Of Course Advertising Works
It works:Because the Advertising Agencies tell you it works without producing one iota of evidence to substantiate their claims as to the exclusive increase in sales that one advertising campaign has produced!It works because we live in an over informed society, and the agencies are working very hard to increase the quantity (but not quality) of clutterIt works because the customer has become immune to advertising, so Advertising Agencies are attempting to cut through the clutter with brilliant creative work.Advertising works – especially now that it is moving onto the Internet!Advertising works because advertising agencies pay scant attention (if any) to the actual process of communication, and concentrate heavily on creativity and media buying.Advertising works because the days are numbered for TV ads dominance…but they don’t know what to replace it with!Advertising works because the correct model of communication is totally ignored by the advertising industry whilst they cling onto the reach frequency model beloved by the advertising industry but which has no relevance to the actual process of communication.Advertising works to waste your money. Study the annual expenditure of advertising in America, Britain, France, Germany, Spain, Japan and Australia.
Apply the statement “50% of my advertising expenditure is wasted but I don’t know which fifty percent” the costly ineffectiveness of advertising is huge, to say the least. Now factor in the fact that there has never been any true accountability.Then consider that this wastefulness has been going on since the end of the Second World War, now that’s wastefulness!Advertising is clinging to a world that existed ten years ago as if it were trying not to notice it’s vanished. Advertising has to modernise and change.
Its effectiveness will regenerate itself because the information content of advertising is a fundamental necessity for the efficient conduct of a complex and free market place.Instead of asking, “When are the good times coming back?” we should be applying ourselves to doing advertising in ways that are right for the time we live in.Of course advertising works, it works very efficiently to kill off any good idea that was not invented within their own agency. It is amazing when you consider the many excellent marketing ideas that have been available, however the promoters of such ideas eventually gave up selling to advertising agencies because all advertising agencies wanted was to get their clients onto television.That it might not be the ideal medium was totally ignored!Of course advertising works, consider this: Despite all the evidence to the contrary, here’s what a current luminary of the advertising industry said recently”The conventional stuff won’t ever go away,” said Kate Bruges, the Marketing Director of J Walter Thompson.”An awful lot of this unconventional stuff is the icing on the cake, that extra bit of media mileage. But it’s never going to give you the cost-efficient mileage or get the message across consistently enough to a large enough number of people.”Another example of the usual Advertising Agency bull. They will not accept that there are better ways of communicating with consumers than ‘conventional stuff’.It is also fascinating that she talks about cost-efficiency when she has no idea just how cost ‘ineffective’ her cost-efficient mileage really is! Just where is the evidence to support this cost-efficient mileage? What factual piece of research has been done to measure the cost effectiveness of the ‘conventional stuff’? And without such why are people like Kate allowed to get away with making such audacious claims?
Bank Secrecy and How it Affects Your Offshore Bank Account
It may sound great to have an offshore bank account guarded by razor-sharp banking secrecy, but is it all that it seems? Here we explore what bank secrecy really is, and whether countries will actually enforce it to protect your privacy.Bank Secrecy, also referred to as banking or financial secrecy refers to a legal principle which allows banks to keep their client information confidential. This is extremely important to protect against fiscal fraud and identity theft, but while in some countries like Switzerland or Panama breaking bank secrecy could land you in jail, in other countries it is routinely broken without penalty.Why is this? There is great potential for fraud and/or money laundering if bank information is kept entirely confidential. Governments would be powerless to stop criminal elements porting ill-gotten money around at will. The US government was one of the first to introduce legislation to combat fraud with its 1970 bank secrecy act. This required banks to report suspicious transactions over 10,000USD.After the 9/11 attacks it introduced further legislation within the Patriot Act that required even greater reporting requirements. The US government can now track every US dollar transaction in the world, since it must pass through a US correspondent bank.The trouble is, governments worldwide have started to treat bank secrecy itself like a crime. Using the ‘terror-tactics’ of hype and exaggeration they have campaigned against bank secrecy as if its only purpose were to protect terrorists, drug lords and dictators. They really want it extinguished to find out about (and therefore tax) every cent of your income, whether derived domestically or abroad.Bank secrecy is being slowly eroded, even the Swiss who can claim to have created banking secrecy with the 1934 Swiss Banking Act have agreed to certain concessions. The OECD, a Paris based think tank with no official authority has drawn up a model for international financial transparency and information sharing on tax issues. Many former tax havens have ‘repented’ and made concessions on their bank secrecy in order to avoid being put on an OECD blacklist of uncooperative tax havens. These include Liechtenstein, Andorra, Switzerland and Luxembourg. Monaco, Honk Kong and Singapore have said they will think about signing up.While many tax havens will claim to have strong bank secrecy, not all will walk the walk. At the very least all countries will provide exceptions for matters relating to terrorism, money-laundering or other serious criminal offences.Here’s an overview of the more popular tax havens and the effectiveness of their bank secrecy laws:Switzerland – Although it recently pledged to sign up to the OECD model it still has some of the strongest bank secrecy legislation in the world. It has agreed to share information in cases where there is concrete evidence of tax evasion, otherwise the law remains unchanged. Unless somebody knows you have an account at a particular bank and has strong evidence of wrongdoing, you are well protected.Panama – Has very strong bank secrecy, breaking it could result in up to 2 years in jail. Panama does not respond to foreign requests for information involving tax evasion, which it does not view as a crime.Honk Kong – Still has very strong bank secrecy because it has no tax information exchange agreements with other countries (this means that it has no legal requirement to respond to a request for tax related information from another country), except with China. It is thinking about joining the OECD model.Cayman Islands – Although it has very strong bank secrecy laws on paper, these have been waived under US government requests for information. They are unlikely to stand up against foreign pressure if it is an individual’s account at stake.Although bank secrecy is important when thinking about your private offshore bank account, another important thing to keep in mind is visibility. If you park your money in Switzerland during a worldwide campaign against tax havens, it’s clear that you funds will be in the spotlight. A better solution may be to keep your money in a smaller country not regarded as a tax haven, where your home government is less likely to go looking.
Cheap Homes and Tips For Buying a House in Sale
A home is a financial asset and more: it’s a place to live and raise children; it’s a plan for the future; it’s an investment in your community. That’s why all Americans should have an opportunity to enjoy the benefits of owning a home. And here are some tips for first-time home buyers.Knowledge is said to open doors. This is literally true when it comes to buying a home. To become a first-time home buyer, you need to know where and how to begin the home buying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge of home purchasing. In addition to helping you begin, these steps will give you the tools necessary to navigate the entire home buying process – from deciding whether you’re ready to buy house, all the way to that final proud step of owning a home, getting the keys to your new home.1. HOW DO I KNOW IF I’M READY TO BUY A HOME?You can find out by asking yourself some questions:Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
Do I have a good record of paying my bills?
Do I have few outstanding long-term debts, like car payments?
Do I have money saved for a down payment?
Do I have the ability to pay a mortgage every month, plus additional costs?If you can answer “yes” to these questions, you are probably ready to buy your own home.2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment? How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research about property. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper, Foreclosure Listings, and internet search.3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. Monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and real estate services you need.
But make sure you check the prices for homes in the area on internet before you visit any real estate agent.6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.7. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.8. HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.9. HOW CAN I FIND OUT HOW MUCH HOMES ARE SELLING FOR IN CERTAIN COMMUNITIES AND NEIGHBORHOODS?Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a real estate professional, they may have access to comparable sales.10. HOW CAN I FIND INFORMATION ON THE PROPERTY TAX LIABILITY?The total amount of the previous year’s property taxes is usually included in the listing information. If it’s not, ask the seller for a tax receipt or contact the local assessor’s off ice. Tax rates can change from year to year, so these figures may be approximate.11. WHAT OTHER TAX ISSUES SHOULD I TAKE INTO CONSIDERATION?Keep in mind that your mortgage interest and real estate taxes will be deductible. A qualified real estate professional can give you more details on other tax benefits and liabilities,12. IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?There isn’t a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn’t mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don’t want to worry initially about upkeep and repairs.13. WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A HOME?
In addition to comparing the home to your minimum requirement and wish lists, use the Home Scorecard and consider the following:Is there enough room for both the present and the future?
Are there enough bedrooms and bathrooms?
Is the house structurally sound?
Do the mechanical systems and appliances work?
Is the yard big enough?
Do you like the floor plan?
Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.)
Does anything need to repaired or replaced? Will the seller repair or replace the items?Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.14. WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT HOMES?Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller’s or real estate agent’s answers are clear and complete. Ask questions until you understand all of the information they’ve given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. Prepare your own Home question list before you visit property. Find out about monthly utility bills for entire home.15. HOW CAN I KEEP TRACK OF ALL THE HOMES I SEE?If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don’t hesitate to return for a second look. Organize your photos and notes for each house.16. HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?There isn’t a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, home buyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you’re looking for. It will help avoid wasting your time.YOU’VE FOUND THE DREAM HOME17. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs,that are needed.The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an ‘out” on buying the house if serious problems are found,or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.18. DO I NEED TO BE THERE FOR THE INSPECTION?It’s not required, but it’s a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d I like to purchase and it is a good time to ask general, maintenance questions.19. ARE OTHER TYPES OF INSPECTIONS REQUIRED?If your home inspector discovers a serious problem a more specific Inspection may be recommended. It’s a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas asbestos, or possible problems with the water or waste disposal system.20. HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?If the house you’re considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based point. It’s important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips.21. DO I NEED A LAWYER TO BUY A HOME?Laws vary by state. Some states require a lawyer to assist in several aspects of the home buying process while other states do not, as long as a qualified real estate professional is involved. Even if your state doesn’t require one, you may want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the closing process. Your real estate agent may be able to recommend a lawyer. If not, shop around. Find out what services are provided for what fee, and whether the attorney is experienced at representing home buyers.22. DO I REALLY NEED HOME OWNER’S INSURANCE?Yes. A paid home owner’s insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.23. WHAT STEPS COULD I TAKE TO LOWER MY HOME OWNER’S INSURANCE COSTS?Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Choose a home with a fire hydrant or a fire department nearby.24. IS THE HOME LOCATED IN A FLOOD PLAIN?Your real estate agent or lender can help you answer this question. If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.25. WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME?Always check to see if the house is in a low-lying area, in a high-risk area for natural disasters (like earthquakes, hurricanes, tornadoes, etc.), or in a hazardous materials area. Be sure the house meets building codes. Also consider local zoning laws, which could affect remodeling or making an addition in the future. Your real estate agent should be able to help you with these questions.26. HOW DO I MAKE AN OFFER?Your real estate agent will assist you in making an offer, which will include the following information:Complete legal description of the property
Amount of earnest money
own payment and financing details
Proposed move-in date
Price you are offering
Proposed closing date
Length of time the offer is valid
Details of the dealRemember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just Making an offer.Other ways to lower ins-insurance costs include insuring your home and car(s) with the same company, increasing home security, and seeking group coverage through alumni or business associations. Insurance costs are always lowered by raising your deductibles, but this exposes you to a higher out-of-pocket cost if you have to file a claim.27. HOW DO I DETERMINE THE INITIAL OFFER?Unless you have a buyer’s agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent’s advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price. Check Home price in that area on websites.28. WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.29. WHAT ARE “HOME WARRANTIES”, AND SHOULD I CONSIDER THEM?Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by home owner’s insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.GENERAL FINANCING QUESTIONS:THE BASICS30. WHAT IS A MORTGAGE?Generally speaking, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.31. WHAT IS A LOAN TO VALUE (LTV) HOW DOES IT DETERMINE THE SIZE OF MY LOAN?The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: With a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay,$2,500 as a down payment.The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash home buyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance policy.32. WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?Fixed Rate Mortgages: Payments remain the same for the the life of the loanTypes15-year
30-yearAdvantagesPredictable
Housing cost remains unaffected by interest rate changes and inflation.Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limitsTypesBalloon Mortgage- Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is clue or refinanced (though not automatically)
Two-Step Mortgage- Interest rate adjusts only once and remains the same for the life of the loan
ARMS linked to a specific index or marginAdvantagesGenerally offer lower initial interest rates
Monthly payments can be lower
May allow borrower to qualify for a larger loan amount33. WHEN DO ARMS MAKE SENSE?An ARM may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren’t concerned about potential increases in interest rates.34. WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS?30-Year:In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions.
As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.15-year:Loan is usually made at a lower interest rate.
Equity is built faster because early payments pay more principal.35. CAN I PAY OFF MY LOAN AHEAD OF SCHEDULE?Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment, though you may have to pay a prepayment penalty to do so. Ask your lender for details.36. ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOME BUYERS?Yes. Lenders now offer several affordable mortgage options which can help first-time home buyers overcome obstacles that made purchasing a home difficult in the past. Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or have experienced income irregularities.37. HOW LARGE OF A DOWN PAYMENT DO I NEED?There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you’ll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you’ll also need money for closing costs, moving expenses, and – possibly -repairs and decorating.38. WHAT IS INCLUDED IN A MONTHLY MORTGAGE PAYMENT?The monthly mortgage payment mainly pays off principal and interest. But most lenders also include local real estate taxes, home owner’s insurance, and mortgage insurance (if applicable).39. WHAT FACTORS AFFECT MORTGAGE PAYMENTS?The amount of the down payment, the size of the mortgage loan, the interest rate, the length of the repayment term and payment schedule will all affect the size of your mortgage payment.40. HOW DOES THE INTEREST RATE FACTOR IN SECURING A MORTGAGE LOAN?A lower interest rate allows you to borrow more money than a high rate with the some monthly payment. Interest rates can fluctuate as you shop for a loan, so ask-lenders if they offer a rate “lock-in”which guarantees a specific interest rate for a certain period of time. Remember that a lender must disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the interest rate because it also includes the cost of points, mortgage insurance, and other fees included in the loan.41. WHAT HAPPENS IF INTEREST RATES DECREASE AND I HAVE A FIXED RATE LOAN?If interest rates drop significantly, you may want to investigate refinancing. Most experts agree that if you plan to be in your house for at least 18 months and you can get a rate 2% less than your current one, refinancing is smart. Refinancing may, however, involve paying many of the same fees paid at the original closing, plus origination and application fees.42. WHAT ARE DISCOUNT POINTS?Discount points allow you to lower your interest rate. They are essentially prepaid interest, With each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases With each point paid. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment. Points are tax deductible when you purchase a home and you may be able to negotiate for the seller to pay for some of them.43. WHAT IS AN ESCROW ACCOUNT? DO I NEED ONE?Established by your lender, an escrow account is a place to set aside a portion of your monthly mortgage payment to cover annual charges for home owner’s insurance, mortgage insurance (if applicable), and property taxes. Escrow accounts are a good idea because they assure money will always be available for these payments. If you use an escrow account to pay property tax or home owner’s insurance, make sure you are not penalized for late payments since it is the lender’s responsibility to make those payments.44. WHAT STEPS NEED TO BE TAKEN TO SECURE A LOAN?The first step in securing a loan is to complete a loan application. To do so, you’ll need the following information.Pay stubs for the past 2-3 months
W-2 forms for the past 2 years
Information on long-term debts
Recent bank statements
tax returns for the past 2 years
Proof of any other income
Address and description of the property you wish to buy
Sales contractDuring the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.45. HOW DO I CHOOSE THE RIGHT LENDER FOR ME?Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable. A lender that has the authority to approve and process your loan locally is preferable, since it will be easier for you to monitor the status of your application and ask questions. Plus, it’s beneficial when the lender knows home values and conditions in the local area. Do research and ask family, friends, and your real estate agent for recommendations. Once again internet research can help you in home financing too.46. HOW ARE PRE-QUALIFYING AND PRE-APPROVAL DIFFERENT?Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.Pre-approval is a lender’s actual commitment to lend to you. It involves assembling the financial records mentioned in Question 47 (Without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.47. WHAT IS A CREDIT BUREAU SCORE AND HOW DO LENDERS USE THEM?A credit bureau score is a number, based upon your credit history, that represents the possibility that you will be unable to repay a loan. Lenders use it to determine your ability to qualify for a mortgage loan. The better the score, the better your chances are of getting a loan. Ask your lender for details.CLOSING48. WHAT HAPPENS AFTER I’VE APPLIED FOR MY LOAN?It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you’ll be able to move into your new home.49. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.50. WHAT MAKES UP CLOSING COST OF HOME?There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:Attorney’s or escrow fees (Yours and your lender’s if applicable)
Property taxes (to cover tax period to date)
Interest (paid from date of closing to 30 days before first monthly payment)
Loan Origination fee (covers lenders administrative cost)
Recording fees
Survey fee
First premium of mortgage Insurance (if applicable)
Title Insurance (yours and lender’s)
Loan discount points
First payment to escrow account for future real estate taxes and insurance
Paid receipt for home owner’s insurance policy (and fire and flood insurance if applicable).
Any documentation preparation fees51. WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?You’ll present your paid home owner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.You’ll pay the lender’s agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.52. WHAT DO I GET AT CLOSING?Settlement Statement (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)Truth-in-Lending StatementMortgage NoteMortgage or Deed of TrustBinding Sales Contract (prepared by the seller; your lawyer should review it)Keys to your new homeWHERE CAN I FIND CHEAP HOMES FOR SALE?Visit the link below and Find Cheap Homes for Sale near you.
Property Investing and Due Diligence – What Should You Consider Including?
From Wikipedia – “Due diligence is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for acquisition.”Due diligence has been common practice in many areas where a potential buyer is looking to buy an asset of some description. In the field of property, carrying out due diligence is and has been common practice in the commercial property world but this has not been the case with residential property, perhaps with the exception of some professional landlords.The concept of buy to let was launched by ARLA, the Association of Residential Letting Agents, in 1996 and quickly generated substantial public interest across the UK, both in respect of buying to let in the UK and overseas. Concurrently a whole host of training organisations sprang up to “educate” the public in the “dark” arts of making millions in property without risking their own money using ever more “creative” concepts, whilst not really explaining the dynamics of property investment. Greed was the driver and the ever rising values of property, almost regardless of location, were the food that fed the greed.I have been one of those educators, since 1996, although I would like to think that the seminars and workshops I have presented have been ethical and have fully explained the dynamics of property investment and the inherent risks. For example, way back when valuations were being inflated on new build and loan to values were based on the inflated valuations, I was pointing out that a property had to sell at the inflated value for this to become an Open Market Value on which the LTV of a mortgage could be based and I was often rubbished for my protestations. I could give you a number of other examples but I am digressing from due diligence.One thing that is certain is that had I tried to teach due diligence then as I do today, I would probably have had a number of my students walking out because they were there to learn how to become a millionaire overnight and easily and “don’t bother me with the detail”.Today though, the whole environment has changed, and I think it is unlikely that we will ever return to the market conditions that existed through the 10 years from 1996-2007. For a considerable time to come everyone will be far more cautious about getting involved in property investment and this includes the lenders without whom, as we have already learned, there isn’t any property business.Whilst there are still some investors who are prepared to take what I would regard as a “cavalier” attitude, most are looking to act responsibly, gain a real understanding of the dynamics of the market and develop and operate a relatively risk-free strategy rather than the high-risk strategies which were prevalent in the past 10 years, to the substantial cost of investors.The results of these high-risk strategies are most obvious in the auction rooms today where properties are being offered at auction at 50% or less of their 2006 – 2007 “value”. Even at 50% – I deliberately haven’t used the word discount here – a number of these properties, particularly apartments, are still not selling and so the lenders are reluctant to lend against them.This brings me to due diligence. I firmly believe that, as the dust starts to settles on the recent excesses in the residential property investment industry, the suppliers who investors depend on as well as the lenders will look to make sure that the borrower has both a viable business plan which allows for changes in market conditions and is able to show that he has carried out due diligence on each individual investment.The lenders will do this for 2 reasons: 1. to protect their investment, the money they have lent the investor and 2. to protect themselves from being attacked and possibly sued for irresponsible lending.In my view Due diligence splits into 2 parts.Part 1: Research on the location in which the property is sited.I use the word location, as it is a common term in the property world though I would prefer to use the word neighbourhood since we don’t really live in a “location” but we certainly live in neighbourhoods with neighbours who we may or may not enjoy.Also, it is difficult to conceive, without any preset parameters, the size of a location. I don’t think a large city can be a location but a small one certainly can be. Personally I am based in the ‘small’ city of Oxford. A town or village can be a location but in terms of due diligence on where a property is sited, we’re still talking about too large an area. Within a city or town a suburb is possibly the right size.In my view, a location for the purpose of Due Diligence is an electoral ward, which can be broken down into a number of neighbourhoods, dependent on the physical structure of the Ward. I live in North Oxford and have carried out due diligence on the electoral ward I live in. I have broken down the Ward into 5 separate neighbourhoods, each of which has very different criteria from a property investment point of view.By carrying out this in depth due diligence, I learnt a lot about the Ward I live in that I was unaware of before, even though I have lived in and around this area for close on 30 years. For instance, even though North Oxford is supposedly the most expensive property area in Oxford, within my Ward there are 3 or 4 streets which feature in the top 10 cheapest streets in the city according to mouseprice.com.So, due diligence on the neighbourhood in which you are going to invest is vitally important and should enable you to demonstrate to those interested why your investment will be viable both in the short and long-term. I would advise including in your due diligence the neighbourhood, which should be quite a small area, the electoral ward in which the property is located and the suburb in which the electoral ward is located if the two are not the same.How you carry out this due diligence will be the subject of another article.Part 2. Research on the property.This should be associated with your customer, your tenant (buy to let) or buyer (buy to flip) as the two are effectively joined at the hip and either, from an investment perspective, does not exist without the other.Now before I expand on carrying out due diligence on the property, the question that arises is: Which comes 1st, the location in general terms, and by that I mean the town or small city, or the property.This should depend on your strategy and as there is no single right strategy, your strategy should reflect what you want to do because at the end of the day there is no point in trying to develop a strategy which really doesn’t excite you.To be successful you need to be excited about developing your strategy and that excitement must be generated by more than just making money. I don’t propose to expand further on strategies in this article, except to say that in settling your strategy, you will have decided on the type of property you intend to buy and who your customer is.In carrying out due diligence on the customer and the property you need to be able to prove that the first fits the second, both today, tomorrow and, if the strategy is buy to let, for the next 10 years.The principle driver in due diligence is ultimately the customer. Your “choice” customer determines what type of property you should buy, the standard and facilities that are included in the property and the neighbourhood in which it is located.Your customer will also dictate the rent that you can charge (buy to let) or the actual sale price as against the asking price (buy to flip). By default, your customer therefore dictates the price that you can afford to pay for the property, after deducting acquisition and renovation/refit costs.So in preparing your due diligence on your investment proposal you need to demonstrate that your customer exists as well as the source of said customer.Let’s use students for the purposes of this example.In carrying out your due diligence, there are a number of questions that you should answer about who your customer is.
What is the source of students, which university or college?
Do the students need rented housing outside of the University or College. Remember, many universities and colleges house their students.
Assuming the answer to the second point is yes, does the University have any plans to increase their in-house accommodation within the next 10 years.
Does the University intend to relocate within the next 10 years.
Does the University intend to expand over the next 10 years.Assuming you have proven you have a customer, you must go on to define what that customer wants.Something I have preached for many years is that your property should always be “1st choice” for your chosen customer. In achieving 1st choice, you need to be able to marry up the neighbourhood with the property, with the standard, with the cost (rent/sell price) and with the local facilities.Quite possibly the 1st criterion from our students’ point of view is the neighbourhood. What facilities and amenities are available nearby and are they student oriented? Neighbourhood is also often the 1st criterion for other customers although they will likely be looking for slightly different amenities and facilities.The next criterion is standard: What is the customer getting for his money? This, in the case of students, may be determined or influenced by the university or college that they are attending as many universities inspect the housing they list for the students.The third criterion will likely be cost which will be driven by what your customers can afford coupled with Neighbourhood/Ward comparisons. Most of your customers will already have researched where your property is located to decide whether or not they can afford it and whether it is worth progressing any further. If they can afford it, they will contact you.So to summarise, I believe that demonstrable due diligence on an investor’s project will become increasingly important to the lenders in future. As a result it should be top of the list for any investor, if they are concerned with mitigating the risks inherent in any property investment.