How to get a Real Estate Loan

How to get Real Estate Loan

There are many types of real estate loans to consider. The most common real estate loan is the traditional bank loan. A bank loan is getter harder to get and many banks are leaving real estate lending. Other options include owner financing, private party loans, hard money loans, online lenders, and peer to peer lenders.

Bank Loans

Banks loans are the traditional loan for land and home purchases. They are still the main type of home and real estate loan but are less common for buying land. Banks are hesitant make land loans after the huge losses suffered during the Great Recession.

Bank loans usually have a lower interest rate than owner financing or hard money loans but have higher closing costs. If you can get approved the bank loan is still an excellent option to buy homes or other real estate.

Owner Financing

Owner financing is the best of the real estate loans. In this arrangement the buyer pays a down payment and then makes payments to the seller. The seller acts as the bank. The advantages to sellers are the interest earned and the deferral of income for tax purposes.

There are also advantages to buyers. Although the interest rate may be higher than a bank there are minimal closing costs. (The interest rate is negotiated between buyer and seller.) There are usually no credit checks, helping buyers with lower credit scores.

Like a standard bank loan, owner financing is set up using standard legal documents which protect the seller in the event of a default.

Private Party Loans

A private party loan is money borrowed from an acquaintance or family member. There are two types of private party real estate loans. The first is a personal loan without collateral.

The second uses the land as collateral, similar to a bank loan or owner financing. The loan will be structured similar to a bank loan, or owner financing, allowing the lender (your friend or family member) to foreclose if a default occurs.

In either case you are looking for an acquaintance or family member willing to make you a loan.

Hard Money Loans

Hard money loans should only be used in extreme circumstances. This type of real estate loan is known for high interest, high closing costs and short terms. Realtors, title companies or others involved in the real estate industry may know of people or companies willing to make a hard money loan. You can also search online. I would recommend against a hard money loan. The costs are extremely high, and the terms strict.

If the seller is willing owner financing is the best option. Many sellers understand that cash buyers are rare and seller financing may be the only way to sell at a reasonable price. Owner financing is negotiated in the purchase contract, and setup by the title company.

Online Lenders

There are online lenders which are similar to banks. There are more all the time. Quicken Loans is one example and is a large home lender. Unfortunately, they only do home loans.

Peer to Peer Lending

A new option is peer to peer lenders. This is a newer concept, that pools money from investors and lends it out to qualified applicants. Each company is different and has different qualifications. Again these Lenders are concentrating on home loans. Lending Tree is an example of this type of loan. Other are found by searching online.

Owner Financing. Owner Financing, also known as seller financing, is a real estate transaction where the seller is also the lender. Owner financed land can be any real property, although it is more common with land than houses or commercial property.

February 17, 2016

The Real Estate Closing Process

The Escrow Closing or Real Estate Closing Process is not as complicated as it seems, with a little help anyone can understand and feel comfortable with the process.

The escrow closing process follows certain steps in a certain order, once you understand these steps, the process becomes clear. Several of the steps are part of every closing; others are optional depending on the circumstances.

Real Estate Contract

The Real Estate Closing process begins when you make an offer by signing a purchase contract, and the offer is accepted by the seller. When this step is completed several people get involved in your closing.
The Title Company begins to research the title of the property. An appraiser and surveyor may also start working on your closing. These happen in the background, all preparing for the signing or closing.

Title Commitment Review

After signing the Purchase Contract, the title company will prepare a Title Commitment. The Title Commitment shows any liens, judgments and other problem with the real estate title or ownership.

It is also a commitment to insure the property in your name at closing, subject to any terms contained in the Title Commitment. Review it carefully and call the title company with any questions.

Disclosures Review

Before closing, the seller is required to make disclosures to the buyer. These disclosures vary from state to state but include any leases that may be on the property as well as other things the seller is aware of.

If there are building on the property the disclosures should also include any problems or required repairs on the buildings.

If the disclosures show significant problems you have a certain amount of time to cancel the deal. The exact amount of time you have to cancel is spelled out in the purchase contract.

Appraisal

An appraisal is performed by a licensed appraiser, who uses recent land sales, to estimate the market value of your land.

If you requested an appraisal on the property, you should receive it before signing. If you do order an appraisal, the purchase contract should be conditioned on the property appraising for at least the purchase price. The appraisal is optional.

Land Survey

A Survey is often part of the real estate closing. The Purpose of a real estate survey is to mark the property boundaries, and map them in relation to the surrounding properties.

If there isn’t an existing survey on the property, and the boundaries are not marked, you need a survey.
Surveys are often required when you build a house on the property. If you plan on building in the future, this is good time to get a survey as the seller may pay all or part of the cost.

Property Inspection

The inspection is your last chance to look at the land again before you buy. This is usually scheduled just before signing.

Depending on what you are buying this could be very important. If you are buying land only, it may be less important, but if you are buying land with buildings, equipment, etc., this is the time to make sure everything is in working condition.

Real Estate Escrow Signing

Finally, it’s time to show up at the designated place to sign the Real Estate closing documents. This is sometimes referred to as the Escrow closing, although the entire process is part of the escrow closing. The previous steps may happen without your knowledge, and explains why it takes so long.

You will need to bring the required money to close. The amount should be certified funds (cashier’s check, wire, etc.).

This is the time to review all the papers and have any questions answered. This is your last chance to have any concerns addressed by the seller or realtor. Once you sign the papers the land and any problems are yours.

Document Recording

After signing, and after the money has been cleared, the title company will record the deed, transferring the property into your name.

If you borrowed money to purchase, the mortgage documents will also be recorded. After the recording is completed, you become the official owner.

Possession

Date of possession will be sometime after Recording. It is usually an agreed number of days after the recording, as agreed in the purchase contract.

February 16, 2016

9 Questions to ask Before Buying Land

When Buying Land your are making a big decision and a big investment. Go slow, ask questions, and learn everything you can about the property before you buy. Below are some of the important questions to ask.

Should I Use A Realtor when Buying Land?

I believe in most cases you should use a realtor when buying land. The realtor is paid a commission from the seller so there is no charge to you. Why not use an expert for free?

Am I Paying A Fair Price?

Real Estate prices vary and it is hard to calculate an exact value for a piece of land. Be careful, look at similar parcels of land that sold recently to get an idea of the value when you are buying land.

Are There Land Use Limits?

There are many possible limits or restrictions on how you can use a parcel of land. Many restrictions are government regulations. These could include Zoning restrictions and Building Permit Requirements. You should also look for CCR’s (Covenants, Conditions and Restrictions.

Can I Connect To Public Utilities?

If the land is not already connected to electricity, water and sewer there can be significant costs in connecting. You may need to drill a well and install a septic system instead of connecting to water and sewer.

Does The Land Have Title Problems?

You should use a title company to handle the closing and insist on an Owner’s Title Insurance Policy when you buy land. This will insure you against any title problems, including liens, judgments, forged deeds etc. Have the title company explain the policy and any exceptions to coverage at closing.

Do I Have Legal Access To The Land?

Legal access means you have the right to use the roads leading to your land, crossing any property between your land and the nearest public road. The title company should insure access as part of the Owner’s Title Insurance Policy.

Who Owns The Mineral Rights?

The Mineral Rights are often owned by a different person than the surface rights (what we commonly think of as the land). If the mineral rights are owned separately the owners of the mineral rights may have the right to enter your property and set up equipment to extract their minerals.

Do I Like The Neighbors?

Before you buy land, meet the neighbors. While you are getting to know them ask them what they know about the land. They may have information that the realtor doesn’t.

Do I Like The Area?

If you find a parcel of land that you like but dislike the area you will end up disliking the land too. Investigate the local schools, the stores, the community and the roads you will travel.

Don’t forget to find out what the area is like in the winter and the summer. Of course this doesn’t cover everything you should look into when buying land, but it gives you a place to start. Remember caveat emptor (buyer beware), when buying land.

6 Reason to use a Real Estate Agent. Buyers and Sellers should find an experienced, trustworthy Real Estate Agent and let them guide you through the land closing process in Utah.

Understanding Mineral Rights. Mineral rights are a cause of controversy among property owners. This is especially true in areas with oil and gas exploration. Owners of these rights have certain rights which are difficult for land owner’s to accept. These rights are often called oil rights or sub-surface rights.

How To Calculate Real Estate Values. The most important step when buying or selling property is to decide the real estate values. I recently observed two land purchases. The two parcels of land were almost identical. Both were 10 acres of vacant land next to one another. The first parcel sold for $5,000.00; the second for $47,000.00. Almost 10 times more!

February 15, 2016

Real Estate Foreclosures in Utah

The real estate foreclosures process is long and complicated. The documents used in real estate loans are standard across the nation, but the process is governed by state law, making the process unique to each state.

This is an in depth look at real estate foreclosures in Utah. Keep in mind each state has differences.

Default

Foreclosure starts when a default occurs. A default occurs due to the action or inaction of the borrower or property owner. The most common default is failure to make payments, but is not the only default.

Breaking any agreement in the closing documents constitutes a default. These include not paying property taxes, not maintaining property insurance, destroying the property, etc. This is the start of a real estate foreclosure.

Trustee

Foreclosure auctions, or Trustees Sales as they are more correctly termed, are conducted by a Trustee who handles all phases of the foreclosure process. Trustees must be a attorney, title company, lending institution or certain government agencies.

Regardless of who is the original Trustee on the Trust Deed, it is usually changed to an attorney or title company when a default occurs.

Notice of Default

When a default occurs a Notice of Default is recorded at the county recorder’s office. A certified copy is also sent to the owner no later than 10 days after recording. The Notice of Default states what the default was. The lender must then wait 3 months before taking further action. During this three month period, the Borrower is allowed to correct the default.
Correcting the default would include paying the overdue payments including interest and penalties, paying the taxing, obtaining insurance or correcting whatever default occurred.

Notice of Trustee’s Sale

As the name implies a Notice of Trustee’s Sale is a public notice that a default has occurred and was not cured within the three month period.

If the default is not cured in the three months, the Trustee publishes a Notice of Trustee’s sale. This notice must be posted in at least three conspicuous places in the city or county where the property is located. It must also be posted on the property. It is then published in a local newspaper, once a week, for 3 consecutive weeks. The last publication must be at least 10 days, but not more than 30 days before the sale date.

During this period the borrower has the right to payoff the property but the lender is not required to accept just delinquent payments as during the Notice of Default phase.

Trustee’s Sale

If the default is not cured by the time of sale the Trustee holds the sale at the published location and time. The first bid is automatically placed in behalf of the lender and is usually the amount of the loan payoff plus interest, penalties and foreclosure fees. Anyone can bid at the Trustee’s sale as it is held as a public auction.

Funds to Purchase

To place a bid at a foreclosure auction or trustee’s sale, bidders are usually required to have certified funds for a set amount (often $5,000) and must pay the remaining bid price within 24 hours. The amount needed at the auction will be listed in the newspaper in the Notice of Trustee’s Sale.

Trustee’s Deed

After the auction is completed a Trustee’s Deed will be issued by the Trustee to the successful bidder. This deed conveys all interest of the Lender but may not convey all the property interest.

Conclusion

The real estate foreclosure process is painful for homeowners. For those looking for a great investment it is worth a look.

February 12, 2016

4 Biggest Mistakes When You Buy Property

4 Mistakes when You Buy Property

Of the 4 biggest mistakes when you buy property, paying too much for the real estate is the biggest of land buying mistakes. Every parcel of land is unique. You can’t “look up” the value, making it difficult to know the right price. This especially applies in Utah Real Estate as the previous sales price is not disclosed in public records.

You must have an idea of the value before you make an offer to buy property, don’t assume the price you are quoted is even close to the actual value. The seller is telling you what they want to sell it for and that may be 10 times what it is actually worth.

Falling In Love Before You Know Facts

Love at first sight. It might work with romance but it doesn’t work with land. Don’t fall in love with a piece of land until you have all the facts. This is a very dangerous mistake when buying property.

What negatives does the land have? Do you like the area? Do you like the neighbors? How is the road that accesses this property? Will you still like the land in 5 years? Slow down, don’t rush into an offer. Take a deep breath and think about it before you sign the contract.

Don’t Buy Property With Title Problems

There is no reason to buy land with title problems. Use a title company, get a title insurance policy, which will protect you against title problems. I have seen many sad stories of people purchasing land and finding problems later.

Never believe the words, “ I have owned it for years and I know there are no problems.” There could be problems the seller is not even aware of. A Title Insurance Policy will protect you.

Don’t Buy Property Without Legal Access

It is possible to buy land and have no right to access it. This happens when you must cross other land to access yours, and have no legal right to cross the other land. Make sure the title company is insuring access to the property. If there are problems with access in the future they will fix it.

NOTE: Legal access does not mean there is an actual road to your property; it means that you have a right to access your property which may require you to build a road.

Conclusion

First, make sure you don’t pay too much for the land you choose. Next, take your time and look at everything, weighing the pros and cons, before you decide to buy. Finally, get a Title Policy to protect yourself against any problems, including lack of access. These are land buying mistakes you can avoid.

February 6, 2016

Cheap Land and How To Find It

Cheap Land and How to Find It

Cheap land or anything else is not always best of course, but in this case we are discussing getting a good deal on land.

Utah Tax Sale

In a Utah Tax Sale the delinquent tax property is sold at public auction. The county keeps the amount owed for delinquent taxes, plus penalties and interest, any remaining money is forwarded to the owner.

You can attend the tax sale auction to buy property. You need to research the property ahead of time, to find out the approximate value, any title problems that the property might have (that aren’t extinguished by the tax sale), and other details such as legal access, water rights, etc.

Many people get an excellent deal on property at a tax sale. Others pay several times what the property is worth, so do your research to get the best price possible.

Another option is to contact the owner before the tax sale and make them an offer on the property. You will avoid the auction itself and often pay less than you would at the auction. A county waits until there are several years of delinquent taxes before selling the property. You can contact the owner before this time and often get a good deal.

Foreclosure Property

Foreclosures may be the best for how to buy cheap land. There are three basic stages in a foreclosure.

1. Default

During the default stage the property has not been foreclosed, but the seller has been notified that a foreclosure is in progress. During the early part of this stage the foreclosure can be automatically stopped by paying the overdue amount or a negotiated amount. You can contact the owner and offer to buy the property. Owners in foreclosure can be very motivated to sell.

2. Foreclosure Sale

If the delinquent amounts are not resolved during the default phase the property goes to a foreclosure sale. Anyone can bid on the property at the sale. Contact the company handling the foreclosure and ask what their requirements are.

Similar to tax sales, you need to do your research before the foreclosure sale. Know what the property is worth before bidding.

3. Foreclosed Property

The lender usually receives the property after the foreclosure sale for a variety of reasons. Few people show up at foreclosures and often the minimum bid is more than the property is worth.

The Lender is motivated to sell the property quickly and will entertain any reasonable offer. Contact them and make an offer.

Assume The Existing Loan

Although this is more difficult to do, it can be an excellent way to buy land. The current owner may be tired of the property and willing to sell it for little or no money, if you will assume the payments. This only works if the property is financed by an individual. Banks don’t usually allow anyone to assume their loans.

This method of buying cheap land can be combined with the tax sale or foreclosure methods above. You can contact the owner, pay the delinquent amounts, and take over the payments. Use an attorney or title company so the proper paperwork is filed, and the land is properly transferred to you.

Bankruptcies

Bankruptcies are public. You can contact the court or attorney handling it and offer to buy property involved in the bankruptcy. You will need to research what property is owned by the person filing bankruptcy.

This method is more difficult to use than the others, but can be an excellent way to buy property below market value. There are many methods to learn about how to buy land cheap. The above are just a few.

Buying Real Estate at Tax Sale. How to buy Real Estate at a tax sale. This is a great way to get a good deal on property, but auctions are a buyer beware place. Know before you buy.

Buying Real Estate at Foreclosure Auctions. Buying Real Estate at Foreclosure Auctions. To be successful you need to know the property, its value, and any liens or other title problems.

January 30, 2016

Real Estate Agent – 6 Reasons to Use One

6 Reason to use a Real Estate Agent

Buyers and Sellers should find an experienced, trustworthy Real Estate Agent and let them guide you through the land closing process in Utah.

A Realtor is your best friend during this process and will walk you through it from beginning to end. They will help you avoid many of the pitfalls and problems that arise when buying land.

Sellers are also usually better using a Real Estate Professional. There are many possible problems with a sale and the agent can work through most of these.

The Real Estate Agent May Be Free!

The Real Estate Agent is paid a commission from the sale of the property. The commission is paid by the seller so buyers use a realtor for free.

Buyers don’t have to use the realtor who listed and advertises the property. Choose the realtor you want, the payment will be worked out between the two realtors, and you will have the realtors services for free.

Will Help You Find The Right Property

A Real Estate Agent has access to the local MLS (Multiple Listing Service) which lists all the property for sale by realtors in the area. Using the MLS the realtor can find properties that meet the buyers criteria and take you to those properties.

Many MLS’s are now listed on Realtor.com, where anyone can view them, but the realtor is an expert at using this information to find the land you are looking for. When selling the agents access to the MLS allows your property to be seen by many potential buyers.

Will Do the Work For You

The Real Estate Agent will do most of the work involved in finding and purchasing property, and finding buyers. A real estate purchase transaction is a complicated procedure which involves many details as well as many people. In most cases the transaction will be easier and much smoother if a realtor is involved in the process.

Will Help You Pay a Fair Price

One problem for buyers is paying too much for land. It is difficult to know what the land is really worth. Because Realtors deal with many parcels of land they know approximately what a specific parcel of land is worth.

In my line of work I have observed those who use a realtor usually buy land at a fair price. Keep in mind the realtor who listed a parcel of land has an obligation to sell for the highest price since they represent the seller.

Will Show You The Property

The Realtor knows the local area and will help you find the land you are looking for. Looking for land may involve driving down back roads without directions or street signs. The realtor will take you to the properties you want to look at, and the areas you want to look in.

Often a piece of land does not have an address or directions. Sometimes you will need to read legal descriptions and topographical maps. The realtor has experience in reading these and can take you right to the property, and show you the property boundaries.

Will Help You Avoid Many Problems

Using a Real Estate Agent will help you avoid many of the problems experienced in land transaction. Many of these problems don’t arise until after the purchase.

There are many possible problems, too many to mention, but include such things as: road issues, water rights, mineral rights, etc. Save yourself from many problems and use an experienced, trustworthy realtor.

January 30, 2016

Utah Real Estate Vesting: A Tale of Stolen Inheritance

A Tale of Stolen Inheritance of Utah Real Estate

The following story is the best way to illustrate the importance of Utah real estate vesting.

Jim Duncan was a 70 year old widower with 3 grown children. His 2 daughters were married and lived out of state. His son Thomas, also married, lived next to him on the family farm, which had been in the family for 5 generations. His son now handled most of the work on the farm. The farm was on the edge of a mid-size city and was worth several million dollars. Neither Jim nor his son had any interest in selling the farm, to them it was a way of life.

Thomas Duncan would be the 6th generation to own and run the farm. He would pass it on to his children, as the family had done for over 100 years. Thomas was happy when his dad decided to remarry. His new step mom was a few years younger than his father, with two grown children, which he met at the wedding.

Just 2 years later his father, and his fathers wife, were killed in a car accident. His father died at the scene, the wife died 2 days later in the hospital, without regaining consciousness. The funeral was the second time he met her children. A week later they offered to sell him the farm – for 2 million dollars! Thomas thought it was a joke. After consulting with his attorney, he learned they owned everything. Thomas was unable to pay the price and the farm was sold to someone else.

How Did This Happen?

I have seen this type of scenario happen several times. Here is what happened. When Jim Duncan remarried he transferred the farm to himself and his new wife, as “joint tenants”. Joint Tenants is the vesting (type of ownership) which allows the property to go to the owner that lives the longest; in this case the new wife.

This is the most common way of transferring property, to a married couple, and is usually the correct way. Using “Joint Tenants’ when a spouse dies, the property goes to the surviving spouse without attorneys or courts involved. Upon the death of Jim Duncan, in the car accident, the property automatically transferred to his wife. On her death, the property transferred to her heirs, as she was now the sole owner. Her heirs were her 2 children, not Tom Duncan.

The Moral of Utah Real Estate Vesting

Make sure you know the correct way to have property transferred, or the correct real estate vesting. It really does matter!

Note: The names and some details have been changed to protect the privacy of the parties involved. In this case the property should have been tenants in common.

Joint Tenancy in Real Estate. Joint Tenancy allows the real estate to transfer to the surviving owner(s) on the death of one owner. It is most commonly used between spouses but is used in other situations and between more than two people.

Tenancy in Common in Real Estate. Tenancy in Common is the standard form of vesting, allowing real estate to pass to the owner’s heirs. When a owners dies their part of the land passes to their heirs instead of the remaining owners. In contrast, Joint Tenancy passes the property to the surviving owners.

The Family Trust and Real Estate. A Family Trust, also known as a Family Living Trust or a Revocable Family Trust, is a legal entity created by a Trust Agreement to hold ownership to your personal and real property. Your attorney will create the necessary documents to establish the trust. A Trust is created for estate planning purposes.

January 30, 2016

Do I need title insurance, when buying a Utah home?

Question: Do I need title insurance, when buying a new home in Utah?

Answer: Construction of a new home raises special title problems for the lender and owner. You may think you are the first owner when constructing a home on a purchased lot.

However, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased.

In addition, builders occasionally fail to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property.

Again, lenders want to make sure the property has clear title. Purchasing owner’s title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.

January 30, 2016

I’m refinancing, why do I need title insurance?

Question: I’m refinancing, why do I need new title insurance?

Answer: When you obtain a new loan, the lender will require title insurance. Even if you recently purchased your home, there are some problems that could arise with the title. For instance, you may have incurred a mechanic’s lien from a contractor who claims they were not paid or you may have had a judgment placed on your house for unpaid taxes. The lender wants to make sure their interest will be secured and the title to the property is clear.

You will not need to purchase new owner’s title insurance when refinancing. Owner’s title insurance is purchased at a one-time fee and lasts as long as you own the property.