Escrow and Closing Cost Basics

Escrow and Closing

When you want to buy our sale your home, you may be surprised about how many fees there are and how complex the process is.   The closing process is designed to make sure that everything in the purchase and sale agreement is performed legally per the contract.    The process will also assure that everything is done and there are no surprises when the title is being transferred.

Many times buyers and sellers in the Texas real estate market are surprised and have concerns about all the escrow and closing cost involved in buy or selling their home.  Escrow and closing cost refer to expenses that occur during the process of transfer of title, obtaining a mortgage and inspecting the property.

Closing Cost

  • Title Insurance Premium
  • Realtor Commissions
  • Transfer Charges
  • Assumption Charges
  • Recording Fees
  • Loan Fees
  • Tax Proration’s
  • Insurance
  • Pest Inspections
  • Surveying the Property
  • Home Warranty
  • Home Inspection
  • Appraisals
  • Option Fees
  • Escrow Money – Money held in trust account to insure both parties have “skin in the game”, so to speak.

Escrow Cost

I have heard many complaints about closing and escrow cost, but it is necessary to insure that safety of the home buying process.    Laws now stipulate that Title Company give you an estimated closing statement.   When you buy or sale a home, I suggest you review this so you understand what you are paying for and what you are getting.

If you have any questions regarding the escrow and closing process please contact me at (208)830-7991 or via email at tom@tomashworth.com.

 

Is There Any Such Thing as the IDEAL INVESTMENT?

Horseshoe Bay Rental Property

Horseshoe Bay Rental Property

In today’s market rental property could be the IDEAL investment.  Rental property , especially in Horseshoe Bay, offers a high rate of return when compared to the ups and downs of the stock market.

In this article I am using IDEAL to mean “Identify the Advantages of rental homes”:

  • Where can you have someone else pay for your investment?  Rental homes the monthly rent goes toward paying your expenses and generates your return on investment.
  • You can depreciate your property and get a tax shelter.
  • Your equity in the home grows monthly as the mortgage is paid.
  • Homes are worth a lot more now than they were 20 years ago.  So you will get appreciation as your home goes up in value.
  • And of course you get leverage by using borrowed funds to grow your wealth.

If taken as a whole, the items mentioned above make rental property a fantastic investment.   Rents have been on the rise due to people losing their home to foreclosure and bankruptcy.  People still have to live somewhere, so the rent market is booming now.

Right now in Burnet Texas there is a huge demand for rental properties.  Let me help you learn how to be an Real Estate investor.

Burnet Texas Homes: Why Real Estate Deals Fail – Part 2

Incompetent or Inexperienced Texas Hill Country Real Estate Agent

Why Deals Fall Apart

Why Deals Fall Apart

I believe it takes an agent about 30 closed transactions before they understand how Texas Hill Country Real Estate works.

If you hire an enthusiastic young agent, the benefits might be they think positive and are very eager to please. But since they are going through on the job training, be prepared missed deadlines, unreturned phone calls and missing things critical to getting your transaction closed.

Likewise, if an agent is representing a lot of clients they sometimes become distant when it is time to give you support that you need. I know listing agents that put a sign in front of the home, hang a lock box and you never see them until it closing time and they show up to get paid.

It does not cost you a dime more to work with a Realtor® that has experience.

Texas Hill Country Insurance Issues

Sometime insuring Texas Hill Country homes can be difficult. This is true especially if it out in the country. Sometimes this is due to lack of fire protection.

Also, if the home had a history of water damage, fire, mold or other issues filed it could be hard to insure.

Every lender will require insurance. So if you don’t get the home insured, it means they will not loan you money.

Cash buyers will sometimes back out of deals due to lack of affordable insurance.

Texas Hill Country Appraisal Issues

Part of the lending process is to get an appraisal on the home.

Lenders do this to assure the home is worth what they are giving you in a loan.

An appraisal is a person’s opinion based on findings. Therefore you can sometimes get appraisals in the Texas Hill Country that are not good.

Texas Hill Country comparable sales, pending sales and active listing similar to the subject property play a huge role in the appraisal value. So if you are a “For Sale by Owner” (FSBO) and you think your home is worth $400,000 (most home owners over-value their homes) and a property similar to yours sold for $350,000, then don’t expect to be able to sell your home for $400,000 even if you have a buyer willing to pay that. Truth is the bank will never loan what you are asking.

Yeah, I get it. Your home is way nicer than everyone else’s home, but the appraiser will never see that. Many times the appraiser never enters the home or closely inspects things.

If your home does not appraise at what you are asking, most times the buyer will want you to adjust the price. If you don’t, the deal will fail.

Burnet Texas Homes: Why Real Estate Deals Fail – Part 1

Why Deals Fall Apart

Why Deals Fall Apart

Most buyers and sellers of Burnet Texas homes are usually surprised when their real estate deal falls through, but the reasons this happens is often predictable for an experienced agent.

Here are a few of the most common causes:

Financing Problems

If you are selling your home, you should never take your home off the market and put it to a pending status unless you a firm loan commitment from a lender. This does not mean “pre-qualified”, this means “pre-approved”.

A “pre-qualified” letter means nothing. It just says that they have an OK credit rating and according to what they told the lender, they should be able to get a loan. These letters usually contain a list of conditions that must be achieved before the lender will approve the buyers’ loan.

Inspection Items

Many times you have to negotiate twice on every real estate transaction. Once with you negotiate the initial contract to sell your home and then you have to negotiate if your home has defects that fail home inspection.

If you can’t get both parties in the transaction to agree the deal will fail.

Buyer’s Changed Their Minds

A home buyer (especially in declining markets) realizes that they offered more than they should have for the home. They could just forfeit the earnest money and walk away or try and find something wrong in home inspection, just to get out of the contract. Since there are many contingencies in real estate contracts, buyers usually have no problem getting out of the contract and getting the earnest money returned.

It is a good idea to get a high earnest money deposit with the offer if you are a seller. 1% to 1.5% or $1000 whichever is greater is usually what I recommend.

If I am representing a buyer, I usually try to offer as little earnest money as possible. I suggest my clients start at 1% or $500 whichever is lower.

Seller’s Changed Their Minds

This can be very tricky. It is very hard for a seller to get out of a deal on a real estate contract than it is for a buyer. Usually the only way is for this to be handled in a court of law or by an arbitrator.

Other People

Attorneys reviewing the contract can recommend that the buyer get out. Parents can influence their children (First Time Home Buyer) to back out of the deal for many different reasons. I once lost a transaction once because the father did not like the fact the home was more than 5 miles away from where he lived.

Horseshoe Bay Texas Market is HOT

Time to get in the Game

Great news for home sellers is that home sales look like they are heading up.  A lot of Realtors© I know are very busy.
If you are selling your home, it is time to get in the game.   The market is set for quicker sales and lower inventories of homes on the market.   What I would like to do is give you some tips on getting a higher price for your home.  Some of these tips will help you have a potential gain in your home price of tens of thousands of dollars.
Some upgrades on your home matter much more than others when you are selling.   Of course you need to work with a Realtor© to stage your home, but that alone is not going to raise the price of your property substantially.
The main things that will raise the price of your home are:

  • More Space in Your Home.
  • Lower Maintenance Cost and Utility Bills.
  • Curb Appeal – You Never Get a Second Chance at a First Impression.

Exterior Home Improvements

Curb Appeal Means Everything

Here are 4 things you can do to increase the value of your home substantially.

  1. Finish Your Basement – The finished square footage does matter.  It matters a lot.  If you have a home with an unfinished basement, you could easily sheet rock walls ceiling, add light fixtures, carpet the floors and turn it into a finished room.  A finished basement can add a serious amount of value to your home.  Adding the extra space that can be used as a home gym, bonus room, office or bedroom, will give your home an advantage of other similar home that do not have a finished basement.
  2. Turn a side office into a bedroom – If you have an office that is large enough for a bed, you should consider adding a closet and making it a bedroom.  The difference between a two and three bedroom house is substantial.  This can increase your asking price several thousand dollars.  If you are planning on turning the extra space into a bedroom, you will need to make sure it is approved by local regulatory agencies.  They may require windows that open and other things to be used as a bedroom.  You will also want to update this with the Tax Assessor, so that it is recorded with the larger number of bedrooms.  The pain of dealing with the government agency may yield many thousands to the value of your home.  I have seen a 2 bedroom home that was valued at $350,000 increase to $425,000 just by adding a bedroom.
  3. Curb Appeal – The first impression is the most important aspect.  It sets the mood for the home buyer.    Improving the exterior of your home can mean tens of thousands in the asking price of your home.   Drive around and look at houses.   Identify houses that look great from the front and try and do the same with your home.  Buyers are heavily influenced by what they see first.  If you have a great interior, buyers will feel like they are settling if the outside is not great.  Paint and landscaping can do a lot.
  4. A Good Roof – All buyers will check the roof.  If yours looks bad, then many will stop looking and move on.  No one wants a home that the roof looks like it may leak or fall in.   A new roof is a great advertising feature.

I know that you are now saying, “That will cost me a lot of money”.  What I am saying is that “you may have to spend a little to gain a lot.”