What are the costs involved with buying a real estate property?

• You certainly will have to pay around $1,000 as lawyer fees
• Closing costs:
  Lots of things that you don’t want to know comprise of closing costs.
• Land transfer tax:
  The area you live in determines this cost. However, you cannot avoid to consider this as the cost is high.
• Maintenance Costs:
  If you have a house, and if you want to maintain it properly, you would have to pay some amount every month to get things fixed or for decoration.
• Property Tax:
  Whatever you own, government has a share in it. You investment is never only yours.

Real estate is a good investment, but not always. If you buy a property without much research, you can bear huge loss as well. Besides, there are many investment options you can consider instead of putting money in real estate. Some of them are:

Savings Account:

This certainly wouldn’t give you high returns, but it’s a safe investment. Spend some time researching banks that provide high interest on your savings account, and put your money in it. You money will steadily grow, while you sleep without any fear of losing money.

New Business:

If you have a good idea in mind, start a new business. This could, however, be a comparatively riskier investment, as it involves registering business, setting up office, purchasing required materials, promotion, and so on. And if id doesn’t work, you may loose all your money.

Stock Market:

Buying stocks is comparatively easier as it doesn’t involve lots of paperwork, nor does it asks for a huge capital, unlike real estate. You can invest in an existing business, or invest in a new business (IPO). However, make sure you don’t put your money without research.

Investing in real estate should be a well-planned investment. Before you buy a property in any area, you must know why you are buying in and what you profit would be when you liquidate it.

Times are changing now, though not rapidly. This is probably the best time to buy foreclosed homes at cheaper prices. And the best part is, these days they don’t come with a sad story, like those in earlier days. Previously, owning a foreclosed home seemed to be a cruel step, as every such home was a family’s lost dream. However, the recent crisis brought a steep drop in real estate prices, which made people abandon their homes and seek a cheaper one.

Besides, if you are buying a property for investment, and not to live in, you don’t have to bother about sad stories. Prices are too low now, and they are on the edge of shooting up again. Hence, if you buy a house today, within a couple of years, you would make a killing. At lest that’s what experts have suggest.

We don’t really know how much time it would take the real estate market to come up. Hence, if you are planning for real estate investment, put money only if you have enough holding capacity. Now is not the time for house flip, but for long term real estate investment.

Although the interest rates on mortgages are low, you would have a tough time availing a loan, if you credit score is not up to the mark. Also, with property, comes real estate taxes, insurance, and tax on capital gains, if you sell it at a profit. Hence, be prepared for all these costs.

Many houses were foreclosed since November 2008. Hence, if you get a home that’s been abandoned since a year or more, you definitely will have to incur some repairing costs. Make sure you perform a comprehensive research before investing in real estate.

Later, in December 2009, the November data was released which again proved disappointing. There was a 16% fall in the sales of houses than October. This the first time the sales figure dropped since past 9 months.

Experts had forecasted a 2% fall. When they were asked about the steep fall in sales, “People took a Breather,” is what David Crowe, chief economist in National Association of Home Builders, concluded.

Another chief economist from NAR, Lawrence Yun blamed the alteration in end-date of first time home buyers tax credit. The tax benefit was initially dated to end on 1st Dec, but was later protracted till June.

I agree with him because the buyers who initially decided to utilize the tax credit signed the contract immediately and tried to wind up the home mortgage before the end of November 2009.

Actually, we cannot disgrace the sales figures of November because the numbers are much better (15% up) than those in same month last year. So, people bought new houses but not as much as in the months of July, August, and September. They wanted to get the $8000 benefit ASAP.

If demand for new houses falls, understandably, there is a cut in prices. And when there is a price fall, the demand rises (logic again). However, subsequent to the recent price fall, there was hardly a surge in the demand trend.

Since May 2009, there has been 3% depreciation in real estate prices. Most of the experts and forecasters are quite optimistic about the market. They predict a substantial price fall in 2010. According to Fiserv Lending Solution, a reputed financial firm, we will witness around 11.3% fall in the real estate prices in 2010.

That’s pretty good new, and let us all try to be as optimistic as Fiserv. However, what are the reasons behind these predictions? Why are experts predicting a fall?

More Foreclosures this year

Moody’s expects many foreclosures this year due to the limitation and errors in recent mortgage modification programs. We have seen many experimental modifications and many permanent ones are re-defaulting at higher rater.

Hence, due to these foreclosures, there would be 8% decrease in house prices. Most of these foreclosures would be seen in the states of Arizona, Florida, Nevada, and California.

Next, many people bought new homes with adjustable mortgage rates (AMR). In coming months, these rates are definitely going to increase landing the homeowners in trouble.

Lastly, there are people who just want to walk away. Many people buy houses as a form of investment, but when they see a huge fall in the real estate rates, they file for bankruptcy.

Raising Interest Rates

At present, the interest rates prevailing in the market is extremely low. However, experts believe this privilege won’t last many months. Pat Newport, analyst at HIS Global Research, says that you will soon have to pay interest more than 6% for a 30-year mortgage as the government intends to withdraw the support given to real estate market.

It’s always wise to stay informed; hence I use Quicken Loans to stay abreast with the recent real estate trends. It has a simple layout for beginners and professionals. I like it because it provides local results, while others offer a broader view.

Probably in March, we will witness a halt in purchase of government backed securities by Fed, which will be another factor causing price rise.

End of First-time homebuyer’s tax credit – Fall in Price

End in tax credit will definitely affect the number of houses purchased every month. It will also affect the price trends.

If this tax credit helps to boost the sales figures as per predicted, not many people will buy new homes after the tax benefit ends in June. People intending to buy houses this year will strive hard to do it before June to get the benefit. Hence, the period after June will see a steep fall in the sales figure. Subsequently, the fall in demand would possibly lead to fall in house rates.

Tough Times

Due to the above mentioned reasons, prices will probably dip. However, experts are not so sure about its effect on the economy. Will it recover or will it sink down further?

But we can be sure of thing: Do not treat your house as an investment. It would be a risky gamble that could affect your credit score, kid’s education, and other financial areas.

Joint property is a major asset of many couples and the issue of liabilities regarding the property arises when they decide to part. The value of homes is much lower than what it used to be about a year and half ago. Many couples have not completed paying up for the houses that they’ve bought. But the prices at which they bought the houses were higher than the current value. The mortgage rates are consequently higher which makes it difficult for the couple to afford at the present times especially if they think of splitting because even if they sell the house they will not get the original cost price with which they can pay back the mortgage. Also many a time, the division of the monetary returns turns out to be an issue with hassles.

To overcome the problems that are posed due to divorce, many couples are opting to share accommodation even though they decide to split. They divide the liabilities amongst themselves. One of the biggest dilemmas that most couple intending to split is about retaining the family home or selling it. One of the partners qualifies for refinancing the home. If the house is not being sold, then the spouse who stays in the house has to refinance the mortgage. This is the only condition under which the other spouse is allowed to vacate the house. If both are a liable, then if one is not able to refinance the loan the other is liable to pay even if he/she does not stay in the house anymore.

There are some of good options that couples about to get divorced can consider. Firstly they can think of postponing the sale of the asset till it fetches a good value. The partner who moves out of the house will not be eligible for another mortgage until the current one is cleared. He needs to stay in a rental home till the home is sold or the mortgage is cleared. Secondly, the couple could rent a home rather than buy one. This will save the money paid up in mortgages. The last option, though not profitable can turn out to be the best option at times as no fuss is involved. You accept the loss and move out. The buyer may also bear the entire loss and offer to pay up the mortgages.

There’s more good news! The 30 year mortgage rates are not the only ones to plummet! Their kin, the 15-year mortgage rates followed suit very recently and have fallen from 4.32 % to 4.29 %. Unbelievable though it may seem, this is the lowest percentage of interest rates for the 15 –year mortgages in the last 18 years! The 5-year adjustable–rate mortgage have also gone down from 4.25 % to 4.18 % on an average, in the last few days. However, the 1-year mortgage rates seem to be the most of immune members of the family of mortgage rates because they seem to be maintaining a steady value of 4.35 %. Now, does this motivate you further to go ahead with your property buying scheme?

If you want to know why the mortgage rates have shown a decline in recent times, you should attribute it to the Government’s $1.5 trillion venture of purchasing mortgage- based securities in an endeavor to lower the interest rates, last November. The Government’s initiative has paid off well, as this has managed to keep the interest rates on mortgages from going beyond 5 % since April this year. This in turn has revived mortgage refinancing and today on an average, an American gets to save up approximately $100 on a monthly basis, on a $200,000 mortgage of a fixed rate.

So ultimately, the falling interest rates on mortgages might pump up your adrenaline with the excitement of the possibility of owning a home of your choice in the coming times. That is good, but you’ve got to think about something else too. If you go by Wall Street Journal report, you’ll find that refinancing might be slowing down after all, since the time it started last year. In the third week of November refinancing fell by a disappointing 9.5 %. This inspite of falling mortgage rates is indeed pretty surprising. Also in the second week of November, the number of applications for mortgage was noticed to be lesser by 2.5 % than before. So, what should we infer? Are lowered interest rates not reason enough for boosting up home purchases? What do you think?

As the negotiating powers of buyers seem to be plummeting if you are a prospective buyer how best can you still turn the presently unfavorable situation in your direction ?

Here are some ways in which you can do that.

Get Your Loan Approved

When you apply for loan for buying your property or go for a mortgage get your income certificates and credit reports verified and approved by the lender. They will give you a clear loan repayment plan for a fixed period of time. When you show these documents to the seller of the property she will regard you as a credible buyer and they will esteem you more than others. She will prefer to sell her property to a person who has a clear cut repayment blueprint rather than one who does not have that. You stand a better chance of getting the property at your negotiated amount.

Find Out the Home History

When selecting homes for purchasing cleverly find out the history of the properties you wish to buy. Take the help of a real estate consultant if you want to. Those homes that have been in the market for a longer time are the ones that are more negotiable. The owners of those homes that have newly entered the market will more rigid regarding their sale prices as they feel confident of getting more customers later.

Properties on Timed Sales Are More Negotiable

When searching for homes, tactfully find out if the owner has any time constraints for selling. Those properties that are on sale within a specific period of time will be negotiable in the last moment.

Wait For Tax Credit

Many people are waiting till the coming spring to make purchases as they want to take advantage of the tax credit purchases that will come into effect next year. You can also wait till December and January to make your purchases as this is the time of the year when the real estate industry is literally sleeping. You’ll not have many competitors.

Find out the best deals for yourself using these tips for bargaining and survive the slackening negotiation times.

One of the hardest hit areas of the recession is real estate. The housing market in particular has suffered pretty severely and there are not many signs of its recovery yet. Still the market is flooded with foreclosed properties that need to be sold and there are some other types of properties also which need to be cleared. If you are a bear, you might have been pretty optimistic about the entire issue despite the discouraging improvement. You might have bought a property thinking that the recession was a bad dream that you’ve left behind and now everything will be smooth and green. Of course, the rapid fall in interest rates to below 5 % was encouraging enough for the bearish amongst us to make investments in properties in the present times.

The prices of the houses are low, so you can expect people to have a tendency to invest in them rather than rent them out. What is the psychological factor that makes a buyer decide upon whether he should buy a property or rent it out? A prospective buyer always first compares the money he would have to invest in the property in case he buys it with the annual rent she’d have to pay for the property. If the ratio is more than 15 –people naturally conclude that renting out is a frugal option. Otherwise they consider buying a better option. The other question that buyers usually consider before purchasing is their tentative tenure of stay. There is no use in buying a house if you are not going to stay in it for long. With the prices of estates falling rapidly, you can expect the selling prices to reach as low as 10 percent of the purchase price. Think of purchasing a property for staying only if you intend to stay in it for at least 5 -7 years.

The high end housing market that remains far above the realms of bargain buying does not seem to have escaped it. The prices of housing properties as estimated by real estate companies like JP Morgan Chase and others are on a rapid decline. The interest charged by lenders is also pretty high on second homes. The owners still have to keep their properties competitively priced as plenty of foreclosed properties are still on sale. All this gives a bleak image of the real estate world, at least for the present. There’s only one favorable outcome of all this. The real estate contractors have become more affordable now.

High end properties are being sold at greater discounts. The common discount percentage for properties belonging to the lavish categories is about 14 % which is much more than the price discount for the normal properties. Media reports such as that of the National Association of Realtors might boast of a 11 % increase in the sales of properties but when one comes to realize that this increase in sales is because of the heavy cut in selling prices, one might not be actually happy about it, if he is the owner of a property. What’s the point in selling a huge number of properties when the price that you fetch on those is actually low? The home buyer tax credit was another reason why the sales of properties increased.

The areas in which the maximum foreclosures have taken place i.e. the areas around Fresno, Las Vegas, California  and Detroit the slashing of listed prices has reduced to a certain extent, but those few who are offering the discounts are slashing the prices very much. They are slashing the prices by a good 15 % -25 %. That’s quite a bit! If you compare this to the national average of discounted percentage, you’ll see that in these areas it is 10 % more. According to recent reports from Trulia the slashing of listing prices seems to have stabilized quite a bit in hard hit areas. Nowadays property owners are not being forced to lower the listed prices of their properties.

The  sale percentage of homes was in a way made to compete with the percentage of foreclosures and that is the reason many of the owners had to sell off their properties at very low prices. As a part of competing with foreclosures, the property owners had to offer their properties at a price lower than that offered by banks for the foreclosed properties. People naturally bought foreclosed properties as they were being offered at a very cheap rate.

As the tax credits enhance the buying potential of the customers. The people who wanted to sell their properties a couple of years later would want to sell them right now due to the tax credit advantage. This increases the supply of homes which influences the pricing.  The best thing that a home owner could do at this moment is to price his property a little above the local price so that any instability in the prices is adjusted well.

Plummeting rents and rising vacancies spells more hard time for the real estate industry. There’s already scarcity of credit in the sector. Apart from that, land owners are not going to make payments which will mean greater hassles for financial institutions which have already put around trillions in the real estate industry. According to Victor Calanog, Reis research director, “It means more losses for the banks, because they will have to write off more bad debt.”

From the point of hirers, this is a time to rejoice because you are saving yourself that extra buck. You’ll be getting build-out expenses and free rents as some of the perks from the owners. This situation seems to be a short term thing, but you never know. With unemployment on the rise it seems the situation will worsen in the near future.
According to Calnog, “Even though the technical recession may be over, the labor market typically takes anywhere from 18 to 24 months to bounce back in a consistent way. If employers are still shedding jobs, they are also going to shed space.” So, for those who think recession is over, just wait a while before you think of rejoicing because it will take another 1 ½ to 2 years for the economy to recuperate.
A lot of vacancies are available in places where housing is low and in big industrial centers.

So if your hands are full of cash for office accommodation and you want to strike when the iron’s hot here are some suggestions that you can heed for renting.

• Don’t get lured by offers for more space and long term lease. These might fetch you some immediate concessions, but in the long run you might lose out? What if the rents are made very high once the economy normalizes and you can’t afford to pay that?
• Consult reliable real estate experts before you make a commitment to rent out a thing. There are a lot of complications involved in the terms and conditions of renting and hiring out space which you should be fully aware of before hiring. Ask your real estate expert to show you the best deals around.
• Follow your lease agreement thoroughly. Don’t violate any rules as this might fetch you a lot of problems. Read the agreement carefully and get it clarified through a real estate expert and/or a legal professional before signing it.