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Buying a Home

Now is a Great Time to Buy!

IF YOU'RE BUYING A HOME

The first question to ask yourself is: how much house can you afford? Two things will answer this question: 1) how much you have available for the down payment, and 2) how much a financial institution will agree to lend you based on your income, debt and credit history.

What is the Down PaymentWhat is the down payment?

The biggest hurdle for most first-time homebuyers is saving enough money for the down payment. If you haven't saved much, you may want to set aside funds for a down payment on a regular basis from your paycheck. Look at all the funds that are potentially available to you: your checking and savings accounts, mutual funds, savings bonds you've stashed away, stocks and bond funds, the cash value of your life insurance policy, and gifts from parents or other relatives. It may even be savings from a part-time job that are devoted to your down payment.

If you do put less than 20 percent down, you may be required to purchase private mortgage insurance, or PMI, which helps protect the lending institution in case you fail to make payments on your mortgage. Typically, these costs will be added to your monthly mortgage payments and to your closing costs. In helping you decide how much money you feel comfortable paying as a down payment, you should think about the many other expenses that go along with buying a home. There will be moving expenses, any home repairs might need to be made immediately, and home decorating costs. You should try to avoid moving into the home of your dreams with a savings account on empty. In addition to your down payment and closing expenses, it's a good idea to have two or three months of mortgage payments saved in a cash reserve when you apply for your mortgage.

Are there mortgages that don't require a down payment?

Some lenders will finance 100% of your home purchase. Ask your REALTOR® or representative for information.

What are closing costs?

In addition to the down payment, you will also need to consider closing costs. The closing is the process during which ownership of the house is transferred to you. Closing costs generally range from 2.5 percent to 3 percent of the amount of the mortgage. For example, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $2,850 and $5,700 on your $95,000 mortgage. Sometimes, you can negotiate with the seller of a property to pay some of your closing costs, which will reduce the amount of money you will need to bring to closing.

What is earnest money or deposit?

Sometimes new homebuyers forget about the "up front" cash needed when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a deposit to show "good faith." Talk with your real estate professional about how much they recommend. A REALTOR® or an attorney usually holds the deposit, and it will become part of your down payment. If your offer is refused, your earnest money is refunded to you.

Financial Institutions and LendingHow much will a financial institution lend you?

Besides having funds for a down payment and closing costs, the other major factor in your home purchase decision will be how much you can borrow. When you apply for a mortgage, the lender will consider both your earnings and your existing debts in determining the size of your loan. Lenders generally use the following two qualifying guidelines to determine what size mortgage you are eligible for:

1) The amount of money you owe for mortgage payments, property taxes, insurance, and condominium or co-op fee, if applicable, should total no more than 28 percent of your monthly

gross (before-tax) income. This is called the housing expense ratio.

2) The amount of money you owe for the above items plus other long-term debts should total no more than 36 percent of your monthly gross income. This is called the total debt-to-income ratio.

Basically, lenders are saying that a household should spend no more than about one-fourth of its income (28%) on housing and no more than about one-third of its income (36%) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay their mortgages fairly comfortably.

These ratios are flexible guidelines. If you have a consistent record of paying rent that is very close in amount to your proposed monthly mortgage payments or if you make a large down payment, you may be able to use somewhat higher ratios. Some lenders offer special loans for low- and moderate-income homebuyers that allow them to use as much as 33 percent of their gross monthly income for housing expenses and 38 percent for total debt.

A mortgage lender will use all the relevant data--your income, your existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance--to calculate whether you qualify to borrow the amount of money you need to buy the house. Rather than guessing or estimating how much you can afford to spend, ask a lender or mortgage broker to give you a full assessment and a letter stating how much you're qualified to borrow. The true amount may be much more or less than you think.

Pre-qualify or pre-approval?

If you're serious about buying a home, obtaining a mortgage pre-approval early in the process can greatly enhance your negotiating power and will give you a valuable competitive edge. With your purchasing power known, house-hunting tours can be focused on the homes in your price range. When you make an offer, sellers will view yours more favorably because having a mortgage pre-approval removes any doubt about your ability to obtain financing, and might even make the difference in your getting the home you want - or someone else getting it. When negotiating to purchase a home, your offer and counter offer strategies can be crafted based on the terms that are best for you. For instance, you may benefit more from seller paid points or closing costs than from a lower selling price, or vice versa, depending on the lender's terms. It is critical for you to know the best strategies up front because it is nearly impossible to re-negotiate a contract at a later time.

Finally, don't mistake mortgage pre-qualification for mortgage pre-approval. Mortgage pre-qualification has little or no value because it is only based on the answers given to a simple, brief interview by the lender. Mortgage pre-qualification gives no guarantee that a loan will be granted. In contrast, mortgage pre-approval means that an application has been completed and reviewed, a credit report has been obtained and the lender has agreed to loan a specific amount of money to the buyer.

The Fun Part - House HuntingWhy use a real estate professional to help you buy a home?

The best advice for any home buyer is to think through the process very carefully. There are many, many activities that have to happen before a home can be purchased. A couple of things to think about:

Information vs. Knowledge: If you're buying a home, think about how much you know about what is a reasonable price to pay for the property. Buying a home is the largest investment most people make. A professional can guide you in making the best offer.

Your Time: How many homes do you have time to tour if you're buying? A professional puts in many, many hours into searching for the right home for you, and in smoothing the way for your eventual transaction. Much of this activity goes on "behind the scenes" so many people are not aware of how much effort actually goes into the home buying and selling process.

Now the fun part: House hunting

Now that so many properties are online at www.REALTOR.com and other sites, you can start looking for your new home without even leaving your desk. If you don't have an opportunity to shop on the Internet, another good way to start is by picking up home guides and magazines that often are distributed at your area grocery stores. And, of course, an excellent resource is the classified advertising that appears in your local newspaper. You can also visit model homes that are often open on weekends for touring. When you've decided what you like (and don't like) and narrowed down your choices, you can save time by visiting only the properties that best match your needs.

Some things are going to be important to consider in your new home, so make a list. Do you really know what you need and want in your home? You'll save yourself many hours of shopping if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don't want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn't suit your needs. Start compiling your wish list by thinking about what you like and dislike about your current home.

Location, location, location

The three most important factors in finding the right home? Location, location, location. The location of your new home is critical. How far will you have to drive to work? How good are the local schools, shopping centers, public transportation, seniors' services and other neighborhood amenities? Will your new neighbor be a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it's in an undesirable location, and a poorly located home can be a particularly bad choice if you anticipate reselling the home within a few years.

Check lists are a great way to remember what you like or don't like about the houses you see. Rather than relying on memory, make notes about the homes you visit. Turn your priorities into a personalized home-shopping checklist and use it to track the features of each home.

Feel free to open closets and cabinetry. Look in storage areas and crawl spaces. Most sellers provide information sheets about the home, and you can add your own notes to these fact sheets. It's easy to "fall in love" with a house, but before it becomes your home, you might want to "check off" these additional considerations:

Will your furniture fit in the new spaces?

Are there enough bathrooms to serve the needs of your family now and in the near future?

Are there comfortable spaces for any overnight visitors?

Is there plenty of storage space and is it easily accessed?

Which schools serve this address? Are there other children in the area?

How far is the home from work, school or recreation?

Will pets be comfortable in the new surroundings? Does the community have pet restrictions?

What kind of repairs will be required right away? Will there be an excessive amount of ongoing maintenance required?

How old are the heating, cooling and roofing systems, and are they in good working order?

Is the home protected against unexpected repairs by a home warranty plan?

Home WarrantiesWhat is a Home Inspection?

Obtaining a professional home inspection is one of the most important aspects of purchasing a home. Unfortunately, the expertise of inspectors varies greatly, and home inspectors are not regulated or licensed in most states, including Georgia. Your real estate professional can provide a list of experienced home inspectors in your area.

If you are purchasing a somewhat unique home (such as historic property, farm, rehab), ask if the inspector has experience with that type of property. Consider ordering specialized inspections for systems such as heating and cooling, solar, alarm or security, pools and spas, etc. Look for contractors specifically experienced with those systems. Explain up front that you will not request repairs from their firm. A good inspector only performs inspections. Don't hire an inspector who claims to make corrective repairs as identified by the inspection. This is the best way to avoid conflict of interest issues. A few questions to ask before you hire the inspector can include:

Are you a full time inspector?

Are you a member of a professional association?

Do you hold any special licenses or degrees? (Electrician, plumber, engineer, general contractor, claims adjuster, etc.)

How many inspections have you performed?

What type of report do you provide? When is the report available?

May I check your recent references?

Can the inspector return to look at repairs made after the inspection? If so, how much will it cost?

Once you've selected an inspector, plan to be present for the inspection and pay close attention. You will learn a lot about the home and the future maintenance that may be necessary. Don't bring friends, children, decorators, painters or contractors along. Avoid being distracted from the inspection, this is the best opportunity to learn about your prospective new home.

"Wear and tear" flaws or minor cosmetic deficiencies may be pointed out by your inspector. But it's important to understand that that the purpose of inspections is to uncover major defects for which you may be able to negotiate with the seller for corrective repairs. Make any such request for repairs in writing. Get repair estimates from qualified contractors. Prepare documentation and allow your agent to present it to the seller as part of the negotiation.

A home inspection cannot eliminate all future maintenance problems, but it can give you a detailed understanding of the home's condition at the time you purchase it. A careful inspection will help you to avoid costly surprises. For further protection, you may want to consider purchasing a Home Warranty or Home Protection Plan.

What's a Home Warranty?

Buyers, as well as sellers, can benefit from a Home Warranty or Home Protection Plan, as it's sometimes called. A warranty may protect you against expensive repair or replacement costs when the major working components in the home you're selling or buying break down, including things like the water heater, furnace, built-in appliances, electrical wiring, central air conditioning, exposed duct work, interior plumbing system and fixtures.

Protection typically lasts for a full year from the date of purchase on a previously owned home, and often can be extended beyond one year if desired. For sellers, homes protected by a Home Warranty can sell up to 15% faster on average, because buyers see it as an additional advantage and safeguard for them. In addition, most plans offer protection for the seller on the same major components until the day of sale while the home is on the market.

If you're looking for a home warranty plan, check with your real estate professional for companies they recommend. Review each plan thoroughly to know what components are - and are not - covered.

Making and OfferReady to make an offer?

A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you must enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but all the terms and conditions of the purchase. For example, if the sellers said they'd help with $2,000 toward your closing costs, be sure that's included in your written offer and in the final completed contract, or you won't have grounds for having that credited at settlement.

Real estate professionals usually have a variety of standard forms (including Residential Purchase Agreements) that are up to date with the changing laws. In addition, your agent will cover the questions that need to be answered during the process. In Georgia, adverse factors of the property must be disclosed by the seller, and your representative will ensure that this takes place.

If you are not working with a professional, keep in mind that you must draw up a purchase offer or contract that conforms to state local laws and that incorporates all of the key items.

After the offer is drawn up and signed, it will usually be presented to the seller by your agent, by the seller's agent if that's a different agent, or sometimes by the two together.

What the offer contains

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). It's important, therefore, that it contains all the items that will serve as a "blueprint for the final sale." These purchase offer items include such things as:

Personal property, such as appliances, draperies, etc.

Address and sometimes a legal description of the property

Sale price

Terms -- for example, all cash or subject to your obtaining a mortgage for a given amount

Seller's promise to provide clear title (ownership)

Target date for closing (the actual sale) - NOTE: If you have a mortgage, make certain that your closing occurs BEFORE the expiration date of your loan commitment and interest rate lock-in.

Amount of earnest money deposit accompanying the offer, and whether it's a check, cash or promissory note, and how it's to be returned to you if the offer is rejected -- or kept as damages if you later back out for no good reason

Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller

Provisions about who will pay for title insurance, survey, termite inspections and the like

Type of deed to be given

Other requirements, which might include a chance for attorney review of the contract, disclosure of any known environmental hazards or other specific clauses

A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing

A time limit (preferably short) after which the offer will expire

Contingencies, which are an extremely important matter and discussed below

What are contingencies?

If your offer says "this offer is contingent upon (or subject to) a certain event," you're saying that you will only go through with the purchase if that event occurs. The following are two common contingencies contained in a purchase order:

The buyer obtaining specific financing from a lending institution. If the loan can't be found, the buyer won't be bound by the contract.

A satisfactory report by a home inspector (for example) "within 10 days after acceptance of the offer." The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all the details are nailed down in the written contract.

Negotiating tips for Buyers

First, look to your agent for guidance on negotiating strategies. You're in a strong bargaining position -- meaning, you look particularly welcome to a seller -- if:

You're an all-cash buyer; or

You're already pre-approved for a mortgage; and

You don't have a present house that has to be sold before you can afford to buy.

In those circumstances, you may be able to negotiate some discount from the listed price. On the other hand, in a "hot" seller's market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers.

It's very helpful to find out why the house is being sold and whether the seller is under pressure. Keep these considerations in mind:

Every month a vacant house remains unsold represents considerable extra expense for the seller;

Some owners might be relocating immediately because of a job change, or working with a relocation company; and

Estate sales often yield a bargain in return for a prompt deal.

How does a Seller respond to an offer?

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that's that, and the sellers cannot later change their minds and hold you to it.

If the seller likes everything except the sale price, or the proposed closing date, or the hot tub you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer. For example, "We accept the counteroffer with the higher price, except that we still insist on having the hot tub."

Each time either party makes any change in the terms, the other side is free to accept or reject it, or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal.

Withdrawing an offer

Can you take back an offer to buy? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven't yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don't want to lose your earnest money deposit, or find yourself being sued for damages the seller may have suffered by relying on your actions.

The ClosingBetween the sales contract and the closing

Many activities take place in the weeks and days before your home sale or purchase closes. The date of closing may be estimated in the sales contract, with flexibility to allow for the preparation of documents necessary to finalize the sale. For example:

You will need to obtain homeowners insurance before closing.

Work out the transfer of the utilities ahead of time.

Change your mailing address.

If the property is in or near a flood plain, consider obtaining flood insurance.

If the home has well or septic systems, then certifications should be ordered from the appropriate authorities.

A newly constructed home may need a certificate of occupancy from the municipality before closing can occur.

Your lender may require a survey - an accurate plat of the propertys boundaries and easements.

Customarily, the seller obtains a termite report no sooner than thirty days prior to closing.

Your real estate professional will facilitate the gathering and transfer of information between your attorney or settlement agent, the sellers and their attorney, your lender and any government authorities required.

What's a Walk-Through?

The sales contract should allow for a pre-settlement walk-through of the home to verify that the condition, fixtures and amenities are unchanged and undamaged from the day the contract was executed. This is not the time to find major problems: that should have happened during the inspection process. The walk-through usually takes place shortly before or on the day of closing. Be sure to look at any requested repairs made after the execution of the contract. If unwanted changes have occurred, or the agreed-upon repair was not made, settlement may be delayed until the problem can be resolved. Options include postponing settlement until the problems can be corrected, or entering into an agreement for the future resolution of the problems, usually by placing funds in an escrow account held by your attorney or settlement agent to cover major repairs or the replacement of fixtures. Once the seller has made the necessary repairs, the escrowed funds will be returned to the buyer.

What is Title Insurance?

In preparation for closing, the title on the property will be searched to look for liens or encumbrances against the property, and to verify that the seller is indeed the seller for the property. Owners title insurance is necessary as additional protection against undiscovered flaws in the title of the property. If you have a mortgage, the lender will require a lenders policy. Obtaining a combined owners/lenders policy may provide some cost savings. Additional savings can also be possible through obtaining title insurance at what is called a "re-issue" rate from the company that previously insured the property. If you work with a real estate professional, that person is trained to look for these and other savings on your behalf.

Just before closing:

Several days before closing, contact your attorney or settlement agent, or your real estate agent, to request an estimated settlement statement or "HUD-1." The charges and credits anticipated for the buyers side and the sellers side of the transaction will be listed, so review the statement very carefully, and notify your attorney, settlement agent or real estate agent of any errors immediately. Then, figure the estimated funds you will need to bring to closing and the means of payment your closing attorney or settlement agent will accept, which is typically a certified or cashiers check made out to the closing attorney or settlement agent. It sounds like a simple thing, but be sure to check the hours your bank will be open to prepare your check in advance of closing! The final figure may vary somewhat from the estimate, so arrangements need to be made with the closing attorney or settlement agent for paying the balance or receiving a refund at closing.

Finally, it's a good idea to establish a master file for all the important papers related to your home ownership. You will need to reference these documents in the future. For instance, if a job transfer necessitated your purchase, your employer may need your records to reimburse your expenses. When filing your taxes each year, items such as property tax payments and mortgage interest may be deductible. Remember to keep track of all capital improvements you make to your home - this information could be important in the future for establishing your cost basis for the home. If your mortgage lender requires private mortgage insurance (PMI), with good records, in the future you should be able to substantiate a claim that your equity in the home is great enough for the PMI requirement to be removed.

The Closing

For sellers and buyers, the last step in the transaction process is the closing. In Georgia, a "security deed" or deed to secure debt instrument is established. This arrangement allows title to be received by the buyer, but in turn the buyer conveys title to a lender until the loan is paid in full. When you sell the home or pay off your mortgage, be sure to obtain a release of deed when the loan has been fully satisfied.

Mortgage loan documents must be calculated using the actual date of closing, so it's typical for some paperwork to come together at the last minute. A homebuyer has the right to choose the closing attorney or settlement agent.

When you select your attorney or settlement agent, consider the reputation of the person or firm, and their experience in real estate and mortgage closings. Your real estate professional can provide a list of qualified attorneys or settlement agents who are reputable and provide quality service. Fees vary, so inquire about all of the fees up front. Sometimes a low closing fee is offered, but may be offset by the charging of unnecessary fees or higher than normal fees for routine processing. Be aware of what you're paying for. A closing agent ensures that all aspects of the transaction are finalized; verifies that the property is in the promised condition by inspecting the title evidence, the seller's deed, documentation about seller's liens; and prepares the paperwork for the closing itself.

Closings customarily take place at the office of the buyers attorney or settlement agent. Typically, all parties in the transaction will attend the closing. The process takes about an hour to complete. After closing, the attorney or settlement agent will record the deed at the clerks office for the municipality where the home is located. After recordation, final papers will be mailed to all parties, usually within a month. RESPA (the Real Estate Settlement Procedures Act) requires that a final closing statement be provided to both the buyer and seller, giving the final accounting and detailing what each can expect to pay or receive.

Fair Housing Fair Housing is for Everyone

Fair housing laws have been around since 1866, and apply to the sale of real estate, to rental property, and to the mortgage and homeowners insurance process. When fair housing laws were originally passed, an immediate goal was to eliminate housing discrimination against African-Americans. Today the reach of fair housing laws is much broader. Not only is it illegal to discriminate on the basis of race, but its also illegal to discriminate on the basis of sex, color, religion, handicap, familial status and national origin.

REALTORS® have their own article in the Code of Ethics that addresses fair housing issues.

The fair housing laws are there to protect you, if not today, then some day soon. The reality is that under these laws you have enforceable rights if you are treated differently in the housing market because of your race, sex, color, religion, handicap, familial status and national origin. For more information, contact the Georgia Commission on Equal Opportunity at (800) 493-OPEN or log on to their Web site at www.gceo.state.ga.us.

REALTOR® Lingo Scroll down the list below for commonly used terms. Click here for a more extensive list.

1031 exchange or Starker exchange: The delayed exchange of properties that qualifies for tax purposes as a tax-deferred exchange.

Addendum: An addition to; a document.

Adjustable rate mortgage (ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.

Amended value: The actual sale price after the seller successfully markets and sells his or her home through the broker of his or her choice. The sale is turned over to a third-party relocation company for closing, and the guaranteed offer is amended or changed.

Annual percentage rate (APR): The total costs (interest rate, closing costs, fees, and so on) that are part of a borrowers loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.

Appraisal: A document of opinion of property value at a specific point in time.

Appraised price (AP): The price the third-party relocation company offers (under most contracts) the seller for his or her property. Generally, the average of two or more independent appraisals.

As-is: A contract or offer clause stating that the seller will not repair or correct any problems with the property. Also used in listings and marketing materials.

Assumable mortgage: One in which the buyer agrees to fulfill the obligations of the existing loan agreement that the seller made with the lender. When assuming a mortgage, a buyer becomes personally liable for the payment of principal and interest. The original mortgagor should receive a written release from the liability when the buyer assumes the original mortgage.

Balloon mortgage: A type of mortgage that is generally paid over a short period of time, but is amortized over a longer period of time. The borrower typically pays a combination of principal and interest. At the end of the loan term, the entire unpaid balance must be repaid.

Back-up offer: When an offer is accepted contingent on the fall through or voiding of an accepted first offer on a property.

Bill of sale: Transfers title to personal property in a transaction.

Board or Association of REALTORS® (local): An association of REALTORS® in a specific geographic area.

Broker: A state licensed individual who acts as the agent for the seller or buyer.

Closing: The end of a transaction process where the deed is delivered, documents are signed, and funds are dispersed.

Contingency: A provision in a contract requiring certain acts to be completed before the contract is binding.

Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.

Contract of sale: An agreement between the third-party relocation company and the seller (transferee) whereby the third-party company purchases property owned by the seller.

Conventional mortgage: A type of mortgage that has certain limitations placed on it to meet secondary market guidelines. Mortgage companies, banks, and savings and loans underwrite conventional mortgages.

Counteroffer: The response to an offer or a bid by the seller or buyer after the original offer or bid.

Credit report: Includes all of the history for a borrowers credit accounts, outstanding debts, and payment timelines on past or current debts.

Credit score: A score assigned to a borrowers credit report based on information contained therein.

Curb appeal: The visual impact a property projects from the street.

Days on market: The number of days a property has been on the market.

Disclosures: Federal, state, county, and local requirements of disclosure that the seller provides and the buyer acknowledges.

Down payment: The amount of cash put toward a purchase by the borrower.

Earnest money deposit: The money given to the seller at the time the offer is made as a sign of the buyers good faith.

Escrow account for real estate taxes and insurance: An account into which borrowers pay monthly prorations for real estate taxes and property insurance.

Exclusions: Fixtures or personal property that are excluded from the contract or offer to purchase.

FHA (Federal Housing Administration) Loan Guarantee: A guarantee by the FHA that a percentage of a loan will be underwritten by a mortgage company or banker.

Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.

For sale by owner (FSBO): A property that is for sale by the owner of the property.

Good faith estimate: Under the Real Estate Settlement Procedures Act, within three days of an application submission, lenders are required to provide in writing to potential borrowers a good faith estimate of closing costs.

Guaranteed offer: The amount, after appraisals, the employer offers the transferring employee for his or her property.

Hazard insurance: Insurance that covers losses to real estate from damages that might affect its value.

Homeowners insurance: Coverage that includes personal liability and theft insurance in addition to hazard insurance.

HUD: U.S. Department of Housing and Urban Development.

HUD/RESPA (Housing and Urban Development/Real EstateSettlement Procedures Act): A document and statement that details all of the monies paid out and received at a real estate property closing.

Inclusions: Fixtures or personal property that are included in a contract or offer to purchase.

List date: Actual date the property was listed with the current broker.

List price: The price of a property through a listing agreement.

Listing: Brokers written agreement to represent a seller and their property. Agents refer to their inventory of agreements with sellers as listings.

Listing agent: The real estate sales agent that is representing the sellers and their property, through a listing agreement.

Listing agreement: A document that establishes the real estate agents agreement with the sellers to represent their property in the market.

Listing appointment: The time when a real estate sales agent meets with potential clients selling a property to secure a listing agreement.

Loan: An amount of money that is lent to a borrower who agrees to repay the amount plus interest.

Loan closing costs: The costs a lender charges to close a borrowers loan. These costs vary from lender to lender and from market to market.

Loan commitment: A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the loan commitment is based.

Lockbox: A tool that allows secure storage of property keys on the premises for agent use. A combo uses a rotating dial to gain access with a combination; a Supra® (electronic lockbox or ELB) features a keypad.

Multiple listing service (MLS): A service that compiles available properties for sale by member brokers.

Multiple Offers: More than one buyers broker present an offer on one property where the offers are negotiated at the same time.

NATIONAL ASSOCIATION OF REALTORS® (NAR): A national association comprised of real estate professionals.

Open house (public): When a listing that is on market is available to the public for viewings and showings.

Preapproval: A higher level of buyer/borrower prequalification required by a mortgage lender. Some preapprovals have conditions the borrower must meet.

Prepaid interest: Funds paid by the borrower at closing based on the number of days left in the month of closing.

Prequalification: The mortgage company tells a buyer in advance of the formal mortgage application, how much money the borrower can afford to borrow. Some pre-qualifications have conditions that the borrower must meet.

Principal: The amount of money a buyer borrows.

Principal, interest, taxes, and insurance (PITI): The four parts that make up a borrowers monthly mortgage payment.

Private mortgage insurance (PMI):A special insurance paid by a borrower in monthly installments, typically of loans of more than 80 percent of the value of the property.

Promissory note: A promise-to-pay document used with a contract or an offer to purchase.

REALTOR®: A registered trademark of the NATIONAL ASSOCIATION OF REALTORS that can be used only by its members.

Showing: When a listing is shown to prospective buyers or the buyers agent (preview).

Transaction: The real estate process from offer to closing or escrow.

Transaction sides: The two sides of a transaction, sellers and buyers. The term used to record the number of transactions in which a real estate sales agent or broker was involved during a specific period.

Under contract: A property that has an accepted real estate contract between seller and buyer.

Vacate date: The date on which the seller (transferee) vacates the property (generally the date when responsibility for property expense by the transferee ends) and the third-party company assumes ownership for the property through a buyout.

Walk-through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.

Will: A document by which a person disposes of his or her property after death.

Work sheet (transaction): The real estate sales company form that records all information relevant to a transaction.

Source: The Original New Agents Guide: Starting & Succeeding in Real Estate by Mark Nash (South-Western Publishing). To order the book, call 1-800-354-9706 or go online: http://realestate.swlearning.com.

What is the Down PaymentFinancial Institutions and LendingThe Fun Part - House HuntingHome WarrantiesMaking and OfferThe ClosingFair Housing REALTOR® LingoSelling a HomeThirteen percent of sellers sold their home without the assistance of an agent compared with 13 percent of sellers nationally. Among all sellers, 6 percent were For Sale By Owner (FSBO) sellers who knew the buyer. Fifty-three percent of FSBO sellers reported that they had some difficulty in selling their home themselves, in performing tasks such as understanding and performing the necessary paperwork to complete the transaction, preparing the home for sale, and getting the price right. Use a REALTOR® , the odds are in your favor!

Use a REALTOR®

If You're Selling

Your Home's Price

Few decisions are as important as the decision to sell your home. Many questions may come to mind. What makes a house sell? When is the best time to sell? What are the current market conditions and how will they affect my success? Changes occur at a breakneck pace in the laws effecting real estate contracts and disclosures, so if this is not the first home you've sold, chances are the process will be different than the last.

Today's savvy buyers are armed with vast amounts of information on which they base offers or request concessions. Determining the best approach to ensure a successful closing at the optimum price, terms and conditions can be a scary process.

What can a REALTOR® do for you?

The REALTOR® you choose will prepare a comprehensive market analysis (CMA) to help you determine a fair asking price for your home. He or she should provide an objective look at your home and make suggestions for repairs and improvements to help you obtain the maximum price. An agent can also suggest techniques for "staging your home" to showcase its most appealing features to buyers. Look for your agent to prepare a detailed marketing plan for selling the home.

Nationally over 80% of all sales are cooperative sales where one agent represents the seller and another agent brings the buyer. Don't overlook negotiating skills when selecting your agent. The process of negotiating contracts involves understanding market conditions and the competing sales inventory (other homes for sale), the evaluation of the buyers qualifications and such issues as appraisals, inspections and financing. An experienced agent can guide you through the process to help you avoid mistakes that could result in the loss of hundreds or thousands of dollars.

When a contract is in place on your house, your agent will coordinate various activities such as circulation of paperwork to the appropriate parties, whole house and termite inspections, survey, appraisal and buyers final walk-through. If repairs are requested, your agent will guide you in determining which repairs are necessary to comply with your agreement and those that may fall outside the scope of your agreement.

Why use a REALTOR® to help you sell your home?

There are many, many activities that have to happen before a home can be sold, and many "for sale by owners" are eventually turned over to a professional once the seller learns what's involved. Some of the hazards you can encounter:

Personal Security: Do you really want strangers coming into your house who have not been pre-qualified and accompanied by a professional?

Information vs. Knowledge: If you price your home for sale too low, you lose out. Too high, and no one is interested. Comparing to a nearby home to establish a selling price is a tricky business - that home may have been sold six months ago. The real estate market can change rapidly in six months, and valuations can go up - or down.

Legal Issues: Are you ready to deal with the many legal disclosures now required by law when you put your house on the market? What would you do if you accepted a contract on your house and the buyers backed out? It's a complicated process, and not for those unwilling to take on potential legal risks.