Real Estate Guide

Introduction to Real Estate

Real estate is defined as a piece of land, including the air above it and the ground below it, as well as any buildings or structures on it. Another definition that we can give for real estate is land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land. Real estate is now a booming industry. Land has existed over a long time, and ownership of the land varies over time. The idea of uninterrupted ownership of land is not possible in today’s civilized world and so the ownership of land varies over time. These various rights to ownership are divided into estates and chattel interests. Estates are rights in real estate which amount to real property. Taking real estate into consideration one can ask several questions. It is important to find the answers to these questions such as:

What market is available for brokerage services?

What factors determine broker and agent compensation?

How does brokerage participation influence market price?

Is the brokerage market efficient?

How do brokerage markets vary internationally?

The property sector has gained greatly over the years of economic expansion. Real Estate prices are rocketing at a high pace as there is great demand for new commercial space, production facilities and housing. Every growth depends on the sound economic logic of supply and demand conditions. The fast rise in prices attracts a lot of speculators who do not have the power to stay on. The battle becomes hard to fight bringing down even the genuine investors. With rise in the earning capacity, the borrowers are ready to accept bigger mortgages as a result profiting commercial banks. Thus, housing finance has become highly profitable to banks. The price for similar types of real estate property can vary depending on several factors.

One of the main factors is the concept of a Buyer's Market versus a Seller's Market. Being a buyer gives you an upper hand in the market, so take ample time to study the market trends carefully. Watch out for areas where there is a potential for foreclosed homes. Keep yourself informed on the latest improvements in the town; maybe a new transit line or roadway, which makes the area have high potential. A person who is a buyer for the first time may not be familiar with the real estate buying process. They should approach the real estate professional who will act as the agent between the buyer and the seller. There are also exclusive buyer agents. The commercial property segment is bound to benefit from higher infrastructure spending and industrial investments over the next few years.

Why Invest in Real Estate

Every one of us has at least once tried to imagine what our lives may be 20 or more years from now. We all want to be happily settled down with the assurance of a good home and a sufficient savings to meet all our expenses without having to work through what should be an easy retirement. As we move quickly towards those 20 years, we need to find out a way to achieve our goal. Fortunately, the ball is in our court. Saving and reducing expenses are one of the two most prominent means of increasing our wealth. We can get a better idea of our net worth by simply adding up all our assets (home equity, personal property owned, savings accounts, investments, etc.) and reduce them by our liabilities (mortgage balance, credit card and other consumer debt balances, etc.) It is every persons dream to make a fortune on the stock market. There is no doubt that this is true. Real estate is now a booming industry and the stock market is now every persons dream ride to fortune. However, with real estate, land has long been viewed as a solid and tangible investment and yes, you have a tangible asset you can actually see, use and touch! Real estate prices are sky rocketing at a high pace as there is great demand for new commercial space, production facilities and housing. Real estate investment requires a lot of wise thinking. You have to manage your investments properly in order to meet your goals. It is better to invest over long term to mitigate the risk that is associated with the stock market. The stock market goes up and down from time to time.

For most people, their home is their largest asset. With the way the real estate industry is booming, one can realize how owning investment real estate can build ones net worth quicker than nearly any other investment. Though there are some inherent risks with investing in real estate, it can be a great investment for someone who knows what they're doing. Most people concentrate on trying to grow their net worth, but they really need to work on increasing their assets and reducing liabilities. Here are some tips that will help you plan your financial future:

The first thing to do is to get out of debt. This alone will help to increase your net worth by a large amount. Try to do more saving. This will bring surplus returns in the future. Reduce your mortgage by trying to pay off a small amount every month. This reduces your interest payments and builds equity. As you go ahead with the savings, get in touch with a professional and learn about various loan programs. Ask the help of a professional realtor to find your first investment property. As the saying goes, “slow and steady wins the race.” The best way to increase your net worth is one month at a time. You can start by simply spending less than you earn and applying the difference toward investments and debt reduction.

Foreclosure Overview

A foreclosure is the legal process by which an owner's right to a property is terminated, usually due to default. It typically involves a forced sale of the property at public auction, with the proceeds being applied to the mortgage debt. Put in other words, it is a legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage - also known as repossession of a property. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Lis Pendens. The foreclosure process can end in several ways, such as:

The borrower pays off the remaining amount during a grace period decided by the state. This grace period is also known as pre-foreclosure.

The borrower sells off the plot during this foreclosure period. The money that comes from the sale helps the home owner to pay back the remaining amount, thereby preventing a history of foreclosure from appearing on their credit report.

If the owner is not able to sell the property he goes into foreclosure. The lender takes up the property with the intention of selling it off to get back the default amount. A third party can then buy the property from a public auction. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. They are also known as bank-owned or REO properties (Real Estate Owned properties by the lender).

Most of the time, home owners prefer paying for their homes through loans as they find paying off a large amount in a single payment is too difficult. They approach an institution such as a bank that offers mortgage loans at a reasonable rate. The story does not end here. The situation gets a bit tougher when the borrower is not able to pay the mortgage off on time. This may occur because of a job loss or some kind of crisis may exist. However the mortgage lender offers a relaxation period hoping that the borrower will be able to make the payment. If the borrower is still not able to pay, then the lender realizes that this is not a win-win situation. The only option for the lender to recover their loan is by foreclosure. Having to pay off a large mortgage amount is not at all an easy task, and having to face foreclosure is a very difficult circumstance.


A Pre-foreclosure is a situation where a default loan has taken place; hence the lender has begun a judicial or non-judicial proceeding. The property becomes subject to foreclosure. Pre-foreclosures still belong to the owner.

Pre-foreclosure is sometimes known as Lis Pendens (lawsuit pending) in states that conduct judicial proceedings. To avoid losing their homes to foreclosure, and losing their equity and damaging their credit, troubled homeowners would always prefer to sell their homes as quickly as possible, at a very low price. The foreclosure rate is soaring in most areas of the country presenting incredible opportunities for pre-foreclosure real estate investors! There are a number of ways the informed real estate investor can profit from homes facing foreclosure and one of the most lucrative is the pre-foreclosure.

There is less competition in buying pre-foreclosures than there is when buying at foreclosure auctions. Some people do not know how to find pre-foreclosure or probate property opportunities, and some people fear dealing and negotiating with lenders.

Stopping a foreclosure helps to save the owner’s credit rating, help lenders to recover their money and also helps you in getting a profitable deal.

There is no single law or procedure covering all foreclosures in the United States. Each federal and local government agency applies different rules. However, learning this procedure is not difficult, and once you go through buying a pre-foreclosure home, then you are in the game forever!

Find loans in default. You can do this by checking Lis Pendens in your county through:

Get access to pre-foreclosure leads and grab the opportunity while it exists!

Bank-Owned REO

Any real estate property that is currently under the ownership of a bank or lender is termed as REO.

The lender/bank attains ownership to the property, either through an agreement with the owner during pre-foreclosure or at a public auction. They usually sell the property to recover the unpaid loan amount. The potential bargain is often less than a pre-foreclosure or auction property.

Although the lender usually clears out any liens on the title, you should be cautious and make sure that the title is clear. Usually the lender focuses on recovering any money they've invested in the property, but you still have a fair chance of getting an offer which is well below the market value.

Since banks treat an REO as a non-performing asset, they try to sell such assets as quickly as possible. Except in such cases where a "redemption period" is stated, banks are free to sell REO’s under their possession at anytime.


The United States Department of Housing and Urban Development (HUD), is a Cabinet department of the United States government. It was founded in 1965, and they focus primarily on housing.

The Federal Housing Administration (FHA), provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories.

A HUD home is a residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. If you have the cash or can qualify for a loan you may buy a HUD Home. All HUD homes and properties available for purchase by the public are offered for sale at

Any real estate broker registered with HUD may submit an offer and contract to purchase on your behalf. We encourage you to get an inspection after your offer is accepted. All HUD Homes are sold AS-IS, without warranty. HUD will neither make repairs nor pay to correct any problems.


Real estate auctions accelerate the selling process, making it a win-win proposition for everyone. Motivated buyers and sellers come together in a competitive bidding environment that allows a property's true market value to emerge.

Because lenders are eager to sell foreclosed homes quickly to avoid the high carrying costs of bad debt, buyers can typically purchase foreclosed homes below their market value at auctions.

There are significant benefits to using the Internet to purchase property, as one can shop for real estate around the world, pick a suitable property, and bid online from the comfort of one's home.

Traditional real estate auctions for government property or bank foreclosures occur on the steps of the home at a specified time with the potential buyers present at the property to bid, or at the local town hall. Potential buyers usually have the opportunity to inspect the property before bidding and are present at the property during auction so no unforeseen glitches in the process can occur. Traditional auctions are somewhat of a gamble since the buyer never knows how high the price might climb in the midst of competitive bidding.

FSBO - A Buyer’s Guide

The number of people who sell their home privately is growing rapidly. These vendors are known as "For Sale By Owner,” or FSBO. They make use of real estate websites to post their advertisements. As a buyer, you can profit from a FSBO deal since the expense required for marketing the house is less for a seller, compared to other means of property sale through an agent.

Here are the guidelines that will help a buyer get the best out of a FSBO deal.

Identify your dream home from the FSBO listings on RealtyBargains.

You will find all the necessary contact information of the seller, with each FSBO listing.

It would be advisable to get pre-approved for a loan. Consult lenders, study and compare costs and interest rates, and be sure to have financing ready to avoid a last minute rush.

A local real estate agent can give you a good picture of local trends and the various financing options available for you.

Try to get a better idea of the local market condition and the real value of the property before you start discussing sale price negotiating.

A real estate home inspector will have the expertise to figure out the exact condition of a home. Arrange a home inspector who is proficient enough to calculate the remaining life of the various systems in the house and the amount of maintenance that could arise in the future.

In most states, a seller is expected to fill out a disclosure statement. You can ask the seller to provide you a copy of it.

Make sure to check the home's current insurance record (CLUE report), this could let you back out if you can't attain insurance at rates you find reasonable.

Make sure the agreement lays down all the points that should help you for a smooth transaction. If you are a first time home buyer, you may hire a professional to help you with the paperwork.

Any agreement made should be in writing and make sure to get it certified by a home inspector and a real estate attorney before you sign them.

Consult a real estate agent or an attorney whom you can call at any moment to discuss issues regarding the transaction.

Financing for Your Dream Home

Arranging the required financing is a major challenge you will have to face while searching for your new home. It is not always practical to look for a loan, and at the same time hunt for a house. So make sure you get the formalities for arranging financing completed, before you decide on the home that you wish to buy.

There are thousands of financial products and services that make it possible for low, moderate, and middle-income families to buy homes of their own, but in general the mortgage you choose will likely be determined by several factors which will be discussed here. Obtaining a mortgage is a method of using property for loan value, and they are available in a wide range from banks to building societies and other lenders.

You have to plan well ahead before buying a home and you should develop a financial plan. This will guide you in saving money for the down payment, covering other expenses such as your credit check, mortgage application and closing costs.

An established credit history plays an important role in the home buying process. This is an important document that instills mortgage lender confidence in you. The main goal should be to show that you are financially responsible and a "good credit risk.” Start off with taking care of how you pay for things; don't pay for everything with cash. You should be paying your bills on time, limit your debt, reduce the number of credit cards you have, and using them responsibly.

It's also important to review your credit report. It shows your past and current debt that states when, how and if you paid. The information contained in your credit report should be accurate. The better your credit history, the better your credit score will be and the more likely your mortgage lender will offer you more mortgage options with better terms.

What mortgage plan can you afford?

The mortgage lender whom you approach will calculate the amount you can afford and the type of mortgage plans that will match your requirement. Also, bear in mind there are always additional expenses like legal fees and moving costs.

Find out the various ways to get financing arranged for your dream home:
Mortgage Pre-approval

Pre-approval means a process wherein the bank or the lender calculates the loan amount that you are eligible for, the interest you are expected to pay and the monthly installment. A pre-approval also helps in assuring the seller that you have the financial means to purchase his or her home. You will also be able to determine the type of home that will fit your budget.

Your Down Payment

A down payment is referred to as the initial amount that needs to be paid toward the purchase of your home. The larger your down payment, the less you pay each month on the mortgage, and the lower the interest costs will be over the life of the mortgage. The amount of the down payment and the installment will depend upon the type of mortgage plan you have selected.

Your Mortgage

Your financial situation will determine the type of financing option you have. The various financing options available are:

Adjustable Rate Mortgage (ARM):

A mortgage loan where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate.

Fixed Rate Mortgage (FRM):

A mortgage loan where the interest rate on the note remains the same through the term of the loan, and is initially based on an index. This is done to ensure a steady payment amount for the borrower.

Conventional Mortgage:

A mortgage that falls within Fannie Mae guidelines, and covers loans up to a pre-determined amount.

Jumbo Mortgage:

A mortgage with a loan amount above the industry standard definition of conventional conforming loan limits. This standard is set by the two largest secondary market lenders, Fannie Mae and Freddie Mac. Loans above the conforming limits may be offered by seller servicers of these wholesale institutions as well as Wall Street conduits who provide warehouse financing for mortgage lenders. The loan amounts reflect average loan sizes nationwide. Jumbo mortgages apply when agency (FNMA and FHLMC) limits don't cover the full loan amount.

Government-Backed Loans:

There are two types of government-backed loans -- FHA and VA.

In order to qualify for an FHA housing loan, applicants must meet certain criteria, including employment, credit ratings and income levels. The specific requirements are:

Credit report should be in good standing with less than two thirty day late payments in the past two years.

Any foreclosure must be at least three years old.

Any bankruptcy on record must be at least two years old with good credit for the two consecutive years

Mortgage payment qualified for must be approximately thirty percent of your total monthly gross income

VA loan is a mortgage loan in the United States guaranteed by the Veterans Administration. The loan may be issued by qualified lenders.

The VA loan was designed to offer long-term financing to American veterans or their surviving spouses (provided they do not re-marry). The VA loan allows veterans 100% financing without private mortgage insurance or 20% second mortgage.

Closing and Additional Costs

The closing is when ownership of your new home officially transfers from the seller to you. You need to be prepared to pay this additional cost, unless the seller volunteers to pay it. Other additional costs may include:

Mortgage application and credit report fees.

Good faith deposit: This is a deposit which normally varies between 1% and 10% of the sales price, used to provide an assurance to the seller that you are a genuine buyer interested in making an offer on their home.

Before a mortgage company approves your lending arrangement and allows you to close on your new home, they might ask you to show proof of title, title insurance, and homeowner's insurance. Make sure to have these documents ready with you in order to have a smooth transaction.

Making an Offer

Once you decide on the house that you are interested in, its time to make an offer to the seller that will communicate your interest in that property. A purchase offer will need to be drawn, which is a written contract that states your proposal, including terms and conditions that you expect to be accepted by the seller.

What the Offer Contains

If the seller accepts all the conditions stated on the purchase offer, it will be constituted as a purchase agreement. So make sure the initial offer you make lays down all the requisite terms and conditions.


In the offer made, if you specify any statement which says, “this offer is contingent upon (or subject to) a certain event," it means that this purchase will occur only if that specified event occurs.

Negotiating a Deal

You stand a fair chance of winning the negotiation process if,

You are an all-cash buyer

You are already pre-approved for a mortgage

You don't have a present house that has to be sold before you can afford to buy.

Getting to know the reason why the seller wishes to sell his house can aid you in devising a proper negotiating strategy.

Earnest Money Deposit

This is a deposit made by the buyer to impress the seller that the buyer "earnestly" intends to purchase the property. This is a deposit that you give when making an offer on a house. An attorney usually holds this deposit. Once your offer is accepted and the sale deed is signed, this deposit becomes part of your down payment.

The Seller's Response to Your Offer

The seller is free to accept, reject or make a counter offer if they wish to modify any of the conditions specified in your proposal.

As a buyer, you can freely negotiate with the seller, and can make counter offers in writing. The document becomes a binding contract only when either of the party signs an unconditional acceptance of the other side's proposal.

Withdrawing an Offer

In some cases you may feel like stepping out of the deal, due to various reasons. In most of the situations you may be able to revoke your offer, provided you are unaware of the fact that the seller has accepted your offer. Before communicating your plan to withdraw the offer to the seller, make sure you consult a lawyer experienced in real estate issues.