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Jun 18th, 2009
your tookit to prepare for home ownership in Las vegas
For the first time in many years, it’s a great opportunity for newcomers to buy a home in the Las Vegas area, with plenty of housing inventory available. As of April 2009, the average selling price of a single family home was $166,196, representing a 41.5 percent decline from the same month in 2008, according to the Greater Las Vegas Association of Realtors. This presents a unique opportunity for buyers, but it’s more important than ever to work with a qualified real estate team that is familiar with the Las Vegas market. As a newcomer to the Las Vegas region, you may not be new to the home-buying process. Even so, it’s helpful to review all the steps involved, as well as Las Vegas-area resources and conditions. With many neighborhoods in the greater Las Vegas area, it’s important to decide where you’d like to live. That decision can be based on where you work, the schools you choose for your children and lifestyle choices – do you want to live in an urban setting or would you prefer a master-planned community with amenities, such as a golf course? Selecting an Agent Before you relocate to the area, a good idea is to find an agent who is a relocation specialist or a buyer’s agent. A relocation specialist specializes in helping people move to a new area, and many are available through nationwide real estate brokerages. If you’re unfamiliar with real estate companies in the Las Vegas region, you can ask a real estate agent you know in your current city for a company recommendation or affiliation. You can go online and search for companies that meet your needs and geographic location. You can also contact the advertisers included in Relocation Resources Las Vegas. Selecting the right real estate agent is important as you will be working closely with that professional on one of the most important financial transactions in your life – the purchase of your home. When interviewing real estate agents, include these questions to ask:
After deciding on the right agent, it’s important to remember to keep communication lines open, sharing any thoughts, concerns or reservations at any point along the way to ensure the best home buying experience. Why Work with a Realtor®? The National Association of Realtors® provides this list of important differences to consider when selecting a real estate professional to represent your homebuying interests. All real estate licensees are not the same. Only real estate licensees who are members of the National Association of Realtors (NAR) are properly called Realtors®. When you begin your home search, consider using a member of the Greater Las Vegas Association of Realtors® and the National Association of Realtors®.
Specialty Real Estate Professionals As you interview and speak with real estate agents and Realtors®, you’ll start noticing acronyms such as CRS and ABR on these professionals’ business cards. What exactly do these designations mean to you and the home buying process? Once you’re aware these specialties exist, it may influence your selection process. Certified Relocation Professionals Through training courses, a real estate agent can become accredited as a Certified Relocation Professional, Senior Certified Relocation Professional or a Global Mobility Specialist, which entitles the agent to include the professional designation of CRP, SCRP or GMS after his or her name. These specialists are experienced in assisting families in their relocation needs, whether the move is within the U.S. or internationally. In addition to helping you find a home, a relocation specialist can provide information about schools, day and senior care, recreation opportunities, spouse employment, cross-cultural issues and cost of living. Usually, each large real estate firm has relocation professionals on staff to assist relocating families. Certified Residential Specialists (CRS) CRS specialists have completed advanced training in residential real estate and in related areas such as finance, technology and marketing. These specialists have a proven track record of sales transactions required to earn the CRS designation. In addition, less than 4 percent of all licensed Realtors® are CRS designees. In working with a CRS specialist, buyers are glad to know that every CRS designee is required to maintain membership in the National Association of Realtors® and to abide by its strict subheader of ethics. Accredited Buyer Representative (ABR) An Accredited Buyer’s Representative designation represents best-in-class buyer services. When you look for an ABR® before you look for a home, you’ll be served, not sold. A buyer’s agent is someone who represents only the buyer’s interests in the negotiations and has special education and experience to better understand home buyers particular needs. Plus, a Realtor® who has an ABR® designation also has an established track record, with proven experience in representing the concerns of homebuyers. Real estate agency relationships, like all business relationships, can be formed in a number of ways. In order to help talk through your options, here are several questions to ask your buyer’s representative:
Once you’ve formalized an agency relationship, typically by signing an agreement with a buyer’s representative, you can expect him or her to:
A buyer’s rep who has earned the Accredited Buyer’s Representative (ABR®) Realtor® designation has made an extra effort to raise the bar, with additional training and experience in serving you, the homebuyer. If you work with an ABR®, you can feel more confident that you’ll receive the highest level of buyer-representation services. Risk Reduction Graduate™ Society This program is specifically designed to help Realtors® understand and interpret contracts and the laws that govern them. Most every class is written and taught by Nevada Real Estate Attorneys. The Risk Reduction Graduate™ Society keeps its members apprised of risk management and current legal and legislative issues. The RRG education is above and beyond the required classes for licensing and continued education. Agent’s Role In addition to helping find you a home, an agent serves as the “manager” of a larger team and is responsible for coordinating other team players at the appropriate time in the process. These other team players include the mortgage company, inspectors, the title company, insurance company and possibly an attorney. Your agent should be able to perform the following as part of his service to you:
Buying Tips from Real Estate Professionals Increase your chances of getting your Las Vegas dream house instead of losing it to another buyer, with these easy steps.
Before You Start Looking at Houses All the steps above will help you prepare for the mortgage loan applications. At the same time, you need to be thinking of the kind of home you want. Start by identifying preferred and ideal locations based on your needs, social activities, job location and lifestyle preference. If you’re new to the area, get familiar by driving around some of the neighborhoods at different times of the day. Once targeted locations are identified, then it is important to define living needs within the house and the “style” of the buyer. For example, how many bedrooms and bathrooms are needed and are there special requests, such as ample kitchen counter prep space or an island in the kitchen for food preparation? What about the importance of having a family room or backyard? Are there preferences for the kitchen, such as gourmet features with top-of-the-line equipment or will a functional kitchen be acceptable? What architectural and aesthetic preferences are important – single level, multilevel, traditional or contemporary, bold and modern or warm and rustic? What about a swimming pool, a view or a big yard – are any of these items a priority? If so, your agent will need to know. A discussion about location or proximity to certain facilities and amenities is also an important conversation as it will influence a family’s opinion of a property. It’s also important to note what you don’t like and communicate that to your Realtor®. If traffic noise near your home is a problem, make note. Is there adequate shade around the property so utilities won’t be high in summer? Is the potential home light, bright and airy or in need of immediate modernization? Is the property located in your preferred school district? How about shopping? Is it necessary to drive far to buy groceries or access services? Are there adequate roadways in and out of your neighborhood, especially during rush hours? Let these ideas help you develop your own list that you can refer to during the home shopping process. This can help you avoid making an emotional decision. What About Online Real Estate Brokerage Firms? According to Zip Realty, the leading U.S. online real estate brokerage firm, by using the efficiencies of the Internet, it has streamlined the real estate process and is able to pass significant savings on to its clients. Licensed Zip Agents have years of experience in the areas they serve, allowing homeowners to save thousands, without compromising on service. Buyer benefits listed by Zip Realty (www.ziprealty.com), include:
Using the Web as Research Tool In addition to searching for properties and real estate agents in the Las Vegas area at www.lasvegasrealtor.com, there are national real estate Web sites that list homes for sale and provide information and tips but don’t handle transactions. These include Zillow.com, Yahoo Real Estate (www.realestateyahoo.com) and MSN Real Estate (www.realestatemsn.com). At these sites, you can learn about individual neighborhoods, school districts, local area statistics, home values as well as access to current real estate market reports. Anticipating Your Costs Review the information provided below to anticipate your costs involved in buying a home. This is only a partial list. For more detailed costs, ask your Realtor® to help you create a worksheet that can be updated as necessary. — Estimating Buyer’s Fees Whether it’s called loan origination or loan service fee, it can be up to 3 percent of the loan amount and can include the following:
— Real Estate Commissions Everyone deserves to be paid for valuable services they render to others, and real estate professionals are no different. But as a prospective homebuyer, you’ll want to be sure you understand how compensation factors into your transaction. The Real Estate Buyer’s Agent Council (REBAC) of the National Association of Realtors® offers answers to these questions. Question 1: What is the standard compensation structure? ANSWER: For the most part, real estate professionals are compensated by commission, based on a home’s selling price. Commission rates are not standardized, but vary. How the sales commission will be divided between the agents on the selling and buying side of the transaction also varies. There is consistency, however, in how commissions are paid. When a seller signs a listing agreement, their contract is with a brokerage firm. All fees must pass through that brokerage firm. Typically, the seller’s representative – and your buyer’s rep – will be paid by the listing broker after the transaction closes. Question 2: What services can I expect to receive? ANSWER: This depends on what level of service you have established as a homebuyer. If you have not formed an agency relationship, you are probably considered a customer, rather than a client, and you will likely receive a lower level of service. The terms vary from state-to-state, and each buyer’s representative can set their own guidelines within their state parameters and their brokerage practices. So you should clarify, preferably in writing, the services you are entitled to receive before you start viewing properties. It’s also important to understand that if you do buy a home, your buyer’s rep will probably receive compensation (through the listing broker), regardless of whether you are a customer or a client. More times than not, it’s in your best interest to formalize an agency/representation relationship, so you’ll receive the highest level of service possible. Question 3: Will I pay more to be represented as a buyer? ANSWER: In the vast majority of cases, the answer is no. When a house is listed for sale, the seller’s contract spells out the commission rate that will be awarded to a buyer’s representative. This is known up front and typically covers all, or at least most, of your representative’s compensation. If it doesn’t, the choice is yours. You can scratch this house off your list, or decide to view it, knowing that any remaining compensation will need to be addressed. But even if the seller’s listing contract doesn’t entirely cover your buyer’s representative’s compensation, and you must pay the difference, it’s quite possible that these relatively small differences will be more than offset by other purchasing terms negotiated with the seller. Question 4: Can I avoid real estate commissions altogether and buy directly from a seller? ANSWER: Yes, this is an option that some buyers explore. However, it’s important to understand that nothing is truly free and this approach still carries a price. Unrepresented sellers (for-sale-by-owner properties) frequently lack adequate information about how to price their home, or attempt to inflate the price in lieu of paying a real estate commission. As an unrepresented buyer, it will be much harder for you to know if you’re overpaying. Real estate professionals have developed keen pricing insights that go well beyond simply evaluating data through the Multiple Listing Service (MLS). And if you are overpaying, it will create further complications in securing financing. For these, and many other reasons, a high majority of consumer-to-consumer housing transactions never reach closing. Real estate professionals play a valuable role in keeping your home-purchase on track, starting with selecting and touring properties and continuing through negotiations, inspections, financing and closing. This is especially true in today’s market, where alternative buying opportunities, Saving for the Down Payment It is recommended to pay about 20 percent or more of the cost for the down payment. This is known as 80 percent Loan To Value ratio (LTV). If you put down less than this you will be required to pay Private Mortgage Insurance (PMI), which protects the lender in the event you default on the loan. PMI is not tax deductible and can cost anywhere from $25 to $65 per month for a $100,000 loan. It’s determined by the size of the down payment, the type of mortgage and amount of insurance. Monthly PMI is paid with the mortgage. Remember that, under the federal law, the lender is required to cancel the PMI once the LTV ratio reaches 78 percent or, in other words, when your mortgage amortized to 78% of the original value of the house. The borrower must be current on all mortgage payments and the lender must tell the borrower at closing when the mortgage will hit that 78 percent mark. Alternative Buying Opportunities While these options are limited to a small percentage of transactions, they can arise. Always consult with your Realtor® or an advisor if you’re in need of more information. — Foreclosure Properties Unfortunately, due to the global financial slowdown, foreclosures in the Las Vegas area are making headlines. While foreclosures may initially appear to be an appealing homeownership option, it’s also essential to recognize that investing in foreclosure properties is not a simple process. This is a niche market with many subtle but important nuances, requiring considerable specialized knowledge, experience and contacts. If you decide to pursue a foreclosure purchase, you’ll want to work with an experienced Realtor® who can educate you on the process. He or she can help you crunch the numbers, determine a logical purchase plan, avoid potential set-backs, and assist you with all the unique processes and paperwork involved with foreclosures. — Short Sales This buying option is becoming more common in Western states, including Nevada and particularly in Las Vegas where many homeowners paid higher prices for their homes a few years ago than the homes are currently worth. Short sales are an alternative to a foreclosure. When the borrower can no longer make the mortgage payments as agreed, he is faced with many decisions. One is to allow the lender to foreclose. Another is to get the lender to agree to accept a payoff of less than the balance owing on the loan. — Auction Sales Auctions have become more popular, in part, because property owners recognize that taxes, maintenance, financing and other costs can significantly erode their equity, especially if the property sits idle for many months. Auction sellers can effectively pick their sale date. They also may be sending a strong signal that they’re motivated to sell, depending on the type of auction method chosen. As a homebuyer in the auction process, you are able to determine the price you will pay. The seller may set a minimum price, and you will still have to compete with other buyers, but the actual selling price is ultimately set by you, which differs from houses listed for sale through brokerage firms, where the seller sets the price, and the rest of the purchase process is about negotiating a sale. Even though auctions are managed differently than traditional brokerage sales, it’s still a good idea to engage the help of a qualified Accredited Buyer’s Representative or Realtor®. Your agent can assist you by providing a competitive market analysis and other information that will be helpful in developing your pricing strategy. He or she can also help you review the disclosure package, accompany you to any presale inspections, explain the sales terms and auction procedures, coordinate attorney reviews, assist in prearranging financing and act as your representative in managing transaction paperwork with the auction company. How is Your Credit? Before you even begin applying for a mortgage loan, you’ll need to be sure you are credit-worthy. There are three major credit reporting agencies Equifax, Experian and TransUnion in the United States that maintain records of your use of credit and other information about you. These records are called credit reports, and lenders will want to check your credit report when you apply for credit. Generally, lenders will also want to know your credit score. What is a credit score? A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time. A credit score helps lenders evaluate your credit report and estimate your credit risk. National Credit-Reporting Agencies:
Go to www.annualcreditreport.com to ask for a free copy of your credit report, once a year, or call 877-322-8228. See, also, www.FTC.gov. FICO Scores The most widely used credit scores are FICO® scores, the credit scores created by Fair Isaac Corporation. Lenders can buy FICO® scores from all three major credit reporting agencies. Lenders use FICO® scores to help them make billions of credit decisions every year. Fair Isaac develops FICO® scores based solely on information in consumer credit reports maintained at the credit reporting agencies. Your credit score influences the credit that’s available to you and the terms (interest rate, etc.) that lenders offer you. It’s a vital part of your credit health. Understanding your FICO® score can help you manage your credit health. By knowing how your credit risk is evaluated, you can take actions that may lower your credit risk – and thus raise your credit score – over time. — Why You Want a High FICO Score According to Fair Isaac Corporation, the difference between a FICO® score of 620 and 760 can often be tens of thousands of dollars over the life of your loan. A low score can cost you money each month or even stop you from refinancing at a rate you know other people are getting. — How Are FICO Scores Calculated? Different credit data is collected to determine your credit score. This data can be grouped into five categories representing different percentages, reflecting how important each of the categories is in determining your FICO score. The FICO score is based on your credit history and is a compilation of several factors including: your payment history, outstanding credit, length of credit history, types of credit used and new credit you’ve acquired or applied for. Payment History: The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors in a FICO score. Your payment history accounts for approximately 35 percent of your FICO score. Amounts Owed: Number of accounts with balances represents approximately 30 percent of your FICO score. The amount owed on all accounts. Note that even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report. Length of Credit Used: In general, a longer credit history will increase your FICO score. However, even people who have not been using credit long may get high FICO scores, depending on how the rest of the credit report looks. Credit history accounts for approximately 15 percent of your FICO score. New Credit: Factors here include how many new accounts you have by type of account. It also may look at how many of your accounts are new. How long it has been since you opened a new account? What is the length of time since credit report inquiries were made by lenders. Re-establishing credit and making payments on time after a period of late payment behavior will help to raise a FICO score over time. Your new credit accounts account for 10 percent of your FICO score. Types of Credit Used: Is it a “healthy” mix? Approximately 10 percent of your FICO score is based on this category. The score considers your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Your FICO score also takes into account the kinds of credit accounts you have. Do you have experience with both revolving and installment type accounts, or has your credit experience been limited to only one type? How many of each? Your FICO score also looks at the total number of accounts you have. For different credit profiles, how many is too many will vary depending on your overall credit picture. According to Fair Isaac Corporation, a FICO score takes into consideration all these categories of information. Also, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your FICO credit score. Other tools and resources: Visit www.myfico.com and select credit calculators to compare loans, determine mortgage payments, whether a fixed or an adjustable loan makes sense, determine closing costs or is renting vs. buying the better option. Getting Your Loan Preapproved Being preapproved by a lender can put you in a much stronger negotiating position because it shows the seller that you are a qualified, ready-to-buy buyer, financially capable of buying the property and more likely to close on the property. Getting preapproved also allows you to understand your financial condition and how much you can afford before you begin your home search. Preapproval is different from prequalification, which is merely an estimate of what you may be able to afford. Preapproval occurs when the lender has reviewed your credit and believes that you can finance a home up to a specific amount based on collected preliminary information. However, neither preapproval nor prequalification represents or implies a commitment on the part of a lender to actually fund a loan. Here are some of the current documents you’ll need to get started: Income:
Assets:
Debts:
You’re now ready to learn more about financing options in the section entitled Financing and Mortgages. You’ll find out more about specific conditions in Las Vegas, the types of financing available, the financing roadmap, making the offer, selecting a home inspector, Nevada property taxes and title insurance. |
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