A real-estate-investment program will consume large amounts of your time, subject you to considerable financial risk, and force you to engage in the generally unpleasant task of dealing with tenants and maybe employees and subcontractors.

“No investment is without risks.” The enormous increase in the quantity and value of real estate assets absorbs huge amount of savings. The way the savings are allocated to the real estate sector affects not only the long-term elasticity of supply of real estate space, but also the financial stability of the economy.

High capital mobility can trigger financial crisis when the problem of excessive lending becomes apparent.

A severe mismatch in maturity between assets and liabilities of domestic financial institutions makes the economy vulnerable to external shocks that raise the cost of short-term funding. A vicious cycle of capital outflow and credit deterioration ensues.

Real estate shows vulnerability to short-term liquidity difficulty due to the maturity mismatch and high intermediation cost.

Real Estate Credit and Financial Risks:

Funding real estate credit with money supply also contributes to asset price inflation and volatility. Absent a long-term private debt market where households can invest their savings, the opportunity cost of equity capital, especially that of homeowners, would be determined by the return on savings deposit, which is low due to short maturity and high intermediation cost. The required return on assets would be determined by the cost of funding, which is a weighted average of the cost of equity and that of debt. Investing investment in unimproved land leads to financial risk. The increase in equity financing in the real estate sector—partly due to the high cost of bank loans relative to that of equity, as reflected by the lending interest margin—contributes to a lower opportunity cost of funding. The narrowing spread between real estate capitalization rates and the real cost of loans, especially in the residential market, is indicative of the increasing influence of the lower opportunity cost of equity of speculative investors. Furthermore, the components of real estate funding cost—the cost of credit, linked to the best lending rate, and the opportunity cost of equity, determined by savings interest rates— are closely linked to short-term interest rates and are thus volatile. Consequently, real estate valuation tends to be volatile.

o There is generally limited marketability in real estate (depending on the nature and location of the property.)

o There is also a lack of liquidity, in that there is no guarantee that the property can be disposed of at its original value, especially if it must be done within short period of time.

o A relatively large initial investment often is required to buy real estate.

o If ownership in investment property is held directly by the investor, there are many “hands-on” management duties that must be performed.

o Real estate is often considered high risk because if is fixed in location and character. It is particularly vulnerable to economic fluctuations such as interest rate changes and/or recession.

o The Tax Reform Act of 1986 eliminated many of the previously –available tax advantages relating to real estate

The high financial leverage in the real estate sector, both for homeowners and real estate firms, greatly increase the credit risk of real estate loans. In Real Estate, the variables that drive residential real estate prices can be grouped into macro forces and micro forces. Macro forces include mortgage interest rates, economic strength (the business cycle process in Real Estate), demographics, and federal taxes. Micro forces include local economic strength, state and municipal zoning, neighborhood features (such as quality of schools), and the condition of the property itself.

In Real Estate, horizon risk occurs primarily with fixed income securities, such as bonds, when the buyer locks in a rate for an extended period of time and the expected return on the investment decreases as a result of changes in the inflation rate over time.

In Real Estate, the risk that an investment’s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. Such changes usually affect securities inversely and can be reduced by diversifying with different durations.

Unimproved land, Low-income housing focus on financial risk. Within real estate, money used to purchase property for the sole purpose of holding or leasing for income and where there is an element of capital risk is deemed a real estate investment.

Overcoming Financial Risks of Growing Real Estate Credit

The financial fragility of the economies affected by the crisis can be attributed to four major sources:

* Currency mismatch
* Maturity mismatch in funding domestic investment
* Asset price inflation
* Poor credit allocation.

The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. This risk can be reduced by diversifying the durations of the fixed-income investments that are held at a given time.

Real estate sector plays a central role in the financial fragility, particularly in these East Asian economies disrupted by the financial crisis. The real estate sector absorbs a major portion of domestic credit. Real estate loans are typically of long-term nature and thus contribute to the maturity mismatch of the lending institutions that rely on short-term funding. Since real estate produces local services and thus local-currency income, real estate loans also contribute to the currency mismatch when these loans are funded by foreign capital. Moreover, credit misallocation is likely manifested in overbuilding in the real estate sector. Finally, real estate market is typically the center stage of asset price inflation, exposing the borrowers and their banks to high credit risks. Furthermore, in economies where the information process supporting credit decisions is inadequate, financial institutions tend to rely on real estate collateral for credit allocation.

Rising Real Estate Wealth and Sources of Price Volatility

* Demand for residential real estate rose with population and income.

* The significant expansion in real estate wealth was accompanied by substantial Volatility in prices and rents.

* To understand the sources of real estate price volatility it is useful to decompose changes in prices into changes in rents and in capitalization rate (or rental yield). Underlying this decomposition is a distinction between the market for real estate space and that for real estate assets. In the space market rents adjust according to vacancy rates that reflect the supply and demand conditions; in the assets market prices adjust according to asset valuation (capitalization rates) and rents.

* Accordingly, the causes of real estate price volatility can be divided into two sources:

1. Real economic activities affecting the supply and demand for real estate space
2. Financial conditions affecting asset valuation.

Advantages of Real Estates

* The potential for high return in real estate exists due, in part to the frequent use of financial leverage. Financial leverage is the use of borrowed funds, as in a long-term mortgage, to try to increase the rate of return that can be earned on the investment. When the cost of borrowing is less than what can be earned on the investment, it is considered “favorable” leverage, but when the reverse is true, it is considered “unfavorable” leverage.
* There are potential tax advantages in real estate, as well. First, for personal use residential property, there is the opportunity to deduct interest paid (first and second homes, within limitations) their may also be deductions for property taxes. If the property is income producing, other expenses may be deductible, as well, such as depreciation, insurance, and repairs. Also real estate can be traded or exchanged for like-kind property on a tax-free basis. And, lastly, if the sale of investment real estate results in a profit, the gain is normally a capital gain. (Note: Real estate investment was dealt a blow under the Tax Reform Act of 1986, and the related rules are somewhat complex, as it relates to passive business activities, so your tax adviser should be consulted concerning any tax implications for your specific situation.)
* Some consider real estate a good hedge against inflation.
* Good quality carefully selected income property will generally produce a positive cash flow.
* As a real estate owner, you may be in a position to take your gains from real estate through refinancing the property without having to sell the property, therein triggering a taxable capital gain. Real estate is advantageous, in this respect because good quality properties can be used to secure mortgage loans up to a relatively high percentage of current value.

Refinancing involves paying off your current mortgage and replacing it with a new mortgage. It often involves many of the same steps and expenses that were required when the original mortgage was obtained.

The most common reason to refinance is to lower monthly mortgage payments, but there are other reasons to consider refinancing.

Reasons to Refinance

Lower the Monthly Payment

If interest rates have dropped, refinancing may lower your mortgage payment. This is the primary reason people refinance.

Reduce the Term (Length) of the Mortgage

A drop in interest rates may allow you to shorten the amount of time you pay the mortgage but leave the mortgage payment about the same.

Reduce the Risk on an Adjustable Rate Mortgage (ARM)

An ARM mortgage may have enabled you to afford your home but if the interest rate has increased significantly, evaluate a fixed-rate alternative. The risk of further interest rate increases is then eliminated.

Use the Home’s Equity

As an alternative to a home equity loan, you may elect to refinance your home for an amount greater than the remaining balance of your mortgage. This is known as a “cash out” loan.

Consolidate Debts

An owner with outstanding loans or credit card balances that have high interest rates can consolidate these loans into one new mortgage.

• Fixed Rate vs. Adjustable Rate
• 30-Year vs. 15-Year Terms
• Rates and Points
• Should You Pay More Or Less “Up-Front”?
• Buydowns vs. Graduated Payment Mortgages (GPMs)

Fixed-Rate vs. Adjustable Rate

Fixed-Rate Mortgage

A Fixed-Rate Mortgage applies the same interest rate toward monthly loan payments for the life of the loan. Fixed-rate mortgages are more straightforward and easier to understand than Adjustable Rate Mortgages (ARMs), are more secure for the buyer, and are popular with first-time homebuyers. Since the risk to the lender is higher, fixed-rate mortgages generally have higher interest rates than ARMs.

For example, a lender can offer a 30-year fixed loan to a homebuyer at a 7.0% interest rate. The loan is locked in to the 7.0% interest rate, even if the market interest rate rises to 9.0%. Conversely, if the market interest rate decreases to 5.5%, the borrower will continue to pay the 7% interest rate.

Fixed-Rate benefits include:

• No change in monthly principal and interest payments regardless of fluctuations in interest rates
• More stability may give you “peace-of-mind”

Fixed-Rate considerations include:

• Higher initial monthly payments compared to those of adjustable rate mortgages
• Less flexibility

Adjustable Rate Mortgage

An Adjustable Rate Mortgage (ARM) does not apply the same interest rate toward monthly payments for the life of the loan. Throughout the life of that loan, the homebuyer’s principal and interest payment will adjust periodically based on fluctuations in the interest rate.

For example, a lender could offer a 30-year ARM loan to a homebuyer at an initial 6.5% interest rate. During an adjustment period for the ARM loan, the market interest rate could rise to 8.0%, resulting in a significantly larger interest payment. Similarly, the market interest rate could decrease to 6.0%, resulting in lower interest payments.

ARM benefits include:

• Initial payments lower due to lower beginning interest rate, usually about 2 percentage points below the fixed rate
• Ability to qualify for a higher loan amount due to lower initial interest rates
• Lower interest payments if the interest rate drops over time
• Interest rate caps limit the maximum interest payment allowed for the loan

ARM considerations include:

• Initial lower interest rate and monthly payments are temporary and apply to the first adjustment period. Typically, the interest rate will rise after the initial adjustment period.
• Higher interest payments if the interest rate rises over time

30-Year vs. 15-Year Mortgage Terms

Typically, a 30-year mortgage term will have lower monthly payments than a 15-year mortgage term. If you decide on a 15-year loan, you will pay significantly less in total interest over the life of the loan, but your monthly mortgage payments will be higher. As a homebuyer, you will need to consider the implications of supporting higher monthly payments when accepting a 15-year term. Can you consistently meet those monthly payments over time? Look at the table below.

Rates and Points

The interest rate determines the monthly interest payments over the lifetime of the loan. A “point” or “discount point” is equivalent to 1% of the loan amount and usually reduces or “discounts” the loan rate by an eighth of a percentage point.

For example: You want to get a loan for $100,000 to buy a home. Each “point” would cost you 1% of $100,000 or $1,000 but would reduce your loan’s interest rate by .125%. The lender might offer you an 8.0% loan with zero points, a 7.875% loan with one point, or a 7.75% loan with 2 points.

Points, like the down payment, are paid at closing. In some cases, lenders will allow borrowers to finance the points over the term of the loan. Lenders sometimes use points to make their interest rates appear lower. Be aware that lower interest rate offered by a lender may translate into higher points requirements.

Should You Pay More or Less “Up-Front”?

The size of the down payment, money paid at closing, can affect your mortgage in a number of ways.

Higher up-front payments result in:

• lower monthly payments
• lower private mortgage insurance (PMI) costs (if applicable)
• lower interest payments

In fact, making a down payment of 20% or more can save the homebuyer money by avoiding the monthly mortgage insurance payments.

On the other hand, lower up-front costs mean that your cash requirements at closing are much less, although monthly payments may be somewhat higher.

These lower up-front costs may be a significant benefit for first-time homebuyers and people who simply don’t have a lot of cash on hand. The Department of Housing and Urban Development (HUD) has some tips that may be helpful to you as you shop for mortgages.

Buydown vs. GPM

While these two mortgage types start the homebuyer off at one rate and increase the rate over time, one of these types of mortgages may be right for you:

Buydown

Type of mortgage loan where the loan rate is reduced by paying more up-front at closing and is increased by one percent each year for the period set for the loan product.

For example: For a 2-1 buydown at an 8% rate, Year 1 the rate is 6%, Year 2 the rate is 7%. For Year 3 through the life of the loan, the rate is 8%.

Qualification rules for the loan programs remain the same. Depending on the lender, the buyer may qualify using the reduced rate. (Example: For a 3-2-1 Buydown at a rate of 8%, the buyer could qualify using the 5% rate.)

The difference between the actual payment schedule and the rate schedule is usually paid “up-front” at closing. This can be paid by the seller, the buyer, the homebuilder, or in some cases, the lender. If the cost is borne by the lender, it is usually offset with increased rates or in points. Generally the funds used to buy down the loan are held in a separate account and are applied with the borrower’s payment to equal the true interest rate.

Graduated Payment Mortgage (GPM)

Type of mortgage loan where the mortgage payments increase gradually for a period established in the loan product, typically five years. This is a negatively amortizing loan, which means that the difference between the interest paid and the interest due is deferred and added to the loan balances. Because of this, your loan amount will increase once you start paying off the loan; it will amortize normally at the end of the loan period. These loan products are more popular when the interest rates are higher, providing a financial incentive for potential buyers.

Since many lenders will qualify a buyer at a lower rate, a buyer can secure a larger mortgage. These loan types are good for those buyers who expect their incomes to increase to cover the increase in loan amount.

Time Becomes Money

It’s a good idea to place your home on the market as far in advance as possible of purchasing a new one. If you find a new home first and then try to sell your present home, you may wind up with two mortgages.

Keep in mind that when people move, sell and buy, there usually is a domino effect. Closing and moving dates have to be coordinated, and the more firmly everyone commits to a window of dates and sticks to them, the better for all involved. Put all agreements about dates in writing, and protect yourself by negotiating financial penalties for failure to comply.

Check Your Curb Appeal
A home that’s visually appealing and in good condition will attract potential buyers driving down the street. Use this checklist to view your property through an outsider’s eyes.

· Are the lawn and shrubs well maintained?
· Are there cracks in the foundation or walkways?
· Does the driveway need resurfacing?
· Are the gutters, chimney and walls in good condition?
· Do the window casings, shutters, siding or doors need painting?
· Are garbage and debris stored out of sight?
· Are lawn mowers and hoses properly stored?
· Is the garage door closed?

On the Inside

Strong curb appeal will lure potential buyers inside, where you have to live up to their expectations. Fortunately, there are plenty of easy improvements you can make to your home’s interior without spending a lot of money. Cleaning is No. 1. Your windows, floors and bathroom tiles should sparkle. Make sure you have clean heating and air conditioning filters. Shampoo dirty carpets, clean tubs and showers, repair dripping faucets and oil squeaky doors. Keep your home neat, clean and picked-up at all times. It may not seem fair, but a peek in the oven may be the hallmark by which a buyer judges how well you have kept up your home.

Remove unnecessary clutter from the garage, basement, attic, closets and straighten stored items. Also remove any items that might make a statement that would be offensive to others who may not share your same views, beliefs or sense of humor. If your home is crowded with too much furniture, consider putting some things into storage. If a room needs a fresh coat of paint, use a neutral off-white. Think, too, about how your home smells. You may be used to the smell of a pet or cigarettes, but such odors can be a strong turn-off to others. Finally, set a mood for the buyer. Make your house homey with live flowers and fresh guest towels in the bathroom. Place scented potpourri around the house or, on the day you’re expecting a potential buyer, pop a batch of frozen cinnamon rolls into the oven for a welcoming aroma.

Go It Alone – or Choose an Agent?

Some homeowners decide to sell their homes themselves in order to save the commission charged by a real estate agent. The commission rate may vary, depending on where you live or what agency you choose. However, handling your own sale means you will be responsible for placing ads, answering phones and showing your home to strangers. What’s more, buyers who know you are saving on an agent’s commission may offer less for your home, wiping out the financial incentive to do it all yourself.

However there are some benefits of going through professional real estate agents:

· They will help you establish a fair asking price for your home.
· They will promote your home to other agents and list your property in multiple listing services. A multiple listing service is a book or computer database that all real estate agents who subscribe to the service can access. Your home will get exposure to all those agents, one of whom may have the perfect buyer.
· They will create, pay for and place advertising for you.
· They will schedule appointments to show your home to prospective buyers even when you are not there.
· They can weed out buyers who will not qualify for a mortgage.
· They can refer you to sources for insurance, inspections, legal counsel and financing.
· They will help you negotiate with the buyer.
· They can make suggestions to help make your home more attractive to a potential buyer.

Setting a Fair Pricez

Naturally, you want to get the best price for your home. But, at the same time, you don’t want to scare off potential buyers with a price tag that’s too high. Setting an artificially high price may cause your property to languish on the market for months. Reducing your asking price later on may lead buyers to wonder if there is something wrong with your home. Here are some of the factors to consider in pricing your home.

· Your location
· Economic conditions
· Supply and demand in the local housing market
· Seasonal influences
· Local schools
· Average home prices in the neighborhood
· Your home’s extras – pool, fireplace, central air, etc.

To determine the value of your home, you probably will want the advice of a real estate agent or appraiser.

Qualifying a Buyer
Either you or your agent will want to quickly weed out potential buyers who cannot really afford to purchase your home. A number of factors will help determine whether or not you are wasting your time negotiating a sale.

· The buyer’s current income and employment.
· The buyer’s cash position and availability of a down payment.
· The length of time the buyer needs before closing on your home.
· How interested the buyer appears to be in your home versus others.

Seek Legal Representation
When selling your home—particularly if you are selling on your own—it’s a good idea to be represented by an attorney. Look for an attorney with expertise in real estate transactions. When a potential buyer puts an offer in writing and you accept it, the signed acceptance becomes the sales contract. Your attorney will be present at the actual closing to protect your interests and can assist you with the following elements of a sales contract:

· The sale price.
· What is included in the sale price — draperies, carpeting, light fixtures, heating oil, etc.
· The amount of the down payment.
· The date of settlement and possession date.
· Contingencies to the sale–inspections (e.g. structural, lead-based paint, radon), required improvements, legal review of the contract by the buyer’s or seller’s attorney, etc.
· The amount and length of the mortgage loan, interest rate and time limits to secure the loan.
· Determining which closing costs are to be paid by the buyer and which by the seller.

Seller Tips in general

Selling Your Home:
· Getting the Highest Price in the Shortest Time
· Making a Good First Impression
· Know Why You are Selling
· Setting the Price
· Plan of Action
· Finding the Right Agent
· Considering Offers
· Insist on a Home Inspection

Getting the Highest Price in the Shortest Time

In order to get the highest price in the shortest time, you need to know how to market your home. The better you market your home, the more offers you will get. And the more offers you get, the more choices you have to get the price and terms you want.

The most important factor of marketing your home is pricing it right. Your price should be adjusted to reflect the market, and the property’s worth. The key is to get many people checking out your property at a fair price instead of having no buyers because your price is set too high.

Another important factor is the condition of your home. Make sure that your home looks ready to be sold. Fix any defects (peeling or faded paint, cracks, stains, etc.) Condition alone can sometimes prompt fast buying decisions. Not only should you fix any defects, but consider upgrading your home by making major repairs and cosmetic improvements before selling. A nice looking home triggers the emotional response that can lead to a financial response.

Learn how to negotiate the best terms for all parties involved. Terms are another factor which may be adjusted to attract buyers. If you insist on getting your asking price, think of what you can offer to the buyers, for example, improvements you’ve made, or even offering seller financing at a lower than market interest rate on a portion of the sale price. Convince them why they should be paying the price you have set.

Lastly, get the buzz out about your home. List your house with a hot agent that ensures your house is listed on the MLS and on the Internet. On your own, get the word out. It should be visible to passerby’s that your house if for sale, whether it be signs, local advertisements or you telling friends, family, and acquaintances.

Making a Good First Impression

If you want buyers to be interested in your home, you need to show it in its best light. A good first impression can influence a buyer into making an offer; it influences a buyer emotionally and visually. In addition, what the buyer first sees is what they think of when they consider the asking price.

A bad first impression can dissuade a potential buyer. Don’t show your property until it’s all fixed up. You do not want to give buyers the chance to use the negative first impression they have as means of negotiation.

Ask around for the opinions others have of your home. Real estate agents who see houses everyday can give solid advice on what needs to be done. Consider what architects or landscape designers have to say. What you need are objective opinions, and it’s sometimes hard to separate the personal and emotional ties you have for the home from the property itself.

Typically, there are some general fix ups that need to be done both outside and on the inside. As a seller, you should consider the following:

· Landscaping – Has the front yard been maintained? Are areas of the house visible to the street in good condition?
· Cleaning or Redoing the driveway – Is your driveway cluttered with toys, tools, trash etc.?
· Painting – Does both the exterior and the interior look like they have been well taken care of?
· Carpeting – - Does the carpet have stains? Or does the carpet look old and dirty?
Know Why You are Selling
If you know exactly why you are selling, then it is easier for you to set the right plan of action to get what it is that you want.

If you are a seller who needs to close a sale as quickly as possible, then you should know that getting the highest price possible is not one of your priorities. It does not mean that you won’t or cannot get the highest price, but it means that the price is not the deciding factor. A buyer who can give you a quick closing time will appeal much more to you than a buyer who can offer you more money but the negotiation and closing time drag on.

It’s always good to know how low you will go, in terms of selling price. This will help to eliminate some of the offers that you find simply offensive or ridiculous. Even though you should consider all offers seriously and take into consideration the terms of each offer, sometimes, if you know the bottom line and are strict about it, you can save yourself time.

Once you know what your limits and reasons are, discuss them with your agent so that they can help you set your goals realistically. If you decide to list your home on your own, make sure you do research on the current market, and you get the proper advice you need in terms of legal issues, etc. The key is to be realistic and to know what your goals are so that they can be met.

Setting the Price

The price is the first thing buyers notice about your property. If you set your price too high, then the chance of alienating buyers is higher. You want your house to be taken seriously, and the asking price reflects how serious you are about selling your home.

Several factors will contribute to your final decision. First, you should compare your house to others that are in the market. If you use an agent, he/she will provide you with a CMA. The CMA will reflect the following:

· houses in your price range and area sold within the last half-year
· asking and selling prices of houses
· current inventory of houses on the market
· features of each house on the market

From the CMA, you will find out the difference between the asking price and selling price for all homes sold, the condition of the market, and other houses comparable to yours.

Also, try to find out what types of houses are selling and see if it applies to your area. Buyers follow trends, and these trends can help you set your price.

Always be realistic. And understand and set your price to reflect the current market situation.

Plan of Action
Analyze why you are selling – If you understand your motives, you will be able to better negotiate and to get what it is that you want, whether it be a quick sale, high price, or somewhere in the middle.

· Prepare your home for the buyer – Maximize the strengths of your property and fix up it’s weaknesses. You want the buyer to walk away from your home with a lasting good impression.

· Find a good real estate agent that understands your needs – Make sure that your agent is loyal to you, and can negotiate to help you achieve your goals. In addition, they should be assertive and honest with both you and the buyer.

· Be prepared for negotiation – Learn and understand your buyer’s situation; what are their motives? Can you demand a big deposit from them? Try to lock in the buyer so that the deal goes through.

· Negotiate for the best price and the best terms – Learn how to counter offer to get more from every offer.

· Make sure the contract is complete – Be honest with your disclosures; you do not want to lose the deal because you were lying or diminishing your home’s defects. Insist the buyers get a professional inspection. This will protect both you and the buyer.

Finding the Right Agent

Not all agents work the same way. The most important attribute of an agent is that he/she is well connected to the real estate industry. He/she should know the market and provide information on past sales, current listings, his or her marketing plan, and at least 4 solid references. In addition, you also want to look for an agent that is honest, assertive, and one that best understands your needs.

Try to go with a local agent. They can better serve your needs; they are familiar with what the local market condition is, the local prices are, and what’s hot or not in your community.

Considering Offers
When reading an offer, keep in mind that you are out to get the best price AND the best terms for you. If you focus solely on the price, you may overlook terms that could be favorable to you as a buyer.

Some terms that may work in your favor:

· higher-than-market-interest in a second mortgage for your home
· the buyer will pay for most or all of the closing costs
· the buyer will take care of any repairs
· quick close – the buyer is pre-approved and ready to close in a time that best suits you
· all-cash deal

When reading through offers, remember to look at the whole package. Take the time that you need to assess what is being offered and if it meets your needs.

Insist on a Home Inspection

A professional home inspection protects both you and the buyer. It allows both you and the buyer the opportunity to learn about the property’s defects.

A home inspection usually covers the following:

· Plumbing conditions - if there is leakage or clogging
· Roofing conditions – the extent of deterioration, if there is leakage
· Electrical conditions - if there are inadequate circuits or potential fire hazards
· Structural problems - if there are problems with the underlying foundation of your home

As a seller, the home inspection reports protect you because it establishes the actual condition of the property at the time of sale.

General

When buying a home or a new development site it is imperative to include into your mortgage repayment figures the cost of the any monthly maintenance expenditure. This sounds like common sense doesn’t it, but the amount of times purchasers of new home and apartments find themselves in trouble and having to over stretch their budget is alarming. With the ever increasing shift to Common Interest Style Development in this country, it is no wonder that we have seen an increase in failed mortgages as purchasers haven’t done a few basic checks and put aside the initial emotion and excitement of moving into their new home or apartment.

Finance Tips

Know the Market, Know your Finance

Do your own research into the area and the market you are thinking of buying into. Don’t just see one agent. Real Estate agents are groomed and slick, they’ll be your best friend and have always pleasant things to say. It’s a good idea to listen but NEVER take one opinion only. Stand alone and be sure when you decide to purchase that you know what you are paying is good value, and that your investment is sound. Shop around through the agents, see what each says, see what each has listed. Do your Internet and news paper research on recent sales and have a visit and evaluate the properties, which you are interested to buy

Commonly used Real Estate Finance terms:

Actual cash value:

The price property will bring in a fair market, after fair and reasonable efforts have been made to find the purchaser who will give the highest price.

Cost approach:

A method in which the value of a property is derived by estimating the replacement cost of the improvements, deducting the estimated depreciation, and adding the value of the land, as estimated by use of the market data approach.

Creative financing:

Any financing arrangement other than a traditional mortgage from a third-party lending institution.

Debt service:

The payments consisting of amortization and interest on a loan.

Depreciation:

A loss from upper limit of value caused by deterioration and/or obsolescence.

Discount rate:

An interest rate commensurate with perceived risk; used to convert future payments or receipts to present value.

EMI is the Equated Monthly Installment payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal

Equity:

The net value of a property, obtained by subtracting from its total value all liens and other charges against it. The term is frequently applied to the value of the owner’s (as opposed to the lender’s) interest in property in excess of all claims and liens.

Income approach:

An appraisal technique in which the anticipated net income is processed to indicate the capital amount of the investment that produces it.

Leverage:

The use of borrowed funds to complete an investment transaction.

Market value:

Market value connotes what a property is actually worth and for what market price it might sell.

Renting:

What is a lease?

Lease is a contract between the Lessor and Lessee.

What is a lessor?

The person or party who owns the property and wants to let it out on lease.

What is a lessee?

The person or party who wants to take the property for rent for a specified period of time.

What are the conditions for a valid lease?

• The lease agreement which contains all the terms and conditions of the lease should be understood and accepted by both the lessor and the lessee before affixing their signatures to it.

• Agreement to lease for a period of over 1 year should be registered under the Rent Control Act with proper stamp duty paid.

• The lessor should promise to let out the property owned by him to the lessee for a fixed period of time in return of agreed rental value.

How can lease agreement be created?

Lease agreement of an immovable property can be created by the following method:

Registered instrument in cases where the lease is from year to year or exceeding one year rent or reserving yearly rent. In such cases the instrument must be executed by both the lessor and the lessee and be registered with the concerned registrar.

An overview of some important rights you have as a homebuyer:

Consumer Credit Protection Act (1960)

Guarantees confidentiality of credit reports and allows consumers to correct inaccurate information in their reports.

Equal Credit Opportunity Act of 1975 (ECOA)

Prohibits the discrimination in any credit action based on race, sex, marital status, color, religion, age, handicap, or national origin.

Equal Housing Opportunity

Prohibits housing discrimination based on race, sex, marital status, color, religion, age, handicap, family status or national origin.

Fair Housing Act

Prohibits the discrimination based on race, sex, marital status, handicap, or national origin in any real estate transaction.

Federal Consumer Credit Protection Act (commonly known as the Truth in Lending Act) (1969)

Requires that lenders disclose the actual terms and conditions of a loan before an applicant commits to the loan.

Home Mortgage Disclosure Act (1975)

Provides information to help determine whether public institutions are assisting the housing needs of their communities and neighborhoods.

Real Estate Settlement Procedures Act of 1974 (RESPA)

Encouraging homeownership through consumer protection, this act regulates certain lending actions related to closing/settlement. Some of its provisions are:

• RESPA requires lenders to provide buyers a good faith estimate of the cost of the loan, including disclosure of the Annual Percentage Rate (APR).
• RESPA requires lenders to provide buyers with general information about settlement costs.
• Lenders must provide buyers a copy of the Mortgage Servicing Disclosure Statement, regarding loan servicing and transfer.
• Within three days after receiving the loan application, lenders must provide the buyer with an estimate of closing costs and monthly payments.
• RESPA provides the borrower the opportunity to see the HUD-1 Settlement Statement one day before the actual settlement.
• Prohibits kickbacks between Real Estate professionals for referrals and prohibits fee-splitting and receiving unearned fees for services not rendered.

Regulation B of the Consumer Credit Protection Act

Requires lenders to inform potential borrowers of any adverse actions taken on their loan applications.

Regulation Z

Includes regulations related to consumer credit disclosures identified in the Consumer Credit Protection Act.

Veterans Housing Benefits Act (1978)

Increases the housing benefits for eligible veterans including increased loan amounts.

Participants in the Homebuying Process

Lender

Bank/Mortgage company which provides the funds for the purchase of a home.

Buyer

A person purchasing a home. The buyer may search for a home with or without the help of a Real Estate Agent (a Buyer’s Agent).

Seller

A person selling a home. The seller usually works closely with a Real Estate Agent to sell his/her home.

Real Estate Agent

There are two types of Real Estate Agents:

• Selling Agent – A person who earns a commission on the sale of a home from the seller.
• Buyer’s Agent – A person who earns a commission on the purchase of a home.

Either Real Estate Agent may be a certified Realtor or a lawyer specializing in Real Estate.

Home Inspector

A Real Estate professional who inspects a home prior to settlement day. The final result of a home inspection is a report detailing the condition of the house.

Home Appraiser

A Real Estate professional who sets a dollar value for a home’s worth, using standard appraisal criteria. The appraisal is one of the important documents required at closing.

Research Is the Key
Home sellers won’t call you with an offer to buy a maintenance-free home with a wonderful mortgage. You have to find the gems yourself! Only by reading available materials, talking to friends and experts, and spending time looking at different homes, schools, and neighborhoods you will end up with your DREAM HOME.

Make a Plan

Every important decision needs to be clearly thought out. Developing a home buying plan can help you focus on the important factors and organize the entire process. You may even want to use a binder with sections on house hunting, home financing, service providers, etc. Loan pre-qualifying helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28% formula (your monthly mortgage can’t exceed 28% of your monthly income) in approving your loan. Planning your actions and getting pre-qualified will keep you out of the panic mode and allow you to take advantage of opportunities. A thorough plan will save both time and money!

Value

The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. The saying, “make money buying a home, not selling one,” should keep you focused on the long-term importance of the purchasing price.

Create A Top 10 List of Amenities

When shopping for a home, list the features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you in deciding on which home to buy. Establishing “your criteria” early on will save time shopping for inappropriate homes, your top reason for buying a home should be the value you are getting.

Get A Quality Home Inspection

Although it is hard to believe, more people pay for inspections before buying used cars than when making the biggest investment of their lives — their homes. Paying for a qualified home inspection before you buy a home isn’t just spending “a little extra” for peace of mind; it’s absolutely essential for anyone who doesn’t want to spend thousands of rupees for repairs.

Legal Advise

Before buying property, it is advisable to appoint a solicitor to inspect the original title documents of the property being purchased. If the title is not clear, the number of complications arising in future may be numerous. For eg., no bank would provide a loan against a property not having a clear title, it may be difficult to transfer share certificate of the society in your name, selling of property will not be simple, etc.

Buying : LEGAL ISSUES

Verification of the Title of the vendor

This is the most important aspect of a purchase transaction of an immovable property and may be competently handled by a reputed lawyer/solicitor/chartered accountant etc. The verification is necessary from following three angles:

1. Validity of Title: The vendor must have a clear, valid and marketable title over the immovable property which is the subject matter of transaction. This would require a close scrutiny of documents of title produced by the vendor. The document must be a registered document.
2. Obtaining of Non-encumbrances certificate from registrar and good title from the concerning tehsildar.
3. Acquisition of land in any scheme by the land acquisition officer.

Buyer Tips in general

Buying a Home:
· Use a Buyer’s Agent
· Why You Should Not Make Any Major Credit Purchases
· Getting a Legitimate Lender and Getting Pre-Approved
· Finding the Right Seller
· Build a Plan of Action and Get Ready
· Hot, Normal, and Cold Markets
· Importance of Inspection
· Avoiding Financial Stress

Use a Buyer’s Agent
It’s important that you choose an experienced agent who is there for you. Your agent should be actively finding you potential homes, keeping you informed of the entire process, negotiating furiously on your behalf, and answering all of your questions with competence and speed.

First, find an agent who represents you and not the seller. This is beneficial during the negotiation process. If you are working with a buyer’s agent, he or she is required not to tell the seller of your top choice. In addition, he or she is also focused on getting you the lowest asking price.

Also, when you use a buyer’s agent, you will see more properties. Not only are they plugged into their Multiple Listing Service, but also they are actively finding homes that are listed as FSBO, or homes that sellers are thinking about listing.

Why You Should Not Make Any Major Credit Purchases

Don’t go on a spending spree using credit if you are thinking about buying a home, or in the process of buying a new home. Your mortgage pre-approval is subject to a final evaluation of your financial situation.

Every $100 you pay per month on a credit payment could cost your about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage.

Even if you have accumulated enough savings, you should consider not making any large purchases until after closing. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.

Getting a Legitimate Lender and Getting Pre-Approved
It used to be that buyers could go house shopping and when they have found their dream home, then they go to get pre-approved. However, in today’s market, that has proven to be one of the least effective methods in landing the dream home.

Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be.

A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property.

In addition to being pre-approved, it’s important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders.

Some lenders to avoid: those who lose a form or misplace a file, those who gather information from you in an unorganized manner, those who are not informed about interest rates, points or costs, and those who cannot provide you with the right information.

Finding the Right Seller

The best seller is one who is highly motivated. A highly motivated seller is more likely to sell for less than his or her house is worth. And it matters that you find out why; learning the reason why can help you get the price you want and help the seller get what they want: a timely sale.

When given the opportunity to meet with sellers, ask them why they are selling. The reasons could be anything from job change to a new location to financial problems. If you can solve their problem, whether it is cash related or time related, do so. For example, if the sellers are highly motivated because they need to move quickly, give them a fast sale – and a lower price. If you can make an offer, even a low one, that gives them cash in a short time, they are more likely to accept.

There are also some sellers that you should avoid. Not every seller is as genuinely motivated as they make themselves to be. Some possible hints:

· they stall on having the home appraised or inspected
· is unable to clear up liens against their property
· does not own 100% of their property
· they push back the move-out date
· does not have a replacement property or back up plan

It is impossible to find the perfect seller. But it is possible to find out which sellers are legit, and which ones aren’t.

Build a Plan of Action and Get Ready

Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.

Before you can build a plan of action, take the time to lay the groundwork for your decision-making process.

First, ask yourself how much can you afford to pay for a home. If you’re not sure on the price range, find a lender and get preapproved. Preapproval will let you know how much you can afford so that you can look for homes in your price range. Getting pre-approved helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range.

Second, ask yourself where you want to live and what is the best location for you and/or your family. Things to consider:

· convenience for all family members
· proximity to work, school
· crime rate of neighborhood
· local transportation
· types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.

Hot, Normal, and Cold Markets

Hot Market

This is an extremely competitive market, one that is advantageous to the seller. Sometimes, homes will sell as soon as they are listed or even before homes are listed. Typically, during a hot market, multiple offers will be made on each home and more often than not, homes will sell for more than their asking price. It is even more crucial to be prepared and to be ready as a buyer when the market is hot. It can be easy to get caught up in the bid for a home, but if you are prepared (pre-approved, solid in price range, realistic about your needs), it is easier to remain focused on your housing needs and price range.

Normal Market

In a normal market, there is fairly a large number of homes available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home, but he or she may not be desperate to sell either. Again, it is the buyer’s responsibility to be prepared. During a normal market, the chances to negotiate are higher than in a hot market. As a buyer, you can expect to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking.

Cold Market

In a cold market, houses may be listed for more than a year and the prices of houses listed may drop considerably. This market is advantageous to the buyer. As a buyer, you have the time to make an offer that works to your best interest. It is not uncommon to low-ball and to find that sellers are accommodating to meet your needs. Keep in mind that even though this market is a great time for buyers, you do not want to lose your dream home by being unrealistic. Your goal is to get your dream home at the best possible price.

Importance of Inspection

As a buyer, you are entitled to know exactly what you are getting. Don’t take for granted what you see and what the seller or the listing agent tells you. A professional home inspection is something you must do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition.

Beforehand, make sure the report will be done by a professional organization, such as a local trade organization or a national trade organization. Not only should you never skip an inspection, but also you should go along with the inspector during inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. Once the inspection is complete, review the inspection report carefully.

You have to demand an inspection when you present your offer. It must be written in as a contingency; if you do not approve the inspection report, then you don’t buy. Most real estate contracts automatically provide an inspection contingency.

Avoiding Financial Stress
By asking the right questions, and knowing exactly what your needs are, you can find the right loan for you. There are certain approaches that you can take while mortgage shopping that can cost or save you money.

It is still true that the better qualifications you have, the lower your interest rate will be. However, there are mortgages available for almost everyone; it’s the interest rates or the down payments that vary.

Before speaking with a lender, know what monthly dollar amount you feel comfortable committing to. Then when you discuss mortgage pre-approval with your lender, it is easier for you to determine the monthly amount and what value of home the monthly amount translates into. Do not put yourself in the position where you will be paying more each month than you intended simply because the “dream” house requires it.

Windows 7 is produced by Microsoft Windows, the latest release version of operating system as of February 2010 for use on personal computers, desktops, laptops, netbooks, tablet PCs, media center PCs. Windows 7 has new features, improved process, faster, 64-bit support, more reliable performance that make a great worldwide release. So customers can take full advantage of the latest powerful PCs and great features like HomeGroup, Windows Media Center and Windows Touch make all the new things possible.

Windows 7 will include multiple fonts have adds more forty fonts for each of the official languages of India. It has a better ways to find and manage files like Jump lists and improved taskbar previews to help the work speed everyday.

Merits

1. Windows 7 is less expensive than Windows Vista.
   Windows 7 is faster than its previous versions.
   It is worth installing Windows 7 in your system.

Demerits

1. Windows 7 is expensive than the earlier versions of Windows because minimum $120 to upgrade the system with Windows 7 Operating system.
   Many of the programs that work in XP and Vista are not compatible in Windows 7.
   It mostly acts as a closed system.

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Google SMS Channels is a new product launched by Google India. People can subscribe to blog updates, news alerts, other kinds of information such as horoscopes, blog RSS feeds, jokes, stocks exchange market, cricket scores, weather information, SMS text messages etc.

There are many commercial group messaging solutions in India where the primary means of mobile communiations is SMS. However, unlike GupShup, Zook, and MyToday, Google’s SMS channel is two-way allowing for SMS discussions and also enabling subscribers to publish to the channel.

Google SMS Channels is a free service for both content publishers and mobile phones users who subscribe to text updates via SMS. This service will get from Google, Google partners, other websites and blogs with RSS support. People can create own channel and publish the content to other users can subscribe easily with it. Also can create groups over SMS to communicate with their friends, family and co-workers same like the SMS GupShup service. It supports English, Hindi, Telugu, Tamil, Malayalam and Kannada languages.