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Choosing the Right Agent / Broker

Do you know what makes a good Real Estate Agent? Most of us have very little idea what their role actually is or how to pick a good one. Wherever you find an agent, asking a few questions up front can save you a heap of trouble later by choosing the right real estate agent now.

15 Questions to Ask an Agent

  1. Is this your full-time gig? How many clients have you served this year?
    Okay, that’s two questions. But both get to the heart of the same issue: an active, full-time agent is more likely to be up-to-date on the market and the law.
  2. How many sales have you handled in my target area or neighborhoods?
    You want someone who knows the local market, with a few recent deals in your target neighborhoods.
  3. When clients are unhappy with your service, what has gone wrong?
    Asking why a client has been a bad fit for an agent can help you figure out if you’re a good fit.
  4. Has a client ever filed a complaint against you?
    If you’re uncomfortable asking, just check with your state’s licensing board.
  5. What’s your fee?
    The seller pays the buyer’s agent using the money you pay for the house, typically 2-3% of the sales price. Since the commission amount is set by the seller and can vary from home to home, you should insist that your agent is upfront about his share; you don’t want an agent who pressures you into a home based on his chances of landing a fatter commission check.
  6. What services do you offer beyond negotiations and escrow?
    Make a list of what you’ll be paying for. Negotiations, paperwork and contingencies are the minimum.
  7. When am I committed to working with you?
    Many consumers start touring homes without realizing this can obligate them to work with the agent, contract or no contract.
  8. How many foreclosure or short-sale transactions have you handled (if applicable in your situation)?
    Distressed properties can be great deals, but the paperwork is complicated, and your liability is greater. The best agents have experience closing deals with banks.
  9. Who else will be working with me?
    An agent is often supported by a team. But the person you hire should do most of the work when choosing the right real estate agent.
  10. Am I obligated to work with the lender, inspector, or other service providers you recommend?
    A “yes” here is a big red flag. Though good agents may have solid recommendations for lenders, inspectors, or other service providers, you should never feel pressured to use their recommendation. It’s illegal for an agent to force you to use “his” lender or other service provider.
  11. How quickly can you get me into a home?
    Hot homes move fast. Ask how the agent handles tours on short notice.
  12. Do you represent buyers and sellers on the same house?
    When one agent represents both the buyer and seller, this is known as dual agency, and it is not a good thing for buyers. If the seller’s agent is trying to get the most money for his client’s home, how can he also be trying to get you the best deal? Our advice is simple: avoid dual agency.
  13. What sets you apart from other agents?
    Look for expertise, not just enthusiasm. You want an agent with experience in your favorite neighborhoods, a proven track record of happy customers, and deep knowledge of any special requirements you might have in your home search.
  14. What if I’m unhappy with your service?
    Most agents get paid when you buy a house, giving them an incentive to close the deal, even if you have doubts. Even if you have complaints after you purchase your home, it may be too late to do anything. Ask your agent if she’s willing to guarantee your satisfaction, and what recourse you’ll have for a bad experience.
  15. Can I see reviews of your past deals?
    Every agent has clients he served well. But the best agents consistently deliver excellent service. There’s a difference between reading a few hand-picked endorsements and getting the full good, bad, and ugly on your agent. We think a good agent should have nothing to hide; that’s why Redfin posts reviews for all agents and partner agents after every deal. While you won’t find that for every real estate agency, you can use sites like Yelp.com to view real customer opinions for an agent you’re considering.
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10 Steps to Home Buying

  1. Start With Your Credit
    Credit reports are kept by the three major credit agencies, Experian, Equifax, and TransUnion. They show whether you are habitually late with payments and whether you have run into serious credit problems in the past. A credit score is a number calculated from a formula created by Fair Isaac based on the information in your credit report. You have three different credit scores, one for each of your credit reports. A low credit score may hurt your chances for getting the best interest rate, or getting financing at all. So get a copy of your reports and know your credit scores. Try Fair Isaac’s MyFICO.com. Errors are common. If you find any, contact the agencies directly to correct them, which can take two or three months to resolve. If the report is accurate but shows past problems, be prepared to explain them to a loan officer.
  2. Set Your Budget
    Next, you need to determine how much house you can afford. You can start with an online calculator. For a more accurate figure, ask to be pre-approved by a lender, who will look at your income, debt and credit to determine the kind of loan that’s in your league. The rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower. Another rule of thumb: All your monthly home payments should not exceed 36% of your gross monthly income. The size of your down payment will also determine how much you can afford.
  1. Line Up Cash
    You’ll need to come up with cash for your down payment and closing costs. Lenders like to see 20% of the home’s price as a down payment. If you can put down more than that, the lender may be willing to approve a larger loan. If you have less, you’ll need to find loans that can accommodate you. Various private and public agencies — including Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Department of Veterans Affairs — provide low down payment mortgages through banks and mortgage companies. If you qualify, it’s possible to pay as little as 3% up front. A warning: With a down payment under 20%, you will probably wind up having to pay for private mortgage insurance (PMI), a safety net protecting the bank in case you fail to make payments. PMI adds about 0.5% of the total loan amount to your mortgage payments for the year. Once you’ve considered the down payment, make sure you’ve got enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney’s fees, inspection fees, and the cost of a title search. They can easily add up to more than $10,000 — and often run to 5% of the mortgage amount. If your available cash doesn’t cover your needs, you have several options. First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account, if you have one, though you must pay taxes on the amount. You can also receive a cash gift of up to $14,000 a year from each of your parents without triggering a gift tax. Check on whether your employer can help; some big companies will chip in on the down payment or help you get a low-interest loan from selected lenders. You can also tap a 401(k) or similar retirement plan for a loan from yourself.
  1. Find an Agent
    Most sellers list their homes through an agent — but those agents work for the seller, not you. They’re paid based on a percentage, usually 5 to 7% of the purchase price, so their interest will be in getting you to pay more. You need “exclusive buyer agent.” Sometimes buyer agents are paid directly by you, on an hourly or contracted fee. Other times they split the commission that the seller’s agent gets upon sale. A buyer’s representative has the same access to homes for sale that a seller’s agent does, but his or her allegiance is supposed to be only to you.
  1. Search For a Home
    Your first step here is to figure out what city or neighborhood you want to live in. Look for signs of economic vitality: a mixture of young families and older couples, low unemployment and good incomes. Pay special attention to districts with good schools, even if you don’t have school-age children. When it comes time to sell, you’ll find that a strong school system is a major advantage in helping your home retain or gain value. Try also to get an idea about the real estate market in the area. For example, if homes are selling close to or even above the asking price, that shows the area is desirable. If you have the flexibility, consider doing your house hunt in the off-season — meaning, generally, the colder months of the year. You’ll have less competition and sellers may be more willing to negotiate. Be wary of choosing search criteria that are too restrictive. For example, select a price range 10% above and 10% below your true range. Add a 10-mile cushion to the location you specify.
  1. Make An Offer
    Once you find the house you want, move quickly to make your bid. If you’re working with a buyer’s broker, then get advice from him or her on an initial offer. If you’re working with a seller’s agent, devise the strategy yourself. Try to line up data on at least three houses that have sold recently in the neighborhood. If you really want the house, don’t lowball. The seller may give up in disgust. Remember, that your leverage depends on the pace of the market. In a slow market, you’ve got muscle; in a hot market, you may have none at all. There’s no foolproof system for negotiating a fair price. Occasionally it’s best to deal directly with the seller yourself. More often it’s better to work exclusively through intermediaries. Be creative about finding ways to satisfy the seller’s needs. For instance, ask if the seller would throw in kitchen and laundry appliances if you meet his price — or take them away in exchange for a lower price. Once you reach a mutually acceptable price, the seller’s agent will draw up an offer to purchase that includes an estimated closing date (usually 45 to 60 days from acceptance of the offer).
  1. Enter Contract
    Have your lawyer or buyers agent review this document to make sure the deal is contingent upon:

    1. Your obtaining a mortgage
    2. A home inspection that shows no significant defects
    3. A guarantee that you may conduct a walk-through inspection 24 hours before closing. You also need to make a good-faith deposit — usually 1% to 10% of the purchase price — that should be deposited into an escrow account. The seller will receive this money after the deal has closed. If the deal falls through, you will get the money back only if you or the home failed any of the contingency clauses.
  1. Secure a Loan
    Now call your mortgage broker or lender and move quickly to agree on terms, if you have not already done so. This is when you decide whether to go with the fixed rate or adjustable rate mortgage and whether to pay points. Expect to pay $50 to $75 for a credit check at this point, and another $150, on average to $300 for an appraisal of the home. Most other fees will be due at the closing. If you don’t already have one, look into taking out a homeowner’s insurance policy, too. Most lenders require that you have homeowner’s insurance in place before they’ll approve your loan.
  1. Get an Inspection
    In addition to the appraisal that the mortgage lender will make of your home, you should hire your own home inspector. An inspection costs about $300, on average, and up to $1,000 for a big job and takes two hours or more. Ask to be present during the inspection, because you will learn a lot about your house, including its overall condition, construction materials, wiring, and heating. If the inspector turns up major problems, like a roof that needs to be replaced, then ask your lawyer or agent to discuss it with the seller. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price. If the seller won’t agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract.
  1. Close the Deal
    About two days before the actual closing, you will receive a final HUD Settlement Statement from your lender that lists all the charges you can expect to pay at closing. Review it carefully. It will include things like the cost of title insurance that protects you and the lender from any claims someone may make regarding ownership of your property. The cost of title insurance varies greatly from state to state but usually comes in at less than 1% of the home’s price. The lender might also require you to establish an escrow account, which it can tap if you fall behind on your mortgage or property tax payments. Lenders can require deposits of up to two months’ worth of payments. The actual closing is often somewhat anticlimactic. It’s a ritual affair, with customs that differ by region. Your lawyer or real estate agent can brief you on the particulars.

Article courtesy of CNN Money

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How Much Home Can I Afford?

To arrive at an “affordable” home price (that is, how much home you can afford), we followed the guidelines of most lenders. In general, that means your total debt payments should be no more than 36% of your gross income.

Use the Home Affordability Calculator Now

Once you enter your monthly debt (including credit cards, student loan and car payments), we come up with a maximum monthly home payment you could handle while staying under that threshold.

Why do lenders use this guideline? It’s been shown to be a level of debt that most borrowers can comfortably repay.

 That home payment assumes a 30-year mortgage at current rates, and includes 1% property tax and 0.4% for homeowners insurance.

It does not factor in private mortgage insurance, which you’ll owe if your down payment is less than 20% of the purchase price.

You should reduce the maximum target if you have other savings needs (such as retirement and college) or additional expenses (such as child care, private school tuition, health care, or alimony payments).

Courtesy of CNN Money