Making an Offer on a Home? Here’s How!

Making an Offer on a Home-Here's How- 150x150Making an offer on a home can be somewhat confusing for most first time home buyers. Before making an offer, most people inevitably ask themselves if maybe the offer is too low or too high. Unfortunately, there is no set in stone rule when making an offer on a home. There are several factors that you should take into consideration before contacting the seller with an offer. These factors can make it easier for you to tell how much the seller might be willing to accept for his or her home.

Whatever your offer ends up being, keep in mind that a verbal promise is not legally enforceable. You will need to make an offer in writing, which will also include the terms and conditions of the purchase. Your offer will only be the first step of the negotiation process. The seller will, most likely, get back to you with a counter offer, which you can take or try to negotiate further.

Deciding on How Much to Offer

When making an offer on a home, you will have to make sure that the offer is not too low, which can result in the seller feeling insulted. Also, you have to make sure that the offer is not too high, because that will be more money out of your pocket. So the solution is finding a middle ground, a price that will satisfy the seller, and one that you can live with. Before making an offer on a home, you should do some research, which will help you better evaluate how much the home is actually worth, and give you information to back up the price you offer.

  • Find out how much other comparable homes have sold for recently. Your real estate agent can probably help you with finding out how much other homes like the one that you are prepared to buy have sold for in the past few months. Try to find homes that are as similar as possible, in the same area with the same number of rooms, similar amenities and appliances.
  • Find out if the local demand for homes is high or low. Finding out if there’s a high or low demand for homes in the area is really important and can help you significantly in coming up with an offer. If the demand for homes is high in the area, then prices are going up because it’s a sellers’ market, and you will probably have to compete against other bidders for that home. If the demand for homes is low in the area, then you probably won’t have any competition, and it will give you more room to negotiate.
  • Find out if other buyers are interested in the home. Having competition means that you will probably have to outbid other buyers in order to purchase the home. This is not a good situation to be in, so your first offer should be closer to the asking price. This will increase your chances of being the one that wins the bidding war, but it is up to you to decide if paying close or even exactly the asking price is worth it.
  • Find out if the owner is in a hurry to sell. The seller might need to move quickly or need the money from the sale for a new home. Knowing this means that you can negotiate more aggressively, especially if there are no other buyers involved.
  • Find out what condition the property is in. It may cost you a few hundred dollars, but having the home professionally inspected before signing a contract can save you a lot of money and headaches in the future. Based on the results of the inspection, you can also decide how much to offer.

Making an offer on a home is not as easy as it looks. But researching your purchase and knowing what you are looking for can put you in a position where you know how much you can negotiate, and better estimate how much the seller is willing to accept. Remember that making an offer that is too low is almost as bad as making an offer that is too high. The price will usually be the maximum that the seller expects to receive for the home, but that doesn’t mean that they will go much lower than that. Based on the factors listed above, you should be able to come up with the perfect offer which the seller will hopefully accept.

To Buy an Existing Home or a New Home, That is the Question

To Buy an Existing Home or a New Home, That is the Question- 150x150There may come a time in your life when you will want to stop paying for rent or living with your family or friends and become a home owner. One of the most basic dilemmas that most people who are looking into home ownership have is whether to buy an existing home or a new home. Finding the answer to this dilemma is surprisingly difficult because there are many factors that you will have to take into consideration when buying a home. Both choices have plenty of advantages and a few disadvantages, which should be carefully looked into before deciding which way to go.

Advantages to Buying an Existing Home

Buying an existing home may not seem that beneficial for you at first glance, when compared to buying a new home or building your own. But there are some clear pros to buying an existing home and they shouldn’t be overlooked. Here are the most important:

  • Location. Existing homes are most likely built closer to major metropolitan areas, which will make your work commute and shopping significantly less difficult and cheap. Many new homes are built at the edge of the city or town, so your commute will be longer, which means that you will be spending more gas and time on the road every day. Check out the most expensive housing markets as well as the least expensive housing markets to help make your decision.
  • Build quality. Both construction materials and labor were less expensive in the past, which means that even if the home is a few years older, it’s very likely that it was built stronger and with better materials than a home built recently.
  • Appliances. Many existing homes are sold with included appliances, such as stoves, refrigerators, or even television sets. Buying a new home or building means that you may have to buy all or some of these appliances which can end up being quite expensive.
  • Better curb appeal. Most existing homes have mature trees around them and landscaping. You probably won’t get that with a new home, and, depending on which area the new home is built in, you may have to wait years until your home’s surroundings will be complete with mature foliage and finished construction projects.
  • The neighborhood. Most existing homes are located in already established neighborhoods, so it will be easy for you to find out if you are moving into a good or a bad neighborhood. You can also find out what your neighbors are like before buying the home. When buying or building a new home in an unknown area, you can end up having some unwanted developments built right next to your home.

Advantages to Buying a New Home

Buying a newly built home or building your own home also has plenty of advantages and, depending on your situation, might be the better choice. Here are the pros to buying a new home:

  • Location. While this can also be considered a disadvantage, living on the outskirts of a city, where new houses are often built, can also be a blessing for those who want to live away from the noise and agitation of a large city. If you’re looking at rural areas, you can potentially apply for a USDA mortgage loan.
  • Less maintenance. A newly built home will need repairs and maintenance much less than an existing, older home. Many parts of the home may even be covered by a few years of warranty. Serious and expensive repairs to things like the roof or the electrical system will be much cheaper or even free if they are covered by a warranty.
  • More modern. People’s taste in homes changes over time, which means that you will probably like a new home, with bigger rooms and a more modern design. On the other hand, older homes may have certain unique architectural elements that you my like.
  • More energy efficient. Because new homes are made with newer materials, they may be better insulated, making your energy and heating bills much lower. Existing homes usually cost more to heat or cool, but it generally depends on the age of the construction.
  • Amenities. Many new homes may offer amenities that are not usually offered when moving into an existing home. These amenities can include a swimming pool, jogging trails, or playgrounds for your children.

Buying an existing home or buying a new home may seem like an easy decision, but it is actually a very serious and difficult decision. Whatever your budget and requirements are, you should not dismiss either option before taking a closer look at what each has to offer. Additionally, renting a home may be an option to consider. You might be set on buying or building a new home, only to find that it will be much cheaper and convenient to buy an existing home that will satisfy all your needs.  Alternatively, you may also find that buying a new home over an existing home can be more beneficial for your situation.

Don’t Fall for These Homes: Deal Breakers You Need to Know

Don’t Fall for These Homes- Deal Breakers You Need to Know- 150x150When looking for a home, it’s easy to fall in love with certain aspects of a house and totally disregard others. Whether it’s the neighborhood that the house is located in, the neighbors, or the curb appeal, you should take a step back and start looking at the whole picture. The issues that you might have missed will almost definitely give you big headaches in the future, and  if possible, they might be expensive to fix.

A house that may seem like it’s in great shape could be hiding some major damage and/or structure issues that will cost you an arm and a leg, while a house that doesn’t make such a great first impression could be easily and cheaply fixed to your liking, saving you big money in the long run. Here are some of the most important deal breakers that you should be aware of.

Important Deal Breakers

1. The location. Your new house will probably be your home for a long time, so its location should be one of the most important factors that will influence your home buying decision. Houses that are in close proximity to interstates, busy intersections, or train tracks might not be such a good choice if you don’t want to deal with a lot of noise and traffic. Also, one of the main considerations when buying a house is the neighborhood that it is in. An out of shape house located in a nice neighborhood could have a greater value than a good looking house located in a bad neighborhood.

2. The foundation. Foundation damage is not only one of the most expensive issues that the house can have, but it can also cause other damage to your home unsuspectingly. The house’s plumbing and walls can be affected by a cracked foundation, meaning that the repair bill will be in the tens of thousands of dollars. Even if the foundation was fixed, make sure that the work is covered by a warranty, preferably a lifetime warranty.

3. The roof. Changing, and even repairing, the roof of a house is a very expensive operation. Pay close attention to what shape the roof is in and, if the seller doesn’t agree to pay for its repair, it would probably be better to keep looking. Of course, this all relates to the cost of the house. The house may be listed for cheaper than other similar houses because its roof needs replacing. The biggest problem when buying a house with a damaged roof is that, when the first heavy rain comes, you might find yourself having to repair more than just the roof.

4. The plumbing and wiring. Two other parts of a house that can be very expensive to repair or replace are the electrical wiring and the plumbing. Re-wiring and re-plumbing a house involves opening up walls, digging, and usually quite a bit of time. Faulty electrical wiring can cause fires and bad plumbing can cause floods, so they are both problems that need dealing with before they put your life in danger.

5. Schools. If you have children, or plan on having them in the future, your home’s proximity to schools will be important. More important than that, though, is what school district your house is in. The quality of education, as well as the distance, both matter when you have kids. If the school is too far from your house, you will have to spend significant time driving your kids to and from school, or they will have to spend a lot of time on the bus.

6. Termites or pests. Probably unseen when you first visit the house, termite and pest problems can also be a deal breaker. Hiring someone who can thoroughly search the house for any of these problems is a great idea. Even if the seller has gotten rid of termites, they can still come back if prevention methods were not used, so make sure you inquire about what methods that prevent the reappearance of termites were used and when.

When buying a house, try to look at the big picture. The location is very important, as you will probably live there for many years to come, but you shouldn’t ignore the house’s existing damage just because you think you have found exactly what you were looking for. Even small damage to the roof or foundation can become a big and expensive problem in the future, so finding them before you buy the house is of utmost importance. A few hundred dollars spent on a professional home inspection can save you a fortune in the future.

10 Ways to Improve Your Chances as a Buyer in a Sellers’ Market

Top 10 Tips for Home Buyers in a Sellers' Market- 150x150Prices and current mortgage rates are very low right now, and it may seem like the perfect time to buy a home, but things are not as good as they seem in the real estate world. Inventories of homes for sale are extremely low and home builders are just starting to recover from the recession. Homes listed for sale receive a lot of offers, which makes it very stressful for all home buyers.

Trying to buy a home in a seller’s market is a frustrating process that will usually result in you not being able to buy the first home that you want. When demand for homes exceeds supply, sellers will receive multiple offers on their homes, which will make the home prices go up. With a little research and preparation, your chances of succeeding in a sellers’ market will be greatly improved. Here are 10 tips that will turn the odds in your favor:

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Tips for Home Buyers

1. Find a Good Real Estate Agent. In a sellers’ market, sellers receive multiple offers on their home, so things tend to move faster than usual. You will need to be quick and have knowledge of the whole process. A very good real estate agent will greatly increase the chances of you getting the home that you are looking for. He or she has to know the area, have good relationships with many other real estate agents, and give you the best advice when it comes to making an offer on a home.

2. Know the Process. Do some research on the whole home buying process. From knowing what to look at when considering a house or apartment, to knowing the steps involved in buying a home, this process can be overwhelming. You must also be aware of what you are looking for and what the home prices are in your area. Having a good real estate agent is enough for most people, but knowing a few things about what buying a home involves can help you act quickly when needed, and avoid a lot of headaches.

3. Get Pre-Approved with a Good Lender. Getting pre-approved for mortgage loans will involve some running around in order to get the paperwork ready, but it is an important step in buying a home, as most sellers will not even consider your offer otherwise. Preparing all the paperwork before even starting looking at houses is always a great idea which will save you a lot of time, and give you the advantage of acting quicker when you find a home.

4. Act Quickly. After finding a home that you like, don’t wait too long before making an offer. The more you wait, the bigger the chances are that more people will become interested in that home, and your competition will increase to a point where someone else will make a more attractive offer.

5. Pay the Closing Costs. Because it’s a sellers’ market, the seller will most likely have a bunch of offers for his or her home. Asking the seller for closing costs credit will put you at a disadvantage, as there might be other buyers who didn’t ask for credit. For example, if the sales price of a house is $450,000 and you need a $15,000 credit for closing costs means that the seller will only get $435,000 for the house. Even offering him $465,000 and asking for closing costs credit will put you at a disadvantage, because the seller will have to pay more in commission, tax and title fees.

6. Expect to Pay Market Value. Adjust your offer according to sales prices in the area that you are interested in. If your initial bid is too low, you may ruin any chance of getting that house. In a sellers’ market prices usually keep going up and you need to adapt before making an offer.

7. Good Faith Deposit. While a good faith deposit, or an earnest money deposit, doesn’t normally have a set requirement, sellers in a sellers’ market expect buyers to show a little more “good faith.” Normally, good faith deposits are between 1 and 3 percent of the sales price.

8. Be Flexible. If you can offer a larger down payment or if you can move in any time after you buy the home, then make sure you mention it. Also, if you plan on fixing and improving things in your new home, then it’s generally best not to be too picky after you inspect the house or apartment.

9. Write a Personal Note to the Seller. A personal letter that includes a little about yourself and why you like the seller’s home can make you stand out from other interested parties, or it can make a big difference if the seller has another offer similar to yours.

10. Don’t Give Up. In a sellers’ market, the chances that some of your offers will be rejected are very big. Try not to take it personally and, more importantly, don’t give up. While it is disappointing, keep in mind that the seller is only making choices based on what is best for him or her.

Buying a home in a sellers’ market, when prices are high and your offers keep getting rejected, can prove to be a challenge, but doing a little research on the subject can go a long way and save you a lot of trouble.

10 Clever Ways to Save Money Using Home Buyer Tax Deductions

Top 10 Tax Deductions for Home Buyers-150x150Buying a home is a dream come true for most people. While becoming a home owner usually involves a great financial sacrifice, it does come with some perks, besides owning your own home, of course. Many expenses related to your home are tax deductible, and these deductions apply to any type of home: town house, apartment, mobile home, single family residence and more. Unfortunately, this will complicate your taxes, but the extra effort put into detailing your deductible expenses is well worth it.

From the time you become a home buyer until you decide to sell, your home will provide a lot of tax benefits. Consulting a professional advisor in order to get all the details is always a good idea, but here is a list of the top 10 tax deductions for home buyers.

Top 10 Deductions

1. Mortgage Interest Deduction. If your mortgage loan is less than $1 million, then the interest that you are paying is tax deductible. For the first few years, your monthly payment will be mostly made up be interest, so this tax deduction will make our home more affordable, especially if you are a first time home buyer.

2. Points Deduction. When taking out a mortgage loan, your lender charges you a variety of fees. One of these fees is called “points” and one point equals 1 percent of the principal on the loan. Unlike in the case of a mortgage refinance, where the points are deducted over the life of the loan, when buying a home with a mortgage loan, the points are fully deductible up front.

3. Interest Deduction on a Home Improvement Loan. If you take out a loan in order to make “capital improvements” to your home, be aware that the interest on this loan is tax deductible. Capital improvements are improvements to your home that increase its value or extend its life, and should not be confused with simple repairs. In case of a loan taken out for repairs to your home, the interest will not be deductible.

4. Equity Loan Interest Deduction. A portion of the interest that you paid on a home equity loan or line of credit can be deducted, but there is a limit set by the IRS on how much you can treat as home equity. This limit is $100,000 for a family or $50,000 per each member of the married couple, or the home’s market value.

5. Property Taxes Deduction. A large part of your monthly mortgage payments will be represented by property taxes. The amount is held into an escrow account in order to pay the property taxes yearly. You can only claim this tax deduction when the money is taken out of the escrow account and paid.

6. Private Mortgage Insurance (PMI) Deduction. When getting a mortgage loan, if your down payment is less than 20 percent, you will usually be required by your lender to pay a Private Mortgage Insurance. This type of insurance can represent a large portion of your monthly payment, and it is tax deductible, but only for those who qualify.

7. Selling Profit Deduction. Up to $250,000(or $500,000 for a married couple) of the profit that you or your family make from selling your home is tax deductible, with the condition that you have owned your property for at least 2 years and the home has been your primary residence for 2 of the past 5 years.

8. Home Office Deduction. If part of your home is used as an office, you will be able to deduct a percentage of your mortgage and utilities. There are a few requirements, in order to qualify for this deduction: your home office has to be your primary office location for your business, it must be used only for business, and its size has to be realistic.

9. Health Related Improvements Deduction. Making improvements for medical reasons to your home can be tax deducted, as long as the improvements are made for a chronically ill person.

10. Moving Expenses Deductions. If buying your home is a result of your need to relocate for work, then you might be able to deduct the cost of moving and other related costs. However, your new job must be more than 50 miles further from where your old job was.

Buying a home can provide some important benefits when the time comes to file your federal tax return. From deducting your mortgage interest, to tax deductions related to your relocation, there are a lot of areas in which you can save money, as long as you qualify and do your research.