Home Sweet Home: Shelter from Taxes

More Americans than ever own homes because it's the ultimate tax shelter.

You save taxes when you buy it. You save taxes while you own it. You save taxes when you sell it.

"The mortgage interest deduction and the deduction for property taxes are, to most Americans, sacred. These deductions have been around since time immemorial and the purpose was to encourage home ownership," said Leonard W. Williams, a certified public accountant in Sunnyvale, CA.

Mortgage interest deduction

All but the very wealthy homeowners deduct all the mortgage interest they pay and consider that the primary tax benefit to home ownership.

IRS Publication 936 "Home Mortgage Interest Deduction" says, in general, joint tax filers can deduct all the interest on a maximum of $1 million in mortgage debts secured by a first and second home, plus the interest paid on a maximum $100,000 in home equity loans. The maximums are halved for married tax payers filing separately.

Watch out for those popular 125 percent equity-loans. Your equity tax deduction is limited to the lesser of the $100,000 maximum and the home's fair market value, determined by a complicated formula found in Publication 936.

The mortgage interest deduction, along with other itemized deductions are included on "Schedule A, Itemized Deductions" to reduce your taxable income and ultimately your tax bill.

"If that total exceeds the standard deduction ($3,550 for married couples filing separately, $4,250 for singles, $6,250 for heads of household and $7,100 for married couples filing joint returns) then you get it deducted from your adjusted gross income," said Peter Vernaci, a certified public accountant from San Jose.

Mortgage tax credit

The Mortgage Credit Certificate (MCC) program allows some first time home buyers to benefit from a mortgage interest tax credit.

An MCC, which you first must obtain from your local housing department before you get a mortgage, gives a qualified first-time home buyer a federal income tax credit of up to 20 percent each year the buyer keeps the same loan and lives in the same house.

As explained in IRS Publication 530, "Tax Information for First-Time Homeowners," the credit is subtracted, dollar for dollar, from the income tax owed. For example, if you paid $10,000 in interest, your tax credit would be $2,000. The remaining 80 percent of the interest _ $8,000 is taken as a typical mortgage interest deduction.

You can see the tax credit's benefit immediately in your paycheck by adjusting your W-4 exemption status to reflect the credit. In some cases, lenders will qualify you for a loan based on the monthly mortgage payment minus the tax credit, enabling you to qualify for a bigger loan.

Points

Home buyers also get to fully deduct all points associated with a home purchase mortgage. Sometimes called "origination fees," "loan discounts" and "broker discounts," each point is one percent of the financed amount. In many cases, the buyer can also deduct points on the buyer's mortgage that are paid by the seller.

Points on refinanced mortgages are also deductible, but over time.

"If you refinance, you have to amortize the deduction for points over the life of the loan, but if you refinance again you get to write off the balance of the points from the old refinance," said Vernaci.

Taxes

Property taxes, referred to as "real estate taxes" in Publication 530, are also deductible from your income. Be careful not to deduct escrow money held for property taxes, but not actually used to pay them, say until the next tax period. Local tax refunds reduce your deduction by a like amount.

Home sales

Even when you sell your home, it continues to be a tax shelter, for a few homeowners.

"The broker's commission, title insurance, any of the legal fees, administrative costs, inspection fees. Those are selling costs, and as expenses of the sale, they are deductible from the gain," said Vernaci.

Your gain is your home's selling price, minus deductible closing costs, minus your basis. Publication 530 also offers a worksheet to help you figure your basis - the original purchase price, plus capital improvements, minus any depreciation.

Thanks to the 1997 Taxpayer Relief Act, however, many home sellers no longer suffer a taxable gain.

That's because, under the act, sellers get to keep, tax free, up to $250,000 in capital gains ($500,000 for married sellers who file taxes jointly) on sales of homes used as a principal residence for two of the prior five years.

"If the gain is less than the $250,000/$500,000 exclusion, then those sales expenses are a kiss-off. They aren't written off against taxable income, hence they don't save any taxes," Williams said.

Source: http://www.realtor.com/Basics/Buy/ClosePossess/TaxShelter.asp?source=web

Tax Benefits of Home Ownership Are Almost Too Good to Be True

Uncle Sam helps you in three ways when you own your home.

They say there are only two things you can count on in this world: death and taxes. But when it comes to owning a home, it appears there may be a third. And that is the favorable treatment of home ownership by the Internal Revenue Service.

1. The purchase

When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding.

The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.

Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.

2. Mortgage interest

In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction.
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In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.

3. The sale

This is the best. In fact, I can hardly believe this myself. Here's how it works:

If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That's assuming you are married - singles get up to $250,000 tax free. And here comes the kicker:

You can do this as often as every two years for the rest of your life.

This is as good an excuse for getting married as I have ever heard. Buy a fixer-upper in an up and coming neighborhood, work on it nights and weekends for two years, then sell it at a nice profit and pocket the cash, totally free of federal taxes. And most states recognize the federal exclusion, so you put the cash away totally tax free. You don't have to re-invest, you don't have to be age 55, and you can do this every two years forever. No, I'm not kidding.

The one restriction is that you MUST own and occupy the house as your principal residence, so don't try this on a rental property by pretending you live there when you don't. And there are some unclear rules about how you can take a partial exclusion if you live there less than two years, but we don't really know what they mean yet, so I recommend you stay there two years.

Many of these benefits came into being with the 1997 tax law, but lots of folks are just finding out about them now, so buy and sell to your heart's content. Just don't plan on staying forever!

Source: http://www.realtor.com/Basics/Buy/ClosePossess/TaxBenefits.asp?source=web

Hiring a Home Inspector

Years ago, home inspections were unheard of in residential real estate transactions. Instead, buyers simply relied on their own impressions of the home and the representations of the seller's real estate agent. Today, the process is dramatically different. Most real estate purchase contracts give the buyer fairly broad rights to order one or more professional inspections of the home before completing the purchase.

The right to have inspections comes with the challenge of hiring diligent and competent inspectors. Finding the right person isn't as easy as it may seem because in most states, just about anyone with an official-looking checklist and a flashlight can set up shop as a home inspector. The exception to this free-for-all is that special training is required to perform inspection or remediation work for such potentially hazardous materials as asbestos and lead-based paint.

A good real estate agent should be willing and able to recommend well-qualified home inspectors. Here are six of the many factors to consider:

1. Qualifications. Ask open-ended questions about the inspector's training and experience as it relates to home inspections. The inspector should have some training in construction and building maintenance standards and a track-record of experience in the home inspection business. Depending on the location and age of the home, you may need to hire an inspector who's qualified to deal with asbestos, lead-based paint or other potentially hazardous substances. You may also need to hire a geologist or structural engineer.

2. Scope. Ask the inspector which components of the property are -- and are not -- included in his or her inspection. Will the inspector check out the roof? How about the swimming pool? The built-in appliances?

3. Sample report. Ask the inspector to provide a sample of his or her checklist or inspection report. Does the report include a narrative description or just check-off boxes? Is the information presented and explained clearly and completely? Does the report highlight any problems that could present a safety hazard?

4. References. Ask the inspector for the names and telephone numbers of several homeowners who have used his or her services. Call those people and ask them whether they were satisfied with the report and other services they received. Be sure to talk to some people who have owned their home for a few months or longer. Some problems overlooked by an inspection can take a while to surface.

5. Memberships. Many good inspectors don't belong to a national or state association of home inspectors. However, all else being equal, an association membership is often a plus. These groups provide their members with training and certification programs and up-to-date information about industry practices and inspection standards.

6. Errors and omissions. Even top-notch inspectors are only human and can make errors or overlook problems they probably should have noticed. Ask about the company's policy in such situations. Does the company have insurance for errors and omissions? Does the company or individual inspector stand behind the report? Many companies ask customers to sign a waiver limiting the company's liability to the cost of the inspection.
Source: http://www.realtor.com/Basics/Buy/InspNegot/Hire.asp?source=web

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How to Get a Mortgage

Shopping for a mortgage is the first step toward owning a home and perhaps the most daunting, especially if you are not prepared.

Once a simple task that meant comparing fixed rates from among perhaps a dozen or fewer savings and loan companies, the mortgage hunt today is like finding your way through a maze.

There are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions, even stock brokerage firms. Contrary to popular belief, finding a mortgage doesn't begin with an application.

Education is a better first choice. Mortgage information sources are as vast as the number of mortgages available. Web sites, topical newspaper articles, mortgage books, consumer seminars and workshops, financial planners, real estate agents, mortgage brokers and lenders are all available to assist you along the way.

First and foremost, you must determine how your mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road.

If you discover too late that you can't afford your mortgage, you'll not only face the possibility of losing the roof over your head, but you could also damage your ability to purchase a home later.

Examine your finances

If you can afford to buy a home, you must then determine how much mortgage you can afford. Lenders are apt to put your loan application in the best light and qualify you for as much as they are willing to lend, which can be more than you can afford.

It's up to you to take stock of your income and expenses, both current and projected, to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.

Shopping for a loan

When you are ready to shop for a loan you have two basic types of mortgage stores to shop -- direct lenders and mortgage brokers.

Direct lenders have money to lend. They make the final decision on your application. Brokers are intermediaries who, like you, have many lenders from which to choose. Lenders have a limited number of in-house loans available. Brokers can shop many lenders for each lender's store of loans. If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need. Mortgage brokers, however, are paid with a slice of the amount you borrow, some more than others, some less. Internet brokers today perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.

Along with shopping the source, you'll also have to shop loan costs, including the interest rate, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal and a host of others.

Apply for a loan

The application process is the easy part -- provided you've gathered documents necessary to prove claims you make on the application.

The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).

The lender will run a credit check on you to take a look at your credit status, but you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, and other documentation. If the lender deems you creditworthy, it will likely hire a professional appraisal to make sure the value of the home you are about to buy is truly worth your loan amount.

Source: http://www.realtor.com/Basics/Buy/GetLoan/GetLoan.asp?source=web

What Are My Mortgage Options?

The two most common types of mortgages are fixed-rate mortgages and adjustable-rate mortgages, known as ARMs.

A fixed-rated mortgage comes with an interest rate that remains the same for the life of the loan.

The life or term of a mortgage is 30 years by industry standards, but 15 and 20-year term loans are also available.

Shorter term loans come with cheaper interest rates. A 15-year mortgage's interest rate is typically one-quarter to one-half percent lower than a 30-year mortgage. Both the cheaper rate and the shorter term mean you'll also pay less over the life of the loan than you would if you borrowed the same amount of money with a long term loan.

Monthly payments of a shorter term loan, however, are generally higher than the same loan for a long term because the larger payments of the short term loan are necessary to repay the debt sooner.

A long term loan with smaller monthly payments can be easier to budget, but if you have a stable salary that allows you to afford the larger monthly outlay, the shorter term loan could be to your advantage.

Whatever term you choose, fixed rate mortgages protect you from the risk of rising interest rates. Of course, since you are locked in to a given rate, you could end up with a rate higher than the going rate should rates fall.

The second major category of mortgages are ARMs. They come with interest rates that adjust up or down, depending upon current economic trends.

An ARM's rate is based on a money market index. The one-year U.S. Treasury bill is commonly used because its yield is similar to the 30-year U.S. Treasury bill used to set rates on 30-year fixed mortgages. ARMs might also be tied to other indexes, including certificates of deposit (CDs) or the London Inter-Bank Offer Rate (LIBOR) rates, among other regularly published indexes.

To come up with the ARM rate, the lender will add a "margin," usually two to four percentage points, to the index.

Initially, the ARM rate is lower than the fixed rate, from about a quarter point to two points or more, depending upon the economy. When the first adjustment occurs (from six months to many years) and how often the rate adjusts, depends upon the terms of the loan. After the first adjustment occurs, subsequent adjustments can occur every six months, once a year, or during larger periods. The adjustment period is disclosed in the loan.

ARMs generally have limits or "caps" on how high it can adjust during each adjustment period as well as over the life of the loan.

The caps protect you from drastic market changes, but ARMS don't offer the stability of a fixed rate loan.

ARMs' lower initial rate, however, can help you qualify for a larger loan or start you off with smaller payments than you'd have to pay for the same mortgage with a higher fixed rate. And if index rates fall with an ARM, of course, so does your monthly mortgage.

ARMs could also be a good choice for someone who knows his or her income will rise and at least keep pace with the loan rate's periodic adjustment cap. If you plan to move in a few years and are not concerned about the possibility of a higher rate, an ARM also could be a good choice.

Source: http://www.realtor.com/Basics/Buy/GetLoan/Options.asp?source=web

Mortgage Basics

Likely the largest debt you'll ever take on, a mortgage is a loan to finance the purchase of your home.

Your home is collateral for your mortgage loan, which is also a legal contract you sign to promise that you'll pay the debt, with interest and other costs, typically over 15 to 30 years.

If you don't pay the debt, the lender has the right to take back the property and sell it to cover the debt. To repay the debt, you make monthly installments or payments that typically include the principal, interest, taxes and insurance, together known as PITI.

Principal -- The principal is simply the sum of money you borrowed to buy your home. Before the principal is financed you can give the lender a sum of cash called a down payment to reduce the amount of money that will be financed.

Interest -- Usually expressed as a percentage called the interest rate, interest is what the lender charges you to use the money you borrowed. As well as the given rate, the lender could also charge you points, and additional loan costs. Each point is one percent of the financed amount and is financed along with the principal.

Principal and interest comprise the bulk of your monthly payments in a process called amortization, which reduces your debt over a fixed period of time. With amortization, your monthly payments are largely interest during the early years and principal later.

In addition to your principal and interest, your mortgage payment could include money that's deposited in an escrow or trust account to pay certain taxes and insurance.

Generally, if your down payment is less than 20 percent, your lender considers your loan riskier than those with larger down payments. To offset that risk, the lender sets up the escrow account to collect those additional expenses, which are rolled into your monthly mortgage payment.

Taxes -- The taxes are property taxes your community levies based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community, say to build schools, roads, infrastructure and other needs. You must pay property taxes even if you don't need an escrow account and even after your mortgage is paid off. Special Assessments, if there are any on the home you are considering are paid in the same manner as property taxes.

Source: http://www.realtor.com/Basics/Buy/GetLoan/MortBasics.asp?source=web

20 Signs It’s Time to Sell Your Home

1. When you first bought your house, you lived in the country. Now that same house is part of the city. 
2. The kids have all graduated from college. You and your husband finally have time to yourselves…then they move back home!
3. You can’t get anything repaired because “they stopped making those parts years ago.”
4. You have three spare rooms in a four bedroom house.
5. The swing set in the backyard has sprouted roots.
6. You have to shuffle your cars each morning to leave for work.
7. The plumber’s phone is on your speed dial.
8. Your phone number is on your plumber’s speed dial.
9. You spend more time driving to work than you do with your family.
10. You spend more money each month for storage than you do for your mortgage.
11. Your neighbor found a loophole in the homeowner's association rules and is raising donkeys.
12. You keep hearing faint voices telling you to "get out" and they're getting louder.
13. Grandpa Jed just struck oil while hunting in your back yard.
14. The dog’s house doubles as a guest room.
15. You have to take a number to use the bathroom.
16. All the children’s rooms are now guest bedrooms
17. You haven’t visited the other half of the house in six months.
18. You have to move the furniture to see the carpet’s original color.
19. Your bathroom is decorated in avocado green — from the first time it was in style.
20. You can’t make any improvements to the exterior of your home without getting approval from the “Board of Historic Monuments.”

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How to Choose a Neighborhood

Narrow your home search by identifying neighborhoods that are right for you.

When evaluating a neighborhood you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others: 

• quality of schools
• property values
• traffic
• crime rate
• future construction
• proximity to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural activities such as museums, concerts and theaters.

Neighborhood search strategies

If you’re a first time-buyer with limited financial resources, it's wise to buy a home that meets your primary needs in the best neighborhood that fits within your price range. You can maximize your home purchase location by incorporating some of the following strategies into your neighborhood search:

Look for communities that are likely to become "hot neighborhoods" in the coming years. They can often be discovered on the periphery of the most continuously desirable areas. Look for a home in a good neighborhood that is a bit farther out of the city. If commuting is a concern, purchase a home that is close to public transportation.

Look at the neighborhood demand by asking your REALTOR® whether multiple offers are being made, whether the gap between the list price and sale price is decreasing, and whether there is active community involvement. You can also drive around neighborhoods and see how many "sale pending" and "sold" signs there are in a particular area.

Look into purchasing a condominium or co-op, rather than a house, in a desirable neighborhood. This way you still may be able to purchase in a prime area that you otherwise could not afford.

Source: http://www.realtor.com/Basics/Buy/ChooseOffer/ChooseNeighborhood.asp?source=web

Specials & Taxes: What are they and how much will they cost me?

Specials & Taxes: 
What are they and
 how much will they cost me?

Specials Unpd & Specials Inst – Specials Unpaid means the total amount of specials owed to the city on that particular property. Specials Installment is amount due to the city yearly. Just like taxes, if you have a mortgage, the lender usually figures this into your monthly payment and then pays your yearly specials payment for you.

YOUR HOMES SPECIALS AMOUNTS:

If you would like to view all of the details, amounts, interest rates and loan terms on each project of special assessments on your property, you can also see if there are any new or future projects being assessed to your home. Email me at shannon@modernmarketrealtors.com if you'd like me to send you the detailed information on your property. I'd be glad to.

Gen Tax – Property tax amount due yearly. When you have a mortgage, they usually collect this monthly with your house payment and then the mortgage company pays your yearly taxes.

Don't Forget Your Pre-Approval Letter

Here are five reasons why getting a pre-approval letter is a good idea.

Most home buyers know they should get a mortgage pre-approval letter from a lender before they begin seriously shopping for a home. But the reasons for this advice aren't always clear, and buyers sometimes are dismayed by the amount of paperwork involved. Here is some of the reasoning behind the advice:
 
 

1. A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a "pre-qual" from a Web site is just as easy. Enter some information, click "submit" and voilà. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.

2. You'll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there's no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors -- down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on -- are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history.

3. You'll have more leverage in negotiations with the seller. Most sellers require a preapproval letter to accompany all offers. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you'll be able to obtain a mortgage.

4. Your real estate agent will work harder on your behalf. A pre-approval letter signals to your real estate agent that you're a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale -- and a commission -- will naturally motivate your agent to devote more time and energy to you. In fact, some agents won't even show property to buyers who don't have a pre-approval letter.

5. A few caveats: Pre-approval letters aren't binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.

Source: Read article here

Real Estate Lingo – What do all those abbreviations and terms really mean?

Real Estate "Jargon"

Real estate listings and advertisements are usually full of acronyms and abbreviations that are unfamiliar to first-time buyers. Here's a cheat sheet to help you figure out what it all means.

Bedrooms (bds,bdrms,beds) - "Bedroom" usually means a sleeping area with a door, window and a closet, but the definition varies in different places. If a bedroom in the basement does not have an egress window, it cannot be considered a bedroom on the listing. So, if you see the home has 3 bedrooms, there may be a 4 room in the basement that can be converted into a bedroom by just adding an egress window.

Bathrooms (bth,bths) -“Full bathroom" is a room with a toilet, a sink and a bathtub (with or without a shower also). A "three-quarter bathroom" has a toilet, a sink and a shower. A "half bathroom" or has only a toilet and a sink.

Closing costs -- The entire package of miscellaneous expenses paid by the buyer and the seller when the real estate deal closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney's settlement charges, transfer taxes, recording fees, title insurance and so on. Closing costs are generally paid through escrow. Buyer and Seller each individually have their own costs related to closing that they are required to pay. In some cases the buyer may ask the seller to pay for some of their closing costs as part of the offer to purchase their home, talk to your lender to see how much you are allowed to ask for if you are considering asking the seller to pay for any closing costs. There are limits with each different type of loan and situation.

CMA – comparative/comparable/competitive market analysis. A CMA is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.

Contingency – “an offer contingent upon…” a provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One example is a buyer's contractual right to obtain a professional home inspection before purchasing the home.

Fixture (attached) -- anything of value that is permanently attached to or a part of real property. (Real estate is legally called "real property," while movables are called "personal property.") Examples of fixtures include installed wall-to-wall carpeting, light fixtures, window coverings, landscaping and so on. Some things may be secured to a wall but can be unsecured easily (i.e. shelving unit screwed to the wall with one screw for instance can be looked at as unsecured because the screw is simply holding it up, but yet it is attached to the wall so many of these items can be a “gray” area). Fixtures are a frequent subject of buyer and seller disputes. When in doubt, get it in writing.

FP/GFP -- fireplace or gas fireplace

Gen Tax – Property tax amount due yearly. When you have a mortgage, they usually collect this monthly with your house payment and then the mortgage company pays your yearly taxes.

Heat System – OHW,GHW,EHW,OFA,GFA,EFA, EBB, Dual Fuel/Off-Peak, Floor, Radiant, Multi-Zones – HW stand for Hot Water Heating which means the home has a boiler type furnace. FA stands for Forced Air which means there is a furnace with duct work to distribute the heat. EBB stands for Electric Base Board Heating. Dual/Off-peak means that there are two forms of heating and usually set up so that one system shuts off during high-peak hours and the 2nd system turns on during that time to cut down on heating costs during peak hours. Radiant heating are similar to baseboard heating but have been known to be safer and more cost effective, located closer to the ceiling instead of close to the floor. Floor stands for in-floor heating, usually under ceramic tile or under cement (i.e garage floor heat). Multi-Zones stands for multiple controls for different areas of the home to be set at different temperatures to regulate the heat separately in different areas of the home.

HDW, HWF, HDWD -- hardwood floors

Hollywood Bath – Means it is accessible from a bedroom and also from the main hall.

Listing -- an agreement between a real estate broker and a home owner that allows the broker to market and arrange for the sale of the owner's home. The word "listing" is also used to refer to the for-sale home itself. A home being sold by the owner without a real estate agent isn't a "listing."

HOA -- homeowner's association dues. But find out if its paid monthly or yearly and what it covers.

Lock box -- locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent

MLS -- Multiple Listing Service. An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. Membership isn't open to the general public, although selected MLS data may be sold to real estate listings Web sites. MLSs are local or regional. There is no MLS covering the whole country.

REALTOR® -- a real estate broker or sales associate who is a member of the National Association of REALTORS®. Not all real estate agents are REALTORS®.

Specials Unpd & Specials Inst – Specials Unpaid means the total amount of specials owed to the city on that particular property. Specials Installment is amount due to the city yearly. Just like taxes, if you have a mortgage, the lender usually figures this into your monthly payment and then pays your yearly specials payment for you.

Title Insurance -- an insurance policy that protects a lender's or owner's interest in real property from assorted types of unexpected or fraudulent claims of ownership. It's customary for the buyer to pay for the lender's title insurance policy. The buyer will usually be offered an “owner’s” title insurance policy at closing for an extra fee and will have 30 days after closing to decide whether to purchase at the reduced rate or not. After that it may still be available for purchase at a higher price. It’s a good idea to ask friends, family or a real estate attorney if they think you should purchase the policy for the particular property you are purchasing.

M,B,U,L – (floor levels) Main Floor, Basement, Upper Level, Lower Level (Upper and Lower are usually used in regards to bi-levels and multi-level homes.

Red River Flood Bill Voting SOON! Legislators Contact Info Here...

The bill could be up for a vote as early as next week!

Call your legislator!

Fargo Moorhead and Cass County have formed a coalition to create plans to protect area communities permanently from future floods. HB 1020 relates to the development of policies and procedures of the state water commission relating to the community water facility loan fund, the water-related topics overview committee and Fargo flood control project funding.

They need our help and support. The Red River has exceeded flood stage in 48 of the past 109 years including every year from 1993 through 2011. The coalition is planning a diversion channel and storage area around their communities.

THEY NEED OUR HELP - and HELP FROM THE LEGISLATORS!!

Please see full text of the bill at:

Bill - HB 1020

For a list of legislators and their contact information, please go to:

Legislators Contact Info

 and coming out of committee later this week so contacts the legislators with your opinions!  Your opinions COUNT!

Title Insurance – What is it and Should I Get it?

It is an insurance policy that protects a lender's or owner's interest in real property from assorted types of unexpected or fraudulent claims of ownership. It's customary for the buyer to pay for the "lender's" title insurance policy, this protects the "lender's" interest. Most if not all lending institutions require this and normally include this fee in your estimated closing costs.

What is not included in your estimated closing costs is "Owners Title Insurance", this protects the "owner"/you (the buyer). An Owners Policy protects the owner from title problems that were not disclosed by an examination of the public records and while a Lender’s policy only insures that the lender has first lien on the property. The buyer will usually be offered an “owner’s” title insurance policy at closing for an additional fee:

This is calculated by the purchase price of the home:

For example: With a purchase price of $150,000

Initial reduced rate would be $575.00 for ND & $637.50 for MN

You will have up to 30 days after closing to decide whether to purchase at the reduced rate or not. After that it may still be available for purchase at a higher rate. It’s a good idea to ask friends, family or a real estate attorney if they think you should purchase the policy for the particular property you are purchasing. This is a personal decision just like any other optional insurance policy (i.e. life insurance).

FM Title Company will answer all of your questions about title insurance, feel free to call them anytime if you have questions or if you would like a quote for owners insurance on your purchase.

FM Title Company 701-893-1000

Fargo Moorhead Real Estate Statistics UPDATE! April 2013

It appears the market is lacking for this time of year as far as New Listings on the market.  Yes, they are down from last year, but not as much as you would think...

Along with the number of listings being a bit lower, the amount of buyers have gone up!

Here are some of the Fargo Moorhead Real Estate Statistics as of yesterday!

New Listings from January 1st -April 7th
2013 - 1091 Homes Listed - 17.5% down from the last 4 yr average
2012 - 1284 Homes Listed
2011 - 1136 Homes Listed
2010 - 1674 Homes Listed
2009 - 1198 Homes Listed

(average over last 4 years= 1323 Homes)


Sold Listings from January 1st-April 7th
2013 - 600 Homes Sold - 23.7% up from the last 4 yr average
2012 - 542 Homes Sold
2011 - 408 Homes Sold
2010 - 490 Homes Sold
2009 - 390 Homes Sold

(average over last 4 years= 458 Homes)

We may have a lower number of homes listed, but we also have a higher number of buyers than we've had in the last 4 years and quite a bit above average.

If you're a seller, this is obviously a great time to list your home.  Contact us today and we'll give you a free market analysis of your home and help you get started!

If you're a buyer, rates are at unbelievable LOWS so its obviously a great time to buy also, but keep these statistics in mind while looking at homes.  Make sure to watch the new listings daily as there are just that many more buyers also watching for the same homes as you. The homes priced right and in good condition will sell QUICK!  Don't take your time, when you find the house you really want - move fast!

If you are interested in getting set up for the Fargo Moorhead MLS auto email service where you will receive new listings in your email the very first day they go up for sale!  We can set this up for you anytime.  We can narrow it down to your own personal search criteria so that you only receive new listings if they fit what you're looking for.

Contact us today - this service is free and very beneficial to all buyers!!  Dont wait, you could miss the perfect home!

Explain Assessed Value vs Appraised Value

Two Very Different Methods of Valuation, with Two Very Different Outcomes

I often hear homeowners ask me to give them an, "appraisal," of their property, or what I think the, "assessed value," or "assessment" is. So here you go.



Both of those terms sound similar but are often mistaken for one another and are not on not interchangeable. They are wholly different in who does them, how they are used and for what purposes.


An assessment, or assessor or assessed values are all terms surrounding tax valuations. Municipalities have to meet their budget obligations to provide services and infrastructure, perform repairs and replacements of buildings, and pay employees among a host of other duties like providing police, fire and public safety services.


Most counties or towns have an assessment office, in charge of collecting taxes from its citizens to pay for these budget items. Some of these offices have an assessor whose job it is to apportion the amount of taxes that need to be collected from each owner.


Owners typically pay taxes based on the size and value of property they own. These valuations are typically based on market value, but the assessments aren't updated often, so as the market increases and decreases in value, the assessment often doesn't change for a long time. That means that as the market heats up and houses sell for more money, the tax assessment may lag behind the market value. Conversely, as the market falls and homes are worth less, the opposite is true. Owners pay more than market value.


When municipalities fall short of their revenue needs, they have a few options in addition to lay-offs, reducing spending, etc. They can raise taxes. Sometimes an across-the-board percentage increase will be introduced, so that everyone pays their current market value plus some flat percentage. Sometimes a complete re-evaluation is done and homes get updated assessment values.


An appraisal is conducted by a state-licensed appraiser, usually for the benefit of a lender, to determine if the amount requested to be loaned is appropriate for the property. Banks want third-party knowledge and expertise to confirm that the property is worth the amount of money being loaned so that if the buyer defaults on the loan, the bank will have an asset upon which they can reasonably be expected to recoup their losses.


Appraisers are licensed by each state. Some appraisers are independent contractors; others work for small or large firms. Some appraisers specialize in residential appraisals, others in various aspects of commercial real estate.


Appraisers use current and past-market data to create valuations for properties. They look at the surrounding geographic area, other like-properties, and try to focus on properties that have recently experienced buying or selling activity.


Appraisers can also be hired by homeowners to get a value for a private sale, to determine the worth of a new or potential addition or renovation.


Real estate agents provide neither. Agents perform a CMA or Comparative Market Analysis for sellers to determine that starting selling price, or for buyers to gauge and guide an initial offer. Neither can be used to get a loan or pay taxes. CMA's are used to determine a home's selling price to potential buyers keeping in mind the competition and market trends.


Appraisals and assessments serve two different purposes, and done by two different kinds of people and are used for very different reasons. Be sure you're asking for the right person!

What does the yellow letter next to a listing mean? (contingent upon...)

As you are searching on the MLS for homes for sale, you will sometimes see a little yellow letter next to the listing. Here guideline of what those letters mean so you know what you're dealing with when you run across them. 

"P" means "pending" - this means SOLD, no contingencies, just waiting for closing day.

"I" means "contingent upon inspection" - not very often does it go back up for sale, but at any time until it is removed, they will accept back up offers.  During the inspection time frame, homes can still be viewed so it may be worth looking at and/or submitting an offer, hoping that they will run into some small issue that would give the seller the option to pass on their current offer and take the back up offer(s) that are submitted to them.  Usually the only time the back up offer even gets considered is if its a really good one.  If the current buyer requests any repairs (even small), then the seller would have the option of cancelling their current signed contract and moving on to the new backup offer. (This is a good thing to keep in mind if YOU are the buyer having the inspection, many buyers don't realize that once they request even the smallest repair to the seller that it opens the seller up to cancel their current contract and move on to any back up offers they may have.)

"R" means "right of first refusal", this means the sellers have accepted an offer from a buyer who has a home to sell and it is not sold yet.  At any time, these properties can be viewed and offers can be submitted.  In this case, offers have a better chance of getting accepted because the current buyers hands are sometimes tied and there's not much they can do in the time frame they've agreed to remove their contingency. Each situations time frame is different, it depends on what they agreed on at the time of the offer - usually 24,48 or 72 hrs is the time frame that the current buyer would have to either get their home sold, do a bridge loan or just decide to have 2 mortgages until they can get their home sold. If after the time frame passes, the buyer is unable to remove that contingency, then the seller would be able to take the offer that was submitted to them.

"B" means "accepting back up offers", this means they have a current accepted offer but are willing to take back up offers in case the current offer falls thru.  Usually the agent will put this on a listing they feel has the possibility of not making it all the way to closing for one reason or another. Sometimes they will put it on there for no apparent reason whatsoever which doesn't make sense to me but it happens and is potentially a waste of everyone's time, so if you are interested in a home that has this letter next to it, just let me know, it is best for me to call the listing agent to find out the details on that particular listing.

"S" means "see private remarks", private remarks are only viewable to realtors.  Contact us and we can let you know the details on that particular property.

If you have any other questions as you're searching, feel free to call us anytime, we'd be glad to explain things to you or get more information on any listing.  Good luck in your house search!

Remember... the national sites have a lot of inaccurate information: sold homes, spam, incomplete data, very few pictures and only "some" of the listings for the Fargo Moorhead Area.  The ONLY place you will find accurate and complete listings of all homes for sale is on the Fargo Moorhead MLS - you can access the full site here: www.fmrealtors.net

Call/Email or Text us an address if you would like to see ANY home listed by any company/realtor - we'd love to show it to you!

Happy House Hunting!

House-Hunting Tips

1. Location counts. You've probably heard the old real estate joke about "location, location, location," but the point still bears repeating. Location is crucial. How far are you really willing to commute to your place of employment? How good are the local schools, shopping centers, public transportation, seniors services and other public amenities? Will your new home be next to a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it's in an undesirable location, and a poor-location home can be a particularly bad choice if you anticipate reselling the home within a few years.


2. Make a list. Do you (and your spouse, if you're married) really know what you need and want in your home? You'll save yourself many hours of shopping (and potentially arguing) if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don't want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn't suit your needs. Tip: Start compiling your wish list by thinking about what you like and dislike about your current home.
Moving?

3. Do your homework. Not long ago, consumers had very little access to information about recent home sales prices, market trends, homes on the market, neighborhood statistics and the home-buying process. Today, all this information and more is available on the Web. Go surfing. Get educated. Become empowered.

4. Get preapproved for a mortgage. Your top-dollar home price is a function of your household income, your creditworthiness, interest rates, the type of loan you select and how much ready cash you have for the down payment and closing costs, among other factors. Rather than guessing or estimating how much you can afford to spend, ask a lender or mortgage broker to give you a full assessment and a letter stating how much you're qualified to borrow. The true amount may be much more or much less than you think.

5. Use a checklist. Touring multiple homes is a confusing experience for most people. Rather than relying on memory, make notes about the homes you visit. Turn your priorities into a personalized home-shopping checklist and use it track the features of each home.

6. Wear comfortable clothing and sturdy shoes. House-hunting can be tiring, especially if you're relocating to a distant community and want to see a dozen homes in one day. There's no sense in torturing your feet unnecessarily.

7. Be prepared to make an offer. House-hunting can also be frustrating, especially if you know in your heart you're not really emotionally or financially ready to buy a home. If you're not ready, don't put yourself through the exercise. If you are ready, go through a blank purchase contract ahead of time so you'll know what decisions you'll face when you make an offer.

8. Relax. Granted, buying a home is a major life-altering event. But it's not worth making yourself insanely crazy or super-duper stressed. Save time at the end of your house-hunting expedition to unwind, calm your thoughts and emotions and keep the whole experience in perspective.

Source:

How a REALTOR® Can Help

A real estate agent can help you understand everything you need to know about the buying process.

The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity. If you give a real estate agent 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.

Looking
Once you know how much you can and want to invest, the next step is to find the properties that most nearly fit your needs. This is the time to choose a real estate licensee. When picking a real estate agent look for one who is also a REALTOR®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS®, a real estate trade association, and all members agree to abide by a 17 article Code of Ethics. A REALTOR® has many resources to assist you in your search. Sometimes the property you are seeking is available but not actively advertised in the market. It will take some investigation by your agent to find all available properties.

Choosing a property
Your job is to make the final selection of the right property for you. This is when excitement and emotion run high. Your real estate agent 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?

Negotiating
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.

Due diligence
With a negotiated agreement in hand, it is time to complete 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 agent 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. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your agent, title company or attorney can help you resolve issues that might cause problems at a later date.

Financing
As soon as you are reasonably sure the property is right for you, the process of obtaining financing begins. Your agent can help you in understanding different financing options and in identifying qualified lenders.

Closing or settlement
Finally, there is the closing, or settlement, as it is known in different parts of the country. Every area has its own unique customs. In some areas, the title or escrow company will handle this process. In other parts of the country, an attorney does it all. Again, your real estate agent can guide you through this process and make sure everything flows together smoothly.

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 their business cards or other marketing and sales literature. REALTORS® are committed to treat all parties in a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a high 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.

You be the judge
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®!

Source: Realtor.com

Fargo Home Buyer Alert: What is a credit score.

Our credit score can mean the difference between being denied or approved for credit, and a low or high interest rate. A good score can help you qualify for an apartment rental and even help you get utilities connected without a deposit.

So what is it?

Your credit score is a three-digit number generated by a mathematical algorithm using information in your credit report. It's designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring.

There are a multitude of credit-scoring models in existence, but there's one that dominates the market: the FICO credit score. According to myFICO.com, the consumer website for the FICO score developer, "90 percent of all financial institutions in the U.S. use FICO scores in their decision-making process."

FICO scores range from 300 to 850, where a higher number indicates lower risk. What's a good score?

A consumer has three FICO scores, one for each credit report provided by the three major credit bureaus: Equifax, Experian and TransUnion. Unfortunately, consumers currently have access to only their Equifax and TransUnion FICO scores. Experian ended its agreement with myFICO.com in 2009.

What goes into a credit score?

Data from your credit report goes into five major categories that make up a FICO score. The scoring model weighs some factors more heavily, such as payment history and debt owed.


Payment history: (35 percent) -- Your account payment information, including any delinquencies and public records.

Amounts owed: (30 percent) -- How much you owe on your accounts. The amount of available credit you're using on revolving accounts is heavily weighted.


Length of credit history: (15 percent) -- How long ago you opened accounts and time since account activity.

Types of credit used: (10 percent) -- The mix of accounts you have, such as revolving and installment.

New credit: (10 percent) -- Your pursuit of new credit, including credit inquiries and number of recently opened accounts.

Personal or demographic information such as age, race, address, marital status, income and employment don't affect the score.


Different score impact for same missteps

How much does a specific change affect a credit score? The answer is usually "it depends," and for good reason. Credit score developers don't reveal the exact point deductions. The weight of any given activity can also vary for different credit histories.


Within a scoring model, there's more than one formula used to calculate a score, and each formula is designed for a category of consumers with similar credit profiles. The information in your credit report determines which formula is used. If you are new to credit, for instance, the scoring model will put you into a category for people with young credit histories, and use a scoring formula specific to that group. Such groups are called scorecards. Within that group, recent inquiries may cost more points than they would for a different group.

How to check your credit score

Federal law mandates the consumer's right to a free credit report annually from each credit reporting agency, but not to a free credit score. Use our FICO score estimator to get your score range free of charge. To get your exact number, you have to purchase it from a score provider, such as myFICO.com or one of the reporting agencies.