Buyer Information

Advantages of Home Ownership

Build Wealth

Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation. Though past performance of the housing market is not a guarantee of future performance, with concerted government support the housing market will eventually recover. When it does, will you be a homeowner who benefits from the turnaround?

Pride of Ownership

Pride of ownership is the number one reason why people would like to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It's making an investment in your future.

Mortgage Interest Deductions

Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment. Renters do not get this benefit. Therefore, a higher mortgage payment is effectively much less than a similar rental payment. You get more for less.

Property Tax Deductions

IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In Wake County area, the combined City and County property tax is usually close to 1% of the assessed value of a home which are determined every few years. This tax rate is much lower than many other states where the tax rate is in the range of 2-3%.

Capital Gain Exclusion

As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit, subject to limitation, free from taxation.

Preferential Tax Treatment

If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.

Morgage Reduction Builds Equity

Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.

Equity Loans

Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.

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First time Home Buyer Information

Just because you may feel restricted by price ranges, especially if this is your first or second home purchase, don't let anybody tell you that you can't afford to be selective when looking for a home to buy! You are unique. You have desires and needs, hopes and dreams for your new home that are different from your parents, friends or coworkers. OK? So let's define these homebuying parameters.

Location & Neighborhood

• Suburbs or Country.

  Pros: Generally less expensive. Often newer. Tract homes are conforming. More home for the money.
  Cons: More time in traffic if driving to town for work. Further away from entertainment options cities offer.

• Urban.

  Pros: Closer to many employers. Walking distance to theaters, restaurants, schools. Many period homes offer more distinctiveness in styles.
  Cons: Often noisier. Higher crime rates. More expensive.

• Busy Streets.

  Pros: Often homes on streets with more traffic are thousands of dollars cheaper. If noise doesn't bother you, don't pass up homes on busy streets. Drive by at different times of the day / week to ascertain noise levels.
  Cons: These types of homes will always sell for less than others in the same area. If bedrooms are located near the street, sleep may be disturbed.

• Cul de sac.

  Pros: Number one choice of buyers with children.
  Cons: Less privacy, neighbors know more about you.

• Corner lots.

  Pros: Often larger lots. Fewer neighbors. More visibility.
  Cons: More traffic noise. More vulnerable to vehicles jumping the curb. Kids might trespass at the corner. More sidewalk to shovel in winter.

Type of Home

• Single Family.

  Pros: Good appreciation. Opportunity for gardens. More privacy. Quieter.
  Cons: More expensive than our next category. More maintenance.

• Townhomes.

  Pros: Less expensive than comparable single-family homes. Generally newer so fewer repairs. Lock-n-go lifestyle. No yard or exterior maintenance.
  Cons: Less privacy. Noisier. Common walls and/or floors and ceilings. Sometimes no private yard or balcony.

Number of Stories

• Single Story.

  Pros: Easy wheelchair access. Some medical conditions such as bad knees make it hard for certain individuals to climb stairs. Easier to clean.
  Cons: Can be noisier if stereos or televisions are located on the same floor as bedrooms. Some people feel safety is compromised if bedrooms are located at ground level. More of the lot is absorbed by living quarters. Usually, one story homes cost more per square foot of the living area.

• More than One Story.

  Pros: More living space on same foundation than a ranch home. Less noise if entertaining on lower level while other family members sleep upstairs.
  Cons: More trips up and down the stairs to carry stuff to bedrooms. If laundry rooms are on the second floor, washer leaks are major. Might need dual vacuum cleaners. At least two zone heating and cooling units are required for efficient cooling and heating. Usually, the cost per square foot of these homes is less than a one story ranch.

Interior Specifications

• Number of Bedrooms.

  Pros: Common minimum requested configurations are three bedrooms. Newer parents prefer bedrooms located on one level.
  Cons: Two bedrooms appeal primarily to first-time home buyers, singles or seniors. However, don't discount a two bedroom if an extra den will satisfy your space requirements.

• Number of Bathrooms.

  Pros: At least two bathrooms are required by most people. Most single family homes in our area come with at least 2.5 baths. These homes will usually cost the less compared to homes with three or more baths.
  Cons: More baths means more areas to clean and maintain. I do not recommend buying a home knowing that it does not have the bathrooms you will need. If you are a typical family with at least one boy and one girl, your family needs at least three baths and may be three and one half. One for the owners, one for the girl(s), one for the boy(s), and at least one half for your guests. So plan ahead and get a house that will meet the needs of your family in coming years.

• Square Footage.

  Pros: larger spaces offer more room and cost less per square foot than smaller spaces.
  Cons: Don't be misled as layout is more important than actual square footage. Sometimes well designed smaller spaces appear larger.

• Bonus Rooms.

  Pros: Extra space for media rooms, art studios, children's playrooms, gyms, den/study.
  Cons: More expensive.

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The Home Buying Process: Selecting your Home and Making an Offer

• Read about Working With Real Estate Agents here - A brochure required to be reviewed with all consumers before an agent can assist them in any way.
• If you currently own a home, you may skip reading this paragraph. First of all, please make sure that you have achieved a level of financial stability to pay for expenses related to buying and owning a home. You may be required to put down a significant amount of downpayment. In addition, there may be significant expenses associated with getting your loan application processed, home inspected and surveyed. For buyers, these costs usually add up to approximately 4-6% of the total sales price of a home. 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. After the closing, in addition to regular mortgage payments, you will be responsible for the real estate taxes, home owners association assessments, and higher utility expenses. Please take all these into account before deciding to purchase home for the first time.


• If you are a first time home buyer, you may skip reading this paragraph. If you currently own a home and are using it as your primary residence, please make sure that you have analyzed your financial situation and determined whether you need to sell your current home before you can purchase your next home. If you cannot afford to carry two mortgage payments simultanously, you will be required to make a contigent offer. Contingent offers are not considered favorably by sellers. In addition, you run the risk to incurring various expenses related to making and offer and doing the due diligence before the closing. You may be able to rent your current home to alleviate this situation. Please research this area thoroughly understand financial implications, particularly your cash flow situation, before starting your home search. I may be able to help you do this research to make sure you have considered important factors.


• Get pre-approved for your mortgage loan with your financial institution. This will give you peace of mind. Be open to shopping around for a loan. The total loan costs may vary significantly from lender to lender even for similar loan products. It is so because different lenders target different types of borrowers; and based on your financial profile one may give you more favorable consideration than another.


• Write down your basic requirements such as the number of bedrooms, the number of baths (full and half counted separately), garage size, etc.
  • Number of Bedrooms, Bathrooms, Garage size, etc.
  • Approximate range of total living area in sq. ft.
  • Any specific front elevation requirement such as a full porch
  • Front lawn, back yard, fencing requirements
  • Type of kitchen countertops, appliances, etc.
  • Any other requirements.
  
  
• The next most important step is to sign us up as your real estate agent! We work with buyers for their exclusive benefit and apply the designated dual agency role where applicable to allow us to fully represent the interest of our clients. Don't understand some of these terms? Don't worry, we will explain these terms to you when we meet for the first time. Please note that there is no cost or obligation to meet with us to learn more about the home buying process.


• If you have children who go to public schools, ask us to give you pointers so you may research schools to help you select an area where you would like to purchase your home.


• Determine your daily commute to and from work from the selected area. We suggest that you actually drive, during your usual commute hour, to and from your area of interest to get a first hand knowledge of how long your commute to work is going to be.


• Determine the distance to other social and extra curricular activities for your family members.


• After you have narrowed down areas, ask us to find at least a few listings that match your criteria. Alternately, you could do this on my website under the search tab. Please feel free to call us, if you need assistance using our website.


• Review the listing material that we have provided to you and select some houses that you would like to see. We will arrange the necessary appointments for us to go and see these houses.


• Take notes during your visits to see these houses and provide some feedback to us to help us fine tune your search criteria until you have found some houses that you can call home!


• Once you have short listed some (we recommend at least two) houses, we recommend that you ask us to show these houses to you a second time. It will allow you to confirm your prioritization of this short list. If we have not already provided a Comparative Market Analysis (CMA) for each of these houses, we will bring those to the second showing. Our buyers CMA includes a recommended starting offer price and the suggested maximum price.


• After the second showing if you are still interested in a house, visit it at least three times. Once during a morning commute, once during a mid day, and once during the evening commute time. During each visit, arrive a few minutes early, wait on the roadside nearby with you window slightly down to allow you to listen to ambient noises such as plane, train, highway traffic or any nearby commercial establishment noise.


• If you decide to make an offer on a house, working closely with you, we will develop and help you execute a sophisticated and systematic price negotiations scheme for each offer taking into account your needs, market conditions, and conditions of the house and its owners. We will guide you to help you get a house that is in line with your needs at the best possible price. Most importantly, our objective is to make sure that you make decisions as an informed buyer.


• Along with your offer you will need to provide two checks. One for the Earnest Money Deposit and one for the Due Diligence Fee. The Due Diligence Fee is directly paid to the seller to take the home off of market and to allow you to conduct due diligence to make sure you still want the home. You get this fee back only in one of following three conditions: you buy the home, the seller is in breach of contract or the home is destroyed. Usually, your personal check is acceptable for this purpose. Please make sure that when you write these checks, you already have funds in your account. It could be deposited the same day, if you offer is accepted. If it bounces for any reason, you may be responsible for additional costs.


• Once an offer has been accepted by the sellers, it goes into a due diligence period. At this time, your checks will be deposited. Now we move on to the exciting part of performing due diligence to get it inspected and repaired as needed before you complete the transaction and make it your own home. Don't worry, we will be there with you every step of the way to make it a fun experience for you and your family.

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Prepare to Close and Take Possession of your home

• The day both parties (you and the sellers) have an agreement is known as the Effective Date of the Purchase Contract. Within a day, I will provide you a to-do list with tasks and due dates. It will usually have dates for the following activities: ordering inspections, submitting the final loan application to your lender, confirming your homeowner's insurance quote, gathering information regarding utility companies to turn on water, electricity, gas, cable, etc. accounts in your name.


• I will assist you with most of the above activities except for your loan application and utility account transfers.


• After all inspection reports have been received, we will review all items and determine the contents of our Request for Repairs to the Sellers. I will work closely with you and the Seller's agent to make sure that all required work is done to appropriate standards and on time.


• Your lender would have provided you a Good Faith Estimate (GFE) which shows the funds you will need to provide at the closing. Please arrange for the necessary funds to be available in your account a few days before the closing date.


• At least a day before the closing, please contact the closing attorney to get a copy of the HUD Settlement statement. This statement will contain the exact amount of funds you will need to provide in the form of a cashier's check at the closing. It may slightly vary from the GFE.


• On the day of the closing, a few hours before the closing time, we will meet at your new home and perform a final walk through to make sure that everything is in order and there are no surprises.


• Please arrive to the closing location on time. As soon as closing has been recorded, I will arrange for the keys to be delivered to you.


• Congratulations!! you are now a proud homeowner! On the day of your move, I will personally deliver to you the dinner for your family from a local restaurant with all the fixings. Rest assured that you will have sufficient nutrition the night you unpack and start to make your new home yours!


• After you have moved in, please feel free to call me for any advice you may need regarding any repairs or remodeling. While I am not a general contractor, I can usually point you in the right direction and save you time and money.

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DISCLAIMER: The above material is intended only as a brief introduction for my clients and is NOT a substitute for my professional service.