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For Sale By Owner Misconceptions

With the rising popularity of selling homes by owner, have risen some misconceptions that should be straightened out to clarify the process. The first thing that we should look at is how financing works in the FSBO world. One thing that occurs more often than it should is when buyers think that “for sale by owner” means that the owner is also offering financing. Most of the time this is not the case. This error is usually seen when people with little or damaged credit feel that it is in their best interest to avoid mortgage brokers & realtors. This is a huge mistake as individuals such as mortgage brokers are experienced and trained to deal with these individuals and to help them repair their credit and obtain a favorable mortgage.

Its a good idea to seek out a mortgage company that is experienced, even specializes in the financing of FSBO sales. These companies differ from most mortgage companies in that their services are more comprehensive than most. They have expanded their offerings to include many things not usually covered by traditional mortgage companies such as closing contracts, title issues and inspections. The closing of a home contract is one of the more confusing aspects of the purchase process and should be handled by a trained professional. Also take into account that most mortgage companies rely on realtors to bring them the bulk of their business, therefore they are ill-equipped to provide educated FSBO financing. This is why its good to find a FSBO specialist mortgage company when dealing with someone who is selling their home themselves.

Another misconception deals with the fact that the buyer is saving money by dealing with an FSBO situation. The truth is that usually the seller is the one trying to save money on agent commissions. If they have subtracted the price of the agent from their asking price, it is possible to save some cash.But this is hardly ever the case. Most FSBO sellers are listing their homes at market value as if an agent was selling the home. Then they attempt to do everything themselves and pocket the cash that would normally go to the agent.

Educated Consumers Can Save Money on Mortgages

Not only is owning a home an integral part of the American dream, but our home is likely the biggest purchase we will ever make and the biggest asset – or liability – we will ever have. Until about a year ago, of course, no one would have imagined that a home could be a liability. That’s when housing prices started to drop and relatively new homeowners realized that it was only a matter of time before their adjustable rate mortgages would skyrocket.

Experts agree that house values haven’t yet reached their nadir and that many homeowners are poised on the precipice. While some people might find it easier to stick their heads in the proverbial sand, smart homeowners and homebuyers see the current market as an opportunity to either take a second look at their existing mortgages or to shop around for new mortgages. Either way, it’s important to learn all that you can about different ways to finance a home before you take the plunge. Here are a few scenarios that illustrate some of the choices available today.

Nine years ago, Sam and Jenny Thompson bought a home that was ten years old. They were savvy enough to buy their house just before prices went through the roof. They have well over $100,000 of equity in their home, but their home is showing signs of wear. It’s time for a new roof, a new heating and air conditioning system, and they know that they need to have some dry rot repaired and have the house painted. They don’t have much in savings, though, and want to borrow money so that they can get the repairs done.

Sam and Jenny have a few options to pay for home improvement. They can refinance their home and get cash out for the repairs, they can get a home equity line of credit, or they can get a second mortgage. Which option is best depends largely on that status of their current mortgage. If they have a low interest, fixed rate loan, it probably doesn’t make sense to refinance. If they’re planning on staggering their home improvement over the next two years, it probably doesn’t make sense to get a lump-sum second mortgage. Instead, a home equity line of credit might work best. On the other hand, if they have an adjustable rate mortgage, it might be financially prudent to refinance to a fixed rate loan and cash out part of their equity to make their home repairs.

Cynthia and Bill Williams have owned their home for five years, but are concerned that Bill might be laid off in the next six months. They have quite a bit of money in savings, but have racked up considerable credit card debt. Because they’re paying a high interest rate on their credit card debt, they may want to use a home equity line of credit for debt consolidation purposes, and to have a cushion in case Bill does lose his job.

When Rebecca Richards bought her home two years ago, she thought housing prices would continue to soar and interest rates would go down. She bought her house with an adjustable loan and is terrified that, when the loan adjusts later this year, she won’t be able to make her payments. In this scenario, Rebecca needs to meet with her lender now, rather than wait for the other shoe to drop. If possible, she should convert her adjustable rate home loan to a fixed rate loan.

The bottom line is that, whatever your circumstances, you need to learn all that you can about the options available to you. Thankfully, there are resources on the Internet that not only have a library of informative articles on mortgages, but that also provide the calculators and tools you need to find the answers to your questions. The best sites even offer a variety of loan programs and will prepare a personalized quote for the types of mortgages that you might be interested in.

Different Types Of Real Estate Investments

The fastest growing commodity in the United States is real estate. In 2005, it increased in value by 12% compared to other goods and services that increased by only 4.5%. With such a high return on their investment, many people are purchasing real estate instead of stocks and bonds.

Some investors choose to invest in run down properties. They buy for a low price and hope to sell for a higher price once the necessary improvements to the house and yard are made. Many investors choose to do the repairs themselves, saving on labor costs. Others hire contractors to do the work. Either way, it is expected that the cost of repairing the home will increase its value. The new value is anticipated to exceed the original cost plus the cost of repairs. If the owner can rapidly sell the property, he/she can recoup their investment, make a profit and move on to another real estate purchase.

Other investors purchase properties that are vacant and require little repair to make them marketable. These houses can be resold or rented out. Here the owner has made the decision that the investment will be reimbursed over time. The monthly rent on the property must exceed the owner’s monthly payment on the loan. In the case of property rentals, the owner assumes responsibility for maintaining the property. He/she will act as the landlord, collect the monthly rent, make any necessary repairs, and handle the paperwork for obtaining tenants. If the owner does not have the time to invest in being the landlord, he/she can pay another person or real estate agency to act on his/her behalf. This saves the owner time and aggravation but it costs money to pay the substitute landlord a salary. This has to be figured into the rental price. Thus the monthly rent should be the monthly cost of the loan plus the monthly cost of maintaining the property plus the cost of the landlord plus a profit for the owner.

Sometimes an investor may choose to buy an apartment building or condominium complex and rent the individual units out. Here the formula for determining the monthly rent should be the monthly cost of the loan divided by the number of units for rent plus the monthly cost of maintaining the property plus the cost of a landlord plus a profit for the owner. If any units are vacant, the owner must make up the difference in the loan payment owed that month. This can be quite expensive if the units remain vacant over time or the number of vacant units grows in number.

There are times when the housing market has slid. This is called the bubble effect. Prices go up until, at last, they burst like a bubble and begin to decline. This can be a serious problem if you have all your money tied up in real estate. If you were depending on your new property to earn enough equity to make you a profit and the value of the property fails to increase or decreases, you may be in financial trouble. Make sure in advance that you can make your monthly payments. You should not depend entirely on the equity to make your payments. Financial experts suggest that, if you don’t have to sell the property and you can make the payments, don’t sell. Wait it out and see if property values rise again.

Financial experts say that an informed consumer will know what is happening in the market place and be prepared for it. Instead of borrowing again to meet the downturn in real estate, they recommend that you cut back on your expenses where you can. Use the extra money to step up payments and reduce the amount of the loan.

Descriptive Terms in Real Estate Ads – Yet More Definitions

If you are buying or selling a home, the chances are good you struggle with the meaning of descriptive real estate terms. Here are explanations and definitions for more terms.

“Plantation Shutters”

Refers to interior shutters with large, moveable louvers that can be used much like Venetian blinds. Often they’re used only on the bottom half of the window.

“Palladian Window”

A tall window that is rectangular except for an arched top and has wooden muntins separating the panes of glass. It is based on a revived classic style of architecture and the work of Andrea Palladio. Builders often use them as the window over the front door in homes with two story entrance foyers.

“Pocket Doors”

Doors that open by sliding into a slot in the wall much as a serving tray fits into a vertical slot built into a kitchen cabinet. It leaves wall space unaffected by opening and closing doors. I’ve seen them on bathrooms in modern houses. I’ve also seen them used in pairs that meet in the middle when closed as they were in older houses. Between a living room and dining room might be a good place. My grandmother had one between the front and back parlors in her home in Richmond, Virginia. Now that was a neat old house. It could always expand to accommodate one more family member or friend.

“Fireplace,” “Wood Stove,” “Wood Stove Insert”

A fireplace can burn wood, coal, or gas (natural or propane). If gas, it may or may not be vented to the outdoors. It is generally thought to be dangerous to have a non-vented gas fireplace in a bedroom and is against “code” in many areas. A wood stove burns wood, is free standing (on a non-flammable surface), and is vented to the outside. A wood stove insert is generally fitted into an existing fireplace designed to burn wood or coal. Preferences have to do with perceived beauty, convenience, heat production, and safety.

Well, those are some of the terms frequently seen in real estate listings and advertisements and their usual meanings at this writing. I hope you find it useful.

Foreclosure Investing – The Pros And Cons Of Investing In Foreclosures

Investing in foreclosures is no doubt one of the best opportunities to make money in today’s economy. As with any type of business venture, there are risks involved. Investing in foreclosed properties offers great opportunity to buy homes significantly under market, but there are some risks such as considerable research, under lying lien problems, long-term carrying costs and several others. If you are willing to take the chance on a property or two you may prosper in the end.

Foreclosed homes can be purchased at several stages. First is the pre-foreclosure phase, then the auction phase and finally the REO phase each of these presents their own set of pros and cons. Familiarize yourself with each of these different types of foreclosures, weigh the pros and cons for each, you may be able to avoid a costly mistakes and headaches through the process of investing in home foreclosures.

Take a look at the possible pros and cons at the various stages of a foreclosure:

Pre-Foreclosure Phase
This is the stage where the homeowner is still in control of the property. Although the loan is in default and the pressure from the lenders is just beginning. The homeowner is usually in a position to sell the property quickly and avoid the foreclosure process all together. This means hue savings and large potential profits for you.

Pros
20-40% discounts on the estimate value
Low or no down payment, due to the built in equity
Research and inspection opportunities
Sales agreements that are flexible

Cons
Home owner may not be reachable
Fierce competition, many investors are trying to buy these type foreclosures
Time to research documents and court filings
Undisclosed or underlying liens against the property

Auction Phase
Possibly the most profitable stage of a foreclosure. Auctioned properties usually offer the best potential profit when buying foreclosures. An auctioned property is sold during a public auction to the highest bidder. If you have done you, research these types of properties are sometimes sold way under market value.

Pros
Greater discounts can be as high as 35-50%
Great ROI, return on investment
Greater potential profit

Cons
Property inspection is generally not available
Postponed auctions mean valuable time lost and research wasted
Large down payments that must be paid at the time of auction
Incomplete research can cost you a lot of money
You may not win the auction at all

Discovering The Weak Link: Optimizing Your Commercial Real Estate Investment Strategy

Being an investor is a lot like owning your own business. You have money and people to manage, important financial decisions to make, and systems that represent your strategy. While these assets and operations result in successful and profitable deals, there are always problems arising, just like in a normal business, that can slow down productivity and progress of whatever activity is currently in motion.

A problem with many investors is that they do not view their process as a business. They do not have a company name or multiple teams working below them. They do not have business rules, regulations, checks and balances, or protocol for the people they work with. However, the truth is, commercial real estate investing, no matter how small, is a business all itself. In order to optimize this fact, one should follow proven business strategy that allows great companies to flourish with very little constraint or pain.

A very important theory that is used not only in business, but in science, politics, sports, and even everyday life is the Theory of Constraints. This theory literally transcends all boundaries as it is a scientific principle that can be applied to any relationship between two or more subjects. You have all heard of the expression, “You are only as strong as your weakest link.” This is in reference to the Theory of Constraints.

What is basically introduced is the concept that you can look at a process or relationship as a chain. One link to another, that chain is reliant on the strength of the relationship. If it is a process, and each link is a task, then each task must be working optimally so it does not weaken the chain. If one link becomes tired, lazy or behind, then the chain is all together weaker and ineffective at producing the result.

At any one time there can only be one constraint. You must tackle that constraint, and then another may appear. However, at that time, there is only one constraint to attend to. In order for a process or system to be working 100%, each link must be strong. If not, you suffer from inefficiencies; suboptimal performance and a complete slow down of the process.

Do you find areas in your business of commercial real estate investing that you are not pleased with? Are there areas you feel you and the people you work with and rely on could improve? Could wasted time be eliminated? What areas could you improve that would increase overall profitability of your commercial real estate strategies?

Within these questions you will uncover the areas where a streamlined process can greatly improve performance and decrease crisis and other problems. If your current strategy and processes are running at 100%- then there is no need to read this article. However, if you feel there could be considerable improvement, or even a small improvement that could increase your results exponentially, please read on!

Implementing processes and systems are the best way to optimize total performance. How this is done is you write down every single task within a certain boundary. For example, write down every task in creating the information packet to submit to a lender to get approval for a loan on a project. Write down every task for this specific process and then number them in how they follow in sequence.

Are there certain people involved who make this process happen? You may realize how you can cut out duplicated efforts, combine tasks into a single person who performs them, and completely streamline the process. What you do now is create a process map or flow chart showing the entire process from first step to last in the proper sequence. Identify who does what task and any time allotments or due dates if necessary. You know have a tangible, easy to learn, communicate and control process for submitting a proposal to a lender for a new project. Doing this alone will allow others to follow along with your process and have a clear understanding as to what is supposed to be done.

Do have protégés or other eager minds willing to help you in order to gain a valuable education from an experienced investor? Now you don’t have to worry about being the only one who “knows” the business. With a clear system and process map, you can now teach those around you the same, working, proven systems. With a process map individual tasks and relationships can be easily changed as continuous improvement is a benefit of process maps.