Buying A Home?

Visit   http://www.aaronline.com

To Review the Arizona Department of Real Estate's  BUYER ADVISORY GUIDE

 We think of home ownership as the "American dream," and it's what many of us work for most of our lives. Buying a home is the single biggest expenditure most people make, and because we don't want to make a mistake, it can be a very frightening experience. Knowing a little bit about real estate law and about the processes surrounding the purchase of a home can help ease your fears.

Working with a Real Estate Agent

In searching for the perfect home, you need to be certain that all options are explored and researched.  Once you find the home, you need to be certain the purchase is successful.  People who look for a home on their own often find it to be an overwhelming task.

As a prospective buyer, you need to understand that the nice real estate agent who has the home listed for sale is not your friend. This person works for and on behalf of the seller; his or her obligation is to the seller, not to you. Among other things, this means that the listing agents will not disclose to you anything negative about the property (except such defects that they are required by law to disclose), because that's not in the seller's best interests.

To look out for your interests, you should hire your own agent--a buyer's agent. A buyer's agent represents you, so he or she will have to tell you all the relevant information about the property, good and bad. Plus, a buyer's agent can help you negotiate the purchase terms.

Partnering with a buyers agent is the best way to ensure you make an informed decision and experienced as smooth of a purchase process as possible.  Here are a few specific reasons to work with an agent. 

•  Arizona law requires real estate licensees to have an understanding of the general purpose and legal effect of real estate contracts.  A.R.S. 32-2124(E)(2).  However, contract questions are by far the most common questions received by the Arizona Association of REALTORS (R) ("AAR") Legal Hotline every year.  Many of these  questions can be answered by applying the basic contract law.

• Minimum Elements - For a valid contract to exit there needs to be an offer, acceptance, consideration and sufficient specificity so that the obligations involved can be ascertained.  The AAR contracts are designed to address these requirements in a uniform manner.

• Statute of Frauds - The Statue of Frauds requires a contract for the sale of real property to be in writing and signed by the party against whom enforcement of the contract is sought.  A signature can be a mark, if a person cannot write, with the person's name written near it and witnessed by a person who writes the person's own name as witness.  Electronic signatures are also legal.

• An offer is a willingness to enter into a contract expressed in such way that the other person understands that agreement to the offer is invited and will result in a binding contract.  When an offer or counteroffer is not supported by independent consideration, it may be withdrawn at any time prior to its acceptance.  Any statement clearly implying unwillingness to contract according to the terms of their offer, communicated before acceptance of the offer, is sufficient to prevent contract formation.  Although the Statute of Frauds requires that an offer or counteroffer be in writing, a written offer of counteroffer can be verbally withdrawn.  However, when withdrawing an offer, do so in writing if at all possible, to avoid disputes.

• Acceptance - Acceptance is agreement to the terms of an offer in the manner required by offer.  Acceptance of an offer must be on the exact terms as the offer.  Any attempt to accept on terms materially different from the original offer constitutes a counteroffer, which rejects the offer.  Acceptance of an offer must be conveyed to be effective; silence does not ordinarily establish acceptance.

• Consideration - Consideration need not be money but may involve a promise for a promise.  Consideration may be a benefit to a promisor or a detriment to a promisee.  By Arizona Statute, "every contract in writing imports a consideration."  A.R.S. 44-121.

• Fixtures and Personal Property - A fixture is an item that was once personal property but is affixed to the real estate in such a manner as to become a part of the real property.  Arizona employs a three-parts test for determining when personal property, also known as chattel, has become a fixture:  (1) the chattel is affixed to the real estate:  (2) the chattel has adaptability or application to the use of the real estate: and (3) the party intended to make the chattel a permanent part of the real estate.  Voight v. Ott, 86 Arizz. 128,341 P. 2d 923 (1959).  To avoid ambiguity, the contract should specifically identify all items that are to be conveyed in the transactions.  The AAR contract contains a list of fixtures and personal property to be conveyed.  Any additional personal property to be conveyed should be written into the contract.

• Parties - The parties to be bound to the contract should be set forth with specificity.  If either party is a corporation, limited liability company, or partnership, all pertinent information about the entity should be included, such as the entity's exact name, address, and state of formation.  If either party is an entity, the signer's authority to bind the entity should also be ascertained.  In any real estate transaction both husband and wife must sign the contract for the community property to be obligated.  A.R.S. 33-452.  Therefore, both husband and wife must sign all real estate contracts, including contract modifications.  In the alternative, "either husband or wife my authorize the other by power of attorney to sign the contract on his or her behalf."  A.R.S. 33-454.  The parties should also be competent.  Generally, in order to invalidate a contract based on in competency, the owner must have been incompetent at the time of the execution of the contract.  Further, be aware that the in competency of an individual will invalidate a general or special power of attorney, (i.e., for specific property) unless the power of attorney is a durable power of attorney that specifically states that the power of attorney will not be affected by the in competency of the principal. A.R.S. 14-5501

• Close of Escrow - The close of escrow date is an important date that should be specified in the purchase contract.  Both parties will likely make significant plans based upon the close of escrow date and may have simultaneous closings on other properties.  Nonetheless, time is usually not regarded as being of the essence in a real estate contract.  Miller v. Long Family Partnership, 151 Ariz. 306, 308, 727 P.2d 359, 361 (App. 1986). Time should be considered of the essence in a contract when:  (1) Time is of the essence is expressly stated in the parties' contract.  (2)  Because of fluctuations in value or from the terms of the contract, the treatment of time as a non-essential will produce a hardship and delay in performance and would subject the other party to serious injury or loss.  (3)  An express notice is given by a party who is not in default to the other party who is in default requiring the contract to be performed within a stated reasonable time.  The AAR contract contains an express recital that "time is of the essence" and that the close of escrow date is expressly made a material term.  However, if a client is considering canceling a contract over the objections of the other party due to a failure to close, advise independent legal counsel.

• Boilerplate - The AAR contract contains pre-printed or "boilerplate" language.  However, the form is often revised or supplemented to address issues unique to the particular transaction.  Where written provisions of the contract are inconsistent with the printed or "boilerplate" provisions, the written provisions will prevail.

• Written by K. Michelle Lind who is General Counsel to the Arizona Association of REALTORS (R) (AAR") and a State Bar of Arizona board certified real estate specialist.

REALTORS (R)

Þ      Agents have access to the Multiple Listing Service (MLS).  This is a computer system devoted solely to keeping track of all the home listings in the area you desire.  The majority of homes on the Market are in the MLS and need an agent for access.

Þ      Agents are trained to write a legally binding Purchase Contract Offer, know all the legalities both Buyer and Seller are responsible to know and adhere to, handle negotiations, resolve any issues that may arise, offer real estate advice.  All this will allow you the security of knowing your best interest are being cared for and you will be able to make informed decisions every step of the way.

Þ      Agents are knowledgeable about the area in which you wish to live.  In addition to real estate market knowledge, they can educate you on the attributes of a desired area.

Þ      Agents are knowledgeable about the market values.  Your agent will work with the listing agent to obtain the best price possible for you.

Þ      Agents can help save deals.  Due to the complexity of the buying process, occasionally unexpected problems arise.  Agents know the process and are trained to handle these issues that might otherwise end a transaction.

Þ     Your agent will help you digest all the information you will receive,  they can not & should not make decisions for you.

Credit Sense

Credit is a part of our everyday life!  It's important for everyone to understand and use credit wisely.

Credit Scoring

Many lenders rely on credit scoring to analyze your credit report.  *Scores range from 350 to 900

Scores are based on the following:  Check out:  http://www.myfico.com/myfico/Home.asp  for a fee you can receive your credit score on line and start your search for a lender knowing your buying power or be able to address your credit issues before you take that next step.

• The number and amount of debts you owe now

• Your history of defaults, if any

• Prior problems such as bankruptcy, court judgments, foreclosures or a criminal record

• The length of time since your most recent credit problem

• How long you have kept your existing accounts

• Certain other aspects of your use of credit over time.

• A credit score of 620 or above is usually considered a good risk.

Home Seller Tips Making a Contingent Offer You weren't planning to sell your home and move right away - just starting to think about it. Then, Sunday afternoon you went for a drive to look at a few open houses. And there it was, your perfect dream house, new on the market and in your budget! Now what do you do? Here are some suggestions: - Call your real estate agent right away so you get professional advice and representation in what is almost certain to be a complex transaction. - If you're not already pre-approved for a mortgage, contact a mortgage broker or bank first thing Monday morning (ask your agent for a referral). - You may consider making a "contingent" offer on the new home. This means that your purchase of the new home is contingent on the sale of your old home. - If a contingent offer won't work, consider a "bridge loan," a temporary financing package that allows you to buy the new home while waiting for your current home to sell and close. - Finally, buying or selling a home is stressful under the best of circumstances. Ask yourself and your family, is this new home so perfect that it’s worth the extra stress of compressing two transactions into one? If so, go for it! If you have other questions about contingent offers or other complex transactions, the agent listed here would be happy to help.   In a contingent offer, don't get your heart set on your new home. Instead, focus on preparing your current home for a fast sale. In a busy market, sellers rarely accept contingent offers.

Take with you to the Lenders

Lenders request the following items to process your loan request:

1. Consecutive two year employment history

2. Copies of driver's license (s)

3. Copies of thirty days most recent pay-stubs

4. Copies of Sixty days most recent statements for all bank accounts and investments (most recent quarterly or annual if monthly not provided)

5. Explanation and documentation for any large deposits that cannot be documented by a pay stub

6. Gift funds - please ask for the correct procedure if you will be using gift funds

7. Copies of most recent two years W-2 forms from all employers

8. Complete copies last two years tax returns

9. Copies of divorce decrees and bankruptcy papers, if applicable

10. Check for credit report payable to the Lender of your Choice.  (Credit report fee may vary and is per person unless married and applying jointly

11. Letters of explanation for any derogatory credit

12. Alternative credit (i.e. rental reference, utility rating, car insurance, etc.)

13. Two year residence history

14. If renting, name and phone number of landlord

15. List of all debts, creditors, student loans etc.,

16. VA-Certificate of eligibility and DD214

17. FHA-Driver's license and social security card

Declarations

1. Any judgments against you?

2. Declared bankruptcy, had property foreclosed upon, given title, or deed in lien thereof in the last 7 years?

3. Party to a lawsuit?

4. Directly or indirectly been obligated on any loan which resulted in foreclosure, transfer of title in lieu thereof, or judgment?

5. Presently delinquent or in default on any federal debt, or other financial obligation?

6. Obligated to pay alimony, child support, or separate maintenance?

7. Is my part of the down payment borrowed?

8. Are you a co-maker or endorser on any loan?

9. Are you a US Citizen

10. Are you a permanent resident alien?

11. Do you attend to occupy the property as your primary residence?

12. Have you had ownership interest in a property in the last three years?  If yes, what type?

Principal Residence (PR), Second Home (SH), or Jointly W/Another Person (O) (Please circle type)

13. First time home buyer?

Borrower Information

Legal Name                                                                            Maiden Name

Social Security Number                                                      

Age                                Number of Dependents

Marital Status:  Married        Unmarried        Separated       Divorced  (Married Spouse will submit same information)

Home Phone                                                                          Work Phone

Fax Number                                                                            Email Address 

1. Present Address                                      City                                        State                            Zip

2. No. Yrs.         Mos.          Own             Rent $

3. Landlord's Name                                            Phone Number        Address

Previous rental history (2 year history required)

1. Address                                                              City                                        State                            Zip

2. No. Yrs.         Mos.          Own             Rent $

3. Landlord's Name                                            Phone Number        Address

1. Address                                                              City                                        State                            Zip

2. No. Yrs.         Mos.          Own             Rent $

3. Landlord's Name                                            Phone Number        Address

1. Address                                                              City                                        State                            Zip

2. No. Yrs.         Mos.          Own             Rent $

3. Landlord's Name                                            Phone Number        Address

Current Employer (2 year history required)

1. Name                                        Address                                        City                    State                            Zip

2. Phone Number                                   Position/Title                         Time on Job     #       Years      #       Months

3. Gross Yearly Income $                      Gross Monthly Income $                            #       Years in Profession

4. Overtime $                                          Bonuses $                        Commission $                            Other $

1. Name                                        Address                                        City                    State                            Zip

2. Phone Number                                   Position/Title                         Time on Job     #       Years      #       Months

3. Gross Yearly Income $                      Gross Monthly Income $                            #       Years in Profession

4. Overtime $                                          Bonuses $                        Commission $                            Other $

1. Name                                        Address                                        City                    State                            Zip

2. Phone Number                                   Position/Title                         Time on Job     #       Years      #       Months

3. Gross Yearly Income $                      Gross Monthly Income $                            #       Years in Profession

4. Overtime $                                          Bonuses $                        Commission $                            Other $

1. Name                                        Address                                        City                    State                            Zip

2. Phone Number                                   Position/Title                         Time on Job     #       Years      #       Months

3. Gross Yearly Income $                      Gross Monthly Income $                            #       Years in Profession

4. Overtime $                                          Bonuses $                        Commission $                            Other $

Other Income

(Part time, notes receivable, child support, other)

1. Source                                                                                Amount $

2. Source                                                                                Amount $

3. Source                                                                                Amount $

Bank Account Information

Bank Name

Address

1. Account #1                                            Type                            Amount $

2. Account #2                                            Type                            Amount $

3. Account #3                                            Type                            Amount $

Bank Name

Address

1. Account #1                                            Type                            Amount $

2. Account #2                                            Type                            Amount $

3. Account #3                                            Type                            Amount $

Bank Name

Address

1. Account #1                                            Type                            Amount $

2. Account #2                                            Type                            Amount $

3. Account #3                                            Type                            Amount $

Other Assets

• Stocks & Bonds                                                                                Amount $

• Retirement Accounts                                                                        Amount $

• Life Insurance - Cash Value                                                            Amount $

• Monthly Alimony Payment                                                                Amount $

• Monthly Child Support Payment                                                      Amount $

• Monthly Child Care Expense                                                           Amount $

• Furniture / Personal Property                                                          Value     $

• Source of down payment for home purchase:

Automobiles

• Make & Year                                                                                               Value    $

• Where Financed                                                           

• Account #                                            Monthly Payment $                                        Balance $

• Make & Year                                                                                               Value    $

• Where Financed                                                           

• Account #                                            Monthly Payment $                                        Balance $

Real Estate Owned

• Property Address/City/State/Zip

• Property Type                                                                        To be sold/rented?

• Monthly income $                                                                  Monthly payment $

• Value $                                                                                   Loan #

• Mtg. Type                                                Orig. Amt $                                                Bal. $

• Lenders Name

• Address/City/State/Zip

Other Liabilities

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

• Name                                      Payment $                                                         Bal. $                        Account #

Can you afford to choose?

Deciding whether to buy or sell first is rarely easy

Deciding whether to buy or sell first is rarely easy. There are pros and cons to each strategy. If you buy a new home first, you'll eliminate the anxiety about where you'll live next. The worry is how long it will take your current home to sell. Owning two homes can be costly.

Making sure you don't overpay when buying a home

Who would have imagined that home sales would play a starring role in the U.S. economy after September 11th?  Few economists expected housing markets to remain as buoyant as they have in the months since the terrorist attacks. 

"Housing was going gangbusters throughout 2001 and is still strong in many areas," says Frank Nothaft, chief economist for Freddie Mac, a company that funds mortgages made by lenders to millions of Americans.

The secret to the continuing resilience of the housing market is relatively low mortgage interest rates, economists say.

"Prices are still going up in a lot of communities," says Karl Case, an economics professor and a partner at Case Shiller Weiss Inc., a firm that tracks home values for clients ranging from individual consumers to Wall Street investors.

Despite housing market strength, overpaying remains a risk for home shoppers, given the economy's volatility.  Headlines show that job cuts continue.  Although the consensus among economists is that a recovery should begin early this year, Case stresses that no one knows for sure.  "Economists are very bad at predicting the depth and length of a decline," he says.

No matter the outlook, buyers should do their homework on local property value trends before venturing a bid on a home they like.  Here are several pointers for buyers;

...Be particularly cautious in areas where the economy is very uncertain.  Are you planning to make an offer on a home in a community that is heavily dependent on a technology or manufacturing business where layoffs have been prevalent of late?  Then you should move with utmost care before making a bid, Case says.

...Also, he believes you should watch out for the possibility, however remote, of a short-term price slump if you're buying in an enclave of upscale homes -- those in the top 10 percent for the region as a whole.  During the late 1990s, many wealthy Americans took profits on stock gains to purchase expensive homes, pushing up prices rapidly for this segment of the market.  But the relatively weak stock market performance of the recent past has meant less demand for luxury housing, leading to a moderation in home prices in this segment.

...Use online sources as general guides to value trends.  One reliable source is the Web site run by the Office of Federal Housing Enterprise Oversight (www.ofheo.gov)  There you can find valuation changes on a quarterly basis for towns and cities across the country.  While this information does not project future home value performance, it's considered a good guide to past patterns.

...In addition, some Web sites look to the future.  For example, the Case Shiller Weiss (www.cswv.com) provides free home - price forecasts for many metropolitan areas.  Also, for a nominal fee, the firm offers consumers current price estimates on specific homes nationwide (however your REALTOR (R) will offer this to you for free).

...Turn to your real estate agent for help in judging a home's worth.  Realtors can provide a wealth of statistics to help you learn about price patterns.  One key measure is the number of days homes linger on the market.  If that number is increasing, demand could be falling and prices could be weakening.  Another indication of a cooling market is a widening gap between list price and actual sales price.

...In addition, there is no substitute for information on recent sale prices of homes very comparable to the one you're interested in buying.  Your agent would provide you with at least three such "comps" before you bid, Case says.

...Seek anecdotal information from those who know a neighborhood well.  Statistics go only so far in telling you about property values.  Case says there's also much to learn by chatting with residents of the community where you're home shopping -- perhaps on a Saturday afternoon stroll through the neighborhood.

..."You want to get the street talk -- to get the inside information on what happened to the sale that fell through a block away," Case says.  Neighbors can tell you about oddball situations involving homes that go unsold month after month, perhaps because of a less-than-obvious defect.  However, Case contends that well over half the time, overpricing is the reason homes languish on the market.

...Recognize that a "lowball" offer is unlikely to succeed -- even in a recession.  Indeed, lowball offers are sometimes so offensive to owners that they can result in a sudden cutoff in negotiations.  Also, homeowners are increasingly savvy about the true value of their assets and will hold out for a reasonable offer.

...Link your hopes for appreciation to your expected stay in a home.  You can do extensive research to be sure you're not overpaying for the property of your choice.  But the chances of making a healthy profit on the place are much greater if you stay five years or longer, according to Nothaft.

By Ellen James Martin, distributed by Universal Press

Financing a Home

Most of us can't afford to pay cash for the entire purchase price of a home. Instead we obtain a loan from a bank or other lending institution, and the house serves as security for the loan. That's what a mortgage is.

You should think about how you're going to finance the purchase of your home long before you make an offer on a piece of property.

Determining How Much You Can Afford

The amount you can afford to spend on a home depends on your income, assets, expenses, debts, the current mortgage interest rates, and the cash needed for a down payment.

The rule of thumb used by lenders is that you can afford a home that costs no more than two and one-half times your annual income. For example, if you earn $50,000 per year, lenders assume that you can afford a home that costs no more than $125,000; if you earn $100,000, you can afford up to a $250,000 home. (Of course, just because you can afford a certain level of home doesn't mean you have to, or will want to, buy property in that price range. You may have other priorities that suggest that a more modest investment is in order.)

Another rule of thumb is that the monthly mortgage payment (including property taxes and insurance) should not exceed 28% of your monthly income, and total loan payments (including payments on car loans, student loans, or any other debt) should not exceed 36% of your monthly income. The prospective buyer making $50,000 is assumed to be able to afford a monthly mortgage payment of $1,166 and total debt payments of $1,500 per month. An annual income of $100,000 could support $2,333 per month for the mortgage and $3,000 applied to overall debt.

Remember, these are just guidelines you can use to estimate what you can afford. They're based on a national average that indicates that about 64% of monthly income is spent on income taxes and monthly expenses (other than debt). If you think your expenses are unusually high or low, you'll be able to afford less or more of a mortgage payment. Keep track of all your expenses for a month or two and compare the figures to your average monthly income to find out where you stand.

Pre-qualifying
Perhaps the easiest way to find out how much you can afford is to visit with your local lender and ask the loan officer to "prequalify" you. Lenders generally are very willing to do so, with no obligation to you.

The process is relatively painless. The lender will ask you a few simple questions about your income, assets and debts, and then apply some debt-to-income ratios that have proven successful over the years. Then they will provide you with the maximum amount of a mortgage loan that they think you can afford. Pre-qualifying is not the same as pre-approval, but the process could provide you with peace of mind and confidence as you shop for a home.

Call me for a free analysis of your approximate monthly mortgage   "PAYMENT"