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6 Crucial Questions to Ask a Title Insurance Provider

November 11, 2019

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Shopping for title insurance may not be the most thrilling step in buying a house, but it is one of the most important.

Before you can own a home, or “take title” to a property, most lenders will require a title search of public property records to make sure there aren’t any issues in transferring the property into your name.

For example, title issues can crop up due to liens on the property (say, from a contractor who did work on the house but wasn’t paid), unfulfilled financial obligations such as unpaid taxes, or claims of ownership from a long-lost heir. In such cases, a home seller may not have the legal right to transfer ownership of the property.

To protect against any financial loss, two types of title insurance exist: lender’s title insurance and owner’s title insurance. The lender’s title insurance policy pays for the expense of researching a claim and any court costs incurred as a result of any disputes they uncover.

Owner’s title insurance, meanwhile, protects you as the homeowner during any future disputes over ownership of the property.

Lenders require borrowers to purchase lender’s title insurance. Owner’s title insurance, however, is optional—but, given the protections it provides, buying it is a smart move. (Generally, home buyers use the same title insurance company to purchase both policies.)

Unlike homeowner insurance, title insurance is taken care of as a one-time payment that’s made when (or shortly before) you close on your house.

Now that we’ve got the basics of title insurance squared away, let’s look at some of the more surprising questions you probably never thought to ask a title insurance provider but totally should. After all, as the home buyer, it’s your choice which title company you decide to use.

1. What are your title insurance rates?

Although this might seem like an obvious question, some home buyers forget to ask it. And that can be a big mistake. Why? Because even though the average cost of title insurance is around $1,000 per policy—which covers all upfront work and ongoing legal and loss coverage—the price can vary widely, depending on where you live and the price of your home.

In many states, including Texas and Florida, title insurance premiums are set by the state, meaning that you’ll pay exactly the same amount no matter what title insurance company you choose.

However, some states, like California and New Mexico, do not regulate title insurance fees at all, and rates can vary widely from one title agency to another, says Rafael Castellanos, a managing partner at Expert Title Insurance Agency in New York City. If rates aren’t preset by the state, they’re negotiable.

It’s advisable that all home buyers find out what a title insurance company’s rates are before they choose an insurance provider.

2. What has been your most challenging title search, and how did you handle it?

Some title searches are easier to clear than others. While there’s no telling how difficult yours will be, you want a title company that can handle complicated problems.

“There are issues that we run into on residential properties that can be complex, and we have to go to great lengths to resolve them,” says Tim Evans, owner of Evans Title Agency in Troy, OH.

Ask how a title company solved their most challenging title search, and you’ll gain some valuable insight—and some assurance that the company will be able to troubleshoot issues during your title search if any should arise.

3. How much experience does your title insurance attorney have?

A title company’s attorney is the person who is going to determine whether you can legally take title of the property and receive title insurance. Using a title company with a seasoned attorney, therefore, is crucial.

However, “in the early 2000s, it was very common to see people forming their own title insurance agencies after just a few months,” Evans says. “Though that’s less common today, you can still run into title attorneys who have very little experience.”

4. What’s your company’s ratio of title claims to customers?

Because title searches can be complicated, claims are an inherent part of the business. However, some title companies are more “liberal” than others, Castellanos says, with respect to whom they will—and whom they won’t—issue title insurance.

“Some title companies pay lots of claims, which can put a lot of stress on their clients,” says Castellanos. “You want a title company that is incredibly careful and conservative.”

So, how many title claims are too many? Title insurance claim rates are approximately 5%, according to industry estimates.

As a result, here’s a good guideline: If a title company has had a lot of title claims relative to the volume of their business—say, 1 out of every 10 customers—you’ll want to continue your search.

5. How long does it take for you to complete a title search, on average?

Depending on the terms of your home sales contract, you may be under a tight deadline to reach settlement, warns Kimberly Sands, a real estate broker in Carolina Beach, NC.

Of course, you won’t know that until you actually make an offer on a house. But, since it’s a possibility, you’ll want to find a title company that can conduct a title search in a timely manner, Sands says.

Typically, the whole process takes about two weeks. If a title company says that it will take significantly longer to complete a title search, using that company could force you to delay closing, which could potentially cause your whole home purchase to collapse.

6. Do you belong to any professional associations?

While being a member of a professional association certainly doesn’t guarantee that a title company is good, title agencies that belong to industry groups are often held to a higher standard, says Evans.

Organizations like the American Land Title Association (ALTA) also offer their members unique education programs, business tools, and industry certifications that will serve clients well. Moreover, membership in an industry group adds a layer of credibility for an insurance provider.

The bottom line

Title insurance can be confusing for home buyers, but it’s an essential protection of homeownership. So, in addition to asking the questions above, take time to read online reviews and talk to your real estate agent before picking your title insurance provider.

The post 6 Crucial Questions to Ask a Title Insurance Provider appeared first on Real Estate News & Insights | realtor.com®.

Home Inspectors Tell All: Strange but True Tales From the Trenches

November 5, 2019

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Home inspectors go where none of us particularly wants to go—into all the nooks and crannies around our homes, both inside and out. So you can bet that they’ve seen it all. You know—all that stuff that you don’t want to think about happening in those dark and creepy spaces.

Wait, actually we do want to know. (Is it masochism?) So we asked home inspectors who’ve been in the biz for a long time—and boy, did they deliver, with stories ranging from Stephen King–level horror to just downright weird. Check out some of the crazy things these home inspectors have witnessed. It’s all in a day’s work!

It’s a zoo in there

“Some of the nastiest stuff we find is animals—dead ones in attics or crawl spaces, which are always disgusting, and live ones, which are always scary,” says Reuben Saltzman, president of Structure Tech Home Inspections in Minneapolis. “In Minnesota, we usually find raccoons and squirrels, and inspectors in the Southern part of the country find a lot worse.”

There have been drowned frogs under water heaters, cooked mice in furnaces, frozen porcupines in crawl spaces, and dead fish on a roof. Was it a bird that somehow dumped it there, or something weirder, Saltzman wonders?

“We’ve also found wasp’s nests the size of basketballs inside of attics, and in the basement at the ceiling rim joist, and homeowners who didn’t know they had wasps,” Saltzman adds.

Bruce Barker, founder and president of Dream Home Consultants, in Cary, NC, has collected close to 6,000 photos documenting things like fried lizards and mice inside electrical panels, snakes in basements and crawl spaces, and even a black widow spider.

“We’ve found termite tubes hanging down from the ceiling. Termites need soil to travel and live, so they build tubes out of mud,” he explains. “It looked like there were stalactites hanging down.”

Then, of course, there’s the mass quantities of bird poop, which is nasty, toxic stuff.

Puzzling decisions

Home inspector horror stories
One beam holding up an entire deck.

Reuben Saltzman

“One of the craziest things that I’ve ever seen was a boat trailer being used as the foundation for a home,” Saltzman recalls.

“In the crawl space, I saw a tire half-embedded in concrete. I had to stare at it for a little while to figure out what I was looking at,” he says. “And I realized the whole addition was built on top of a trailer.”

Sometimes projects are half-finished, or half-baked, like a deck being held up by a single, wobbly post.

“This puts the ‘can’t’ in ‘cantilever,’” Saltzman quips about one memorable photo featuring a doomed deck.

Perilous plumbing solutions

Saltzman frequently discovers homeowners have tried to fix leaky plumbing with whatever materials they have on hand. Contrary to popular belief, duct tape does not, in fact, fix leaky pipes, shower wall tiles, or drains, he says.

“People will use caulk, radiator hoses, hose clamps, vice grips—just the craziest stuff—to keep water from coming out of a place where it shouldn’t,” he says.

This sparked some concern

Home inspector horror stories
Definitely an electrocution hazard

Bruce Barker

Perhaps the most alarming things home inspectors come across involve electrical systems and outlets in a home, Barker says.

“I’ve seen people not putting the wire connections in boxes, and just leaving them hanging out. If I had a dollar for every one of those, I wouldn’t have to crawl through crawl spaces anymore,” he says, noting that this is a major fire hazard.

Also in the “What were they thinking?!” department: Another home featured rows of Christmas lights strung directly over a pool (see image above). When the water fountain feature is activated, the swimmers beneath could get seriously injured from electrocution.

Ridiculous roofs

One homeowner strategically placed a basketball net with its glass backboard leaning against the roof, making it the ideal magnifying glass fire-starter on a blazing sunny day. Saltzman has also seen a roof so covered in moss and plant debris, it should have been mowed.

Barker has been amazed to see turbine vents in older houses that have lost their covers, unbeknown to the homeowners, or worse, have been covered with strange things—like an upside-down Halloween candy bucket.

Makeshift chimney repairs are often laughably ineffective, adds Barker, who has seen flammable asphalt material used to fix crumbling chimneys.

Weird and wacky windows

In older homes, it’s not uncommon to find wooden window frames that have seen better days, Saltzman notes. What’s odd are the homeowners who think up outlandish ways to fix them.

“One of my favorite photos of all time was taken 15 years ago: Somebody had taken spray foam to fill in all the rotted wood, and then cut the spray foam to match the profile of the wood, which they painted to match,” he recalls.

Deal-breaking disasters

Other head-scratching discoveries Saltzman’s team has made include a mysterious pile of leaves in the attic, scissors embedded in an electrical panel, a downspout aimed squarely at an electrical outlet, a roof fascia repaired with a hockey puck, and a bunch of unopened bags of insulation in an attic. (Pro tip: A home will always be warmer when insulation is actually laid out and not trapped in plastic.)

It’s not just horrifying for the home inspectors—all this weird stuff could kill a deal. Once potential buyers see things like mushrooms growing out of a floor drain, a crawl space filled with animal excrement and spider webs, or frost in the attic, they’ll wonder what else hasn’t been maintained, Saltzman says. And often, they’ll be spooked enough to walk away.

“We’ve got about 20 inspectors on my team,” he says, “and between all of us, every day someone decides they’re not buying a house based on what we found.”

The post Home Inspectors Tell All: Strange but True Tales From the Trenches appeared first on Real Estate News & Insights | realtor.com®.

How to Avoid Unexpectedly Buying a Haunted House—Because It Could Happen to You

October 31, 2019

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Footsteps late at night. Music randomly playing. Lights flickering. Unexplained shadows. True-horror fans might get a thrill out of moving into a house with a haunted past, but others might see it as a nightmare.

It wouldn’t surprise us to hear that notorious homes like the Manson murder house in Los Feliz or the “In Cold Blood” house have experienced some paranormal activity. The same goes for homes in towns with notoriously gruesome histories, like Salem, MA, where about two dozen people accused of witchcraft were executed or died in jail in the 1600s.

“Salem is one of the markets where I practice real estate, and you never know what’s lurking behind closed doors,” says Dana Bull, real estate agent at Sagan Harborside Sotheby’s International Realty in Marblehead, MA.

At this point, your eyes may be rolling, especially if you don’t believe in ghosts. But bear with us. Because there’s no way of knowing exactly what has gone on during a house’s history—and what may still linger.

“Sellers may or may not be aware of ghosts or other strange, paranormal activities, and almost none of the real estate listing contracts have any clauses or questions about such things. Add to that the fact that the majority of potential buyers don’t believe in the paranormal,” says Jane Phillips, a psychic, medium, and paranormal investigator for Geyser Energy Clearing Services, in Santa Fe, NM.

Therefore, in the spirit of Halloween, we beseech you to suspend your disbelief and take the following precautionary steps to avoid buying a haunted house. Because after staying up for a late-night viewing of “The Amityville Horror,” you want to be able to fall asleep with no fear whatsoever of poltergeists in your own home.

So whether you believe in ghosts or not (or only in the wee hours), here’s how to cover your bases. It’s better to be safe than sorry, right?

Know your state’s disclosure laws

The rules on what sellers have to disclose to buyers vary by state—and sometimes even by city. Sometimes you’ll receive the full picture about a house’s history, but there’s also chance you could be left in the dark.

“A haunted house falls under the category of a stigmatized property,” says Bull. A stigmatized property is a home that may be displeasing to buyers for other reasons besides its physical condition.

“In many states, it’s not mandatory to disclose a stigma like a murder, suicide, or crime—or paranormal activity. You can check with a real estate attorney in your state for the rules,” she says.

California, for example, has a law that requires deaths that occurred on the property within the past three years be disclosed.

New Mexico is one state that doesn’t disclose any nonmaterial facts about a property when it’s listed for sale, Phillips says. That can be tricky for both the agent and buyer, especially if the seller doesn’t reveal some facts that could cause a haunting.

Research the house

Good old-fashioned research can usually turn up information on a house.

“Always Google the address before you purchase a home. You might be surprised by what pops up,” says Bull.

Look at newspaper clippings and historical records to see if any deaths happened at that house that you should be aware of.

Also, research the land the house was built on—does it sit on a former battlefield or an ancient burial ground? (Remember “Poltergeist”?)

“In New Mexico we have a lot of trapped Native American energies on or near properties that need to be moved on,” says Phillips.

Another option is to check DiedInHouse.com, an online resource that allows users access to the death records of specific addresses.

Talk to neighbors

Neighbors usually have the 411 on all things going on in the neighborhood, and that likely includes any rumors about a local haunted house.

If you see any neighbors out walking their dog or raking leaves, try striking up a conversation with them, particularly those who have lived in the neighborhood for a while.

“Not surprisingly, some sellers may be tight-lipped about paranormal activity, so you want to talk to the neighbors,” says Bull.

Check the buy, sell, and repair history of the house

Another tidbit of information that may reveal some interesting clues about the house’s past is in its buy and sell history. Did the house lose value? Does it have a history of being bought and sold several times over the years? That could mean there’s something uncanny about the house that keeps people from settling in.

“If it’s something you are nervous about, ask! Sellers and their representatives are required to disclose what they know when asked a pointed question,” says Bull.

Phillips says to also look into whether there has been an unusual amount of repairs on the property in the past few years, which could indicate paranormal activity.

“I’ve cleared houses simply because the owners have had three broken water heaters in one year, or because their list of repairs was never-ending,” says Phillips.

Call in the ghostbusters

Want to be extra, extra sure your potential future home isn’t inhabited by a ghostly presence? Call in the professionals. A medium or paranormal investigator can perform services that are aimed at clearing the house of uninvited guests.

Phillips has performed 300 clearings of unwanted spirits, mostly residential and mostly for real estate agents.

“I recommend that anyone purchasing a new residence hire a professional to do paranormal energy clearing before moving into the space,” Phillips says. “We arrange for the physical cleaning of our homes, and it’s good practice to also clear the energetics.”

The post How to Avoid Unexpectedly Buying a Haunted House—Because It Could Happen to You appeared first on Real Estate News & Insights | realtor.com®.

Come and Get It, Please! The Weirdest, Grossest Things Home Sellers Leave Behind

October 31, 2019

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Once the ink is dry on your purchase agreement, it’s time to close the deal and bring your belongings into your new home. But what happens when moving day unearths some seriously odd items left behind by the previous residents?

Sellers are supposed to remove everything from the house that wasn’t previously agreed to be part of the sale. Still, many homeowners dish on social media about finding stuff that they’d wished the sellers had packed up, tossed out, or hauled away—including a hyperbaric chamber for small animals, a stash of porn under the floorboards, and a strange self-portrait of the previous resident. (We can’t make this stuff up.)

So we asked irritated buyers and their savvy real estate agents: What do you do when you literally get more than you bargained for?

Disgusting discoveries

When Jane Langille and her family moved into their Toronto-area home, they were dismayed to discover that the sellers had left large stacks of old magazines behind, and they hadn’t mowed the lawn or cleaned a toilet in weeks.

And things quickly went from bad to worse.

“They left someone’s old tooth in the bathroom cabinet under the sink, and a bottle of liquid people use to teach dogs where to pee. It had leaked in the kitchen cabinet, and it reeked to high heaven,” Langille recalls.

Stacey Freed’s experience in suburban Rochester, NY, was even stranger.

“I found a weird flesh-toned rubber cone in the wall where the bathtub pipes were. My husband and I had no idea what it was,” says Freed. “My 80-year-old father Googled it and announced it was a sex toy.”

Can sellers do that?!

While some buyers worry about items being taken from the home that were included in the purchase price, it’s much more common that sellers leave stuff behind, says Danielle Stepp, a Realtor® at Foundation Realty in Tecumseh, MI.

“Two of the biggest things I’ve seen left in a house after a seller has moved out are pianos and ashes,” Stepp says. “You have this urn, and you can’t throw out Uncle Billy, but you can ‘accidentally’ forget him. Just as you can say that the piano fits the room so well, we thought we’d leave it for the buyers.”

The thing is, sellers can’t just randomly leave things in the home, even if they weigh a ton and are a huge pain to move, adds Rona Fischman, principal broker at 4 Buyer’s Real Estate in Cambridge, MA.

“Sellers are obligated to leave the house free of all possessions and broom-clean, which means that anything that’s big enough to push with a broom is supposed to be gone,” Fischman explains. She often sees sleeper sofas left behind, because they’re impossibly heavy, along with 1950s-era dead refrigerators in the basement.

“Probably the most disgusting bit I’ve ever seen in my life was a house with a refrigerator that had rotten food in it. When we walked in, we thought somebody had died in there,” she recalls.

Sometimes, sellers honestly just forget things

Moving is exhausting, and sometimes sellers just run out of steam, Fischman says.

For example, she once did a walk-through in a big, old Victorian house that had lots of window seats with storage spaces, so she made sure to peek inside every nook and cranny.

“We found a bag with equipment for a whole hockey team—a couple of thousand dollars’ worth of sticks, pads, and helmets,” she recalls. “The seller came back and got it within a couple of days. Another time, we found four bags of stuffed animals in an eave. The seller didn’t want them, so we asked if we could give them away. She wanted to ask her kids—who were 35. They came back and took their favorites before we gave them away.”

Inspect the property before you get the keys

So how do you keep from having your own disgusting discovery? A final walk-through—before closing day—is the best way to ensure that the house is empty and move-in ready, Stepp says.

“Once the closing is finished, it’s much harder to take care of any issues that have arisen,” she notes.

During your preclosing once-over, take photos of anything that’s not supposed to be there, so your agent can present them at closing, Fischman adds, because all items should be collected at the seller’s cost, not yours.

“When we say, ‘We have an estimate from a mover who will charge us $300 to get rid of all this stuff,’ the seller’s attorney usually says, ‘Fine. Here’s a check for $300,’” she says.

If all else fails, take the sellers to court

If the previous owners won’t cough up some cash to have their things carted away, buyers may go the legal route, says Stepp.

“Many times, the only way to settle things is to go through the court system, but that can take months, with no guarantees,” Stepp says,

Good things get left behind, too

When Vanessa McGrady moved into her Los Angeles condo, it was as if Santa had stopped by first.

“There was a brand-new, boxed KitchenAid mixer, a coffee maker, and four crates of sweet collectible Christmas ornaments,” McGrady recalls. “I kept trying to get hold of the previous owners, and no dice. I donated the coffee maker to hurricane efforts, kept the KitchenAid, and gave away the ornaments at my annual Christmas party.”

Brette Sember’s sellers in Clarence, NY, left two ’50s-style coupe glasses and a split of Champagne for her.

“We also found a can of boiled peanuts and a pack of American cheese in the fridge,” she recalls.

Nothing like a snack after a long moving day!

The post Come and Get It, Please! The Weirdest, Grossest Things Home Sellers Leave Behind appeared first on Real Estate News & Insights | realtor.com®.

Should You Buy a Stale Listing? Pros and Cons of Buying a House With a High DOM

October 30, 2019

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A real estate listing can tell you an awful lot about a home, beyond just the price—essential stats like the year the property was built and the price per square foot. But one of the most important numbers to be aware of is the days on market, or DOM, the amount of time the home has been listed for sale on the multiple listing service. The DOM gives you an idea of how other buyers are reacting to the property and whether it’s priced high or low.

Properties with a high DOM are commonly referred to as stale listings, meaning the house has been languishing on the market for a long time. Depending on the specifics of local housing markets, experts consider that a house starts becoming stale around three to five weeks—and it usually causes one of two possible reactions. Some buyers think such homes are a bit tainted, while others believe they’ll have more bargaining power and can get the house at a steal. Which is more true?

Buyer beware?

First of all, let’s dispel the myth that there’s always something wrong with the house when it doesn’t sell quickly. There are a lot of factors that could come into play.

For example, Dolly Hertz, licensed associate real estate broker at Engel & Völkers in New York, says there’s a backlog of unsold inventory in the greater New York market—both city and suburbs. Hertz says some homes have languished on these markets for two or even three years.

Shawn Breyer of Breyer House Buyers, in Atlanta, tells us he’s seen a lot of great homes that are simply overpriced.

“As homeowners progressively lower the price on the home, the perception is that something is wrong with it—and this perception sometimes keeps would-be buyers from looking at the house,” he says.

Sometimes, a high DOM may be due to factors out of the seller’s control.

“Perhaps the seller accepted a contract at some point, but it fell through because the buyer couldn’t qualify for financing,” says Shafaq Chawla, a real estate professional with Compass in Los Gatos, CA.

But the problem could also be the home itself. Outdated interiors or big-ticket items in need of repair can scare buyers away. Some people would never gamble on buying a house with roof damage.

“Buyers are also turned off by homes that need a new paint job, landscaping work, and upgrades to decks, floors, and appliances,” Hertz says.

Location is yet another factor that could stall a home’s sale.

“Houses on busy roads or in a flood zone typically have longer days on market,” says Sarah M. Drennan, at broker/manager at Terrie O’Connor Realtors, in Allendale, NJ.

And, of course, bad listing photos can tarnish buyers’ opinion of the house before they even set foot inside.

Deal or no deal

Does a high DOM give buyers more bargaining power? Sometimes.

“Remember, market value is what a buyer is willing to pay for a home, not what a seller expects,” says Chawla. When there is no demand for the home, she says sellers and agents may be willing to accept less than the initial asking price.

“Many deals may be found by salvaging stale listings,” says Michael Kelczewski, a real estate agent with Brandywine Fine Properties Sotheby’s International in Wilmington, DE. “To see if I have any bargaining power, I tend to suggest presenting a low offer to see how the seller will react.”

Just be aware: Sellers aren’t always desperate, regardless of how long the home has been on the market.

“Some are just fishing for the highest price they can get and won’t sell unless they get the price that they have in mind,” says Breyer. He recommends asking your real estate broker to find out why the homeowner wants to sell, since this can help you determine if you have any bargaining power.

For example, the sellers may just be testing the market and not desperate to sell, and Drennan says they may not be willing to take less than they’re asking. However, if circumstances dictate that they have to sell the home, you’re dealing with a motivated seller and can negotiate accordingly.

Proceed with caution

Finding a house with a high DOM that actually meets all of your criteria may feel like finding a designer blouse at the bottom of a bargain bin, but don’t get excited just yet. You may be able to strike a deal, but the first move is to understand why the house is overpriced.

“Is it the location, a major defect, repairs needed, or difficult sellers?” asks Breyer.

If you do make an offer, be sure to include house inspection contingencies in the contract.

“The house may seem fine, but there may be issues that are not immediately apparent,” Hertz says.

A home inspector will reveal the house’s flaw that may cost you an arm and a leg to repair. But a contingency will give you the right to back out of the sale if something looks fishy.

The post Should You Buy a Stale Listing? Pros and Cons of Buying a House With a High DOM appeared first on Real Estate News & Insights | realtor.com®.

5 Crucial Questions to Ask Before You Flip Your First House

October 30, 2019

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Thanks to the seemingly endless glut of home improvement TV shows like “Flip or Flop,” “Masters of Flip,” and “Rehab Addict,” it seems like flipping houses has become America’s favorite pastime.

But for the inexperienced, house flipping can be a dangerous and costly game. Make one wrong move, and that “great investment” can turn into a monumental mistake.

Don’t want your first flip to be a flop? Here are five questions you might never think to ask yourself, but totally should, before you begin flipping houses.

1. Do I have a great house flipping team?

Buying and flipping a house isn’t a one-person job; it’s a team sport, and you need to surround yourself with the right players. This starts with having a savvy real estate agent who can help you not only find a great investment opportunity but also negotiate a great deal on the property. Buy low, and things are already looking up!

You also need home improvement professionals who can guide you through the remodeling process and help you set a budget, determine what renovations to make (some yield a better return on investment than others), and solve any issues that crop up during construction.

Typically, you want to hire a general contractor, a person who’s responsible for providing all of the laborers, building materials, and equipment necessary for the entire project.

2. How long will it take to flip this house?

Ideally, you want to buy a house that can be renovated within four to six weeks, says Bobby Curtis, a real estate broker at Living Room Realty in Portland, OR.

A short turnaround time will help you keep costs like interest and taxes to a minimum.

On average, homes take about 180 days to flip, according to ATTOM Data Solutions, curator of a nationwide property database. But flipping a house can take a lot longer. After all, there’s no telling what you’ll find when you start tearing down walls.

Mold could be lurking behind drywall in a basement, or there could be electrical issues beneath the surface, warns J.B. Sassano, president of Mr. Handyman, a national home improvement company based in Ann Arbor, MI.

Also, depending on the housing market, it may take you a while to find a buyer once the home is fixed up.

The moral of the story: Patience is more than just a virtue for house flippers—it’s a requirement.

3. Am I putting too much at risk?

Although there are a number of loan options for house flipping, many first-time house flippers stretch themselves too thin when it comes to how much of their money they invest in a project. Some even put their entire retirement savings or child’s college fund on the line. Not a great idea!

It’s important to truly assess your risk tolerance. Depending on where you are financially, you may or may not be a good candidate for flipping houses right now.

4. Can I think like an investor instead of a homeowner?

When flipping houses, you have to keep future home buyers in mind. While it may be tempting, the last thing you want to do is make home improvements and design decisions that reflect your personal tastes instead of what most home buyers want.

Be prepared to choose home features and housing materials that are classic and offer wide appeal. If you can’t commit to doing that, flipping houses isn’t the right endeavor for you.

5. Do I understand my loan options?

Unless you have a ton of cash readily available, you’ll need to borrow money to buy and renovate a distressed property. But obtaining a loan for a house flip isn’t like getting a conventional loan for a home you intend to actually live in.

Most house flippers use a “fix-and-flip loan” that’s specifically designed for purchasing and remodeling homes. There are five types of fix-and-flip loans, and each comes with its own set of qualification requirements and pros and cons.

Hard-money loan: Sometimes called “rehab loans,” these are short-term loans intended for real estate investments. These loans are usually much shorter than traditional mortgages. Six months to one year is most common, but hard-money loans can go up to five years. Moreover, interest rates are considerably higher, typically ranging from 12% to 21%, and most hard-money lenders also charge 3 to 6 points upfront, where 1 point equals 1% of the loan.

There’s also a limit on how much you can borrow. Typically, hard-money loan lenders allow you to borrow about 60% to 75% of the property value you intend to purchase. So, if you’re looking at a $200,000 property, for example, the most you’ll probably be allowed to borrow would be $150,000, meaning you’d have to pay $50,000 upfront.

Cash-out refinance: If the value of your primary residence has increased, one financing option for your flip is a cash-out refinance. This lets you tap the equity in your home by refinancing your mortgage for more than you currently owe and taking the difference in cash. Your new loan will be the amount you still owe on your mortgage, plus the cash you wanted to take out.

So, say you had a $300,000 loan, on which you still owed $200,000. That would mean you had $100,000 in equity in your house. You could cash out $25,000 of that equity, and get a new mortgage for $225,000, to replace your existing $200,000 loan—and then put that $25,000 toward your house flip.

The drawbacks? You’ll have to pay closing costs—which average about 3% to 6% of the total loan—and if you’re refinancing to a higher mortgage rate, you could wind up paying more money in interest on your loan over the long run.

Home equity loan or line of credit: Both a home equity loan or home equity line of credit are financing options that let you borrow money using the equity in your home as collateral.

The big difference: a home equity loan provides you with the cash upfront, and you pay monthly installments over the length of the loan (like you do on your first mortgage). With a HELOC, you access the money in small chunks over the life of the loan.

Investment line of credit: Also called an “acquisition line of credit,” an investment line of credit is similar to an HELOC—except it’s issued solely for buying investment properties.

This short-term financing option—with loans generally lasting from about 18 to 24 months—lets you borrow cash as needed, up to a predetermined loan limit. These loans are best suited for people who have experience flipping houses, since borrowers are underwritten and approved based on their demonstrated record of owning or flipping investment properties, and their financial wherewithal.

Crowdfunding: When using crowdfunding, or “peer-to-peer lending,” the funds are raised through the contributions of a large number of people, usually through the internet.

For instance, RealtyShares, a San Francisco–based company that finances investment properties in 35 states, gives house flippers access to more than 38,000 high net worth individuals who invest in a specific transaction for as little as $5,000. RealtyShares funds up to 70% of the estimated after-repair value of a property in as little as 10 days. Interest rates vary from 8% to 11%, with the average loan term on luxury flips being 12 months.

The post 5 Crucial Questions to Ask Before You Flip Your First House appeared first on Real Estate News & Insights | realtor.com®.

Do You Get Your Earnest Money Back If You Can’t Get a Mortgage?

October 29, 2019

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After you make an offer on a house and it’s accepted by the seller, you’ll be asked to put down an earnest money deposit to show your commitment to this purchase. But while you might be gung-ho to move ahead, the deal could still fall through if you can’t get a mortgage.

Which begs the question: If financing fails to happen, do you get that earnest money back?

In most cases, yes—that is, if you take a few precautions. Here’s more on how to protect your earnest money during the home loan process.

Mortgage pre-approval

It’s best to find out if you can get a loan—and how much—before you start house hunting. That alone could help you protect your earnest money.

Here’s how it works: You approach a lender and explain that you’re ready to go house hunting. The lender asks you for details about your finances—usually copies of your pay stubs, tax returns, and the like.

The lender then comes up with an amount it’s  willing to lend you to buy a house. This process is known as a mortgage pre-approval.

Getting pre-approved for a loan will help you when it comes to choosing a home that’s within your price range. That way, you won’t put down earnest money on a house only to find out the bank isn’t willing to lend you enough to buy the place.

Financing contingency

Another way to protect your earnest money is to include a financing contingency in your real estate contract. Basically this means that the purchase of this property depends on your getting a loan first. If a loan can’t be secured, then you won’t buy the house—and can take back your earnest money.

A real estate attorney can help draw up a contract with contingencies that protect you and your earnest money, says Scott Browder, broker in charge at Wilkinson ERA Real Estate in Charlotte, NC.

If there’s no contingency, you are out of luck—and the seller will get to keep that earnest money.

The lender appraisal process

The lender appraisal process is another place where things can get tricky. Your bank may have said you’re qualified to take out a loan large enough to cover the cost of the home you want to buy, but to ensure its money isn’t at risk, the bank will send an expert known as an appraiser to the home to evaluate just how much it’s worth.

If the bank’s appraiser doesn’t feel the house is worth as much as or more than the agreed-on asking price, the bank may not approve a loan that large, even though you were pre-approved.

If that happens, there are a few options: The seller can lobby for another appraisal, which will hopefully increase the amount the bank is willing to loan. A buyer can put up a heftier down payment. If either option is manageable, you’ve saved your earnest money!

If neither option is possible and you must walk away from the deal, you may still be able to hang onto that earnest money if your financing contingency states you need a loan of a certain amount to buy the house. That way, if your loan amount falls short, you can cut your losses and keep your earnest money.

How to protect your earnest money deposit

If your loan is large enough to cover the costs, you should be all set, right? Well, usually, says Browder. But even with a pre-approved loan, a buyer can still be denied financing as the closing date nears, especially if the buyer has major financial changes such as a job loss or a credit score decline.

Browder is quick to warn his clients not to make any big purchases or any drastic moves that could affect their credit score between mortgage pre-approval time and the closing of the real estate deal.

“There is one final credit check right before closing,” Browder says, “so no buying furniture or anything for that matter!”

That final credit check could cause financing to fall through late in the game. Once again, if you have a contingency in place that covers a loan falling through, you should get your earnest money back. But if the contingency isn’t there, you’ll lose that money.

The post Do You Get Your Earnest Money Back If You Can’t Get a Mortgage? appeared first on Real Estate News & Insights | realtor.com®.

Haunted (Open) Houses: Real-Life Ghost Stories From Real Estate Pros

October 23, 2019

diane39/iStock; realtor.com

For anyone who’s ever experienced the hair-raising presence of the paranormal, you’ll know that spooky things can happen any time of year—and not just on Halloween. Just check out the recent ghost stories related to the “Watcher House” (which is exactly as creepy as it sounds), or this summer’s sale of “The Conjuring” house—there’s never a shortage of insanely scary stories if you know where to find them.

And fortunately for you, we do! In celebration of everyone’s favorite haunted holiday, we’re bringing you three crazy (and true) spooky stories from real estate agents across the country. Read at your own peril—preferably with the lights on.

The blue room with a tragic history

Have you ever walked into a room and just felt that something wasn’t right? That’s what happened to broker Brad Pauly when touring a house with his client in Austin, TX, several years back.

“As I entered a back bedroom with all navy walls, I got a chill and goosebumps,” he said. “I didn’t know why, but I had to get out of the house and catch my breath.”

After running outside to recover, Pauly did a little digging to find out what was going on in the house.

“When I asked the agent why the seller was selling, she told me that someone had committed suicide in the navy blue bedroom two weeks prior to our showing,” Pauly recalls.

A curse on the house

It’s one thing to have a ghost lurking around the house, but what do you do when a living person is casting curses? That’s exactly what Yawar Charlie, director of estates at the Aaron Kirman Group in Los Angeles, was forced to figure out.

“A couple of years ago I was given the opportunity to list a major house in Beverly Hills in a gated community,” he recalls. “It was a gigantic house, well over 15,000 [square] feet, and we were brought in to sell it because the couple who owned it were going through a bitter divorce.”

Although the husband was keen on selling, the wife, who was a practicing Wiccan, didn’t want to—a fact that quickly became apparent.

“She had put up roadblocks at almost every turn on our way up to the property, and one of them was a curse on the house,” Charlie explains.

After days of spooky happenings in the home—including unexplained and sudden power outages—Charlie decided to take matters into his own hands.

“I paid $5,000 to bring in one of my spiritual advisers to cleanse the home,” he recalls. “Once they were in the house, not knowing anything about the owners except that the wife was a practicing Wiccan, they told me they could feel the fights that the couple had had in various rooms of the house.”

The ‘restless bride’

While touring a potential fixer-upper in a trendy neighborhood in Knoxville, TN, Cassidy Melhorn and his agent ran into an unwelcome and creepy surprise.

“I met my Realtor® at a property that was built in the late 1940s and appeared to have great bones, only needing some updating,” explains Melhorn, who’s also the  founder of Volhomes.

After doing a walk-through of the home together, Melhorn noticed something weird about one wall of the hallway. Being an experienced engineer, he decided to take a closer look.

“I told my agent, ‘There’s a large dead space here,’” he recalls.

Melhorn assumed it was an old fireplace that could be restored, so he got to work carefully prying off the loose paneling that covered the hidden space.

“Behind the panel was a staircase to a second floor of the house that had been boarded completely shut,” he says. “I had so many questions. First of all, why would someone board up a second level and then cover the staircase completely? Secondly, how did I not realize the house had a second level?”

Melhorn ran outside to have a better look at the house. He asked his agent if she’d known the house had two floors. She hadn’t.

Once back inside, things started to get even creepier.

“As we rounded the corner through the kitchen on our way to the dining room, I noticed it,” he says. “Hanging in the middle of the large opening between the dining room and living room was a large silk wedding dress complete with veil, and slightly yellowed from years of aging. The hair on my neck stood straight up as I asked my agent, ‘Was that there when we came through?’”

Neither Melhorn nor his agent had seen the dress on their first walk-through.

“We immediately left,” he explains. Since the discovery of the enclosed second floor and the mysteriously appearing dress, Melhorn has kept tabs on the property.

“The house has been listed for rent many, many times,” he explains. “It’s currently vacant.”

The post Haunted (Open) Houses: Real-Life Ghost Stories From Real Estate Pros appeared first on Real Estate News & Insights | realtor.com®.

You’d Better Ask These 5 Crucial Questions Before You Buy a House

October 21, 2019

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No matter how many episodes of “House Hunters” or “Love It or List It” you’ve watched, buying a home inevitably comes with surprises. Though a sharp real estate agent will help you navigate these hidden challenges, before you start shopping for a house, you should take account of some important things that you probably haven’t considered.

Curious what you might be missing? Here are five questions you’d never think to ask yourself but totally should before buying a home.

1. Have I checked my credit report?

When you apply for a mortgage to buy a home, lenders want some reassurance that you’ll repay them later. Of course they do! One way they assess this is to check your creditworthiness, by scrutinizing your credit report and score. Having a high credit rating or FICO score (named after the company that created it, the Fair Isaac Corporation) proves that you have reliably paid off past debts, whether they’re from a credit card, college loan, or other forms of debt.

Credit scores can range from 300 to 850; in general, what’s considered an excellent credit score is in the range of 750 to 850. A good credit score is from 700 to 749; a fair credit score, 650 to 699. A credit score lower than 650 is deemed poor, meaning that your credit history has had some rough patches.

The three nationwide consumer credit-reporting companies—Equifax, Experian, and TransUnion—are each required to provide you with a free copy of your credit report annually if you request it. You can order all three at once, or stagger them throughout the year, from one central source: AnnualCreditReport.com.

You should closely examine each report before you meet with a mortgage lender. Why? Because even if you’re fairly sure you’ve never made a late payment, 1 in 4 Americans find errors on their credit file, according to a 2013 Federal Trade Commission survey. The simple truth is that creditors make mistakes reporting customer slip-ups.

If you discover errors, you can remove them from your credit report by contacting Equifax, Experian, or TransUnion with proof that the information was incorrect. From there, they will remove these flaws from your report, which will later be reflected in your FICO score.

2. Who’s the best real estate agent for me?

Finding the right real estate agent to partner with can be a daunting task. A lot’s at stake, and there’s certainly no shortage of options. Should you go for a savvy veteran agent or eager newbie?

Veteran real estate agents can provide sage advice, based on the breadth of knowledge they’ve built up over the years. Having dealt with just about every issue that can affect a sale, they can help you navigate any complicated problems that may arise.

However, experienced agents are usually in high demand, working with several clients at once. Because their time is limited, they may not be available to show you as many homes in person, meet you for last-minute showings, or handle other pressing issues.

Rookie agents, meanwhile, bring fresh energy and enthusiasm to their job. And, because beginners usually have fewer clients than more seasoned agents, they may be able to spend more time with you than an experienced agent who’s juggling multiple clients.

In short, choosing the right agent boils down to what kind of customer service you’re looking for. Need help finding one? You can search for agents in your area at realtor.com/realestateagents, where you’ll find such details as their years of experience, number of homes sold, clients’ reviews, and more.

3. If I get a new job, am I likely to have to relocate?

Your career plans play a pivotal role in determining whether it makes sense for you to buy a house.

“Previous generations planned to get one job, keep it forever, and ultimately retire. Buying into a house because they were looking for a permanent living situation made a lot more sense,” says Chandler Crouch, broker at Chandler Crouch Realtors in Fort Worth, TX. “Now, job-hopping is prevalent.”

Indeed, according to a recent report from the Bureau of Labor Statistics, the median tenure of workers of ages 55 to 64 is a whopping 10.1 years, more than three times that of workers ages 25 to 34, who stay at a job for 2.8 years on average.

Changing jobs won’t be a big deal if your new gig is in your current city, but if there aren’t a ton of job opportunities in your industry in your area, you may find yourself having to relocate a year or two after you bought your home—in which case you may not be able to recoup the amount of money it cost you to purchase the house.

“It honestly isn’t a good idea to buy a house unless you plan on staying there for at least five years,” Crouch says. If you’re considering buying a house but already know you are likely to move in that time frame, remaining a renter may be your best choice.

4. Can I afford to pay closing costs?

Getting a mortgage comes with a number of closing fees, which borrowers have to pay when they reach the settlement table. These are out-of-pocket expenses that you need to budget for.

Although buyers and sellers both typically pitch in to cover closing costs, buyers shoulder the lion’s share of the load (3% to 4% of the home’s price) compared with sellers. So, on a $250,000 home, your closing costs could come to about $7,500 to $10,000.

Typical closing fees include the following:

  • Closing fee ($300 to $600): A representative from the title company will come to your closing to supervise the transfer of title, and you’ll have to pay for the service.
  • Lender’s title insurance (usually 0.5% of the purchase price): This protects your lender if something was missed in the title search. The cost depends on the size of the policy and is set by the state.
  • Title search ($300 to $600): Your lender will do a search to ensure there are no liens on the property or anything that could prevent you from purchasing it. Sometimes this will be bundled with other title fees in your closing document.
  • Wire or courier fees ($30 to $100): If documents need to be sent overnight or money needs to be wired, you’ll pay these fees at closing.
  • Document recording fees for the deed and mortgage ($125 on average): Every time a home is sold, the government must record the change of ownership; this fee is typically paid by the home buyer.

Under federal law, borrowers must receive what’s called a “loan estimate” form (previously called a “good-faith estimate”) that outlines their approximate closing costs from their mortgage lender. When you obtain this information, you’ll be able to gauge whether you can pay for closing costs and truly afford to purchase a home.

5. Am I dead set on finding my ‘dream home’?

People throw around the words “dream home” a lot. (Heck, we’re guilty of it.) However, the honest truth is this: “There’s no such thing as a perfect house,” says Daniel Gyomory, a real estate agent in Northville, MI.

Some home buyers, though, have a hard time accepting this, Gyomory says, and make the mistake of holding out for their ultimate forever home.

If your list of “must-haves” is immensely long (you’re looking for great schools, affordable home prices, easy access to public transportation, good walkability, and lots of shops and restaurants) but you’re not willing to budge on anything, shopping for a house may wind up being a waste of your time.

This is why it’s important to sit down and identify your housing criteria in order to get a better picture of what it is you’re looking for—and whether that kind of home exists.

The post You’d Better Ask These 5 Crucial Questions Before You Buy a House appeared first on Real Estate News & Insights | realtor.com®.

What Is a Mansion? The Luxury Home Next Door Might Not Qualify

October 19, 2019

What is a mansion

EricVega/iStock; Stavklem/iStock

What is a mansion? Do visions of stately residences with acres of lush landscaping, sweeping staircases, and grand ballrooms dance through your head? Perhaps you think of the most luxurious house in the neighborhood complete with lavish amenities like a koi pond, wine cellar, and four-car garage. Or it could be a sprawling New York City apartment in a landmark pre-war building with Old French masters on the walls and miles of marble.

So what is a mansion anyway? Let’s explore what qualifies a property as a mansion.

If your word definition is based strictly on size, you’ll find that there is no general consensus among experts. According to reference.com, a good rule of thumb is 5,000 square feet.

Charlie Cheever of quora.com writes, “Technically, realtors term mansions as houses that have at least 8,000 square feet of floor space.” Merriam-Webster‘s dictionary definition is less definitive, simply stating that a mansion is “a large and impressive house: the large house of a wealthy person.”

With so many diverse answers to the question out there, we decided to consult luxury real estate expert Jade Mills, a leading agent with Coldwell Banker Previews International, for the final word on “what is a mansion?”

No one knows mansions more than Mills. She recently sold the Playboy mansion, complete with playboy in chief Hugh Hefner in residence, for $100 million. She currently represents the Warner estate, which includes an eight-bedroom, 11-bathroom, 12,254-square-foot manor house, listed for $40 million.

What is a mansion?

According to Mills, real estate agents don’t often use the word “mansion” in listings unless, of course, it’s a part of an iconic house’s title, like the various Wrigley Mansions or Gracie Mansion, the New York City mayor’s residence.

“‘Mansion’ is a very subjective word,” Mills says. “I grew up in a house in Northern California that was about 900 square feet. One year, when we were driving down to Southern California to go to Disneyland, some friends told us they were staying in a mansion on Sunset Boulevard, and that we could come visit them. When we got there, I thought it was a mansion and more. But looking back, it was only about 5,000 square feet, and wouldn’t be considered a mansion by today’s standards.”

Mills notes that in the red-hot Los Angeles luxury market, some buyers don’t think of a house of less than 20,000 square feet as a true mansion.

Luxe amenities are a must

Although size and the number of rooms play a part, other features define what a mansion is as well. Almost every resource agrees that in addition to a greater-than-average number of bedrooms, bathrooms, and square feet, a true mansion will have the following features:

  • Entertainment facilities: Mansions built in the 20th century weren’t complete without ballrooms, salons, billiard rooms, and lounges. Modern mansion must-haves for entertaining guests include elaborate game rooms, massive great rooms, specialty bars, and often a pool with a pool house or cabana. These houses also include one, two, or three kitchens to cater to guests.
  • Leisure space: A century ago, greenhouses, conservatories, or libraries were important for chill time. Today, large spa facilities, home theaters, gyms, and high-tech media rooms—maybe even a high-tech safe room—would be at the top of most mansion dwellers’ lists. And let’s not forget massive closets, some of which have become mini man caves for the rich and well-dressed.
  • Lavish grounds: Formal or Zen gardens, sports facilities, water features, motor courts, extensive garages, fire pits, hiking trails, and guesthouses are common in lavish properties today.
  • Superlative building materials and finishes: We’re all too familiar with McMansions—those huge but tacky homes that are often built hastily, with an eye to the bottom line. We can definitively say those are not mansions. Mansions must be made of materials that are a cut above: the finest woods and most luxurious stonework and fabrics, all customized, of course. Top-of the-line appliances are expected and, lately, sustainable materials, smart home features, and elaborate security systems make the list of desirable amenities in mansions.

Bottom line: There is neither a legal dictionary definition nor a checklist of characteristics that defines what is a mansion.

“It’s all about the homeowner’s perspective,” says Mills. So if you want to call your charming three-bedroom a mansion, go for it.

The post What Is a Mansion? The Luxury Home Next Door Might Not Qualify appeared first on Real Estate News & Insights | realtor.com®.