Consideration associated with a contract is generally thought to be the price and terms but being sympathetic and courteous towards the seller could make a difference in getting the home you want.

Business people, like store owners, expect to deal with customers and even come to expect behavior that might not be accepted in a purely social atmosphere. Homeowners, on the other hand, may not be aware of what to expect.  They are opening the sanctity of their home to the public for review and criticism.  Buyers may be detached from emotional feelings while the sellers might react unfavorably to comments that are taken personally. 

1. Be on time for appointments; cancel if necessary.  The sellers may be rearranging their schedules and making an additional effort to make it convenient for you to see the property.
2. Be a good guest and respect the seller’s privacy.  Look at the home and avoid looking at the seller’s personal items; there is no reason to look in refrigerators or furniture drawers.
3. Don’t sweat the small stuff.  Try to focus on critical items of a home like location, floor plan, layout, size and not dwell on cosmetic items that are easily and inexpensively changed.
4. It’s not a good negotiating technique to list the defects.  Most people become defensive when presented with a list which could have the opposite effect of helping you get a better deal.
5. Limit your visits until you actually own the home.  It’s natural to be excited and making plans to move into your new home but it is still the seller’s until closing and they’re making plans to move too.
6. Negotiations are generally finished when a contract is completed.  It can be frustrating to continually be asked for “one more thing.” Make a deal with the seller and live with it.  If there’s something you’re not sure about, specify it in writing in the contract.

Some things are obvious: the seller wants the most for their home and the buyer wants to pay the least possible.  Showing consideration to the seller about things that don’t have anything directly to do with price can actually benefit the buyer.

94% of purchasers last year opted for a fixed-rate mortgage at some of the lowest rates in home buying history.  Yet, some of them will pay more in interest than necessary based on the time they’ll own the home.

If a person only plans to be in the home a few years, the adjustable-rate can offer significant savings.

Not only is the interest rate on the adjustable-rate lower than the fixed in the initial period, amortization on a lower interest rate amortizes faster than a higher interest rate.

In the example shown below, a $200,000 mortgage for 30 years is compared using a 4.25% fixed-rate to a 3.25% 5/1 FHA adjustable rate.  The first five years of the ARM generates a $113.47 a month savings which accumulates to $6,808.20.  In addition, due to faster amortization on lower interest rate loans, the unpaid balance at the end of five years will be $3,001 lower on the ARM for a total savings of $9,801.

Assuming the adjustable-rate mortgage was to escalate the maximum allowed at each period, the breakeven would occur in 8 years and 6 months. If a person were to sell the home prior to this point, the ARM would provide a lower cost of housing for the homeowner.

For some people, the uncertainty of how the interest rate may change is not acceptable.  On the other hand, for the risk tolerant individual who may be more confident in financial matters or who may know when they’ll be moving next, the ARM can be a smart choice.

To make projections using your individual numbers, see the Adjustable Rate Comparison.

Paying cash for a home seems like a huge advantage to qualifying for a mortgage and an appraisal.  However, for the fortunate few who don’t need a mortgage, there is a question they should answer before they make that decision: Do you think at any point in the future, you might put a mortgage on this property?

It’s important because paying cash for a home could affect the ability to deduct the interest if the homeowner should place a mortgage on the home at a later date.

Most homeowner’s know they can deduct the interest on up to $1,000,000 of acquisition debt on their principal residence but they may not understand the limitations of such debt.

Acquisition debt is the amount used to buy, build or improve a person’s principal residence.  The amount is not static but changes over time.  An amortized loan reduces the principal owed with each payment made and the acquisition debt is reduced accordingly.  If a person stays in a home long enough to retire the loan, the acquisition debt is reduced to zero.

Our current federal law allows a homeowner to deduct the interest on the acquisition debt plus the interest on up to an additional $100,000 home equity debt.  If a person pays cash for a home, the acquisition debt would be zero and the only interest deduction allowed would be for home equity debt.

If you answered yes or even maybe to the question, before you pay cash to buy your home, you should discuss your situation with your tax advisor.

With interest rates lower than they’ve been in over 40 years, it may be difficult to think of a “window of opportunity” closing.  However, it isn’t difficult to understand that it may very probably cost more to live in a home in the near future due to rising interest rates and prices.

Zillow recently reported results from a nationwide study that home values are expected to appreciate by 4.5% through the end of the year.  Coupled with Freddie Mac’s projection that rates are going up, the cost of housing for buyers by the end of the year will be higher than it is now.

While uncertainty of the future can stagnate some people, the fear of loss can be much more devastating when a person realizes that the amount they pay to live and enjoy a home could have been considerably lower had they acted when prices and mortgage rates were lower.

The following example considers a $250,000 purchase today with a FHA mortgage compared to what it might be at the end of the year with a higher price and interest rate as discussed earlier.  The net effect is that it will cost $191.87 more each month to live in the very same home based on the cost of waiting to buy.

To see what the cost might be for your price range, use this Cost of Waiting to Buy spreadsheet.

IRS allows taxpayers the option to take the standard deduction or the itemized deduction.  The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.

The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer.  It doesn’t require any proof of actual expense and has no requirement for home ownership.

Items that can be included on Schedule A for itemized deductions include: 

• Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
• Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
• Charitable contributions
• Casualty or theft losses
• Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
• Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.

While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous.

Prepaid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence.  When points are paid on a refinance, they are not a current deduction but have to be taken prorata over the life of the mortgage.

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, a deduction of $100 per year is allowed.  When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he or she can accurately reflect the deductions in your return.  Currently, the most common situation is homeowners may be refinancing their home for the second, third or even, fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on Refinancing in this publication. For advice considering your specific situation, contact your tax professional.

The Qualified Mortgage Rule came into effect on January 14, 2014 as one of the results to the Dodd Frank Reform Act to protect consumers from predatory lending practices.  This will affect the underwriting standards that the majority of lenders will use to qualify borrowers.

The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender.  The borrower must have sufficient assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%.  In an effort to present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage’s true cost.

A maximum of 3% in upfront points and fees can be paid on behalf of the borrower.  There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years.

While there are more requirements, most deal with good underwriting practices that are followed by reputable lenders such as considering and verifying things that affect the ability to repay the mortgage like income, assets, employment status, simultaneous loans, debt, alimony, child support and credit history.

A water meter key is like insurance; buy it before you need it.

Imagine a pipe has burst and there is water flowing like a river through your home.  There may a cut-off valve to each sink if it works and if that’s where the leak is coming from. Your home may have a master cut-off valve but if you haven’t used it before, you might not know where it is. The last resort is to cut off all the water to your house at the meter.

In most cases, you’ll need a key to get into the meter.  With water starting to rise in your home, concern over the damage being done may add to your anxieties.  You don’t have time to call a plumber or even go the store to buy a water meter key.

Emergencies are handled much better when you plan for them in advance and practice, even though you hope you’ll never need it.

1. Determine what kind of key you need to open your water meter.
2. Purchase it at the home improvement or hardware store.
3. Practice opening the meter to be able to do it quickly and easily.
4. If your meter key doesn’t have a wrench on one end, you need a wrench to turn the water valve.
5. Practice turning the water off just to see how it works and feels.
6. Put the key in an obvious and conspicuous place.
7. Have the phone number of an emergency plumber, just in case you need it.

While you’re planning for the unexpected, it might be a good idea to show some of the other family members how it works and where you keep the key.

Coffee should be hot. Beer should be cold. Mexican food should be spicy.  However, if these things are less than the standard that you expect, there are not any lasting consequences.

As the value of the object in question rises, either in price or gravity, the expectations usually increase and decisions become progressively more important.  Marriage, children, health and careers are certainly a few of the more important items that bear careful consideration.

The sale of the largest asset that most people own, their home, also merits having reasonable expectations.  A homeowner should expect to get the market value for their home in a reasonable period of time with as few inconveniences as possible.

According to the latest Home Buyers and Sellers Survey, more homeowners are entrusting the sale of their home to real estate professionals.  Owners can increase the likelihood of a favorable outcome by sharing their expectations with agents prior to listing their home for sale.

Challenge your agent to explain what they intend to do to:

• Price the home correctly
• Prepare the home to make a good impression
• Position the home in the marketplace

It is reasonable for a seller to expect the agent will work hard to sell the home; will tell the truth and represent the client’s interests to the best of their ability.  Agents exemplify remarkable service when they exceed the seller’s expectations.