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Published
Articles
Updated 1/1/2000
Buying
A Home? Consider This...
Searching
for a home can be really exciting but it can also be very stressful.
Having an idea of what you can afford and what you are looking
for can eliminate some of the stress associated with searching
for a home. Consider the following:
- What can
you afford? You should consider talking to a loan officer or
a mortgage broker both to determine what you can actually afford
and to obtain a pre-qualification letter. With interest rates
likely on the rise, you may want to inquire how much it would
cost to "lock in" a certain interest rate.
- Have you
sold your existing home? If you have not sold your existing
home, can you afford two homes? If not, you may want to consider
making the purchase of the new home contingent upon selling
your existing home. If you do not have an existing home, are
you leasing? If so, when does your lease expire? If you break
your lease, you might lose your security deposit and the landlord
may attempt to seek rent from you for the remainder of the lease
unless you negotiate a termination of the lease.
- Are you
working with a realtor? Realtors who are familiar with the area
where you want to purchase can be extremely helpful especially
if you do not have a lot of time to search for a home. Generally,
if you are purchasing a home that is already listed with a broker,
your realtor will be paid by the seller.
- Do you
want new construction or existing construction? Sometimes this
depends upon how quickly you need to move into your new home
and whether or not you want to have the option of selecting
the colors and/or patterns for your new home.
- Are there
schools and parks in the area? If you have children, it will
be important for you to determine where your children will be
attending school and whether there are parks in the area. After
finding a home, consider consulting an attorney before signing
a contract for purchase. An attorney can review the contract
with you, make any necessary changes, and negotiate with the
seller. Good luck finding a home!
FLORIDA
HOMESTEAD EXEMPTIONS:
The concept
of homestead is as old as the State of Florida. There are only
a few states with homestead exemptions. Florida is considered
one of the most generous. There are 2 types of homestead exemptions
available to property owners in Florida: (a) homestead exemption
for real property tax purposes and (b) homestead exemption for
asset protection purposes. The fact that you have one type of
exemption does not necessarily mean that you have the other type
of exemption as each exemption has distinct requirements.
Specifically,
the homestead exemption for real property tax purposes provides
an owner of property with a $25,000.00 reduction from the assessed
value of the property thereby currently reducing the amount of
real property taxes by approximately $650.00 each year. Since
real property taxes are paid in arrears in Florida (just like
interest on your mortgage), this type of homestead exemption is
only available if the owner is the permanent resident of residential
property as of December 31 of the prior year and owner makes application
for the exemption at the property appraiser's office on or before
March 1 of the following year. If you are widowed or permanently
disabled, you may be entitled to an additional reduction from
the assessed value of the property.
The homestead
exemption for asset protection purposes provides the owner of
property with a shield from virtually all non-lien creditors.
This type of homestead exemption is only available if the property
is your primary residence and a court makes a determination that
the property is within a municipality or outside of a municipality.
If your property is within a municipality, protection is provided
for only one half acre of contiguous land. If your property is
outside of a municipality, protection is provided for 160 acres
of contiguous land.
Know Your
Rights Concerning Real Estate Deposits On New Homes
Typically
when you buy a new home in Florida, the builder will require that
you make a deposit equal to 10% of the purchase price of the home.
Sometimes for homes less than $150,000.00 the builder may accept
a deposit of a lesser amount. On occasion when a buyer is purchasing
a new home in excess of $500,000.00, the builder will attempt
to obtain a deposit for as much as 20% or 30% of the purchase
price. Naturally, as most things in real estate, the amount of
the deposit is negotiable including the timing of the payment
of the deposits.
If one is
buying a new home, the question that always arises is whether
or not to place your deposit in escrow or release the funds to
the builder. Under Florida law, the Buyer has a choice and must
decide in writing which option to choose. While at first glance
the decision would appear simple: Put the money in escrow. Indeed,
the decision requires carefully weighing factors such as whether
or not the builder is likely to complete the project and the general
risk tolerance of the Buyer.
If the Buyer
elects to place the earnest money deposit in escrow, the builder
has the right under Florida law to charge the purchaser the builder's
cost of borrowing that amount of money, less any interest that
the builder is able to obtain on the escrow's while the deposits
are being held in the bank. What does that exactly mean?
For example,
if it costs the builder 12% in annual interest to obtain an unsecured
loan and the Buyer's deposit is $20,000.00 and during the course
of construction, which we shall assume for purposes here is one
year, the builder obtains interest at the rate of 3% for the Buyer's
Deposit, at closing the builder will charge the Buyer 9% (12%
? 3%) or $1,800.00 for the "privilege" of having the
funds held in escrow.
So as you
can see, that for the privilege of being able to sleep well at
night knowing that your funds are safe and secure, you have effectively
purchased an insurance policy for $1,800.00. Naturally, if your
deposit is for less, or the interest rate that the builder obtains
for you is more, and if the builder can complete the home in less
than twelve months the cost to you for having your funds secure
and safe will be less.
Having said
all this, sometimes builders during the course of construction
will provide an incentive to the Buyer to release their escrow
to the builder. Such an incentive usually includes an abatement
of costs associated with the escrow. Some buyers who had previously
escrowed their funds and now see that construction is progressing
and their builder appears not to be having financial problems,
will then consider releasing their escrow to their builder.
Remember,
the decision of whether to release your escrow is yours. Never
allow a builder to talk you into releasing your escrow if you
do not want to do so. In fact, if a builder appears too eager
to have you release the escrow to them, maybe, just maybe, that
is a warning signal.
Selling
Your Home? Consider This...
- Are you
ready to sell your home? Beware of "seller's remorse"
which may appear immediately after signing a contract for sale.
Be sure that you and your family are ready to move out of your
home within the time frame in the contract for sale. Consider
whether or not your children will be able to remain in the same
school for the remainder of the school year after you close
on the sale of your home.
- What is
your ideal sales price? This may depend upon whether you are
selling your home For Sale By Owner or with the help of a Real
Estate Broker? If you are going to sell your home with the help
of a Real Estate Broker, ask the Real Estate Broker to do a
comparable to determine what the homes in your neighborhood
are selling for and consider that amount of the real estate
commission when determining a sales price for your home. Before
entering into a listing agreement with a Real Estate Broker,
negotiate the real estate commission and ask the Real Estate
Broker what he or she will do to market your home.
- Is the
purchaser seeking financing? If your contract for sale is contingent
on the purchaser obtaining a mortgage, you may want to require
the prospective purchaser to provide you with a letter from
a bank or a mortgage broker indicating that the purchaser is
pre-qualified.
- Where will
you and your family live after you sell your home? Do you have
another home or are you in the process of purchasing another
home? If you are in the process of purchasing another home,
you may want to make the sale of your home contingent upon the
purchasing of your new home and you may want to schedule the
sale of your old home and the purchase of your new home back
to back.
You should
also consider what personal property is included in the sale
of your home, if any, and whether you are going to sell your
home in "as is" condition or whether you are going
to pay up to a certain amount of percentage for repairs.
These are
only some of the things you should think about when selling your
home. After finding a purchaser for your home, you should consider
consulting with an attorney before signing a contract for sale.
Good luck selling your home!
Is Your
Home Like Your Car?
First of
all, like many things in American life, supply and demand is a
major factor. Therefore, if your home is truly "unique"
it will always fetch a value for unique homes. Less supply and
high demand equals a higher price. Unfortunately, since most of
us do not live in unique homes, our property values will only
rise based on a few circumstances:
- Simple
inflation: Just like in the late 70's and early 80's homes increased
substantially because of inflation where everything was going
up more than 10% a year.
- Sometimes
we luck out and end up living in an area or development that
is perceived as "hot" and therefore demand far exceeds
supply;
- If we
stay in our homes long enough, the simple replacement value
will in all likelihood exceed the original cost of our home.
Factors of
course that lend to a home being unique are water views, such
as living on the beach or a large lake, or living on a golf
course.
On
the flip side, many homes in fact will depreciate in part over
time unless they are impeccable maintained. For example, most
equipment used to run the home such as air conditioners, refrigerators,
water heaters, outdoor ceiling fans, swimming pools, and their
pumps, will wear out over time and will require replacement.
Thus, certain portions of the home will indeed depreciate. The
same also holds true for the structure. The roof needs to be
regularly cleaned and eventually replaced. The outside of the
house needs to be kept painted and flooring and wall treatments
need also to be maintained and also eventually replaced.
Also,
if developers continue to build a similar house in your area
their pricing will obviously affect the value of your home.
If their prices are going up, your will likely to. Putting it
simply, strictly as an investment, buying a home may not be
your best investment. In fact, the average American family has
now more money invested in stocks and bonds then they do in
the equity of their home. So again what does this all come down
to. It's very simple. When you're buying a home, do so because
you want to create a certain lifestyle and comfort level for
you and your family. Buy a home because it is a safe place to
place your money since in Florida your judgment creditors generally
will not be able to attach the equity in your home if it is
indeed your homestead.
If inflation
rears its head again, you will have a good hedge to protect
the real value of the money you put in your house. Of course,
if you purchase your home with a mortgage, each monthly payment
you make is effectively a form of forced savings since, initially
a small portion, but later a larger portion of your payment
will go towards building up equity in your home.
Finally,
if you sell your home and the value has not increased remember,
the house has created both psychological and economic value
to you in that you have, just like a car, enjoyed the use of
the house.
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