Sunday, February 27, 2011
Tuesday, February 22, 2011
Friday, February 11, 2011
Creative Financing: Lease Options/Rent-to-own
Rent-to-own or lease option to purchase are creative strategies to purchase a home. You should seek legal advice from a qualified real estate attorney before considering this type of transaction. Below is a list of tips and items to consider, but should not be considered legal advice, as I am not an attorney. I would recommend learning as much as possible about this type of transaction, so you and your real estate attorney come up with a strategy that works for you.
- Budget
If you are deciding to rent-to-own, aka lease option to buy, then you and your family, if applicable, should come up with a family budget. Try to input all the monthly expenses: i.e. credit cards, utilities, gas/oil, student loans, taxes, insurance, groceries, car payment, etc. Email me for a copy of the spreadsheet that my family uses.After you complete your family budget, click here to access the Mass Housing affordability calculator. This should give you a good idea of what you can afford.
- Financing
One of the first steps should be to talk to a bank or mortgage broker to find out what you can afford. The goal is to walk away with a pre-approval letter. Next, plug the estimated mortgage payment, taxes and insurance into your budget to confirm you can afford the home. FHA is a great resource of information, as well as a potential option to finance your home. Click here for the FHA loan checklist. Email me for a contact list or search the web for a list of mortgage brokers and banks that you would like to interview. Be careful of web based lenders, not all are bad, but you definitely want to do your homework. I would recommend digging up 7 to 10 lenders. Visit your local banks, regional and national banks should be considered as well. Mortgage brokers have access to a wide variety of lenders, so if your credit is not pristine—not to worry—mortgage brokers may have a solution for you.
Now, you can begin to analyze the different mortgages and lease options to find the best value and maximum protection. This is a time to quiz your real estate broker to see what strategies s/he recommend. There are several strategies, so review all of the potential options. For example, a buyer could offer a seller a $1 or $10,000 option money. The buyer could offer could base the price on current market value or market value when the option is exercised. Terms of the option agreement could be 6 months or 2 years. Remember, in most cases, the option money is non-refundable. There are many ways to structure these deals, so analyze your options, review them with your real estate attorney and broker to decide the best strategy.
Find out from lenders when you can expect to qualify for a mortgage, so you can determine how long you will need to rent/lease. Email me for a copy of a spreadsheet to analyze the different quotes.
- Research the Market
Find a real estate pro that has experience working with buyers in your area. Review your budget to ensure you are looking at homes that you can afford, while considering the number of bed and bathrooms you need. The real estate broker will have access to properties on the market that fit your criteria, and may be able to find a motivated seller that would consider a lease option to buy. Homes that have been on the market for awhile are good candidates for this type of transaction. - Negotiate the transaction
Again, I would recommend hiring a real estate attorney to help you with the contract and negotiation. I have heard nightmare stories about family attorney’s, so I would recommend an attorney that specializes in real estate. In conjunction with your real estate broker, the real estate attorney can help structure the deal to protect you. Remember, real estate brokers and agents are not permitted to give legal advice.As mentioned before, there are several ways to structure these deals, so figure out what is best for you while considering your real estate brokers advice, and more importantly your real estate attorney's legal counsel. For example, if you are going to rent for a year, then you want a portion of your rent to go towards the purchase price. These are items that your real estate attorney should structure into the deal.
- Due Diligence
Below is a list of items to cover with your real estate broker & attorney:
- Seller disclosures (i.e. lead based paint)
- Review title policy
- Home inspection
- Home appraisal
Courteous of Novel Realty, http://novelrealty.wordpress.com/.
Thursday, February 10, 2011
Wednesday, February 9, 2011
Tuesday, February 8, 2011
Monday, February 7, 2011
Friday, February 4, 2011
Thursday, February 3, 2011
Is it Time to Buy in Massachusetts?
Here comes the barrage of media coverage to invade our flat screens with a fresh new apocalypse—Egypt is on fire. Do you feel like a pinball that has bounced from the sovereign debt crisis in Greece, to Ireland, Spain and Portugal? Then we sailed off to the Mediterranean for the Tunisian rebellion, and now Egypt. Don’t tell me, the pyramids are ablaze and King Tut has reemerged as the new Egyptian pharaoh.
The pessimism will never stop, but at some point reality will settle in and the American economy will ignite. Many analysts would argue, Jim ‘Mad Man’ Cramer from Mad Money being one of the bulls—boasting every night that the US economy is roaring and that “we need to get in the game.” The reality is that the Dow Jones Industrial Average and S&P 500 have broken their psychological barriers of 12,000 and 1,300, respectively. The economy is getting better, companies are flush with cash, while Wall Street and big banks are healing rapidly. At some point, corporate America will start hiring again.
Dave Wilson of Bloomberg reported today that Tobias Levkovich, Citigroup chief U.S. equity strategist, believes the recovery will continue with U.S. banks greasing the wheels of economic growth for U.S. businesses. The thesis that Citigroup’s Levkovich argues, is that more bankers are easing “loan criteria” for U.S. companies, than those tightening lending standards. According to Levkovich, the ease in lending standards will have a positive impact on economic growth. Unfortunately, there is a nine-month lag for the market to feel the ease in credit. This is a good sign for corporate America and those looking for a job.
On the flip side, you have the pessimistic analysts, aka the bears, that keep pulling the market back after it appears to be gaining its footing. This could be one of the many reasons the labor market has not bounced back as quickly as previous recessions, which in turn affects the housing market. According to the Bureau of Labor Statistics, the unemployment rate did fall in December to 9.4% from November’s 9.8%—little slice of optimism.
The obvious—real estate is local, so, what does a homeowner in the suburbs do if they need or want to move? The first step is to see how your neighborhoods real estate market has fared during the Great Recession. Just because national home prices have dropped 2,000% (forgive my sarcasm), does not mean your neighborhood has experienced the same abysmal price declines. Ask your local real estate professional to pull the sales comparables for the last 3 months in your neighborhood. To be a little more specific, you want to investigate the sales in the last thirty days within ½ to 2 mile square radius of your home. This will give you a sense of your homes value.
Recently, Zillow released a report that forecasted home prices to fall, however, the
Massachusetts Association of REALTORS® released a report last week that home sales in December were up for the first time since June. Although median price declined less than two percent, the increase in home sales is a positive indicator for the Massachusetts housing market. The low interest rates and lower prices have been a bright spot for residential real estate. Laurie Cadigan, MAR President, stated in a recent article that she sees sales improving in the first quarter.
Where does this leave us? In my opinion, we are going to have a volatile market for the remainder of 2011. Many potential buyers are going to sit on the fence to make sure they buy at the bottom of the market, which some buyers will inevitably miss. If you are in the market to buy a home or trade up, this is your time. With historically low interest rates and markets flooded with short sales and foreclosures, you are bound to find a good deal. Be patient, do your homework and research, and you should discover a diamond in the rough.
The pessimism will never stop, but at some point reality will settle in and the American economy will ignite. Many analysts would argue, Jim ‘Mad Man’ Cramer from Mad Money being one of the bulls—boasting every night that the US economy is roaring and that “we need to get in the game.” The reality is that the Dow Jones Industrial Average and S&P 500 have broken their psychological barriers of 12,000 and 1,300, respectively. The economy is getting better, companies are flush with cash, while Wall Street and big banks are healing rapidly. At some point, corporate America will start hiring again.
Dave Wilson of Bloomberg reported today that Tobias Levkovich, Citigroup chief U.S. equity strategist, believes the recovery will continue with U.S. banks greasing the wheels of economic growth for U.S. businesses. The thesis that Citigroup’s Levkovich argues, is that more bankers are easing “loan criteria” for U.S. companies, than those tightening lending standards. According to Levkovich, the ease in lending standards will have a positive impact on economic growth. Unfortunately, there is a nine-month lag for the market to feel the ease in credit. This is a good sign for corporate America and those looking for a job.
On the flip side, you have the pessimistic analysts, aka the bears, that keep pulling the market back after it appears to be gaining its footing. This could be one of the many reasons the labor market has not bounced back as quickly as previous recessions, which in turn affects the housing market. According to the Bureau of Labor Statistics, the unemployment rate did fall in December to 9.4% from November’s 9.8%—little slice of optimism.
The obvious—real estate is local, so, what does a homeowner in the suburbs do if they need or want to move? The first step is to see how your neighborhoods real estate market has fared during the Great Recession. Just because national home prices have dropped 2,000% (forgive my sarcasm), does not mean your neighborhood has experienced the same abysmal price declines. Ask your local real estate professional to pull the sales comparables for the last 3 months in your neighborhood. To be a little more specific, you want to investigate the sales in the last thirty days within ½ to 2 mile square radius of your home. This will give you a sense of your homes value.
Recently, Zillow released a report that forecasted home prices to fall, however, the
"four largest 20 markets analyzed by the company did not decline in value: Los Angeles, Boston, Riverside (Calif.) and San Diego. The gateway cities -- Boston, New York City, Seattle, San Francisco, Los Angeles and San Diego -- are bouncing back, according to Rosen. The Central Valley in California has not yet stabilized. Silicon Valley is doing well with job creation, and home sales have picked up in the area. Washington, D.C., continues to grow."
Massachusetts Association of REALTORS® released a report last week that home sales in December were up for the first time since June. Although median price declined less than two percent, the increase in home sales is a positive indicator for the Massachusetts housing market. The low interest rates and lower prices have been a bright spot for residential real estate. Laurie Cadigan, MAR President, stated in a recent article that she sees sales improving in the first quarter.
Where does this leave us? In my opinion, we are going to have a volatile market for the remainder of 2011. Many potential buyers are going to sit on the fence to make sure they buy at the bottom of the market, which some buyers will inevitably miss. If you are in the market to buy a home or trade up, this is your time. With historically low interest rates and markets flooded with short sales and foreclosures, you are bound to find a good deal. Be patient, do your homework and research, and you should discover a diamond in the rough.
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