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Building a New Home

March 7, 2012
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Jeff Donnellan Re/Max

Building an new home is an exciting process and some times necessary when the real estate market is short on supply of what you need or want.  When people have specific needs or looking for that forever home it’s important to get what you want, otherwise you just end up moving again.

The home builder market has shrunk considerably since 2007, with many being stuck with a large inventory and eventually declaring bankruptcy.  In many ways this was a good thing since it cleared out many of the people that had no idea what they were doing as well as the disreputable business men.  What remains is the best of the best and home builders with a well run business.  Most home builders do not build spec homes any more or if they do, the selection is very limited.  Because of this they some times charge a premium which is a little bit over market.

The benefits of a building a new home are that you get to make all the selections, such as location, lot, features and amenities with no trade offs or remodeling.  The benefits of projected long term ownership and energy efficiency can be well worth paying a bit over market because moving costs are extremely expensive when you consider closing cost, hiring a Realtor and paying commissions.

Once you find the right home builder and location it’s important to negotiate the final price of the home with the lot and all upgrades.  Find out what is standard and what is an upgrade.  Ask about the materials used and how they effect over all usage, durability and energy efficiency.  Make sure the home builder provides a warranty and is reliable about fixing any issues that go wrong in the 1st months of ownership.  Also ask for at least 3 referrals.

The largest challenge is planning a strategic move.  Financing plays key role and may take some creative financing to make it work since many home buyers also have a home to sell.  Here are some options that can set you up for success if you currently own a home and want to build a new one.

1.  You many need to qualify for loans, your current and the new one in order to start construction.  The construction period is usually 4-6 months.  This would give 3-5 months to market your home and find a buyer.  This may be challenge depending your current real estate market.

2.  Qualify for both loans and rent out your existing home just before construction is complete.  This may be a great option if you can afford the new down payment and use rents to pay your existing mortgage.

3.  Find alternative financing or a portfolio loan.  The rates may be a bit higher but they do not have to meet conforming mortgage standards and could be a bit more flexible.  Many of these mortgage lenders will set up a refinance with in 1 year once the mortgage has  seasoned and you build property management history.  At that point you can qualify for a conforming loan with lower rates.

4.  Option 4 is to sell your home and find temporary living while the new home is being built.  This could be a short term rental of 6 months.  The key to this option this option would be to select all the details of your new home and once you get a purchase contract for your existing home, get the construction process started immediately.

Good luck with your new home.

www.webhomesearcher.com

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Steps to Purchasing a Chicago Home

March 2, 2012
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Jeff Donnellan

www.webhomesearcher.com

So you’ve found that perfect home after searching for a week, a month, or a year.  So what’s next?   Most likely you’ve already done your pre-approval and financially qualified the home to make sure it’s in your budget.  The next steps will show in detail of how to make that perfect home yours.

1.  Ask for the Home owner’s disclosures such as “lead paint”, “Radon”, and the Seller’s disclosure that lists about 20 items that are critical to a well-functioning home.  If you are buying a foreclosure the seller will not provide disclosures.  So a home inspection is crucial.

2.  Next a CMA or Comparative Market Analysis prepared by gathering at least 3 sold homes with in close proximity and similar features will help determine value and offer price.  If a home is asking 200k and the comparable sales are 195k, the home is well priced.

3.  Making the offer:  These are the 5 negotiable parts of the contract.

  • Price
  • Earnest Money ( good faith deposit kept in escrow until closing when it is returned)
  • Closing Date
  • Personal property ( appliances, fixtures, furniture)
  • Financing (FHA, VA, Conventional, Cash)

4.  After the contract is negotiated it’s time to get busy.  A home inspection should be scheduled in the 1st 5 days after acceptance.  The inspection will help determine if there are any defective parts of the home and issues that need to be repaired.

5.  An attorney should be contact as well to review the contract and get in writing  home inspection issues that the seller agreed to fix or give as cash credits. (with in 10 business days  after contract acceptance)

6.  Contact your mortgage lender and let them know you have an accepted contract.  They will take a mortgage application and start your loan processing.  They will ask for additional documentation such as bank statements, pay stubs, w 2’s and tax returns.

7.  Many of the next steps take place behind the scenes.  The underwriting your loan will begin to make sure all documentation is place and the appraisal will be order to verify the property’s value meets the loan amount.

8.  A mortgage commitment will be issued stating that funds are approved and awaiting the closing.

9.  You will want to do a final walk through of the home usually the day before or morning of closing to make sure no damage was done to the home when the seller moved out and that all agreed upon items have been left in place.

10.  And finally the Closing.  Your mortgage funds will be wired to the title company where the closing is taking place and loan documents will be signed.  Items needed:  A cashier check for down payment, & closing costs made out to the title company and Identification like drivers license or passport.

Congratulations!!! You’re now the proud owner of  a home.