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THE SMART BUYER'S GUIDE
Advantages of a Buyer's Specialist or Representative
A buyer's representative works only with buyers and keeps the buyer's interests throughout the
transaction, from inspections and other contract contingencies through closing.
Shortening the Search . Buyer's representative takes the time to learn about the buyer's needs and
wants. This allows the search to be focused, and shorter. Studies by the National Association of
Realtors have shown that a buyer using a buyer's representative found a home one week faster and
looked at three more properties than buyer's no using a buyer's representative.
Looking for Problems . A buyer's representative will research a property for potential problems that
might make it less valuable or marketable in the future. This aids the buyer in making an informed
decision about which house to buyer and how much to offer.
Assist with financing . Buyer's representatives help the buyer find qualified lenders and loan programs
that best fit their needs.
Negotiating the best terms of a purchase offer. This can include earnest money, contingencies,
inspections, financing, possession dates and more. The best terms for the buyer may not mean the
lowest price. A buyer's representative would ensure the buyer's circumstances are addressed in the
contract. Having to sell a home first may be more important than getting the lowest price.
How do buyers find the right representative? Buyers should look for an representative marketing
themselves as a Buyer's Representative. Then look for one you trust. Experience, professionalism,
track records and personal referrals are all important. But what's most important is that you feel
comfortable with the representative and can share personal information and specific needs with them.
Most buyers' representatives in Arizona are paid by the listing broker, who shares the seller's
commission with the buyer's representative.
Buying a home is a huge investment. Protect yourself.
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How to Be A Smart Buyer
(1) Get pre-approved for a mortgage before shopping for a home. By getting a lender's written pre-
approval letter, you will know how much you can afford and won't over extend your finances. A house
you can't afford is a bad house .
(2) Ask your buyer's representative to report on school quality if that is of interest for your family needs.
(3) Double check on your buyer's representative by shopping on the internet. More than 50 percent of
home buyers now shop for their next home purchase on the internet. Check for new listings at Web
sites such as www.realtor.com and www.coldwellbankersedona.com . But, keep in mind that houses
with contracts on them will stay on the internet sites until escrow actually closes. Ask your buyer's
representative about the status of listings.
(4) Hire a home inspector. The typical cost of about $300-$350 paid by the buyer, is far cheaper than
buying a bad house. Accompany the inspector if you can. Once the report is received, you can present
the seller with the “Buyer's Notice” of requested repairs, or cancel the contract if the condition of the
house or condo is too poor to proceed. A wood infestation inspection should be performed at the
same time, so any services to be performed in that line may be requested along with the home
inspection repairs. Discuss the reports with your buyer's representative for a greater understanding.
Again, if anything is too overwhelming, you may cancel the contract during your inspection period.
(5) If you decide to buy a new house or condo, your buyer's representative can represent you and the
developer will pay the sales commission. Be sure your purchase contract allows you to hire, at your
own expense, a professional home inspector to check on the construction quality and search for
defects. Don't be shy about knocking on doors in the neighborhood to ask what the residents like
best and least about their new home/condo.
(6) When buying a resale home, study over the “Seller's Property Disclosure Statement” carefully.
(7) Understand what an “as is” home purchase means. That means the seller refuses to pay for
repairs. There is nothing wrong with buying an “as is” property, as long as you have a professional
home inspection and know all of its defects. The seller and listing representative must disclose
any known defects, usually noted in the “Seller's Property Disclosure Statement” (“SPDS).
(8) Take a close look at the house or condo and its location before making an offer. No residence
is perfect, but you can come close. Consider the floor plan, neighborhood noises, and conveniences.
Visit the location during the morning, mid-day and evening.
(9) Ask yourself: Is this home where I want to spend several years of my life? Inquire about how
easy it will be to resell you residence in a few years.
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5 SECRETS TO BUYING THE BEST HOUSE FOR YOUR MONEY
1. Get “Pre-Qualified” or “Pre-Approved”
Make sure you are in the strongest negotiating position possible. Price is only one element in
negotiations. Often other terms, such as the strength of the buyer or the length of the escrow, are
critical to a seller. Before your house-hunting trip to Sedona, spend a few minutes on the phone with
an Arizona licensed lender answering a few simple questions. I have a list of qualified lenders if you
need one. The mortgage broker or lender will be happy to write you a pre-qualification letter to
accompany any offer you make. This is a very powerful weapon I recommend to all my clients for
their negotiating arsenal.
2. Sell Your Property First, Then Buy the House
If you have a house to sell, sell if before selecting a house to buy! Contingency sales aren't nearly as
strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You've found
the perfect house – now you have to go make an offer to the seller. You want the seller to reduce the
price and wait until you sell you house. The seller figures that you are a risky deal, since while his
house is off the market, he might pass up a buyer who doesn't have to sell a house. So he says OK,
but it has to be a full price offer! You have now paid more for the house than you could have because
of the contingency, and you have to sell your existing house in a hurry! In order to sell quickly, you might
take an offer that's lower than if you had more time. Bottom line is that buying before selling might cost
you THOUSANDS of dollars.
If you're concerned that there is not a house on the market for you, then call me to take you on a
“window-shopping” trip. Or, you can identify possible houses and locations by visiting the internet.
Then I'll take you on a tour of 4 homes that fit closest to your criteria. If you feel confident after that,
you can then put your house on the market.
Another tactic is to make the sale “subject to seller finding suitable housing.” Adding this phrase
to the listing means when you do find a buyer, you will have some time to find the new place. If you
don't find anything to your liking, you don't have to sell your present home.
3. Play the Game of Nines
Before house hunting, make a list of things you want in the new place. Then make a list of the things
you don't want. Share this list with your representative and use it as a guide to rate each property.
Here's the list of the most commonly requested features for a house in Sedona:
(1) View
(2) Open floor plan
(3) Light & Bright
(4) High Ceilings
(5) Privacy.
Often during the course of house-hunting, the priorities change, depending on the clients' budget.
There is a value associated with views, thus increasing the price of the house. Views are available
everywhere in Sedona, though not necessarily taken advantage of in older homes. However, the older
homes are usually in the better locations so worth considering for renovation.
When house hunting, keep in mind the difference between “Style and Substance”. “Substance” is
things that cannot be changed such as location, view, size of lot, noise in area, school district and
floor plan. “Style” represents easily changed surface finishes like carpet, wallpaper, color, and
window coverings. Buy the house with good substance, because the style can always be changed.
Imagine each house as if it were vacant.
Consider each house on its underlying merits, not the seller's decorating skills.
4. Maintain Good Communications and Be Ready to Make a Decision
When I work with clients, I diligently show them the properties within their budget and according to
their criteria. I never push clients into making a decision that is not right for them. As the search
progresses, a client's criteria may change such as their price range, style of house preferred,
and part of town they really want to live in. It's important to convey your changing priorities to your
representative. You both have to be on the same page to be successful. You may even decide to
switch from a house to vacant land. That's OK. Just be open with yourself and your representative.
The real estate market in Sedona has been a seller's market in the under $500,000 range lately.
So if you find something you like, don't walk away thinking you'll find it later for the same price. It
will only go up and you'll end up paying more or settling for less.
5. Stop Calling Ads!
Please note – ads are mostly created to make the phone ring! Many of the homes have some
drawback that's not mentioned in the ad. What's not mentioned is as important as what is.
Be very careful in reading ads. Remember the person writing is representing the seller and not you!
The most important thing you can do is have someone on your side looking out for your best
interests. Your own representative will critique the property with an eye towards how well it meets
your needs and will point out any drawbacks you should know about, so whether you decide to work
with me or not, pick and representative you feel comfortable with.
Did you know that many homes are sold WITHOUT A SIGN EVER GOING UP OR AN AD EVER BEING
PUT IN THE PAPER? These “great deals” go to those people who are committed to working with one
representative. When an representative hears of a great buy, she calls her client, not someone who
just called on the phone and said “keep your eyes open.” So to get the best buy on a property, choose
your own representative and stick with her!
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The Lure of the Fixer-Upper
One persistent myth in real estate is that anyone can make money by buying a fixer-upper, or
foreclosure property, at low cost, doing the renovation work themselves, and then reselling at
a profit. Many experienced contractors and career renovators do just that, but first-time buyers can
get caught in a web of cost overruns, contractor disputes and resale problems. For many first-time
buyers, a fixer is the only option, and sometimes the best option. Follow these basic rules of thumb
when you consider buying fixer-uppers, foreclosure properties or other real estate "bargains".
(1) Look for fixer-uppers that have only cosmetic problems.
Exterior additions or major defect repairs can be costly, and the expense
of correcting major structural defects may not add a penny to the market
value of the house. Fixers that have only cosmetic problems, such as
ancient shag carpeting or bad wallpaper, are ideal for first-time buyers.
Cosmetic repairs can be relatively inexpensive, and some fixer-uppers will
pay back double their cost. Always have a fixer-upper carefully inspected
before you buy.
(2) Don't pay too much, especially if you want to resell quickly.
If you overpay, you may suffer a loss when you sell. In terms of
investment potential, the best time to buy a fixer is when the market has
bottomed out and is turning around. The worst time to buy is when the
market has peaked and is starting to decline. Research the potential
market for the restored fixer-upper, and make sure that your plans for the
house don't result in an over-improvement for the neighborhood.
(3) Estimate renovation costs accurately before you buy.
If you miscalculate, your profit will dwindle. Have the property inspected
as a condition of the purchase, particularly if you buy it in "as is"
condition. You'll reduce the chance of having to fix unanticipated
defects.
(4) Evaluate the floor plan.
With a good basic layout even the most hideously decorated house is an
ideal fixer-upper. On the other hand, a house that seems a maze of rooms
may have a defective floor plan that no amount of paint and paper will
remedy.
(5) Renovate wisely.
In planning your remodel, keep resale value in mind--even if you plan to
live in the house for some time. Kitchens, bathrooms and storage spaces
are important to today's buyers. Curb appeal sells houses, so concentrate
on improving the landscaping and front entry. Also, stick to neutral color
schemes. You can get home improvement information and referrals in
Resources & Services.
Creative Financing for Fixer-Uppers
Nailing down the money to remodel
FHA Title 1 :
Short-term, fixed-rate loan; allows buyer to borrow up to $25,000 to make
specific home improvements to a house, such as upgrading the kitchen.
U.S. Dept. of Housing and Urban Development 203(K): Long-term, fixed-rate
loan based on expected market value of home after renovation; allows buyer
to purchase a fixer-upper property "as is" and rehabilitate it; down
payments range from 3 to 5 percent.
Seller financing :
Loan terms negotiable; seller may pay for some or all of the work before
closing, or carry a second loan for repairs or home improvements.
Assumable adjustable rate mortgage :
Long-term flexible loan; allows loan to be included with house when it is
resold; ideal for remodeling buyers who want to do the work, then turn
around and resell again.
Combination loan/equity line :
Long-term, fixed-rate loan combined with short-term line of credit; allows
the buyer to take out an equity line of credit to pay for renovations
after closing (loan may be paid off by refinancing on higher appraised
value).
TIP: You can also get a seller to pick up all or part of the cost of home
improvements if you negotiate for them as repairs required after a home
inspection. Many sellers prefer to lower their asking price and sell the
property "as is" instead of financing the repairs. This presents fewer
problems for the seller and the buyer can close the deal easily.
Other Bargains: A Short Course
Some real estate investors make a career out of buying and selling
foreclosure, probate and short-sale properties, but it's a dangerous
business for the inexperienced. If you're a first-time buyer, consider
working with an representative or lawyer who has experience in such
properties.
Foreclosures
If a buyer can't keep up with loan payments, their lender will foreclose
on the mortgage and put the property up for auction. If the auction fails
to produce a buyer, the property reverts to the lender, which then offers
it for sale. You can purchase other foreclosure properties through the
Federal Housing Administration (FHA) or the Department of Veterans Affairs
(VA). Check local legal ads and, in the case of FHA and VA properties, the
Internet.
CAUTION
If you buy a foreclosure property, you may have to agree to an all-cash
deal with no contingencies and buy the property "as is." Always get an
inspection to avoid buying a house with major defects. You may also have
to deal with eviction proceedings if the current owner hasn't vacated the
property.
Probate sales
Probate property is sold to settle the estate of a deceased owner. These
properties may be listed with an representative, though some sales take
place at a court hearing. Because the estate's executor or a court administrator
coordinate the sale, you may or may not get a bargain price. Their interest is
to get the best price they can. If the heirs dispute each other over who has the legal
right to the property, it may not be saleable until estate matters are settled. Always
get an inspection to avoid buying a house with major defects.
Short sales
A short sale occurs when a lender reduces the amount of the loan payoff on
a home, which it may do for a seller who can't cover the mortgage due and
closing costs in order to sell. Many lenders prefer to clear such a loan
from their books, even at a loss, to avoid the cost of foreclosure or
having the house in their inventory. This can make for an attractive deal
for a bargain-hunting buyer.
Make sure your purchase contract includes a time frame (30 days) for the
seller to obtain written permission from the lender to conduct a short
sale. Prepare for a tough negotiation. As always, get an inspection to
avoid buying a house with major defects.
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10 Important Tips to Successful Real Estate Investing
Be a Real Estate Investor - 10 Important Secrets
When it comes to investing, everybody has certain goals and aspirations. However, we have
found that there are certain guidelines every aspiring real estate investor needs to know:
1. Compare Property Values and Rents
Financial statistics only go so far; the best measure of a property's
market value is often the sale prices of nearby properties. The same
holds true for area rents. A low price can often be justified by a
reasonable rent; renters who can afford a high rent can afford to buy
instead, so reasonably priced rent is a need.
2. Be careful - Tax laws may change
Don't base your tax investment on current tax laws. The tax code is
constantly changing, and a good investment is a good investment
regardless of the tax code. The right property with the right
financing is what you should look for as an investor.
3. Specialize in something you Know
Start in a market segment you know. Whether you focus on fixer-uppers,
foreclosures, starter homes, low-down payment properties,
condominiums, or small apartment buildings, you'll benefit from
experience by specializing in one aspect of investment real estate
properties.
4. Know the Costs going in!
Know the financial statements inside out. What are operating expenses?
What are loan payments? Vacancy costs? Taxes? What does the cash flow
statement look like? These are key issues that must be addressed
before making a solid investment.
5. Know where your tenants are coming from
If the last rent increase was recent, your tenants may be considering
a move. If tenants have a short-term lease, they may be living there
simply to attract unsuspecting buyers. It is also important to collect
the tenants' security deposits at closing.
6. Assess the tax situation
Taxes are an integral part of successful real estate investing, and
they often make the difference between a positive cash flow and a
negative one. Know the tax situation, and see how it can be
manipulated to your advantage. It may be a good idea to consult a
tax advisor.
7. Investigate insurance coverage
If seller's coverage is based on lower-than-current replacement value,
your insurance cost may increase when you pay a higher purchase price.
8. Confirm Utility Costs
Ask the local utilities to verify recent utility expenses, especially
if any of these costs are included in your tenant's rent.
9. Consult Your Accountant
Taxation is a key element of successful real estate investing, so be
sure to find an accountant who is well-versed with the constantly
evolving tax code.
10. Inspect!
Make sure that you always perform a thorough inspection of the
property before buying it. Never, ever buy any property without at
least examining the site. In some cases, hiring professional
inspectors to examine the structural mechanical system may be a sound
investment.
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How to Make Money in Real Estate Investing
Lower Your Taxes
Tax incentives for real estate investors can often make the difference in your tax rates. Deductions
for rental property can often be used to offset wage income. Tax breaks can often enable investors
to turn a loss into a profit.
For which items can investors get tax breaks? You could claim deductions for actual costs you
incur for financing, managing and operating the rental property. This includes mortgage interest
payments, real estate taxes, insurance, maintenance, repairs, property management fees,
travel, advertising, and utilities (assuming the tenant doesn't pay them). These expenses can be
subtracted from your adjusted gross income when determining your personal income taxes. Of
course, these deductions cannot exceed the amount of real estate income you receive. In addition
to deductions for operating costs, you can also receive breaks for depreciation. Buildings naturally
deteriorate over time, and these "losses" can be deducted regardless of the actual market value
of the property. Because depreciation is a non-cash expense -- you are not actually spending any
money -- the tax code can get a bit tricky. For more information about depreciation and various tax
alternatives, ask your tax advisor about Section 1031 of the U.S. Tax Code.
Have a Positive Cash Flow
There are two kinds of positive cash flows: pre-tax and after-tax. A pre-tax positive cash flow occurs
when income received is greater than expenses incurred. This sort of situation is difficult to find, but
they are usually a strong and safe investment. An after-tax positive cash flow may have expenses
that outweigh collected income, but various tax breaks allow for a positive cash flow. This is more
common, but it is generally not as strong or safe as a pre-tax positive cash flow.
Regardless of what kind of real estate you choose to invest in, timely collections from your tenants
is absolutely necessary. A positive cash flow -- whether it be pre-tax or after-tax -- requires rental income.
Be sure to find quality tenants; a thorough credit and employment check is probably a good idea.
Use Leverage
One of the most important factors in determining a solid investment is the amount of equity you
are purchasing. Equity is the difference between the actual worth of the property and the balanced
owed on the mortgage. In order to increase equity, investors often choose to borrow money. Borrowing
money allows you to magnify the return on your investment. Borrowing money to increase equity is
known as leverage. Leverage can make the money you invest out of your pocket go a long way.
In order to illustrate the value of leverage, let's take a fictional example: assume you bought a $200,000
rental property with a 30% down payment; the remaining 70% of the purchasing price is paid for with
borrowed money. Let's further assume that after several years the home is worth $270,000. The $70,000
return on your $60,000 investment -- the amount that you paid directly -- is more than 100%. (There is more
to calculating the return on investing, but this will keep it simple.) If you bought that same $200,000 property
without borrowing, the return on your investment would be 35%. Leverage puts borrowed money to work for
you.
Benefit from Growing Equity
While investing in real estate is relatively complex, it is often worth the extra work. When compared to
other financial investments, like bonds or CD's, the return on investment for real estate purchases can
often be greater.
The key to real estate investing is equity. Determine an amount of equity that you want to achieve. When
you reach your goal, it's time to sell or refinance. Determining the proper amount of equity may require
the assistance of a real estate professional.
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A FEW POINTS ABOUT INTEREST RATES!!
Less is more
If you're new to investing or real estate and don't know the first thing about interest rates, here's a good tip: the
higher the interest rate, the more expensive it's going to be. High interest rates mean you will have to pay back
more on the money you borrow. Another good rule of thumb is that affordability increases if you use an adjustable
rate mortgage (it's easier to qualify this way). Of course, there will be a wide range of prices that you can choose
from, depending on what kind of financing you choose...
Not even the Fed knows for sure
The Fed holds a considerable amount of power, but they can't control everything. Mortgage interest rates are
affected by many unpredictable political, economic and social events. So there is no guarantee what direction
interest rates will go, despite the forecasts of the experts. Therefore, make your financial decision based on
where things are today including your budget, your needs and your future plans.
Locking in rates assures your lowest interest
If you do decide you want to lock in at a certain interest rate, you will need to complete a loan application and send
it to your lender as soon as possible. This must be done so that your commitment doesn't run out before your loan
is approved. Follow up and be se sure that the lender is receiving all of the necessary documentation. Get a
property appraisal, which usually costs about $300, through your loan representative as soon as possible.
Don't obsess and miss a good real estate deal
Although rising interest rates can create more problems for home buyers, waiting and hoping for low rates is not
necessarily a smart move. You may end up paying a higher price. Also, refinancing is always an option in the
event that interest rates come down. Visit again soon! We have more information that you will need!
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FREQUENTLY ASKED QUESTIONS
What is the average sales price of a home in Sedona ? January 1, 2004 to present has been an extremely active
market. To date 275 site-built homes have sold at an average price of $474,405 . This price includes the statistics
of over 20 million-dollar+ homes closed so far this year. Likewise the average list price of a home is inflated to
$833,682 by the inventory of over 80 million-dollar+ homes on the market. The market for homes under $300,000
is disappearing.
I'm looking for a condo. What can I expect?
The price range for condos in Sedona ranges from $130,000 - $650,000 depending on age, views, size, location.
The market for condos under $300,000 is a seller's market at this time and there is a waiting list of clients looking
for condos in the $200,000-$300,000 price range. To be successful in your search, you must have a dedicated
representative looking for you, and be willing to write an offer sight unseen based on the advice of your
representative. Of course, we would expect you to come to Sedona to approve the sale during the inspection period.
I want a lot with views in Sedona. How much should I expect to pay? Is there a time limit for building on
the lot ?
Due to the limitation of land and loss of views upon leaving Sedona, lots with views generally start at about
$200,000. There is no time limit for building since many homeowners buy additional lots and hold to protect
views and privacy.
What are the building codes for height and color of new homes in Sedona ? There is a height restriction by the
county of 22' from the point of land. However some neighborhood codes have a lower limit on height restrictions.
Paint color of the exterior must fit within a range of hues that must be approved by the homeowner's association.
Whiteor colors with high reflectivity, are not allowed.
How much should I expect to pay per square foot to build a house ? Naturally, that is dependant upon your
choices in building. If using a local contractor, the price of a new home can start about $125 per square foot and
I've seen people spend as much as $400/sq. ft. Each house is designed specifically for the lot and views. Since
there are no subdivisions of pre-developed house plans to help drive the overall cost of construction down,
building in Sedona will be more expensive than a city development. However, the joy of living in your custom
home with views of the red rock mountains often overshadows the cost.
What medical facilities are in Sedona ? The Sedona Medical Center is located on Highway 89A in West Sedona.
It services regular doctor visits, x-rays, blood tests and emergencies. The Verde Valley Regional Medical Centerl
is located 15 miles south in Cottonwood. Flagstaff Medical C enter is located 28 miles to the north. Both are
equipped to handle more serious cases and injuries. Phoenix has the Mayo Clinic, Arizona Heart Institute and
numerous other hospitals. Back to top |
