With the economy picking up, some of you may have begun flirting with thoughts of buying or selling a home. If so, this is the perfect time of year to begin your due diligence so you are prepared to hit the ground running after the holidays. For advice on how you can best position yourself to be a savvy real estate seller and/or buyer, Help Squad consulted the following two experts.
Barbara Barnhouse, Vice President Mortgage Lending, Guaranteed Rate, Northbrook
• If selling one home to buy another, you may want to take out a home equity loan (HELOC) to use as a down payment on the new purchase. This MUST be done prior to listing your home for sale, as you cannot get a HELOC once your house is listed.
• Determine if you will qualify for a loan on a new home before selling your current one. If you don’t, your current home will have to sell and close before receiving loan approval. If this is the case, wait to place an offer on a new home until after your sale is past all its contingencies.
• If you will require a loan, request your mortgage broker pull your credit score early in the process. (Just FYI, mortgage credit reports are not always the same as ones consumers can access online.) It’s best to be informed of any issues in advance so they can be resolved well before a loan is needed.
• Be sure to compute the following expenses prior to beginning a house search: lender costs, which are not simply the interest rate but can also include an appraisal fee, credit report fee, tax service fee, processing fee, etc.; your escrow payment; inspection fees; attorney costs and, of course, the down payment.
• Calculate all closing costs. There are prorated real estate taxes for the seller to cover (see more on this, below), possible city or county transfer taxes, seller title fees, realtor and attorney fees, and even possible escrow shortages (a shortfall in your lender escrow account that covers taxes, insurance and PMI).
• When purchasing a condominium, know that a unit’s monthly assessment (another monthly expense, like the mortgage) will impact the loan amount for which you can qualify.
Joan Ferraro, Real Estate Attorney, Joan M. Ferraro & Associates, Ltd., Northfield
• When hiring an attorney, be sure to clarify whether you will be working directly with the attorney or a legal assistant. Working with a legal assistant is not the wisest place to save money on what is an average consumer’s largest financial transaction.
• If you are selling a home, contact an attorney before you sign any documents – including the real estate listing agreement.
• Be informed about the following with regard to real estate taxes: Real estate taxes are generally paid a year behind and must be prorated for the amount accrued through the closing date. When buying, consider whether a property is likely to be reassessed, resulting in a higher tax bill. Investigate whether a property’s current tax bill includes exemptions, such as a senior citizen exemption or an assessment freeze. If a buyer doesn’t qualify for the same exemptions, taxes can rise significantly.
• When purchasing a condominium or house in a homeowners’ association, the following are examples of essential due diligence. Is a special assessment likely? How many owners are currently not paying their assessments? Are there restrictions on renting the unit? Is there pending litigation affecting the association?
Joan concludes, “The common thread here is to hire someone who will be a strong advocate for you in your real estate transaction. Be fully informed. Remember, there are no simple deals. You can avoid any pitfalls by working with knowledgeable professionals.”
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