Realestate by fanzhongqing

VIEWS: 23 PAGES: 44

									     Real Estate

Creating wealth with real
         estate




           1
Homeownership has grown




           2
3
               Rent versus Buy
1. If you’re planning to move within five years, renting
   gives you more flexibility.
2. If you’re uncertain about your present or near future
   financial circumstances, renting requires less financial
   commitment and risk.
3. If time does not permit you to look for the area you
   would be making such an investment into. You should
   research very carefully before you buy a house.
4. Renting often offers fewer responsibilities such as
   repairs, yard maintenance or needing to buy
   appliances, which could be expensive and take time.

                              4
    Activity – Rent versus Buy
• Do a rent versus buy analysis using this
  calculator
• http://www.ginniemae.gov/rent_vs_buy/ren
  t_vs_buy_calc.asp?Section=YPTH
•




                    5
  The Six Steps to Buying a House
1. Determine how much you can afford to buy and if it is the right time
   to buy. Check out resources to help you buy a home.
2. Recruit a team to help you find your home. Find a good broker,
   attorney, home inspector and insurance agent.
3. Do your research and select a Home, What features are important
   to your family? Starting the search for the home.
4. Get mutual acceptance: Contract completely signed around and all
   parties agrees to the terms of the contract.
5. Shop for a mortgage: Take the time to shop for the best mortgage.
6. Close the deal. Satisfy all contingencies and sign the closing
   document at escrow.



                                   6
           Step 1: Prepare
• Check credit report and correct all errors
• Determine what you can afford, don’t let
  the broker tell you




                      7
       What can you afford?
• How affordable is the real estate in your
  area?
• National Association of Home Builders
  Housing Affordability Index measures
  the percentage of homes sold that a
  median income family could afford
  http://www.demographia.com/db-
  nahb0001.htm

                      8
Look at housing prices




          9
               Debt-to-income ratio
• A = Total all your housing expenses (mortgage,
  insurance and taxes)
• B = Total all your debt payments A + others (car,
  education and credit card)
• C = Total all your monthly income
• Debt-to-income ratio
  A/C and B/C determines how much you can afford
Try it at:
http://www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH




                                        10
   How much down payment?
• Check for resources to help with down
  payment:
• http://www.hud.gov/local/wa/homeownersh
  ip/buyingprgms.cfm.




                    11
                How to hold title
• Single ownership – tenancy in severalty
• Concurrent ownership
   – joint tenancy - equal ownership of property by two or more
     parties, each with the right of survivorship.
   – tenancy by the entireties - ownership of property only between
     husband and wife in which neither can sell without the consent of
     the other and the property is owned by the survivor in the event
     of death of either party.
   – tenancy in common - equal ownership of property by two or
     more parties without the right of survivorship.




                                 12
    Step 2 – Choose the right team
•   Real estate broker
•   Home inspector
•   Insurance agent
•   Attorney




                         13
               Real estate broker
• Realtor knows the housing market in the area of your choice well.
  The realtor should be able to assist the home buyer with any homes
  they desire.
• Interview your realtor. How does the realtor work with buyers?
  Have the realtor to explain their buying process, including the follow-
  up. How much time will the realtor spend with you? How many
  homes has your realtor sold?
• Realtor should be resourceful and able to assist or refer the
  homebuyer to sources of information for the community and schools.
• What fees are paid to the realtor when buying a home? Is the
  homebuyer expected to pay any of these fees?
• What hours does the realtor work? Are these hours convenient to
  you?

                                   14
                  Home inspector
• Get a list of the items the home inspector will cover.
• Ask for referrals.
• Check to make sure that they are experienced in residential
  inspections.
• The average on-site inspection time for a single inspector is two to
  three hours for a typical single-family house.
• Negotiate a price before they start.
• Ask to see samples of the inspection report and determine whether
  or not you can understand the inspector's reporting style.
• Attend the inspection.
• Make sure the inspector is up-to-date by asking if they are part of an
  association or attend classes.


                                   15
Step 3: Select your home




           16
                     Factors
• Neighborhood – transportation, school,
  shopping, hospital, traffic, security, parking, etc.
• Price range
• Type of home – style, age, condition, yard, etc.
• Interior – bedrooms, bathrooms, flooring,
  kitchen, living room, dining room, fireplace,
  workshop, in-law, etc.



                           17
   Activity – Your dream home
• Using The Basics and Wishlist from the
  handouts, determine what kind of home
  you want to buy




                     18
        Step 4: Making an offer and getting mutual
                       acceptance

•   Sales Price. For most home purchasers, the sales price is the most important term.
•   Title. The seller should provide title, free and clear of all claims by others against your new home.
•   Mortgage Clause. The agreement of sale should provide that your earnest money or “deposit” will
    be refunded if the sale has to be canceled because you are unable to get a mortgage loan.
•   Pests. Your lender will require a certificate from a qualified inspector stating that the home is free
    from termites and other pests and pest damage.
•   Home Inspection. An inspection will determine the condition of the plumbing, heating, cooling
    and electrical systems.
•   Lead-Based Paint Hazards in Housing Built Before 1978. If you buy a home built before 1978,
    you have certain rights concerning lead-based paint and lead poisoning hazards.
•   Other Environmental Concerns. Your city or state may have laws requiring buyers or sellers to
    test for environmental hazards such as leaking underground oil tanks, the presence of radon or
    asbestos, lead water pipes, and other such hazards, and to take the steps to clean-up any such
    hazards.
•   Sharing of Expenses. You need to agree with the seller about how expenses related to the
    property such as taxes, water and sewer charges, condominium fees, and utility bills, are to be
    divided on the date of settlement.

                                                   19
 Activity – Purchase Agreement
• Look at the purchase agreement and give
  factors that you should consider.




                    20
       Step 5: Obtain a loan


The home is part of the American dream,
 but you can’t get one without a mortgage.




                     21
Mortgages -$10.2 trillion in debt
                                                                Mortgages and Refinances
                                                                       ($ billions)
   1400



   1200

                                                   Refinance
   1000                                            Originations
                                                   Purchase
                                                   Originations
    800



    600



    400



    200



      0
          1990-Q1


                     1991-Q1


                               1992-Q1


                                         1993-Q1


                                                      1994-Q1


                                                                1995-Q1


                                                                          1996-Q1


                                                                                    1997-Q1


                                                                                               1998-Q1


                                                                                                         1999-Q1


                                                                                                                   2000-Q1


                                                                                                                             2001-Q1


                                                                                                                                       2002-Q1


                                                                                                                                                 2003-Q1


                                                                                                                                                           2004-Q1


                                                                                                                                                                     2005-Q1


                                                                                                                                                                               2006-Q1
                    Source: Mortgage Bankers Association


                                                                                              22
         How do mortgages work?
                 Breakdown of Annual Mortgage Payment by Year of Payment
                                $200,000 at 6% for 30 years


$14,000.00


$12,000.00

                                                                          Principal
$10,000.00                                                              Total $200,000

 $8,000.00


 $6,000.00


 $4,000.00

                                 Finance Charge
 $2,000.00
                                  Total $235,893

     $0.00
             1   2   3   4   5   6   7   8   9   10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30


                                                           23
Interest rates change




          24
Effect of interest rates




           25
             Adjustable-rate Mortgages

Per            Monthly
                               You have an adjustable-rate
  $100,000    Payment
                               mortgage for $200,000 that
       5%      $542.10         resets after a year. The rate
       6%      $605.41         is set at 2% above the 90-
       7%      $671.55         day treasury bill. When you
                               assumed the mortgage a
       8%      $740.23         year ago, you were given the
       9%      $811.14         rate of 4.97%. The treasury
      10%      $883.99         bill rate is now 5.03%. What
                               will your rate be? What
       11%     $958.54         increase will you see in your
      12%     $1,034.53        monthly payments?
      13%     $1,111.76
      14%     $1,190.02
                          26
      15%     $1,269.17
              Effect of term of mortgage
                                              30-year mortgage $200,000
                                                Total Interest $235,894
$16,000.00
$14,000.00
$12,000.00
$10,000.00
 $8,000.00                                                                                                       Principal
 $6,000.00                                                                                                       Interest
 $4,000.00
 $2,000.00
     $0.00
              1   2   3   4   5   6   7   8   9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
                                                 15-year mortgage $200,000
                                                   Total interest $108,888
 $25,000.00

 $20,000.00

 $15,000.00
                                                                                                                  Principal
 $10,000.00
                                                                                                                  Interest
  $5,000.00

      $0.00
              1   2   3   4   5   6   7   8   9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
                                                                27
                Understanding APR
             APR 10%               APR 18%
Month   Principal   Interest   Principal   Interest
    1                             $7.96         $1.50
    2                             $8.02         $1.38
    3                             $8.09         $1.27
    4                             $8.16         $1.15
    5                             $8.23         $1.03
    6                             $8.30         $0.91
    7                             $8.36         $0.78
    8                             $8.43         $0.66
    9                             $8.50         $0.53
   10                             $8.58         $0.40
   11                             $8.65         $0.27
   12   $ 100.00    $ 10.00       $8.72         $0.14
                                           28
        $ 100.00    $ 10.00     $100.00     $10.02
    Evaluating a mortgage - APR
Company Interest        Points     Down       APR
        rate                       payment
A       5.75            0          0 – 20%
B            5.875      1          0 – 20%
C            4.875      5.875      0 – 20%
D            5.25       2.875      0 – 20%


    – http://www.dinkytown.net/java/MortgageApr.html


                            29
    Mortgage Shopping Worksheet
• What could you afford?
• Down payment
• APR
• Points
• Private mortgage insurance
• Fees (Application, origination, lender, appraisal,
  attorney, document preparation, broker’s fee,
  credit report fee
• Other closing fees
• Other costs

                         30
              Mortgages
• Adjustable versus fixed rate?
• 30-year versus 15-year?
• How much down payment?
Try it at:
http://www.ginniemae.gov/2_prequal/le_intro
  _questions.asp?subTitle=YPTH


                     31
 Activity – Shop for a mortgage
• Break into groups.
• Using the mortgage evaluation form,
  evaluate 3 mortgages




                     32
       Step 6: Close the deal
• Satisfy all contingencies and then close
  the deal




                      33
                    Escrow Agent
• Gathers the purchase and sale agreement and other necessary
  information that is needed for closing
• Obtains preliminary title report from the title insurance company.
  They ensure that the title is not cloudy
• Pays off all debts secured by the property and prepares the deed
  and other necessary documents
• Deposits all monies from the buyer and seller
• Prorates expenses and allocates closing costs
• Prepares the Settlement Statement
• Obtains title insurance policies
• Records and documents
• Delivers funds and other important documents

                                  34
Activity – Settlement Statement
• In the forms packet, look at the DFI
  explanation of the Settlement Statement




                     35
       Mr. and Mrs. Lee Buys A Home
•   Follow the six step buying process to prepare you for buying your next home. All
    analysis, decision making and follow up must be included in your written
    presentation.
•   Mr. and Mrs. Lee are relocating to Seattle Washington from Houston Texas. They
    have three children: ages 13, 5, and 15. They want a 4 bedroom homes with a
    minimum of 3 baths.
•   Mrs. Lee’s concerns are schools, shopping, and community activity for the children to
    participate in. She wants to live in suburban area. They are moving from a 3200 sq
    feet home on 1.5 acres; which just sold for $250,000 (seller’s net of $198,000)
•   Mr. Lee concern is the distance from his job site to his home. He also likes to work
    on small projects in the garage. A shop will be ideal.
•   Their joint income is $150,000 per year. Ms Lee is a stay-home mom.
•   Debts: 30,000 on two cars, 15,000 in credit card; rental home with outstanding
    mortgage of $35,000; stocks and bonds=Market value of $45,000;




                                           36
                              Your rights
According to the Real Estate Settlement Procedures Act, you have the following rights.
• To shop for the best loan for you and compare the charges of different mortgage
   brokers and lenders.
• To be informed about the total cost of your loan including the interest rate, points and
   other fees.
• To ask for a Good Faith Estimate of all loan and settlement charges before you agree
   to the loan and pay any fees.
• To know what fees are not refundable if you decide to cancel the loan agreement.
• To ask your mortgage broker to explain exactly what the mortgage broker will do for
   you.
• To know how much the mortgage broker is getting paid by you and the lender for
   your loan.
• To ask questions about charges and loan terms that you do not understand.
• To a credit decision that is not based on your race, color, religion, national origin, sex,
   marital status, age, or whether any income is from public assistance.
• To know the reason if your loan was turned down.

                                             37
                 Your rights
• The Fair Housing Act prohibits discrimination by
  direct providers of housing, such as landlords
  and real estate companies as well as other
  entities, such as municipalities, banks or other
  lending institutions and homeowners insurance
  companies whose discriminatory practices make
  housing unavailable to persons because of race,
  religion, sex, national origin, family status, or
  disability.
•
                         38
Investing in Real Estate




           39
Commercial real estate




          40
Commercial real estate




          41
How has real estate done?




            42
Do most landlords make money?




              43
Analysis based on the economy




              44

								
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