Preparing to Buy

Before you start shopping for your property, it is a good idea to make some preparations.

Build Your Green File.

A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:

• Financial statements
• Bank accounts
• Investments
• Credit cards
• Auto loans
• Recent pay stubs
• Tax returns for two years
• Copies of leases for investment properties
• 401K statements, life insurance, stocks, bonds, and mutual account information.

Check Your Credit Rating.

Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.

THE BUYING PROCESS INFORMATION:

• Step 1: Start Your Research Early
  As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.

• Step 2: Determine How Much House You Can Afford
  Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt. But you should make this determination based on your own financial situation.

• Step 3: Get Prequalified and Preapproved for credit for Your Mortgage
  Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much we can lend you. This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit.

• Step 4: Find the Right Real Estate Agent

  Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house.

• Step 5: Shop for Your Home and Make an Offer
  Start touring homes in your price range. It might be helpful to take notes on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.

• Step 6: Get a Home Inspection
  Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.

  Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.

• Step 7: Work with a Mortgage Banker to Select Your Loan
  Lenders have a wide range of competitively priced loan programs and a reputation for exceptional customer service. You will have many questions when you are purchasing a home, and having one of our experienced, responsive mortgage bankers assist you can make the process much easier.
  Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still others pick a loan based on the knowledge they will be moving again in just a few years.

• Step 8: Have the Home Appraised
  Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.

• Step 9: Coordinate the Paperwork
  As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.

• Step 10: Close the Sale
  At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, you are ready to move into your new home!

Expenses

If you are securing a loan, there will be an attorney hired by the lender to handle the closing. This is an expense borne by you, the Buyer/Borrower. This attorney can go over closing documents with you and can answer your questions but they actually represent the lender. In general, your interests and the banks are the same, i.e., clean title to the property, documents in proper order and promptly recorded etc. but it is a distinction that you should be aware of.

**

Other buyer expenses include title insurance, cost of the appraisal and other bank fees, cost of structural and pest inspections and a portion of the surveyor fees if you are buying land or a home (referred to as an as built survey it checks for encroachments).

As occurs in the continental U.S, local jurisdictions are paid a ‘transfer fee’ when properties are conveyed. In the Virgin Islands, it is referred to as the Stamp Tax and is a negotiable item which can be paid by either Seller or Buyer or paid 50/50. It is paid on the full value of the sale on a sliding rate scale by value of the property, e.g., on sales $250,000-$999,999, the Stamp Tax is 2.5%; at 1M it goes to 3%.

*Commercial listings may be leasehold, i.e., they are selling the business and its assets including the lease but not the real estate. Fractional ownership, i.e., time shares or vacation clubs may or may not be fee simple ownership.

**We are considered an “attorney state”. Attorneys vs. escrow companies generally handle closings.

Be Careful With Your Finances.

Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.

Facts to Consider when buying and selling in the Virgin Islands

Real Estate Closing Costs

Closing costs in USVI may differ depending on the loans involved and the type of property you are dealing with. You may expect the pay the costs below at closing:

• Real Estate Attorney Fees
• First Year of Homeowner’s Insurance
• Earnest money
• Appraisal
• Down Payment
• Inspection Costs

Virgin Islands Transfer Tax/Stamp Tax

Real Estate Transfer Tax or Stamp Tax is a tax that may be imposed for the privilege of transferring real property between parties in that jurisdiction. This tax includes residential, commercial and industrial properties. USVI Stamp Tax may vary significantly depending on the value of the properties—if you have a higher value property you may have a higher percentage stamp tax.

The potentially ranges of transfer taxes are found below (as of 2015):

• 2% for property worth up to $350,000.
• 5% for property worth $350,000 to 1 million.
• 3% for property worth $1 million to $5 million.
• 5% for property worth over $5 million.

Property Taxes

Property taxes often depend on the type of property you own on the U.S. Virgin Islands.

Below are the tax rates, which is organized by property type:

• Residential Property – .003770
• Land – .004946
• Commercial Property –.007110
• Timeshare – .014070

To learn more about property tax rates on the islands, visit the USVI Tax Collector’s Office website.

Property Windstorm/Earthquake Insurance

Hazard Insurance can be particularly expensive on the islands considering the amount of extreme whether we tend to get. The cost of your insurance will depend on a number of factors, including the construction of the property and the presence of shutters and high impact glass. Windstorm insurance can vary significantly for residential vs. commercial properties.

Typically, homeowners may pay somewhere between 1.35% and 2% of the replacement cost per year for a home that is fully shuttered and built with stable concrete construction.

Windstorm/earthquake insurance cost is about 2% to 4% of property value depending on construction (wood frame is higher than masonry).

Title Insurance

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