Straight Talk About Real Estate

These two terms are often used interchangeably, but they do not mean the same thing.

As a mortgage broker, I often pre-qualify my clients. I run their credit, and obtain income and asset information. Based on that, I figure out their housing and debt ratios. With knowledge of underwriting guidelines, I can tell how much of a loan they can most likely qualify for. If I find that they will likely qualify for $300,000, we will look for homes in that price range. If they see a house they like for $500,000, I will not write the offer for them knowing that they will not qualify for the loan. The pre-qualification gives the buyer, seller and agent assurance that we are not wasting our time.

Being pre-approved means an application has been submitted to a lender. The information regarding the credit, income and assets have been verified. The lender will extend the loan, subject to conditions. While this sounds like a sure thing, there are still variables that may cause a fallout. For example, if anything changes in the buyer’s income, debt, credit, or assets negatively, the approval is no good. If the interest rate goes up after the pre-approval, the buyer may not qualify for the same amount. The property also has to qualify in the appraisal value, and clean title transfer.

Is it necessary to be pre-qualified before you start house hunting? Yes. Otherwise you may not qualify for what you want.

Is it necessary to be pre-approved before you start house hunting? No. After you make an offer to purchase, you customarily have a period of time to obtain final loan approval as a contingency to the purchase. If for some unforeseen reason you are cannot get a loan within that amount of time, you can cancel the purchase and receive your deposit back.

Is it better to be pre-approved before you start house hunting? Yes, but…Be prepared to supply updated material, so in a sense, you are having to repeat the process all over again. Also the exact loan amount may change, so the underwriting process has to be repeated. For example, you are pre-approved for a loan based on buying a $400,000 house. You end up getting a $415,000 house. You may still qualify with the higher amount, but it just has to be done all over again.

From November to February, the real estate market slows down, for obvious reasons. Not only are buyers and sellers reluctant to move during the holidays, this is the time most agents take their vacations. Who wants to show homes in bad weather?

However, this is a good time to buy because there is less competition with other buyers. If you find a seller who needs to move by early next year, or who had planned their move before the holidays and has already moved, you might get a decent buy.

It’s kind of like taking advantage of cheaper airfares during off season.

Here are some hints to help keep your appliances longer:

Clothes dryer - Clean lint filter after every drying cycle and keep vent hose clear. Clogging could burn up the motor. I had the unfortunate experience of learning this the hard way! 10-13 years life expectancy.

Dishwasher - Keep drains clear of debris by pre-rinsing dishes. If you normally hand wash your dishes, use your dishwasher at least a few times a month. Otherwise the rubber hoses will harden and be brittle, resulting in leaks. 10-12 years life expectancy.

Garbage disposal - Have cold water running the entire time the disposal is in use. Using cold water allows fats to coagulate and drain out while hot water melts the fats when the water is hot, but will coagulate against the cold pipes further down. Also pour ice cubes into the drain while the disposal is running to clean the blades. It makes a lot of noise, but it will not hurt the disposal. 6-12 years life expectancy.

Is a professional home inspection absolutely necessary?

Most buyers do not have a lot of experience with how homes are built and what could possibly go wrong in a house. A good home inspector will show you the major systems in the house, tell you what general condition they are in, and what to watch out for. I always tell the buyer to follow the inspector around and see what he is checking. Just don’t get the way or interrupt him with questions every 10 seconds. By seeing what he is checking, you can see what things can go wrong, and later check them yourself. The end of the inspection is the proper time to ask the inspector questions about what he did.

You get the most for your money for the home inspection by following the inspector to get educated about the workings of a house. Don’t just wait to read it in the report. I use the information I’ve learned from inspectors to help my clients when they buy or sell.

Interest rates have been so low with so many types of programs for buyers that seller financing has been very rare in recent years. However, I saw a use for it recently.

The buyer and seller agreed on a sales price of $585,000. However, the appraisal came in at $540,000. This house has been completely overhauled, it is like a new home. But the comparable sales show a low value because it is in an area of older homes.

By carrying the difference between the sales price and the appraised value in the form of a second trust deed, the seller was able to sell the home and the buyer was happy to be able to buy. For further information on how to do this, you are welcome to e-mail me.

Real estate is all about location, location, location.

To preserve the value of your home, it pays to build neighborhood pride so everyone will keep their property in good shape.

An excellent opportunity to do this is to get your neighbors into the spirit of Christmas. If you were a buyer, wouldn’t you prefer a neighborhood where every home is decorated, as oppose to a neighborhood where only a few homes are lit up for the holidays?

Set the example by putting up your decorations early. Offer to help your neighbors put up theirs.

Instead of having to fight with strands of lights and sweating to balance the lights evenly on a tree, you can get a tree with the lights already on. Sure saves on time and trouble. Have your decorations up early and enjoy!

When a buyer makes an offer to purchase, how can the seller know that this buyer is serious about buying? What if the seller accepts the offer and proceeds with his plans to move and the buyer decides to change his mind?

The seriousness of the buyer is measured by the size of his deposit. The deposit is the money he puts into escrow upon signing of the purchase contract before the transaction is closed. This is not the down payment.

The deposit is what the buyer stands to lose if he changes his mind about buying the house for reasons that are not stated as contingencies in the contract. For example, if obtaining a certain kind of loan is a contingency to buying, and the buyer couldn’t qualify for that loan, then he can cancel the contract and get his deposit back. Another example, if buying is contingent on the buyer’s satisfaction with the termite inspection, and the termite report did not satisfy him, then he gets his deposit back.

However, if the buyer’s contingencies have all be met, and then he decides he just doesn’t want to buy, then he loses his deposit to the seller.

The deposit can be any amount acceptable to both buyer and seller. As you can see, it is more secure for the seller to see a higher deposit, and it is better for the buyer to give as low a deposit as possible. A customary amount in our area is anywhere from 2 to 3% of the purchase price. If I represent the seller, and the buyer’s deposit is low, I find out if there is a good explanation, and ask for a higher deposit. If the buyer is unwilling to put in more for no good reason, I discourage the seller from accepting the offer. I find that a buyer with a low deposit is generally not serious, and usually causes problems down the line, and end up cancelling escrow.

Incidences of home buglary goes up around the holidays. Criminals are watching and waiting while you are out shopping and partying.

My house was broken into on Christmas Day 13 years ago. The policeman told us the best security system against buglars is a dog. A few months later, we adopted a Rottweiler. We have not had another incident of break-in since then. I suppose buglars checked off our house since there is nothing left to steal a second time.

Compare to 13 years ago, the technology for home security has improved much. It is much easier and cheaper to obtain a good electronic security system. Whether you DIY (do it yourself) or have a professional company install a system, or get a big dog, it is a good idea to be armed with some kind of deterrent.

With many homes having access to high-speed internet service, one attractive option is a internet camera. This allows you to monitor your home from anywhere in the world, as long as you have net access. Rather than worry about wiring, there are now remote internet cameras that can be hidden around the home and easily accessed off-site.

If you own a business, it’s also comforting to be able to monitor activity at your business. Several times a year we get an the burglar alarm going off at the office. Most of the time, its a false alarm. But what if it isn’t? Rather than frantic phone calls or a drive-by to check on it, a quick look through the internet camera will show if it’s all clear.

Did you ever want to own your own home - at sea?

Knut U. Kloster Jr, former chairman of Royal Viking Line and Norwegian Cruise Lines, came up with the concept of building condo units on a cruise ship. The idea is to combine the comforts of home while traveling around the world.

Do you want to take a guess at the price? The ship - The World - offers a 630 square foot unit for $6.3 million, while a 3,200 square foot condo with three bedrooms sells for $6.3. The annual maintenance fee costs from $80,000 to $450,000, based on the unit’s square footage. The upside: there is no property tax.

I wonder: Does homeowner’s insurance cover “sunk ship”?

This is a whole new way of looking at “vacation homes”.

It is no surprise that a home in Southern California, built with a wood frame, will have termites. There are different types, but the bottom line is, they feast on wood and wood products.

If the termite inspector sees evidence of termite infestation, such as droppings, etc., they will either recommend local treatment or fumigation.

People are concerned about the chemicals used in fumigating their homes. There are different types of methods and gases for fumigation. I am not an expert on that. What I do want to point out here is, if you have a tile roof, or a light weight metal roof, there is 100% chance that it will be damaged to some extent when you fumigate.

The workers have to get on your roof to put up the tent that covers the house. The covering is heavy. They cannot possibly tiptoe on the roof while pulling that heavy material onto the roof. You will be asked to sign a waiver saying they will not be responsible for damage to the roof. If you do not sign it, they will not do the job.

You can expect broken tiles. It’s not a big deal to replace them. You just need to anticipate that this will happen and not get upset when it does.

If you have a composition roof, you do not have to worry.