Month: August 2014

Basics of Home Repair Requests for Home Buyers

A home inspection report will highlight a list of home repair issues needing attention before you complete the purchase transaction.

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Regardless of whether the house you want to buy is a new construction or decades old, you will always need to make a request for repairs.

Repairs can run the gamut from major plumbing or electrical issues to minor tile chips or floor scratches.

Keep in mind that it is unlikely that the sellers will repair the tens (or hundreds) of line items on your fix-it wish list.

Therefore, it is important for a buyer to have clear and reasonable expectations when making home repair requests.

Leverage Home Repair in Your Favor

Let them hear it from a pro: hire a professional, experienced home inspector to fully inspect the home you have your eye on.

Aside from determining whether the house is in good enough shape for you to invest your hard earned money in it, having an official inspection report will give you an edge at the negotiation table.

Telling the seller you want the porch repaired because it feels shaky will not hold weight unless a professional home inspector submits a report about the porch’s structural damage.

Each Home Repair is Not Equal to the Next

If the home repair is relatively minor in cost or a non-safety issue, it may not be worth making an issue over it. Valid buyer repair requests are generally significant issues uncovered by a thorough home inspection.

Any items obvious when you initially look at the house—like cracked sidewalks or peeling paint—should be stipulated in the purchase offer and not requested as a home repair later in the process.

Common Home Repair Requests

Here are some items commonly found on buyers’ home repair lists, although sellers may or may not be willing to fix them:

-Upgrading ungrounded electrical wiring if the house was built before the 1960s
-Replacing old-style galvanized water pipes or any leaking pipes
-Making roof repairs
-Changing disintegrating sewer pipes
-Upgrading heating/cooling systems and water heaters

 

Required Home Repair Items

Items a seller must fix are these:

-Any water penetration issues, such as a wet basement or moldy walls
-Local code safety violations, such as missing handrails or an unstable deck

In addition, any repairs listed on the appraisal report must be fixed.

For example, if a structural problem was noted on the appraisal, a lender may not be willing to release funds to the buyer until that home repair is made.

In many cases, the seller may opt to offer you a cash credit for the cost of the repair, rather than taking the time to have it repaired themselves.

This is actually in the buyer’s favor, as the seller no longer has a vested interest in ensuring the job will be done right.

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When Do I Finally Get the Keys to My New House?

It might be the most nerve-wracking, anticipatory, hard-to-find-the-patience question of home buying for first timers:

“When do I finally get the keys to my new house?”

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Usually, a buyer takes possession of a new home after closing. But exactly how that is defined differs transaction to transaction.

In some states, this occurs when the local government has the new title on file, which could be a few days after you’ve signed all the papers. And other contingencies can be built into the negotiating process.

Get the Keys Before Closing

New buyers might want to move in before closing for a variety of reasons—because they sold their old place, because they want to get a jump on fixing up the new house, or because in a buyer’s market, they may ask themselves, “Why not?”

But moving in early presents a host of issues. First, there’s legal liability—what if the soon-to-be-owners do something to the house, or hurt themselves while in the new place? Who’s responsible for damage to property or person?

Then there’s the money angle—the old homeowners could ask for rent, since they still own the place, which the almost-owners might not be keen on paying.

And of course, there’s always the risk that for some reason the sale falls apart in the final hours, especially with all the various deals, parties and paperwork involved in home buying. And what if the new occupants refuse to move?

This type of possession can work, especially if the seller has already vacated the property. Just make sure to get any agreement in writing, in case anything sours.

Get the Keys At or After Closing

This is more typical. But exactly when closing occurs varies. It’s not always at the signing of the papers, no matter how exhaustive that process.

As mentioned above, you may have to wait until the county officially records the new title. Your REALTOR® should know local laws and be able to guide you through this process. This way, there’s a clear delineation between the previous owner and their responsibility and liability for the home, and the new owner’s.

The biggest surprise to many homeowners can be how long it takes the county to record the title. It could be a few days after signing—so while you just handed over large sums and signed hours worth of paperwork, the keys may not officially be yours for a few more days.

Again, talk to your REALTOR® about your local rules.

Renting Back

If you’re selling, organizing a move can be a challenge. Not only do you need to pack, but booking movers during a busy summer season or around a holiday can prove tough.

And if you’re selling your current home and buying a new one in quick succession, you’ve got a lot to coordinate. Some buyers will agree to rent-back agreements, where they will rent the home back to the seller for a few days after closing. Divide the mortgage and costs by 30 (or 31), and that’s usually the amount you’ll pay per day to rent the home back.

Buyers don’t have to do this, of course, and they may have their own reasons for wanting to take the keys ASAP. They might have someone moving in to their old place. Maybe they are moving from out-of-town straight to the new house, so a rent-back means they’d have to find their own shelter for a few days.

Or maybe they just want to get a jump on painting and shampooing the carpet—their right as the owners. So while renting can be an option, it’s not always possible.

And the sellers can rent to the buyers as well. If the buyers want an early possession, a rental agreement is certainly in the rights of the soon-to-be-former homeowners, and often happens on similar terms as rental agreements after closing, at daily rates based on monthly mortgage costs.

Delays

Most loans close in a timely manner, but be prepared for closing delays.

First, there’s the radical delay—don’t expect your South Florida closing date to hold if, say, there’s a hurricane churning up the coast. That’s an unlikely scenario but not an unheard-of one.

More typically, the closing delay stems from more benign paperwork and human error. An active market when a high amount of home transfer activity translates into higher amounts of paperwork for banks and county deed recorders’ offices.

From the loan standpoint, delays occur when the bank requires some type of loan condition, such as additional credit references, additional paperwork to show income, or a higher escrow amount. A mortgage underwriter, upon reviewing the particulars of the closing, may want more information.

Some paperwork glitch might delay money transfers until late in the day, and then the funds won’t be available until the next morning, notes REALTOR® Jonathan Osman in his Charlotte, NC, area blog.

His tips: Always schedule closings for mornings, never close on Fridays, and plan movers for the day after you plan to get the keys. That way you leave yourself some wiggle room.

For all, patience rules. Many veteran homebuyers have last-minute home buying paperwork frustrations to share. But ultimately, their trials ended with that most prized possession—getting the keys.

Should You Buy Someone Else’s Customized Home?

Buying a previously-owned customized home can open up some attractive and unusual options for a homebuyer.

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You may love everything the former owner incorporated into the house and appreciate the extra amenities. If the features aren’t to your liking, however, you’ll need to factor in the additional cost and inconvenience of remodeling the home.

Here are the four factors to consider when buying a previously-owned customized home.

 

 

 

1. Indoor Customizations

Many typical indoor features are innocuous and often add value to the customized home:

-custom and unusual floor tiles or coverings
-wallpaper
-chair rails and ceiling moldings
-skylights
-special light fixtures
-built-in architectural shelves
-work areas
-movie rooms
-mudrooms
-children’s playrooms

Even if you don’t have kids who will use a playroom, it may be easy to modify the space and fixtures to fit your need for a home office. Repainting the walls, removing wallpaper and replacing carpet with something better fitting your taste are things you’d probably do in any previously-owned home, custom or not.

On the other hand, other features might take more time and expense to modify or maintain:

-home gyms
-special electronics, like built-in A/V systems
-central home vacuuming system
-unusual bathrooms
-saunas
-indoor pools
2. Outdoor Customizations

Customizations extend to the outdoors, too. These can include the following:

-special exterior home trim features such as moldings and cornices
-customized gardens and walkways
-gazebos
-workshops
-greenhouses
-guesthouses
-unusual plantings
-swimming pool area
-statues
-outdoor cooking and entertaining areas

These options can be wonderful if put to good use, but you don’t want to wind up perplexed as what to do with the spaces. While it may be easy to replace and plant new greenery in the garden, it may be costly to modify custom outbuildings, a pool or entertainment area for other purposes.

 

3. Buyer Pre-Approval

Keep in mind that customizations to a home can affect financing. When applying for a loan, you may need to create a list of the customizations for the lender. Some banks may not want to loan you the entire amount of the home’s value with the customizations.

Or, you may be required to put down a higher down payment. An appraiser will need to physically visit the property and assign a market value to the home and its customized features.

 

4. Do You Like the Home?

As with any potential home purchase, envision yourself living in the home. Don’t buy a previously customized home just because it is unique. You have to live there and be comfortable long after you have moved in.

If you don’t like the customizations and want to change them, get remodeling estimates before you buy so you are aware of all the expenses involved. After you have all of the information, put it down on paper and decide if it is worth the extra expense to make changes on top of the selling price.

A previously-owned customized home may just be the house of your dreams—and well worth the cost.

How Long Does It Take to Buy a Home?

Consumers considering a home purchase often want to get a handle on how it takes to actually buy a home.

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The problem is this: it’s a surprisingly subjective and multilayered question. Answers tend to focus on the typical time it takes to close a home loan once you’re under contract, which is usually 30 to 45 days.

That’s an accurate response, but it’s a vantage point that leaves little room between the starting and finish lines. The home-buying journey—from financial preparation and finding the right home to getting under contract and through closing—tends to take a lot longer.

The reality is there is no stock answer on how long it takes to buy a home, mostly because everyone’s journey is different. Here is a closer look at some stages and steps that can shape your home-buying timeline.

Building Credit & Savings

Signing a purchase agreement to buy a home is a key step, but it doesn’t mean much if you don’t have the credit and assets necessary to secure a mortgage.

You might need to spend time burnishing your credit profile or stockpiling savings in order to qualify for a home loan. Credit-score and down payment requirements can vary depending on the lender and the loan type. (Checking your credit scores before you begin your home search can help you determine if you need more time to build your credit. There are various services that allow you to check your credit scores for free, including Credit.com.)

Borrowers looking at a $300,000 home would need at least $15,000 in cash for a minimum down payment on conventional financing (5%) and at least $10,500 for FHA financing (3.5%).

The average conventional borrower in April had a 755 credit score, while the average FHA borrower had a score of 685, according to mortgage software company Ellie Mae.

Paying down debt, correcting mistakes on your credit report and other steps can help boost your score, rapidly in some cases. But some blemishes can take longer to clear up than others.

How long it takes to build that down payment nest egg depends on the borrower and their budget. Scraping together enough cash to simply meet those minimum requirements can take considerable time, especially for first-time buyers.

Finding the Right Home

Last year, homebuyers typically looked at 10 homes over 12 weeks before getting under contract, according to the National Association of Realtors.

But there’s no game clock on your home search. You can tour 50 homes over 50 weeks. You can buy the first showing.

It’s obviously the most personal part of the process, but it’s also a time when perfect can truly be the enemy of good. First-time buyers especially have to learn to balance wants and needs with the realities of their housing market and what they can afford.

That’s not always an easy—or quick—lesson to learn.

Loan Processing

For mortgage lenders, the home-buying clock starts once they get a copy of your purchase agreement. From there, work starts on getting the property appraised and all of your financial documentation in order for an underwriter to review.

Like credit and underwriting requirements, appraisal time frames can vary depending on the loan type. For example, most appraisals on VA loans are back within 10 days, but it might take longer in more remote parts of the country.

That 30- to 45-day window from contract to close is a good ballpark for most purchase loans, unless you are trying to buy a short sale (think more like 90 to 120 days). But understand it’s not uncommon for underwriters to require additional documents once they begin scrutinizing your loan file.

Borrowers can help speed the process along by returning those documents as quickly as possible. You don’t have a ton of control once you are under contract on a home, but this is one key area where your swift action—or lack of it—can have a big impact on your home-buying timeline.