buyers guide

CHAPTER ONE: Considering Buying a Home
Whether you're thinking about buying your first home or your twentieth, the decision to purchase real estate is a complicated one. Homes are often a great investment, and choosing the right home, negotiating the right price, and obtaining good financing are all critically important to the ultimate return on your investment.

Organization
Real estate transactions involve many people and many pieces of paper. The ability to keep all your paperwork organized can help take a lot of the stress out of the transaction.

Keep the names and phone number of EVERYONE in a location that is easy to remember. Keep all your business cards and notes. These may include your bank, REALTOR®, title company, loan officer, contractors, suppliers, etc.

Write down as much as possible. This will help you to later remember conversations or events that happened.

Trust
It is virtually guaranteed that at some point during the transaction something will happen that will make your heart skip a beat. In nearly every circumstance it turns out to be completely normal. Always talk to us before panicking.

Remember that every person involved has a vested interest in getting you into your new home. If you ever doubt the integrity of someone, immediately talk to us about it.


CHAPTER TWO: Financing
You will probably be financing some or all of the money to purchase your home, so understanding the details of your personal financial situation is important before you begin looking for a home. In today's mortgage market, there are three key factors that will determine the type of loan you qualify for.

Credit score: A numeric rating that indicates how well you have used credit in the past.

Down Payment: How much money you have to "put down" toward the cost of your home.

Income: The income you can show you earned over the last two years. Lenders usually like to look at both income tax returns and W-2s if available.

To qualify for a good conventional loan at the type of rates you see advertised all the time, it is usually necessary to be relatively strong in at least two of the three key factors. For example, if you have a large down payment and a good credit score, you can qualify for a loan without even showing any income. Or, if you have a great income and a large down payment, you can qualify with a low credit score. Finally a good income and a good credit mean you could qualify for a loan with no down payment.

Being weak in two areas does not necessarily disqualify you for a loan; it just means you may have to pay a higher interest rate. The only time loans are almost impossible is if you have little down payment, a low credit score and a little provable income.

Understanding Your Credit Report
The name of the particular credit score used in the mortgage industry is called a FICO score. It is independently reported by three different credit-reporting agencies and the scores they report are usually a little different from each other. A lender will usually pull reports from two, if not three, of the reporting companies, so it is important that you know what all three agencies are reporting on you. You can obtain reports from the three agencies directly or from one website called www.myfico.com.

Your FICO credit score reflects dozens of parameters in your financial history. It is used to determine insurance and loan rates, credit or even whether or not you get that new job you're going for. When was the last time you checked your score? Here's a quick summary of what your score means:

Score 700 to 850: Smooth loan process; best rates. You will qualify for the best rates banks offer and it should be easy to work around issues such as poor income documentation or no down payment.

Score 620 to 700: Medium risk; higher rates. With a modest down payment and income verification, you will qualify for the best market rates. You would also likely qualify for a “no money down," interest only, or other special types of loans, as long as your income is verifiable. Finally, if you can't verify your income or you haven't been in the same type of job long enough, you can still qualify for good rates as long as you have a reasonable down payment.

Score 550 to 620: High risk; highest rates. Loans at somewhat higher interest rates are available as long as your income is verifiable, you have a reasonable down payment and you've had no blemishes on your credit record for the past 12 months. If you have any outstanding liens or judgments, or past due balances on your credit, the lender will require you to pay them before you can close on your new home.

Score 300 to 549: Highest risk. You will probably not be able to get a loan. Loans may still be available to you from companies that specialize in higher risk financing. Typically these lenders will want you to have a large down payment and proof of strong income. The terms for these loans are usually quite shocking and most reputable financial consultants would advise you to avoid them.

Sometimes low FICO scores are caused by incorrect information on your credit report. Mistakes can be removed if you provide documentation to the credit-reporting agency that the information is incorrect. It may take from one to three months to have the information corrected and your score adjusted. It is also possible to raise your score over time by doing things that help build a better score. Paying down outstanding credit card balances and making all payments on time are the two most powerful positive impacts on your credit score.

What Helps:

• Pay all bills and pay on time
• Maintain two to four credit cards
• Close unused credit or store cards
• Keep balances well below the limit
• Pay more than the minimums
• Establish long-term credit history
  

What Hurts:

• Too many credit cards or zero cards
• High non-mortgage debt
• Delinquent accounts
• Frequent job or address changes
• Charge off's (bills marked uncollectable)
  

To minimize the impact of identity theft and to protect credit you should order a copy of your credit report at least twice a year. The contact information for the three major credit bureaus is listed below. You can also use www.myfico.com to order a review of your credit history. It is possible to have different information on each credit file, so be sure to check all three:

Equifax: 800-685-1111 - www.Equifax.com

Experian: 888-397-3142 - www.Experian.com

TransUnion: 800-888-4213 - www.TransUnion.com

The following can have a negative impact on your financing options

Bankruptcy: Lenders will usually require a minimum of two years since final discharge date before they will issue a new mortgage.

Foreclosure: Lenders will usually require a minimum of three years since foreclosure was finalized before they will issue a new mortgage.

Late Payments: Most loan guidelines will require a minimum of 12 months (one year) with no late payments on a credit report. If credit has been excellent for years and a minor late payment occurs, it may be acceptable with explanation. A late payment for installment loans or credit card accounts usually only appears on a credit report if a payment, or minimum required payment, is 30 days or more late. Lenders also usually check with landlords for a borrower's rental payment history for at least the past two years to verify timely payments.

Defaulted Student Loans: Generally, if a government guaranteed student loan is in default, this will disqualify a person for a government-assisted mortgage. Sometimes if a loan repayment schedule has been renegotiated and payments are timely again for at least a year, the history of the defaulted loan might not disqualify the borrower.

Collections: Generally any account that is in collection status must be repaid before qualifying for a mortgage loan.

Judgments: Generally, any court ordered judgment must be paid in full. In cases of court ordered child support payments, the payments must be caught up and current.

Lawsuits or Pending Divorce: If a borrower is being sued, or is otherwise involved in a legal actions such as a pending divorce, often a mortgage loan cannot be granted until the lawsuit is settled.

Down Payment Information
The main thing to remember here is that your down payment has to be "sourced and "seasoned." What that means is the lender wants to verify that it is indeed your funds and they want to see it in an institution for at least three months. You will have to show three months back statements. If you have $20,000 under the mattress you cannot use it for a down payment.

Of course, there are exceptions to every rule. FHA will allow mattress money if you can prove that you do not use banks for checking and savings and operate on a cash-only basis (No credit either!) There are also a few non-conforming loans that do not source or season the funds. And, of course there are programs that allow gifts for down payments, but those funds usually have to be sourced, too.

FHA: Requires 3% down payment unless you are using one of the gift programs (still 3% if it is a gift). Closing cost may be paid by the seller and/or part of them may be financed in the loan. The Loan to Value can actually go as high as 97.75%.

VA: Zero down payment and closing cost can be paid by the seller.

Conventional: Fannie Mae and Freddie Mac require 5% down and sometimes they carry first time homebuyer programs that only require 3% down.

Non-Conforming: It is quite common to get 100% financing in this market. Some lenders have more than 100% financing. Of course, rates are higher because the risk is higher and these programs are credit score driven. A score lower than 580-600 will usually require a down payment and lower the score the larger the down payment.

Calculating Your Income
You need to know what type of income is permissible as “qualifying income.” There are strict rules that lenders must follow to calculate a person's qualifying income. As a general rule, a lender will take a person's weekly salary and multiply it times 52 weeks in a year, then divide that amount by 12 months to determine your monthly income. Some income cannot be calculated in such a simple way and requires more effort. Listed below are other potential sources of income:

Self-Employment and Commission-Based Income: In most cases, self-employment income and commission income cannot be used as qualifying income for a mortgage loan until the income has been received for at least two years, so that the lender can use an average income. There can be some exceptions.

Overtime and Bonus Income: In most cases, a lender will count overtime or bonus pay as qualifying income for a mortgage loan until the income has been received for at least two years, so that the lender can use an average income. There can be some exceptions.

Income from a Second Job: If a borrower works at two jobs, the income from the secondary job (usually a second part-time job) is often only able to be included as qualifying income if the borrower has had a continuing history of working two jobs for at least two years.

Child Support Income: Income from child support needs to be received consistently to be used as qualifying income. Often a history of payments is required, so newly awarded child support payments might not be considered "qualifying" income in some circumstances.

SELECTING A LENDER AND LOAN PROGRAM

Just as important as choosing the right house is choosing the right lender and loan program. Today’s mortgage marketplace is more complicated than ever and the number of choices available can be mind-boggling.

Like your REALTOR®, your loan officer is an important ally to ensure your transaction goes smoothly. There are two critically important things a good loan office does for you:

Help you pick the loan product that is ideal for your particular situation: With all the loan choices available, it is very important that you pick the combination of interest rate, down payment, and repayment terms that best meet your needs. The glossary at the end of this section will help you better understand the meanings of different loan terms, but a good loan officer is absolutely invaluable in helping you pick the program that is best for you. Excellent loan officers can usually find solutions to the most complicated financing situations and save you thousands of dollars when you go to sell or refinance your house in the future.

Make sure your loan closes on time: In Arizona there is no law or contract that forces a lender to make sure your loan is ready to fund on your closing date. In fact, as a buyer, you can be financially responsible for damages to the seller if you fail to close by your close of escrow date, even if the fault lies not with you, but entirely with your lender. In Arizona today, the number one cause of transactions falling apart is poor performance on the part of the buyer's lender. Unfortunately, it is all too common for disreputable lenders to promise buyers they are approved all the way up to and even beyond a closing date, only to reject the loan in the end. This is often a heartbreaking situation for everyone involved in the transaction and there is usually no legal recourse against the lender.

Hahn-Lowry and Associates has worked with many lenders and will be happy to recommend several excellent choices for you. Our recommendation will be based on our experience in hundreds of transactions and will be unique to your specific situation. While it is important to be aware of where interest rates are throughout your transaction, we recommend that you do not select a lender by calling around for interest rate quotes. Listed below are several reasons for this.

• Interest rates change daily and any rate that someone quotes you over the phone or on the Internet is not locked-in. It is very easy and common for a lender to use "bait-and-switch” tactics to get your business and you may not find out until it is too late.
• There are different loan programs for different financial situations. If a lender does not know much about you, they might quote you a rate from a program that does not fit your situations.
• It is extremely important to work with a lender who has a proven track record for accuracy, trustworthiness and the ability to close your loan in a timely manner. This can be even more important than the quoted interest rate.
  

MORTGAGE LOAN CHECKLIST
Throughout the loan process the lender may ask you for various pieces of paper work, most of which are listed below. Sometimes an underwriter will ask for pieces of paperwork very late in the process, even up to the day of close! This can be stressful, but sometimes it is unavoidable. The best approach is to be prepared ahead of time. Many buyers prepare a file with all of this information so they can be ready for last minute lender requests. I t is also a good idea to keep a copy of every document you supply to a lender in case they call you at the last minute saying they "lost" something you already sent them. It happens much more often than you think!

Documents You Will Need:

• Sales contract on the purchase of your new home
• Copy of sales contract and certified closing statement on your present home
• For FHA loans the lender needs a copy of your social security card and driver's license
  

Employment History:

• Employer's name and complete address for the past two years
• Dates of employment for each job
• Two years of most recent W-2 Forms
• Two years of most recent tax returns with all schedules signed in blue ink
• Be prepared to explain any gaps in employment history
• If self-employed, you need a current balance sheet and year-to-date profit and loss statement

Residence History:

• Two years of most recent residences with complete addresses
• Length of time at each residence
• If renting, provide your landlord's name and complete address
  

Accounts:

• Names and addresses of each financial institution
• All account numbers
• Three months statements for all accounts
• All current balances and values

Loans and Credit Cards:

• Creditor's name and addresses
• All account numbers
• Current balances owed
• Monthly payments and number of payments remaining

Current Real Estate:

• Property addresses
• Estimated market values
• Outstanding loan balances
• Monthly payment amount
• If you own investment properties, provide the monthly rental income amounts

Personal Property:

• Year, make and value of your automobile
• Net cash value of your life insurance
• Value of your furniture and other personal property

If applicable, the following is also necessary:

• Divorce papers
• A check for credit reports and appraisal
• VA loans require a certificate of eligibility and form DD214
  

Here is a short list of some types of commonly used loans for real estate transactions:

Adjustable Rate Mortgage:
Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amount and times of an adjustment are agreed to at the inception of the loan.

Balloon Payment Loan: A loan that is typically amortized over 30 years, but is due and payable at the end of a certain term. May be extended or rolled over to a different loan. An example would be making payments as if it were a 30 year loan, but the loan is due in full at the end of 5 years.

Buy-Down Loan: A loan that has a reduced rate and payment for a specific period of time. This is done by paying interest up-front.

Community Homebuyer's Program: A first time buyer program with a fixed rate and low down payment, commonly 3-5%. There are no cash reserve requirements and qualifying ratios are easier. Loan is subject to buyer meeting all income standards and completing a four-hour training course.

Conventional Loan: A mortgage secured by investors instead of under a government insured program.

FHA Loan: A loan insured by the Federal Housing Administration under HUD. They offer low down payments and easier qualifying.

Fixed Rate Loan: A loan with one interest rate that remains constant through the life of the loan.

Graduated Payment Mortgage: A loan that starts payments lower than standard fixed rate loans and increases the payment by a predetermined amount each year.

Interest Only Loan: A loan that starts, but does not require principal to be repaid until some years in the future. Payments are made on the interest only, resulting in lower monthly payments.

No Qualification Loan: A loan based solely on information obtained through the credit reporting agencies. These loans require larger down payments and higher interest rates which will be determined by your credit rating.

VA Loan: A loan that can be 100%.

Closing Costs
Closing costs are fees included in the home buying process; they are often confusing. To help clarify, I have constructed this mini-glossary of standard closing costs. When you apply for your loan, you will receive a good faith estimate of these charges as well as an explanatory booklet:

Appraisal Fee: A one-time fee to pay an independent fee appraiser.

Credit Report Fee: A one-time fee covering the cost of the credit report.

Document Preparation Fee: To cover costs associated with printing documents.

Homeowners' Association Fee: Some associations may require an up-front deposit or dues as well as a fee to transfer their records from seller to buyer (transfer fee). These amounts vary for each association.

Loan Discount: A one-time fee to adjust the yield on the loan to what market conditions demand (often referred to as “points”).

Loan Origination Fee: A one-time set up fee charged by the lender for their administrative costs.

Escrow Company Charges: The title company may charge fees for items such as title search, title examination, recording fees, notary fees and a closing or escrow fee.

PMI Premium: Depending on your down payment, you may have to pay an up-front fee for mortgage insurance. Lenders may also require monies to be held in a reserve account.

Pre-Paid Interest: This is a per diem charge that may vary depending on the time of month your loan closes.

Taxes and Hazard Insurance: Depending on when your escrow closes, you may be required to reimburse the seller for property taxes. You will have to pay a year's hazard insurance premium up-front and may be required by the lender to put a certain amount for taxes and insurance in a reserve account. The lender will hold this account.

FOUR THINGS TO AVOID DURING THE TRANSACTION

Do not change jobs: Changing jobs before or during the loan process can create a real problem in qualifying you for a loan, particularly if that job is in a different line of work or at a lower rate of pay.

Do not switch banks or move money around: It is difficult to verify funds if money is moved, so leave everything as is until your loan is closed.

Do not pay off bills: Your loan officer will advise you if it is necessary to pay bills to help qualify. They will show you how to pay off bills so there is sufficient proof of payment.

Do not make any major purchases: Large purchases have a major impact on qualification. If you add a payment, or increase a payment, it will decrease your qualification amount. Stay away from purchases such as cars, boats, furniture, etc.

PRE-QUALIFICATION (LSR)

In order to determine your property price range, we recommend getting pre-qualified. Pre-qualification should be done before beginning your search for a new home. You will receive an exact amount you can qualify for. This allows you to view properties you are certain you can afford. Your monthly payment will be estimated, so you can figure it into your budget. You will receive closing cost and down payment figures.

You and your lender can select the best loan program for you particular situation. If you are a first time buyer, you might qualify for a special loan package that would allow you to get more home for you money.

The standard Purchase Contract for buying a resale home now requires buyers to provide the seller a Loan Status Report from the buyer's lender. This document tells the seller how far along in the loan approval process you are. Being pre-qualified allows the lender to advise the seller that you are a high quality buyer!

CHAPTER THREE: What about my current home?

SELLING ONE, BUYING ANOTHER

In a perfect world, you sell your old home and buy the new one on the same day. Given that things rarely turn out perfectly, here are some things to keep in mind as you negotiate the sale of one house with the purchase of another.

Time It Right
Since it is virtually impossible for your two transactions to close simultaneously, a housing gap - rather than two mortgages - is better. It's easier and usually cheaper to find a temporary housing than juggle two mortgages. Also, the lender may not be able to approve you for two mortgages. Sadly, many people don't get their new home because they waited to long to sell their old home.

Selling First
Selling your home before buying a new one minimizes financial hazards. Even if you have to find temporary housing, it's generally cheaper than two mortgages.

Get an appraisal right away. That way you'll have a good idea how the sale of your home will affect your purchasing power on the new one. This will help keep you from over extending your mortgage abilities.

Get pre-approved on a loan for the new home.

Until most of your contingencies have been met, wait to put an offer on a new house. You don’t want to be left holding the bag, or in this case the house.

If you're ready to accept an offer on your home, but haven’t found the right new home, negotiate a long escrow or a sale/leaseback. This will give you more time to look for the new home. Otherwise, look for temporary housing.

Buying First
It happens. You're only thinking of buying and suddenly the right home shows up. Now you have to sell you old home quickly. Here are some tips on making things work in your favor:

Negotiating a long escrow on the buying side of the sale works too. You can also make the purchase contingent on the selling of your house. This will work better in a slow market, but it's worth a try in any market. You never know what may also work best for the seller of your new home.

Try to schedule the closing date of your current home prior to closing on your new home. Temporary housing is generally a better situation than two mortgages.
Take a close look at what price you're going to ask for your home. Make sure it's realistic for a quick sale in the current market.

When you get an acceptable offer, be sure to consider the buyer's credit-worthiness. You don't want any surprises that are going to delay things. If you've closed on the new home, but haven't sold the old one you may want to consider renting it out.

Same Market Or Cross-Country
Generally, if you're buying and selling in the same market, you can negotiate closing dates to work for you. But when you're dealing with a cross-country move, it's a lot harder. Legal documents can be faxed or sent via overnight courier. You may end up renting one home of the other, or have to consider a bridge loan.

Show Me The Money
Make sure you have a tight hold on and a clear understanding of your financial situation. Cash reserves are always helpful, but never more or so than during the purchase of a home. Two or three month’s rent is the recommended reserve, but if you don't have it, this is where the bridge loan comes in handy. Some lenders are more inclined to make a loan if it's for the purchase of a home. If you're a smart shopper/seller, you'll accept an offer from someone who's flexible about move-in dates. It can save you money in the long run. Too many moves with storage costs can quickly eat up profits you may have made in the transaction.

CHAPTER FOUR:

Working With Us and Looking for Your New Home
Now that you have compiled your list of features you'd like in your new home and you've spoken with a lender, it is time to begin searching for your new home. You are wise to be working with a Hahn-Lowry and Associates REALTOR® to purchase a home. As your REALTOR®, we represent only your interests throughout the buying process. As you will see on the "Agency Disclosure Form" a REALTOR® has certain duties to their client. Like a lawyer, your agent has a duty to be loyal to you and to do their best to ensure your objectives are achieved. The agent representing the seller has a duty to represent the seller's interest only. Buying a home without a REALTOR® is like going to court without an attorney. It is extremely important for you to have your own representation!

It is customary for all real estate commissions to be paid by the seller. This means that you are receiving professional representation at someone else's expense. This is a great advantage when you are buying a home, but not so great when you are selling a home.

NEW HOMES
Selling new homes is serious business and the builder's sales person is a highly skilled agent whose job is to get the most money from you with the least amount of hassle for the builder. Homebuilders always require that your agent accompany you on your first visit to the community in order for the builder to pay a commission to your agent. That means you should not go looking at model homes without your Hahn-Lowry and Associates REALTOR®. If you buy a new home without representation you most likely will never know what kind of rights and resources you have available to you.

RESALE HOMES
What is the Multiple Listing Service (MLS) and how does it work for you? The MLS is a database of properties currently on the market in the area. Brokers participating in the MLS (which includes virtually all Brokers in the area) list all the homes they have for sale and agree to share in the sales commission of the properties. The first place a buyer's agent looks is always on the MLS. There is simply no better way to gain instant and widespread access to your potential new home than on the MLS.

Once we have a list of properties that meet your criteria, an appointment to show the homes must be set. Since most of these homes have someone living in them, it is inappropriate to show up unannounced.

CHAPTER FIVE: Making an Offer

When you decide to make an offer you will work with your agent to write it up and your agent will fax it to the seller's agent with a deadline for them to respond. In Arizona the form of the buyer's offer is actually an entire purchase contract signed by you, the buyer. If the seller accepts it by signing it and sending it back, the document becomes the actual binding purchase contract. Therefore, it is critically important for you to review all the terms and conditions of the offer. You will need to decide what to offer for each of the following:

Purchase Price and Financing Terms: You will specify the total price you are willing to pay and the financing you need in order to complete the transaction.

Earnest Money: you will usually provide to your agent a check intended to show your “seriousness” in purchasing the home. Your agent will hold this check until the seller accepts the contract at which time it will be deposited with a title company as a deposit toward your purchase price. This earnest money is refundable to you if any of the contingencies are not met or if the seller does not perform to the terms of the contract. However, if all contingencies are met and you breach the terms of the contract, the title company may refund the earnest money to the seller in the form of liquidated damages. The higher the amount of earnest money the more the seller will like your offer. As a rule of thumb, 17% of the purchase price is a good starting amount for earnest money.

Contingencies: All sales are contingent on the inspection process outlined later and most are also contingent on you qualifying for the financing you outline in the offer. You may also specify that the sale is contingent on the sale of your existing home or on the seller providing special financing consideration.

Fees: There are many closing costs involved in a real estate transaction and most of these are negotiable between you and the seller. In the offer you will propose who will pay for the various fees.

Closing Date: You will propose a close of escrow date. This is the date that the title company actually transfers title from the seller to you. In order to meet the close of escrow date, you and your lender will need to make sure the title company has all the paperwork and funds necessary to meet the terms of the contract by that date.

Inclusion of Personal Property: Any items attached to the home are automatically considered part of the house. Things such as light fixtures, curtains and curtain rods, stoves and dishwashers, bathroom mirrors and built-in grills usually convey automatically unless otherwise noted in the contract. You may specify other items you will want included such as the washer and dryer, refrigerator, sound system, patio set, etc. If you do not specify an item in the offer and if the item is not attached to the home, the item will not convey to you.

Offer Expiration Date: You will indicate an expiration date and time for the offer after which it is no longer valid.

Loan Status Report: The buyer may provide a document from the lender that shows that the lender has conditionally approved them for a loan. This can be useful information, but it does not necessarily guarantee that the buyer can and will get the financing stated.

There are many other important terms and conditions in the contract and you should take your time to review everything in detail. We will answer as many questions as we can, but if you are unsure about anything you should not hesitate to contact a real estate attorney. We can provide the names and numbers of attorneys who can provide legal advice with quick turnaround times at reasonable prices.

CHAPTER SIX: Why Do We Need a Title Company?

The closing process on your home will be coordinated by a title company and escrow officer. Title companies are much like the escrow they handle: a neutral third party. An escrow officer is employed by the title company to service the escrows.

An escrow is a neutral independent account used as an instrument to service a transaction. It protects the interests of all parties involved and therefore does not favor the buyer or seller. An escrow is created after a purchase agreement is executed and signed by both the buyers and sellers.

Opening an Escrow: The buyers' agent traditionally opens the escrow and places the earnest money in an escrow account at the title company. You will receive a receipt from the title company for the earnest money deposit.

Information You Need to Provide: You will be asked to complete a Statement of Identity for the title company. This is a confidential tool used to correctly identify all parties involved.

Escrow Length: Standard escrow length is 30-60 days, yet every transaction varies due to individual circumstances.

The escrow officer will coordinate the following for you:

• Accept contract and issue earnest money receipts
• Order preliminary title report
• Obtain payoffs to clear title
• Provide buyers' lender with title information
• Assist the buyer and seller when signing documents
• Handle money disbursements
• Record all documents to transfer title
• Issue policy of title insurance

WAYS TO TAKE TITLE IN ARIZONA
The title company will ask you how you want to take title to your new home. Listed here are the choices most buyers have. How you decide to take title could have significant tax or estate planning consequences, so you should consult an attorney if you have any questions.

Tenancy in Common: Two or more persons may hold title to real property as tenants in common. Married couples must reject community property in order to specifically take title as tenants in common. Each owner has a distinct and proportionate interest without the right of survivorship. The only unity involved is possession. Their undivided interest need not be equal, but in the aggregate cannot exceed 100% of the ownership interest. A tenant in common may transfer his undivided interest without destroying the co-tenancy estate.

Joint Tenancy with the Right of Survivorship: Two or more natural persons may hold title to property as joint tenants with the right of survivorship, provided that they share the four unities of time, title, interest and possession. That is, they acquire their joint ownership at the same time, by the same title, have identical interests in duration, and share equal rights of possession. Evidence of the intent of a married couple to hold title to real property as joint tenants with the right of survivorship MUST BE IN WRITING so as to avoid presumption of community property. If one joint tenant transfers his interest, this transfer destroys the joint tenancy estate and the co-tenants become tenants in common. Upon the death of a joint tenant, their interest is transferred outside probate to the surviving joint tenant.

Community Property: Only persons married to each other may own real property as community property. Spouses own an undivided one-half interest in their community property. Each spouse may provide by will for the disposition of his or her community property. However, Arizona community property law requires both spouses to join in a conveyance or encumbrance of community real property. Property acquired by a spouse during marriage is presumed to be community property except that property acquired by gift, devise, or descent. A married couple seeking to hold title to real property located in Arizona in a form other than community property may do so by renouncing the community property form and specifically accepting another form of co-tenancy.

Community Property with the Right of Survivorship: Only persons married to each other may take title as community property with the right of survivorship. One spouse is entitled to the whole of the property upon the death of the other and both halves of the community property receive a new tax basis equal to the fair market value as of the date of death. Evidence of the intent of a married couple to hold title to real property as community property with the right of survivorship MUST BE IN WRITING, in order to avid the presumption of community property. When parties holding property as community property with the right of survivorship dissolve or annul their marriage, the property converts to tenancy in common.

Title Insurance
The title company will provide to you a document called "The Commitment for Title Insurance" or "prelim." The document contains a multitude of items that pertain to the subject property. It is a detailed report of findings done through a title search. It explains the current status of the property ownership. Title insurance offered by the title company and any exceptions or exclusions to the policy. Upon receipt, you should review your prelim paying particular attention to the sections listed below:

• Be sure all the information is correct and that names on the prelim match those on your purchase contract.
• Review the informational notes for important property facts.

A title policy is guaranteed insurance against any undetermined risks. The following lists items and issues typically covered by a title policy.

• Mistakes in interpretation of legal documents and wills
• A forged signature on the deed
• Errors in indexing or copying
• Falsification of records
• Impersonation of the real owner
• Deeds delivered without consent of grantor
• Recording mistakes
• Missing or undisclosed heirs
• Deeds and mortgages signed by persons of unsound mind, by minors or by someone listed as single but actually married

In regards to lenders coverage, the title policy covers:
Invalidity of the insured assignment

• Priority of the insured mortgage
• Invalidity of the insured mortgage on the title

Items and issues that are not covered include:

• Matters that an accurate survey would show -- easements, boundaries, etc.
• Matters assumed, known or created by the insured
• Rights of Parties in possession
• Unpatented water or mineral rights
• Unrecorded matters
• Matters that a physical inspection would disclose
  

When you buy a resale home, there is a provision in the contract allowing you a ten-day inspection period. It begins the day after contract acceptance. We recommend (and will help you) hire a professional, licensed home inspector to go into the house and inspect all the major systems. The inspector provides a written report outlining his findings. The inspection will include the following information:

Structural: Home inspection organizations have set standard on areas of the home that the inspector looks at to determine the integrity of the essential internal and external structural components. Inspectors are not structural engineers, but can identify visual defects in areas requiring immediate repairs.

Electrical: Do all the outlets work? Does the house use fuses or is there a breaker box? Are there any signs of fraying on the wiring?

Plumbing: Are there any leaks or annoying drips? Are all the mechanical systems and fixtures working properly?

Built-in Appliances: Are they functioning properly? Is the air conditioner producing the proper amount of cooling?

Safety Hazards: Inspectors are not environmental specialists, but they can identify a number of safety hazards and dangerous conditions.

Miscellaneous: Other items may or not be included in the home inspection. Some may be septic systems, roofs, drainage, wood decks, patios, pools, spas and other exterior structures.

It is also required that you conduct a termite inspection. We can help you arrange for it. Some buyers will also hire roof inspectors, air conditioning inspectors, pool inspectors or other specialized inspectors. After these inspections, but within ten days, you have the right to provide the seller a list in writing of items you want the seller to repair or replace. The seller then has up to five days to respond in writing indicating which items they will or will not fix. You then have up to five days to either accept this or cancel the contract. We will facilitate all the communication and make sure your rights are protected.

After the buyer and seller have agreed on the repairs to be done, the inspection period is over, and the escrow period continues until the close date.

CHAPTER EIGHT: New Construction and Inspection Process

When you buy a new home from a builder it may take anywhere from six to twelve months for construction to be completed. Most builders follow a fairly standard construction schedule.

CHAPTER NINE: Preparing to Close

Your escrow officer should schedule your closing appointment at least three business days before your escrow close date. This is the time you will sign all your loan documents. Listed below are the items you need to obtain and bring to your escrow appointment.

Identification: In order to notarize your signature, you must bring a picture ID (current driver's license, military ID or passport).

Funds: You must bring a cashier's check made out to the title company. Wiring funds is also an acceptable method of payment. Your escrow officer will tell you the amount you will need to provide.

Taking Title: Review your options and decide how you wish to take title to your new home.

Fire and Hazard Insurance: Be sure to contact your insurance agent to order coverage before your appointment. Have your agent contact your escrow officer with premium information and for property verification.

Note: It may take several weeks for the recorder's office to send you your deed.

CHAPTER TEN: Home Warranties

If you buy a new home from a builder, the builder will typically provide a one-year warranty on most items in the home. They also may provide a longer warranty on structural defects.

If you buy a resale home, you should purchase your own home warranty. They are relatively inexpensive (typically $395 to $595 depending on the size of the home) and provide coverage for one year. Home warranties are policies designed to protect the buyer against repair costs of mechanical systems and major appliances. They consist of an origination fee (sometimes offered by the seller or negotiated into the sales contract) and a small deductible (paid by the buyer). There are a variety of plans covering items such as heating, air conditioning, dishwashers, garbage disposals, etc. These policies are remarkably affordable considering the peace of mind they can provide. We will be happy to provide more information on warranty plans available to you.

BENIFITS OF HOME WARRANTY PROTECTION:

• Coverage for your major mechanical systems and built-in-appliances
• A full network of well-qualified technicians at your service
• Your budget is protected against large, unexpected repair bills
• All of the above at the price of a very low deductible /service call

CHAPTER ELEVEN: Property & Income Tax Information

Most mortgages will have an escrow account to pay taxes and insurance. Still, it’s important to verify your property taxes are being paid on time.

Your Annual Tax Statement: Annual tax statements are issued in the fall of the current year and billed for the calendar year. They may be paid in two installments, the first due on October 1, and the second on March 1. The county treasurer cannot be held responsible for payments made on the wrong property. Here are two ways to be sure your payments are properly credited:

• Always check the property description on your tax statement.
• Always provide your parcel number when making payments or inquiries. Your parcel number can be found on the paperwork you get from the title company at the time of your closing.

New Ownership Information: It can take the county up to six months to process home sale transactions. If you purchase your home after November 1, you may not receive a tax statement. You should contact the County Treasurer if you do not receive a statement by October 15 of any year. The phone number is 602-506-8511.

Notification of Value: Assessment notices are sent to every property owner on or before January 31 of each year. This notice includes the assessed value, classification and assessment ratio. These issues can be protested through the county assessor within 45 days of receipt. The Assessor's phone number is (602) 506-3406.

Income Tax
One of the great advantages of owning a home is the ability for most owners to deduct the interest portion of their mortgage payments from their income at tax time. This can provide so much tax savings that many people buy a home just for this reason!

However, many people don't realize that certain costs of the home buying process can be deductible as well. Listed below are some of the items that you may be able to deduct from your income taxes if you meet the IRS's requirements for a qualifying move. These are general suggestions and you should review you particular situation with your accountant or tax advisor:

• The expense of having your furniture and household items shipped or stored for up to 30 days. This includes the cost of packing and insurance.
• Select costs from the sale of your previous home and the purchase of your new home. Costs typically include legal fees, real estate commissions, title fees, state transfer fees and appraisal fees. You can find these fees on the information from the title company.
• The cost of transporting your family to the new town, including food and lodging.
• If you have not found the perfect property, or it is not ready when you arrive, the cost of lodging and 80% of your food up to 30 days is deductible.
  
  

CHARLES' FIVE COMMANDMENTS OF HOME REMODELING

The First Commandment: Your neighborhood is the most important determinant of your home's value. Your first priority should be to do whatever is necessary to keep your home's minimum features in line with your neighborhood. For example, if you buy a new construction home that does not have landscaping in the backyard, then installing landscaping should be on of your first big projects. Adding at least a basic professional landscape package with irrigation to your backyard will bring it up to par with most of your neighbors, yielding an excellent return on your investment when it comes time to sell. Similarly, if most of your neighbors upgraded their flooring to tile, but you still have vinyl, adding tile would be a very safe investment in your home's value.

The Second Commandment: Adding livable square footage always adds value to your home. Whenever you add quality living space to your home, you increase its appeal. Now, that doesn't mean you have to hire a contractor and add on a room! You can add "livability" in many other ways. For example, extending your patio, adding a gazebo and installing a built-in outdoor cooking area can transform your backyard into an amazing outdoor entertaining area. It is one of the best ways you can literally "add another room to your house" with a minimal investment. If you have a den with an exterior wall on the side of your home, it might be a great idea to install a French door and open your den onto the side of the house. Install a small brick paver patio, a water feature, and a colorful garden, and you can transform a wasted side yard into a romantic courtyard, adding thousands of dollars in resale value in the process.

The Third Commandment: Kitchens and bathrooms sell houses. In general, investments in upgrading your kitchen or bath are almost always a smart move. Homes with stainless steel appliances and solid surface countertops are always more marketable than those without. Similarly, you can rarely go wrong replacing vinyl with tile or standard plumbing fixtures with more up-to-date ones.

The Fourth Commandment: Updating small things can make a big difference. For older homes, small investments in updating the little details will make a big difference when it is time to sell. If you walk through some new model homes, you'll see the following items in almost every builder's model house:

• Brushed nickel door hardware and light fixtures
• Bright white electric outlet and switch plate covers
• Digital thermostats
• Fresh, new welcome mats
• Modern bathroom linens and shower curtains
• Modern towel racks and toilet paper dispensers

Keeping these relatively inexpensive items up to date in your home costs very little and will add a surprising amount of value when it comes time to sell.

The Fifth Commandment: Don’t overdo it! Upgrading your home to levels significantly beyond your neighborhood yields low return on investment. This is the corollary to the first commandment. If all the other homes in your neighborhood have textured drywall with standard paint and you spend $30,000 adding Venetian plaster and tiled mosaics to your walls, you will not recoup your investment. Or, if most of your neighbors have either no pool or a standard play pool and you add a $100,000 diving pool with a waterslide, rope swing and a 15-foot waterfall, I guarantee you will make less than half your money back when you sell. But please invite me over as soon as the pool is finished -- I love waterslides!