How To Save Thousands of Dollars When You Buy a Home

“When you analyze those successful homebuyers who have the experience to purchase the home they want for thousands of dollars below a seller’s asking
price, some common denominators emerge.”

If you’re like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to pur­chase this home for the lowest possible price. When you analyze those successful homebuyers who have been able to pur­chase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Negotiating skills are important, but there are three additional key factors that must come into play long before you ever submit an offer.

These Steps Will Help You Save Thousands When You Buy a Home

Make sure you know what you want…As simple as this sounds, many homebuyers don’t have a firm idea in their heads before they go out searching for a home. In fact, when you go shopping for a place to live, there are actually two homes competing for your attention: the one that meets your needs, and the one that fulfills your desires. Obviously, your goal is to find one home that does both. But in the real world, this situation doesn’t always occur. When you’re looking at homes, you’ll find that you fall in love with one or another home for entirely dif­ferent reasons. Is it better to buy the 4-bedroom home with room for your family to grow, or the one with the big eat-in kitchen that romances you with thoughts of big weekend family brunches? What’s more important: a big backyard, or proximity to your child’s school? Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn’t meet their needs.
Don’t shop with stars in your eyes: satisfy your needs first. If you’re lucky, you’ll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.
Find out if your agent offers a “Buyer Profile System” or “House­hunting Service,” which takes the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an on-going basis. A program like this helps home­owners take off their rose-colored glasses and, affordably, move into the home of their dreams.
To help you develop your home buying strategy, use this form:

What do I absolutely NEED in my next home:
1. __________________
2. __________________
3. __________________
4. __________________
5. ________________

What would I absolutely LOVE in my next home:
1. __________________
2. __________________
3. __________________
4. __________________
5. ________________

How Sellers Set Their Asking Price – For you to understand how much to offer for a home you’re interested in, it’s important for you to know how sellers price their homes. Here are 4 common strategies you’ll start to recog­nize when you begin to view homes:

1. Clearly Overpriced: Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to over inflate the value of your home. This is done far too often, with many homes that are priced 10-20% over their true market value. This is not in your best interest, because in most cases the market won’t be fooled. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks: your home is likely to be labeled as a “troubled” house by other agents, leading to a lower than fair market price when an offer is finally made, you have been greatly inconve­nienced with having to constantly have your home in “showing” condition for nothing: These homes often expire off the market, forcing you to go through the listing process all over again.

2. Somewhat Overpriced: About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there’s a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you both in terms of time on the market and ultimate price received

3. Priced Correctly at Market Value: Some sellers understand that real estate is part of the capitalistic system of supply and demand and will careful­ly and realistically price their homes based on a thorough analysis of other homes on the market. These competi­tively priced homes usually sell within a reasonable timeframe and very close to the asking price.

4. Priced Below the Fair Market Value: Some sellers are motivated by a quick sale. These homes attract multi­ple offers and sell fast – usually in a few days – at, or above, the asking price. Be cautious that the agent sug­gesting this method is doing so with your best interest in mind.

For additional information on buying a home, contact 708-966-9282 or
Email Me

Best Financing

“…shopping for the best financing should start long before you start shopping for a home.”

When you’re looking to buy a home, the first thing most homebuyers do is start the process of house hunting. However, experience proves that this is one of the last steps you should be taking if you want to get the most home for the least amount of money. In fact, shopping for the best financing should start long before you start shopping for a home.

This report outlines 3 important steps you should take to obtain the best financing rates when you buy a home. Read on to find out where you can enquire, what questions you should ask, and how to manage the process to your personal advantage.

3 Point Plan – 3 Critical Questions to Ask When you’re looking for an agent to assist you in finding a home, make sure you find out the answers to these important questions:

1. Can you get me quick, easy and FREE mortgage preapproval?
2. Can I get preferred access to special low down payments, monthly pay­ments and interest rates?
3. Can I get special advance notice of listings that computer-match my homebuying criteria?
You owe it to yourself to benefit from these cost saving benefits.

1. Get Preapproved for a Mortgage …Getting preapproved for a mortgage will give you a number of important benefits including emotional security in the house-hunting process, and insurance against rising interest rates in the market place. Preapproval is easy, and can give you complete peace-of-mind when shopping for your home. Mortgage brokers can obtain written preapproval for you at no cost and no obligation. More than just a verbal approval from your lending institution, a written preapproval is as good as money in the bank. It entails a completed credit application, and a certificate, which guarantees you a mortgage to the specified level when you find the home you’re looking for. Preapproval means no last minute shopping around for money and rates. With a preapproved mortgage, if rates go up, you still get the preapproved rate, but if rates go down, you receive the lower rate.

2. Receive Preferred Access to Special Low Financing…Agents that conduct hundreds of real estate transac­tions every year may be able to offer you certain negotiating advantages with lending institutions. These lenders are often anxious to do business with such agents and their clients, and may be willing to extend better than average rates. This can make purchasing a home much easier and more affordable for many buyers to qualify for a minimum down payment, and low monthly pay­ments. Therefore many more buyers can own the home of their dreams much sooner than they ever thought possible.

3. House hunting Service…Most agents offer a house-hunting service to make it easier for you to find the home you want. Through these programs you can find out in advance which homes on the market match your home buying criteria. To do this you simply provide your agent with a brief description of the type of home you’re looking for, for example, number of bedrooms, price range, neighborhood and so on. Then you should receive advance notice (including pictures) of all the homes for sale that match your requirements. This will give you the competitive edge to find out before other buyers which homes that are likely to be of interest to you. Because you are there before most other buyers, perhaps you can even negotiate a better price. You can then drive by these homes, without the assis­tance of an agent. to see which ones you want to view. Then it’s simply a matter of you advising your agent about which homes you like and want to see.

If you would like more information on buying a home, please contact me 708-966-9282 or email me now. http://www.bairdwarner.com/chrisha.mitchell

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Is This a Joke? FHA Loan Limits Set to Fall, Down Payments to Rise

By: Matt Dornic

Published: August 17, 2011

Batten down the hatches, because the U.S. housing market is headed straight into another storm. That’s because limits for Federal Housing Administration (FHA) loans are set to shrink significantly on Oct. 1, 2011, and the only people who can steer this ship to safety are off enjoying a long summer holiday.

Batten down the hatches, because the U.S. housing market is headed straight into another storm. That’s because limits for Federal Housing Administration (FHA) loans are set to shrink significantly on Oct. 1, 2011, and the only people who can steer this ship to safety are off enjoying a long summer holiday.

If you’re looking to purchase or refinance a home valued between $271,050 and $729,000, take note: You may be ineligible for an FHA-backed loan.

A little FHA background
Established during the Great Depression to help stabilize the market, the FHA loan program has long made home ownership an affordable reality for millions of Americans. The program backs mortgages for creditworthy buyers who don’t necessarily make the cut for a traditional bank loan. For example, FHA offers qualified home buyers financing with as little as a 3.5% down payment and credit score as low as 620. If you can put 10% down, your credit score can be as low as 500. In turn, borrowers who take an FHA-backed mortgage pay a premium of roughly 1% annually.

FHA currently provides loans for up to $729,750 in the nation’s most expensive real estate markets. But right now, when it’s needed most, the program is being limited.

It’s been widely reported that unless Congress intervenes before Sept. 30, 2011, loan limits for conforming mortgages (those that FHA, Fannie Mae, or Freddie Mac will back) will drop to $625,500 from $729,750 in the nation’s priciest real estate markets, such as San Francisco and New York.

But what the media has failed to highlight is the impact of the decreased conforming mortgage limit on regions that fall below the maximum loan ceiling. Few areas of the country will be spared: The limit decrease would affect 669 counties in 42 states and the territories.

The average national decline would be around $68,000. In some areas, it’ll shrink by only $1,000. But in Monterey, Calif., for instance, it’ll decrease by almost $250,000. FHA loans correspond to an area’s median home price, so the limits for FHA-backed loans vary regionally.

Making a tough housing market unnecessarily tougher
The NATIONAL ASSOCIATION OF REALTORS® estimates that 59% of all owner-occupied housing will be ineligible for affordable FHA financing. If families can’t sell their homes and others can’t buy, how do you think that will affect your buying power? Or for that matter, your property value?

Adding insult to injury are proposed reforms to FHA standards. In an attempt to further limit the government’s role in the housing market, some lawmakers want to change the requirements for an FHA loan, moving the minimum down payment to 5% from 3.5%.

So let’s recap. Mortgage limits are being lowered as requirements for FHA loans are being raised. This must be Capitol Hill’s idea of a joke. How exactly will this help the housing market or America’s economy?

How do you think the change in loan limits would affect the housing market?

By: G. M. Filisko

Published: April 9, 2010

Knowing how to read your good-faith estimate can help you save money on your home loan.

When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you’ll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.

1. Know which fees can increase and by how much
In the past, lenders provided an estimate of the costs involved in getting your home loan, and if those costs rose by the time you closed on your home, tough luck. The good-faith estimate shows some fees the lender can’t change, like the loan origination fee that you pay to get a certain interest rate (commonly called points) and transfer costs.

The form also lists the charges that can increase by up to 10%, like some title company fees and local government recording fees. The lender must cover any increase over that amount.

Finally, the good-faith estimate lists the fees that can change without any limit, such as daily interest charges.

2. Look for answers to basic loan questions
In the summary section, lenders explain your loan’s terms in simple language. Can your interest rate rise? If so, a lender must spell out how much the rate can jump and what your new payment would be if it does. Can the amount you owe the lender increase, even if you make your payments on time? If it can, a lender must show you the potential increase.

3. Evaluate the “tradeoffs” on a loan
In the new “tradeoff table,” you can ask lenders to provide details on the tradeoffs you can make in choosing among home loans. If you’d like the same loan with lower settlement charges, how will the interest rate change? If you’d like a lower interest rate, how much will your settlement charges increase?

4. Compare apples to apples with the shopping chart
Included on the good-faith estimate is space for you to list all the terms and fees for four different loans, so you can make side-by-side comparisons.

5. Know what’s missing from the good-faith estimate
The new form lacks some key information, such as how much you’ll reimburse the sellers for property taxes they’ve already paid on the home. It also doesn’t tell you the amount of money you’ll have to bring to the closing table. Some lenders have created supplemental forms providing that information. If yours hasn’t, ask for it.

More from HouseLogic
More on the new good-faith estimate form

Other web resources
The new U.S. Housing and Urban Development good-faith estimate

More on shopping for a loan

G.M. Filisko is an attorney and award-winning writer who has encountered many settlement statements that bore no resemblance to the lender’s good-faith estimate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Chrisha Mitchell,
Baird & Warner, Orland Park
BUY/SELL/RENT/INVEST
708-966-9282
http://ilplatinumrealestate.com

How to Use Comparable Sales to Price Your Home

By: Carl Vogel

Published: August 5, 2010

Before you put your home up for sale, use the right comparable sales to find the perfect price.

Knowing how much homes similar to yours, called comparable sales (or in real estate lingo, comps), sold for gives you the best idea of the current estimated value of your home. The trick is finding sales that closely match yours.

What makes a good comparable sale?
Your best comparable sale is the same model as your house in the same subdivision—and it closed escrow last week. If you can’t find that, here are other factors that count:

Location: The closer to your house the better, but don’t just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.

Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it’s finished), finishes, and yard size.

Amenities and upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?

Date of sale: You may want to use a comparable sale from two years ago when the market was high, but that won’t fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.

Sales sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.

Agents can help adjust price based on insider insights
Even if you live in a subdivision, your home will always be different from your neighbors’. Evaluating those differences—like the fact that your home has one more bedroom than the comparables or a basement office—is one of the ways real estate agents add value.

An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS®, lenders, closing agents, and appraisers said about the comparable sale.

More ways to pick a home listing price
If you’re still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).

Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?

Are foreclosures and short sales comparables?
If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.

A foreclosed home is usually in poor condition because owners who can’t pay their mortgage can’t afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.

Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they’re divorcing, or their employer is moving them to Kansas.

How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.

So you have to rely on your REALTOR’s® knowledge of the local market to use a short sale as a comparable sale.

More from HouseLogic
What You Must Know About Home Appraisals

6 Reasons to Reduce Your Home Price

Other web resources
New York State: “How Estimates of Market Value are Determined for Residential Properties”

What’s the Value of a View? Research from Texas Christian University

Carl Vogel, a freelance writer and former editor of The Neighborhood Works magazine, lives in a home in Chicago that is not typical of those nearby, so he appreciates a savvy comp.

http://www.bairdwarner.com/chrisha.mitchell

We Think We’re Going to Believe Grandpa

by THE KCM CREW on MARCH 22, 2011

There are those currently debating the financial advantages of owning a home. Some are looking at studies and reporting that homeownership has never really been a great investment.

One of these people is Jack C. Francis, a former Federal Reserve economist and professor at Baruch College. He said in a recent CNBC article:

“For generations, parents and grandparents have been telling us that the way to get ahead was to buy a house and keep making payments with a fixed interest rate and after 20 or 30 years it would be way up in value and that was your nest egg in old age. You could either live in it rent free or sell it and use the proceeds to rent an apartment.”

The article goes on to explain the rest of Mr. Francis’ comment:

That was good advice until 2006 when home prices collapsed, he says, and it “may become good advice 10 years from now, but right now it’s not.”

Mr. Francis bases his conclusions on a study he completed which covered the years 1978 through 2008. In his study it showed that home prices increased annually by 5.7% and that the S&P 500 increased by 10.8%. Based on this information, Mr. Francis gives the following advice:

To students who come to him for guidance on whether to buy or rent in the near term, however, Francis has one word of advice: wait. “I keep telling them this is not the time to buy,” he says.

Let’s take a closer look at this conclusion.

1. We have our own study.

Mr. Francis did a study over a thirty year period which did not include the last 3 years. If we look at the same categories since January 2000 (covering one of the worst decades in American real estate history), we find that home values GAINED 42% while the S&P LOST 4.7%. It all depends on which set of data you choose to use.

2. The proper comparison is rent vs. buy.

All of these comparisons claim that putting your money into a different investment vehicle other than real estate might make sense. What they are not taking into consideration is that the investor will still have a housing expense. They will still need money for shelter. They cannot just take their money for shelter and buy other assets with it. A person can’t live in their 401k or their IRA. This leads us to…

3. In most markets today, owning is LESS expensive than renting.

Trulia recently came out with their Rent vs. Buy Index. The report shows:

that it is more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities.

For more on this issue including a 50 city breakdown, click here.

4. Current mortgage opportunities may never be available again

The government has driven mortgage interest rates to all time lows. You can still get a 5% rate and guarantee it for 30 years. Both of these opportunities may soon disappear. Mortgage rates will increase as the economy improves and the Fed no longer feels pressure to keep rates low. The 30 year mortgage may soon be a thing of the past if suggested mortgage reforms come to be. You can lock in your housing expense for 30 years if you purchase. Renting is like having an adjustable rate loan with no cap that readjusts EVERY year. Which way do you think a landlord will readjust it?

For more on this, click here.

5. Most Americans see more to homeownership than financial value.

Last week, Fannie Mae released the National Housing Survey. The survey reported:

96% of all homeowners said homeownership has been a positive experience.
84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.
2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).
Bottom Line

There are more and more studies being done on the value of homeownership. We think we will trust in what our parents and grandparents said. Your mortgage payment is money you put into your savings. Your rent payment goes into the garbage.

Click here to view Chicagoland homes!
or for more information on purchasing a home Call Chrisha directly at (708) 966-9787.