Guide for First-Time Homebuyers in Seminole & Orange County Florida - Part One of Two (Choosing a Realtor and the Home Buying Process in Central Florida)

What are the benefits to buying, compared to renting in Central Florida, Orlando and Lake Mary?

A home is an investment. When you write your monthly rent check, that money is gone forever. However, when you own your home, you can deduct the cost of your mortgage loan interest from your taxes. This will save you a lot of money each year, because the majority of your monthly payment for the first few years of your mortgage is applied toward interest. You can also deduct your property taxes. Plus, the principal amount that you pay on your mortgage is like an automatic savings account. In addition, during most times, the value of your home may go up over the years. You'll want to consult a Realtor to make sure you're making a good purchase. Finally, you'll enjoy having something that's yours - a home where your own personal style will tell the world who you are. And that pride in ownership is a great feeling! There's a great book called The Automatic Millionaire Homeowner, by David Bach, and it illustrates many of these points, as well as how you can build wealth by being a homeowner.

Should I use a real estate agent?

Using a real estate agent is a very good idea and makes sure you're interests are protected. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate agent will be well-acquainted with all the important things you'll want to know about the neighborhood you may be considering, and will direct you to the proper resources to help in your research of...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the agent can save you hours of wasted time driving-around. When it's time to make an offer on a home, the agent can point out ways to structure your deal to save you money. They'll even use their expertise to negotiate the best possible price on your new home. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. The best part is that you don't have to pay your agent anything! Your agent is paid by the seller.

How much money do I need to buy a home?

It all depends. You'll need to have enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you're serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you would like, or are required pay when you go to settlement; and closing costs, the costs to actually transfer ownership when you buy a house.

When you make an offer on a home, your real estate agent will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies and is determined by the seller. It is also negotiable.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers find an FHA loan to be their best option. FHA loansU require only 3% down - and sometimes less. There are even options for the seller to contribute that 3% down payment for you. Use your Realtor to negotiate on your behalf.

Closing costs - which you will pay at settlementU - average 3-4% of the price of your home. These costs cover various fees your lender charges, title insurance, fees charged by the government and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. Again, if your Realtor is a good negotiator and if the loan program allows, your real estate agent may be able to get the seller to pay many or even all of your closing costs.

When I find the home I want, how much should I offer?

Again, your real estate agent can help you here. But there are many things to consider. Is the asking price in line with prices of similar homes in the area? Is the home in good condition or will you have to spend a lot of money customizing it to your tastes? How long has the home been on the market? If it's been for sale for awhile, the seller may be more eager to accept a lower offer. How much will you need to borrow? Make sure you really can afford whatever offer you make. How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. Even in this market, you'll find yourself bidding against others for the same home and in these cases, you may even want to offer more than the asking price. And remember, when you make a low offer, a good listing agent will call any other buyers who've expressed an interest and get them to make an offer as well, working to get higher offers for their seller. There are rewards in making low offers, but first prepare yourself that it could cause you to lose out on getting the home.

What if my offer is rejected?

Now your Realtor will begin negotiating once agai. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn't normally be expected. Often, negotiations go back and forth several times before an agreement is reached. Don't get so caught up in negotiations that you lose a home that you both want and can afford!

What happens once my offer is accepted?

Once your offer is accepted, your real estate agent and lender will be working diligently behind the scenes to ensure all the details are handled. The property will be researched by a title company to ensure there are no legal issues which will harm you in the future. You'll also want to schedule a home inspection and also a wood destroying organism inspection. You may also want to schedule a mold inspection. Your Realtor will be able to help you arrange these inspections. Once complete, you'll be able to review the report and evaluate any items of concern. If there are minor issues, your real estate agent will have probably negotiated a repair allowance in the initial offer, and these may be repaired at the seller's cost. Any major issues could be a reason for you to decide against purchasing the home, or it could be reason to begin the negotiation process once again. You're real estate agent will be looking out for your best interests and can advise you on these issues as they arise.

So what will happen at closing?

Basically, you'll sit at a table with your Realtor, the real estate agent for the seller, probably the seller, and a closing agent for the title company or attorney. The closing agent will have a stack of papers for you and the seller each to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your real estate agent to make sure you know exactly what you're signing. After all, this is a large amount of money you're committing to pay for a lot of years! At least 3 days prior to closing, your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you'll have to supply at closing, and a list of documents you'll need at closing. If you don't get those items, be sure to call your lender BEFORE you go to closing. And, don't hesitate to ask questions.

Beware of the IRS If Your Creditor Writes Off or Settles a Debt

As more and more people are finding their sub-prime mortgage rates rise rapidly, a record number of foreclosures and short sales are occurring. A short sale is a great tool for many people experiencing hardship, however most people don't realize there are tax implications.  We like to prepare our clients for everything they may encounter, so they can be fully prepared. For more information on how a short sale can be conducted, or what other options are available, please feel free to contact us directly. We advise all of our clients to consult with their accountant or tax attorney to fully understand how saving their credit through a short sale will impact their tax liability.

From the Nolo.com Debt & Bankruptcy Center

The IRS may count a debt written off or settled by your creditor as income to you.

An IRS regulation could cost you money if you settle a debt with a creditor. This rule may also shrink your wallet if a creditor writes off money you owe -- that is, ceases collection efforts, declares the debt uncollectible and reports it as a tax loss to the IRS. (26 U.S.C. § 108.) Debts subject to this regulation include money owed after foreclosure, property repossession or on a credit card bill you don't pay.

Under the IRS regulation, any financial institution that forgives or writes off $600 or more of a debt's principal (the amount not attributable interest or fees) must send you and the IRS a Form 1099-C at the end of the tax year. These forms are for the report of income, which means that when you file your tax return for the tax year in which your debt was settled or written off, the IRS will make sure that you report the amount on the Form 1099-C as income.

There are five exceptions stated in the Internal Revenue Code, three of which apply to consumers. So even if the financial institution issues a Form 1099-C, you do not have to report the income on your tax return if:

• the cancellation or write off of the debt is intended as a gift (this would be unusual)
• you discharge the debt in bankruptcy, or
• you were insolvent before the creditor agreed to settle or write off the debt.

The Internal Revenue Code does not define what is meant by insolvent. Generally, it means that your debts exceed the value of your assets. Therefore, to figure out whether or not you are insolvent, you will have to total up your assets and your debts, including the debt that was settled or written off.

If you conclude that your debts exceed the value of your assets, include IRS Form 982 with your tax return. You can download the form off the IRS's website at www.irs.ustreas.gov/forms_pubs/forms.html. Completing it is simple.

If your debts are enormous and your bank or other financial institution is willing to settle for less than you owe, it could cost you a lot in the end. Before accepting what sounds like a deal, have a tax preparer calculate your tax liability. If your tax bill will be too high and you cannot prove you are insolvent, you may be better off filing for bankruptcy and discharging the entire debt, if possible.

 If you plan to file for bankruptcy and want to include a debt that a creditor has settled or written off, talk to a bankruptcy lawyer -- preferably one who knows tax law. Some lawyers have concluded that on the day the creditor settles or writes off a debt, a "taxable event" occurs. This means that if you file for bankruptcy after that date, you cannot wipe out the debt unless your tax debt could be wiped out in bankruptcy. Other lawyers feel that the taxable event occurs on April 15, when your taxes are due, and that you can file for bankruptcy and wipe out the debt before that date, assuming it otherwise qualifies to be eliminated in bankruptcy.

Finally, bear in mind this fact: even if you don't get a Form 1099-C from a creditor, the creditor may very well have submitted one to the IRS. You can take the risk that the creditor did not pass the information on to the IRS and "forget" to list the income when you file your tax return. But if the IRS has the information, it will send you a tax bill, or worse, an audit notice, which could end up costing you more -- because of IRS interest and penalties -- in the long run.

INCENTIVES:
12 Contract Options That Entice Buyers

If you're selling in today's market, you want to make your house outshine the competition. Buyers are most likely to choose your house if it offers something special. Here are 12 ways to make sure you land a "Sale, Sweet Sale."

A Spoonful Of Sugar

1. Offer a warranty.

Purchase a buyer's home warranty to protect against future problems.

2. Help with closing costs.

Cash-poor buyers concerned more with out-of-pocket costs than monthly payments will especially appreciate this one.

3. Consider financing help.

Provide seller financing or buy down the buyer's mortgage rate for the first year.

4. Help with utilities.

Pay some or all estimated utilities for 6 or 12 months.

5. Help with fees.

Pay a year's condominium or homeowners association fees.

6. Pre-pay memberships.

Buy a one-year pool or community golf club membership, cable TV subscription, or other recreational activity.

7. Consider a moving allowance.

Pay the buyer's documented moving expenses, or provide an allowance toward moving costs.

8. Treat them to window treatments.

Offer redecorating cash for new carpet or drapes.

9. Mow down any objections.

Buy a lawn-maintenance service for a year, or offer a riding mower if the lot is large.

10. Give them a dock on the bay.

If you live in a waterfront community, offer to rent a boat slip for a year.

11. Reimburse buyer the cost of points.

This is often a double benefit for buyers, who save both on the points themselves and on their federal taxes. The IRS now allows buyers to deduct the cost of seller-paid points as a Schedule A mortgage expense.

12. Price your home below comparable properties.

Prove your home's good value by having an appraisal done and setting the price below the appraised amount.

Call on us for more ideas of ways to make your home the sweetest one on the market. We'll create a customized marketing program to help get your home sold in any market!

SOLD:
How To Attract More Buyers With Seller Financing

Like honey draws bees, creative financing can draw buyers to your doorstep. Many home seekers are motivated to buy but need help meeting mortgage-qualification rules. You can help a prospective buyer finance the purchase of your house (and speed your sale) in several creative ways.

Seller takes back first trust.

You can lend the buyer the money, pocket the interest payments, and hold the mortgage on the property, as long as there is no current mortgage. The tax benefits are you may be able to pay income tax only on a percentage of the principal and interest that you get each year. You probably will want a 20% down payment (to discourage default on the loan), and you'll need an attorney to draw up a deed of trust and promissory note.

Seller takes back second trust.

You can help fill the gap between other sources of financing and the sales price of the house. The second trust is usually for a smaller amount than a first trust but is riskier since it could be wiped out by defaulting on the first trust. Be sure to have your interests legally protected by your attorney.

Assumption.

On older mortgages, the buyer can sometimes take over the obligations of the existing mortgage at the stated interest rate for little or no additional cost. Often the seller takes back a second trust for the difference between the sales price and the balance of the old mortgage. If the sale is "subject to," the seller remains liable for the old mortgage if the buyer defaults.

Wraparound financing.

In this loan, which is a type of second trust, the seller retains the existing mortgage and makes regular payments on it. But the seller lends the buyer the total sales price less the down payment, often at an interest rate a little higher than the first mortgage rate, so the seller makes some profit. An additional risk for this second trust is if the loan is unassumable, the existing mortgage can be called by the lender.

While creative financing may not be as simple as traditional financing, in difficult market conditions a little sweetener can go a long way to attract the right buyer.

Smart Design Is the Difference Between "Planting" and "Landscaping" 

Planting is haphazard: "Let’s get a pine tree; where shall we put it?" "I have always wanted rambling roses; they would look great over there by the back fence." Sometimes this approach works; but sometimes it creates havoc.

Landscaping is planned, artistic design. Starting with a concept (rustic, formal, Japanese, for example), you outline the large areas as if you were sketching the basic design of a picture: the placement of large trees and shrubs, the "living areas" for gathering, the "play areas"(a pool, badminton space), the flower (and herb or vegetable) gardens. Then you fill in the all-important details: small decorative pools, terrace planters, birdhouses and baths, outdoor lighting (in the ground and under the eaves). If you plan right, you can be as whimsical and creative as you please without creating havoc.

Choose plants (trees, shrubs and flowers) that will keep the yard colorful all year round. Keep in mind the view of the yard from inside the house and, if possible, install picture windows to bring the scene right indoors. Also, since nobody wants to be a slave to a yard, plan for easy maintenance as well as good looks. That’s smart landscaping that pays off in many ways.

When it comes to buying and selling houses, working with professionals pays off in many ways, too. E-mail us to learn more about the advantages we can bring to your home-buying or selling experience.

You're neither rich nor poor, and you're ready to buy your first home. You look around. All those homes on the market! All seemingly priced out of reach!

Cheer up. You're not alone. With some solid real estate counseling and some help from lenders and/or sellers and others, you can not only get your toe in the door, but you can own the house too. It just takes some creativity, a few inside tips and a bit of homework.

Examine your goals

How ironclad are your dreams? Can your ideal of a formal dining room or a hot tub on a redwood deck be postponed? Must you have a two-car garage? Lowering your expectations and starting out modestly (in decent housing that meets your needs) can lead to owning those dreams -- in time.

Start saving

Get your priorities straight. Without taking all the fun out of life, what's more important to you, weekends on the road and dinners out or stashing away at least part of your down payment? (Most lenders want to see that some of the money you invest is your own.)

Keep your credit record clean

When you go mortgage shopping, lenders will be looking over your payment records. Don't let a late-payment habit rise to haunt you. (Reformed late-payers can request creditors to erase the blots on their records -- for a small fee.)

Look for financial assistance

Your parents and other relatives may be able and willing to give you gifts that will get you over the down payment hurdle. (Loans from relatives will be counted as debts and will lower the amount of mortgage payments your lender will allow you to carry.)

Get some co-signers

Parents, relatives (and unrelated investors) can either co-sign a loan or share the ownership of your home. With shared ownership, you'll be the resident but your co-investor may share specified expenses (plus tax advantages and equity accrual), and will share in your profit on sale.

Shop for mortgage loans

Qualifying for a mortgage can be managed in several ways to fit your down payment and monthly-payment abilities. FHA and VA loans come with low down payment requirements, and lenders offer ARMs (adjustable-rate mortgages) at initially low interest rates. (Look for an ARM that can be converted to a fixed rate should rates drop.)

Consider creative financing

Also, new-home builders and other sellers may offer buy-downs that lower your interest rate in the first few years of a mortgage, thereby making a home more affordable. Balloon loans (if they have at least a 7-year term) can often bridge gaps and give you time to accumulate equity and/or cash to pay them off. Home sellers can sometimes help you financially -- with a lease-purchase arrangement or a take-back loan. Lenders and sellers are constantly creating new ways to help buyers buy homes. We can help you check them out.

Look at starter homes

Once freed of the vision of "instant dream home," you can look for housing that will start you on the equity-building path to realizing your dream. Condominiums and townhouses are often much less expensive than detached houses and buying one now can serve well as a stepping stone.

Search for bargains

If you're handy with tools, a fixer-upper home gives you the opportunity to buy inexpensively, fix up and, in a few years, trade up. And if you're adventurous, auctioned properties in suitable neighborhoods can also be good values. If you don't mind a longer commute to work, outlying areas frequently offer homes at lower prices than those found close to town.

Whatever route you choose toward buying your first home, keep cool. It may take time to find the right combination of elements, but there is a home out there for you and a way to obtain it. We'll be most happy to help you create your path to its door.

Call or e-mail us for more information on buying your first home.

What's the best way to help your home make a glorious first impression on would-be buyers? Real estate experts agree that “staging” (also called “fluffing”) your home to show it in the most favorable light is well worth your time and effort.

Beyond the pre-sale cleaning and organizing you would expect to do, successful staging includes strategically arranging objects and furniture, adding decorative touches and more. Here are a few tips from the pros to help buyers make an immediate emotional connection with your home:

• Add a pot of fresh blooming flowers to the entryway (yellow is a very welcoming color)
• Open blinds to show off nice views. A vase on the window sill plays down less attractive views
• Add throw pillows, a soft lap blanket, candles and a candy dish for a cozy living room
• Use a soft bedspread, quilt, pillows and a throw rug to turn a bedroom into a relaxing retreat
• Set your dining room table with dishes, placemats, wine glasses, etc.
• Banish television sets, computers, kitchen and bathroom appliances from sight
• Don't forget the garage! Make sure surfaces are clean and neat. Store tools and gardening products to make room for cars.