Also on
this site is our very popular newly-updated comprehensive real estate
terms glossary,
which will help you understand the jargon of the real estate industry.
All realty agents
are members of the National Association of REALTORS® (NAR).
In addition, if you are relocating either with or without employer
funding, consider the Relocation
TRIP® Kit, which is a product that supplies a personal counselor,
file tracking, and a full relocation package of services that helps
you relieve the stress and hassles of a move. The Relocation TRIP®
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Whether you are
moving, planning a relocation for personal or transfer purposes, our
Home Referral Network counselor
will help you find an appropriate and qualified real estate agent
(at no cost to you) to
sell or buy your home and to arrange
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for your household goods and auto transport. The counselor will also
help you find the appropriate specialist to locate a temporary apartment--even
your mortgage.
Here are six special consumer reports about the
advantages of using buyer agents:
1
Research
shows that most homebuyers understand very little about whom their
agents represent and its vital importance. While State law requires
agents to disclose whose side they are on, most required disclosures
are woefully inadequate, poorly explained, glossed over, minimized,
and downright confusing. A growing number of brokers represent only
the buyer, which is known as Exclusive Buyer Brokerage or Exclusive
Buyer Representation. Buyer’s Resource® is the nations oldest
brokerage franchise system working only for buyers and never having
any conflicts of interest.
ARE
ALL REALTORS® ALIKE? No. There are four types of Realtors:
Seller Agents, Exclusive Buyer Agents (or Brokers), Dual Agents (including
non-exclusive Buyer Agents), and Transaction Brokers.
1.
SELLER AGENTS - list property and represent the seller. Remember that
if you are buying a home and call the listing company, it is the legal
obligation of the company's agents to get the highest price and best
terms for the seller. Any information given by a prospective homebuyer
to the seller’s agent must be told to the sellers. This includes any
reference to the buyer's financial and personal data, potentially
increasing the cost of the home by thousands of dollars.
2.
DUAL AGENTS - are real estate agents whose company lists property
for sale, but act as buyer agents on those properties. Unfortunately,
for buyers and sellers, dual agents are legal in most states. While
dual agents attempt to justify this practice, consumer advocates
warn NEVER to use a dual agent. The National Association of Realtors
wrote that the practice of dual agency is as dangerous as playing
Russian Roulette. If a real estate company lists property and represents
the seller--you can strongly doubt any attempted claim that their
agents can properly represent homebuyers. Funny how some folks
like the CIA do not like dual agents, because they know them as "double
agents!"
3.
TRANSACTION BROKERS -- are also known as a facilitators, finders,
and statutory agents. These are true non-agents because there is no
liability for wrongdoing. The attempt by a growing number of real
estate agents to avoid the responsibility owed to buyers and sellers
is legal in a few states (including Florida and Colorado). Services
by transaction brokers are substantially reduced from those of true
agents, and should be avoided by all sellers and buyers.
4.
EXCLUSIVE BUYER AGENTS -- represent homebuyers--never sellers. These
agents are required by law to get the best price and best terms for
the Homebuyer. All consumer advocates recommend that homebuyers
take advantage of the benefits offered by exclusive buyer agents.
Exclusive buyer agents are specialists in the home buying process.
This higher level of professional service for buyers has resulted
in an average of over 5% savings and greater satisfaction for homebuyers.
Because these agents do not list property, they do not have company
listings to try to sell to you first. Instead, all homes are available
to homebuyers without bias, including For Sale By Owner, New Build
Construction by homebuilders, and Multiple Listing Service homes (other
Realtor listings). Exclusive Buyer Brokers will better protect the
interests of buyers than dual agents, sub-agents, designated agents,
or so called split agents. They are more likely to negotiate a lower
sale price on a home, for example.
According
to the
Consumer
Federation of America,
when
interviewing real estate agents or buyer brokers to buy a home,
"Make
certain at least one is a Buyer Broker that works exclusively with
buyers."
THE
CFA RECOMMENDS ASKING THE FOLLOWING SEVEN IMPORTANT QUESTIONS:
1.
Will you (the agent) represent my interests only or those of the seller?
2.
Do you or your brokerage represent any sellers or builders?
3.
Do you have full access to the Multiple Listing Service?
4.
Will you show me for sale by owner properties?
5.
Can you give me the names of several current and former clients?
6.
What experience do you have as an agent and Buyer-Broker? What other
designations or credentials do you have?
7.
Does your commission amount vary? What about bonuses, inducements,
or rebates (kickbacks)? Do you give them back to me the buyer? (After
all, you the buyer are paying it!)
NO
DUAL, DESIGNATED, OR SPLIT AGENTS! By agency law, a listing real estate
company and all of their agents represent the individual(s) selling
the home. If they say they can represent the buyer and the seller
that is dual (i.e.: double, like a spy) agency or designated
(also called split) agency. Confused? So are most traditional brokers
and agents! If they try to minimize or downplay its importance to
you be very careful. It is at this point that dual or split agents
may begin to protect their commission checks rather than your interests.
An Exclusive Buyer Broker does not take listings and never represents
sellers. They will not "steer" you into looking at their company inventory
of homes for sale, because they do not have any!
The
entire foundation of exclusive buyer representation is not having
any real or potential conflicts of interest with a buyer/client. When
representing a buyer/client who has a home to sell a true Exclusive
Buyer Broker chooses not to "list" the property for sale. In other
words, they turn down thousands of dollars in full commissions each
month because their clients’ best interests are at stake. An Exclusive
Buyer Broker will never change their fiduciary relationship with a
buyer/client during their entire home buying process, whereas 99%
of so called "buyer agents" and their brokerages gladly represent
sellers and may "switch" their relationship with you.
Remember
that while buyers and sellers need not be adversarial in actions and
attitude, their personal interests are adverse. Buyers want the lowest
price and best terms, and sellers want the highest price and best
terms. We do not make wild claims that we will save a client $100,000
on their next home purchase. We do negotiate for our clients without
any chance of real or perceived conflicts of interest. You would not
expect less from your doctor, accountant, or attorney, so why potentially
settle for less on the biggest financial transaction of your life?
STEPS
TO ENSURE THE SELECTION OF A QUALITY EXCLUSIVE BUYER BROKER:
1.
Be sure the Exclusive Buyer Broker is a Realtor whose company
does not ever take listings or represents sellers.
2.
Use only Exclusive Buyer Brokers who have access to For Sale
By Owner, New Construction by Builders, and Realtor inventory Homes
in the MLS (Multiple Listing Service).
3.
Membership in a national organization helps to assure a higher standard
of quality service (for example, Buyer's Resource, the National Association
of Exclusive Buyer Agents (NAEBA), the Real Estate Buyer’s Agent Council
(REBAC), etc.
4.
Insist upon signing an Exclusive Buyer Brokerage Agency Agreement.
This agreement assures that the real estate agent and company are
committed to the buyer exclusively. Those companies who do not use
this agreement are not able or willing to make a full commitment to
you.
5.
Be sure that the Exclusive Buyer Agent uses a Purchase and
Sale Contract that is "buyer friendly." (Most contracts are seller
oriented.) Your Exclusive Buyer Agent will negotiate terms
and conditions in the purchase contract that offer greater protection
to homebuyers.
BUYING
A BUILDER’S NEW HOME: SHOULD I USE AN EXCLUSIVE BUYER AGENT? Yes.
It is just as important to use a qualified Exclusive Buyer
Agent Realtor in purchasing a new home. Benefits include:
1.
There is no additional cost involved to have an Exclusive Buyer
Broker represent you. The builder cannot give you any cash back because
you are not licensed as a real estate agent. It would be illegal,
so therefore the builder cannot give anything back to you, the buyer.
2.
Knowledge and history of various developments help match the buyer
with the right community.
3.
Knowledge of builders' pricing strategies helps buyers determine best
negotiating strategy.
4.
Knowledge of other builders of equal and greater quality help buyers
get the best builder for the money.
5.
Knowledge of builders' reputations regarding quality, follow- up,
warranty, and financial stability, help prevent problems after the
sale is closed.
6.
In many cases, lower prices or other concessions are offered to buyers
with buyer agents, as builders consider these agents as "multiple
sources of buyers." Individual buyers buy only one home; buyer agents
bring in many buyers.
Be
sure, however, to use only Exclusive Buyer Agents who can help
buyers with both new and existing homes. So-called new home specialists
often do not have access to or knowledge of existing homes and may
have monetary relationships with builders, which can cost you thousands.
SELLING
YOUR HOME: CAN AN EXCLUSIVE BUYER AGENT HELP ME? Yes. An Exclusive
Buyer Agent only represents homebuyers and does not take listings.
These agents, however, work with hundreds of listing agents. They
know which ones will aggressively market your home and provide excellent
seller representation.
2.
Are
you just out of college or new in your career or job? Are you
making big rent payments but have little or no down payment?
What if you could buy, are you confused between new construction versus
existing homes?
Buying
a residence can be a fretful experience, one that you may be thinking
is several years away from serious consideration. However, what
if you could stop renting now, begin to build equity, have Uncle Sam
help with your payments, and not have a downpayment?
Most
people do little or no research before they invest time and money
to buy their first home. Doesn’t it make sense to become completely
informed before you buy your first home? This special report
is designed to help you avoid 7 common and crucial mistakes.
The right real estate professional who specializes in Exclusive Buyer
Representation can help you make good sound business decisions based
on your personal circumstances.
1.
Choose the right agent. When looking for new or resale homes,
you need an advocate for you, protecting your interests in the home
search. Using an Exclusive Buyer Broker to help you is just
like using a credit card to make a purchase. It does not cost
you any more and it gives you added protection for that purchase.
Most consumers do not realize that all merchants pay a “commission”
to their bank for all credit card transactions as a cost of doing
business. It is just the same using an Exclusive Buyer Broker
- the fee is part of the cost the builder pays or part of the listing
commission the seller pays to sell a home through a Realtor®.
Trying to go it alone (buying directly from the builder or the real
estate agent or company whose sign is in the yard) will not save you
money. Further, you have no representation (meaning no one is
protecting you), and may end up costing you much in terms of time
and money! The only thing you invest with an Exclusive Buyer
Broker is your time! Would you defend yourself in court without
an attorney? Then why make the biggest financial transaction
in your life without someone on your side protecting you,
at no additional charge!
2.
No down payment - no problem. A common misconception is that
you need 5, 10, or 20% downpayment funds to buy a home. The
opposite is true. The homebuilders, lenders, and Realtors® nationwide
understand that many people have the qualifying income to buy a home
rather than wasting it on renting. They also understand that
saving up for a downpayment is the number one reason that prevents
people from home ownership. As a result, there are now loan
programs that require little or no money down, such as 1% down, sweat
equity (work for downpayment) on new homes (painting, cleaning, landscaping,
etc.), FHA, VA, Community Home Buyers, special builder programs, and
more. Ask your Exclusive Buyer Broker about these programs and
other options that meet your needs at this important time in your
life.
3.
Little time on the job - just out of school. Most mortgage lenders
generally require at least two years on the job. If you changed
jobs less than two years ago, then it must be in the same field of
work and that you are under no probationary or conditional period.
However, if your job or career is related to what you received your
degree in - Bingo! Lenders will count your school time as time
on the “job.” Consequently, consider the two-year requirement
of being on the job as waived.
4.
Income Minus Lifestyle Equals Potential Mortgage Payment. Sit
down with your Exclusive Buyer Broker and honestly discuss your income
level and living expenses. Take into account future considerations,
children, add-ons, amenities, fix-ups, raising income levels, promotions.
Your first home is certainly worth a sacrifice but do not mortgage
your entire future. Do not budget yourself two paychecks ahead
of a foreclosure. Remember that your first home will not be
your final or ultimate dream home. Be realistic and flexible
on your goals.
5. Uncle Sam will help with your payments. You may vaguely
understand or have heard of the tax benefits of home ownership.
The mortgage interest on your house payment is fully tax deductible
off your gross income in most cases. In the beginning of a mortgage,
almost all of the payment is interest, so you can have a superb tax
shelter by simply buying a home. Other expenses are also deductible,
including real property taxes and moneys paid at closing by the buyer
or seller for discount points. Always consult a tax professional.
6.
Use Your Team. By aligning yourself with the right Exclusive
Buyer Broker, you will have an entire Team at your disposal.
Consult with your lender, home inspector, insurance agent, and real
estate attorney. Each of them should work hand in hand for your
benefit. Explore all the options.
7.
Loyalty Breeds Loyalty. Be open, honest and up front with your
Exclusive Buyer Broker. Wrong motives or assumptions will cause
headaches, delays, extra expenses, or may keep you from getting your
home.
According to the Consumer Federation of America, when interviewing
real estate agents or buyer brokers to buy a home, “Make certain
at least one is a Buyer Broker that works exclusively with buyers.”
The
CFA recommends asking the following seven important questions:
1. Will you (the agent) represent my interests only or those of the
seller?
2. Do you or your brokerage represent any sellers or builders?
3. Do you have full access to the Multiple Listing Service?
4. Will you show me for sale by owner properties?
5. Can you give me the names of several current and former clients?
6. What experience do you have as an agent and Buyer-Broker?
What other designations or credentials do you have?
7. Does your commission amount vary? What about bonuses, inducements,
or rebates (kickbacks)? Do you give them back to me the buyer?
(After all, you the buyer are paying it!)
Finally,
do you work with first time buyers and are you knowledgeable about
the special financing programs discussed in this report?
No
matter where you are moving to nationwide, please contact our office.
We can be of service to you at your destination! In addition,
remember that there is no cost for our relocation or referral services!
Take the time now to learn more at one of our consumer workshops or
at a personalized buyer workshop.
3.
CONSUMER
REPORTS: BUYING A HOME
Copyright
Consumers Union of U.S., Inc., May, 1996 Transmitted Via Internet:
7/31/96 2:38 PM
THE
CURRENT MARKET. The old rules of residential real estate no
longer apply. For most of the postwar period, the goal of most
homeowners was to climb what economists call the "housing ladder.”
You grabbed hold of the first rung by buying a condo or a starter
house, stayed in it a few years to enjoy some easy appreciation, then
continued to trade up to the biggest new home you could persuade a
willing banker to finance. By the time you'd clambered to the
top, your home was much more than just a nice place to live.
Its steadily increasing value made it an unbeatable investment as
well.
For
millions of homeowners today, the housing ladder has turned into a
treadmill. Home values have fallen in California and in the
major urban centers of the Northeast, a phenomenon not seen since
the 1930s. By one estimate, some 45% of homeowning Californians
couldn't trade up even if they wanted to. They haven't enough
equity in their current homes to scrape together a down payment.
It will still make more sense to own than to rent, as long as Congress
continues to allow homeowners to deduct their mortgage interest payments
from their federal income taxes.
Don't
bet that you will be able to finance your kids' educations or your
retirement from the growth of your investment in your home.
On average, housing prices are forecast to rise by about 3% a year
in the next few years. In some major markets, they aren't even
expected to keep pace with inflation. Consumer Reports' Table
of modest gains lists METRO AREAs in the U.S., the MEDIAN home price
in 1995 (in $000s), the annual growth rate from 1986 to 1995 (GROWTH
1986-1995) and the annual projected growth rate to 2000 (GROWTH 2000).
Sources: National Association of Realtors and, for projections, Regional
Financial Associates.
Be
clear about your motives if you are considering a trade-up to a bigger
house. If you need the space for a growing family, for example,
it could make sense. But if you do it expecting to reap a windfall
when you sell, you'd probably be better off staying where you are.
It makes little sense to borrow heavily to buy a home that may lag
behind other investments, such as mutual funds, especially since they
may also be easier to sell should you need cash.
The
most reliable indicator of a home's value is what similar homes sold
for in the past. Find out as much as you can about past transactions
in the neighborhood you're interested in to get a sense of recent
trends. A good place to start is the Consumer Reports Home Price
Service (800-775-1212), which offers information by phone on home
sales covering approximately 80% of the U.S. For a fee of $10
for a 10-minute search, you can get information on an individual property,
all sales on a given street or all properties that sold for prices
within a specified range. By checking the Web page of the local
newspaper, computer users may also be able to find price information
for some locales online. But in at least 10 states and in parts
of others, no home sale price data are publicly available.
A
good real-estate agent can help you settle on the right price, but
buyers should keep in mind that brokers traditionally work for the
seller. If you confide in the seller's agent what you are willing
to spend on a given house, the agent is obliged to pass that information
on to the seller. The local board of realtors in our area may
be able to refer you to a so-called "buyer broker," who will work
exclusively with you to find the right house, negotiate the deal and
keep any information you share confidential. But be aware that
the buyer-broker's interests may not be identical to yours.
Typically, these brokers are compensated by a cut they take of the
commission that the seller pays to his or her own agent.
There
are other ways to pare expenses when buying a home. The transaction's
closing costs, which include fees for drawing up a purchase agreement,
searching the title records and filing a new deed, can be cut in states
that allow buyers to hire paralegals at a fraction of what attorneys
charge. You should also shop around for the title insurance
most mortgage issuers require instead of simply going with the first
company that your lender or real-estate agent suggests.
The
rewards of today's housing market are unlike those of the recent past.
You may no longer be able to claim, as you once could, that your home
is now worth two or three times what you originally paid for it.
But if you've done your homework, you'll be able to feel good about
the home you can afford to live in. For more information, you
may also want to consult "How to Buy a House, Condo, or Co-op" (Second
edition, $16.95), which you can order from Consumer Reports Books,
at 515-237-4903.
MORTGAGES
– Introduction. Perhaps the most consequential step you will
take when buying a home, or refinancing the one you have, is finding
a mortgage and a lender you can afford to live with. Your monthly
mortgage payment, after all, will almost surely be your heaviest financial
burden. Now that load is lighter than it has been, with all
but a few brief exceptions, for over a generation. Interest
rates for a conventional 30-year mortgage have fallen by nearly two
full percentage points since the beginning of 1995, to a national
average of just 7.08% in February.
Despite
the recent turmoil in the financial markets, housing experts still
expect rates to settle around 7.5% for at least several more months.
Lower rates mean it's easier to buy a home, or afford a bigger one.
For example, potential first-time buyers can now qualify for a $70,000
loan to buy a condominium on an annual income of just $22,800, or
nearly 20% less than a lender would have required in 1995. A
growing family living in a $112,200 home (the national median home
value) can now buy a house selling for nearly 20% more and pay no
more per month than it currently does. Families content to stay
where they are can cut their monthly payment, by more than $200 for
a year-old $150,000 mortgage, and salt the savings away for the kids'
education or retirement.
Shopping
for a mortgage is a financial rite of passage, with many potential
perils. Lenders offer low initial teaser rates on adjustable
mortgages that can climb steeply. Some are beginning to add
onerous penalty clauses to loan contracts that can cost you money
if you refinance. And there is no shortage of "experts" eager
to sell you advice.
The
banking industry wants Congress to throw another obstacle in the way
of consumers thinking of refinancing. Now, when would-be borrowers
have provisionally agreed to refinancing terms, they have three days
to reconsider whether they want to complete the transaction.
Lenders must honor the consumer's right to withdraw from the deal
and refund any fees they have been paid. But, if the banking
industry gets new legislation passed, lenders would be able to keep
fees consumers have paid for a credit check and a property appraisal.
Indeed,
any missteps you make on the way to signing a mortgage contract can
have costly repercussions. Even within a single region, interest
rates on a 30-year mortgage can vary by as much as two percentage
points, according to HSH Associates, a Butler, N.J., firm that tracks
the rates. Choose a mortgage that charges a half-percentage
point too much, or select one that has a maturity that is too long,
or too short, and you could end up paying tens of thousands of dollars
more than necessary over the life of the loan.
Types.
Competition among lenders has given consumers a broad array of mortgage
choices, but it hasn't made comparison-shopping easy. Mortgages
now come in nearly every conceivable combination of interest rate,
duration and fee structure. Which loan makes the most sense
depends on how long you plan to remain in the home and the monthly
payment you can afford. If you live in a city where co-operative
apartments are common, you will probably have fewer options.
Lenders consider not just the credit-worthiness of the co-op buyer,
but the underlying financial health of the corporation that issues
the building's shares.
The
conventional 30-year fixed-rate mortgage has been the perennial favorite
of borrowers, and it's more popular than ever as both buyers and refinancers
scramble to lock in today's low rates. It offers homeowners
the peace of mind of knowing that even if economic conditions cause
interest rates to rise sharply, their payments will remain steady.
But in these footloose days, relatively few people remain rooted in
a home for a lifetime. If you plan to relocate within a few
years, you may find an adjustable-rate mortgage (ARM) less costly,
at least at first.
The
most common ARMs recalibrate interest once a year, based on an index
of benchmark government bond rates. ARMs made sense for many
borrowers in the early 1980s, when interest rates were high and volatile.
Their lower initial rates were often the only way that many people
could afford to buy a home. That was still the case as recently
as late 1994, when the difference between the initial rate on a single-year
ARM and a
30-year fixed was more than three percentage points.
With
the average one-year ARM priced at 5.3% in February, the spread has
narrowed to just 1.8 percentage points, too small to be worth the
risk of paying more next year unless it's the only way your income
qualifies you for a mortgage. One breed of ARMs is worth considering.
These maintain a fixed interest rate for a specified number of years
(typically 3, 5, 7 or 10) and then adjust annually for the balance
of the loan.
Multiyear
ARMs may be well suited for consumers planning to relocate within
or soon after the mortgage's initial period. In fact, the average
mortgage is paid off in just seven years because the borrower moves
to a different home or refinances the loan in that time. Multiyear
ARMs permit borrowers to lock in, at least for a few years, a lower
initial interest rate than they could get for a fixed-rate mortgage.
And, because the monthly payment on an ARM is lower, banks are able
to qualify borrowers with a smaller income.
How
To Lower Your Costs. While the interest rate you get will be
the biggest factor determining the ultimate cost of your mortgage,
lenders have other ways of upping your costs. You can save thousands
of dollars and much frustration by getting pre-qualified and pre-approved
for a mortgage and by minimizing transaction fees. Following
are your best opportunities to save:
Pre-qualification.
Lenders expect borrowers to spend no more than 28% of pretax income
on total housing costs, including mortgage payments, insurance and
taxes. Housing costs plus all other long- term debt, such as
car payments and student loans, should not exceed 36% of your gross
income. Ask your broker or a potential lender whether you would
qualify for a loan before you begin shopping. It can save you
time by focusing your attention on properties that realistically fit
your budget.
Preapproval.
As you get closer to selecting the property you want, consider lining
up a bank that will give you its provisional agreement to grant you
a loan. Preapproval can boost your bargaining power with the
seller, who knows that with financing in place you can close the deal
quickly. There are some pitfalls to beware of. While many
lenders preapprove free, some charge a fee. At NationsBanc Mortgage
in Roanoke, Va., for example, preapproved borrowers pay $50 for a
credit check, but they won't get their money back if they decide to
go with another lender.
Locking
in the rate. Before you pay to lock in a given interest rate
for a specified time period, ask if the lender will be willing to
lower it if interest rates decline. And get a commitment for
at least 60 days. A 30-day lock-in won't be useful if you're
just beginning to shop for a home. (It often takes 45 days to
complete all the paperwork.)
Points
and other closing costs. Your lender may be willing to offer
you a lower interest rate on a mortgage that includes points (each
point equals a 1-% fee paid at the closing on the total amount of
the loan). In mid-March, for example, Countrywide Home Loans,
a California-based lender, advertised an 8.13% rate for a 30-year
loan with no points. Pay 2 1/4 points and the rate drops to
7.63%. If you are planning to stay in the home you buy for at
least six years, you will come out ahead by paying points to get the
lower rate.
Your
lender is required to give you a good-faith estimate of charges you'll
be expected to pay to finalize the loan (for property appraisal, title
insurance, credit reports and the like). Carefully review every
item on the list. Sometimes lenders will pad the bill with unnecessary
charges, such as courier fees. Other items, like title insurance,
you may be able to buy more cheaply on your own.
The
mortgage-insurance ripoff. Borrowers who put down less than
20% of the purchase price must have mortgage insurance to protect
the lender in the event of default. But avoid "lender paid"
insurance, a way some lenders like Countrywide and Chase Bank get
you to make extra premium payments. It sounds good, the premium
is part of your tax-deductible monthly mortgage interest payment.
But you go on paying even after your equity exceeds 20% of the home's
value. You should pay the premiums separately in cash and drop
the policy once your home equity crosses that 20% threshold.
Prepayment penalties. Watch out for mortgages that impose a
penalty if you decide to pay them off ahead of schedule. With
more consumers trading in their old mortgages for lower-cost new ones,
lenders want to write the penalties into more loan contracts, something
many states currently allow them to do. In California, BankAmerica
Mortgage already assesses a stiff 2% charge on the original loan amount
to borrowers who pay off certain adjustable-rate mortgages within
the first three years. It may soon slap prepayment penalties
on some of its fixed-rate loans, too.
Accelerated
payment. Another thing you shouldn't have to pay extra for:
biweekly payments that help you pay off your loan faster. Lenders
like Mellon Mortgage Co. in Denver, Colo., will charge you a fee of
$400 or so to arrange it. But if you make the extra payments
yourself, you can avoid the fee and the obligation that comes with
the lender's program. Borrowers who regularly make 13 monthly
payments a year instead of 12 can pay off a 30- year mortgage in about
22 years and save some $52,000 over the life of a $100,000 loan.
Where
To Find Help and Advice. Can young families or other consumers
of low or moderate income still share in the American dream to own
a home? Some moderation in prices along with lower mortgage
rates should help these would-be buyers. But many more need
a boost over the financial threshold. Now, there are several
programs that help millions of Americans, thanks largely to the Community
Reinvestment Act (CRA), a federal law intended to end discriminatory
lending practices by requiring banks to lend to modest-income consumers.
CRA
has spurred thousands of lenders to develop programs that let consumers
who meet income guidelines put down as little as 3% of a home's selling
price and qualify for mortgages on more lenient borrowing terms.
More banks are also being encouraged to lend to lower-income consumers
by the Community Home Buyer's Program run by the Federal National
Mortgage Association, the government-sponsored agency that buys mortgages
from the original lenders.
The
agency provides referrals to participating lenders as well as to local
nonprofit organizations in your area that offer home-ownership counseling
services. (Call the public information office at 800-732-6643.)
To learn about other programs in your community, call your state or
city housing agency or a local office of the U.S. Department of Housing
and Urban Development (HUD). Income is only one reason mortgage
money can be difficult to raise. If you feel that your mortgage
application has been rejected because of racial discrimination, start
by contacting the lender's Community Reinvestment Act officer.
If
the bank's explanation still leaves you unsatisfied, contact your
local or state fair-housing enforcement agency, which will be listed
in the government pages of your phone directory, or call HUD's housing
hotline at 800-669-9777. The agencies can investigate your case
to see if the lender may have violated any fair-lending laws.
In
terms of finding good mortgage advice, lenders' ads in the local newspaper
can give you a flavor of what's available, but don't buy on the strength
of an ad alone. The most attractive advertised rates are often
a tease to draw customers in, and, in any event, the rates in effect
when the ad is published will likely be different when you are ready
to deal.
One
good source of up-to-date information is HSH Associates' "Homebuyer's
Mortgage Kit," which you can receive by mail. For $20, you get
a clearly written booklet on how to shop for a mortgage and detailed
information on loan rates from 80% of the lenders in the market you
select. (To order, call 800-873-2837.) Also, a good realtor
should know which banks offer the best terms in the community where
you are buying. And the National Association of Mortgage Brokers
can help locate a mortgage broker in your state who specializes in
weighing the competing offers of several banks. (Write to them at
1735 N. Lynn St., Suite 950, Arlington, Va. 22209.)
Be
careful before you act on any expert's advice. A real-estate agent
may refer you to a lender that is affiliated with his or her company.
And mortgage brokers don't work for free: If you aren't paying their
fee, the lender to whom they refer your business probably is. A good
real-estate professional can help save you time, money and anxiety,
but you have too much at stake to trust an expert to do your homework
for you.
To
Refinance or Not? If you have a variable-rate mortgage, do you
want to lock in a lower rate on a fixed-term loan? Or do you already
have a conventional 30-year mortgage, even one that you may have refinanced
just a year or so ago? Whichever is the case, you owe it to yourself
to see if it makes sense to refinance your mortgage on more advantageous
terms.
Consumer
Reports' worksheet can help determine whether refinancing is the right
step for you. First, write down your current monthly mortgage expenses.
Then, use the interest-rate table to estimate what your monthly payments
would be on a new loan at a lower rate. For example, if you can get
a rate of 7.25% on a $125,000 loan, you'd pay $852.50 per month ($6.82
from the table, multiplied by 125 for the number of thousands of dollars
you are financing, equals $852.50). Subtract this figure from your
current payment to determine what your gross monthly savings would
be.
Finally,
add the transaction costs you will incur (points, appraisal, attorneys'
fees and the like). Divide the total by the monthly savings. This
will tell you how many months it will take to recoup your costs. It
probably pays to refinance if you plan to stay in your current home
longer than this period.
COMPUTING
YOUR MONTHLY PAYMENT ON A 30-YEAR LOAN
RATE PAYMENT RATE PAYMENT RATE PAYMENT
7.00% $6.65 7.25 $6.82 7.50
6.99
7.75 7.16 8.00
7.34 8.25 7.51
8.50 7.69 8.75
7.87 9.00 8.05
9.25 8.23 9.50
8.41 9.75 8.59
10.00 8.78 Payment is for each $1,000 of principal.
Source: HSH Associates.
CONSUMER
REPORTS' WORKSHEET
1). Your current monthly mortgage payment: (excluding insurance
and taxes) $
2). Monthly payment for your new loan: (Use previous chart
to compute figure)
3). Closing costs: (points, fees for application, (title search, attorneys
and appraisal)
4). Monthly saving: (Subtract line 2
from line 1)
5). Number of months you'll need to stay in home to recoup cost of
refinancing:
(Divide line
3 by line 4)
NEOTRADITIONAL
NEIGHBORHOODS – Introduction. The millions of Americans who
buy homes each year base their decision on a familiar list of choices,
such as the commute to work, the number of bedrooms and baths, the
quality of the schools. But they have surprisingly little choice
in one important factor: the physical layout of the neighborhood.
Many people dream of buying a home on an old-fashioned tree-lined
street with a few shops on the corner. But for a half-century,
developers have maintained that tract houses with big front lawns
in auto-oriented subdivisions are what Americans want. And local
officials have often made it illegal to build new neighborhoods in
the old style.
As a result, in many cities 1920s-style homes, in traditional
neighborhoods, have become highly desirable, despite small closets
and baths. "Ask yourself what neighborhood in your hometown
people are willing to pay a premium to live in," says D.R. Bryan,
a North Carolina builder. "It's probably a neighborhood built
between 1890 and 1920."
Over
the past decade, the persistent appeal of old neighborhoods has persuaded
a small but influential group of designers and developers to advocate
building old-style communities for a new era. These "neotraditional"
places would look and work like the back streets of a comfortable
pre-World War II city, with a rich mix of housing types, cultural
centers and shopping districts within walking distance, and a vibrant
public personality. Such neighborhoods are being built in places
as different in scale and location as downtown San Diego and rural
North Carolina.
Consumer
Reports visited several of these neotraditional developments and talked
with leading proponents of the approach, as well as with developers,
town planners and residents. We also looked at the traditional
neighborhoods that serve as the models. There aren't enough
completed examples to tell whether these will be honest copies of
old-style, mixed-income communities or just pricey boutique villages
for the well-to-do. But we think this style of neighborhood
is a choice that buyers ought to have.
We
also learned that the forces discouraging such innovation remain embedded
in the legal and financial apparatus that controls land development:
thousands of local zoning codes, road standards, the requirements
of national retail chains and the financial structure of the real-estate
development industry. Change, if it does come, will depend largely
on decisions that need to be made locally.
Building
Better Towns. The critics of suburban sprawl decry land-use
designs that tear communities into far-flung fragments and make residents
use a car to get anywhere. Instead, they offer this alternative
vision:
1.
Houses occupy small lots clustered around pretty public spaces, such
as parks or playgrounds.
2. Garages retreat to the rear of the lot or an alley.
3. Street grids replace isolated cul-de-sacs and the broader
roads that connect them.
4. Shopping takes place on intimate Main Streets, with stores
lined up along the sidewalk and parking to the rear.
5. Walking is encouraged by sidewalks, street trees, front porches,
narrow roads that slow down cars and, most important, commercial and
recreational areas located a short walk from most houses.
6. Public transportation is made possible by clustering neighborhoods
and offices along lines that can readily be served by buses, trolleys,
or light-rail lines.
7. Housing types are varied in size and price, to facilitate
the kind of mix of people found in a city. The mix also means
that grown children won't have to move so far away to start a home,
and older people won't have to leave the neighborhood when they retire
to a smaller home.
Miami
architects Andres Duany and Elizabeth Plater-Zyberk, pioneers of neotraditionalism
and its most prominent advocates, feel this vision offers not only
a livable alternative to regular suburbia, but also a path away from
our dependence on the private auto.
Where
Do the Cars Go? It is the handling of cars, not the addition
of picket fences or front porches, that really distinguishes neotraditionalism
from standard suburban design. The movement's most radical proposal
is to abandon the now-standard street hierarchy that dominates suburbia:
Isolated residential loops or cul-de-sacs, which feed broad connector
streets, which, in turn, feed busy multilane arterials. Instead,
homes would line a grid of neighborhood streets.
"What
we have done with traffic...turns out to have been the worst possible
thing," says Walter Kulash, an Orlando, Fla., traffic planner and
convert to neotraditionalism. "By concentrating traffic on a
few arterial streets and prohibiting it from other streets, we've
made people hostage to ugly congestion for the six to nine trips the
average household makes in a day. It affects the quality of
life of everybody who has to do that kind of traveling."
Neotraditionalists
also would repeal the long-standing suburban rule that every commercial
building must come with on-site parking in the front yard. Instead,
they would park cars on the street (to slow passing traffic and serve
as a physical and psychological barrier between road and pedestrians);
behind the stores (to eliminate the unsightly "strip" store developments
laced through many towns, and to encourage people to walk from store
to store); and in shared lots (where spaces could be used, say, by
bank customers by day and restaurant patrons by night).
All
this sounds great to many city and county governments, which are desperately
seeking ways to get out from under the financial burden of servicing
sprawling suburbs with wide roads, big parking lots, and expensive
police and fire protection. City planners also believe neotraditional
design offers a new way of halting or reversing decline in the inner
city and in older suburbs. In some cities, they've rewritten
their building codes to encourage neotraditional design instead of
outlawing it.
The
neotraditionalist argument is gaining ground among traffic planners
as well. The Institute of Transportation Engineers is in the
process of creating street standards for neotraditional communities.
These guidelines will endorse a connected road network, allow streets
much narrower than the current suburban norm, and tip the balance
away from cars and toward pedestrians. This addition to the
existing standards will have far-reaching influence, since cities
and towns nationwide rely on them to guide local development.
But
what about people who want to live on a quiet street with little traffic?
Neotraditionalists say you don't need cul-de-sacs to keep traffic
down. In a well-connected grid of streets, they note, traffic
distributes itself evenly and thinly as motorists given a choice of
routes automatically select the least congested one. What's
more, narrow streets, sharp corners and stop signs force cars to move
slowly, which in turn greatly reduces the noise and commotion they
generate.
In
the traditional neighborhoods Consumer Reports visited, among both
the originals and their modern imitators, we saw no more traffic than
in conventional suburbs. And we found driving on their slow-moving,
two-lane commercial streets a lot more pleasant than racing down a
six-lane arterial, searching for a place to make a U-turn to get to
the strip mall we passed a mile back.
The
First Communities. Big neotraditionalist developments that have
gotten the lion's share of attention include: Duany and Plater-Zyberk's
Seaside, a resort town on the Florida panhandle; their other major
project, Kentlands, outside Washington, D.C.; Laguna West, south of
Sacramento; and Harbor Town, on an island in the Mississippi River
across from downtown Memphis. Though their streetscapes are
attractive, none of these developments contains every element of the
neotraditional prescription.
Laguna
West doesn't yet have a single apartment. Only Seaside has a
central shopping street. Except for Seaside, a free-standing
beach community, all these neighborhoods remain isolated within a
surrounding matrix of conventional suburban sprawl, with poor public
transportation connections and limited shopping. The center
of activity in Laguna West, for instance, is a stylish new community
building that bustles day and night with art and exercise classes.
But the only nearby businesses are a Jiffy Lube and a gas station.
But
even as the big neotraditionalist projects have struggled toward completion,
smaller-scale developments have quietly been succeeding in many places.
Among the ones Consumer Reports found: Fearrington, near Chapel Hill,
N.C., which is built alongside anexisting cluster of specialty shops
and restaurants, and Fairview Village, near Portland, Ore., which
will bring a new Main Street-style downtown to a suburban area that
never had one. In Mashpee, Mass., and Boca Raton, Fla., neotraditionalist
designers built successful downtowns literally on top of the vast
parking lots of failed strip malls.
What
may be the most complete realization of neotraditional principles
is being assembled now on orchard land outside Orlando. The
Disney Co. is building an instant small town, called Celebration,
which from the beginning will include shops, offices and large apartment
blocks as well as single-family homes. The first residents are
to move in this summer.
Finally,
neotraditionalism is prompting some real traditional towns to come
full circle. For decades, many tried to re-make themselves as
suburbs, by replacing downtowns with enclosed malls and forcing new
housing, even in old neighborhoods, to obey zoning and building rules
that encourage sprawl. Now, the towns are using neotraditional
principles to restore and revitalize those shopping areas and neighborhoods.
Neotraditionalists are applying their ideas to big cities as well,
by treating them as a collection of small, pedestrian-scale neighborhoods.
In San Diego, an empty urban-renewal site now boasts a profitable
supermarket (with underground parking) linked to streets densely lined
with townhouses.
Neotraditionalists have also designed plans for, among other places,
downtown Providence and Los Angeles. So far, however, the great
majority of neotraditional projects, both urban and suburban, have
been for middle- and upper-income residents.
Obstacles.
In spite of growing support from city planners, neotraditionalism
has a long way to go before it becomes a standard community design.
Local fire departments worry that the streets will be too narrow for
their trucks (a test in Laguna West proved they were wrong).
Builders are afraid the houses won't sell as well as standard suburban
models. "The development industry is full of legends about people
who tried something different and went broke," says Steve Tracy, a
Sacramento County planner who is trying to encourage neotraditional
construction.
Neotraditionalism
doesn't fit standard patterns of financing developments. A major
stumbling block is that developers, as well as the banks and insurance
companies that lend them money, tend to specialize in one kind of
project (retail, office or residential). "Right now, we're in
heavy conversation with three different banks, who specialize in three
different categories," says Richard Holt, developer of Oregon's Fairview
Village project.
Without
a big front parking lot, many retailers won't locate in neotraditional
downtowns, and might not be able to get a bank loan even if they were
willing to come. But some retailers are coming around to neotraditionalism.
Robert Gibbs, a Michigan- based retail consultant, says that such
mall powerhouses as The Gap and Victoria's Secret are seeking out
prosperous Main Street locations.
Some
neotraditionalists liken the situation to that faced by the auto industry
in the 1970s. "Detroit had this very monolithic version of what
car buyers wanted," observes John Massengale, a neotraditionalist
planner from Bedford, N.Y. "Then Honda and BMW came in and showed
that General Motors may have been right about three-fourths of the
market, but nobody was building for the other one-fourth. Developers
ignore this. They just look at what's being built today, but
they ignore the fact that two miles away, an old house with substandard
plumbing and wiring is going for twice the price."
Environmental Impact. Promoters of neotraditional neighborhoods
say their plans would reduce car use and promote public transit.
That would be an environmental boon, since personal transportation
accounts for a big chunk of the emissions causing global warming.
Consumer Reports calculated the carbon dioxide, a key contributor
to global warming, generated per commuter in several major cities.
It turns out that commute distance and the extent of public transit
make a big difference. For average commuters traveling to the
central city, the amount of carbon dioxide they generated each day
was at least 50% greater in San Francisco and Los Angeles than in
New York City, Washington D.C., or Philadelphia, where a much higher
percentage of commuters use subways, trains and buses instead of cars.
But will building neotraditional neighborhoods get people out of cars?
The evidence is shaky.
Numerous
transportation studies have shown that, unless a place is much more
densely settled than most new neotraditional projects, people prefer
to drive. And studies of actual traditional neighborhoods show
that residents drive about as much as people living in conventional
suburbs. To make a real dent in emissions of global-warming
gases, governments will have to display a more serious commitment
to public transportation in cities as well as towns, and to land-use
patterns that bring people closer to jobs.
Neotraditional
planning alone won't bring about the needed changes. But unlike
conventional suburban sprawl, neotraditionalism, with its mixed-use
commercial centers within walking distance of houses and apartments,
is fully compatible with these more far-reaching changes.
What the Future Holds. How many places will eventually
embrace neotraditionalism is still unclear. Overcoming the resistance
of the retail and real estate finance industries may require inventing
entirely new ways of building and financing shopping districts.
Then there's the question of what home buyers want: Neotraditionalism
may not be for everyone, any more than a Toyota will satisfy the needs
of every car buyer.
The
market for suburban cul-de-sac neighborhoods remains strong.
But researchers have found that many consumers do like traditional
neighborhoods, or would, if given a choice. Anton Nelessen,
a New Jersey planner, conducts innovative "visual preference surveys"
in which he shows, side-by-side, slides of traditional and conventional
city and suburban streets, homes, apartments and commercial districts.
Audiences of ordinary citizens of all ages and walks of life overwhelmingly
prefer the look of traditional communities. And studies by real-estate
economists of Baltimore, Dallas and Oakland, Calif., show that when
you strip away all the other factors known to influence home prices,
buyers are willing to pay a steep premium for a home in a well-preserved
traditional neighborhood. Consumer Reports' biggest worry is
that neotraditionalism will become an expensive "niche" product for
upper-income homebuyers, maintaining the very socioeconomic uniformity
that the movement's advocates are trying to undo. We think neotraditionalism
is worth encouraging, even if all it ever does is put a prettier face
on the suburbs. But in the long run we hope that these neighborhoods,
and the lifestyle they make possible, once more are so common and
affordable that they're ordinary.
How
Your Neighborhood Shapes You. Looking at a house? Before
you commit yourself, take a minute to step back from it and consider
its surroundings. The lay of the land is likely to have a significant
effect on your life: how much time you spend at stoplights, where
you shop and even your sense of community. The difference is
most noticeable when you compare life at opposite ends of the scale,
in neighborhoods built at opposite ends of the century.
Though
neotraditional design is cropping up in some new neighborhoods, the
overwhelming majority of homebuyers still have to choose between an
old house in a pre-World War II neighborhood or a newer house in a
postwar-style one. To find out the consequences of choosing
one over the other, Consumer Reports visited people living in both
kinds of neighborhood in two fast-growing Sunbelt cities, Sacramento,
Calif., and Orlando, Fla., and asked them how they felt about their
neighborhood and how they handled the daily routines of their lives.
Consumer
Reports also consulted the academic and professional literature on
the relationship between urban form and travel patterns. What
we learned can be summarized as several questions worth considering
no matter where you're planning to buy a house.
What's
the traffic? The standard street pattern in postwar suburbs
assures that every single car has no choice but to get on the main
drag, the arterial, at some point, for a trip of any length.
And as new malls, subdivisions and offices sprout along arterials,
traffic inevitably builds from year to year. We didn't find
any residents who actually admitted to liking strip-mall development,
but many were willing to tolerate it in exchange for a newer house.
Also, many appreciated the flip side of heavy arterial traffic: almost
no traffic on neighborhood streets, where, as one suburban father
told us, "there are more kids' vehicles than cars."
By contrast, people who live in an older neighborhood with a connected
grid of streets get a steadier but relatively light flow of traffic
past their homes. Meanwhile, these communities' "main" commercial
streets never acquire the intense congestion of arterials, something
inhabitants of old-fashioned neighborhoods especially prize.
"I really like going downtown, because you can take the back roads
instead of those big, congested roads," says James Glazebrook, who
lives in Winter Park, a traditional community just north of Orlando.
Homebuyer's
tip: Before signing that sales contract, drive or walk to the nearest
grocery store, drugstore, and dry cleaner and see how you like the
trip because you'll be making it regularly for years to come.
What
is my neighborhood? Consumer Reports found a subtle difference
in people's "mental map" of their neighborhoods, depending on what
kind they lived in. In modern subdivisions, where land uses
are deliberately kept well separated, people think of their neighborhood
as, basically, the streets within the subdivision walls. There,
they form strong social bonds with neighbors. To describe the
world outside the development walls, subdivision-dwellers tend to
use purely utilitarian terms, not sentimental ones. Asked where
they shop for groceries or prescriptions, they answer with a description
of how many minutes or miles it takes to get to the nearest neighborhood
strip mall. In contrast, people who have chosen a traditional
neighborhood consider the entire neighborhood, not just their block,
as a distinctive, cohesive community.
Homebuyer's
tip: Think hard about your expectations for your neighborhood.
If you are community-minded, you might have trouble making all the
connections you want in a subdivision on the outskirts of town.
If you want lots of privacy, though, a traditional neighborhood might
feel too "public."
Who
needs to walk, and why? Whether the neighborhood you choose
is conducive to travel on foot depends somewhat on whether you want
to walk, or need to walk. People stroll for pleasure and exercise
no matter what kind of neighborhood they live in, according to surveys
done in California and Texas by Susan Handy, a planning expert at
the University of Texas. When Consumer Reports asked residents
in Orlando and Sacramento to keep a brief log of car and walking trips,
we found exactly the same thing. A neighborhood where your walk
takes you to an actual destination is harder to find. First,
it must have schools, stores and parks within a quarter-mile or less.
To
entice people out of their cars, the walk itself should be along narrow
streets that have slow-moving, light-to-moderate traffic, and a variety
of appealing things to look at, preferably all shaded by mature trees.
It also helps if there's a sidewalk. These elements can be found
more readily in traditional neighborhoods than in modern suburban
ones.
Walkability
is most important for people who don't have the option of driving,
older children and some senior citizens. In upscale Winter Park,
retirees living in expensive apartments flock to nearby downtown shops
and restaurants. And Margaret Sanders, a mother of four, says
the family chose the community having previously lived in a spread-out
suburb near Milwaukee. "Here the kids can ride their bikes to
the library or to get an ice-cream cone downtown."
Homebuyer's
tip: If you like or need to walk, get out of the car and take a stroll
around the neighborhoods you're considering. You can't assess
walkability through the windshield of a moving car.
Will
things stay the same here? When Meg and Jay Clark moved into
their new suburban Orlando ranch house in 1984, "we liked it because
it was rural," Meg recalls. Just beyond the back yard was a
quiet orange grove. The street outside the subdivision walls
was a sleepy two-lane road. Today, a forest of houses has replaced
the orange grove, and that quiet country road has become an ever-busier
six-lane arterial. Development has brought some advantages,
a larger selection of stores nearby, but no one would mistake the
Clarks' neighborhood for "rural" any more. In contrast, traditional
neighborhoods, having long since been fully "built out," usually don't
offer scenic rural vistas. On the other hand, the best ones
do have strategically placed parks. In any case, what you see
is likely to be what you'll get for years to come.
Homebuyer's
tip: If you're looking at a house at the edge of town, check with
the local planning department to see what developments might be permitted
there in the future. Don't expect the developer to volunteer
this information.
4.
Relocating
Out Of Town?
Relocating?
Do you desire to buy a new or second home to escape the cold weather
four to six months of each year? If you answered yes to these
questions, relocation can be a hair-raising experience. A roller
coaster of emotions from choosing the right agent, to finding the right
place at the right price and terms, to securing the loan if need be,
to moving in. To make matters worse, there is much misinformation
and disingenuous people in real estate. For example, there is
an old saying in Florida, “If you live in Florida and do not know a
friend in the real estate business you don’t have any friends!”
It seems as though everybody and their brother (or sister!) is an agent
or has a relative who is one!
It
makes sense to become completely informed before relocating or buying
your new or second home or condominium. The right real estate
professional who specializes in exclusive buyer representation can
help you make good sound decisions.
For
a full-service personal coordinator with a full-service relocaton
firm at no net additional cost, go to The Relocation TRIP Kit, which specilaize
in relocation services for individuals and for companies without a
relocation policy covering all expenses.
1.
Choose The Right Agent - An Exclusive Buyer Broker - When looking
for new or resale homes and condominiums, you need an advocate for
you, protecting your interests in the home search. Using an
exclusive buyer broker to help you is just like using a credit card
to make a purchase. It does not cost you any more and it gives
you added protection for that purchase. Most consumers do not
realize that all merchants pay a “commission” to their bank for all
credit card transactions. It is a cost of doing business.
It is just the same using an exclusive buyer broker - the fee is part
of the listing commission the seller pays to sell a home through their
Realtor®. Trying to go it alone by buying directly from the
developer, builder, or the agent and company whose sign is in the
yard will not save you money. It gives you no representation
(meaning no one is protecting you), and may end up costing you much
in terms of time and money! The only thing you invest with an
exclusive buyer broker is your time! Would you defend yourself
in court without an attorney? Why, then, make one of the most
important financial transaction in your life, without someone on your
side protecting you, especially when it’s at no additional charge
to you!
2.
Inspect, and Re-inspect - Go over the property inspection report with
a fine tooth comb. Do not be afraid to re-negotiate if necessary,
and do not be afraid to back out of the deal if there are significant
problems the seller or builder will not correct. Make sure a
professional inspector who belongs to a national inspection organization,
such as NAHI or ASHI performs the inspection, and ask for references.
For condo purchases be sure to review the by-laws and association
fees before the closing. Do not take anything for granted inspect
everything!
3.
Imagine The Property Vacant - Do not be dazzled by beautiful furniture
and decorating…it leaves with the owner. Conversely, a vacant
home or condo will appear bigger than it is. Be sure your furnishings
will fit the new floor plan. Take measurements of your furniture
before going on your first showings.
4.
View Several Homes and/or Condos - See at least 4 to 8 properties.
Ask your agent for all available appraisal (historical) data, as well
as data on all competing (available) properties. Remember that
your exclusive buyer broker will show you all available properties.
5.
Use Your Team - By aligning yourself with exclusive buyer broker you
will have an entire team at your disposal. Use your lender,
home inspector, insurance agent, and real estate attorney. Each
of them should work hand in hand exclusively for your benefit.
6.
Be A Detective - Check out all costs and expenses before you sign,
including utilities, taxes, and insurance, maintenance, condominium
and homeowner dues if applicable. Make sure all utilities are
on (gas, water, and electricity) so you can inspect everything in
working order. Ask many questions and be very detail conscious.
7.
Do A Final Walk Through - Visit the property after all furnishings
and belongings have been removed. Be sure there are no surprises
(if possible before closing). Be positive the property is left
exactly as you had agreed upon in the contract. Often times,
things are overlooked that could have been spotted in the final walk
through. Your contract should specify your right to a final
walk through just before the actual closing, typically within 48 hours.
8.
If It Is Not In Writing, It Does Not Exist - All promises and discussions
are to be in writing. Do not make any assumptions or believe
any assurances. Even the best intentions may be misinterpreted.
Ask your exclusive buyer broker if he/she keeps an ongoing log, in
writing, of all significant discussions, and get the seller’s written
approval for all agreements, changes, and addenda. Be open,
honest and up front with your team. You can be assured they
are on your side, not the sellers, if the brokerage only represents
buyers exclusively.
According
to the Consumer Federation of America,
when interviewing real estate agents or buyer brokers to buy a home,
“Make certain at least one is a Buyer Broker that works exclusively
with buyers.”
The
CFA recommends asking the following seven important questions:
1. Will you (the agent) represent my interests only or those of the
seller?
2. Do you or your brokerage represent any sellers or builders?
3. Do you have full access to the Multiple Listing Service?
4. Will you show me for sale by owner properties?
5. Can you give me the names of several current and former clients?
6. What experience do you have as an agent and Buyer-Broker?
What other designations or credentials do you have?
7. Does your commission amount vary? What about bonuses, inducements,
or rebates (kickbacks)? Do you give them back to me the buyer?
(After all, the buyer is paying for it!)
No
matter where you are moving to nationwide, please contact our office.
There
is never any cost for our relocation or referral service!
5.
Read
This Report Before You Sign Anything!
The
right or wrong decision when signing your home mortgage can mean thousands
of dollar's difference in interest paid. There are very important
considerations to evaluate before you commit to a mortgage and promissory
note. For many of us, our mortgage payment is the most important
financial decision we will ever make. It makes sense to know
as much as possible about the financing of your home. Take the
time to investigate all of your options!
Typically,
the excitement of the new home purchase reduces the mortgage to not
much more than an afterthought. What you read here could save
you hundreds or even thousands of dollars. Your Exclusive Buyer
Broker professional has established relationships with the top lenders
in your area. By aligning yourself with a true Exclusive Buyer
Broker, you insure that all the financial steps are taken care of
properly and economically.
1.
Consider Lenders Recommended By Your Agent - Lenders are often more
flexible with buyers of agents that have done business with them previously.
The lenders and your Exclusive Buyer Broker work effectively together,
and may make a difference in helping you find the right lender to
qualify for financing if you are “tight on the ratios”. Your
Exclusive Buyer Broker will assist finding the most economical financing
possible. The right financing can save you thousands of dollars
over the life of your loan!
2.
Do Not Attempt Paperwork Alone - All the paperwork required to obtain
financing for a home could be quite intimidating and frustrating for
a homebuyer. Make sure you have your lender help you with all
the paperwork. Get help from your Exclusive Buyer Broker.
Their expertise will help alleviate the stress and it will prove to
be invaluable before you sign your mortgage.
3.
Look at All Financing Options - Make sure you see at least 4 loan
programs for your home purchase. Lenders have at least 10 programs
and should work with you and your exclusive buyer broker on deciding
what is best for your circumstances. Evaluate all your options.
After all it is your money - not theirs!
4.
Demand Service - Most of the time there is little difference between
a bank, savings and loan, or mortgage brokers when it comes to the
competitiveness of their loan rates. The difference is in the
service they provide. It is their job to serve you! You
want to get the loan approved and move into your new home as quickly
as possible. Do not overlook the fact that you are the one spending
the money and they are the ones who should cater to your needs.
Do not let the process become so intimidating that you lose that understanding.
5.
Stay in Complete Touch - You should receive a written report from
your lender about every step. This will insure that no details
are overlooked and there will be no surprises. Your purchase
contract may call for an “opinion letter” to be sent to the sellers.
Make sure your lender and Exclusive Buyer Broker follows through for
you.
6.
Negotiate a Flexible Loan - Do not just accept the terms they lay
down in front of you. Lenders are in the business of loaning
money and they want your business. Make sure you examine every
option available to you. If you negotiate a variable rate loan,
many lenders have the ability to move you into a fixed loan if rates
start rising. Make sure that you understand whether this is
an option in the loan terms you are considering.
7.
Do Not Give Up If The Underwriter Says No – Being turned down for
a loan is not always a final decision. Going to a higher authority
can sometimes get you the loan, but do so with the assistance and
compliance of your lender and exclusive buyer broker. Many time’s
special circumstances when explained properly to the person in charge,
will win you the loan.
8.
Do Not Wait For The “Bottom of the Market” - The odds of you hitting
the bottom of the market are about like the odds of you hitting the
state lotto! You will almost never hit the bottom of a market.
Trying to time the decision exactly right is often costly. It
usually causes a person or family to miss out on the opportunity to
purchase a very nice property. You are better off simply negotiating
the best rate and terms you can at the time you find a property.
If interest rates go down, you can refinance. This is a much
better approach because you will not miss the property you have spent
so much time locating.
9.
Honesty Is The Best Policy With Your Lender - Your lender wants to
help you with your loan. The only time they are paid is when
you are approved and the loan “closes.” The more information
(good or bad) you provide your lender, the easier it will be for them
to get an approval. It helps them present the loan in the best
light, because they will find out everything credit wise eventually.
This in turn helps the loan get the highest approval rating.
10.
Become Completely Educated - Pick your lender's brain. Lenders
will teach you all about your various options, even if you have not
found the right property yet. They will be very patient with
you while you are looking, especially if you have aligned yourself
with the right agent. They understand all the up-front work
will pay off in future business. Your Exclusive Buyer Broker
will then continue to recommend clients to the courteous and service
minded lender on down the line.
11.
Get Pre Approved. Lenders will provide you with a letter of
pre-approval. The money goes for a mortgage credit report, which
you would pay anyway once you applied for financing. By getting
pre approved, and not just pre qualified, you know exactly what financial
parameters to stay within. Your exclusive buyer broker and lender
will consult with you and help you get approved for the loan that
best fits your needs. Getting pre approved for a loan is easier
than you might have thought and you may be able to get a larger loan
than you expected. Remember that being pre approved is the same
as being a “cash” buyer, which could save you money in negotiating
a lower price or giving you a competitive advantage over competing
buyers.
According to the Consumer Federation of America,
when interviewing real estate agents or buyer brokers to buy a
home, “Make certain at least one is a Buyer Broker that works exclusively
with buyers.”
Thank
you for taking the time to read this report! There is no cost
for our relocation or referral services. Take the time now to
learn more at one of our consumer workshops or at a personalized buyer
workshop.
Talk
with your Buyer's Resource agent to find a suitable lender to provide
a mortgage pre-approval.
6.
Buyer
Brokerage:
Changing
the face of real estate
by
Andrew Show
Much
has been said about buyer brokerage and the profound changes that
have occurred as a result of it in our profession. Many continue
to believe that it is the consumer who has, and still is, demanding
representation in the biggest financial transaction of their life.
The
benefits to the consumer are obvious. It is very easy to explain
what we do, and that our relationship with our clients will not change.
There have been massive attempts nationally and statewide to change
common law. Despite the new agency law, the home buying consumer
understands the inherent real or potential conflicts of interest on
in house transactions. This is why as an exclusive buyer broker
I will not change my practice. I believe the change in law December
13, 1996 will actually help all exclusive buyer brokers in recruiting
agents, in agent production, and in brokerage profitability.
I also feel that a listing company that represents sellers exclusively
would have a tremendous marketing advantage over other traditional
listing companies. The first major seller brokerage to do so
could further erode the market share of the competition.
The
common misconception among agents is that if you only work with buyers
you'll loose half or more of your income potential. In reality,
being an exclusive buyer broker makes it easy to distinguish oneself
in a very crowded agent market and to have a marketing advantage over
traditional agents. All of our clients are under agency contract,
just as a seller would be on the ‘listing’ side. Further, clients
are financially pre-approved which means our agents work with motivated
buyers.
If
you set ‘agency law’ aside for a moment, consider this. Your
brokerage most likely earns referral fees from other brokerages outside
your service area, right? Your brokerage most likely pays referral
fees to other brokerages outside their service area, right?
The only difference is that we also earn fees for referring our clients
who have homes to sell inside our service area! With the consent
of our clients our agents can earn almost half what they would have
normally earned and not spend any time, effort, or money other than
setting up the referral. This is additional non-energy income
for the agent.
Agent
costs are considerably reduced
both in monetary terms and in time as well.
Agent
costs are considerably reduced both in monetary terms and in time
as well. Since we enjoy such a high success rate we can work
with less clients to achieve the same dollar production, this in turn
means more free time for family and other activities. Exclusive
agents work smarter, not harder.