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Mercury in Retrograde: Your Guide to Buying and Selling While the Planets Go Crazy

July 17, 2019


If the sh*t really started hitting the fan for you right around July 7, you wouldn’t be the only one. Mercury is in retrograde until July 31, which explains why your mood might be all over the place and why you and your S.O. got in those epically dumb fights last week. It also explains why, as I was writing this piece, I found myself running to catch a flight at the changed (unannounced) gate, laptop open, coffee spilling down my shirt, only to end up having my seat moved to an aisle with the world’s unhappiest children.

But let’s back up for a second: Several times a year, planet Mercury is said to go retrograde—meaning it moves in an opposite direction to Earth. (“This backward movement is actually an illusion, similar to the one you experience when you’re in a car on the highway moving faster than a train alongside you,” according to Mother Nature Network.) Regardless, astrologers believe that this brief planetary upheaval also throws chaos into life down here on our planet.

While there’s no need to stock up on your favorite instant mac and cheese and prepare for the apocalypse, you might want to be a little extra cautious during this time, says astrologer and psychic Suzie Kerr Wright—especially if you find yourself about to make a particularly huge and consequential decision, like, say, buying or selling a house.

“Mercury rules our communication and thinking, so all of that can become murky,” Wright explains. “The period messes with our minds so we may misplace or lose things, we might feel a little off, or, if we’re rushing to send an email, we may reply to all instead of one person. We may find we’re a bit clumsier too.”

So how does Mercury play into buying and selling?

“Some people out there are more sensitive to Mercury retrograde than others,” explains Mary Dunne, real estate broker at Warburg Realty in New York. “In many instances, I believe a Mercury retrograde can add some complications or delay some aspects of the process, and generally highlight the need to read the fine print.”

With all of the craziness happening, you might start thinking a moving Mercury might wind up derailing the close on your new house. But both Dunne and Wright insist this isn’t the case.

“I don’t highlight the timing to clients unless it’s brought up,” Dunne says. “I just play more cautious around the time.”

And despite all of the spilled coffee and drama-filled days, Wright actually insists that Mercury in retrograde can be a positive thing.

“The real purpose of a retrograde period is to get us to slow down, rethink what we’ve been doing, revisit old ideas, and reconnect with ourselves and others,” she says. “It’s a break, not a curse.”

How to get through a retrograde sale

The key to getting through a big decision while Mercury does its business isn’t to hole up and hide away. Get out there and keep on keepin’ on—just do it thoughtfully.

“Make decisions from the perspective you had prior to the retrograde,” Wright says. “In other words, if you want a Craftsman home and that’s what you’ve always wanted, but you find a ranch during a retrograde you feel you can’t live without, step back. Think, think, and then think again. Is this really what you would want long-term and why did you want a Craftsman for all this time?”

Some fine print details to get you through the crazy

  • Check contract numbers twice, and double-check everything before signing anything.
  • Overcommunicate your expectations to everyone involved in the deal. That means your real estate agent, and possibly even your buyer or your seller. Make sure everyone is on the same page, and avoid any miscommunications.
  • Avoid last-minute changes. “Buying and selling during retrograde is fine,” Wright says, “so long as contracts have been drawn up before.” If any major last-minute changes take place, consider waiting until after retrograde to sign the paperwork.
  • Don’t be swayed by your own change of heart. Lots of folks are changing their minds right now, so don’t let your new inkling for a ranch make you throw out weeks of negotiating on your former Craftsman dream home.

The bottom line

Sure, weird stuff might happen during this period. But ultimately, everything is going to be OK.

“Starting something new in a retrograde period is not advised, but life goes on and you won’t die if you do,” Wright says. “Just double-check everything, and stay out of the panic mode.”

The post Mercury in Retrograde: Your Guide to Buying and Selling While the Planets Go Crazy appeared first on Real Estate News & Insights |®.

Is It Cheaper to Buy or Build a House? Compare the Pros and Cons

July 12, 2019

is it cheaper to buy or build a house


When you decide it’s time to put down roots and become a homeowner, you may wonder: Does it cost less per square foot to buy or build your own house? Unless you’re rolling in money, you’ll probably want to weigh the pros and cons of new versus old construction—and the price you pay for construction costs versus an existing home is only the beginning.

Here we lay out everything a home buyer needs to know about buying an existing home compared with building one from scratch or having it built by a general contractor.

Is it cheaper to buy or build a house?

First, consider the upfront costs.

If you buy an existing home: According to the latest figures, the median cost of buying an existing single-family house is $223,000. For the average 1,500-square-foot home built before the 1960s, that comes to about $148 per square foot. That said, the exact price can vary widely based on where you live. (Go to to see the price per square foot in your area.)

If you build a new home: The latest figures show that the cost to buy or build new construction will set you back an average of $289,415. That’s $66,415 more than the cost of an existing home! Still, you’ll get a lot more for your money. For one, new construction is usually more spacious, with a median size of 2,467 square feet—so the cost to build per square foot, $103, is actually lower than that of existing homes.

Another advantage of having a builder construct a custom home is you pay for only what you want, whereas an existing home may have interior and exterior features (e.g., a finished basement or a basketball court) you’ll pay a premium for, even if you don’t want them. But if an older house happens to be your dream home the way it is, that may be the more bargain-friendly route.


If you buy an existing home: Older homes have more wear and tear, which means certain things may need more maintenance—or, if they’re on their last legs, replacement, points out Michael Schaffer, a broker associate at Colorado’s LIV Sotheby’s International Realty.

Naturally, the cost of this upkeep isn’t cheap, so make sure you know the age of the main items. For example, the average furnace is expected to last 20 years and will cost $4,000 to replace. The typical HVAC system lasts 15 years and costs $5,000 and more to replace. Another biggie is the roof: The average shingled roof holds up for about 25 years. If you need to replace roofing, you’re looking at a bill of at least $5,000. Plumbing and septic systems can go for some time without a problem, but when something goes wrong, it’s an emergency.

With an existing home, unless you step into a high-end home with everything you want, you may want to start changing things, even if they are still functional. Home improvement shows make it seem simple to change countertops and flooring, or even overhaul floor plans. When you’re paying for material and labor costs for plumbing and drywall work, you may start to think your total cost might have been less paying a builder for a custom home in the first place.

If you build a new home: Considerably less upkeep is one of the primary reasons to build your own single-family home, because everything from major appliances to the HVAC system is new and under warranty. In fact, sometimes the entire home is protected for up to 10 years because a builder generally offers a construction warranty “for any problems that arise,” says Schaffer. Your interior and exterior maintenance outlay for a decade is potentially zero dollars. That can make up for some home construction costs per square foot that you paid by opting for a custom home.


If you buy an existing home: A major perk of older homes is mature landscaping with large trees and established plantings. That may not seem like a big deal until you consider that the U.S. Forest Service estimates that strategically placed mature trees can add tens of thousands of dollars to a property’s value and save up to 56% on annual air-conditioning costs.

If you build a new home: Builders often do little or no landscaping to new construction. It may take thousands of dollars—and many years—to get the yard you want. For instance, one 6- to 7-foot-tall red maple will cost about $120 (if you plant it yourself), which will then grow 2 to 3 feet a year. According to HomeAdvisor, the average cost of adding complete landscaping is $3,219.

Energy efficiency

If you buy an existing home: The latest U.S. Census found the median age of American houses to be 36 years. Older construction means dated windows and appliances—dollars flying out the window on wasted energy expense.

If you build your own home: Recent construction almost always beats older homes in energy efficiency, says Kyle Alfriend of the Alfriend Real Estate Group Re/Max, in Ohio. Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into reduced energy expense every month, even with the higher square footage in many newer homes.


If you buy an existing home: The nice thing about old homes is that there’s context to your purchase: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables, or comps) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.

If you build a new home: New house construction, particularly in up-and-coming neighborhoods, can be more of a gamble. Without a proven track record of lots of comps, there just aren’t enough data points to really know what could happen down the line. This is also true for all of the latest amenities you might ask the builder to install in your home (think self-cleaning toilets).

“Some trends die quickly, dating the home, and can negate any appreciation,” says Alfriend. So when in doubt, try to steer clear of anything that screams it’s a passing fad.

That said, if you pay reasonable home costs when you build a home, and your local community is thriving, you should be able to get a good sales price for your home down the line.

The post Is It Cheaper to Buy or Build a House? Compare the Pros and Cons appeared first on Real Estate News & Insights |®.

They Took What?! The Strangest Things Home Sellers Have Removed—and What Buyers Can Do

July 11, 2019

When Diana Abu-Jaber moved into her Miami home, she expected to find everything she had seen when she made her offer to purchase. Instead, she discovered that the previous owners had left her in the dark. Literally.

“The sellers took the lightbulbs,” she recalls. “They also took the batteries from the smoke detector, the knobs from the bathroom faucet, the curtains, and all the toilet paper. They even pried a clock out of the wall.”

Abu-Jaber isn’t the only new homeowner to find strange things taken from the properties they have just moved into. On various social media sites, buyers have reported missing closet rods, door stoppers, and shower heads.

Should home sellers be allowed to take these things with them when they move? We got the lowdown—and what you should do if it happens to you.

Figure out whether the items are theirs or yours

First, you should understand the difference between fixtures and personal property. Fixtures are items physically affixed to a property and therefore automatically included in the purchase agreement (unless otherwise excluded in the property listing). Chattels or personal property include anything movable, says Rona Fischman, a Realtor® and principal broker at 4 Buyer’s Real Estate in Cambridge, MA.

Buyers are legally entitled to receive all of the home fixtures as they appeared when the offer to purchase was made—so if a funky entryway light was there when you visited the house, it should still be there when you move in (unless you’ve negotiated otherwise).

“We’re really, really fussy: We actually write all that stuff out, because there are many things in that gray area between personal items and real estate,” explains Fischman, who works exclusively as a buyer’s agent. “The classic one is drapery: That’s chattel, but the brackets are fixtures, so decide in advance who’s getting the set.”

Be very specific about what stays and what goes so there are no misunderstandings.

“When buyers are ready to make an offer, we’ll ask, ‘Is there anything in that gray area that, if it was gone, you’d be unhappy about?’” she says. “And then we add it onto the offer.”

What to do if sellers take things anyway

If a bunch of things have mysteriously gone MIA, buyers do have some recourse, says Andrea Duane, a Realtor with Coldwell Banker in El Dorado Hills, CA.

She’s also experienced surprises during walk-throughs with clients.

“Once, we noticed all the kitchen cabinet hardware and drawer pulls had been removed,” she says. “The sellers wanted to bring everything to their next place, but you can’t do that. We went right back to the seller’s agent and said, ‘Your client did this. It wasn’t disclosed and these things were bolted and attached to the property—they need to be put back because they are permanent fixtures of the house.”

Monica Kemp thought she had come to terms with a seller who had mentioned she was taking the dining room chandelier.

“We were fine with that. However, once we closed, we got to our new house and saw she had not only taken the chandelier, but she didn’t replace it with anything—we just had wires hanging out of the ceiling,” recalls Kemp, who purchased that house before she became a Realtor with Coldwell Banker Residential Brokerage in Leesburg, VA.

“Now, because of my experience,” she says, “I know to include that if anyone is specifying they’re taking something, they have to make sure it’s replaced.”

In Abu-Jaber’s case, the sellers were getting divorced, and she opted to cut them some slack.

“It was a tough situation that made me so sad for them, so we didn’t ask for any of the items back, but we also ended up putting that house back on the market really quickly,” she says. “The fit was never quite right; we always felt a little unwelcome—it was bad juju.”

Beware: Sellers might remove items out of spite

Why on Earth would sellers bother to remove toilet paper holders, doorknobs, or switch plates? Fischman says such actions could indicate an underlying issue.

“When that kind of thing happens, it usually means you had a bad deal; somebody thinks they’ve been ripped off,” she says.

To avoid a sour situation, be proactive: Take photos during visits, describe all inclusions in the offer to purchase, and be respectful and reasonable during the negotiating process, Fischman adds.

And, while most closings happen without a hitch, it’s always a good idea to do one or two walk-throughs with your agent just to be sure everything’s in order.

Abu-Jaber, who’s moved several times, has learned a few things along the way.

“Usually, people are pretty reasonable and don’t strip the house bare—mine was an unusual experience and I wouldn’t suggest making yourself nuts trying to itemize every detail,” she says.

Plus, if you negotiate with the sellers, you could end up with some pretty rad finds. Abu-Jaber, in fact, has bought and sold all sorts of furnishings with their home purchases.

“If you get to know your sellers a bit, you can get some great deals, too,” she says. “We bought our much-loved dining room table for $25 from our seller.”

The post They Took What?! The Strangest Things Home Sellers Have Removed—and What Buyers Can Do appeared first on Real Estate News & Insights |®.

What Is a Cape Cod House? Hint: It’s on the Monopoly Board

July 9, 2019

what is a cape cod house?


Countless Monopoly games have been won and lost over the placement of tiny green houses (as well as slightly larger red hotels, but that’s another story). But if you’ve ever inspected these pieces of plastic, you’d see that they’re actually miniature versions of the popular home architecture known as Cape Cod design. All of which begs the question: What is a Cape Cod house, anyway?

Characteristics of a Cape Cod house

These New England homes are named, of course, after Cape Cod—the place that gave them their start. This beloved vacation destination is located off the coast of Massachusetts and is known for its breathtaking beaches and quaint little towns.

In the 1600s, Cape Cod gave birth to its namesake style of home, which was built to withstand harsh New England winters. As such, cottages in Cape Cod typically had the following features:

  • A simple rectangular shape and small (one-story) size, though some Cape Cod house plans are one-and-a-half level or three-quarter Cape (Due to the extreme cold of New England winters, the smaller the cottage, the easier and less expensive it was to heat.)
  • A steep, slanted, gabled roof (sometimes side-gabled) to help snow melt off
  • A central chimney in the middle of the home (all the easier to heat the space) connected to fireplaces in many rooms
  • Cedar shutters and shake shingles to protect against strong winds
  • Double-hung, multipane windows
  • Low ceilings, which also help conserve heat
  • A simple floor plan with a front door opening to a central hall, offering equal space on either side for living and dining rooms
  • No porch, roofline, or other ornamentation (except for simple clapboard siding, shingles, and shutters) (A typical early Cape home wouldn’t have dormers, though later iterations might include two symmetrical ones.)

Postwar Cape Cod boom

After soldiers returned home from World War II, Boston architect Royal Barry Willis was instrumental in the spread of Cape Cod homes in suburbs across the United States—starting in New England and moving westward. Young families flocked to them because of their affordability, especially during the Great Depression.

Modern takes on the Cape Cod style

The Colonial-era Cape Cod home style is still going strong today, both in New England and other parts of the country. A Cape Cod uses many different construction materials for roofs and siding, and may add features like porches or gables, but it retains the style’s traditional characteristics. Below is a gorgeous example of a Cape Cod–style home with dormers and a chimney in the Pacific Northwest:
Key Peninsula Residence

Photo by David Vandervort Architects
Capes fall into the midrange cost when it comes to building, as you can lose some livable space because of the architectural style (namely, the steep roof and its rafters). Still, it’s considered an affordable and practical housing style for both a main residence or a summer home, plus it features Colonial Revival flair.

If you want the feel of a New England Cape, a Cape Cod–style house may be available to shop for wherever you live. Or at the very least, you can divulge some fun trivia related to Cape Cod–style homes during your next Monopoly game.

The post What Is a Cape Cod House? Hint: It’s on the Monopoly Board appeared first on Real Estate News & Insights |®.

5 Common House-Flipping Myths You Should Never Believe

July 2, 2019


We’re willing to bet you’ve seen at least one episode of “Flip or Flop” or any number of other home makeover shows packing the HGTV schedule. There’s no denying the role they’ve played in motivating regular folks to get into the business of buying distressed houses, renovating them, and selling them. Easy-peasy, right? Fun, too! Glamorous, even.

But the reality is a bit more complicated than these heavily edited TV versions of real life would suggest. In fact, there’s an awful lot about flipping houses that the average investor probably doesn’t know. Below, we shed light on the myths about home flipping that buyers should never let cloud their judgment.

Myth 1: It’s easy to flip houses

We have real estate TV shows to thank for fueling the idea that it’s possible for anyone with a contractor and a sense of design to flip a house. The truth is, flipping a house can be a big challenge.

Just for starters, a contractor may not show up, or an insurance claims adjuster may not get back to you in a timely fashion. These are the kinds of things that can derail your project pronto.

And of course there’s always the possibility of hidden problems and repair costs.

“Problematic septic systems, rotten trusses, and unstable foundations can eat your profits alive if you’re not careful,” according to Brian Rudderow of the real estate investing firm Tactical Investing, in Colorado Springs, CO. “Every second of wasted time is another mortgage payment that you will be responsible for making.”

Myth 2: A house flip can be done quickly

On the small screen, home improvement gurus flip a house in a month or two, but Rudderow says house flipping can be an extremely complicated process, and sometimes a time-consuming one as well.

“You have to deal with homeowners insurance, taxes, utilities, permits, inspections, appraisals, title insurance and closing costs, possible HOA fees and special assessments, liens, insurance claims, shady contractors, materials being delivered late or incorrectly, and much more,” he says.

Experts can fully gut and flip a house in a month or two, but it’s because they have plenty of knowledge and experience under their belt.

Myth 3: Flipping houses is a way to get rich quick

Flipping houses can help you build wealth, but it’s not a path to immediately profitability.

“It normally takes first-time home investors much longer than they expect to complete a quality renovation, and they often make the mistake of forgetting that they will have to carry costs during the remodel,” says Andrey Sokurec, property investor, trainer, and owner of Homestead Road, in St. Louis Park, MN. Those costs include the actual price of the home, closing costs, and renovations.

On average, Sokurec says, an investor makes about $30,000 in profit on a flip. “But you also need to be prepared for the reality that you can actually lose money on a deal if surprises come up.”

Myth 4: More money, more profit

So, if $30,000 is the average amount investors make, you might think that flipping a more expensive house can yield substantially higher profits. But this is not necessarily the case.

“The more expensive a property becomes, the more limited your buying demographic becomes. This can mean longer holding costs,” says James Judge, an agent at HomeSmart in Phoenix who has designed and flipped over 50 homes in the past five years.

Myth 5: You need loads of cash to flip a house

Yes, an unlimited budget will make flipping easier, but that doesn’t mean you need a boatload of cash to pull off a successful flip. If you don’t have a large nest egg, Sokurec says, you can take out a home equity line of credit or get a business loan.

“Loans can come from a bank, mortgage broker, or private lender,” he says. In fact, most first-time investors borrow the money from friends or family. That’s because people without house-flipping experience will have a more difficult time getting financing.

The post 5 Common House-Flipping Myths You Should Never Believe appeared first on Real Estate News & Insights |®.

7 Myths About Buying a Foreclosure Home That’ll Surprise Deal Seekers

July 2, 2019

Steve Debenport/iStock

Considering buying a foreclosed home? Any home buyer looking to pay below market value should be paying attention to foreclosure listings. But the process of buying a repossessed home is full of misconceptions—and we’re here to help separate the false stereotypes from the reality.

These are some common myths that need to be set straight.

Myth 1: The house must be bought in cash

That all depends on what stage a foreclosure property is in, says Bill Gassett with Re/Max Executive Realty in Hopkinton, MA. If the home is in pre-foreclosure or “short sale,” the buyer does not need to shell out an all-cash offer.

“They can procure a mortgage just like any traditional sale,” Gassett says.

If the bank sells a property at public auction, the mortgage holder usually does require that the home is bought with cash and mortgage contingencies are not allowed in the sale.

If you don’t have a lot of cash on hand but know you’d like to buy a home in foreclosure, Bobbi Dempsey, author of “Idiot’s Guide to Buying Foreclosures,” suggests drawing from a line of credit obtained using current property.

When the foreclosure is a bank-owned property, Gassett says the bank is usually actively looking for an end buyer.

“The purchaser of a bank-owned property is almost always able to procure a mortgage as part of the contract with the bank,” he says.

Myth 2: Buyers forfeit their right to have a home inspection

Definitely not true! Buyers have the right to do a home inspection and ask for repairs, but banks or sellers aren’t required to make them, says Rob Jensen, broker and president of Rob Jensen Co., in Las Vegas. But home inspections are actually encouraged since nearly all banks sell their foreclosed homes in as-is condition, and want to avoid liability down the line.

“It is common for structural, electrical, and plumbing issues that pertain to the safety and integrity of the home to be repaired, but there’s no guarantee,” says Jensen. “Every bank and every deal is different.” However, don’t count on the bank to fix those cosmetic issues.

Jensen says paint, carpet stains, and other minor blemishes are not likely to be addressed.

Buyers considering a foreclosure should make sure the sales contract has a contingency clause that requires a passing home inspection. This way, buyers can either choose to accept any issues with the home or back out of the contract.

With courthouse sales, however, homes are sold as they are, with no inspection.

Myth 3: Foreclosure homes require huge overhauls

It’s incorrect to assume that all homes in foreclosure are in shoddy condition. A large percentage of foreclosures are the result of job loss, illness, death, divorce, or even fluctuations in the real estate market, which means many of these homes were well maintained and may need only minor touch-ups.

“It quite often depends on the attitude of who last owned the property and whether or not they went out of their way to destroy the place,” says Jensen.

Myth 4: Foreclosures sell at heavy discounts

A common belief is that a foreclosure home will sell for at least half of its original value. But remember, the bank still wants to make a profit. Buying a foreclosure home can save you green, but the seller will hold out for the maximum price possible.

Home buyers often make a beeline to foreclosures because they think they can get a home for pennies on the dollar. But, Jensen says, by the time they factor in the time and renovation costs, they may reconsider.

“Foreclosures can provide opportunity to save, but you usually need time and extra cash to take advantage of it,” he says.

Myth 5: Foreclosure homes carry hidden costs

The fear of hidden costs may send would-be buyers running, but it’s not necessarily a worthwhile concern.

“A lot of the costs involved are typical for any real estate purchase—things like inspections, appraisals, transfer fees, etc.,” says Dempsey.

Yes, repairs or liens on a foreclosure can prove costly, but a home inspection will reveal any potential problems during escrow (this is where that inspection contingency comes in handy).

Also, the property deed can be researched on a foreclosed home. And, buying a HUD home or REO (or real estate–owned property) means the Department of Housing and Urban Development is required to clear the title of liens before it resells the home. Lenders will usually clear them, too, but buyers should make sure of that before they purchase.

“Generally speaking, there are not any more hidden expenses in purchasing a foreclosed home than there would be in a traditional sale,” says Gassett.

Myth 6: Foreclosures lose value faster than regular homes

Foreclosed homes actually tend to rise quickly in value. With any home, there’s no guarantee it will deliver increases, but buying a foreclosure sold below market value can provide instant equity. And any extra work done to the home can only increase the value.

“There are a variety of factors that influence home values, including economic conditions, local market conditions, and the overall condition of the property,” says Andrew Leff, senior vice president and head of strategic alliance programs at Wells Fargo in New York City.

Myth 7: Buying a foreclosure is risky

Let’s be honest. Any real estate purchase comes with risk. Gassett says the only scenario where there’s some extreme risk is when buying at auction, since you are buying the property as is. Buyers are not able to conduct a professional home inspection and often not even able to see the inside of the property. Plus, they will be inheriting whatever came with the home.

“For example, if there is a lien on the property, you could become responsible for it. When buying a home at auction, it is essential to do a title search first,” says Gassett.

Leff says buyers should be informed before entering into any type of real estate transaction. This means aligning themselves with resources that can help them navigate the purchase and financing process with confidence.

“A knowledgeable real estate agent and lender can help ensure that a buyer is making an educated decision so that the property and any resulting financing is the right fit for them,” says Leff.

The post 7 Myths About Buying a Foreclosure Home That’ll Surprise Deal Seekers appeared first on Real Estate News & Insights |®.

Do You Get Your Earnest Money Back at Closing?

June 24, 2019

Can I Get My Earnest Money Back At Closing?

Sargis Zubov/iStock

Do you get your earnest money back at closing? If you’re buying a house and planning to finance the purchase with the help of a mortgage, the question is bound to come up. The short answer is: You don’t usually get your earnest money back at closing.

But hold on! Sometimes earnest money is returned at closing. What? Read on to find out what happens to your earnest money at closing.

What is earnest money, anyway?

So you’ve heard the term “earnest money” thrown around during the purchase process, and you’re not quite sure what it means? Sometimes called “good-faith money” or a deposit, earnest money is a sum that home buyers put down when they make their offer on a house, to show they’re committed to the purchase.

Earnest money (typically about 1% to 2% of the amount you plan to pay for the house) is put down by a buyer within five days of an offer being accepted by a seller. The money is then deposited into an account by an escrow agent.

Maybe you’ve heard it called “going into escrow“? That’s because the escrow officer will set the earnest money aside while you continue the steps of buying a house, such as getting an appraisal so your bank will approve the purchase or sending a home inspector to the house to ensure there are no reasons you should back out of the deal. They can’t touch that money during that time, and neither can the seller!

Do I get my earnest money back at closing?

If the appraisal comes through at a price that makes your lender happy, and the home inspection doesn’t turn up anything alarming, eventually you’ll get to closing—the end of the home-buying process—when you pay the seller and walk away with keys to your new castle.

This is when your escrow agent is going to pull your earnest money out of escrow. What happens with it next is typically dependent on the sort of earnest money that was put down, says Keith Lucas, broker and owner of the Charleston Real Estate Company, in Charleston, SC.

If you put down cash (which is nearly always the case), the earnest money is traditionally applied to closing costs or toward your down payment—the portion of the sale price that buyers pay on their own in conjunction with a mortgage.

But there are times when you might get the earnest money back. Maybe you have secured a loan with no down payment required, such as a Veterans Affairs loan or a mortgage backed by the U.S. Department of Agriculture. If that happens, the earnest money will be applied to closing costs instead of down payment. If there’s money left over after the closing costs are paid, you will get the surplus back.

But sometimes the earnest money isn’t actually money at all.

Wait a second. How can there be money that isn’t, well, “money”? It turns out, sometimes that good-faith deposit can just be something of “good and considerable value.”

“There are cases where a watch, car, boat, real estate, or precious metals have been used as an earnest deposit,” Lucas says. “In that case it might be returned to the buyer or liquidated by the seller and put toward the purchase price at closing.”

Bottom line: Even if you don’t get your earnest money back at closing, don’t worry! That big chunk of change you put down at the beginning of the home-buying process hasn’t disappeared. It’s been used to help pay for your brand-new house.

The post Do You Get Your Earnest Money Back at Closing? appeared first on Real Estate News & Insights |®.

What Is ‘Tenants in Common’ and Should I Arrange One?

June 21, 2019

tenants in common


“Tenants in common” may sound like a legal term rental property managers throw around, but it’s actually an important agreement between co-owners of real estate. It’s one type of arrangement that can come into play when multiple people decide to buy real estate together, be it a primary residence or a vacation home. The other common type of arrangement for multiple co-owners to buy real estate is called joint tenancy, also known as joint tenancy with right of survivorship.

For some people, buying real estate as co-owners with friends sounds ludicrous. You love your friends, but taking on a shared financial responsibility and  a mortgage? No way! But others may see becoming co-owners as a real opportunity with a serious payoff, and could one day become party to a tenants-in-common or joint tenancy agreement.

What is ‘tenants in common’?

A tenants-in-common (TIC) agreement is a way to own a share of an entire property with a number of people, says Jeff Miller, a real estate agent and team lead at AE Home Group in Baltimore. (In a TIC agreement or joint tenancy, the owners are called “tenants.”)

Unlike a joint tenancy with right of survivorship agreement, a TIC agreement allows co-owners to own unequal shares of the same property and to pass on their ownership in the property to an heir when they die.

“For example, one owner may take responsibility for managing the property and in return receive a higher share of ownership,” Miller says. “It may also be the case that, after a number of years, someone sells part of his or her ownership to the other co-owners and maintains a smaller stake in the property.”

The TIC agreement provides a legal framework for the tenants to structure how the tenancy will operate, from deciding how co-owners should split the purchase price to choosing which co-owners make major decisions about the property. So while each tenant will own a share of the property and may have tenancy rights to live in and use the property, tenants pay their share of the mortgage, taxes, insurance, and maintenance costs based on the tenant’s share of ownership.

Advantages of a tenants-in-common agreement

Because a TIC agreement brings a number of tenants together to split costs and ownership, there can be a clear financial advantage for tenants who don’t have the means to buy property or qualify for a mortgage on their own. The flexibility of the tenants-in-common arrangement can be more attractive to prospective tenants who may plan to use real property for only part of the time (e.g., during the holidays or summer months) than being joint tenants. As TIC owners, they may opt for a smaller share in the real property, instead of equal shares.

This tenancy arrangement also allows the individual tenants to decide what happens to their ownership percentage of the property in the event that they die. Tenants in common can choose to sell their ownership share or transfer it to a spouse or other person, or to an heir after they are deceased.

A joint tenancy with right of survivorship, on the other hand, requires that the owners become joint tenants in the same deed or instrument at the same time. The joint tenancy survivorship agreement provides that when one joint tenant dies, the property interest of the deceased joint owner transfers to the remaining tenants, without going through probate. Joint tenancy is popular with married couples, because the tenancy of a deceased owner passes automatically to the surviving spouse.

Disadvantages of a tenants-in-common agreement

Of course the autonomy of co-ownership through TIC interests has its drawbacks says Michele Lerner, author of “Homebuying: Tough Times, First Time, Any Time.”

“At anytime, any owner can sell their share of the property or give it to someone else without requiring the consent of the other owners,” Lerner says. “This may result in you owning a house—and perhaps living there—with other tenants that you don’t know or don’t like.”

A tenants-in-common agreement, unlike joint ownership, does not automatically avoid probate.

Be smart when entering into a tenancy agreement

To help things run smoothly, experts advise getting everything regarding co-tenancy in writing, especially a tenants-in-common termination plan that all TIC owners are comfortable signing. Make sure you understand property law, and what will happen when a co-tenant wants to divest his ownership interest, or when he dies.

Miller suggests that a buy-sell agreement that’s backed by life insurance policies be part of that plan; it will give existing tenants the right to buy out a newly inherited tenant if one tenant dies. The buyout amount can be predetermined or the result of a third-party fair market value appraisal at the time of new ownership. The life insurance policy comes in handy in cases where the surviving tenants don’t have cash on hand for a buyout.

Whatever legal plans are drawn up, Lerner advises all tenants seek independent counsel from an estate attorney and a tax professional to walk them through both the legal process and the tax ramifications of purchasing a property in common.

“While owning a home with friends as tenants in common can be a great experience, it’s important to recognize purchasing property together makes the partnership more difficult to dissolve than simply renting a home with friends,” she says. “Professional advice is crucial to a successful agreement.”

The post What Is ‘Tenants in Common’ and Should I Arrange One? appeared first on Real Estate News & Insights |®.

Airbn-Bling: How Renting Out Your Property Can Help You Get a Mortgage

June 19, 2019

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Short-term rental sites such as Airbnb have changed the game for homeowners. Renting out your entire home—or part of it—is an attractive way to make extra cash. In fact, some developers are even building homes aimed at first-time home buyers with separate bed-and-bath areas designed to be rented out—a twist on the classic in-law suite.

But how does your plan to host short-term renters play out when you’re applying for a mortgage? Rent money will increase your yearly earnings, but do lenders count future revenue as income? Can plans to maintain a short-term rental help you get a mortgage?

For the most part, no. Stephen Rybak, senior managing director at GuardHill Financial Corp., says a lender will never consider potential income from renting out part of a single-family home. And it doesn’t matter if we’re talking about a space that’s detached from the house (e.g., a garage apartment, studio, or casita)—it’s all technically part of a one-family home.

“If it’s not zoned for a two-family, you’re never going to get credit for that from a lender,” he says.

Two-family properties

You will, however, be able to include part of your potential rental income if you are buying a building zoned for two or more families. Whether it’s a townhouse, brownstone, or free-standing home with multiple units, the building needs to be a legal two-family dwelling.

Zoning laws vary by city and state, so if you’re considering this kind of building, talk to your real estate agent or lawyer to ensure that the building is a “true” or “legal” multifamily property. The type of building will also be indicated on the listing.

How a lender decides what your rental is worth

In a two-family or multifamily home, the market-rate rent for each unit is determined during the appraisal process.

“The appraiser will give you the market value,” says Rybak, “and the bank will consider 75% of that amount to help you qualify for the loan.”

So if you’re buying a two-family home and the appraiser puts the fair market rent for your unit at $1,000 a month, you’ll get $750 a month, or $9,000 a year, added to your income. That will allow you to qualify for a bigger loan than you otherwise would have been able to get—regardless of what you actually end up making on the rental.

Could short-term rentals hurt your ability to refinance?

Just because the bank won’t consider income from a short-term rental in a one-family home doesn’t mean you shouldn’t do it. Renting out your place is still a great way to help pay your mortgage.

However, keep in mind that, in rare situations, having an active short-term rental could hurt your ability to refinance. If your lender decides that you make enough money from your home to qualify as a commercial or investment property, it could deny your refinance application or charge you a higher interest rate. That means the $30,000 you make a year renting out theº cottage behind your home could disqualify you from refinancing the whole property. In this situation, a bank could consider you to be operating a business out of your home.

That kind of issue is rare, though. So if short-term rentals are legal in your city, and you don’t mind taking on the responsibilities of being a property manager, a supplemental income—potentially thousands of dollars a year—is nothing to sneeze at.

The post Airbn-Bling: How Renting Out Your Property Can Help You Get a Mortgage appeared first on Real Estate News & Insights |®.

What Is a Homeowners Association? HOAs—Explained

June 18, 2019

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What is a homeowners association? If you’re buying a condo, townhouse, or free-standing home in a neighborhood with shared common areas and amenities—such as swimming pools, tennis courts, parking garages, or even just the security gates and sidewalks in front of each residence—odds are high these areas are maintained by a homeowners association, or HOA.

What is a homeowners association, and how will it affect your life?

Homeowners associations help ensure that your community looks its best and functions smoothly, says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School.

For instance, if the pump in the community swimming pool stops working, someone has to take care of it before the water turns green and toxic, right? Rather than expect any one homeowner in the neighborhood to volunteer his time and money to fix the problem, homeowners associations are responsible for getting the job done. Think of it as similar to real estate property taxes that a homeowner pays for city and state services, except these fees go to pay for amenities and maintenance in your own planned community or condo building.

The number of Americans living in a home with an association is on the rise, growing from a mere 1% in 1970 to 25% today, according to the Foundation for Community Association Research. So, it’s wise to know exactly how such an association of homeowners works.

How much are HOA fees?

To cover these property maintenance expenses, homeowners associations collect fees or dues (monthly or yearly) from all community members. For a typical single-family home, HOA fees will cost homeowners around $200 to $300 per month, although they can be lower or much higher depending on the size of your house or condominium and the services provided. The larger the homeowner area, the higher the HOA fee—which makes sense, because the family of four homeowners in a three-bedroom condominium is probably going to be using the common facilities more than a single resident living in a studio condo.

Many HOAs pay property managers to oversee maintenance and deal with other real estate property issues.

In addition, most homeowners associations charge their members a little more in dues than monthly expenses require, so that they can build up a reserve to pay for property emergencies, amenities, and big-ticket items like repairing the roof and water heaters, or acquiring new carpeting, paint, and lights for the hallways.

If the association doesn’t have enough fees in reserve to cover necessary expenses, it can issue a special “assessment,” or an extra fee, in addition to your monthly dues, so that the repairs can be made.

For example, if the elevator in your condo building goes out and it’s going to cost $15,000 to replace it—but the HOA reserve account holds only $12,000—you and the rest of the residents are going to have to pony up at least an additional $3,000 in dues, divided among you, to make up the difference.

And yes, you as a resident still have to contribute your share of dues, even if your property is on the first floor.

HOA rules: What to expect

All HOAs have boards made up of homeowners in the complex who are typically elected by all homeowners. These board members will set up regular meetings where owners can gather and discuss major decisions and issues with their community. For major expenditures, all members of the HOA usually vote, not just members of the board.

In addition to management of the common areas, homeowners associations are also responsible for seeing that its community members follow certain rules and restrictions. Homeowners receive a copy of these rules from the HOA board, known as covenants, conditions, and restrictions (CC&Rs), when they move in, and they’re required to sign a contract saying that they’ll abide by them.

CC&Rs can cover everything from your type of mailbox to the size and breed of your dog. Some HOAs require you to purchase extra homeowners insurance if you own a pit bull, for example. Others have covenants and restrictions prohibiting certain breeds entirely. Many associations even have rules about what color you paint your house, what kind of curtains you can hang if your unit faces the street, and how long your lawn can grow. Its goal is not to meddle—it’s merely to maintain a neighborhood aesthetic. However, if you don’t like being told what to do with your home, living under the bylaws and rules of an association may not be for you.

What happens if you violate HOA rules?

That varies from place to place, but if you break the rules—or fall behind in paying your HOA dues—the consequences can be severe. The management could evict you from your property, or worse. Some HOAs have the right to foreclose on your property if you don’t pay your monthly fees or don’t follow the rules, says Bob Tankel, a Florida attorney specializing in HOA law.

So make sure you read your CC&Rs carefully so you know what to expect, and know the pros and cons of living in an HOA community before you buy real estate with a homeowners association.

The post What Is a Homeowners Association? HOAs—Explained appeared first on Real Estate News & Insights |®.