Category Buyer Tips

BUYERS: Why you need to work with a Buyer’s Agent

In most real estate transactions there are typically two Realtors, one representing each party. The “Listing Agent” represents the seller and their interests and the “Buyers Agent” represents you as the buyer.

A good Buyers Agent is like a well-trained Sherpa that will guide you through the rocky terrain and to the peak of home ownership.

Here are just a few ways a Buyer’s Agent can have your back:

  1. Help you find the right lender and introduce you to loans and programs you may never had heard of otherwise.
  2. Protect ALL of your interests as a buyer. From your financial interests to your family interests and future resale. Buyers agents are focused on protecting you and your investment.
  3. Negotiating the best price and terms. We will run comparable sales in the neighborhood and make sure you are not over paying or getting yourself into a sticky situation.
  4. A great buyer’s agent will help you win multiple offer situations.
  5. Research, research, research. We have access to tax records, permit applications and data that is not available to the public.
  6. Home inspections. We have access to the best home inspectors and contractors that will identify major issues on your home and local issues such as flooding, foundation, radon much, much more.
  7. We will set up private viewings and use our expertise to help you choose the right home and area that fits your needs.
  8. We have access to the local MLS and homes that may be coming on the market or not yet listed.
  9. We are here to answer all your questions or help you find the right answers.
  10. We will be your guide through the entire climb from looking for homes to writing offers and even after closing. Even after their home has closed we are always there for our clients from helping them find great contractors to assisting their friends and family members and beyond.

BUYERS: The real costs involved in purchasing a home no one told you about

So you have all the money you’ve been saving for a down payment and you’re ready to buy a home. Congratulations! Then you get your final statement (called a closing disclosure) and you need an additional $8,000. What!! Well, this scenario should never really happen if you’ve been well prepared by your lender and REALTOR® but it’s still something that happens all too often.

In this blog post I will break down all of the costs of actually purchasing a home and some things you may not have even considered. Overall, it is extremely important that you work with a lender and REALTOR® that educate you and keep you well prepared throughout the process. Don’t lose the home of your dreams out of an obligation to work with a friend who just got their real estate license or lender that sounded nice over the phone. This is your money and the biggest purchase you will ever make so educate yourself!

The exact amount you will need for closing is not actually calculated until about a week before closing so expect some fluctuation. All of the money you will need to buy a home plus down payment is called the “closing costs.” I have broken these down into 3 categories: Upfront costs, Title Insurance and Mortgage Fees. The typical closing cost is 3% – 5% of the purchase price plus the down payment but it can vary greatly.

Upfront Costs – This is the money that all goes directly toward the purchase of the home. These are not fees but money you are paying toward the home, taxes and insurance.

Down Payment – This is the number everyone is familiar with. FHA loans require 3.5% down but there are options for zero and 1% down
Earnest Money Deposit (EMD) – This is not a fee but money you will need up front to secure the home. $1,000 is typical earnest money but could range higher if you are in a multiple offer situation. This is held in an escrow account and applied to your “closing costs” which include your down payment. This is not a fee but you will need it up front. If the sale does not go through for a variety of reasons this is typically returned as spelled out in the sales contract. Consult your agent for more details on this.

Homeowner Insurance – Most loans require a year worth of homeowner insurance up front which in the Ann Arbor and Ypsilanti market typically runs from $1000 – $1400.

Prorated Property Taxes – As a homeowner you will be responsible to pay the up front property taxes to the municipality you are purchasing or reimburse the seller that has already paid these. (Note: In some municipalities the taxes are paid at the end of the year).

Homeowner Association Dues and Start-Up Fee – This only applies to homes and condos that have a homeowner association. Some of them have a startup fee or require 2 months to be paid up front.

Home inspection – Every buyer should have a private home inspection before purchasing. These run from $400 – $600 and cover a visual inspection of the home. There may be some other specialized inspections you may want to have including pest, radon, sewer line or any other issues that may be unique to your geographic area or recommended to you by the home inspector.

Title Insurance – This protects you and the bank against any defects of title. The title company will perform a search and make sure that there are not any liens on the title such as unpaid contractors or outstanding loans. You will be guaranteed a clear title by the company and issued a Title Policy. If something comes up in the future that was missed during the search you will be protected by this policy. In Michigan the sellers typically pay the Owners Policy and the buyers pay the Loan Policy. These amounts are fixed and can be found here: http://vgtitle.com/rate/

Recording Fees, Document Preparation and Flood Certificates – These are all nominal fees which add up to less than a few hundred dollars but every dollar counts!

Closing Fee – The cost to close the transaction. Typical cost is $250 – $350.
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Mortgage Fees – These fees are all related to your loan and vary significantly based on the loan officer you have chosen.

Appraisal Fee – This is for the bank to determine the true value of the home and in some cases if any repairs (usually safety related) need to be made. The fee is usually $375 – $450 and is non-refundable. If you do not purchase the home this is an out of pocket expense that you will have to absorb. Some lenders make you pay up front and some roll into your “closing costs.”

PMI – Private mortgage insurance. If you are putting less than 20% down on the purchase you will be required to pay for this private mortgage insurance. It may be called by a different name i.e. Mortgage Insurance, lender paid mortgage insurance or PMI. This is a protection for the bank in case the home is foreclosed on. In many cases this fee will drop off after you have 20% equity in the home but with FHA and other loans it will be on for the lifetime of the loan. Some loans require a year worth of PMI up front which could run up to a few thousand.

Origination Fee – What you are paying the lender to generate the loan. $1,000 – $2,000

Application Fee – What some lenders charge to process your application. Check with your lender for estimate.

Credit Reporting Fee – Nominal charge to generate your credit report.

Survey Fee– In some cases a survey of the property may be required.

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BUYERS: 7 Things No One Tells You Before Buying A Condo — That you MUST know!

So you’ve decided that condo living is right for you. Before you take the plunge and sign that contract here are a few things you should check out.

1. Understand the associations financial situation and how it is governed

When you buy a condo you become a “co-owner.” This means you share an ownership interest with everyone else in the condominium complex. As a group you are responsible for the financial operations, governing and even the maintenance of the entire property. No this doesn’t mean you will have to mow the lawn or trim the hedges a few times a year. The condo association will typically hire a management company to oversee items like that.

It is important that before you buy a condo that you verify the condo associations yearly budget and latest financial statement. Make sure that the reserves are at least 20% of the total operating budget and that they are not operating with a loss. If they are operating at a loss guess who has to make that up? You will in the form of an assessment.

Sometimes this information is not easily acquired so make sure that any offer you make to purchase a condo allows you to review and approve this information.

2. Read the bylaws

How boring right? Don’t be intimidated by that huge book of legal jargon there are really only a handful of pages that actually would affect your day to day living. These are the most important part of the bylaws to know and understand:
a. Know what the association covers and what you are responsible for. Beyond the basics of grounds maintenance and snow removal you should know what you are responsible for. Do they replace windows, take care of the deck, etc.?
b. What utilities are you responsible for paying? Many associations cover water and some cover gas as well. Know what’s covered.
c. What are the rules regarding pets? Do you have large dogs over 25 pounds? 3 cats? Know the weight limits and rules.
d. Know the rules regarding renting and subletting
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3. Is the condo FHA approved?

If you are an FHA buyer this is one of the most misunderstood and frustrating issues in purchasing a condo. This is really where you need to lean on the experience of your Realtor so you do not end up in a heap of trouble. If you want to view a list of condos in your area that are FHA approved the link is here: https://entp.hud.gov/idapp/html/condlook.cfm If you really love a condo and you are an FHA buyer I would explore some other loan options such as a 3% or 5% down conventional. Just make sure the property is warrantable before you go down that road.
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Because a complex is not FHA approved doesn’t mean that it’s a bad buy. There is a lot of paperwork that the condo association has to complete in order to get approved and many do not have the resources to keep up with this which is required every 2 years.

4. Do they allow rentals and is there a maximum number?
If you are an investor or plan on keeping your condo as a rental unit this is essential information to understand. This is also the biggest mistake amateur investors make which gets them into a lot of trouble and ends up costing thousands.

The majority of condo complexes have strict rules on renting out the units because as co-owners they do not want the complex to become apartment complexes or short stay hotels. As a co-owner that occupies the property as a primary residence you will learn to appreciate these rules.
The most common rules you will find regarding renting out the condo are: Leases must be at least one year in length and approved by the association (there also may be a fee that applies for this), the condo must be approved for rental by the local government (Township, City, etc.), all tenants must follow the same rules and bylaws as co-owners, a cap on rentals in the complex or building of 25% or 50%.

The last one is the most important if you are an investor. If you purchase a unit with a 25% cap and that cap has been met than you will have to go on a waiting list to rent out the unit. I have seen waiting lists as long as 5 years.

One last note on this: The rental rules can change at any time! If you buy a condo to live in for a few years and then plan on renting it out understand the bylaws can be amended at any time and this may significantly alter your plans. This is a very common practice in the Ann Arbor area where I work. Many medical residents or graduate students come to the University of Michigan or Eastern Michigan University to live for a few years. Once they see how high the rental rates are a condo purchase is a no-brainer. For many it turns out to be a great investment but it’s important to understand the risks.

5. What’s the noise factor
Many buyers spend only a few hours between showings and inspections in a home or condo before spending tens of thousands of dollars. Don’t be afraid to ask the other residents and neighbors what they like or dislike about the condo complex. If you are living on a lower unit and your upstairs neighbor loves tap dancing or has a rock band this could be an issue. If there’s attached garages that your unit sits over maybe open and close them to see how loud it is. If you have a neighbor that likes to come home at 2:00 am every night this could be an issue.

6. Are there any pending assessments?
Condos require just as much work as a home such as new roofs, driveways, roadways, pool repair, etc. Part of your association dues go to cover these improvements but sometimes there is poor budgeting or an unforeseen repair that needs to be made. If there is a budget shortfall and an improvement that needs to be made this will be divided up between all the owners in the form of an assessment. Make sure that as part of any offer you are made aware of any pending assessments to the property.

7. Warrantable vs. Non-Warrantable
A Warrantable condo is a development that can be financed by Fannie Mae or Freddie Mac. What does this mean to you? If a condo is non-warrantable then most lenders will not finance the property and it could be very difficult to sell in the future. There are several reasons why a condo may be non-warrantable including: Over 50% of units are rentals, one owner owns more than 10% of the units, more than 15% of owners are delinquent on their association dues and several more.
As an investor a non-warrantable condo is not necessarily a bad purchase if you plan on holding it long term. If you only plan on living in the condo for a few years than you should probably stay away from non-warrantable condos.

Dan’s bottom line: Condo living is easy, comfortable living for many people. Not having to worry about all of the maintenance and repairs that come with a single family home is a great benefit. Educate yourself before you buy and enjoy the condo lifestyle!

BUYERS: 6 GREAT loans/grants you NEED to know about before you buy – must read!!

Even with interest rates at historic lows, it seems to be getting harder and harder for first time homebuyers or people with credit blemishes to get a home loan. Higher student loan payments, rents and overall cost of living are keeping people in Ann Arbor, Ypsilanti and all over the country from buying their first home. Well, you have come to the right place to learn about some awesome home loans that your lender may not tell you about or even know about.

When I get a call from a first-time home buyer, sometimes they have a pre-approval and other times they do not. Even though I am not a lender myself, I have a network of lenders that provide an assortment of products that may be unique to your situation.

Often times I will tell them about a program and their response is “why didn’t my lender tell me about that?”

There is a good chance that their lender did not go through the training necessary to implement the program or that their company simply does not offer that product. This is why it is so important to use a well-established local Realtor.

USDA Rural Development Loan
This is a zero percent down loan sponsored by the United States Department of Agriculture. It is designed to assist low to moderate income families in designated areas. There are many areas around Ann Arbor and Ypsilanti that qualify for Rural Development (also called RD) loans.

To qualify, the home must be located in an RD eligible area. Here is the link to the map.
The maximum income for RD eligibility in Washtenaw County is $92,000. Call me today for a certified RD lender to help in your home search.

Michigan State Housing Development Authority (MSHDA) Programs
There are a couple great loan programs offered from the State of Michigan which include: MSHDA Down Payment Assistance. This is a one percent down loan with a $7,500 zero interest loan to assist in down payment and closing costs. My parents were able to buy their first home in 1980 using this very program. As a Realtor, I am so grateful for this program because every year I have sold at least 20 homes to deserving families that otherwise would not have been able to purchase a home.

Most national lenders and brick and mortar banks do not offer this loan so it is one of the best kept secrets in the Ann Arbor area. Here is a link www.michigan.gov/mshda
There are other variations of this program called MI Next Home DPA and MI First Home DPA. Credit requirements above 640 and income limits do apply, so contact me today for a great lender recommendation.

BONUS!! Most lenders and agents do not know you can actually combine the Rural Development and MSHDA Programs for a zero percent down loan with $7,500 down payment assistance.

LiveYpsi Homebuyer Program
This is a cool program for Employees of Eastern Michigan University and the Eastern Michigan University Foundation. This program is designed to keep employees of EMU in Ypsilanti and areas of Ypsilanti Township. It is a $7,500 loan that is 20% forgiven each year you live in the home and pay the taxes. Stay in the home for 5 years and it’s like getting a FREE $7,500 toward your purchase.

Doctor, Dentist and Resident Home Loans
Are you a Resident coming to the University of Michigan or Ann Arbor area in need of a great Doctor Loan or home buying option. There are a variety of loans especially for Doctors, Dentists and Residents that offer zero percent down, no PMI and options for those saddled with student loan debt. Call or email me for some great lenders looking forward to assisting you.

FHA 203K Rehabilitation Loan
This is a great way to buy a foreclosed home or a home that most lenders wouldn’t touch because it is in need of some TLC. This loan will allow you to borrow the money to fix up the home and make repairs or improvements. Some lenders even allow you to choose your own contractors! The loan covers a lot of great things including roofs, flooring, windows, lead paint removal, furnace, plumbing, structural, etc. Don’t be discouraged because a home seems to need a lot of work and definitely consider this loan.

Portfolio Loans
When you have a nice down payment, but your credit is borderline or you have non-traditional work and have heard “No” from every lender, it’s time to look at a portfolio loan. These loans are offered by some banks at the same interest rates and underwriting requirements, but with private funds. This means the banks can overlook the short sale or bankruptcy you had a few years ago and make their own determination on your ability to repay. If you have saved some money and every bank has told you “No” it’s time to give me a call and I will get you set up with the right people.

BUYERS: How to write a personal note to seller and get your dream home (with samples)

Dear Seller,
You have a wonderful home that smells of rich Mahogany and spices of the Orient. Your family appears to be descendants of nobility and your home is kept as impeccably as the finest art of the Guggenheim. My family humbly asks that you please accept our glorious offer for your impeccable double wide, manufactured retreat in Camelot Estates.

 

What scenario should I write a letter? What should I write? You have the questions and I have the answers in this weeks’ blog.

So is writing a letter to the seller something reserved for HGTV or does it really make a difference?

<br /> <h2>Does writing a personal note to the seller when buying a home really make a difference?</h2

In the primary real estate market where I work in Ann Arbor, Ypsilanti and the surrounding areas, there is a debilitating lack of homes on the market. For every good home that goes on the market there are multiple offers over asking price with crazy escalation clauses. Buyers in the Ann Arbor area need to look for every possible way to stand out from the crowd. At the end of this post, I am going to offer you real letters that were submitted with the purchase agreement and actually helped in getting the home for these families.

The fine line between business and personal

One of the largest hurdles I have doing real estate in Ann Arbor is the impersonal nature of every transaction. I hear from agents all over the country and am quite jealous of the areas that actually bring buyer and seller face-to-face for the negotiation and transaction. While that may not always be the best scenario all the time, it definitely eliminates some of the behind-the-scenes animosity that seems to build up throughout a tense negotiation. As agents, we often have to find a way to keep it so we don’t have to close the deal UFC-style in a giant steel cage death match.

As a Realtor, we learn early on that we are an essential mouthpiece to the transaction and we learn to speak Realtese. It is fundamental to the process that we relay the information to the buyer or seller in a way that it gets the message across without offending the other party. We learn how to take “Tell the seller that the neighbor’s home sold for way less, was 10 times nicer and didn’t smell like an Olympic-sized litter box,” and translate that into “The neighborhood comparable properties were slightly more updated and sold at a lower price point. The carpet may need to be replaced because the buyer has young children sensitive to pet odors.”

How do we relay a message without offending the other party? Obviously, this buyer is trying to get the seller to lower the price, but would they ever say that directly to the seller? I hope not, but these are the kinds of scenarios as a Realtor we deal with every day and we learn to strategically guide our clients through the process. As an agent and a buyer, you have to constantly remind yourself there is another person with a story on the other side of that contract. What didn’t the buyer realize in this scenario? Well, what they didn’t know was the seller has rescued several cats that were abandoned at the end of their lives and gave them a great home for those final years. This was an actual situation that I was in a few years back that involved a lot of sensitive negotiation.

What makes real estate so unique is that it is more than just a business transaction—it is a personal transaction. We are all human and have a story to tell, so if you want to be more to the seller than just a name on a contract you should take the time to tell that story.

When should you write a letter to the seller?

  1. Whenever there is a multiple offer situation. This one is a no-brainer. If you are in a situation where you may need a tie-breaker, the letter could be that ace in the hole that you need. Of course money talks, so if you’re writing a ridiculously low offer, don’t expect the letter to do much for you.
  2. If you sense a seller’s emotional attachment to a property. Look around the home, do the walls tell a story? Are there pictures of children, grandchildren, growth charts on backs of doors? The longer someone has been in the home the stronger the bond. Ask your Realtor, how long has this person owned the home? In one of the attached letters, you will see a situation where this exact scenario saved a buyer $40,000 after the seller turned down many higher priced offers.
  3. In the midst of an intense negotiation regarding inspection items. Go back to the scenario about the litter box. If you are asking for a multitude of repairs that you feel are reasonable that the seller may not, it may be helpful for them to know why you are asking for them. Maybe it’s a health or safety reason that the seller doesn’t understand because they do not know your story.

There are some scenarios where it really doesn’t make sense to write a letter or you may want to hold off until a different point in the process. When you are dealing with a bank or an investor, they do not have an emotional attachment to the property, so there is no sense in submitting a letter with your offer. However, some banks do favor owner occupants, so this may want to be included on the bid or offer itself.

What should you put in the letter?
kids drawing happy family near their houseThe letter to the seller should always be genuine and speak from the heart. It should also focus on the home first and then your personal situation. Give it to your Realtor to proof before sending but they shouldn’t need to make too many changes. If you have kids, have them draw a picture of the home—that is a slam dunk that shatters the glass!

  1. Focus on the home first. Talk about how clean and well-kept it is, how much you loved the garden or the neighborhood.
  2. Find a common element between the home or neighborhood and you or your family. My grandparents grew up in the neighborhood and I have many fond memories. I can see my kids really enjoying the backyard or playroom.
  3. Find a common bond between you and the homeowner. I noticed you had a Michigan football jersey on the wall. When I was younger my parents took me to all the games…
  4. Talk about yourself and why you should be considered a buyer last. Write about your personal situation and how much you are going to take great care of the home and create lasting memories.
  5. Have your kids draw a picture of the home. This is if you live with them and they are under 18. You could draw a picture of the home but it may not be as emotionally engaging. You could sculpt the home maybe or build a diorama.

Some examples of letters that buyers have written that actually got them the home.

Example One
Dear owners of the house on Grant,

We have seen your house a few times now and we really, really like it. My name is Daniela and I am Italian. I relocated to Michigan 5 months ago, with my husband who is American but lived in Italy for the last 17 years. We have 2 kids age 7 and 5.

Our kids also loved the house and they are already making plans to get two cats, and to have each their own bedroom!

We have recently sold our apartment in Italy and with the income from that sale we would now really love to buy your house, it would be the first real house of our lives. I loved the way you kept it and the color and decor that you choose for it. If it were for us to have we would really not change much of it. I think it has a sense of “beauty” and a kind of European aesthetics that I could not find in any of the other houses that I have seen here. Therefore I hope very much that you will consider our offer.

Thank you.

Example Two
To the owners:

My husband and I would like to compliment you on your lovely home and thank you for the opportunity to view it. As we walked through yesterday afternoon, we were very impressed by the efforts you’ve made to keep it well-maintained, both inside and out. The house has wonderful natural light and we share your love of pottery; your collection is fantastic!
We are looking to buy our first home and feel your place would be a great fit for our two sons, Jack (age 7) and Max (age 3), to grow up. The neighborhood looks quiet and safe—with a cute preschool across the street!—and we like the fact that Mitchell Elementary is within walking distance.
I work from home, so finding a livable space that can double as a work environment is critical to our search, and we think your place would be perfect on both fronts. It has very positive energy, no doubt due to the efforts you have put in to make it so.
We appreciate your consideration of our offer and we would be honored to live in your home.
With best regards,

Example Three
To the family of the house,
I have regarded your amazing home since it was listed. I think that if someone was asking to purchase my family’s home I would want to know a few things about them, so I thought to write you a note to let you know a few things about my family.
I’m a single mother with a 9 year old daughter. She is a curious and sharing young lady who would running around in your backyard and getting to know the neighborhood kids. She is looking forward to moving into her school district so she can ride the bus back and forth. She loved your cat!
I’m a medical assistant that worked my way up to a Divisional EMR trainer for all of my company’s Family and Internal medicine offices. I love working in health care each and every day and have done so for the last 11 year. I’m looking forward to moving into your neighborhood as I have friends that live in the area.
Thank you for your time and consideration of our offer.
Regards,

BUYERS: What can a Real Estate Agent do to help you buy the right home?

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good real estate agent can be your guide in many ways:

  • They will help you determine how much home you can actually afford. Often, they can suggest additional ways to accrue the down payment and explain alternative financing methods. They can also introduce you to a mortgage counselor and arrange to have you “pre-approved” which can improve your negotiating position and enable you to achieve your home-buying objectives faster and with less stress.
  • Providing client level services, they can work for you as a buyer’s agent and help negotiate the best price and terms for you. Or, they can serve as a seller’s sub-agent (or disclosed dual agent), acting as a liaison between you and the seller to present offers and counteroffers until an agreement is reached.
  • They will help you work out a realistic idea of the home best suited to your needs – size, style, features, location, accessibility to schools, transportation, shopping, and other personal preferences.
  • They have access to a listing of all available homes in the multi-list system, can evaluate them in terms of your needs and affordability, and will not waste your time showing you unsuitable homes.
  • They can often suggest simple, imaginative changes that could make a home more suitable for you and improve its utility and value.
  • They can supply information on real estate values, taxes, utility costs, municipal services and facilities, and may be aware of proposed zoning changes that could affect your decision to buy.
  • Although the law does not normally require an attorney to review documents or oversee real estate closings, they can provide you with a list of law practitioners to choose from if you would like to use the services of an attorney.
  • They can help familiarize you with the closing process and they will obtain closing figures in advance of closing for your review.
  • They can provide you with a list of qualified home inspectors, pest inspectors, surveyors, and help to coordinate inspection appointments.