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From how we’re expected to file our taxes to a lack of paycheck stubs to sometimes wild swings in income, the self-employed are a different breed. Applying for a mortgage when you lack W-2s, doesn’t disqualify you; you’ll just need to work harder to meet the higher burden of documentation required of the self-employed.

According to a study commissioned by one of the large real estate aggregator sites, the self-employed earn 81 percent more money than other borrowers but receive 40 percent fewer mortgage loan quotes. Let’s take a look at some of what this group of homeowners need to know when applying for a home loan.

Income

The lender will want to see your past two years’ tax returns (and all accompanying schedules) to prove your income. Recently released Fannie Mae guidelines may allow a borrower with only one year of tax returns so speak with your lender if you’re in this situation. With the two years of returns, the underwriter will typically add the two adjusted gross incomes and then divide the sum by 24 to arrive at your average monthly income.

The problem with this is all those expenses we use to reduce our taxable income. After calculating them on Schedule C, guess where that reduced income figure goes? That’s right — in the “Adjusted Gross Income” column on your 1040. So, even if you make a decent income, it won’t look like it on your tax returns.

The solution to this is painful. “If buying or refinancing a home is in your three-year plan, don’t write off every business expense you can write off,” Patrick Ruffner, vice president of mortgage lending at Chicago’s Guaranteed Rate mortgage company tells US News.

Debt-to-Income

Next, the lender will look at your debt-to-income ratios (DTI) to determine how much you can safely afford to borrow. The two ratios they look at are the “front-end,” which should not exceed 28 percent of your income and the “back-end,” which needs to be 36 percent or less of your income.

Although the required ratios are outdated on this page, it will tell you how to determine your DTI. It’s important to note that the DTI ratios aren’t set in stone and lenders often approve borrowers with back-end ratios of up to 43 percent, according to BankRate.com.

Lower your DTI by either paying down debt or raising your income. Easier said than done for the self-employed, right?

Make your application more attractive

If you think about the situation from the lender’s perspective, it’s a bit easier to understand why they are skeptical of the self-employed applicant. Businesses have slow periods; how will the applicant pay the mortgage payment without a steady paycheck from an employer?

It’s up to you to sweeten the pot and to make your application more palatable to a lender and there are several steps you can take to accomplish this:

• Raise your credit score – pay your bills on time and don’t apply for new credit
• Lower your DTI – pay down your debts and/or increase your income
• Come in with a hefty down payment – lenders are more impressed when the borrower is willing to put some skin in the game
• Downsize your home price range – this is especially important if you have a somewhat low net income showing on your tax returns. It’s much more likely you’ll qualify for a lower-priced home.

We don’t blame you for wanting to squeeze every last penny out of the sale of your home. And, aside from just a handful of factors over which you have no control (location, foreclosures or sexual predators nearby, etc), there are some inexpensive cosmetic changes you can make that will appeal to buyers, raising the home’s perceived value.

Even if your home isn’t located in a neighborhood that buyers clamor for, giving it maximum curb appeal will go a long way in getting them out of the car and up to the door.

Let’s take a look at some simple “fixes” you can perform that will ensure that those touring your home fall in love the minute they step through the front door.

1.Create a positive second impression

You know that curb appeal is your home’s first impression. The second? What the buyer sees when the real estate agent opens the door and they step through. If you don’t have an evident entry area, it’s time to create one.

What you use to create this area depends to a large extent on the size. Even the smallest homes, however, have space inside the front door to set a mood, from setting out a simple throw rug and small console table or interesting single chair to getting more elaborate with attractive lighting and accessories. A mirror, by the way, is the ideal accessory for a small foyer as it helps the area look larger.

If you have room, three items you must include in the area are a vase of flowers or healthy potted plant and a table lamp. Then, keep the area clutter-free while the home is on the market.

Next, stand in your foyer and take a look around for anything that appears dated. If it can be seen from the entryway, such as that 1970s light fixture in the hallway, it needs to be updated.

Need ideas? View the foyers at architectureartdesigns.com, RealSimple and Pinterest.

2.Bathrooms matter

Bathrooms and kitchens frequently make or break real estate deals. The former can be a particular turnoff if not updated, staged and kept impeccably tidy. Luckily, it costs far less to give bathrooms a bit of pizzazz than kitchens, so let’s get to it.

If you have a shower curtain, replace it. If you have glass shower doors, clean them. Now, those are the no-brainer basics. To glam it up a bit will require a bit more money and elbow grease.

• Paint
• Change out the linens to match or contrast with the shower curtain.
• Purchase a new faucet for the sink
• Sheet mirrors are boring, so if you have one, and don’t want to replace it, consider framing it.
• Strip “Hollywood” style lighting screams “DATED!” so leave some money in the budget to replace it with something more contemporary. Consider placing sconces on to each side of the mirror where they don’t cast as harsh a light as they do when placed overhead.

 

One of the best sources of inspiration for bathroom updates and staging is Pinterest and you’ll find ideas for doing so on the cheap at This Old House.

3.Do pay attention to the small stuff

The warning from home stagers to “depersonalize” and “declutter” doesn’t mean leaving the home devoid of all personality. Accessories are an important aspect of reaching out to a homebuyer’s emotions and, if chosen carefully, may raise the perceived value of the home to those buyers.

A home’s accessories include everything from throw rugs and art work to the pulls and knobs on cabinets. The latter is a good place to start adding back in a bit of character to the home.

Then, choose a color that you’d like to make primary – perhaps a soft blue in a piece of artwork or a color from your upholstered furniture. Then, use that when choosing accessories. For instance, purchase soft blue pillows for the sofa or candles or a vase in that shade. Sprinkled subtly around the room, these accents bring balance to the area, according to Tracy Kay Griffin, former designer for HGTV’s “Get it Sold.”

“We use lots of coffee table books, add curated collectibles to bookshelves, toss market baskets onto chairs, hang original art and use only real plants to give buyers the impression that someone actually lives there,” she adds.

It’s hard to consider that in just a short time we’ll be bundling up for another winter but it’s on its way and there’s one fall maintenance chore that should never be neglected: Winterizing outdoor irrigation systems and faucets. The time to do so is upon us, so if this is your first autumn in your new home, we’ll walk you through the process.

Start with the faucets

1.The hose and splitters can trap water and cause the faucet to freeze and break. This is why it’s important to disconnect the hose and the splitters early – in case we have an early freeze. Drain the water from the hoses and store them in a dry place so that they don’t become brittle. A large plastic garbage bag makes a handy and appropriate winter storage container.

2. Next, check the faucets for leaks around the spout and the handle. If the leak is happening at the handle, try tightening the packing nut first. If that doesn’t work, you may need to replace the washer behind it. You’ll find a video walk-through of the process at TodaysHomeowner.com.
3. Shut off the water to the faucets and then turn on the faucet. This will drain whatever water is left, again helping to avoid a broken pipe. If you can’t isolate the water line to the faucet, use additional insulation, which we’ll discuss in the next step.
4. Even if you’ve drained the faucet, install a cover to further protect it from freezing. These are available at large hardware and home improvement stores.

Let’s move on to protecting the irrigation lines

PVC pipes have a tendency to crack and break when they freeze so it’s important to blow out your irrigation lines before the first freeze. It’s not hard to do but you’ll need some tools, a 100 psi air compressor and eye protection. Don’t neglect the latter – using compressed air can be dangerous.

Blow out the irrigation lines before the first freeze. Now, this isn’t a challenging project but it does require some equipment you may not have on hand, such as a 100 psi air compressor. Should you decide to tackle the job on your own, here’s a walk-through:

1. Shut off the water to the irrigation system. If you can’t isolate the line, contact a plumber.
2. Use a screwdriver to open the release valve, allowing air into the system. If you have flow sensors, remove them.
3. Choose the release valve furthest from you and use the compressor to force air into it. It should only take a few minutes to blow all of the water out. Close the valve and continue on with each subsequent valve, closing each one when it’s finished.
4. If your backflow system has ball valves, allow them to remain about half-open so that any leftover water to get out in a freeze.
5. Open the release valves at the lower end of the lines to release any water that may still be trapped.

Keep safety in mind

The experts at Hunter Industries provide homeowners with the following warnings:

• Wear appropriate eye protection. Hunter suggests that ANSI (American National Standards Institute)-approved eye protection is best.
• Don’t allow the air pressure to exceed 80 psi for PVC pipes and 50 psi for polyethylene pipes.
• Stand away from irrigation system parts while you’re pressurizing the system with air.
• Don’t use the backflow or pump to blow out the system. First do the blow-out then drain the pump or backflow.
• Don’t forget to close the manual drain valves when you’re finished.

 

If you don’t feel you can handle the job on your own, call a local lawn care company and let the professionals handle it.

Consider this: a mortgage program offers certain Americans a home loan with a zero down payment and no private mortgage insurance requirement. In addition, closing costs are limited and if the home is newly constructed, the builder must supply the buyer with a one-year home warranty.

Despite the obvious perks of the program, only 10.5 percent of the nation’s nearly 22 million veterans take advantage of this aspect of their Veterans Administration benefit offerings. When asked why, 33 percent of those who responded said they were completely unaware of the benefit, another group said that they went with the FHA loan because they assumed it was “easier” to obtain.

Obviously, the VA could be doing a better job informing (especially young) members of the military, veterans and surviving unmarried spouses about the VA loan and the mortgage industry could be doing a whole lot more to get the word out.  So, today we’ll take a look at the program and learn why it may just be the best loan product on the market.

Remember, we aren’t VA, mortgage or financial experts, so consult with the appropriate professional should you have any questions regarding the VA home loan program and its benefits.

The basics of the VA home loan program

Like the Federal Housing Administration (FHA) program, the U.S. Department of Veterans Affairs doesn’t actually make loans, but offers lenders a guaranty, if the veteran defaults on the loan. Should this happen, the VA will pay from 40 to 50 percent of the balance of the loan (the percentage depends on the size of the loan).

As you can imagine, this promise enables lenders to relax when faced with a borrower who may have little or less-than-perfect credit and a lower-than-average income.

So, what can you do with the VA home loan program?

• Buy a home (a condo, too, if it’s in a VA-approved community)
• Build a home
• Simultaneously buy and rehab a home
• Buy a lot and/or manufactured home

Is the VA loan harder to qualify for than the FHA loan?

No-one quite understands why so many current members of the military and veterans assume that the FHA loan is easier to obtain. Although there are additional steps you’ll need to take when pursuing a VA loan, they are quick and somewhat easy (if you have the right lender).

To qualify, you’ll need to say “yes” to at least one of the following questions:

• Were you on active duty for at least 90 consecutive days during wartime?
• Have you served at least 181 days of active duty during peacetime?
• Have you served in the National Guard or Reserves for more than 6 years?
• Are you a widower or widow of a military service member who died either in the line of duty or as the result of an active-duty service-related injury or disability?

The biggest advantages of the VA loan

As previously mentioned, the biggest advantage of the VA loan is that you won’t have to put any money down. Now any conventional or FHA-backed loan for which a borrower submits a less-than 20 percent down payment will require the purchase of mortgage insurance (the Mortgage Insurance Premium in the FHA loan and private mortgage insurance, or PMI, with a conventional loan).

These policies cover the lender in the event the borrower defaults on the loan.  This insurance, which benefits the lender should the borrower default on the loan, can add quite a chunk to your monthly mortgage payment. For instance, FHA’s annual mortgage insurance premium for a 30-year fixed-rate mortgage with 3.5 percent down payment is 0.85 percent annually.

The VA loan has no monthly mortgage insurance premiums, closing costs are limited and there is no prepayment penalty. With no monthly mortgage insurance premium, the veteran’s house payment each month will be less than if he or she had obtained an FHA loan.

The VA home loan process

Yes, there are a few more hoops to jump through when dealing with the VA. Eligibility requirements, however, are much like those for FHA and conventional loans:

•  “Suitable credit.” The VA doesn’t really explain what they mean by “suitable.”
• You should be able to prove that you have the income to cover all your bills and the house payment.
• You must live in the home (you can’t rent it out).
• You must present a VA Certificate of Eligibility (COE). Most VA-approved lenders can access your COE online or you can access your COE on the eBenefits page of the VA website.

The biggest hurdle for vets is that these loans are provided by lenders and they all have their own guidelines. Shop around until you find one that you feel you can work with.

 

 

Imagine you need complicated surgery and you have an amazing insurance plan that allows you to choose your doctor from among every surgeon in your city. Not only that, but you’ll pay the same amount for whomever you choose.

Will you decide on the fresh-from-residency or part-time doc or the surgeon who has been slicing people open for decades, with a proven track record in the very type of operation you need?

While the sale of your home isn’t a life-or-death proposition, it is quite a significant financial transaction and deserves taking your time to do the exacting research required to find the real estate agent that will best help you reach your financial goals. If you’re looking for an agent to help you sell your home, look for the following three qualities.

1.Ten years of silence

After studying thousands of symphonies produced between 1685 and 1900, Carnegie Mellon University psychologist John Hayes narrowed down 500 that are, today, considered “masterworks.”

These 500 pieces were produced by only 76 composers, and all of them but three were written after the composer had been in “business” for at least ten years. Yes, this even includes Mozart. Hayes referred to this decade of hard work and education as the “10 years of silence,” and found that it applied equally to famous poets, artists and others.

Another study claims that to become an expert in any field requires a minimum of 10,000 hours working in it (K. Anders Ericsson and Malcolm Gladwell).

But there is more to it than merely showing up for ten years or 10,000 hours (sounds like a warranty, doesn’t it?). As in most things in life, becoming an expert requires deliberate practice.

Kobe Bryant can walk onto the basketball court and make the game look easy. But, he didn’t become a multiple world record-holder by working part-time. In the off-season, Bryant spent a minimum of six hours a day, six days a week, for six months in deliberate practice. From running to weightlifting to shooting hoops, he worked tirelessly to not only maintain but also to improve his skills.

Real estate agents don’t become expert marketers and negotiators by working only on the weekends. Those with the skills required to sell your home quickly and for top dollar take the time to study the current housing market and the local economy, learning how they affect their clientele and their real estate. They’ve used various negotiating techniques over the years and honed this aspect of their businesses to perfection. They tour the current crop of available homes instead of relying on MLS photos in their comparisons.

Now, the best agents aren’t always veterans and they don’t all work full-time. In fact, rookie agents typically have their brokers working with them on their first few transactions so you’re actually receiving the benefit of the broker’s experience. But if your transaction is complicated, such as selling a luxury home, performing a short sale or listing ranch or farm land, you should rely on an agent with lots of experience.

2. He or she is happy to answer questions

How well does the agent handle your questions? Even homeowners who have sold a home before have questions about the listing and selling process. A professional agent will take his or her time to answer these questions in plain English and ensure you understand the entire process.

3.The agent has a plan, and it’s proven to work

A listing agent has many tasks to perform, from before the ink dries on the listing agreement until the final walk-through just before closing. The most important of these, especially in a slow market, is marketing. Ensure that the agent you hire has a proven marketing plan and the funds to implement it.

Ask for MLS printouts of the agent’s last three listings and check the photos – they should be clear, compelling and there should be lots of them. Check the agent’s remarks about each listing. Do they entice you?

Agents that you interview may try different tactics to get you to list your home with them, from inflating the home’s value (known in the business as “buying the listing”) to claiming to be a “neighborhood expert.” When it comes to the sale of your home, however, go beyond the rhetoric and find the agent you feel the most comfortable with and the one that you feel can best market your home.

 

 

Like shopping for anything expensive, shopping for a home requires research and a game plan. When you have a list of steps to take, the process will be far less perplexing and far more enjoyable. You’ll also be more successful if you have a strategy, so let’s take a look at some of the initial steps to take to get you into that new home. Check them off as you complete them.

Get ready to buy a home – check your finances

No, working on your finances won’t be the most exciting part of the process, but it just may end up being the most rewarding. Just as you wouldn’t go car shopping without knowing exactly how much you can afford to spend, neither should you step foot in even one home for sale without understanding where you stand financially.

A good place to start is with your credit score. If you haven’t checked it in a while, order your credit reports. By law, you are entitled to one free credit report (from each of the three reporting agencies) every 12 months. The only company that is authorized by the Federal Trade Commission to supply consumers with these free reports is annualcreditreport.com.

Go through the reports and dispute any errors you find. Fixing even one error may significantly impact your credit rating.

Then, go over your budget (if you don’t have one, create one using the template here). Tally up all of your debts and figure out how much money you have coming in every month.

Finally, determine where you can make cuts or how you can bring in more money to set aside for your down payment and closing costs. Your down payment requirement will depend on which loan program you use and closing costs, although variable, typically run between 2 and 7 percent of the loan amount, according to the National Association of Realtors.

Shop for a mortgage

Meeting with a lender is the next important step in the game plan. Based on the outcome of your first meeting with a loan officer, you can request a preapproval letter, which puts you in a strong negotiating position with home sellers.

Lenders want stacks of paperwork, all proving that you can afford a home. Plan on supplying your lender with at least the following:

• Tax returns, including Schedule C if you are self-employed
• Pay stubs,
• W2s,
• Bank statements (all pages, including the blank ones)
• Identification, including your Social Security card and driver’s license

The self-employed and those pursuing jumbo loans may be asked for additional documentation.

Make a list of must-haves in your new home

Now that you know how much you can spend on a home, it’s time to make a shopping list, which can include items such as:

• Location – proximity to public transportation, schools, shopping or whatever is important to you.
• Neighborhood must-haves – community pool, security gate, guard, trails, clubhouse, etc. Do you want friendly neighbors or those that keep to themselves? A neighborhood with or without kids?
• Architectural style – if you have a particular style in mind, such as colonial or Victorian, list that, as well as the number of bedrooms and bathrooms you need.
• Interior features – If there is anything you absolutely must have, such as a formal dining room or a chef’s kitchen, make note of it.
• Exterior – Do you need a large lot or just a small yard? Is a carport sufficient or do you require a garage? Don’t forget to list pool, spa, fencing and any other exterior features you want in your new home.

Finally, organize the list, placing the three most important items at the top. These are your priorities, and you should share them with your real estate agent.

Tip: To determine your priorities, think about what you find intolerable about your current living situation. For instance, if barking dogs drive you crazy, vow to find a quiet neighborhood. If you’re sick and tired of mowing the lawn when you’d rather be relaxing, seek a home with low-maintenance landscaping.

Find a real estate agent

Since you’re now ready to look at homes, you’ll need a real estate agent’s help from here on. Remember, the services of a buyer’s agent won’t cost you anything – the seller pays all real estate commissions, so there really is no reason not to have your own representation and many, many reasons you should.

While all of the steps in the above checklist are important, and should be taken in the order listed, securing the services of a professional real estate agent to help in the purchase of a home is critical. Having a pro represent your interests, negotiate on your behalf and walk you through all the piles of paperwork — at no cost to you – will give you peace of mind during the process.

Although experts in the real estate industry continually suggest the importance of seeing a lender before doing anything else with regards to purchasing a home, many buyers don’t. Instead, they merrily attend open houses, mine Internet real estate databases and hound real estate agents to show them homes that they may not even qualify to purchase.

We want to help you be a smart homebuyer, so we’ve developed a checklist to help you keep your home buying wish list realistic.

To avoid creating a fantasy wish list you absolutely must know how much money you can spend on a house. Only a lender can help you determine this figure. Once you know what you can spend, we can help you determine where you can afford to live. From there, you can build a realistic wish list.

The Home

The first items on your wish list should be based on what you absolutely can’t stand about your current home. Is it too far from work? Then your list should include that you want a shorter commute. Does it drive you nuts to have to find a parking place every night when you get home? Put a garage on the list.

Next, determine what you need. If you have a large family, maybe you need additional square footage or more bedrooms and bathrooms. If you work from home, perhaps an office is a must. Bad knees and staircases don’t mix so a one-story home may be a necessity.

Finally, it’s time to think about the extras – those items that you can live without, but it would be wonderful if they were included in your new home.

The Neighborhood

Now that you’ve figured out what your ideal home should include, it’s time to think about the type of neighborhood in which you’d like the home to be situated. Some items to consider:

• Crime: A neighborhood’s crime rate is something that you will need to investigate on your own as laws prevent real estate professionals from discussing this with you. Call the local police department for neighborhood crime statistics. You’ll also find information online, with the FBI’s Sex Offender Registry.

• Property values: Look for a neighborhood where property values are rising. You’ll usually find these types of neighborhoods on the fringes of more expensive communities, according to the    National Association of Realtors.
• Easy Ingress and Egress: The ease of entering and leaving a neighborhood is especially important to commuters.
• Future Plans: Many homebuyers underestimate the impact of an area’s future plans on their property values. The best way to find out what the city has in mind for the area surrounding your neighborhood is by visiting the city planner’s office.
• Noise Level: While many people don’t mind the sound of kids playing and loud music, others aren’t comfortable in anything less than complete silence. If you are of the latter group, cruise the neighborhood in question at different times of the day and night and on weekends as well as weekdays.
• Lifestyle: If you’re a young, single professional you probably won’t feel at home in a family neighborhood so consider a place downtown, or close to it. If you can put up with the typically higher crime rate and lack of convenient parking, a home in the urban core may be ideal. Folks with kids, on the other hand, may want to look at neighborhoods with cul-de-sacs so the little ones are safe from traffic.
• Neighbors: Because the condition of your neighbor’s homes will affect the value of yours, take a good look at the other houses on the block. Foreclosures will drag down the value of neighboring homes. Unsightly landscaping and poorly maintained homes do likewise.
When the list is finished, we’ll find you some affordable neighborhoods and get down to the serious business of the Great American Househunt.

Here’s a checklist to bring along with you:
 Determine exactly how much you can afford to spend on a home.
 Ask us to point you to some neighborhoods with homes priced within your budget.
 Determine what drives you crazy about your current home
 Get clear on your needs in a home
 Decide on your “wants-but-can-live-without” items

Investigate potential neighborhoods:
 Crime
 City planning
 Traffic
 Noise level
 Does it fit your lifestyle?
 Do the neighbors take care of their homes?
 Proximity to schools
 Proximity to city amenities

The phrase “Homeowners Association” may sound innocuous enough to some but it sends shivers down the spines of many. In books and movies this group of homeowners is typically portrayed as power hungry, meddling and suspicious. Think Big Brother meets Mussolini and you’ll have an idea of this group’s image.

Is this reputation deserved? It’s hard not to believe the rumors while being bombarded with news stories about Homeowners Associations (HOAs) that force residents to take down American flags, or those that seize homes when residents are late paying their dues.

HOAs are like “little governments,” according to Jackie Faye of NBC News. Like all governments, they exercise the power granted to them in one of two ways: with benevolence or dictatorially. Perhaps Abraham Lincoln foresaw the rise of the HOA when he claimed that “. . . if you want to test a man’s character, give him power.”

So, who are these people?

A HOA is actually a legal entity whose purpose is to manage a group of housing units, or a common interest development, as they are known in some regions of the country. These developments may be single-family dwellings or condominiums. The decision-making body of this entity is typically known as “the Board,” and there may be committees as well. The HOA board is composed of homeowners who act as volunteers, and are generally chosen in annual elections open to all homeowners within the community.
The reasons for volunteering to sit on a HOA board are varied. Some homeowners want more of a say in how the HOA money is spent, others are concerned with maintaining home values.

HOA duties and responsibilities

Although it seems as if HOA boards have unlimited power to do as the members wish, most states have laws that govern what they can and cannot do. Yes, they sometimes overstep these laws. While duties and responsibilities vary across the country, here are some that are common to most HOAs:
• Paying taxes on the common areas
• The enforcement of the association’s rules, such as the bylaws and the Covenants, Conditions and Restrictions (CC&Rs)
• Creating the association’s budget
• Creating rules for the use of the common areas
• Disciplining homeowners for violations of HOA rules

Buying a home in a HOA-governed community

The HOA must supply the homeowner with certain documents when there is an offer to purchase the property. The seller then gives these documents to the buyer. There is usually a charge for the copies and the seller typically pays this fee.
HOA doc packages are usually quite thick and may be extremely complex and boring. It is essential, though, that you read and understand everything in them. If you need help, contact an attorney. Once you own the home, you are obliged to follow the HOA’s rules.
Some items to pay close attention to in the CC&Rs include:
• Pet policies, if you have pets
• Parking rules, for yourself and guests
• The rules and restrictions for the use of onsite amenities
• Landscaping rules
• House color, exterior decorations allowed
• Restrictions on the construction of outbuildings, such as sheds and gazebos
• The rules regarding leasing your home
Look at the HOA’s budget:
• Does the income cover the costs? If not, why?
• How is the money spent?
• Does the reserve account hold enough money for emergencies?

Check out the board’s meeting minutes:
• What type of issues does the board typically face?
• What type of actions have they taken against homeowners?
• Have they talked about increasing fees or any upcoming special assessments?

Read over the governing documents, or bylaws, to determine how and when elections are held, how to sit on the board and the length of board member’s terms.

One of the most important aspects of purchasing a home governed by an HOA involves determining if there is pending litigation. Sometimes the HOA is suing the developer or a homeowner or the HOA is being sued. If there is litigation pending, you may not be able to get a loan, so make sure you get all the information you need about this.

Buying a home regulated by a homeowners association has advantages, such as security and the regulation of the area’s appearance and noise levels. The drawbacks, on the other hand, are numerous and include the additional monthly outlay for HOA fees and the sometimes-meddlesome members of the HOA. Do your homework when considering purchasing into a common interest development governed by a HOA. Investigate it thoroughly to make sure you don’t end up in a HOA horror story on the nightly news.

The seller of that home you are about to purchase no doubt thought long and hard about how much to ask for it. She consulted with her real estate agent who spent some time poring over statistics and the prices of recently sold homes in the area to come to a rough estimate of the home’s value.

You made your offer based on what you felt the home was worth (hopefully based on your agent’s research). When all is said and done, however, neither your opinion nor that of the seller matter. The home is worth what the appraiser says it’s worth, at least as far as your lender is concerned.

Who is the appraiser?

A professional appraiser is an unbiased third party that is trained to determine the value of a piece of property. While not all appraisers are state-licensed, federally regulated lenders are required by law to use only those who are. Like many real estate agents that belong to a national association that adheres to strict ethics, so do many appraisers.

Are appraisers always accurate in their evaluation of homes? Usually they are, but not always. It depends on the information available to them at the time.

What affects a home appraisal?

Numerous factors can influence a home’s appraised value. Some of these include:

• The national and local economies
• The location of the home
• Nearby foreclosures
• The condition of the home
• The value of other, similar homes that were recently sold in the area
• The appearance of the home compared to those that have recently sold
• Upgrades made to the home.

A day in the life of an appraisal

Let’s assume you’ve made a full-price offer on a house that is listed at $300,000. The lender will order an appraisal of the house before giving you the final decision on your loan application.

The appraiser visits the home and looks at every aspect of its exterior, from the roof to the soil. Then, she inspects the interior, from the ceiling to the floors. Finally, most appraisers measure the square footage of both the house and the lot.

Back at her office, the appraiser uses the information she compiled to compare it against comparable sales nearby. She takes other facts into account as well, such as any problems with the house and any upgrades. She may also check local planning departments to ascertain if anything is planned in the nearby community that may impact the home’s future value. Finally, the appraisal is compiled and handed off to the lender.

The best news a buyer can receive is that the house appraised for more than he offered. The next best news, for both buyer and seller, is that it appraised at the offered price.

Then, there’s the worst news

A buyer typically has four choices when an appraisal comes in under the agreed-upon sale price: ask the seller to lower the price, increase the cash down payment, negotiate with the seller to pay half of the shortfall and you pay the other half, dispute the appraisal or walk away from the deal.

Sellers, on the other hand, have several choices as well. These include lowering the price of the house to meet the appraised value.

If you feel the appraisal was too low, work with your agent to find discrepancies in the report. Check that it accurately reflects the square footage, the age of the home (as well as those of comparable homes) and the number of bathrooms and bedrooms. Check the comps the appraiser used for errors regarding the home’s condition.

If you find errors, have your real estate agent contact the lender for a new appraisal. Most experienced real estate listing agents come close to the figure that the appraiser gives. Typically, it’s the homeowner that sets an unreasonably high home price and a buyer that either wants the home so much she is willing to overpay or a buyer that doesn’t do her homework and fails to research the sales prices of nearby homes.

It’s funny how a house doesn’t feel like an investment until it comes time to sell it. All of a sudden, after years of living there, the thought of its value hits you upside the head. Hopefully, you’ve practiced good home maintenance over the years and can now focus on cosmetic changes to increase value. And these won’t cost a fortune because many are typical do-it-yourself projects.

Lipstick on a pig

All the cosmetics in the world won’t make a pig look any prettier. Sure, if you choose those fixes carefully you can realize a tidy sum at the close of escrow. But, if the house has major problems, such as with the roof or heating system, you may end up giving that money back to the buyer for repairs.

If you suspect there may be problems with the house, hire a home inspector to come in a do a thorough check. It’s worth the fee because it may allow you to head off a slowdown in the future transaction with a buyer. Home repairs that buyers expect to be made and that increase value the most include:

• Plumbing repairs
• Updating electrical system
• Repairing damaged floors
• Don’t forget the little things: the dripping faucet, torn window screens and damaged countertops. You may have been able to live with these details but a buyer will notice them.

Larger projects, such as roof problems, are sometimes better dealt with by disclosing them to potential buyers and letting it be known that the price of the home reflects the need for the repair.

Clean

It’s a fact: clean houses sell faster and for more money than dirty ones. Buyers like houses that have been well cared for and a clean house looks like a maintained house.

They also place a higher value on houses that appear to be ready to move right into. Nobody wants to have to clean a house before settling in. Some sellers think they’ll get around this chore by offering to have the house professionally cleaned before moving out. There’s no value added in that plan. The time to clean is before it hits the market.

Paint

Painting the walls creates an instant transformation in a number of ways. Paint adds color to a room and makes it look and smell cleaner. Keep to the neutral colors on the color wheel, as they appeal to a broader segment of buyers.

Update the kitchen

In general, kitchens are usually most important in terms of enhancing the return on your home investment. Bathrooms are a close second. Attention to some of these little kitchen details can add to the home’s value.

• Replace the lighting fixtures.
• Put in new cabinets or, at the very least, replace the existing hardware.
• Replace old appliances. New appliances make a good impression on prospective buyers.
• Upgrade the faucet
• Buy new curtains and throw rugs
• Remove everything from the countertops with the exception of a few decorative items. Check decorating magazines for ideas.

Fix up the bathrooms

Nothing kills a real estate deal quicker than a nasty bathroom. Thoroughly cleaning it and painting the walls provides an instant transformation, but there’s more you can do that will add value to the entire home:

• Install new lighting. New fixtures can create a statement with minimal effort.
• Replace old sink, shower and bath faucets and handles with new decorative faucets.
• Install new towel racks.
• Replace shower doors.
• Re-caulk the tub and sink to freshen their appearance.
• Replace mirrors and medicine cabinets.
• Hang new towels and add throw rugs that compliment the wall color.

That oh-so-important curb appeal

It doesn’t do you any good to invest in home improvements and updating if the exterior of the home doesn’t invite potential buyers inside. Plus, updated landscaping adds around 10 percent more to the home’s value. Here are some general considerations:

• Clean up the yard. Remove toys, trash, leaves and dead plants.
• Clean the front porch by removing cobwebs from the light fixture, sweeping and applying a fresh coat of paint to the front door.
• Mow the lawn. If it’s discolored, de-thatch and fertilize.
• Trim trees and prune perennials to make them look tidier.
• Add container plants to the porch or next to the front door.
• Add surprising pops of color with seasonal flowers.
• Apply fresh mulch to the beds.
• Plant trees. According to the U.S. Forestry Service, trees increase property values by as much as 10 percent.

Keeping a perspective on all the work that you do in, on or around your home is important. Specifically, focus on the kinds of improvements that will enhance your return on investment. And bear in mind that improvements should be appropriate for the immediate neighborhood. While your aim should be to have the most attractive home on the block, don’t over-improve for the neighborhood.