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March, 2002 Newsletter

+++++++++++ March 1, 2002 +++++++++++++++++++

Introduction: Continued Strength in Housing
Mortgage Rate Update: Small Changes
This Month's Tip: Legal Pitfalls of Building a Home

Introduction: Continued Strength in Housing

Welcome to the March edition of the Home Buyer's
Information Newsletter. The housing market in
the U.S. continues to show strength in contrast
to much of the rest of the overall economic
climate. Mainly due to continued low interest
rates, sales of both existing and new homes
continue to show healthy growth. Since
much of valuation--both current and in
future appreciation--is directly attributable
to the strength of the market, this is good
news for current homeowners. If this strength
continues, it will also be good news for
those entering the market now, since such
positive circumstances are favorable to
future increases in value.

An important warning here (and one we have
discussed frequently in the last year):
You can only get the advantages of this value
appreciation IF you are careful about the
price you pay when you buy. If you do not
do your research, or let your heart govern
instead of your wallet (and overpay for a home)
it can take many years longer to take
advantage of equity appreciation. You can read
a discussion on this subject in our January
newsletter here:
Overpaying Can Ruin Your Financial Health

Mortgage Rate Update: Small Changes

Mortgage rates continued in the narrow range
that has been seen for much of the last several
months. Generally, 30-year fixed rate mortgages
have averaged between 6.80 % and 7.20% since
the end of November, 2001. Current 30-year
fixed rates, according to mortgage company
Freddie Mac, averaged 6.81% as of February
22. 15-year fixed rates averaged 6.28% for
the same period. Barring any economic news
that could impact these rates, most mortgage
industry analysts expect the same general
rate range in the forseeable future.

For current average mortgage rates, see:
Mortgage Rates
For more a complete discussion of the entire
mortgage process, from pre-qualification to
comparisons to selecting the right mortgage,
visit the following section of the site:
Mortgage Information


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easily. See more information at:
Sources of Credit Reports


This Month's Tip: Legal Pitfalls of Building a Home

Although many of the components of buying an existing
home and building a new one are similar, there are
several potential concerns that are unique to home
building. One of the most important is the legal
aspect, addressed in this month's guest article,
written by Lawrence Thomas. Although many buyers
who build homes may have no legal hassles at all,
Lawrence addresses some pitfalls that can severely
impact the process, so it is important to give them

By Lawrence Thomas,

When major problems arise in the building of a
new home, many customers are upset after they
realize the purchase contract they signed heavily
favors the builder. Before you sign any documents
supplied by a builder for the purchase of a
new home, make sure you have an attorney review
them with you.

Many new home customers unknowingly agree to terms
that can come back and haunt them when a problem
arises. Here are some typical excerpts from
builders' contracts:

* Purchaser agrees to pay Seller upon substantial
completion of the house.
* Escrow will not be allowed for unfinished interior
* Seller shall attempt to complete items on
Pre-Settlement List, but closing will not be delayed
due to unfinished items, nor shall funds be escrowed.

You pay the seller (builder) when the house is done.
Completely. If the yard is not complete and it's the
middle of winter, then have money placed in escrow
and release it upon completion of the yard in spring.
Here is an example of how the above excerpts from
"big builder" contracts came together in one house
and created a huge problem for the homebuyer:
A builder was constructing a house that was falling
behind schedule. The house needed to be ready for
closing (legal transfer of ownership to the customer)
in eighteen days. The house still needed almost
all exterior work - siding, concrete driveway,
stoop, patio, and brickwork including a
full masonry fireplace. The eighteen days would
have been sufficient time, considering the fact
that the interior was nearly complete, but nobody
could have predicted the eighteen days of record
frigid weather that was about to descend on the
area. Laying brick and pouring concrete in such
cold temperatures compromised the quality of the job.
But, because the builder needed this closing before
the end of the quarter, (in order to meet their
budget) they forced the supervisor and subcontractors
to press on. The builder knew that the contract
language would back him up if the buyer balked and
refused to close on the house. In the end,
the house was complete enough to get a certificate
of occupancy (the municipality had approved it
for occupancy), but was in no condition to perform
a thorough and proper walk through of the finished
home. But remember the contract excerpts from above:

* Purchaser agrees to pay Seller upon substantial
completion of the house.
* Escrow will not be allowed for unfinished interior
* Seller shall attempt to complete items on
Pre-Settlement List, but closing will not be delayed
due to unfinished items, nor shall funds be escrowed.

The house was substantially complete, so the buyer
had to pay the seller. Money from the buyer could
not be withheld to make sure the final items were
complete because escrow was not allowed. But at
least the builder would attempt to complete the home!
The above examples cover only one small
section of most builders' purchase agreements.
What about all of the other legal mumbo-jumbo
favoring the builder which you will be agreeing to if
you simply sign on their dotted line? Make sure you
have a good real estate attorney review the contract
with you before you decide to build your dream home!

Lawrence Thomas is the author of Home Building Pitfalls.
The guide provides step-by-step, non-technical
information on how to avoid the pitfalls of having a
new home built. You can download a sample chapter
or read the entire book on his site:
Home Building Pitfalls

As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
drop us a quick line here:
Email Us
or access our feedback page at:
HomeBuyers Information Center Feedback

A special thanks to all those who have written to let us know
that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great month and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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