Buying a Home

Arm’s Length Transaction - What The Heck Is It?

A person's arm with an arm's length transaction tattoo in front of a house for sale.

If you're not familiar with the term, you may be wondering what an arm’s length has to do with the sale of a home? Well, this is the United States, and we do use feet to measure distance, so… Maybe the arms sounded like logical choice when the phrase was first coined; who knows?

I’m not sure where the term originated, but it’s become a means of describing how close (relationship, not distance) the parties of a transaction are to each other. These days, whether or not the sale of residential property is an arm’s length transaction must be disclosed, and it may even impact the terms of the sale. It may also be referred to as arm’s length negotiation, depending on who you’re talking to.

Definition Of An Arm’s Length Transaction

When it comes to buying and selling real estate, an arm’s length transaction is one where the parties involved in the contract have no relationship to each other that would otherwise influence their decisions during the purchase/sale of a property. A “relationship” can include: family members by blood, family by marriage, business associates, beneficiaries, or even parties that share a common business interest with each other.

In an arm’s length transaction, all parties are considered to have equivalent bargaining positions, a clear mind, and equal knowledge of the property being sold. Without the presence of a pre-existing relationship or undue duress, it’s determined that buyers and sellers will act in their own best interest. This also means, pressure or coercion...

23 Essential Things To Do During Due Diligence

A list of items a buyer may need to complete during their due diligence period.

Buying a home can be a pretty stressful process. Many buyers falsely assume that once they’ve found the right home and negotiated a contract, the rest is a walk in the park. That couldn’t be further from the truth. In my experience, getting the home under contract is usually the easiest part; something most buyers enjoy. After all, going out and looking at homes is fun, and hearing back from the seller that your offer has been accepted, is exciting.

Once you’re under contract, the work begins… and so does the stress. In Georgia, homebuyers are customarily given an opportunity to thoroughly inspect the property, research the neighborhood, and decide whether they want to move forward with the purchase. This opportunity is known as due diligence, and it gives the buyer the option to terminate the agreement within a designated timeframe, usually without any repercussions (such as loss of earnest money).

In this article, I’m going to cover some of the most important things you’ll want to do during your due diligence period to help ensure your next home purchase is a success.

How To Dominate Due Diligence (Video)

 
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Student Loan Debt: A Hurdle For Many First-Time Buyers

College students at graduation with student loan amount on their caps.

It’s the American Dream – graduate from college, get a job, get married, and buy a house. What the dream doesn’t take into account, however, is the increasing amount of student loan debt that many young graduates are faced with. How does this kind of large loan affect first-time homebuyers that are necessary in the real estate world?

Most recently, first-time homebuyers have composed a smaller percentage of the housing market in recent years; the National Association of Realtors (NAR) counted first-time homebuyers as only 1-in-3 of properties sold in the United States. In fact, many potential homebuyers aren’t even entertaining the thought of buying, because of near-impossible debt.

In addition, recent changes to underwriting guidelines have made it even more challenging for those with student loan debt to obtain a mortgage. However, despite these disheartening statistics, student loan debt doesn’t mean home ownership is out of the question.

Favorable Financing & Down Payments Options

For starters, mortgage rates are at an all-time low, and that’s not changing anytime soon. Furthermore, there are a number of programs and loans available for first-time homebuyers; most require a very low down payment and some require none at all.

Let’s start at the beginning. Mortgages are approved because of three main things: a down payment amount, a credit score, and income. Student loans affect a person’s debt to income ratio (DTI), which makes many believe that they simply can’t afford both student loan payments and a house payment. Generally, a DTI must be 43% or less to get...

How Reality TV Shows Often Distort The Home Buying Process

A woman being filmed for a popular home buying reality television show.

We’ve all seen them. You know, those “reality TV" shows on HGTV, detailing the journey of a first-time home buyer or an investor flipping a property. The most ubiquitous of these, however, is House Hunters. The show originally aired in 1999 and has since expanded to include House Hunters International, House Hunters: Where Are They Now, and House Hunters Renovation.

For years, these shows have often painted a less than accurate picture of the home buying process. Among the many represented falsehoods, there are a few things viewers should keep in mind when watching these shows:

Finding An Agent Shouldn’t Be An Afterthought

In House Hunters, buyers seem to magically have a trusted REALTOR® in their back pocket – since the process of finding one is never broached. In reality, interviewing several agents for the job of helping you buy a house is a vital component of the home buying process. In fact, it is estimated that about 40% of home buyers begin their real estate search by looking at homes online, instead of securing a licensed REALTOR® to help them find a place.

Many buyers will spend months searching homes for sale on their own, before ever contacting an agent. Unfortunately, they’re often times looking at properties that aren’t even for sale, giving them a false sense of the market.

Properly Searching Homes For Sale Online

Most real estate agents set up online searches for their clients; providing up-to-date listings, fed directly from the local MLS. In...

Investors vs First-Time Homebuyers In Today’s Market

A home split down the middle with investors vs first-time homebuyers overlay.

Each year since 2003, the National Association of REALTORS® has organized a report entitled The Investment and Vacation Home Buyers Report, based on a survey of those who bought a residential property including a primary residence, investment home, or vacation retreat. The 2015 results are in, and there are several surprising facts.

National Trends In 2015

2015 saw a substantial increase in competition between property investors and first-time homebuyers. According to the report, investors are beginning to search for smaller, more affordable properties in both urban and suburban areas, often outbidding first-time homebuyers. How?

Cash & Favorable Financing Terms

Investors normally have a higher income with more disposable cash flow, which means they are more willing to buy a home outright with cash instead of apply for a mortgage. This makes them more appealing to sellers because they can close quickly and there are less hurdles to jump through to get the sale closed.

Additionally, when investors do obtain a mortgage, investors are able to make a higher down payment, often in excess of the 20% norm, meaning their loan is more likely to get approved. Investors have a lower debt-to-income ratio as well as higher credit scores, making them the total package, as well. Most first-time homebuyers can’t compete with qualifications like that.

More Investors = More Competition For Entry Level Homes

Most investors buy homes to use as rental properties, and with the traditionally low interest rates we’ve been seeing these past few years,...

Important Questions To Ask Yourself Before Buying A Home

A young man in deep thought with many questions.

Make Sure You’re Truly Ready To Buy

Are you planning on purchasing a home in the near future? If so, get ready for one of the most exciting and stressful times in your life. To reduce that stress, there are some important questions you need to ask yourself before making the decision to buy a home.

How much home can I afford?

A very important question. Normally, a home should cost between two and three times your gross income. You should also factor in extra costs that you don’t pay as a renter, including property taxes, homeowner's insurance, maintenance, and community association fees. There are numerous online mortgage calculators that can help you with the math and determine an appropriate purchase price. Regardless of how much you qualify for, you should determine a maximum monthly payment you’re comfortable with and stay within that range.

How much do I want to devote to a down payment?

A down payment used to be a solid 20%, but with the numerous loans available today the down payment can be as little as 3.5%. Remember, the larger the down payment, the more likely you will be approved for the loan you want and the lower your monthly payments will be, so shoot for 20% if you can. Mortgages with less than 20% down typically require you to pay monthly mortgage insurance, which adds to your costs. However, you should avoid putting too much down and completely draining your savings.

What do I want in a home?

Make a wish list! This is the fun part. Have you always dreamed of a sunroom? Do you want a huge finished basement to watch the game every Sunday? Know exactly what you want, what you can...

Essential Tools For The First Time Homeowner

A black & white photo of various tools for new homeowners.

The Basic Tools For Every New Homeowner

Buying a home is one of the biggest financial decisions you’ll ever make, so the first time you find yourself sitting at a closing table signing the papers will be nerve wracking, naturally. One of the most shocking things that a first time homeowner will experience is the realization that they can no longer call the landlord when something breaks or goes wrong. As a homeowner, if there is a problem, you have to fix it. Luckily, I’ve compiled a list of the top tools that a first time homeowner will undoubtedly need.

Ladder

Whether A-frame or extension, every homeowner needs a ladder. From hanging holiday lights to cleaning gutters, a ladder makes everyday life much easier.

Circular Saw

If you’re like most new homeowners, you have some ideas for projects and home improvements. A circular saw can help with anything from building a new deck to installing new shelving, any project where a hand saw would take too much effort and time.

Cordless Drill

A no-brainer. A good cordless drill will help you hang curtain rods and pictures, construct shelving and DIY pieces, and just about anything else you can think of. As an added bonus, a battery powered drill gives you all the power without struggling with a long cord.

Hammer

Everyone should have a hammer. Whether you want to be thrifty or buy a quality tool, hammers come in an array of designs, colors, and materials.

Garden Hose

A garden hose is the thing you don’t think of until you need it. Nowadays, you can find garden hoses in a variety of colors and materials. Don’t forget the nozzle and a good storage option....