attendants as they are the ones acquiring the new home.  The buyer has the most paperwork to sign as they are usually implementing a mortgage on the property.

Home Buyer

For most new home purchases, when a mortgage is on the new property, a package is generated from the lender.  A package is simply a group of documents that make up the legal transaction of the implementing the mortgage.  That package is sent to the closing attorney who makes sure that everything is in place and the notary oversees the signing of all of the documents.

Home Seller

In many instances the home seller will attend the closing but that is always not the case.  The home seller may show up at a previous time to sign the conveyance or Act of Sale, which as as the legal document that transfers the property from the previous owner to the new home buyer.  They will also be required to sign a HUD1 (which now has been renamed).  the closing attorney or notary will usually have a handful of other documents for the seller of the property to sign, but these two are the most important.

The Closing Notary

Usually it is more cost effective for a closing notary to oversee the actual documents being signed.  The notary’s job is to verify that each person signing a document, is indeed who they say they are.  They usually will take a copy of some form of the home buyers identification as well as the home-sellers identification.

Closing Attorney

Most real estate transactions require the use of a real estate attorney to oversee the process and to generate many of the closing documentation.  The closing attorney makes sure that all of the required documents are legally prepared and meet the federal, state and local requirements as well as the requirements of the lender.

Lender

The lender plays a crucial role in the closing process.  The lender provides the funds for the real estate transaction.  They prepare the “package” which contains all of the required loan documents that the closing attorney will oversee and the notary will witness being signed buy the home purchaser.

Insurance Company

In almost every case, an insurance company is needed to insure the new home.  The lender will usually require that insurance cover all aspects of damage to the new property as the property itself acts as collateral for the mortgage.  All of the required insurance documents are prepared prior to closing to take effect the day of the closing.  Once again, the notary will oversee the signing of the insurance documents and insure that everyone is who they say they are.

Other Miscellaneous Players

Their may be many other people or companies that play a part in the closing on a new property.  For instance, the buyer may have a new home warranty that goes into effect the day of the closing and in turn must be paid for.  In that instance, the home warranty documentation is filled out and payment of the new home warranty will usually come out of the proceeds that the seller gets and is deducted on the HUD1.