Mark Thompson: The List and Buy Guy Nix Tann and Associates, Inc. C 601 291 0820, O 601 982 7918 Mark@nixtann.com - SAVE MONEY ON YOUR DREAM HOME

SAVE MONEY ON YOUR DREAM HOME

Mark Thompson The List & Buy Guy The Insight Group www.thelistandbuyguy.com C 601 - 291 - 0820 | O 769 - 300 - 2651

If you are currently working with another brokerage, this is not a solicitation for business.

Table Of Contents

How Real Estate Agents Help Home Buyers

Owning Vs. Renting

Buyers' Needs And Desires

Real Estate Horror Stories To Learn From 29

Searching For The Right Home

Buying A House: Negotiation Dos And Don'ts 43

What To Know About Home Inspections

Shopping For A Home Loan

Programs For Home Buyers

10. The Closing Process

11. Organizing Your Move

Introduction

Team,

Thanks for taking the time to read my latest book on How to Save Money on Buying Your Dream Home, which, to most, may well be the biggest purchase we will make. If you are like many of us, you may be nervous about the entire process. Hopefully, I can ease the angst. With 41 years in real estate coupled with 28 years in mortgage lending, I think I have the tools to make the home buying process easy and seamless. Throughout my years of experience in the real estate industry, as well as the finance and construction industry, I’ve amassed insider knowledge to help home buyers get great deals on their home purchases. And now, you’ve got all of that information at your fingertips.

In my book, you’ll find the following:

• An overview of the buying process • How to determine your wants vs. needs in your next home • Information on securing a home loan • Common mistakes to avoid • A negotiation guide to saving money on your purchase • And much, much more Sure, you can try to employ these strategies yourself, but you should know that it costs you absolutely nothing to hire me to help you find your next home. Yes, buying a home can be stressful, but with my book and experience, we can make the process go as smoothly as possible.

About Me

With over 41 years in the real estate industry, which includes construction, listing and selling, managing my personal portfolio and rehabbing houses for resale and wholesaling. I was also a Mortgage Lender for 28 years during that time. I feel I have the inside track when it comes to getting my clients approved and some call that my "Special Sauce" because I have the inside track on knowing how the mortgage business works and my contacts there. For fun I play tennis where I have won six National Tennis titles and I am in the Hall of Fame. I don't say that to impress you, but to impress upon you my drive and determination to be the best. I believe to be successful you have to be consistent, coupled with a wicked relentless work ethic, always staying locked into what you are trying to accomplish. That being said, I would be honored to be included on you or your friends/relatives' team for your real estate needs.

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What others are saying about Mar ying about Mark

Here’s a list of people whom I have helped buy or sell a home and what they said about working with me:

Mark had a tough job, but he did it!

We were challenging clients, to say the least! We were moving to Madison and didn’t have a lot of time to look at houses, having to deal with our employer’s relocation and all of the other challenges that came along. But Mark went above and beyond to help us. Even now, one year after the sale closed, I can still call him for business and service recommendations in the area — he seems to know just about everyone and is always happy to help.

Mark is the best agent in the Tri-County area!

I’ve used Mark twice so far, and I was impressed. I bought my dream home with Mark a year ago. He worked long and hard to find me the perfect home. And he just recently sold another property of mine. Everything went quickly and smoothly. Both of my real estate deals were done in a professional way. Mark is honestly the BEST in the business. I would highly recommend him.

Mark's perseverance got me the house.

My experience with Mark during the entire home-buying process, from start to finish, has been nothing short of exceptional. I have a unique work structure, and because of this, it was very difficult to find mortgage lenders that would approve me for a home. That's where Mark's 28 years of lending experience came in. I was very frustrated and on the verge of giving up, but Mark insisted we continue searching. Not only

did we find a mortgage lender but also a mortgage that I felt great about. His perseverance is the reason I am now a homeowner. He is professional, punctual, knowledgeable, and very easy to work with. With the highest regard, I will recommend Mark to all my friends and family.

Very attentive to concerns, details, and negotiations.

Mark helped me find a house by literally picking it out for me. Every house I wanted to go in, I got there and didn’t love it. Mark was busy taking notes of my likes and dislikes, and Mark said, “I have a house that you’re going to love,” AND I DID! I went back 4 or 5 times to show other family members, and he accommodated me without complaint. I was a first-time home buyer, and he walked me through the steps of everything, gave me advice, and constantly followed up to make sure I was doing OK. With his help, I was able to close on the house early, right before I started my new job. I would recommend Mark to EVERYONE, buying or selling. Mark made it so so easy. He guided us through the entire process. He recommended great people to work with every step of the way. He was available 24/7 to answer any questions we may have had. With his high standards, expertise in the industry, and patience, we would recommend him as a realtor to anyone looking! He was amazing!

Mark even advised me on how to prepare my house.

Mark was a gem. In addition to being highly knowledgeable about the real estate market, with 41 years of experience, he also has 28 years of lending experience. He is the consummate professional. He was extremely easy to work with, gave me excellent advice about preparing my house for sale, and was very responsive during the entire process of receiving offers, selling, and closing. I would work with him again in a heartbeat. He's

that good.

Mark is the first agent I would call.

Mark and his team were able to rapidly list, show, and sell my property. Being an expert in real estate, he was spot on in pricing my property and getting this deal completed. Overall, I highly recommend Mark and his team. If I want to buy real estate, Mark would be the first person I’d call.

Mark got us an offer in three days!

Mark was the consummate professional during our stressful and complicated process. While juggling a "failed" marketing effort with another agent, he presented a well-thought-out plan and strategy to sell our home in short order. We needed to move quickly due to a growing family and another baby on the way. He helped alleviate that pressure by securing an acceptable offer within only three days of listing. We put pressure on him, and Mark delivered. Later, we found out that Mark has won 6 National Championships and is in the Tennis Hall of Fame. No wonder the pressure did not phase him. We could never thank him enough.

Mark kept us calm throughout the process!

Mark always made himself available to answer questions. He worked hard to sell our home and find the best fit for our new home. Mark and his team worked with us through the entire process and kept us calm when we got anxious.

I am 100 percent satisfied!!

Mark is professional and knowledgeable about everything. He is also always available. I would definitely recommend him to anyone—very smooth transaction from start to finish. I felt

confident with his experience.

Mark found us our dream home.

Mark was very efficient and helped us find our dream home within a few short months. He was able to negotiate the price that we wanted for the house. Overall, I would definitely use Mark again to help us look for a house if need be in the future. Thank you so much!

Efficient communication and service.

Mark and his staff were very helpful in selling our condo. They kept me informed frequently with email, sending reports on showings, offers, and feedback from potential buyers. We are very satisfied.

Mark will get your house sold fast!

Mark is great and has the expertise to get your house sold. The communication throughout our sale (from beginning to end) has been outstanding. Mark understands the stress involved in selling your home, and he updated our family consistently! This made us feel we were in good hands. I have worked with numerous agents, and I highly recommend that he represent you when it comes time to sell your home.

Excellent experience topped off with a personal touch.

Excellent experience all around. Not only are they knowledgeable, but Mark and his team have a very personal touch. I felt like family throughout the entire process. He always took his time; we never felt rushed or like “just a number.” I sold my home and bought another one with Mark. We had lots of questions that he gladly answered, and Mark guided us through the entire process, eliminating lots of stress. I truly appreciate

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that and would recommend Mark and his team to family and friends.

Sold our home in a week!

Mark was an absolute dream to work with. Professional, responsive, efficient, and my moral support when in time of need...unfortunately for him. Ha! We sold our home within a week. What else can you ask for? Grateful, grateful, grateful!!!

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CHAPTER 1 How Real Estat eal Estate Agents e Agents Help Home Buyers

I’m a REALTOR. As a REALTOR, my fiduciary duties are to be loyal, confidential, obedient, fully disclose, have full accountability, use skill, care, and be diligent. To the seller and buyer, a duty of honesty and fair dealing. I would be truly honored to join your team. Did you know that real estate agents for buyers are generally paid for out of the listing agent’s commission? Ha! So, I’m not looking to part you from your money. Instead, you will enjoy the benefits of 41 years of real estate experience, 28 years of lending experience, and advice I have gleaned throughout my career of being the List and Buy Guy or, as some have said, the Premium Services Upgrade. If you allow me to join your team and help you find that dream home, you can text or call me at 601-291-0820 or by email at Mark@nixtann.com, and we will set up a time to visit. Technology has changed the way homes are sought and bought today. In this “Information Era,” most buyers are first introduced to the house they eventually purchase via the internet, through Zillow, Trulia, Yahoo! Homes, Realtor.com, Redfin, or hundreds of other real estate websites.

WHY DO HOME BUYERS NEED A REAL ES UYERS NEED A REAL ESTATE AGENT? GENT?

The reasons to use a real estate agent today are as valid as yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their own real estate transactions came about recently, throughout the last decade. This has caused buyers to wonder if using a real estate agent is no 1

longer necessary or if it's an expense that can be avoided. While doing the work yourself can save you money if you buy a “For Sale By Owner” (FSBO) house and the seller agrees to reduce the price by 3% (half of what a listing agent would receive), for many, a do-it-yourself home purchase might be pricier than a real estate agent’s commission in the long run. Besides, a buyer generally doesn’t directly pay any commission to an agent on a house purchase. In most home sales, there is a listing agent (the agent engaged by the seller to sell the property) and a selling agent (the agent who introduces the eventual buyer into the transaction). The selling agent is sometimes called the “buyer’s agent” because they are often working on a certain buyer’s behalf, and it’s easier than explaining that the selling agent is not the listing agent but really the buyer’s agent. Some real estate agents market themselves as “buyer’s agents,” “exclusive buyer’s agents,” or “buyer’s representatives.” These real estate agents have chosen to make a business of finding homes for prospective buyers and handling the negotiations and transactions attendant to the purchase. These agents want to accentuate why a buyer shouldn’t go directly to the listing agent when purchasing real estate. A buyer who goes directly to the listing agent and allows that agent to “manage” both sides of the transaction is dealing with an agent who may have conflicting responsibilities. Their job is to get a reasonable price for the seller, and they might not zealously represent the interests of the buyer. Those who market themselves as buyer’s agents indicate they’re only working for the buyer in a real estate transaction. The buyer’s agent's commission is paid by the seller, with rare exceptions. They either get paid directly by the seller or set up the transaction so that the seller provides a “credit” to the buyer for how much the real estate commission is — then the buyer pays

the commission. A maxim in real estate is, “No matter how it’s set up, the buyer still walks away with the house, and the seller still walks away with around 94% of the purchase price.”

MORE ACCESS TO THE REAL ES O THE REAL ESTATE MARKE TE MARKET

A real estate agent will have better access to the market and special knowledge of local conditions. The agent is a full-time liaison between sellers and buyers. An agent will have ready access to other properties listed by other agents. Buyers’ and Sellers’ agents know how to put a real estate deal together. A real estate agent will track down homes that meet your criteria, contact sellers’ agents, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things. This is even more so when a buyer is moving due to relocation or employment opportunities.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate agent will keep the transaction “at arm’s length” such that personalities and emotions do not become involved. Price negotiations take a special skill and understanding of the psychology of offering and counter-offering. Agents keep the transaction dispassionate and rational. For example, a buyer (you) might like a home but despise its wood- paneled walls, shag carpet, and lurid orange kitchen. When you work with an agent, you can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home without insulting the owner. Your agent will translate that to the seller — that you very much like the property but can see having to spend a certain amount in decorating costs and thus can offer that much less.

CONTRACTUALLY SPEAKING…

There are many contracts and documents involved in purchasing a house. The stack is more than an inch thick. Unless you’re a real estate lawyer or title agent, these documents will be foreign to you. Yet, they require detailed and accurate completions. Buying a property is not necessarily a “fill-in-the- blanks” transaction. In title work, one mistake could haunt the buyer well down the line after purchase. This very situation happened. A property that sat on a double lot was put on the market. The neighbor bought it to carve off a bit of the second lot to expand his own yard. The seller then put the home back on the market, and it sold. Months later, through a property tax notification, it came out that, in preparing new deeds for the properties, the expanded yard area was correctly in the neighbor's name; however, the house had been transferred to the home buyer. The new homeowner now owned both houses, and the neighbor owned his expanded driveway and yard. Fortunately, they were good neighbors and settled the matter with a few signatures. A real estate agent regularly deals with these contracts, conditions, and unexpected situations and is familiar with which conditions should be used, when they can safely be removed, and how to use the contract to protect you.

YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY

The point of not using a real estate agent would be to save money, right? Otherwise, why would someone turn down professional assistance in finding a home?

However, it’s unlikely that both the buyer and the seller will reap

the benefits of not paying real estate agent commissions. It works like this: An owner selling on his own (FSBO) will price the house based on the sale prices of other comparable properties in the area. Many of these properties will be sold with the help of an agent; therefore, the seller profits in getting to keep the percentage of the home’s sale price that might otherwise be paid to the real estate agent (usually 6%). Buyers looking to purchase a home sold by the owner without an agent may believe they can save money on the home by not having an agent involved, so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unless the buyer and seller agree to split the savings, they can’t both save the commission — and that’s if the listing price was not already lowered by near the commission amount to make it more market-attractive. Here’s a shortlist of the advantages that using a real estate agent can bring to your buying experience:

• Education and experience • Neighborhood knowledge • Price guidance

• Information on market conditions • Negotiation skills and confidentiality • The ability to handle the paperwork • The ability to handle closing questions • Relationships for Future Business

It’s extremely important to know your real estate agent before you bring one along with you to help in your search for a home, just so that you know what to expect and what will be expected of you.

WHO A REAL ESTATE AGENT IS GENT IS 5

Simply put, a real estate agent is someone licensed to list and sell real estate, including homes, multi-family properties, commercial and industrial buildings. A Realtor®, however, is somewhat different. A Realtor® is a member of the National Association of Realtors®. While an agent is always a real estate agent, a real estate agent isn’t always a Realtor®. Real estate agents who work on behalf of the buyer's best interests are commonly called buyer’s agents. All listing agents represent the seller, but other agents who don’t have buyer-agency agreements with prospective buyers — even though they may show homes to those buyers — are working on behalf of the seller and must obtain the best price they can for the seller. In contrast, buyer’s agents work on commission, which is contracted in the listing agreement. When a buyer’s agent brings the buyer, the listing agent must split the contracted commission with the buyer’s agent.

HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS UR NEEDS

You might feel the urge to pick the first real estate agent who appeals to or approaches you, but that’s something to avoid. As with any profession, there are degrees of professionalism, dedication, and experience. The “wow factor” will simply wear off. Meet with prospective buyer's agents in their offices. A good buyer’s agent will want to know whether you’re pre-approved for a loan by a lender, what kind, and what are the terms of the loan. They should spend adequate time listening to your needs. They should listen more than they talk and ask questions. Is the agent taking notes?

If the agent doesn’t broach the topic, ask for an explanation of his understanding of agency relationships and obligations to you. The law requires agents to explain whether they’ll be working for the buyer or the seller whenever they have substantive contact with a customer or prospective client. Be sure that the agent will show you all listings or properties on the market that meet your requirements, not only listings that are handled in-house. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even when an agent will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and take you to see viable prospects. A good buyer’s agent will provide a home-buying education. The listing agent will point out all the features of a home; a good buyer’s agent will point to the faults — or advise when they can be overlooked. Competent buyer agents help their buyers think clearly as the home-buying process unfolds. For example, if a house is a good buy, a buyer’s agent might suggest looking past the dated bathroom and help the buyer realize that the garage could make a perfect art studio. Likewise, a cute house with all the amenities but with knob-and-tube wiring or a 40-year-old roof might not be worth the asking price. According to the San Francisco Chronicle’s Home Guide, if you decide to buy with the intention of building an addition, the agent should advise you to check the zoning before making an offer. Agree to sign a buyer’s agency agreement after you have met with an agent. Some people sign an agency agreement after attending a showing given by the agent. Working with a seller’s agent is a mistake, according to an article by Amy Fontinelle of Forbes’ Investopedia. Any information you reveal will become leverage that the seller can use in a purchase negotiation. A buyer’s agent

is legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties.

LOOK FOR PROPER CREDENTIALS

You wouldn’t trust a doctor who didn't have the proper credentials and license. Don’t trust real estate agents who don’t present theirs or don’t have them at all. It’s easy to find real estate agents who can take the job, but finding agents with special credentials — those who have gone that extra step to take additional classes in certain specialties of real estate sales — is worth looking into. Here are just a few credentials within real estate that you should be on the lookout for: • Accredited Buyer’s Representative (ABR): Completed additional education during representation of buyers in their transactions. • Certified Residential Specialist (CRS): t (CRS):Completed additional training during the handling of residential real estate, such as houses and apartments. • Seniors Real Estate Specialist (SRES): RES):Completed training for the purpose of helping sellers and buyers 50+ years old. Similarly, if you choose to use a real estate agent who’s also a member of the National Association of Realtors®, it will be a bonus. However, ensure they have credentials relevant to your need(s).

RESEARCH LICENSING

Your state will have a licensing board of all active Realtors® and 8

agents, which you can easily access. You will also be able to see their contact information, disciplinary actions, complaints, or any other information that you’ll need to help influence your decision — especially since most of the information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good agent will know about all the other properties for sale in the area. Also, a good agent always does his or her research regarding the events in the current market and those homes that are out there for the taking. In short, you want an agent who’s an expert on the current market and someone who constantly stays on top of things.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence that a real estate agent has is the best way to figure them out. Ideally, you’ll want an agent who specializes in one or two real estate markets and understands which types of homes and amenities are available within your price range. You can unearth this information by asking them or by asking the state licensing authority if you’re not comfortable with asking the agent directly. You’re better off with an agent who’s engaged actively in one area and price range — e.g., residential homes around the $200,000 to $250,000 range or the $400,000 and up range.

GOING THE BUYER'S AGENT ROUTE

So, you’re ready to take the plunge and look for a place to call “home.” To get the most out of it, use a buyer’s agent to avoid a flurry of paperwork, stampedes of buyers competing for the same property, and other challenges. Home buying can be exciting and exhilarating, but it can also be complex and stressful — which is

why having a pro by your side can make an enormous difference.

As discussed, you’ve probably heard of buyer’s agents, seller’s agents, listing agents, etc. You’re a buyer, so what’s a buyer’s agent? True to the name, buyer’s agents assist home buyers every step of the way; they can also save you both time and money on the road to home ownership. When you find the right one for you, these real estate agents will work day and night to ensure all your needs and requirements are met when it comes to finding the right home.

WHAT BUYER'S AGENTS DO FOR YOU

Your buyer’s agent will have a vast knowledge of the current real estate market for the area, which will include neighborhood amenities and conditions, the law, zoning issues, price trends, negotiations, taxes, financing, and insurance. Once you meet with the buyer’s agent, they’ll generally help you determine your needs and wants when it comes to finding a home and a neighborhood. With the lender's help, the agent will explain to you what you can afford, help you set a budget, provide some insight on the current conditions of the market, and explain what you should expect while shopping for a home. During the shopping period, you’ll meet with your agent for tours of homes you might be interested in. They will give your insight into the floor plans, the home’s pertinent selling points, and the overall crime rate of that neighborhood. They will also give you the rundown of local activities, restaurants, shopping centers, and schools nearby. Your agent is responsible for ensuring inspections of the homes are complete, as well as the disclosures therein.

They’re also in charge of helping with the coordination and completion of such items as the roof inspection, the proper docs to get to the attorney, lender info is in order, and coordinating all other professionals involved with the purchase of the home. When negotiations begin, you won’t have to negotiate the contract yourself. Your buyer’s agent will do that for you. You will be responsible for signing the final closing documents. If you can't be there generally, someone from the attorney's office or maybe even your realtor can sign by a specific "power of attorney.'' Your realtor should be present either way.

DUAL AGENCY: THE BASICS

A “dual agency” relationship occurs when a buyer is represented by a brokerage firm that controls the listing. Once an agent represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple states, this is illegal because of the conflicts of interest that can arise regarding the broker. All agents hold the same responsibility, which is to inform their clients of all potential risks that could arise due to conflicts of interest. In some states, agents are not allowed to work on both sides of any transaction without consent from the clients. If you’re selling your home and you don’t want your agent to also work with the buyer of your home, it’s your right to say so in the listing agreement. This is also true for buyers. A buyer can get out of an agreement with an agent if they are interested in purchasing a home their agent is listing.

When it comes to dual agency, there are definite advantages for the seller.

• Trust has already been gained with your listing agent, so representation for the buyer has been established. • Your agent brought you the buyer knowing that you’re selling, even if your property has not yet hit the market. • Your listing agent will have already covered and researched your neighborhood’s market to gain buyer inquiries, which means your agent will be working from all sides of the deal to sell your house faster and with more incentive. • Your agent works together with corporate relocation buyers who need to find a house quickly, and they will ensure it’s your house that’s bought. There are also cons for the seller when it comes to dual agency, and they are the following: • You can’t be advised by your agent as thoroughly when they must act as a dual agent because impartial facilitation is required. • Your listing agent is not allowed to negotiate the best or highest price for you if you are also negotiating both the best and lowest terms for the buyer. • If the opportunity arises, earning a full commission may tempt the agent to coerce a deal that you might not accept otherwise. • Your agent may inhibit all access to your listing through buyers with agents. To avoid surprises or missteps in a dual agency sale, always ensure you have clarified important details with your agent ahead of time. You can do this by using an exclusive buyer agency agreement or a listing agreement.

HOW REAL ESTATE AGENTS ARE PAID

The National Association of Realtors® 2017 Profile of Home Buyers and Sellers states approximately 8% of homeowners opted to put their homes up for sale in 2017 without using a real estate agent or Realtor®. A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related; 87% of buyers chose to work with a real estate agent or Realtor® on the buyer’s side. Real estate agents and Realtors® — unlike professionals in different categories who bill by hourly rates or earn a salary — get paid through a transaction (commission) at the end of each sale. For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction goes through to settlement (closes) based on the home's selling price. At that point, the commission is earned. The commission itself is negotiated — in most cases, between the seller and the agent. Typically, an agent will earn a commission of 6% from the sale price, but some brokerages have commission discounts for the sellers with whom they work. Essentially, the listing agent and the buyer’s agent will split the commission. That can bring forth some issues. For example, sometimes the split might not be negotiated evenly. A seller could have agreed to pay a commission of 5.5% that, if further divided, the buyer’s agent would receive 2.5% while the listing agent

receives 3% of the commission.

Even though some agents are associate brokers or brokers in general, all commission payments go to the broker who manages the brokerage where the agent is working. From there, the commission is then split between the agent and the broker, according to the agreement that’s been made. The split will vary; sometimes, newer agents will earn a small portion of the commission compared to the experienced or successful agents who generally sell more expensive properties or homes.

PAYING THE COMMISSION ITSELF

The overall commission is paid for at the settlement period by the seller. The fee is taken from the proceeds of the sale of the home or the property. However, in a roundabout way, you could say the buyers pay the commission because they’re literally paying to purchase the house. At the same time, the sellers take the commission for the agent into account during the process of determining the price for the listing. From there, the commission is then divided during the settlement process between the buyer’s agent brokerage and the listing agent’s brokerage. Afterward, the agents who made the real estate sale are further paid by their brokers.

CHAPTER 2 Owning vs. Renting

Owning your own home might be one of the defining qualities of the “American Dream”: the ideals that include an opportunity for prosperity and success and an upward social mobility for the family and children, achieved through hard work. Home ownership is surely ingrained as one of the strongest representations of that vision — 66% of Americans own their own home, and more hope they will or wish they did. Something about home ownership plucks a strong chord with Americans. Financial security, permanency, status, and pride are values many of us seek. Lifestyle plays a big role in the decision to own versus rent. Home buying is most often driven by household formation, such as marriage and growing a family. Fewer than 40% of people under 35 years old own homes, 60% of people over 35 years old own homes, and more than 80% of people 65 years old or over own homes. Interestingly, for the millennial generation, the primary reason for buying a home? Owning a dog. The U.S. home ownership rate has fluctuated between 62% and 70% since the 1950's. Most young people begin their independent lives renting an apartment, maximizing lifestyle flexibility and minimizing the hefty upfront costs associated with purchasing a home. As they build careers, save money, and start families, many choose to buy a home, recognizing that home ownership, as opposed to rental living, is more appropriate to their growing family needs. At the other end of the age spectrum are homeowners nearing 15

retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations, and go back to renting.

WHICH IS BEST?

Is it better to rent or buy a home? Most adults ask themselves this at some point as they form their goals and plan for the years ahead. Before you answer the question, here are some things to ask yourself. Owning and renting each has their advantages, but what’s best for you depends on your circumstances. What will be the duration of your stay in the home? Each market is different, but it is possible to predict whether the time you plan to spend in the house warrants its purchase. In general terms, it takes four to seven years to break even on a home (i.e., where there has been enough appreciation to pay back the cost of the transaction and cost of ownership). If you’re thinking about buying a home and selling it in two years, buying is very unlikely to be cheaper than renting. Do you think of or need your house as an investment in your retirement plan? Americans are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. In 2015, Gallup reported that more Americans named real estate than stocks, gold, savings accounts/CDs, or bonds as the best long-term investment for the second straight year. With 31% of Americans choosing it, Real estate leads, followed by stocks/mutual funds at 25%. A cautionary note though — although home prices have recovered their pre-2006 market slump and continue to rise, the value of your home can fall, as well as rise. Are you financially ready? Owning a home is a financial commitment that requires planning how home ownership fits into where your life is headed. Ask yourself what your budget is and if either buying or renting would require you to stretch

your finances. Crunch all the numbers. A frequent mistake of first-time home buyers is comparing a month’s rent to a month’s mortgage payment. Many people don’t have all the numbers. There are many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, homeowners’ association (HOA) fees, and ongoing maintenance. Are you prepared for the down payment? This is the lump sum payment that funds your equity in the property (how much of the property you own). Sometimes relatives help with the down payment. If you have a choice, take a gift from a parent or other relative rather than a loan because lenders will add the loan debt to your other monthly obligations, which will affect your total debt to income ratio. Be very clear with your lender about acceptable donors for the gift and the documentation. That is another "Non-Realtor" area where I can be helpful. Can you afford the monthly mortgage and its components? Generally, a mortgage includes principal and interest (both amortized over the life of the loan), homeowner’s insurance and property taxes (prorated). These items can affect the monthly payment by several hundred dollars.

ADVANTAGES OF BUYING YOUR HOME

Control over housing expenses. By selecting a fixed-rate 15, 20, 25, or 30 year mortgage, principal and interest won’t increase over the period. You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go to homeowner’s insurance and county taxes. The remainder pays down the loan principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual property ownership. Further, the property should appreciate each year, adding to

equity (what the house could be sold for versus what is owed). Discounting certain blip periods, such as the 2006 housing bubble burst, home prices in the U.S. appreciate nationally at an average annual rate between 3% and 5%. Remember, though, home value appreciation in different metro areas can appreciate at markedly different rates than the national average. Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, potentially boosting its value. Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: • Homestead exemption. Many states exempt owner- occupied homes (homesteads) from a portion of the property tax amount that would typically accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, so a $200,000 home in New Orleans is taxed as if it were worth $125,000. • Federal tax deductions. When you’re looking to purchase a home, it’s important to understand what can be deducted on your tax return and what can’t. Property taxes and interest paid on your mortgage can be deducted if you itemize your federal income taxes, which can reduce your income tax burden. Please check with your CPA for the latest regulations. Unfortunately, many home buyers overlook the effect of mortgage interest on their federal income tax payments. Mortgage interest can

be a powerful financial planning tool. Calculate the mortgage interest deductions you are eligible for and include that in your annual financial planning. Then, check Internal Revenue Service (IRS) Form 1098, which you’ll receive from your lender at the end of the year. This form shows the amount of mortgage interest that you’ve paid. The Tax Cuts and Jobs Act (TCJA) applies from 2018 to 2025 and limits the aggregate deduction for state and local real estate property taxes; state and local personal property taxes; state, local, foreign income, war profits, excess profits taxes; and general sales taxes (if elected) for any tax year, up to $10,000 ($5,000 for marrieds filing separately). This limit does not apply if those taxes are paid or accrued in carrying on a trade or business or in an activity to produce income. In other words, if you are living in your home, you can only claim up to $10,000 in tax deductions on your property, but if you are earning income directly from your home in some way, the limit might be waived. Ownership rights and creative freedom. Your decorating and home-improvement choices are just that — yours, provided they don’t break building codes or violate homeowners’ association rules. You can paint walls any which way, add fixtures, update or finish your basement, or build a patio or deck. Changing your environment to suit your whims is a freeing aspect of home ownership. A sense of belonging to the community. Homeowners tend to stay in homes longer than renters and are more likely to grow roots. They might join a neighborhood association, volunteer at a nearby community center, join a school group, or align with a business improvement district. Renters might not do any of those

things, particularly if they know their lease is up in a year and they might move. There’s an intangible pleasant feeling attached to owning your own house — a sense of freedom and independence. The home you live in belongs to you, and you can do what you want with it. You aren’t daunted about increases in rent or losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area on a more permanent basis; you never need to worry about a notice from the landlord to vacate your rented house or apartment for a variety of reasons over which you have no control.

DISADVANTAGES OF RENTING

No equity building. The monthly rent you pay goes to the landlord. It represents the fee you pay for using the property. You gain no ownership in the property, no matter how long you live there. You are actually feathering the owner's nest egg by helping them pay off their loan. No tax benefits. While homeowners can deduct property taxes and mortgage interest on their tax returns (again, please check with your CPA - times, they are a-changin'), renters aren’t eligible for housing-related federal tax credits or deductions. Home improvements go to the landlord. Any structural and decorative home improvements that renters make belong to the building owner and will have to stay behind when you move to a different place. Additionally, approval for desired major redecoration will be necessary. After all is said and done, the decision to buy or rent depends on the prospective home buyer’s circumstances. There’s no denying that a home of your own is a good financial and a great emotional investment. An investment in a home can also mean an

investment in your future.

There is much to consider when you want to buy a home. Switching from renting to home ownership is generally an exciting and amazing decision to make.

CHAPTER 3 Buyers' Needs and Desires

After you’ve decided to buy a home, what sort of home will it be? It’s a better approach to have a concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). With your needs fulfilled, you turn to your desires. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room or an Olympic-sized swimming pool with a hot tub and sauna. Your priority in any home purchase should be ensuring all of your needs are met. Sometimes, you won’t find everything you desire in a home and if you do, you may not be able to afford it. It’s important to prioritize the things you want in a home by how important they are in your search.

Decide your needs vs your desires.

• Would you like a swimming pool? Enough that a home without one will not be looked at? • In what areas or neighborhoods are you looking? Do you need to live close to work? • What features would make it special? 23

• What can you afford and what is out of your budget?

Budget usually constrains us most in selecting a home. While some things are necessary for any home (as mentioned, a good roof and working appliances), others will just stay on the list of desires for now (like the sauna).

MAKE A LIST; CHECK IT T ; CHECK IT TWICE.

You may have an impression of what you want in your new home. Putting that to paper and having a complete checklist can prove useful. Before starting your hunt for a new home, it’s advisable to make a list of all your basic needs and desires, then prioritize the desires, figuring that all needs must be met in any house under consideration. This will make the search easier and help weed out the ones that don’t meet the basics. Realize, however, that it’s nearly impossible to find a home that meets all requirements. Compromises will be necessary. It’s a good idea to work from outside-the-house factors to inside- the-house. For example, location is perhaps the primary concern and both “needs” and “desires” might be involved. A “need” would be “must be within 10 miles of work.” A desire might be “would like Westwood” (a favored neighborhood), while a need might be “on the north side of the city” (because work, family, friends, and recreation activities are all located there). Location needs may include proximity to schools, frequently used recreation facilities, or mode of transportation (bus or suburban rail access). Whether an item is a need or a desire depends on circumstance. Closeness to family might be a need for a couple with young children or elderly parents to care for — or a desire if those 24

factors aren’t involved. It’s items like these that make a checklist most helpful. After location needs and desires are compiled, housing factors can be considered. Needs include having all essential house structures and systems in good working order. Accepting a house needing a new roof because the owner is willing to knock $7,000 off the listing price — but it will cost $10,000 to replace the roof in two years — is not a sensible deal. Needs might include a minimum number of bedrooms and bathrooms, no steps, a fenced yard, perhaps a first-floor laundry facility, and any feature the prospective buyers have decided they cannot accept a home without. Desires are features that make the home more attractive or enjoyable — an upgraded kitchen, walk-in closets, and a main bedroom suite. Of course, one buyer’s need is another buyer’s desire. The point is to know your own needs and desires to easily assess potential properties and make the process smoother. Regardless, buying a house is not a simple process. Much of the planning should be done well before contacting a real estate agent or looking at homes. Work the costs as well as your budget. Choose a general location. Contact lenders well ahead of home shopping so that your offers aren’t tied up in getting financial approval. In this market, most sellers are requiring a pre- approval letter with your offer. Having the image of your dream home is reality married with imagination. In fact, you may find that some aspects of the house you intend to buy are different. It’s not the same as what your dreams told you. Different people have different requirements. It depends on your thought processes, as well as your personality. We understand important things and potential compromises differently. Needs are basic requirements that just can’t be

ignored or compromised. Desires, on the other hand, can be left behind if the situation demands it. You need to make a clear distinction between what your needs are and which items you would classify as desires. No matter how many desires you have unfulfilled now, they can be worked on later. A pool can be added and paint colors can always be changed.

A NOTE ABOUT PETS

Consider your pets in your home shopping. Home buyers who are pet owners have specific requirements — they must provide for their pets. A third of millennial-aged Americans (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to buy the home, according to a survey conducted online by Harris Poll, on behalf of SunTrust Mortgage. Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/upcoming marriage, 25%, or the birth/expected birth of a child, 19%. Make sure that the neighborhood you are looking in has no restrictions on pets — or livestock, if that’s something you desire. Do you raise American Staffordshire Terriers, also known as pit bulls? There are neighborhoods that ban this breed. What about goats? Vietnamese pigs? Have you always wanted fresh eggs from your own chickens? Include your animals in location planning. Some pet owners choose wood or another hard flooring, not wanting to risk pet damage or odors. An appropriate-sized fenced backyard is on the “needs” list for many pet-owning house buyers. Consider the arrangement of rooms and the structure of the house to ensure it’s suitable for your pets, too. Traffic in the area could be another checklist item.

Pet services, such as veterinary, grooming, and exercising, should be conveniently nearby.

LOCATION, LOCATION, LOCATION!

You must make sure to limit your search to a neighborhood that offers the closest possible match to the kind of lifestyle that you like and want to live. Trulia recently conducted a survey with Harris Interactive, and the real estate site found 84% of Americans said the neighborhood would be equally important to — or more important than — the house itself, if they were searching for a new home. Location is so important that people are willing to give up “must- have” features to buy into their desired neighborhood — 72% would forget about a pool, 55% would lose a finished basement, and 33% would accept less square footage. What matters is living in a safe place with good schools. According to Trulia, 69% would drive through the neighborhood during different times of day to determine if the neighborhood was the right fit. You can’t go shopping for a home without choosing a location where you’d like to live. Probably the most significant decision when buying a home is where it is. Location influences your everyday life. Your property does not exist in a bubble; it’s part of a bigger community. It’s important to find a neighborhood or area that suits your needs. Do you want the peace of secluded woods or the energy of a bustling city center? Do research before starting your search. Drive through the area and see if all the stores, activities, and features you want are

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