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Showing posts from 2019

Selecting an agent

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When a whole lobster was presented at the table of a restaurant, the customer noticed there was only one claw on it.He asked what happened to the lobster and the waiter said, maybe he lost a fight with another lobster.The customer replied to the explanation by saying "then, bring me the winner."There are approximately 1.3 million REALTORS® in the U.S.The July 2019 Existing Home Sales annualized about 5.4 million units with a listing side and a selling side that totals 10.8 million transactions.That means that the average number of units sold per agent is 8.In any given market, 20% of the agents are selling 80% of the homes.260,000 agents are selling 8,480,000 or an average of 32 transactions sides.Some markets are dominated by 10% of these successful agents selling 90% of the market.If that were the case, 130,000 agents are selling 9,720,000 or an average of 75 transactions sides.The question you should ask yourself is who do you want representing you in the purchase or sale…

Price It Right the First Time

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The Internet has empowered all buyers with information and home buyers are no exception.The amount of information available to public includes details on size, condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth.If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price.It is a natural reaction from people, personally or professionally, to assume that something must be wrong with a home that doesn't sell in a reasonable time for that market.The seller is entitled to maximize the equity in their home and pricing it properly in the beginning is the best way to achieve that.Overpricing can reduce buyers activity because they assume that the best homes are purchased soon after they are offered fo…

What every homeowner should know about their property insurance

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Insurance is required on a home by the mortgage company, but homeowners rely on it for peace of mind also.Unfortunately, people may not take the time to investigate their policy and what it covers until they need to file a claim, which could be too late.While it may not seem like the best use of your time, an in-depth visit with your property insurance agent once a year could be valuable to you if you have losses and could increase your peace of mind.The following are some questions you can ask your insurance agent:What is the insured value of the policy and the replacement cost of your home?Insured value is the amount that would be paid for a total loss but replacing the home could cost more than that amount.What is the deductible?Higher deductibles on the first amount of the loss are one way to lower the cost of the premium.It may sound good when you're having to pay for the policy but feel very different at the time you file a claim.What does the policy cover? Typical policies …

Want to be a Landlord?

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Real estate has consistently been one of the highest rated investments available to individuals.  TV shows certainly make rentals look easy and you may even know someone who has made a lot of money with them.  Possibly, the thought has crossed your mind that if they can do it, you can too.Before you contract for your first investment, ask yourself some questions that could save you time and energy.  Not all people have the time, the inclination or even the skill to manage property.  Landlords need to be good business people who can maximize revenue and minimize expenses.  If investors don't have the skills and talent to handle some of the repairs, they at least need to know reputable and reasonable service professionals.Another important element is to be familiar with the state and local landlord tenant laws.  You'll need to know what are allowable security deposits and where the money can be held.  Knowing how long you have to return it to a tenant is important and what to do…

Money You Saved for a Down Payment

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Occasionally, buyers who can qualify to purchase a home decide to "take a break" and wait to purchase a home.When the focus of buying a home is relaxed, other uses for the money that was going to be used for the home are considered. Maybe they think how much fun it would be to have a Sea Doo or a motorcycle or a new car.It is amazing how many people would like to buy a home but either don't have the down payment, the income or the good credit to make it possible.Instead of spending the money, consider investing the money for two years until the time is right to buy a home.Let's look at putting the money in a certificate of deposit that earns 2% or in the stock market that could average a 5% return.Assume you were purchasing a $295,000 home on a FHA loan with 3.5% down payment.The $10,325 would grow to $10,742 in the CD which isn't a big increase but at least it is safe and secure, and it will be available when you're ready.If the same amount were invested in …

Downsizing is an Alternative

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It is estimated that over 15% of the population in the U.S. are over 65 years of age.With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their "big" home like they did before.In other situations, their lifestyle might have changed, and the house just doesn't "fit" anymore.The benefits of a smaller home can include the following:Easier to maintainLower utilitiesLower property taxes Lower insuranceMore convenient locationSingle levelPossibly more energy efficientPossibly lower maintenanceLike any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes.Are they going to stay in the same area?What type of property would suit their needs for the future?The tax-free exclusion al…

Steps in Home Buying Process

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The process of buying a home can be different based on the price range and whether a mortgage is needed.While some things are different, others are similar regardless of price, financing or local customs.Each year, the National Association of REALTORS® surveys buyers and sellers who have purchased or sold in the previous twelve months in order to identify the process and steps taken.It provides a lot of information for the people who will be going through the process now and in the near future.44% of all buyers looked online for properties for sale.This might be considered a logical first step to determine the prices of homes in certain areas and what features they offered.17% of all buyers stated that their next step was to contact a real estate agent.In another REALTOR study, it is reported that 87% of all buyers purchased their home through a real estate agent or broker.Buyers identify a wide range of services the agents offer that is considered valuable in the purchase of a home.T…

Invest in Equity Build-up

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Equity build-up could be one of the biggest advantages to buying a home.There are two distinct dynamics that take place to make this happen:each house payment applies an amount to reduce the mortgage owed and appreciation causes the value of the home to go up.It is easy to make a projection based on the type of mortgage you get and your estimation of appreciation over the time you expect to own the home.Even conservative estimates can produce impressive results.Let's look at an example of a home with a $270,000 mortgage at 4.5% for 30 years and a total payment of $2,047.55 payment including principal, interest, taxes and insurance.The average monthly principal reduction for the first year is $362.98. If you assume a 3% appreciation on the $300,000 home, the average monthly appreciation is $750 a month.The total payment of $2,047.55 less $1,112.98 for principal reduction and appreciation makes the net monthly cost of housing, excluding tax benefits, $934.57.If this hypothetical per…

America Still Considers Real Estate the Best

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35% of respondents, in a recent annual Gallup poll that dates back to 2002, identified real estate as the best long-term investment option compared to 27% who identified stocks.The top choices included real estate, stocks, savings accounts and gold.Even with the remarkable prices of the different U.S. stock indices recorded in 2019 through April and May, homes have the highest confidence in the minds of the respondents.This seems to be based on the stability of the housing market and the expectation that home prices will continue to rise.Homeowners build equity from both appreciation as well as reducing principal with each payment made. These same factors exist for investors of rental homes in predominantly owner-occupied neighborhoods.Real estate has another dynamic working to produce favorable investment results due to leverage.Leverage occurs when borrowed funds are used to control an asset.When the borrowed funds are at a lower rate than the overall investment results, positive le…

Determining Property Type

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The Internal Revenue Service considers four different types of real estate.  Specific types of properties have benefits based on their classification.  The determination does not depend on the property itself as much as it depends on how the property is used and what the owner's intentions are.Principal Residence ... a principal residence is the place a person lives or expects to return if they are temporarily away from it.  It could be a single family, detached home or condominium or a duplex, tri-plex or four-unit.  The owner(s) can deduct the qualified mortgage interest and property taxes on the schedule A of their tax return.  There is a capital gains exclusion on profit of up to $250,000 for a single taxpayer and up to $500,000 for a married taxpayer.  Income Property - is improved property that is rented or leased to tenants as opposed to using it personally.  It can include houses and condos, apartment buildings, office complexes, shopping centers, warehouses and other comm…

Get Leverage Working for You

Leverage is an investment term that describes the use of borrowed funds to control an asset; sometimes referred to as using other people's money.  Borrowed funds can affect the investment in your home positively.For instance, if you had a $100,000 rental property, collected the rents and paid the expenses and had $10,000 left, you would earn a 10% return (divide the $10,000 by the $100,000.)  With no loan on the property, there is no leverage.If you decided to get an 80% mortgage at 8%, you would owe an additional $6,400 in expenses leaving you only $3,600 net.  However, your return would grow to 18% because your investment is now $20,000 in cash (divide the $3,600 by $20,000.) Leverage, the use of borrowed funds, causes the return to increase in this example.  While, most people associate leverage with rental properties, it also applies to a home.  The larger the mortgage, the more leverage you have.  A FHA mortgage with a 3.5% down payment has more leverage than an 80% loan.Assu…

Delay Will Usually Cost More

Two things can happen when the mortgage rates go up before you've found a home or locked-in your mortgage.You'll either pay the current mortgage rate which means a higher payment, or you'll have to increase your down payment to keep the monthly payment at the same level.If the rate were to go up by ½%, the payment on a $275,000 mortgage would increase by $82.87 per month for the entire 30-year term.That would increase the cost of the home by $29,835.Some people are purchasing the maximum home that they can qualify for.In that case, they cannot qualify for a higher payment and the only way to buy the same price home is to put more money down which may not be a possibility.The other alternative is to buy a lower price home which may not be in the same area or size which will involve some compromises.The rate is not the only dynamic that affects buyers waiting to purchase.The home they want could sell to someone else.Prices could increase as new homes come on the market.The q…

Measuring Square Footage

Square footage is commonly used to determine if a home will fit a buyer's needs.The price per square foot can be used to compare the costs of different homes and even, determine the value of a property.The challenge is what is the source of the square footage measurement and how was it done.County records use square footage to determine assessed value for property tax purposes.They are assumed to be reliable but there can be inaccuracies in their tax rolls.Another source of square footage could be from the house plans but the problem there is that the builder may have made modifications, or a subsequent owner could have made additions.Appraisers are required to measure the home to determine square footage and they generally, adhere to a standard method which leads to uniformity in the industry.The ANSI, American National Standards Institute, guidelines are considered the standard but there are no laws governing the process.Because basements are below grade level, regardless of whe…

Checking for Water Leaks

Aside from standing water in your yard or water running out from under a sink, the first indication that you might have a water leak comes from a larger than normal water bill.Before calling a leak specialist or a plumber, there is a simple diagnostic you can perform.Go through your home and make certain that all the faucets are turned off and that the toilets have indeed stopped filling the reserve.Then, go to the water meter and make a mark on the lens where the dial is currently.If there is water in the meter box, the meter itself could be leaking.If the meter is still turning, the leak is between the meter and the house. By inspecting the area between the meter and the house, you can look for soft, muddy areas or grass that is greener than the rest of the yard.One of the hardest places to isolate a leak is in a swimming pool.If you have an automatic filler, like in a toilet, you'll need to turn it off.Mark the water line on the wall and wait to see if the water level goes down…

Checking for Water Leaks

Aside from standing water in your yard or water running out from under a sink, the first indication that you might have a water leak comes from a larger than normal water bill.Before calling a leak specialist or a plumber, there is a simple diagnostic you can perform.Go through your home and make certain that all the faucets are turned off and that the toilets have indeed stopped filling the reserve.Then, go to the water meter and make a mark on the lens where the dial is currently.If there is water in the meter box, the meter itself could be leaking.If the meter is still turning, the leak is between the meter and the house. By inspecting the area between the meter and the house, you can look for soft, muddy areas or grass that is greener than the rest of the yard.One of the hardest places to isolate a leak is in a swimming pool.If you have an automatic filler, like in a toilet, you'll need to turn it off.Mark the water line on the wall and wait to see if the water level goes down…

Building Equity

Owning a home is the first step to building equity.Tenants build equity but not for themselves; they build it for the owners.Equity is the difference in the value of the home and what is owed on the home.There are two dynamics that cause this to grow: appreciation and principal reduction.As the home increases in value, it is said to appreciate.Various authorities will annualize an appreciation rate based on average sales prices from one year to the next.Since appreciation is based on supply and demand as well as economic conditions, it will not be the same year after year.If you looked at a ten to twelve-year period, some would be higher than others and there may even be some individual years that it is flat or even declined.For the most part, values tend to appreciate over time.Most mortgages are amortized which means that a portion of the payment each month is applied to the principal in order to pay off the loan by the end of the term.A $300,000 mortgage at 4.5% for 30 years has $3…

Taxes and the Homeowner

Whether you're an owner now or expect to be one in the future, it is important to be familiar with the federal tax laws that affect homeownership.Since personal income tax was enacted in 1913 with the 16th amendment, homes have had preferential treatment.The mortgage interest deduction is based on up to $750,000 of acquisition debt used to buy, build or improve a principal residence.In addition to the interest, the property taxes are deductible, limited to the new $10,000 limit on the aggregate of state and local taxes (SALT).The taxpayer may also deduct interest and property taxes subject to limits on a second home.Homeowners can decide each year whether to take itemized personal deductions or the allowable standard deduction which was significantly increased under the Tax Cuts and Jobs Act of 2017.Single taxpayers may exclude up to $250,000 of capital gain on the sale of their home and up to $500,000 if married filing jointly.They must have owned and lived in the home for at lea…

Show Them You're Serious

June and July are the busiest home sale months of the year. When inventory is in short supply and you may be competing with other offers, it is important to show the seller you're serious. Make your offer look as good as possible because you may not get the chance to make or accept a counter-offer.Put yourself in the seller's shoes.Your home has just gone on the market.There is lots of activity and suddenly, there is more than one offer to purchase.The seller's first consideration may be to accept the highest offer but there are many other things to consider like closing dates, closing costs, possible repairs, contingencies and of course, the ability of the borrower to get a loan.Offer a fair price for the property in your initial purchase agreement.It shows sincerity and good faith that you're actually trying to purchase the home and not trying to take advantage of the seller.The old adage that you can always go up later may never happen if there are multiple offers o…

Don't Leave Home Without...

You've been planning this trip for some time and almost every detail has been considered...or has it?Have you thought about how to protect your home while you're out of town?What's going to make sure that everything you left is still there in you return?Nothing could ruin a trip more than coming back to find out your home has been burglarized or worse.It makes sense to spend a little time before you leave on making sure your home is as safe and sound as it can be.There are a host of devices to use across the Internet including camera door bells, video cameras, door locks, garage door openers, light and thermostat controls.You can monitor your home whenever you have an Internet connection.The question is whether you want the distraction from your trip.Consider these low-tech suggestions along with your other normal efforts:Tell your neighbors you'll be out of town and to be aware of any unusual activity.Notify your alarm companyDiscontinue your postal deliveryUse timers…

Temporarily Renting a Home

IRS has provisions for homeowners regarding the sale of a principal residence that allows for temporarily renting the home without losing the ability to exclude the gain if the home is sold under the correct conditions.The rules for the exclusion of gain on the sale of a principal residence are:Up to $250,000 of gain may be excluded for single taxpayers and up to $500,000 for married taxpayers filing jointly.Ownership and Use must have been a principal residence for two of the five years preceding the date of sale (closing date).This allows for a temporary rental for up to three years maximum.Either spouse may meet the ownership test.Both spouses must meet the use test.No exclusion has been used in the previous 24-month period.Let's pretend that a person had owned a home from more than two years.This person married and moved into their new spouse's home two years, six months ago.That person decided to sell the home and would have approximately $200,000 of gain in the sale.If t…

Time to Buy Again

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For people who have experienced a distressed sale of a home and gotten their finances and credit back in shape, there can still be an unanswered question of "How long do we have to wait to qualify for another mortgage."The loan types for the new loan will differ in amounts of time based on the event.The different lending authorities, VA, FHA, Fannie Mae (FNMA) and Freddie Mac (FHLMC), establish their own waiting periods.A borrower may be eligible to qualify for one type of mortgage before another type, even though during this waiting period, that the person was current on all payments and maintained a history of good credit.The following chart indicates how long a person might have to wait.A recommended lender can give you specific information regarding your individual situation and can make suggestions that will improve your ability to qualify for a mortgage.This process should be started before looking at homes because of the time constraints listed here can vary based on …

Tech to Find the Right Home

According to the 2018 Profile of Buyers and Sellers, 52% of buyers want help to find the right home to purchase.Physically locating the home is certainly part of what buyers want from their agent but finding the right home at the right price and terms is also crucial.87% of buyers purchased their home through a real estate agent or broker.Slightly more than half of buyers were referred to their real estate professional by/or is a friend or relative or had used the agent previously to buy or sell a home.There are tech tools that can be used together with the expertise and experience of your real estate professional to make the home buying process efficient and effective.Listing Alert ... while this service is called by other names, the buyer identifies the specifics about the home they want, and it will notify them directly when a new listing comes on the market that matches their needs.Real estate smartphone apps ... imagine driving a neighborhood, seeing a sign and immediately being …

Comfort Systems

Heating and air-conditioning are frequently referred to as the "comfort systems."If one has gone out in the dead of winter or the heat of summer, lack of comfort becomes a primary concern.Regular maintenance with a HVAC checklist is something that homeowners can do themselves to ensure that the units operate properly.PeriodicallyChange your filter every 90 days; every 30 days if you have shedding pets.Maintain at least two feet of clearance around outdoor air conditioning units and heat pumps.Don't allow leaves, grass clippings, lint or other things to block circulation of coils.Inspect insulation on refrigerant lines leading into house monthly and replace if missing or damaged.Annually, in springConfirm that outdoor air conditioning units and heat pumps are on level pads. Pour bleach in the air conditioner's condensation drain to clear mold and algae which can cause a clog.Avoid closing more than 20% of a home's registers to keep from overworking the system.Repl…

A Home Warranty Can Save Money

Your income tax is probably filed for last year by now and you've been through your expenses for the year.  Money spent on repairs to your home is not deductible but being aware of how much you spent last year may help you make a decision that could save you money this year.Sellers, often, provide a home warranty to buyers to give them peace of mind by limiting some of the out-of-pocket money spent on unexpected repairs for one year.Home warranties can be renewed by the buyer by paying the annual fee and any homeowner can purchase one for their home whether they had one when they bought it or not.A home service contract typically covers mechanical systems and built-in appliances in the home.Many times, these items are not covered by the homeowner's insurance policy.They can also include other things such as pool and spa equipment, and free-standing appliances like refrigerators, washers and dryers.The process is simple.It doesn't cover pre-existing conditions.Once a plan i…

iBuyers - Convenient at a Price

There are an increasing number of real estate companies, termed iBuyers, like Open Door, Offerpad, Zillow, Knock and others that market a service that has an appeal to homeowners.The pitch for these quick cash offer companies will include some variation of "let us buy your home in days without the normal hassles of listing."This approach attempts to provide an alternative to selling a home in a normal manner at the expense of not realizing the full equity a homeowner is entitled. There is no fiduciary relationship requiring the broker to put a seller's best interest above their own interest.An iBuyer does not represent a seller and does not owe client-level services like loyalty, obedience disclosure among other things required by most state license laws.The offer is based on an automated valuation model, many times, without a physical inspection of the home.In some cases, a contract is written but there are provisions that allow iBuyers time to possibly "flip"…

One Loan for Purchase & Renovations

The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing.This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements.Any type of renovation or repair is eligible if it is a permanent part of the property.Improvements must be completed within 12 months from the date the mortgage loan is delivered.15 and 30-year fixed rate and eligible adjustable rate loans are available.Typical FNMA down payments are available starting as low as 3% for a one-unit principal residence to 25% for three and four-unit principal residence and one-unit investment properties.Borrower must choose h…

Get Rid of Things You Don't Need

Periodically, you need to rid yourself of things that are taking up you time and space to make room for more of what you like and want.There's a frequently quoted suggestion that if you haven't used something for two years, maybe it isn't essential in your life.If you have books you'll never read again, give them to someone who will.If you have a deviled egg plate that hasn't been used since the year your Aunt Phoebe gave it to you, it's out of there.Periodically, go through every closet, drawer, cabinet, room and storage area to get rid of the things that are just taking up space in your home and your life. Every item receives the decision to keep or get rid of.Consider these questions as you judge each item:When was the last time you used it?Do you believe you'll use it again?Is there a sentimental reason to keep it?You have four options for the things that you're not going to keep.Give it to someone who needs it or will appreciate itSell it in a gara…

Qualified Charitable Contribution

If you're at an age where you need to be taking Required Minimum Distributions (age 70.5) from your IRA, a qualified charitable contribution and some planning may allow you to lower your overall tax liability.Let's say that a couple's 2019 itemized deductions include $8,000 in property taxes, $4,400 in interest and $20,000 in charitable contributions.That would total $32,400 which exceeds the 2019 $25,300 standard deduction for married couples, 65 years of age or older, filing jointly.Their required minimum distribution from their IRA is $40,000 which will be taxed at ordinary income.If this couple is in the 24% tax bracket, the tax liability would be $9,600.Alternatively, if they made the $20,000 in charitable contributions from their IRA as a Qualified Charitable Contribution, it would not be taxable in the withdrawal.The balance of the RMD of $20,000 would be taxable at 24% which would have a tax liability of $4,800.Their $32,400 worth of itemized deductions would be re…

Auto Pay Your Mortgage Payment

In the time that it takes to write one check, you can set it up with your bank and never have to do it again.You won't have to write checks, envelopes or buy stamps anymore.You'll save time, money and benefit in other ways too.Never be late ... avoid late fees and protect your creditSchedule additional principal contributions monthly to save interest, build equity and shorten the mortgage term.
An extra $200 a month applied to the principal on a $200,000 mortgage at 4.5% for 30 years will result in shortening the loan by 8.5 years.If the loan was paid to term, it would save $52,977 in interest.Use the Equity Accelerator to see how much you can save.It's convenient ... by doing it online with your bank, you'll have a centralized history of the payments.Protect your credit ... your payment history is the single biggest component of your credit score and accounts for over 1/3 of your credit score.Establishing the practice of auto bill pay could run the risk of overd…

To-Do List for Better Homeowners

Checklists work because they contain the important things that need to be done.  They provide a reminder about things we know and realize but may have slipped our minds as well as inform us about things we didn't consider.  Periodic attention to these areas can protect the investment in your home.Change HVAC filters regularly.Consider purchasing a supply of the correct sizes needed onlineand they'll even remind you when it's time to order them again.Change batteries in smoke and carbon monoxide detectors annually.Create and regularly update a Home Inventory to keep track of personal belongings in case of burglary or casualty loss.Keep track of capital improvements, with a Homeowners Tax Guide, made to your home throughout the year that increases your basis and lowers gain. Order free credit reports from all three bureaus once a year at www.AnnualCreditReport.com. Challenge your property tax assessment when you receive that year's assessment when you feel that the value…

Reasons Rental Homes Rank Highest

Single family homes offer the investor an opportunity to borrow large loan-to-value loans at fixed interest rates for long terms.Lenders will loan 75-80% of the purchase price at 5.5% to 6.5% interest rate for thirty years.Compare that with other popular investment alternatives like precious metals, commodities, stocks, and mutual funds and it will be hard to find financing available at all.There may be some short term, one-year, loans at a floating rate tied to prime plus with no guarantee that it will be renewed.Some of those loans require you to have a 50% margin of equity and if the value goes down, you'll have to put up additional cash or be forced to sell.The advantage of having long-term mortgages is that an investor could find the optimal time to sell the property instead of needing to sell it because the term is due, and no other financing is available.Supply and demand cause the real estate market to be higher and lower and a long-term mortgage provides options to sell w…