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Making a Good Offer

When you’ve finally found your dream home, making an offer is the next step. Make sure you’re working with a buyer’s agent, so you know you have someone looking out for your best interests. A buyer’s agent will help get the best deal possible, assisting you with negotiations, paperwork, and the myriad other details involved buying your dream home.

When coming up with an offer amount, keep in mind that some sellers may get offended with an offer significantly lower than their asking price. Though their selling agent should counsel them not to let emotions get in the way, some people will see your low offer as a personal insult. That doesn’t mean you shouldn’t make an offer substantially lower than the asking price. Perhaps you think that’s the fair value of the property. Just know that you may not hear back from the seller.

Many times a seller receives more than one offer at a time, and it’s up to you and your buyer’s agent to make your offer look as attractive as possible. After coming up with your offer price, you must also determine how much earnest money will accompany your offer. This money is used to show the seller that you are serious about purchasing the home and acts as a “good faith” deposit.

There are other ways to make your offer attractive. Talk with your Texas REALTOR® about the best game plan for making your offer look at appealing as possible.

Texas Association of Realtors®

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Buyer Tip – Closing Costs

Everyone knows that in most cases you’ll need at least a small down payment to purchase a home … but that’s not all. You’ll also need to come to the transaction with money for closing costs, which can be sizeable.

Your lender is required by the Real Estate Settlement Procedures Act (RESPA) to provide a good faith estimate of your closing costs. This estimate is an itemized list of fees you’ll pay to get a loan.

Mortgage closing costs cover things like appraisals, attorney fees, title insurance, taxes, and other expenses associated with getting a loan.

A property appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. An appraiser is needed to make this determination.

A survey of the property is usually required to verify that boundary lines for your property, easements, and fences are where they’re supposed to be.

You’re about to buy the home … after that, you’ll own it, right? Well, in some cases, there may be a lien on the property, or some historical dispute to your right of possession. A title search fee is paid to the title company for doing detailed research on the property records for your home. The title company will look at prior deeds, court records, property and name indexes, and many other documents. This is to ensure that there are no liens or problems associated with your ownership of the property.

You’ll need homeowner’s insurance, which covers the costs of rebuilding should an insured event occur. In some cases, your first year’s insurance may be paid at closing.

Other fees that you may see include attorney fees, courier fees, pest inspection, plat drawing, underwriting, flood-zone certification, document preparation, and others.

It’s important to check your lender fees and closing costs carefully, and don’t be afraid to ask for advice … the only bad question is one that you don’t ask. This is where your Texas REALTOR® can really help.

Texas Association of Realtors®

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Home Buying Process Chart

I came across this handy chart that lays out different steps that need to take place in the home buying process.  The only thing I would change is perhaps spreading everything out to 45 days instead of 30 days.  Loan underwriting is quite a challenge, even for buyers with good credit and lots of money to put down.  So, 30 days is very aggresive.  But, I think this chart is right on track with the steps involved in finding your new home.

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First Time Homebuyer Credit

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2.800.

 

For those tracking the math in the examples above, you may be wondering where the “$20,000″ came from—that is, why you divide “$10,000 by $20,000″ in the first example and “$13,000 by $20,000″ in the second example. Here’s where the $20,000 comes into play:

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

In other words:

• $170,000 – $150,000 = the $20,000 in the first example
• $95,000 – $75,000 = the $20,000 in the second example

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principal residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principal residence also qualify.