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Expert Buyer Articles - Joe Hayden, Realtor®

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All articles are original works by Joe Hayden, all copyrights retained.  You have permission to reprint these articles as you see fit as long as Joe Hayden, Realtor is clearly credited with authoring the article, and you include the following link back to this site:  Thank you, and...enjoy!

How To Write A Repair Request - It's In The Details

Some Tips for Taking Advantage of a Buyer's Market

Put it in Writing - Contract Basics for the First-Time Buyer

Real Estate Investing - 101

Defensive Buying - 5 Ways to Buy Smart in a Down Economy

Credit Reports, Credit Scores, and You - A Guide for Home Buyers

How To Write A Repair Request - It's In The Details

Disclaimer: While your Realtor may draft a repair request for you, or you may do it yourself, I strongly recommend seeking competent guidance from an attorney who specializes in real estate matters. Real estate agents cannot give legal advice unless specifically qualified to do so.

One of the major components of any quality real estate sales and purchase contract is the home inspection contingencies. Once you have agreed to the basic terms and conditions with a seller, you should have allowed yourself a reasonable time period to fully inspect the property using any resource you see fit. It is very typical to find numerous items that may need attention during this period and you must decide what should be repaired and what you can deal with later.

The sales and purchase contract should have detailed instructions on how to handle any requests for repairs, and you should review these instructions with your Realtor before drafting a repair request. Failing to follow these instructions can be just a bad as failing to adequately express your expectations. Make sure you understand what you must do and what your recourse could be or you may end up purchasing a property with significant defects.

Let's develop a scenario to use as an example of the many possible solutions to finding problems and getting them satisfactorily resolved. One situation I recently observed a friend go through with the sale of her home was the repair of a ceiling with water damage from a previous water leak. The buyers noticed the stain on the ceiling and the seller had disclosed the fact the roof had leaked and was repaired. The seller had sufficient documentation to prove this fact and provided it to the buyers.

The buyers took issue with the condition of the ceiling during the inspection phase and made a request to have the ceiling repaired. The exact wording of the repair request was "seller to repair ceiling in the living room". This request was properly presented to the seller according to the contract and was agreed upon by both parties. At this point, all parties involved were content with the the status of the transaction.

Obviously, for this to be a good example for our discussion, something has to go wrong, right? Well, something did go wrong, and it led to some very heated arguments and accusations. The buyers' intentions with the repair request was to have the ceiling opened up, inspected for further water damage and mold, and then repaired and painted to match the surrounding ceiling. The seller's intention was to replace the affected area on the ceiling with new drywall and mud, but not repaint or inspect for other damage.

Now, re-read the exact wording of the repair request. Who has the correct interpretation of the intent of the request? The seller or the buyer? In my opinion, both viewed the extremely vague wording of the request to their advantage and failed to recognize the other party's intentions. Both could be correct, but since money and time are involved, neither side wished to give in to the other.

The seller did exactly as I stated and had the stain removed from the ceiling and did not repaint. When the buyers came through the house on their 24 hour prior to close walk-through, they saw the ceiling and immediately protested. This led to an escalating argument that culminated with a war at the closing table over the meaning of the repair request. It was ultimately determined that the seller had complied with the letter of the request and the buyers were left with no further recourse.

What can we learn from this specific transaction? I hope the first and most important thing you learn is to write extremely detailed, well though-out repair requests. My personal suggestion in this case would be to have written... "Seller to repair stain on the ceiling in the living room. Seller to have repair made by a reputable company with a successful history in this sort of repair. Seller to have the ceiling inspected for further damage caused by the previous roof leak and to inform the buyer immediately if any water damage or mold is present. Buyer shall have the right to make further requests for repairs should other damage be found. Seller to have repair completely and accurately documented and shall transfer any warranties that accompany the repair. Seller shall repaint the ceiling to match the surrounding ceiling."

I don't claim to have the perfect request for repairs in this situation, but I think both parties would have had a much better understanding of the intentions of the buyers and it is possible to have alleviated some of the contention at closing if wording more similar to this had been used. When you need to make a request for repairs in a real estate transaction, make sure you have considered all of the details and it is very explicitly and clearly written on paper. I would even consider consulting with a home inspector and attorney to help with the language.

I hope you find this information helpful and will be very careful when making requests for repairs in your next real estate transaction...

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Some Tips for Taking Advantage of a Buyer's Market

Presently we are experiencing what many in both the media and industry circles term a buyer's market. Very simply, it is the first lesson from Marketing 101; when demand is high and supply is low, prices will increase, but when demand is low and supply is high, prices decrease. If you want to increase your price, you need to either increase demand or reduce supply. The challenge we face today revolves around the high number of people forced to sell for various reasons, and the perceived fall-out from loose lending practices.

As a potential buyer in this market, you are afforded a number of advantages over the seller that typically are unavailable. Before we go any further, I want to address a common mis-conception the buying public learns from mass-media outlets and certain market gurus... A buyer's market does not mean you will receive any concession from a seller at all regarding price, and you may still end up paying top retail price for your next home. Nice homes in great locations will always command top prices, and if you think otherwise, you may be easily outbid by another, more aggressive buyer. We'll return to price in a moment.

In this buyer's market there are other significant ways in which you can save money and increase your purchasing power, and that is the focus of this article. First, let's look at some options from a seller's perspective. The seller's goal is to make the maximum amount of money in the shortest time with the least investment into the property they intend to sell. To make any sort of investment in the property, the seller will need access to capital resources to fund the updates or repairs. A seller can avoid spending the cash or tapping a credit line for this venture and offer you the buyer a credit on price or in the form of a decorating allowance if they choose.

What typically happens, though, is the seller will not make the repairs or updates and leave it up to the buyer to either accept the home as-is, or to ask for some concessions in the purchase contract. My first tip for you in this buyer's market is to therefore ask the seller to give you a credit for a decorating allowance, or to make the necessary repairs before closing. Now you may think I just wasted your time and gave you a useless piece of advice, but you would be amazed how many buyers are too timid or afraid to be aggressive with these types of concessions. If you do not ask, you will never receive. The worst that can happen is the sellers will say no.

Another way to save money in a buyer's market is to include a provision in the purchase contract that requires the seller to pay all or part of the buyer's closing costs and/or prepaids. This can have a tremendous impact on your buying power because these costs associated with buying a home are what makes the first few years of homeownership unprofitable. If you save this money, you will more quickly realize the benefits of appreciation and the reduction in your debt obligation to the lender. It is very important to coordinate with your lender, your real estate agent, and your financial adviser to determine exactly what to ask for so you receive maximum benefit. It is also critical that the contract be written precisely correct to ensure the seller cannot avoid paying certain costs on a technicality.

Let's revisit price and look at why the buyer's market hype will not affect an educated seller. Most sellers who have elected to list their home with an agent will have access to very detailed market data. It will be obvious to even the most novice seller what the market indicates their home is worth. If the sellers take the time and make the effort to prep their home to sell properly, and they heed the market data, they will most likely settle in on a price that a competent buyer will fairly pay. This means you will probably not be receiving any break in pricing from this type of seller.

But you are a savvy buyer fully informed on the market and fearless in your negotiations. You will realize that the asking price is fair for the market and attempt to save money in the other ways mentioned above. Sellers are funny... They will settle in on a price, but will turn right around and give concessions worth thousands of dollars when confronted with a strong, motivated buyer and a signed purchase contract.

While I have remained general in my suggestions, you can easily tailor these ideas into your specific situation and confidently save money, ask for and receive repairs or updates, and increase the value of your purchase. Never forget that quality and location bring a certain value to the sellers, so don't make the mistake of low-balling your dream home and then losing it because you offended the sellers. Be fair with the price, but get your concessions and savings in other, more creative ways. This is how I believe you can best take advantage of this buyer's market.

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Put it in Writing - Contract Basics for the First-Time Buyer

Only attorneys can legally guide you through the technical aspects of a contract (in Kentucky). A real estate agent can provide a pre-printed contract and help you fill in the blanks, but cannot provide legal advice. What follows is only my opinion based on experience and it does not supersede the guidance of an attorney.

After all of the hard work getting your finances in order, putting together your real estate team, and finding your dream home, you must now take the time to carefully prepare a written offer and present it to the seller. This offer will form the framework that the rest of the real estate transfer will follow, and therefore it is very important that you get it right from the beginning.

Let's take a look at how real estate contracts are structured; in no particular order they will always contain the full name of the person(s) making the offer, the legal property description and address, the price of the offer, the payment terms, contingencies for inspections, the closing date, and a signature/acceptance page. In addition, they may contain a myriad of other terms and conditions that are usually traditionally negotiated in your local area. I am going to focus on the basics and you should secure competent, professional representation to explain the additional terms and protect your interests during the negotiation process.

When preparing your offer it is critical that you get the legal description of the property you wish to purchase correct. While I'm certain in most cases it will be obvious what your intentions were if a mistake is made, it will not suffice to have the incorrect description on the contract. The seller will reject the contract if they notice the discrepancy, and they can use it as leverage against you should the transaction become troubled. Don't leave this door open!

The price and terms of payment are primary negotiating points, so you want to make sure you have done your due diligence with the market and your lender to ensure you remain within reason and budget. It is not always the best technique to aim low and let the seller counter back with a higher, but still acceptable price. In a hot market, or with a desirable property, making your highest and best offer right from the start could make the difference between getting the home and missing an opportunity. Even if the seller counters your highest and best, you can counter back at your original terms, or reject their counter.  Always coordinate with your real estate agent to determine the best negotiating strategy.

The specific terms of payment and the amount of money to put down is also a point of negotiation. Put yourself in the seller's shoes when determining how much to offer as a good-faith deposit. The more you offer not only indicates your motivation to get the transaction to the closing table, but it also gives the seller comfort about your purchasing power. Who wants to lock up a $150,000 home with a $500 good-faith deposit? The sellers will be very wary of letting a weak buyer gain a measure of control over their property, especially if it is a desirable one.

Contingencies are used in contracts to give protection to one or both of the parties involved. For example, any decent real estate contract should include a contingency for allowing the buyer to inspect the property and either ask for repairs or corrections, or to terminate the contract if they are unsatisfied with the condition of the home. This contingency will have a time limit, after which there will be no further contractual relief should the buyer discover any faults with the home prior to close. Of course, you can still attempt to negotiate if a genuine problem surfaces, but it may land you in a court battle with the seller. Make sure you have an inspection contingency in your contract, and make sure you fully understand exactly what it instructs you to do.

The basic negotiating process consists of a written offer followed by an acceptance, a rejection, or a counteroffer. If your initial offer is accepted on the terms you set, good job! Now buckle down and make full use of your contingencies. If your initial offer is rejected, before you get discouraged review all of your terms and conditions and ensure you made a fair offer acceptable to you, and if you did, then either resubmit on different terms, or walk away. If you receive a counteroffer to your initial offer, then you must carefully review the changed terms and decide if they can be acceptable to you. If not, you can either reject or counteroffer again in an attempt to keep the negotiations alive.

This process can sometimes continue back and forth through several alterations of the original terms and conditions, sometimes over minor points like the exact day of closing. This is okay, though, and you should be prepared to continue negotiating with a reasonable seller to get your dream home if you think there is any way to keep negotiations alive. Always keep in mind that the terms and conditions you set will be used by all of the additional parties to a real estate transfer like attorneys, title companies, other real estate agents, and by the seller and yourself to finalize the property transfer. You must fully understand and be comfortable with all facets of the contract.

I hope this outline has given you a little guidance and inspired a few questions for you to ask your real estate team. Putting an offer into writing is both an art and a science, and it requires professional assistance, plus creative thinking. Good luck with the purchase of your new home!

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Real Estate Investing - 101

Forget the Sunday morning infomercials...Forget the "I made $30,000 is 15 minutes" crowd...Forget the spinmeisters and sales gurus who claim your pathway to riches is on the next block over...Real estate investing is a challenging, yet rewarding, long-term, venture that is truly not for everyone.

How do you define investing? Do you religiously take $5 to the corner mart and buy lottery tickets every week? You know, there is an old saying that goes "I used to wonder what I was going to do if I won the lottery, and now I wonder what I'm going to do if I don't!" Do you put a little money in a savings account and watch it grow at 3.5% interest? What is your honest take on investing?

My opinion on investing is that it requires work, vigilance, educating yourself about the investment, and a keen eye for minimizing costs while maximizing profits. Oh yeah...It also takes time. Very, very few investments afford you a quick payout, and a majority of those investments require precise timing (some refer to this as luck) that even the best in the business don't always achieve.

Real estate investing is no different than any other type of investing except it affords you potential access to a piece of real property. Yes, you can get involved in a real estate trust and never see the property you co-own, but typically you will be able to drive down the street and see your investment. It is a tangible object that is subject to all of the normal wear-and-tear all of the other properties in the area are subject to, plus it will typically hold renters or leasees who will cause additional degradation of the property.

Why am I telling you this? Because if you are considering making an investment in real estate, you have to be prepared to commit to that investment for enough time for it to pay off, plus you must either be capable of handling all of the various aspects of managing the investment or put together a team to help you succeed.

There is another sage aphorism goes a little like this... "you make your money in real estate the day you buy the property". Failing to "buy it right" can doom even the best investment plan to failure as uncalculated costs, undiscovered faults, and other surprises devastate your profit. There are quite a few opinions on this particular subject, but frankly there are a number of highly precise formulas that can account for nearly every type of expense, profit, tax, or loss long before you put your name on a purchase contract. If you do not know these formulas, or how to apply them, find someone who does and can. It will quickly let you determine if you are looking at a good investment.

All investments require at least a minimal amount of work and oversight. Unless you hire a reputable property management company to handle your day-to-day property affairs, you will need to do this yourself ( must account for all of your expenses no matter which path you choose). Water heaters do break in the middle of the night, you know, and someone has to take that call. Keep this in mind when you evaluate an investment because these seemingly minor costs can erase your profit.

Most importantly, never forget holding costs and planning your exit strategy from the get-go. Holding costs are most prevalent in rental properties when there is a vacancy. Someone has to make the mortgage payment. For those who choose to flip properties, holding costs include everything from the electric bill to the mortgage payment while you rehab and wait to sell. Not estimating these costs correctly and sufficiently will ruin your investment very quickly.

Your exit strategy needs to be based upon accurate market projections, tax and depreciation calculations, plus using a formula to calculate what is called internal rate of return to help you determine the optimum time to sell an investment. Using the best available data, plus the input of your team, you should be able to have a clear picture of your exit strategy before you even make an offer to purchase the property. Again, failing to take this step could have an adverse affect on your investment.

There, I think I've said enough to wet your whistle. I hope if you are considering making an investment in real estate you will hear me loud and clear when I say "do your due diligence, put together a competent, trustworthy team, and make sure you have run all of the numbers before you put one word into writing on a purchase contract!" Also, you need to do a little soul-searching to ensure you are up to the challenges of owning investment property. It really isn't for everyone, and there are many, many other investment options that can provide returns completely in line with those from real estate. I wish you well in your adventures!

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Defensive Buying - 5 Ways to Buy Smart in a Down Economy

Depending on where you live, your local real estate market may be experiencing a downturn. Historically, these market adjustments have served as a natural protection against runaway price inflation, and in the long-run can be very positive, but as a buyer in one of these markets you must buy smart to protect your financial future.

Here are 5 ways in which you can take advantage of a down market and protect your interests for the future at the same time...

1. Look at the local job market. Know who the major employers are in town and where their employees typically live. Read the papers and pay attention to the stability of these employers. If the company is in financial trouble, or is going to lay off employees, be careful about buying in areas heavily populated by their employees. Yes, you may get a great deal, but home prices may drop dramatically around you and cause you to lose money. Plan for that in your negotiations.

2. Research new commercial developments in your area. If you discover that a new retail / commercial center is going in near an area you desire to live in, take the time to find out what stores are planned for the development, and look at how things like traffic flow and access are going to be addressed. A bad plan can negatively affect area property values, but conversely a well-planned development can draw buyers like a magnet raising property values.

3. Learn about zoning. If you buy a home right next to land zoned for commercial development and you do not realize it, your property value could be negatively affected by the increase in traffic and the type of development. If you are looking in a fully-developed residential area this may not prove to be much of a factor, but be aware of any nearby open spaces and their zoning that could make access to your residential area more challenging. Again, good developments can be to your benefit, but consider how the changes could affect value in your negotiations.

4. Drive the area you desire to live in. Take a camera and a note pad to record what you find. Look for things like for-sale signs, blighted properties, new construction or residential developments, open lots and land, road construction and access, and the availability of retail services. Lots of 'for sale by owner' or real estate signs could spell trouble as numerous homes for sale could cause a price reduction war to sell. Again, it may be to your benefit, but you must consider this in your negotiations.

Blighted properties will reduce the value of homes in the immediate area, and new construction, or anything that increases housing density can ultimately reduce value in a slow market as inventory increases and the number of buyers decreases. Be wary of new developments without any noticeable construction activity as there may be financial issues that could affect the value of all of the homes in the area. Don't be the sucker that pays top price for a home nobody wants.

Open lots and the availability of land can be a positive depending on the area you are looking in, but keep in mind that zoning can change and there are lots of commercial developers out there looking for any sliver of land possible to develop in many markets.

5. Negotiate strongly with the seller. I am a firm believer in homes being exchanged for fair market values, meaning the transaction should be a win-win, but that doesn't mean you cannot, or should not attempt to negotiate your best terms. Do your research and come to the table armed with extensive, current market knowledge, and a willingness to set your final terms and stick with them. Be reasonable, but firm. Be aware of the long-term implications of your purchase and ensure you have an exit strategy in place. Most importantly, do not be afraid to stand your ground. If you have done your research, the numbers will speak for themselves.

I hope these ideas will help you make a smart purchase in a down market. You must keep in mind that even if you get a great deal on a home, the market can continue to slow down and negate your gains. Know your market well enough to withstand the fluctuations. Above all, secure competent, knowledgeable assistance from professionals in the real estate industry to answer your questions and educate you so you can buy smart in our current market.

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Credit Reports, Credit Scores, and You - A Guide for Home Buyers

Let's take a brief look at credit scores, credit reports, and how these items affect your home buying power, plus your long-term financial strength. Three companies provide this information to potential lenders, and others who deem this information necessary; Experian, TransUnion, and Equifax. Also, it is a federal law that you be provided a copy of your credit report from these three companies once a year. Go to to view your reports.

First, your credit report is a compilation of your credit history related to things like credit cards, revolving charge accounts (gas card or Sears card), previous mortgages, student loans, car payments, etc. It contains detailed information on your payment history, whether or not you have any negative items affecting your credit, plus details of your personal information known by the credit reporting company. It is very important you immediately dispute any negative reports in these credit reports if they are incorrect, or take whatever steps necessary to correct the negatives if they are correct.

Several items on your credit report will affect your credit score, the number that is supposed to represent to the lender the risk they will take on by loaning you money. The factors are, in no particular order, the length of your credit history (the longer they have data for you, the better), the length of time you have had your accounts open (again, the more time, the better), the type of accounts you have (variety is good), your payment history with your accounts (on time, never late is your goal), and the ratio of your debt to your credit limit (Even if you have a credit card with a $100 max limit, if you carry a $100 balance, you are considered 100% financed, and this is viewed as a negative.).

How can you improve your credit scores by viewing the information on your credit report? Most credit reports will have a summary page that tells if there any negative items on your credit report. It is very important you do whatever necessary to remove these items from your credit report. Let me give you an example...

Back in the days before free credit reports existed, I had an outstanding medical bill that went to an old address and was never forwarded that I did not know about until I made an attempt to make a purchase that required my credit to be pulled. This negative showed up because the bill had gone to collections. All I had to do was call the doctor's office, explain what had happened, pay the bill plus a small penalty, and they immediately reported the matter resolved to the credit reporting companies. I also followed up with the credit reporting companies and it took a few weeks of time for everything to stabilize, but the action disappeared from my credit report and I was able to again get prime rates. It won't always be this easy, but you have to do everything in your power to resolve all negatives if you want credit and the best rates.

Another way to improve your scores is to get your debt ratios below 50% on your credit cards and revolving charge accounts. As I stated before, just because your balance is low in terms of dollars it doesn't mean that is a positive if your debt ratios are above 50%. Use your credit report to compare account balances and credit limits and devise a plan to get your balances under the 50% (25% is even better) debt-to-credit-limit ratio as soon as possible. This will definitely improve your credit score.

Two more ways to improve your scores are to pay all of your bills on time, and not to have too many people pull your credit at any one time. There is some debate as to how much your credit score is affected by numerous pulls, and it seems to be less of a problem if all of the pulls are for the same thing, but your score will go down with every credit pull no matter what it is for. Don't go buy a car on credit, then the next week buy a TV on credit, then a house...Space your purchases out reasonably and monitor your credit scores to see when they recover from each purchase.

Speaking of monitoring your scores, for a small one-time or monthly fee any one of the credit reporting companies will give you your credit score. It can be worth it to monitor your score as you prepare to buy a home to see what changes are improving your score and to have an objective goal to work towards to get the best possible rates and terms.

I hope this post has provided you with some helpful guidance to first gather your credit report, correct any negatives, and then improve your score. If you think of the thousands upon thousands of dollars in interest this work could potentially save you, I think it is well worth the effort...

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Louisville Market Stats
Homes for Sale 1,404
New Properties Today 0
Days on Market 76
Avg List Price $345,585
Med List Price $275,000
MOM Chng 1.85%

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