Buying a home should be one of the most fun times of your life, not stressful. As you look for your first home, next home, or dream home, keep in mind these tips for making the process as peaceful as possible.
Find a real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the Buyer’s Agent you chose is both highly skilled and a good fit with your personality. One thing to look for is responsiveness. Looking at sites with agent reviews like Zillow is a good way to see what others have found from their experience regarding agent responsiveness, local knowledge, process expertise, and more!
Remember, there’s no “right” or perfect time to buy. When you find that perfect home, don’t try to second-guess interest rates or the housing market by waiting longer — especially if your purchase timeline is for 3-5 years or longer or you risk losing out on the home of your dreams. In a low inventoried market like we are in right now with less than 4 months of housing supply in much of our market, this can cause others to jump in and make offers and you might miss out! Zillow is predicting housing prices up 4% nationally this year so the 2014 housing market probably won’t change fast enough to make that much difference in price except for up, and a good home won’t stay on the market long. Last fall mortgage rates showed us just how quickly they can go up! Rising 150 basis points or so from the lows of last summer, we now see rates in the 4.5%-4.625% range and probably moving higher over the next six months. As the economy perceptively improves so will mortgage rates move higher!
Know that no house is ever perfect. I have built homes before that I still saw things I would change or do differently next time. If it’s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Ask the seller to address them upon inspection and prior to closing or if unimportant, let the minor ones go.
Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price in a market like this one where inventory is so low we are back in a “Seller’s Market” or by refusing to budge on your offer may cost you the home you love. Negotiation is give and take and meeting in the middle! This is a distinctly different market than it was 2-3 years ago when there was 15-18 months’ supply of housing sitting on the market and aging rapidly with high days on market. Seeing in certain areas of our market homes going under contract in “days” once again!
Plan ahead and “first things first!” Buyers contact me every day wanting to know when we can go see a specific property! I always try and educate Buyers I work with that the first thing that needs to be done, is to get pre-qualified for a mortgage. Takes minutes and hours not days anymore! Most of the time it can be done online without ever having to go to a mortgage company or bank! Don’t even need financial docs most times to get pre-qualified! The lending process is drastically different than it was 6-8 years ago. If it has been that long (or longer) since you last purchased a home, don’t assume because it was no problem before to get financing that today is going to be the same. Also, and this is important for first time home buyers, getting a mortgage is more than having a good credit score and a job! It is about a combination credit score, “documented income,” access to down payment funds, and falling into a precise range of “debt to income” ratios that determine how much house you can afford! Waiting until you’ve found a home and made an offer to get approved for a mortgage, investigate home insurance, and consider a schedule for the home inspection is too late! Too, it makes your offer weaker, and in the presence of this being a “Seller’s Market” once again with multiple offers, low inventory, and homes not staying on the market long it might cause you to miss that purchase you are looking to make on that next, first, or dream home because you weren’t ready to fully make the strongest offer you could. Presenting an offer contingent on a lot of unresolved issues will make your offer much less attractive to sellers.
Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be costs. Don’t leave yourself short and let your home deteriorate.
Look at differences in MI or Mortgage Insurance. Most are still going FHA. FHA mortgage MI has gotten much more expensive over the past six months. Look at differences between FHA and a Conventional mortgage as to whether you can qualify and the cost of doing both!
Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big financial commitment. But it also yields big benefits. Don’t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.
Choose a home first because you love it; then think about appreciation. While U.S. homes are expected to appreciate at an average of 1-2 percent annually above inflation between now and 2020 from one report I recently read, a home’s most important role is to serve as a comfortable, safe place to live.
For more information about the home buying process please contact me! Let me take your stress so you can relax and enjoy your new home!
- How long will I be there?
Purchasing a condominium is like any other real estate purchase. You’ll need to own the Condo for at least a couple of years in order to recoup the closing costs. For shorter term needs, leasing may be a better option.
- What amenities are offered at the complex?
There are a broad array of potential amenities to a condo complex. Some are sparse with simple covered parking and a little landscaping. Others have grand work out facilities, picnic/barbeque areas, work out facilities, playgrounds, pools, common libraries, media centers, laundry facilities, etc. Determine what extras you are looking for before you begin your search.
- What are the current condo market conditions?
The condo market may be quite different from the single family housing market at any time. And like all real estate, the location of the condo will also make a large difference in the value of the unit. Study recent sales in the neighborhood and building you are seeking. Be sure to account for the differences in amenities between the complexes/buildings when studying these figures.
- What is the reputation of the building you are considering?
Different condominium buildings/complexes have different senses of community. There are many buildings that are principally owner occupied, while others have a stronger tenant base. Some communities have very stable populations while others see more turnover. For example, condo complexes closely located to a large university will likely have a younger population and frequent turnover as students move in and out each year. Determine the characteristics that are important to you and talk to some of the neighbors.
- Do the owners get along, or are they at each others throats?
Condominium ownership is a cooperative community effort. The common areas and structures of the community are supported by payments from all of the owners. By requesting copies of the HOA minutes, you can get a feel for how unified the residents are. No one wants to move into an atmosphere of strife and turmoil. Look to see if there are any hot issues that are burning in the community.
- How well funded is the HOA?
As an owner, you are ultimately responsible for the common maintenance of common amenities and structures. You will pay a monthly HOA fee representative of your “fair share” of these costs. In the event that major repairs or maintenance is required, a special assessment may be charged of all owners
if the HOA account does not have sufficient balance to cover the expense. You will want to make sure that the HOA is financially sound so that you don’t get hit with an immediate assessment upon buying into the property.
- What is the history of Special Assessments?
Request the Special Assessment history for the last ten years. Take a look at the patterns that have emerged. A well managed condominium should not see regular special assessments.
- Are you comfortable with the association rules and by-laws?
Closely review the rules of the community and make sure that your lifestyle matches with the community that they have developed. Talk with the condo association and the residents to see how closely these rules are enforced. This will be the community that you are joining. You will want to be sure that you like the structure set in place, and that it actually occurs.
- What are the parking arrangements for guests?
As an owner, you will have parking for your vehicles. You will be limited in how many vehicles you can park on the property. Generally, guests will be directed to specific parking places. In some complexes, that parking available for guests may not be either convenient or plentiful. Make sure you understand how parking works, and that it is sufficient for your lifestyle. This seems to be one of the leading sources of aggravation in a condominium community.
- Who actually manages the condo property, and what services do they provide?
Some condominium complexes are self-managed by the owners while others employ a professional management company. For owner occupants, the idea of self-managing can be quite appealing. Who has a more vested interest in the property than the unit owners that live there. For landlords, it is frequently easier to deal with a professional management company than with local owners. Along with association management, be sure to also explore association insurance. Make sure that in the event of catastrophe your investment is protected.
Did you notice the lack of the words “First Time” in the title. Here’s a little something for those of us who already own a piece of the American dream. If last year’s tax credit was enough to get first time buyers into the market, let’s hope that this stimulates things even more.
Congress and President Obama have seen fit to extend the Home Buyer Tax Credit into 2010, and they have significantly increased the scope of the incentive. It is now available to anyone homeowner who meets certain income guidelines and sells their home between Nov 7, 2009 and May 31, 2010. And the definition of sell is now translated as enter into a contract to sell by May 31, 2010 and close by Jul 31, 2010.
Homebuyer Tax Credit — Revised November 2009
|FEATURE||Jan. 1 – Nov. 30, 2009
Rules As Enacted
|Nov. 7 – Apr. 30, 2010
Rules As Enacted
|First-time Buyer – Amount of Credit||$8,000 ($4,000 married filing separate)||$8,000 ($4,000 married filing separate)|
|First-time Buyer – Definition for Eligibility||May not have had an interest in a principal residence for 3 years prior to purchase||Same|
|Current Homeowner – Amount of Credit||No Provision||$6,500 ($3,250 married filing separate)|
|Effective Date – Current Owner||No Provision||November 7, 2009|
|Current Homeowner – Definition for Eligibility||No Provision||Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years|
|Termination of Credit||Purchases after November 30, 2009.
(Becomes April 30, 2010 on November 7, 2009)
|Purchases after April 30, 2010|
|Binding Contract Rule||None||So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close|
|Income Limits (Note: Increased income limits are effective as of November 7, 2009)||$75,000 – single
$150,000 – married
Additional $20,000 phase out
|$125,000 – single
$225,000 – married
Additional $20,000 phase out
|Limitation on Cost of Purchased Home||None||$800,000
November 7, 2009
|Purchase by a Dependent||No Provision||Ineligible
November 7, 2009
|Anti-fraud Rule||None||Purchaser must attach documentation of purchase to tax return|
Source: National Association of Realtors
The tax credit to existing homeowners is up to $6,500, so if you were thinking about upgrading the homestead, now is definitely the time to act. Low interest rates, great buys available in the market, and a tax credit to boot – it’s the “perfect storm” for making the move to the larger house, or the incentive to finally downsize into the cozy home, depending on your vantage point of life.
In upcoming posts, I’ll examine some financial strategies for accessing this tax credit during the course of your transaction. Stay tuned…