Closing is the point at which a contract between a buyer and a seller is executed, and the title to the property changes hands. This process has a variety of associated costs, most of which are paid at closing.
Normal Closing Costs
Closing costs can be highly variable since they're dependant on the size of the mortgage and the value of the property. Typically, closing costs are between three and five percent of the property's value, and may include the following:
* Loan origination fees - also called points (one point equals one percent of the mortgage). The standard fee is one point. Paying more points can secure a lower interest rate.
* Title search and insurance - a title search examines a property's historical records to ensure that the seller is the legal owner of the property. Title insurance protects the buyer if tax liens or unpaid mortgages are overlooked in the examination.
* Inspection fees - includes pest and property inspection.
* Mortgage broker fee - applicable only if you use a broker.
* Tax service fee - if the lender chooses to hire an independent service to monitor property tax payments.
* Document preparation and administration fees.
Payable in Advance
Most closing costs are paid when the sale of the property is finalized. However, some fees must be paid in advance, including:
* Application fee - the cost of processing the loan, usually payable at the time of application.
* Credit report fee - the buyer's credit history is reviewed as part of the application process.
* Appraisal fee for the property.
* Pre-paid interest - the interest on the loan from the day of closing until the first monthly mortgage payment.
* Escrow account funds - may include two months' worth of advance payments for mortgage insurance, hazard insurance, homeowner's insurance and property taxes.
Hidden Costs
So-called hidden costs are those which lenders are not required to disclose in the Good Faith Estimate. These can include:
* Courier fees
* Notary fees
* Documentation fees
* Overnight delivery fees
* Processing fees
You can save money on these hidden costs by asking lenders to send documents by regular mail rather than by overnight delivery, or by asking if they can transfer documents electronically.
Who Pays?
In a typical situation, the buyer of a property will pay closing costs. However, you can sometimes persuade the seller to pay for some or all of the closing costs. If your immediate finances are tight, reducing the amount of cash you need to pay at closing can be very helpful.
If you ask the seller to pay some or all of your closing costs, it is essentially the same as negotiating a lower sale price for the property. To a seller who is asking $200,000 for their property, there is no difference in accepting an offer of $190,000 and accepting an offer of $195,000 which includes agreeing to pay $5,000 in closing costs. To you as the buyer, however, it means that you've reduced the amount of cash you need by $5,000. You may not save any money overall, but if the seller pays for closing, it means you pay less cash up front. If you want to ask the seller to pay for closing costs, it can be as simple as deciding what you want to offer for the property, adding your estimated closing costs to it - and then making that offer contingent on the seller paying for closing. Note that if the market is slow or the seller needs to sell quickly, you stand a better chance of negotiating successfully.
Monday, January 7, 2008
How to Avoid 8 Costly Moving Mistakes
If you have a move in your future, there are definite ways to make the process go as smoothly as possible. Plan ahead and you'll avoid these 8 costly moving mistakes.
1. Scheduling your move on the same day of closing
While most buyers take possession of their new home on the day of closing, there are a lot of conflicts that can arise unexpectedly. Be sure to keep in constant communication with your escrow company so as not to delay your moving plans.
2. Not requiring a written estimate
It's fine to have moving companies give you an estimate over the phone or Internet. But to get a firm price, you need to ask the company to send a representative to walk through your home while you point out exactly what you want transported. Be sure you understand the conditions of the estimate - can they raise your bill on delivery? Does the contract allow them to bill you for more later?
3. Choosing a moving company based on price alone
You could end up spending more time and money in the end trying to fix a moving disaster. Check out the company's references (try to get two), licensing, insurance and length of time in business.
4. Not making a first night survival kit
Better to be safe than sorry. If your shipment hasn't arrived or you're simply too tired to unpack everything, you'll be thankful to have an accessible overnight bag with some essential items you'll need for the first night in your new place. Don't forget toiletries, medication, children's and pet's necessities - and maybe even a bottle of champagne to celebrate.
5. Not using a dolly or a hand truck
Whether you're moving yourself or just rearranging things after a professional move, the money you spend to rent or buy moving equipment will pay for itself by dodging back strains and chiropractic visits.
6. Refusing extra coverage for loss and breakage
The basic limited liability coverage offered to you, free of charge, by the movers will not be sufficient. And most homeowners' policies don't cover items broken or lost in a move. Extra insurance can be purchased through an independent insurance company, which will cover you for the duration of the move. Your mover will be able to direct you to a company that will bind your move.
7. Not labeling boxes
When packing boxes, make sure you label the top and sides of boxes with contents, location of contents in your house and any special instructions, such as "fragile" or "open first." Also, by keeping a list of the contents on the outside of the box, you won't have to dig through several boxes marked "kitchen" just to find a pan.
8. Not keeping your receipts
If you're moving closer to a job, your moving costs may be tax-deductible. Keep receipts for moving household goods, utility change fees and lodging and travel expenses. However, if your employer covers those costs, you won't be allowed to deduct them.
1. Scheduling your move on the same day of closing
While most buyers take possession of their new home on the day of closing, there are a lot of conflicts that can arise unexpectedly. Be sure to keep in constant communication with your escrow company so as not to delay your moving plans.
2. Not requiring a written estimate
It's fine to have moving companies give you an estimate over the phone or Internet. But to get a firm price, you need to ask the company to send a representative to walk through your home while you point out exactly what you want transported. Be sure you understand the conditions of the estimate - can they raise your bill on delivery? Does the contract allow them to bill you for more later?
3. Choosing a moving company based on price alone
You could end up spending more time and money in the end trying to fix a moving disaster. Check out the company's references (try to get two), licensing, insurance and length of time in business.
4. Not making a first night survival kit
Better to be safe than sorry. If your shipment hasn't arrived or you're simply too tired to unpack everything, you'll be thankful to have an accessible overnight bag with some essential items you'll need for the first night in your new place. Don't forget toiletries, medication, children's and pet's necessities - and maybe even a bottle of champagne to celebrate.
5. Not using a dolly or a hand truck
Whether you're moving yourself or just rearranging things after a professional move, the money you spend to rent or buy moving equipment will pay for itself by dodging back strains and chiropractic visits.
6. Refusing extra coverage for loss and breakage
The basic limited liability coverage offered to you, free of charge, by the movers will not be sufficient. And most homeowners' policies don't cover items broken or lost in a move. Extra insurance can be purchased through an independent insurance company, which will cover you for the duration of the move. Your mover will be able to direct you to a company that will bind your move.
7. Not labeling boxes
When packing boxes, make sure you label the top and sides of boxes with contents, location of contents in your house and any special instructions, such as "fragile" or "open first." Also, by keeping a list of the contents on the outside of the box, you won't have to dig through several boxes marked "kitchen" just to find a pan.
8. Not keeping your receipts
If you're moving closer to a job, your moving costs may be tax-deductible. Keep receipts for moving household goods, utility change fees and lodging and travel expenses. However, if your employer covers those costs, you won't be allowed to deduct them.
Increase Your Home’s Value through Energy Efficient Upgrades
Increasing energy efficiency in the home is becoming more important for several reasons. It is, of course, a great way to reduce your monthly utility bills, but it's also important because the world's sources of energy are not infinite, and more people are recognizing this and looking at ways to make their homes more energy-efficient. Lastly, remodeling your home with energy efficiency in mind increases its value due to the resulting lower monthly utility costs.
Insulation
Good insulation is perhaps the most effective way of improving the energy efficiency of your home. However, some insulators are better than others. Fiberglass, once the most commonly-used insulator, is no longer as popular as it once was. Most fiberglass insulators are made using formaldehyde, and can release gas which decreases your air quality. Cellulose is a more efficient option; however some cellulose insulators may be treated with formaldehyde, so it pays to check before you by. Superior cellulose insulators are treated with ammonium sulfate or borates, both of which are non-toxic. Cotton insulation has been increasing in popularity, due to its efficacy and the fact that it is environmentally-friendly. Cotton insulation is treated with boron, and is fire-retardant, pest-repellant, and completely non-toxic.
Windows and Doors
The average home loses up to 30% of its heat (or air-conditioning) energy through windows. Well-sealed windows and exterior doors are just as important as insulation for preventing energy loss. However, many frame materials require maintenance and choosing framing material that provides greater energy efficiency is often a trade-off in which more frequent maintenance is required. Wood frames are the most efficient in terms of energy loss and cause less condensation than other materials, however they will require painting or staining to keep them looking attractive. Aluminum frames, on the other hand, need very little maintenance but they are at the bottom of the list in terms of energy efficiency. Aluminum-clad windows are much more efficient. These are wood frames with an aluminum exterior, and combine the efficiency of wood with the low maintenance requirements of traditional aluminum frames.
Cooling
Many of the measures you take to prevent heat loss in your home will also help keep it cooler during warm weather. In addition, consider installing ceiling fans in your home. These are a more energy-efficient way of cooling than air-conditioners.
Efficient Lighting
When it comes to installing energy-efficient lighting, there are two main options - light dimmers and motion sensors. Light dimmers are switches which allow you to control the intensity of lighting in a room. Motion sensors turn lights on and off automatically by sensing when people enter and leave a room. These are particularly effective in rooms which are used irregularly, and in outdoor areas.
Outdoors
In the outdoors, trees and large shrubs are a less obvious way of making your home more energy efficient. With the additional advantage of adding appeal to your yard, careful planting of trees can add windbreaks which shield your house from wind, helping to prevent heat loss. Trees can also provide shade during the summer months, and help keep your home cool.
Using an Energy-Efficient Mortgage to Finance Remodeling
Major remodeling jobs that are planned with energy efficiency in mind can be expensive. This kind of remodeling will save you money in the long term, but the start-up costs are high. One way of financing such remodeling is with an Energy-efficient Mortgage. To qualify for an EEM, the money you save on your monthly utility bills must be greater than the monthly repayment of the EEM, and your total savings must also be more than your total costs (including maintenance). When you are granted an EEM, you have 90-180 days to carry out the remodeling work. Additionally, you cannot be granted an EEM if you apply after remodeling has started, or if you apply after any other financing has been granted.
Insulation
Good insulation is perhaps the most effective way of improving the energy efficiency of your home. However, some insulators are better than others. Fiberglass, once the most commonly-used insulator, is no longer as popular as it once was. Most fiberglass insulators are made using formaldehyde, and can release gas which decreases your air quality. Cellulose is a more efficient option; however some cellulose insulators may be treated with formaldehyde, so it pays to check before you by. Superior cellulose insulators are treated with ammonium sulfate or borates, both of which are non-toxic. Cotton insulation has been increasing in popularity, due to its efficacy and the fact that it is environmentally-friendly. Cotton insulation is treated with boron, and is fire-retardant, pest-repellant, and completely non-toxic.
Windows and Doors
The average home loses up to 30% of its heat (or air-conditioning) energy through windows. Well-sealed windows and exterior doors are just as important as insulation for preventing energy loss. However, many frame materials require maintenance and choosing framing material that provides greater energy efficiency is often a trade-off in which more frequent maintenance is required. Wood frames are the most efficient in terms of energy loss and cause less condensation than other materials, however they will require painting or staining to keep them looking attractive. Aluminum frames, on the other hand, need very little maintenance but they are at the bottom of the list in terms of energy efficiency. Aluminum-clad windows are much more efficient. These are wood frames with an aluminum exterior, and combine the efficiency of wood with the low maintenance requirements of traditional aluminum frames.
Cooling
Many of the measures you take to prevent heat loss in your home will also help keep it cooler during warm weather. In addition, consider installing ceiling fans in your home. These are a more energy-efficient way of cooling than air-conditioners.
Efficient Lighting
When it comes to installing energy-efficient lighting, there are two main options - light dimmers and motion sensors. Light dimmers are switches which allow you to control the intensity of lighting in a room. Motion sensors turn lights on and off automatically by sensing when people enter and leave a room. These are particularly effective in rooms which are used irregularly, and in outdoor areas.
Outdoors
In the outdoors, trees and large shrubs are a less obvious way of making your home more energy efficient. With the additional advantage of adding appeal to your yard, careful planting of trees can add windbreaks which shield your house from wind, helping to prevent heat loss. Trees can also provide shade during the summer months, and help keep your home cool.
Using an Energy-Efficient Mortgage to Finance Remodeling
Major remodeling jobs that are planned with energy efficiency in mind can be expensive. This kind of remodeling will save you money in the long term, but the start-up costs are high. One way of financing such remodeling is with an Energy-efficient Mortgage. To qualify for an EEM, the money you save on your monthly utility bills must be greater than the monthly repayment of the EEM, and your total savings must also be more than your total costs (including maintenance). When you are granted an EEM, you have 90-180 days to carry out the remodeling work. Additionally, you cannot be granted an EEM if you apply after remodeling has started, or if you apply after any other financing has been granted.
Thought Provoking: 1/7/08
The Wooden Bowl
A frail old man went to live with his son, daughter-in-law and four-year old grandson. The old man's hands trembled, his eyesight was blurred and his step faltered. Even in this frail condition, he ate his meals with the family at the dinner table.
But the elderly grandfather's shaky hands and failing sight made eating difficult. Peas rolled off his spoon onto the floor. When he grasped the glass, milk spilled on the tablecloth.
The son and daughter-in-law became irritated with the mess. "We must do something about Grandfather," said the son. I've had enough of his spilled milk, noisy eating and food on the floor.So the husband and wife set a small table in the corner. There, Grandfather ate alone while the rest of the family enjoyed dinner. Since Grandfather had broken a dish or two, his food was served in a wooden bowl.
When the family glanced in Grandfather's direction, sometime he had a tear in his eye as he sat alone. Still, the only words the couple had for him were sharp admonitions when he dropped a fork or spilled food. The four-year-old watched it all in silence.
One evening before supper, the father noticed his son playing with wood scraps on the floor. He asked the child sweetly, "What are you making?" Just as sweetly, the boy responded, "Oh, I am making a little bowl so you and Mama can eat your food when I grow up." The four-year-old smiled and went back to work.
The words so struck the parents that they were speechless. Then tears started to stream down their cheeks. Though no word was spoken, both knew what they had to do.
That evening the husband took Grandfather's hand and gently led him back to the family table. For the remainder of his days the old man ate every meal with the family. And for some reason, neither husband nor wife seemed to care any longer when a fork was dropped, milk was spilled or the tablecloth was soiled.
- - Author Unknown
We've all heard it said that we should never judge another man until we have walked a mile in his shoes. Hopefully, the story of the Wooden Bowl has again reinforced the concept of giving consideration to other people's circumstances before we pass judgment on their activities.
Wouldn't it be best, when we become irritated with another person, to pause for a moment, give thought to his/her situation and then take action only after having done so. The world would become a much better place if we all made this a rule by which we live.
A frail old man went to live with his son, daughter-in-law and four-year old grandson. The old man's hands trembled, his eyesight was blurred and his step faltered. Even in this frail condition, he ate his meals with the family at the dinner table.
But the elderly grandfather's shaky hands and failing sight made eating difficult. Peas rolled off his spoon onto the floor. When he grasped the glass, milk spilled on the tablecloth.
The son and daughter-in-law became irritated with the mess. "We must do something about Grandfather," said the son. I've had enough of his spilled milk, noisy eating and food on the floor.So the husband and wife set a small table in the corner. There, Grandfather ate alone while the rest of the family enjoyed dinner. Since Grandfather had broken a dish or two, his food was served in a wooden bowl.
When the family glanced in Grandfather's direction, sometime he had a tear in his eye as he sat alone. Still, the only words the couple had for him were sharp admonitions when he dropped a fork or spilled food. The four-year-old watched it all in silence.
One evening before supper, the father noticed his son playing with wood scraps on the floor. He asked the child sweetly, "What are you making?" Just as sweetly, the boy responded, "Oh, I am making a little bowl so you and Mama can eat your food when I grow up." The four-year-old smiled and went back to work.
The words so struck the parents that they were speechless. Then tears started to stream down their cheeks. Though no word was spoken, both knew what they had to do.
That evening the husband took Grandfather's hand and gently led him back to the family table. For the remainder of his days the old man ate every meal with the family. And for some reason, neither husband nor wife seemed to care any longer when a fork was dropped, milk was spilled or the tablecloth was soiled.
- - Author Unknown
We've all heard it said that we should never judge another man until we have walked a mile in his shoes. Hopefully, the story of the Wooden Bowl has again reinforced the concept of giving consideration to other people's circumstances before we pass judgment on their activities.
Wouldn't it be best, when we become irritated with another person, to pause for a moment, give thought to his/her situation and then take action only after having done so. The world would become a much better place if we all made this a rule by which we live.
The Buying Process
Buyers are a huge part of our business model and we're finding that the average home buyer doesn't know the basic systems and processes for buying a home. I thought it would be helpful to list the HIGH LEVEL steps normally taken during the buying process:
1) The buyer holds an initial consultation with a Realtor.
2) Buyer meets with a lender for Loan Qualification. Buyer obtains a prequalification letter.
3) Buyer meets with his/her Realtor to shop for a home.
4) Buyer finds the "ideal home" and writes an offer.
5) The offer is presented and is negotiated.
6) An "escrow" is opened.
7) Buyer submits a loan application.
8) Buyer completes inspections and approves of disclosures.
9) The loan is underwritten and the home is appraised.
10) Contingencies are removed.
11) All title documents are searched and reviewed.
12) The loan is approved.
13) Buyer obtains homeowners insurance.
14) Documents are signed.
15) Down payment is submitted and the loan is funded.
16) Title transfers.
There are certainly additional, more granular steps when buying, but the above process will give you a high level idea for process and flow.
BUYING A NEIGHBORHOOD/COMMUNITY
When searching for a new home, don't forget one of the most important considerations: location, location, and location.
Because the neighborhood/community in which you live affects your life in many ways--including your children's education, travel time to and from conveniences and work, the level of comfort you feel with your surroundings, the future value of your home investment and many other factors--we suggest that you focus on a neighborhood/community before you search for a specific home.
Working through your Realtor, explore the personalities of the neighborhoods/communities in your price range, before narrowing your search down to individual homes. Take the time to research the schools, driving times, available conveniences, the social and professional make-up, value trends, etc. Be sure you choose to view homes only in neighborhoods that fit your personality and life style. This will ensure a happy end result!
Because the neighborhood/community in which you live affects your life in many ways--including your children's education, travel time to and from conveniences and work, the level of comfort you feel with your surroundings, the future value of your home investment and many other factors--we suggest that you focus on a neighborhood/community before you search for a specific home.
Working through your Realtor, explore the personalities of the neighborhoods/communities in your price range, before narrowing your search down to individual homes. Take the time to research the schools, driving times, available conveniences, the social and professional make-up, value trends, etc. Be sure you choose to view homes only in neighborhoods that fit your personality and life style. This will ensure a happy end result!
Home Inspection Thoughts
When buying a new home, please don't just accept the seller's word that the residence is in good condition and that it is free of problems. It is very possible defects exist that are less than obvious to an untrained eye and of which the seller is unaware. It is in the buyer's best interest to, at the buyer's expense, hire a professional home inspector.
In most locations, the seller is required to provide for the buyer a Disclosure Form that details the property's features. This form also notifies the purchaser of any defects in the home of which the seller has knowledge. The buyer should take the time to read this completed disclosure form carefully. If there are flaws indicated that he/she finds unacceptable, the seller should be asked to correct the problems. If the seller refuses to fulfill the buyer's request, the buyer should be under no further obligation to complete the transaction.
To discover hidden or less obvious defects, a buyer can hire a professional home inspector to scrutinize the property. These professionals are trained to examine a house in detail and to find any problems that may affect a home's value. To find a quality home inspector, simply ask your Realtor for a list of recommendations.
As a value added benefit for listing and selling your home with The Davidson Team, you will receive a FREE home inspection as a part of our services. Additionally, we also provide tips on how to gain the most out of the inspections.
In most locations, the seller is required to provide for the buyer a Disclosure Form that details the property's features. This form also notifies the purchaser of any defects in the home of which the seller has knowledge. The buyer should take the time to read this completed disclosure form carefully. If there are flaws indicated that he/she finds unacceptable, the seller should be asked to correct the problems. If the seller refuses to fulfill the buyer's request, the buyer should be under no further obligation to complete the transaction.
To discover hidden or less obvious defects, a buyer can hire a professional home inspector to scrutinize the property. These professionals are trained to examine a house in detail and to find any problems that may affect a home's value. To find a quality home inspector, simply ask your Realtor for a list of recommendations.
As a value added benefit for listing and selling your home with The Davidson Team, you will receive a FREE home inspection as a part of our services. Additionally, we also provide tips on how to gain the most out of the inspections.
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