What a Buyer Should Expect During the Closing

By Keith Reilly

 The last step in the home buying process is what real estate professionals commonly refer to as “the closing.” The closing, or settlement or close of escrow, is when all the progressive steps in buying a home from the acceptance of the offer, title search, home inspection, mortgage approval, and so on, come together in a final transaction. The documents are ready to sign, the buyer is ready to hand over the purchase price and the seller is ready to transfer title—and most importantly the keys!

 Usually held in an office setting, most require about an hour and may be attended by some or all of the various parties in the process: the buyer, seller, real estate sales professionals or attorney, and title-company representative.

 What goes on during the closing? The buyer reviews and signs loan and real estate documents, as well as pays for the property, closing and other costs. One such loan document is the federal Truth-in-Lending disclosure form which describes the annual rate of financing (APR), finance charges, amount financed, total of payments and the payment schedule. There will also be a form itemizing what your monthly payment consists of including the principal, interest, taxes, insurance and other monthly charges. If everything is in order, the buyer signs the loan papers.

 Real estate documents are just as important. There’s the HUD-1 form, which you have the right to inspect at least one day before the closing. This statement itemizes services provided and the fees charged for the entire real estate transactions. There will be a breakdown of the seller’s and buyer’s (borrower) financial obligations. Some of the charges include appraisal fee, credit report fee, loan origination fee, loan discount (points), title insurance fee, government recording fees, PMI Premium, inspections and attorney fee.

 Other real estate documents that may be reviewed and/or signed include title documents, warranty deed (which transfers the title of the property) and other acknowledgment of reports.

 Assuming that the funds are in order, the deed is correct and the title is clear, the final step is the disbursement of funds to the seller for the purchase price of the home. The title company should already have the loan funds in its possession, but the buyer will need to bring a cashier’s or certified check for the down payment and the closing costs if it was not included in the mortgage loan. If the buyer’s annual real estate taxes and homeowner’s insurance will be paid through the lender, an escrow account will also be established.

 Once all the papers are signed and funds are disbursed, the buyer will receive the keys and is now a homeowner.

5 Tips to Help You Sell Your Home FAST

 

There is no question that in many parts of the country, houses are currently on the market longer. As a seller, this slow-down means there is more competition for a limited pool of potential buyers. Consider the following five tips to place your home on the fast track to sale:

 

Price It Right

The first 30 days are the most critical. If your home is priced too high, interested buyers may never even tour your listing. The longer the property is on the market, the fewer the prospects.

 

Deciding the value of a home isn’t an exact science. Yet, there is data to help you determine a fair asking price that is right on target. You may want to hire a real estate appraiser for an objective, unbiased estimate. Then consult with a real estate professional who can help you determine true market value based on a comparable market analysis, which will include recent home sale transactions as well as homes currently on the market. From your analysis, you may want to price your home conservatively to give it a competitive edge.

 

Make Your Home Irresistible

Unless they are looking for a fixer-upper, most homesellers are more likely to make a bid on a home that they can enjoy immediately. Therefore, you need to create an environment the buyer can’t resist. In other words, do everything you can to make the home so attractive, charming, cozy, inviting, comfortable and exciting that a buyer will want to buy that lifestyle for himself.

 

Evaluate the home from a buyer’s point of view. An experienced real estate professional will be able to offer an objective view and will also know what buyers are asking for. Get your home in tip-top shape by making repairs and cosmetic improvements, and removing clutter. This may mean investing in a few upgrades to modernize your home’s look such as installing newer carpet and light fixtures and painting the walls a neutral shade.

 

Create Traffic

If you want buyers to see your home, you must first find the buyers. Work with your real estate professional to design a marketing plan that is flexible and capitalizes on your property’s most desirable features. Your strategy should include ways to reach buyers online and offline – such as word of mouth, the Internet, yard signs, direct mail, open houses and so on.

 

Go with a Professional

Selling a home is more than just putting a sign in your yard and having a listing on the Internet. And in a competitive market, you don’t really want to take the chance of making novice mistakes that can slow the selling of your home. By hiring a real estate professional, you get the benefit of an experienced marketer and negotiator who is familiar with real estate issues in your community. A real estate professional can offer worthy advice on pricing and staging your home based on their vast experience.

 

Plus, there’s the added value of the peer-to-peer networking among real estate professionals, which can bring buyers and sellers together – sometimes even before the property goes on the market.

 

Offer Incentives

Offering incentives can be just the impetus a potential buyer needs to select your property over others. You may want to consider offering a carpet or paint allowance. Or, pay for a professional home inspection or a home warranty – and, depending on your market and budget, offer to pay some of the closing costs.

 

Don’t be discouraged if there are competing homes for sale in your neighborhood. With just a few smart moves, you can turn a buyers’ market in your favor.

 

-Keith Reilly

How to build wealth with multi-unit properties.

Duplex’s Triplex’s and Quad’s

Although there are many different ways to invest in real estate, I would like to talk about one of the easiest and safest ways.  I want to talk to you about the strategy of buying and holding multi-unit properties.  Now before we get into the nuts and bolts we need to establish some ground rules.

The beginning investor

1. Currently be living within his or her means.

2.  Has paid off all credit card debt

3. Has a steady and secure job with discretionary funds

OK, now that we have set the basic ground rules your next assignment is to build your investing team.  Your team must consist of people who have a track record of honest and hard work.  Make sure you do your due diligence on their background and experience.  I would recommend asking your family and friends to recommend these people.

The Basic Real Estate Investing Team

1. General contractor

2. Realtor

3. Mortgage Rep

4. Real Estate lawyer

Now that you have built your team of honest and hard working professionals it is time to talk about the investing strategy.

Buy and Hold.

Contact your mortgage rep and find out how much money you can borrow.  This is called a pre-approval.  Once you have been pre-approved you will know how much house you can afford.  If you cannot get approved for a loan then now is not the time for you to be investing in real estate.  If you ARE approved for a loan, then congratulations you now have the tools to get started.  In my opinion, the safest and easiest way to build real estate wealth is by purchasing multi-unit properties for as little cash down as possible.  You will be living in one unit of the house and renting out the other units.  These “other” units will be paying your mortgage for you, allowing you to build up equity without paying for it.  You will want to purchase duplex’s, triplex’s or quad’s.  These are obviously houses with 2, 3 and 4 units in them respectively.  Once you have been pre-approved for a loan amount, tell you Realtor you want to look at these tree types of properties within the loan amount that you have been pre-approved for.  The reason that you want to purchase houses from 2-4 units is because lenders will allow you to move into houses for as little as a 3% downpayment on houses up to 4 units.  Let me show you the basic math here.

Quadplex Example

Purchase price:  250,000

Down payment:  -7,500 (3%)

Mortgage (5%):  -1,300 /m

Rents: (750/m per unit)  2,250 /m

Cash flow:  +950/m

That was a pretty basic example but it illustrates some very important principles.  It shows how for very little money down you can live in a house that is not only paying for itself but giving you a return every month.  Now of course there are expenses that have to be paid like  insurance, taxes, mortgage insurance, utilities etc but you can see my point.  Instead of you shelling out hard earned cash for your apartment or you house you are now being PAID to live in your home.  I would suggest taking that extra cash from rent and putting it into an account to be used for vacancies and home repairs.  Take that extra rent and put it back into your house.  This will let you raise rent and increase the resale value.  This is called “forced appreciation“.

Part 2

You are now living in your quadplex and you are covering all your expenses and making a few dollars on top of that which you are using to slowly rehab the house.  To use that minimum down payment that you used to buy the house you had to agree with the lenders to live in the house as your primary residence for at least a year.  A year has now gone by and you should have been saving up cash for your next house cause guess what?  You are going to be buying your next multi-family property!  Go talk to you mortgage rep and get pre-approved for your next mortgage.  If you don’t get approved then keep saving and try again later.  If you DO get approved then purchase your next multi and repeat the process.  Your first house will now be generating more cash now that you put a tenet into the unit you were living with and you now have your next quad that is paying your bills.  lets do the math again now.

Quad  1

Purchase Price:  250,000

mortgage and expenses:  -2,000

rents from 4 units (750/unit:  3,000

Cash flow:  +1,000

Quad 2

mortgage and expenses:  2,000

rents from 3 units:  2,250

Cash flow:  +250

Quad 1 & 2

Combined Cash flow:  +1,250

Combined home value:  500,000

Lets pretend you don’t buy anymore properties and you hold these two homes for say 5 years.  Lets also say that they don’t appreciate or increase in value due to demand.

Five years later:

Quad 1

Equity built up:  +25,162

Quad 2

Equity built up:  +20,429

From just an equity standpoint, using 15,000 cash you built up $45,591 in equity in five years.  Not to mention that extra cash flow on top of that.  Now, lets say that your houses appreciated at a modest 3% appreciation rate a year.  Those two properties would be worth $298,513 and $289,818 respectively.  That’s $88,331 worth of appreciation.

Lets look at those numbers again.

Quad 1

purchased in 2009 at 250,000

Quad 2

purchased in 2010 at 250,000

2015:

Total Equity built up: $45,591

Total Appreciation built up:  $88,331

Total Profit:  +133,922

Initial investment:  -$15,000

So what exactly does that mean?  It means you purchased 2 quads in five years that not only paid for themselves, but also gave you a profit of $133,922 on your initial investment of $15,000.  That’s is quite a nice return wouldn’t you agree?  Of course it is easier said then done but just by going through this simple example you can see how you can easily built wealth with very little money.  Just think if you had kept purchasing multi-unit properties that paid for themselves your entire life?  The return would be tremendous.  Of course to pull this off you would have to lean heavily on your team.  Your contractor would be needed to keep those properties is good shape and continuously improving them.  Your Realtor would have to be finding you the best deals and closing them.  Your mortgage rep would be busy finding ways for you to finance them and your lawyer would be busy keeping you out of trouble.  Once again I know this was a very basic example but knowing the fundamentals is half the battle.

All that’s left is a commitment.

-Keith

A Year in Review…

 

Since beginning my real estate career in May of this year, I have had the privilege of experiencing many different aspects of the business and I have to say…I love it!  I just wanted to share with you some of the things that I’ve been blessed with doing this year:

· I have attended countless training courses in subjects such as ethics, buyer/seller representation, real estate investing, commercial transactions, foreclosures and many other topics in order to get up to speed with my peers within the industry. 

· I have shown over 150 homes to clients throughout Bucks County, Montgomery County, Philadelphia County, Chester County and Delaware County resulting in successful sales and satisfied customers.

· I have connected out of state clients with trustworthy, local real estate professionals in South Carolina and Delaware that have resulted in closed transactions and satisfied customers.

I am hoping that with a can-do attitude and strong work ethic my business will continue to grow in 2009 in the face of a challenging market. 

I would like to personally thank those of you who have supported my transition from the US Marine Corps into real estate this year.  I continue to find this career an exciting challenge and am optimistically looking forward to serving you in 2009!

 Happy Holidays to you all and many blessings in the New Year!

Can You Afford That House?

Before you start searching for your dream home, you first need to determine a price range you can afford. According to the Federal Housing Administration (FHA), depending on the consumer’s current debt ratio, most people can typically afford to pay 31 percent of their gross monthly income for mortgage payments. For example, if you earn $50,000 annually, then your monthly income is about $4,167. Thirty-one percent of that is $1,292.

There are several online tools to calculate a monthly mortgage you can afford using factors such as your current monthly expenses, down payment and the interest rate. You can also work with a lender to get pre-qualified for a loan. This estimate will help you gauge how much money you may be able to borrow and the monthly mortgage payments.

However, the amount you are able to afford for a home loan should not be your only consideration for determining your price range. With homeownership come other housing expenses.

 Utilities

The most obvious of additional housing expenses are utilities—gas, electricity and water. But don’t forget about telephone, trash collection, and cable or satellite bills.

Taxes

As a property owner, you are responsible for property taxes. The rate will vary from city to city. In our community, the tax rate is (insert %) percent. That means for a home with a market value of $200,000, yearly taxes will run (insert dollar amount). To get a general idea on how much the tax bill will be for a property, ask the seller for a copy of the previous year’s tax assessment. Your real estate professional can help you refine these figures.

Association Dues

Another cost you may incur is homeowner association (HOA) dues. Most condominiums and some (residential developments/subdivisions/neighborhoods) have HOAs, which are legal entities, created to maintain common areas and enforce deed restrictions. As a property owner, you are required to pay the established monthly or annual homeowner association dues. Be sure you factor this cost into your budget.

Maintenance

You also need to consider the upkeep of your home. You should budget for seasonal maintenance such as lawn care, pest inspections and carpet cleaning, as well as unexpected repairs. The amount you budget will depend on the age of the home, as older homes tend to require more repairs such as installing a new roof, painting and replacing older appliances.

Insurance

Depending on the type of coverage and your area, the costs for homeowners insurance each year can be anywhere from a few hundred to thousands of dollars.  And, if you live in an area that has high risks for flooding, earthquakes, hurricanes, etc., you may need supplemental insurance.

Remodeling/Upgrades

Unless the home you purchase is picture perfect, you’ll more than likely be adding your personal touch. Therefore, you need add to your housing budget the costs for remodeling and upgrades. According to “Remodeling Magazine’s” 2007 Cost vs. Value Report, the national average for a midrange minor kitchen remodel is $21,185; a bathroom remodel averages $15,789.

Even minor cosmetic fix-ups such as light fixtures, window treatments, carpeting and decorative cabinet knobs can begin to add up.

By determining all the costs associated with homeownership, you can go into your home search with a reasonable price range that will allow you stay within your budget.

30-year rates are low. Really low. Are you going to take advantage of it?

If you just can’t decide whether or not now is a good time to buy, these rates should convince you. They are historically low and there is just no way to predict what rate they will be in the future. I had a client apply for his mortgage when it was at 6%, it jumped to 7% while it was getting approved and he locked in at 6.5% a few weeks later. This was only last month. The point I’m trying to make is that if you are thinking about buying, locking in at these rates now will give you a much better return on your investment. If you wait, there is a good chance these rates won’t be around. Don’t say I didn’t warn ya!

Freddie Mac reports a decline in the 30-year fixed mortgage rate to 5.47 percent during the week ended Dec. 11 from 5.53 percent last week and 6.11 percent a year ago.

Some lenders are locking in even lower rates as they build on momentum started when the Federal Reserve announced plans last month to purchase a substantial number of mortgage-backed securities. HSH Associates and Inside Mortgage Finance are reporting interest on 30-year fixed loans at 5.33 percent and 5.09 percent, respectively.

Freddie Mac chief economist Frank Nothaft says mortgage rates also were driven downward by the recession and rising unemployment.

Source: The Washington Post, Dina ElBoghdady (12/12/08)

Thinking about buying real estate? Now is the time!

If you’re ready to buy a home and can afford it, now is a great time to buy. Mortgage interest rates remain very low. In many areas, buyers have a lot of inventory from which to choose and long-term homeownership continues to be one of the best ways for the typical American to build wealth.

Don’t let all of the negative media attention about the “mortgage meltdown” keep you from pursuing your homeownership dream. Mortgage industry woes are primarily limited to subprime loans and other types of creative and comparatively risky financing products. While the mortgage industry stalled briefly to reconsider its more exotic loans, there is plenty of conventional financing available for qualified homebuyers. Interest rates remain at historically low levels – still less than 7% for the typical, 30-year fixed-rate mortgage.

Indeed, the market has changed. It’s gone from a frenzied seller’s market to calmer buyer’s market. In fact, buyers haven’t seen a market this strong in years. When the national median home price dropped for the first time on record, the decline made huge albeit misleading headlines. For starters, there is no such thing as a national real estate market. All real estate markets are local and driven by local factors that include the local economy, housing supply and demand factors and other attributes like geography.

The slight decline followed years of unprecedented steep home price appreciation and the reality is that only a handful of markets experienced price declines. Corrections in markets that experienced exorbitant home price appreciation were expected and signal good news for buyers. According to 2007 third-quarter National Association of REALTORS® (NAR) statistics, the vast majority of the nation’s metropolitan areas showed rising or stable home prices with most areas experiencing modest gains.

Right now there are many homes from which to choose and in most areas buyers don’t have to deal with the harried and hurried competition of multiple bids. The changing market has also changed the inventory landscape to include fewer speculative sellers and a larger share of serious and motivated sellers.

Prospective homebuyers have some time to shop inventory and thoroughly compare home types and prices, amenities, neighborhoods, commutes and other important real estate-related features. And buyers have stronger price negotiation power as sellers compete for their attention by offering concessions or other incentives.

While all real estate markets have ups and downs, Americans continue to consistently build wealth through homeownership. According to the NAR:

One average, the value of a home doubles every 10 years. During the past three decades, home values have increased an average of 6.6% per year.

The average homeowner today has 36 times the wealth of the average renter. Homeowners are essentially paying themselves when they pay their mortgages and this means they’re building equity. Homeowners also benefit from some real estate-related tax write-offs like mortgage interest.

Sixty percent of the average homeowner’s wealth is their home’s equity. For homeowners who’re in their homes for the long-term, home equity typically is their single largest source of wealth.

Because every market is different, it’s a good idea for potential homebuyers to contact a local real estate specialist to learn more about what’s happening in his or her community and real estate market. The bottom line in real estate doesn’t change – if you’re ready to buy and can afford to make a long-term homeownership commitment, it’s always a good time to buy!

Bucks County Real Estate Market for Third Quarter 2008

As you can see below, while the rest of the country is experiencing a decline in real estate pricing, Bucks County prices continue to increase.  This is due to the steady increase in employment and population that is mixed with very low mortgage rates.  For these reasons, TREND is forecasting continued growth in the fourth quarter for Bucks County housing prices.

click to zoom

Source:  www.TrendMLS.com

Tips for First Time Home Buyers

Home-price adjustments in markets around the country have opened doors of opportunity for many renters. If you are transitioning from renter to homeowner, the prospect of making such a large investment may be exciting, while at the same time overwhelming. But it doesn’t have to be. Here are six common mistakes to avoid.

1. Not understanding the home buying process. Educate yourself. Find a homebuyer seminar that you can attend or research online. The U.S. Department of Housing and Urban Development Web site (www.hud.gov) has an entire section devoted to homebuyers with common questions of first-time homebuyers, mortgage and home-buying programs information, downloadable tools such as a wish list and home-shopping checklist, tips on selecting a real estate professional, etc. Likewise, Prudential Real Estate’s popular Web site, prudential.com/real estate, offers consumers brand-new tools for the home buying process, such as free home environmental reports, Value Range Estimates and Property Profiles, among other resources.

2. Not asking questions. There are many facets and intricacies to the home buying process, so although you may gain a basic knowledge, you will still have questions. Don’t hesitate to let your real estate professional know that you are new to the process. Make sure you choose a sales professional who is willing to spend time with you and walk you through the entire process. He or she will expect you to have questions at each step—from house hunting, to making an offer to the closing. Remember, this is one of the largest financial transactions of your life, so you want to have a clear understanding of what’s going on.

3. Buying on impulse. Don’t feel pressured into making an offer on the first home you see. Buyers, especially first-timers, may be impressed by the first two or three homes they view. Look at a good selection. List the positives and negatives about each home. Narrow the prospects to three or four and then return for a closer look. When you decide to make a bid on a property, work with your real estate professional to get all of your questions answered before making an offer. But don’t wait too long to make an offer. The longer you wait, the greater the chance other prospective buyers may place offers, making it harder for you to negotiate a good deal.

4. Looking outside your price range. Before beginning your home search, consider getting pre-qualified to so get an idea of how much you may be able to borrow. Use this information as a starting point in determining your price range. Then take into consideration other factors that will affect your monthly budget once you are a homeowner, such as property taxes, homeowners insurance, utilities, private mortgage insurance (PMI) and maintenance.

5. Not planning ahead. Think about personal changes you are planning in the next five to seven years. For instance, are you starting a family, and if so, is the home large enough and will it continue to be? If this will be a starter home or if you think you’ll be relocating in a few years, you’ll probably want to pay closer attention to appreciation and resale value. If a double-income is necessary to qualify for financing and to make your payments, do your plans foresee an income sufficient to continue making payments?

6. Failure to focus on location. Don’t just focus on the house. Examine the community. Does it suit your lifestyle? Is the area safe, well-maintained, close to work, stores and schools? Find out about zoning and what new construction is planned on vacant land in the immediate area. Also consider the property marketability when it’s time to sell.

Above all, remember knowledge is key. No question is a silly question. Your real estate professional can be an invaluable asset throughout the process. Making smart home buying decisions will make the home-buying process less scary and your first home purchase a rewarding experience.

Five Tips for a Green Home

Eco-friendly.  Being “green”. Energy-efficiency. These catch phrases have become part of our every day language as we’ve become more aware of not only our impact on the environment, but also the rising costs of energy. As a homeowner, there are some simple, inexpensive steps you can take to make your home energy-efficient. Get started on the road to being “green” with these five tips:

Change Your Light Bulbs

By replacing just five incandescent light bulbs with compact fluorescent (CFL) bulbs, you can save $100 per year on electric bills while using up to 75 percent less energy and removing greenhouse gases from the environment.

Buy ENERGY STAR® Appliances

ENERGY STAR-qualified appliances, such as refrigerators, washers and air conditioners, meet a higher level of energy efficiency set by the Environmental Protection Agency and U.S. Department of Energy than standard models. According to ENERGY STAR, if just one in 10 homes used ENERGY STAR-qualified appliances, the impact could be compared to planting 1.7 million new acres of trees. And, switching to these appliances is not only good for the environment, but easy on your pocketbook. Although these appliances may costs more, you can reduce your energy bill by $80 per year.

Seal Up

Cracks and air leaks represent cash seeping from your doors and windows. Get rid of air leaks in doors, windows and other areas by caulking gaps and cracks. This will help decrease your heating and air conditioning bill. But make sure you use silicone sealants. Acrylic caulk tends to shrink, while silicone sealants are waterproof and won’t shrink or crack, creating less waste.

Use Less Water

Did you know that roughly 60 percent of a home’s water consumption takes place in the bathroom, according to the California Urban Water Conservation Council? The largest culprit is the toilet, which accounts for 27 percent of your household supply every year. By installing low-flow toilets, showerheads and faucets, you can save thousands of gallons of water each year. In addition, replace leaky fixtures. That slow-dripping faucet can waste as much as 2,400 gallons of water per year.

Adjust the Thermostat

When adjusting your home’s thermostat, the rule of thumb should be: turn up the dial in the summer and down in the winter. Lowering the temperature by just one degree will reduce your electrical costs. And if you use a programmable thermostat, you can program your air-conditioning and heating systems to reduce output while no one is at home or at night while you sleep. Ceiling fans are also helpful in circulating the air to keep the room cool in the summer and warm in the winter.

Going green doesn’t have to be overwhelming or costly. By making just a few small changes within your home, you can help decrease energy consumption and help make the world a “greener” place while saving yourself a few bucks in the process.

Philadelphia-area home market still outperforms nation

Finally, some good news on the real estate market in Bucks County!  On November 13th, 2008 the Philadelphia Inquirer wrote an article outlining how the Philadelphia area market was outperforming the rest of the nation.  Here are some notable quotes from the article:

“Just 4.4% of area homes sold in the last five years had negative equity.  Nationally it was 14.3%”

“The area has a healthy five year annualized appreciation of 6 percent, compared with 3.4 percent nationally”

“It seems Philadelphia may escape the worst of the housing market woes affecting much of the rest of the country”

14.3 percent of national homes with negative equity and Philadelphia area only had 4.4%.  That is great news!  Well of course we would rather see NO negative equity but with all things being considered, I think we should feel pretty good about our current market.  Posted below is the news article.

Phila-area home market still outperforms nation

Flipping houses- The Down & Dirty

So you wanna try flipping houses?  I’ll give you some pure basics to get you started.

1.  Locate an undervalued home for sale that is structurally sound but requires some pretty extensive cosmetic work.  When I say cosmetics I mean rehabbing the siding, windows, kitchen, bathrooms, carpets, appliances and painting the walls.  To find an undervalued home, I would recommend using a Realtor.

2.  Once you’ve found your target home,  you are going to need financing.  One source of funding that rehabbers use are “hard money lenders”.  These types of loans are secured by the value of the house you are going to flip and are usually issued by private investors.  Talk to your Realtor about finding hard money lenders or check with your local real estate investing group.  For those of you from Bucks County, the local investing group would be DIG (www.digonline.org).

3.  Ok, you’ve found the home and got the financing.  Now is time for the number crunching.  First determine your After Rehab Value or ARV.  This is the value of the property once you’ve finished all the cosmetic work.  This can be determined by your Realtor.  Here is the basic format for determining your bottom line and what your offer should be for you to make a minimum of $10,000 cash on the flip (The Golden Rule).

ARV minus:

• Repair Costs
• Holding Costs (monthly loan charges)
• Sales commission (5%-6% of ARV)
• Closing Costs ( transfer taxes on the buy and the sell, 1% for each in Bucks County)
• Hard Money Costs (points-probably around 3%-5% of the loan)
• PROFIT ($10,000 MINIMUM!)

Now, what’s left is what your offer is going to be.  Simple right?  Again, for more details please consult a real estate professional.

BUCKS COUNTY EXAMPLE

Your average home in Falls Twp is selling for around $230,000; so we’ll make that our ARV.

ARV $230,000 minus:

• Repair costs $20,000
• Holding costs $6,000 (takes three months to flip and sell)
• Commission $11,500 (5% commission on the sale)
• Closing Costs $4,000 (transfer taxes of 1% on the buy and then on the sell, estimated)
• Hard Money Costs $5,000 ( 5 points estimated)
• PROFIT $10,000 MINIMUM

EQUALS YOUR OFFER $173,500

Now, can you find houses selling for $173,000 in Falls Twp?  You bet.  I’d love to show them to you!

Bucks County real estate market update

**The average sold price in Bucks County for October 08 was $321,352**

For a comparison, here are the stats for October in previous years for Bucks County:

The average sold price for October 07 was $325,029

The average sold price for October 06 was $331,924

The average sold price for October 05 was $326,519

Market Statistics Criteria Used:

Price Range: 0 to 999,000

Property Category: Residential

Area: All Bucks County

Source:  www.TrendMLS.com

How much lower will it go?

That’s the question everyone in Bucks County is asking and I certainly wish I knew that answer. Many people are holding their breath and waiting to see how this election will affect the market. The only immediate reaction that I foresee stemming from this election will be a boost in consumer confidence. A fresh face with exciting new ideas will help some consumers to get off the fence and finally buy or sell that home they have patiently been waiting on. John McCain and Barack Obama both have good ideas for jump starting the economy but remember, no matter who gets elected, the various policies each presidential candidate would like to enact still have to be ratified by the rest of the government and are nothing but good ideas until that happens.

How Buyers Find the Homes They Purchase

How buyers find their home

Interesting, isnt it? All that money spent on newspaper advertising and those fancy schmantzy “fine homes” magazines only accounts for about 4%.  When it comes to finding a home, the Realtor still continues to be the best asset in the home searching process.  The next best way is using the internet.  My broker supplies a free home search program that is a mirror image of the MLS database that all real estate professionals use to locate homes.  Its know as Home Pilot and it very comprehensive.  What I like most about it is that I can have my client log in and let the system know that I am representing them.  While they are searching, I can then see what my clients are looking at and saving.  This is VERY helpful for me because it lets me see exactly what types of homes are tickling my clients fancy.  If you are in the home search phase, I would suggest giving the Home Pilot a try.  You can also register for it at my website at www.KeithReillyRealEstate.com. 

Happy Hunting!

The property inspection process explained

Once you have made an offer on a property you would like to own and the seller accepts that offer, the buyer has several things he or she needs to accomplish prior to settlement.  One of those is the property inspection.  The inspection is critical because it gives the buyer the opportunity to discover all the things that may be wrong with the home so that he or she can make the most informed decisions they can.

To begin with, some houses on the market are being sold in an “as-is” condition.  This means that if you purchase the property, you are taking the property exactly as it is being sold without the opportunity to ask for the seller to fix anything.  Even if you are buying a property in an as-is condition you still want to get an inspection so you can fully understand all the conditions of the house before you have the keys in your hand.

Now, once you have determined that the house is not being sold as-is and the sellers have accepted your offer then the property inspection process shall begin.  First, the home buyer is given two options for tackling the inspections.

Option 1

This option allows buyers to terminate an agreement of sale if they discover a problem with the property during the inspection.  The buyer also has the opportunity to negotiate with the seller for repairs or credits in relation to any problems with the house that the inspection may turn up.

Option 2

The main difference between option 1 and option 2 is that if any problems come up from the inspection, the buyer is required to submit a “Written Corrective Proposal” for repairs or credits of said problems.  Once the seller receives this proposal, he or she may choose to whether or not to satisfy the proposal for repairs or credits.  If the seller agrees to the proposal, than the buyer MUST follow through with the purchase of the property.

In summary, Option 1 gives the buyer a bit more leverage during the inspection process and Option 2 gives more leverage to the seller.

Take a closer look by reading page 10 of the Agreement of Sale

Page 10 AOS

Once you have decided on the option you would like to choose, then the next step is to hire an inspector to come out and inspect the property.  You can easily find an inspection company through Google or the Yellow Pages.  When hiring the inspector, you need to make sure that they are a member of the national home inspection association.  Here is a PA home inspector compliance statement you should have filled out by the inspector.

Home Inspector Compliance Statement

Ok, you have scheduled the inspector to come inspect the home.  You want to make sure that you and your Realtor are present during the inspection and are asking as many questions as possible.  Once the inspection is complete, the inspector will give you a summary of any problems he found and what it might cost to fix those problems.  One thing I want to point out to you is that there is no such thing as a perfect house.  An inspector can go into a brand new home and find issues with it.  That being said, you have this summary, the final phase of the inspection process begins which is called the “Reply to Inspection”

The reply to inspection is addressed on a specific form and it outlines how you as the buyer intend to deal with the issues that came up during the inspection.  Using this form, you will state if you will be accepting the property, terminating the deal, asking for repairs, asking for credits, changing the purchase price or any other number of things. If you intend to take the property, call it your wish list.  Once you have this form completed it will be given to the seller who will then decide how he wants to handle your requests.  Let the negotiations begin!  In the end,  the buyer and seller will either come to an agreement over the inspection or the entire deal will fall apart.  As you can see, the inspection process many times can make or break the deal!

In this article I talked about some of the essential parts of the home inspection process.  As you can see, it can be very difficult for a consumer to navigate through this process if he or she does not fully understand it.  That is why I will always tell you that its in your best interests to be fully represented by a real estate professional.  Your Realtor will ensure that your money, time and overall best interests are fully realized during this whole process, saving you both head and heartache in the end.

Bucks County Real Estate Market Graphs

Median Sold Price for every real estate transaction in Bucks County over the last 2 years.  This graph includes single families, unit/flats, row/townhomes and mobile homes with a price range from 0-100,000,000.

Median price for Bucks County over the last 2 years

This next graph provides a visual representation of the distribution of prices in Bucks County.

Blue Line-The number of properties that were LISTED over the last 12 months

Green Line-The number of properties that were SOLD during the last 12 months

Red Line-The number of properties currently ACTIVE.

Bucks County price distribution

This last graph shows supply and demand over the last two years.

Bucks County 2 year supply and demand

all the information contained in these graphs is supplied by www.trendmls.com

Month’s Supply of Inventory (MSI) and why its important

When selling a home, it is important for one to understand the factors affecting how long it will take for that particular property to sell.  One of the factors that can affect the sale is whats called the month’s supply of inventory or MSI for short.  The MSI is a calculation that expresses how long it will take for all the homes (inventory) in a particular market to be sold.  This calculation is based on the amount of homes currently on the market and how quickly  these homes are selling.  For those of you mathematically inclined, the calculation is as follows:

The number of properties For Sale (FS) during the month (that is, the property was Active at least one day during the month) minus the number of properties that went Under Contract (UC) during the month minus the number of properties that Expired (X) during the month, divided by the number or properties that went Under Contract (UC) during the month:

MSI = (FS – UC – X) / UC

Example:

At the end of September in Bucks County their were 2,791 homes currently on the market with 252 homes under contract.  2,791/252 = 11.08

What this says is that it will take 11 months for the inventory in Bucks County to be sold.

Pictured below is a graphical representation of the MSI for the last two years in Bucks County.

In practical terms, the higher the MSI the more of a Buyer’s Market there is.  There are many more homes to choose from and home sellers will compete with each other, thus driving down prices.  If the MSI is lower, then there is less inventory on the market which gives home sellers the advantage.  For instance,  when the market was a Seller’s Market in 2005, the National Association of Realtors quoted that the MSI was about 4.6.  Compare that to the current Buyer’s Market MSI in Bucks County at 11.  Understanding the MSI is important because it helps to give real estate consumers a clear picture of what the market is doing and what they can expect when buying or selling a home.  By looking at the graph above, you can clearly see that today’s market is in fact a Buyer’s Market and consumers need to set their expectations accordingly.

The statistical information provided in this post was obtained from www.trendmls.com

Bucks County Real Estate Appreciation

Average sales price for single family homes in Bucks County¹

Date             Price              Appreciation

Dec 2000     $209,000        start

Dec 2001     $225,000        7.66 %

Dec 2002     $260,000        15.56 %

Dec 2003     $286,000        10 %

Dec 2004     $323,000        12.94 %

Dec 2005     $361,000        11.76 %

Dec 2006     $376,000        4.16 %

Dec 2007     $378,000        .53 %

Aug 2008     $362,000        -4.23 %

Total Appreciation Dec 2000 to Aug 2008: 7.35 %

¹www.trendmls.com

Top Ten Real Estate Brokers in Bucks County

I was told once that the two most stressful things in life are buying a house and selling your house.  Now, of course, I can think of quite a few more things that might be just as stressful but this individual’s point is well spoken.  Buying or selling a home can be quite stressful because so many times it is one of the biggest financial decisions a person will be making.  So how does one combat this?  Well, I would suggest starting by working with a reputable real estate  broker.  A quick search for real estate brokers on the Yellow Pages website for zip code 19067 gave me a whopping 497 search results!  Holy cow!  With so many options how are you possibly going to find a reputable broker?  That, of course, is ultimately up to you…but to make things easier I have posted the top ten brokers doing the most business in Bucks County below to help you in your search.

*The above statistics are taken directly from Trend MLS.  Trend MLS is the database that is used by every residential real estate proffesional within the region to buy and sell real estate.

What is a REALTOR® and why should you use one?

Often times misunderstood, I would like to take a second and write about Realtors®, what it is they do and why you should use one.

A real estate agent is a Realtor when he or she is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.  Realtors are real estate professionals that guide their clients through the process of buying and selling real estate.  They are not paid by the hour.  They are not paid every time they take a client out to view houses.  They are 1099 contractors who are paid a commission at settlement.  Commissions are typically 3% of the price of the transaction at settlement.  Once Realtors are paid their commission, they typically have to give a portion of this percent back to their respective broker such as Prudential, Keller Williams, Coldwell Banker, etc.  For newer agents, this can be as much as 50% of their commission.  Let’s not forget taxes as well.

Realtors can represent buyers, sellers and renters.  If you hire a Realtor, you need to make sure you ask him or her to go over the Consumer Notice with you.  This notice defines the relationship that Realtor will have with you and it is absolutely important that you understand this relationship when buying or selling a house.  The consumer notice also outlines what you can expect from your Realtor during the buying or selling process.  It would behoove you to get familiar with this document.

Here is a copy Consumer Notice

So why should you use a Realtor?  You should use one because if you are buying or selling a home, it is probably going to be one of the biggest financial decisions of your life.  Why wouldn’t you want to use an expert?