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BUYING THE RIGHT HOME THE RIGHT WAY

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					BUYING THE
RIGHT HOME
 THE RIGHT
   WAY
The Ultimate Real Estate Guide
   FRASIER FINANCIAL




        By Ben Frasier




                                 1
                            Download your FREE e-book here:

                         http://www.frasierfinancial.com/page/996301

                                           Overview

Chapter 1: Getting Started – What To Do Once You Decide To Buy A House

Chapter 2: Getting Pre-Approved Not Just Pre-Qualified

Chapter 3: Real Estate Agent Vs For Sale By Owner (FSBO) Is One Better Than The Other?

Chapter 4: What Every Smart Home Buyer Knows

Chapter 5: The Ten Biggest Home Buyer Mistakes

Chapter 6: What's That Home Really Worth?

Chapter 7: The Complete Survival Guide To Surviving The Closing

Chapter 8: How To Handle The Appraisal And Surviving Appraisal Glitches

Chapter 9: Eleven Tips For First Time Home Buyers

Chapter 10: Complete Home Buying-Selling Dictionary

Chapter 11: Buying And Financing Manufactured Homes: Pros And Cons

Chapter 12: FAQ To Many Asked Questions About Buying Homes

Chapter 13: Eight Steps To Buying A Home With Bad Credit

Chapter 14: Buying A Home After Bankruptcy – How To Tell When You Are Ready

Chapter 15: The ABCs Of Bad Credit Lending

Chapter 16: How To Buy Foreclosed Homes

Chapter 17: Buying Foreclosures At The Auction

Chapter 18: What Everyone Should Know When You Buy A Home For Sale By Owner

Chapter 19: Negotiating Tactics: Offense And Defense




                                                                                         2
    Chapter 1 Getting Started:
                          How much house can you afford?

                           Mortgage lenders are chiefly concerned with your ability to
repay your mortgage. To determine if you qualify for a loan, they will consider your
credit history, your monthly gross income and how much cash you'll be able to
accumulate for a down payment, which generally runs anywhere from 5 percent to 20
percent of the purchase price of the home.

So how much house can you afford? You can easily calculate the answer using two
standard debt-to-income ratios:

       The housing expense, or front-end ratio, shows how much of your gross (pretax)
    monthly income would go toward the mortgage payment. As a general guideline, your
    monthly mortgage payment, including principal, interest, real estate taxes and
    homeowners insurance, should not exceed 28 percent of your gross monthly income.
    To calculate your housing expense, multiply your annual salary by 0.28, then divide
    by 12 (months). The answer is your maximum housing expense.

The total debt-to-income, or back-end ratio, shows how much of your gross income
would go toward all of your debt obligations, including mortgage, car loans, child support
and alimony, credit card bills, student loans and condominium fees. In general, your total
monthly debt obligation should not exceed 36 percent of your gross income. To calculate
your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12
(months). The answer is your maximum allowable debt-to-income ratio.

Example
Let's take a home buyer who makes $40,000 a year. The maximum amount available for
a monthly mortgage payment at 28 percent of gross income would be $933. However, the
lender says the total debt payments each month should not exceed 36 percent, which
comes to $1,200.

Examine the below chart. It shows your maximum monthly mortgage payment and
maximum allowable debt load based on your annual gross salary:

                          Gross        28% of          36% of
                         income        monthly         monthly
                         $20,000         $467            $600
                         $30,000         $700            $900
                         $40,000         $933           $1,200




                                                                                         3
                           $50,000         $1,167           $1,500
                           $60,000         $1,400           $1,800
                           $80,000         $1,867           $2,400
                          $100,000         $2,333           $3,000
                          $150,000         $3,500           $4,500


Taxes and Insurance
In addition, lenders include the cost of taxes and insurance when calculating how much
house you can afford:

        Real estate taxes: Because property taxes are part of your monthly mortgage
    payment, it is important to get an estimate of what yours would be. Ask your real
    estate agent or tax office for the rates that apply in the area you want to buy. If you are
    interested in keeping taxes and insurance separate from the monthly payment, inquire
    with the lender to see what they require to release this interest in the deal.

        Homeowners insurance: You must insure your property to obtain a mortgage.
    You can get an estimate of insurance costs from your insurance agent or a major
    insurance company in the area where you are house hunting. Be sure to inquire about
    special requirements for hazard insurance, such as mandatory coverage for floods,
    earthquakes, or wind in coastal areas. If you put down less than 20 percent of your
    home's value, you also will have to obtain private mortgage insurance (PMI).
    Insurance is highly recommended regardless of whether you have a loan on the
    property. In my years as a loan officer I have heard horror stories of people’s homes
    burning down without insurance. This will put you on the curb quicker than anything.

Here's a look at typical debt ratio requirements by loan type:

      Conventional loans
    Housing costs: 26-28 percent of monthly gross income
    Housing + debt costs: 33-36 percent of monthly gross income

      FHA loans
    Housing costs: 29 percent of monthly gross income
    Housing + debt costs: 41 percent of monthly gross income



       Special Circumstance Loans

        VA Loans, Doctor Loans, Private Practice Loans are other scenarios for people in
        different parts of there lives.



                                                                                              4
Calculator
Armed with the above information, check out any mortgage calculators and find out how
much home you can afford.




                                                                                    5
 Chapter 2 Get Pre-Approved, Not Just
           Pre-Qualified
Once you've determined how much house you can afford, why not take the next step and
get pre-qualified and pre-approved for a home mortgage loan?

Not only will you know your housing budget to the dollar before you start looking for a
home, you'll also have more negotiating leverage because the seller knows you've already
got a loan virtually in your pocket.

Pre-qualification
Pre-qualification acts as a dry run of the loan application process. The mortgage lender
will use details you provide about your credit, income, assets and debts to arrive at an
estimate of how much mortgage you can afford. The whole process may take only
minutes or a few hours at most, and is usually free.

While a "pre-qual" is non-binding to the lender (because the information you provide has
not been verified), it does serve as a good indication to potential sellers of your general
creditworthiness.




Pre-approval
Pre-approval takes pre-qualification one step further. The lender will contact your
employer, your bank and others to verify your income, assets, debts and credit history,
and then issue you a letter stating that your mortgage is approved for a certain amount
within a certain timeframe. You may be charged a small fee to cover the cost of your
credit reports and your application, often refunded at closing.

Gain the buying edge
The advantages of pre-qualification and pre-approval are two-fold: you're more attractive
to sellers, who needn't worry that they'll accept your offer only to have your loan turned
down, and you'll save time to closing when you find a home because the lender will have
already completed the necessary qualifying and underwriting steps.

Important note: Should your financial circumstances change before closing, make sure to
contact your lender, as your pre-qualification or pre-approval status may no longer be
valid. It is better to eliminate as many surprises before closing so no embarrassing
moments occur.




                                                                                           6
 Chapter 3 Real Estate Agent Vs For Sale
           by Owner (FSBO)
First, remember that the homeowner is making the decision whether to list her property
with a real estate agent. So the homeowner is deciding whether you will pay a
commission. You can limit your search to for-sale-by-owner properties, but that can
drastically limit your selection of available homes, since about 80 percent of all homes
are listed with a real estate agent.

The seller may be a little more flexible on price when selling by owner, but they're not
likely to give you all the commission savings or they'd be no better off than if they had let
a real estate agent have the listing. So the seller's motivation is to keep all or part of what
she would have paid in commissions.

Let's assume that the typical commission in your market is 6 percent. Let's further assume
that by purchasing a by-owner listing you can save half the commission, or 3 percent. If
the homeowner can reasonably expect that her house will sell at $150,000, then she's
saving $9,000 on commissions by not listing the property and may be willing to sell the
house for $145,500, splitting the commission savings with the buyer. You could save
$4,500.

You're going to spend at least some of that savings in additional time and effort in
completing the transaction. Do you know which costs are customary for a seller to pay in
your market and which the buyer normally pays? Can you pick out a good home
inspector, termite inspector and do you have any thoughts about when you want to close
on your new home?

You'll definitely want a real estate attorney to review the transaction. You should take
that step even if you used a real estate agent since the agent can't provide legal advice, but
how many extra hours of the lawyer's time will you require because you bought a house
without an agent?

I think a first-time home buyer is well served by selecting a buyer's agent to represent
them. A buyer's agent represents your interests in a real estate transaction. If you don't
sign a buyer's agent contract with your agent, then they represent the seller in the
transaction even though you're the one who brought them into the transaction.

The listing agent and the buyer's agent will typically split the commission stipulated in
the listing agreement. You want to make sure that your agent is paid in that manner and
can't come back to you for any part of the commission.




                                                                                             7
The written contract that you sign with a buyer's agent should stipulate that the buyer's
agent's commission is to be paid solely by the seller from the sales transaction proceeds.
It would be a good idea to have your real estate attorney read this contract before signing.

It would be best to have an exclusive buyer's agent rather than someone who could
potentially represent both buyer and seller. You may not be able to find someone in your
area that is exclusively a buyer's agent. That's OK. You can still have them act as your
buyer's agent up to the point where you're asked to sign a dual agency agreement.

A dual agency agreement allows the real estate agent to represent both seller and buyer.
In your situation as a first-time home buyer, I wouldn't recommend that you sign a dual
agency agreement.

Financing the home of your dreams:

First, remember that the homeowner is making the decision whether to list her property
with a real estate agent. So the homeowner is deciding whether you will pay a
commission. You can limit your search to for-sale-by-owner properties, but that can
drastically limit your selection of available homes, since about 80 percent of all homes
are listed with a real estate agent.

The seller may be a little more flexible on price when selling by owner, but they're not
likely to give you all the commission savings or they'd be no better off than if they had let
a real estate agent have the listing. So the seller's motivation is to keep all or part of what
she would have paid in commissions.

Let's assume that the typical commission in your market is 6 percent. Let's further assume
that by purchasing a by-owner listing you can save half the commission, or 3 percent. If
the homeowner can reasonably expect that her house will sell at $150,000, then she's
saving $9,000 on commissions by not listing the property and may be willing to sell the
house for $145,500, splitting the commission savings with the buyer. You could save
$4,500.

You're going to spend at least some of that savings in additional time and effort in
completing the transaction. Do you know which costs are customary for a seller to pay in
your market and which the buyer normally pays? Can you pick out a good home
inspector, termite inspector and do you have any thoughts about when you want to close
on your new home?

You'll definitely want a real estate attorney to review the transaction. You should take
that step even if you used a real estate agent since the agent can't provide legal advice, but
how many extra hours of the lawyer's time will you require because you bought a house
without an agent?

I think a first-time home buyer is well served by selecting a buyer's agent to represent
them. A buyer's agent represents your interests in a real estate transaction. If you don't


                                                                                             8
sign a buyer's agent contract with your agent, then they represent the seller in the
transaction even though you're the one who brought them into the transaction.

The listing agent and the buyer's agent will typically split the commission stipulated in
the listing agreement. You want to make sure that your agent is paid in that manner and
can't come back to you for any part of the commission.

The written contract that you sign with a buyer's agent should stipulate that the buyer's
agent's commission is to be paid solely by the seller from the sales transaction proceeds.
It would be a good idea to have your real estate attorney read this contract before signing.

It would be best to have an exclusive buyer's agent rather than someone who could
potentially represent both buyer and seller. You may not be able to find someone in your
area that is exclusively a buyer's agent. That's OK. You can still have them act as your
buyer's agent up to the point where you're asked to sign a dual agency agreement.

A dual agency agreement allows the real estate agent to represent both seller and buyer.
In your situation as a first-time home buyer, I wouldn't recommend that you sign a dual
agency agreement. The Bankrate.com story Is 'your' agent really working for you? has
more information on real estate agents, including buyer's agents.

First, remember that the homeowner is making the decision whether to list her property
with a real estate agent. So the homeowner is deciding whether you will pay a
commission. You can limit your search to for-sale-by-owner properties, but that can
drastically limit your selection of available homes, since about 80 percent of all homes
are listed with a real estate agent.

The seller may be a little more flexible on price when selling by owner, but they're not
likely to give you all the commission savings or they'd be no better off than if they had let
a real estate agent have the listing. So the seller's motivation is to keep all or part of what
she would have paid in commissions.

Let's assume that the typical commission in your market is 6 percent. Let's further assume
that by purchasing a by-owner listing you can save half the commission, or 3 percent. If
the homeowner can reasonably expect that her house will sell at $150,000, then she's
saving $9,000 on commissions by not listing the property and may be willing to sell the
house for $145,500, splitting the commission savings with the buyer. You could save
$4,500.

You're going to spend at least some of that savings in additional time and effort in
completing the transaction. Do you know which costs are customary for a seller to pay in
your market and which the buyer normally pays? Can you pick out a good home
inspector, termite inspector and do you have any thoughts about when you want to close
on your new home?




                                                                                             9
You'll definitely want a real estate attorney to review the transaction. You should take
that step even if you used a real estate agent since the agent can't provide legal advice, but
how many extra hours of the lawyer's time will you require because you bought a house
without an agent?

I think a first-time home buyer is well served by selecting a buyer's agent to represent
them. A buyer's agent represents your interests in a real estate transaction. If you don't
sign a buyer's agent contract with your agent, then they represent the seller in the
transaction even though you're the one who brought them into the transaction.

The listing agent and the buyer's agent will typically split the commission stipulated in
the listing agreement. You want to make sure that your agent is paid in that manner and
can't come back to you for any part of the commission.

The written contract that you sign with a buyer's agent should stipulate that the buyer's
agent's commission is to be paid solely by the seller from the sales transaction proceeds.
It would be a good idea to have your real estate attorney read this contract before signing.

It would be best to have an exclusive buyer's agent rather than someone who could
potentially represent both buyer and seller. You may not be able to find someone in your
area that is exclusively a buyer's agent. That's OK. You can still have them act as your
buyer's agent up to the point where you're asked to sign a dual agency agreement.

A dual agency agreement allows the real estate agent to represent both seller and buyer.
In your situation as a first-time home buyer, I wouldn't recommend that you sign a dual
agency agreement. The Bankrate.com story Is 'your' agent really working for you? has
more information on real estate agents, including buyer's agents.

First, remember that the homeowner is making the decision whether to list her property
with a real estate agent. So the homeowner is deciding whether you will pay a
commission. You can limit your search to for-sale-by-owner properties, but that can
drastically limit your selection of available homes, since about 80 percent of all homes
are listed with a real estate agent.

The seller may be a little more flexible on price when selling by owner, but they're not
likely to give you all the commission savings or they'd be no better off than if they had let
a real estate agent have the listing. So the seller's motivation is to keep all or part of what
she would have paid in commissions.

Let's assume that the typical commission in your market is 6 percent. Let's further assume
that by purchasing a by-owner listing you can save half the commission, or 3 percent. If
the homeowner can reasonably expect that her house will sell at $150,000, then she's
saving $9,000 on commissions by not listing the property and may be willing to sell the
house for $145,500, splitting the commission savings with the buyer. You could save
$4,500.



                                                                                             10
You're going to spend at least some of that savings in additional time and effort in
completing the transaction. Do you know which costs are customary for a seller to pay in
your market and which the buyer normally pays? Can you pick out a good home
inspector, termite inspector and do you have any thoughts about when you want to close
on your new home?

You'll definitely want a real estate attorney to review the transaction. You should take
that step even if you used a real estate agent since the agent can't provide legal advice, but
how many extra hours of the lawyer's time will you require because you bought a house
without an agent?

I think a first-time home buyer is well served by selecting a buyer's agent to represent
them. A buyer's agent represents your interests in a real estate transaction. If you don't
sign a buyer's agent contract with your agent, then they represent the seller in the
transaction even though you're the one who brought them into the transaction.

The listing agent and the buyer's agent will typically split the commission stipulated in
the listing agreement. You want to make sure that your agent is paid in that manner and
can't come back to you for any part of the commission.

The written contract that you sign with a buyer's agent should stipulate that the buyer's
agent's commission is to be paid solely by the seller from the sales transaction proceeds.
It would be a good idea to have your real estate attorney read this contract before signing.

It would be best to have an exclusive buyer's agent rather than someone who could
potentially represent both buyer and seller. You may not be able to find someone in your
area that is exclusively a buyer's agent. That's OK. You can still have them act as your
buyer's agent up to the point where you're asked to sign a dual agency agreement.

A dual agency agreement allows the real estate agent to represent both seller and buyer.
In your situation as a first-time home buyer, I wouldn't recommend that you sign a dual
agency agreement. The Bankrate.com story Is 'your' agent really working for you? has
more information on real estate agents, including buyer's agents.




                                                                                             11
 Chapter 4 What every smart home
           buyer knows
When it comes to buying a home, there's no such thing as too much information. Not
only do you need the nuts and bolts of the properties you're shopping, you also have to
consider the kind of life you want while you're living there.

"What are the goals for the home in your life?" asks Gary Eldred, author of "The 106
Common Mistakes Homebuyers Make (& How to Avoid Them)." "What do you want
this home to accomplish for you?"

That's the approach Kevin and Kathleen O'Connor took when they bought their first
home last year on Boston's North Shore.

"The No. 1 thing that I have learned is that it is critical to think hard and understand how
you live your life and separate that from the sometimes fiction of what you think you
want in a house," says Kevin O'Connor, host of television's "This Old House" and "Ask
This Old House."

The couple wanted a real neighborhood within walking distance of shops, parks and other
amenities. They found their perfect home in an 1894 Victorian. "We paid a premium
because of the location," says O'Connor. "But on the other hand, it doesn't have a garage
or a driveway. It's a great house that suits our lifestyle very well. You forgo some
amenities and get some benefits."

Robert Irwin, author of "Home Buyer's Checklist," advises focusing on two things: How
is the home going to fit your needs? And how easy is this house going to be to resell?

"One of the biggest mistakes people make is assuming that they will live in a house
forever," says Irwin.

"It sounds counterintuitive because you're buying, why should you look at selling?" he
says. "But it's also an investment, and from an investment perspective you have to be
looking at selling."

Curb your enthusiasm
The most important advice for potential buyers? Don't get emotionally involved.

"A lot of people talk themselves into falling in love with something before they've really
looked at it," says Stephen Gladstone, president of the American Society of Home
Inspectors. "They really should be looking at quality as well as location."

So give that potential home the critical eye.



                                                                                          12
"It's very important for the home buyer to look at the outside of the house from the curb,"
says Kenneth Austin, co-author of "The Homebuyer's Inspection Guide." "Does it have
curb appeal? That's going to give you a great clue as to how the rest of the house has been
maintained."

"When I look at a house, the first thing I do when I get out of the truck is look at the
overall location of how it sits on the lot," says Tom Silva, general contractor for "This
Old House" and "Ask This Old House."

Silva eyeballs the roof line (dipped or crooked could mean rot, rust or a structural
problem with a joist or rafter). Ditto the line of the windows. "If the sills are straight --
that's a good thing," says Silva, also a professional contractor with Mass.-based Silva
Brothers Construction.

Silva also looks at the roll of the land in relation to the house, which can be an important
factor for drainage problems. "Does [the lot] pitch to the house? And even though it does,
is there means for water to get disbursed before it enters the house?"

Does the exterior show signs of water damage?

Savvy buyers also look at the roof, which can be expensive to replace.

"Look for signs of deterioration or damage," Gladstone says.

Some clues: Do the shingles look worn or warped? If wood, are they covered with mold
or moss? Are they cracking or curling? If the roof is a flat membrane, is it ripped? Does it
have an alligator skin-like appearance?

Check the siding too, Gladstone says. First check out the paint: "Is there peeling,
bubbling or stain damage? Does it look worn or thin? Are there sections of the siding that
look damaged? Are there holes or loose pieces?"

Do you see cracks in the exterior brick? "Ask why," says Strong. "What has settled that
the brick should crack?" While it doesn't mean you should pass on the house, it is a sign
that you need a qualified expert to examine the situation before you buy, he says.

Interior insight
"Beware of a home that has a lot of awkward features like a bathroom off a kitchen or a
bedroom off a living room. They can be expensive to change," Irwin says. "You might be
willing to live with it, but it might make it difficult to sell later on."

Other features that can affect resale: small bathrooms or less than two bathrooms; less
than three bedrooms; (with some exceptions, like golf course condos); carports; one-car
garages; homes that are atypical of the neighborhood, or a pool, which can be a plus or a
minus.



                                                                                                13
When you tour the house, be nosy. Open closet doors. Walk through the attic, garage and
basement. Note how well the yard is kept.

Those normally hidden spaces "are a barometer of how well it's been taken care of in the
past." says James Katen, a home inspector and the owner of Benchmark Inspection
Services in Gaston, Ore.

Check out the air filter and the ducts. If they're dirty, the house isn't being maintained
properly, says Gladstone.

Walk corner to corner in large rooms and pace the length of long hallways or stairways.
Feel any depressions or dips?

Check the condition of the floor, says Silva. "Is it bubbled?"

Inside, diagonal cracks above the interior door jams or windows and windows that don't
open properly could signal a foundation problem, Strong says.

When you walk through the basement and stick your head in the attic, do you smell
mold? Are there pots and pans to collect water?

"Magazines and papers stacked on the [basement] floor are a good sign -- no water," says
Austin. On the other hand, fresh paint, rust on the furnace or everything up off the ground
"may be telling you something," he says.

Test out the heating and air conditioning systems. "Something I'm finding in a lot of new
construction are messed up HVAC systems," says Kurt Mittenbuler, a home inspector
with Kurt Mittenbuler & Associates in Chicago. In trying to cram more space into a
home, he says, builders are putting vents and ducts in less than optimal places. As a
result, "people are building million-dollar homes that don't heat or cool properly," he
says.

You're also looking for signs of quality, says Gladstone. What are the materials that are
used in the home? Are they typical of the neighborhood?

Too many times, he says, potential buyers are focused on the wrong things. "Everyone
worries about the furnace," says Mittenbuler. "But furnaces are one of the cheapest things
in a house (about $3,000)," he says. "In the market I work with, a couple of broken
windows can be $3,000."

And if you are planning on remodeling yourself, make sure the home is up to the job.

"Everybody worries about load-bearing walls," he says. "That's the easy part." The real
test? "Where's the duct work? It's not so much about where the load-bearing walls are, it's
about where are the mechanical systems."




                                                                                             14
Every house has its secrets
"Talk to the present owners -- what sorts of things have they done to the house while it's
been in their care?" says Katen. If they've done a lot of the work themselves, "proceed
with caution," he says. "Next to water, a house's greatest enemy is an eager
homeowner/repairman."

You also need to find out about the environmental factors. "In houses built before 1978,
the odds are they used lead paint," says Ron Phipps, principal broker with Phipps Realty
& Relocation Services in Warwick, R.I. "The cost to cure can be significant. You need to
know that going in, and you need to be aware of what the state laws are."

Ditto radon, mold and asbestos. What hidden problems are lurking? What will you need
to do to feel comfortable with the house and what, if anything, will you be required to
do?

Verify any ongoing costs like utilities and taxes.

"Get copies of the utility bills," says Eldred, who says the information is public for many
utility companies. If that's not possible in your area, ask the seller to get them for you.

It's also easy to underestimate taxes. "Understand that last year's property taxes won't
necessarily be the amount you pay as a new buyer," says Eldred. "Many states have caps
on property taxes."

Instead, call the tax office, verify your rate as a new buyer and find out what exemptions
you could claim.

And if you're buying a condominium, "beware of condo commandos," says Eldred. You
want to talk to enough residents that you know the condo board has a smooth working
relationship with the community. And you want to see enough financial information to be
certain that the association is well funded and that there isn't a special assessment in your
future.

Plumbing and electric
Even before the home inspector comes out -- and don't buy a home without one -- there
are things you can do to detect problems.

"There is no reason in the world when you're walking through the house with the [agent]
or owner not to do a mini-inspection," says Gladstone. "Most sellers are prepared for
that."

So open those kitchen cabinets, the oven door and the dishwasher. Check out the
refrigerator if it comes with the house.




                                                                                          15
"Go in the kitchen and turn on the microwave and see if the lights dim," says Strong.
"Turn on the air conditioning and see if the lights flicker. If they do, that means the
wiring is undersized."

How old are the pipes? If it has a new bathroom, or you're planning to install one, can the
existing plumbing and hot water heater handle the job?

If you're serious about buying a particular house, tag along during the home inspection.
"Ninety-one percent of our clients come with us," says Austin. "That means 9 percent of
the people miss out."

Show some appreciation
Real estate professionals often sing the praises of location, location, location.

"Particularly in the higher priced neighborhoods, the value to the property is the dirt it
sits on," says John Aust, president of the National Association of Real Estate Appraisers,
a professional trade group. Are you near a shopping village and parks? Or is a
superhighway going to be your new neighbor six months from now?

Phipps agrees. "It's not just having a nice address," he says. "It's analyzing potential for
appreciation based on location, distance from adverse conditions and the likelihood that
[the neighborhood] improves or stays the same."

Don't buy the most expensive home on the block. With property at the lower end of value
in a neighborhood, "the chance of appreciation is greater," says Alan Hummel, CEO of
Iowa Residential Appraisal Co. and past president of The Appraisal Institute, a trade
organization of real estate appraisers.

You also want to see what your potential home is like on different days of the week,
different times of the day and in various weather conditions. And don't forget to try out
your commute, Eldred says.

Call your insurance agent. "Previously, if the home had a [water or mold] claim, it can be
difficult or impossible to get insurance," says Irwin. Also ask about flood plains,
earthquake zones and any other location-related risks.

And don't forget to talk to the neighbors. "People will be very open," says Austin. Ask:
"Is there anything I need to know about what's happening in the general area?" Do the
same thing at the local municipal office. Whether it's a new dump or a road expansion,
"you don't know about these things, and you don't want any surprises," he says.

"The bottom line: do your homework," says Austin. For most people, "it's the biggest
investment anyone will make in their lifetime."




                                                                                            16
 Chapter 5 10 biggest home-buying
           mistakes
David Weekley, CEO of Houston-based David Weekley Homes, is one of the country's
largest home builders and also the author of a new book, How to Buy a Home Without
Getting Hammered.

Based on 30 years of home-building experience for 40,000 people, Weekley offers these
10 biggest mistakes in home buying:

Not doing your homework. Knowledge is power. Tremendous information is available
on the Internet. There is no excuse for entering the market unprepared.

Trying to make a shrewd investment. People need to buy based on what fits their
family. Don't try to guess what will happen to the market.

Choosing a poor location. Even within a neighborhood, location matters. Is it on the
busiest street? Is there a shopping center out the back window?

Overlooking an inferior floor plan for an attractive exterior. It may have gorgeous
curb appeal, but you don't live on the lawn. No matter how attractive the exterior, you
need a livable home.

Overlooking how the house will function for your family. How do you really live? Do
you really need a formal dining room and living room? Would you be happier with an
eat-in kitchen and a great room and a den to use as a home office? The house only needs
to fit one family -- yours.

Not having the home properly inspected in a resale. This is not the time for surprises.
Get an inspection from a qualified, respected professional.

Not checking out the builder's reputation on a new home. Talk to three or four people
who live in the builder's homes and see what they have to say. If one builder did all the
houses in a neighborhood, talk to the residents and get their input. It's also a great way to
see what your neighbors would be like.

Not getting what you want because you're impatient. This is a big decision. You need
time. Impatient decisions can lead to mistakes.

Waiting for a better market and interest rates. Warren Buffett says the rear view
mirror is always clearer than the windshield.

Not buying at all. If you can afford a home and you don't make that purchase, you'll lose
the benefit of tax deductions, building home equity and the appreciation in value.


                                                                                           17
 Chapter 6 What's that home really
           worth?
                            By Dana Dratch • Bankrate.com

You've fallen in love with a neighborhood and decided to buy a home. Now how do
you find out what individual houses there are really worth?

Welcome to the world of comparables. Here's how it works: If two identical homes
are on the market and one sells for $250,000, that will be a big factor in the cost of the
second home.

In real life, however, two houses are seldom identical. And the differences -- such as
an updated kitchen or poor maintenance -- can make a big difference.

So, if you're interested in a neighborhood, you need to know what's selling, for how
much and how long it's on the market.

Getting the goods on your neighborhood
Now, where do you dig for the dirt?

"The problem with people trying to do this research themselves is it tends to be
proprietary," says John Bredemeyer, national chair of government relations for The
Appraisal Institute, a professional association of real estate appraisers. "That can be a
difficulty."

Start with your real estate professional. Realtors have access to the Multiple Listing
Service (MLS), an automated record of sales, the length of time on the market and a
detailed description of the home. If you're looking to buy or sell, the information is
invaluable.

In some parts of the country, local Realtors or Realtors' associations put information
from the MLS on their Web sites, says Rodney Gansho, manager of policy
information for the National Association of Realtors. In some places, this will also
include sales information, he says.

"It depends, locally, if the MLS allows its brokers to display that information,"
Gansho says. "In some areas, it's a matter of public record; in other areas, it's not."

You may also be able to get some listing information from the National Association of
Realtors site: www.realtor.com. In many cases, you need to contact a Realtor to get
recent sales information.




                                                                                             18
Some will require a formalized agreement before they share MLS information. Others
will make the data part of their pitch for your business.

If you're a homeowner, ask a potential agent, "If I ask you to shop my property, how
would you deduce the price?" says Alan Hummel, CEO of Des Moines-based Iowa
Residential Appraisal Co. and past president of the Appraisal Institute. "What is your
suggestion for the listing price? And what documentation can you show me to support
that that's reasonable?"

"Unfortunately, Realtors still largely control the market information," says Kenneth
Austin, co-author of "The Home Buyer's Inspection Guide," "although more is
becoming available on the Internet."

Pixels and print
If you want to do a little digging on your own before you sign with a real estate pro,
you can start on your home computer. Several online sites like Owners.com,
Forsalebyowner.com and ElectronicAppraiser.com provide sales data and/or appraisal
estimates. The wrinkle: you sometimes have to pay and the information could be
months or years old.

At ElectronicAppraiser.com, you can buy a detailed valuation of a particular home
along with comparables for $29.95. "It takes about eight seconds," says Rudy De La
Garza Jr., the site's director of business development.

For $9.90, the consumer can purchase just the comparables -- typically, four to seven
properties that have sold within the past year. The data "is as updated as the county
assessor's office is," says De La Garza.

Want to get a picture of your favorite community over the past several years? Try
ForSaleByOwner.com, which will let you look at a rough estimate of what homes in a
neighborhood have sold for over the past 10 years, says Colby Sambrotto, the site's
chief operating officer. For the East Coast, pricing will be as recent as the past year,
while on the West Coast, data could be a few years old, he says.

But not every site promising comparables is helpful. Some "are trying to get your
information and give it to a local broker because you're in the market," says John
Aust, president of the National Association of Real Estate Appraisers.

In some parts of the country, comparing home prices is as easy and cheap as picking
up a newspaper.

"I go to the [Chicago] Tribune and see what's on the market," says Kurt Mittenbuler, a
home inspector with Kurt Mittenbuler & Associates in Chicago. "Every month the
Tribune publishes all the transactions that occurred."




                                                                                           19
But too many times, he says, people look just at the numbers.

"The big mistake people make in comps is that they don't look at all the details," says
Mittenbuler, who also moderates the Internet tech forum for the American Society of
Home Inspectors. It's not just about the number of bedrooms and bathrooms, he says.
"It's about the kitchen and the baths and the floor plans and very specific location
requirements."

For example, in Chicago, the location of a house "on the east or west side of Sheridan
Road can mean $250,000," says Mittenbuler.

The age of the home can also make a difference. If there are two identical homes in
the same neighborhood and one is new while the other is 5 years old, guess which will
bring the higher price?

"A resale home is not a new home," says Austin. "It's best not to compare it with a
new home. It will be worn a little bit."

And there are a lot of little details that can explain why a house that's "exactly" like
yours brings $20,000 more -- or $10,000 less. Some factors: number of bedrooms,
number of bathrooms, square footage, floor plan, size of garage (attached or
detached?), fireplace, size of family room, renovations, lot size, location (does it back
on roads, utility lines, shopping centers, etc.), school system, pool, above ground or
underground utilities, condition and how long it's been on the market.

Government records
You can also use your city or county tax assessor's data. "In many places it's available
online and you can search by neighborhood or area," says Hummel. The problem: "It's
different in every jurisdiction," he says.

His tip: Call the office and find out if the information is online. If it's not, many
offices are automated. Ask if they can walk you through what you need to do to get
the information you want.

Depending on the county, the information might not be as up-to-date as you need. In
some localities, "taxes are assessed only when you buy or do improvements," says
Robert Irwin, author of "Home Buyer's Checklist." In other areas, taxes are assessed
more frequently.

Local town halls have comparable information, says Ron Phipps, principal broker
with Phipps Realty & Relocation Services in Warwick, R.I. "The reality is you need to
know how to get at it." And the reality is, "It's not real easy to get at."

But official records, newspaper accounts or even the neighborhood gossip might not
know which party paid closing costs or other concessions that ultimately count against



                                                                                            20
the final price, says Myra Zollinger, owner/broker with Coldwell Banker Realty
Center in Chapel Hill..

Irwin's advice: see an agent -- or two or three -- who specializes in the neighborhood
that you've targeted. "If you can find somebody whose been working in the business
for 20 years and is in the area, they've got an incentive to give you the right pieces [of
information]," he says.

Some appraisers have access to MLS data. And in many cases, buyers and sellers can
hire an appraiser for an hourly rate to give them an idea of what specific homes in
specific neighborhoods are bringing, says Hummel. Figure $50 to $125 an hour and
"two to three hours would not be unreasonable," he says.

I spy
Don't be afraid to do a little reconnaissance. When homes go up for sale in a
neighborhood you've targeted, go through them. What is the asking price? What are
the special features that warrant that price? How long does it stay on the market and
what -- if you can find out -- is the final selling price?

In a hot market, sellers get what they ask and sometime a little more, says Hummel.
On average, the sales price is 3 percent to 7 percent lower than the list price, says
Hummel. Other real estate agents say it could vary by 5 percent to 10 percent.

And put things in historical perspective. When gathering comparables, most real estate
agents look at sales records going back six months to a year. If the market is slow,
they may be forced to use older data. If the market is hot, buyers and sellers need the
most recent numbers.

Phipps has worked in markets where homes are appreciating so fast that a model
identical to one that brought $250,000 six months ago "could legitimately be worth
$275,000 [today]," he says. "That's information you want to be aware of."

Even if the data is only a month old, that could mean a difference of $2,000 to $3,000
in value in some markets, says Don Fialk, broker/owner with Choice Realty Co. in
Iselin, N.J.

"I wouldn't just look at six months," says Phipps. "I would look historically to see
what the neighborhood has done over a period of time, four to five years."

Comparables can also tell you a little about your Realtor. Is your agent padding the
listing price to leave room for negotiation or pricing the homes to sell? Compare a
string of an agent's list prices with the final sales prices, says Kevin O'Connor, host of
"This Old House" and "Ask This Old House."

And once you've settled on a particular house, hire a neutral appraiser who is not



                                                                                             21
affiliated with the agent or the mortgage company.

The cost: somewhere in the $300 to $500 range, says Bredemeyer.

But when it comes to predicting the sales price of a home, formulas and comparables
only go so far, says Don Strong, a general contractor with Strong Brothers Inc. in
Houston. "The ultimate value," he says, "is what [the seller] can get for it."

                                   Dana Dratch is a freelance writer based in Atlanta.

Closing the deal on the Home of your dreams




                                                                                         22
    Chapter 7 Survival guide to a real
              estate closing
By Cynthia E. Brodrick • Bankrate.com

Buying a house is hard work; closing on one is like taking a final exam. What can you
expect when you get there -- other than writer's cramp?

The closing is the end of the long and arduous process of buying a house. It refers to
the day you close the deal on a piece of real estate and on the mortgage to buy that
real estate. Essentially it's the final transfer of money and keys. When you walk out of
the agent's office, you own a new home.

Just like every mother has a labor story, every homeowner has a tale of woe and
wonder about a closing. For a first-time home buyer who has heard these stories, the
closing takes on a peculiar mystique complete with anxiety and drama.

Let's start our guide to the big day with the most important piece of advice: You'll
want a good night's sleep before closing. It's an exciting and stressful time during
which a lot of legal and financial information will be thrown at you. Many folks, who
actually attempt moving on the day of the closing, double the anxiety, workload and
chance of error. So rest up.

Timing is everything
Timing is critical when scheduling the transaction. Here are a few things to consider:

       Current living situation. If you are renting, you'll want to schedule the
    closing around the time your lease ends. If your plan is to do some work on your
    new home before moving in, pick a date a couple of months before you have to
    move from your rental.

    If you'll be moving out of a house that you are selling, you'll be juggling two
    closing dates. Most folks need the cash out of the first house to pay for the second
    house, so schedule the closings in the right order. But beware; two closings in one
    day will make for a headache. However, it's over in one fell swoop.
        Mortgage considerations. Make sure the closing date is set before your
    lender's commitment -- or any interest rate lock -- expires.
        Work schedule. Though most well-run closings last only about an hour, you
    don't want to try to squeeze this into a lunch break. Things can go wrong. And hey
    -- this is a huge day in your life, so take at least half of it off from work.




                                                                                           23
        Moving. If you plan to move the day you close, schedule the paperwork as
    early in the day as you can.
        Yearend. If you are scheduling a closing at the end of the year, keep taxes in
    mind. Any points and interest paid before the New Year can become deductions for
    this year's taxes. Check with a tax adviser for the timing of any other deductions.

Sign here ... and here ... and here
Most closings are actually two closings. You'll be closing on the purchase of real
estate, and you'll be closing on the mortgage loan you are taking to buy that real
estate. All that paperwork will have to do with one or the other. Some documents are
common to most closings, and other documents will be unique to your area or
situation.

Mortgage documents you can expect to see, read and sign, will include:

        Truth in lending statement, also known as Regulation Z. This important
    piece of paper will disclose the interest rate, annual percentage rate, amount
    financed and the total cost of the loan over its life. These are important numbers to
    check and double check before signing. This is not a time for surprises.
        Itemization of amount financed. This document is like an addendum to the
    Truth in Lending statement. It summarizes the finance costs, such as points.
        Monthly payment letter. This document reveals the break down of your
    monthly payment into principal, interest, taxes, insurance and any other monthly
    escrows. Again, look for any surprises.
        Note. Take a deep breath when signing this. This is where you're actually
    borrowing the money -- and giving your personal guarantee to pay it back. Gulp.
        Mortgage. Take a second deep breath with this one. This paper puts a lien on
    the house as security for the loan -- allowing the bank to foreclose if you default on
    the note mentioned above.

Then there are the real estate documents that will finally make the house yours.
Yippee. Now it's getting fun.

        HUD Form 1 or Disclosure/Settlement Statement. This is another one to
    read carefully (though, of course, all these papers are important and need to be
    read). The form will contain all the actual settlement costs and amounts. Again,
    this is a paper ripe for typos and errors. The closing agent will go over this
    document with the buyer and seller. Do pay attention.
        Warranty deed. This is the document that brought all these people to the
    table. This document should include the names of the buyer, the seller and a
    description of the property. Often this deed also guarantees that the seller has the
    right to sell the property. With the signatures of the seller and buyer, this piece of
    paper transfers the title of property. Savor this particular signing; it's the real deal.
        Proration agreements. These describe how you and the seller are divvying up



                                                                                                24
    the costs of the house for the month in which it is being bought. For example, the
    seller may have already paid the property taxes, so the buyer needs to reimburse
    the seller for the portion of the tax bill that covers the time after the buyer takes
    over the property. Or in reverse, the seller may not have paid the quarterly
    homeowner's association fees yet. The buyer will be paying this, but at the closing,
    the seller reimburses for the period he was still living in the house. In the end, lots
    of little bits of money may go back and forth across the table -- at least on paper.
        Tax and utility receipts. You'll probably also be signing various city and state
    receipts acknowledging that this or that has been paid by the seller or will be paid
    by the buyer.
        Name affidavit. Here's where too many legal technicalities get annoying. This
    document is certifying that you are who you say you are.
        Acknowledgment of reports. More legalese assures that the buyer has seen
    all of the reports regarding the property. These can include surveys and a termite
    inspection.
        Search or Abstract of Title. This one would make excellent bedtime reading
    for an insomniac. The abstract gives a listing of every document that has been
    recorded about this particular piece of property. Don't worry, this doesn't obligate
    you to anything, but it does give you the history of the house.

Hand over the money
The closing is not the day to forget your lunch money. The buyer and sometimes even
the seller are expected to have some dough ready to hand over during this fateful
meeting. You should be informed of the amount you need before the meeting. If you
are not, call and ask. You'll want to bring a certified check for the correct amount.

Here are a few things a buyer will be paying for at the closing:

       Closing costs. Expect to pay a portion of the closing costs. These can vary
    from state to state and even from county to county. Also, most are negotiable
    (ahead of time), so closing costs can vary greatly.
       Payment for the house. The buyer brings the down payment (if any) at this
    time, minus any earlier deposit(s). It is given to the closing agent, along with the
    lender's check for the balance.
       Escrows. Often the buyer's annual taxes, insurance and other items are paid
    through the lender. An escrow account (or reserve) will be established at this time.

Smile. Now you get the keys.

A closing may be the end of the house hunt and buying process, but it's the opening
curtain on your new life as a homeowner.




                                                                                              25
 Chapter 8 Appraisal Glitches Can
           Stall And Derail Home
Sales
By Holden Lewis • Bankrate.com

 My nephew bought his first house not long ago, but only after the deal was almost
scuttled by a faulty appraisal.

The appraiser from the Veterans Administration didn't notice that an addition had
been built onto the house in Oak Harbor, Ohio. He appraised the home's value based
on the original square footage listed in the county records. The appraisal report
concluded that the house was worth less than the price that the seller and my nephew,
J.R. Majewski, had informally agreed upon.

J.R.'s experience shows that an appraisal for less than the price of the house doesn't
have to derail a sale, although it can.

In J.R.'s highly unusual case, the faulty appraisal aided him. The owners were selling
without a real estate agent and were desperate to close the sale fast because they were
having another house built and needed the cash. J.R. was willing to pay $110,000, but
his banker told him not to sign a purchase agreement until the appraisal came back.

When the appraised value came in at $97,300, the sellers almost balked. Their harshly
worded phone call to the appraiser made things worse -- the appraiser refused to come
back out. Instead of putting up with a three- to four-week delay for another appraisal,
or searching for another willing buyer, they sold the house in Oak Harbor, Ohio, to
J.R. and his wife, Nikki, for $99,300 -- in effect, a $10,700 discount. J.R. and Nikki
borrowed $97,300 through a VA loan and paid the $2,000 extra via gift money from
family.

"The VA appraiser, as much of a jerk as he was, actually helped me," J.R. says.




Appraisers' role
When you borrow money to buy a house, the lender requires an appraisal -- a neutral
expert's estimation of the home's fair market value. The appraiser considers many
factors, including the prices of comparable homes that have been sold recently as well
as the condition, size and amenities of the property being appraised.

The lender requires an appraisal because it would be bad business to unwittingly lend


                                                                                          26
more than the house is worth. In the vast majority of cases, everything is fine: The
house is appraised at or above the sale price and the loan goes through.

Occasionally, the appraisal is for less than the home's selling price. What happens next
depends upon how much of a down payment the buyer plans to make.

If the buyer is going to make a sizable down payment, the lender might not care about
the low appraisal. For example, if the sale price is $200,000, the appraisal comes in at
$20,000 less than that, and the buyer is making a $100,000 down payment, the bank
will let it slide. "The risk is still low enough for the bank to close on the transaction,"
says James Mason, sales director for online lender MortgageIT.

Time's a factor
Why not dot the i's and cross the t's by getting another appraisal? "Because everything
takes time," including appraisals, says Ellen Bitton, president and CEO of New York-
based Park Avenue Mortgage. In every real-estate transaction, time is of the essence.

The process works differently when the down payment is small or nonexistent. If
someone has $3,000 for a down payment on a $100,000 house, and the appraised
value comes in at $95,000, that loan will not be approved. The bank won't lend
$97,000 for a house that an appraiser says is worth less than that, especially if the
buyer can scarcely scrape up a down payment.

"In the case where the appraiser has missed something, the bank usually goes back to
the appraisal company to have them reevaluate," Mason says. Perhaps it's an obvious
error such as not noticing that an addition was built onto the house. More likely, the
problem stems from not finding the right "comps," or "comparables" -- prices of
similar, nearby houses that were sold within the last six months.

When is a comp not a comp?
In slow markets and rural areas, the appraiser might have trouble finding comps, so
the lender might ask the appraiser to look farther away for examples of comparable
homes, or to search farther back in time -- up to 18 months ago instead of six months.

In very hot markets, the appraiser might be looking at recent sales data that already
are out of date because prices are rising so fast. This happens because appraisers rely
on county records, which usually take two or more weeks to be updated. In some
super-hot areas on the coasts, home values can rise more than 20 percent a year,
meaning that sales prices are out of date after just a few weeks.

When the appraiser won't budge, or time is limited, the buyer and seller have three
options: Reduce the price, make a bigger down payment, or nix the deal.

"It usually works out," says Diane Saatchi, senior VP with the Corcoran Group in East
Hampton, N.Y.. It's rare for the agreed-upon price to truly be too high, she says,



                                                                                              27
"because, by definition, if somebody's willing to pay it, that's what it's worth."


Appraisal glitches can stall, derail home sales
By Holden Lewis • Bankrate.com

 My nephew bought his first house not long ago, but only after the deal was almost
scuttled by a faulty appraisal.

The appraiser from the Veterans Administration didn't notice that an addition had
been built onto the house in Oak Harbor, Ohio. He appraised the home's value based
on the original square footage listed in the county records. The appraisal report
concluded that the house was worth less than the price that the seller and my nephew,
J.R. Majewski, had informally agreed upon.

J.R.'s experience shows that an appraisal for less than the price of the house doesn't
have to derail a sale, although it can.

In J.R.'s highly unusual case, the faulty appraisal aided him. The owners were selling
without a real estate agent and were desperate to close the sale fast because they were
having another house built and needed the cash. J.R. was willing to pay $110,000, but
his banker told him not to sign a purchase agreement until the appraisal came back.

When the appraised value came in at $97,300, the sellers almost balked. Their harshly
worded phone call to the appraiser made things worse -- the appraiser refused to come
back out. Instead of putting up with a three- to four-week delay for another appraisal,
or searching for another willing buyer, they sold the house in Oak Harbor, Ohio, to
J.R. and his wife, Nikki, for $99,300 -- in effect, a $10,700 discount. J.R. and Nikki
borrowed $97,300 through a VA loan and paid the $2,000 extra via gift money from
family.

"The VA appraiser, as much of a jerk as he was, actually helped me," J.R. says.




Appraisers' role
When you borrow money to buy a house, the lender requires an appraisal -- a neutral
expert's estimation of the home's fair market value. The appraiser considers many
factors, including the prices of comparable homes that have been sold recently as well
as the condition, size and amenities of the property being appraised.

The lender requires an appraisal because it would be bad business to unwittingly lend
more than the house is worth. In the vast majority of cases, everything is fine: The
house is appraised at or above the sale price and the loan goes through.




                                                                                          28
Occasionally, the appraisal is for less than the home's selling price. What happens next
depends upon how much of a down payment the buyer plans to make.

If the buyer is going to make a sizable down payment, the lender might not care about
the low appraisal. For example, if the sale price is $200,000, the appraisal comes in at
$20,000 less than that, and the buyer is making a $100,000 down payment, the bank
will let it slide. "The risk is still low enough for the bank to close on the transaction,"
says James Mason, sales director for online lender MortgageIT.

Time's a factor
Why not dot the i's and cross the t's by getting another appraisal? "Because everything
takes time," including appraisals, says Ellen Bitton, president and CEO of New York-
based Park Avenue Mortgage. In every real-estate transaction, time is of the essence.

The process works differently when the down payment is small or nonexistent. If
someone has $3,000 for a down payment on a $100,000 house, and the appraised
value comes in at $95,000, that loan will not be approved. The bank won't lend
$97,000 for a house that an appraiser says is worth less than that, especially if the
buyer can scarcely scrape up a down payment.

"In the case where the appraiser has missed something, the bank usually goes back to
the appraisal company to have them reevaluate," Mason says. Perhaps it's an obvious
error such as not noticing that an addition was built onto the house. More likely, the
problem stems from not finding the right "comps," or "comparables" -- prices of
similar, nearby houses that were sold within the last six months.

When is a comp not a comp?
In slow markets and rural areas, the appraiser might have trouble finding comps, so
the lender might ask the appraiser to look farther away for examples of comparable
homes, or to search farther back in time -- up to 18 months ago instead of six months.

In very hot markets, the appraiser might be looking at recent sales data that already
are out of date because prices are rising so fast. This happens because appraisers rely
on county records, which usually take two or more weeks to be updated. In some
super-hot areas on the coasts, home values can rise more than 20 percent a year,
meaning that sales prices are out of date after just a few weeks.

When the appraiser won't budge, or time is limited, the buyer and seller have three
options: Reduce the price, make a bigger down payment, or nix the deal.

"It usually works out," says Diane Saatchi, senior VP with the Corcoran Group in East
Hampton, N.Y.. It's rare for the agreed-upon price to truly be too high, she says,
"because, by definition, if somebody's willing to pay it, that's what it's worth."

First Time Home Buyer Tips:



                                                                                              29
    Chapter 9 Buyer prepare: Tips for
              first-time home buyers
                           By Salvatore Caputo • Bankrate.com
Buying a home for the first time can be scary, but as with anything else in life, the
right preparation brings about good results. Remember, the right home for you is one
you want and can afford.

Step 1: Ask yourself if you're ready.
You need to decide whether you're financially ready to buy a home, says Connie
Barbosa, vice president and branch manager of Slade's Ferry Bank in Somerset, Mass.
She suggests first-time buyers ask themselves some simple questions:

       Do you have a steady job and income?
       Do you plan on remaining in the same area for a few years?
       Do you have enough money set aside for your down payment and closing
    costs?
       Do you have an emergency fund?
       Do you live within your means, avoiding credit card debt?

Another consideration is whether you're mentally prepared for the responsibility, says
Charles Glass, a real estate agent who sells in the Washington, D.C.-Maryland market.




"A first-time home buyer is probably used to renting," Glass says. "They've got to get
used to budgeting a little differently in terms of having a reserve when things go
wrong. And whether it's a new home or an old one, things will go wrong. Experienced
homeowners know this. First-time buyers don't."

Step 2: Find out what you can afford.
When you're sure you have the right mind set to be a homeowner, it's time to
determine how much house you can afford. Probably the best way to do that is to get
pre-qualified for a loan. In fact, some real estate agents won't work with someone who
is not pre-qualified.

There are three options for pre-qualifying: go to a lender with whom you have already
established rapport, find a real estate agent you trust and follow the agent's
recommendations for a lender, or research lenders online.

Glass says the first option is the best because "if you've built a relationship with a
lender, they will go to extra lengths to make sure they qualify you for the loan."




                                                                                         30
Your total monthly mortgage payment -- principal, interest, taxes and insurance (or
PITI) -- should not exceed 32 percent of your monthly gross income, Barbosa says.
The U.S. Department of Housing and Urban Development (HUD) suggests that figure
should be 29 percent. So this is not an exact science. You can calculate a ballpark
figure from this information, but then talk to your lender to get a better feel for how
much flexibility you might have with different lending arrangements.

According to Bank of America's Consumer Real Estate Group, you should find a
lender that offers "first-time buyer options and financing ideas that take into
consideration your personal situation. For example, many first-time buyer mortgage
programs require only a low down payment or even no money down. If a down
payment is required, you may be allowed to use 'gift' money from family members
and other sources. Some first-time home buyer programs feature no closing costs.
There may also be down-payment assistance programs available in your community."

Remember, the bigger the down payment, the less you're borrowing, and the less
expensive your mortgage will be in the long run.

HUD offers programs to help first-time buyers, too. real-estate/agency1.asp

Step 3: Find out what's available
Now it's time to decide where you want to live and research what types of housing are
available -- one-story single family, condos, town homes, etc. You can get an idea by
looking at ads and driving around the community before you ever call a real estate
agent, Glass says. In fact, he prefers clients who have done some research.

In searching for an agent, find one who makes you feel comfortable and, more
importantly, one who listens to you, Glass says.

HUD points out that it's traditional for the real estate agent to represent the seller's
interests, although most state licensing laws require them to treat the buyer fairly.
Laws regarding the relationships between real estate agents and clients vary from state
to state and buyers should be aware who your agent is working for.

Step 4: Choose a neighborhood.
Once you know the housing stock, you can look at specific neighborhoods. Cruise by
at night time to see whether you get a "vibe" that it's a safe neighborhood. If you have
children, you'll want to check out the quality of the schools. You may want to check
out what types of large-scale facilities (airports, highways, chemical plants, etc.) are
nearby, and whether you're convenient to shopping, work and schools. You can do
much of this independently, but you can also ask your agent to help you find sources
of information about such things.

Step 5:Checking out potential neighbors




                                                                                           31
"Smells like they're cooking a goddamned cat over there." -- Art Weingartner in The
'Burbs

Before you discover that you've moved in next to Reuben Klopek, let me suggest a
way to avoid the dearest of neighbor nightmares.

Most first time home buyer guides I've come across serve up the same simple dish
about researching a neighborhood. It usually runs something like this:

"Hit the Web for detailed information on neighborhoods offering homes in that range.
Sites like xxxx provide not only the most up to date listings from the local MLS, but
also data on schools and crime stats."

While this is not a bad recommendation, it's merely a starting point. The data on crime
stats generally give you only an idea of the level of crime in the area; not what types
of crimes are being committed or in which exact areas they are more frequent.

You don't need general crime stats. You need to know as much as is legally possible
about what you're immediate neighbors are up to -- in the street and behind closed
doors.

So, once you've decided on a house or a neighborhood, be sure to make a couple of
drive-bys during the night to see what kind of activity is going down.

But, most importantly, take a drive to the local police station and ask for a list of all
the calls dispatched within a 1-mile radius of your neighborhood in the last two years.
This report should list the dates and times of the calls, the addresses the police were
dispatched to and the reasons for the calls.

When we bought our first home, my wife, a crime reporter at the Sun-Sentinel, picked
up the report for us -- unfortunately we waited until after we signed the contract -- and
we happened to notice that the quaint, oak-tree shaded house next to us had police
visit three times in the last year for "domestic dispute." It was too late to affect our
decision, but at least we had an idea of what we might be dealing with.

Always best to go in with eyes wide open.

Step 6: Define your house and find it.
Now, you can narrow down the features you want in a house. Do you want an energy-
efficient model? Do you want two stories, a basement, a bathroom downstairs or a
large back yard? You may not find a unit with every feature that you want, but this
will help you to define what's most important for you, Glass says.

When you've found a house that has your most important features, is in the right
neighborhood and is affordable, you're ready to buy.



                                                                                            32
Step 7: Do a home inspection.
HUD recommends that an offer should be contingent on a home inspection. As the
buyer, you cover the cost of the inspection. If you're unsatisfied with the results, you
may ask the seller to pay for certain repairs or to lower the price, or you may decide to
walk away from the deal.

Reggie Marston, a home inspector who can be seen regularly on HGTV's "House
Detective" program, says home buyers should have an inspection done regardless of
the age of the home and should interview several inspectors before hiring one.

"A home inspection should uncover defects that could become very costly to repair
after (buyers) assume ownership," he says. "It will also uncover safety issues, water
infiltration issues, roof problems, structural issues, etc.

"A first-time home buyer should start interviewing home inspectors before or at the
same time they're interviewing real estate agents and mortgage lenders. Normally, real
estate contracts only allow three to 10 days for a home inspection after acceptance of
the contract and that doesn't allow the purchaser adequate time to find a qualified
home inspector."

Step 8: Shop around for homeowners insurance.
Your lender will require you to carry homeowners insurance. Such insurance comes in
many flavors, so it's a good idea to search for a policy that meets your needs for
protection while being easy on your pocketbook. Access insurance information that is
appropriate for your state. Many states provide data on typical rates charged by
insurers, as well as information on the frequency of consumer complaints against a
company.

Step 9: Negotiate.
Once you've found the house you want, you should make an offer that's lower than the
seller's asking price. The seller expects this and will likely make a counter-offer. You
have to decide before you start negotiating what your make or break point is, and stick
to it. Just be reasonable. Don't expect the seller to give you a 50 percent discount on a
good property.

Step 10: Closing.
In a number of states, it is customary for each party to have an attorney review the
closing papers and to be present at closing. Whether that's the custom in your state or
not, it's a good idea to hire your own attorney to review the documents to be sure that
your best interests are represented in the paperwork. You'll foot the bill for your own
attorney.

Step 11: Move in.
You've done all the homework and bought a great home. Enjoy it.




                                                                                            33
 Chapter 10 Complete Home Buying-
            Selling Dictionary
                         Whether you are thinking about buying or selling a
home, the "Home Buying-Selling Dictionary" can provide you with an understanding
of a number of common words and terms used in a typical real estate transaction.

A few notes about the "Home Buying-Selling Dictionary":

       Terms are defined as they are commonly used in the mortgage and real estate
        industry. These same terms may have different meanings in another context.
       Definitions are intentionally general, non-technical and short. They may not
        encompass all possible meanings, and some definitions may not be applicable
        under all states' existing laws.

A

Abstract (Of Title)

A summary of the public records relating to the title to a particular piece of land. An
attorney or title insurance company reviews an abstract of title to determine whether
there are any title defects which must be cleared before a buyer can purchase clear,
marketable, and insurable title.

Acceleration Clause

Condition in a mortgage that may require the balance of the loan to become due
immediately, if regular mortgage payments are not made or for breach of other
conditions of the mortgage.

Agreement of Sale

Known by various names, such as contract of purchase, purchase agreement, or sales
agreement according to location or jurisdiction. A contract in which a seller agrees to
sell and a buyer agrees to buy, under certain specific terms and conditions spelled out
in writing and signed by both parties.

Amortization

A payment plan which enables the borrower to reduce his debt gradually through
monthly payments of principal.

Appraisal



                                                                                          34
The estimate of value of real property made by an impartial expert, typically including
references to sales of comparable properties to estimate the value. A lender will
require an appraisal, but it does not take the place of an inspection.

Assessments

Costs charged for public improvements that benefit land. Pending assessments must
be addressed in the purchase agreement and at closing.

Assumption of Mortgage

An obligation undertaken by the purchaser of property to be personally liable for
payment of an existing mortgage. In an assumption, the purchaser is substituted for
the original mortgagor in the mortgage instrument and the original mortgagor is to be
released from further liability in the assumption, the mortgagee's consent is usually
required.

The original mortgagor should always obtain a written release from further liability if
he desires to be fully released under the assumption. Failure to obtain such a release
renders the original mortgagor liable if the person assuming the mortgage fails to
make the monthly payments.

An "Assumption of Mortgage" is often confused with "purchasing subject to a
mortgage." When one purchases subject to a mortgage, the purchaser agrees to make
the monthly mortgage payments on an existing mortgage, but the original mortgagor
remains personally liable if the purchaser fails to make the monthly payments. Since
the original mortgagor remains liable in the event of default, the mortgagee's consent
is not required to a sale subject to a mortgage.

Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to
finance the sale of property. They may also be used when a mortgagor is in financial
difficulty and desires to sell the property to avoid foreclosure.

B

Binder or "Offer to Purchase"

A preliminary agreement, secured by the payment of earnest money, between a buyer
and seller as an offer to purchase real estate. A binder secures the right to purchase
real estate upon agreed terms for a limited period of time. If the buyer changes his
mind or is unable to purchase, the earnest money is forfeited unless the binder
expressly provides that it is to be refunded.

Broker




                                                                                          35
(See real estate broker)

Building Line or Setback

Distances from the ends and/or sides of the lot beyond which construction may not
extend. The building line may be established by a filed plat of subdivision, by
restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

C

Certificate of Title

A certificate issued by a title company or a written opinion rendered by an attorney
that the seller has good marketable and insurable title to the property which he is
offering for sale. A certificate of title offers no protection against any hidden defects
in the title which an examination of the records could not reveal. The issuer of a
certificate of title is liable only for damages due to negligence. The protection offered
a homeowner under a certificate of title is not as great as that offered in a title
insurance policy.

Closing

The closing, also known as the settlement, is a meeting at which a transfer of sold
property is finalized. At closing, the buyer signs the mortgage documents and pays all
closing costs, and the seller signs the deed. Both parties sign the closing statement,
which is an accounting of funds credited to the buyer and seller.

Closing Costs

The numerous expenses which buyers and sellers normally incur to complete a
transaction in the transfer of ownership of real estate. These costs are in addition to
price of the property and are items prepaid at the closing day. This is a typical list:

            BUYER'S EXPENSES                  SELLER'S EXPENSES
            Documentary Stamps on Notes       Cost of Abstract
            Recording Deed and Mortgage       Documentary Stamps on Deed
            Escrow Fees                       Real Estate Commission
            Attorney's Fee                    Recording Mortgage
            Title Insurance                   Survey Charge
            Appraisal and Inspection          Escrow Fees
            Survey Charge                     Attorney's Fee




                                                                                            36
state in writing who will pay each of the above costs.

Closing Day

The day on which the formalities of a real estate sale are concluded.

The certificate of title, abstract, and deed are generally prepared for the closing by an
attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing
costs are paid. The final closing merely confirms the original agreement reached in the
agreement of sale.

Cloud (On Title)

An outstanding claim or encumbrance which adversely affects the marketability of
title.

Commission

Money paid to a real estate agent orbroker by the seller as compensation for finding a
buyer and completing the sale. Usually it is a percentage of the sale price--6 to 7
percent on houses, 10 percent on land.

Condemnation

The taking of private property for public use by a government unit, against the will of
the owner, but with payment of just compensation under the government's power of
eminent domain. Condemnation may also be a determination by a governmental
agency that a particular building is unsafe or unfit for use.

Condominium

The owner of a condominium unit owns the unit and has the right, along with other
unit owners, to use the common areas, which are owned by the condominium
association. Condominium laws vary greatly from state to state, but typically include
an association that maintains the building, pays taxes and insurance, and maintains the
reserves for improvements.

Contract for Deed

A contract for deed is a contract that allows a buyer to take possession of property in
exchange for monthly payments until the balance is paid off, even though the seller
maintains legal title to the property until the final payment is made. The parties
negotiate the terms of a contract for deed.

Contract of Purchase



                                                                                            37
(See agreement of sale)

Contractor

In the construction industry, a contractor is one who contracts to erect buildings or
portions of them. There are also contractors for each phase of construction: heating,
electrical, plumbing, air conditioning, road building, bridge and dam erection, and
others.

Conventional Mortgage

A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration.
It is subject to conditions established by the lending institution and State statutes. The
mortgage rates may vary with different institutions and between States. (States have
various interest limits.)

Cooperative Housing

An apartment building or a group of dwellings owned by a corporation, the
stockholders of which are the residents of the dwellings. It is operated for their benefit
by their elected board of directors. In a cooperative, the corporation or association
owns title to the real estate. A resident purchases stock in the corporation which
entitles him to occupy a unit in the building or property owned by the cooperative.
While the resident does not own his unit, he has an absolute right to occupy his unit
for as long as he owns the stock.

D

Deed

A formal written instrument by which title to real property is transferred from one
owner to another. The deed should contain an accurate description of the property
being conveyed, should be signed and witnessed according to the laws of the State
where the property is located, and should be delivered to the purchaser at closing day.
There are two parties to a deed: the grantor and the grantee. (See also deed of trust,
general warranty deed, quitclaim deed, and special warranty deed.)

Deed of Trust

Like a mortgage, a security instrument whereby real property is given as security for a
debt. However, in a deed of trust there are three parties to the instrument: the
borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the
borrower transfers the legal title for the property to the trustee who holds the property
in trust as security for the payment of the debt to the lender or beneficiary. If the
borrower pays the debt as agreed, the deed of trust becomes void. If, however, he



                                                                                             38
defaults in the payment of the debt, the trustee may sell the property at a public sale,
under the terms of the deed of trust. In most jurisdictions where the deed of trust is in
force, the borrower is subject to having his property sold without benefit of legal
proceedings. A few States have begun in recent years to treat the deed of trust like a
mortgage.

Default

Failure to make mortgage payments as agreed to in a commitment based on the terms
and at the designated time set forth in the mortgage or deed of trust. It is the
mortgagor's responsibility to remember the due date and send the payment prior to the
due date, not after. Generally, thirty days after the due date if payment is not received,
the mortgage is in default. In the event of default, the mortgage may give the lender
the right to accelerate payments, take possession and receive rents, and start
foreclosure. Defaults may also come about by the failure to observe other conditions
in the mortgage or deed of trust.

Depreciation

Decline in value of a house due to wear and tear, adverse changes in the
neighborhood, or any other reason.

Documentary Stamps

A State tax, in the forms of stamps, required on deeds and mortgages when real estate
title passes from one owner to another. The amount of stamps required varies with
each State.

Downpayment

The amount of money to be paid by the purchaser to the seller upon the signing of the
agreement of sale. The agreement of sale will refer to the downpayment amount and
will acknowledge receipt of the downpayment. Downpayment is the difference
between the sales price and maximum mortgage amount. The downpayment may not
be refundable if the purchaser fails to buy the property without good cause. If the
purchaser wants the downpayment to be refundable, he should insert a clause in the
agreement of sale specifying the conditions under which the deposit will be refunded,
if the agreement does not already contain such clause. If the seller cannot deliver good
title, the agreement of sale usually requires the seller to return the downpayment and
to pay interest and expenses incurred by the purchaser.

E

Earnest Money




                                                                                             39
The deposit money given to the seller or his agent by the potential buyer upon the
signing of the agreement of sale to show that he is serious about buying the house. If
the sale goes through, the earnest money is applied against the downpayment. If the
sale does not go through, the earnest money will be forfeited or lost unless the binder
or offer to purchase expressly provides that it is refundable.

Easement Rights

A right-of-way granted to a person or company authorizing access to or over the
owner's land. An electric company obtaining a right-of-way across private property is
a common example.

Encroachment

An obstruction, building, or part of a building that intrudes beyond a legal boundary
onto neighboring private or public land, or a building extending beyond the building
line.

Encumbrance

A legal right or interest in land that affects a good or clear title, and diminishes the
land's value. It can take numerous forms, such as zoning ordinances, easement rights,
claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive
convenants. An encumbrance does not legally prevent transfer of the property to
another. A title search is all that is usually done to reveal the existence of such
encumbrances, and it is up to the buyer to determine whether he wants to purchase
with the encumbrance, or what can be done to remove it.

Equity

The value of a homeowner's unencumbered interest in real estate. Equity is computed
by subtracting from the property's fair market value the total of the unpaid mortgage
balance and any outstanding liens or other debts against the property. A homeowner's
equity increases as he pays off his mortgage or as the property appreciates in value.
When the mortgage and all other debts against the property are paid in full the
homeowner has 100% equity in his property.

Escrow

Funds paid by one party to another (the escrow agent) to hold until the occurrence of a
specified event, after which the funds are released to a designated individual. In FHA
mortgage transactions an escrow account usually refers to the funds a mortgagor pays
the lender at the time of the periodic mortgage payments. The money is held in a trust
fund, provided by the lender for the buyer. Such funds should be adequate to cover
yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard



                                                                                           40
insurance premiums, and special assessments.

F

Foreclosure

A legal term applied to any of the various methods of enforcing payment of the debt
secured by a mortgage, or deed of trust, by taking and selling the mortgaged property,
and depriving the mortgagor of possession. Foreclosure proceedings vary by state, but
typically include foreclosure by advertisement, which does not include a court
proceeding, and foreclosure by action in court.

G

General Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the property to
the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as
mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the
grantee may hold the grantor liable.

Grantee

That party in the deed who is the buyer or recipient.

Grantor

That party in the deed who is the seller or giver.

H

Hazard Insurance

Protects against damages caused to property by fire, windstorms, and other common
hazards.

HUD

U.S. Department of Housing and Urban Development. Office of Housing/Federal
Housing Administration within HUD insures home mortgage loans made by lenders
and sets minimum standards for such homes.

I

Interest



                                                                                                41
A charge paid for borrowing money. (See mortgage note)

L

Lien

A claim by one person on the property of another as security for money owed. Such
claims may include obligations not met or satisfied, judgments, unpaid taxes,
materials, or labor. (See also special lien.)

M

Marketable Title

A title that is free and clear of objectionable liens, clouds, or other title defects. A title
which enables an owner to sell his property freely to others and which others will
accept without objection.

Mortgage

A lien or claim against real property given by the buyer to the lender as security for
money borrowed. Under government-insured or loan-guarantee provisions, the
payments may include escrow amounts covering taxes, hazard insurance, water
charges, and special assessments. Mortgages generally run from 10 to 30 years, during
which the loan is to be paid off.

Mortgage Commitment

A written notice from the bank or other lending institution saying it will advance
mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortage Insurance Premium

The payment made by a borrower to the lender for transmittal to HUD to help defray
the cost of the FHA mortgage insurance program and to provide a reserve fund to
protect lenders against loss in insured mortgage transactions. In FHA insured
mortgages this represents an annual rate of one-half of one percent paid by the
mortgagor on a monthly basis.

Mortgage Loan

A mortgage loan is a loan that is secured with a lien on real property. Forms of
mortgages include fixed rate, adjustable-rate, and balloon mortgages. The functioning,
legal effect, and foreclosure of a mortgage varies greatly from state to state.




                                                                                                 42
Mortgage Note

A written agreement to repay a loan. The agreement is secured by a mortgage, serves
as proof of an indebtedness, and states the manner in which it shall be paid. The note
states the actual amount of the debt that the mortgage secures and renders the
mortgagor personally responsible for repayment.

Mortgage (Open-End)

A mortgage with a provision that permits borrowing additional money in the future
without refinancing the loan or paying additional financing charges. Open-end
provisions often limit such borrowing to no more than would raise the balance to the
original loan figure.

Mortgagee

The lender in a mortgage agreement.

Mortgagor

The borrower in a mortgage agreement.

P

Plat

A map or chart of a lot, subdivision or community drawn by a surveyor showing
boundary lines, buildings, improvements on the land, and easements.

Points

Sometimes called "discount points." A point is one percent of the amount of the
mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are
charged by a lender to raise the yield on his loan at a time when money is tight,
interest rates are high, and there is a legal limit to the interest rate that can be charged
on a mortgage. Buyers are prohibited from paying points on HUD or Veterans'
Administration guaranteed loans (sellers can pay, however). On a conventional
mortgage, points may be paid by either buyer or seller or split between them.

Prepayment

Payment of mortgage loan, or part of it, before due date. Mortgage agreements often
restrict the right of prepayment either by limiting the amount that can be prepaid in
any one year or charging a penalty for prepayment. The Federal Housing
Administration does not permit such restrictions in FHA insured mortgages.



                                                                                               43
Principal

The basic element of the loan as distinguished from interest and mortgage insurance
premium. In other words, principal is the amount upon which interest is paid.

Purchase Agreement

See agreement of sale.

Q

Quitclaim Deed

A deed which transfers whatever interest the maker of the deed may have in the
particular parcel of land. A quitclaim deed is often given to clear the title when the
grantor's interest in a property is questionable. By accepting such a deed the buyer
assumes all the risks. Such a deed makes no warranties as to the title, but simply
transfers to the buyer whatever interest the grantor has. (See deed.)

R

Real Estate Broker

A licensed person or entity that represents either the buyer or seller in the purchase or
sale of real estate, usually on a commission basis. A "dual" broker represents both
parties in the same transaction. The terms of broker agreements are negotiable.

Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) requires borrowers to receive
disclosures regarding the costs associated with the settlement, the lender servicing and
escrow account practices and the business relationships between settlement service
providers. RESPA requires a mortgage lender to give the borrower a good faith
estimate of the settlement service charges he or she is likely to have to pay.

Refinancing

The process of the same mortgagor paying off one loan with the proceeds from
another loan.

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created
by deed and may "run with the land," binding all subsequent purchasers of the land, or
may be "personal" and binding only between the original seller and buyer. The



                                                                                            44
determination whether a covenant runs with the land or is personal is governed by the
language of the covenant, the intent of the parties, and the law in the State where the
land is situated. Restrictive covenants that run with the land are encumbrances and
may affect the value and marketability of title. Restrictive covenants may limit the
density of buildings per acre, regulate size, style or price range of buildings to be
erected, or prevent particular businesses from operating or minority groups from
owning or occupying homes in a given area. (This latter discriminatory covenant is
unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

S

Sales Agreement

See agreement of sale.

Special Assessments

A special tax imposed on property, individual lots or all property in the immediate
area, for road construction, sidewalks, sewers, street lights, etc.

Special Lien

A lien that binds a specified piece of property, unlike a general lien, which is levied
against all one's assets. It creates a right to retain something of value belonging to
another person as compensation for labor, material, or money expended in that
person's behalf. In some localities it is called "particular" lien or "specific" lien. (See
lien.)

Special Warranty Deed

A deed in which the grantor conveys title to the grantee and agrees to protect the
grantee against title defects or claims asserted by the grantor and those persons whose
right to assert a claim against the title arose during the period the grantor held title to
the property. In a special warranty deed the grantor guarantees to the grantee that he
has done nothing during the time he held title to the property which has, or which
might in the future, impair the grantee's title.

State Stamps

See documentary stamps

Survey

A map or plat made by a licensed surveyor showing the results of measuring the land
with its elevations, improvements, boundaries, and its relationship to surrounding



                                                                                              45
tracts of land. A survey is often required by the lender to assure him that a building is
actually sited on the land according to its legal description.

T

Tax

As applied to real estate, an enforced charge imposed on persons, property or income,
to be used to support the State. The governing body in turn utilizes the funds in the
best interest of the general public.

Title

As generally used, the rights of ownership and possession of particular property. In
real estate usage, title may refer to the instruments or documents by which a right of
ownership is established (title documents), or it may refer to the ownership interest
one has in the real estate.

Title Insurance

Protects lenders or homeowners against loss of their interest in property due to legal
defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance
benefits will be paid only to the "named insured" in the title policy, so it is important
that an owner purchase an "owner's title policy", if he desires the protection of title
insurance.

Title Search or Examination

A check of the title records, generally at the local courthouse, to make sure the buyer
is purchasing a house from the legal owner and there are no liens, overdue special
assessments, or other claims or outstanding restrictive convenants filed in the record,
which would adversely affect the marketability or value of title.

Trustee

A party who is given legal responsibility to hold property in the best interest of or "for
the benefit of" another. The trustee is one placed in a position of responsibility for
another, a responsibility enforceable in a court of law. (See deed of trust.)

Z

Zoning Ordinances

The acts of an authorized local government establishing building codes, and setting
forth regulations for property land usage.



                                                                                             46
 Chapter 11 Buying and Financing
            Manufactured Homes: Pros
            and Cons
If you are currently in the market for a new home, perhaps you have considered
manufactured housing. What is a manufactured house? It is typically a home that is
built completely in a factory (commonly known as a mobile home). When it is
finished, it is moved to the site where it will be installed.

One of the biggest cons to buying this type of a house is that you can almost never get
a traditional mortgage. Lenders do not like to finance these types of houses as they
could be moved at any time. Also, it is hard to build equity in a manufactured home
(for reference, equity is the property value minus the debt). Many owners of
manufactured houses do not own the land their house is sitting on, and land is a big
part of equity. Manufactured houses simply do not tend to go up in value. They are
also geared towards lower income levels, and sometimes there are inferior building
materials used. These are a few of the reasons why it is hard to get a traditional
mortgage on a manufactured home.

The pros are that manufactured houses are very affordable, and provide people
without a lot of income with a way to own their own home. More and more people are
buying manufactured homes and permanently installing them on land that they own.
Because of this sometimes they are able to qualify for a traditional mortgage.

If you are planning on considering a manufactured home, arrange for your own
financing (do not necessarily go with the offer the seller of the home will try to talk
you into). You will usually get a better deal arranging for financing yourself. Lots of
financing tips are available on www.mortgage-refinancing-online-guide.com. Also,
avoid "all in one packages" that include everything (installation, financing, home-site,
etc). You can get a more competitive price on your home by shopping for just the
home. Try to find a good site to install your home on, before you buy the home. Also,
consider buying rather than renting the site where your home will be.

Manufactured homes have both pros and cons, and are often a good housing solution.
Just be sure you get all the facts and options before you sign any contracts.




                                                                                           47
Chapter 12: Answers To Many
            Frequently Asked Questions
                              Why should I buy, instead of rent?
       o   Answer: You'll love the feeling of having something that's all yours
           - a home where your own personal style will tell the world who you
           are. A thriving vegetable garden in the backyard, a tiled entryway,
           a yellow kitchen...when you own, you can do it all your way! But
           there's more to owning a home than personal satisfaction. You can
           deduct the cost of your mortgage loan interest from your federal
           income taxes, and usually from your state taxes, too. And interest
           will compose nearly all of your monthly payment , for over half the
           number of years you'll be paying your mortgage. This adds up to
           hefty savings at the end of each year. And you're also allowed to
           deduct the property taxes you pay as a homeowner. If you rent,
           you write your monthly check and it's gone forever. Another
           financial plus in owning a home is the possibility its value will go up
           through the years.




   I've had bad credit, and I don't have much for a down-payment.
    Can I become a homebuyer?
       o Answer: You may be a good candidate for one of the federal
           mortgage programs that are available. A good place for you to start
           is by contacting one of the HUD-funded housing counseling
           agencies. They can help you sort through your options. In addition,
           contact your local government to see if there are any local
           homeownership programs that might work for you. Look in the blue
           pages of your phone directory for your local office of housing and
           community development or, if you can't find it, contact your
           mayor's office or your county executive's office.




   I'm a single mother. How would I go about buying a home?
       o Answer: Although you won't have the benefit of two incomes on
           which to qualify for a loan, there's no reason that you can't become
           a homeowner. Become familiar with the process, pick a good real
           estate broker, and think about getting pre-qualified for a loan. You
           might want to contact one of the HUD-funded housing counseling
           agencies in your area to talk through your options. And you also
           might want to think about buying a HUD home - they can be very
           good deals. Also, contact your local government to see if there are
           any local home buying programs that could help you. Look in the
           blue pages of your phone directory for your local office of housing
           and community development or, if you can't find it, contact your
           mayor's office or your county executive's office.




                                                                                     48
   Should I use a real estate broker? How do I find one?
       o Answer: Using a real estate broker is a very good idea. All the
          details involved in home buying, particularly the financial ones, can
          be mind-boggling. A good real estate professional can guide you
          through the entire process and make the experience much easier. A
          real estate broker will be well-acquainted with all the important
          things you'll want to know about a neighborhood you may be
          considering...the quality of schools, the number of children in the
          area, the safety of the neighborhood, traffic volume, and more. He
          or she will help you figure the price range you can afford and
          search the classified ads and multiple listing services for homes
          you'll want to see. With immediate access to homes as soon as
          they're put on the market, the broker can save you hours of wasted
          driving-around time. When it's time to make an offer on a home,
          the broker can point out ways to structure your deal to save you
          money. He or she will explain the advantages and disadvantages of
          different types of mortgages, guide you through the paperwork,
          and be there to hold your hand and answer last-minute questions
          when you sign the final papers at closing. And you don't have to
          pay the broker anything! The payment comes from the home seller
          - not from the buyer.




   How much money will I have to come up with to buy a home?
      o Answer: Well, that depends on a number of factors, including the
         cost of the house and the type of mortgage you get. In general,
         you need to come up with enough money to cover three costs:
         earnest money - the deposit you make on the home when you
         submit your offer, to prove to the seller that you are serious about
         wanting to buy the house; the down payment, a percentage of
         the cost of the home that you must pay when you go to settlement;
         and closing costs, the costs associated with processing the
         paperwork to buy a house.

           When you make an offer on a home, your real estate broker will put
           your earnest money into an escrow account. If the offer is
           accepted, your earnest money will be applied to the down payment
           or closing costs. If your offer is not accepted, your money will be
           returned to you. The amount of your earnest money varies. If you
           buy a HUD home, for example, your deposit generally will range
           from $500 - $2,000.

           The more money you can put into your down payment, the lower
           your mortgage payments will be. Some types of loans require 10-
           20% of the purchase price. That's why many first-time homebuyers
           turn to HUD's FHA for help. FHA loans require only 3% down - and
           sometimes less.




                                                                                  49
           Closing costs - which you will pay at settlement - average 3-4% of
           the price of your home. These costs cover various fees your lender
           charges and other processing expenses. When you apply for your
           loan, your lender will give you an estimate of the closing costs, so
           you won't be caught by surprise.




   How do I know if I can get a loan?
      o Answer: Use our simple mortgage calculators to see how much
         mortgage you could pay - that's a good start. If the amount you
         can afford is significantly less than the cost of homes that interest
         you, then you might want to wait awhile longer. But before you
         give up, why don't you contact a real estate broker or a HUD-
         funded housing counseling agency? They will help you evaluate
         your loan potential. A broker will know what kinds of mortgages the
         lenders are offering and can help you choose a lender with a
         program that might be right for you. Another good idea is to get
         pre-qualified for a loan. That means you go to a lender and apply
         for a mortgage before you actually start looking for a home. Then
         you'll know exactly how much you can afford to spend, and it will
         speed the process once you do find the home of your dreams.




   How do I find a lender?
      o Answer: You can finance a home with a loan from a bank, a
         savings and loan, a credit union, a private mortgage company, or
         various state government lenders. Shopping for a loan is like
         shopping for any other large purchase: you can save money if you
         take some time to look around for the best prices. Different lenders
         can offer quite different interest rates and loan fees; and as you
         know, a lower interest rate can make a big difference in how much
         home you can afford. Talk with several lenders before you decide.
         Most lenders need 3-6 weeks for the whole loan approval process.
         Your real estate broker will be familiar with lenders in the area and
         what they're offering. Or you can look in your local newspaper's
         real estate section - most papers list interest rates being offered by
         local lenders. You can find FHA-approved lenders in the Yellow
         Pages of your phone book. HUD does not make loans directly - you
         must use a HUD-approved lender if you're interested in an FHA
         loan.




   In addition to the mortgage payment, what other costs do I need
    to consider?
        o Answer: Well, of course you'll have your monthly utilities. If your
          utilities have been covered in your rent, this may be new for you.
          Your real estate broker will be able to help you get information from
          the seller on how much utilities normally cost. In addition, you



                                                                                  50
           might have homeowner association or condo association dues.
           You'll definitely have property taxes, and you also may have city or
           county taxes. Taxes normally are rolled into your mortgage
           payment. Again, your broker will be able to help you anticipate
           these costs.




   So what will my mortgage cover?
       o Answer: Most loans have 4 parts: principal: the repayment of the
         amount you actually borrowed; interest: payment to the lender for
         the money you've borrowed; homeowners insurance: a monthly
         amount to insure the property against loss from fire, smoke, theft,
         and other hazards required by most lenders; and property taxes:
         the annual city/county taxes assessed on your property, divided by
         the number of mortgage payments you make in a year. Most loans
         are for 30 years, although 15 year loans are available, too. During
         the life of the loan, you'll pay far more in interest than you will in
         principal - sometimes two or three times more! Because of the way
         loans are structured, in the first years you'll be paying mostly
         interest in your monthly payments. In the final years, you'll be
         paying mostly principal.




   What do I need to take with me when I apply for a mortgage?
      o Answer: Good question! If you have everything with you when you
         visit your lender, you'll save a good deal of time. You should have:
         1) social security numbers for both your and your spouse, if both of
         you are applying for the loan; 2) copies of your checking and
         savings account statements for the past 6 months; 3) evidence of
         any other assets like bonds or stocks; 4) a recent paycheck stub
         detailing your earnings; 5) a list of all credit card accounts and the
         approximate monthly amounts owed on each; 6) a list of account
         numbers and balances due on outstanding loans, such as car loans;
         7) copies of your last 2 years' income tax statements; and 8) the
         name and address of someone who can verify your employment.
         Depending on your lender, you may be asked for other information.




   I know there are lots of types of mortgages - how do I know which
    one is best for me?
       o Answer: You're right - there are many types of mortgages, and the
           more you know about them before you start, the better. Most
           people use a fixed-rate mortgage. In a fixed rate mortgage, your
           interest rate stays the same for the term of the mortgage, which
           normally is 30 years. The advantage of a fixed-rate mortgage is
           that you always know exactly how much your mortgage payment
           will be, and you can plan for it. Another kind of mortgage is an
           Adjustable Rate Mortgage (ARM). With this kind of mortgage, your



                                                                                  51
           interest rate and monthly payments usually start lower than a fixed
           rate mortgage. But your rate and payment can change either up or
           down, as often as once or twice a year. The adjustment is tied to a
           financial index, such as the U.S. Treasury Securities index. The
           advantage of an ARM is that you may be able to afford a more
           expensive home because your initial interest rate will be lower.
           There are several government mortgage programs that might
           interest you, too. Most people have heard of FHA mortgages. FHA
           doesn't actually make loans. Instead, it insures loans so that if
           buyers default for some reason, the lenders will get their money.
           This encourages lenders to give mortgages to people who might not
           otherwise qualify for a loan. Talk to your real estate broker about
           the various kinds of loans, before you begin shopping for a
           mortgage.




   When I find the home I want, how much should I offer?
      o Answer: Again, your real estate broker can help you here. But
         there are several things you should consider: 1) is the asking price
         in line with prices of similar homes in the area? 2) Is the home in
         good condition or will you have to spend a substantial amount of
         money making it the way you want it? You probably want to get a
         professional home inspection before you make your offer. Your real
         estate broker can help you arrange one. 3) How long has the home
         been on the market? If it's been for sale for awhile, the seller may
         be more eager to accept a lower offer. 4) How much mortgage will
         be required? Make sure you really can afford whatever offer you
         make. 5) How much do you really want the home? The closer you
         are to the asking price, the more likely your offer will be accepted.
         In some cases, you may even want to offer more than the asking
         price, if you know you are competing with others for the house.




   What if my offer is rejected?
      o Answer: They often are! But don't let that stop you. Now you
          begin negotiating. Your broker will help you. You may have to offer
          more money, but you may ask the seller to cover some or all of
          your closing costs or to make repairs that wouldn't normally be
          expected. Often, negotiations on a price go back and forth several
          times before a deal is made. Just remember - don't get so caught
          up in negotiations that you lose sight of what you really want and
          can afford!




   So what will happen at closing?
       o Answer: Basically, you'll sit at a table with your broker, the broker
         for the seller, probably the seller, and a closing agent. The closing
         agent will have a stack of papers for you and the seller to sign.



                                                                                 52
While he or she will give you a basic explanation of each paper, you
may want to take the time to read each one and/or consult with
your agent to make sure you know exactly what you're signing.
After all, this is a large amount of money you're committing to pay
for a lot of years! Before you go to closing, your lender is required
to give you a booklet explaining the closing costs, a "good faith
estimate" of how much cash you'll have to supply at closing, and a
list of documents you'll need at closing. If you don't get those
items, be sure to call your lender BEFORE you go to closing. Be
sure to read our booklet on settlement costs. It will help you
understand your rights in the process. Don't hesitate to ask
questions.




                                                                        53
 Chapter 13 8 Steps to Buying
                                       a Home with Poor
                                       Credit and No
Money Down
by Ron Stone


1. Get a copy of your credit report. You can do this yourself or you can have a Broker
check it. Remember there are three bureaus, so check all three.


Some Brokers will only pull one unless you ask for three. If they won't pull all three, go
elsewhere or pull them your self.


Ideally, you want a "Tri-Merge" report which merges all three so as to remove duplicate
items while still showing all three scores. Your " Credit Score" is the middle of the three.
Try http://www.annualcreditreport.com for a free report. At this writing, they don't cover
the whole country but will soon.


You can also go directly to the bureaus. The three bureaus web addresses are
http://www.equifax.com http://www.experian.com and http://www.transunion.com They
may charge a fee or offer the "free" report as part of a credit watch service, which is
probably a service you may want as you rebuild your credit.


2. Study the report for accuracy and have any errors corrected. You can do this through
each bureau's website, the Broker's credit reporting agency. There may be a charge, but
it's well worth it. Correcting derogatory errors on a report can quickly raise your score,
qualifying you for higher LTV loans and lower your interest rate. This could save you tens
of thousands of dollars over the life of the loan. A Broker's credit reporting agency can also
help.


3. Start your road to better credit now. You want to improve it as much as possible so as
to refinance as soon as possible. You might even see your score improve before you find
just the right house and a package is sent to underwriting. Sometimes an improvement of




                                                                                                 54
only a few points will put you into a better category with a higher LTV and/or a lower rate.
Ask the Broker what the lender used as your score for the loan at the time of underwriting
and if that qualifies you for a lower rate. If you've done your research and found an
honest, qualified Broker they will try to lower your rate below their original estimate.


4. Research your area through referrals, advertising and interviews to find a Mortgage
Broker that specializes in sub-prime (less than perfect credit) mortgages that you feel
comfortable with. If you don't intend on pulling your own credit, this will now become your
first step in this process.


5. Discuss your situation in detail with the broker including:

a. Your credit


b. Your Rental payment history and proof of payments


c. Your Employment situation and history


d. The fact that you want a straight zero down loan or one with a seller 2nd or gift of
equity with closing costs financed into the loan


e. How much house you qualify for


f. What estimated closing costs will be through a GFE


g. Obtain a Pre-Qualification


6. Find a Realtor who isn't afraid to work with someone who wants to do 100% loan with
closing costs financed into the loan. Your Broker may know one. If they balk or seem
hesitant, go find someone else.


7. Search the market thoroughly. Be sure the realtor is showing you homes where the
seller's situation fits with your needs. This might include 1) Low Mortgage balance, 2) Good
value so the appraised value will be above their asking price and 3) A seller that is
motivated.


8. Make an offer (multiples if needed) on a home on your terms until you get one accepted
and close your home as soon as possible before rates go up.


Have a celebration with your significant other or family. You've earned it. Enjoy your new



                                                                                               55
life as a homeowner while you make all those little improvements necessary to build equity
and improve your home's value for the future appraisal relating to a sale or refinance, all
the while improving your credit score.




                                                                                              56
 Chapter 14 Buying a Home
                                       After a
                                       Bankruptcy - How
To Tell When You Are Ready
To Buy
by Carrie Reeder


If you've declared bankruptcy in the past, you may wonder if it's possible to qualify for a
home loan. Well, chances are you could get a mortgage loan from a lender, but are you
really ready to buy? Home ownership requires a lot more than just making monthly
payments on your mortgage. Other expenses, like taxes, insurance and maintenance, can
chip away at your budget, too. Here are some ways to tell when you're ready to buy a
house:


YOUR INCOME IS STEADY


If you have a reasonably long employment history with the same employer--at least a
year--lenders will look on you more favorably than someone who's only been with their
company for a few months. A steady income, such as a salary or regular wage, is also
preferable to sporadic income, such as the type that comes to freelancers, entrepreneurs
or the self-employed. Although you can get a home loan in these circumstances, it's best
to wait until your income stream is reasonably steady so you know you'll be able to make
your monthly mortgage payments.


YOU'VE SAVED A DOWN PAYMENT


Although mortgage loans exist that allow borrowers to qualify with no down payment,
these loans tend to cost more. No or low down payment loans typically charge higher
interest. Moreover, you'll have to borrow a larger amount, which means higher monthly
payments and more cost to you in the long run. In general, you should have at least 10%
of the purchase price of your home saved for your down payment, although many lenders




                                                                                              57
prefer that you have 20%.


YOU CAN MANAGE YOUR CREDIT


After declaring bankruptcy, you may have signed up for a new credit card or loan. If so,
take a close look at how you've been handling that debt. Are you making regular monthly
payments? Are they on time? If you've been handling your new debt responsibly, you may
be ready for a home loan. However, if you're struggling to pay the monthly minimum, it
might be a good idea to wait to buy a home until you're on more solid financial ground.
Here is a list of recommended Home Mortgage Lenders online. It's important to use a
reputable lender online to make sure your personal information is secure.


It is possible to get a home loan after bankruptcy if you find a lender that deals with those
types of mortgages. However, it's important to make sure that you're personally ready to
handle a home loan before you seek out lenders.




                                                                                                58
 Chapter 15 The ABCs of Bad
                                        Credit Lending
                                        by Corey Senn


What is a Bad Credit Lender Anyways?

A bad credit lender is any money lender that specializes in difficult to fund loans. These
might include money loans to borrowers with poor credit, low FICO scores and little to no
assets/equity.


Individuals with bad credit may find it difficult, if not impossible, to obtain a loan from a
bank or other financial institution. For borrowers who do not qualify for a bank loan, one
lending option is a private loan, often referred to as a hard money loan or bad credit loan.


Bad Credit Lender Rates


Because the borrower has a shakier track record with paying back their financial
obligations and/or has less economic resources available to them, they carry a greater risk
for defaulting on the loan.


For these reasons, a hard money or bad credit lender charges a higher annual percentage
rate and up front points. Bad credit lenders charge anywhere from 11%-16% plus 1 to 10
points. Lending amounts will vary by lender and by state.


The Benefits of Using a Bad Credit Lender


Borrowers should only apply for a bad credit loan after they have unsuccessfully applied for
a financial loan from several financial institutions. Due to the high percent rate of a bad
credit loan, borrowers should structure their hard money loans so that they do not exceed
12 to 18 months.


The goal for a borrower in this situation is to rebuild their credit during this time
(borrowers are not penalized by credit bureaus if they miss payments etc.). With diligence
and work, hopefully the borrower can now refinance their loan at the end of their loan term
and obtain a sub prime loan.




                                                                                                59
This way, the borrower is on their way to reestablishing their financial future.




 Chapter 16 How To Buy Foreclosed
            Homes
                              When you buy a foreclosed home, you're cashing in on a
home someone was no longer able to pay for. Foreclosures are difficult--both to locate
and to execute the transactions--but the potential to turn them over for a tidy profit
may be there.

Instructions
       STEP 1: See how to buy a house
       STEP 2: Understand that foreclosure means that because a home owner has
        become unable to pay the mortgage, the lender takes back the property. The
        legal steps involved differ from state to state.
       STEP 3: Investigate the advantages. Since a bank or other lender wants to
        recover as much of its investment as quickly as possible, foreclosed homes are
        often unloaded at significant discounts-- upwards of 30 percent or more.
       STEP 4: Find an agent experienced in foreclosures. Some sellers won't accept
        offers from unrepresented buyers.
       STEP 5: Search for foreclosure listings in real estate magazines, newsletters,
        newspapers and Internet search engines. Call lenders for real estate owned
        (REO) properties lists of foreclosures. Government agencies such as Fannie
        Mae (fanniemae.com) and the Department of Housing and Urban
        Development (hud.gov) also advertise foreclosed homes for sale. Check public
        records for other leads. A lender deciding to foreclose must file a notice of
        default in the local county clerk's office.
       STEP 6: Tour the property and inspect it as closely as possible. Some
        foreclosures--unlike fixer-uppers--are in fairly good shape. Others may be
        behind in maintenance.
       STEP 7: Have your agent check nearby or comparable homes to see if the
        asking price for a foreclosed home is, in fact, a bargain.
       STEP 8: Check your credit report and correct any defaults or outdated
        information. Get pre-qualified for a mortgage. Depending on the agency
        handling the sale, it may be required.
       STEP 9: Find out if there is a listing broker and make an offer.
       STEP 10: Check to see if a foreclosed home has any liens on it, such as
        unpaid property taxes. Find out who is liable for those costs.


                                                                                         60
     STEP 11: Have the home inspected if the seller allows. Some sellers include
      this as part of the sales agreement, but the buyer still pays for it.
     STEP 12: Be prepared to deal with more paperwork with a foreclosure than
      you would with a conventional purchase, particularly when a government
      agency is involved.

What To Look For
     Experienced agent
     Suitable properties
     Outstanding lien issues
     Lots of paperwork

Overall Tips & Warnings
     Find out how foreclosure works in your state. Procedures and legal
      requirements differ, so get a sense of how soon you can go after a home that
      appeals to you.
     Be particularly aggressive in negotiating with a bank. They're very keen to sell
      a foreclosed home fast, as it's just sitting on their books doing nothing.
     HUD and other agencies often auction foreclosed homes. However, buyers are
      frequently unable to inspect any property before making an offer. With so little
      information, the higher the bid for the property, the higher the risk that you
      may end up with a money pit. See below for how to purchase properties at
      auction.
     Beware that buying foreclosed property has a very low probability of success
      for all of the above conditions and because many people try to do it.




                                                                                         61
 Chapter 17 Buying at Auction
                             "Sold to the highest bidder!" Buying a home through an
                             auction can mean incredible deals. In most cases, the
                             seller is either the government, which has taken
possession of the property due to unpaid taxes, or the lender, when the former owner
stopped paying the mortgage. Despite the sad circumstances, competition for homes
can be keen.

Instructions
      STEP 1: Get pre-approved for a mortgage. Have your financial package ready
       to go before the bidding begins.
      STEP 2: Look in the newspaper classifieds or under "Home Auctions" in the
       Yellow Pages and on Internet search engines. Call nearby real estate agents to
       see if they're aware of any scheduled auctions. Add your name to mailing lists
       from local auction houses to be alerted to upcoming opportunities.
      STEP 3: Get a list of the properties up for auction. Get as much information as
       possible beforehand from the auctioneer to get a feel for which properties may
       interest you.
      STEP 4: Visit the properties on the block. Auctioneers generally have a
       preview date during which tours of the house will be given, although this isn't
       guaranteed.
      STEP 5: Have any home in which you're interested inspected by a
       professional inspector. This can cost several hundred dollars but will identify
       any significant problems that affect the value of the home, such as pest
       damage, faulty foundations or leaks. You may get approval to have the home
       inspected as a contingency, but bear in mind that contingencies of any kind
       reduce the probability of the bid being accepted at the lowest price. Other
       auctioneers only sell properties as-is.
      STEP 6: Decide how high you're willing to go. Mentally setting your
       maximum bid can stop you from spending more money than might be
       reasonable for a property, or losing a deposit.
      STEP 7: Realize that buying at auction involves some risks. In some cases,
       you can't withdraw a winning bid, even if you're not able to secure financing
       later. Penalties for backing out of a winning bid can be steep, often as high as
       25 percent of the bid amount or whatever the bid deposit may have been.
      STEP 8: Finalize your mortgage if yours is the winning bid. Contact your
       lender as soon as possible after the auction to wrap up your financing and
       paperwork.
      STEP 9: Close escrow. Typically, you will have two weeks to 30 days to do
       this.

What To Look For


                                                                                          62
     Pre-approved mortgage
     Inspection reports
     Free and clear title

Overall Tips & Warnings
     Some auctioneers, at the home owner's request, will set a reserve price that
      guarantees a minimum price will be received. This means that even if you're
      the winning bidder, you may not get the house if your highest bid isn't over the
      reserve price, which should be disclosed in advance of sale.
     Auctioneers may add a buyer's premium of 5 to 10 percent of the winning bid
      as their cut. Be sure and take this into account when you're calculating the
      maximum price you're willing to pay. Confirm who pays the auctioneer's fee.
     Check with the auction company to make sure the property has a free and clear
      title. You don't want to buy something only to learn after the fact that you may
      be liable for unpaid taxes or other bills attached to the property.
     If you're buying a property as an investment, rather than a residence, the
      mortgage approval process may require a much larger chunk of change up
      front.




                                                                                         63
 Chapter 18 How To Buy A Home For
            Sale By Owner
                            Sellers who want to save the brokerage fee by selling
their home themselves put the house on the market as FSBO - For Sale by Owner.
When working with FSBO sellers, keep these steps in mind.

Instructions
      STEP 1: Get comparable prices for other homes in the neighborhood from a
       local real estate company to ensure the home is not overpriced. (Firms usually
       do this at no charge.)
      STEP 2: Question the owners about the asking price. How did they arrive at
       the price? Request to see copies of comparable sales they are using or a copy
       of the appraisal.
      STEP 3: Ask the owners specific questions about the property: How long has
       the home been on the market? Are there any defects or conditions that the
       buyer should be aware of (sellers in many states are required to fill out a
       transfer disclosure statement that lists the condition of the property - ask to see
       one)? Why are the sellers selling and are any nuisances or negative conditions
       in the property?
      STEP 4: Hire your own home inspector, one not recommended by the seller.
      STEP 5: Make an offer that's based on comparable prices in the neighborhood,
       not on the listing price.
      STEP 6: Have an attorney or Realtor to look over contracts and agreements
       before signing.

Tips & Warnings
      FSBO (For Sale by Owner) properties are more common in a hot seller's
       market when sellers get their asking price and sometimes even more.
      Remember, however, that the owner is saving commission costs, so be
       prepared to bargain.
      If it's not a seller's market and the owner has had difficulty selling the home,
       you could reasonably make an offer considerably lower than the asking price.
      Consider hiring an attorney or a buyer's broker to work with you when buying
       a FSBO home. (You'll have to pay the broker's buyer yourself.)
      Negotiations can become personal without a third party acting as a go-
       between. Owners may not know all the key details of a real estate transaction.
       Visit your library and read up on your rights as a buyer in a real estate
       transaction.
      Use an updated deposit receipt. There are new laws that are contained within
       that must be adhered to. Go to a Realtor supply store or buy one from a real



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       estate agent.




 Chapter 19 Negotiating Tactics:
            Offense And Defense
                              We all wish we lived in a perfect world however this is
impossible. If this were true perfect contracts would be negotiated overnight and we
could all sleep well.



If house buying were that simple you wouldn't need this guide. Regardless of which
side the aisle you are on. A buyer or a seller it is important to understand and know
what is going on in the other parties head.



In order to have an effective offense or defense you must be prepared with different
attack moves and counter moves. Negotiating the final price is almost like a chess
game.



Strategy #1 Offense:



Play it cheap or otherwise known as "nickel and diming." This card goes like: "We
would love to offer more money however were short on a down payment or we won't
be able to afford closing costs." Some may even say, "we have to keep our payment
low."



Strategy #1 Defense:



                                                                                        65
Most times the price is not what drives the seller to sell. Many times the seller is
looking for largest net payout possible. Because of this net amount a lower purchase
price can actually benefit the seller. If a buyer offers a higher price, this could be
offset by the seller being required to participate more in the closing costs.



Strategy #2 Offense:

This is when I think of a rabbit chewing away on a carrot. You must whittle away at
that price if possible before or even after you have a signed the contract. Things a
buyer might try would be to see what appliances are included, try to get extras thrown
in or subtract items that may not be included. These could be things like: refrigerators,
microwaves, furniture, etc.



Strategy #2 Defense:

Make sure everything is spelled out in the agreement. Be sure no verbal offers or
counter-offers are made without being in writing. As a buyer you must understand this
could result in you losing the property, so you must be sure whether you want it or
not. The seller also can stipulate that these new events could re-open negotiations and
bump you from the house being tied up.



Strategy #3 Offense:

Good vs. evil, good cop and bad cop. This card is played when you want to put time
on your side for thinking something over or warming the other party up for what you
are going to tell them. One person on the buyer or seller team will play one of the two
roles. It plays out something like this, "Wife may say to buyers, let me discuss it with
my husband, I don't know if he'll go with it, but I'll ask him. "She would later call
back and apologize because the other party wouldn't budge on price. She is the good
cop for asking and trying to lobby your position. He will be the powerful one for all of
the decision making in the process.



Strategy #3 Defense:

Get everyone involved in the other party together at the same time and present the
offer so the good cop and bad cop scenario can't be played out. Don't give them
anymore power than what they may already have.



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Always remember, don't ever be afraid
to walk away from a deal. If you can’t
make it work, sometimes forcing your
 hand can be a mistake. Learn to trust
         your common sense.




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