The first thing you need to know about home inspection: You’ll feel all the feels. There’s the excitement — the inspection could be the longest time you’re in the house, after the showing. Right behind that comes … anxiety. What if the inspector finds something wrong? So wrong you can’t buy the house? Then there’s impatience. Seriously, is this whole home-buying process over yet? Not yet. But you’re close. So take a deep breath. Because the most important thing to know about home inspection: It’s just too good for you, as a buyer, to skip. Here’s why.
A Home Inspector Is Your Protector
An inspector helps you make sure a house isn’t hiding anything before you commit for the long haul. (Think about it this way: You wouldn’t even get coffee with a stranger without checking out their history.)
A home inspector identifies any reasonably discoverable problems with the house (a leaky roof, faulty plumbing, etc.). Hiring an inspector is you doing your due diligence. To find a good one (more on how to do that soon), it helps to have an understanding of what the typical home inspection entails.
An inspection is all about lists.
Before an inspection, the home inspector will review the seller’s property disclosure statement. (Each state has its own requirements for what sellers must disclose on these forms; some have stronger requirements than others.) The statement lists any flaws the seller is aware of that could negatively affect the home’s value.
The disclosure comes in the form of an outline, covering such things as:
Other problems, depending on what your state mandates.
During the inspection, an inspector has three tasks: To:
Identify problems with the house
Estimate how much repairs might cost
He or she produces a written report, usually including photos, that details any issues with the property. This report is critical to you and your agent — it’s what you’ll use to request repairs from the seller. (We’ll get into how you’ll do that in a minute, too.)
The Inspector Won’t Check Everything
Generally, inspectors only examine houses for problems that can be seen with the naked eye. They won’t be tearing down walls or using magical X-ray vision, to find hidden faults.
Inspectors also won’t put themselves in danger. If a roof is too high or steep, for example, they won’t climb up to check for missing or damaged shingles. They’ll use binoculars to examine it instead.
They can’t predict the future, either. While an inspector can give you a rough idea of how many more years that roof will hold up, he or she can’t tell you exactly when it will need to be replaced.
Finally, home inspectors are often generalists. A basic inspection doesn’t routinely include a thorough evaluation of:
Structural engineering work
The ground beneath a home
Fireplaces and chimneys
When it comes to wood-burning fireplaces, for instance, most inspectors will open and close dampers to make sure they’re working, check chimneys for obstructions like birds’ nests, and note if they believe there’s reason to pursue a more thorough safety inspection.
Now you’re ready to connect with someone who’s a pro at doing all of the above. Here’s where — once again — your real estate agent has your back. He or she can recommend reputable home inspectors to you.
In addition to getting recommendations (friends and relatives are handy for those, too), you can rely on online resources such as the American Society of Home Inspectors’ (ASHI) Find a Home Inspector tool, which lets you search by address, metro area, or neighborhood.
You’ll want to interview at least three inspectors before deciding whom to hire. During each chat, ask questions such as:
Are you licensed or certified? Inspector certifications vary, based on where you live. Not every state requires home inspectors to be licensed, and licenses can indicate different degrees of expertise. ASHI lists each state’s requirements here.
How long have you been in the business? Look for someone with at least five years of experience — it indicates more homes inspected.
How much do you charge? The average home inspection costs about $315. For condos and homes under 1,000 square feet, the average cost is $200. Homes over 2,000 square feet can run $400 or more. (Figures are according to HomeAdvisor.com.)
What do you check, exactly? Know what you’re getting for your money.
What don’t you check, specifically? Some home inspectors are more thorough than others.
How soon after the inspection will I receive my report? Home inspection contingencies require you to complete the inspection within a certain period of time after the offer is accepted — normally five to seven days — so you’re on a set timetable. A good home inspector will provide you with the report within 24 hours after the inspection.
May I see a sample report? This will help you gauge how detailed the inspector is and how he or she explains problems.
Show Up for Inspection (and Bring Your Agent)
It’s inspection day, and the honor of your — and your agent’s — presence is not required, but highly recommended. Even though you’ll receive a report summarizing the findings later on, being there gives you a chance to ask questions, and to learn the inner workings of the home.
Block out two to three hours for the inspection. The inspector will survey the property from top to bottom. This includes checking water pressure; leaks in the attic, plumbing, etc.; if door and window frames are straight (if not, it could be a sign of a structural issue); if electrical wiring is up to code; if smoke and carbon monoxide detectors are working; if appliances work properly. Outside, he or she will look at things like siding, fencing, and drainage.
The inspector might also be able to check for termites, asbestos, lead paint, or radon. Because these tests involve more legwork and can require special certification, they come at an additional charge.
Get Ready to Negotiate
Once you receive the inspector’s report, review it with your agent.
Legally, sellers are required to make certain repairs.These can vary depending on location. Most sales contracts require the seller to fix:
Building code violations
Most home repairs, however, are negotiable. Be prepared to pick your battles: Minor issues, like a cracked switchplate or loose kitchen faucet, are easy and cheap to fix on your own. You don’t want to start nickel-and-diming the seller.
If there are major issues with the house, your agent can submit a formal request for repairs that includes a copy of the inspection report. Repair requests should be as specific as possible. For instance: Instead of saying “repair broken windows,” a request should say “replace broken window glass in master bathroom.”
If the seller agrees to make all of your repair requests:He or she must provide you with invoices from a licensed contractor stating that the repairs were made. Then it’s full steam ahead toward the sale.
If the seller responds to your repair requests with a counteroffer: He or she will state which repairs (or credits at closing) he or she is willing to make. The ball is in your court to either agree, counter the seller’s counteroffer, or void the transaction.
At the end of the day, remember to check in with yourself to see how you’re feeling about all of this. You need to be realistic about how much repair work you’d be taking on. At this point in the sale, there’s a lot of pressure from all parties to move into the close. But if you don’t feel comfortable, speak up.
The most important things to remember during the home inspection? Trust your inspector, trust your gut, and lean on your agent — they likely have a lot of experience to support your decision-making.
That’s something to feel good about.
elps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.
What You Should Really Know About Browsing for Homes Online
Oh, let’s just admit it, shall we? Browsing for homes online is a window shopper’s Shangri-La. The elegantly decorated rooms, the sculpted gardens, the colorful front doors that just pop with those “come hither” hues.
Browser beware, though: Those listings may be seductive, but they might not be giving you the complete picture.
That perfect split-level ranch? Might be too close to a loud, traffic-choked street. That handsome colonial with the light-filled photos? Might be hiding some super icky plumbing problems. That attractively priced condo? Might not actually be for sale. Imagine your despair when, after driving across town to see your dream home, you realize it was sold.
So let’s practice some self-care, shall we, and set our expectations appropriately.
Step two, with that worksheet and knowledge in hand, start browsing for homes. As you do, keep in mind exactly what that tool can, and can’t, do. Here’s how.
You Keep Current. Your Property Site Should, Too
First things first: You wouldn’t read last month’s Vanity Fair for the latest cafe society gossip, right? So you shouldn’t browse property sites that show old listings.
Get the latest listings from realtor.com®, which pulls its information every 15 minutes from the Multiple Listing Service (MLS), regional databases where real estate agents post listings for sale. That means that realtor.com®’s listings are more accurate than some others, like Zillow and Trulia, which may update less often. You wouldn’t want to get your heart a flutter for a house that’s already off the market.
BTW, there are other property listing sites as well, including Redfin, which is a brokerage and therefore also relies on relationships with brokers and MLSs for listings.
The Best Properties Aren’t Always the Best Looking
A picture, they say, is worth a thousand words. But what they don’t say is a picture can also hide a thousand cracked floorboards, busted boilers, and leaky pipes. So while it’s natural to focus on photos while browsing, make sure to also consider the property description and other key features.
Each realtor.com® listing, for example, has a “property details” section that may specify important information such as the year the home was built, price per square foot, and how many days the property has been on the market.
Ultimately though, ask your real estate agent to help you interpret what you find. The best agents have hyper-local knowledge of the market and may even know details and histories of some properties. If a listing seems too good to be true, your agent will likely know why.
Treat Your Agent Like Your Bestie
At the end of the day, property sites are like CliffsNotes for a neighborhood: They show you active listings, sold properties, home prices, and sales histories. All that data will give you a working knowledge, but it won’t be exhaustive.
To assess all of this information — and gather facts about any home you’re eyeing, like how far the local elementary school is from the house or where the closest Soul Cycle is — talk to your real estate agent. An agent who can paint a picture of the neighborhood is an asset.
An agent who can go beyond that and deliver the dish on specific properties is a true friend indeed, more likely to guide you away from homes with hidden problems, and more likely to save you the time of visiting a random listing (when you could otherwise be in the park playing with your canine bestie).
Want to go deeper? Consider these sites and sources:
Just remember: You’re probably not going to find that “perfect home” while browsing listings on your smartphone. Instead, consider the online shopping experience to be an amuse bouche to the home-buying entree — a good way for you to get a taste of the different types of homes that are available and a general idea of what else is out there.
Once you’ve spent that time online, you’ll be ready to share what you’ve learned with an agent.
elps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.
Investing in real estate has great potential for passive income. It can also be part of your retirement planning by selling the home and getting a big chunk of equity.
It also comes with risks.
So we wanted to share with you some of the things that we have learned when it comes to knowing our local real estate market and the real estate agents who specialize in working with real estate investors.
Know what’s happening in your area
Are people moving into your area because of job opportunities? Are people retiring there? Are you in a vacation area where you can buy short-term rental homes? Do you want to buy a duplex or four-plex home, live in one of the units and rent out the others?
Understand the costs involved
In addition to a mortgage payment, taxes and insurance, you will need to budget for repairs, landscaping/snow removal.
Long-term or short-term investing
Investing in real estate can help you build your wealth over the long term. Or buying fixer-uppers and selling them immediately can give you more cash over the short term. You will need to decide which one is right for you.
Know all of your financing options
The mortgage rules are different in regard to the down payment, the closing costs and interest rate. We can help you decide which loan program would be the most advantageous for you.
Know your numbers
Cash flow and income tax rules can benefit you when you invest in real estate. That’s where a great accountant/CPA can help you determine if the numbers work for you and your tax bracket. (We can recommend one to you.)
Build your own real estate investment team
Even if you are only considering buying one or two rental properties, it’s best to work with people you can rely on to give you good advice. A real estate agent who specializes in working with investors (We can recommend some to you), a property management company (if you don’t want to manage your own), and a network of contractors who will help you if the home needs to be repaired.
If you are interested in exploring the possibility of investing in real estate, please let us know and we can set up a time to talk.
*American Financial Network, Inc. is not acting on behalf of or at the direction of the federal government, and this offer is not being made by an agency of the government. AFN is not a tax or financial advisor, and individual tax circumstances may vary. Please consult a licensed tax professional and appropriate government agencies to determine tax consequences of home ownership.
What Happens When Your Appraisal Comes in High…or Too Low
When buyers and sellers come to an agreement on the price of a home, it’s the end result of the lowest the seller is willing to accept and the highest the buyer is willing to pay. During negotiations the offer and counteroffer can go back and forth until an agreed upon price is reached…or not. That’s the true market value at work. When you first work with your real estate agent and go over the list of things you want in a home such as how many bedrooms and baths or the school system or the commute to your work, you’re provided with a list of homes that meet your criteria. Working with your loan officer you also get your preapproval letter in your hand, knowing how much you want to borrow and what your monthly payments will be. Your preapproval letter essentially means your financing is all lined up and all that’s missing is a property address.
Sometimes, and this is often the case with first time buyers, the “perfect” home comes on the market and has everything the buyers are looking for. In their eagerness to get the home and be the lucky bidder, they might make an offer that’s over and above the asking price. And while the sellers are happy to take that offer, there might be an issue with the appraised value.
When an appraiser accepts an order to appraise a property, a copy of the sales contract is provided. In the instance of a refinance application, the home owners list what they feel the property is worth directly on the loan application. But this is only the starting point for the real estate agent. Upon receiving an appraisal order, the appraiser will first do a bit of homework, researching public records regarding the sales prices of similar homes in the neighborhood that have recently sold. The appraiser will look at three to four homes and select the best ones that are most like the subject property. Then, the appraiser comes up with a price-per-square-foot value and proceeds to make certain adjustments.
Very rarely are two homes exactly alike in the same neighborhood. They might look similar but there are differences, some small and some not so small, between then. One might have a bigger lot or one might have more trees or a swimming pool. Maybe there’s a three car garage instead of a two car garage. Inside, one house might have an upgraded kitchen or recent master bath remodel. Someone could have added an extra bedroom and added more square footage to the house. The condition of the homes will also be noted and the appraiser can make adjustments for that, too.
When appraising a property for a purchase, it’s common for the sales price on the contract to match the appraised value. After all, everything being equal, it’s an agreed upon price which in turn reflects current market values. But sometimes they don’t match. Sometimes the appraised property value is higher than what appears on the sales contract and sometimes the property is appraised at a lower value. During the course of a refinance when the value comes in higher, it can mean a slightly better interest rate if the loan program being selected is priced partly on the loan amount compared to the property value. Lenders refer to this as a “loan level pricing adjustment.” Or, in the instance of a cash out refinance, a higher appraised value can mean more cash to the buyers at closing.
In a purchase transaction, a higher appraised value doesn’t have much of an impact. When evaluating a loan application lenders will use the lower of the appraised value or sales price. This means when the value comes in higher than the contract price the buyers can’t automatically use that newly found equity as part of their down payment. All it says is that the buyers probably got a better deal than they thought as their accepted offer was lower than what similar homes have recently sold for in the area. In the instance of the appraised value coming in lower than the offer, then the impact is greater.
Let’s say someone makes an offer on a home for $200,000. The appraisal is ordered and after a few days is returned to the lender. The value according to the appraisal is $190,000, not $200,000. What happens? Because the lender uses the lower of the sales price or appraised value, the loan basis is on $190,000. This means the buyers must come to the closing table with the additional $10,000 difference. Or, the buyers can go back to the sellers and renegotiate the price. Most sales contracts today have an addendum that allows the buyers to back out of the deal if the property doesn’t appraise at contract price without penalty and get their earnest money deposit back. If the sellers decide not to renegotiate, the deal is cancelled and the buyers start looking for another home.
When an appraisal comes in high it can indicate a rather robust real estate market and when it comes in low it can indicate a faltering one. Either way, the lower of the two values is used when processing a new loan application. Again, lower or higher values are the exception in most markets and not the rule. Yet by working closely with an experienced real estate agent who knows the market well, your offer will likely be spot on.
10 Problems to Avoid When Buying or Selling a Home
There is nothing worse than making an important decision without having all the information. A lack of preparation can result in mistakes that can cost you thousands of dollars. At Ideal Lending Solutions, we know that preparation, along with a little bit of education, can go a long way in helping prospective buyers and sellers avoid costly mistakes and ensure a positive and affordable outcome.
You’re in the market for a home, but don’t know just how much house you can afford. SOLUTION
Know exactly what you can afford by getting a pre-qualified mortgage through a reliable lender. It’s fast and easy and will give you confidence to make an offer the buyer will take seriously
Learning too late in the buying process that your Realtor represents the seller. SOLUTION
Before you start looking, establish a relationship up front with a Realtor to ensure that your interests are represented
Choosing the wrong mortgage and paying unnecessary interest, closing fees and taxes. SOLUTION
When considering multiple lenders, review all completed Loan Applications with your CPA or a Financial Advisor to ensure you choose the most affordable mortgage.
Purchasing a home and discovering hidden defects after you’ve closed the deal. SOLUTION
Avoid surprises by hiring an independent professional home inspector It is always worth the additional expense. You’ll be glad you did.
Discovering that your credit score is not where it needs to be when you go to buy or refinance. SOLUTION
Work with a mortgage lender in advance. He or she will review your credit rating and recommend steps needed to improve your credit, so you’ll be ready when the time comes.
Setting an asking price too high based on personal need or emotions rather than fair market value. SOLUTION
A Realtor can help you determine fair market value using comparable homes recently sold in your area.
Your home has been on the market for some time and just isn’t selling. SOLUTION
A good home, priced reasonably may not sell because it hasn’t been properly showcased. Before you list your home be sure to repair and clean thoroughly to make the best impression.
You’ve signed a listing contract with a Realtor, you’re unhappy with the results, but you can’t get out of the contract. SOLUTION
Tell your Realtor up front that you want to be able to cancel the listing agreement, with no questions asked, before you sign the contract.
You’ve chosen a Realtor for the wrong reason. (For example, the Realtor works for the most the popular company, or was the only one you met with.) SOLUTION
Meet with a minimum of three agents and be sure to check references. Make your decision on their track record and their proposed marketing plan for your home.
You’ve signed a legally binding contract with a lender before you’ve suddenly learned this transaction will cost you thousands of dollars. SOLUTION
The lender must provide you with a completed Loan Application before closing. Before you sign, review the application with your CPA or Financial Advisor and avoid costly mistakes.
Let’s start with finding the right house. Before you begin your search for a home, it’s important to identify the type and style you’d like. Build your checklist by asking yourself some key questions. Once completed, sharing this list with your real estate agent will help them focus on finding a home that’s just right for you.
While this may be your first home, it’s not likely to be your last. As you put together your list keep in mind on average most first-time buyers move within 5 to 7 years. Set your sights on identifying what meets your needs now and into the foreseeable future. Your list is about identifying basic needs that must be met and features you’d like to have.
Your Family’s Needs
What will make your home, comfortable, efficient and livable?
How many bedrooms do you need? Does each child need their own room?
How many bathrooms do you need?
Do you need additional storage space, a basement or attic?
Do you need a guest room or home office?
Which neighborhoods will best meet your travel and commuting needs?
How far are you willing to commute to work each day?
How close to family members do you need to be?
Do you need to be close to transportation, such as bus or train routes?
Are there other activities you need to be close to like local schools, church or golf club?
What added features do you want? Then, prioritize based on importance.
MISTAKE 1: Start House Hunting Without A Pre-Approval
Imagine finding and falling in love with a house you can’t afford. Starting your search without a pre-approval* can mean wasted time and disappointment. Save time and avoid disappointment by putting first things first. Get a pre-approval letter from a qualified lender that lets you and your Realtor know exactly how much house you can afford.
MISTAKE 2: Buying A Home That’s Not Right For You
A clear understanding of what’s most important to you in a first home is critical. Call it a checklist or a wish list, but before you start your search consider these questions:
What type of home? – Start with your basic “must haves.” This includes not just the style of the home, but also the number of floors, number of bathrooms, availability of a garage, etc.
How much square footage? – How much space will you need? What floor plan will best suit your needs?
What Other features? Think of these as preferences. What type of heating do you prefer? Is a gas stove essential? Do you require a finished basement? Do you prefer the laundry room be on the main floor as opposed to the basement?
Which neighborhood? – For many people where you live is almost as important as the house you choose. What local amenities will you require? Is the location convenient to your work? If you have school age children, how are the local schools rated? What are the real estate taxes like?
*A pre-approval is not a commitment to lend. A pre-approval is subject to satisfactory appraisal, title, and no material changes to borrower’s financial condition.
MISTAKE 3: Not Using A Real Estate Agent
The importance of working with a professional realtor cannot be overstated. A good realtor understands local market conditions, can provide insights into the community such as: the quality of local schools, the convenience of nearby amenities, etc. Most importantly, a seasoned realtor can assist in the crucial negotiations leading up to and following your initial offer.
MISTAKE 4: Tampering With Your Credit Prior to Closing
Your pre-approval is based on a number of factors: income, debt, and perhaps most importantly, your credit history. Prior to closing, the lender will pull your credit report to see if there have been any changes to your financial situation. Changes to your credit report can mean additional documentation that can send your loan application back to underwriting for review. Here are a few things you shouldn’t do if you want to keep you’re closing on schedule and avoid putting your loan approval at risk.
Don’t change jobs
Don’t make any large purchases
Don’t max out or open new credit card accounts
Don’t sell off assets or move large amounts of money between accounts
Hold off on purchasing furniture or appliances for your new home. There will plenty of time to shop after your loan has closed.
Are you tired of paying rent? Don’t miss out on fulfilling your dream of homeownership. Put your hard earned money to work for you, not your landlord. Start your homeownership journey today. Call today to get a free loan pre-approval* from Ideal Lending Solutions. At Ideal Lending Solutions, we have low down payment options available, competitive interest rates, fixed and adjustable rate loans, a variety of loan programs including FHA, VA, USDA, Jumbo and more! The rent you pay to your landlord could be used to help build equity in your own home. Contact us today to learn more about our loan programs and begin your journey towards homeownership.
*A pre-approval does not constitute a loan commitment or guarantee of a loan. Preapproval is subject to a satisfactory appraisal, satisfactory title search, and no meaningful change to borrower’s financial condition. **Ideal Lending Solutions is not a tax or financial adviser. Please consult a licensed tax adviser and appropriate government agencies for any effect on taxes or government benefits.
Rent Payments Add Up Over Time
This chart is a sample of what your total rent payments would add up to over a 30
year time frame based on $1,000 – $3,500 rent amounts (not including additional
costs associated with renting).
Possible Benefits of Homeownership:
• May help build your credit
• Possible tax deductions
• Build equity with each payment
• Freedom to remodel & have pets
• More stable monthly payments (based on a fixed interest rate)
As your lender, Ideal Lending Solutions is required to provide updates on all critical financial documentation that is over 30 days old prior to your closing. So, whether you’re buying a home or refinancing your current mortgage, please keep the following documents on hand as your loan is being processed.
Weekly Pay Stubs – Originals or print online from employer’s website
Changes to Employment Status – i.e. new employer, change in
Monthly Bank Statements – Originals or print online from Bank’s website
Monthly Credit Card Statements – Originals or print online from Credit Card provider’s website
Notify your AFN Loan Officer immediately if receiving “gift funds” as part of your down payment
Should you receive and/or deposit sums of money over $500.00, alert your ILS Loan Officer immediately.
Underwriting guidelines require documentation for the source of these funds:
Copy of Bonus Check
Copy of Tax Refund
Copy of Insurance Settlement
Gift letter with a copy of the check and deposit slip
To ensure that your loan processes quickly it’s important not to do anything that significantly changes your overall financial picture.
Don’t change jobs/employers during or up to 30 days after your closing without consulting with your ILS Loan Officer to determine the impact on the approval of your loan.
Don’t make major purchases before closing. The purchase of a car, appliances, electronics etc., may change your ability to qualify for your mortgage loan.
Don’t open any new lines of credit or take on any additional loans. This includes cosigning a loan. If you do so, be sure to contact your ILS Loan Officer to find what documentation is required and what the impact would be on your loan approval.
Don’t open/close/transfer funds on any of your asset accounts before checking with your ILS Loan Officer. Verifying documentation is required by law for any changes to your assets. (i.e. Selling off stocks and depositing cash into a saving account.)
American Financial Network, Inc. is an Equal Housing Lender. As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, marital status, age (provided you have the capacity to enter into a binding contract), because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. The federal agency that administers our compliance with these federal laws is the Federal Trade Commission, Equal Credit Opportunity, Washington, DC, 20580.
American Financial Network, Inc. is not acting on behalf of or at the direction of the federal government, and this offer is not being made by an agency of the government.