It’s true. Even savvy home buyers lose
thousands of dollars…even tens of thousands of dollars
they could have "pocketed" had they know about the
important "secrets" that make up a successful
purchase of a great home.
They don’t lose money because someone took
advantage of them. And they don’t lose money because of
the economy. The problem is…
Don’t Plan To Fail, But Fail To Plan."
If you’re in the market to buy a home
anytime soon, and you want to find the perfect home at the
best possible price, terms and financing, there are THREE
things you need to do up front:
First, understand and get control of your
personal emotions about the purchase of your home Second,
get the most valuable, important information available so
you make a prudent and educated decision. And third, become
informed about the very best financial resources and
products to fit YOUR needs…NOW, not later.
After all, buying your home is very
different from any other financial transaction. It isn’t
just a "home," it’s a transaction that affects
your monthly overhead expenses…your ultimate net
worth…your retirement…your kids education…and much
So it’s no surprise that buying your home
may involve a bit of fear, anxiety, frustration…or even
excitement for that next move in your life.
The secret is…try not to let these
emotions get in the way of a prudent purchase. The tips and
information in this report will help you have a better
understanding of most, if not all, aspects involved with the
purchase of your next home.
So, let’s examine some of the critical
questions you might have with your next home purchase…
is an "as is" sale?
An "as is" property is sold
without a warranty as to condition, repairs, or structure.
With an "as is" sale, the buyer is on notice that
the seller makes no promises regarding the property's
physical status. With an "as is" sale, it is
extremely difficult to make a claim against a seller if
something is found to be wrong with the property after
closing. "As is" clauses should be seen as an
absolute requirement to make the transaction contingent on a
professional inspection "satisfactory" to you.
With a properly written sale agreement contingency, if you
are not satisfied, then the deal is dead and you can get
back your deposit in full.
long must I live in a house once I buy?
When you apply for a loan a lender will ask
if you intend to use the property as a prime residence. If
the answer is "yes," then it is expected that you
will physically move into the property and live there for
some time. There does not seem to be a set definition in the
term "some time," but what lenders are getting at
is this: They do not want to make residential loans with low
rates and little down to investors.
Thus, if someone gets a residential
mortgage, instantly moves out, and quickly rents the place,
lenders will be more than unhappy - they may call the loan.
They may also review the loan application to see if fraud
was involved. Lenders do not want borrowers to move in and
then rapidly move out, but they will look at the "facts
and circumstances" if such an event occurs. For
instance, a sudden job change not known in advance might be
a valid reason for a move after several months of occupancy.
What lenders do not want are situations where a
"residential" borrower is actually
adisguised investor. Given that most homes are
occupied for 8-10 years, a move after several months or a
year is likely to set off bells.
3. Can I buy real
estate with no money down?
Yes. Millions of people have bought real
estate with no money down through the VA loan program.
If you mean, can you buy real estate at a
discount of 20 or 25% with no cash or credit, and then
instantly sell or rent the place at a profit, then the
answer is probably not. Why "probably" instead of
"absolutely" not? Because in a marketplace with
millions of transactions each year, somebody somewhere has
made a deal with no money down and rented or sold at a
profit. But it is also true that somebody somewhere got hit
by lightening. The problem is that the term "no money
down" is sometimes in the worst cases a code expression
for a deal where someone without cash or credit wishes to
buy property from someone who is needy, unsophisticated,
desperate, in mourning. etc. Under the guide of
"helping" the owner, buyers offer to purchase
property at 20% off, or more, and with subordination and
substitution clauses. Of course, if purchasers really meant
to be helpful, they would surely pay full market values.....
Let's be clear. If no-money-down schemes are so wonderful,
why do folks who engage in such investments have a need for
"partners" with cash?
Rather than get-rich-quick tapes and
seminars, prospective investors are best served by taking a
basic real estate license class in your state. This will
explain much about financing, marketing, title, and other
issues. It will also allow an individual to take the
entry-level real estate exam and qualify for a license.
made an offer on a home that was about 5% below the asking
price. Our offer was rejected. What can we do to make the
owners more reasonable?
Who says the owners aren't reasonable? They
have established a market price for their home. If they can
get that price within a reasonable time frame, then they
have logically priced their home. If the price cannot be
obtained, either they will lower the price or the property
will be withdrawn from the market. Because your experience
in a different market made selling at a loss acceptable,
that does not mean the same logic applies in other markets,
or that your choice should in any way impact the sellers.
Perhaps it would make sense to restructure your offer -
maybe raise your price but seek better terms.
can I get more information regarding accessible housing
Try the following sources:
State architectural associations.
State and local builder organizations.
Hardware and building supply outlets
University architectural schools.
The library of the National
Association of Home Builders in Washington, DC.
Local public housing agencies.
Local chapters of associations that
serve those with special needs.
We are handy and want to buy
a house using sweat equity for a down payment. Will lenders
go for this?
From time to time you hear about lenders
that allow the use of sweat equity as a credit toward a down
payment, but not all of it. Most lenders, however, are not
thrilled with this concept.
problem is valuing labor. If a professional paints a house
there is work completed to a given standard (that helps
maintain the value of the home, the lender's security if the
loan is defaulted) and there is a bill for labor and
expenses (paint, caulk, etc.).
With sweat equity, there can be a cost for
supplies, but what how is labor to be valued? At the same
rate as for a professional? A discount? And what about
The best approach is to speak with as many
lenders as possible to see if they have a program that
allows the use of sweat equity. Ask about the maximum sweat
equity contribution allowed, total cash needed to close,
rates, points, etc.
I discount the sale price to create a down payment?
Lenders provide financing on the basis of
the sale price or the appraised value, whatever is less.
In the case of a "discounted"
price, say selling a home worth $150,000 for $140,000, the
sale price is $140,000. Lenders do not recognize a discount.
A better approach is to pay full market
value but to make the transaction dependent on a
"seller contribution" at closing. The effect is
the same, but the accounting makes more sense to lenders.
is a "due-on-sale" clause?
When a home is financed, the borrower agrees
to make regular monthly payments. However, if those payments
are not made, if they are late, or if the lender's security
is reduced (by not making payments, damaging the property,
not maintaining insurance, not paying property taxes,
selling the property, selling a part of the property by
placing someone else on the title, etc.), then the lender
has the right to call for the complete and immediate (say
within 30 days) repayment of the loan. The mortgage language
outlining the lender's rights is generally called a
"due-on-sale" or "acceleration" clause.
One effect of a due-on-sale clause is that it effectively
prevents a loan from being assumed.
Borrowers should note that state and federal
law may limit the ability of lenders to enforce a
due-on-sale clause. For instance, a title change in the
event of an estate situation may be allowed.
9. What is a
A "land contract" or
"contract for deed" or "agreement for
sale" is an installment sale you buy today but only get
title after some or all of the payments are made. If you
miss a payment, you could lose some or all your equity.
Because title has not been transferred, there is nothing to
foreclose. Some states, however, have special provisions
protecting those who buy property with a land contract.
Be careful in a land contract situation to
look at the proposed financing. Is lender approval required?
If yes, and such approval is not received, the loan could be
State rules regarding land contracts vary
extensively and such arrangements should be reviewed by an
attorney or legal clinic before acceptance.
10. What are the
pros and cons of a land contract?
A land contract may allow a buyer to obtain
real estate even if he or she is not able to obtain
financing through regular loan channels. A land contract may
allow a seller to market a property when interest rates are
If a buyer with limited financial capacity
purchases with a land contract, then a seller may have
problems collecting monthly payments. However, since a buyer
with a land contract does not have title until all
conditions are met, it is often possible for the seller to
get the property back with a "forfeiture" rather
than a "foreclosure." The attraction of a
forfeiture is that it is much quicker to obtain than a
foreclosure. It is also a complex undertaking that should
only be done with an attorney.
If a land contract involves the use of
existing financing that cannot be assumed, that could
set-off a due-on-sale clause. Both buyers and sellers could
lose the property if the loan cannot be repaid.
Or, suppose Seller Jones sells a property to
Buyer Smith using a land contract. Title will remain in
Jones' name until Smith makes a certain number of payments.
But, suppose that Jones goes bankrupt. What rights does
Smith have to the property? Or, suppose Jones does not pay
the property taxes? If the local government forecloses, what
rights does Smith have?
Also, what happens if Seller Jones goes off
to Tahiti? How does Buyer Smith get title?
Land contracts should be seen as complex
arrangements. Both buyers and sellers should consult an
attorney or legal clinic (separately) to assure that all
aspects of the transaction are fully understood.