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2016 Real Estate Market
Home prices are moving up moderately this year, but not to the point of discouraging buyers from a first or second home purchase. In fact, the moderate value increase is – in part – due to a supply vs. demand imbalance in many cities across the United States. With new construction at a 50-year low, there are currently more prospective buyers in the market than there are sellers of existing homes.
Interest Rates and Income Growth
Some of the demand is due to the prospect of a raise to interest rates in the future. Many looking to lock in at today’s lower rates are not waiting for those changes, even though it is a sign of a growing economic stability. Low to moderate income growth for those in the middle class also is impacting the supply, as many who were able to hold onto their homes amid the financial crisis nearly a decade ago are nervous to sell or are still recovering their equity. Yet unable to use equity to perhaps buy above their original starter home, many are sitting tight on their current homes. These factors have created a somewhat even and steady market, with it leaning slightly to the advantage of the seller.
The Rental Cost Impact on the Market
Rental prices have increased, with the result having a multispectral effect on real estate. On one hand, the increases in rental prices are a nudge to the renter to take the necessary steps to become a buyer. On the other, it is often more difficult for a prospective buyer to save for a down payment when more of his or her expendable income is going towards maintaining the rent. At the same time, it is a boon for real estate investors and those looking to purchase a second home to rent, rather than sell, the first.
The 2016 market certainly isn’t the gloom and doom prophesied by some. While homeownership is still at its lowest in 50 years and new development has also slowed, values are growing and sellers are finding that buyers are making smart, competitive bids on property. These positive trends are expected to continue as the average wage income increases over the next few years.
House Flipping: Is It for You?
Maybe you’ve heard of house flipping or seen it on TV. It’s really grown as a method of making money and there are even reality TV shows about it. So how do you know if house flipping is for you? Really, no one else can make that decision except for you. You’re the only person who knows if you can afford it, if you can risk it, and if you will enjoy it.
Here are some situations where house flipping may not be right for you:
- You don’t have the money – It takes money to invest in real estate and if you can’t afford it, you don’t want to risk it right now. Flipping houses can pay off big but you might also lose in some of your investments and if you don’t have the money to take the risk, you shouldn’t do it.
- You don’t have the time – Flipping houses is going to take time. To really do this successfully, you’re going to need to invest time. You need to research houses, watch the market for quick sales and auctions and good deals, invest time in doing appraisals and also in putting time and money into fixing up the home. Then, you’re also going to need to invest time in reselling it. So if you don’t have the time, this is not for you.
- You don’t have the knowledge – If you don’t know anything about real estate, the value of properties and the current market, this might not be right for you. If you don’t have the industry knowledge, you’re not going to know how to find good deals and make profits.
Here are some things that may make house flipping good for you:
- Have a support network – If you have a good network of friends, family members and associates that can help you, this puts you in a good position for doing something like house flipping.
- Have a feel for DIY and handyman stuff – If you enjoy DIY and other handyman work, you might enjoy house flipping because you can do a lot of this work hands-on for yourself. If you’re interested in it and passionate about it, then this could be a great choice for you.
- Experience in real estate – If you already have experience in real estate, you’re going to have the upper hand in the world of house flipping.
With these ideas in mind, you can decide if house flipping is the right choice for you. If you have the money to invest and the time and you enjoy it, this can be a great part-time job or even a full time career for you.
How to Deal with Buyer’s Remorse in Real Estate
How to Deal with Buyer’s Remorse in Real Estate
Buyer’s remorse is not uncommon at all. Buying a house is a major decision and every person who has the mindset of an adult is going to question major decisions they make. They have fears concerning their finances and future, and that’s actually healthy. It prevents them from making decisions on the fly and considering all of the angles rather than making decisions based on things that aren’t really important. As a realtor, it’s your job to let them know how common this is and walk them through a few steps that will help them make the right decision in the end.
Explain Commonalities
Sometimes people need to know they aren’t alone. You can explain to the buyer that many people experience this same feeling. You might even relate this situation to a decision about getting married, though you might want to avoid this route if they are recently divorced. Explain that any life decision this big is bound to cause a bit of anxiety. That doesn’t mean that they are making a bad decision.
Go Back in Time
Talk about why they chose this house to begin with. Point out that those things still exist. If there are elements about the house that they don’t like, address how those might be dealt with. For example, if they don’t like the fact that there are stairs in a house, you can discuss how this is a commitment and a great buy, but that in the future, when the kids are grown and moved out, they might actually make a profit off the house when they sell it and buy something smaller with only one floor. Just be sure to return the focus to the things that they loved about the house and which caused them to claim it as their own.
Discuss Options
The buyer might still have the option of backing out. Talk with them about what might happen if they do back out and what they would look for in the next house. If possible, reveal some of the ways they might incorporate those elements into the house they are set to buy right now.
Sometimes it helps to write things out, so you might sit down with the client and list the pros and cons as they see it. Make a special note in any areas where the cons are going to be the same in any house they choose. Encourage them to take the list home and consider it before making any kind of decision to back out of their existing real estate transaction. Sometimes they just need a bit of time to calm themselves down and see all the potential that their new house has.
Advertising Your Real Estate Listing: What Your Agent Does
Advertising Your Real Estate Listing: What Your Agent Does
You interview a few agents. They each give you their ideas on what needs to be done within your home to sell it. You make a ton of changes, paint the walls, and completely declutter. You sign a contract and your house is magically on the market. So what does your agent do next to make sure it is actually seen? While no two agents are alike, here are some of the things that often happen.
MLS Listings
The first thing your agent will do is take photographs of your home’s interior and exterior. This is quite a process and is a task you need to allow to happen. The agent will either do it himself or have a professional photographer working with his agency participate. The more the better. Showing your home from a myriad of angles will help those viewing your listings decide if they want to see it in person.
After the pictures are taken, your agent will set up an MLS (Multiple Listing Service) ad for your home. All of the details describing your home are listed online and this information is what feeds out to all of the home listing websites you love to browse. If you see your home on a website, the information is being pulled from the MLS.
Virtual Home Tours and Social Media
A virtual tour of your home, in the form of a video, may also be made. This video will be posted to YouTube and other video sharing sites to provide visitors with a more interactive view of your home. The listing will, of course, contain links back to your online home listings and your agent’s contact information.
Your agent should, hopefully, have a strong social media presence where he is also sharing links to your home, videos, pictures, and other pertinent information.
Agent Home Tour
While a lot of people are familiar with the concept of the open house and individual showings, not many are as familiar with the concept of the agent tour. An agent tour happens when your real estate agent invites other real estate agents to see your home. This increases exposure by allowing agents to see the home in person so that they have a fresh idea of what it’s like before recommending it to their potential buyers.
Real estate agents today have a lot of very creative options available to them when selling your home. Print ads, mailers, pamphlets for passers-by to take, and a little bit of old-fashioned scrutiny can go a very long way. Talk to us if you have concerns about where your home is being listed, or how. We’d love to help.
What is Real Estate Leverage?
What is Real Estate Leverage?
When it comes to real estate, finance, and investing, the language used can be a bit confusing and overwhelming. Today we want to take a closer look at real estate leverage and what it means to you, as a buyer and investor.
What is Leverage?
Leverage, by definition, is when you use borrowed money (or capital) or some other financial tool to increase the return you receive on a particular investment. It’s not an uncommon at all. As a matter of fact, most people purchasing homes with mortgages are using leverage.
Take a closer look at the example in this Investopedia article and you’ll see how it works. The example provided is that you are putting 20% of your own money, or $100,000, down as a deposit on a $500,000 asset or home. The other 80% of the purchase price is borrowed money. If the value of the property appreciates 5% over the course of a year, the net worth of the borrower, as the owner of the property, is now $525,000.
If that same borrower had said, “I only have $100,000 and I don’t want to borrow any money,” and thus purchased a $100,000 home outright, that same 5% appreciation would only be worth $5,000 instead of $25,000.
So if an individual is in a position to borrow, the end return on the investment stands to be much higher.
Accessing Leverage
It takes money to make money, and that is especially true when it comes to real estate. While a mortgage company is the most traditional route, many investors will seek private capital or other means of investment. No matter what you choose, you’ll want to make sure you understand the numbers and negotiate the least amount of interest possible – something that will also help you to maximize your ROI.
There are Drawbacks
There are, of course, drawbacks. You need to have a strong understanding of the home you’re buying, the real estate market in general, and the area in which you are purchasing. While in the scenario above the individual’s net worth was increased by $25,000, a simple deflation in the value of the home could result in a negative impact and a decrease in the net worth.
Talk to your financial advisor or lawyer if you need help understanding your own financial position and whether or not leveraging the money you have to purchase a higher valued property is right for you. Once you’re ready, your real estate agent will be happy to help you find a property that fits the mold.
7 Simple Secrets for First-Time Home Buyers
7 Simple Secrets for First-Time Home Buyers
Psst! Hey, you! Buying your first house? We know a few things we think you should know. Things that will ensure you end up in a house you can afford in a neighborhood you love – without having to shell out a ton of money later on to make avoidable repairs. Ready? Here we go…
Counseling is Available – for Free
There are a lot of non-profit organizations who provide housing counselors. Talk to one. These individuals can help you to assess your finances, life situation, and other considerations and help you determine if it’s really the right time for you to buy.
You Need to Understand Your Lifestyle
We’d like nothing better than to sell you the house of your dreams, but the realist inside knows that not everyone has a lifestyle that makes homeownership feasible. Take a close look at your field of work, the current economy, and recent trends. Does buying a home make financial sense?
Assess Your Finances
A lot of people look at homes before looking at their finances and this is a HUGE mistake. You need to consider your credit history, capital for a down payment, capacity to pay your bills, and the collateral (condition of the house you want to buy). There are a lot of online estimators you can use to assess your finances. Try one.
Have a Bottom Line
Walk into every situation using your head, not your heart. You may be in love with a home, but if the seller won’t budge on the price, you have to know when to walk away. Just because you’re approved for a certain mortgage amount doesn’t mean you should buy a house for that same high price.
Shopping for Necessities
A lot of people look at the home but forget about the rest. Make sure you consider the amount of money you’ll need to spend on renovations. Oh, and appliances – the fridge, washer, dryer, and oven are important. If this is truly your first home, you’ll need furniture, too. Shop around and consider the prices as you calculate the total you’ll really need.
You’re Allowed to Make a Low Offer
That house you’re interested in has been sitting empty for a very, very long time. No one seems particularly interested and it’s still there despite you spending weeks looking at other homes. You want to make an offer, but you want to make a low offer. Do it. The worst that can happen is that the seller says no. And you never know; he might just say yes.
Have a Home Inspection
You’ve made your choice. Great! Now make sure you get a professional home inspection. Your offer should be contingent upon the results of the home inspection so that you can back out if the inspector finds something wrong with the home that can’t be handled reasonably. Make sure your offer includes this condition. It’s important.
Your real estate agent is here to help, no matter what. Give us a call and we’ll walk you through the process from start to finish. We can’t wait to see you settle into your first home!
What Does the Chinese Market Mean to US Real Estate?
What Does the Chinese Market Mean to US Real Estate?
The global market has huge reach. A piece of political turmoil in one country, especially when it includes finance or banking, can have a ripple effect that spans the globe – shaking confidence, making people nervous about investments, altering interest rates, and more.
More recently, the world has had its eye on the Chinese stock market based in Shanghai. As the turbulent Chinese market changes and leaves investors feeling less secure about local real estate, Chinese investors are looking to the United States instead. In terms of real estate, a slump in the Chinese market means a boom in US real estate sales.
Go figure.
According to CNBC, “Chinese buyers have poured $28.6 billion into US real estate in the past year…” This is a huge number, and forecasters expect to see further increase. While California has always been a favorite for foreign investors, Florida and Texas are also favored because of educational and work opportunities.
Why real estate? The Chinese yuan and the US dollar have a very close relationship, so turmoil doesn’t necessarily mean a huge change in exchange rates, though some devaluation has been seen very recently. Real estate is considered a safe asset to have as part of an investment portfolio. The risk is considered low to moderate and the returns are generally pretty high, especially in the past several weeks.
The surge in Chinese purchases in the US started before August’s major stock exchange crash, but the impact of the crash has had a significant impact. According to Inman, “The Chinese stock market has lost 30 percent of its value and continues to see major swings,” and “More than half of Chinese citizens are considering buying foreign real estate.”
There are some analysts who wonder if the stock market crash will scare investors away from all avenues of investment, startling them into saving instead of making purchases anywhere – in China or overseas. Most seem to think that investors will continue spending in other countries, particularly in the West.
What does it mean right now? As a real estate agent, it means you need to embrace the opportunity to work with new clients. Focus on today and on your ability to appeal to a new, growing audience. We’ll keep an eye on the stock market and continue to be aware of day-to-day changes and their impacts on the global economy.
Preparing Your Children for the Home Sale Process
Preparing Your Children for the Home Sale Process
Children are often easy-going, but when it comes to moving to a new home you might be surprised at how anxious, worried, and upset they can become. The younger they are, the more difficult things can be emotionally, as they’re confused about change to their routines. Older children are more attached to friends and other people. So what can you do to prepare them for the home sale process?
Timing is Everything
Do you really need to move right now? Are you moving far enough away that your child will have to change schools? If so, can you wait until the school year is over so that your children have time to adjust over the summer? Have you recently had a major emotional event (death, divorce, etc) that your children are dealing with? If so, you may want to postpone a move that isn’t absolutely necessary for a little while as you deal with other emotional issues. Sometimes a few weeks or months can make a huge difference.
If you can’t wait – because of work or money issues – make sure your talk about the move is always positive. Save your concerns and negativity for private discussions far out of the range of little ears.
Communication and Involvement
Whatever you do, don’t spring a surprise move on your kids. Make them as much a part of the process as everyone else in the house. Mark the move date on the calendar and start an exciting countdown. Let the kids decorate their moving boxes and help with the packing of their own toys. You might even consider letting them draw floor plans for their new rooms. Do whatever you can to make them feel as though they’re a part of the process – even if that means giving them a little bit of healthy busywork.
Socialization
Think about the things you can do to help your children make new friends in your new neighborhood. Find out about clubs, sports teams, social groups, or even summer-camp programs your kids can use to not feel isolated if you move between school years. The sooner they start meeting new people, the more comfortable they’ll feel.
Rituals are Important
Don’t let all of your family rituals go by the wayside during the hectic moving process – packing, unpacking, etc. If Friday is always family pizza night, then make sure you have pizza on Friday. If Monday is always family game night, then pull out a quick game. An hour of family down-time won’t hurt anything and will give you all the break (and reassurance about routine) you all need.
Talk to your real estate agent if you have concerns about your children and the moving process. They’ve worked with tons of families and can give you more tips to make the process a little easier!
Buying a Condo: Understanding the HOA
Buying a Condo: Understanding the HOA
When you make the decision to purchase a condo, you also commit yourself to a relationship with the condo association, sometimes referred to as the homeowners association (HOA). Your ownership in the development automatically makes you (along with other owners) a member.
The condo association is responsible for anything not directly related to the inside of your unit. This includes the common areas in the buildings and on the property, upkeep, maintenance, and insurance for the general property and portions of the building not covered by member condo policies.
Covenants, Conditions, and Restrictions (CC&R)
This is where a lot of new homeowners become confused – and sometimes surprised and upset. The condo association (or homeowners association) actually has quite a bit of control over what you can and can’t do around your unit. While some are more laid back, others are very controlling. They may dictate the color you paint the outside (not usually an issue in a condo), the color of the window fixtures you put up (so the building looks uniform from the outside), and what you can and can’t do to your outside landscaping if you have a yard area of your own.
The good news is that you can get a copy of your condo association’s covenants, conditions, and restrictions before you decide to make a purchase. Do so, and make sure you read them carefully. Question anything you don’t like. Negotiating terms before a purchase might be possible. After? Not so much.
Condo Association Fees
You will end up paying a fee to your condo association – monthly, quarterly, or yearly depending on how yours is set up. This fee will be on top of your mortgage payment and it is also non-negotiable. Condo association fees help to pay for the association’s general property and liability insurance, for maintenance, and for the upkeep of the common areas and recreational facilities. From time to time you may also find yourself billed for your share of things known as capital improvements; for example, a new roof or new sidewalk.
Make sure you read the documents to get a clear understanding of when and how often your condo association can increase fees and for what reasons. Those on a tight budget find condo ownership is not feasible primarily due to the extra fees that may come without warning.
There are a lot of benefits to buying a condo, including added security and less responsibility for maintenance and groundwork; but the drawbacks can be pretty significant, especially financially. Make sure you understand exactly what you are getting into and talk to your real estate agent about all of your options before making a final decision.
Have You Considered a Fixer Upper?
Have You Considered a Fixer Upper?
It’s hard to separate the gems from the duds when shopping for a new home. A lot of people will search for months, never quite finding that perfect match. Others will spend a little more time searching but not necessarily for the house but for the house they can make into their own – the perfect fixer-upper.
The Benefits of a Fixer-Upper
Buying a fixer-upper comes with a number of benefits. The most obvious is that you can spend the money you didn’t put into the actual sale into renovations and remodeling in order to make the home exactly what you want. There are other benefits, too, though. Sometimes going with a home that needs some work will allow you to buy a bigger home. You can also be a bit pickier about the neighborhood you buy into, whether you’re looking at a specific area or school district.
Another benefit is that the FHA 203k loan will allow you to roll the cost of your home and the finance cost for major repairs and renovations into one mortgage loan. This means you can still borrow the amount you need to get the job done and only have one loan payment to make each month.
Of course, whether you do that or not, the repairs you do make will almost immediately increase the equity you have in your home. Whether you leave in a few years or stay for the rest of your life, you’re guaranteed a great return on your investment.
What to Consider
You should make some careful considerations, of course. How much of the repair work can you realistically do on your own, keeping in mind that some DIY projects are a lot harder than home improvement shows make them look? Can you get estimates for the repairs you’ll need before you make a final offer on the home? Will the cost of permits put your projects over the top?
Does the home need structural work? This is often one of the biggest deal-breakers as structural repairs can cost a ton. Spending $500 or more on a structural engineer’s inspection before making a final offer could ultimately save you tens of thousands of dollars in headaches. If you do decide to buy, make sure the discount you’re getting for purchasing a fixer-upper reflects the costs you’re going to incur to make it livable.
Don’t only have a structural engineer visit, but a contractor who can do regular home inspections as well. Your offer should always be contingent on the results of a home inspection so you can get out of the offer if there is something major or otherwise undisclosed discovered.
A fixer-upper can be a major benefit, especially to a young couple starting out. You get to buy your dream home, a seller gets to move on without a hassle, and everyone is happy at the end of the day.
