On Using a Buyer's Agent

I came across this video earlier today, and I thought that it illustrated very nicely some of the reason to use a Buyer's Agent when purchasing a home in Green County or anywhere else. Wisconsin laws do allow for a Buyer's Agent, and unless you have a Buyer's Agency Agreement, we as Realtors are obligated to put a Seller's interest first.

Hidden Upgrades

When walking through a home, the eye-catching higher end details often stand out. Great hardwood floors. Solid surface counter tops. Wonderful paint colors. Garden tubs. Six panel, solid wood doors.

Don't forget to ask about the things that are not as easy to see. Look for higher end upgrades in energy efficient features. These upgrades in a home will not only improve your comfort, but they also will save you money, making a home more affordable in the long run.

Take a good look at the windows. Are they a basic builder's grade window, or has the homeowner splurged with low e glass and argon fill? Windows can be a source of enormous heat loss in a home, and quality windows are a huge money saver in the long run. There are many different types of windows, and The Efficient Window Collaborative has an informative website explaining some of the differences.

What is the r-value of the insulation? This one is not easy to see, so ask the seller for documentation if they can provide it. Higher r-values make a home less expensive to both heat and cool.

Have the ducts been sealed? Heating and cooling combined account for about 46% of a home's energy cost on average. With a forced air system, ducts that have been sealed and insulated can prevent energy loss significantly.

Check out the efficiency rating for the heating and cooling system. An Energy Star system is one upgrade that will save you a lot of money over the years.

Those stainless steel appliances might look pretty, but will they cost you a pretty penny to operate? Even low end, inefficient appliances are available in very modern and appealing finishes. Look on the sides of the doors for efficiency ratings or write down the model numbers and check them out online after you take a look at a home.

Ask for copies of the seller's utility bills for the previous twelve months. Yes, there are lifestyle differences the can affect energy usage, but at least you will have a ballpark idea of how much your utility costs would be.

If you buy a highly efficient home, you may be able pay for the cosmetic upgrades you want with the money you are saving on your utility bills. The hidden upgrades can save you big money as the years go by!

Current Homebuyer Tax Credit

New $6500 Tax Credit for Current Homeowners

Are you eligible for the $6500 tax credit? We covered the details in December, so take a look if you want to check. There are 73 days and counting left to get an accepted offer.

You must have an accepted offer in place no later than April 30 and close on the home no later than June 30 in order to qualify for this tax credit.

About that new $6500 tax credit

Much press has been given to the first time home buyer's tax credit, but the newest incarnation of the tax credit includes another very interesting element - the $6500 tax credit available to current home owners.

Not every current homeowner will qualify for this tax credit. Here is a summary of who is eligible:

• You have lived in the home your currently own for at least five consecutive years of the last eight years. This is very important detail that can help those home owners who have had to relocate for work purposes and who have been unable to sell their former home yet.
  
• You are purchasing a home for your primary residence. It does not matter if you are purchasing a traditional single family home, a condo, a townhome or a half duplex as long as it will be your primary residence. Investment and vacation properties do no qualify.
• Your income must be less than $225,000 for a married couple or $125,000 for a single person to qualify for the full tax credit. If your income is between $225,000 and $245,000 for a married couple or $125,000 and $145,000 for a single person, you will receive only a partial credit.
• The home you are purchasing must be less than $800,000.
• You must have an accepted offer to purchase no later than April 30, 2010 and you must close on the property no later than June 30, 2010.

As with the first time home buyer's tax credit, the amount of the credit is based upon the purchase price of the home. The tax credit will be equal to 10% of the purchase price of the property up to a maximum of $6500. If you are purchasing a property that is less than $65,000, your tax credit will be 10% of your purchase price only.

You will need to live in the home for at least three years. If you live there for less than that, you will need to repay the full amount of the credit.

This tax credit is exciting because it helps not just young families move up in their homes as many of these programs normally do, but it also help empty-nesters and retirees who want to downsize.

If it sounds too good to be true...

There are lots of rumors floating around about the $8000 tax credit and whether or not it can be used as a down payment on a home.

Earlier this month, there was a lot of horn tooting excitement because it was announced that it would be possible to use the anticipated tax credit refund as collateral for a short term loan which could then be used as a down payment for a FHA mortgage. This was thrilling news for many first time home buyers out there, and the information was coming from reputable sources - the US government, National Association of Realtors.

A day later, with much less fanfare, the news changed. It was not said that the tax credit could not used as a down payment in this fashion. Oops. The details are being worked on, and while the change is anticipated, nothing has been finalized yet.

FHA requires that a buyer has a down payment of 3.5%. This money can be from the buyer's savings, a gift from a relative, from an approved non-profit group or government agency (down payment assistance program), from a secure loan (ie against an IRA or real property) or from employee contribution programs through the workplace. FHA does not allow for the down payment to come from unsecured loans like those that would be taken out against the anticipated tax refund. The excitement stemmed from early words that the language in the FHA approved sourced for the down payment would be changed to allow for this, but it did not happen.

The tax credit is real, and it is a huge bonus for anyone who has never owned a home or who has not owned one within the last three years and who closes on a home prior to December 1, 2009. There are rules, regulations and limitation on it though. Any buyer who is anticipating receiving this credit should talk not only with a knowledgable realtor but also with a repuatable mortgage banker and/or tax accountant about this.

We all have limitation on our knowledge. I do not pretend to know it all, which is why I hesitate to give advice on matters like the tax credit to my buyers.

Please, be wary of those in our profession who are too free with financial advice. As the old saying goes, if it sounds too good to be true, it probably is.

Termites

When it comes time to write an offer, your realtor is going to ask what contingencies you want to put in it.

Every situation is different, and there is no such things as a standard offer. Many people do put in a financing contingency. If the buyers have a house to sell before they can close, they usually put in a home sale contingency. Most people these days put in a home inspection contingency.

The Offer to Purchase contains a home inspection contingency that allows for a qualified home inspector to look at the house for defects. There is also the word "and" followed by a blank line. This is where the buyer writes in any specific inspections they want: electrical, plumbing, radon testing, etc.

If you are buying a home in Monroe, I would encourage you to have your realtor write in a termite inspection. Long ago, there were lumber yards in Monroe, and this portion of our history has left us with termites in town.

Termites do not discriminate when it comes to age of home, location or price. A termite inspection will cost you the buyer somewhere around $100. Termite treatment is costly, and they can do serious damage to a home. A termite inspection can be money well spent when you are buying a home.

Tips for first time homebuyers

No matter what stage of life you are in, buying a home is never a decision to make lightly. For a first time homeowner, however, this milestone is filled with even more excitement, confusion and worry.

If you are thinking about buying your first home, consider these tips from the National Association of Realtors:

1. Be picky, but don’t be unrealistic. There is no perfect home.

2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs

4. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking.

5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.

6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?

7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as type of mortgage terms that suit you best.

8. Don’t let yourself be house poor. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.

9. Don’t be naïve. Insist on a home inspection and if possible get a warranty from the seller to cover defects within one year.

10. Get help. Consider hiring a REALTOR® as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment.

The process of buying your first home can be wonderful and worrisome at the same time. For most people, their homes are the largest purchases they will make in their lives. You might wake up at three a.m. worried about taking on the mortgage. You may start mentally arranging your furniture and forget to look at windows and roofs. You may be tempted to look "just $10,000 higher" than you can truly afford. Approaching the processes sensibly is important.

If you are buying in the Monroe area, give me or Luis a call. We'll be happy to help you find local bankers and home inspectors, and we can show you what is available in your price range.