Is Your Real Estate Agent A Spy Investment Property Part 1 Buying Rental Properties Some Tips Real Estate Sales Should You Fix Up Your Home Before Listing It Buying A Condo Who S Running The Show
The real estate agent, unless specifically contracted as a buyer’s agent, is working for the seller. Buyers usually know this, but they don’t think it matters, as long as the agent is helpful. While true to an extent, buyers don’t realize that an agent has a real legal responsibility to, and loyalty to the best interests of the seller.It is referred to as a fiduciary responsibility, but what does this mean?
A Real Estate Agent Is A Spy
Let’s suppose you make an offer on a home, and mention that if the seller says no, you’ll probably offer $5,000 more. The sales agent now has an obligation to tell the seller what you said. That’s an expensive comment, isn’t it? An agent may spend all his time with you, showing you houses and helping you write offers, but his allegiance is legally with the seller, unless he is hired by you.
An agent, even if she is a seller’s agent, can be a great help when you are buying, but remember that she is a sales-person, and you’re not the boss. Be careful what you say, and be careful with anything she says. You may want to work with a buyer’s agent. In that case the agent can work for YOUR best interests, but even here remember that she will usually get paid only when you buy something, so her objectivity is suspect.
Some real estate agents work under “dual-agency” rules, meaning they’re supposed to work for both the buyer’s and seller’s interests. Of course, they only get paid when a property is sold, so they may be more helpful to the sellers. In any case, how can someone really be on both sides of a negotiation? It is probable they’ll work harder for whoever they like more. Do you want a popularity contest that can cost you thousands of dollars?
Things Real Estate Agents Won’t Tell You
An agent will often let you assume things, to get the sale closed. They’ll tell you that the seller and buyer always split the closing fee, for example, or let you assume it. They’ll say they can’t change the commission after it has been set. They’ll say you have to write a big check for a “good faith” deposit when you make an offer.
I’ve seen realtors take $4,000 off a commission to get a sale closed at a lower price. I’ve seen the buyer or the seller pay the entire closing fee. Buyers sometimes put less than $1000 down as a deposit with an offer, and sometimes nothing – agreeing to deposit something when the offer is accepted. Little is set in stone when it comes to real estate.
Don’t think real estate agents are all experts. My first time making an offer on a house, the agent didn’t understand when I told him that I wanted to get a 90% first mortgage and have the seller carry a second for 5%, so I could get in with only 5% down. Many years into his career, he still had only dealt with conventional deals.
What do you look for in an agent when you are a buyer? Agents will often be knowledgeable about a certain type of real estate, or a certain neighborhood, but know little else. Just like other professionals, they specialize, so when you want to find a particular type of property, look through listings online until you find a real estate agent that already has several of that type listed.
1. Investment Property
What exactly is an investment property? Since this is real estate investments 101, we will explain. An investment property is a piece of real estate you invest in with the objective of earning a return. Primary residences are not considered investment properties because the primary purpose of such real estate is to provide a place to live. Common investment properties include rental homes, apartments, condos, townhouses as well as commercial properties such as business or industrial parks and shopping centers.
Depreciation is a fancy business way of saying something is decreasing in value. Investment properties may experience depreciation, because typically as a building ages the value of the physical building depreciates. It is important to note the actual depreciation realized is related specifically to the value of the physical building. Historically, real estate prices seem to follow a positive trend. How can this be if old buildings have experienced severe depreciation and thus are worth less today than 20 years ago? We must look at the whole equation. The value of the land is integrated into the equation as well, and traditionally land increases in value. Thus, when we look at investment properties, we normally see an increase in value thanks to the seemingly continuous appreciation of the land the building was built on.
3. Land Contract
A land contract is fairly simple. When you are looking to invest in some property, you will negotiate a price for the land. The written manifestation of these verbal negotiations is a land contract. The land contract for the investment property outlines the terms of the agreements, such as the monthly payments, interest rate, and maturation date of the loan.
4. Land Auction
You might have heard other real estate investors talk of a land auction. A land auction is one way of buying an investment property. In a land auction, land is auctioned off to the highest bidder. Often times one can score a real deal on property auctioned off in such events. Upon winning an auction, you can then sign a land contract for the property and hope your investment property experiences appreciation, rather than depreciation, so that you can cash in on your increased equity a few years down the road.
Before buying an investment property you will want to make sure the property does not have a lien against it. A lien is basically legalese for a claim against the property. A lienholder owns a legal right to extract their money from a property should the borrower default. Thus, if you buy a property that has lien on it, and the person you bought the property has defaulted on their loan, you may find yourself in second standing for right to the property behind the bank that has the lien. It is important to do your due diligence and ensure you are not setting yourself up for a fall by investing in property that can be claimed by others.
Keep in mind that real estate investment can become rather complex. However, if you gain a good grasp on the fundamentals of investing, such as depreciation, liens, and land contracts and auctions, you will be in a position to earn a positive return on your investment property for many years to come.
Buying rental properties can be a great way to build your wealth. However, as in most real estate investment, it is sometimes difficult to know if you’ve found a good deal – especially the first time. Here are some things to look for to be sure that rental is a great investment.
1. Location. If traffic is heavier, rentals are easier to rent. A sign will often pull more response than an ad in the paper. If it is a nice locale, it will usually rent faster. This is also true of places close to amenities.
2. Numbers. Run the numbers. Get every last expense figured into your calculations, and be sure that you will have positive cash flow from the start.
3. High home prices. Look in towns with high home prices, as this creates rental demand. What do people do when they can’t afford to buy? They rent.
4. Low maintenance buildings. Avoid cedar-shake roofs, and wood-sided buildings. Look beyond current expenses to how much maintenance the building will need. Low maintenance means less headaches and more profits.
5. Good rental history. Ask to see the rental history. Note how long residents are staying on average, and how well they pay on time.
6. Below market rents. Buying rental properties with below-market rents means you get to raise rents. Raising rents means you imediately raise the value, because rental property values are based on income.
7. Complies with zoning and fire codes. Have it inspected, and ask local officials if there are any problems.
8. Less than 20 years old. This is somewhat arbitrary, but if you limit your search to newer buildings, you will be less likely to have building code and maintenance problems.
9.Owner/manager that is out of state. These properties are often the best deals, because it is tough to manage a property from far away. An out of state seller is often more concerned with a quick sale than a high price.
10. Neighborhood is stable or improving. Stable is okay, but if you can buy in a neighborhood that is improving, you’ll rent the units more easily, and therefore get automatic appreciation in value with time.
Yes, you should fix all of the obvious things you can. When buyers visit homes, they look for the things they see that obviously need some fixing. Most buyers would rather not see the repairs in front of them. They want to buy a house that is in ‘perfect’ repair.
You should put yourself in the buyer’s shoes. Think like a buyer. Would you want to repair or fix up anything in your new home? No, you would not. While you are still in the buyer’s frame of mind, tour your house. Make a list of all the things you see that need repair.
Here are eleven obvious things to look for and correction any defects:
1. Do your walls need a fresh coat of paint?
2. How about the trim?
3. Are all of your floors and carpets in good shape? Do they need cleaning?
4. Are your windows and shades okay? Are the screens in good condition?
5. Do your appliances work properly?
6. Eliminate squeaks and cracks of all kinds.
7. Is your basement clean and organized?
8. Is your roof in good condition and non-leaking?
9. Check all faucets, fixtures and knobs.
10. Make your lights as bright as you can.
11. Clean the fireplace.
The time and effort you put into this list will save you money and aggravation in the sales process. You can do these repairs yourself or hire someone else to do them for you. The money you spend doing this will come back to you in savings. Your house will show better and sell faster in tip-top shape.
When buying a condo, we are all seduced by the decor, the ambiance, the view, and other visual effects, when we should really be checking something else that is not visual!
The Home Owners Association (HOA) often plays a very nondescript part in the whole process of choosing a condo, – especially for first-time condo buyers. However, the HOA can play a very large part in using up your finances if you hit an unlucky situation after moving in.
In order to avoid a surprise, ask a few pertinent questions about the HOA. One of the important factors would be ‘who is running the show?’ In a very small condo complex it may be run by residents, but a professional management company is preferable, especially in a condo of any size.
Professional management companies do charge for their services, but they can often save this fee by obtaining lower quotes for repairs, because they will use the same company many times. There is also less chance of the company using their influence on resident votes, so they may be construed as more fair. Finally, it is a business to them, and it the HOA will be run as such, instead of as a part-time rush before each meeting is due!
Always ask to see the rules of the HOA, the financial report, the by-laws and the minutes of the last several meetings. The conditions, covenants and restrictions (CC&Rs) will affect your lifestyle, so make sure they ‘fit in’ with it.
The financial report will tell you if there are any big increases in the fees coming up, or if there are any ‘emergency’ fees due soon. This raises the important question, what will happen if there is a big emergency? How is it paid and how much money is in the HOA kitty?
The maintenance reserves will be important; there will hopefully be approximately one third of the gross annual fees charged to all residents in the reserves. A favorable minimum amount would be $4,000 per condo, although is manageable.
Another aspect that the HOA manages is the percentage of rental units allowable. Under 20% is passable, but any more and the re-sale of the condos becomes risky. Renters often do not have the same respect for property or neighbors, so they decrease desireability.Also mortgage companies are aware of this and are reluctant to give out mortgages to high-rental complexes.
Once you have ironed out all these questions, you can consider whether you would like to get a professional inspection done. These inspections include the common areas as well as the condo you are interested in. Once all these precautions are in place, you will feel more secure to go ahead and make an offer..
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