Why use a REALTOR® The decision to sell your home is one of the most important ones you can make. When you are ready to sell your home you need to ask yourself the following questions: Do you have the time, energy, knowledge, sources of information and contacts to do the job your self? Would you benefit by using a REALTOR®? Would a REALTORS®' knowledge on the current real estate market assist you in selling your home for more? Could their vast marketing techniques aid you in quickly finding a qualified buyer who will pay top dollar for your home? Are you aware of all necessary disclosures and the consequences if they don't happen? Are you willing to take on the risks involved without the advice, knowledge and assistance of a REALTOR®? A REALTOR® has the knowledge, education, interest, resources and dedication to guide you successfully through the process. When the public asks for a REALTOR®, they are getting more than a real estate licensee. They are getting a professional that must subscribe to the Associations strict Code of Ethics, Rules and Regulations and Professional Standards. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® are expected to maintain a higher level of knowledge of the process of buying and selling real estate. Real Estate transactions involve one of the biggest financial investments most people experience in their lifetime. Considering the risks involved and the advantages available, it would be foolish to consider a real estate transaction without the professional assistance of a REALTOR®! A REALTOR® can: Provide up-to-date information on current market trends to assist you in determining a reasonable price for your home Place your property on the MLS system* to market your property and introduce it to thousands of other REALTORS® to assure a wider range of prospective buyers Expose your property to numerous other REALTORS® through networking Use their expertise and experience to negotiate on your behalf Handle necessary paperwork Lend knowledge of the market to help you make informed decisions Guide you through each step of the transaction *The MLS System is a compilation of available and off market listings throughout the expanded metro area. A REALTOR® can gather information on what properties are available, what properties are selling and at what price and many other current market trends. All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again. Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®. But if you're still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one: 1. Your REALTOR® can help you determine your buying power -- that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices. 2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties. 3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell? 4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required. 5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date. 6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders. 7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly. 8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle. 9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients. 10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property. 11. Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process. 12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement). 10 Mistakes to Avoid Most advice columns tell you how you should do things. But there are all kinds of things you shouldn't do, either. Here are 10 frequent financial mistakes that consumers routinely make -- and you should avoid. Don't: 1. Choose the Wrong Mortgage: With the advent of instant refinancing, home loans are no longer the lifetime obligations they used to be. Still, you don't want to be saddled for even a short period of time with the wrong one. Investigate all your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility of prepayment penalties. 2. Confuse "Pre-Approved" and "Pre-Qualified" with a Loan Commitment: These are debatable terms in real estate because not all lenders apply the same definition to each expression. In fact, one leading real estate dictionary contains neither expression because their definitions are uncertain. According to one school of thought, however, when you are "pre-qualified," the lender is making an educated guess about how much you can borrow based on information you've provided. When you are "pre-approved," the lender has verified everything you have told him or her and is offering to lend you up to a given amount at current interest rates -- under certain conditions. Whether pre-qualified or pre-approved, final clearance and a check at closing -- a loan commitment -- are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check, and other verifications. When meeting with lenders, always ask how they define each term and what additional steps will be required to obtain a loan. 3. Have Too Much Credit: Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any big ticket purchases until after you buy your house. 4. Lie on Your Loan Application: Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars. But if they find out later, they can call your loan due and payable. Don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrower who ends up paying the price, often in the form of monthly loan payments he can't afford. 5. Hide If You Can't Make Your Payments: The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments. Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice. 6. Skip a Home Inspection: Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake. Independent home inspectors examine houses from stem to stern. They'll be able to tell you whether the roof and/or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last. They can't report on things they can't see, but at least their trained eyes are better than yours. So don't pass just to save $300-$400; that's money well spent. 7. Hire Just Any Agent to Sell Your House: All real estate agents are not the same. You want to look for those who specialize in your neighborhood and are top producers. Ask your candidates how they plan to market your house, what you can do to make the place more attractive to prospects and how much you should ask. If you don't like any of the answers, looks elsewhere. And above all, stay away from relatives. Unless Aunt Bessie or Nephew Nick fit the description above, keep looking. 8. Fail to Check Out a Remodeler: Never, ever hire a contractor who knocks on your door or says his prices are good for only a few days. Reputable remodelers don't solicit door-to-door, and they don't cut prices just because they happen to be in your neighborhood. Check out a potential contractor thoroughly by calling several of his past clients, your local better business bureau, his bankers and suppliers, and your local consumer affairs agency. 9. Pay Too Much Upfront: If a contractor asks for more than a third of the contract price as a downpayment, chances are something's wrong. At worst, he's a scam artist who has no intention of returning after he cashes your check. At best, he's undercapitalized and can't afford to purchase materials on his own. Or, in between, he could be using your money to pay workers on another job. Never give a contractor cash, either. 10. Burn Your Mortgage: It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan docs in a safe place. Choosing Your Home Here are some tips to help determine which house is best for you. Once you've settled on a couple of neighborhoods for your search, it's time to pick out a few homes to view. Your wish list can remind you which features are absolute requirements and which amenities you'd like to have if possible. When narrowing down your home search, consider: • Types of homes • Home purchase considerations • Home comparison chart • What to do when you’ve found the right home for you Types of homes In addition to single family homes (one home per lot), there are other forms of home ownership: Multifamily homes: Some buyers, particularly first-timers, start with multiple family dwellings, so they'll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them. Condominiums: With a condo, you own "from the plaster in" just as you would a single house. You also own a certain percentage of the "common elements" -- staircases, sidewalks, roofs and the like. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowners association administers the development. Co-ops: In a few cities, cooperative apartments are common. With those, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own apartment. A board of directors supervises management. Monthly charges include your share of an overall mortgage on the building. Home purchase considerations Most buyers' first consideration, after neighborhoods are chosen, is the number of bedrooms. As you begin to view homes, keep the following purchase and resale considerations in mind: • Weigh your needs, budget and personal tastes in deciding whether you want a home that’s a newly constructed home, an older home or a home that requires some work -- a "fixer-upper." • One-bedroom condos are more difficult to resell than two-bedroom ones. • Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore less appreciation potential. • Homes with "curb appeal" (a well-maintained, attractive, and charming view-from-the-street appearance) are the easiest to resell. • When resale is a possibility, don't buy the most expensive house on the street, or anything that is unusual or unique. The best investment potential is traditionally found in a less expensive, more moderately sized home on the street. Home comparison chart While house-hunting, it's a good idea to make notes about what you see because viewing several houses at a time can be confusing. Use a home comparison chart to help you keep track of your search, organize your thoughts and record your impressions. When you’ve found the right home Before you begin the home buying process, resolve to act promptly when you find the right house. Every REALTOR® has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then revealed that "we always promised my Dad we'd sleep on it, so we'll make an offer tomorrow." Many times the story has a sad ending -- someone else came in that evening with an offer that was accepted. Resolve at this point that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or under-priced Predatory Lending For most families, buying a home is the biggest and smartest purchase they ever make. Unfortunately, not all loans are in their best interest. When loans hurt instead of help, they can quickly lead to foreclosure and even bankruptcy. It's important to learn the warning signs and common problems associated with predatory lending, and to ask the right questions when shopping for low cost loans. The term, "predatory lending" covers a wide range of abusive practices. Some may be predatory for one borrower but not for another, because everyone's circumstances are different. Predatory lenders often take advantage of firsttime homebuyers and others who may be vulnerable to high-pressure sales tactics, so it pays to know how to protect yourself and who can help. Possible warning signs of a predatory loan It sounds too easy: "Guaranteed approval" or "no income verification" sometimes indicate that the lender doesn't care whether you can afford to make the payments over the long haul. Excessive fees: Make sure fees are typical of those in your market. Because these costs can be financed as part of the loan, they are easy to disguise or downplay. On competitive loans, fees are negotiable. It is common for home buyers to pay only one percent of the loan amount for prime loans. By contrast, a typical predatory loan may cost five percent or more. Large future costs: High-risk adjustable rate mortgages with payments that rise substantially after a short introductory period are seldom appropriate for families who already have had problems repaying other loans. Home buyers should also avoid a large, single "balloon" payment (a lump sum due at the end of the loan's term). Closing delays: A lender who deliberately delays the closing may be waiting for the commitment on a reasonably-priced loan to expire. Over-valued property: Inflated appraisals can allow for excessive fees to be included in the loan, resulting in the borrower owing more to the bank than the home is worth. Barriers to refinancing: Prepayment penalties can make it hard for borrowers to refinance and take advantage of a lower-cost loans. No down payment loans: These loans may be split into two mortgages, with one having a much higher cost. Home buyers should be sure they can afford the payments. Unethical document management: An ethical lender or broker will always require you to sign key loan papers, and they will never ask you to sign a document dated before the date you sign it. Some common problems associated with predatory lending Nearly all predatory lending occurs in the "subprime market," where loans are sold to people with less than ideal credit histories. Subprime loans have played an important role in helping millions of consumers achieve homeownership, but, unfortunately, some lenders abuse their role and take unfair advantage of vulnerable borrowers. Here are some common problems with predatory loans: High interest rates and fees: Predatory lenders often charge extremely high interest and fees that are added into the total amount of the loan the borrower must repay. These lenders charge what they can get away with, not a fair amount based on the credit history of the borrower. Broken promises & bait and switch: Sometimes hosme buyers are offered a new loan or a refinance of an existing loan that seems to meet all of their needs--only to find that interest rates and fees have changed when they get to the closing table. Agreeing to last-minute changes can cost thousands of dollars and result in a loan they just can't afford. Loans that start low and go high: Adjustable rate loans are popular in today's market, but many that seem affordable are likely to have steep cost increases in the future. Avoid "payment shock" by considering whether you can pay for the loan both now and in the future. Loan "flipping": Too many homeowners are persuaded to refinance their mortgage, sometimes repeatedly, when there is no real benefit. Even when a family receives some cash from a refinance, the gains should be weighed against the costs of excessive fees and a higher loan amount. Steering: Some families who receive subprime loans could qualify for a much more affordable home loan. Predatory lenders use aggressive sales tactics to steer families into unnecessarily expensive loan products. Ask the right questions when shopping for the lowest-cost loan REALTORS® develop relationships of trust with the families they serve, and can help you avoid predatory loans by encouraging careful shopping. Ask these important questions: What is my credit score? Can I have a copy of my credit report? What is the best interest rate today? Do I qualify? Is the loan's interest rate fixed or adjustable? What is the term (length) of the loan? What are the total loan fees? What is the total monthly payment? Does this include property taxes and insurance? If not, how much will I need each month for taxes and insurance? Is there an application fee? If so, what is it, and how much is refundable if I don't qualify? Are there any prepayment penalties? If so, what are they and how long do they last? If the loan is an adjustable rate mortgage (ARM), ask: What is the initial rate? How long will that rate stay in effect? How is the adjusted interest rate determined? (Generally, a specified amount-the "margin"-is added to a current published rate-the "index.") How often can the rate change? How much can the rate go up each year and over the life of the loan? What is the maximum monthly payment you could be required to pay? Would you be able to afford it? Does the loan set a minimum interest rate? Do the monthly payments gradually decrease the amount you owe even if interest rates increase? (With some loans, the amount you still owe can increase rather than decrease each month-called "negative amortization.") Does the interest rate increase if your payments are late? Could you qualify for a loan with the maximum interest rate permitted under the mortgage? If not, do you anticipate earning more in the future so you will be able to afford the higher payment? Can the adjustable rate mortgage loan be converted (changed) to a fixed rate without refinancing into a new loan? Is there a charge to convert? Other ways home buyers can protect themselves from predatory lenders Check out lenders with the Better Business Bureau, government websites, or other consumer groups. How long has the lender been in business? Have consumers filed many complaints? Does the lender belong to a trade association with ethics requirements for its members? Refuse to participate in transactions that may be fraudulent. Share predatory lending "horror" stories with regulators, other consumers, REALTORS®, counseling groups, housing professionals, and the media. Make contracts subject to the homebuyer receiving approval from a lender for a fair and affordable loan. Avoid unnecessary contract extensions that could cause the lender's loan commitment to lapse. Get educated on the value of your home by asking your REALTOR® for a comparative market analysis. Review the HUD-1 closing statement before closing. Upon request, home buyers have the right to see this information 24 hours before the loan closing. Report possible violations to appropriate federal, state and local officials. This information is from the brochure, "Shopping for a Mortgage? Do Your Homework First," published by the NATIONAL ASSOCIATION OF REALTORS® and the Center for Responsible Lending.