In real estate making an offer on the perfect home takes research.  How do you go about doing this?  First, your realtor will provide you with data about recent solds in that particular area.  These are called comps, or comparables.  A very important report she will show you is called a CMA or comparative market analysis.  This is very important data for you to analysis and discuss with your realtor.  A CMA will tell you things like what is the average sales price per square foot, what is the average days on market, it compares each homes square footage and stats like bedrooms, baths, etc.  Another important item to look at is percentage of asking price.  All of these things will come into play when deciding what the initial offer should be. 

Once you decide on what you plan to pay for the home then it is time to write the contract and put your numbers down on paper.  It is customary to place an offer, then the sellers will usually come back with a counter offer if they feel your original offer was too low.  At that point you can counter back with another offer or do nothing and the deal is off.

Searching for the perfect home in The Woodlands.  Our new buyers are now ready to start their new home search.  They are now preapproved, so we know exactly what price range they should be looking in.  In The Woodlands, which is located outside of Houston, homes typically sell for about 95-97% of asking price so we are looking in that range.  As their realtor I need to find out as much information as possible about what they are looking for such as size, location, yard maintaince, bedroom locations, style, etc…  After researching all of the home on the market and finding the ones that fit their criteria away we go.

When looking at homes look past the current homeowners tastes and invision your things in the space.  This is very hard to do for many people.  Paint is easily changed.  Furniture will leave with the current homeowners.  Look at the “bones” of the home — the room size, layout, lighting, height of ceilings, yard space — these are the things that matter.  Wallpaper, appliances, fixtures, carpet are all easily changed.

Preapproved vs prequalified for a real estate purchase, “what is the difference?” this was the question that my clients Jane and Jerry had when they first began looking for a new home.  They had received a  letter from a lending institution that was very generic.  Which did they have?  Here is the difference between the two:

Prequalify - the mortgage professional reviews your finances, credit report and income and then, based on their experience, estimates an approximate amount of a mortgage that you should be able to qualify for.

Preapproval - you actually apply for a mortgage with an address “To Be Determined Later” and the application is submitted to a lender and an approval is issued subject to the home qualifying.

Prequalify

If you are looking for a quick indication of whether you will qualify for a loan, many mortgage bankers will prequalify you.  A prequalification is a quick look at your assets and liabilities, your annual income and a determination of how much of a mortgage payment that you should be able to afford assuming that none of these conditions change before the settlement date.  The mortgage professional will then issue you a preapproval certificate or letter on company letterhead indicating that they have reviewed your finances and that is appears that you could qualify for a mortgage loan up to a certain amount. 

The preapproval is the actual process of applying for a loan and sending your loan application through the underwriting process. You will receive a commitment for a loan up to a certain amount that is conditional upon an appraisal of the the desired property meeting the bank’s approval and the purchases price.  When you go through this process it will save you time once you find your dream home.  The loan application process takes approximately 30-45 days.  It also is very positive when you do make and offer because the other party knows that you can afford the home and that the closing process can be quicker than if you were not preapproved.  Apply for the maximum in a preapproval amount. You can reduce the mortgage amount in a day or two. Increasing the mortgage amount is the same as going through the approval process all over again.

UNDERSTAND… A prequalification is NOT a guarantee that you will get a loan, this is only an estimate.

Preapproval

In the case of Jane and Jerry, they received a prequalifying letter — not a preapproval.  A common misunderstanding on the part of first-time home buyers.

During the next few weeks I want to take you through the life of first time home buyers.  We will see the questions they have, the mistakes they may make, and the choices that they are presented with and make.  This is a professional couple, both are degreed individuals with promising careers in the field of engineering.  Currently they are renting a townhouse.  I will name this couple Jane and Jerry.

When I first talked to this couple they had been looking at the local MLS service online bookmarking the homes that they had an interest in.  (There are several sites that you can search, your local MLS service, Realtor.com, all of the major real estate company’s web sites, Zillow.com, etc….) Jane and Jerry have been looking for about six months prior.  They have picked a price range that was conservative for them based on the amount of rent that they have been paying, they have estimated utilities,  taxes, and their current debt.  This is a good rough estimate of how much monthly payment you will feel comfortable with.  There are also mortgage calculators available online that will help you estimate this as well.

One of the first questions that I asked them was are you preapproved?  Their answer, “We aren’t sure.”  Do you know the difference between being preapproved and prequalified?  Where do you begin do you even begin?  Check back tomorrow to find out the answers.

“What is a home warranty and what does it cover?”  This was a question my mom asked just the other day.  You may have the same question.  As the average age of a typical Woodlands home increases things begin to break and need replacing.  A home warranty is a policy that pays repair or replacement costs for the mechanical systems and built-in appliances that break down in a home. There are several companies that provide this service.  American Home Shield is the company that I recommend.  Warranties can be purchased by either the buyer or seller. When the seller is paying for the warranty, it is usually paid for and goes into effect at closing. The coverage period is normally one year. Usually, central heating and air conditioning systems, electrical, plumbing and major appliances are covered. It’s important that you read the policy closely and understand what is and is not covered.  Routine maintenance is usually not covered.  The cost for a one year home warranty typically runs between $300 and $600, depending on the size of the home and the specific types of coverage.  In addition to the policy premium, there is normally a deductible of $50 - $75 to pay when making a repair claim.   Additional policies for pool equipment and additional appliances can be purchased as well.

If you are buying a home and it doesn’t come with a warranty, you may want to consider paying for one yourself. The first year after buying a home is a time when most people don’t have a lot of cash on hand to cover problems that might arise. Having a one year home warranty in place can provide peace of mind during this time, and if something does break down, could really save your budget.  The policy is also available for renewal annually and in some cases can be charged monthly to your credit card.

Check out the different home warranties on the market.  Here is a web site to answer more of your questions.  www.ahswarranty.com

The law recognizes the intent and manner with which an item is attached in determining whether an article or fixture is real or personal property.  Built-in appliances are usually considered real property, while free standing ones are usually personal property. If removing the item requires pulling nails, it’s probably real property. If it can be unscrewed and removed without leaving any damage, it might be an item ready to cause some disagreement!  

If you are a seller and want to take fixed items with you then you need mark it under the exclusions list.  Tell you realtor the very first time you meet that here are things I want to be excluded.  If buyers know this upfront then they are able to negotiate based on this information.  Better yet, take down the fixed item and replace it before the home goes on the market.  Sellers remember - if there is something you want to take with you, and it requires removing a screw or nail, put it in the contract.  

Moving to a new home is stressful to you, but, moving to a new home is also stressful to your pet. So be patient and understanding and provide lots of affection. Here are some pointers to help you settle in safely and sanely.

Cats

 For the first few days in your new home, it’s smart to confine your cat to one room, while you work on putting the rest of the place in order. Prepare the room with your cat’s bed, litter box, food and water bowls, and toys. And, if your cat isn’t already an indoor cat-now is the purr-fect time to make your cat an indoor-only pet.  Indoor-only cats live longer and healthier lives. Resist attempts by your cat to go outdoors. If your cat hasn’t established an outdoor territory, he or she is less likely to be interested in going outside. Accessories such as window perches can ease the transition. If you play with your cat and supply lots of attention, your cat should have all he or she needs indoors.

Dogs

Ideally, your dog’s introduction to his new home will be with familiar furniture already in place, including his bed and crate, toys, and food and water bowls. If you must be away from home for many hours each day, look into a pet-sitter or consider dog day care. If the home you purchased does not have a fenced yard, look into having one installed so that you can let your dog out safely into your rear yard.

Veterinary Care

If you’re not staying within the same geographic area, then as soon as possible, you’ll need to choose a veterinarian and take a practice drive to the nearest emergency veterinary clinic.   There are many great veterinary clinics here in The Woodlands and the surrounding area.   For more information on animal hospitals check out The American Association of Animal Hospitals (AAHA) website at www.healthypet.com.  This website has a wealth information.

Here’s wishing you and yours a many happy memories in your new home!

Closing Costs

There are numerous fees associated with the buying or selling of a home – these fees are called closing costs. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.

Buyer closing costs
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. This will be given to you in advance of your closing.  The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:

       The down payment

       Loan fees (points, application fee, credit report)

       Prepaid interest

       Inspection fees

       Appraisal

       Mortgage insurance (typically 1 years premium plus an escrow of 2 months)

       Hazard insurance (typically 1 years premium plus an escrow of 2 months)

       Title insurance

       Documentary stamps on the note

Seller closing costs
If the home is not owned out right by the seller then the seller’s most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller’s lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs can include:

       Broker’s commission

       Transfer taxes

       Documentary Stamps on the Deed

       Title insurance

       Property taxes (prorated)

Prorations
At the closing, certain costs are often prorated. The most common of these are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed.

Therefore, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won’t come due until the following year. To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.

Hopefully this has answered a few of your questions about the closing process.

Woodlands homeowners, do you know about the alert system that we now have in our community?  You can sign up for it at the following address:

http://www.woodlandsalert.org/SelectAlert/login.aspx

This program is designed to notify The Woodlands homeowners of emergencies, burglaries, or other types of important or urgent community information.  You may receive the information via phone, or email.  Sign up today!

Congratulations to The Woodlands High School Athletics Department for receiving the Houston Chronicle’s Chronicle Cup Award.  Read about the award at the following address:

http://www.chron.com/disp/story.mpl/headline/sports/5873760.html