Q&A

Q: IS IT A GOOD IDEA TO DO A RENT TO OWN?

A: There are really good reasons to rent to own! I have had success with selling a listing as a rent to own with a long term lease of 5 years. The buyer successfully bought the home before the lease term was over and all parties were happy. Of course there are downsides to lease purchases as well. Lease purchasing is a great way to purchase a home if you don’t have the money needed to purchase or if you can not otherwise get a traditional loan. If you are willing to stick with it until the end of the term and actually purchase the property and clean up your credit and save some money, etc this is a great option!

Q: WHAT IS A SHORT SALE?

A: a short sale is a property for sale at a price lower than the amount owed on the mortgage, and market value is lower than the amount owed – the proceeds of the sale will not cover the debt. The seller possibly bought the property when prices were high! The lender needs to agree to receive a lower payoff on the note. If there are other debts secured by liens against the property, all lien holders have to agree. The lender will verify that the homeowner cannot pay monthly loan payments, or doesn’t have enough money to pay the full balance. The short sale is a solution for homeowners that can no longer pay their mortgage, need to move, or have received a notice of default from the lender (first step of foreclosure) and want to avoid foreclosure. A short sale has a lower impact on the credit score than a foreclosure. For a buyer, a short sale can be advantageous – will buy a property at or below fair market value, but in most cases the lender will not pay for repairs and other extras (closing costs, HOA transfer fees, others). Either a seller or a buyer, I recommend to work with a real estate agent that is knowledgeable and pledges to “fight” for you. Please feel free to contact me for details.

Q: WHAT UPGRADES SHOULD WE GO FOR WHEN SELLING?

A: a lot depends on why you are buying the house. Are you buying it mostly as a home or mostly as an investment? There is a difference. For the most part, upgrades are high-profit items for builders. They aren’t designed to enhance the value of the house, but make you happier with the house you do buy.

If you are looking at your home as an investment, then you buy from the smaller to medium size in the tract and spend only a minimal amount on upgrades. If you are looking at your purchase as a home, then you select upgrades that will enhance your quality of living. One rule of thumb is to always upgrade the carpet and padding.

Q: I AGREED TO BUYING, BUT CHANGED MY MIND!

A: For the answer to this, you have to look at your contract. The contract is the legal agreement you have made with the seller. Most contracts have certain contingencies where a cancellation is acceptable. To cancel for reasons other than that, there are often consequences and such a decision should not be taken lightly.

Keep in mind that while you have been preparing to close the transaction, the seller has taken his home off the market and may have entered his own contract to purchase a home. This can create a chain of sales and purchases, all depending on you to fulfill your obligation. If you do not fulfill the contract, your decision may affect many more people than just one seller.

For the legal consequences of canceling a contract, you may have to consult an attorney.

Q: CAN WE GET OUT OF SELLING OUR HOME?

A: First, look at the contract and see if there are any contingencies that allow you out of the contract. You can always decide not to sell.

You just don’t know exactly what the buyer’s reactions are going to be. You don’t know if they will attempt to enforce the contract. You don’t know if there will be legal repercussions. You might want to get an attorney’s opinion at some point, since we do not provide legal advice.

If you do cancel, think about ways to soften the blow to the potential buyer who has put up an earnest money deposit, may have already paid for a credit report and appraisal, and may be charged a cancellation fee by the settlement agent. They may have already given notice (if they rent) or sold their own house, too.

If you reimburse them for some of their hard costs, maybe they will not try to enforce the contract.

Q: IS A GARAGE CONSIDERED IN THE SQUARE FOOTAGE?

A: Although a garage is attached to the home, it is not considered part of the home’s square footage. That is because only livable space is considered in the square footage calculation.

Calculating the square footage of a home is not as easy as it sounds. Neither real estate agents nor homeowners should attempt the calculation (at least not if you want a reliable figure). Rarely are houses perfectly square, which is one reason for the difficulty. Appraisers map out the house on a piece of graph paper, calculate all the edges, come up with “mini-areas” for each rectangle – then add them all together.

Plus, there are other intricate rules. If there has been an addition to the house and the owner did not receive a building permit, then that section of the house may not be allowable as part of the square footage. The same with attic and basement conversions, lofts, and so on.

It is best to rely on a licensed appraiser to recalculate the square footage of a house.

When a home’s square footage is advertised, the figure usually comes from previous sales, perhaps as far back as the builder. Homeowners and real estate agents don’t usually recalculate the square footage. Like we said, it is very very difficult to calculate the square footage of a home.

Q: CAN YOU NEGOTIATE THE PRICE OF A BANK OWNED HOME?

A: Everything in real estate is negotiable. However, banks are more sophisticated about pricing than they were years ago. So those “Get a great deal on a foreclosure!” days aren’t what they used to be. Lowball offers generally don’t go very far.

Q: WHAT IS A LAND CONTRACT?

A: Land contracts vary widely from transaction to transaction.

In most cases, no grant deed is recorded. The buyer rarely obtains a new mortgage loan at the time of purchase. Instead, the new owner makes payments to an intermediary, who then makes payments on the seller’s mortgage, which is still in place.

Keep in mind that such an agreement usually violates the lender’s guidelines. If the lender becomes aware of a transfer of title on the property (which is why you usually don’t record the grant deed), they can exercise the “due on sale” clause of the note. This would require you to refinance the loan or sell the property. Since many who buy on land contracts have problems qualifying for a mortgage, you can see how this can lead to problems. At the same time, lenders generally only check for transfers of title if the loan becomes delinquent.

Within a certain number of years, it is expected the buyer will be able to qualify for a loan. At that time, they will obtain a new mortgage and pay off whatever amount the land contract requires. Then a grant deed is recorded and full ownership is conveyed.

Q: HOW DO I SELL MY HOUSE BY OWNER?

A: You want a quick answer? People write entire books on this topic and one of the better ones is “Sold by Owner,” by Robert Irwin.

It’s like golf – it sounds easy. You just whack the ball a bunch of times until it goes into the hole.  You may land in a sand trap or go out of bounds, but if you keep whacking at it, the ball eventually goes in the hole.

Buying and selling real estate is the same way.  If you are willing to do all the work, you can muddle through and get it done.

Q: WHERE CAN I FIND A REAL ESTATE AGENT'S "CODE OF ETHICS"?

A: Some real estate agents are members of the National Association of Realtors, which does have a code of ethics for their 720,000 members. It is located at http://www.realestateabc.com/codeofethics/

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