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Why Are Closing Costs SUCH a Big Deal?

May 14, 2015

closing costs real estate

It’s important to understand the closing costs you’ll be responsible for when you sign the dotted line.

Buying a home is stressful — period. The searching, the paperwork, the negotiations, and then your carefully accumulated savings, gone in a flash. While the down payment is the primary cost most pay attention to when buying a home, there are other pesky fees to consider, namely, closing costs.

You may have heard the term thrown about in conversation, but what exactly are closing costs? And why are they such a big deal?

Closing costs are lender and third-party fees paid at the closing of a real estate transaction. Typically paid with a cashier’s check, they range from 2 percent to 5 percent of the purchase price. Understanding and educating yourself about what closing costs you can expect to pay is the best way to avoid a headache at the end of the transaction.

Closing costs fall into two main categories: recurring (or prepaid) and nonrecurring. Recurring costs are ongoing expenses that you will pay as a homeowner, with a portion due upon closing the transaction; nonrecurring are one-time fees associated with borrowing money and services required to purchase the home.

While not an exhaustive list, the information below is meant to serve as an explanation of the standard items provided on your HUD-1 Settlement Statement. (The HUD-1 is a detailed summary of closing costs provided by your attorney or escrow agent 24 hours prior to your closing date.)

Recurring closing costs

These items are prepaid expenses due at closing and deposited into your escrow account. Think of it as a forced savings account for your upcoming home expenses. The specific costs can include everything from your fire insurance premiums to homeowners association dues, but these are the most commons ones.

Property taxes: The seller is responsible for the taxes on the home until the day of purchase, then the buyer assumes the tax liability from the date of purchase to the next billing cycle. The sum varies, but the average amount of property taxes deposited into your escrow account can be anywhere from one to eight months’ worth.

Homeowners insurance: Typically, the total annual premium is due at closing. Additionally, another two to three months of payments are deposited in your escrow account with the lender.

Prepaid loan interest: A prorated amount due at closing that includes your loan interest until your first payment the following month.

Nonrecurring closing costs

Lender fees continue to rise, which means shopping around for a good deal is a must. Often, these fees are negotiable — especially when they can be attributed to high administrative costs. Don’t be afraid to ask for the best deal possible and walk away if you feel the cost is unreasonable.

What types of fees can you expect to fork over?

Discount points: Paid upfront to lower your interest rate.

Origination fee: Charged by the lender to process your loan.

Document prep fee: The cost of preparing your loan file for processing.

Appraisal fee: Paid to have a professional estimate the market value of the home.

Survey fee: Charged for verifying a home’s property lines.

Underwriting fee: Covers the cost of evaluating and verifying your loan application.

Credit report fee: The cost of pulling your credit scores.

Wire transfer fee: The cost to wire funds from the lender to escrow to purchase the home.

In addition to lender fees, a number of costs associated with your closing will need to be paid to your escrow closing agent or attorney.

Courier fee: Covers the delivery of paperwork.

Title insurance: This policy is a MUST. It protects you in case the seller doesn’t have full rights and warranties to the title of the property; the amount depends on the purchase price of the home.

Recording fees: Government fees assessed for recording the new land records.

Notary fee: The cost to notarize the Deed of Trust.

Escrow fee/Settlement fee: Paid for the services of the escrow agent.

Closing costs are far from simple
In fact, they can be downright confusing and complicated. Lender guidelines, state-specific charges, and vendor rates are tailored to individual transactions. Rather than exhaust yourself with specifics, use this information to help you have informed conversations with your REALTOR® and mortgage broker. These professionals are your advocates and will be more than happy to help guide you through the process!

Robyn Woodman spent several years as a real estate broker in the Seattle area, helping investors build their residential property portfolios. Based in the Pacific Northwest, she is an independent consultant; her writing has been featured on Refinery29, All Things Real Estate, and Modern Loss.

Visit Houselogic.com for more articles like this. Reprinted from Houselogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

Keep Your Home Sale from Falling Apart

May 7, 2015

 

 

mistakes in real estate home sales

Finding a buyer for your home is just the first step on the homeselling path. Tread carefully in the weeks ahead because if you make one of these common seller mistakes, your deal may not close.

Mistake #1: Ignore Contingencies

If your contract requires you to do something before the sale, do it. If the buyers make the sale contingent on certain repairs, don’t do cheap patch-jobs and expect the buyers not to notice the fixes weren’t done properly.

Mistake #2: Don’t Bother to Fix Things That Break

The last thing any seller needs is for the buyers to notice on the pre-closing walk-through that the home isn’t in the same condition as when they made their offer. When things fall apart in a home about to be purchased, sellers must make the repairs. If the furnace fails, get a professional to fix it, and inform the buyers that the work was done. When you fail to maintain the home, the buyers may lose confidence in your integrity and the condition of the home and back out of the sale.

Mistake #3: Get Lax About Deadlines

Treat deadlines as sacrosanct. If you have three days to accept or reject the home inspection, make your decision within three days. If you’re selling, move out a few days early, so you can turn over the keys at closing.

Mistake #4: Refuse to Negotiate Any Further

Once you’ve negotiated a price, it’s natural to calculate how much you’ll walk away with from the closing table. However, problems uncovered during inspections will have to be fixed. The appraisal may come in at a price below what the buyers offered to pay. Be prepared to negotiate with the buyers over these bottom-line-influencing issues.

Mistake #5: Hide Liens from Buyers

Did you neglect to mention that Uncle Sam has placed a tax lien on your home or you owe six months of homeowners association fees? The title search is going to turn up any liens filed on your house. To sell your house, you have to pay off the lien (or get the borrower to agree to pay it off). If you can do that with the sales proceeds, great. If not, the sale isn’t going to close.
G.M. Filisko is an attorney and award-winning writer who wanted a successful closing on a Wisconsin property so bad that she probably made her agent rethink going into real estate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics. Reprinted from Houselogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

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Top 10 Home Projects to Recoup Costs at Resale

April 30, 2015

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Top10HomeProjectstoRecoup

Preparation Key to Interior Painting Success

April 23, 2015

 

interior paint home

 

By Keith Loria, Rismedia.com

One of the easiest ways to give a room a quick makeover before putting your home on the market is by adding a fresh coat of paint. While picking the right color is typically an exciting part of the process, it’s crucial that you prepare well ahead of time by formulating a plan of action for your interior painting project.

If you’re tackling the paint job yourself, one trip to the local paint store or hardware supply store should be enough to find everything you’ll need for the job. In addition to the paint itself, you’ll need rollers, brushes (of various sizes), a trim edger, paint sticks, protective cloth and a paint pan. Additional items that may come in handy along the way include a tape measure, screwdriver, sandpaper, sponges, household cleaner and drop cloths.

To properly prepare the room, set aside some time to clean it first. This includes removing any small items or furniture that can easily be cleared from the space. For larger items that are too much trouble to move, bring them to the center of the room and cover them with plastic cloths to keep them from getting covered with paint. Next, use blue masking tape to protect light fixtures, switch panels, hinges and knobs, and a drop cloth to protect the floor. It’s also a good idea to keep a window open for ventilation.

Any surfaces that aren’t being painted will have to be masked off with tape as well. This includes the trim on doors and windows, bookshelves and baseboards. The corners between walls and ceilings may also need to be masked off.

As for the walls that are being painted, examine the drywall to see if there are any holes, as these must be repaired before painting. Once drywall repairs are made, the area must be sanded and primed before the paint is applied. If the plaster has any cracks, they’ll need to be fixed with a paste that can be made from Plaster of Paris and water. Be sure to remove any nails from the wall as well.

If the walls have never been painted before—or they were previously painted a dark color/stain—priming is an essential part of the process that can’t be ignored. The primer will help conceal the old color and any unsightly stains that may otherwise show through the new paint.

Once all this is done, it’s time to paint. Bring in some friends and family members and make it fun. Blast some good music, order some pizza for lunch and make it a painting party no one will ever forget.

For more painting preparation tips, contact our office today.

Copyright© 2015 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

How to Assess the Real Cost of a Fixer-Upper House

April 16, 2015

 

calulator

 

 

When you buy a fixer-upper house, you can save a ton of money, or get yourself in a financial fix.

Trying to decide whether to buy a fixer-upper house? Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.

1. Decide what you can do yourself.

TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.

Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer.

Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do.

If you’re doing the work yourself, price the supplies.

Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs.

Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.

Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.

Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work.

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.

Get written estimates for repairs before you commit to buying a home with structural issues.

Don’t purchase a home that needs major structural work unless:

You’re getting it at a steep discount

You’re sure you’ve uncovered the extent of the problem

You know the problem can be fixed

You have a binding written estimate for the repairs

5. Check the cost of financing.

Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings.

If you’re planning to fund the repairs with a home equity or home improvement loan:

Get yourself pre-approved for both loans before you make an offer.

Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.

Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer.

Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

7. Include inspection contingencies in your offer.

Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.

Radon, mold, lead-based paint

Septic and well

Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

(G.M. Filisko is an attorney and award-winning writer whose parents bought and renovated a fixer-upper when she was a teen. A regular contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.)

 

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

Real Estate @ a Glance: April 2015 Edition

April 7, 2015

Better RE glance

Here is the most recent information on the San Diego housing market. For specific information on your neighborhood or a market analysis on your home, please send me an email or call me at 619-888-2117.

Reportable Period :: March 2015 :: SAN DIEGO ASSOCIATION OF REALTORS®

 

All expectations in 2015 are for a healthy and energetic selling season. National stories have been highlighting an increase in new construction sales and pending sales, but national stories are not always readily applied to the local scene. All the same, if ever there was a year to list or purchase a home, wider economic factors seem to indicate that this is the one.

 

Closed Sales increased 3.4 percent for Detached homes and 4.4 percent for Attached homes. Pending Sales increased 27.8 percent for Detached homes and 22.2 percent for Attached homes. Inventory decreased 15.6 percent for Detached homes and 17.9 percent for Attached homes.

 

The Median Sales Price was up 6.0 percent to $519,540 for Detached homes and 15.4 percent to $348,825 for Attached homes. Days on Market decreased 6.4 percent for Detached homes and 8.7 percent for Attached homes. Supply decreased 13.8 percent for Detached homes and 15.4 percent for Attached homes.

 

On average, more people are employed and making more money than they were at this time last year. The jobs picture, as a whole, looks promising. Employment drives home-buying activity, so it is ever critical to watch labor statistics as a key indicator for the residential real estate market. Coupled with the mostly positive jobs picture, it is widely expected that mortgage rates will remain as they are for at least the first six months of the year.

 

Median Sales Price: $460.250
Days on the Market Until Sale:  43
Housing Affordability Index: 31%
Months Supply: 2.4

 

 

Total Market Oveview

 

 

To view larger image, click here.

Buyers Offer More for a Staged Home

April 3, 2015

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

BuyersOfferMoreForAStagedHome

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