Issues in Real Estate

When we speak of the real estate economy, we use national statistics but speak locally. On the other hand the stock market is based on the national or even the world economy. The real estate markets are based on local or even micro-local economy. What is happening in LA may not directly affect what is happening in Toledo.

What affects all real estate markets together are the interest rates. There is no single barometer to measure the entire housing industry in US.

So, while statistics calculations and economic factors are relevant, equally important is using one’s common sense. We must keep our eyes wide open and take a look around and see what is happening. Talking to real estate agents, investors and lenders in a particular area can be a big help to access a market.

These are certain issues one must consider while dealing in real estate.

One major issue facing corporate real estate managers is how to effectively manage the real estate assets in the current market environment.

Secondly, real estate agents provide information about utilities, zoning, schools etc. But two common issues a buyer faces while buying are-

i. Will the property provide the right environment we want for a home?

ii. Will the property have a good resale value when we are ready to sell?

Another important issue that any buyer/investor faces is the legal issue. Real estate laws vary from state to state. One must consult an attorney licensed to practice law in the state in which the property is located.

At times, the property a buyer is seeking is available but not properly advertised. It may take you some time and effort to search for and locate the right property.

The important issue of finance. We must know our financial reserves plus our borrowing capacity. If we know about our current savings, income and debt, then we can take help from lenders; banks and mortgage companies, which offer some choices according to your financial capability.

In America, some real estate association and commissions have sponsored regulation that require all real estate brokers to provide a minimum level of services which forces sellers to buy services they do not want or need.

There is the issue of rebates on transaction fees. Some states in America allow rebates of commissions or fees on real estate transactions but some states have legislated regulations which prohibit rebates.

Next is the issue of consumer participation. The consumer federation of America released a study that real estate boards and commissions are dominated by real estate practitioners and they recommended greater participation by consumers; which is opposed by practitioners – this works against the interest of ordinary buyers and sellers.

Last but not the least, a lot of hoopla has been floating around in the news media about the ‘bubble’ theory of real estate and that the real estate market is going to burst – this may have a psychological impact on the potential buyer or seller.

Real Estate Terminology Explained

Buying a new home can be a daunting project. If this is your first time there will be words and phrases that are used that might as well be in a foreign language – terms like amortization, mortgage, buyer’s agency, appraisal, home inspections, property surveys, septic systems, and the list goes on. Even if you are a repeat buyer, some of these terms may still be a bit fuzzy, especially if you didn’t have the terms fully explained to you first time around.

Sure, you could research the words yourself, however, it is nice to have them explained in one place, and you may not even realize there are others you could learn about. Also, some terms I have included here may seem obvious but they have been included in order to have as complete a list as possible. However, since this is an introductory article meant to be an introduction to the terms used in the housing market, the information presented is by no means as in-depth as it could be. There could be pages written about each of the items included in this list.

Being an informed buyer is a great place to be when searching for your first home, whether for personal residence or for investment. You need to know what is involved in that dream property!

TERMS

Amortization – the process of spreading payments out over time. In real estate this is the length of time that an owner chooses to take to pay off the mortgage. The amortization period is broken down into shorter lengths of time called terms. So a mortgage is spoken about in terms, for example, of a 30 year amortization with a term of 5 years.

Appraisal – an unbiased determination of the value of a property, used to determine how much a home should be mortgaged for. Typically performed by qualified certified appraisers.

Buyer’s Agent – a real estate agency agreement where the agent works for the buyer. It is becoming more and more popular to have buyer agency agreements signed by the prospective buyer, and this action provides benefits for both the agent and the buyer. The buyer benefits from the determined concerted effort the agent will provide for the buyer during the time of the contract. The agent benefits because if the buyer obtains a home anywhere other than through the agent, the agent will be compensated, again during the length of the contract. The length can be discussed and negotiated between the agent and the buyer.

Closed Mortgage – a mortgage provided by a financial institution that does not allow the borrower to pay off without penalty.

*N.B. – Be careful when signing for a closed mortgage as the financial institution may have very expensive costs associated with paying off a closed mortgage. In some cases, the penalty is 3 months worth of payments and in other cases the penalty is the amount of interest lost by the institution with early payoff. Read the terms carefully.

**N.B.B. – the decision to choose an open or closed mortgage should depend upon your long or short term goals. If you plan on selling the home within a short period of time then it may be a better option to go for an open term even though the rates charged are likely to be higher. It is important to discuss your real estate and financial plans with your banker or mortgage broker in order to get the best possible deal with the least cost.

Condominium – a type of property where a portion is set aside for individual personal ownership and another portion is set aside as common elements for which monthly condo fees are paid to support. Condo fees are collected to pay for common elements such as grounds maintenance, elevators, swim or exercise facilities, lighting and external features. Condominiums have written rules and by-laws that are in effect and where these rules conflict with the landlord and tenant act, it may be that the condo rules hold true. For example, condominium rules may prohibit the ownership of pets. BE sure to read the rules completely and contact legal advice if unsure on any component of the document. It is legally binding on the people who purchase a condominium.

Detached – a stand-alone house. Doesn’t share walls with any other unit.

Duplex – a 2 unit building, typically with one dwelling on top of the other dwelling, but it may also be side by side and with the entire unit being sold as a single entity.

Easement – an easement is a privilege given from one owner to another owner for the purposes of transporting across a piece of land. Farmer A owns a piece of land. Farmer B needs to cross Farmer A’s land to get to his own land. Farmer A allocated a portion of his land as an easement thereby allowing Farmer B unrestricted access to his own property. Easements stay with the property, not with the owner. The easement can be terminated – obtain legal advice.

Encroachment – the real estate definition of an encroachment is the use of an owner property by property belonging to a neighbour. For example, a roof overhang could cross a property boundary and this is an encroachment. It is important to obtain legal counsel if an encroachment is suspected during the buying process.

Home Inspection – a non-invasive check of a home by a qualified home inspector to see if there are major defects that may arise in the near future. Items such as fire systems, water systems, electrical systems, are checked and deficiencies noted. As well, the inspector should look for areas where there is excessive heat loss, the age of the appliances. The inspection should include exterior items as well as interior items along with the age of the home and the related elements.

Land Survey – accurate measurement of a piece of property identifying frontage, width, depth, and includes easements, and encroachments, as well as positioning of existing structures.

Life Lease – type of ownership where the buyer only buys the rights to live in the property. Land transfer taxes are not paid because the ownership doesn’t come to the buyer but remains with the building or corporation. Depending on the corporation a life-lease owner may or may not be eligible to earn a profit on the investment.

Mortgagea fancy term for loan, used in the housing market. Instead of a house loan you have a house mortgage.

Open Mortgage – a mortgage provided by a financial institution that allows the borrower to pay it off completely without penalty. Because it reduces the amount of control that the financial institution has over this particular type of mortgage, the interest amount charged by the institution tends to be higher than a closed mortgage.

Seller’s Agent – the real estate agent who is working directly for the seller. This gives the seller the concerted effort of the agent for the purpose of selling the home.

*N.B. – When two individuals use the same agent to buy and sell the home there is a conflict of interest on the real estate agent. The real estate agent’s objective when selling is to get the highest price possible for the home. The real estate agent’s objective when buying the home is to get the lowest price possible for the home. This in and of itself creates a conflicting environment.

Semi-Detached – a type of home that shares 1 common wall. Land size is usually similar to that of a completely detached home and the homes operate as two separate entities.

Septic Systems – A closed system, self-contained. A sewage disposal system for homes that are not connected to the municipal water systems. A qualified inspection should be performed for capacity, age and structural integrity. As well, it is important to learn how to work with a septic system regarding types of waste that the septic system can safely handle. People on a septic system are also typically on a well-water system – get the water checked by a qualified water tester. Do not by-pass this step or you could end up with a huge bill for digging a new well.

Sewer Systems – these are the systems generally associated with homes in the city limits. There are two types of sewer systems – the external and the internal. The external carries away waste water from the streets and the internal carries away human waste. The external system often empties into a river, or pond or some other body of water. The internal system carries to the waste treatment plant to be cleaned before being emptied into a body of water. One thing to check for when purchasing a home is the type of pipes that are used to carry water into the home – lead or polyvinyl choride or pvc. Grants may be available to assist with the removal of lead pipes in a home.

Status Certificate – this is a set of papers obtained from a property management firm containing information relating to a specific registered condominium property. This report provides detailed financial information about the property along with any possible upcoming special assessments. It also includes information about the condominium rules as they are set out when the property was registered as a legal condominium.

Terms – the shorter time period that an amortization is broken into. This is the length of time for which a bank lends the money at a specific interest rate. The first term in your 30 year amortization could be 5 years with a 3.0% closed term.

Town-house – can also be called row housing. These types of homes have very little personal land, generally share a common municipal address and share at least 1 wall with another unit. Some inside units share 2 walls. Town-houses can be owned or rented. If owned they are known as a townhouse condominium. Condo fees apply where the residences are owned and cover items like grounds maintenance, snow removal, exterior finishes, and at times, exterior lighting and even water.

Variable Mortgage – this type of mortgage has a floating interest rate associated with it. Generally, variable rates are lower than both open and closed mortgages. However, if the interest rates are expected to increase it is wise to “lock in” your interest rate and convert your mortgage to either an open or closed mortgage, with an interest rate that doesn’t change, hence the term “locked-in”. Signing this type of mortgage requires the home-owner to be vigilant with regards to what the interest rate market is doing. Most mortgage companies allow the home-owner to lock-in a mortgage without penalty.

Las Vegas -A Quick Overview

Whether you’re thinking of moving to Vegas with your family or considering investing in some commercial property there are plenty of companies specializing in Las Vegas that can help – Here’s a quick overview.

Who and where you get financing will depend on what type of housing you are looking at. Single family dwellings, condos, and townhomes all qualify for different types of financing.

There are financial institutes that specialize in the residential Las Vegas needs. Down payments, interest rates, and terms all depend on a number of factors. Besides traditional mortgages there are other types of Las Vegas available that have relaxed down payments, relaxed terms, and even relaxed credit requirements.

Besides the residential market there are investments in commercial properties and once again there are Las Vegas options that aren’t always traditional.

One of the reasons that Las Vegas has more flexibility is that there is an unwritten understanding that income can come from a variety of sources and not all income may be reported on the tax form. Right or wrong it isn’t up to the company’s that have Las Vegas on their minds to decide. They just want to lend money and make money.

And there is some great news for anyone that has had some credit troubles in the past and thus considered a higher risk. You will have no problem obtaining financing through one of the many Las Vegas conglomerates. They’ll simply charge you a higher rate of interest, give you less flexibility on defaulting, and be happy to take the property back if you miss a payment. And you too can earn a piece of Las Vegas.

When it comes to Las Vegas these institutes are also happy to base their loan to you on your declared income. There is no need to provide a pay stub or proof of employment. That means that if you want to own a home in the Vegas area there’s a very good chance that you can using a Las Vegas institute.

Now if you are about to play with the big boys down on the strip and invest in some commercial properly your Las Vegas agent is going to come from a different deck of cards. Generally speaking those that deal in Las Vegas for residential purposes don’t play in commercial.

Commercial loans require different down payments, different collateral, and different requirements to obtain the loan. Each circumstance is different so you’ll need to make an appointment with a an agent that deals with Las Vegas on the commercial end to see what they can do for you.

A quick search online will reveal many many Las Vegas experts that can help you obtain the funds you need to close that deal. So what are you waiting for?

Copyright © 2007 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author’s information with live links only.)