Residential Real Estate Basics – The Home Buyers Guide


Houses Bought As-Is for ALL CASH! Fast Closings!

Buying real estate is considered one of the biggest and most important investments made by most people. Investing in a home or rental property carries a price tag in the tens of thousands of dollars – and in many cases – the hundreds of thousands of dallars, unlike an auto, piece of furniture, tools or anything else except one’s retirement fund. It is for this reason that the real estate investor must be prepared to make good buying decisions.

But, you may ask, how do I make good buying decisions relevant to real estate property if I have no knowledge of, or experience in that field? And this is a great question and a very legitimate concern shared by a majority of first time home buyers and even some seasoned homeowners. There are probably a number of practical ways to answer this question while addressing these concerns, but having a guide – which we’ll call The Home Buyer’s Guide – to which you can refer may be the easiest to work with.

So please consider certain important steps to be taken when you’ve made the decision to purchase a home, and are therefore on the verge of making your first appointment to view homes, but haven’t yet walked into a real estate agent’s office or made contact with a home seller. Although you are very close to making that first home-viewing appointment, it will do a world of good to take a step back and put it off a little bit longer while you do some home buying preparations per… The Home Buyer’s Guide:

A) Preliminaries

1 – Contact the 3 credit bureaus (namely Equifax, Experian, Trans Union) and request your Credit Report. This should be free of charge and it will show you what is in your credit profile. Having this information will help you eliminate any unpleasant surprises after deciding on a suitable home.

2 – While you’re awaiting the Credit Report, gather your Employment and Financial Documents (namely Last 2 Years W2 Forms and Last 30 Days of Paystubs, as well as Last 2 Months of Bank Statements), and make sure you can explain any large deposits (usually $1,000 or over) that are not job related.

3 – Your down payment will range from 3.5% to 20% of the home’s appraised value (not the seller’s asking price, two figures that are invariable different). Make sure that the money which you set aside for this purchase is well seasoned (meaning that it existed in your account for at least 3 months prior to using it for the earnest deposit and/or down payment.

4 – If you have children, schools will be one of the important considerations in deciding on your new home, so you’ll need to do some extra work to determine what schools are where. You can do this by contacting the school board and requesting this information.

5 – Once you have completed the above steps, and before you contact a home seller or real estate broker, you may wish to contact a mortgage lender to request a pre-qualification analysis and/or pre-approval based on your income, credit and financial information. This step will enhance your “qualified buyer” status in the eyes of the home seller, and perhaps strengthen your negotiation position.

B) RWAB – Ready, Willing and Able to Buy.

1 – Everyone who contemplates buying a home is not necessarily a qualified home buyer. Only when you are Ready, Willing and Able to Buy, as determined by your lender and the down payment or earnest deposit you placed in escrow and your signature on a contract of sale/purchase agreement makes you a qualified buyer. But the preliminary work you would have already done (the above steps) satisfies many of your own questions in this regard.


2 – To purchase through a Real Estate Broker/Agent or not to, is a question many would-be home buyers contemplate because they think that dealing directly with the home seller will help them to get the home at a reduced price (namely a price minus the broker’s commission). Keep in mind, however, that a home seller who is selling without an agent is most likely trying ALSO to eliminate the real estate broker’s commission and keep the money for him/herself. When you both want to cut the agent out, someone usually ends up losing.

3 – You may need to hire a Real Estate Attorney, depending on where (what state) you are making the home purchase. Most home buyers seem to feel more secure (or comfortable, if you will) when they are represented by a lawyer. If you are purchasing real estate in New York, New Jersey or any of the Northeastern states you’re going to need a lawyer. In some Southern states, you need only an escrow agent (title company) and maybe a real estate broker. Part of the attorney’s job is reviewing the contract of sale to make sure it’s legal as well as protective of your rights.

4 – Be prepared to complete a mortgage loan application for, and pay an appraisal, credit report and possibly an application fee to the lender you select to borrow mortgage money from. Keep in mind that these fees are NOT Refundable once the work is done. However, you may request (or insist upon) a copy of the Property Appraisal Report for your own records, but also to refer to because that report will determine how much you may end up paying for the home AND how much your down payment will eventually be.

5 – One of the most important reports you will need as a home buyer is a Title Report. This report consists of a history of the property you are buying. It’s a chronological account of everything that ever happened to or affected that property since it was constructed, including what is referred to as a “chain of title”. The chain of title is like a string of owners of the property and should be intact (unbroken) at the time you assume ownership.

C) Ownership – Your Piece of the Rock

6 – Title Insurance can be obtained from the same company that issues the Title Report. This type of insurance protects your ownership of the property you’ve purchased, but it also protects the lender’s interest in your property by insuring the new mortgage which you gave to the lender in exchange for the funds you borrowed to complete your home purchase.

7 – Proof of ownership comes in the form of a Deed. In most cases this is a Bargain and Sale Deed with a Warranty against Grantor’s Acts. The important thing is that, after all you’ve gone through in preparation, pre-qualification, pre-approval and selection of, and the process of buying your home, you now have a Deed, which by all established real estate norms, makes YOU the proud owner fo your very own home.

When True Real Estate Property Appraisals Count


During my early days as a real estate sales associate (circa 1981), the broker with whom I was associated was very fond of “old adages” and the historical aspect of real estate. As a newcomer to the business of real estate sales my thirst for knowledge was a leading factor in me clinging to every word (pearl of wisdom) uttered by the broker. One of those utterances was regarding a true appraisal.

He would often say that “the truest definition of an appraisal is what a “willing” buyer is willing to pay and a willing seller is “willing” to sell for”. This truest of true definition helped guide my own approach to doing business as a real estate agent in later years. Though, in the early days, I was unsure how much this “truest” definition was relied upon by appraisers who actually evaluated the homes we were selling, it was a lesson soon learned.

But first a two-part question: Does the data from an “all-cash” sale create a comparable for future sales of similar homes in the same community/neighborhood – and can that comparable be used by the lender’s appraiser to support a given value in his/her report? Answering no would be an indication that any “all-cash” sale comparable is to be ignored by property appraisers and therefore has no impact on future home values within the same neighborhood.

A “yes” answer would permit the use of these “all-cash” sale comparables in the appraisal reports thereby helping the appraiser to make neccessary adjustments in his final value because, not only is an appraisal based on the professional opinion of the appraiser, it must also reflect all recent sales activity in the area in which the subject property is located. Therefore any “all-cash” sales that were consummated within 3 to 6 months of the new sale must be taken into consideration, because they also have an impact on the community.

Overall, the appraisal will lead to the conclusion of what the market value is. If the market price can not be defined easily, then someone can look at the different parts of the property and determine what they believe the market price should be. Usually, this will be done by an inspector looking at the various mechanics that may have been swept underneath the rug. But this done ONLY in the absence of usable market data (prior sales activity).

An appraisal is a necessary requirement when a home is being sold and the buyer is obtaining financing from a bank or mortgage lender. The appraiser may use several external resources and definitions of what market value may include in relation to the opinion being made in order to determine the value of a home. When getting an appraisal, you can expect that the estimates will be based around various factors that are related to the particular market area at that time.

Instead of just examining the parts of the property, an appraiser will also examine the neighborhood and see what everything else is worth in relation to the property. So by appraising a property, you will know how much your home is worth in relation to your own needs as they relate to that property, as well as in relation to everything around it. Observing the standards that exist both inside and outside, you will have the knowledge you need to determine when the timing is right to put your home on the market.

What differentiates the “all-cash” property sale from a real estate sale that is financed by a bank/mortgage lender can be a number of factors, but two of the most important of those factors are: One, the lack of a “mortgage clause” in the contract and two, the absence of a bank-ordered certified property appraisal. This does not mean however, that private deal made between a willing seller and buyer in good faith should be ignored or even discounted.


Understanding The Cash-Out Refinance


What is a Cash-Out refinance?

A cash-out refinance enables homeowner to remortgage their home for an amount greater than the exiting mortgage balance. Once the new mortgage is approved and a mortgage closing takes place, the homeowner then begins to make repayments on the new higher amount over the course of a new term. In other words, this cash-out refinance results in a brand new mortgage for the homeowner with new interest rate, new term and new payments. So the reason for refinancing should be a good one and the reason for taking cash-out should be as good or better.

When is a Cash-Out Refinance possible?

A homeowner can apply and, most likely get an approval for a cash-out refinance when there is enough existing equity in the home (for a FHA refi, at least 85% of the property’s appraised value must cover the existing mortgage, closing costs and the amount of any check written to the homeowner. For a conventional refi it’s 80%). This is important because the lender is able to justify the approval of increased funds to the homeowner due to the value of the property. Every lender must have security and collateral for every mortgage, and the cash-out refinance is no different.

Homeowners who wish to take advantage of a cash-out refinance offered by a lender should inquire as to whether or not the lender offers this type of refinancing. This is important because not all lenders offer this option. It should actually be one of the first questions the homeowner asks when inquiring about refinance programs. Doing so will save homeowners, who are seeking a cash-out refinance, a great deal of time.

How Can the Cash be Used?

For many homeowners the most appealing aspect of cash-out re-financing is that the additional funds can be used for any reasonable project or undertaking the homeowner wishes to accomplish. The lender will require an explanation (most likely in affidavit form for FHA mortgages) of how the cash-out money will be used.

It has to make sense to the lender and must also be in accordance with refinance mortgage guidelines set by both conventional and the FHA. Most homeowners would probably not refinance their homes and use the cash to gamble in las vegas or Atlantic City, but in the circumstance where there is one or two who might need cash-out refinance funds to gamble with, they would have to look elsewhere because they wouldn’t get it from a mortgage lender.

That having been said, most homeowners I’ve dealt with during my years as a mortgage lender representative had very practical reasons for wanting a cash-out refinance, and in my opinion that hasn’t changed with homeowners wanting to refinance today.

Of course, getting approved for a cash-out refinance is more of a challenge for today’s homeowners due to the loss of equity and underwater mortgages many have suffered as a result of the subprime mortgage crises. Those who have enough equity for cash-out refinancing will be wise to use the funds in a judicious manner. Some of the popular uses for funds received from cash-out refinancing include:

  • Home Improvement Projects
  • Home Renovations
  • Child’s College Education
  • Hospital/Health-related Bills
  • Mortgage Debt Consolidation
  • Credit Debt Consolidation

There are probably a few more, but all the reasons listed above are excellent uses of a cash-out refinance that a lender would certainly approve your cash-out refinance for. Homeowners who are considering this type of a refinancing option should also consider whether or not the closing costs and other expenses related to the loan are tax deductible.

Using the cash-out option to make home improvements is jus one example of a situation where the funds can be tax deductible. Homeowners should consult their tax professional on the matter to determine whether or not they are able to deduct the interest from the repayment of their refinance mortgage.

An Example of a cash-out Refinance

The process of a cash-out refinance is fairly simple to explain. Consider a homeowner who purchases a home and borrows $150,000 at a rate 7% interest to complete the purchase. Now consider the homeowner has already repaid $50000 of the loan and would like to borrow an additional $20,000 to make a rather large purchase or pay off some credit cards. With this additional funding available the homeowner has an opportunity to use the equity in their home to reduce credit card debt thereby increasing their monthly cash-flow.


In the example above the homeowner may refinance for a total of $120,000 at a lower interest rate such as 6.25%. This process allow the homeowner to take advantage of the existing equity in their home and also allows him/her to qualify for a substantial loan at a great rate AND get rid of credit card debt.