Category Archives: buying a condo

Will Appraisals Continue to be a Challenge in 2016?

Will Appraisals Continue to be a Challenge in 2016? | Keeping Current Matters

First American Title issues a quarterly report, the Real Estate Sentiment Index (RESI), which “measures title agent sentiment on a variety of key market metrics and industry issues”. Their 2015 4th Quarter Edition revealed some interesting information regarding possible challenges with appraisal values as we head into 2016.

“The fourth quarter RESI found that title agents continue to believe that property valuation issues will be the most likely cause of title order cancellation over the coming year.”

This shouldn’t come as a surprise. In a housing market where supply is very low and demand is very high, home values increase rapidly. One major challenge in such a market is the bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

Another monthly report by Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation. Here is a chart showing that difference for each month through 2015.

Will Appraisals Continue to be a Challenge in 2016? | Keeping Current Matters

Bottom Line

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. That is why we suggest that you use an experienced real estate professional to help set your listing price.

Thinking of Buying? Selling? 5 Reasons You Need To Hire A Professional

Thinking of Buying? Selling? 5 Reasons You Need To Hire A Professsional | Keeping Current Matters

Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream.

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $210,000 compared to $245,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

Dave Ramsey, the financial guru advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

Are You Wondering What It Takes To Buy Your First Home?

Are You Wondering What It Takes To Buy Your First Home? | Keeping Current Matters

There are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they are married and have a family. Others may think they are too young. And still others might think their current income would never enable them to qualify for a mortgage.

We want to share what the typical first time homebuyer actually looks like based on theNational Association of REALTORS most recent Profile of Home Buyers & Sellers. Here are some interesting revelations on the first time buyer:

First-Time Homebuyer Statistics | Keeping Current Matters

Bottom Line

You may not be much different than many people who have already purchased their first home. Meet with a local real estate professional today who can help determine if your dream home is within your grasp.

Rents Still Skyrocketing

Rents Still Skyrocketing | Keeping Current Matters

Zillow recently revealed that the 43 million renter households in the US spent $535 billion on rent in 2015. Aggregate numbers like these often make it difficult to truly assess a situation. For more clarity, we want to share some points that were made in aWall Street Journal article earlier this month.

The article made two important points:

1. Rents are increasing faster than the last several years:

 “Apartment rents increased faster last year than at any time since 2007.”

2. Rent increases are accelerating

“Another report from Axiometrics Inc., a Dallas-based apartment research company, showed that rents increased 4.7% in the fourth quarter compared with the same quarter a year earlier, the strongest year-end performance since 2005”.

Here is a graph to illustrate the rate of increase over the last several years:

Average Effective Rent in the US | Keeping Current Matters

Why Do Americans Consider Moving? [INFOGRAPHIC]

Why Do Americans Consider Moving? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • In a recent Harris Poll, Americans listed “change in climate/weather” as their top reason for wanting to relocate.
  • 41% would move for a better job opportunity.
  • Being closer to loved ones filled out 3 of the top 6 reasons why American’s move.

Thinking of Buying a Home? 3 Questions Every Buyer Should Answer First

Thinking of Buying a Home? 3 Questions Every Buyer Should Answer First | Keeping Current Matters

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Answering the following 3 questions will help you determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months.

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait till next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately three-quarters of a percent over the next twelve months as you can see in the chart below:

Mortgage Rate Projections | Keeping Current Matters

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

NAR’s Latest Existing Home Sales Report [INFOGRAPHIC]

NAR's Latest Existing Home Sales Report [INFOGRAPHIC] | Keeping Current Matters

California Real Estate: Who Pays For What?

RE Fees

Customary Fees

In most areas in California, at close of escrow the buyer pays:

  • escrow fees (50/50 split)
  • title insurance fees (for 2 policies protecting the interests of themselves and their lender)
  • loan origination fee and discount points
  • miscellaneous doc drawing and courier fees
  • inspection and appraisal fees
  • loan closing costs, like prepayments of property taxes, interest, insurance and homeowner’s insurance or HOA dues, when the buyer is obtaining a loan with an impound account or as otherwise required by the buyer’s lender.

And the seller pays:

  • escrow fees (50/50 split)
  • broker commissions
  • a re-conveyance fee to their lender
  • buyers home warranty

However, ALL of this is open to negotiation. These are standard practices, but vary more and more in this market climate.

Also, be aware that with bank-owned properties the standard allocations are somewhat different. For example, banks often will pay for the buyer’s title insurance policy, assuming the buyer uses a title provider the bank chooses. Or, the bank may defer to the buyer to elect the title company at which point the buyer is responsible for title and escrow fees.

Also, costs like HOA transfer and documentation fees, city and county transfer taxes, and even escrow fees are often negotiated between buyer and seller. Additionally, many times buyers agree to “pay” their customarily allocated fees, but then negotiate a closing cost credit from the seller that covers some or all of that.

Loan closing fees vary significantly by loan type (i.e., FHA vs. conventional). Also, transfer taxes also vary widely in different California counties; I see transactions where buyers need to be prepared to pay anywhere from 2 to 6% of the purchase price in closing costs – depending on the location. Again, this can be reduced if the buyer is able to negotiate for the seller to pay some or all of their closing costs.

Why Does A Seller Need to Know How I’m Financing My Purchase: What’s the Best Financing Method?

Puzzled LookAs a buyer, have you wondered why is what type of financing you use important? Or why does the seller need to know how you are financing your purchase? Or both?

The type of financing you use is important because, as a seller, you have the right to know how someone plans to purchase your property as well as to see evidence of that person’s ability to purchase. In addition, certain types of financing may not be accepted.

As a seller, you can choose what financing terms you will accept or will not accept. Most sellers are, of course, open to as many financing types as possible. However, in rare instances, specific financing types are sometimes prerequisites to being able to make an offer to purchase. For example, pending HOA litigation in a condo development would trigger this prerequisite. The HOA company will only allow sellers to accept owner occupied buyers with all cash offers or conventional financing.

Additionally, financing has its strengths and weaknesses. A general rule is outlined below recognizing there are always exceptions, and the seller has the final say.

STRONGEST
Cash
Conventional Loan
FHA Loan
FHA with DPA (Down Payment Assistance)
VA Loan
WEAKEST

As you can see, cash is at the top of the list – it is still and will always be king. The VA loan is at the bottom of the list and it is bitter sweet.

Nicknamed the “No-No Loan” the VA loan is structured to be a great tool and benefit to allow our vets to become homeowners. No down payment, no closing costs. The VA buyer isn’t even allowed to pay certain costs associated with closing the loan. Sounds great in theory, however, those costs get passed on most times to the seller who gets to say yes or no to paying them. In a competitive market, this offer gets placed on the bottom of the pile because the seller is netting the least from these offers.

The other loans in between have varying resemblances to the VA loan because they require the seller to give up potential proceeds to make the loan happen for the buyer.

Ultimately, the more cash the buyer puts in, the more of the risk they are taking. The less cash the buyer puts in, the less risk. To a seller, the seller would rather see more risk to ensure your commitment and to increase the possibility of closing.

The above is offered as a guideline and is not set in stone as to what will always happen. There are many other ways your broker/agent can ensure you are making a strong offer no matter what your financing. In all that you do as a buyer, choosing a savvy broker/agent will ensure you are making the strongest offer for your money and budget.

Buy vs Rent: What Really Creates Family Wealth?

Buy vs Rent: What Really Creates Family Wealth? | Keeping Current Matters

There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:

“…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”

The summary goes on to explain that:

“The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership.” (emphasis added)

Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:

“…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”

The Concept of ‘Forced Savings’ and Wealth Accumulation

Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled, Homeownership and Wealth Creation, which discussed this concept. The article explained:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.” “Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

The Truth is in the Historical Data

Edwards Deming once said: “Without data, you’re just another person with an opinion.” Let’s look at the data on this subject. The Federal Reserve has conducted a study titled: Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).

Bottom Line

The New York Times editorial articulated it best:

“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”

If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!