Financing-home loans, Real Estate, The Market

First-Time Homebuyers

A bedroom in an AIMCO apartment home
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Quoted from:

Focus on First Time Homebuyers by Tim McLaughlin

There has been a dramatic shift occurring in the housing sector. According to Realty Times, of the 8.4 million people who have purchased a home in the last two years, 41 percent of them have been first time buyers. This number is up from 35 percent in 2007, and experts believe this growing demographic will influence the home-style landscape in the years to come for first time purchasers.

Today’s first time homebuyers have as much desire to establish household independence as their parents did, but the economic environment has impacted their preferences to some degree. This demographic is much more aware of both how much home they need and what they can afford. But they also have specific preferences in layout, efficiency and neighborhood type according to recent statistics.

On average, over the past few years, first time buyers are buying smaller, lower priced houses than trade up buyers are, the majority buying homes with avg. square feet under 2,500. This buying preference is partially affected by the economy and by maintenance costs, according to Realty Times.

In addition, first time homebuyers seem to have a different mindset regarding a home purchase. They look at the transaction as securing a place to live in first and foremost. While they have less to spend, they want the space they can afford put to the most effective use. This means that the practical spaces they will use every day, like kitchens, laundry rooms and the master bedroom, are their key focus. They appreciate open spaces that can be defined by furniture rather than walls and hallways. Additionally, home location appears to be important to these buyers, who have a keen interest in transit oriented communities. This makes urban areas highly appealing, as well as suburban areas with walk able town centers.

Of biggest concern to this subset appears to be financing questions: qualifications, the right loan structure with the least amount of money down, and understanding an approval process that is much more cumbersome than what their parents had to deal with.

This market is a tough one to navigate…we have very low inventory because of sellers still waiting for appreciation before they will list, but plenty of buyers out looking to take advantage of the great interest rates and loan programs to get into their first home or move up into their “forever home”.  In this environment, it is so important to have a Realtor you trust to help you navigate the offer process as well as all of the steps between the contract signing and settlement.  Between the appraisal, the home inspection, rent-backs and more…it is important to choose someone you like and trust and who keeps current on laws, best practices and the market pulse to guide you through the process (regardless of how many times you have bought and/or sold a home).

Financing-home loans, Real Estate, The Market

Rent vs. Buy

Deutsche Bank
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Deutsche Bank released a very interesting study this week showing that renting a home costs US households more than paying a mortgage for the first time in at least two decades. The rent-buy ratio, or rent as a percentage of after-tax mortgage payments, is based on figures that Deutsche Bank compiled from NAR and the REIS information service. Rent amounted to 100.2% of home-loan costs in last year’s fourth quarter, the highest level since calculations began in 1991.

So dissecting this: renting is now more costly than buying, rates have come back down this week ….it is a great day to buy OR SELL a house!

 

Homes for Sale, House and Home, open houses, Real Estate, The Market

Alexandria VA Open House in Seminary Valley! Sunday March 20, 1p-4p

Alexandria VA Open House in Seminary Valley! Sunday, March 20, 1p-4p

5337 Thayer Ave, Alexandria, VA 22304

SINGLE FAMILY HOME FOR UNDER $500,000!  Lovely 3BR/2 full bath, brick single-family home with large fenced back yard and lovely brick patio, perfect for grilling. Long driveway for off-street parking.  Convenient 1-level living with all bedrooms on the main level, spacious kitchen with adjoined breakfast room and separate dining room, wood floors, wood burning fireplace.  Updated appliances and bathrooms and more…Come see!

Real Estate, The Market

Should you ask a Realtor to reduce their commission?

Well, I think you know what I am going to say…NO!  What else were you expecting from a Realtor? 🙂

Here is the reason for my emphatic “no” though and why you should think twice before asking for a reduced commission.

1) If the agent is worth their “salt”, they will prove to you why they deserve their full brokerage fee (which by the way is decided by each broker).  If they don’t prove it to you, interview someone else.  Don’t ask the person who didn’t wow you if they will take 5% instead of 6% if they are asking for 6%…if they don’t make you believe they can do it, you probably aren’t going to be happy with them after they have had your house on the market for 100 days regardless of the fact that you are paying a reduced rate.

2) If the agent shows what they will do to sell your home and proves their worth, why would you even ask?  Do you ask your doctor to reduce their fee?  If you did, they would say find another doctor…but wait, if you have already seen the doctor, you have to pay either way or you get invoices and then nasty grams from their office.  What other profession does all the work, pays out-of-pocket to market a product and if it doesn’t sell, doesn’t get paid a dime?

3) Here is where the commission goes… let’s use the example of a brokers fee being 6%.  That 6% gets split between the listing brokerage and the selling brokerage (buyer’s brokerage) 50/50 (usually) that is 3% for each side (even though the listing agent and brokerage pay for all of the marketing).  Then, each brokerage takes a portion of that fee (sometimes as much as 50%) and gives the remainder to the agent.  At the end of the day, the agent has made a fraction of the full fee and has done all of the work.

4) If you get the agent to take a reduced fee (let’s say 5% instead of 6%) that agent either has to take 2% for their brokerage and offer 3% to a buyer’s broker or split the discount 50/50 (2.5% each).  Let me tell you a little secret…a lot of agents will avoid showing homes where the seller is offering less than what they are used to seeing or what they feel should be offered.  In this case 3% vs. 2.5%.  I am not one of those agents because I am ethical, but not everyone is the same as me.  This is potentially giving your home less showings.  If your agent is kind enough to still offer out 3% and only take 2% for themselves, they are spending all of the money and making a much smaller share…is that really fair to ask of the person whom you have trusted to sell your home?

5) Many brokerages will not allow a reduced fee.  In other words, if a brokerage has decided that their brokerage fee for a listing is 6%, then they will not allow their agents to accept less than that without approval.  If an agent decides to reduce the fee, a lot of brokerages will make the agent carry the full discount and therefore reducing that agent’s split to cover the loss.  Now the agent has made even less money.

6)  Yes, the more homes you sell, the less you can charge (so if you are interviewing a “top” agent who takes a low fee, it is only reasonable that they sell a lot of homes, so they must do a good job); however, what happens in business when volume becomes more important?  That is right, quality often suffers.  The agent, in an effort to move their inventory fast enough to make up for their low commission can tend to allow for getting less for your home just to get it sold.  Think of the Wal-Mart model vs. the Nordstrom model of business….low price vs. good service…

7) Paying someone a flat fee to put your home on the MLS and doing all of the negotiating yourself.  Well, it will get some showings and will probably sell eventually, but you are not getting representation.  You should probably still hire an attorney (which will cost more money) and it will likely take longer to sell the house because nothing else is being done to market it AND because you have probably priced the home too high as well because you have gotten no advice from a professional educating you on what the market will bear.  This will actually have the opposite effect of money savings because it will force you to make payments on the home for longer than necessary until it sells all while you are potentially missing out on homes you would like to purchase because your home hasn’t sold.   Also, by the time the home does sell, you will probably end up selling if for less than an agent would have because you have had it on the market for so long that you are ready to be rid of it.  Had you paid a real full service agent, you may have sold it sooner for a higher price and paid less in the long run because you are not carrying those payments for an extra number of months.

I understand that it is a lot of money coming out of your pocket, but when you are hiring someone to do a job, any job, you want them to do the best they can, and that has value.  If selling your home is of value to you, why would you be unwilling to pay someone their full fee for their efforts?

Real Estate, The Market

What is “Buying a Listing”?

This was a great article written in the following blog: http://www.realestateabc.com/homeselling/toohigh.htm#But%20which%20Realtor%20do%20you%20choose?

Here are a few excerpts…The full article (link above) is worth a read:

…Amazingly, a couple of the Realtors have come up with prices that are lower than you expected. Although they back up their recommendations with recent sales data of similar homes, you remain convinced your house is worth more.

When you interview the third agent’s figures, they are much more in line with your own anticipated value, or maybe even higher. Suddenly, you are a happy and excited home seller, already counting the money….

The moral of the story is that pricing the home right at the beginning will get your home sold faster and this means you will be paying less in the long run.  Less monthly payments on that home…Less condo/HOA fees for the additional months it is on the market…Less time waiting on the home you want to purchase because your home hasn’t sold…and you may even take home MORE money because the longer time a home is on the market, the lower a buyer is willing to pay.  Had you priced it right up front you would have sold faster and for a higher price.

Financing-home loans, Real Estate, The Market

Optimism in the housing market

Fannie Mae headquarters
Image by futureatlas.com via Flickr

Optimism on the Horizon

by: Tim McLaughlin, Weichert Financial

Last week, Fannie Mae released their National Housing Survey for 4Q10. This comprehensive report and survey showed that the majority of Americans surveyed were upbeat and optimistic about the housing sector as compared to where we were 12 to 24 months ago.

The survey showed that Americans are more confident about the stability of home prices than they were at the beginning of 2010, even though there are some lingering concerns about the acceleration of the economy. If fact, over three-quarters of the respondents (78 percent) believe housing prices will hold steady or increase over the next twelve months.

Other takeaways:

Younger Americans are generally more positive about owning a home than the general population. 59 percent of Generation Y (ages 18-34) believes buying a home has a lot of potential as an investment.

As stated above, 26% of the general population thinks housing prices will increase over the next 12 months, with an additional 52% thinking that housing prices will remain about the same.

On average, members of the survey anticipate home prices to increase 0.4% over the next 12 months, while the same subset expects rental prices to increase 2.8% over the same time period. The expectation that rental increases will far outpace home price increases was prevalent with surveyors over the next five years, in fact.

One in four Americans said they would probably buy a home in the next three years (both current homeowners and non-homeowners), and one in three Hispanics and African Americans were of this thought process.

One interesting (and probably obvious) fact: poor credit is the number one stumbling block keeping potential borrowers from owning a home.

Financing-home loans, Real Estate, The Market, Tips and Tricks

FHA appraisals

Workers using special "roofing shovels&qu...
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FHA appraisals do not differ from conventional appraisals in a large way; however, there are a few differences.

One main difference is that there can be more required repairs.  A big one is the roof.  These are the appraisal guidelines for FHA appraisers:

Roofs and Attics:

The roof must prevent moisture from entering the home and provide reasonable future utility, durability and economy of maintenance. The roof should have a remaining physical life of two years. If the roof has less than two years remaining life, the appraiser must call for re-roofing or repair.FHA will accept a maximum of three layers of existing roofing. If more than two layers exist and repair is necessary, all of the old roofing must be removed as part of the re-roofing.Roofing on slopes of 2.5/12 pitch or less must be installed by a licensed roofer using built-up roofing that meets the Uniform Building Code.

According to http://www.fhainfo.com/fhaappraisals4.htm:

These are the 12 Most Common FHA Repairs

These conditions are not listed to scare you, but to help you understand and erase any worries you may have.The purpose of a repair is to correct deficiencies which may affect the health and safety of the occupants or the continued marketability of the property. If possible, we suggest that you make any repairs to your home prior to the appraisal. This will improve the marketability and help the sale or refinance of your home go smoothly.

1. If the home was built prior to 1978, chipping, peeling paint must be scraped and painted. This includes interior, exterior, garages, sheds, fences, etc.

2. Any useful components (appliances, floor covering, etc.) of the home, especially the roof, should have 2 years of useful life remaining. A roof should have no more than 3 layers of shingles.

3. Broken windows and doors should be replaced.

4. The cause of negative drainage must be cured (i.e., improve drainage away from house, gutters, french drains, etc.).

5. Health and safety hazards (i.e. electric garage door opener won’t reverse with resistance; burglar bars). GFIC outlets are not an FHA requirement.

6. Abandoned inoperable wells must be capped and sealed by a licensed well sealing contractor.

7. Safety handrails should be installed in open stairwells of three or more stairs.

8. Infestation of any kind should be exterminated (i.e., insects, mice, bats, etc.).

9. Damaged or inoperable plumbing, electric and heating systems should be repaired. The appraiser will check these areas.

10. Structural or foundation problems must be repaired.

11. Flammable storage tanks must be removed and filler cap sealed from the inside (i.e., buried oil tank).

12. If there is a crawl space, it will be the homeowner’s responsibility to make this area accessible so that it can be thoroughly inspected

All of the information in this post was taken word for word from: http://www.fhainfo.com/fhaappraisals4.htm

This is meant to be helpful in the determining the right home for you if obtaining an FHA loan or accepting the right offer if you are a seller considering an offer with an FHA loan. Always discuss this information with your Realtor and lender to get more specifics.

**Regardless of the type of loan being used to purchase your home, it is always a good idea to fix anything broken and do all of the maintenance items you were putting off.  This will not only make any appraisal process go more smoothly, but will make a better showing to potential buyers as well.