Rob Bohr – Arizona Realty One Group

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You’ve made the decision that you want to buy a home. What now, where do you begin?

Preparing and Planning
Some people like to begin some of the initial leg work on their own before involving any professionals. You will need to consider your financial outlook and how much money you are willing and able to spend on your home. There are numerous websites that provide tools like Wells Fargo’s Loan Calculator, which will allow you to plug in some of your financial information and it will give you a general idea of how much home you can afford. But, you will have a much more firm number a little bit down the road when you begin talking to a mortgage lender.

There are many things that you will need to consider as far as what you are looking for in a home and now is the time to start making that checklist. For instance, you will have to ask yourself what area of town or neighborhoods you are interested in, whether schools are important, what size house you need, how many bedrooms, how many bathrooms, etc. You can begin searching classifieds and attending open houses on your own. Many real estate websites allow you to search listings on a limited basis. If you live in Arizona, you can view hundreds of MLS listings from any of my featured neighborhoods on my Search for Homes Now page. You can also visit the Looking to Buy page, where you can enter information about what you are looking for and I will personally send you MLS listings of houses that meet your criteria. There is absolutely no cost and no obligation for this service. As you create your checklist for your prospective home, keep track of which things are classified as needs and which are wants, and prioritize these features that you are looking for.

Finding a Realtor and Lender
Once you are ready to get serious about your home search, it’s time to start working with a Realtor and a lender. It will not be difficult to find a real estate agent in your area. Ask for referrals from friends and families and interview several agents before making your final decision. You may be working with the agent for a long time so you will want it to be someone you are comfortable with. Any real estate agent should also be able to provide you a referral for a reputable lender. In fact, many agents are not going to begin showing you houses until you have been pre-qualified by a lender. Otherwise, they may be wasting their time.

Pre-Qualify for Financing
When you contact a lender, they will be able to pre-qualify you, giving you a very good indication of the amount of financing that you will be able to obtain. You will need to provide the lender with some personal financial information. They will review your credit score, income, debt, work history, etc. and then give you approval. They should give you an amount they feel confident you would be able to obtain a loan for. They will also give you an idea of the types of loans that you could qualify for and should be able to provide you with some information about which type of financing may work best for your specific situation. The lender will not charge you for being pre-qualified, but they may expect your business once you are able to finalize your loan.

Search for Homes
Once you have a good indication of what you are able to spend it is time to begin looking at houses with your real estate agent. A real estate agent has exclusive access to homes that are listed on the Multiple Listing Services (MLS) and he or she will be able to find homes that meet the criteria that are most important to you. Most real estate agents will send you some listings that meet your criteria, and ask you to select the ones that you feel are worth seeing. Once you have shown some interest, they will then take you out to start looking at houses. As you begin looking at houses, keep your checklist handy and try to find a home that will meet the largest number of desired characteristics at the best price. Try not to get too attached to one house, because there are many things that could go wrong and you may not end up with it no matter how much you love it.

Making an Offer
Once you find a house that you feel is the right home for you, your agent should do an analysis of comparable properties to determine a good price for the home, and together you can decide how much you want to offer. Many people think that an initial offer should always be much lower than the list price of the home. The truth is that every situation is unique. The house could be listed low for a variety of reasons and you do not want to risk losing out on the home because someone else comes in and offers more. There are many things to consider with price and this will be a conversation for you to have with your lender. There are other factors that are involved in a negotiation, including who pays for what (i.e. closing costs), what contingencies will be allowed, and other concessions that the seller may be willing to make.

Executed Contract and Inspection
Once you submit your offer, it will be up to the sellers to decide if they want to accept your offer, counteroffer, or decline the offer. If you came in below list price, the most likely scenario will be a counteroffer. There could be several counteroffers back and forth before the parties are in agreement. One aspect of the contract will be the timeline and when the close of escrow will be scheduled. Once the contract is executed, this should kick off the ten day inspection period. You should always be advised to have a professional inspection completed before purchasing a home during this ten day period. Based on the inspection, you can then 1) cancel the contract, 2) ask for repairs by the seller, or 3) accept the contract.

Final Loan Approval and Close of Escrow
Assuming the buyer and seller reached agreement following the inspection, you will then complete your application for final loan approval with your lender. Once that loan is approved, it’s time to open escrow. You will need to get a cashier’s check or money order for the amount of your earnest payment. You will schedule a time to close escrow and show up ready to sign, with your check in hand. At the end of process, you should be given the keys to your new home. It’s now time to hire the movers and begin picking out furniture. Congratulations!

Conclusion
It’s important to note that each and every transaction is different. There are many things that can change the course of a transaction and these steps of the process are likely to be altered and there will almost always be some complications along the way.

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Determining the Appropriate Price for Buying or Selling a Home
We are all aware that housing prices have declined at historic rates here in Arizona and throughout the nation. It is hardly an ideal time for most people to sell. With prices so low, it seems like a great time to buy However, with falling prices, buyers are afraid that the prices will continue to decline and they won’t make their purchase at the bottom of the market. So how do we determine the best price to list our homes if we are selling, and how do we know what the right price is if we are buying?

Let’s start with buying a home. The truth is that no one knows when the housing prices have reached their lowest point. We know that prices are much lower than they were a year ago, and lower still than they were two years ago. You, as a buyer, know how much money you are comfortable spending and what you can afford each month for a mortgage payment. You can compare a property to similar properties and determine that the price is competitive for the current market, but there is no way of knowing if the price will continue to decrease.

Gary Keller explains this concept in his book, Shift: How Top Real Estate Agents Tackle Tough Times. He says that when he will often draw a downward line on a piece of paper and ask his clients to stop him when he is at the bottom. It is often when he nears the bottom and starts going up again that the prospective buyer will then tell him to stop. This exemplifies that if one waits until it starts going up again, they will not be at the lowest price and there is no way to pre-determine where that point is.

As long as you feel you are within your comfort zone, you feel you’re getting a fair price according to the current market, and you are happy with the prospective home, you need to pull the trigger and not look back. It does no good to continue to watch the prices every day and get upset when you see homes going for less than what you purchased for. There are a lot of factors to be considered, and you are most likely in your home for a number of years and the long term value of that house is what you should focus on.

So what is the correct price to list your home at if you are selling? There is not an easy answer for this either. The first step is to work with a real estate professional to determine the market value. But, you can and should be involved in the process of determining your list price. You are going to have to be realistic and rational during this process. With values dropping the way they have, many people have a very hard timing coming to terms with the current value of their home, especially when they know how much higher the value was just a few short years ago.

A detailed comparative market analysis is vital to determining the appropriate market value of your property. However, it has been demonstrated that a new listing has a window of opportunity to sell, and if your house is not able to engage prospective buyers when it is first listed, then it may have a much tougher time selling as it stays on the market. This is why you really need to try and price your property ahead of the market. If prices are steadily dropping, you may need to price your property a little below what recent closings have gone for, simply because those closings took place in the past and you are pricing for the future. You want to make sure that you have your home priced right immediately so you can hit that window of opportunity.

Determining the correct price of any real estate transaction is never an exact science and there will always be uncertainties and disagreements, but if we educate and inform ourselves as much as possible going in, we can feel more comfortable with our decision.

With the current state of the housing market a lot of people are deciding to rent out their houses instead of trying to sell them for less than what they may have paid. Others may be choosing to purchase rental properties during the down market as investments. I wanted to discuss some things that you should keep in mind if you are thinking of renting out a home.

First of all, if you live in an HOA you will need to check your Covenants Conditions and Restrictions (CC&R’s) to make sure there are no rules against renting this property. Some HOA’s restrict people from renting out properties. You will also need to register with your municipality and county as a rental property.

There are some tax and insurance implications to consider. If you want to rent a home that you currently live in you should switch your homeowners insurance to rental insurance. You can also consider making it mandatory that any prospective tenants purchase rental insurance to protect their private property. You will also now be paying taxes on the rent that you receive because it is income. Of course if you are paying a mortgage on the rental property, you can still deduct the interest on the mortgage, your property taxes and any expenses related to the property. Expenses could include marketing your property for rent, utility payments, management and legal fees, etc.

Each year you can deduct depreciation from your taxes. If you take the purchase price of your home, divided by 27.5, plus any repairs that you needed to make, this is the amount of depreciation that you can deduct each year. Another important thing to consider is the capital gains tax. If you make a profit on a real estate transaction you need to pay capital gains tax, however, there is an exception if it is your primary residence for 2 out of the last 5 years. If it is your primary residence, you can then not pay the capital gains tax on up to $250,000 for a single tax payer or $500,000 for a couple. So if you are renting out a place for several years, you will have to consider the capital gains tax. Of course, there are other possible ways around paying capital gains such as a 1031 exchange, but that is for another article. If you are even thinking about the capital gains tax during this market you should just consider yourself lucky.

So if you have considered all of these things and you still want to rent out a property how do you begin finding tenants? Advertise is the obvious answer, but there are some other things to consider when screening potential tenants. Many people require a credit and background check. This is highly recommended. Through a background check you may find they were convicted of a drug related offense and the credit check may disclose that they are notoriously late paying any of their bills. The way things are right now, some people do not consider a foreclosure a gigantic red flag, but instead think that steady employment is more important. It is a common practice to charge the prospective tenant for their own credit check. You should also consider charging a security deposit of at least the equivalent of one month’s rent to pay for any damages. You can decide whether or not you want to allow pets in your property, but if you do you can charge an additional pet deposit or even a monthly pet rent.

Once you have your tenant in place there are specific laws that need to be followed based on the legal actions and rights of a landlord. These laws will vary from state to state. In Arizona, you can refer to the Landlord Tenant Act of the Arizona Revised Statutes. These will provide you with information including the legal requirements for dealing with a tenant who fails to pay his or her rent.

Purchasing a rental property can be a great investment, but, like anything else, it also has its risks. If you can keep good tenants in the property and have their rental payments cover your mortgage, you could basically have someone else pay for your house. In other words you can end up with a great asset while putting little or no money into it. In the best case scenarios, you may even be able to find a property that has a positive rental cash flow and you can make a monthly income while paying off your house. Just remember to be prepared for the unexpected and do not count on always having your property occupied.

There are great rental properties and investment opportunities available right now. Visit my website at www.robbohr.com or call me today at 602-478-7015 if you are interested in seeing what is out there