The Real Folsom Blog

Chalk One Up for Home Buyers

Some good news for home buyers on this blustery and very wet Tuesday. On Monday, Governor Schwarzenegger signed The Buyer's Choice Act. The new law allows the buyers of REO (bank-owned) properties to choose the title and escrow company. Under the old regime, banks were dictating that choice, with a "the door is that way if you don't agree"  attitude. The banks and asset managers can no longer force buyers to choose title and escrow companies of the bank's choice. And even better news, the law passed as an urgency measure by the Gov is effective immediately. It's been a tough enough market as it is, how nice to finely be able to give home buyers some old fashioned customer service.

These 10 Steps Will Help Prepare You for Homeownership

I've seen it before. People will spend hours researching and getting ready for a trip abroad or go through stacks of Consumer Reports mags before buying a car or an appliance. Yet, when it comes time to buy a home, these same people will start their search with little more than a vague notion of what they need in a a house and without talking first to a lender or mortgage broker to get a solid understanding of what they can afford and what the costs of homeownership actually cover. Here are 10 steps that will help you prepare to become a first-time homeowner:

1. Decide how much home you can afford. Start your search by talking to a mortgage broker or lender you trust. They will help you understand not only what you can comfortably afford but also will help you calculate all the costs of owning a home. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list. This is especially important if more than one person is involved in the homebuying process. Couples, for example, may think they're on the same page when it comes to what they want in a home, but then find out (painfully at times) that each has different goals.
3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
4. Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price. As in step 1, a trusted lender or mortgage specialist will help with this.
5. Get your credit in order. Have your mortgage specialist obtain a copy of your credit report. Then review it together to see if there are ways for you to improve your credit so you can get the best interest rate possible when you apply for your loan.
6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
7. Organize all the documentation a lender will need to preapprove you for a loan. Your lender will give you a list of the documents you will need. Better to be prepared early with this. Trying to find pay stubs or tax returns once you are in escrow and already packing to move out will be challenging. So just do it early on.
8. Do research on your own to determine if you qualify for any special mortgage or downpayment-assistance programs.
9. Understand all the costs of homeownership, which include property taxes, special taxes like Mello Roos, insurance, maintenance, and homeowners association fees, if applicable.
10. Find an Realtor you trust and are comfortable with. This person will be able to help you throughout the process. Especially in this market flooded with short sales and bank-owned properties, you want someone who knows the local market and real estate trends.

Follow these steps and you should at least be better prepared for owning a home.

Some Tips on Buying a Short Sale

When a home is sold for below what the current owner owes on the property and the owner doesn't have the funds to make up the difference, the sale is called a short sale. In the case of a short sale, the owner still has title to the property but makes the sale contingent on getting their lender to accept the sale. The pricing on short sales can be good but buyers must be aware of the potential pitfalls.

First and foremost you need patience. It can take four months or longer to get lender approval if there are two or more loans against the house, and two months if there is only one loan.

Also, be aware that only about two out of five short sales are approved by lenders according to the National Association of Realtors.

Don't expect any repairs to be done or credit for repairs. Short sales are as is and lenders are already taking a loss on the home so they aren't feeling generous.

You better not have any contigencies in your offer. Lenders like no-contingency offers and want the buyers to be able to close quickly (think half the time it might usually take).

These are just a few of the issues you might have if you are buying a short sale. They're doable, you just need to know what you are getting yourself into when you make an offer on a short sale.

How Long Will That Dryer Last?

More than a few of the homes I show these days are in some state of what I'll nicely call "deferred maintenance." Not surprising considering so many of the homes for sale these days are distressed sales--either bank-owned or short sales. When things start going south financially, owners may not have the upkeep of household appliances or features at the top of their must-do list. But as a buyer, it's important for you to have some idea of how long things usually last in a home so that when you see a home, with say an old dryer, you'll have an idea of when you might have to replace it. My latest issue of Realtor magazine has a nice little article that gives a rundown of the expected longevity of some household items. Here are some of those items:

100 years or more

* Brick siding

* All wooden floors

50-100 years

* Kitchen cabinets: up to 50 years

* Vinyl floors: 50 years

* Copper gutters: 50 plus years

30-50 years

* Wood shake roofs: 30 years

* Thermostats: 35 years

* French interior doors: 30-50 years

10-20 years

* Aluminum windows: 20 years

* Kitchen sink faucets: 15 years

* Gas range: 15 years

* Cultured mable countertop: 20 years

* AC unit: 10-15 years

* Electric or gas water heater: 10 years

* Furnace: 15-20 years

* Dryer and refrigerators: 13 years

5-10 years

* Security system: 5-10 years

* Heat and smoke detectors: 5-10 years

* Dishwasher: 9 years

* Carpet: 8-10 years

All these estimates are based on a new study by the National Association of Home Builders--people who should know!

Making an Attractive Offer on a Bank-Owned House

Buying a bank-owned house can be a good deal. I won't argue with that. However, you are not going to get the deal of the century on every REO out there (REO stands for real estate owned--that's how banks describe properties they've taken back). Yesterday, we had one of the top area REO listing agents in our offices and he had some sound advice on how to close an REO deal with a bank. Like a regular seller, a bank wants to get as much money as they can for their REOs. So when you make an offer on a bank repo, remember to craft an offer that will be attractive to the the seller--the bank. Basically there are three aspects to an offer: 1) the price; 2) the terms; and 3) the conditions. As a rule of thumb, figure that if you are low-balling the bank on the price, then you should make sure the terms and conditions are attractive to the bank. If on the other hand you are intent on getting a section 1 pest clearance, then make sure your offer price is good. For the banks, selling an REO is just another business transaction. The bank will want a deal that closes quickly (20-30 days, if possible) and with as few contingencies as possible. Bottom line: aim for a win-win deal when making your offer. A win for you in that you get a home at a good market price and a win for the bank in that you take the house off their hands with little hassle to them.

Buying: How High Tech Is the Home You Are Looking At?

There are a lot of things to look at and look for when you are out shopping for your next home. Is the roof sound? Do the appliances work? Are there cracks in the foundation? Are there drainage issues? It's a long checklist the careful buyer goes through in evaluating house. Now, you can add technology to that list. If the latest technology or entertainment options are important in your new home, you should add the following questions to your buyer’s checklist.

• Are there enough jacks in every room for cable TV and high-speed Internet hookups?
• Are there enough telephone extensions or jacks?
• Is the home prewired for a home theater or multi-room audio and video?
• Does the home have a local area network for linking computers?
• Does the home already have wiring for DSL or other high-speed Internet connection?
• Does the home have multizoning heating and cooling controls with programmable thermostats?
• Does the home have multi-room lighting controls, window-covering controls, or other home automation features?
• Is the home wired with multi-purpose in-wall wiring that allows for reconfigurations to update services as technology changes?

This quick checklist will help ensure you buy the right home for your family's tech needs.

How To Buy the Right House for Your Family

When buying a home it's easy to get caught up in the features of a particular house and forget to take a step back to look at the bigger picture. After you have identified a home you like, you should always give serious consideration to the neighborhood the home located in. After all you'll live in more than your house, you'll live in that neighbhorhood with all its pros and cons. So it is important when you find a property you like to scout the neighborhood in person by driving through the entire area at different times of day and talking to the people who live there. Here are some factors you will want to consider as you evaluate the neighborhood:

• Look at access to major shopping, thoroughfares, and highways and look at the traffic patterns around the area.
• Listen for noise created by roads, public areas, schools, and commerce.
• Check with local police and fire departments to get more information about the area.
• Identify nearby parks, churches, recreation centers, shopping, schools, restaurants, etc.
• Find out if the neighborhood belongs to a homeowners association, and if it does what services (at what cost) are offered by the association.

Doing a check for these kinds of quality of life items before you make an offer on a house will help prevent any nasty surprises after you move into your "dream" home.

Looking Ahead to 2008, Part II

Last week before all the madness of the holidays, I went over some of the prep work that buyers can do now if they are thinking of buying a home in 2008. Part of that prep work includes knowing what to expect during the purchase process. Picking up where I left off... After you decide to make an offer, your agent will forward the offer to the seller's agent and the seller will either accept your offer as is, counter with their own offer, or reject your offer. If the seller counters, your agent will help you evaluate the seller's proposal and you either accept, counter, or just walk away. Once all parties agree to terms of purchase, the agents will open escrow with a title company, which serves as a neutral third party that ensures all the terms of the purchase contract are adhered to. As the buyer, you will at this point be focusing on any inspections you requested as part of the purchase contract and on securing your loan approval. The contract terms stipulate how much time you have to get the inspections done, review the reports, and get your funding. When that time is up you will be required to remove all contingencies to the sale. In other words, it will be full steam ahead on closing the deal, no backing out without potential penalties. While you are busy taking care of securing your loan and getting the inspections, the title company will be ordering a title report to ensure the seller has clear title to sell the house and it will arrange for title insurance to protect you and your lender from potential hidden title problems. Barring any problems with the loan, the inspections, or the title, you will be set to close escrow and take possession of your home. Tomorrow I'll look at what factors to consider when buying a home.

Looking Ahead to 2008 in Folsom

Even as I'm frantically working against the clock to get ready for the holidays, I find my mind occasionally wanders to 2008, as I think of what I want to accomplish next year. If one of your goals in 2008 is buying a new home, it's also not too early for you to do some prep work towards that goal. In the next few blog entries, I'll cover what you can do to start off your search on the right foot. The first step is making sure you understand the whole buying process. If you know what to expect, you'll feel more in control and more comfortable. Here's what you can expect:

• First find a Realtor you can trust and have a good rapport with.
• Take the time to analyze your family needs in a consultation with your Realtor.
• Next (very important step, especially these days), get financial pre-qualification and pre-approval. Lenders are seriously starting to tighten their lending requirements, which means it's getting harder to get a loan. Don't take for granted you can get the loan you want.
• Your Realtor will start the search and together you will select the properties to view, rate them, and make a decision.
• Next comes the offer.

Tomorrow, I'll continue with Part 2 of the home buying process. Enjoy sunny Folsom, finally!

Five Good Reasons Why You Should Get a Home Inspection

Having a home inspection done prior to purchasing a new home is something you should seriously consider. A comprehensive inspection will include a visual examination of the structure, including the heating and air conditioning systems, plumbing and electrical systems, and anything visible such as the roof, walls, basement, etc. Here are my top 5 reasons why you should always get a home inspection before you purchase your next Folsom home.

1. A home inspection by a reputable inspector will give you a chance to determine the condition of the house, its overall soundness, and whether its mechanical systems are working.
2. Having a home inspection will bring problems to your and the sellers' attention and allow you to negotiate a resolution before the sale closes.
3. A home inspection is a good investment. For a few hundred dollars, you may be able to save many times the cost of the inspection by being aware of any defects or upgrade requirements.
4. The inspector's report can serve as a solid starting point for your home maintenance plan once you move in. A well-done report will include information also on recommended repairs and/or maintenance.
5. You'll gain Peace of Mind, knowing what to expect from the home, performance-wise, once you move in.