DROdio Real Estate

As you may (or may not) know, owner's title insurance is optional. (The lender's part of the title insurance is required if you are financing the purchase of your home).

As a Realtor, my attitude is that title insurance is like any type of insurance - if you can afford the loss, then you don't need the insurance. If you can't afford the loss (meaning you could lose your property if someone claims title to your land), then you should strongly consider the insurance. I do recommend it.

The reality is that the likelihood you'll ever need this insurance is very small. However, the loss you could incur if you do not have title insurance is very real and very great. The most likely scenario would go something like this (and this has happened to clients of mine):

Note: This advice should NOT be construed as legal advice in any way. This is simply advice from a Realtor as the title insurance issue pertains to real estate. We strongly suggest you consult with an attorney to discuss this issue in more detail.

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Use this checklist to understand the steps in the home buying process.

1. Get approved! You will need an approval letter to be able to make an offer on a property. You can get help figuring out what you can afford at www.DROdio.com/loan. We also have several suggested loan officers for you to
talk to at www.DROdio.com/resources. You are not obligated to use this loan officer for the actual purchase of your house.

2. Fill out the Buyer Representation Agreement. We cannot technically represent your interests until you’ve filled out a Buyer Representation Agreement making us your Realtor.

3. Get email MLS alerts. We can set you up to receive a daily email alert with any properties that match your buying criteria.

4. Have us do a manual MLS search for you. You can also do your own searching at www.DROdio.com/search

5. Write an offer. When you’re ready to put an offer on a property, you’ll need three things—the contract, which we’ll help you write, the approval letter from your loan officer (see point 1), and an escrow check. This is a deposit
that signifies your level of seriousness regarding the purchase contract. Usually this amount will be for 1% to 2% of the purchase price.

6. Next steps: Once your offer is accepted, your DROdio Realty agent will get you copies oft he contract, and there will be several contingencies in the contract which will have to be satisfied. These may include: A home inspection, getting the seller an approval letter (if you only got the seller a pre-qualification letter previously), termite inspection, well & septic inspection, receipt of HOA documents, and any other contingencies listed in the contract.

7. Get your loan paperwork worked out! You’ll need to make sure you can successfully close on the property.

8. The Walkthrough: Your DROdio Realty agent will do a walkthrough inspection on or before your closing date to ensure all the walkthrough items in paragraph 7 of the sales contract have been taken care of by the seller.

9. At settlement: You’ll pay the seller for the home and get the keys for your house. At this point, the property will be yours and the seller will have no more rights to it (unless you agree to a rent-back, which sometimes happens).

Professional Tip: If you are in a competitive buying situation, we recommend you write an “emotional letter” to the seller, telling the seller why the property you’ve selected is so well suited for you. You’d be surprised, but we’ve seen our clients beat other buyers out because they connected with the sellers on an emotional level.
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These ‘Professional Tips’ show you how important it is to have a Realtor representing your interests!

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There are four main loan types. Learning the differences in these loan options is very important to your home purchasing process.

The 15 year conventional loan: You pay the entire loan off in fifteen years. The rate stays fixed for the entire period.

The 30 year conventional loan: You pay the entire loan off in thirty years. The rate
stays fixed for the entire period. The ARM (Adjustable Rate Mortgage) loan: The period for this loan is 30 years,
however, only the first portion has a fixed interest rate. For example, a 5/1 ARM has a fixed interest period of five years. After the first five years, the rate adjusts at the market rate. This adjustment is calculated once yearly.

The Interest-Only ARM loan: Similar to the ARM described above, except that you are only paying the interest on the loan. At the end of the period (when you sell your house, for example), you still owe the entire principle amount. For example, if you buy a $400,000 home, and sell your home in five years, you still owe $400,000 on the home. However, in most cases, the home will have risen in value, so you still have equity in the home.

Professional Tip: Many buyers opt for a 30 year loan because it is what they are familiar with, or because it’s what their parents had. However, unless you are going to live in the home for 30 years, you would be well advised to consider other loan options. For example, consider a $400,000 home. Here are your payment options under the four programs:

15 year loan: $3,375.43
Calculated at 6% interest rate

30 year loan: $2,462.87
Calculated at 6.25% interest rate

5/1 ARM loan: $2,147.29
Calculated at 5% interest rate

5/1 Interest-Only ARM: $1,666.67
Calculated at 5% interest rate

As you can see, your payment under the interest-only loan is $796.20 less per month. If you were to pay $2,400
per month with the interest-only loan, you could afford a $590,000 home!
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These ‘Professional Tips’ show you how important it is to have a Realtor representing your interests!

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Many of our clients think they need to get a 30 year conventional loan because they cannot run the risk of getting an ARM. The truth is that each client must carefully evaluate their loan options because in most cases, the 30 year loan is not the best option for them. In other cases, there are some excellent options with the security of 30 year fixed loans, but with a 10 year interest-only option, where you are only paying interest for the first 10 years.

If you are going to live in your next home for the next 30 years, then it’s very possible a 30 year conventional loan is the best option for you, because eventually you will pay the loan off and own the home completely. However, if you are going to live in your next home for, say, 7 or 10 years, what you must know is that even with a conventional 30 year mortgage, you are paying mostly interest anyway (see the graph below).

In this case, you should strongly consider an interest-only loan. Your monthly payment will be lower and you will be able to afford a larger house. By affording a larger home, it is possible, even likely, that you will end up with more equity in your home when you are ready to sell. But even more importantly, when you pay principle plus interest, you are basically putting money into your house that you'll just be taking out later when you sell the house. You're treating your house like a piggy bank. For many buyers, the emotional security of paying down their mortgage makes this worth doing, and that's fine. We just want to make sure you realize that your mortgage is likely the cheapest money you can borrow. You may want to consider paying interest only so you can take your hard-earned cash and put the difference in another investment that will return more than the interest rate you're paying on your loan.

A sample transaction: Joe vs. Jane: Jane can afford $2,400 per month. She gets a 30 year conventional loan and buys a home for $400,000, and owns the home for seven years. At the end of 7 years, the home she purchased is worth $562,840. Her remaining principal balance is 360,134.28, meaning she has a total gain of $202,705.72. However, in those 7 years she’s paid $29,554.44 in monthly payments, meaning her net gain is $173,151.28.

Joe can also afford $2,400 per month. He gets a 5/1 interest-only ARM, and is able to afford a $590,000 home. He owns the home for seven years. At the end of 7 years, the home he purchased is worth $830,189.25. His remaining principal balance is $590,000, meaning he has a total gain of $240,189.25. However, in those 7 years he’s paid $38,349.96 in monthly payments, meaning his net gain is $201,839.29.

In this example, Joe has made $28,688.01 more than Jane while paying less every month.

Note: These numbers are based on a 5% yearly gain in home value. The average gain nationwide is 7% annually, meaning the difference would be even greater. However, these numbers are forward-looking projections and are in no way guaranteed. Please consult a financial advisor to analyze these figures in more detail.

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The following will take place at
closing:

• You will arrive at the settlement company (sometimes called the title company). Usually the sellers will also be
present, although occasionally the sellers complete their part of the settlement process before-hand.

• You will need to ensure the loan company you’ve selected has successfully processed your loan papers and approved you for the loan. If the settlement company doesn’t have all the necessary paperwork from your bank, they may delay closing. A delay in closing will often mean the seller may charge you a per-diem fee until you close successfully, and this can get quite expensive!

• You will need to get a GFE — Good Faith Estimate— before closing from the settlement company, usually a day or two before. This GFE will tell you how much money you need to bring to closing. Be sure to bring the money in certified funds; they rarely take personal checks.

• Be sure to bring a valid photo ID to closing; the Patriot Act requires this.

• Owner’s title insurance is optional, but we recommend you procure it. Like any insurance, if you can afford the loss, you probably don’t need it. If, however, you can’t afford the loss of your home, you will probably want it. Ask us for details.

•Buyer must bring certified funds - paragraph 6 of sales contract stipulates this. Remember, certified funds generally are not available from banks after 2pm, so plan ahead.

• You will receive keys to your new house at closing. Once the closing process is completed, the house is yours!

Professional Tip: We suggest you have the cell phone number of your loan officer at closing and that you’ve communicated with him or her before-hand to ensure their availability when you’re at closing.
There’s nothing more frustrating than being so close to closing on your new house, but a problem with your paperwork keeps you from closing, and your loan officer is nowhere to be found!

Also, if you close at the end of the month, or the first week of the month, you’ll often pay less at the closing table than you would otherwise. Why? You are usually required to pre-pay the interest on your loan for the month in which you’re closing. When you close at the end of the month, you have to pre-pay very little interest. This can add up to thousands of dollars.
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These ‘Professional Tips’ show you how important it is to have a Realtor representing your interests!

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Many real estate firms may tell you they can do a CMA (Comparative Market Analysis) of your home. They just go to the MLS and print out some listings that have sold in your area. There is even a "CMA" button in the MLS system which makes the task very easy... and, we believe, incomplete.

We've found there is more to a CMA than just throwing some listings together, so we've developed a comprehensive method of helping you value & price your home in the marketplace.

Our CMA is centered around a spreadsheet we've designed just for this purpose. We call it the Listing Comparison Tool.

This tool allows us to understand the many factors that define your house and your neighborhood & subdivision. We use a common variable - what the county thinks the house is worth - as a baseline to compare your house to others. The reason this works so well is that the government's mandate is to value homes fairly & accurately, taking into consideration many of the variables that make your house unique. Since the government's tax income is on the line, they tend to do a very thorough job in this area!

We highly recommend you engage one of our agents to perform a DROdio Real Estate, Inc. CMA using our unique Listing Comparison Tool. To do so, just submit an inquiry at right.

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Part of the buying process is making sure you’re not getting a “lemon” of a home. The home inspection helps you ensure the quality of the home. As your Realtor, we highly recommend you choose a home inspection. It
ensures you know of problems before you close and allows you to cancel the purchase contract if there are unforeseen problems.

When the home inspector completes the home inspection report, it will be your Realtor’s responsibility to negotiate a discount on the purchase price of the house. We have contractors that we can recommend come in to do an evaluation of the home inspector’s items and give an estimate on the cost to fix the items.

The home inspection clause states that if the buyer and seller cannot reach a satisfactory negotiated discount, the buyer has the right to walk away from the contract with no obligation. As the buyer you would have your escrow deposit returned to you.

If you'd like more details, you can learn more about the differences between walkthrough items and home inspection items here, and you can see an actual home inspection back & forth with a client here

Professional Tip:This may be one of our most valuable tips. If you feel you need to forego a home inspection in order to win a contract, there may still be ways for you to win the bid and get at least part of the home inspection.

One option is to do a home inspection for informational purposes only. When you do this, you will not have any of the rights a home inspection affords you, but at least you’ll know the status of the house before you close.Another option is to offer to pay the first several thousand dollars of any home inspection items. When you do this, you’re softening the impact of the home inspection to the sellers, while still maintaining the protection a home inspection affords you if there are any major items wrong with the house— like a roof that’s about to fall in!

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These ‘Professional Tips’ show you how important it is to have a Realtor representing your interests!

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Not sure you need a Realtor? Read this...

Dear Buyer, If you're wondering exactly how a Realtor can help you find a home, you'll probably enjoy this whitepaper from our owner, Daniel R. Odio:

I was wondering the exact same thing when I bought a home (before I was a Realtor) from Pulte. What I found was that most Realtors were generally clueless and were just trying to get me into a home so they could get paid their commission. Furthermore, I had no idea how they were even paid. Needless to say, I didn't have the most positive experience, so I decided to start a real estate company to change the way buyers purchase homes.

The first thing I did was apply my background (in technology) to make the search process as easy & transparent as possible for buyers. Most Realtors try to restrictaccess to the MLS, not enable it, because they want control over the process. Our approach is entirely different.

We give you access to as much information as possible (take a look at our hundreds of Q&A blog postings for buyers - all links open in new windows). We created a Google Maps based home search tool, BirdsEyeSearch.com that searches the MLS, and we include the address of the homes, so you can drive by yourself. In fact, we'll even help you help yourself, with our free GPS loaner so you don't get lost. Our philosophy is this: If we let you do your own research at your own pace, then we believe you'll contact us when you're ready for an expert.

Everyone wants some hand holding at a different part of their search process. That's why we're always available, 24x7, for phone calls. In fact you can call me, the owner, at 202-250-3846 anytime you have a question (and yes, I take midnight phone calls all the time, so feel free). Some buyers want us to show them homes at the beginning of their search, and other buyers want to drive themselves around until they've narrowed their choices to a few homes or a few neighborhoods. The point is, we're here when you need us, and we won't bother you until you're ready for us to help.

We think that most Realtors have a fundamental misunderstanding of what their role should be in the home buying process. Most Realtors think they have to "control" the process, and they think that by driving you around to certain homes, you'll buy one of the ones they show you. We call this the "taxi driving syndrome." But we don't think our value lies in being a taxi driver. Our agents are expert negotiators and don't mind making lowball offers, all of it with the goal of serving your best interests (and here's an example - $130k below asking price). We'd rather enable you with the ability to see homes, with addresses, through our search tools, and let you take your time, and then be the expert to guide you through the process when you're ready. To that end, we have a series of buyer tutorials, including "How to make a lowball offer" and "How to buy a home as a Realtor would", which you can access, for free, at DROdio.com/video. We even work more efficiently than any other firm I know of, allowing you to digitally sign documents instead of running around looking for fax machines.

But that's not all. In our quest to empower you with information, we've even automated some of the more tedious parts of the home search process. By signing up at ListingNotice.com, you can have our servers check the MLS for you, once an hour, for any homes that match your criteria. If you want to be alerted when a 4 BR home in a certain neighborhood is for sale, no problem, we'll email you the second any homes that match come on the market. And yes, we give you the street address so you can drive by yourself to see if you're interested.

We've also had many buyers wondering if they could search for certain keywords, like "backs to woods" or "close to Metro" so we created a search tool for that too, called TheBestHomeSearchEver.com, which lets you do exactly that, and much more, like searching for homes that have dropped by a certain amount in price, or have been listed for a certain number of days or more. Even Realtors don't have the ability to search by keywords in theirsuper-duper MLS search tool, so they use our site too!

Many people ask me if I'm worried that people will just use our free tools but never contact us. I know a certain percentage of buyers will do that, but I figure that by putting the tools out there, buyers will recognize that our approach is a better one, and we really do enable our clients to make better decisions than they would on their own. For every buyer that takes advantage of these tools without contacting us, there will be several other buyers that do want our help. And that's just fine with us, because we really do think we've come up with a better way to help you buy a home.

Best regards, and good house hunting. We're here when you need us.

Daniel R. Odio
Owner & Managing Broker
DROdio Real Estate, Inc.

P.S. - if you'd like to learn more about me and my philosophies, I invite you to visit my personal blog, at http://blog.DanielOdio.com.

P.P.S. - Others must think what we're doing is pretty neat too, as we've been featured in multiple publications for our progressive use of technology in the real estate world, including The Discovery Channel, CNN, CNBC, The Washington Business Journal, Forbes.com, CNN Money, The Washington Post, The Washington Times, and many others.

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