Closing Day Surprises

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For many buyers, closing day can’t come fast enough. Once the offer is made and accepted, the time between can seem like eternity. For many, closing day goes smoothly. For others, there may be some unexpected surprises that pop up. While closing day problems are not usually anticipated by a buyer, they are not unheard of, and depending on what kind come up, some can be minor while others can impact the entire deal. Here are some of the most common closing day surprises.

unnamed 1 300x224 - Closing Day SurprisesWalk-Through Surprises

For many buyers, a final walk-through is a must before closing as it allows the buyer to ensure the property’s condition hasn’t changed since the last visit and that any agreed-upon repairs have been done per the contract. If moving furniture created a new hole in the wall, agreed-upon fixtures have been removed, or the property is in total disarray, the issues need to be addressed immediately. The buyer’s agent should work with the seller’s agent to resolve any surprises that have come up. Walk-through issues are generally not deal breakers, but they can be a thorn in a buyer’s side.

Document Surprises

A common surprise at closing is an error in the documents. Errors can include misspelled names, incorrect addresses, and even incorrect loan amounts or missing pages. Some issues can cause an hour or two delay, while others can result in a much longer delay. To avoid any document surprises, a buyer can request to see every document ahead of closing. Loan documents should be scrutinized prior to closing; by law, a buyer should receive a Loan Estimate form and Closing Disclosure form three days before closing. Once these forms are received, it’s up to the buyer to double-check the loan amount, down payment amount, interest rate, and all personal information, including spellings. If questions arise, the sooner they’re answered the better.

Title Surprises
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When buying a home, a title company will make sure the title to a property is legitimate by doing a title search, which is essentially a thorough examination of property records to make sure the title is clear of any liens or claims on the property. Title surprises can include: IRS tax liens, unpaid property taxes, judgments, contractor or mechanics liens, identity affidavit, and encroachments. Some of these surprises can be resolved on closing day; others may take a significant amount of time to resolve and will undoubtedly delay closing. Once escrow opens, the title company completes a preliminary title report and sends it to the lender and agents involved — a buyer can get a copy from his/her lender or from the title company and check if there are any preliminary issues. Many purchase agreements include a specific time period for the buyer to bring up any concerns regarding the title, so if there are issues w ith the title, get the ball rolling on resolutions as soon as possible.

Credit Surprises

For buyers applying for a mortgage loan, maintaining the same level of credit between being approved and the final closing is extremely important for a successful transaction. A person’s credit can be impacted by anything: changing jobs, getting a new credit card, closing a credit card, falling behind on payments, and even adding additional debt through large purchases. Surprises when it comes to a buyer’s credit can be a deal breaker for the lender; to prevent issues, a buyer can contact the lender ahead of closing to discuss any surprises that may have come up and come to a solution. The best way to prevent credit surprises: avoid making large financial decisions prior to closing.

unnamed 3 300x199 - Closing Day SurprisesMortgage Surprises

Credit surprises can impact a mortgage loan, but there are other mortgage surprises that can come up on closing day. In a hot real estate market, lenders can be incredibly busy and inundated with loan applications. Sometimes, a buyer’s loan file can find itself on the bottom of the pile, meaning there may be important items omitted, documents missing, or extra information needed to complete the file on time. For a buyer applying for a mortgage loan, asking the lender what documents will be required ahead of time can save time and prevent headaches on closing day. Buyers can also call or email the lender to make sure they have all the important documents, items, etc. to complete the loan file on time. Before closing, a closing agent will be assigned to the transaction (the closing agent coordinates the final steps of the transaction to make sure all documents and funds are in order and handled correctly) — the bu yer can contact the closing agent to make sure the lender has all the needed documents, and if there is still any doubt, copies of all the documents and anything else that may seem important or pertinent to the transaction can be brought to closing.

Remember, your real estate agent is working on your behalf. Keep your agent informed — your agent wants to help you as much as possible, and he or she can be a great resource when you have questions.

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Renters: It is about to Get A Lot Worse

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We often promote homeownership over renting when a family is ready, willing and able to purchase. There are both financial and non-financial benefits to owning a home of your own. Based on the headlines below, many news outlets agreed with us after they reviewed a recent report from the Harvard Joint Center for Housing Studies and Enterprise Community Partners.

The study states that the number of households spending 50% or more of their income on rent is expected to rise by over ten percent in the next decade. They concluded:

“Overall, this white paper projects a fairly bleak picture of severe renter burdens across the US for the coming decade.”

What do other experts think of the report? You can tell by the headlines they chose to introduce their stories:

“Renters, get ready to take it on the chin” – CNBC

“The Rent Crisis Is About to Get a Lot Worse” – Bloomberg Business

“Renters Will Continue to Struggle for the Next Decade” – World Street Journal

“Why the renting crisis could be about to get a lot worse” – Fortune Magazine

“Soaring rents are a problem that will only get worse” – Business Insider

“High rents are here to stay” – The Real Deal

Bottom Line

If you are thinking about buying a home and are financially positioned to do so, now may be better than later.

The Hidden Costs of Homeownership

If you’ve never owned your own property before, there are some costs you should prepare yourself for ahead of time. Should you take out a mortgage, you’ll have your monthly mortgage payment, but often there are additional costs and fees added that a new homeowner will not expect. Listed below are items you should expect to pay once you become a homeowner.

Property Taxes

budgeting - The Hidden Costs of HomeownershipWhen you rent, you are not responsible for the property taxes on the property. But when you become a homeowner, you’re expected to pay yearly property taxes, of which go to public works, wages for government workers or public school boards. Based on the current value of your home, property taxes are assessed every year and will likely change to reflect an increase (or decrease) in your home’s value. Property taxes can be paid at one time, or they can be divided into 12 payments over the course of a year and added to your mortgage payment. When you’re trying to determine what your mortgage payment will be each month, don’t forget to factor in property taxes.

Home Maintenance

home maintenance - The Hidden Costs of HomeownershipWhen you live in a rental property, most maintenance is performed by the landlord or a property manager. When you become a homeowner, those maintenance costs fall upon you. When you purchase a home, all maintenance items should be considered when it comes to your overall budget. Will you want to replace all the appliances? Will the property need new windows or a new roof? Does the home need basic upgrades? Most people in the industry suggest you allocate 1% of your home’s worth for maintenance costs every year, but the reality is that 1% is likely the minimum – you should plan on more than 1% maintenance costs each year as a homeowner, and if you plan on any larger renovations, bet on the costs to be even higher.

Mortgage Insurance

Most people, when they buy a home or property, are able to do so by taking out a mortgage loan. If you put less than 20% of the cost of your property down, you’re required to have Private Mortgage Insurance (PMI). PMI protects lenders if the borrower defaults on their loan. PMI is charged annually, and it will typically cost 0.5% to 1% of the entire loan amount. The payments are generally paid each month rather than in a large one-time payment. If you plan on taking out a mortgage loan, and you don’t have 20% to put down, expect to add private mortgage insurance payments to your other monthly bills.

Supplemental Insurance

flood - The Hidden Costs of HomeownershipDo you live in an area prone to natural disaster? As a homeowner you’ll need to have regular home insurance to protect your home or property from typical things (plumbing issues, roof leaks, etc.) that homeowners encounter. Should you live in an area that’s prone to weather-related issues (floods, tornadoes, earthquakes, hurricanes) you will want to purchase supplemental insurance to make sure your home is covered should nature decide to show herself.

Landscaping and Lawn Care

landscaping - The Hidden Costs of HomeownershipWhen you rent a condo or an apartment, it’s highly likely you are not spending a lot of time outside in a yard. When you buy your own property (should it have a yard or some kind of outdoor area), expect some hidden costs to come in the form of lawn care. Does the yard need some major landscaping? Are you going to mow it yourself, or will you hire a company to do it? Do you have a lawn mower, rakes, snow or leaf blower, yard tools, shed, and any other items needed to keep your yard looking great year-round? A yard comes with extra costs, so be sure to know how much you want to spend on upkeep per year.

HOA Fees

If you’ve been renting your previous residence, it’s likely you haven’t had to pay Homeowners Association (HOA) fees for your apartment or rental. Should you buy a house, condo or townhouse in a neighborhood with common areas, a clubhouse, pool, or any other kind of community meeting places, it’s likely you’ll move into a neighborhood with an HOA. HOA fees can vary in terms of what the HOA covers within the community, but unless you know through your Realtor or through the homeowner the monthly fee, you can expect to spend anywhere from $10 to hundreds of dollars per month on HOA fees.

Buying your first home or property is a huge step in anyone’s life. Before you start your property search, make sure you consider all of the items above when you’re thinking of buying a home or property and during your property search.

 

Is it Time to Downsize your Home?

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A recent study by Edelman Berland revealed that of homeowners who are contemplating selling their house in the near future 33% plan to scale down. Let’s look at a few reasons why that would make sense to many Americans.

In a recent blog post, Dave Ramsey, the financial guru, discussed the advantages of selling your current house and downsizing into a smaller home that better serves your current needs. Ramsey explains three potential financial advantages to downsizing:

  1. A smaller home means less space, but it also means less time, stress and money spent on upkeep
  2. Let’s assume you save $500 a month on your mortgage payment. In 30 years, you could have an additional $1–1.6 million in the bank to get you through your golden years.
  3. Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! If you can’t pay cash, aim for a 15-year fixed rate mortgage and put at least 10–20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment. At 3% interest, you could pay off a $200,000 mortgage in less than 10.5 years, saving almost $16,000 in the process.

Realtor.com also addressed downsizing in a recent article. They suggest you ask yourself some questions before deciding if downsizing is right for you and your family. Here are two of their questions followed by their answers (in italics) and some additional information that could help.

Q: What kind of lifestyle do I want after I downsize?

A: “For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”

Comments: Many homeowners are taking the profit from the sale of their current home and splitting it to put down payments on a smaller home in their current location and a vacation/retirement home where they plan to live when they retire.

This allows them to lock in the home price and mortgage interest rate at today’s values. This makes sense financially as both home prices and interest rates are projected to rise.

Q: Have I built up enough equity in my current home to make a profit?

A: “For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”

Comments: A recent study by Fannie Mae revealed that only 37% of Americans believe they have significant equity (> 20%) in their current home. In actually, 69% have greater than 20% equity. That equity could enable you to build a life you have always dreamt about.

Bottom Line

If you are debating downsizing your home and want to evaluate the options you currently have, meet with a real estate professional in your area who can help guide you through the process.

by The KCM Crew

Prepping Your Home for Vacation

Real Estate Advisor: May 2015
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Prepping Your Home for a Vacation

Vacations are a time to relax and escape from regular life. When you’re miles from home, the last thing you want to worry about is the safety of your home. If you plan on taking a vacation this summer (or any time this year), here are some simple tips on prepping your home for a vacation.

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Stop Your Newspaper and Mail

One sure sign of being absent from your home is a pile of newspapers in the driveway. Contact your newspaper delivery person and stop service while you’re gone. If you don’t have a locked mailbox, contact the post office and have them hold your mail. You can also ask a trusted neighbor to collect mail, newspapers and deliveries and have him/her hold them for you until you’re back.

Park Your Car in the Garage

The last thing you want is to get home from a vacation and have your car gone. If you can, park your car inside the garage, or have a family member park it at his/her house. You can also ask a neighbor to park their car in your driveway, making it look like someone is leaving each morning.

Put a Light on a Timer

A dark house stands out in a neighborhood, especially when all the other homes are lit up. Before you leave, buy a timer and install it on a lamp in your home. It’s also a good idea to install a motion-activated sensor on an outdoor floodlight that will be triggered should someone walk by it. You can also ask a neighbor to turn on the front porch light in the evening.

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Mow Your Lawn

Grass can grow pretty fast in two or three days. If you have a lawn, make sure it’s trimmed before you embark on your trip. If you’re going to be gone longer than a week, ask a family member or neighbor to cut the grass in the front yard while you’re away.

Some of these items are easily overlooked, but could cause major issues when you’re away:

Unplug Small Appliances and Electronics

Small appliances and electronics can be energy vampires when plugged in, and some are still active even when they look like they’re turned off. Before you leave, unplug those items that won’t be used while you’re gone (coffee makers, toasters, espresso machines, etc.). It’s also a good time to make sure all smoke detectors work properly throughout your home.

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Turn Down the Thermostat

Your thermostat makes sure your home maintains a specific temperature throughout the day. Before you leave, set the thermostat to a lower temperature if the house is going to be empty. This will help conserve energy while you’re gone. If you do turn down the thermostat, be sure to keep your home at a temperature that will still protect plants, pets and furniture.

Put the Water Heater in Vacation Mode

Traditional water heaters heat water throughout the day, even when you’re not using water. Before you head out on a vacation, put the heater in vacation mode. Check to see if your water heater has a VAC setting — which is for vacations. If it doesn’t, you can turn down the thermostat to the lowest setting. But don’t stop at the water heater: turn off water valves to the dishwasher, washing machine and any sinks. The last thing you want to come home to is a flood in your house because a pipe broke or a hose burst.

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Tidy Up the Kitchen

Before you leave it’s always a good idea to clean out the fridge and dispose of anything that will go bad while you’re gone. The sink can harbor things that cause bad smells — run a half cup of vinegar and some water through the garbage disposal to alleviate any potential buildups, and make sure to take out any trash and recycling so you don’t come home to a smelly house. If you have a trusted neighbor, ask them to put your garbage, recycling or yard debris bins out on pickup day.

Leave Emergency Contact Info with Neighbors

You may tell your family that you’re heading out, but you should also let a neighbor know. Neighbors live near you and can be your first point of contact should something happen to your home while you’re away. Let a trusted neighbor know you’re going to be out of town — provide them with information on where you’re going, how long you’ll be gone, and contact information for yourself and for family members in case of an emergency.

Shared from May issue of Real Estate Advisor

The Market Needs Your Homes!

Uncle-Sam

The real estate market has rebounded. So much so that there is a short supply of available homes for sale on the market. Especially for lower priced homes.

How does real estate help our economy?

The increased sales mean increased sales prices. Increased sales prices mean increased values for homes. Even those who aren’t selling their homes will realize the increased values. This in turn boosts  consumer confidence and consumer spending.

NAR compiled data from research conducted by the Bureau of Economic Analysis & Macroeconomic Advisors on the economic impact of a home purchase.

After reviewing the data, they concluded that the total economic impact of a typical home sale in the United States is an astonishing $52,205.

The more homes that are sold the better the economy. The better the economy the better it is for everyone.

How does this help you?

Homes listed in todays market go fast! And with mortgage rates still low this may be the time to upgrade your current home to a bigger house or one in a nicer location.

Give us a call and we will happy to show you what your options are.