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Buying a Foreclosure

When a homeowner fails to pay property taxes or the mortgage, local government or lenders initiate a foreclosure (take back) process to forcibly acquire ownership of the home. Once it has been through the foreclosure process, the owner is no longer legally bound to the property and it will usually be placed in an auction. This will be public record and once the home was transferred from a homeowner to a bank or lender, it will be available at a reduced price in the housing market.

Foreclosed properties are often cheaper than other homes for sale, but there are plenty of reasons for that which are worth considering. While it can be high risk, there is a good chance it is also a great investment. Search for a realtor that specializes in foreclosed homes. The home you have found may be listed at an affordable price, but often buyers underestimate the money they will spend to make the home livable. Usually, these homes are in need of repair and the A good realtor can help determine if it is worth the investment.

It’s absolutely a must to do a physical inspection because buying a foreclosed home is buying “as is”.  The bank that now owns the home does not have to disclose and usually doesn’t know any of the previous history, or any problems that have taken place. Missing appliances, hidden holes in floors & walls, vandalism, broken piping, and stolen fixtures are just a few of the details easily missed. Trees, vines, and bushes can uproot foundations and grow into the piping. The longer the home has been sitting – which can be quite a long time frame – the more damage is found.

The Bottom Line: Buying a foreclosed home might end up costing more in repairs than planned and may end up being a bad financial move. The home might be sold at a great price, but in the end, the home could be a money pit. Getting the help of a skilled realtor is paramount in this situation because what you see and don’t see in the home is what you get. It is essential that the buyer knows what they are getting into and a good Realtor will be able to highlight all the pros and the cons.

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Avoiding Buyer’s Remorse

Online real estate company, Trulia, performed a study indicating roughly 44% of Americans have buyer’s remorse after buying a home. The biggest purchase you will ever make is most likely buying a home. Due to the magnitude of this investment, what steps should be taken to keep you from becoming one of the 44% after closing?

Create a Realistic Budget: Establish a budget that encompasses all hidden significant costs, including mortgage payments, property taxes, and maintenance costs. Doing this will give you a complete view of your financial commitment and prevent overspending. There’s more to homeownership than paying the basic principal and interest

Create a Wants and Needs List: Sit down and put together a list of must-haves and nice-to-haves for your ideal home, like location, size, and amenities. This list will keep you centered on what truly matters during the home search, helping to avoid hasty decisions. An example – If you have children and are planning on having more, buying a home in a good school system is a need.

Learn the Neighborhood: It’s critical when buying a home that you always consider the location of the home. What is the proximity to highways, parks, schools, and railroad tracks? Is this a forever home or a transition home? If you’ll be moving again, you’ll want to be in an area where the market is projected to go up over the next few years.  Visit the home at different times of the day and under various weather conditions. This will help you to really see the neighborhood, traffic patterns, and overall environment.

Be Patient: Avoid rushing into a decision simply to secure a property. Take your time when searching for a home and making an offer. Patience will help you wait for the right opportunity to present itself, minimizing the risk of future regret. Know that the entire home-buying process may come with various unexpected challenges and setbacks. Be flexible and adapt so you are able to navigate any hurdles.

The Bottom Line: Always trust your gut during the search for a home. Rushing into a home that just does not feel right will never be a good decision. Don’t be rattled by what is going on around you, how many offers a home has, or the fear that you may lose out on a home. If you are in a situation where you’ll be without housing soon, you may have to make sacrifices. If that is not the case and you are in a home, absolutely listen to your gut and pass on homes that give you a bad feeling, are too pricey, or just aren’t giving you enthusiasm. Your home should be your refuge, not a place full of regret.

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True Story: You Need Title Insurance

MYTH: You don’t need title insurance

Everyone needs title insurance. You may think you know the entire history of the house you’re purchasing, but it’s impossible to know everything. Title insurance protects your right to the property in the event that a previously unknown heir claims ownership of the property if it is later revealed that the “sellers” were not the rightful owners, or if liens against the property resurface. If you have an owner’s title insurance policy, you will not be responsible for paying any of the fees associated with protecting your right to the property, should these types of issues arise.

MYTH: New construction homes don’t need title insurance

Your home could be brand new, but the land on which the house is built isn’t. Chances are, the land had several previous owners before construction began. Buying property on such land opens you up to certain risks tied to ownership issues from previous owners.

Disputed wills, easements, and property liens are just a few of the issues common to land ownership. You could get caught in the mess and end up losing your resources or, worse still, your new property as well. Title insurance is crucial even for a new home and should be on your list of priorities during the closing process.

MYTH: If no one challenges ownership, then the title policy is a waste

At the closing, when you purchase a title insurance policy, the closing company does the bulk of the work behind the scenes. The title company goes through many steps to make sure that everything is in place by that time, including conducting a comprehensive title search and identifying any potential issues. The team investigates the entire history of the property to ensure that you, the buyer, will be aware of any problems that will need to be addressed before closing. By the time the closing comes around, the title company has completed a great deal of research and legwork for you.

MYTHTitle insurance offers only minimal protection

When you purchase a home, you receive the “title” to the property. This title is your legal right to own it. Early in the home-buying process, a title search is conducted to review the history of the property and uncover any issues that could limit your right to ownership. Even after the most meticulous search of public records, there can be hidden title defects, such as tax liens, forged signatures, claims by ex-spouses, and recording errors. These title defects can remain undiscovered for months or even years after you purchase the home.

MYTH: Title insurance is the same thing as homeowner’s insurance

Homeowners insurance protects you so you have the resources to pay for any damage that might occur to your property. Title insurance protects you from anyone else claiming your home is theirs or for some prior owner’s back taxes or encumbrances or any other real property dispute

Title First Agency: Dedicated to innovation and passionate about service, Title First Agency is your comprehensive, nationwide resource for title and real estate settlement services. Headquartered in Columbus, Ohio, Title First has branch offices throughout the Midwest and a robust virtual partner network throughout the country. Title First got its start in 1956 as an affiliate of a local law firm and has since emerged as one of the largest independent title agencies in the nation. Proudly servicing Realtorslendersbuildersdevelopers, law firms, buyers and sellers, Title First is equipped to serve your residential and commercial title and settlement needs.

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Some Warning Signs You Might Be Making a Bad Real Estate Investment

Real estate investing comes with plenty of pros and cons to consider. It’s especially important to evaluate the situation and the property that you are attempting to put an offer on and eventually buy. How do you identify if there are any signs that you might be jumping into a bad investment?

It’s important to know that when a realtor shows excitement in selling you a property, it is literally their job to do so. However, if they seem overly avid or even pushy, there might be some details about the property that could make it hard to sell which is making the realtor a bit extra aggressive to sell it. Listen to your instincts and, if necessary, investigate as much as you need to ensure you are making a good investment. Have the property fully inspected before agreeing to sign anything. Realtors should be truthful and upfront, offering their professional guidance on the best course of action, even if it’s not what you were expecting or hoping to hear.

One of the most important factors that determine if a property is worth investing in is the location. Even if the property is in a perfect state, if it’s poorly located, chances are you will be losing money. Some of the factors that determine a location are the local economic health, the levels of vandalism and crime, the school district, etc. Before coming to a final decision, make sure you do a thorough investigation of the location. Choose areas, for instance, that have great schools, fun attractions, quality transportation options, high walkability, and great retail spots. Proceed with caution—no matter how the numbers look on paper.

If a property has been on the market for six months or longer, other investors have probably checked it out. There’s a reason it’s not selling. It could be a bad neighborhood, or too many issues to fix, whatever the reason…a property that has been for sale for months and hasn’t sold might be too much trouble than it’s worth. Dig deep into why it has been for sale for far too long to find out why exactly. While it’s possible for a property to simply evade the attention of other prospective buyers and investors, this isn’t the most likely explanation for a listing that’s been up for a long time. If it seems like there’s no interest in a given property, it’s a red flag that there isn’t sufficient market demand for that type of investment.

A property can look good on paper and still be a bad investment. If a house has structural damage, foundation issues, or other problems that will require a long inventory cycle or cost so much that it will eat into your profits, then your best bet is to walk away. Considering renting out the home? If the plumbing, electricity, and other infrastructure will need constant and frequent repairs, it could be a bigger headache than it’s worth.

Thinking to the future not only on the property you are interested in but to its surroundings as well. Learning of the current and potential growth in an area can greatly benefit any investor. Visiting the municipal planning department can yield information on developments and project plans that have already been zoned into the area. 

One important consideration is the amount of new construction in the area. Lots of new planned projects and those still in development typically represent an area of substantial growth. If you will be renting out the property that would mean new tenants with the growth of the area.

The Bottom Line:  These are just a few signs on how to spot a bad investment. Nobody wants to deal with the fallout after a bad real estate investment, so you must do everything you can to minimize your risk and do a lot of investigating on each property. Arm yourself with a good realtor, access to information, and patience.

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Closing Time

Closing on a house is the most rewarding part of the home-buying experience. This is a time to celebrate this important milestone in your life! And it’s the last step in buying your new home. The actual closing and paperwork can be tedious and sometimes a little overwhelming. What should you expect once the seller accepts your offer? The behind-the-scenes work begins and then you can expect closing to happen within 30 to 90 days.

  1. Select a Closing Agent: If you are working with a realtor, with your permission, he or she may place an order with a closing agent as soon as your sales contract is accepted. The closing agent can be a title company, an escrow company, or a settlement company. Most homebuyers rely on their real estate agents to select a closing agent – someone they work with regularly and know to be professional, reliable, and efficient. The closing agent will oversee the closing process and make sure everything happens in the right order and on time, without unnecessary delays or glitches.
  2. Draw up an Escrow Agreement: First, a contract or escrow agreement is drafted, which the closing agent reviews for completeness and accuracy. The agent will also put your deposit into an escrow account, where the funds will remain until closing.
  3. Title Search is Conducted: Once the title order is placed, the title company conducts a search of the public records. This should identify any issues with the title such as liens against the property, utility easements, and so on. If a problem is discovered, most often the title professional will take care of it without you even knowing about it. After the title search is complete, the title company can provide a title insurance policy.
  4. Shop for Title Insurance: There are two kinds of title insurance coverage: a Lender’s policy, which covers the lender for the amount of the mortgage loan; and an Owner’s policy, which covers the homebuyer for the amount of the purchase price. If you are obtaining a loan, the bank or lender will typically require that you purchase a Lender’s policy. However, it only protects the lender. It is always recommended that you obtain an Owner’s policy to protect your investment. The party that pays for the Owner’s policy varies from state to state, so ask your settlement agent for guidance. before closing.
  5. Obtain a Closing Disclosure: Your lender must provide a Closing Disclosure to you at least three days prior to closing. Your lender may also have a closing agent provide the Closing Disclosure to you three days before you close your transaction. If your lender makes certain significant changes between the time the Closing Disclosure form is given to you and the closing, you must be provided a new form and an additional three-business-day waiting period after the receipt of the new form. This applies if the creditor: 1: Makes changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods) 2. Changes the loan product 3. Adds a prepayment penalty to the loan. If the changes are less significant, they can be disclosed on a revised Closing Disclosure form provided to you at or before closing, without delaying the closing.
  6. The Finish Line: Prepare for Closing: As closing day approaches, the closing agent orders any updated information that may be required. Once the closing agent confirms with the lender and the seller, he or she will set a final date, time, and location of the closing. On closing day, all of the behind-the-scenes work is complete. While you’ve been busy packing, ordering utilities, and coordinating the movers, your closing agent has been managing the closing process so that you can rest assured, knowing all the paperwork is in order.

The Bottom Line: This long process can seem daunting at times, but if you are teamed up with the best realtor and title agency you will be well prepared. When you finally reach the closing date and are holding the keys to the property, plan a celebration!

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Update to Sell

What do new home buyers want? We are in the era of social media, smartphones, and AI algorithms, leaving us with a plethora of information on how we should renovate, remodel, and increase the value of our homes. Of course, affordability tops the list, followed up with updated large open gourmet kitchens with large center islands for cooking and gathering.

If you will be selling your home and you only have a certain amount of time and money, there are a few things that buyers are looking for right now.

HOME OFFICE: More than 13 million Americans work from home, according to the most current U.S. Census data, and all signs point to that trend continuing. That makes a home office important for many buyers. As you would list rooms like kitchen and living room, a greater amount of people working and schooling from home means “home office” should be included in the listing. Or, consider saying there is a room as a potential home office.

ACCESSIBLE LAUNDRY ROOM: According to a nationwide survey of recent and prospective homebuyers conducted by the National Association of Home Builders, 87% of respondents wanted a laundry room, making it the most requested feature on their list. No more dark basements. Today’s home buyers seek a bright and large laundry room with plenty of storage, and counter space for folding clothes and it’s always a plus to have a utility sink.

ENSUITE MASTER BATH:  If your master bathroom only contains a shower stall or a tub and not both, you’re going to be at a big disadvantage when it comes to selling. According to the latest annual report published by the National Association of Home Builders (NAHB), a whopping 76% of millennial buyers consider this their top must-have. When pushed to specify, potential buyers also revealed that they’d want the tub to feature whirlpool jets and that the shower should have multiple heads. 

CENTRAL AIR CONDITIONING: Nearly seven in 10 homeowners said they would be willing to pay more for central air conditioning — the same as new kitchen appliances and more than any other feature. Central air conditioning was considered “very important” by more than 60% of people in all age groups.

ENERGY EFFICIENCY: This is a top home feature that has earned high marks from home buyers. As the cost of energy continues to rise, many home buyers today are looking for homes that are going to be easier and less expensive to run long-term. Consider installing LED lights or using a programmable thermostat.  These features can be attractive to home buyers because they often result in saving money on utility bills.

The Bottom Line: Team up with the most successful realtor in your area who will recommend what updates you will need in your specific home to bring in the most money. We can’t control the circumstances of the current real estate market, but we can control parts of our home’s value and appeal. Making strategic improvements can significantly increase the success of the sale of your home.

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The Magic Number

What can I get for my home? This is one of the first questions a homeowner will ask a realtor.  Hiring an experienced realtor is key to getting the magic number – the price that your home will sell. Getting your home priced right is quite possibly the most important thing your realtor can do for you. Too many times, realtors will tell sellers what they want to hear instead of what they need to hear to sell their homes.

Pricing a home is a skill that takes training, an understanding of the market, and comparable sales (comps). Negotiating a home price requires a lot of patience, organization, and sometimes compromise. When a home is listed too high, buyers pass on even looking at it. It will end up being on the market for a long period of time and the price will eventually be forced to be lowered to be competitive. But, by that time buyers assume there must be something wrong with the home and it will gain a bad reputation and continue to be bypassed. Even the buyers who do look at it will lowball the new price and the home will end up being sold for less than what it would have had you priced it correctly to being with. Homes sell for the most money when they are on the market for less than 30 days in almost all markets.

You don’t want your home priced lower than it is worth, but you want it low enough to create excitement among buyers and possibly even multiple offers coming in. This is an excellent option if you want to sell a home fast.

A good Realtor will make sure that the seller’s home shows up in online searches. To make sure this happens, a proper price is paramount. If the neighborhood comps are lower, the house may not show up if it’s even slightly higher! For instance, if the comps top out at $300,000, and the buyer wants a 4-bedroom home in that neighborhood under $300,000, the house listed at $325,000 won’t even show up in the search.

Pricing a home to sell properly is a skill that the best Realtors have. It is the most critical piece to selling your home. The right price is 75% of the marketing for any home on the market. It’s what will attract buyers. So, when you are interviewing Realtors to sell your home, ask the question “What’s my home worth” and know they can’t tell you what it will sell for but expect comparable sales, pending sales, and active sales. Finally, ask to see a track record of their previous listings – the original price and the final sale number. And, don’t be afraid to ask for a personal guarantee from them.

The Bottom Line: If your home is immediately identified as being overpriced, agents will dismiss the property. As a result, sparking interest may take drastic measures (i.e. massive price reductions) and you might end up lower than where you could have been if you had priced the property right the first time.

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Maintenance Projects First-Time Homeowners May Not Know

Household maintenance is necessary if you want to protect your investment and keep your home in good shape. Homes require internal and external upkeep with regular cleanings and inspections to ensure everything is safe and functional. There is a lot to keep track of and first-time homeowners can mistakenly skip over something important that needs to be done simply because the list can seem so overwhelming. Keeping a regular home maintenance checklist and schedule will ensure that your house is in order year-round. Here are a few tasks that new homeowners may not even know about.

Window Weep Holes: Many sliding windows and vinyl replacement windows have weep holes on the exterior bottom of the frame. These holes are designed to drain away rainwater that can collect in the frame’s bottom channel. These tiny holes can easily get plugged up with bugs and debris, and if that happens, water could fill up the channel and spill over into your house. It’s best to clean them every six months by using a pin or paper clip to pick the debris out. To make sure they’re clear, spray water onto your window and check to make sure it leaks out. If it doesn’t, it means one of two things: the weep holes are still clogged, or they’re currently redundant due to a watertight seal around your windows.

Refrigerator Condenser coils: These are located on the back of the fridge or across the bottom. When coils are clogged with dust, pet hair, and cobwebs, they can’t efficiently release heat. The result is your compressor works harder and longer than it was designed to, using more energy and shortening the life of your fridge. Pull it away from the wall and vacuum the condenser coils or wipe them off with a clean dust cloth every few months. Your refrigerator is one of the most expensive and necessary appliances; you want to extend it’s life.

Chimney Cleaning: This needs to be cleaned yearly to remove creosote, a flammable byproduct of wood burning, that can cause fires and elevate the risk of carbon monoxide poisoning. A quick way to tell if your chimney needs cleaning is to run the point of your fireplace poker along the inside of your chimney liner. If you find a 1/8-in. or more layers of buildup. call a chimney sweep.  Finally, make sure there is not any damage to the chimney on the outside – missing bricks and flashing that should be tight against it to guide water away.

Flush Hot Water Heater: The water in your water heater tank contains minerals that can settle out of the water and build up in the bottom of the tank. Just a few minutes of water heater maintenance once a year pays off by extending the tank’s life span and maintaining your water heater’s efficiency and safety. Draining two to three gallons of water is usually enough to flush out sediments, but always let the water flow until you no longer see particles in the bucket.

The Bottom Line: Making a maintenance checklist to use year after year will help ensure your home is safe and secure. Some of your monthly checklist is likely to change with the seasons. A simple Google search will help you find websites dedicated to yearly home upkeep. Be sure that you set aside money for home repairs and maintenance. Neglecting small tasks will cause you grief, time, and money in the long run.

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Fraud Protection

The rapid growth of technology in the real estate industry has brought opportunity as well as a whole new set of challenges. Potential home buyers have the ability to search for homes from their fingertips while home-related fraud has become more prevalent. It’s important to protect yourself against fraud by becoming educated on the most common types of threats.

Title Fraud
What is It:
Any forgery or fraud act that involves the home title. There are many types of title fraud, including, but not limited to, forgery committed by the seller or someone who steals the identity of the current homeowner.

Preventative Steps:
One of the easiest ways to prevent title fraud is to purchase title insurance. This type of insurance eliminates the risk of being held accountable for any type of fraud that happened before you owned the property. Additionally, title insurance protects against other potential issues such as clerical errors or incorrect information. Any errors or misinformation on the property title will be handled by the title company where the insurance was purchased.

Wire Fraud
What is It:
Wire fraud is any scheme utilizing false pretenses to obtain money or property via wire transfer or communication. This type of fraud is particularly harmful in the real estate industry because property is such a large investment. The most common type of wire fraud in the home-buying process is a fraudulent request for a deposit on the home.

Preventative Steps:
Once you’re nearing the end of the homebuying process, there are many legal documents and steps involving your personal identity. It’s critical that you protect any personal and financial information while finishing the closing process. Your information is particularly vulnerable through email or other forms of electronic communication.

Here are a few helpful steps to prevent against wire fraud:

  • Never send out any personal financial information via email.
  • Do not click on any links or attachments in unfamiliar email addresses or emails that are unexpected.
  • Clean out your email regularly so that hackers cannot detect any patterns.
  • Change your usernames and passwords on a regular basis.
  • Install and update antivirus and firewall programs on your computer.
  • Report any fraudulent activity to the FBI via the Internet Crime Complaint Center.
  • Ask your title representative, mortgage lender, and real estate broker their typical means of communication. If you receive anything from an unusual method of communication, confirm that it was sent from your real estate professional.
  • Don’t share detailed information about your home purchase on social media.

The Bottom Line: No matter where you are buying a home, be sure to do plenty of research on the home-buying process so that you are able to spot suspicious activity. If you ever notice any potential threats, speak directly to your real estate professionals to confirm the security of your transaction. The best way to protect yourself against fraudulent real estate activity is to remain cautious and informed.

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The Four C’s of Home Buying

Underwriting is when your lender analyzes the final mortgage application to make the decision to give you a loan or not. If the decision is made to go forward with the loan, conditions need to be made. This is a process that you have to go through even if you have been pre-approved for a mortgage. Lenders will consider four criteria, aka “the four c’s of home buying”: Credit, Capacity, Capital, and Collateral. All four of these areas must be satisfied for your application to be approved.

Credit: Possibly the most important factor of the 4 C’s. Your credit score taken from the credit report is the simplest measure of your credit strength. In determining an applicant’s credit score lenders will simply use the middle of the three credit scores reported by the three credit repositories (Transunion, Equifax, & Experian).

Credit scores are heavily influenced by your payment history over the preceding 24 months. Other factors may include the proportion of revolving debt relative to the high credit limits, the number of accounts, lack of credit depth, and many more.

Another factor that becomes part of your credit profile is your housing payment history over the preceding 12 months. This may be reflected in a previous mortgage on the credit report or by verifying rent payments if you don’t currently own a home.

Finally, bankruptcies, judgments, and foreclosures can all negatively impact your credit analysis. Just because you may have any negative marks on your credit report doesn’t mean you won’t get approved for a mortgage. It simply means that you will have to show other compensating factors and/ or may have to accept higher rates and terms.

Capacity: In addition to reviewing your credit, lenders want to analyze your ability to repay the mortgage over time. Capacity is the analysis of comparing a borrower’s income to their debt. The primary tool used for this analysis is a debt-to-income ratio. Simply put, the debt-to-income ratio is the sum of all monthly payment obligations you have (including the potential upcoming housing payment) divided by your gross monthly income.

Capital: Do you have a financial cushion to fall back on if your income is unexpectedly interrupted? Have you shown a pattern and habit of saving money over time? These are important questions to a lender and can be answered by reviewing your capital accounts.

Capital accounts are any account with liquid assets that a borrower could access if need be. The most common forms of capital accounts on a loan application are checking, savings, money market, brokerage, IRA, and 401K accounts.

Usually, the bank will want to verify that you have an amount equal to 2 months’ worth of your total housing payment (including real estate taxes and homeowner’s insurance) saved up in a capital account after they subtract any cash required for down payment & settlement charges. If the mortgage is going to be secured by an investment property or second home the bank may want to see more capital for the applicant.

Collateral: This refers to the property itself. Underwriters consider a home’s appraised value when deciding whether to approve a mortgage application. Property size, location, condition, and the value of nearby homes are just some of the things considered when a house is appraised. If you have passed the first three C’s with flying colors, unfortunately, if a home doesn’t appraise well the final loan may not be approved. This is because collateral ensures that the lender won’t lose their money if you default on the loan.

The Bottom Line: Private lenders may have different practices than traditional banks or other financial institutions. They could be more flexible and willing to consider other factors. You, as the borrower, should be prepared to demonstrate that you meet the criteria of the four C’s to increase your chances of getting loan approval. You should also talk openly and freely to the loan officer as they will be supporting you and want to build your file as favorably as possible.

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