Home Buyer Tips

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Carrie Holmes, Member of Colorado Association of Realtors

Why Use a Realtor®?	Downpayment Assistance
Overview of the Home Buying Process	First Time Home Buyers
Benefits of Home Ownership	The 5 Biggest Mistakes Buyers Make in Today's Market
Finding the Right Home	Home Inspections
Home Shopping Tips	Answers to Frequenty Asked Questions

Why Use A REALTOR®?

All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84" of home buyers would use the same REALTOR® again.

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $ 100,000. If you had a $ 100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $ 100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.

But if you're still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one:

Your REALTOR® can help you determine your buying power -- that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, Title Company or attorney can help you resolve issues that might cause problems at a later date.

Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.

Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.

When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50" of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82" of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

to top Down Payment Assistance

We All Can Use a Little Help Sometimes

Down payment assistance or "gifting" programs target working families with steady employment, who are unable to save the required down payment. Under current law, down payment assistance programs allow the seller; lender, real estate professional and buyer to work together with a non-profit affordable housing organization, so deserving families get their down payment as a gift.

In the early 1990s, federal housing laws were changed to allow nonprofit housing groups to fund down payments, closing costs and other upfront cash requirements for families who need a little boost up the economic ladder. As a result, homeowners can enter their first home with equity.

There are a lot of different down payment assistance gift fund programs out there. All of them give you money to help with your down payment from funds that are raised by home sellers. Does it really matter which down payment gift fund program you use? Yes. Nonprofit groups like Colorado Cares not only assists you with your down payment, it also requires the seller to contribute money to an organization that is committed to making the world a better place. The Colorado Cares Program also uses the latest internet-based technology to ensure that your down payment assistance gift funds are at the closing table when you are.

While each nonprofit has different procedures; typically the programs are very simple. After a buyer is approved, the charity donates the down payment with no requirements to pay it back-ever. Anyone qualifying for an FHA loan is potentially eligible for this kind of down payment assistance.

The monies for the down payment come from donations received by nonprofits and from fees paid by sellers to enroll their homes in the program. The typical down payment gift is between two and five percent of the home's final contract sales price. Colorado Cares provide gift funds up to six percent.

The approach is obviously working. Programs like Colorado Cares are helping working individuals and families with good credit, steady employment, but little or no upfront money to take that first step toward home ownership.

For more information on down payment assistance programs go to Carhof

to top First Time Home Buyers

Each year more than 40 percent of all homes are purchased by first-time buyers according to the National Association of Realtors, a percentage which should offer some comfort if you're about to buy a first home. Here in capsule form are 10 baseline strategies to make that first purchase a good experience.

Think credit. Poor credit will make you a bigger risk in lender eyes -- and more risk means higher rates and steeper monthly mortgage costs. Make a point of paying credit car bills, auto loans, rent, and other payments on time, all the time, and in full.

Consider taxes. When you buy a home mortgage interest and property taxes are generally deductible from income taxes. This means while monthly housing costs may be larger when you own than when you rent, what you save in taxes can make up some or all of the difference. For details, speak with a tax professional.

Know the broker's role. Real estate brokers are at the center of most property transactions. It's important for you to know what a broker does, who is represented, and how the brokerage system works.

Consider what location will work best for you. Look at your needs, the needs of household members, and your preferences in terms of commuting, shopping, recreation, and other factors that are important to you.

Plan on getting a home inspection as part of any offer you make. A professional inspection can help you understand the condition of the property and the repair bills you are likely to face in the next few years.

Look into the financing process as soon as possible. Get pre-approved so that you generally know how much you can borrow, what you can afford, and so owners will see you as a serious buyer.

Save. You'll need money for a down payment, closing costs, moving, and other expenses. Put off trips and luxuries until after you're in your new home.

Examine the different financial options which are open to you -- consider FHA, VA, and state-backed loan programs which require little down and have liberal qualification standards.

Look for gifts and grants. According to NAR, 22 percent of all first time buyers receive gifts from relatives and friends. Some companies offer grants and other incentives to employees who are buying a first home. Community groups may also have programs and financing in place for first-time buyers, while the federal government has established special programs for teachers and police officers.

Start now, take your time, and ask as many questions as you like. Being a first-time home buyer is challenging, but millions of people do it each year -- and you can too.

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Overview of the Home Buying Process
BUYER	SELLER
Consider Purchasing a Home Selects a Real Estate Agent Determines Needs and Wants Discusses Financial Issues Views and Researches Target Homes Makes an Offer to Buy	Decides to Sell Property Selects a Real Estate Agent Determines Needs Prepares Home for Marketing Agent Markets the Home Accepts, Rejects or Counters the Offer
7. Offer accepted 8. Loan Application 9. Inspections 10. Title Search 11. Appraisal 12. Loan Approval 13. Closing Papers Signed 14. Documents Recorded 15. Funds Available to Seller
16. Seller Moves Out	17. Buyer Moves In

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Benefits of Home Ownership

Credit: Owning a home helps you establish financial credibility.

Independence: Owning your own home provides you with independence and more privacy than renting. You are free to paint walls, plant flowers, keep pets and anything else within legal bounds.

Investment: As you make more payments and own more of your home, you add to its investment value. Most improvements you make will also add to its value.

Pride: A home reflects its owner's values and lifestyle. Owning a home can provide you with a source of pride, enjoyment and satisfaction.

Security: A home can provide security against inflation because the value of your home increases as prices go up.

Stability: Being established in a community provides a sense of belonging, stability and security.

Tax Advantages: Interest on your mortgage loan is deductible on your yearly personal income tax return. Many of the closing costs associated with purchasing your home are deductible, as are your property taxes.

to top

Finding the Right Home

Real Estate Agents You can sit down with a real estate agent and discuss your needs, type of area, style of home, amenities and everything you really want in your next home. Real estate agents can help you by accessing a Listing Service which covers all properties listed for sale within a specific area. Together, you can select the homes you would like to see, set appointments and preview homes in a short period of time. An agent can guide you through the entire process.

Newspaper Ads/Internet Many people go through the real estate classified section or browse the Internet to find a home that appeals to them. However, your real estate agent will have many listings available that may not appear in the newspaper or Internet on a continuous basis. New listings come on the market daily.

Multiple Listing Service Your real estate agent should have access to the multiple listing service if it is available in your area. It usually includes the following details about homes and properties for sale:

Current financing (when assumable)

Listing company

When Previewing A Home

Write notes when previewing a home so you will be able to discuss the details later with your real estate agent.

Ask questions about the home and discuss any objections or concerns you may have.

Ask about the community - schools, shopping and transportation.

Ask specific questions about the construction of the home; electrical, plumbing, heating, cooling systems, etc.

Have Fun Relax. Finding your new home can be a rewarding experience. Have a good time and enjoy the process.

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Home Shopping Tips
Check For Properly Working Appliances/Fixtures:
Bathroom Sinks Showers/Tubs Toilets Vent Fan Heating Fan	Kitchen Kitchen Cabinet Doors Drawers Sinks
Appliances Dishwasher Stove Oven Ice Maker Garbage Disposal Range Hood Refrigerator Freezer Microwave Trash Compactor	General Lights (interior and exterior) Windows Heating System Ceiling Fans Hot Water System Air Conditioning System Electrical Outlets Door Bells Doors Water Purifier Fireplace Damper Garage Door
Ensure House Is Well-Built and Systems Are In Working Condition:
Interior Sub-Flooring damaged or Loose Cracked Walls or Ceiling Cracked Tiles Loose Plaster Flooring Damaged Soft, Springy Floors Water Stains near Windows Water Stains in Attic Pipe Insulation Missing
	Exterior Brick Bulging or Cracking Shingles Misssing or Broken Siding Rotted or Missing Gutters Damaged or Need to be Cleaned Concrete cracked in sideways/driveway Basement Water Seepage in Basement Cracks in Foundation Poor Ventilation

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Home Inspections

What is an inspection?

There are numerous types of inspections. An inspection is meant to evaluate, at minimum, the structural and mechanical condition of a property. It is not the same as an appraisal which evaluates the market value of a property. Persons involved in real estate transactions need unbiased information about the physical condition of property they plan to buy or sell and your contract should include a contingency that you obtain a satisfactory inspection report. Talk with your agent about the types of inspections available.

Home Inspectors vs. Engineers

Home Inspector: A person who examines any component of a building, through visual means and through normal user controls, without the use of mathematical sciences. Engineering: Analysis or design work requiring extensive preparation and experience in the use of mathematics, physics, chemistry and the engineering sciences.

Finding a qualified Inspector

Referrals from satisfied customers

Referral from a local real estate agent or mortgage company

Local consumer affairs office

Yellow Pages under "Building Inspection Services"

Ask if she/he is a member of the American Society of Home Inspectors (ASHI). The ASHI has established standards of practice which include the specific services, limitations and exclusions that can be expected from private home inspectors.

What the inspection, at minimum, includes

Every inspection should include, but not be limited to, an evaluation of at least the following:

Foundations

Plumbing and electrical systems

Doors

Ceiling, walls and floors

Roof

Hazardous materials concerns

Heating and air conditioning systems

Common areas (in condominiums)

Insulation

Ventilation

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The 5 Biggest Mistakes Buyers Make in Today's Market

The Don't ACT QUICKLY enough when they find the right home.
When they meet with a Lender they Don't ask ENOUGH or the RIGHT QUESTIONS.
They Don't THINK RESALE.
They Don't PACKAGE THEMSELVES or their offer so that it looks the best to the Seller or Listing AGent.
They select the WRONG AGENT and/or the WRONG COMPANY.

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Answers to Frequently Asked Questions

What is the difference between "pre-qualified" and "pre-approved"?

If you are "pre-qualified" you have determined, with a loan officer, what price you can afford based on the down payment, your debts and the amount the mortgage company will approve for your mortgage. Being "pre-qualified" is only a determination of your probable credit. If you are "pre-approved", your credit, employment and funds have been approved by the lender.

What are closing costs?

Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For buyers, they are usually about 4-6 % of the total sales price of a property. Some of the closing costs you might encounter are: application fees, appraisal fee, county taxes, credit report, discount points, documentation fee, escrow fees, homeowners' association fees, loan fees, mortgage insurance, origination fees, tax registration and title insurance premium.

What is a point?

One point is equal to 1 % of the new loan amount. Whenever government regulation, state usury laws and/or competitive practices prohibit the lender from charging a rate of interest that would make the real estate loan competitive with other fields of investments, the lender must seek some method of increasing the yield for the investors. By charging "points", the lender can bring the real estate loan up to those other investments.

What is earnest money?

When you make an offer, you will need to put up an earnest money deposit as a sign of good faith that you are seriously interested in buying a home. That deposit becomes a part of the purchase price and is held in a trust account until there is full acceptance of the offer. Typically, an earnest money is 3-5 % of the offer amount.

What is title insurance?

Title insurance protects the named insured against loss because of defects, liens, encumbrances, adverse claims or other matters not shown or disclosed to the new owner that attach before date of policy.

Is VA or FHA financing unfair to sellers?

FHA and VA loans provide purchasers the opportunity to buy homes with minimal cash investment and at lower interest rates. The result is a larger market for sellers, who also benefit by receiving all cash for their equity.

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