Ways to Save Money!

I love this recent article found on http://finance.yahoo.com/banking budgeting/article/112954/confessions-extreme-penny-pinchers-cnnmoney?mod=bb-budgeting

What a great idea! So many kids today tend to have this entitlement attitude because their parents worked hard to give them so much! So when they grow up they feel as though people owe them things just because. I think this is a great way parents can teach their kids about the appreciation of the dollar early in life. Plus it placed on a smile on my face! 

I Make My Kids Pay for Dinner

Name: John Snyder

Hometown: Boyne City, Mich.

On a recent family vacation, my wife and I decided that -- after the first night of eating out -- the rest of the nights each kid would pay half the bill.

The child whose turn it was to pay would also be able to choose the restaurant. So after a tab of $73 the first night (for a family of five), we moved on to Chick-fil-A the next night ($26 total), and pizza the night after that ($32, after using the coupon that my daughter found).

It was funny watching the kids act out, and say to each other, "You guys can share!" or "No, you're getting water!" -- the things I'm usually thinking while biting my tongue.

As parents you always hate to be the ogre saying: "You don't need that." So you just sit there and spend your money, but this made them do it themselves and it was fun for them, because it turned into kind of a game -- with all of them looking for coupons and special deals when it was their turn to pay.

Because of these discounts and how much pressure the kids put on each other to save money, we potentially saved at least $50 a night. A couple of our younger kids had to take out a loan from us for some of the dinners, but they'll be paying that back.

We'll continue doing this on vacations. We're going to a wedding in Wisconsin in July, and my five-year old got off free on the last vacation, so he probably owes us one.

Paying into an Escrow Account

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Taken from the book entitled, Make No Mistakes About Buying Real Estate.

When the borrower makes a mortgage payment to the lender, the principal and interest go directly to the lender to pay off the note. The taxes and insurance segments go into an account known as an “escrow” or “reserve account” until the property tax and insurance bills are due. These bills are typically due annually or semi-annually. At that time, the escrow agency simply deducts the appropriate amount of money from the escrow account and pays the bill. This way, the borrower doesn’t have to come up with a large sum of money to pay real estate taxes and the insurance bill. Mortgage escrow accounts are a good idea for most borrowers. Fortunately, in many cases, they’re mandatory. These escrow accounts decrease the number of foreclosures due to unpaid taxes and insurance. Homeowners who choose not to escrow often get into trouble – if they are not honest with themselves, and do not save aside the money for the taxes and insurance.

    To assure that there will always be enough money in the account, lenders ask for more than they actually need as a cushion, or “reserve.” If the taxing authority or the insurance provider raises the rates, the lender doesn’t have to come to the borrower for the difference. The lender simply dips into the reserves, which is the extra money sitting in the account to pay your taxes and insurance bill for the year. At closing, lenders typically require two to four months’ equivalent of taxes and insurance to set up this escrow account.  They are collected from the borrower at closing in the form of prepaids.

Can You Avoid Paying into Escrow?

Yes. Here’s how:

Contribute 20% as your down payment
Find a second lender who will take on a second note to reduce the risk for the primary lender

It’s important to consider, however, all the ramifications of not paying into escrow. For one thing, borrowers usually pay ¼ to ¾ points higher interest rates if they don’t pay into this monthly escrow account.
There are two big advantages we see to not escrowing:

You pay less at closing because you don’t have to pay the required prepaids, i.e., the two to four months of taxes and insurance premiums
You pay less every month because you only pay the principle and interest to your lender

Borrowers who choose not to escrow now have one or two big tax payments during the year that they must pay on their own. This usually means saving money each month to make these big payments when they’re due. For some people, that’s not a problem. A borrower can also make separate arrangements to pay his or her insurance premiums directly to the insurance carrier, often on a monthly basis once the first year has been paid in advance. If you’re an expert saver, choosing to not escrow might work for you.

The downside to all of this is we’ve seen too many people with good intentions not have the money to pay their taxes on time. The annual or semi-annual tax payment is usually due toward the end of the year, often during the holidays, which is an expensive time of year anyway. Not paying a tax bill is serious business. Interest and fines accrue on unpaid tax bills, and eventually a tax lien could be placed on the property. Everyday, borrowers lose their property in auction sales for as little as the back taxes due. A mortgage escrow account is an easy, worry free way to manage your tax payments and insurance premiums.

Avoid Costly Mistake Of Purchasing into a Neighborhood with Existing Lawsuits

​My stomach dropped! I was a first time homebuyer and I attended my first homeowners association (HOA) meeting over 20 years only to find out that the community I just purchased in was involved in a major lawsuit!!! Here I was the new owner on the block excited to meet my new neighbors as they all gawked at me with the expression, "you poor thing". You can only imagine how upset I was with my realtor. My thoughts raging of how I had been duped! The reality it had my agent ordered a resale certificate back then I would have been better prepared to make a better decision about the property I owned for seven years.  Back then this document was not a mandatory step. According to a recent article I found on ainsleylaw.com/pdf/Texas-HOA-Changes-2011.pdf the legislation amended the Texas Property Code to require the Seller’s disclosure form to include a specific statement concerning the purchaser’s right to receive various documents and a resale certificate from the property owners association if the home is located within a mandatory membership association. The revised resale certificate now requires that the HOA disclose all lawsuits to which it is a party (rather than just those in which it was a defendant as required under the existing law).

My Make No Mistakes system (www.MakeNoMistakes.com) always included this step but now in Texas its the law! Please call me today to see how you can get yourself a copy of the Make No Mistakes Home Buyers Checklist!

Does Title Insurance Expire?

​Article copied from: Courthouse Direct.

If you're in the process of closing on a new home or looking to make an offer in the near future, you've probably heard a few things about title insurance. Although title insurance is nearly as common as regular homeowners insurance, it's the source of a wide range of misunderstandings. Before you agree to take out a specific title insurance policy, take a moment to review some of the most common attributes of this important form of financial protection.

​Title Insurance Review

​Title insurance is less complicated than it seems. A title insurance policy is designed to protect against financial losses related to the emergence of competing ownership claims, liens or other title-related defects. There are two basic types of title insurance. Whereas owner's insurance protects a prospective home-buyer from defects or claims that could ultimately derail the closing process, lender's title insurance protects banks and lending agencies that have made financial commitments to the closing of a given piece of property. An owner's insurance policy may be open-ended or indefinite. A lender's policy typically expires with the final payment on the mortgage that it covers.

​Common Defects and Coverages

Whether it's structured as an owner's policy or a lender's policy, a typical title insurance policy should cover most common defects and claims. These might include:

• Fraudulent or forged title documents
• Improperly indexed, cataloged or recorded title documents
• "Missing" heirs who come forward during or after a property's sale
• Back taxes, judgments and other liens
• Financing problems that impede closing
• Withdrawal from or termination of the closing process by the lender or buyer

Although it might seem redundant, prospective home-buyers are encouraged to commit to both types of title insurance policies. This "double coverage" ensures that all parties to a given real estate transaction enjoy comprehensive financial protection and peace of mind.

​Payment and Negotiation

​In general, prospective home-buyers who agree to purchase owner's and lender's policies as a package deal are entitled to a significant discount. In addition, some lenders may agree to subtract the value of one or both policies from the final closing costs or use some other financial incentives to encourage buyers to obtain title insurance. Buyers are free to negotiate these terms and other title insurance-related issues with their lenders.

When Does Title Insurance Expire?

The vast majority of owner's policies remain in force on an indefinite basis. Homeowners who carry such policies enjoy open-ended protection for the duration of their tenure and may also be sheltered from retroactive claims that arise after they've moved on. Owner's policies may also shield their holders' heirs from retroactive claims. Meanwhile, lender's policies last until the satisfaction of the insured organization's interest in the covered property.

Title insurance's open-ended nature is crucial to the orderly functioning of the entire real estate industry. Since competing ownership claims and previously overlooked defects can arise years after closing, title insurance provides homeowners and their lenders with much-needed assurances that they won't be held liable for such problems at any point in the future. Common "after the fact" defects that arise from indexing or cataloging mistakes are especially common.

​Legal Protections and Common Customs

Although the legal protections that prospective home-buyers enjoy are too numerous to name in a single primer, many of the most important protections apply to holders of title insurance. Home-seekers are under no obligation to use title insurance providers that have been recommended by their lenders, real estate brokers or attorneys. Moreover, real banks and real estate professionals are prohibited from receiving kickbacks or commissions from title insurance providers. Prospective home-buyers who believe that they've been charged unreasonable fees or given misleading information may lodge formal complaints with state and federal housing authorities.

With its straightforward structure, robust legal protections and open-ended term length, title insurance is a crucial instrument that protects countless lenders and home-buyers each year. Whether you aim to purchase your first-ever property or make a career out of buying and selling land, don't neglect this money-saving form of financial protection.

http://my.courthousedirect.com/blog/bid/314489/does-title-insurance-expire?source=Blog_Email_[Does%20Title%20Insurance]

TEMPORARY LEASE BACK FOR THE SELLER OR BUYER

​A Sellers Temporary Lease Back is when the seller wishes to continue living in the home after closing for a negotiated, short period of time – usually a few days (although we have seen it as long as 90 days). When I represent sellers, I usually request a temporary lease because it allows the sellers to move out of the home only after they know their money from the closing is in the bank. Too many times, I've seen sellers move out and the buyers’ financing delayed or just falls apart. The seller is then stuck having to start over again and go through the entire process of trying to sell the house. In the meantime, the sellers may have committed to another property. Now, they are faced with the cost of paying two mortgages, or losing their earnest money and other cash outlays associated with buying the other home. They had thought everything was going to work out, despite not actually receiving the funds from the sale of their home yet. At this point, you, as the buyer, may also have lost your earnest money and all the cash outlays associated with getting to this point. 

Because of this potential for disaster, don’t be surprised if the seller’s agent asks you to agree to a Seller's Temporary Residential Lease, although it is not required to sell a home. It is a short, two page document, and is not meant to replace the full-length lease contract, which is used for leases longer than 90 days. It is also not uncommon for sellers to request a lease when they need a short while longer to get enough cash to actually move. 

The opposite counterpart to the temporary lease is a document known as the Buyer’s Temporary Residential Lease. In this case, the sellers become the landlord and the buyers become the tenants. This form is used when buyers wish to occupy the property prior to closing, perhaps because their existing lease is expiring and they anticipated being able to close on a certain date – which didn’t happen. It’s likely the agent representing the seller will advise the seller not to lease the property to you as the buyer, simply because the risk is high that something could go wrong, such as buyer’s remorse, or, worse yet, a further delay in a closing that may never happen. Imagine how complicated this would make the seller’s ability to market and sell the property!

Both of these temporary residential lease agreements must contain the following items:

Clearly identify the landlord and the tenant

State the property address

Explain the lease’s term, including a start date and a termination date
Establish a per diem rate. It is customary and usually fairly easy to get the seller’s agreement to cover the costs of PITI, including any HOA fees, on a per diem basis. To calculate the per diem rate, simply divide your mortgage cost by the number of days in the given month
 Be sure to include a security deposit amount, which the tenant pays the landlord to cover damages to the property and/or to satisfy the tenant’s obligations under the lease (As the buyer, I would encourage you to insist on a security deposit, paid on the day of closing, by the seller. It would incent the seller to leave the property in good move-in condition when they move out.)

List the cost of the utilities, whether they are included or excluded
Include information about pets, whether they are allowed or not
Describe property alterations which are not allowed, such as nail holes
Detail the current property conditions and mention how to address repairs

List who handles and pays for repairs and/or maintenance expenses
Make sure at least one party maintains insurance, although usually both parties will. As a tenant, be sure your contents are covered.
Include an indemnification of the landlord from claims made against you by a third party

Possession of the property by the buyer as a tenant may change insurance policy coverage

Use language which addresses what happens in the event either party defaults

Establish reasons for termination of the lease
Describe any holding over, which are fees as damages for failing to terminate the contract

One last thought on temporary leasebacks and temporary residential leases: As a buyer, be sure to consult your insurance agent about changes of ownership and possession for limited purposes.  

Thinking of Refinancing? Here are 3 questions you need answers to

Here are questions you need answers to before you commit to refinancing your home:

Is there a prepayment penalty involved with your existing loan? A prepayment penalty may make cost-prohibitive. Look at your Notes Payable document to see if one exists and, if so, how much the penalty is. Then decide if adding the penalty amount to the balance owed is worth it.

1.  What is your current interest rate?

It is usually stated that a difference of 1% may warrant refinancing. However, the loan amount you’re refinancing and the length of the term should also contribute to your decision. Replacing an ARM with a fixed-rate product is another good reason to refinance, but you still have to qualify for the loan. Knowing your rate will stay fixed for the long haul is certainly more comforting than the unknown of an adjustable-rate product, so some people choose to refinance away from an ARM even if they’re not saving a lot of money with a lower interest rate.

2.  What do you currently owe on the property and what is the current market value of your property?

There are certain areas in which home values are rapidly deteriorating and you will find it almost impossible to get your home refinanced. In order for a home to be refinanced the lender must see that the new appraised value meets or exceeds the new loan amount, which is the current loan amount plus closing costs. Lenders often conduct reviews of all appraisals. They’ll have an independent third party go over the appraisal to make sure the property’s market value is accurate.

​3.  How much longer do you expect to continue owning the property?

Obviously, the longer you plan to stay in the property, the better. It would not make too much sense to go through the expense of refinancing if you plan to stay in the home for only another year or two. You should calculate the payback period for all out-of-pocket costs by dividing the monthly mortgage payment savings into the total cost of refinancing. For example, if your new loan reduced your payments by $100 per month and the total cost to refinance was $4,800, the payback period would be 48 months, or four years. There are tons of mortgage calculators on the internet that can help you with this decision from a financial standpoint.​

Most of us get caught up in chasing the lowest rate. But remember, just because there’s a lower rate, it doesn’t mean you qualify for it. The market has changed recently and it may not be as easy to refinance as it was in the past. The good news is that rates have dropped, but the bad news is many homeowners can’t meet the new lender guidelines for refinancing.

For more information check out www.MakeNoMistakes.com

​Pro’s and Con’s of a Fixer Upper or Foreclosure

​Foreclosures are properties that are owned by the lender, who is holding the mortgage note because the homeowner couldn’t pay it. The lender then tries to sell the home and earn back the amount still owing on the mortgage. There’s usually a lot of paperwork involved, and sometimes a loss for the bank. A bank is in the business of selling money, not houses. Their goal is to get their money as quickly as possible from the highest bidder on the house, so they can start the process again by loaning out their money and earning interest on the loan.

These types of properties are always an option and always available. Just decide if you have the temperament to deal with what comes with a fixer upper or a foreclosure. If you aren’t handy around your home or apartment, be very careful with fixer uppers. Also, if a house went into foreclosure, it was probably because the owners didn’t have the money to properly care and maintain it. Perhaps the utilities were turned off, causing damage, such as mold. In addition, the chances of you getting a sellers’ disclosure that tells you all that is wrong and right with the house is slim. The key is to not get caught up with wanting to purchase a home simply because it’s a foreclosure and you’ve heard that foreclosures are bargains.

Mistake # 35: Underestimating the cost of repairs

When you’re inspecting these types of homes, be sure to have a sense of how much it will take to fix the property. Our experience with contractors has always been that you’ll get a quote, but by the time they finish the job it’s always over budget. This is especially true if you don’t know what you don’t know, or rather, if you lack knowledge. Also, contractors and tradesmen can be unreliable. They commit to the job and then don’t show up, often because of scheduling changes on their end. Ask your real estate agent to assist you with finding reputable contractors or subcontractors.

Again, it is important to do your research before you bid on a foreclosure. Don’t think just because it’s a foreclosure it’s a good deal. That’s a myth. Don’t fall for it. Do your homework and look at the comparatives that are similar to the foreclosure property. More importantly, determine how much of your cash you’ll need to improve the property so it meets your expectations.

​Importance of a Realtor

Everybody has an opinion on how to purchase real estate and, once they know you’re considering this big purchase, they’ll all offer advice. You’ll be inundated with tips, referrals and a surplus of information. While many people have good intentions, the reality of it is – everyone has enough knowledge about real estate to be dangerous!

The first things you should do as you start your quest for your ideal piece of real estate: Put together the right team of people. These professionals will use their experience to advise you throughout the process, helping you to save time and energy, and decreasing your chances of a costly mistake.

The first person to choose as part of your team is a coach. Coaches use their expertise earned over many years to help you through the process. CEOs, presidents, executives and world-class athletes have coaches, and there’s no reason you can’t too. This does not mean you give up control. You’re the boss. It’s not hard to find a good coach if you know what to ask and what signs to look for when interviewing your candidates.

So, just who is this coach? Well, a good real estate agent would make an ideal coach. Not just any real estate agent, but a good one. The beauty of using a top-notch real estate agent as your coach is there’s NO cost to you for this person’s expert time and services. Your coach/real estate agent gets paid by the seller when you purchase the property! You may think we want to push the use of a real estate agent because that’s our profession, but let us explain. We’ll illustrate our point with a story:

Years ago I contracted to have work done on my patio. I was very unhappy with the work and the craftsmanship. Unfortunately, I put down a substantial deposit. After several discussions with the contractor, I realized my only recourse for restitution was to go to small claims court. Eventually, months later, we went before the small claims court mediator.

I was well-prepared when it was my turn to present my side of the story. I had contacted and received advice from several law firms. I spoke with friends who were attorneys and believed I had enough ammunition to go into the courtroom and win this battle. Several attorneys were willing to represent me that day, but I thought their fee of 40% was much too steep for what I perceived they had to do: simply show up.

During my presentation to the mediator, he asked if I had a certain piece of evidence in my possession, which I did not. Suddenly, I remembered one of the attorneys asking me the same question. I chose not to get the evidence when the attorney first brought it up because, in my mind, it was inconsequential. So within minutes, and after I had prepared for months and lived with an ugly patio, the mediator rendered his decision. I lost $5,000.

I thought I could do this process on my own and save the $2,000 attorney’s fee. Hindsight, of course, says if I had not tried to be such a know-it-all, and if I had valued the experience of an attorney, I could have walked away with $3,000; instead I got nothing. Except an ugly patio and of course, a lot of wasted time and energy.

The moral of this story: Use a professional! If I am not someone who is in the courtroom dealing with civil litigations on a daily basis, why would I attempt it on my own, without a professional? A coach, in this case, would not only have represented me and spoken the language of the legal system, but he would have advised me. Most importantly, the coach would have anticipated various scenarios and requests from the defendant and mediator.

The same applies to real estate! If you are not dealing with real estate on a daily basis, why would you chance it on your own? My excuse was I didn’t want to share with the attorney any of the $5,000 I expected to win. But in real estate, the buyer doesn’t have to spend a penny to get the skilled, experienced services of a good real estate agent.

Some of you might still say this has nothing to do with real estate. Maybe not, but it has everything to do with the importance of teaming up with a professional. Throughout this reference guide you will read many stories which show real estate buyers choosing to do it their own way -- and losing thousands of dollars. A few may win, but many more will lose. And loss can come in many forms, including financial issues, legal problems, wasted time and emotional stress. As much as you think you know, there will probably be a point during the transaction when there is something you won’t know – and it could cost you greatly!

TEACH YOUR CHILDREN ABOUT REAL ESTATE

My vision is to increase homeownership and revitalize America’s communities for future generations through real estate literacy and by creating a grassroots movement. Real prosperity is multigenerational. Our beliefs about money and wealth are often passed down from our parents to us at a very young age, and then influenced by our experiences, friendships and media.

In my business, I encounter many people of all races and financial backgrounds. I also notice one thing common to everyone. When our clients bring their children with them while searching for real estate, the children all take an interest! From the 4-year-old who insists on finding his or her new room to the 14-year-old who has a comment about the offer price. All children know what they like and whether or not that home makes sense for their family.

Yet so many parents leave their children at home because they view it as adult business and the kids will only slow down the process. When, in fact, one of the most important gifts parents can give their children is teaching them the process of buying real estate and what it takes to own a home.  

Ask children to point out homes they would love to live in and they all will answer with enthusiasm. Would this not be a great time to discuss what this dream home would cost and what they would have to do in life to get it? As parents, we want to teach responsibility to our children and how to become self sufficient in life. However, as parents, many of us are limited to the knowledge and experiences our parents passed on to us.  

Almost everywhere you turn, you can find books, articles, lectures, blogs, workshops and courses on real estate.  Never before have we had such a variety of resources available to us in real estate.  But at the same time, many parents have neglected to “Pass the Knowledge On” to their children.  The question is, why?  

They think the kids will not understand it.

They believe its adults’ business, not kids’.

They don’t know how to communicate it to their kids.

They don’t remember what they learned about real estate so they can’t share it.

Let’s give them the knowledge that will help prevent future real estate mistakes. Start the process with just allowing them to follow your purchasing process and learn from your positive experience. Trust us when we tell you they’ll ask questions and want to learn about it.

Even if you are not in the market right now to purchase a home, ask your child to go online to MLS and find a house for sale that he or she would want to live in one day. Then, make an appointment to visit the house during an open house. See what types of questions your children ask and encourage them. Use your reference guide located at www.MakeNoMistakes.com to answer any questions and, more importantly, let them know it’s possible!