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A Home

Tax Benefits of Florida Homeownership
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Buying For Sale By Owner
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Budgeting for a Home Purchase
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Getting Pre-approved for a Mortgage
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Finding a Great Lender
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Building your Home Buying Team
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Online Shopping, Real Estate Apps & Sales Pitches
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Property Types: fee-simple, condominium concepts, villas & more
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Location: Cities, Neighborhoods, Schools and Lifestyle Choices
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Touring Homes & Open Houses
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Making an Offer on a Home
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Contingencies
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Negotiating a Home Purchase
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Applying for the Home Loan
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Home Inspection
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Appraisal
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Homeowners Insurance
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Buyers Home Warranty
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Title Insurance
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Final Walkthrough Inspection
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What Happens When Closing On A Home Sale?
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After You Close Checklist
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Tax Benefits of Florida Homeownership

Florida attracts residents from all over the world with a warm subtropical climate and breathtaking beaches.  Aside from the lifestyle perks, there are significant tax benefits of Florida homeownership.  Establishing Florida residency offers major tax benefits with no income or estate tax, a generous Homestead exemption, retirement tax breaks, and corporate tax exemptions

No State Or Local Income Tax

There are no state or local income taxes in Florida.  This can be a substantial saving, particularly for those moving from states with higher local and state taxes, such as New Jersey, New York, or Vermont.  Since the 2017 Tax Cuts and Jobs Act, which limits the amount of state and local taxes an individual is able to deduct on the federal level to $10,000, Florida is an even more attractive move.

No Estate Or Death Taxes

Be sure to update your will and estate plan to show your Florida address as your primary residence.  Include any Florida properties, and be sure to express that your wishes are to have your will and estate plans executed under Florida law.  In the event of your death, Florida, unlike the majority of states, does not tax your heirs or your estate.  If you do not have estate plans or a will in the state of Florida, and you die, the state intestacy succession laws will decide how to move forward with your assets.

Homestead Exemption, SOH, Amendment 5

The original legislation for Homestead Exemption, one of the first tax benefits of living in Florida, was passed in 1934.  The exemption originated to protect homeowners who fall financially on hard times and widowers from losing their homes.  Additionally, Homestead Exemption also was intended to entice people to move to Florida.  Homestead gives a $25,000 exemption, including school district taxes on the home’s assessed value.  The next $25,000 of the assessed value is fully taxed, then the 25k between $50,000 and $75,000 is exempt, but not from school district taxes.

Save Our Homes or “SOH” allows the transfer of tax benefits from one primary home residence to a new house.  Portability is the term used for this transfer of tax benefits.  The new house must be filed for Homestead exemption and the primary residence of the homeowner.  SOH allows up to $500,000 in portability.  The equation works like this, take your previous home and subtract the assessment value from the market value.  That number can then be subtracted from your new home’s assessed value for a current assessed value for taxes.  For example, if your previous home’s market value is $250,000, the assessed value is $200,000.  Your new home has an assessed value of $300,000.  You would be able to minus $50,000 from the new home for a current assessed value of $250,000.

Amendment 5 passed in November 2020 and extended the timeframe for portability to 3 calendar years where it previously was 2.  This gives sellers an opportunity to sell when the market is hot yet have the flexibility to rent if there are circumstances that aren’t allowing an immediate purchase of a new home. The tax benefits from a previously homesteaded house can be transferred to a new primary residence in Florida for up to 3 years.  Note that it is 3 tax years, so no matter what month you sell your house, the rest of that year is number 1.

Retiree Tax Benefits of Living In Florida

It is important to mention that in addition to the savings on property taxes from Homestead and SOH, tax benefits of living in Floria for retirees are massive.  Retirees with Florida domicile do not have to pay state or local income taxes on any retirement income or social security benefits.  Furthermore, not having to pay state or local income taxes, those retirees who choose to work part time get to keep more of their paycheck.

Business Taxes

In addition to the tax benefits of living in Florida, there are advantages to owning a business in the sunshine state.  LLC’s, sole proprietorships, and S Corporations are exempt from state income taxes in Florida.  C corporations, defined as a company where the shareholders or owners are taxed independently from the business, are the only entities required to pay state taxes in Florida.  Business profits are taxed on both the owners and the business.  The Florida state tax on federally taxable income is 5.5%, but this can be lowered through deductions and credits.  Corporate taxes are exempt from the first $50,000 of income in Florida.  After that, businesses either pay the minimum tax rate of 3.3% or the standard 5.5% rate,  subtracting all exemptions and credits, whichever is less.

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Buying For Sale By Owner

If you are buying a home that is a for sale by owner (FSBO), you will need some professional assistance. Your offer will need to be submitted on a contract that is approved by the Florida Bar.  Don’t get taken advantage of.  Protect yourself with a home inspection, appraisal, and title insurance.

Submitting an Offer on a For Sale By Owner

Most FSBOs will pay commission to a buyer’s agent.  The seller, not the buyer, pays Realtor commissions. It’s important to ask the seller upfront if they’re willing to pay your agent’s commission.   You will need a good agent to write your offer up on a standardized FAR BAR contract.  Necessary addenda and disclosures will have to be included such as the Lead Based Paint Addendum for homes built before 1978, a Homeowner’s Association Disclosure, etc. A smart agent will be sure that your offer is complete.

There are many negotiables in the FAR BAR Contract for Sale & Purchase.  It is important to know what is up for negotiation and how your best interest is represented in each term of the contract without causing the seller to reject your offer.   There is a lot more to your offer than the purchase price, be sure you understand your offer in its entirety.

Protect Yourself When Buying For Sale By Owner

Securing a mortgage will require an appraisal.  However, if you’re paying cash, you can opt-out of the appraisal process.  This is not a good idea!  You need assurance that you aren’t overpaying.  In a market with limited inventory, it can be tempting to waive the appraisal contingency.  If you are willing to pay above market value due to a lack of available homes on the market, you can offer to pay a specified amount over the appraised price.  This will offer more protection than going in blindly without an appraisal.

You should receive a Seller’s Disclosure listing property defects.  However, sellers can only disclose defects that they are aware of.  And let’s face it, not everyone is honest when disclosing home defects despite their legal obligation to do so.  If a seller opts to sell without an agent, they could be unaware of their legal responsibility to disclose defects. Therefore, when buying a for sale by owner property, home inspections are absolutely essential.  A home inspection will give you a much better idea of the home’s overall condition so you can assess repair costs and negotiate with the seller accordingly.

Title Insurance  will protect you from any existing liens against the property.  If you don’t have a title insurance policy and the seller has code violations, unpaid taxes, or any other liens against the property, these financial obligations will carry over to you as the new owner.  Your title company will run a title search to ensure that there are no clouds on the title.  If a person or institution tries to lay claim to your property, your title insurance policy will protect you and your heirs for as long as you own the property.

 

 

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Budgeting for a Home Purchase

Do your Homework:

Budgeting for a home purchase requires calculating your monthly income and expenses to determine how much can you comfortably afford.  You will need to assess your savings to ensure you have enough to cover your down payment and closing costs.

Calculate the Cost of Homeownership to decide if it is right for you:

    1. Add up all the income you bring in each month. If you take home $5,000 and your spouse takes home $4,000 each month. Your total monthly net pay would be $9,000.
    2. Multiply your monthly take-home pay by 25% to get a COMFORTABLE mortgage payment amount. If you take home $9,000 a month, your monthly house payment should be no more than $2,250. Keep in mind, many mortgages will let you take out loans upwards of 40%, but YOU are the decision maker here, do you want to struggle to make your payments?
    3. Down Payment. Consider saving for a down payment of 20% because you’ll avoid private mortgage insurance (PMI). PMI is an extra cost added to your monthly mortgage payment, and it doesn’t go toward paying off your mortgage balance. PMI typically costs between 0.41% to 2.25% of the entire loan amount on an annual basis (depending on your credit score, loan-to-value (LTV) ratio, and debt-to-income (DTI) ratio). If 20% is out of reach make sure to ask how to get it taken off your loan when you reach 20%!

***Consider down payment assistance grants, gifts from family, and government programs.

 

Loan Amount: Your loan amount will be the cost of the home you buy minus your down payment. Here is a table to give you a better idea:

Monthly Mortgage

Closing Costs: When you close on a house you must pay for expenses like appraisal fees, home inspections, title insurance, lien searches, surveys and lenders fees. You’ll also need to cover property taxes and homeowner’s insurance for the rest of the Lenders call these prepaid items. Your real estate agent and lender will give you a detailed list of these costs before your closing day. On average, you’ll pay 3–4% of the purchase price of your home in closing fees. For a $300,000 home, that’s another $9,000–$12,000 you’ll need to save on top of your down payment.

Ask your agent and lender about closing cost credits from the seller, lender, and government programs.

Bottom line: Preparedness is key. If you don’t have enough money saved for these upfront costs, you’ll either need to hold off on your home purchase or aim a little lower with your price range. Whatever you do, don’t let the closing costs keep you from making the biggest down payment possible. Research, ask, and take advantage of all your options.

Once you are comfortable with your budgeting for a home purchase, shop around lenders to get pre-approved for a mortgage.

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Getting Pre-approved for a Mortgage

PRE-QUALIFICATION VS PRE-APPROVAL

A lender can pre-qualify you to buy a house after a quick conversation about your income, assets, and down payment. Unfortunately, a prequalification has no value to sellers and little value to you. Getting pre-approved for a mortgage is completely different, a lender will need to verify your financial information and submit your loan for preliminary underwriting. That extra effort will pay off when you begin your home search. A pre-approval letter saves you time, stress, and heartache. It shows sellers you are serious. It is the gold seal of excellence on your offer.

WHAT YOU WILL NEED TO PREPARE:

Identification

  • Driver’s license or U.S. passport
  • Social Security card or number
  • A copy of the front and back of your permanent resident card (if you aren’t a U.S. citizen)
  • Credit history
  • Employment verification (employment letter and yearly salary)

Income

  • Pay stubs covering the last 30 days
  • W-2 forms from the last two years
  • Proof of any additional income
  • Federal income tax returns (personal and business) with all pages and schedules from the last two years

Assets

 

Important to note: Getting pre-approved for a mortgage sets you up for success, but it does not commit you to a lender.  There are many types of lenders to choose from.  You have the right to shop around, and should.

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Finding a Great Lender

The Mortgage Shopping Guide

How to Shop for A Mortgage: Types of Lenders & Key Questions to Ask:

You have 45 Days to shop for a mortgage without affecting your credit.
Costs vary, lenders offer different products, and there are so many different personalities. You can shop as many as you like to get a great deal and find someone you LOVE to work with! Don’t settle.  Below are types of lenders and what to ask them:

TYPES OF LENDERS:

  1. Mortgage brokers are intermediaries between you and lenders. In other words, mortgage brokers don’t control the borrowing guidelines, timeline or final loan approval. Brokers are licensed professionals who collect your mortgage application and qualifying documentation. They can counsel you on items to address in your credit report and with your finances to strengthen your approval chances. Many mortgage brokers work for an independent mortgage company so they can shop multiple lenders on your behalf, helping you find the best possible rate and deal. Mortgage brokers are typically paid by the lender after a loan closes; sometimes the borrower pays the broker’s commission upfront at closing. ASK!
  2. Retail / Bank lenders provide mortgages directly to consumers, not institutions. Retail lenders include banks, credit unions, and mortgage bankers. In addition to mortgages, retail lenders offer other products such as checking and savings accounts, personal loans, and auto loans. Retail lenders sell multiple products to consumers and tend to have more stringent underwriting rules. Lenders have specific borrowing guidelines to verify your creditworthiness and ability to repay a loan. They set the terms, interest rate, repayment schedule, and other key aspects of your
  3. Direct lenders originate their own loans. These lenders either use their own funds or borrow them from elsewhere. Mortgage banks and portfolio lenders can be direct lenders. What distinguishes a direct lender from a retail bank lender is specialization in mortgages. With a niche focus on home loans, direct lenders tend to have more flexible qualifying guidelines and alternatives for borrowers with complex loan files. Direct lenders, much like retail lenders, offer only their own products so you’d have to apply to multiple direct lenders to comparison shop. Many direct lenders operate online or have limited branch locations, a potential drawback if you prefer face-to-face
  4. Portfolio lenders fund borrowers’ loans with their own money. Accordingly, this type of lender isn’t beholden to the demands and interests of outside investors. Portfolio lenders set their own borrowing guidelines and terms, which may appeal to certain borrowers. For example, someone who needs a jumbo loan or is buying an investment property might find more flexibility in working with a portfolio
  5. Wholesale lenders are banks or other financial institutions that offer loans through third parties, such as mortgage brokers, other banks or credit unions. Wholesale lenders don’t work directly with consumers, but originate, fund, and sometimes service loans. The wholesale lender’s name (not the mortgage broker’s company) appears on loan documents because the wholesale lender sets the terms of your home loan. Many mortgage banks operate both retail and wholesale divisions. Wholesale lenders usually sell their loans on the secondary market shortly after
  6. Hard money lenders are usually the last resort if you can’t qualify with a portfolio lender or if you fix-and-flip homes. These lenders are usually private companies or individuals with significant cash reserves. Hard money loans usually must be repaid in a few years so they appeal to fix-and-flip investors who buy, repair and quickly sell homes for profit. Hard money lenders tend to be flexible and close loans quickly. However, they charge hefty loan origination fees, interest rates as high as 10% to 20% and require a substantial down payment. Hard money lenders also use the property as collateral to secure the loan. If the borrower defaults, the lender seizes the home

How to shop for a mortgage: Pick at least three lenders and compare. Ask them for a written estimate on the costs of getting a loan with them. Get it in writing.

Important Questions to Ask Lenders When Shopping for a Mortgage:

  1. Loan Programs: 3%, 3.5%, 5%, 10% or 20% down? Government-backed or conventional?
  2. Interest rate: is it fixed, adjustable, negotiable? Can you buy it down?
  3. Discount points- if it’s too good to be true ASK why!
  4. Closing costs: Can the seller pay a percentage? How much can you negotiate?
  5. Origination fees: Are they negotiable? Ask!
  6. Private Mortgage Insurance: Do you have to pay it for the LIFE of the loan or just to 20% loan value ratio?
  7. How long to get the loan closed? Closing times can impact the seller’s willingness to accept your offer.
  8. Are the underwriters and processors in-house or tough to communicate with? This could be the difference between a smooth process and a stressful
  9. Will the mortgage broker or loan officer be your primary contact throughout the loan process? Are you going to become a file for someone else after they start the program? Is the loan originator easy to communicate with, organized, and well educated?
  10. Do they offer any lender credits to buyers? Closing cost assistance? Are you eligible for any local programs?

Once you have a clear idea of what you are being charged NEGOTIATE! Take your best bid to your second-best offer and see if they will beat it, in writing. Take that bid back to number 1, they’ll likely beat it too! Remember costs really add up over 30 years!

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Building your Home Buying Team

Real Estate Agent:

The first step in the home buying process is to find a real estate agent. Your advocate and team leader. Your agent will organize your entire home buying experience, ensuring a smooth transaction. They might make it look easy, but behind the scenes, they work nonstop for you!

Your agent will:

 

Communicates with:

  • Escrow Officers
  • Appraisers & Inspectors
  • Closers
  • Attorneys
  • Sellers
  • Brokers
  • Insurance Agents

 

Loan Officer:

Your personal guide through the loan application, processing, and underwriting process.

This person is going to:

  • Handle all of your sensitive information
  • Document your financial history
  • Determine your creditworthiness
  • Get you the funds to buy your home

 

Home Inspector:

Your home inspector will give you the inside scoop on all the systems, appliances, structure, and coverings of the home. They will uncover all the issues, defects and problems you should know about to ensure you don’t discover hidden problems after you close.

Closer:

Your closer could be an attorney or title company.

The closer is going to:

  • Arrange for clear title on your home
  • Organize the sale
  • Draft up your deed
  • Hold and transfer closing funds and escrows
  • Compile the documents from all parties and host the signing on closing day

 

Broker Vs. Agent: Is there a difference?

A real estate agent is a licensed professional who helps people buy, sell, rent or invest in homes. To become an agent, a person must take pre-licensing training from a certified institution and pass the state’s real estate licensing exam. Then they must affiliate themselves with a real estate brokerage and operate under a broker’s license.

A real estate broker is a professional who has additional education beyond the agent level, as required by state law, and who has passed a broker’s exam. In some cases, brokers also have more years of experience than agents. The biggest difference between a broker and an agent is that a broker may work independently. An agent must be overseen by a broker.

Most importantly, choose someone to represent you that you are comfortable working with. Just because an agent has 100 sales in the last year does not mean they will be good for you. Someone that busy could have very little time for each customer.

THINGS YOU MAY WANT TO CONSIDER:

  • Local knowledge: Do they know their stuff about neighborhood home value trends, shops and restaurants, schools, events, transit, local government and upcoming development?
  • Product knowledge: Do they know home construction, lending, inspections, common issues, code issues, permit violations, contracts, negotiations and are they a good teacher- you’ll want to learn!
  • Communication: There will be lots of questions. How do they communicate best? Text, call, email? How many customers do they have right now? Do they have time for you on your terms?
  • Reputation: How are their online reviews, can they offer any testimonials or references?
  • Verify the agent’s license; search “Florida real estate license

 

Ultimately: Find a real estate agent you like! Good vibes? Friendly? Trust? Remember you will be spending a lot of time with this person. Find the perfect agent for you!

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Online Shopping, Real Estate Apps & Sales Pitches

Online Shopping, Apps & Sales Pitches: Avoid Gimmicks & Real Estate Scams

Real estate websites that offer something that seems too good to be true, likely isn’t. Here are a few common real estate scams to look out for:

  1. Your Home Sold, Guaranteed- or we will buy it Yup, for 60% of its value then assign the contract before closing to an investor for 80% market
  2. 1% Commission Plus the buyer’s agent’s commission, that 1% might not get you anything but a lockbox and a basic MLS listing. ASK for a marketing plan and get it in writing, then have your attorney look it over for you.
  3. We buy houses cash, in any condition They sure do, for way less than market value.
  4. Wholesale prices & off-market inventory Are often assignable contracts without warranty and buyers will be asked to pay commission and finders
  5. Short Sales, Foreclosures, and Bank-Owned Deals They sell for market value; if it is undervalued there is a reason- you’ll pay the difference one way or another.
  6. Free money You know better, right? If they are giving you money, there is a reason, find it. There is truly no such thing as a free lunch. Agents who claim to gift commissions also gift less service, time, and effort in negotiating, researching, and pursuing your best interests.
  7. Rental Scams If you find a rental online that is listed well below market value, you should proceed with caution. The Federal Trade Commission has received 182,200 fraud reports from January 1, 2020, to February 1, 2021, for a total of $319.96 million lost from real estate scams. Learn how to spot rental scams. The listing description, photography, domain, and contact information should be examined for red flags.

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Property Types: fee-simple, condominium concepts, villas & more

So you’ve decided to make a home purchase.  Now it’s time to do your research.  There are quite a few property types to choose from.  The property type you choose will impact what type of financing you can qualify for, how much you will need to spend, and ultimately the type of lifestyle you will have in your new home.

SINGLE FAMILY HOME:

A single-family is generally a free-standing dwelling that has these traits:

  • No common walls: it is a stand-alone, detached property, the home doesn’t share common walls or a roof with any other dwelling.
  • Land: it is built on its own parcel of land and the area around the building is for the private use of the owner.
  • Entrance and exit: has its own private and direct access to a street or
  • Utilities: Only one set of utilities can service a single-family
  • One owner: A single-family home is built as the residence for one family, person, or household, whose owner has an undivided interest in the property.
  • Single kitchen: A single-family home has one kitchen (adding a kitchen to an in-law suite or pool house will alter a home’s zoning classification).

Financing Single-family homes are financeable through the widest variety of government-backed and conventional loan products. Renovation financing options like Fannie Mae’s “HomeStyles”, FHA’s “203K” and Freddy Mac’s “CHOICERenovation are available.” Jumbo, private, grants and bonds are other options. Talk to your agent about the age of the home and the condition of the property to select which is best for you.

A TOWNHOUSE :

A townhouse is a single-family home that shares one or more walls with other independently-owned units. They are often rows of uniform homes, two stories or taller. Residents own their interior and exterior walls, lawn, and roof. Insurance for both the home and the property is needed. There is often a homeowners association that collects dues to communally pay for shared areas like a community pool and shared maintenance like trash collection, lawn care, and roof repair. Occasionally you will find townhomes that are governed by a condominium association, effectively making them condos and not townhomes. Ask upfront how a townhome is governed to avoid wasting your time because there are major differences when it comes to financing. Your agent can always steer you in the right direction!

Financing townhomes can be financed any way a single-family home may be financed as long as they are not governed as a condominium. Government-backed loans like FHA, FHA 203K, and VA loans are available as well as a wide variety of conventional conforming and non-conforming products, both private and retail. The lender will have to take homeowners association dues along with any upcoming or levied assessments into consideration to determine the buyer’s debt to income ratio.

CONDOMINIUM:

or “Condo” is an ownership concept, often in an apartment building. The owner has a deed for the apartment and pays real estate taxes for the unit. Condo owners pay fees to maintain the grounds and the building (or buildings, for a larger complex). The owner pays fees to contribute to the building maintenance, the land, and the collective utilities. The owners elect a board to make decisions for the owners and they set the rules and regulations along with the budgets and repair schedules. Collectively you share in the costs of ownership. The board may require larger down payments for condo purchases in some buildings to hedge against default.

Financing may require a higher down payment than a single family home because as many condo boards require larger equity positions to protect the communal assets. The reasoning is that if a buyer has a substantial amount of equity in the unit, they are less likely to default on the mortgage and/or stop paying their association dues which would cause financial burdens on the rest of the unit holders or jeopardize the building.

CO-OP :

Is a non-profit company that owns and operates a residential complex. Buyers lease one of  the building’s units by buying shares of stock in the building’s corporation along with a proprietary deed that claims their rights to exclusively inhabit. The land is often leased on a 99-year land lease and renewed every century. Buyers have to go through an approval process, don’t own their apartment, and don’t have ultimate control over renting, subletting, or selling. If renting, you may have to present your potential tenants to the board for approval. Lease and tax bills aren’t sent to the co-op shareholders but instead to the corporation. A monthly co-op fee includes mortgage payments, taxes, maintenance, and utilities. This cost is usually higher than condo fees. And they often require a larger down payment than other options—but usually cost less overall. There are financial advantages of co-op living—including substantial breaks on real estate taxes, transfer taxes, and a state recordation tax that occurs in real estate transactions. In some cases, co-op owners can deduct the maintenance fees from their taxes.

Financing is tough as few lenders will finance co-ops, and very few co-ops will accept financing as an option. This is due to the high risk a lender takes on. Should a co-op owner default on their loan, the lender would be foreclosing on a stock certificate not on real property. For similar reasons the boards of most co-ops are not willing to take on the risk of default and communal disturbances that could accompany a foreclosure. Most purchases are Cash.

Duplex ( Triplex/ Quadplex)

A duplex refers to residential units attached to another, with a yard to maintain. You could purchase a two-family house and rent out the second unit, subsidizing your own housing costs with a real estate investment. If you decide to move out, you can simply rent it out (ask your lender about limitations on loan products if this is the goal). Your rented duplex would then be a 100% rental property, and your expenditures would be tax-deductible. Keep in mind, though that your on-site living arrangements won’t offer you as much privacy as a single-family home. And you’ll have to learn how to play landlord—you’re responsible for not only your backed-up toilet but your tenant’s as well.

Financing is open to FHA loans, Conventional loans, Jumbo loans, Renovation financing options like Fanny Mae’s “HomeStyles”, FHA’s “203K” and Freddy Mac’s “CHOICERenovation.”

Depending on location, you may be able to qualify for publicly-funded home improvement costs. After 4 units the rules change.

Types of Ownership

    • Fee simple ownership is the most complete form of ownership. A fee simple buyer is given title (ownership) of the property, which includes the land and any improvements to the land in perpetuity. Aside from a few exceptions, no one can legally take real estate from an owner with fee simple title. The fee simple owner has the right to possess, use the land and dispose of the land as he wishes — sell it, give it away, trade it for other things, lease it to others or pass it to others upon

    • Leasehold ownership or “interest” is created when a fee simple land-owner (Lessor) enters into an agreement or contract called a ground lease with a person or entity (Lessee). A Lessee gives compensation to the Lessor for the rights of use and enjoyment of the land.

  • The buyer of leasehold real estate does not own the land; they only have a right to use the land for a pre-determined amount of time.
  • If the leasehold real estate is transferred to a new owner, use of the land is limited to the remaining years covered by the original lease. At the end of the pre-determined period, the land reverts back to the Lessor (called reversion.) Depending on the provisions of any surrender clause in the lease, the buildings and other improvements on the land may also revert to the lessor.

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Location: Cities, Neighborhoods, Schools and Lifestyle Choices

Do your city and neighborhood research. You are not just buying a house, you’re buying a neighborhood, a city, schools, amenities, conveniences, and inconveniences too. And that is likely the most important element of seeing a property in person. With Real-ativity, it’s easy to get a great overview of the neighborhood, but it never gets better than a live tour. During your visit pay attention to traffic speeds, sidewalks, lighting at night, and whether there’s plentiful access to amenities you need. Spend some time walking around the neighborhood around 6pm and see what the neighbors are up to after work/school hours. Do it again at 10 pm and once on a Saturday.

Consider the city:

Cities and local governments make all the difference. Real-ativity will give you the big picture. Do your diligence so you can see the city for what it is now, and for what it is planned to be in the future. Look at these attributes:

  1. CRAs (Community Redevelopment Agency) will let you know what is planned to change in the city. Often revitalization programs will let you know where the next cool renovated area will be, where there have been art grants, or where new walkable businesses are setting up.
  2. School information: Look into the local public and private schools and daycare programs. Elementary, junior, and high school.
  3. Crime statistics: Call the local police station or visit their website.
  4. Events: Check the city event calendar, is this a parade/ festival town? Do they shut the streets down bi-weekly for street parties? Is this a city on the move or a city asleep?
  5. Parks and recreation: What type of outdoor activities are there? How far to the beach, canoeing, biking, hiking, hunting, picnicking?
  6. Cultural attractions: Theaters, art centers, zoos, maker’s space, science museums, and aquariums! Think rainy day.

 

Neighborhood Research:

alt="Neighbors enjoying lunch together in a friendly neighborhood"

  1. Do you have children or are you planning to have children soon? Research the school system. Even if you’re single, living in an area with a sought-after school system raises your property resale value.
  2. What type of home? Are you interested in a single-family home, duplex, townhouse, condo or co-op?
  3. What does transportation look like? Can you take public transit, must you drive, is it walkable? What about parking for you and your guests?
  4. Do you want to be in a downtown area or in the suburbs? Ask yourself why, and really think it
  5. What is the most important reason you are moving? Crave the farm air? Have you always wanted to live on the waterfront? Did you just buy a boat? Put that at the top of your list.
  6. Would you like to be within walking distance of shops, restaurants, and bars? Or would you be willing to drive for amenities?
  7. Neighborhood associations: Does the community you’re looking at have one, and, if so, are there lawn or construction restrictions? Is there a yearly fee?
  8. Are the neighbors friendly & courteous? Are they hosting neighborhood barbeques and happy hours or do they yell “get off my lawn” when you pass by? It’s important!

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Touring Homes & Open Houses

Open House Tips for Buyers

Open houses are incredible learning experiences.  They provide a chance to get familiar with different layouts (outside of pictures) and see some neighborhoods! Planning ahead makes all the difference.  Here are some good open house tips for buyers:

  1. Get a LIST of Which Houses Are “Open”.
    Your agent will have details on specific properties and can keep you informed of open houses that fit your criteria. They don’t need to escort you to every open house in the beginning- ask for a list of open properties. Get a stack of your agent’s cards to present to the listing agent upon request or exit.
  2. Physically prepare.
    Eat a good breakfast, wear comfortable shoes (not heels that break in gravel or decks,) plan plenty of time to wander, bring a notepad and pen, and a friendly smile.
  3. Map out your drive to save you from the frustrations of zig-zagging all over town.
  4. Make a list of questions for the listing agent
    Take notes so you can keep track of what you learned about the area & home
  5. Don’t Overshare Information
    If you end up making an offer, you’ll use the information you’ve gathered here to inform your bid, the seller’s agent will do the same. Oversharing could hurt your negotiating power as the host works for the seller, not you.
  6. Be polite.
    “Hello my name is…” “May we walk around upstairs?” and “Thank you for the tour” is always welcomed. If you do decide to make an offer on this home or another they represent they will remember how nice you were. They might be more likely to choose your offer or be more accepting of negotiations.
  7. Take a spin around the neighborhood.
    Wave to the neighbors, chat them up to get an insider’s view on what life in that community is really like — families, singles, what the vibe on the block is like, and whether the homeowner’s or condo association (if there is one) is easy to work with.

Questions to ask an open house host:

  1. Why are they selling? Motivations are a big part of negotiations, getting the most information upfront is not only helpful if you decide to make an offer on this home, but it’s helpful to open your mind so you have a bigger picture of other’s motivations. All information is
  2. When does the seller want to move? If the seller is in a hurry (say, for a new job), they may be willing to accept a lower
  3. When does the seller want to close? One way to strengthen your offer is to propose a closing date that’s ideal for the seller. You might be able to make their life easier with a long closing period or a leaseback agreement (allowing them to remain in the property after closing for a limited time) to make their transition easier. Agreeable terms are not limited to
  4. Is the seller negotiable on price? There’s always a chance the host will offer extra information here. And, in some instances, the seller has authorized their agent to tell interested buyers that the price is negotiable. It never hurts to ask…also note this question is different from “Is the price negotiable?” You are learning about the seller.
  5. Do you have any offers? Listing agents can’t disclose the amount of any other offers, only whether they Perhaps you’ll learn that there is something they are negotiating you’d like to beat or the reasons they can’t come to an agreement with other offers.
  6. How long has the home been on the market? This is online but the host can give you more detail. Maybe the home was under contract but the buyer’s financing fell through or the seller overshot the listing price and had to make a price reduction? Again, all details are good
  7. Has the price changed? Find out why the seller dropped the price or get a feel for what kind of seller you may be dealing with. Was it listed way over market price then reduced over a long period? Is the seller unrealistic? Have there been many listing agents?
  8. Has the home been recently inspected by a professional? Have there been any renovations or recent repairs made to the home? Any upgrades? Are there any issues with the plumbing, electrical, roof, appliances, and HVAC system? What is the age of the roof and HVAC system?
  9. What are the average utility costs? What is a typical monthly utility bill during the summer and during the winter?
  10. What are the HOA or Condo Association dues? What do they cover? Do they require any equity buy-in at closing or deposits from buyers? What is their application fee? Is the property manager easy to contact?
  11. How are the neighbors? Loud dogs? Children? Grumpy? Does the woman upstairs line-dance in wooden shoes at 6 am? Definitely worth asking…

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Making an Offer on a Home

After exploring all your options, you’ve found the perfect house.  Now you’ll need to know how to make an offer on a home.  Offers begin on contracts, usually standardized. Your agent will explain all relevant terms and contingencies to you before drafting up an offer for you to sign. Then, your real estate agent will present the offer to the sellers (or sellers’ real estate agent).

The offer might include:

  • Offered price
  • Street address
  • Legal Description
  • Sale terms (cash purchase, mortgage financing, trade or seller financing)
  • Closing Date: The date the property will change hands
  • Escrow agents & deposit agreements (see bottom ½ of this page)
  • Any agreements on the prorating of utility bills
  • Agreements to transfer lease and tenant deposits
  • Payment of title insurance and home inspections
  • Deed details
  • Specific required clauses and addenda (consult your real estate agent or broker for these)
  • Offer timetable and expiration date
  • Contingency plans that will come into effect as the result of a canceled/defaulted sale
  • Time period allotted for inspections and loan commitment

From Offer to Contract

The sellers may accept, decline, or counter the offer. Once it is executed it becomes your working contract. Your agent will then manage your transaction and guide you through every step, clearing contingencies and working towards closing.

The offer checklist can be found in the home buyers guide here.

How Escrow Works

Once your offer has been accepted by the seller, your transaction is then placed into “escrow.”

“Escrow” is a term that describes the neutral third-party handling of funds, documents, and tasks specific to the closing (or settlement, as it is also known), as outlined on the real estate purchase agreement or sales contract. The purpose of escrow is to facilitate the transaction by managing the disbursement of funds and documents. Wires, checks, and transfers are risky these days, internet fraud is rampant. The FBI reported $221 million in losses due to wire fraud in 2019 alone. Be careful!

5 Tips to Protect Yourself:

  1. Always carefully examine the email address from which you receive updates on your transaction from your real estate agent, escrow officer, or settlement agent to verify it is correct. If an email seems suspicious, notify your real estate or settlement agent immediately.
  2. Call instead of email. Use the phone number on the company’s official website or business card. Don’t trust the phone number included in the email.
  3. Be suspicious of any requested change to wiring instructions. It’s highly unusual for your title or escrow company to request any last-minute changes.
  4. Confirm the account before sending. Ask your bank to verify the account information before sending a wire. First American transactions will always be to “First American Trust”
  5. Verify funds immediately. Call your title or escrow company to verify the funds have been received.

Making an offer on a home can be exciting.  Don’t get ahead of yourself.  Make sure you fully understand the terms of your offer and use extreme caution when wiring funds.

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Contingencies

Real Estate contingencies are conditions of the contract that are in place to protect the buyer and seller from things that could go wrong during the transaction. Each condition must be met to ensure that the sale progresses in a timely manner. Your agent will walk you through them step-by-step to make sure the transaction is flawless. But if problems do arise, the contingencies are there to protect you. Contingency clauses can be written for nearly any need or concern. Always be clear on the contract you sign and make sure your agent or attorney has answered all your questions.  Here are the most common Real Estate contingencies:

Appraisal Contingency

This protects the buyer and is used to ensure a property is valued at a minimum, specified amount. If the property does not appraise for at least the specified amount, the contract can be terminated. An appraisal contingency may include terms that permit the buyer to proceed with the purchase even if the appraisal is below the specified amount, typically within a specified number of days after the buyer receives the notice of appraisal value. The seller might have the opportunity to lower the price to the appraisal amount. The contingency specifies a release date that the buyer must notify the seller of any issues with the appraisal. Otherwise, the contingency will be deemed satisfied, and the buyer will not be able to back out of the transaction.

Financing Contingency

The financing contingency gives the buyer time to apply for and obtain financing for the purchase of the property. This provides important protection for the buyer, who can back out of the contract and reclaim their earnest money in the event they are unable to secure financing from a bank, mortgage broker, or another type of lending institution. A finance contingency will state a specified number of days that the buyer has to obtain financing. The buyer has until this date to terminate the contract (or request an extension that must be agreed to in writing by the seller). Otherwise, the buyer automatically waives the contingency and becomes obligated to purchase the property—even if a loan is not

Home Sale Contingency

A home sale contingency gives the buyer a specified amount of time to sell and settle their existing home in order to finance the new one. This type of contingency protects buyers because, if an existing home doesn’t sell for at least the asking price, the buyer can back out of the contract without legal consequences. This can be difficult on the seller, who may be forced to pass up another offer while waiting for the outcome of the contingency. The seller retains the right to cancel the contract if the buyer’s home is not sold within the specified number of

Inspection Contingency

The Inspection Period gives the buyer the right to have a home inspection within a specified time period (usually 5-15 days). It protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional home inspector. The inspector furnishes a report to the buyer detailing any issues discovered during the inspection. At this point the buyer has 4 choices:

    1. Approve the report, and the deal moves forward
    2. Disapprove the report, back out of the deal, and have the earnest money returned
    3. Request time for further inspections if something needs a second look
    4. Request repairs or concession (if the seller agrees, the deal moves forward; if the seller refuses, the buyer can back out of the deal and have their earnest money returned)

Cost-of-Repair Contingency

This is sometimes included in addition to the inspection contingency. This specifies a maximum dollar amount for necessary repairs. If the inspection indicates that repairs will cost more than this dollar amount, the buyer can elect to terminate the contract. In many cases the cost-of-repair contingency is based on a certain percentage of the sales price, such as 1.5% of the purchase price.

Kick-Out Clause

A contingency added by sellers to provide a measure of protection against a home sale contingency. While the seller agrees to a home sale contingency, he or she can add a kick-out clause stating that the seller can continue to market the property. If another qualified buyer steps up, the seller gives the current buyer a specified amount of time (such as 72 hours) to remove the home sale contingency and keep the contract alive. Otherwise, the seller can back out of the contract and sell to the new buyer.

Title Contingency

Gives the buyer the option to walk away instead of dealing with any contested ownership claims. For example, that can happen if the house is being sold as part of a divorce or probate.  The buyer has the right to review a title report to assess any liens or easements that exist.

Insurance Approval

Ensures that you can get insurance. If for some reason you can’t or the insurance is outrageously expensive, you should be able to walk.  Things like previous claims for mold, polybutylene pipes, outdated electrical systems, or an old roof can make a house difficult to insure.

Final Walk-Through

It’s common to take a final walk-through the day before closing. Do not skip this step! You want to make sure there hasn’t been any serious damage to the property since you entered into the contract. You’ll also want to check that all agreed-upon repairs have been completed to your satisfaction.

Attorney Review

You may wish to include a clause that allows your attorney to review the contract for a period of time before closing. They can make sure nothing has been removed or sneaked into the contract without your knowledge.  This is especially useful if the seller has added specific clauses or Real Estate contingencies to the contract that your agent is not familiar with.

 

Real Estate contingencies are not to be taken lightly. It is important to read and understand your contract, paying attention to all specified dates and deadlines. Because time is of the essence, one day (and one missed deadline) can have a negative—and costly—effect on your real estate transaction.

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Negotiating a Home Purchase

Negotiating a home purchase requires in-depth knowledge.  Your agent should be well versed on market value in the area to properly negotiate the price.  But the needed expertise is not limited to price.  Your agent will need to have a full understanding of common negotiables and contingencies that can be used as leverage to get you the best deal and terms.

Common Negotiables

  • Price
  • Earnest Money Deposit How Much? Does it “go hard” at any point to secure the seller’s risk?
  • Inspection Periods Since you may cancel your contract without risk during an inspection period, the shorter the better for most
  • Appraisal Contingencies are tough if the seller has an over-improved home or there have been distressed sales close Removing an appraisal contingency means that if the home is valued at less than the purchase price, the buyer can’t cancel the contract based on the failure to appraise. However, the buyer will likely still be protected by the finance contingency. The buyer can bring additional cash to the table as the mortgage company will not lend above the appraised value. A cash deal without an appraisal contingency is risky for the buyer because, in a seller’s market, the seller will be less likely to reduce the purchase price to make up for the appraisal deficiency. If the appraisal comes in very low with no contingencies left in the contract, the buyer may be better off forfeiting their earnest money deposit than paying way above value.
  • Home Warranty purchases and costs can be apportioned many ways, buyers may ask the seller to buy at closing in lieu of asking for repairs or updates. (home warranties are worth looking into)
  • Repairs and Credits can be requested for items that were flagged during the home inspection.
  • Closing Credits can cover a significant part of your downpayment or prorations included in the contract. You can make a very attractive offer to a seller for a higher price, better terms, and faster closing to offset the seller’s decrease in net proceeds from closing credits. Ask your agent & lender.
  • Closing Date is important to the seller because it factors into their carrying costs, relocation plans, and purchase of a new property. They worry that if it takes too long you may not close and they will have wasted valuable market exposure time. Or depending on their situation, they might want more time to close.
  • Leaseback is the term for allowing the seller to stay in the property for a period of time, accompanied by a lease for a rental amount. This may make your offer very attractive for the right
  • Buyer financing can affect the appraisals, inspections, loan costs, loan amounts, and closing times. Due your diligence and make the best EDUCATED decision for
  • Furniture may be written into a contract but cannot be financed into a home loan. Selling furnished might be convenient for an out-of-state seller. On the other side, perhaps you want to ask for a custom kitchen table built to match the kitchen?

 

Most important things to know about negotiating a home purchase:
1- Ultimately, everything is negotiable.
2- You get more flies with honey.

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Applying for the Home Loan

OFFICIALLY Applying for your Loan: Preparedness is Key

You have prepared to apply for a home loan. You know the best lender for you, you know the best financial product for you, you have an executed real estate contract in hand for the perfect home. Now you have to arrange to pay for it.

Your lender will be working, behind the scenes, step by step, to get you to closing. Your job is to make sure they have what they need to get you there- sometimes it seems redundant- but it’s because there are many different parties involved all looking at information differently. You got this.

It is always better to be prepared upfront with EVERYTHING needed rather than slowly gathering documents because your loan officer must get a complete package off to underwriting and processing. Everything you miss holds up the process and makes your life more stressful. Even the most prepared applicant will have “conditions” that need satisfying along the way, always be quick to respond and get them what they need.

Checklist of Items your lender will need to apply for a loan:

  1. Signed real estate contract
  2. W2’s from current and past employers
  3. Bank Statements (Last 2 years from all accounts)
  4. Paycheck stubs
  5. Tax returns
  6. Gift letter (if using gift funds / Your lender will provide details)
  7. List of your debts
  8. List of all your assets
  9. Proof of timely rental payments
  10. Credit Report
  11. Profit and loss statements
  12. Proof of additional income
  13. Divorcee decree (if applies)
  14. Bankruptcy paperwork (if applies)

 

Don’t Do This

The list of things that may cause FAILURE when you apply for a home loan:

  1. DON’T: Make large deposits or withdrawals.
  2. DON’T: Change jobs
  3. DON’T: Apply for credit cards (this means NO Home Depot cards, NO Macy’s cards- even if you get 50% off!)
  4. DON’T: Buy new furniture on credit (0% for 10 years is still credit)
  5. DON’T: Buy a new car
  6. DON’T: Up a home equity line of credit
  7. DON’T: Close credit accounts.
  8. DON’T: Make payments on collection accounts.

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Home Inspection

Buying a home is a big deal, make sure to have the home inspected to avoid unpleasant surprises and unexpected difficulties. You’ll want to learn as much as you can about the newly constructed or existing house before you buy it. A home inspection may identify the need for major repairs, builder oversights, and deferred maintenance. After the inspection, you will know more about the house, which will allow you to make decisions with confidence.

TYPES OF INSPECTIONS:

Comprehensive Home Inspection:

Evaluates the general condition of the property, hundreds of items on each house, from the foundation to the roof, inside and out. This helps identify defects or adverse conditions that could significantly impact the property value, and if needed, alerts you to any situations where a specialist may be required to make repairs or evaluate more specific hazards.

  • Roof, Electrical, Plumbing, HVAC
  • Wood Destroying Organism
  • Appliances
  • Sprinklers, pool, gutters,
  • Cupboards, blinds, windows

 

Four-Point Inspections:

Also known as the ‘Insurance Quote’ inspection. Once a home reaches a certain age, many insurance carriers would like to take a peek at the four main sources of insurance claims: the roof, plumbing, electrical, and HVAC

Seawall Inspections:

Will assess the physical condition while giving a projection of the remaining life expectancy & repairs that may be needed. Inspectors should identify cracks, rust stains, soil loss, erosion, corroded tie rods, or deteriorating rebar that can affect the integrity of the wall and can compromise the strength, performance, and life expectancy. Insurance rarely covers seawalls and they are very costly to replace.

Termite (Wood-Destroying Organism) Inspections:

Include dry wood termites, subterranean termites, Formosan termites, as well as several types of beetles. Inspectors will provide a WDO Certificate for mortgage or other reasons.

Mold Inspections:

Visual & lab-tested examination of a home’s environment to determine if a home presently has mold. Includes sampling the air, identifying any areas of moisture intrusion, inspecting for non-visible mold, evaluating any existing mold or mildew damage in the home, and obtaining a detailed lab result for each sample taken; this will provide you with clear information regarding the types of mold found and potential toxicity.

Windstorm Inspections:

Inspectors evaluate roof covering and installation including roof-to-wall ties & roof deck attachment, windows, doors, and secondary water resistance. This checklist ensures that your home has been thoroughly checked at all the known points that water or wind can enter your home. It is not a costly inspection and can lead to large insurance discounts.

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Appraisal

What is an Appraisal:

An appraisal is an unbiased professional opinion of a home’s value. The appraisal assures the lender that they aren’t handing the borrower more money than the home is worth and that you are not overpaying!
Lenders want to make sure that you are not over-borrowing for a property because the home serves as collateral for the mortgage. If you should default on the mortgage and go into
foreclosure, the lender will sell the home to recoup the money it lent. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.

Appraisals are part of closing costs (paid by the buyer) but can often be paid on a credit card in advance, or paid by others- like your lender- 

Renegotiating, Saving the Deal & Saving Money

Yay, the house appraised: If the appraisal comes in, at or above the contract price, the transaction proceeds as planned.
Oh, no, the house didn’t appraise: If the appraisal comes in below the contract price, there is a chance to renegotiate. Chances are neither you nor the seller wants the transaction to fall through. As the buyer, you have an advantage, in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price.

  1. Reduce the Purchase price: Did you have an appraisal contingency? Does your loan depend on it? Talk this through with your agent/lender first.
  2. Negotiate with the sellers: If the gap between the offer price and the appraised value isn’t too large, you may be able to meet somewhere in the middle and secure your dream home. Be nice. Consider a letter to the seller about how this is your dream home…
  3. Make up the difference: Most lenders will allow you to pay the difference in price outside of your loan, you might reduce your down payment.
  4. Cancel the contract: Sometimes deals just fall through. Even if you really love the home, be smart and don’t buy a property that’s overpriced. Always be prepared to walk away.
  5. Wait it out: Keep your eye on the house because if a deal falls through because of appraisal issues, the homeowners have a hard time getting higher offers from other buyers. They may come back to you to negotiate again.
  6. Appeal the appraisal: if you think the appraisal was unrealistic and can make a case that it was way off the mark, ask your loan officer to compose a rebuttal (with help from your agent).

***FHA appraisals stick with the property for 120 days, during this time the original appraisal will be used even if a new buyer comes along with a new FHA loan. VA Loans stick for 6 months.

***With all other loan types, a new appraisal is ordered for each potential buyer if the first transaction falls through.

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Homeowners Insurance

Your lender will require that you have homeowners insurance coverage at the time you close. How much coverage they require depends on the lender, but it must be at least enough to entirely rebuild the house in the event of a disaster. Often, you’ll be required to purchase one year’s coverage in advance.

Homeowners Insurance Covers:

Damage to the home typically covers things like fire or smoke damage, wind, lightning strikes, or hail. Not every natural disaster is covered. You may be required to buy additional flood insurance coverage in order to get a mortgage.

Damage to other structures on the property like a shed or garage.

Personal property: If you purchase personal property coverage and have anything that’s stolen or damaged during a covered disaster, this coverage helps you replace it. These policies have certain limits, but you can buy extended coverage (sometimes referred to as riders) for valuable items like jewelry. Ask your agent.

Liability coverage helps pay for expenses related to things you may have caused or are negligent about- like a slip and fall accident in your garage or if you shoot a golf ball through the neighbor’s window.

Important Questions To Ask:

  1. Can you explain the differences of coverage between your HO-1 through HO-8 policies? In the U.S., there are eight levels of homeowners insurance. They range from basic condo insurance to comprehensive, full-coverage single-family home insurance. Ask your lender what you MUST have and ask your agent what would best protect you.
  2. Do you cover replacement cost or actual cash value? Replacement cost is better because, after paying for a deductible, you’ll receive funds to replace what was lost. With an actual cash value policy, the insurance company will depreciate your assets and you may end up with much less money to help you replace your
  3. What is the replacement value of my (future) home? The replacement value of a home may be less than the purchase/appraised value of a home. In the case of a tragedy, you may have to pay for repairs out of your own pocket on top of the
  4. What is excluded from the policy?
  5. Does this policy cover water damage? Some cover sewer damage but may not cover flood damage. Make sure you ask if you need flood insurance as

 

You may be eligible for discounts, ask!

Consider these things for lower rates:

  • Higher deductible
  • Remove “land coverage”
  • Wind Mitigation inspection
  • Home security system
  • Fence around the pool
  • Primary property
  • Bundle your home, auto, and motorcycle insurance with them

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Buyers Home Warranty

A buyer’s home warranty can provide peace of mind when purchasing a used home.  Resale properties usually offer better deals than new construction, but the tradeoff is older systems and appliances that could require repair in the near future.  You can request a buyer’s home warranty from the seller in your offer, it never hurts to ask.

What Does a Home Warranty Cover?

Home warranty coverage varies from company to company and depends on the package you select.  There are plans that will cover systems such as HVAC, electrical, and plumbing.  Appliances packages will cover your stove, refrigerator, built-in microwave, garage door opener, and washer/dryer. Combination plans that cover systems and appliances are available as well.  Most companies offer add-ons for swimming pools, minor roof leaks, re-key service, septic tanks, and well pumps.  If a covered item is beyond repair, the home warranty company will replace it.

Defects discovered in the home inspection are considered pre-existing conditions.  Pre-existing conditions are not covered by most home warranty companies. However, appliances or systems that are functioning properly during the home inspection, but are toward the end of their lifespan, will be protected in most cases.  Systems or appliances that are installed incorrectly or are not properly maintained will not be covered.

Compare Costs & Coverage

Plans that cover systems and appliances generally range from $500 to $750.  Prices range based on company pricing, square footage, and location.  If the seller is not willing to purchase a home warranty for you, you can pay the flat fee at closing.  You will pay a service fee when requesting repairs.  Service fees are generally $75 to $100 but vary among companies.

The Home Improvement show This Old House complied a list of the 7 Best Home Warranty Companies of 2021 that has some useful information for comparing Home Warranty Companies.  Reach out to your Realtor for advice and assistance with purchasing a buyer’s home warranty.

 

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Title Insurance

Title insurance protects you and your property against title defects. Past owner’s liens, debt, tax liens, zoning violations, building code violations, past due utility bills, closing errors, marital rights, inheritance issues, and other claims of ownership may have been instituted prior to your purchasing the home. If future claims should come back to haunt you, the title policy will cover them.

Owner’s Policy (every owner should get this)

  • Title insurance protects you against past problems
  • Paid for one time
  • Good for as long as you or your heirs retain interest in the property
  • Average cost: varies widely per state

 

Loan Policy (only buyers with a mortgage will need this)

  • Policy required by the mortgage lender to protect against title defects that could affect the lien of the lender’s mortgage
  • Paid for one time
  • Effective for the life of the loan
  • Average cost: varies depending on credit score, loan to value ratio, and state

 

Title Search:

  • Federal, State, County and local records
  • Court Records

 

Examine:

  • Identify title defects
  • Issue preliminary title report/ title commitment
  • Identify curative actions

 

Cure:

  • Remove “clouds” on title
  • Settle existing liens
  • Resolve title issues

 

Close:

  • Issue title policy
  • Disburse funds
  • Transfer ownership

 

Your closing company or attorney will be able to arrange and purchase your title policy for you, this will be part of your closing costs.

The 10 most common title problems

  • Forgeries
  • Public records errors
  • Illegal deeds
  • Unknown liens
  • Missing heirs
  • Undiscovered encumbrances
  • Unknown easements
  • Survey & boundary disputes
  • Undiscovered wills
  • False impersonation of a previous owner

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Final Walkthrough Inspection

A final walkthrough gives you the opportunity to inspect the home one last time before closing.  Your agent will escort you to the walkthrough to ensure the home is broom clean condition, that any repairs that you negotiated with the seller were completed properly, all personal property included in the sale is present, and no damage was done to the home since you signed the contract.  The utilities must be turned on for the walkthrough so that a proper inspection can be performed.

Final Walkthrough Checklist

  • Any agreed-upon repairs were performed
  • All personal property included in the sale is present
  • The interior & exterior are clear of debris
  • The seller didn’t leave any personal property behind that wasn’t included in the sale
  • The home is in broom swept condition: deep cleaning is courteous – but not required
  • No pests or evidence of infestation
  • Check for pipe leaks and recent water damage or visible mold
  • Test the water pressure at all faucets, tubs, and showers
  • Run water to test for clogged drains and flush all toilets
  • Test the hot water for proper temperature
  • Run all appliances included in the sale to ensure they are in working order
  • Test the air conditioning and heat
  • Check the garbage disposal
  • Locate and test garage door openers and ceiling fan remotes
  • Look to see if any light fixtures were changed out and make sure they are functioning
  • Account for all window treatments – unless excluded from the sale
  • Open, close, and lock all windows and doors
  • Inspect the floors and walls for damage caused by moving – patching holes from nails is not automatically stipulated in the contract

 

If you find that the home’s condition violates the terms of the contract, you can back out of the deal and receive a refund of your deposit.  However, the seller is usually motivated to close this late in the transaction.  So it’s highly likely that they will work with you, even if it means delaying closing or placing money in escrow to remedy the defects that were discovered at the final walkthrough.

 

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What Happens When Closing On A Home Sale?

Are you closing on a home sale soon?  At Real-ativity, we want to educate and inspire you to navigate the world of residential real estate.  You have read up in our “smarts” section for all the steps to either sell or buy a home.  You have a contract, signed sealed delivered, fully executed, and a closing date is set for the near future.  Now, it’s time to have a look at what to expect when closing on a home sale.

Before Closing On A Home Sale

  1. The first step before closing on a house sale is to determine who will conduct your closing, where it will be, and when.
    Closing agent name/ Company:
    Closing agent phone number:
    Closing Date:
    Time:
    Address of Closing:
  2. Protect yourself from a mortgage closing. It happens all the time. BEWARE of last-minute emails.
    Get the names and numbers of TWO people who can confirm wire instructions, save them on your phone. Use them when you are at the bank.
    *Name & Phone
    *Name & Phone
  3. Ask the closing agent directly what to expect and bring with you.
    • Cashier’s check or wire transfer receipt? How much?
    • Your “CD” (Closing Disclosure) for comparison
    • Agent/Attorney
    • Co-Borrower
    • Checkbook for last-minute changes
    • HOA Approval
    • Drivers License/Passport/ID
    • What happens if you walk at closing? What do you owe the seller?
    • Look for errors and to make sure you have a clear understanding of the loan terms
    • Compare your Closing Disclosure to your Loan Estimate:Make time to review the CLOSING documents carefully

Are the loan type, interest rate, monthly payment, and other key terms the same as I expected?

  1. Read all of your closing documents, if not in advance, then at closing.
    Is my personal information correct on all of the documents? What happens if I don’t pay my loan?
    Do the key numbers (loan amount, monthly payment, interest rate) match exactly across all of my documents?
    How can I exercise my Right to Cancel (refinance only)?
  2. Do a final walk-through of the property before closing to ensure everything is as it is supposed to be with your agent.

At Closing

  1. Bring these things to closing:
    • A cashier’s check or proof of wire transfer for the exact amount of money you need to close (double-check the wire instructions, BEWARE of scams!)
    • Your Closing You’ll want to compare it to the final documents one more time
    • Your Agent, or lawyer, if you want an advocate at the table
    • Your co-borrower or the person who is co-signing your loan
    • Your checkbook, in case there are any last-minute charges
    • Your driver’s license or passport
  2. Get answers to these questions at your closing:
    • How will I pay my taxes and Homeowners Insurance, are they included in my monthly payments, or do I have to pay them on my own?
    • Where do I send my monthly payments?
    • Will I save money by making bi-monthly payments or extra principal payments?
    • How do I pay Homeowner’s Association dues?
    • Who should I call if I have questions after closing?
    • When will I get my title insurance policy?
    • Will my payments ever change?
    • Will I be notified when I no longer have to pay mortgage insurance?
  3. Take your time.
    Ask questions. You have a right to read and understand your closing documents, no matter how long it takes. Make sure you are 100% comfortable.
  4. Save your ENTIRE Closing file as it includes these important documents:
    • Closing Disclosure
    • Promissory Note
    • Mortgage / Security Instrument / Deed of Trust
    • Deed, a document that transfers property ownership (purchase only)
    • Right to Cancel (refinance only)

BE AWARE OF MAIL, EMAIL, AND PHONE SCAMS AFTER CLOSING
Marketers target new homeowners; YOUR DEED AND MORTGAGE are recorded public records.

  • Solicitations for new credit cards or home equity lines of If you want to opt-out of these solicitations, call (888) 567-8688.
  • Solicitations from home improvement contractors. Not only should you wait before making major investments, but scams are common. Research a contractor’s reputation and always get three quotes before choosing a
  • Solicitations for “mortgage protection (life) insurance” often sent in official-looking envelopes with your MORTAGE COMPANY Most homeowners are better off with standard life insurance, which is more flexible and usually cheaper.
  • Offers to structure bi-weekly payment plans. You can easily set this up yourself, for free.
  • Refinance offers that don’t save you money. Don’t refinance too soon. The closing costs are not worth it.

 

Download PDF

After You Close Checklist

Print this moving checklist so that you don’t miss a beat after you close.  Moving can be overwhelming, take it step by step.

Before the Move

 

After the Move

  • Clean your new home
  • Change the locks to outside doors and make sure all windows lock properly
  • Check smoke detectors and replace batteries, if needed
  • Be sure that all utility services are turned on and in your name (Electric, Gas, Water, Basin and Drainage, Garbage, etc.)
  • Arrange times for cable and internet providers to come and install
  • Change your address on your bank accounts, credit cards, driver’s license, vehicle registration, voter’s registration, etc.
  • Notify your employer of your new address and new local tax ID
  • Store all of your home’s closing documents in a safe place
  • Find and store manuals for the home’s appliances and systems
  • Store important documents such as birth certificates, sales records, legal/financial papers in a safe place that will not get lost after the move
  • Meet your neighbors
  • Unpack and enjoy your new home!

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Selling

A Home

Real Estate: What is a Seller’s Market?
Read More
Comparative Market Analysis Explained
Download PDF
What is the Absorption Rate in Real Estate
Download PDF
How Does Real Estate Commission Work in Florida?
Read More
Common Negotiables & Red Flags in The Listing Agreement
Read More
Getting Your Home Ready to Sell: A Checklist
Download PDF
Seller’s Disclosure: Building Code Violations
Download PDF
Seller’s Disclosure: Property Condition
Download PDF
Marketing Your Home
Download PDF
Appraisal
Download PDF
Curb Appeal
Download PDF
Preparing for Open Houses
Download PDF

Real Estate: What is a Seller’s Market?

If you’re considering selling your home, you’ll need to know more about current market conditions to determine the list price, set realistic expectations for how long your home will take to sell, and what renovations and repairs you should do before listing.  Generally speaking, listing your home in a seller’s market will allow you to sell faster for more money.  Sounds great, right?  But what is a seller’s market in real estate?   The absorption rate, median days to contract, and the average sales price are some important statistics that will help you determine whether or not current conditions point to a seller’s market.

Absorption Rate

First, you will want to take a look at the absorption rate.  The absorption rate in real estate is the rate at which listed homes in a given market will sell over a defined time frame. The absorption rate will help you to determine how long it should take for your home to sell, but it also reveals important clues about the overall market conditions.  An absorption rate above 20% indicates a seller’s market.  A rate between 15 and 20 percent is considered to be a balanced market, and a rate below 15% is a buyer’s market.  Be sure to discuss the absorption rate in your market with your agent during the listing presentation so that you will have clear expectations for your sale and can plan accordingly.

Median Days to Contract

Second, look at the median days to contract in your neighborhood.  This is another important clue that will tell you how long it will take for your home to sell.  Be careful here as improperly priced listings can skew this number dramatically.  If it takes 30 days on average for a property to go under contract in your neighborhood and there is a listing that has been on the market for 200 days, this is an indication that the property is either overpriced or has some serious flaws.  If your property sits on the market significantly longer than the average days on the market, you will want to revisit the list price.

Average Sales Price

Third, you’ll want to look at the average sales price over the last 6 months to a year.  Are prices going up or down?  This is directly related to housing inventory. The law of supply and demand states that if there is a limited supply, prices tend to increase. If buyers don’t have many options to choose from, you can expect to receive multiple offers which will result in a bidding war.  The key to sparking a bidding war is to price your property right at market value.  Even if buyer demand warrants a higher list price, pricing your home at market value will spark greater interest and will result in more offers.  Once you collect multiple offers, you can ask buyers to submit their highest and best offers which usually produces offers above asking price.

Renovating in a Seller’s Market

If the current market statistics point to a seller’s market, you might want to think twice before doing any costly renovations in preparation for selling your home.  Remember that markets fluctuate.  A shift to a buyer’s market can happen pretty quickly.  Taking too long to list can cut into your net profit.  Furthermore, not all renovations pay off at resale.  Just because a renovation costs you $40,000 does not mean that you can increase the list price by this amount.  Look at the standards in the neighborhood and make sure that you don’t over-improve the property.

If you are curious about your market value and would like more information about your neighborhood statistics, don’t hesitate to reach out to us at 561.560.9995 or visit the Home Valuation tab at Real-ativity.com.

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Comparative Market Analysis Explained

What is a comparative market analysis? 

A comparative market analysis, often referred to as a CMA, is a real estate agent’s estimate of market value based on recent sales of similar homes in the same neighborhood.  A CMA is useful for sellers to determine a list price for their home, and for buyers to come up with a reasonable dollar amount when submitting an offer to purchase.

Finding Comps with Similar Features

The key to an accurate CMA is finding comparable sales, known as comps, that are as similar as possible to the subject property (the home that is being valued).  Unless the subject property is in a cookie-cutter neighborhood with identical floorplans and features, finding good comps can be challenging.  The real estate agent will use the details and photos in the multiple listing service to find comps that are similar to the subject property based on the following criteria:

alt="Collage of three similar Meditteranean style Florida homes used in a comparative market analysis"

  • Same property type
  • Square footage = +/- 15%
  • Number of beds and baths
  • The year built
  • Type of construction
  • Lot size
  • Overall condition
  • Property features: pool, summer kitchen, waterfront, impact windows etc.

Making Adjustments for a Comparative Market Analysis

Adjustments may need to be made to increase or decrease the sale price of a comp to account for home features.  For example, if the subject property has a pool, but the comp being used does not, the agent would add the average value for a pool in that neighborhood to the comp’s sale price.  This is where your agent’s knowledge of the neighborhood makes a world of difference.  There is no standard adjustment for a pool, your agent will need extensive knowledge of your market to adjust accordingly.

Neighborhood Comps: Proximity is Key

Agent expertise is also essential in determining the area that will be covered in a comparative market analysis.  Home values can differ drastically within neighborhoods that border one another.  If the subject property is in a gated community with an HOA, it is best to stay within that community. The closer to the subject property the better, but a general rule of thumb is to stay within half a mile from the property in the same city and school district.  However, if the home is located in a rural area, the agent may need to go a mile out to locate comps.

alt="Neighborhood comps for CMA depicted by an aerial shot of a neighborhood with palm tree lined streets"

Use Recent Comps

Another important consideration in finding good comps is the sale date.  The more recent, the better, especially in a changing market.  Ideally, there will be enough recent sales that your agent will only have to go back three to six months.  However, if there haven’t been a lot of sales in the neighborhood, your agent might need to look at sales over the past year.  Only properties that have closed can be used as a true comp.  However, it’s a good idea to look at active listings to ensure that you are pricing the property competitively.  Listings that are pending, meaning they have gone under contract with a buyer but haven’t closed yet, can also provide useful information.  The actual sale price of a pending listing is unknown until closing occurs, but looking at how many days it took the property to go under contract at the list price is useful in determining a list price.

CMA vs Appraisal

Once your agent has located four to ten comps and has made adjustments for home features, you will be provided with a range of market value. It’s important to note that a CMA is not the same as an appraisal.  An appraisal is conducted by a neutral third party that is licensed by the state.  If you receive an offer on your home that is financed, the bank will order an appraisal to ensure that they are not issuing a mortgage that is greater than the market value.  Oftentimes, cash buyers will order an appraisal for their own peace of mind as well.  While the process for a CMA and an appraisal is similar, an appraisal provides a more detailed analysis.

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What is the Absorption Rate in Real Estate

The absorption rate in real estate is the rate at which listed homes in a given market will sell over a defined time frame.  A community can be defined as a neighborhood, city, zip code, county, or metropolitan statistical area.  This important statistic will help you figure out how long it will take to sell your home under current market conditions.

Calculating the Absorption Rate in Real Estate

To calculate the absorption rate, define a time frame, say one month. Second, count the number of homes that sold over the past month.  Third, divide the number of homes sold by the number of homes listed in the market.  For example, if 200 homes sold in Boynton Beach in 30 days, and 300 homes are currently listed, the absorption rate would be 66%.  Therefore the market would have 1.5 months of inventory.  This means that a home seller in Boynton Beach that prices his or her home according to market value could expect to sell their home within one and a half months.   It is best to calculate the absorption rate for similarly priced homes since different price ranges tend to sell at different rates.

alt text = ""

Buyer’s Market vs Seller’s Market

The absorption rate will help you to determine how long it should take for your home to sell. While it also reveals important clues about the overall market conditions.  An absorption rate above 20% indicates a seller’s market.  A 15 to 20 percent rate is a balanced market, and a rate below 15% is a buyer’s market.  Be sure to discuss the absorption rate in your market with your agent during the listing presentation so that you will have clear expectations for your sale and can plan accordingly.

 

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How Does Real Estate Commission Work in Florida?

The Listing Agreement Determines the Real Estate Commission

When listing your home for sale with a real estate agent, you will sign a listing agreement.  A listing agreement is a contract between the homeowner and the real estate agent’s brokerage that will lay out the commission rate.  While some agents charge a flat fee, most real estate commissions are a percentage of the sale price.  In order to place the listing on the multiple listing service, the seller must agree to offer a commission to the agent that represents the buyer purchasing the home.

The Listing Agent Splits Commission with the Buyer’s Agent

Technically, the listing agent agrees to share a percentage of their commission with the buyer’s agent, and this split is approved by the seller in the listing agreement.  Usually, the commission is split evenly between the two agents involved in the transaction.  However, the seller may decide to pay the buyer’s agent a higher commission to attract more interest in their home.  A higher commission often motivates a buyer’s agent to show the home more frequently to their buyers.  This can be a good strategy in a buyer’s market where the seller is competing with multiple other listings in the neighborhood.

Alt="Real Estate Agent adds up marketing expenses with a calculator in one hand and a wooden model home in the other"

Agent Expenses

While the real estate commission rate is negotiable, the average rate in Florida is 6% of the sales price.  If you sell a $250,000 house, you would pay a $15,000 commission at 6%. This might sound like a lot, but remember that the listing agent will cover marketing expenses which can add up quickly.  If you negotiate a lower commission, the agent might cut corners on marketing to make up for the loss.  The agents involved in the transaction will usually have to pay their brokerage a percentage of the commission and will be responsible for taxes and other operating expenses.  An agent only earns a commission when a property closes so they are not compensated for the work performed on deals that fall through.

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Common Negotiables & Red Flags in The Listing Agreement

A listing agreement is a contract between you and your agent’s brokerage that will lay out the terms and conditions of the listing. There are three different types of listing agreements you should be familiar with, although the most common is the Exclusive-Right-of-Sale.  Find out which items are negotiable and how to spot red flags in a Florida Exclusive Right of Sale Listing Agreement.

Types of Listing Agreements

Open Listing: The seller employs multiple brokers.  Brokers are not obligated to market the property and will only be entitled to a commission if they bring a ready, willing, and able buyer to submit an offer on the property that is accepted by the seller.  The seller may sell on their own merit without owing a commission.

Exclusive Agency: The seller employs one broker to list the property.  The listing broker agrees to cooperate with buyer’s agents from competing brokerages.  The seller has the right to sell on their own merit without paying a commission. This arrangement often causes disputes over procuring cause between the broker and the seller.

Exclusive-Right-of-Sale: The seller employs only one broker to list the property and agrees to pay a commission if the property is sold within the listing period.  This is the only type of listing agreement that will permit the broker to advertise the listing on the MLS.  The seller can not sell on their own merit without paying a commission unless exclusions are written into the listing agreement.

alt="Couple shaking hands with their Realtor after successfully negotiating the terms of the listing agreement"

Negotiables in the Exclusive Right-of-Sale Listing Agreement:

alt="Blond woman with frustrated expression reading a real estate listing agreement on a laptop while holding up a red flag"

Red Flags in the Exclusive Right-of-Sale Listing Agreement

  • Retained Deposits: It is common for brokerages to take up to 50% of retained deposits, but that doesn’t make it right.  This means that if you get under contract with a buyer who fails to perform their duties in the sales contract and you’re eligible to retain their earnest money deposit, your agent could keep a portion of these funds.  This is negotiable.
  • Cancellation Fees:  Many Realtors charge a fee if you decide not to sell to cover their marketing expenses.  Cancellation fees are negotiable and exorbitant fees are a red flag.
  • Commission Paid to Cooperating Broker: Usually, the commission is split evenly between the listing and buyer’s agents.  If you’re selling in a buyer’s market, you may want to consider offering a higher commission percentage or a bonus to the buyer’s agent to help generate greater interest in your property.  However, if the listing agent is taking a higher commission than they are offering to the buyer’s agent, they are doing you an injustice because buyer’s agents are more likely to show properties that offer higher commission rates.

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Getting Your Home Ready to Sell: A Checklist

Planning to sell? Preparing in advance will make the process much easier.

We suggest a three month lead time before you put your home on the market, this will give you time to get organized, reduce clutter, and make the home presentable. Below you will find our tips for preparing to sell your home and a checklist to download.

Decide on a date to go on the market.

Planning on a listing date will let you structure your entire plan, culminating in the day you go live on the market. Keep things like holidays and school seasons in mind so that it’s convenient for you and more appealing for buyers who may have children. Exposure is the name of the game when you list your home, the more buyers that are looking the better. Your agent will be able to advise you of current market conditions- and it’s best to have a conversation well in advance of listing with an advisor to get your strategy down. For some quick advice with no strings attached call the experts at Real-ativity (they can help you with dates and processes well before hiring an agent, it’s free and fast.)

It takes 21-45 days to close on a house, depending on how the financing and title work progresses as well as working your way through negotiables and contingencies. When you pick a list date you must keep in mind marketing time and contract to close time.

Plan three months from listing date to closing date. If you are planning on buying a home while you are selling your home make sure and get the guide on buying and selling at the same time in the smarts section.  These logistical factors are crucial to consider while preparing to sell your home.

Do advanced market research, look into recent sales and supply and demand stats.

Throughout the process of preparing your home to sell, you will need to do your homework. Real Estate markets can be volatile and can change drastically based on lending criteria and interest rates, job markets, distressed inventory, and investment competition. Depending on the type and location of your property you own there could be a different marketplace than what you hear in the media, your early research will help you manage your own expectations and make your decisions easier and less stressful.

Take an honest look at the condition of your home.

Sellers sometimes have a difficult time making an accurate assessment of their home so you may find it helpful to have a property inspector come in to do a pre-inspection which is generally between $300-$500 and will act as a to-do list for your repairs and prepare you for what a buyer may want to negotiate.  As a seller you will need to disclose all material facts, knowing what needs to be done and addressing issues in advance will likely save you money on repairs and ensure your home is saleable to the widest variety of buyers. Keep in mind some types of financing dictate property conditions be up to a certain standard, FHA guidelines and Veterans Administration Guidelines for purchasing can be sticky, its best to take a look in advance since these types of buyers are prevalent in the Florida market.

Decide on a listing agent.

alt text = "interview agents before listing"

The selling process can be handled on your own, but usually results in a lower sales price. The statistics on for sale by owners accounted for 11% of home sales in 2018. The typical FSBO home sold for $200,000 compared to $280,000 for agent-assisted home sales. That’s HUGE! And stressful, remember agents are paid a commission only if you close at terms acceptable to you, and from their commission, they handle contracts and manage most of the pre-listing details, pay for the photography, print, and digital marketing, schedule and supervise showings, negotiate, work through contingencies and make sure you get the best deal.

Repair damages and refresh your home in advance of listing

Go through your home and fix the little things that might deter a buyer or give your home an appearance of disrepair, buyers want to see a pride of ownership and you only have one time to make a great impression. If there is a broken gate, fix it, make sure doors open and close well, replace burnt bulbs, retouch paint, and broken handles. Lightswitch covers, plug covers, leaky faucets, and toilets are low-cost repairs, and taking on weekend warrior duties will increase your sales price and reduce negotiation stress.

Preparing to Sell Your Home: Declutter, organize and open space up.

alt text = "organized closets seem bigger"

Start this early, you want photographers to get amazing shots and buyers to feel your home is spacious and inviting. Consider a temporary storage unit for large furniture, closet items you don’t use, and garage extras that are overwhelming your space (like holiday decor and collector’s items). Closet floors should be visible and shelves should not seem overfull. Simple things like color coordinating your closets for photos and facing your pantry labels and cleaning products give potential buyers an impression of a meticulous owner and lends itself to trust and confidence in the home.

Preparing to sell your home includes the interior and exterior.  Outside of the home needs to be clean, and neat also- do you need a new paint job? Powerwash, mulch, trim, mow, replace broken sprinkler heads and plant some pretty flowers! Curb appeal is real.

Work with your agent on a marketing plan and timeline.

Listing your property on the multiple listing service is a start, but it is the base level. If you want to get top dollar exposure is the name of the game, your agent should do all of the following:

  • Book 4k Professional Photography
  • Drone Aerial Photos
  • Stage the home or plan virtual staging
  • Create Virtual Tours for buyers who will be shopping online
  • Decide on video marketing and distribution
  • Collateral Material design (EDDM mailings, flyers, and buyers presentations)
  • Decide on custom websites and/ or landing page
  • Strategize for Social Media Marketing on Facebook & Instagram by targeting buyers looking at similar homes, defining most likely buyer audiences and traffic funnels.
  • Build Bing and Google Ads marketing channels targeting buyers who have recently qualified for a mortgage and are looking at homes in the surrounding 50 miles.
  • Write comprehensive multiple listing service descriptions and supplements.
  • Syndication plans for exposure both local and abroad
  • Featured the listing on advertising platforms like Real-ativity, Zillow, Trulia & Realtor.com
  • Email marketing to the entire South Florida Brokerage community
  • Plan Broker’s opens
  • Plan public open houses

 

Get paperwork in order, you’ll need it for closing and some of it is handy in marketing!

  • A copy of your deed
  • Copies of permits for past renovation work
  • Warranty documentation on systems and appliances
  • Elevation certificates and land survey
  • Most recent tax bills
  • Mortgage payoff amount

Set a listing price

Spend some time seriously looking at what has sold in your neighborhood and the surrounding neighborhoods, then look at what is on the market and assess the activity. Homes that have been sitting on the market for months are likely overpriced. Talk to your agent about consumer buying ability and get recent stats for interest rates and debt to income ratios for buyers. Your agent will be able to map out the possibilities and pricing strategies that will get the most exposure for your property. Gone are the days of “list high and hope to negotiate,” this is the digital age, buyers are using advanced algorithms to define buying price strategy and home prices- you want to both understand what this looks like and how you can use it to your advantage.

Clean like the queen is coming for a visit!

alt text = "two girls cleaning house before listing it for sale"

  • Steam clean the carpets
  • Wash the windows and screens
  • Scour sinks
  • Scour door handles
  • Scrub lightswitches
  • Fan blades need to be dusted
  • Vacuum the door jambs and slider tracks so doors work well
  • Disinfect bathrooms, replace toilet seats (low cost and big for buyers), and polish fixtures
  • kitchen appliances need to be scoured, polished (Sheila shine works wonders)
  • Scour and organize the fridge and freezer

Keep it up— you’ll need to keep clean the whole time your home is on the market, touch up every time the home is going to be shown.

Hire a professional photographer

Whether you’re selling with an agent or on your own, professional photographs are a must in today’s market. Check to see if your photographer can also capture a virtual 3D house tour to give your listing a boost in online views. Before your appointment, make sure rooms are sparsely furnished, depersonalized, bright, welcoming and photo-ready.

Plan for showings

Talk with your agent about the logistics of private showings

  • When will tours be allowed?
  • When will open houses be scheduled?
  • Will you allow unescorted tours?
  • Will the house be on a lockbox? digital or conventional?
  • How much notice does your agent need to give you to book a tour?
  • It’s best that you are not there for showings, where will you go?
  • Make sure medications and cash and valuables are hidden away
  • Will you keep cold drinks and designate a bathroom for public use?

Download PDF

Seller’s Disclosure: Building Code Violations

You Must Disclose All Known Building Code Violations

When you are selling a property, you must make buyers aware of any fact that materially affects the property. If you have building code violations, or pending citations that are in the process of being recorded you must disclose all the details in writing prior to closing.

The disclosure must:

  • The seller’s disclosure must be in writing
  • The disclosure must state the existence and nature of the violations or proceedings
  • The seller must provide a copy of the pleadings, notices, and other materials received by the seller
  • State that the buyer’s agreement is to be liable for correcting the code violations
  • The buyer must sign and return a copy to you

 

Your city or county may vary in additional rules, so it is best to find out about policies in advance. The statute says that within five days after the transfer of the property, the seller must provide the code enforcement agency with the name and address of the new owner, and provide copies of the disclosure notices given to the buyer. A seller who violates this provision is guilty of fraud [125.69(2)(d)].   Always do your diligence and make sure you understand your rights and responsibilities as a seller from the start, it could save you time, effort, and money.

sellers disclosure must include code violations

Download PDF

Seller’s Disclosure: Property Condition

A Seller’s Disclosure is a comprehensive document listing any known issues with the property and anything that may materially affect the value of the property. A Seller’s Disclosure should include systematic, structural, electrical, plumbing, water/flooding, governmental and environmental issues. It is the responsibility of the seller to prepare it and offer it to the buyer. One would be wise to have it signed and returned although Florida law does not mandate its use or execution, better safe than sorry.

men shake hands and trust each other after disclosing all property defects in a real estate transaction

As a seller, you are in the best position to know all the details, especially those that cannot be seen with the naked eye, which may affect property conditions. Disclosing details to the buyer is the right thing to do, its your integrity on the line. If you don’t disclose material facts you could face legal liability down the road.

What is Covered in the Seller’s Disclosure?

Generally, a seller’s property disclosure form will include:

  • structural issues such as the roof, plumbing, and foundations integrity
  • environmental hazards (like mold, asbestos, lead, defective drywall and others)
  • wood-destroying organisms (like termites) are active or have been in the past
  • plumbing, septic tank and drain field facts and known conditions
  • old wiring, electrical panel issues, or unsafe electrical conditions
  • condition of the HVAC, water heater, and other systems
  • problems with appliances and warranties on appliances
  • condition of the windows, upgrades, and existence of storm shutters
  • water intrusion and drainage issues
  • condition of the pool, pool pump, spa, and lighting
  • sprinkler system, well and pump issues
  • whether any actual or potential legal claims
  • levied fines
  • litigation against the property or any court proceedings
  • boundaries disputes
  • past or present sinkhole existence
  • governance, restrictions, and rules (Homeowners association, condo docs, co-op rules)
  • upcoming assessments both levied and approved
  • FIRPTA- “Foreign Investment in Real Property Tax Act” (are withholding sales proceeds for the IRS?

Do the Right Thing: Disclose Defects to Buyers

Most legal experts say you should disclose information in writing. Florida law does not require all disclosures must be in writing, but, if you make verbal disclosures without any written receipt, you could have a difficult time proving to a court that you did. Your integrity in the community and others’ trust in you depends on it.

Meter with the word intergrity printed on it to depict concept that your integrity depends on disclosing defects to buyers

Download PDF

Marketing Your Home

Marketing Your Home to Sell Fast for Top Dollar

Listing your property on the multiple listing service is a start, but really it’s the bare minimum. If you want to get top dollar, exposure is the name of the game.  Your agent should be marketing your home with all of the following:

Open House to market your home

  • Book 4k Professional Photography
  • Drone Aerial Photos
  • Stage the home or plan virtual staging
  • Create Virtual Tours for buyers who will be shopping online
  • Decide on video marketing and distribution
  • Collateral Material design (EDDM mailings, flyers, and buyers presentations)
  • Decide on custom websites and/ or landing page
  • Strategize for Social Media Marketing on Facebook & Instagram by targeting buyers looking at similar homes, defining most likely buyer audiences and traffic funnels.
  • Build Bing and Google Ads marketing channels targeting buyers who have recently qualified for a mortgage and are looking at homes in the surrounding 50 miles.
  • Write comprehensive multiple listing service descriptions and supplements.
  • Syndication plans to market your home locally and abroad
  • Featured the listing on advertising platforms like Real-ativity, Zillow, Trulia & Realtor.com
  • Email marketing to the entire South Florida Brokerage community
  • Plan Broker’s opens
  • Plan public open houses

Download Real-ativiy’s Get Your Home Ready to Sell Checklist before you launch the marketing campaign for your home.  This will ensure that your home shows in its best possible light to make a great first impression on potential buyers.

Download PDF

Appraisal

What is a Real Estate Appraisal?

A home appraisal is an unbiased professional opinion of a home’s value. The appraisal assures the lender that they aren’t handing the borrower more money than the home is worth and that you are not overpaying!

Lenders want to make sure that you are not over-borrowing for a property because the home serves as collateral for the mortgage. If you should default on the mortgage and go into foreclosure, the lender will sell the home to recoup the money it lent. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.

Appraisals are part of closing costs (paid by the buyer) but can often be paid on a credit card in advance, or paid by others- like your lender.

Renegotiating, Saving the Deal & Saving Money

Yay, the house appraised: If the appraisal comes in, at or above the contract price, the transaction proceeds as planned.

Oh, no, the house didn’t appraise: If the appraisal comes in below the contract price, there is a chance to renegotiate. Chances are neither you nor the seller wants the transaction to fall through. As the buyer, you have an advantage, in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price.

  1. Reduce the Purchase price: Did you have an appraisal contingency? Does your loan depend on it? Talk this through with your agent/lender first.
  2. Negotiate with the sellers: If the gap between the offer price and the appraised value isn’t too large, you may be able to meet somewhere in the middle and secure your dream home. Be nice. Consider a letter to the seller about how this is your dream home…
  3. Make up the difference: Most lenders will allow you to pay the difference in price outside of your loan, you might reduce your down payment.
  4. Cancel the contract: Sometimes deals just fall through. Even if you really love the home, be smart and don’t buy a property that’s overpriced. Always be prepared to walk away.
  5. Wait it out: Keep your eye on the house because if a deal falls through because of appraisal issues, the homeowners have a hard time getting higher offers from other buyers. They may come back to you to negotiate again.
  6. Appeal the appraisal: if you think the appraisal was unrealistic and can make a case that it was way off the mark, ask your loan officer to compose a rebuttal (with help from your agent).

***FHA appraisals stick with the property for 120 days, during this time the original appraisal will be used even if a new buyer comes along with a new FHA loan. VA Loans stick for 6 months.

***With all other loan types, a new appraisal is ordered for each potential buyer if the first transaction falls through.

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Curb Appeal

Curb Appeal RefreshPotential buyers formulate a first impression of a home from the outside.  This is why creating an attractive, pleasant, and meticulously manicured exterior is of great importance while you get your home ready to sell.  Before you put your home on the market make sure you are maximizing its appeal by refreshing the landscape and making your home inviting. CURB APPEAL IS REAL!  Here are 10 quick things you can do to improve your curb appeal quick:

  1. Trim the trees & hedges
  2. Use an electric edger to make the lines that border streets, sidewalks and driveways clean
  3. Add fresh mulch in green beds and around trees
  4. Powerwash driveway and sidewalks
  5. Plant fresh flowers
  6. Repair and paint fence
  7. Make the entry welcoming with potted plants
  8. Paint, replace or plant around the mailbox
  9. Paint the front door, wash doorknobs & wash windows
  10. Add a new welcome mat

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Preparing for Open Houses

Open Houses are a Great Opportunity for Exposure

Properly preparing for an open house is very important. Open houses are a chance for potential buyers to view your home. If the open house is heavily marketed and has a good turnout, buyers will perceive a competitive environment and will be more likely to submit offers at or above the list price.  Broker’s open houses are great for exposure because the agents who attend represent many buyers.

To see your home in its best light, make sure it shines! Offer cold drinks and a restroom for their convenience, they may have had a long drive- it’s best to encourage their comfort so they stay a while and get a good impression.

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Checklist: Preparing for an Open House

  1. Remove big furniture that makes your rooms seem smaller, even if it is nice, it’s making your home tight.
  2. Reduce clutter: clean off the countertops, ditch the magazine piles, move the collections to storage space, check under the sinks too.
  3. Powerwash driveways, sidewalks, and home exterior.
  4. Wash the windows inside and out, open the blinds, and dust the fans.
  5. Wash/paint the front door, oil the hinges, clean the lighting sconces, and replace the front welcome mat.
  6. Replace the address numbers if needed
  7. Clean out the closets, only keep what you need now, then color coordinate. The floors need to be seen and the shelves should seem partially empty, this gives buyers a feeling of plenty of storage. Face the boxes and cans in the pantry, wash the shelves and organize the cleaning products.
  8. Wash the light switch covers and door handles with a magic eraser.
  9. Scour all the sinks and tubs.
  10. Iron your bedding and sheets
  11. Clean the appliances and polish their surfaces.
  12. Wash the inside of the fridge, handles, and doors.
  13. Vacuum, dust, mop.
  14. Remove all the personal stuff: family stuff, religious stuff, political stuff. Buyers need to imagine them there, not you.
  15. Mow the lawn, add fresh mulch, trim the hedges, and plant fresh flowers.

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Financing

A Home

How to get a mortgage pre-approval
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Financing a Co-op
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Financing a Townhouse
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Financing a Duplex
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Financing a Condo
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Fixed Rate Vs. Adjustable Rate Mortgage
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Different Types of Loans
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FHA Financing
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Conventional Loans
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How to get a mortgage pre-approval

Mortgage Preapproval vs Prequalification

There is a big difference between mortgage preapproval and prequalification.  A lender can prequalify you after a quick conversation, but sellers won’t take your offer very seriously.  Whereas a preapproval will tell sellers that your lender has done their due diligence in assessing your ability to qualify for a loan.  In today’s competitive market, you need to submit a preapproval with desktop underwriting.

It is important to note that having a preapproval does not obligate you to a particular lender.  You should shop around for the best rate and terms.  You can apply for a mortgage pre-approval through many different types of lenders.  Mortgage brokers tend to be a good choice because they usually work for an independent mortgage company so they can shop multiple lenders on your behalf.  Mortgage brokers are typically paid by the lender after a loan closes; sometimes the borrower pays the broker’s commission upfront at closing. ASK!

Documents Needed

  • Driver’s license or passport
  • SS or permanent resident card
  • Credit history- lender will pull this for you
  • Employment verification
  • Pay stubs for the past 30 days
  • Federal income tax returns
  • W-2s for the past two years
  • Proof additional income
  • Bank statements

Don’t forget to bring proof of funds for your down payment and closing costs in the form of bank statements, statements from stock accounts and mutual funds, a grant approval certificate and/or a gift letter.

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Financing a Co-op

Co-ops are apartment buildings communally owned by a corporation. Each owner receives shares of stock in the corporation, and the building often resides on leased land.

Financing a Co-Op with a Share Loan

You can’t get a mortgage on a co-op because mortgages are reserved for real property.  However, co-ops can be financed with a share loan.  With a share loan, the lender holds a proprietary lease & stock certificate as collateral. Ask your lender and Realtor about co-op financing. If you discover a co-op that does accept financing, ask the board which lenders they have worked with in the past. Co-ops can be financed, it just requires a little more research.

Financing a Co-Op is Rare

Most co-op purchases are cash. Very few lenders will finance co-ops in Florida, and very few co-ops will accept financing as an option.  Most co-op boards are not willing to take on the risk of default and the communal disturbances that accompany a foreclosure.  You will probably be required to put down a higher down payment and show proof of sufficient liquidity to cover carrying costs for a few years if you do find a co-op that accepts financing.

Co-Op Foreclosures

It is much easier for a lender to foreclose on co-ops than it is for real property.  A bank can conduct a foreclosure sale on a co-op without a judge’s approval.  All the lender has to do is publish a foreclosure notice in a local newspaper for three weeks before holding an auction.  If the co-op unit fails to sell at auction, the bank will take possession.

 

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Financing a Townhouse

Financing a Townhouse with Government-Backed Loans and Conventional Mortgages

Generally, townhouses are eligible for the same loan products as single-family homes.  Government-backed loans like FHA, FHA 203K, and VA loans are available as well as a wide variety of conventional conforming and non-conforming products, both private and retail. The lender will have to take homeowners association dues and any upcoming or levied assessments into consideration.  Some associations cover insurance while others don’t, this is another important factor for calculating carrying costs.  If these additional fees are too high, they could push the buyer outside the lender’s acceptable debt to income ratio resulting in loan disqualification.

Every once in a while, you might come across a townhouse that is governed by a condominium association.  In these cases, obtaining government-backed financing can be more difficult.  You would need to ask your lender if the condominium complex has been approved for FHA / VA financing.  If the complex hasn’t been approved, the lender might be able to perform a single unit approval.  If your lender is unwilling or unable to do single-unit FHA / VA approval, you can always shop around for a lender that is more comfortable with the process.

Fee Simple Townhome Financing:

 

Condominium Townhouse financing:

  • Is complex approved?
  • Single Unit Approval
  • Shop around !!!

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Financing a Duplex

Financing a Duplex

Financing a duplex depends on whether you plan to use the property as your primary residence.  Duplexes, two residences in one building, have some great advantages for a buyer.  Live on one side and rent the other as a mortgage subsidy or as an investment for an income-producing property. Your options to finance a duplex will depend on whether you plan to use the property as your primary residence.

Financing a Duplex in Florida

You can use government-backed loans like FHA & VA to finance a duplex as long as you use one of the units as your primary residence.  Conventional loans are available for both owner-occupiers and investors. Jumbo loans can be secured for the pricier properties, and often times you can use the potential rental income to help you qualify for the loan.

Perhaps you find a fixer-upper.  You can finance the purchase and the renovations with loan options like Fanny Mae’s “HomeStyles”FHA’s “203K” and Freddy Mac’s “CHOICERenovation”. Each has distinct advantages. Ask your lender which may be right for you!
Additionally, depending on location, you may be able to qualify for publicly-funded home improvement costs, down payment assistance, or local grants to improve affordable housing.

 

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Financing a Condo

Down Payment Requirements to Finance a Condo

The condo association or elected board in some buildings may require larger down payments when financing a condo to hedge against default. They usually require larger equity positions in purchases to protect the communal assets.  The reasoning is that if a buyer has a substantial amount of equity in the unit, they are less likely to default on their mortgage.  Defaults lead to missed payments of association dues which causes financial burdens on the rest of the unitholders and jeopardizes the building’s budget. 

The Condo Questionnaire

When financing a condo, lenders will require a condo questionnaire to evaluate the budget and any legal action against the association. Government-backed loans like FHA and VA may require budgeted reserves and planned contributions to mitigate their risk. If you plan on purchasing a condo with a government-backed loan, ask your lender for a list of buildings that are already FHA VA approved.  As of August 2019, lenders can perform single-unit approvals which allow you to purchase in a building that has not been FHA /VA approved.  Be sure that you have a full understanding of the single unit approval process before committing. This is not an easy task and could require additional time and effort to get to the closing table.

FannieMae’s Condo Questionnaires:

  • Condominium Project Questionnaire—Full Form (Form 1076) contains a list of eligibility questions to support a Full Review, and
  • Condominium Project Questionnaire—Short Form (Form 1077) contains a shorter list of questions to facilitate a Limited Review.

 

FreddyMac’s Condo General Project Eligibility Requirements:

 

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Fixed Rate Vs. Adjustable Rate Mortgage

What is the Difference Between Adjustable-Rate and Fixed-Rate Mortgages?

The difference between fixed-rate and adjustable-rate mortgages is exactly what it sounds like.  With a fixed-rate mortgage, your interest rate remains fixed.  While the interest rate for an adjustable-rate is adjustable.  This sounds painfully obvious, but there are pros and cons to both types of loans, so let’s dig a little deeper.

The Adjustable-Rate Mortgage

The Adjustable-rate mortgage often referred to as the ARM, offers a lower interest rate than fixed-rate loans during the first 5 to 7 years.  After this initial period, the monthly payments could rise substantially.  This may be a good option if you don’t plan on living in a home for long or if you will make more money in the future.  Avoid any surprises and ask your lender to calculate the maximum monthly payment that could be due.  Cap rates do vary so be sure to shop around.

The Fixed-Rate Mortgage

A fixed-rate mortgage locks in the interest rate for the life of the loan.  Borrowers will only see fluctuations in their monthly payments when taxes and insurance premiums change.  Fixed-rate mortgages tend to have higher interest rates than ARMs because the lender risks locking in a low rate that could be much higher in the future.  When your lender pre-approves you for a mortgage, he or she will take this higher interest rate into account when determining how much house you can afford.

This higher interest rate does not seem to deter buyers as fixed-rate mortgages are much more popular than ARMs.  Most borrowers prefer the predictability of a fixed-rate with the future of interest rates being so uncertain. Fixed-rate mortgages are available in 15 or 30-year terms. Explore different types of loans available for home purchasing to ensure you find the best product for your financial future.

 

 

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Different Types of Loans

There are many different types of loans available for your home purchase.  The right loan product for you will depend on the type of property you are purchasing, property condition, your credit history, your budget and savings for a down payment, and the length of time you plan on owning the home.

A Fixed-Rate Mortgage

Allows you to lock in an interest rate so your monthly payment will stay the same over the life of the loan (only slightly changing with tax & insurance changes).

  • A 30-year fixed-rate mortgage offers a lower monthly payment for the loan amount (for this reason, it’s more popular than the 15-year option).
  • A 15-year fixed-rate mortgage typically offers a lower interest rate but a higher monthly payment because you’re paying the loan amount off faster.

 

Adjustable-Rate Mortgage (ARM)

Good if you plan to live in a home for a short time or you expect your income to go up to offset potentially higher future rates.

  • Offers a lower interest rate than a fixed-rate mortgage for an initial period of time — maybe, five or seven years — but the rate can fluctuate after the introductory period is over, depending on changes in interest rate conditions.
  • Has caps that protect how high the rate can go.
  • Different lenders may offer the same initial interest rate but different rate caps. It’s important to compare rate caps when shopping around for an ARM.
  • Adjustable-rate mortgages have a reputation for being complicated. As the Consumer Financial Protection Bureau advises, make sure to read the fine print.

Which fixed-rate or adjustable-rate mortgage you qualify for introduces a whole host of other categories, and they fall under two umbrellas: conventional loans and government loans.

Conventional Loans

Originated in the private sector, and is not insured by the government.

  • Often a credit score of 620 or above.
  • 3% Down payment to qualify.
  • Renovation Financing options available from 5% down.
  • Very competitive interest rates.
  • 0% down with down payment assistance programs.

 

Government Loans

Government loans: Originated in the private sector, but is insured by the government.

FHA LOAN

Federal Housing Administration

  • Low down payment of 3.5% with minimum credit score of 580 or sometimes lower.
  • You must pay an upfront mortgage insurance premium (MIP) and an annual premium of 0.85%. Currently, the MIP is 1.75% of the loan amount ($1,750 for a $100,000 loan). This can be paid upfront at the closing or can be rolled into the monthly mortgage payment.
  • FHA 203K Renovation financing loans available.
  • 0% down with down payment assistance programs.

 

VA LOAN

 U.S. Department of Veterans Affairs

    • Available to active or retired military (or a veteran’s surviving spouse).
    • 0% down payment.
    • The VA only allows lenders to charge 1% maximum to cover the costs of originating and underwriting the loan, so you save money at closing. There is, however, an additional upfront, one-time funding fee of 2.15%.
    • No mortgage insurance.

 

USDA LOAN

U.S. Department of Agriculture & Rural Development

    • Limited-income homebuyers in towns with populations of 10,000 or less, or that are “rural in character,” meaning that some areas that now have bigger populations are grandfathered in.
    • Lower interest rates than non-USDA loans.
    • Down payments can be as low as 0%.
    • Lenient credit score requirements.
    • Upfront mortgage insurance fee of 1% of the loan amount and an annual mortgage insurance premium of 0.35%.

 

Shop Around

Now that you have a general idea of the different types of loans available for your home purchase, it’s important to shop around.  There are many types of lenders as well.  Starting with a mortgage broker is usually a good choice because he or she can help you compare lender’s rates and terms.  Be sure you have all the required documentation compiled to get pre-approved for a mortgage.

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FHA Financing

FHA Financing Has Loose Standards: Making Home Ownership Accessible to More People

FHA stands for Federal Housing Administration.  FHA loans are backed by the government.  This government insurance mitigates the lender’s risk; as a result, FHA financing is easier to qualify for than conventional financing in terms of credit scores and loan-to-income ratios.

The minimum down payment is as low as 3.5%.  In the past, this low down payment made FHA financing attractive to buyers with little savings.  Nowadays conventional financing is available for only 3% down.  So in most cases, buyers select FHA because they have difficulty qualifying for a conventional loan.

Mortgage Insurance Premiums

The downside to FHA loans is the upfront mortgage insurance premium (MIP).  MIP covers a percentage of the lender’s loss if you default on your loan.  FHA borrowers don’t receive any protection from MIP policies, but they are responsible for monthly premiums for the life of the loan.

Typically they pay two different kinds of mortgage insurance premiums:

  • The upfront premium is approximately 1.75% of the loan amount.
  • Annual premium of 0.85% for most borrowers (sometimes more).

FHA Appraisals

If you are looking to purchase an older home, you will need to be sure that the property is in good condition and does not pose any health or safety risks.  You could be denied FHA financing if there are issues with the roof, plumbing, electrical, heating or cooling systems, or appliances.  Termites and lead-based paint are also major red flags for FHA lenders. If you opt for FHA financing, be sure you review FHA Appraisal Guidelines before you begin your home search. Furthermore, FHA has loan limits.  Visit HUD.gov to find the limit in your county.

 

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Conventional Loans

So you have decided to purchase a home and now it’s time to explore the many different types of loans available to finance your purchase.  While it’s important to explore all your options, researching conventional loans is a good place to start.

What is a Conventional Loan?

A conventional loan is originated in the private sector and is not insured by the government.  Conventional loans are more difficult to qualify for than government-insured loans because they pose a greater risk to the lender.  A credit score of 620 and a debt-to-income ratio of 50% or less is generally required, but requirements do fluctuate. Most homebuyers that can meet these credit requirements opt for conventional loan products because they offer very competitive interest rates.  Another perk is being able to avoid private mortgage insurance with a 20% down payment.

Conforming conventional mortgages are originated according to certain guidelines so that they can be purchased by Government Sponsored Enterprises (GSEs) such as Fannie Mae or Freddie Mac in the secondary mortgage market.   Selling off existing mortgages allows lenders to maintain sufficient liquidity to keep lending to new homebuyers.  However, since the risk of default is being passed on, GSEs put forth credit requirements, down payment minimums, property condition guidelines, and loan limits to minimize this risk. The 2021 loan limit for conforming loans is $548,250.  For areas with a higher cost of living, the limit is up to $822,375.  If you want to purchase a home that exceeds this limit, you would need to apply for a non-conforming jumbo loan.

Down Payment Requirements

Conventional loans offer 3% down payment options, but select lenders are able to qualify buyers with 0% down.  Down payment requirements vary based on a number of factors including the type of property you are purchasing.  For example, you may need to put 15% down if you are purchasing a property with more than one unit.  If you’re purchasing a second home, there is a 10% down payment requirement.  Adjustable-rate mortgages require at least 5% down.  Renovation Financing options are also available with at least  5% down. HomeStyle Renovation Financing and FreddyMac ChoiceRenovation are worth looking into if you fall in love with a home in need of extensive renovations.

 

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Real Estate

Negotiation

Common Negotiables
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Negotiating Repairs After Inspection
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Appraisal Negotiations
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Force Majeure or “Acts of God” like Hurricanes
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What Is CAM
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Common Negotiables

Most Common Negotiables in a Real Estate Transaction:

  • Price
  • Earnest Money Deposit: How Much? Is it due in one lump sum or multiple installments? At what point in the contract is it due? Does it “go hard” at any point to secure the seller’s risk?
  • Inspection Period: Since you may cancel your contract without risk during an inspection period, the shorter the better for most sellers.  Buyers should ensure they have enough time in the inspection period to get quotes from specialists for any items that require repair in the home inspection report.
  • Appraisal Contingencies are tough if the seller has an over-improved home or there have been distressed sales close by. Removing an appraisal contingency means that if the home is valued at less than the purchase price, the buyer can’t cancel the contract based on the failure to appraise. However, the buyer will likely still be protected by the finance contingency. The buyer can bring additional cash to the table as the mortgage company will not lend above the appraised value. A cash deal without an appraisal contingency is risky for the buyer because, in a seller’s market, the seller will be less likely to reduce the purchase price to make up for the appraisal deficiency. If the appraisal comes in very low when there are no contingencies left in the contract, the buyer may be better off forfeiting their earnest money deposit than paying way above value.
  • Home Warranty purchases and costs can be apportioned in many ways, buyers may ask the seller to buy at closing in lieu of asking for repairs or updates.  Home warranties are worth looking into.
  • Repairs and Credits for repair or replacement of inspection issues.
  • Closing Credits can cover a significant part of your downpayment or prorations included in the contract. You can make a very attractive offer to a seller for a higher price, better terms, and faster closing to offest the seller’s decrease in net proceeds from closing credits. Ask your agent & lender.
  • Closing Date is important to the seller because it factors into their carrying costs, relocation plans, and purchase of new property. They worry that if it takes too long you may not close and they will have wasted valuable market exposure time. Or depending on their situation, they might want more time to close.
  • Leaseback is the term for allowing the seller to stay in the property for a period of time, accompanied by a lease for a rental amount. This may make your offer very attractive for a seller that needs more time to make arrangements for their move.  An inexpensive leaseback can be a great tool to get your offer noticed in a multiple-offer situation.
  • Buyer Financing can affect appraisals, inspections, loan costs, loan amounts, and closing times. Do your due diligence and make the best EDUCATED decision for you.
  • Furniture may be written into a contract but cannot be financed into a home loan. Selling furnished might be convenient for an out-of-state seller. On the other side, perhaps you want to ask for a custom kitchen table built to match the kitchen?

 

Most Important Things to Know about Real Estate Negotiations:

1- Ultimately, everything is negotiable.
2- You get more flies with honey.

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Negotiating Repairs After Inspection

Nearly all home inspection reports list items in need of repair or replacement.  Repair negotiations after inspection are common.  If major defects that require costly repairs come up, it’s reasonable to ask the seller to make the repairs or issue you a credit at closing to cover the cost of repair.  On the other hand, requesting repairs r credits for minor cosmetic issues can create a hostile transaction that will be more difficult to navigate should you need to ask the seller for concessions or extensions in the future.  Your agent can guide you on what is worth negotiating.

Attend Your Inspection

It’s inspection day! You don’t have to be there- BUT YOU SHOULD, even if it’s only for an hour at the end of the inspection. Even though you’ll receive a report summarizing the findings later on, being there gives you a chance to ask questions, and to learn the inner workings of the home.

Ask the inspector how long you should plan on being there in advance. The inspector will survey the property from top to bottom. This includes checking water pressure, leaks in the attic, plumbing, if door and window frames are straight (if not, it could be a sign of structural issues), if electrical wiring is up to code, if smoke and carbon monoxide detectors are working, and if appliances are working properly. Outside, he or she will look at things like siding, fencing, and drainage.

Negotiating Repairs with The Seller

Once you receive the inspector’s report, review it with your agent. Most sales contracts (ask your agent) require the seller to fix:

 

Most home repairs, however, are negotiable. But choose your battles wisely. Minor issues, like a cracked switchplate or loose kitchen faucet, are easy and cheap to fix on your own. If there are major issues with the house, your agent can submit a formal request for repairs that includes a copy of the inspection report. Trust your inspector, trust your gut, and lean on your agent — they likely have a lot of experience to support your decision-making.

If the seller agrees to make repairs they must provide you with invoices from a licensed contractor stating that the repairs were made. If the seller agrees to issue you a credit at closing instead, be sure you get quotes from licensed contractors with good reviews before you agree to the credit amount.  This is why it’s important to schedule your inspection as soon as possible so you will have ample time remaining in your inspection period to investigate the cost of needed repairs.  Then it’s full steam ahead toward the sale.

If the seller responds to your repair requests with a counteroffer they will state which repairs (or credits at closing) he or she is willing to make. The ball is in your court to either agree, counter the seller’s counteroffer or void the transaction.

Repair negotiations after inspection can make the difference between moving into the home of your dreams or taking on a money pit.  You need to be realistic about how much repair work you’d be taking on. At this point in the sale, there’s a lot of pressure from all parties to move into the close. But if you don’t feel comfortable, speak up.

 

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Appraisal Negotiations

What is an Appraisal?

An appraisal is an unbiased professional opinion of a home’s value. The appraisal assures the lender that they aren’t handing the borrower more money than the home is worth and that you are not overpaying!

Lenders want to make sure that you are not over-borrowing for a property because the home serves as collateral for the mortgage. If you should default on the mortgage and go into foreclosure, the lender will sell the home to recoup the money it lent. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.

Yay, the house appraised: If the appraisal comes in, at or above the
contract price, the transaction proceeds as planned.

Negotiating with a Seller After a Low Appraisal

Oh, no, the house didn’t appraise: If the appraisal comes in below the contract price, there is a chance to renegotiate. Chances are neither you nor the seller wants the transaction to fall through. As the buyer you have an advantage, in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price.  How to negotiate with a seller after a low appraisal:

  1. Reduce the Purchase price: Did you have an appraisal contingency? Does your loan depend on it? Talk this through with your agent/lender first.
  2. Negotiate with the sellers: If the gap between the offer price and the appraised value isn’t too large, you may be able to meet somewhere in the middle and secure your dream home. Be nice. Consider a letter to the seller about how this is your dream home…
  3. Make up the difference: Most lenders will allow you to pay the difference in price outside of your loan, you might reduce your down payment.
  4. Cancel the contract: Sometimes deals just fall through. Even if you really love the home, be smart and don’t buy a property that’s overpriced. Always be prepared to walk away.
  5. Wait it out: Keep your eye on the house because if a deal falls through because of appraisal issues, the homeowners have a hard time getting higher offers from other buyers. They may come back to you to negotiate again.
  6. Appeal the appraisal: If you think the appraisal was unrealistic and can make a case that it was way off the mark, ask your loan officer to compose a rebuttal (with help from your agent).

***FHA appraisals stick with the property for 120 days, during this time the original appraisal will be used even if a new buyer comes along with a new FHA loan. VA Loans stick for 6 months.
***With all other loan types, a new appraisal is ordered for each potential buyer if the first transaction

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Force Majeure or “Acts of God” like Hurricanes

What to do if a major storm or hurricane is headed your way while you are under contract?

Great news, the Florida standard real estate contract known as the FloridaRealtors/FloridaBar-ASIS-5x  contains a force majeure clause.  This clause protects the transaction, ensuring that all parties are granted the time they need to close and that the buyer will receive the same home they expected, not one missing a roof!

Force Majeure Provisions

There are basically two provisions in the FarBar Contract that address the current situation. They are Paragraph 5 (b) and Paragraph 18 G, respectively.

More specifically, Paragraph 5 (b) states:

If an event constituting “Force Majeure” causes services essential for Closing to be unavailable, including the unavailability of utilities or issuance of hazard, wind, flood, or homeowners’ insurance, Closing Date shall be extended as provided in Standard G.

Force Majeure 5B

Standard G under Paragraph 18 of the Contract is the Force Majeure provision. It states:

Buyer or Seller shall not be required to perform any obligation under this Contract or be liable to each other for damages so long as performance or non-performance of the obligation, or the availability of services, insurance, or required approvals essential to Closing, is disrupted, delayed, caused or prevented by Force Majeure. “Force Majeure” refers to hurricanes, floods, extreme weather, earthquakes, fire, or other “acts of God”….which, by the exercise of reasonable diligent effort, the non-performing party is unable as a whole or in part to prevent or overcome.

Standard G far bar contract

According to Paragraph 18 G, all time periods, including the Closing Date, will be extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under the Contract, provided, however, if such Force Majeure continues to prevent performance under the Contract more than 30 days beyond the Closing Date. Either party may terminate the Contract by delivering written notice to the other, and the Deposit shall be refunded to Buyer, thereby releasing Buyer and Seller from all further obligations under the Contract.

Additionally, keep in mind the Seller must still comply with the Maintenance Requirement under the terms of the Contract (See Paragraph 11 of both the FarBar As-Is and Repair Contracts). Further, the Risk of Loss provision (See Paragraph 18 M) is still in play.

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What Is CAM

What is CAM?

CAM stands for Common Area Maintenance and is also known as “Operating Expenses”.  In a commercial lease, a CAM provision requires the tenant to pay their pro-rata share of the operating and maintenance expenses for the building or shopping center.    This usually covers items such as building repairs, landscaping, parking lot maintenance, cleaning, security, administrative services, utilities, taxes, and insurance.

Items covered by common area maintenance differ for retail, office, and industrial properties.  For example, electricity is usually included in office buildings because it is assumed that electric usage is pretty uniform across each office space.  However, retail establishments will differ widely in their electricity usage depending on the type of business and hours of operation.  A cell phone store would not be expected to pay the same amount as a 24-hour laundromat in the same complex.  Therefore, retail spaces are usually metered separately.

How is CAM Calculated?

The property manager forecasts the annual operating expenses at the beginning of the year.    The tenant’s share of operating expenses is calculated by dividing the tenant’s square footage by the gross leasable square footage in the building.  At the end of the year, the property manager will reconcile the actual annual operating expenses.  If you overpaid, you will get a credit.  If you underpaid, you will receive a bill to make up the difference.

Negotiating CAM

Before signing a commercial lease, ask for the history of the building’s CAM charges for the past few years. This will give you an idea of annual increases.  Compare these costs to surrounding buildings to make sure they are reasonable.  Like all parts of the lease, CAM is negotiable.  Be careful if there is a provision in the lease that makes the landlord’s CAM determination final without allowing the tenant to review the calculations. Talk to your agent about options, and always be prepared to walk away should the lease be more than you budget for.  Be wary of rental scams that have been on the rise since the pandemic hit.

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Inspection

Comprehensive Inspection
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Mold Inspection
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Four Point Inspection
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Wind Mitigation Inspection
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Comprehensive Inspection

What is a Comprehensive Home Inspection

A comprehensive home inspection evaluates the general condition of the property.  The home inspector will assess hundreds of items throughout the house, from the foundation to the roof, inside and out. Not all home defects are immediately identifiably with the naked eye.  While most sellers provide a Seller’s Disclosure,  there could be issues they are unaware of or are failing to disclose.  A comprehensive home inspection helps identify aging systems or appliances, deferred maintenance, pest infestations, and needed repairs that could significantly impact the property value.

In some cases, the home inspector will recommend further investigation by a specialist such as an electrician or a mold inspector.  It is important to conduct your comprehensive home inspection as soon as possible after signing a contract for sale and purchase.  This way you will have enough time remaining in your inspection period to get repair quotes if something major comes up in the inspection.

We recommend downloading this inspection report checklist for future use.  You may need it as a reference for all the things that may need improving after you have purchased, or a guide to what might be making that noise in a few years…

What does a Comprehensive Home Inspection Cover?

  • Roof
  • Flashings and trim
  • Skylights
  • Chimney and roof vents
  • Fireplace damper door and hearth
  • Decks, stoops, porches, walkways, and railings.
  • Eaves, soffit and fascia.
  • Electrical service lines
  • Meter box
  • Main disconnect and service amperage
  • Electrical panels, breakers and fuses
  • Grounding and bonding
  • GFCI’s and AFCI’s
  • Plumbing
  • Water penetration and foundation movement
  • Grading and drainage
  • Main water shut off valves
  • Water heating system
  • Interior plumbing fixtures and faucets
  • Drainage sump pumps with accessible floats
  • Fixtures
  • Heating systems
  • Cooling systems
  • Insulation and ventilation
  • Wood Destroying Organisms
  • Pests
  • Water heater
  • Appliances
  • Sprinklers
  • Pool
  • Gutters & downspouts
  • Cupboards
  • Blinds
  • Garage doors, safety sensors and openers

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Mold Inspection

Mold Inspection Process

A mold inspection is a visual & lab-tested examination of a home’s environment to determine if mold is present. It entails sampling the air, identifying any areas of moisture intrusion, inspecting for non-visible mold, and evaluating any existing mold or mildew damage. The inspector will send each sample taken off to an environmental testing laboratory for analysis.  This inspection will provide you with clear information regarding the types of mold found and potential toxicity.

What is Mold?

Mold is a form of fungus. It typically grows in areas of a home that are poorly ventilated or have been exposed to water in the form of excess moisture or humidity. For mold to develop, it requires a combination of moisture, warmth, and organic matter to feed on. Some mold is toxic while other types are essentially harmless.  As mold is naturally occurring, spores generally enter a home or building through open windows and doors and contaminate the air.

Mold is a common problem in the humid weather of Florida. This is why Floridians keep their air conditioners running all year round, even while on vacation. Roof leaks are another common cause of mold growth.  With so many older homes with aging roofs and frequent rainstorms, roofers stay busy in the Sunshine State.

Health Risks

Mold can present a serious risk to your family’s health.  Stachybotrys, known as black mold, can cause memory loss, headaches, respiratory damage, and diarrhea. Children, the elderly, and individuals with weakened immune systems are more susceptible to mold-induced illness.  Finding a great home inspector that can identify dangerous mold is a smart choice.

cleaning agents and mask to remediate mold found on inspection

Mold Cleanup

According to the Envornmental Protection Agency’s Guidelines mold cleanup should be handled by a professional remediation company that follows the recommendations of the EPA’s Mold Remediation in Schools and Commercial Buildings.  However, if the contaminated area is less than 10 square feet and the home has not been subjected to serious water intrusion, you may be able to handle the cleanup on your own.  It is best to consult a professional if the source of the mold is your HVAC system or exposure to sewage.  If you have any underlying health problems, consult a healthcare professional before tackling the cleanup on your own.  Consult the EPA for detailed instructions and precautions.

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Four Point Inspection

What is a Four-Point Inspection

The four-point inspection is also known as the ‘Insurance Quote’ inspection. Once a home reaches a certain age, many insurance carriers would like to take a peek at the four main sources of insurance claims: the roof, plumbing, electrical, and HVAC. This inspection identifies their components, determines their age, and assesses their overall condition.  Insurance underwriters and insurance companies use this report to determine risk before they approve a homeowners insurance policy for the home.

Attend your property inspection

It’s inspection day! You do not have to be there- BUT YOU SHOULD!  Even if it’s only for an hour at the end of the inspection. Even though you’ll receive a report summarizing the findings later on, being there gives you a chance to ask questions, and to learn the inner workings of the home. Ask the inspector how long you should plan on being there in advance.

You May Be Able to Negotiate Repairs with the Seller

Items that will prevent you from getting insurance, and therefore closing on a loan, will likely be negotiable to a seller who has accepted your financing terms.  Once you receive the inspector’s report, review it with your agent.

Most sales contracts (ask your agent) require the seller to fix:

Ask your agent to guide you through this process, never be afraid to ask questions before and after- make sure you are satisfied and understand the entire inspection report before you move past your inspection period.

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Wind Mitigation Inspection

WIND MITIGATION REPORTS

Wind Mitigation inspections evaluate the roof covering and installation to predict how the home will hold up in a hurricane.  The inspector will assess roof-to-wall ties, the roof deck attachment, windows, doors, and secondary water resistance. This evaluation ensures that your home has been thoroughly checked at all the known water or wind entry points. Determining the stability of your home in the event of strong winds, like those that visit Florida during hurricane season, is important for both insurance and safety. It’s not a costly inspection and can lead to large insurance discounts.

homes with poor wind mitigation destroyed by hurricanes

Wind Mitigation Home Features

Wind mitigation inspections document construction features that have been shown to reduce losses in high winds.  The results of your wind mitigation report will depend on the presence of:

 

Home Insurance Discounts

Windstorm insurance quotes can be substantially lower with a solid wind mitigation report. Owners need to submit a recent positive wind mitigation inspection report to their insurer in order to obtain the discount. Premium discounts for favorable wind mitigation features are mandated by Florida State law.  Homeowners can receive a discount of up to 45% of the original policy’s premium. So it’s well worth taking a good look at the existing structure to note what can be done to improve the wind mitigation in order to cash in on huge insurance discounts!

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