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The process of buying your first home can be intimidating enough, until you realize there’s an entire language of terms you need to learn to fully understand the process and then things become even more daunting. From the different types of mortgages to the process of putting in an offer and then closing on a property, real estate brokers will toss around terms and phrases that may go right over your head. Fear not. We polled some experts and compiled a list of must-know lingo to help you navigate this intense but exciting process. Read on for an education.
A separate document form describing a change or addition to the initial purchase agreement. Addendums can be used for many items, for example changing the closing date.
Adjustable Rate Mortgage (ARM)
A mortgage that has a fluctuating interest rate. ARMs may have lower initial interest rates for a set time and then start to adjust according to an index.
The appraisal is the process of determining the value of a home. This is required by the lender and organized by its choice of an impartial professional appraiser. The results may not be the same amount as the selling price. If the value comes back lower, it could result in additional negotiations between the buyer and seller.
Certificate of Title
This proves that that property is legally owned by the seller and no other institution or party has any claims.
This is when the buyer, agent or lawyer, and the escrow agent (more on that later) meet with the seller and their representatives to finalize the purchase. This will incur fees known as closing costs which include attorney’s fees, a loan origination fee, and other charges totaling around six percent of the house.
Comparative Market Analysis (CMA)
This is when a home’s market value is determined in order to come up with a fair asking price. This will be done by a broker who will find the CMA by comparing the home to other similar properties in the vicinity that have recently sold.
The term for properties that are comparable (in size, amenities, location, and more) to the property being analyzed.
The deed is the legal document that proves the transfer of ownership from the seller to the buyer.
Information about the home (not always flattering) that a seller must provide to a buyer. Examples might include noting the the basement often floods in heavy rain or if there is lead paint anywhere in the house.
This is a percentage of the purchase price that the buyer pays in cash. It usually ranges from as low as three percent up to 20.
This is the responsibility of the buyer to take all necessary care before closing on the purchase. For example, it would include confirming the seller’s broker and attorney are legitimate and confirming there are no issues that have yet to be disclosed that would prevent the buyer from wanting to proceed with the purchase.
This refers to the time period and process where the purchase funds are released and the transfer of the house between parties is completed. The escrow company is a neutral third party and executes the transaction utilizing the purchase agreement and other documents as the directive.
This refers to the obligation your broker or real estate agent has to act solely in your interest. Examples of these duties are disclosure, confidentiality, and loyalty.
A type of mortgage in which the interest rate does not change over the course of the loan.
Anything of value that is permanently attached to or a part of the property. This can include lighting, carpet, or landscaping. These items can be a source of dispute between buyer and seller and can be leverage for negotiations.
The short form of Homeowner’s Association Documents. These apply when purchasing a condo and include HOA meeting minutes, a copy of the building’s yearly budget, and/or rules for shared spaces.
This stands for Multiple Listing Service and is where brokers to share their listings with other brokers.
A document that pledges the property to the lender as security for the loan needed to purchase the home.
Principal, Interest, Tax and Insurance (PITI)
This is another way of describing your monthly mortgage payment. Principal is the portion of the payment that goes toward paying down the loan and interest is the portion that pays the lender for loaning the money to purchase the property.
The process the loaner goes through to confirm if a borrower qualifies for a loan based on their credit history and current financial status as well as the amount of money a recipient qualifies to receive.
So you’ve listed your home for sale, you’ve had a showing or two but now there’s no interest from anyone. You’re in home seller’s hell! Below are the 7 deadly home seller sins. Chances are, it’s one of these 7 sins that are preventing the sale of your home. The good news? They’re not too hard to correct.
It’s natural to want to get the most money you can out of your house. But if you overprice your home, it’ll sit on the market indefinitely. Buyers are looking for a house at fair market value. If yours is overpriced you won’t even get buyers in the door for showings, much less an offer. This article by Bill Gassett fully examines the dangers of overpricing a home.
Picking the Wrong Realtor
Your Realtor is your best ally when it comes to selling your home. If you choose a Realtor who is inexperienced, overworked, or dispassionate, you’re going to have a weak ally. Quite frankly, there are a lot of Realtors out there who aren’t good at their job for one reason or another. It’s vital to your home sale that you put in the time to interview multiple Realtors. Ask questions such as:
- Are you a part-time or full-time agent?
- How long have you been a Realtor?
- How many listings did you have/sell last year?
- How will you communicate with me?
- Can I see references?
You can know something important and completely ignore its significance without realizing that you are.
There is one fact in real estate that is expensive to ignore, but it does not always get the attention it deserves. This fact can become buried under a mass of distracting secondary information about choosing real estate to buy.
If this happens you may purchase the wrong property, so the mistake you make will be expensive for two reasons: first, real estate is the most expensive thing you'll buy and, second, most people mortgage heavily and usually end up paying double or triple the original amount borrowed.
The fact? The three most important factors in determining real estate value are location, location, location. You've heard this before. Your real estate professional probably explained the significance when discussing neighborhoods or communities within your budget. You know location is important, but do you ignore its significance without realizing that you are?
Is your attention focused on decor, granite counters, spa-like ensuites, and stainless steel appliances when you look at properties? If so, you are concentrating on changeable aspects of the property that will depreciate or lose value as styles change. Instead, concentrate on what will not depreciate or go out of style — the land. The supply of land is limited — they're not making any more of it — and demand continues to rise.
The simple logic of location-based value should make it difficult to ignore: you cannot move land.
Homes and other buildings can be altered drastically and moved from one location to another. Trees, soil, and rocks can be shifted from one property to another — landscapers do this for a living. The surface of land, and what is under it, can be altered, but the location of a property can not be changed.
Further, land does not depreciate like buildings and other man-made features, including interior design and appliances. If you've bought well, the land will increase in value or appreciate over time.
The pattern of appreciation in a neighborhood will give some indication of future trends. Location value is determined by proximity to favored items like schools, transportation, walkable retail areas, and local attractions. Changes in usage including building of high rises and transit can downgrade or upgrade the value of some properties or may affect an entire area, so local knowledge is vital.
To track price changes, the Federal Housing Finance Agency publishes monthly and quarterly House Price Index (HPI) reports, which are held as accurate indicators of house price trends at various geographic locations. HPI reports can help you evaluate areas being considered.
For instance, the fourth quarter 2015 HPI report stated that:
- Home prices rose in every state and in the District of Columbia between the fourth quarter of 2014 and the fourth quarter of 2015. The top five states in annual appreciation were: 1) Nevada 12.7 percent; 2) Colorado 10.9 percent; 3) Idaho 10.7 percent; 4) Washington 10.7 percent; and 5) Oregon 10.6 percent.
- Among the 100 most populated metropolitan areas in the U.S., four-quarter price increases were greatest in the San Francisco-Redwood City-South San Francisco, CA Metropolitan Statistical Areas District (MSAD), where prices increased by 20.7 percent. Prices were weakest in New Haven-Milford, Connecticut, where they fell 1.5 percent.
- At one extreme, the lesser location may provide the greatest fit with your "must haves" and may include additional benefits, or At the other extreme, the best location may or may not require some compromise on "must haves."
The rule of thumb here is to zero in on the "worst" property on the best street or in the best area you can afford. Then, as you improve that property over the years, you'll increase its value. Meanwhile, as the better homes continue to get better, they will cause the neighborhood to become more desirable driving values up further. In this healthy-appreciation environment, you will end up with all you want in the property and a solid increase on your initial investment.
The "worst" property may be smaller, more modest, older, more rundown, on a busier street, or merely more garishly decorated than the others. It is not necessarily a "bad buy" because the land is in a great location. In fact, the "worst" may be the best buy in the immediate area because of this potential.
Repeat the location-location-location mantra as you view properties and wander potential neighborhoods. Don't buy decor, buy land.
For the curious…In 1956, Lord Samuel of London, a real estate magnate, was cited as being the first to make the location-location-location value statement. In fact, the adage first appeared in print in a 1926 Chicago Tribune real estate ad and was felt to be a familiar saying at that time.
Caution- Speed Bumps Ahead
As an experienced real estate agent, I've seen and heard my share (and experienced my own) horror stories when it comes to buying a home. So, I'm about to lay it on the line with you as if you were my good friends or family members who were about to embark on purchasing their first home as a couple. I'm going to get to the nitty gritty dirty details so that you and your partner can avoid the speed bumps along the way and get to the closing table unscathed..well, maybe minus a hubcap.
Legal Issues First
If you are married, you can skip this paragraph. Believe me I know first hand that it's not very romantic to talk about legal issues when buying a home with someone you are not legally wed to (in that state if it's same sex marriage). However, relationships and engagements do end prior to tying the knot (it happened to me). You need to have your ducks in a row and speak with an attorney as to how to structure the mortgage, how the title will be held and of course, who's names will be on the deed. One person may not be on the mortgage, but both parties should be on the deed in order for maximum protection.
Now everyone needs to read this. If there are any outstanding child support issues from a previous relationship/marriage, it needs to be taken care of prior to seeking a mortgage. Laws have changed. You cannot escape it when buying a home. The last not so pleasant question that is required by law to be asked is "Have you been married previously"? If you have and your new partner is not aware of it, now is a good time to spill the beans. I have an attorney friend who was conducting a closing and came to that routine question when it turned out the soon-to-be husband had indeed been married not once, but twice before...and his fiance had no knowledge of either weddings. Needless to say, the closing didn't occur nor did the wedding.
Don't even think about calling up a real estate agent to take you out "looking" at homes until you have been pre-approved by a reputable mortgage lender. Unless you know what that magic number is, you will just be wasting your time and getting upset if you can't buy that gorgeous home you saw last month because it's out of your budget. Find out what you qualify for and take it to the next step where your credit is pulled. This will generate a mortgage pre-approval. You will absolutely need this when you write up a contract. If you aren't comfortable spending the entire amount you qualify for on a monthly basis, then work with the loan officer to determine what you would be. Let's say you are qualified up to $2500 per month, but you only feel comfortable with $1800. Speak up and have them calculate a figure you could live with. Then go out looking at homes that will fall into that price range.
How long are you planning to live there
Did you know the average length of time in a home is only 7 years. Yet, when first purchasing that property, they thought they would be there 15 years. You need to think about how long you will be in this home. If it's a starter home, then don't get caught up on the fact that it has to have 4 bedrooms now. You can do that for the next one. Perhaps you think you're only going to be in that 2 bedroom condo for a couple of years. Remember you can't get everything the first time around. So, you need to get the most that's right for you.
You Found THE House, Now What Should You Do
- Always have a full home inspection- Never skip this for budgetary reasons. This could be the best $450 ever spent if it detects a problem that is the responsibility of the seller. If you live in the Princeton NJ area, definitely conduct a radon test for $50. At least one of every four homes I've sold had a higher radon level and the sellers successfully re-mediated it. Don't sweat the small cosmetic stuff that the inspector will put in the report. Please. Home inspections are designed to uncover structural, environmental and other more significant issues. If the disclosure said they didn't put on a new roof and the furnace/ac is the original, don't expect the seller to provide you with a new one if the others are in working order. Just because the inspector writes "budget for a new one because it's at the end of its life cycle" doesn't mean you should expect a new one.
- Get a survey- Your lender may or may not require it, however it is a good thing to have. If could turn up issues such as your neighbor's fence is 1 foot on your property.
When you apply for your mortgage here are some things that may seem like commonsense, but some buyers have not listened and lost out on the loan. Here's what you should NOT do:
- Sign a new car loan
- Buy a house full of furniture on credit
- Change jobs
- Co-sign a loan (yes, it will be part of YOUR debt now)
- Skip a payment or get behind on any bills
- Deposit a wad of cash into your bank account without having the proper documentation that it is part of a "gift funds towards down payment". That even means if you just got married, don't deposit all the checks one week prior to closing. That will waive a red flag
If you're hoping to increase your home's value (above and beyond the cost of an upgrade itself), you should know that the upgrades you value might not be valuable to potential buyers. In fact, you may never recoup the full cost of some home improvements, and the primary offenders might surprise you!
What five common upgrades have the worst return on investment? Find out below.
1. Adding a pool
Pools can be hit-or-miss when it comes to added value. If you're selling Orlando, FL, real estate, or you live in a warm climate where people are inclined to use a pool year-round, you're more likely to get a favorable response from buyers. Often, however, the return is not enough to pay for the pool itself. Don't forget that you'll need to operate and maintain the pool, and this comes with a sizable extra cost. Ultimately, your likelihood of recouping the money you spent on maintenance, in addition to the installation costs, is pretty low.
Plus, adding a pool to your home could be a major turnoff to some buyers. Buyers with small children may be concerned about safety risks, those looking for a low-maintenance yard won't want to deal with the hassle and upkeep of cleaning a pool, and buyers who are on a tight budget may not have the extra cash to deal with the added expense.
2. Highly custom design decisions
Your idea of a dream kitchen probably isn't everyone's idea of a dream kitchen. Unless you plan to stay in your house for many years to come, think twice about renovations that are too personalized. If you install a kitchen backsplash, you might recoup the cost, because the difference between "no backsplash" and "backsplash" is noticeable. But the specific type of tile might not matter to buyers — they could be just as happy with a simple ceramic tile as they would with an expensive Calacatta marble tile. Similarly, choosing a beveled countertop edge that's complex and ornate, rather than a basic beveled edge, can turn off buyers whose tastes don't align with yours.
In fact, these custom features may wind up costing you come listing time, as many buyers will factor in the money they'll need to spend to change the house to suit their own tastes. If you're going to upgrade your kitchen just for the sake of selling, stick with neutral, builder-grade design decisions.
3. Room conversions
Buyers will be looking to check certain boxes when they tour your home: For example, three bedrooms, two bathrooms, and a garage. Getting rid of these expected spaces (or altering them into something unusual) may harm your resale value. Every bedroom, for instance, is coveted space that can bump your listing up into the next bracket. Buyers are looking for a two-bedroom, three-bedroom, or four-or-more-bedroom home.
You might not need that extra room and dream of knocking down a wall to create a giant walk-in closet. Or perhaps you'd prefer to cover the walls with soundproof foam and convert it into a recording studio. Unfortunately, most buyers won't share your interests. Instead, they prefer an extra bedroom for children or guests.
4. Incremental square footage gains
Sizable square footage gains — like finishing your dingy basement so it becomes an additional livable floor — can be a boon in buyers' minds. But tiny, incremental changes may not give you much of a return on your investment. You may love your new sunroom, but it's not likely to drastically increase your home's overall value. Adding square footage in a way that doesn't flow well with the floor plan can also backfire. Sure, a half bath on the first floor would be useful, but if buyers have to pass through the kitchen to get to it, the half bath loses some of its appeal.
No one wants to buy a mega-mansion on a block full of split-levels. When your upgrades feel overboard for your neighborhood, you alienate buyers on two fronts: Buyers who are drawn to your neighborhood won't be able to afford your home, and buyers who can afford a home of your caliber will prefer to be in a ritzier area. Keep the "base level" of your neighborhood in mind. Tour some open houses on your block to see how your neighbors' kitchens look before you invest a small fortune in granite countertops and high-end fixtures. Being a little nicer than the other houses around you can be a selling point, but being vastly more luxurious is not.
Pursue these home upgrades for your own enjoyment — but don't trick yourself into believing you'll more than recoup the cost of the improvement in the form of a much larger listing price when it comes time to sell. You can always opt for the projects that have the best potential to draw in a buyer instead!
After a beautiful wedding celebration and exotic honeymoon, you and your loved one are ready to settle in and enjoy your newly married bliss, especially in a new home. Although putting together a house can seem like an everlasting project, you can make it your home right away with the following new-home essentials.
Create a color scheme for your home by starting with your window treatments. The interior-design theme of your home can be a long-term project, and hanging curtains is a great starting point. Colorful curtains and stylish blinds can eliminate a room's drab aura and create interior warmth, even without other complementary furnishings. Go for eye-catching, rich hues, such as emerald green, indigo blue, canary yellow, or even Pantone's color of the year, radiant orchid.
As a newlywed couple, your bedroom is your sacred sanctuary. The relaxing space should be free of electronics and full of tranquil elements and decor reflective of you both as a couple. Start with your bed and gender-neutral bed trimmings, including a duvet, bed skirt, throw pillows and linens. An accessorized bed will create aesthetic comfort as you begin to incorporate more furniture and other decor, such as wall art, a rug, flower-filled vases, and plants.
Cleaning a house is a monumentally more challenging and exhausting chore than cleaning an apartment. Although more space in a home is enjoyable, you've now got more ground to cover with a broom and mop. Visit Macys.com and invest in a Dyson vacuum that will help keep your floors clean and spotless. Not only will the superior-quality vacuum help give you flawless floors and carpeting, it can make cleaning a pleasant experience, rather than a dreaded household duty.
Since you're now responsible for your own home repairs and around-the-house tasks, you'll want a well-stocked supply of tools. ToolGuyd.com provides a list of safety gear and 12 basic tools that every homeowner-turned handyman should own. For unexpected repairs and home DIY projects, you'll need to start a tool collection that includes, for example, a utility knife, tape measure, a variety of screwdrivers, and adjustable and combination wrenches. Along with the Tool Guyd recommended list of tools, you'll also want to stock up on paint supplies, sandpaper, an electrical outlet tester, nuts, screws, nails, and sandpaper.
For most new homeowners, splurging on fancy decor isn't within the budget. Get creative with how you personalize your home and give it character. Shop at flea markets for photo frames, vases or a vintage piece of furniture that you can refurbish with a bright paint color and fun patterns. Visit CasaSugar.com for home inspiration. Decorate a plain white vase with orange washi tape. Frame an old map to cover bare wall space. Glue metallic buttons to a lamp for glammed-out lighting. DIY decor projects can also become a new hobby and creative outlet for a happy homemaker.
Enjoying a new home is the most exciting when you can share it with your friends and family. Stock up on party-hosting essentials such as wine and cocktail glasses, a cocktail shaker, a serving platter, place mats, a table runner, and basic dishes and cutlery. Don't forget to create a soothing playlist for your guests to enjoy during your dinner party. Plan an upcoming housewarming party and play host and hostess by inviting guests and cooking them a delectable dinner.
Spring is right around the corner, though in Utah it might be June before spring is sprung. Regardless, it’s coming. Whether you plan to list your home, (with one of our amazing Prudential agents, of course), or you plan to stay put for a while, we have a honey-do home improvement list for spring that will ensure you enjoy your summer.
Don’t Just Cut the Grass, Manicure your Lawn
If you want your side of the fence to have greener grass, start thinking about your lawn now. Early spring is prime seeding time, particularly for Kentucky Bluegrass. You can start to feed your lawn as soon as it starts greening. Get some bulbs in the ground and add a few plants that thrive in Utah (plants labeled for zone 5 and lower), to really make your yard shine. Spring is also the perfect time to put in new beds or that water feature you always wanted. Koi fish are optional.
Hope You Had a Blow Out
Your sprinkler system might have looked dormant all winter, but chances are it was up to no good if you didn’t have it blown out. If your system wasn’t winterized, consider bringing in a pro to get it back up to snuff. If it was winterized, (good job), turn the water back on SLOWLY. If you don’t hear the water shut off after a few seconds, check to make sure the backflow or blowout valve is closed. Run a test and check for any broken sprinkler heads and replace them. Reset your sprinkler timer and you’re ready to go. The internet abounds with how-to guides if you plan to turn your system back on without professional help.
Life in the Great Outdoors
Consider some new outdoor furniture or create a living space outside to enjoy this summer and many more to come. If you already have patio furniture, update the cushions or add a new umbrella to make your backyard your favorite hang out. Potted tropical plants that can be brought inside during cooler months do double duty. Clean the grill, fix any loose decking or pavers, and you’re ready for an amazing summer retreat just outside your door.
Early spring is the ideal time to check your air conditioner for issues. You’ll beat the summer rush before all the contractors are booked and won’t be left sweltering when the mercury rises. Clean your A/C unit to ensure efficiency and if you haven’t replaced filters in a while, now is the time.
The Roof Over Your Head
Have you checked your roof lately? Clean the gutters, (everyone’s favorite chore), and check your roof for any damage it might have incurred over the winter. Catching small issues early can extend the life of your roof significantly, not to mention the savings that come from repair vs. replacement. If you are ready for a new roof, start looking for a contractor and book for summer.
While some of these home improvement tasks might seem a bit daunting, get them done early and you’ll enjoy some much needed R and R this summer. Not only that, but you’ll increase your home’s value and boost curb appeal when you keep it in good repair.