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Legal Life Guide to Buying and Selling Real Estate
The following are a few tips taken from the Legal Life Real Estate Handbook. This free information is meant to help individuals become familiar with the various procedures involved in the process of buying or selling a home. You can purchase the complete guide through the following Handbook link.
Buying vs. Renting
The decision of whether or not you should buy or rent property is based on a number of factors. If you decide to live in an area for a brief period of time - say less than 2 years, renting may be best. Other the other hand, if you have decided to settle in a location for many years, home ownership might be your goal.
Do you qualify for financing?
Unless you have the cash to pay in full, one of the first things you'll have to do in buying a home is to see if you can quality for a mortgage loan from a financial institution. Factors that go into qualifying you for a loan include your credit rating, level of income, and assets. If you have found a home you are interested in buying, you can contact any number of lenders who will help you with the qualification process and tell you more about what types of loans are available, what loan amount you are approved for, or if not approved, what you need in order to try to quality for a loan in the future.
If you qualify for a loan, the lender will lend you money that you repay over many years (normally 15 or 30 years), with interest. In addition, you agree that if you cannot make the payments, the lender has the right to "foreclose the mortgage," take possession of and sell your house in order to repay themselves for the loan you are unable to pay back. The "mortgage" itself is a legal claim on the real estate that secures the promise to pay the debt.
The "principal" is the amount of the loan. "Interest" is the fee you pay the lender for keeping their money over a long period of time, paying it back only slowly. The lender recovers the interest more quickly than the principal, and therefore your first few years of monthly payments will consist more of interest payment than principal payment. As the mid-point of the life of the loan passes, more and more of each monthly payment represents principal. You can pre-pay principal, which will shorten the life of your mortgage, and thereby reduce the amount of interest you have to pay.
Real Estate Agents
A real estate agent can help in finding a suitable home at the right price, but real estate agents have to be paid. Realtors have access to computer databases containing information on all regional property sales and can accurately ascertain the value of property in any area. In transactions where there are real estate agents representing both Buyer and Seller, the Seller normally pays all agents out of the sale proceeds (though this may vary by region). However, if the Seller is selling the home himself, without an agent, then he may not be willing to pay the Buyer's agent. Buyer may have to pay the agent himself. When a Buyer is considering obtaining an agent, the Buyer should question the agent on how the agent's fees will be paid in the even that the home purchased is "For Sale by Owner."
Real estate agent fees are negotiable, but typically average 6% of the sales price of the property.
Real Estate Attorneys
Though it is possible to sell a home without hiring an attorney, it is often useful to employ one for one or more of the following functions: 1) Providing legal advice on real estate matters. 2) Reviewing documents. 3) Representing you at the "closing," or handling/hosting the closing.
Discuss the fees your lawyer will charge for tasks including review of documents you have prepared, preparation of documents if necessary, representation at closing, and/or actually handling/performing the closing its component activities. If the price seems high, shop around. A reasonable range is $250 - $750 to handle a closing, depending on the region in which you live.
Setting an Asking Price
How much is your house worth? The answer can be found in what similar houses are selling for in your neighborhood. Local real estate agencies are good sources of information on local housing market prices. Call an agency and ask for a Comparative Market Analysis, a document listing recent sale prices for homes in your area.
Many websites now offer information online in terms of what homes are selling for in your local area.
Advertising and Showing
In order to get your house sold, you have to get the word out to potential buyers that your home is on the market. You have to advertise. A chief advantage of using a real estate agent to sell your home is that the agent acts as your "advertising executive," using a database known as the "multiple listing service" to get the word out to all other realtors that your home is for sale. This makes advertising easy.
In addition to (or instead of) using the multiple listing service, you call your local newspapers and ask about real estate sales advertising. For a reasonable price you can place an ad, probably with a picture, that will run for several weeks.
If selling on your own, you can place a "For Sale By Owner" sign in your front yard. Purchase one from a home-supply store or make one yourself. Make sure your sign looks nice, is durable, includes your phone number, and can be seen and read clearly from the street.
Many internet websites offer the same home listing services as newspapers. More people are browsing homes on the internet every day, and it may be in your interest to check into placing an ad on one or more real estate websites. Use an internet search engine to search for the terms "Real Estate Advertising."
Making an Offer
In order to make a competitive offer, it is very helpful to know how much comparable houses (close to the same square footage, number of rooms and features, etc.) have recently sold for in the area. If you know this, you have a basis for knowing what the house is actually worth, and can gauge your offer accordingly. Other factors can influence the ultimate sale price, including how urgently the Seller needs the money or needs to move (and how urgently YOU want/need to buy the house), the level of activity in the housing market, the amount of work needed to "update" the house, etc.
When making an offer, you will submit a written offer to the Seller. You should be pre-approved for financing in at least the amount you are willing to pay. The seller will either accept your offer, reject your offer outright (in which case you can make another offer), or reject your offer but make a counter offer for your acceptance, rejection or counter-offer.
The Contract is the central legal document through which Buyer and Seller ("the Parties") agree upon the terms and conditions of the property sale. Because real estate sales are relatively complex and important transactions, state law normally requires a written, signed contract for such transactions to be enforceable. This legal requirement is rooted in practical reality: with so many details involved in the typical home sale, the Parties could easily become confused and fall into disagreement over their various rights and responsibilities related to the sale. The Contract provides an organized framework within which the Parties can proceed with the sale process from beginning to end without unnecessary disputes, omissions or misunderstandings.
The Legal Life Real Estate Handbook is available for purchase at the following link
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