Questions to Ask Before Buying a House

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What to Know When Buying a Home For The First Time

Buying a home for the first time can be daunting. Before you put down your hard-earned deposit and sign away the next 15-20 years of your lives, there are a few points to clarify, and this is the time to ask the questions.

When you are spending hundreds of thousands of dollars, there are no questions that are too trivial. If you have a real estate agent, make sure you lean on them for advice. If they are worth their salt, they will be someone to lean on for all the things you’re unsure of.

Having a first-time home buying guide is always useful. You can also seek assistance from family and friends that have already been through the process.

Consider a few of the following points as a first time home buyer. These are great questions to ask yourself as you journey towards owning your first house.

  • How far will you be from work, and how good is the public transport?
  • How long does the commute take?
  • Do you want to live near shops, schools, hospitals, cafes, and parks?
  • Will you be near enough to Mom and Dad so you can drop in for dinner?
  • If you are pregnant, how near is your hospital?
  • Can the kids walk to school? Homes in sought after school districts always sell really well! So even if you are not having children consider this fact from a resale perspective.
  • You want a neighborhood with a good community appeal, where you have a large enough population to support cafes and diverse restaurants, and possibly a good pizza/sub shop.
  • Do you have a dog? You will want an off-leash dog park, to take Fido for a run, and a local vet.
  • You are busy, so look for a home requiring minimal renovation. Major renovations are not affordable when you are in your first home. It would help if you got a bit more equity first. Having said that, even minor renovations require a handy hardware store nearby.
  • Try not to exceed your budget. The lender will look for some leeway in the budget, so when you choose a home, make sure, based on your combined salaries, that you can afford it. You want to keep your housing costs, including insurances, between 25% and 28% of your monthly take-home pay. This is a bit easier for a couple than for a single buyer.
  • Are you eligible for any first home buyer grants or incentives? The United States Department of Housing and Urban Development (HUD) also provides grants to first home buyers. If you apply early in the new financial year, you may be eligible to receive one, important to apply early as the program has limited funds, is soon exhausted, and is not refunded until the following fiscal year. You just may qualify!

Questions to Ask When Buying a Home

Questions to Ask and Things to Do Before Buying a Home

Get a Mortgage Preapproval

Once you have everything in place, try to get your mortgage preapproval in writing from a well-known lender. It is always a good idea to comparison shop a few lenders as well before settling on one.

Be prepared to have your financial information (proof of employment and income) verified for written preapprovals.

These last for about three months and you are then ‘buyer ready.’

Make Sure You Have a Professional Home Inspection.

Have a look to be sure that the roof, foundation, HVAC systems, flooring, and walls are all in good order. Make sure you have a house inspection before closure done by a well respected local professional.

You really want to know before you put the escrow deposit down if there is anything to be done. Home inspections are also a great learning exercise about the property you are purchasing.

The home inspector will go over all the systems, especially the furnace, air-conditioning, and electrical. They will check the basement for dampness and mold. A good inspector will also have a keen eye for evidence of termites, other insects, and rodents.

Getting a home inspection done is especially important when you are purchasing a fixer-upper home.

Is The Home Low Lying?

Is the house near a river or a low lying flood plain. You don’t want to be paying for flood insurance as it is costly. If the area is a flood zone, it might be why the home is cheaper. Once a house is flooded, it is never the same again. So, avoid any possible flood area.

Is The House on a Busy or Noisy Road?

Houses on major roads are usually less expensive. If you decide to purchase on a major road, make sure that the house has insulation, as a major road can be very noisy and polluting. Avoid big thoroughfares if you can, because it won’t have a good resale value.

Think About Using a Buyer’s Agent?

If you are having difficulty sifting through the choices available, you may decide to hire a buyer’s agent. It likely won’t cost you anything as real estate commissions are typically paid by sellers.

A great buyer’s agent will be in your corner working hard to find you the right home. The best agents will not offer any pressure for you to purchase. If you are a busy professional, having someone scouring the multiple listing service for you every day can be a godsend.

Make an Offer Stick

Start attending open houses to get a feel for the market. Are real estate values rising, falling, or stable. If home prices are falling, that will be good news for you. It might be possible to find a house you previously thought to be unaffordable.

When you find the home that makes you happy, you’ll want to pounce on it, especially if it is an excellent deal. Get together with your real estate agent and write the offer. Be prepared to have some give and take, which is often the case. Negotiating is something buyers, and sellers do. Try to make it a win-win if you can.

If the seller has already bought elsewhere, you will probably be in the driver’s seat as there will be some urgency to get a deal done.

On the other hand, if you are in a hot seller’s market, be prepared to move quickly. There could be multiple offers and bidding wars. Unfortunately, there will be less flexibility. To get the house you really want, you’re probably going to need to step up to the plate and give the seller their desired terms.

It is vital to be proactive at this stage, as you want to get into a house before your preapprovals expire. The financial markets are very mercurial, and especially in a rising market, conditions change very quickly.

Prepare For Moving

One of the most arduous tasks when buying or selling a home is moving. The move can not only be physically stressful but mentally as well. There are so many things to get done. Did you change your address with the post office? How about getting one of the best moving companies in the area?

Maybe you have found that hiring professional movers will be too expensive and rent a moving truck instead? Lots of folks choose to rent a moving truck from U-Haul because of the convenience and lower cost.

These are all things that should be thought about well in advance. Proper planning goes a long way when buying your first house.

Final Thoughts on Buying a First House

Once you have the finance approved for your new house, it is important to be ready to recognize and grab a good deal when it comes along. Buying a home for the first time can be a full time and stressful job. You will have a limited amount of time to perform what seems like an endless list of tasks. The good news is, it will soon be over, and you will be in your own home.

Hopefully, you have found some of these first-time homebuyer tips to be useful.

7 Things to Consider When Selling an Inherited House

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Inheriting a home can come with a mixed bag of emotions and responsibilities. In addition to processing the death of a loved one, acquiring a house can be daunting.

There are often several heirs involved in the process, as well as financial debt and legal issues to navigate. If you’re interested in selling a home you’ve recently inherited, here are some important things to consider as you begin the process. 

The home’s worth

Getting a broker’s price opinion will be your first step.

Before you make any decisions, try to determine the value of the home. Many online estimators can assist you in this process but keep in mind that they’re not always completely accurate. In other words, you may not be able to sell for that exact price. 

Comparable properties in the area (that are selling in the current housing market) may help you make the most accurate prediction. Also, note that the house may need repairs or minor updates if it hasn’t been cared for in a while. 

Having a general idea of how much the home is worth will be important as you work towards finalizing your listing.

Things to Consider When Selling an Inherited HouseAny remaining amount on the mortgage

Next, it’s important to figure out how much is left on the mortgage. If the home is not paid off, you’ll be responsible for making payments every month. This is why it’s critical to find out where the mortgage stands as soon as possible.

In addition to monthly mortgage payments, check to ensure all property taxes are up to date and paid in full. You should also complete a title search to check for any liens on the property. These types of financial issues will need to be settled before you can begin the process of preparing for a sale. 

How many heirs are inheriting the property?

There are often several heirs when it comes to an inherited home. For those who have siblings (or even cousins), this can be a lot to sort through. 

Carefully examine the will to identify all heirs and notify them of the situation. You should also identify the executor who will have the ultimate say on any decisions. This individual will be in charge of caring for the home and ensuring the mortgage is paid every month until it comes time to sell.

If the will does not name an executor, the heirs need to work together to identify one. This should be someone ready and willing to step up and handle necessary responsibilities.  

The probate processes

Probate is defined as “the formal legal process that gives recognition to a will and appoints the executor or representative who will administer the estate and distribute assets to the intended beneficiaries.” 

In addition to every state having various inheritance laws, there are different ways the decedent can leave behind assets. For example, a trust is different from a will. Consulting with an attorney is the best way to determine whether a probate proceeding is necessary.

The good news is that many states have worked to simplify probate. While it was traditionally known as a lengthy process, many people report a more streamlined system today.

Tax implications

Selling an inherited house will likely lead to some level of tax implications. Please note that this is just an overview of what to expect. You should always consult with a tax professional to get a better idea of what to expect when you sell an inherited property.

If you’re wondering whether the sale of this property is taxable, you must first determine your basis.

According to the IRS, the basis of property inherited from a decedent is usually one of the following:

  • The fair market value (FMV) of the property on the date of the decedent’s death 
  • The FMV of the property on the alternate valuation date if the executor of the estate files an estate tax return and elects to use the alternate valuation on that return

For more information on this, visit the IRS website

In addition to issues of basis and capital gains, you’ll have to determine whether estate tax applies to your situation. This is a tax on someone’s right to transfer property after their death.

Finally, it’s important to remember that you are responsible for any unpaid and upcoming property taxes on the home when you inherit it.

Preparation before listing

If you’ve made it this far, it may feel like you’re close to the finish line, but preparing the house for a sale can take a lot of time and effort. This is especially true if the person lived there for many years. 

Your real estate agent will guide how you should prepare the house before listing it. Whether they prefer it to be empty or staged with furniture, you should trust their advice.

Regardless of which route you go, it’s time for everyone to determine what they’d like to keep and pack up in a box to bring home. When it comes to old furniture items that have seen better days, consider hiring a company to haul them away. For items that may still hold some value, put one of the heirs in charge of selling items online

Once this is accomplished, you can hire a company to do a deep cleaning of the house before a photographer takes photos for the listing. 

Accepting the right offer

If you have time and patience, it pays to wait for the right offer. Your real estate agent will help you facilitate negotiations that lead to a fair price. This is the best way to ensure every heir gets a sum of money they’re satisfied with.

If you’re eager to sell quickly (and without making repairs or improvements), you may want to consider selling to a cash buyer. These are companies that are willing to buy houses for cash, usually as is. The downside is that you won’t get full price for the home.

Consider your options before making a careful decision.  

Things Worth Checking For in a New Construction Contract

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If you’re thinking about selling your house, but your dream home isn’t on the market, it may be time to consider building.

New homes offer many perks, including the opportunity to choose a floor plan that suits your personal needs.

If this is your first time purchasing a new build, the contract is very different from your typical real estate transaction. Unfortunately, they’re usually designed to protect the builder more than the buyer. 

You must be diligent about understanding every aspect of the document you’re about to sign. Address every issue you find, and if possible, hire a real estate attorney with your best interest at heart to examine it.

As you review your new construction contract, here are a few items to keep in mind.

What to Check For in a New Construction ContractTimeline Estimates and Penalties

Construction time frames are an important part of the contract. Although most new builds require about a year of preparation and building, construction has been slower in the aftermath of the COVID-19 pandemic.

Make sure you understand the start and finish dates and deadlines for selecting materials. Also, check for information regarding what happens if the home isn’t completed by the estimated date.

Delays and incomplete work can cause some of the biggest legal issues when it comes to construction. If there are no penalties in place, try to negotiate them. This will incentivize the builder to finish your home within a reasonable amount of time.

Scope of Work

This refers to the work your builder agrees to perform. Building is much more than hammering nails. Your builder will usually obtain all the necessary permits for your county or municipality. In addition, the builder will agree to follow the architectural specifications you’ve agreed upon.

Keep in mind, the scope of work may change at some point during the building process if you decide to add a special feature or the builder uncovers a problem that doesn’t allow for a certain element. 

These scenarios should require signed changes to the scope of work within your contract. Plus, you should be made aware of any fees or refunds that result from changes along the way.

Pricing

Perhaps the most contentious part of building a new home is determining the final price and what happens if additional expenses arise along the way. In short, is your price locked in or will you have to foot the bill for unexpected costs?

Both parties must be completely clear about what is and isn’t included in the final price. For example, will the builder include landscaping or work solely on the home? Will your driveway be finished with cement, or will you need to hire another contractor? 

Nine out of 10 construction projects exceed their budget, according to the International Journal of Innovation, Management and Technology. This can be because of delays that require more labor or even rising material costs. Investigate your contract for clauses regarding these situations. 

Warranty Coverage

Although it’s tempting to assume a new house won’t have a single problem, that’s rarely the case. Mistakes can lead to maintenance problems in new homes that are expensive to fix, but repairing them shouldn’t be your responsibility. Whether you’re purchasing your home for the first time or you’re an experienced buyer, warranties are great to have.

A builder’s warranty can last anywhere from six months to two years. Some major structural elements may be covered for up to a decade. In most cases, your warranty should include the following:

  • Concrete foundation
  • Landscaping
  • Carpentry
  • Insulation
  • Electrical wiring
  • Roofing and siding
  • Doors and windows
  • Garage doors
  • Plumbing
  • Septic system
  • HVAC
  • Waterproofing

Likewise, there are certain things that usually won’t be covered in a builder’s warranty, including:

  • Appliances
  • Fading paint
  • Minor cracks
  • Weather-related damage
  • Insect damage

The bottom line is, make sure you fully understand the scope of your builder’s warranty before signing the contract. If you’re worried that it doesn’t supply enough coverage, consider boosting your homeowners insurance.

Dispute Resolution

When you’re excited about the prospect of a shiny new home, it can be easy to view everything in a positive light. Unfortunately, disputes are common in the construction business, and it’s important to know what to expect if you encounter a problem.

Most contracts will include information about dispute resolution. In many cases, they require arbitration, which means you can’t sue the builder. You’ll have to submit a complaint to an arbitrator, who will hear both sides and make a decision. 

This is similar to a trial in court, but the key difference is you lose your right to appeal the final decision. Make sure you fully understand the guidance set forth in this section.

If there’s no information regarding attorney fees, broach the topic before signing. Some states won’t allow you to recover your money, even if the decision is in your favor, unless it’s stated in the contract.

The Bottom Line

Contracts are binding, which makes it imperative to have a full understanding of what you’re about to sign. Take time to fully review the wording of each section, and don’t be afraid to ask questions or negotiate. 

In addition to hiring a lawyer to review the contract, check your builder’s license, insurance, and references. Remember, you’re the one who will be paying the mortgage each month. You have a right to protect your interests when you make such a large investment.

Investing in Single-Family vs. Multi-family Properties

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Seasoned real estate investors know when it comes to investing in single-family rental (SFR) or multifamily rental (MFR) homes that each type of property comes with its own set of pros and cons.

Single-family homes are generally freestanding residences designed to accommodate one family on a parcel of land and with one set of utilities.

Multifamily homes are intended to accommodate more than one family living independently from one another, although they may share walls, common areas, garages, or outdoor spaces. 

Single-family rental homes can be relatively easy to buy and hold, offer flexibility, and generally have lower associated costs, but SFRs typically produce less income than multi-family homes and pose a financial risk if you find yourself without a tenant for any length of time. 

Multifamily homes may provide multiple revenue streams and generate higher income, but MFRs also have higher costs associated with building maintenance and management. 

Many MFRs are co-owned by an investment syndicate —  meaning a collection of investors — and profits are shared amongst the co-owners. While this can reduce the risk for an investor, it also means you have less individual control over the property.

Which type of property is the most beneficial investment opportunity for you will depend on multiple factors including your financial goals, budget, and market conditions.

For example, if it is a buyer’s market or a seller’s market.

Single Family vs Multi Family InvestingAdvantages of Single-Family Rentals

Less Expensive to Start

A key advantage of single-family properties is that because they’re typically less expensive than MFRs, they require less of a cash investment up front.

Conventional lenders traditionally require a 20% down payment for a standard residential real estate loan, but a multifamily property with four or more units will likely require an investor to finance the purchase through a commercial lender, which typically requires a down payment between 25% and 30%.

A $100,000 SFR would require about $20,000 for a down payment, while a $1 million multifamily property, for example, would require $250,000 or more.

Of course, a larger property loan equates to a larger monthly mortgage payment as well, making MFRs cost-prohibitive for some investors. 

Easy to Sell

Because single-family homes are relatively easy to buy, that means they’re usually easy to sell when the time comes to exit your investment. The buyer’s pool for SFRs is larger because it includes traditional buyers as well as potential investors.

Selling a multifamily property requires a more carefully planned strategy and can take longer to execute. 

If it’s a vacation rental property it is likely to be in a high demand area.

Low Tenant Turnover

Single-family rental homes typically see lower tenant turnover than multifamily properties, with the average tenant renting for three or more years.

Many SFR tenants have families with children and are looking to put down roots in a particular neighborhood or are attracted to the school district. It makes sense that SFR tenants looking for long-term stability are more likely to treat the property as their own. 

That said, realize that replacing tenants when they do move on involves maintenance like cleaning and repairs due to normal wear and tear, possible upgrades or updates to the property, and marketing the home to a pool of potential tenants. 

Your finances should be able to absorb an out-of-pocket loss of rent should your property sit vacant for any length of time while you market to new tenants. 

Growing Demand

Demand for single-family rental homes has grown by 30% in the U.S. in the last five years and is expected to continue to grow steadily. Because SFRs are in high demand, they tend to appreciate at a higher value than multifamily rentals. 

Advantages of multifamily rentals

Higher Cash Flow

A multifamily rental typically generates a higher rental income than an SFR because of the simple fact that an MFR comprises more units. One single-family home equates to one stream of revenue, while a multifamily home with four units provides four rental streams. 

Because of this, vacancies pose less of an issue with an MFR as well. If a tenant moves out of a 4-unit multifamily residence, the landlord is still receiving 75% of the rental income until that tenant is replaced.

It’s far less likely that an MFR will suffer from 0% occupancy at any given time than an SFR. This safety net of revenue streams usually reduces the risk an MFR will go into foreclosure. 

Able to Scale Faster

Investors can quickly grow a real estate portfolio at once by purchasing a multifamily property. Increasing your portfolio by ten, for example, is easier to do by purchasing a ten-unit apartment building than purchasing ten individual single-family homes with ten separate mortgages.

Securing financing for an MFR might require working with a commercial lender with stricter guardrails, but you’ll be securing a single mortgage rather than ten. 

Economies of Scale 

It’s usually more efficient and cost-effective to manage multiple units under one roof, as well as increase the value of those units with a single upgrade, improvement, or repair. 

If you repair the roof or the HVAC system on a multifamily home, add a pool to the outdoor space, or update the common entryway, you’re completing that project one time but increasing the value of each unit in the building. 

In addition, a multifamily property requires only one insurance policy, one location to market multiple units and host showings, and one location to perform routine inspections and maintenance. 

Most property management companies charge less to manage MFRs as well. Rates to manage a multifamily property are generally about 4% to 7% of the monthly gross income, compared to the average 10% charged to manage an SFR. 

Though some real estate investors focus exclusively on buying one type of property versus another, the reality is that both single-family and multifamily properties have their benefits and challenges. 

A single-family property might be a good choice if you’re a new investor, want to spend less cash upfront, or need the relatively high liquidity and ease with which you can both enter and exit the investment market. 

A multifamily property could work for you if you’re ready to expand and diversify your portfolio, can handle the higher costs associated with owning a multifamily residence, or are willing to share profits and have less control by purchasing MFR property through a syndicate. 

Ultimately, the right property for you will depend on your current needs and long-term goals.