Tag: Real Estate How To

Financing your land purchase

There can be challenges in financing your land purchase. Why you ask? The bottom line is banks don’t love dirt. Lending institutions can be surprisingly cautious when lending on raw land. A vacant property produces no income and offer very little collateral. For these reasons, lending institutions see it as a high-risk investment.

So, what does a loan look like on raw land? In order to obtain a loan on a piece of raw land, you could expect to make a large down payment, for one thing. That down payment can be as much as 35 to 50% of the cost of the land. Furthermore, the loan on a piece of land is typically not for a term of 30 years, like the mortgage on a home. The term that can be expected is typically five to 15 years. The approval process can take longer than expected also and the interest rate on the loan tends to be higher than for home loans. So, how is a buyer to make this all work if they want to purchase land? There are other options available.

Construction loan

What are options for purchasing raw land with a loan? One option, if you plan on building a home on on the property soon, is to take out your construction loan for the package of the land and home. The first draw from that loan would be to purchase the land. For the seller of the land, this would look like a cash transaction that would be able to close quickly and also not require loan approval or appraisal. If you do not plan on building on the land right away, what are other options?

Community bank

Another options is to work with a local credit union or community bank for your loan on the land. These institutions understand the regional markets better than large national banks and are more willing to take the risk on raw land. They also are often more flexible with terms on the land loans they provide.

Seller financing

An additional option is seller financing. This type of financing can streamline the process and bypass the banking process entirely. No need to have an appraisal or loan approval. This option also gives both parties room to negotiate terms that are desirable for both. Be aware that not every seller of land is able to provide seller financing. The seller must own the property free and clear of a mortgage and be willing to remain involved in the process for the agreed upon period of the seller financing.

Financing your land purchase is not as simple as financing for a home. You cannot just call up the bank that holds the mortgage on your home and ask for another loan. There are options available, but the terms on a land purchase will be different than those on a home loan. Going into the process knowing things will be different and allowing time for finalization of your financing you can be successful in getting a loan on your land purchase.

Is the appraisal important?

Part of the home buying process is the appraisal. Some agents refer to the appraisal as the last hurtle in the under contract process. Is the appraisal important in the real estate transaction? The answer in a word is, YES! The value of the appraisal can mean the difference between the house selling to a particular buyer or not.

What is an appraisal?

Let’s go over what an appraisal is and details about it. An appraisal is one person’s opinion on the value of a property. It is required by the lender most of the time, if the buyer is getting a loan. Sometimes if the buyer is putting a significant amount down, over 40%, the lender may not requiring an appraisal. A buyer that is paying cash for a property, may decide to get an appraisal just to make sure the price they are paying is fair. The appraisal is ordered by the lender or buyer if paying cash. Once the property has been viewed by the appraiser, the appraiser compares the subject property to others. The appraiser prepares a report and offers an opinion of the value of the property. Most of the time that value is the same as the contract price. But, what happens if it isn’t?

Appraisal is high

If the value of the property is higher, it can make the buyer feel like they got a “deal” on the home. Nothing changes. There is no price increase. The buyer does not have to pay more for the home. They purchase the home feeling like they have a little bit of equity already.

Appraisal is low

If the appraisal comes in below the contract price, there are several options. The buyer can bring the difference to closing and go ahead and close. What does that mean? Let’s say the buyer is under contract on a property priced at $500,000 and the appraisal comes in at $490,000. The buyer can pay the difference in the gap between the two numbers. Meaning, the buyer can bring an additional $10,000 that is not being used as their down payment to closing to cover the gap. If that is not possible, what else can happen? Another option is the seller can agree to sell the home for $390,000. Or also the buyer can choose to walk away from the home without penalty.

Contesting the appraisal

There is one final option for the buyer. This option involves contesting the value/opinion of the appraisal and asking that the appraisal be reviewed. This process is called a reconsideration of value. Often times, in order to have this done, the buyer or their agent needs to find errors in the appraisal. Another possibility is to note that the appraiser did not include important information. It is not common that this leads to a change in the appraised price. Remember, it is the opinion of the appraiser. Most people do not change their opinion.

As you can see, the appraisal is an important part of the process of purchasing a home. If the appraisal does not come in at the contract price, it can be a stumbling block in the transaction. This may be too significant to overcome and can mean the buyer is not able to purchase the home. There is not much that can be done to avoid problems. Involve your agent in determining the price that you arrive at in your offer. Make sure that your agent has comparable properties that can be provided to the appraiser if needed. Know that problems occur very infrequently. Hold your breath and hope it doesn’t happen to you.

Sell it or rent it

So, it is fall and you have had your home on the market all summer. You are left wondering, do I continue to try to sell or should I just rent out the home. When a home does not sell as quickly as expected, it is tempting to think, I could just rent it. That idea is becoming more common among sellers that have a low interest rate mortgage on a home that they are trying to sell. The numbers may work for them to rent out the property. They could perhaps even have a positive cash flow if they do. But there is more to look at than just a positive cash flow.

Look at the whole picture

Before you decide that renting is the way to go, you should look at the whole picture. There are some important questions to ask before you decide to become a landlord.

Are you ready to be a landlord?

  1. Are you ready to become a landlord? Collecting rental income and building wealth with someone else paying the mortgage is appealing. But what about the 2:00 am call that there is a problem with the water heater? There is also the issue of finding tenants and collecting the rent. Even if you decide to use a property management company, this does not mean that you can have a completely hands off experience.
  2. Does the property work as a rental? Not every home is cut out to be a rental. Location, condition and maintenance costs all matter. As the owner of the home, you know it better than anyone. Do you have looming repairs? Can you manage those repairs from far away or trust that a property management company will handle them the way that you want? Is the property too large to be a rental or in a location that no one would want to drive to? All of these should be considered before you turn a home into a rental.
  3. Do the numbers add up when looking at all of the costs involved in holding on to the property? Look seriously at all of the costs. There will be the house payment, maintenance costs, advertising and management of the property. There is also the possibility of vacancy and no rent being collected. When all of this is taken into account, do you have a positive cash flow on the property? If the answer is no, can you budget to comfortably add the difference each month? There is also the consideration of insurance costs. Insurance will be more expensive on a rental than an owner occupied property. You should also look at tax ramifications.

Re-evaluate your strategy

If you are considering renting out a property because it has not sold, it may be time to reevaluate your selling strategy. Sometimes all it takes is a price adjustment or some fresh photos or a change in marketing. Renting out a property can be a smart, long-term strategy, but it is not the best fall back position that it may seem. If you are not sure what to do, discuss with your real estate agent and make a plan to reach your goals.

Tips for buying in an HOA

After considering the pros and cons of an HOA you are ready to go looking at houses to purchase. Knowing that the home that you choose to purchase might in in an homeowner association. Here are some tips to ensure that you are ready for the life in an HOA if your dream home is located in one.

Tip number one:

Read all of the rules and regulations BEFORE buying. In the State of Colorado the contract has dates and deadlines for when the buyers must be provided with all of the HOA information. This includes rules, regulations and the financial information regarding the HOA. Once the information is received the buyer has the right to cancel the contract, due to finding the HOA docs unsatisfactory. This could be because you find out the HOA has a maximum weight for dogs of 25 pounds. You have a wonderful black lab that weights 75 pounds.

Tip number two:

Another things to remember when you are living in an HOA is to follow the rules. Once you have purchased your property and moved in, you need to follow the rules. They are not suggestions. You cannot bend or or change the existing rules. Not following the HOA rules and regulations can mean you are charged fines.

Tip number three:

Stay informed. Your HOA will communicated with you and let you know proposed changes in rules and fees. Your HOA will also provide you with meeting minutes so that you can stay informed about issues before the HOA board.

Tip number four:

Attend board meetings. Reading the minutes is great, but being present for the annual meeting is even better. The more involved you are the more informed you will be. Being involves allows you to have a say in community decisions.

Tip number five:

Join the board. Most HOA.s are needing board members to volunteer their hime to join the board. Serving on the board lets you directly influence decisions that are made that affect your neighborhood. As a board member, you are able to affect policies and advocate for your interests.

HOA’s are not entirely good or bad. Whether you buy a home in an HOA or not is a personal preference. If you valued the amenities and services that the HOA offers, an HOA could be a good fit. Make sure that you know what you are getting into. Making an informed decision is important. Once you are in an HOA be sure to follow the rules and get involved.

Moving with Kids

Selling your home can be an emotional decision. Even if you are selling for all of the “right” reasons. Some of those “right” reasons could be to purchase a larger home that you need for your growing family. You might be selling to shorten your commute or move to a better school district. Moving, even for all of the “right” reasons can impact your child. Adults can feel the stress of a move and navigate the process. But kids may not ever have experience a move and may feel like their whole world is about to be turned upside down. How is a parent to deal with these emotions and help kids make the adjustment? Here are some helpful tips to make the process as smooth as possible.

Helpful tips

  1. Don’t assume that they will not care. Even if your child is not particularly sentimental, they can have strong feelings about selling the family home. They may have concerns about leaving the home that they have made great memories in. It may be the only home they have ever known. Your child may just not like change. Let your child voice their feelings about moving. Your child’s feelings matter.
  2. Be sure to talk openly about the move. Involve your kids in the process. Talk to them about what they would like in a new home. While kids will not have the final decision, remember to take into account their feelings. Explain your reasons for moving, in age appropriate terms. Share with them the benefits of moving. Be transparent but firm to help manage expectations.
  3. Don’t spring the final decision on your child at the last minute. Talking about the move is great, but make sure that you have help your child sort through their feelings before the sign goes in the yard. While it is important to have empathy and understand, at the end of the day it is your decision. It is okay to prioritize your needs as well as the needs of your family as a whole.
  4. Seek professional support if necessary. If your child is particularly anxious or resistant, consider involving a family therapist. Sometimes having a third part to talk to can make things easier.

Let your agent know

It is a good idea to make your real estate agent aware of how your child is feeling. An experienced agent can often help smooth the way forward. They know how to get young children involved in fun ways. Your agent may also be able to offer helpful hints for helping older kids feel heard and ease their concerns. Lestel has a pamphlet available: Smooth Moves. Real Estate for Your Kid’s World. It is helpful tips on moving with kids of all ages. Ask her and she can provide you with a copy.

Selling your home when children are involved can be challenging. It is wise to talk to your child as soon as possible and involve them in the process. The more your child feelings included the more likely they are to be on board with moving!

How to sell your home and buy another one

Buying a home as a first time home buyer is not easy. You have to pull together the money for the down payment. Then there is the process of trying to find a house in your price range that you actually like. Once you find the house you want to buy, hoping that you will not be competing with other buyers for the home. Going through what first time home buyers go through is not easy. When you are having to sell a a home before you can buy another one, you may be wishing for the simpler times when you just were buying a home.

So, you need to sell your home before you buy another one. Good news is your are not alone. Plenty of people navigate the process of moving up, buying and selling, just like you. Here are some common concerns people like you have and some tips on how to deal with them.

What if I don’t find a house I want to buy?

The first concern is: What if I Don’t Find a House I Want to Buy? This is certainly a legitimate concern. But waiting until you find your next home, before you put yours on the market isn’t necessary the best way to be successful in this process. Waiting to put your home on the market can lead to rush decisions that can cost you money. You also run the risk of the dream home being purchased by a buyer that doesn’t have a home to sell, before you are ready to buy.

What if the house I want to buy sells before I am ready?

A second concern is: What if the House I Want to Buy Sells Before I am Ready? You have found the house you want to buy. You do not want anything to get in the way of purchasing that home. If you wait, hoping your home will go under contract before you write an offer on the new one, you may lose out. You can write an offer that is contingent upon the sale of your home. But what if the seller does not want to accept an offer that is contingent upon a home selling? There are strategies that can be implemented in this situation so you don’t miss out!

What if I get stuck with two mortgages?

Another question that you may have is: What if I Get Stuck With Two Mortgages? You have decided to move forward with a contract on your new home before your old home sells. You know that you qualify for both mortgages, but certainly do not want to be paying a mortgage on your old home and your new one. This is something most everyone would like to avoid. The best way to avoid this is to not go under contract on the new home before all of the contingencies have been met with the contract on your existing home. Make sure that your agent puts language in your contract, on the new home, that gives you an out if you do not close on your existing home. This will keep you safe.

Could I end up homeless?

A fourth concern that you may have is: Where Will I Live if my House Sells and I have not Found the House I Want to Buy? This question can be easier to answer than most of the other questions. You will not be left living in your car. You have options. Some of those options can be as easy as family, or a temporary rental, or even a short term rental. There can also be a change in the closing date of the contract so that the dates of both contract match up and you are not without a place to live. You can also do a rent back of your existing home after you close, until the new home closing occurs.

These concerns are common concerns of people buying and selling. The process of buying and selling a home can be challenging. Work with an experience agent that knows the strategies that work so you can be successful. Then all you will have to worry about is packing and moving into your new home.

What NOT to Expect from Sellers

Congratulations you are under contract to buy a home. You are very excited and can hardly wait to move in. But what can you expect during the next phase of the transaction. Here are some things to remember that you should NOT expect of the seller during the under contract process.

No excessive showings

The first thing to remember, once you are under contract, is the house still belongs to the seller. During the under contract period the seller should allow you to get into the house for the necessary inspections. The seller should be willing to allow an additional quick showing for measurements. But, over and above those showings, endless visits to the house for whatever reason should not be expected. It is important to realize that it is still the owners home. They are living their lives and getting ready to move. They do not need a parade of people regularly visiting their home once the home is under contract.

No early move in

It is not uncommon to want to check and see if it is possible to move a few things in to the house before closing. It may happen that you end up in between places to live for a period of time, before you can close. If this happens it can be difficult to find a short term rental. In this situation, the question can come up, can we move in early? This is a tough request for the seller. The seller is trying to time their own move. It is also not in the best interest to allow for early move in or to allow the buyers to just move in a few things. When working with the seller, I always tell them to just say NO to this request.

No deliveries

Another thing that might happen, during the under contract period is needing to have things delivered to the new house. It would be so easy to just have it delivered early, before closing, and then you would not have to move it. As a buyer, if you are deliberately having Amazon or Wayfair deliver things to the house before closing you are not being appropriate. It is not the sellers responsibility to store or keep track of your belongings. The house is not yours until after closing. It is not uncommon for a piece of mail to be delivered to your new home before you close, but that is different than a delivery. No deliveries until the house is yours.

No head start on renovations

As a buyer, you may be buying a fixer upper. You are so anxious to get started on the renovations. It would be great if you could start before closing. You would like to ask the seller if it is okay. The short answer is NO! I know, I know, You just want to paint or have the hardwood floors sanded. Until it is your house, you need to stay excited and wait until after closing.

This blog post must seem like a lot of no’s. It is. Until after closing, the house belongs to someone else. Things happen and closings do not happen. If you have moved in or had things delivered to the home, what will happen now? Be patient and enjoy the process. The home will be yours soon enough. Schedule things to happen and packages to be delivered after closing.

Time for photography

You have contacted an agent to sell your home. You have met with them and signed all of the necessary documents. One of the next steps is having your home photographed. Preparing your home for real estate photography is crucial for attracting potential buyers. Preparing for the photos means making sure that your home looks its best, so that you can sell for top dollar. Here are some instructions for preparing your home for your photo session.

Make sure your home looks its best

One thing to keep in mind as you prepare for your photo session is that your home will photograph just the way it is. That means if a comforter on your bed is not straight, if will photograph just that way. If the dog bowl is in kitchen, it will be in the kitchen and in the picture. It is important to make sure your home looks its best in each area of your home. Here are some tips for you to make sure your home looks its best.

Remove clutter

It is important that you remove clutter from your home. Remove the clutter from the counter tops in the kitchen, living areas and throughout the house. Wipe down surfaces, including counter tops, appliances and cabinets. Make sure that magnets and photos are off the fridge. Put all of the dishes away and make sure the sink is empty.

In living areas, of your home, again, remove clutter. Arrange your furniture to create an open and inviting space. Fluff your cushions, and pillows. Make sure that lights are on and curtains are open to let as much light in as possible. Turn off the TV and hide remotes.

Clean, clean, clean

In bathrooms of your home, clear all surfaces of toiletries including toothbrushes, soap and razors. Remove extra towels, and bathmats. Wipe down all surfaces, including sinks, showers the toilet. Make sure that the toilet seat is down. Also make sure that glass shower doors and mirrors are streak free. Keep the shower curtain open, but remove shampoo, conditioner and soaps.

It is important that your bedroom also be clutter free. Make your bed and fluff pillows. Remove anything under the bed that might be seen in pictures. Clear away any items from your closet floors and shelves. Less is better in your closet. Removing some items will make your closet appear more spacious.

Don’t forget the exterior

The exterior of your home should also look its best. You want to give a good first impression. Time any overgrown plants and trees. Make sure the lawn has been recently mowed. Remove toys from the yard and clean up any pet waste. Be sure to remove any dead or dying potted plants and replace with new. Uncover pools and hot tubs so they look inviting.

Remember being prepared is the best way to get the best photos. According to a study done by Zillow, homes with clutter-free, clean photos sold 32% faster than homes with cluttered photos. By following these instructions, you can help ensure that your home looks its best for your photographer. This also increases your chances of selling your property for the highest possible price.

Thinking of buying an investment property for your college student?

You are considering buying an investment for your college student to live in while they go to school. What questions should you ask yourself before making this decision?

A significant amount of money will be spent on housing if you have a child going to college. According to an article published by Education Data Initiative, the average room and board costs can range from $8,000 to over $14,000 per year. The costs vary depending on a two year school or four year, and whether it is public or private school. Those are averages and the actual cost may be higher or lower depending up the school your student attends. Regardless of where your student attends school, housing costs are a significant amount of money. For this reason, many parents consider purchasing an investment property for their child to live in while in school. But is buying an investment right for you?

Does the math work?

Here are some questions to ask yourself before you decide. Does the math make sense? Would buying a property, actually save you money? Depending on the real estate market where your child will be living, does the cost of buying and maintaining a property save you money over the cost of a dorm room?

Renting rooms?

With that question being asked, do you plan on other students renting rooms to cover some of the costs? This is one way a parent might justify the cost of buying a place. Tenants could defray costs. If that is the plan, make sure your child feels comfortable living with whoever has committed to renting there. Also make sure the other students sign a lease. If the tenant/students back out, do the numbers still work or would it be cheaper to have your student in the dorm.

Is your child responsible?

Is your child responsible enough to handle living in their own place and being in charge of it? This can be a growing and learning experience for your student to live in a place and be responsible for the day-to-day upkeep. But it can also be distracting or in some cases, overwhelming. The most important thing for your student is school. You want them to focus and be successful at school. If they are able to learn life skills and school at the same time this might be a great experience for them.

Appreciation?

Another question to ask is regarding appreciation. Will the property will appreciate enough over time to offset the carrying costs and the costs of sale. This question is impossible to predict, but with research you may have a good idea whether you will make a profit over the time that you own the property. One last question to ask is if the property will sell easily when your child graduates. This is another question that is impossible to answer but you can make some educated predictions. Is what you would like to purchase a popular, desirable choice in the real estate market? If the property cannot be sold quickly could you continue to use it as an investment property? Will you hire a property management company to manage the property at that point?

These questions are not intended to scare you away from buying an investment property for your child to live in while in college. These questions are meant to ensure you make a well informed decision. If you feel a purchase is right, be sure to connect with a business savvy real estate agent to guide you, like me! Call Lestel 970-310-8379.

How long will it take to find my next home?

Buyers often wonder how long it will take for them to find the perfect home. It is important to know this in order to plan when to start the home search in earnest. According to the National Association of Realtors it typically takes about ten weeks to find a home. That is based on their data. I do NOT agree. That sounds like an eternity to me.

There is no way to predict how long it will take to find a home. Buyers often take as much time as they have to work with. If you hare not in a rush, you will take much longer than someone that has a short time frame and needs something quick. Market conditions will also affect how long it takes you to find a home. If there are a lot of homes for sale in the price range you are looking and there are not many buyers looking, you will have more control over how long it takes. If there are few homes for sale and many buyers competing for those few homes, it could take you longer to find a home. You cannot control supply and demand. In order to make your home search as efficient and stress free as possible here are some things to be aware of in searching for a home.

Know the areas you like

Know the areas that you are interested in before you begin your home search. You can certainly change your mind, but knowing the areas you are most interested in saves time looking in places you do not want to live. You can focus on the houses, because you know the location that you want.

Know your price

Know your price range. Get pre-approved for a mortgage before you start looking. Accept the reality of what you can afford and look at homes only in that range. Looking at your specific price range allows you to hone in on the perfect house for the money that you can spend. Don’t waste time looking above your price range. I know, you just want to see what a bit more money could buy. It is pointless and makes it difficult for you to like the houses that you can afford. Doing this also adds time to the process due to the psychological and emotional toll that it takes on your during the process.

See houses as soon as they are listed

Make sure you can take time to see a home as soon as it is listed. House hunting can be a daily process, not just saved for the weekend. Real estate cam be fast paced and the good homes sell fast. Try to be the first to see a home and you could be the one to make that home yours.

Make a strong offer

Make sure that your offer is strong the first time. In the world of real estate if you do not make a strong offer the first time you write, you may not get a second chance. The seller may have multiple offers to consider, or the seller may just reject the offer you have presented/. Don’t loose out on the house you want over a few thousand dollars. Make a strong offer the first time.

While you can’t control supply and demand or overall market conditions you can keep the length of time it takes you to find a house to a minimum if you remember these take aways.