Who pays what?

My clients often ask me who pays for which fees when selling or buying a house. Because this is such a common question and there seems to be so much confusion on the subject here is a list of who pays for what:

The Seller Generally Pays:

Real estate commission

Document preparation fee for Documentary transfer tax

Any city transfer/conveyance tax (according to contract)

Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)

Interest accrued to lender being paid off, statement fees, reconveyance fees and prepayment penalties

Termite work (according to contract)

Any judgments, tax liens, etc., against the seller

Tax proration for any taxes unpaid at time of transfer of title

Any unpaid homeowner’s insurance

Recording charges to clear all documents of record against seller

Any bonds or assessments (according to contract)

Any and all delinquent taxes

Notary fees

Escrow fees

Title Insurance premium (Owner’s policy)

The Buyer Generally Pays:

Title insurance premium (Lender’s policy)

Escrow fee

Document preparation (if applicable)

Notary fees

Recording charges for all documents in buyer’s name

Termite inspection (according to contract)

Tax proration (from date of acquisition)

Homeowner’s transfer fee

All new loan charges (except those required by lender for seller to pay if applicable)

Interest on new loan from date of funding to 30 days prior to first payment date

Assumption/charge of record fees for takeover of existing loan

Inspection fees (roofing, property inspection, geological, etc.)

Home warranty (according to contract)

City transfer/conveyance tax (according to contract)

File insurance premium for first year

The Basics of Buying a Home

Here's What You Need to Know:

Obtain A Mortgage Preapproval Before You Begin House Hunting
> Learn how much financing is available to you
> Strengthen your bargaining position with sellers

Chose a Real Estate Agent
> Select a reputable professional who will listen to your needs and make you feel comfortable
> Ask agents for references from former clients

Find the Right Home
> Determine the needs of you and your family
> Create a wish list of desirable features
> Take notes as your preview homes

Make an Offer
> Your real estate agent presents your offer to the seller, who will accept, counter or reject it
> When the price is settled, you and the seller sign a Purchase Agreement, defining the terms of the sale

Have the Home Inspected
> Hire a professional home inspector after the offer has been accepted to provide an in-depth look at the basic systems of the house, to reveal any safety hazards and give you a chance to reconsider the deal

The Home Will Be Appraised
> An appraisal, required by your mortgage lender, is a formal, written estimate of the home's current market value

Obtain Title Insurance (where applicable)
> This guarantees that the property you are purchasing is free of liens or confusion in rights of ownership
> The policy insures against any losses to the property that result from defects in the title or deed

Close On the Property
> Ownership of the property is transferred
> A closing agent coordinates and distributes all the paperwork and funds

And you become the proud owner of your new home!

10 Tax Changes for 2008

Plan now and you’ll be in a better position to know what you’ll owe Uncle Sam this time next year.

1. More money for gas. The standard mileage deduction for business increases to 50.5 cents per mile. Note that mileage rates for medical or moving purposes fall to 19 cents per mile.

2. More money for retirement. You can contribute $5,000 to your IRA ($6,000 if you’re over 50) in 2008.

3. No breaks for sales taxes. The provision permitting taxpayers to deduct state sales taxes – a big plus in states with no income tax – expired at the end of 2007.

4. More tax breaks for retirement savings. Married taxpayers with joint income of up to $85,000 will be able to deduct IRA contributions if they file jointly; individuals with income of up to $53,000 can take the deduction.

5. Higher standard deduction. If you’re one of the two-thirds of taxpayers who don’t itemize, you’ll be able to deduct $10,900 as a married couple filing jointly ($5,450 for singles) in 2008.

6. No tax on some capital gains. Joint filers whose taxable income doesn’t exceed $65,100 and single filers with income that doesn’t exceed $32,550 don’t have to pay any tax on capital gains they realize in 2008; the rate for other taxpayers remains at 15 percent.

7. More time to sell a house when you lose a spouse. Taxpayers who lose a spouse now have up to two years after that death to take the maximum exclusion of $500,000 in gain on the sale of a principal residence. The other requirements for the exclusion must have been met before the death.

8. Less money back for some hybrid cars. While buying a hybrid car can still save you taxes, the tax credit has been phased out on many popular models such as the Toyota Prius. Check out the 2008 Model Year Hybrid List at www.irs.gov before you buy.

9. Tougher taxes for kids. Children 18 and under or full-time students up to 24 years old will pay taxes at their parent’s tax rate for investment income over $1,700. Note that this rate doesn’t apply to wages a child earns.

10. Higher cutoffs for Social Security. The maximum amount of earnings subject to Social Security tax increases to $102,000 in 2008.

Home Improvements: Which Projects Pay-Off?

Your home isn’t just a place to live; it’s also an investment – and likely a very lucrative investment at that. Home prices nationwide have been steadily climbing. For this reason, it’s important to consider how well home renovations will hold their value when it comes time to sell.

RETURN ON INVESTMENT
While few renovations can be expected to fully pay for themselves come resale time, some clearly hold their value better than others. The Wall Street Journal recently published the national average costs and estimated returns for a number of different home improvement projects. Here’s how they stack up:

KITCHEN REMODELING – The kitchen is the heart of the home for most people, so it’s usually a good place to invest – especially if yours is an older home with outdated kitchen features and appliances. The average spent on a major midrange kitchen remodeling job in the U.S. is $43,804 and returns 75 percent, while $68,962 is spent for a major upscale remodeling and returns 80 percent.

ADDING A DECK – In many areas of the country, buyers no longer consider decks to be upgrades, but rather a standard feature. Decks are also one of the most reliable home improvement values, averaging about $6,300 to build but recouping an impressive 104 percent of their cost at resale time.

WINDOW REPLACEMENTS – Replacing old and drafty windows makes sense from both an energy efficiency and resale standpoint. You’ll see the savings almost immediately on your utility bill, and window replacements are a pretty good investment, too. The average of $15,557 spent on an upscale window replacement job returns 87 percent, and the $9,586 spent on a midrange window replacement job returns 85 percent.

SIDING REPLACEMENT – Replacing old or worn-out siding ranked #2 on the list of highest returns, right behind decks. At an average cost of $7,329, siding replacement returns 98 percent of the investment.

FINISHED BASEMENTS – Finished basements have become one of the most popular home improvements. They’re not a bad investment either. The average basement remodeling job costs $43,865 and returns 79 percent of the investment – not to mention the money saved in movie tickets!

EXTERIOR PAINTING – This is not technically a home improvement, but rather a home maintenance project. In most areas of the country, home exteriors, (wood and siding) should be repainted every 3 – 5 years. So you ned to make a judgement call regarding repainting your home exterior if you’re getting the home ready to sell, since you’ll recoup about 81 percent of the average cost of $3,250. If the home is in obvious need of repainting, you’ll probably need to make the investment if you want to give your home the best chance of selling quickly and at the highest possible price.

Of course, the return on investment is just one factor when considering home renovations. Your primary reason for making renovations should be because you will enjoy them yourself (especially since improvements made in the year before a home’s sale only return an average of 70 to 80 cents on the dollar.)

Ignore the Headlines

The following article is a worthwhile read for anyone interested in buying real estate in the current market.

Thursday, Feb. 14, 2008
Ignore the Headlines
By Dan Kadlec

Famed Money Manager is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.

That's no easy thing. How do you tune out all the chatter and ink on recession, housing, subprime woes, the credit crunch, rogue traders, insolvent bond insurers, $100 oil and nukes in Iran? It's enough to make you sit on your thumbs and wait before making any big moves. But what, exactly, are you waiting for?

There has rarely been a moment in history when you couldn't scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, "in spite of all the great and minor calamities that have occurred ... all the thousands of reasons that the world might be coming to an end--owning stocks has continued to be twice as rewarding as owning bonds."

A top reason to not buy stocks, in Lynch's view, is if you don't already own a home--in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. Through a spokesman, Lynch reaffirmed these views to me--housing debacle and all.
When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger excel in the long run. As John D. Rockefeller famously said, "The way to make money is to buy when blood is running in the streets."

And the streets are stained crimson. Start with stocks. They have been pummeled this year. GDP braked sharply last quarter, and there has been plenty of panic about a recession. The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. But if you stick to your steady, diversified plan while everyone else is retreating, you will be happy years from now. For one thing, Fed rate cuts always lift the economy eventually, and the stock market typically starts responding just as headlines get gloomiest. Sure, the market could fall again before recovering. But the recession may be half over already--or we may avoid one altogether. You just never know.

As for housing, certainly some skepticism is in order. Formerly sizzling markets in Florida, Nevada, Arizona and California probably haven't seen the worst headlines just yet, though they may well be close. And "jumbo" mortgages, those more than $417,000, are likely to remain artificially high for a few more months while banks work through their credit issues.

But let's say you are emotionally ready to be a homeowner. You have good credit, plan to stay put for five years and have been waiting for the perfect entry point. It's time to get serious--before an inevitable rise in interest rates wipes out your advantage. "The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher," says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs.

Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Monthly principal and interest come to $994.31. Let's say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be.

It's more complicated if you must sell before you can buy. But that logjam won't persist forever--and if it appears you'll be trapped for a few years, try to refinance at today's lower rates. Risks always seem most acute when the headlines give you ulcers. But that's exactly when you should think long term--and get off your thumbs.

[This article contains a table. Please see hardcopy of magazine.]

Due to an inputting error in information supplied by Lending Tree, the original version of this article contained incorrect data in an example assessing the relative cost savings of buying a home today or waiting a year for the housing market to drop 10%.

Find this article at: http://www.time.com/time/magazine/article/0,9171,1713483,00.html

Tips for the First Time Buyer

Now is the time to buy. Many first time buyers may be apprehensive in our current market, however, if you follow the tips below, you have no need to fear. With the new loans and low interests rates, and many homes to chose from, now is the time to find the home of your dreams!

What is the difference between an agent and a realtor?

The word "agent" is a general term meaning any person that represents another in a transaction or business. This term can be used broadly for your real estate agent or realtor, but an agent with the title of realtor, a registered trademark, identifies a professional in real estate who subscribes to a strict Code of Ethics and is a member of the National Association of Realtors.

Why should I have a Realtor?

Every real estate buyer should have their own buyer's agent, otherwise the seller's agent will represent you. The seller's agent is working in the seller's best interest, not yours. Engaging in a transaction without your own agent is like going to court and using your opponent's attorney! Why would anyone want to do that? Your agent will represent you with your best interest in mind, making sure that you get a fair price and any discounts. Besides that, it's free!What will it cost me?It does not cost a buyer anything to have a real estate agent. The seller gives a commission to any real estate agent that brings in a buyer. If you buy without your own agent, that same commission will go to the seller's agent instead, on top of their seller's commission.

Why should I sign an exclusive contract with my realtor?

A realtor invests their own time and money, at their own personal expense, to find you a home. This includes all overhead costs which keep them in business (subscriptions to top real estate databases, websites, advertising, signage, open houses, property scouting, gas, etc.). If you have several realtors scouting property for you (i.e. no exclusive contract), they can not be certain that you will use them as your representative when they finally decide to buy - which means, they will have been working for free! If you are one of these clients, you will be on the bottom of the priority list, while other contracted buyers will get the utmost service and time from their brokers.

What will my realtor do for me?

Your realtor will endlessly search for property that fits your needs. They will do so by scouring the multiple listing services, driving and visiting Open Houses in your area(s) of interest, keeping up on top of new listings that come out weekly in Caravan Express, the real estate agents publication, and using their interoffice networks and associates for new property profiles even before they are listed!

Your realtor will do a complete market analysis of your area of interest to make sure that the properties you are considering are within market value and not overpriced. She will also negotiate on your behalf to get a fair market price and/ or added value.If you are uncertain what you are looking for, your real estate agent will guide you - directing you to areas that are appealing and which you can afford! She will give you demographics, school information, crime rates, local attractions, businesses and any other information you need to know.

Your broker will also scout Open Houses that you do not have time to attend. She will let you know her thoughts and will also take digital photos at your request.Why should I get preapproved for a loan?A preapproved loan lets you know what you can afford before you start searching. This saves both you and your broker time looking in price ranges above or below what you can afford. It also saves you the heartache of finding a home that you love but can not afford. When you come with your preapproval letter, you can look at Open Houses in your price range, so that when you do find the home you want, you are comfortable and can afford your purchase. Seller's are also looking for preapproved buyers. They will not even look at offers from buyers without preapprovals, as they are not ready to go. In a seller's world, it is about selling fast!

Where can I get a valid preapproval letter?

30% to 40% of preapprovals issued are faulty or invalid. Internet based lenders and mortgage brokers contribute largely to these numbers. A faulty pre-approval letter is a key cause in breakdowns of transactions and make a buyer highly vulnerable to costly postponement or a blow-up on a deal. A faulty preapproval letter will provide mortgage terms, rates, and amounts without a lender having ever seen any documentation. No preapproval letter is worth it's weight if the lending institution has not thoroughly checked credit files, income and cash on hand. Basic standards deem that the preapproval letter should disclose, for example, that the loan amount offered is subject to full appraisal, formal underwriting and receipt of an acceptable contract. It should state that the interest rate quoted is not locked and could change.Your realtor can also put you in touch with several reputable lenders for you to evaluate.

What should I do once I have my preapproval letter?

Once you get your preapproval letter, put your life on hold. Don't change jobs, don't buy a car, don't apply for a credit card, don't do anything that could affect your credit! Otherwise, your financial profile and credit score could change enough to render your once valid preapproval letter useless!

With your preapproval letter in hand, contact your realtor of choice, Adele Langdon, and let her take you home!