DEAN GRAZIOSI: DEAN GRAZIOSI REVIEW – REAL ESTATE FEED BY DEAN GRAZIOSI

Whenever you purchase a piece of real estate, there are certain closing costs involved. Most people know this before they go into negotiation for a mortgage, though the vast majority of investors and potential homeowners do not fully understand what is involved with each of these fees. In addition to the costs discussed below, these can include survey fees, credit checks, home inspection, points and more.

Each lender is different, so consulting your loan officer is the first step to understanding your closing costs. Ask them what kind of origination fees they have, if there are points involved, and what kind of structure they have for property taxes. Many lenders will require a portion of your loan payment go to an Escrow account to pay for property taxes, homeowner’s insurance, and other such necessities to protect their investment. For the duration of the loan, Escrow fees are taken out of monthly payments; however, at the time the loan is approved there may be two or three months’ contribution to the Escrow account up front.

Origination fees are the fees exacted by every lender at the time the loan is approved to cover the paperwork, time with the lending officer, and other such fees. In many cases this is approximately 1% of the loan’s value, but this number can add up quickly so be sure you know what that cost will be before finalizing a loan.

Appraisals are almost always part of the closing cost. Lenders need to be certain that, in the case of a foreclosure, they will be getting a sound, valuable property. This requires that a licensed appraiser come to the prospective property and test its soundness on a range of aspects that may affect its overall value. Depending on the size of the home, this could add anywhere from a couple hundred to a couple thousand dollars to the cost.

The loan officer responsible for your prospective mortgage can cover all the closing costs with you before the loan is finalized. If the officer is unwilling to go over these in fine detail until you understand and are comfortable with all the costs involved, request another loan officer or go to a different lender. Lenders are in the business to help you purchase property and should always be willing to take the time to explain every facet of the process to you so that you can rest assured you’re getting what you’re paying for.

Bookmark With

Thousands of homeowners around the nation have recently become acquainted with the feeling of having a home go into foreclosure. This process generally begins when a homeowner is three or four months behind on their payments. Owners are generally given 120 days (depending on the state) to bring the loan current, plus pay any legal fees accrued through the foreclosure process up to that point.

Often, this means the owners must come up with as much as a couple thousand dollars in addition to the back payments on their property.  For many, especially those who are already financially distressed, this sum is far out of reach on short notice. These owners generally have the choice of either letting the home foreclose, or finding a buyer for the home before the foreclosure goes through. There is another option as well, one in which the owner may give their permission to their lender, or ask permission of the lender, to sell the home in a short sale – or for less than is still owed on the property.

The most obvious advantage to the owner in the case of a short sale is that they will not have a foreclosure on their credit if the home is sold while in pre-foreclosure. Credit scores are quite unforgiving in cases of any loan default, but arguably the worst of all of these as far as the credit is concerned is a mortgage default. These are generally loans with a high balance with a low percentage paid off, and are invariably reported to all the major credit bureaus.

Foreclosures can be costly, and the cost must be borne either by the financial institution initiating the foreclosure, or by the owner who wasn’t able to make their loan payment in the first place. The cost and risk can be significantly reduced for both parties by a short sale, and the lender may claim any difference as a loss on their taxes. In most cases, once a short sale is agreed upon, a deficiency judgment cannot be made against the owners for any difference between the owed amount and the sale price.

Finally, short sales are beneficial to the buyer because they often allow for great discounts off the market value of the property without the hassle and risk of foreclosure auctions. Many times, buyers looking to purchase at auction expend a lot of effort only to have their target property go for higher than their top bid, or not even make it to auction at all. There are a number of ways to buy distressed properties and short sales are but one option to explore when looking to make an investment.

Bookmark With

The terminology used in many real estate transactions, especially those that are meant to be financially beneficial investments, can be confusing to newcomers to the market.  Short sales are particularly confusing.  Most people starting out in real estate investments are primarily accustomed to more common house hunting methods or property buying procedures that involve an eager seller, considering true value, making bids and having them countered or accepted.  The idea of a short sale is somewhat foreign to most of those new investors.
A short sale is instigated when a seller is desperate to get out of a financially draining situation due to the economic market or loss of income.  In those cases, rather than go through an actual foreclosure, they will seek relief from their mortgage lender and request the ability to sell at a lower price than their actual mortgage reflects in order to move the property quickly.
It is important to note that not all lenders will agree to such an arrangement.  However, in some cases they may consider it advisable rather than lose the entire amount of the loan, or taking the property as an un-performing asset that may sit on the market for years doing nothing for their income.
A short sale can allow you to obtain real estate you would otherwise not be able to afford, or give you the ability to turn it over faster because of the lower cost to you and still make a decent profit if sold at a more realistic rate according to the market value.  Using short sales is an excellent strategy, but you should always seek the advice of a reputable real estate lawyer to be sure all of the documents are in order and the original lender is in complete agreement to avoid possible complications at a later date.

Bookmark With

Being in business for yourself can be risky.  Even when you are successful, it is important to keep your personal assets protected so that if problems pop up your family’s safety is secure.  The way all businesses do that, including real estate investors, is by forming an LLC for all of your related transactions.  Once you are an LLC you will no longer do business in your name, but rather as your company; even if it is named after yourself, it will be an entity protected by the legal structure.
What is an LLC?
LLC is an acronym for Limited Liability Company.  An LLC assigns all debts acquired by your company to be covered by any assets you hold as a company but NOT as a personal asset.  That means if a creditor comes after you, a deal goes bad and you owe money on it, or someone is hurt on one of your properties that you haven’t obtained insurance on yet, you may lose assets your company owns.  However, those assets won’t include what you own personally, like your car, your personal home, or money in your personal bank accounts.
Setting it up
Setting up an LLC is the first move you should ever make when considering any form of business, including investment businesses.  It is simple to start the paperwork for an LLC and they can often be established online without ever leaving home.  All you have to do is pick a name for your company, fill out the paperwork, develop an LLC agreement that most LLC websites will assist you in doing, publish a notice in your local paper of intent to become a LLC, and you have it.  Once you have that vital piece of business taken care of you can begin your career with a feeling of security, knowing that your family is protected from any problems you may encounter in your ventures.

Bookmark With

Fixed-rate mortgages are a safe, stable loan in which the interest rate never changes throughout the life of the loan. However, variable-rate loans continue to be the most popular loan type in the United States because of their very low introductory interest rates. Issues arise when the introductory period ends and the interest rates of variable-rate mortgages can skyrocket. The foreclosure crisis that caused the housing market crash in the US has been mainly attributed to these variable-rate mortgages.

In most cases, if you’re purchasing a primary home or a rental property a fixed-rate mortgage is the best loan to go with. Payments may be a little higher than variable-rate counterparts, but you are assured that those payments will remain the same for the next 20-30 years until the loan is paid off. For the most part, fixed-rate mortgages are the best option for long-term borrowing. Especially in times when the economy is down and the market is poor, fixed-rate mortgages should be seen as the best option as variable-rate interest can cause severe financial hardship.

If you’re looking to refinance a property, fixed-rate mortgages are generally preferable and easy to get in instances where a nice down payment is included. Many homeowners switch from variable-rate to fixed-rate mortgage loans before or shortly after the introductory period of their first loan is complete. If you’re planning to purchase a property and want to finance with a variable-rate loan first, make sure you know the policy for early payoff. Count in the cost for re-appraising the property and any other closing costs for the refinance to see if having a variable-rate mortgage to start will even save you any money. In many cases, these costs end up making it more expensive than if the buyer had just gone with a fixed-rate loan from the beginning.

Bookmark With

They say that 50% of potential buyers make up their minds about a house within the first sixty seconds. A seller can improve the odds for a sale by improving curb appeal and developing selling points such as efficiency. Replacing the windows is a relatively easy way to do this and it is a method often overlooked by sellers.

New windows are more energy-efficient, look nicer, and for a potential buyer they mean one less thing that might have to be dealt with after the purchase. Efficiency is a huge selling point because it lets buyers know they will be spending less on heating and cooling bills. Try to think about convenience for the new owner — what will be the easiest to clean and maintain – as well as the out-of-pocket cost for you.

If the windows are already fairly new, or you are unable to change them out completely but you wish to make them look better, you can replace the old hardware to add character and a fresher, cleaner look. Also, even if you can’t replace the windows, make sure that they can all be opened.  Consult an interior designer for a quick, general idea about changes if you are unsure of what will sell.

By replacing the windows in your investment property you can also modernize your house, thus making it more appealing to potential buyers. Historical properties can be given a more modern energy efficiency. For others, you can change the style, color, and about every other option imaginable to help give your property a look that will help make that sale.

Don’t forget that replacing the windows in your home, as well as other energy-efficient measures, increases the value of the home altogether. It usually brings an 80% return on your investment, but may mean the difference between selling or not. When you are looking to sell your home and increase its curb appeal and bottom line value, look to newer, energy-efficient windows that look great.

Bookmark With

So you’re looking to move out of a house or want to make a return on a non-primary home. There are two main options for homeowners in this situation – you can either sell the home, or rent it out. Both options have their pros and cons, and the “right” decision has to be based on your individual situation. Some of the things to consider for renting include the age of the house and the kind of screening and lease agreements you’ll have in place.

Older houses are often cheaper and thus attractive to investors looking for rental properties, but they can end up being more trouble than they’re worth. Older plumbing, wiring and fixtures are more likely to break than newer houses. Water heaters and furnaces may be outdated, inefficient and also prone to breakdowns. These are all fixes that must be made by the owner; they have to be done quickly and out of your own pocket. If you have the time and money to put into modernizing an older house it may turn into a good investment because of the lower sale price and property taxes.

Responsible renters who will take care of the property like their own are worth their weight in gold, and nearly ensure that the property will be profitable. However, there is no guarantee that your renters will be responsible and the house may require even more maintenance. Homes that allow pets are in high demand, but you will have to decide if it’s worth the additional risk to allow them. Being a landlord may require a lot of time and energy, and in the case of people who do not pay on time may require some unpleasant exchanges. Lease agreements must be done properly and legally if you wish to have any protection against legal issues. Many homeowners opt to hire a rental management company to worry about all the issues that may arise. They will handle screening rental applicants, enforcing eviction orders and coordinating repair and maintenance professionals for your property. You will have to decide whether hiring such a company will be worth the cut in your profits.

Bookmark With

 Stains on garage floors are inevitable, but very unsightly. If you’re putting a house on the market, this is often a task on the priority list. First, try to identify what kind of stain it is; this makes it easier to use the proper method for either removing the stain or bleaching it to the point that it can’t be seen. Most commonly, they will be oil stains or other fluids from cars.

If the stain is fresh, you can usually remove it with dish soap, water, a nylon scrub brush and an old towel. Never use a brush with wire bristles as it will leave little pieces of metal behind which will rust over time, causing an even larger stain. You can use cat litter in place of an old towel to pick up the water and oil after the stain has been removed. If you don’t want to go to the trouble of scrubbing, many hardware stores have oil removal products available.

For things such as mildew and algae, it’s best to treat the stains as soon as possible to avoid deep staining the concrete. When treating these stains, you will need a power washer, hot water, and oxygenated bleach or a deck-whitening agent.

To treat berry stains, do not use soap as this will cause it to set. For stains caused by fruit juices use hydrogen peroxide and flour to make a thick paste the consistency of peanut butter. Apply the mixture to the stain in a layer approximately ¼” thick and cover with plastic wrap. Tape the plastic wrap into place securely and allow it to sit until completely dry, usually about 24 to 48 hours. If you have a large stain you may want to consider purchasing a commercial product.

Finally, never use chlorine bleach for rust stains as it sets the stain, making it nearly impossible to remove. You should purchase a commercial product that contains oxalic acid and use rubber gloves, eye protection, warm water and a nylon scrub brush –preferably a long-handled one. Apply the product according to the directions, taking great care to keep it from touching bare skin.

Often, your local hardware store can give you additional pointers for removing specific types of stains from your garage floor.

Bookmark With

When it comes to buying or selling a home, one of the first steps is finding a responsible, reliable realtor to work with. You need to find a realtor that has your best interests in mind, so if you’re in the market to purchase a new home you would need the help of a selling agent. If you’re selling your home, a listing agent will be able to help you get the best price for your home.

In a few states, it’s legal for the seller’s agent to also be the buyer’s agent. In this case, the realtor would receive commission both from the home being sold as well as from the person buying it. Be aware of agents working on both sides; they usually have only their own interests in mind. Your agent should be on your side, working with you to get you the most bang for your buck, whether you are selling your home or purchasing a new home.

When you are shopping for a realtor, one great source for information is friends and family who have recently purchased a home with the help of a realtor. They will be able to give you honest, straightforward feedback on the quality of service they received from their realtor. They will be able to tell you if they would recommend that realtor.

If you don’t have anyone who has recently purchased a home to give you recommendations, then be sure to check the references of the realtor you are interested in hiring, which should be readily available. You should feel comfortable about asking your agent any questions that pertain to your house hunt, and they should be honest and sincere with every answer.

Some relevant questions to ask the realtor should include:

• How long have you been in business?
• Do you work directly with the seller? If so, do you have any obligations to the seller?
• Are you willing to show homes with a lower commission rate?

Don’t be afraid to ask a realtor to lower their commission if you think it’s unreasonable. If many other local realtors are charging 5.5% and your realtor is charging 6.75%, you may want to assess whether the service they provide is worth the difference. Your realtor should be trustworthy and his/her first priority must be getting you a good home at the right price.

Bookmark With

Today’s real estate market is complex, and if you have opted to sell your home during these hard times, you may be discouraged.  Real estate experts such as Dean Graziosi understand the market and before you start the selling process, it is essential that you do as well. 

First of all, contrary to what many believe, you can still sell your home in today’s market.  The truth of the matter is that if you have a home that people want to buy, and the price is right, the house will sell, it’s just a matter of how long it will take to get the job done. 

So, let’s assume you are ready to show your home.  Here is a checklist of some things you may have overlooked. 

• Have realistic expectations when it comes to the selling price of your home.  You must remember that in order to sell your home in a declining market, your home must be listed at today’s value. 
• Is your home in show condition?  Remember, you are not selling what is in the home, but the home itself.  Get rid of the clutter, this makes your rooms look bigger.  You should also clean your walls, floors and doors.  Invest in new light fixtures if they are outdated.  All of these things cost pennies on the dollar and can turn lookers into buyers.  Look at your home from across the street or from next door.  Does anything stand out that you may want to change?  Nice curb appeal is imperative, as buyers will make a judgment about the inside of your home just from seeing the outside. 
• In today’s market, you should be willing to negotiate on terms and financing.  It is much harder for buyers to be approved for home loans today than it was just a few years ago.  Therefore, if you are willing to assist in the financing part of things, your chances of selling greatly improve. 
• Above all, be patient and don’t get discouraged.  While it may take longer to sell your home, if you are proactive, it is just a matter of time.  Remember, chances are you are competing with thousands of other homes in your area, and many of them are foreclosures.  You must take the time to make your home appealing both physically and financially. 

If you think like a real estate investor, you can still find your success in the midst of a failing economy. 

Bookmark With