Home Buying Real Estate

Buying Real Estate

What You Must Know About Purchasing Real Estate

What You Must Know About Purchasing Real Estate

The transfer and purchase of property involves often intense scrutiny and investigation, as well as considerable advertising, and high stakes negotiation. Hence, the sale and rental of commercial and residential property is big business, in addition to be highly complicated, and is thus sometimes best left to the professionals.
 
While land sales have being transacted for most of recorded history, the realtor (often known more officially as the real estate agent or real estate broker), whose profession lies in the transaction of property, has really only been around for a few centuries, and finds its basis in English Common Law. In the United States, the realtor, as a profession, really came into its own in the earlier part of the 20th century, with the formation of the group that would go on to be known as the National Association of Realtors in 1908.
 
Typically, if someone wanted to sell a property to, either move or upgrade their home, the realtor would help throughout the entire process of selling the old property and purchasing a new one. Realtors also usually work during the process of coordinating the other elements involved in home sale and purchase, such as land survey, title insurance, and legal representation, though it is important to note that they, themselves, rarely, if ever, perform those tasks on their own.
 
Realtors work under an exclusivity agreement with their client, and in exchange for this, they are responsible for marketing the sale and aggressively trying to sell property and/or procure new property. In exchange for this, they receive exclusive rights to the benefits of the sale and the purchase of the new property. The benefits nearly always take the form of a commission, which, in most cases, is negotiable within a set range (usually five percent, but substantial variations are not uncommon).
 
Realtors in the United States must always be licensed, having shown to have completed a fairly uniform 60 hours of coursework as well as passing a licensing exam.  Due, however, to the sometimes Herculean tasks involved in the sale of property, especially in the Internet age, where estate listings have now gone global, “sale by owner” situations are comparatively rare, and many sellers and buyers find it to their advantage to have their transactions processed through a professional realtor.

Being Smart and Hiring an Agent

Being Smart and Hiring an Agent

The hiring of a real estate agent or realtor is an important step in the process of selling or purchasing property. The realtor works as the buyer/seller’s representative, and the representative of their property, and it is the realtor’s job to see that the individual gets either the best return or the best value for their sale or investment. 
The realtor essentially works as a coordinator for all the multiple tasks involved in real estate transactions, and basically holds the hand of the customer as they make the transaction. An important consideration any buyer/seller must keep in mind when selecting an agent is that, while their realtor is given a great deal of responsibility, they ultimately risk very little besides their time, effort, or, to often a very limited degree, reputation. The risk of return is on the customer, thus, it is important that the customer selects a realtor that will be most effective for the needs of their transaction, and be most in tune to what the customer wants.
 
Primarily, it is important to understand what a real estate agent will do for the customer in most general circumstances. In terms of selling a property, the realtor’s primary purpose is to advertise the property, which they do through both traditional listing services, but also now, in modern ages, through the Internet. 
They work in conjunction with the seller in order to provide the best representation of the home, both in written literature and advertising, but also for presentation purposes. The realtor will likely run open houses to show the property to as many individuals at a time as possible, and will work as the point person for the property. Nearly always, the realtor will place a sign outside the property advertising its sale price and providing the realtor’s contact information.
 
Advertising a property usually represents the realtor’s largest expenditure of resources, and in making this risk, they are entitled to exclusivity in brokering the eventual sale of the property. Thus, a contract is usually drawn up between the realtor and the seller to insure the exclusivity. These contracts can always later be dissolved with relative ease if the relationship is not beneficial to either party. However, in real estate sales, lost time is often lost money in terms of property cost and devaluation in market worth, such as which occurs the longer a property is on the market.
 
It is the realtor’s responsibility to also negotiate on behalf of the seller, and perform background checks on potential buyers, though they are entitled to obtain final approval on the sale from the seller. The realtor also ensures that all aspects of the closing of the sale proceed properly, even though they, themselves, do not perform the legal transfer of property (which is usually done by attorneys). The realtor traditionally receives a commission of the sale and of the purchase of a new property, usually five percent, but that is often open to negotiation. In terms of purchasing a property, the realtor will guide the seller in finding an appropriate property, and is tasked with, again, negotiating the final price on behalf of the client.
 
As can be seen, a realtor is a demanding and important job in real estate transaction, and, thus, it is important to find the right one. As mentioned, most real estate transactions yield the best results for all when they are completed with haste, so time is important, but so is caution. Often approaching numerous Realtors is advised, and sorting out which is the best for the customer is important. While one certainly does not want to pay an exorbitant commission, it is important to note that that a fair commission is important, because that will ultimately be the realtor’s source of revenue. The better the deal they hope to make, the better they will work on the behalf of the customer and their property.
 
Overseeing and maintaining communication with the realtor is vitally important, especially when in the stages of purchasing a property. One of the major criticisms of the realty system is the lack of oversight possible in negotiating by a realtor on purchasing a property. Since a realtor makes a commission off of a purchase, the incentive is there to often not negotiate for the best price on behalf of their client. Therefore, trust and dependability is an important part of the relationship, especially in the later stages of the relationship.
 
In the modern Internet era, it really has never been easier to research a realtor or the services their offices provide. Almost all Realtors are online, and therefore, one has ready access to determine the effectiveness of their salesmanship and the proliferation of their advertising. 
However, traditional means, such as success, word of mouth, and initial impressions are important as well. Anything that helps a customer feel comfortable in their decision is crucial, because in selling or buying a property, having the right realtor is perhaps the biggest and most important step one can take.

Negotiation and Purchasing Real Estate

Negotiation and Purchasing Real Estate

The negotiation and purchasing of real estate is often completed through intermediaries for the actual buyers and sellers of the property, most often through real estate agents. 
 
The two agents working on each side of the transaction are, in essence, working as fiduciaries for their clients. They have negotiating power due to the power of attorney they acquire, on the other hand, the client has the final say. 
The agent for a buyer is expected to negotiate an asking price down, just as the seller is expected to try to maintain a price that is as close to the initial asking price as possible (an often criticized flaw in the realty system can be found to occur in the fact that both agents receive a commission if the sale is completed, therefore there can be an incentive on the part of the buying agent to not negotiate the best price for their client, thus protecting the amount of their commission). Once a price is agreed upon by the agents and their clients, there is still a very long way to go before the sale can be completed.
 
In order for a transaction to be completed, the buyer and seller are both entitled to a series of checks and balances, often called contingencies, in order to ensure full satisfaction of both parties. The seller is primarily entitled to a guarantee of purchase, or to put it simply, that the buyer is able to pay for the property. The task, in this case, falls upon the agent for the seller to perform a credit and background check on the buyer, and the buyer is naturally required to disclose that they have the means of completing the transaction.
If they buyer does not have the liquid capital for the sale, which is often the case, they typically must show proof of a mortgage agreement that will cover the purchase of the property. Sometimes, however, if the buyer is intending to purchase the new property with the proceeds of the sale of a previous or older one (but the sale has yet to be completed), they most be able to scrupulously illustrate that the sale is pending (this naturally, can become very complicated with all of the contingencies for this additional sale becoming incorporated into the first one).
 
The buyer is also entitled to a number of contingencies that would need to be satisfied. The buyer is allowed a full property inspection, and sometimes even a land survey, and has the right to have the property appraised in order to be sure they are paying a fair market value. In these cases, if there are irregularities discovered, it is not uncommon for a seller to also have the same procedures done in order to verify or discredit the findings. It is also not uncommon that deals can fall apart or be renegotiated upon the basis of appraisals and inspections. 
Often the seller has to guarantee that when the property when transferred, it is in good condition, maintained to a standard level of cleanliness. If everything is found to be in order, and the property being offered is determined to be as promised, then a transaction may go forward.
 

Loans and Mortgages For Real Estate

Loans and Mortgages For Real Estate

Whether someone is buying property for the first, second, or third time, it is very rare, unless one has a tremendous surplus of liquid capital, to pay the entire cost of a property by themselves. In most cases, especially with new homeowners, it is entirely unrealistic. This is where loans and mortgages come in. A mortgage is a kind of loan where a lending institution leverages a property in exchange for an expenditure of capital (in the form of the loan). 
The loan/mortgage is thus paid back in recurring increments over time, with a set rate of interest (which is how the institution, in theory, makes its profit off the loan). Until it is paid, the lending institution has leverage of ownership over the property, which means that if the owner cannot pay back the mortgage, to the point where they default on it, the bank takes ownership over the property in restitution for their initial expenditure.
 
Mortgages generally represent a significant risk on the behalf of a lending institution, therefore, the applicant applying for the mortgage is required to show a great deal of fiscal stability, usually in the form of a high paying job or assets that illustrate long term financial stability. In essence, the lender has to be sure that the applicant is capable of paying back the mortgage over a long period of time, or else they will find themselves with a foreclosed property, which they must then take the time-consuming steps to liquidate in order to try to regain their investment. Lenders are often capable of transferring a mortgage through sale or “swap” with other financial institutions, provided the new institution does not change the terms of the initial agreement with the property buyer.
 
As stated, it is fairly common for most people buying their first property to do so with a loan, usually because of the initial costs being outside the realm of savings capital. The property leveraged against is then almost always the property being purchased. When the owner of the property, say a homeowner, decides to relocate or buy a different house or property and undertakes property sale proceedings, the proceeds of the sale generally will be used to pay off the remainder of the mortgage, thus removing the lender’s leverage on the house and making it clear for sale. If necessary, the homeowner can then obtain a new mortgage to pay the cost of the new home for whatever amount is necessary to make up the shortfall (with lender approval, of course).
 
Some property owners have been known to get mortgages adjusted, a process known as refinancing, usually when needing either extra capital or when adjusting monthly payment amounts (this nearly always requires the owner to be in good standing with the institution and have a good credit history). It has also been common for individuals to take out second or even third mortgages on a property when the need for liquid capital arises, but again, this represents a significant risk on the behalf of the lending institution and is a much rarer occurrence in the light of recent economic conditions (much of which was brought on by an proliferation of overly risky, low rate mortgages than were defaulted on at rates higher than many institutions could keep pace with).
 
One form of second mortgage that is still fairly common is the home equity loan. Home equity loans are usually given to homeowners, with the express purpose of being spent to improve the home, usually in the form of repairs or improvements. In addition, however, it is not uncommon for them to be used for other expenses, such as medical. Usually, these loans are only given to applicants with excellent credit history, and often stand to decrease the home’s actual equity. Home equity loans are usually for amounts much lower than the traditional mortgage, and often have a much shorter term of repayment.

How to Make Real Estate an Investment Opportunity

How to Make Real Estate an Investment Opportunity

Usually the most valuable commodity an individual can own is land or property. Simply put, everyone will always need land in some form. People with income always require the use of property for either residential or commercial use, and even in the digital age, property becomes a physical necessity for any given lifestyle or business.
 
Thus, owning land for any purpose represents, not only a considerable investment, but also a considerable portion of one’s net worth. Therefore, the ownership and investment in property has, historically, been one of the greatest potential progenitors of wealth. The main purpose for this is that, when examined over the long term, land generally increases in value at a rate that far outpaces traditional inflation, thus meaning an investment in property now, given a few years, almost always yields a return on the initial investment. However, this is not to say that property investment does not entail considerable risk.
 
For starters, initial land investment is never cheap, and often requires a considerable initial expenditure of liquid capital and the maintenance on property. In addition, nearly all private property in the United States is susceptible to taxation just for existing, and this can and will quickly erode any potential return on an investment. Thus, even if one owns property with the purposes of turning it over in the future for a profit, it is sometimes most feasible to put it to some use in order to yield income that will maintain its cost. Generally, this means property gets leased or rented for either residential or commercial use. 
The benefits of exploiting property for commercial use are considerable, as are also its risks and drawbacks, but a key benefit is that rental property, in most cases, provides a stable tax shelter, and if done properly, can yield a considerable ongoing profit. In addition, the ownership of property gives the owners considerable control to dictate the terms of the use of his property, and adjust the costs of its usage based on the needs of the owner. However, this can have a downside as well, because this increases one’s responsibility for the property considerably, and could sometimes be a massive drain, if not on time, than on resources and capital.
 
Though one of the risks entailed in the ownership of property is a comparatively low liquidity of assets, one of the advantages is that property can be used as a very beneficial source of financial leveraging. Real estate offers the most potential of any solid capital to yield strong leveraging results, especially in terms of borrowed capital. As a general rule, the more property one owns, the easier it is to acquire new property for just this very reason. To put it in simpler terms, by staking a property’s value toward another purchase, or towards a lending institution, land can be used as a a valuable piece of collateral for either gaining liquid capital or insuring the stability of continued payment on the purchase of a new property.
 
While real estate investment should never be seen as a “sure thing,” and the responsibilities and initial investment requirements can be substantial, there are few commodities that have proven able to weather even the harshest economic climates. Land ownership, while offering significant risk, can ultimately lead to a considerable reward.