What’s the One Unbreakable Law of Real Estate?

“Perform due diligence!” is the one law you should never break in any kind of real estate deal – residential, multi-occupant, or commercial!

What is due diligence? It’s a common phrase for the evaluation of a property and its surrounding environment before you commit to buying it.

Due diligence has two objectives. First, you want to reduce or eliminate risk! Needless to say, you’ll be assuming a large loan and will want to know exactly what’s right or wrong with a property before you sink any money into it.

Two, due diligence allows you to uncover real bargains, especially for investors. On the surface, one property may look like a “loser,” but a closer inspection may reveal that the building is structurally sound and requires only minor and inexpensive maintenance and repairs.

One part of due diligence is what you’d expect – the physical inspection of the property and inspection of all documents and records concerning that specific property. The other part is the inspection of the documents and records concerning that property.

In this article, I’ll just talk about the physical inspection portion of due diligence.

Physical Inspection of Properties

Below, I’ve listed all the inspection tasks which should be performed by a professional inspector. Of course, you should visit the property as well. Many times, a quick “eyeballing” can reveal any obvious signs or poor maintenance or decay - a leaky roof, wet basement, foundation cracks, cracks in the walls, plumbing leaks, etc.. In those cases, you’ll know you don’t need to waste any further time on that property.

As I mentioned earlier, such an inspection may reveal that you’ve actually got a bargain on your hands instead of a “dog.” In such a case, you’ll want to purchase or invest in that property quickly.

What happens when you find problems in a property and still like it? Well, then, you can require that the seller correct those problems or reduce the price before you sign any contract.

In general, defects fall into two categories. One category contains the obvious defects – wet basements, peeling paint, broken windows, leaky plumbing, warped floors, etc.

The other category contains the more expensive and dangerous hidden defects. These can include corroded pipes in the walls, roof or window leaks that don’t show up until it rains or snows, subtle cracks in the foundation.

Obviously, you want to make sure these hazards are spotted before you ever sign a purchase agreement. They can cost you a lot of money in the long run, not to mention the fact that they can send your blood pressure through the roof!

What Do Professional Inspectors Look For?

Below are the items inspectors examine when they check a property:

• Overall structural integrity
• Property drainage/landscaping
• Walks and drives 
• Foundation, footings, crawl space, basements, sub-flooring, decks
• Exterior walls, siding, trim 
• Windows, doors, cabinets, counters 
• Gutters, downspouts 
• Roof, roof shingles, roof structures. chimneys, attic
• Floors, walls, ceilings, etc.
• HVAC systems 
• Plumbing systems, (fixtures, supply lines, drains, water heating devices, etc.)
• Electrical system (wiring, service panel, devices, and service capacity
• Energy conservation/safety Items 
• Insulation & ventilation 
• Moisture intrusion/mold

And, of course, we can’t forget the voracious appetites of….bugs!

Pest Control Inspection

Depending on the area of the country in which you live, insects can cause a heckuva lot of damage to a property!

I’m talking about such bugs as termites, carpenter ants, powder post beetles, and any other insect that likes to munch on wood. Then, there’s fungus, in the form of “dry rot.” It can also cause a lot of destruction.
In such cases, you’ll need to hire the services of a specialist (pest control inspector) to examine the property.

If the operator identifies any problems, he or she should provide you with a diagram that pinpoints the location of the infestations. If serious problems exist, they need to be corrected immediately! The expense is usually paid for by the seller.

To protect yourself against any of the problems I mentioned above, ensure that the purchase contract provides for cancellation without penalty or loss of money if the physical condition of the property doesn’t meet standards.

So, there you have it – all the physical items you or an inspector should check on to meet the law of due diligence! Remember – never, ever break this law! To learn more about any special concerns for due diligence in our area, contact me today!

How Do I Find the Property Value Trends in My Area?

Knowing property value trends can be very helpful to you as a buyer, seller or investor. As a buyer, you can pinpoint bargains in areas that are trending upward (or downward) in price. As a seller, you can use the information as part of the bargaining process to get the maximum price from the sale. As an investor, you can use the latest forecasts and trends to determine whether you want to invest, when you want to invest, and how much to put into a property. 

Remember, the trends are not guarantees of future performance; they're an educated guess as to which way the market is moving.Whatever your real estate goals, you want the latest and best information, and you want it from experienced professionals. In terms of your neighborhood and/or city, your local real estate agent is the best source for weekly and monthly trends. After all, it's their job to stay on top of such trends in the markets they serve. 

Other organizations provide state, regional and national forecasts. They're often updated on a monthly or quarterly basis. Sources of Information Thanks to the Internet, there are many, many sources for data on real estate property value trends. 

For state trends, go to the Federal Housing Finance Agency website (http://www.fhfa.gov/Default.aspx?Page=215). Click on your state to get the Housing Price Index (HPI). 

If you're wondering exactly what the HPI measures and how it's calculated, here's what the site says: "The HPI is a broad measure of the movement of single-family house prices. The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or re-financings on the same properties.

This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975. The HPI serves as a timely, accurate indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes." So, if you want property value trends for Nebraska from the FHFA site, click on "State HPI Summary" and scan down the list of states until you find Nebraska. The handy table gives rankings and trends in quarterly, 1 year, 5 year and "Since 1991Q1" columns.On the same site, you can also click on "Research and Analysis," and you'll get a list of government and industry sites which will provide you with information on property trends. Note: The FHFA site doesn't provide predictions; it simply reports data. To get analysis and predictions, try the respected RealtyTimes.com. It reports on current market conditions and provides advice to consumers as well. Another site for information on residential properties is Zillow.com.

To find local information, fist click on the "Local Information" tab. That takes you to the page where you'll find the "State," "City," and "Nearby Neighborhoods" tabs. Click on the appropriate names, and you have local information! There are many, many other websites from which you can gather property value information. 

I don't have the space to list them all, so here's a partial list of major industry and governmental agencies: 

- National Association of Realtors = Freddie Mac 
- National Association of Home Builders 
- Census Bureau 

Of course, the network, cable, and satellite channels report many of the finding from the sources listed above on a national basis. But, if you want local information, I recommend you work with your local real estate agent! He or she is best positioned to give you the latest information on property value trends. 

To see what I can do for you in that regard, please contact me today.

How a Down Payment on a New Home Makes a Molehill Out of a Mountain!

Believe me, your down payment on a new home affects nearly everything you can think of in the buying process - the loan programs you're able to qualify for, the size of the interest rate, the amount of closing costs, etc.

The basic rule is this: the more you have to put down on a down payment for a home, the more options you have!

This rule is true because, like all lenders, mortgage lenders dislike risk. They're in the business of making money by lending money. So, the more money you put down, the lower the risk, and the more lenders like your deal.

And, that's not all. If you have enough cash for a large down payment, then more choices open up to you! You can choose conventional fixed rate loans, adjustable rate mortgages, VA, FHA, graduated payment mortgages and all the variations of each of these programs.

By the way, when you combine a good-to-excellent credit score with a large down payment, you'll definitely get positive attention from loan officers!

Acceptable Sources for Down Payment Monies

In general, lenders want to see adequate funds available for a period of at least sixty (60) days in your account. The usual methods of proof of these funds are either a Verification of Deposit form or two months' worth of your most recent bank account statements.

So, if you're person who keeps money "under the mattress" or somewhere in your home, this isn't acceptable. It has to be deposited in an account (bank or investment) for at least two months (preferably longer).

In technical terms, this is called "seasoning." And the reason behind it is this: First, by having money in an account, it shows you have to ability and discipline to save money and, thus, are a good risk from the lender's point of view. Second, it demonstrates that the money is likely yours and not a personal loan from a family member or a friend. Lastly, and obviously, it shows you have enough money on hand for a down payment.

In general, here are sources you can use for a down payment:

• Checking account
• Savings account
• 401k account
• IRA account (have to meet specific guidelines)
• Money market account
• Stocks
• Bonds
• Mutual funds
• Certificates of deposit and other liquid assets.
• Sale of an asset, etc.

Frankly, in this New Age of Frugality, the safest method is to simply save the money for a down payment. This teaches you financial discipline which is good for all aspects of your life, and it means you don't have to rob other assets to pay the down payment.

I'd be happy to discuss and suggest many different ways of obtaining down payment money. Contact me today.

The Advantages and Disadvantages of FSBOs

Many home owners think about selling their own home but relatively few attempt it. Why? Because it's an extremely time-consuming and often exhausting process, especially if you're working a full-time job! It's the Realtor who takes this burden off your back.

Nonetheless, I don't discourage you from putting your home on the market and attempting to sell it yourself.
But before you do it, I do encourage you to become extremely knowledgeable about the process and aware of the both advantages and disadvantages of it.

Below, I've provided information on the benefits and drawbacks of doing a "For Sale By Owner" (FSBO) sale. 

Read it carefully and then make your decision!

Advantages of Selling Your Own Home

Of course, the biggest advantage a FSBO is that there's no commission to be paid to a Realtor. You get all the proceeds from the sale, minus any marketing costs you incur.

A second advantage is that you have complete control of the transaction. You don't have to rely on anyone else. You're totally independent.

A third advantage concerns your equity. If it's low, you have the possibility of selling your home without having to write a check.

A fourth advantage is that you don't have to rely on a realtor to schedule showings, answer inquiries, etc.

Disadvantages of Selling Your Own Home

Perhaps the greatest disadvantage is the tremendous amount of time you have to put into the sale.

It's a time-consuming process to do all the paperwork, the marketing and advertising, the showings, etc. by yourself - not to mention the hours it takes to get acquainted with all the legal, financial, and other issues. You must be prepared for this.

A second disadvantage is the costs in terms of marketing and advertising. If you don't exactly what you're doing, this can be very expensive!

A third disadvantage is that you won't have access to the Multiple Listing Service (MLS) unless you pay a fee to have your listing included. If you don't pay that fee, then you'll end up hunting for buyers one at a time, a very inefficient, ineffective, and frustrating process.

The fourth disadvantage relates to your knowledge of the market. If you're not knowledgeable about it, you may not price your house correctly.

That is, you may underprice it or overprice it. If you underprice your home, you lose money. If you overprice it, you lose buyers. By the same token, if you do find a buyer and you're not experienced at negotiation, you could be taken advantage of.

A fifth disadvantage relates to a belief of some buyers. They believe that since you're selling the house by yourself and not paying a commission, then they're the ones who should get the savings instead of you!

My Advice: Do your homework before considering selling your home by yourself! And, if you do decide to go the FSBO route, be fully prepared in all aspects of home sales!

If you'd like more information and advice on selling your own home as well as my real estate services, contact me.

How to Be a Wise House-Shopper in a Great Buyer’s Market!

There’s no doubt about it – there are a great many bargains in the real estate market today if you’re a person looking for a new home.However, I highly recommend that you don’t get dazzled by all the opportunities and make a potentially expensive and poor decision. To that end, I’d like to offer you some common-sense guidelines to follow.

Guideline 1: Pay Attention to Your Budget
Before beginning your search for that new home, sit down and come up with a monthly payment you can handle with ease and then look for the house that fits that budget.

Guideline 2: Save Up for a Down Payment
Due to the “mortgage meltdown,” lenders are currently much more cautious about giving out money. Depending on the situation, they may insist on a minimum down payment of 10% or one that’s all the way up to 25%. So, start saving!

Guideline 3: Improve Your Credit Score
A good credit score is a great way to make the whole process easier when you apply for a loan. Today’s lenders scrutinize such scores more closely today than in the past. If you don’t have a good score, work hard to get it up into an acceptable range. It’ll save you money on interest charges and down payments in the long run!

Guideline 4: Get a Pre-Approved Mortgage Loan
If you’re a first-time home buyer or simply a buyer who wants to make sure you stay within your means, it’s a wise idea to get a pre-approved mortgage.This is simply the process of applying for a mortgage and getting approval for the loan prior to buying a home.

A “pre-approval” is an indication that the lender is ready to extend a mortgage to you once you’ve located the right property.  And it has several benefits. First of all, it saves time and energy. Once you have a pre-approved loan amount, you’re required to stay within the limits of that loan in terms of the price you’ll pay for a house.

First, when working with a realtor, ask him or her to limit the choices to those stated in the loan. This prevents the agent from showing you properties which are out of your range. By the way, they’ll really appreciate those parameters because it’ll help them zero in on properties with the best chance of sale! 

Second, you can spend more time looking at homes you really like and, simultaneously, not wasting time on houses that aren’t within your budget. This allows you to focus on the details of the homes you do like in order to make sure you select the right one; for example, kitchens, baths, garages, etc.

Third, you can bargain more effectively with sellers once they know you’re pre-approved. In the current market, that’s a great relief for many sellers because they realize they have a reasonable certainty of selling their property when working with a pre-approved buyer.

Fourth, you can close faster with a pre-approved loan because there’s no time lost in the usual processing period for loans. For example, an appraisal can be ordered right away, and you have the potential to cut a 30-day closing to two or three weeks.

Finally, the seller will prefer to deal with you, particularly if he or she needs to move quickly.

Now, you have some common-sense guidelines to follow when seeking a new home in today’s market! You can learn even more by contacting me today a 402.690.1573.

Ride the Magic Carpet of Increased Home Value!

Your carpet. Maybe it's full of dirt tracked in by the kids and pets. Maybe you're exasperated because it's hard to maintain. Don't despair! You just need to realize that your carpet is… FULL OF MONEY!

No, I'm not kidding; it really it is! And here's the simple "magical" proof - when you clean your carpet or replace an old one, you can increase the value of your home by as much as 10%! How can that be? Well, you know the old saying, "You only get one chance to make a good impression?" That's doubly true when buyers come to look at your home!

When they see a dirty or worn carpet, they think, "Oh, wow, there's an expense I don't need. What else is wrong with this place?" Ouch! With one 10-second glance, your home's value has fallen off a cliff! It's not fair, is it? But, the good news is that you can "magically" get things headed in the opposite direction of increased value by taking one of two simple steps!

Clean the Carpet!

Okay, you have two choices here. You can shampoo/steam clean/dry clean that magic carpet of yours by yourself. There are all kinds of rental systems available to you. The dry system (Oreck, for example) dries almost immediately and kills almost all mold and bacteria. These methods are cheap because you supply all the labor.

The second choice is to hire a professional carpet cleaning service (Stanley Steemer, etc.). If your carpet has a lot of bad stains, we recommend you use one of these professionals. They're experts at it, and their equipment is much more high powered than anything you can rent. It'll be more expensive, but the results will be worth it! Like magic, your carpet will look like new and have a great impact on visitors!

Replace the Carpet!

I know, I know - your first reaction is, "Wow, that's going to be expensive!" Yes, but this initial outlay has the potential to make you money in the long run. How can that be?

Well, let's assume you want to sell your home in the future. A $4,000 investment in new carpet can make a $10,000 difference in the sale price! In other words, by investing $4,000 in a new carpet, you may end up adding $6,000 to the value of your home! Now that's some financial magic that makes you look at your carpet in a whole new way, isn't it?!

So, what are you waiting for? Clean or replace that carpet right now and let your house soar upward with increased value!

For any questions or concerns about cashing in on carpet care, contact me at 402.690.1573 or Email me anytime at teresa@teamelliott.net!

P.S. If you've never called anyone on the carpet, now's the time to do so!