Taking Stress Out Of Home Buying

New home search fulfilled – THIS is the objective!!

By: Hank Bailey
From: Realty Times,
January 2014
Full Article








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!

    Right Size Your Life – The Time is NOW!!

    Another home SOLD by Keller Williams

    It has been a banner year for real estate sales in the DFW market. We are experiencing activity levels not seen in many years, and events with which many agents are not familiar. In Collin County, homes priced in the typical range for first time home buyers are receiving multiple offers, frequently on the day which they are listed. During a recent search in which I represented the Buyer, I had conversations with several listing agents indicating they were unfamiliar with how to handle the influx of offers they were receiving. It has been many years since homes attracted multiple offers, and quite frankly, agents who have only been in the market for 3-5 years have never experienced this phenomena.

    In east Dallas, the activity levels are also similar. I had the pleasure of representing a Seller who was able to convey their existing home at the highest $/square foot seen in over 5 years. This allowed them to purchase a much larger home, and they got a great deal on the mortgage. For while sales prices are high, interest rates are still at historical lows. This combination makes today the perfect time to right size your life!

    Whether you need to increase the size of your living space, or step down into a smaller home and save a little money, there has never been a better time to act.

    After the Tax Incentive

    So what was the effect of the First Time Homebuyer Tax Credit? It may still be a bit early to tell, but one phenomenon is easy to identify. The number of properties placed under contract in May 2010 was at its lowest level in years. However, this should not be surprising. Buyers in the market for the first time, or the first time in a long time, had plenty of incentive to get their contracts executed before May. The net effect was to accelerate what would normally have been May contracts into April.

    If this were indeed the case, then April contract should have been at an all time high. And, yes, they were. April’s new contract numbers are larger than they had been in recent memory, validating the “hurry up” mentality in the market.

    But this does not answer the larger question of whether or not the First Time Home Buyer Tax Credit achieved its purpose. The purpose was to stabalize the housing market and housing prices across the country by adding pruchase demand to the economy. The increased demand fueld by the tax credit should have placed housing prices in check. If this incentive had achieved its purpose, housing markets would stabalize and the incentive could be removed. The US government decided that the end of April was a good point to check this correction.

    I think it will be late summer to early fall before we get a true reading on the full effect. I hope it worked, but I have the sinking feeling that it did not run for quite long enough. Jobs reports continue to be suspect with claims that the private sector is now paying the lowest percentage of wages since the Great Depression. This does not bode well for increased housing sales. Bully for the average American, savings rates are rising across the country, indicating that people have learned at leasst a partial lesson for the time being. However, that too means that large expenditures are being placed on hold.

    I believe the housing market in total will continue to be fragile. But what about your home? What if you have to move?

    The news can get better. While the housing market is fragile, it is also starved for quality product. I can’t tell you how disappointed I am with many of the homes that I tour. There are a number of inexpensive repairs that can be done to a house to get it ready to bring to market. New carpet and paint, a deep cleaning and decluttering, inexpensive cosmetic updates, cleaning the yard, timming the bushes, removing debris, etc.

    If you need to sell, please give me a call. I would be happy to schedule a walk-through and show you some of the easy things that will make your home sell quickly, even in a less robust market.

    For those inclined to move up, this remains the best of markets to increase your home size.

    Tax Season Is Upon US

    OK, so this isn’t my favorite time of year. It seems that as much as I pay in taxes, rarely do I see one of those refund checks. But in the spirit of helping others, here are a few items that might just help you receive a refund on your 2009 taxes. At a minimum, maybe these ideas will help you reduce the amount that you owe. As with all tax related issues, I strongly encourage you to consult with a CPA or tax professional to make sure that these tips apply to your particular situation.

    Trulia.com has just posted a great blog entry that covers the following five tips:

    1. 2009-2010 First Time Home Buyer Tax Credit
    2. 2009-10 Move-Up Buyer Tax Credit
    3. Energy Efficient Housing Tax Credits
    4. Private Mortgage Insurance Deduction
    5. The Mortgage Forgiveness Debt Relief Act

     

    And if you need to expand that list with a few more ideas, Kiplinger.com offers these:

    Source: Kiplinger

    Acquisition debt. See Mortgage interest.

    Boats as homes. A boat that has eating, sleeping and sanitary facilities can qualify as a first or second home, so you can deduct mortgage interest paid on the loan secured by the boat to buy it. However, if you are subject to the alternative minimum tax, this write-off is not allowed.

    Cancelled debt on foreclosure or short sale. Generally, when a debt is canceled or forgiven, the borrower is considered to have received taxable income equal to the amount of the canceled debt. However, through 2012, up to $2 million of debt discharged on a mortgage on a principal residence — in a foreclosure, for example, or short sale — can be tax-free.

    Casualty loss. If your home was damaged or destroyed — by fire or storm, for example — you may be able to get financial help from Uncle Sam by deducting a casualty loss on your return. Your deduction is generally the total of your unreimbursed loss reduced by $500 and further reduced by 10% of your adjusted gross income. However, for 2009, the 10% squeeze does not apply to any losses that occurred in federally declared disaster areas.

    Depreciation on home. Profit due to depreciation claimed on your residence before May 7, 1997 — because you had a home office, for example, or at one time rented out the property — qualifies for the rule that lets you treat $250,000 of home sale profit as tax-free income. (The limit is $500,000 if you’re married and file a joint return.) Profit due to depreciation after May 6, 1997, is taxed at 25%, unless you’re in a lower tax bracket, in which case that rate applies.

    Discharged debt. See Cancelled debt on foreclosure or short sale.

    D.C. first-time homebuyer credit. If you bought a home in the nation’s capital during 2009, you may be eligible for a $5,000 tax credit. It doesn’t really have to be your first home … just a home you purchased in the District of Columbia after not owning one in D.C. for at least one year. It doesn’t matter if you have owned a home elsewhere. This break phases out as income exceeds $70,000 on single returns and $110,000 on married filing jointly returns. See first-time homebuyer credit.

    Energy credits. You can earn a 2009 tax credit for installing energy-saving home improvements such as new doors, new windows, energy-efficient furnaces, heat pumps, hot water heaters, air conditioners, etc. The credit is 30% of the cost of installing such energy savers, up to a top credit of $1,500. For windows and doors, the credit is based on the cost of the materials; for furnaces and air conditioners and the like, you can count the cost of installation, too. A bigger credit is available for more ambitious projects – like solar hot-water heating systems, geothermal heat pumps and, yes, even residential wind energy systems. Start generating your own power and Uncle Sam will rebate 30% of the full cost of your system…with no dollar cap.

    First-time homebuyer credit. If you bought a home in 2009, you may qualify for either an $8,000 or $6,500 home buyer credit. And, you don’t really have to be a first-time home buyer to qualify for either credit. To qualify for the $8,000 credit you (and your spouse if married) must not have owned a home in the three years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $8,000. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (There’s no price cap for purchases earlier in the year.)

    To qualify for the $6,500 credit, you must be a long-time homeowner, defined as owing and living in the same principal residence for five of the eight years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $6,500. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (Again, there’s no price cap for purchases earlier in the year.)

    Unlike a first-time home buyer credit available in 2008 – which had to be paid back over 15 years by adding $500 in each of those years to the taxpayer’s tax bill – the 2009 credit does not have to be paid back, as long as you live in the principal residence for at least three years.

    Foreclosure. See Cancelled debt on foreclosure or short sale.

    Home-equity debt. Interest on up to $100,000 of debt secured by your first or second home — using a second mortgage, say, or home equity line of credit — can be deducted, regardless of how the money is used. The use of home-equity debt gives homeowners an opportunity to skirt the rules that generally block the deduction of debt used to buy automobiles, for example, or pay for vacations.

    Home-office deduction. You can deduct the costs of a home office that you use exclusively and regularly for business. This includes depreciation, utilities and insurance for the office portion of your home. To qualify for the tax break you must either meet with clients there regularly, or the home office must be your principal place of business (unless it is not attached to your house).

    Home-sale exclusion. Up to $250,000 of profit from the sale of your home can be tax free; $500,000 if you are married an file a joint return. To qualify, you must own and live in the house for periods totaling two years out of the five years leading up to the sale. A reduced exclusion is available if you fail the two-year test due to unforeseen circumstances such as a move resulting from a job change, for example, or divorce. You can use this exclusion any number of times but no more frequently than once every two years.

    IRA payouts for first-time homebuyers. You can withdraw as much as $10,000 from a traditional IRA early (before age 59½) without penalty if the money is used to buy the first home for yourself, a child or grandchild, or your parents or grandparents. Although the payout avoids the normal 10% early-withdrawal penalty, it is taxed. If a Roth IRA is involved it is taxed as income. See Roth IRA payouts for first-time homebuyers.

    Loan prepayment penalties. If your lender charges you a penalty for prepaying your mortgage early, the charge is deductible as mortgage interest.

    Mortgage interest. You can deduct interest on up to $1.1 million of loans used to buy or build or improve your first or second home and secured by the property. Up to $1 million of such debt is called acquisition debt, which must be used to acquire or improve the property, and up to $100,000 more is called home equity debt, which can be used for any purpose.

    Mortgage interest credit. If you received a mortgage credit certificate from a state or local governmental agency, you can claim a tax credit of up to $2,000 of mortgage interest paid.

    Moving expenses. If a move is connected with taking a new job that is at least 50 miles farther from your old home than your old job was, you can deduct travel and lodging expenses for you and your family and the cost of moving your household goods. If you drive your own car, you can deduct 24 cents a mile for 2009 moves. (For 2010, the standard mileage rate for moving is 16.5 cents a mile.) If you moved to take your first job, the 50-mile test applies to the distance between your old home and your new job. The deduction is allowed even if you do not itemize deductions.

    Parsonage allowance. For members of the clergy, the value of a home provided by the church is a tax-free fringe benefit. A housing allowance is also tax-free.

    Points. Points you pay to get a mortgage for your principal residence are generally fully deductible in the year paid, even if you persuade the seller to pay your points for you. They are not deductible if paid as part of a refinancing; in that case, you deduct the points over the life of the loan.

    Presidentially declared disaster. If your home was damaged or destroyed in an area that the President declared a disaster area, special rules apply to the casualty loss deduction. For one thing, for 2009 losses the law waives the requirement that you reduce your loss by an amount equal to 10% of your adjusted gross income to arrive at the deduction. And, you may choose to deduct your loss in the year it occurred or the previous year, whichever is more advantageous.

    Property taxes. See Real estate taxes.

    Real estate taxes. You can deduct state and local real estate taxes paid during the year on any number of personal residences you own. If you choose to claim the standard deduction rather than itemize deductions, you can add $500 if single or $1,000 if married filing jointly to the regular standard deduction amount if you paid at least that much in state and local real estate taxes. (If you own rental properties, real estate taxes on them are deducted on Schedule E where you report rental income.)

    Real estate taxes when you buy a home. If you bought a home during the year, check to see if the seller had prepaid property taxes for a period you actually owned the home. If so, include that amount in your property tax deduction for the year . . .even if you did not reimburse the seller.

    Recreational vehicle. If your RV has cooking, sleeping and sanitation facilities, interest on a loan used to buy it can qualify as deductible mortgage interest on a first or second home. If you are subject to the alternative minimum tax, interest on an RV loan is not deductible.

    Refinancing points. Generally, points paid when refinancing are deducted over the term of the loan. But if you refinanced a loan that you previously refinanced, you can deduct in full the as-yet-undeducted points remaining on the prior loan. There’s a catch, however: If you refinanced with the same lender, the remaining points must be amortized over the term of the new loan.

    Rehabilitation credit. If your residence is certified by the government as a historic building, you can claim a tax credit for 20% of the cost of renovating it. The renovation must be substantial, and the expenses must be incurred within a 24-month period.

    Reverse mortgage. Amounts received under a reverse mortgage — either a lump sum payment or periodic payments — are tax free. Interest that accrues on a reverse mortgage is not deductible until it is paid, and then only interest on up to $100,000 of debt can qualify.

    Roth IRA payouts for first-time homebuyers. Because the rules for the Roth IRA allow you to withdraw contributions at any time without penalty, the Roth can be a powerful tool for saving for a first home. Say you and your spouse each put $5,000 a year into a Roth for five years. The entire $50,000 could be withdrawn tax- and penalty-free for a down payment and, because the accounts have been opened for at least five years, up to $10,000 of earnings can be withdrawn tax- and penalty-free if used to buy your first home.

    Serial refinancers. If you refinanced in 2009 and paid off a home mortgage you acquired when refinancing to pay off an earlier mortgage, any as-yet-undeducted points on the previous refinancing may be deductible on your 2009 return. See Refinancing points.

    Tax-free profit. See Home sale exclusion.

    Tax-free profit on vacation home. Because Because you can use the home-sale exclusion repeatedly, it’s possible to make profit on a vacation home tax free. If you move into the place and live there for two of the five years prior to selling it, you can qualify to claim up to $250,000 of profit tax free (up to $500,000 if you are married and file a joint return).

    Since 2008, however, the potential value of this break has been diluted. For vacation homes converted to principal residences after December 31, 2008, a portion of the gain will be taxed. The taxable part will be based on the ratio of the time after 2008 when the house was a second home or a rental to the total time you owned it. So if you have owned a vacation home for 18 years and make it your main residence in 2011 for two years before selling it, 10% of the gain would be taxed. The rest would still qualify for the exclusion of up to $500,000.

    Tax-free rental income. If you rent out your home for 14 or fewer days during the year — when there’s a major sporting event or political convention in your hometown, for example — the rental income is tax-free, regardless of how much you make.

    Vacation home. Mortgage interest on your second home is deductible, just as it is for your principal residence. Property taxes can be deducted on any number of homes. If you rent the place for 14 or fewer days during the year, the rental income is tax-free to you. If you rent it for more than 14 days a year, you must report the income, but also may claim deductions for rental expenses.

    Strong First Time Home Sales Make This a Move Up Market!

    Over the course of the last year, I have noticed that my personal sales history shows that smaller homes are selling much faster than larger homes.  I have seen a number of 3 bedroom, 2 bath homes sell in less than 30 days, even in this austere market.  And these homes are selling for strong prices, several having appreciated in the last year.  One of the small homes that I sold in 2009 set the mark for the highest price per square foot in its Plano neighborhood.

    Across the nation, the strength of smaller size homes seems to be consistent.  A USA Today article published this morning addresses this topic directly.  The article quotes statistics from the National Association of Home Builders noting that this trend has not been overlooked by those who bring new product to the market.  The median square footage of homes has dropped about 9%, from a peak of 2300 sq ft in the third quarter of 2006 to 2100 sq ft in the same period of 2009.

    I believe there are a couple of factors that cause this trend to occur.  First, the general strength of the economy has everyone scrutinizing expenditures, and people are beginning to realize that they can survive on less.  The thought pattern goes something like this “We’d love to have the media room, but do I really need it?  Perhaps now is not the time – we’ll get that in the next house.”  Second, the strongest segment of the market is in first time home buyers.  People are realizing that given price levels, interest rates and tax incentives, it make sense to buy a home rather than rent for those who can qualify for a mortgage.  First time home buyers have not built up equity over the years and usually start by purchasing smaller homes.  The combination of these occurrences leads to smaller homes outperforming larger homes in the current market.

    So what’s the moral of the story?  If you have been in your first home for the last several years, and are thinking that perhaps now is the time to move up, you couldn’t be more right.  Your smaller starter home will yield the best price in the market, and the home that you purchase will likely be discounted from its level of the past couple of years.  The market is taking shape to make now the best time to step into a larger home.

    Did the First Time Home Buyer Tax Credit Work?

    As 2009 draws to a close, I am wondering how well the first time home buyer tax credit worked this year. Rather than simply speculate, I will look to market numbers to answer the question. According to the National Association of Realtors (NAR), first time home buyers accounted for 47 percent of all real estate transactions that were completed thus far in 2009. That figure represents an all time high percentage of first time home buyers, eclipsing the mark of 41 percent that was seen last year and the previous record high of 44 percent in 1991.

    Money Picture
    Up to $8000 coming back to First Time Home Buyers

    Paul Bishop, NAR Vice President of Research notes, “It’s interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession.” Well, I’m all for pulling out of the recession, so I sure hope that an upward trend of home sales continues in 2010.

    In addition to the tax credit received by first time home buyers in 2009, there were additional factors that contributed to the increase in the number of first time home buyers. Interest rates were phenomenally low throughout the year. I would hope that they remain low through the next year, but prolonged periods of interest rates this low have not often been observed in our economic history. Additionally, home prices in many areas fell during the past year. So, bottom line, there was a product “on sale” with very cheap financing that someone (Uncle Sam) was paying the consumer to buy. Sounds like a good recipe for success. To those first time home buyers who purchased a home in 2009, congratulations! To find out if, and how much, tax credit you received, click here.

    First Time Home Buyer

    Although it may seem counter-intuitive, I believe that now is an excellent time for first time home buyers in Dallas to enter the market. Many entry level homes are available at great prices in Dallas, especially if you are a first time home buyer that can do a few repairs. The number of foreclosure properties in Dallas is increasing, but these properties frequently come with a few warts. Given that the last occupant could not afford the mortgage, it is likely that they could not afford to keep up with repairs either. However, with a little TLC, Dallas homes can be spectacular again. They are all at a discount price for first time home buyers in Dallas.

    Dream House Sketch
    Live Your Dreams!!

    So how do you go about buying a home in Dallas as a first time home buyer? How do you know if you are getting a good deal? How do you get it financed? How does the closing process actually work? How do I obtain good advice when being a first time home buyer? All of these are great questions, and the answer to most of them is “don’t do what I did when I was a first time home buyer in Dallas.” Here’s my story…

    Young and relatively new to Dallas, I was ready to be a first time home buyer. A US Navy officer at the time, I knew that I could obtain financing through the VA and have little out of pocket cost. I walked into a local real estate office in and announced that I was ready to be a first time home buyer in Dallas. I was soon signing a long term representation agreement with an agent that turned out not to know very much. It was up to me to figure things out, and I made some rather large mistakes (bought a house about 300 yards from the Dallas county line. Had I crossed over the line, taxes and car insurance would have been significantly cheaper).

    So here are my recommendations to any first time home buyers . First, work with a seasoned agent or broker that has years rather than minutes of experience about Dallas real estate. Get to know them before signing a long term agreement, and then only sign an agreement if you have a way out. Don’t get yourself tied up for six months. Good agents will always have clauses that will release you from the agreement. Also, if you are a first time home buyer in Dallas make sure that you really trust the person you are working with. Watch the way that they present information and ask questions until you can determine whether or not they seem knowledgeable and trustworthy. If you can get a reference from a friend, do so. If the references you use are provided by the agent, ask them hard questions.

    Second, if you are a first time home buyer in Dallas get yourself qualified for a mortgage before you start a serious search. This will let you know what you can afford. No sense looking at $750,000 homes if you only qualify for a $200,000 mortgage as a first time home buyer. When it comes time to make an offer, you are going to have to prove to the seller that you can obtain financing before they will accept the offer. Going through the qualification process early as a first time home buyer in Dallas will help throughout the process.

    Finally, think about the things that are really important to your life, and find a home near them. Being a first time home buyer, I purchased in the outer Dallas suburbs, but my life never moved out there. All of our friends and social events were in Dallas. Being a first time home buyer, I could have afforded to pay a higher mortgage in exchange for the fuel and wear and tear that I put on my cars.