The Dept of Housing & Urban Development (HUD) is revitalizing neighborhoods by creating more quality homeowners who will improve their homes and surrounding area. Let’s look at the specifics:

Who?
•  Law Enforcement Officers
•  Pre-Kindergarten through 12th Grade Teachers
•  Firefighters
•  Emergency Medical Technicians

What?
The ability to buy a home for 50% of the list price. You don’t have to pay back the other half if you live in the home for at least 36 months.

Where?
Homes that qualify must be in revitalization areas that HUD has designated.  Checkout HUD Revitalization Areas.

When?
You can sell the home after 3 years and keep the profit. You don’t have to be a first time buyer to qualify. You just need to be ok with living in the selected neighborhoods that need some revitalizing.

Why?
To improve neighborhoods and benefit those who give to their community through their jobs.

How?
You must commit to living in the home for at least 3 years. If you use an FHA loan, your downpayment is only $100. You may also finance in your closing costs, making it very inexpensive to get into a home.

You may be able to use a 203k Rehab “fixer-upper” loan to help with fix up costs with this program.

Check out the neighborhood very carefully. You are making a big commitment living in this home for 3 years.

Your Buyers Agent and Mortgage Professional are going to be crucial advisors anytime you use a unique program like this.

The closing process speeds up in the final week or two of your home purchase.  Here are the steps you’ll need to take.

Order Homeowners Insurance. Call your insurance agent at least 2 weeks before closing to discuss what policy you will get & ensure that there will not be problems getting insurance.

Ask your Buyers Agent how the final document signing and closing process happens in your area.

Walkthrough & Verify Repairs. You should visit the home 3 to 5 days before closing to make sure the property is in the same condition as when you put the offer on it. You will also want to verify that any repairs have been done properly. Just getting receipts from contractors who did the repairs is not sufficient, you should look at the repairs or have your inspector come back to verify repairs were done properly (usually for a $50-100 charge).  See our Lesson Removing Contingencies & Your Final Walkthrough.

Signing. You’ll have an appointment to sign the final mortgage paperwork and closing documents. Be sure to bring your photo ID and a cashiers check for any funds you need to provide.

Plan to take about an hour to an hour and a half to sign all the final paperwork to close the transaction.

Review of documents. Once you sign the final mortgage paperwork, it will be sent back to the lender to verify its been completed properly.

Closing. The closing process is finalized.  Closing a home sale involves transferring ownership from the seller to you and recording it in public records.  Congratulations- you’ve achieved home ownership!

Possession. You take possession of your new home on the date you agreed upon with the seller in your sale agreement.

The longer a seller is allowed to have possession of the home after closing, the more potential problems can come up.

A contingency, in real estate, means something that gives a buyer or seller an “out” clause to cancel or modify the terms of sale without violating the contract.  In the buyer’s case, this means that if they choose to cancel the transaction using a contingency clause, they can still get their earnest money deposit back.  See Escrow, Earnest Money, & Good Faith Deposits.  Closing on a house requires that contingencies either expire or are removed. Let’s look at some common contingencies and how they are removed before closing on a house.

Loan approval. Often it’s not completely removed until the sale actually closes.  Read your Sale Agreement for specific details.

Appraisal. This is removed upon the home appraising for the purchase price or more.  See All About Home Appraisals.

Insurance. You typically must have insurance lined up within a specified number of days.

Homeowners Insurance is also called Hazard or Fire Insurance.  Talk to your insurance agent at least 2 weeks before closing.

Home inspection. Once the inspection period ends, the seller does not have to negotiate repairs any more.  See Negotiating Home Repairs.

Property survey. If this is standard in your area, it must be done by a specified date and approved by the buyer.

Water & Sewer. Are you satisfied with tests and inspections on water and sewer lines/systems?  These must be completed by a specified date or accepted “as is.”

Repairs. You need to tell the seller, in writing, what date you expect repairs to be completed & how you’ll be approving them.

To make removing inspection and repair contingencies go smoothly, be very specific when asking for repairs to be done and by what date they must be completed.

Disclosures. If disclosures are given to you, you’ll have a certain number of days to back out of the deal if unhappy with them.

Construction. When having a home built, you may be able to cancel the agreement if construction deadlines are not met.

Review of paperwork by a professional. You’ll agree on a time frame with the seller to approve of findings by professionals.

Watch your timelines for each contingency carefully because the seller may not be willing to extend them.

“Title” is a document that shows ownership, also called a “deed.”  After you have an accepted offer, the title insurance company will research the history of ownership of the property as well as the current status of the title and provide you with a Preliminary Title Report.  This report shows:

• How much is owed by the seller (so you can be sure they don’t owe more than they are selling it for, see What’s a Short Sale & Should I Buy One?
• Who the legal owner is (hopefully the person selling it!)
• If there’s a Homeowners Association or Covenants, Conditions & Restrictions (CC&R’s are rules for the neighborhood) that go with the property.  See What’s a Homeowners Association?
• Lawsuits filed against the seller. (including divorce)
• Liens (legal claims involving the property) that have been filed by the government, contractors, lenders, etc.

A “cloud” on title isn’t bad weather! It’s anything that could affect your ability to transfer ownership when you sell.

Title insurance does the following for you:

• Verifies that the person selling the property has legal authority to do so.
• Ensures that any liens are removed.
• Covers problems arising from fraud, legal issues, divorce claims in transferring title.
• Covers prior forgeries, mistakes in legal documents, inheritance.
• Protects you against someone challenging your rightful ownership of the property.

Unlike other types of insurance, you only pay for Title Insurance once & it covers you as long as you own the property.

Title insurance may not be exciting, but you’ll definitely be glad you have it if you need it!

You and your Buyer’s Agent will decide what repairs to ask the seller to make.  Or, you can ask the seller to give you a dollar amount credit instead of making repairs.  Whether the seller will do either of these things depends on who the seller is and their level of motivation.

Negotiating repairs can be harder than offer price since both buyer & seller feel they’ve already given as much as they can.

If the home is owned by a normal seller, you’re more likely to get them to agree to some repairs.  If the seller is a bank or a “short sale,” the likelihood of getting repairs paid for is very low.  Banks generally won’t pay for obvious things like cosmetic repairs, broken windows, or most anything you can easily see by walking around the property.  However, if major repairs such as a dead furnace or leaking roof (that looked fine prior to inspection) are discovered, they are more likely to pay for these to be repaired or replaced.

Getting a credit instead of repairs completed can be risky because repair costs may end up higher than estimated!

The thing to remember is that you can ask for anything you want.  Everything in real estate is negotiable.  The answer may be “No”, but you can ask.

A good rule of thumb is to ask a seller to do repairs that would require hiring a professional, and not asking for repairs that you can do yourself.  Include photos and a description of the the problem areas (from your inspection report) to support your requests.  Also, be sure to tell the seller what repairs you are not asking for so they see you’re being reasonable and not expecting a brand new house (unless of course it is a brand new house!)

The seller is not required to do any repairs, but you have the right to cancel the sale if they refuse.

The General Home Inspection is a turning point to decide if you move forward with your purchase or back out of the deal.

Don’t confuse Inspections and Appraisals. Appraisals are to establish a property’s value for your lender.  Inspections are for you to find out about any specific repairs that are needed.

Since the Inspection can take 2 hours or longer, you’ll have the opportunity to look at the home in much more depth than you did before making an offer. Open the closets, try out kitchen cabinets, run faucets & showers, measure room sizes, and get a feel for what the home will be like to live in.  Make sure your Inspector takes pictures of problem areas so you don’t have to go under the house or on the roof!

Different parts of the country may use different names for the Home Inspection like Property Inspection, Real Estate Inspection, etc.

Your Inspector is like a Primary Care Physician who refers you to other specialists when needed, so ask for recommendations.  You’re welcome to follow the Inspector and ask questions. Take full advantage of your inspectors wealth of knowledge and ask questions, not only about what problems they find, but also how to care for the home.  Some crucial questions include:

• How should I prepare the house for cold weather?
• Where is the main water shutoff to the house?
• Are there any recommendations you have to improve the insulation and energy efficiency?
• Do you have a recommended maintenance schedule?
• What is your opinion of this type of construction/style of home as far as potential maintenance issues over time?
• What care should I plan for with a roof of this type?
• How does the condition of this home compare to the average home you inspect?

After your Inspection is complete, you’ll discuss with your Buyer’s Agent what repairs you’d like to ask the seller to take care of, so see Negotiating Home Repairs next.  My extremely thorough and competent Home Inspector, Don Hatch at Assurance Inspections in Portland, Oregon, gives some wonderful insights and even a few laughs in our download: “Q & A with the General Home Inspector.”

Your inspector doesn’t have “x-ray vision”, but they can look for symptoms that point to hidden problems.

This can serve as a checklist for home inspections you may want to have, but you need to have your Buyer’s Agent advise you on inspections in your area.  We’re including links to authoritative sources for more in depth info as well.

• A sewer scope checks sewer lines for leaking and damage and should be done on nearly all properties.
• Radon is a naturally occurring gas that comes out of the ground.
• Roof – ask your home inspector if it should be checked by a professional roofer.
• Furnace – the home inspector may recommend a furnace specialist if needed.

The general home inspector is like a primary care doctor – they will recommend other inspections if conditions warrant them.

• Pest & Dryrot – typically done as part of the general home inspection & includes termites, carpenter ants, etc.
• Lead Paint – homes built before 1978 could have lead paint and you may have it tested.
• Mold is everywhere & most varieties are not harmful to most individuals. You should have it tested if there is water damage, high concentrations of mold or if someone who will live in the home is young or sensitive to mold.

You must get the sellers permission for some inspections, especially those that will cause even small amounts of damage in testing.

• Septic systems should be pumped & inspected every 3-5 years depending on use
• Underground storage tanks for heating oil can leak & should always be tested
• Asbestos is very harmful to your lungs if it becomes airborne, but if contained, does not pose health issues.
• Siding/Artificial Stucco. Defective siding & artificial stucco can cause rot & mold. Your home inspector will alert you if needed.

You could spend a fortune on unnecessary inspections, so ask your Buyer’s Agent for guidance in choosing which to perform.

These negotiation tactics have proven themselves to be some of the most effective when dealing with residential real estate.  Buying someone’s home is almost always a sensitive negotiation because of the strong feelings people have about their home.

Get personal. Submit an introduction letter with your offer telling the seller anything positive about you and the home. An example would be what your job is, what you like about the area, how you appreciate what the seller has done with the home, landscaping, etc. This “softens up” the seller in many cases because they want to sell the home to someone they like.

Don’t bother sending an introduction if the seller is a bank, they won’t see it and don’t care!

Don’t get too personal. One tactic that almost never works is to “beat up” the seller over their price or the condition of the home. Giving the seller a list of comparable homes with lower prices or a list of repairs needed will make them LESS willing to negotiate with you!  Remember, this is their home and people will negotiate based on emotion.

If you get the seller to accept a much lower price, they will typically not budge much on doing repairs.

Make it about you. If you come in with a low offer, you’ll get much more flexibility out of a seller if you use this tactic. Tell the seller “This is how much we can afford to pay for the home. We did not want to offend you, we just wanted to give you this offer in case you can flex on your price now or in the future. Thank you.” This tactic has worked many times for our clients because even if they won’t come down today, they often will later on.

A seller is allowed to accept another offer while they are negotiating with you so don’t drag out negotiations for too long.

When buying a house, your offer price can be determined by looking at three points of view.

Measure the “Mo” -  The Sellers Point of View

”How much do you think they’ll take?” is a question I get all the time. I wish I could pull out my crystal ball to see the sellers level of “mo” tivation. Truth is, we have to do it the ol’ fashioned way- with good detective work!  See our checklist of “Questions to Determine a Sellers Motivation”

Using “dollars per square foot” is faulty.  See Download on the right “What doesn’t work to decide on an offer price.”

The “Morning After” Question -  Your Point of View

Ask yourself, “If I write an offer tonight at X price and my Buyer’s Agent calls me in the morning and says someone beat me out with a higher offer, how bad would I feel?”  If you’d be crushed, you should offer a bit higher.  If you’d feel just fine and need to get it at your price, offer a bit lower.

Compare “Apples to Apples” -  Market Point of View

Everyone has comparison shopped for cars, apartments, etc.  It’s the same with a home.  Once you’ve seen 4 to 6 similar homes in a neighborhood, you get a good feel for what’s a good deal and what’s not.  Have your agent pull up “sold” prices of similar homes for the most accurate comparison shopping.

There is no exact price for a home!  It all depends on how motivated a person is & motivation is personal.

We work with many first time homebuyers and the vast majority ask the seller to pay for some or all of their closing costs.  Sellers are generally fine with paying some of your costs, but they will consider how much it costs them.  Let’s look at an example of how this works:

A home is listed for $150,000.  You offer $145,000 and ask the seller to pay for $5000 of your closing costs.  The seller sees this as a “true” offer of $140,000 since they will not get to keep the $5000 they pay toward your costs.

When you structure your offer, decide what “true” offer price you want the seller to see.  What if the home is perfectly priced at $150,000 and the seller won’t come down at all in price?  You’ll need to offer $155,000 and have the seller pay $5000 in order for your offer to net the seller $150,000.

Before writing an offer, ask your Mortgage Professional how much the seller is allowed to pay toward closing costs & prepaid expenses.

Keep in mind that most loans have restrictions on how much in closing costs the seller is allowed to pay.  They care who pays closing costs because they don’t want the purchase price artificially inflated very much.

Remember, these are your closing costs. Sellers have much higher closing costs of their own and may want a higher price in return for paying yours as well.