Kay, can you explain what "points" are?

There are good "points" and there are bad "points." Bad points are the ones you pay; good points are the ones someone else pays! Lending institutions charge these as extra upfront, one-time lump-sum interest - when a new loan is placed. Each point is one percent of the loan amount. Note: this is based on the loan amount, not on the purchase amount. For example, if you bought a home for $120,000 and the loan amount was only $100,000, one point would equal $1,000 (not $1,200). Two points would be $2,000, etc. Points are usually paid at closing.

Sometimes you can pay extra points for a "lock-in" that guarantees you will later receive the interest rate current at the time of application, provided it is closed in a specific time period.

No, not necessarily. Points can be paid by either the buyer or the seller, depending on their agreement. Such is the case in a VA loan. A veteran can be charged no more than one point.

If you as a buyer pay the points on your primary residence, the amount of the points are income tax deductible. Points paid on an investment property must be amortized bit by bit over the years. Points paid by the seller are not tax deductible. Consult your tax advisor for more information.

By using a buyers agent, you will get assistance in writing the offer to purchase. As your buyers agent, I will advise you on the best strategies, depending on your individual circumstances, and help you negotiate out-of-pocket expenses such as points.

As a rule of thumb, it is not financially wise to over-improve beyond your home's neighbors. Few improvements increase the resale value of your home by the amount you put into them. If it has always been your dream to own an in-ground swimming pool, then feel free to add one if you wish. But understand that it may not add any value; in some cases, it may be a detriment.

A neighborhood or a given street will support only a certain price range, no matter how many improvements are made. After that, buyers will look to more prestigious neighborhoods or streets, if they have the additional money to spend.

On the other hand, you as a buyer may get a great deal from an owner who has put too much money into improvements and renovations, and can't recoup his investment.

If you are considering buying a property and have plans for additions and improvements, it's best to consult an appraiser and inform him of your plans. Even though I am a buyers agent, I have also been a state-certified appraiser for many years. I can give you advice on whether your plans are risky or will reap you great rewards.

Kay, as our buyer-agent, how do you get paid?

Since the onset of buyer-agency some years ago, many things have changed in the home-buying process. One thing, however, has remained constant: how your buyer-agent normally gets paid.

The difference in how a buyer-agent traditionally gets paid depends on whether the home is listed in the local Multiple Listing Service, or is offered for sale by-owner.

If the home you buy is listed in the local Multiple Listing Service, the listing agent is paid a commission by the seller. If the home is actually "sold" by another Realtor member of the MLS, the listing agent "shares" the commission with the "other" agent, often a "buyer-agent." This is the most common way your buyer-agent gets paid. You'll need a written buyer-agency agreement with your "buyer-agent." This agreement, in our area, states that the "agent" can accept a shared commission from the listing agent.

But what about homes offered for sale by-owner, or any home not listed through the Multiple Listing Service (such as new construction)?

Not a problem! In our office we deal with by-owner homes (not all real estate companies do). We simply contact the owner and explain that we might have a potential buyer for his home - in return for a reasonable commission upon a successful closing. This arrangement is negotiated with the owner on an individual basis. We've been quite successful at helping buyers find really nice homes offered by-owner.

Similarly, if you want to build a custom home, we will negotiate with the builder on your behalf, including analyzing the feasiblility of the home you think you want to build, negotiate all contracts, change orders, and work with you through all the planning stages to be sure you get the home you're dreaming of. In return, we ask the builder to pay a commission to us, as your buyer-agent.

Buyers seldom pay a buyer-agent directly. A buyer-agent's commission is already agreed upon when a home is listed through the multiple listing service. Owners selling their own homes by owner generally welcome the expertise of a buyer-agent, and are willing to pay your buyer-agent for you. Builders understand the help a buyer-agent can be in the long and sometimes troublesome process of building a custom home.

The onset of buyer-agency has changed a lot of things in residential home selling, but how a buyer-agent gets paid is not much different from years ago when all agents worked for the seller. This method of getting paid is a smart move because few buyers have enough cash to pay the buyer-agent outright.

Let me know your real estate questions. I will give you an answer back promptly. This is part of our Home Run Service!

Kay Hunkins - Consultant,
HomeBuyer Coach & Appraiser

Burlington, Greensboro & Triad area, NC
336-686-2177   Toll-free: 1-888-315-7284
Fax: (Toll-Free) 1-877-273-2689
Websites: www.khunkins.com
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