A Real Estate Broker’s Share

1. Get Pre-Approved. Even if you don't think you can afford it, or are concerned about a down payment, or your credit - the first thing you should do is talk to a skilled mortgage lender. It's their job to help you fix your credit, tell you how much you can afford, and help make it all happen. They will advise you if a down payment is needed (it may not! Many people arrange to buy a home with nothing down, $500 down, or 5% down), how much your monthly payment will translate to (i.e. tell them you want to spend $X a month, and they'll translate that into a purchase price of $Y). If you need to repair your credit, they'll be able to refer someone or give you some tips and help on how to fix it up.

2. Once you meet with a mortgage lender, you'll get a letter of pre-approval. It looks informal, but what matters is the listing agent (representing the sellers of a house you later want to buy) calling them and doing some research on whether you can in fact close and purchase the property. You then take this letter to a Realtor (R) / Real Estate Agent (note: Realtor is a real estate agent that adheres to a code of ethics; for practical purposes they're essentially the same, though a Realtor(R) has more accountability and is therefore more highly recommended). This is step 2 of buying real estate.

3. The fun part: Shopping! Step 3 of buying real estate usually involves you looking at a bunch of properties on the internet, driving around some neighborhoods, then when you see some homes you think you might like, just email or call your agent and ask to go see it. Don't get too hung up on this, and at first, go see some houses even if you know it's not quite right - just to get some ideas of what you like and don't like. On paper, or on the computer, a house is just a bunch of numbers - 3 bedrooms, 1873 square feet, etc. - but in person, you'll find that the "bones" of a house, they layout, and the materials vary widely. On each home, communicate what you like and don't like to your agent. Ideally, you should do this on each home, and by listing your favorite points, and factors you didn't like, you'll help your agent slowly hone in on what you really want. This is step 3 of buying real estate, and it usually turns out to be more work than you expect. By the way, it's OK if a house or condo or lot seems ok on paper, but just doesn't feel right. Trust your gut...buying real estate is emotional and you want to feel at home. Usually, if something doesn't feel right, it's because it reminds you of some other home, and many times, people ultimately buy a home that feels like a home they lived in as a child and therefore feel at home in.

4. The exciting part of buying real estate comes when you find a home you want. Just tell your agent this one feels right, and you'd like to put in an offer. Let your agent do the negotiating for you, it's their job, and they get paid by the seller so the service is essentially free. You can call the mortgage lender back now and tell them you're finally buying real estate, and give them the purchase price you want to offer, along with any other expenses such as taxes and insurance. They can give you a more exact payment on the house, which you'll then give your agent a range to offer, starting low with a walk-away price. The agent helping you in buying real estate will know the conventions and strategy best for your local market and sniff out competing offers, etc. This offer will then be accepted or declined or counter-offered.

5. The nerve-wracking part of buying real estate is closing the actual transaction. Once your offer is accepted, you then start a 2-way "dance" called "escrow" or "under contract" or "closing". This means the further you get into the deal, the more committed you are financially, and the more committed the seller is because they're packing their life into boxes. Expect a bit of buyers remorse - it always happens about a week in, and just remind yourself why you like the house and imagine your life in your new home. Also, expect that the closing date is just a guideline, and it could be earlier by a few days, or later by a few days. Most commonly, people close in about 30-45 days. Depending on your state, you'll sign a new loan on about day 25 or day 29, and then move in about day 30 (or 45, depending on your contract period). You'll sign a binding loan and get keys, the seller gets cash (and their old loan paid off, if they have one), and the bank gets an enforceable contract that you make house payments toward. Once it "records" the deal is 100% done, you own the home, and about 6 weeks later you'll make your first house payment to the bank.

Buying real estate is fun, and can make a big impact in how you live your life. For most Americans, buying real estate is one of the most important financial investments they ever make, and regardless of market it continues to prove a good investment simply due to inflation if not market appreciation. Just as your grandparents paid 15 cents for coffee and bought their first house for what seems like little money, so will your grandchildren (or you in your old age!) look back on buying real estate that first time as "cheap". Back when people were buying real estate for $5,000 for a home, the average income was only $1200 a year for some... our relationship with money changes over time. Once you cross the buying real estate bridge, you'll not only build wealth - but you'll build a home filled with memories as well.

I took my concerns to a financial advisor. He suggested that I change my retirement plan from my company's 401 K into a self-directed IRA. He said that with the Roth IRA I can choose where my money goes instead of having the company make the choice for me. Not only could I make the choice of where I wanted my money to go, but after I placed it into this kind of account; I would never have to pay taxes on the money again. Can you imagine what that means? I am sure that by the time I retire, we will have seen a huge jump in the income tax. But I won't have to worry about it, because the income from my retirement will not be taxable.

My counselor advised me that buying real estate with Roth IRA is the best choice in today's wavering financial market. Property represents a tangible item that generally sees a rise in its value over time. Today, prices are low. The time is ripe to purchase property. Soon, the government's plan to shore up the housing market will kick into effect and property prices will regain their momentum. The return on my investments is sure to go over the 8% return that I am seeing today. Will a roll over IRA buying real estate really be an answer to my current financial woes?

I have decided to take my financial counselor's advice and have chosen to take my 401k and use the money to invest in a roll over IRA buying real estate. I look forward to sitting back and watching my investments grow. Buying real estate with Roth IRA seems like the right way to go for me.

So what is a system? In this instance a system is a set of tasks that fit together to complete a given objective. You can define a system for almost anything. For example you could write a system for making breakfast:

1. Get the newspaper
2. Cook the eggs & bacon
3. Make the coffee
4. Set the table

In this example you could assign the four tasks to four separate people. Each task could be defined in more detail so that a stranger could perform the task and the end result would still be satisfactory. However, if even one of the tasks is missed or poorly done then the end result will be disappointing.

In real estate the tasks are usually very simple but there are usually a lot of them. Missing some steps due to the pressure of work or just poor discipline can have a drastic effect on the final income. Also, real estate salespeople are generally not renowned for their discipline. They prefer to be more intuitive, outgoing and people focussed. Therefore it is common to have checklists, computer systems or office managers to ensure that all the steps have been completed.

Example : Buyer enquiry system

Enquiries from potential buyers can come from a variety of sources including people simply walking into the office and asking for a specific property. The agent needs to work with each potential buyer and look after their needs. He or she needs to make the buyer feel special and that there is no need to go elsewhere for real estate services. This needs to be done in a proactive but reassuring way. That last thing that should be done is scare the person away by over servicing or being too pushy.

Each agent will develop their own style and will eventually develop a pattern that works for them. A typical system for managing the buyer enquiry might look like this:

1. Complete a buyer enquiry form. Usually a paper form filled out by the agent whilst talking to the potential buyer.
2. Conduct a search of possible properties for the buyer.
3. Take the buyer to inspect the possible properties and sell one of them if possible.
4. Gauge the buyer reaction to the properties and build a profile for the kind of property that will be suitable.
5. Enter the buyer details in the client database and schedule a trail of follow up actions based on the assessment of the buyer and his or her likelihood of purchasing in the next few weeks.
6. Same day - send a letter thanking the buyer and providing details of the properties seen and confirming the preferred property features for future searches.
7. Every week. Call the buyer and discuss the details of other properties coming onto the market. Try to arrange some more inspections.
8. Every month. Send a copy of the office newsletter.
9. Every three months. Send a copy of the suburb profile with updated sales and new listings during the period as evidence of sales activity.
10. Every three months. Visit the buyer and discuss how he values your service and whether he wishes to continue. You may then decide to change his details and the nature of your follow up campaign based on his comments.

When done well, these follow up systems build a trusted relationship between the clients and the agent. That in turn leads to a strong referral business.

Many real estate agents manage an area, or farm, consisting of over 500 people as potential sellers. Sometimes up to 2,000 people. The number of long term potential buyers, depending on the market, could be in the hundreds at any one time. Therefore it is apparent that a successful agent soon builds up a large list of daily actions and must be extremely efficient to stay on top. Writing the details in the diary is simply not going to provide the follow up necessary.

Please refer to Selecting and Using a Real Estate Database for more information.

Systems, tools and effective teams are the way forward in real estate sales today.

But a lot of people get tricked into thinking they have to deposit at least something whenever they buy real estate, even using a simple option purchase agreement.

That is a massive misconception. Huge! So in the next couple of minutes let me show you how ordinary people like you are confidently doing safe, no money down real estate investing even in today's economic environment. Some of them are successfully dong this on their own, although this is not easy. Many others are utilizing only their good credit and provable income yet getting real estate investments that are secure, high yielding and yet are practically turn-key.

Have you heard about the highly negotiable, so-called 'sandwich' lease option?

With it, you take over the house payments and equity of someone who can't keep those payments up, but not the house ownership, by linking a revocable option to purchase agreement with a lease agreement written in your favor. The option ties up the property before you buy it, but makes it possible for you to revoke it. Almost certainly you will have to make a promise to pay, or put money or a security down at the time you sign the agreement. But with these instruments in place you can back out when you want to with no recourse except losing anything you might have put down.

Now, most people seem to think they have to write a check or put down some cash to make these options legally valid. This is not correct. Because you and the seller can make a revocable option turn on a consideration of any sort that you both agree to. It can be money. But it could equally be a promise to pay, say, part of future rentals. Or something like a car or jewelry. Anything you both write into the option.

That promise to pay is attractive ... it basically means you put nothing down right now and will only make an agreed payment once the option is exercised. People are using these promise to pay clauses right now. This is pure no money down real estate investing with the security of commercial law and requiring zero cash.

Because it is so good, it is difficult to get this written into your option to purchase. Also, sellers generally must get rid of the property but with this option you are not taking over the ownership of the home. However, when you can agree on this option you scoop up all the benefits of no money down real estate investing.

There are several things to consider before trying to strike this agreement, however. And many first-time real estate investors gloss over them.

One, you must find out why the seller has not yet sold his house? Is there something wrong with the location or the physical condition of the house itself? Are city building or zoning regulations unhelpful? If there are problems with the house, will these make it difficult for you to keep up the payments you take over?

Next, do the numbers stack up? Most people thinking for the first time about no money down real estate investing concentrate on the fact that there is no money down. Don't overlook another fact --- you might lose money if the rental market is paying less than your payments. You might lose a ton of money! Here's an example of this. Say you take over mortgage payments of $1200 a month and rental market for the property only pays $1000 a month. You will be losing from Day One.

I don't mean to highlight the negatives that are present in this form of no money down real estate investing. So let me show you anther way to get into this business. This can even be turn-key.

If you have good credit (and it is easier to have good credit than you may realize) and make over $70,000 a year, it's possible to find a program where you can purchase real estate with 100 percent financing. Again this is pure no money down real estate investing. And to make it stress-free, you just need to find a program that will take care of the variables I've mentioned.

Ideally, that program would sell you a good looking, well designed property that could definitely be rented out. The home would be refurbished and meet (or even exceed) city building codes and standards. It might even be rented to a tenant backed by a government initiative such as Section Eight. The property would come with sufficient equity to get the bank loan and make certain your future profits. And it would give you a cash flow after moorage, insurance, tax and maintenance expenses.

Sound like a turn-key dream? There are no money down real estate investing programs that deliver exactly this.

So my advice is that you keep learning about no money down real estate investing, but that you raise your expectations and only consider joining turn-key programs that genuinely require no money down at the start, take care of many of the variables, and give you a reasonable return for relatively low outgoing costs over the life of your investment.

First and foremost...decide how you will pay for it! Do you have cash...or you will be looking for financing? If financing is in your plans...be sure to arrange for it ahead of time. Be sure to obtain a copy of your credit report and correct any mistakes...NOW! If you plan to live in the home as your primary residence, it will require a smaller down payment. But, if this is an investment...you should plan on at least 20% down. AND always have a pre-approval letter from your lender in hand when you make your offer! It will greatly help your agent negotiate the best possible price for you.

Then, when it's time to start house-hunting...look for a good Exclusive Buyer's Agent who will help you find the right property...and buy it at the best possible price. A few tips to consider when buying real estate:

- Look for a good neighborhood that will most likely increase in value. Be sure to drive through communities to see which ones would best fit your needs. It stands to reason that you wouldn't want to buy on the upper end of any neighborhood...so look for a smaller house in a nicer neighborhood.

- Have a game plan! Study the market -- and have your facts before making your offer to purchase. What is the median home price? Average days on the market? Comparables? -- Your agent can provide these for you. How many homes are owner-occupied? What about vacant properties? Foreclosures? Environmental issues such as high tension wires, noise, etc.

- Find out all you can about anything that could affect the home values in any given area. New road construction? Schools? Shopping? Hospitals?

- Before spending money on a home inspection, look the house over for yourself! Does the roof appear to be in good condition? What about the floors? Do they sag or look worn? Do the appliances need to be replaced? Do you notice any water and/or damage in the basement or crawl space? Are there any noticeable cracks in the brick or foundation wall? What is the age and condition of the HVAC units? Do the bathrooms need updating? What about paint?

- Remember that the seller is obligated by law to disclose any known problems...so be sure to take a close look at any and all disclosures relating to the property.

It's always wise to do your homework and investigate before buying real estate!

When preparing your offer...be sure to listen to your Exclusive Buyer's Agent. He/she will be able to give you good solid advice based on years of experience. Keep in mind:

- Make your best offer and present it with your pre-approval letter from the lender.

- Keeping the contingencies to a minimum can help you obtain a lower purchase price.

- Offering a decent earnest money deposit will help assure the seller that you are a serious buyer.

- If the home is in danger of foreclosure -- your best bet is to offer a quick closing. In this situation, the seller is interested in one thing...getting out of the house quickly...with as little damage to his credit as possible.

- It if is already a foreclosure -- make your best offer up front because you may be dealing with a multiple offer situation.

Please contact me with any questions you have about buying real estate in today's market.

Some of the most basic real estate terms to learn when initiating your first transaction are:

Realtor or Real Estate Agent

Realtors are those individuals who have registered with the National Association of Realtors. Both real estate agents and realtors work to help buyers to locate properties and for sellers to sell their properties.

APR

APR stands for Annual Percentage Rate and this is typically listed on your offer for a mortgage loan. Your APR is typically higher than your interest rate listed on your mortgage.

Seller Note

A seller note is a financing strategy in which the property owner self financing the sale of their property to a buyer. The terms of the self financed mortgage such as the interest rate, duration of the loan and the loan length are all determined between the buyer and the seller.

Assumable Mortgage

This type of mortgage is one in which the loan and payments can simply be transferred to another person, typically a buyer.

Appraisal

When purchasing a property, it is common for the lender to require an appraisal prior to agreeing to fund the loan. An appraisal uses features about the property as well as current comparable properties in the area to determine what the present market value of the home is. Appraisals are also often required when a home owner inquires into refinancing the mortgage or for a home equity loan.

Inspection

A home inspection is common in both residential and commercial properties and is sometimes required by the lender. A home inspection involves carefully examining all portions of the property, including the interior, the exterior and the land itself. Any issues will be reported to the buyer and the seller for remedy prior to closing. Some buyers will request that items be repaired prior to the closing, some will ask for financial renumeration in the amount estimated to repair the items found in the inspection and some buyers will cancel their offer if the inspection items are perceived to be too costly.

Closing Costs

Closing costs are one-time costs that the buyer and/or the seller will be responsible for when the closing takes place, transferring ownership of a property to another party. Closing costs are in addition to the down payment applied from the buyer and can include things such as property taxes prorated, mortgage interest prorated, insurance payments prorated, fees assessed by the title company, fees assessed by the real estate agents and other miscellaneous administration fees required to process the transaction. Closing costs range, but can typically be estimated from 2-4% of the purchase price of the property.

Earnest Money

Many sellers will require a good faith deposit called earnest money when a buyer makes an offer. These funds are held in an escrow account by the title company closing the transaction. And, it is typically applied towards the down payment.

Property Taxes

These are the taxes due annually for your property which are based upon the property value. They are typically due at the beginning of the year, although some municipalities require payments semi-annually. Some mortgage companies collect a portion of real estate taxes due each month to pay the annual real estate taxes on behalf of the property owner.

"Love your enemies! Do good to them! Lend to them! And don't be concerned that they might not repay. Then your reward from heaven will be very great, and you will truly be acting as children of the Most High, for he is kind to the unthankful and to those who are wicked."
Luke 6:35 NLT