The monthly mortgage payment on a home is generally determined by two elements: the price of the house and the interest rate you pay on your mortgage. There are other factors too, like taxes, insurance, and homeowners association dues, but to keep it simple, let’s just look at price and mortgage rate.
HOME PRICE PROJECTIONS. Recently released reports are revealing that the experts expect both of those elements to increase in 2016. Nationwide, a 5.2% home value appreciation for the next twelve months has been projected. This image gives you a breakdown by state. Texas is expected to see a 2.4% increase, although I wouldn’t be surprised if that percentage is higher given what has occurred just in the past 6 to 8 months here in the Dallas-Fort Worth area.
MORTGAGE INTEREST RATES. All four of the entities that provide projections on mortgage interest rates agree: they’re going up in 2016. And if you’ve spoken to me about the market anytime within the past year, you’ve probably heard me say the same thing…rates are going to go up. They really have to, because the “frenzy” that we’ve experienced in this market really can’t continue. The financial powers that be are going to be interested in stabilizing things a bit, and stabilization in this case means an interest rate increase. Here are the predictions over the next four quarters:
BOTTOM LINE: With both home values and interest rates projected to increase over the next twelve months, buying (or moving-up), sooner rather than later, makes sense. Conventional wisdom says that the holidays aren’t a good time to list…well I can tell you that last week was Thanksgiving, I had two clients who trusted what I told them about the holiday season being a good time to sell a home because there’s less competition out there, and one of those homes is under contract and the other has an offer. If the time might be right for you, I’m looking forward to hearing from you soon!
If you’re fortunate enough to live in North Texas you’ve no doubt seen plenty of media stories about our region’s rising home values. So, it’s only natural if you’ve been wondering, “What’s my home worth now?” Well, the reality is there’s more than one answer. Your home actually has three potentially very different values…
If your home is destroyed by a disaster, like a fire or tornado, replacement cost is what it would take to remove debris and rebuild. Most experts agree that homes should be insured for 100 percent of the minimum estimated replacement cost. If your home is not, you run the risk of coming up short if the cost to rebuild is more than your coverage will pay.
Property Tax Value
This is the number taxing authorities use to calculate your property tax bill. Typically, property tax values are meant to approximate a home’s market value, though sometimes there are large discrepancies between the two because of outdated assessments or mistakes by assessors. If the property tax value of your home exceeds the market value, consider contesting the value with your taxing authority. The market is so crazy these days that I have witnessed many taxing authorities in North Texas overvaluing homes, and I have helped many clients with information to contest their property tax value. It’s very important to pay attention to that value!
This is the measure most of us think of when trying to estimate our home’s value. Determined in part by the price people have paid or are willing to pay for similar houses in your neighborhood, market value is not based on what you paid for the home or how much it cost to remodel that beautiful new kitchen or master bath.
Determining market value is a job for a properly educated real estate professional, like yours truly, of course. If you’re considering offering your home for sale, let me know. I’m happy to run some numbers for you to see if the value you have in mind is consistent with what the market says your house is worth. And really, now is the time – I ran some numbers for a client in September but she wanted to wait until she found a home she wanted to purchase before she listed her house, so a month and a half later, I ran numbers again when she was ready to list…her value had gone up about $12,000 due to 3 good sold houses (i.e., comps or comparable properties) that had closed in between. I couldn’t quite believe it myself! Bottom line, if you’re considering selling, please get in touch, I’d love to help!
Master bedrooms should be relaxing places of refuge, right? A place where we go to decompress, maybe read a good book or have a good conversation with our spouse. But let’s face it, most of us use it as a place to pile laundry and/or crash at the end of a long day of work and taking care of kiddos. So really, what are some simple things that we can do to make the master bedroom a more inviting space that we want to be in and enjoy? Here are 5 that will help, even though laundry will probably still pile up and grown-ups will probably still be exhausted much of the time!
- Bedding. Add some colorful pillows or a new comforter/duvet.
- Headboard. Change your headboard out, especially if all the furniture matches! This is a great way to add some uniqueness and a personal touch to your bedroom.
- Area Rug. Add a rug to tie the whole room together and provide a real cohesiveness to the overall look of the bedroom.
- Paint. Change the paint color; this is the easiest way to made a big change to a room without a big hit to the budget!
- Lighting. Buy new lamps, or go “shopping” in other rooms of your home to move the lamps from one room to the master bedroom. The lighting itself will change the room, and the looks of the lamps will make a change as well.
And if you can’t change up your master bedroom enough to satisfy you, and only a different master bedroom in a different house will do, get in touch with me – I can help with that!
What do most people do when they’re thinking of buying a home? Look at homes for sale on the internet. Then what do they do? Contact an agent to go see a home, or maybe two. Potential buyers find agents in many different ways, but the best way is to ask friends and family about realtors that they’ve used and had a good experience with. The worst way is to just pick an agent at random over the internet, meet them one time, and allow that agent to represent them WITHOUT doing any research or asking any questions.
A home is the biggest asset most people will ever buy, and I take that very seriously. I expect to be asked questions, and in fact I like to be challenged because it shows me that the potential buyer is taking the home-buying process seriously as well. I have been the seller’s (i.e., listing) agent so many times when I actually feel badly for the buyer due to the quality of representation that they’re getting.
For example, in Texas during the home buying process, once you put an offer on a house and get it under contract, the buyer has to submit two money payments immediately – one for approximately $100 (option money) and another for 1% of the contract price of the home (earnest money). That earnest money is often a large sum of money and buyers don’t want to lose that money if they need to back out of the contract. A good realtor will be watchful and mindful of the critical timeframes in the home buying process that could cause that money to be returned or forfeited – this is critical and is an important part of the job of a realtor! But many realtors are not as aware of the contractual timeframes, and sadly, buyers sometimes have to lose that money when that could have been avoided simply by a buyer agent paying more attention to the transaction. In fact, this scenario was noted as One of the 5 Foolish Mistakes a Home Buyer Can Make by USA Today. I just had this happen, and I am on the listing side…the buyer terminated after their time period ended for receiving their earnest money back, and now contractually they owe the seller $2,500, and they can’t buy the house!
So, these are some vital questions a buyer agent should be asked:
- How many buyers have you helped buy homes this year and/or last year? In my opinion, that answer should be at least 10, which is a number that represents enough business that the realtor knows what they’re doing and does it on a regular basis. Also, don’t hesitate to ask for references, especially if this is a realtor who wasn’t a referral.
- What is the basic home-buying process? A realtor should be able to answer this quickly and effectively. I even provide a flowchart document for my buyers that goes through the process in a simple and graphic way – here’s a link to my Home Buying Flow Chart.
- What do other houses like this one sell for in this area? Many realtors won’t be able to answer this one on the spot, but they will offer to find out for you. Most often, I’ll say to a buyer that I think a home is priced well, or priced high, or give a general response, and then I’ll go do specific research to answer that question. The point of this is though, that a buyer needs a realtor to understand why they’re asking and to be willing and able to provide the answer.
- What are some ways I can make my offer stand-out to a seller? An agent that helps a lot of buyers and is familiar with helping buyers in this sellers market (i.e., multiple offer market) will have some good ideas for a buyer that will help their offer stand out.
- What should I expect to spend before closing? And is any of that money refundable? No buyer wants to put an offer or a contract on a house thinking they’re either going to lose money or back out of buying it. But, things happen and it’s an agent’s fiduciary responsibility to protect the buyer’s money to the furthest extent possible. This is a question that a good buyer agent can answer immediately. If the realtor can’t answer this question, find another realtor!
Bottom line, buyers need an agent they can trust, but should take great care not to put that trust in the wrong realtor. They shouldn’t be afraid to ask questions and demand answers of a realtor – a good one will not hesitate to answer them and will be up to the challenge! Questions, comments, want to ask me these questions? I’m ready, just get in touch!
In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges we real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, I believe that it’s always best to tell the homeowner the truth…this is more important than getting the seller to “like me”, because I’m there to try to help them sell a house! Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” But this is important to remember: there is no “later”.
Research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes. John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Price published in Real Estate Economics revealed:
“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”
Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.
Don’t build “negotiation room” into the price. Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house. Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it! One great way to see this is with the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.
The best strategy is to price your house properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house. Look at it this way: if you only receive one offer, you are not in as much of a “power position” with the one prospective buyer as you are when you have multiple offers. When you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?
The Price is Right…Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Look for an agent that will take the time to simply and effectively explain what is happening in the housing market and how it applies to your home. You need an agent that will tell you what you need to know rather than what you want to hear. This will put you in the best possible position. Questions? Comments? Get in touch with me…I’m here to help with any of your real estate needs!
One of my preferred lenders, Kristy Osborn with Service First Mortgage, sent out an e-mail the other day that I thought would be so helpful to both Buyers and Sellers. It really illustrates how there are so many things to think about in the home-buying and selling processes, and how it’s so important to surround yourself with a good realtor, good lender, good title people, etc. when you’re going through it. Getting the contract is not the end of the process! You can breathe a sigh of relief, of course, when you do get that contract, but that’s only half the battle – getting it to close is the other half. How can you ensure that the loan will close? The short answer is that’s it’s never 100% guaranteed (that’s only death and taxes, right?). But, educating yourself on the various issues that could come up during the processing of a loan to buy a house is a great way to help you to understand what it really takes to get that house closed, whether it’s your loan as the buyer or you’re on the seller side. So, in the words of one of my fabulous lenders, here are the Top Ten Reasons Loans Go Bad…
- Got No Time Left– In the market that we are in, one of the #1 ways to sabotage a smooth closing is having unrealistic expectations for the time it will take to close. A minimum of 18 business days from the time we get the contract in our hand (providing that we can order the appraisal and the title work immediately) is the time it takes to close on a home. It is taking 2 weeks to get tax return verifications through the IRS. It is important to also understand that appraisers, title companies, inspectors, underwriters, etc, etc are maxed out in this unprecedented market and over commitment will only lead to frustration.
- Needing 411– Lack of Disclosure/Information– So many times we think of this when it comes to sellers. But when a buyer is not up front with the lender, there is a very good possibility that the transaction will blow up during the verifications. Lenders are required now to verify tax returns, employment, income, and bank accounts as well as various other information. It is vital that the buyers get all their documentation upfront so that there are no surprises at the end.
- Gimme More– Delay of Information/Documentation– The guidelines are tighter, underwriters have no “wiggle room” to overlook any discrepancies and over documentation is the name of the game. Borrowers must get all requested documentation to their lender immediately and upfront and also understand that there is a very good possibility that more will be asked for during the process.
- For What It’s Worth– The art of appraising a home and opinion of appraisals is harder than ever. Lenders want the majority of comps to be within 90 days and second review appraisals are very common (and subject to underwriting discretion). If you cannot find the comps, neither can the appraiser- there is no secret to this :). The old “adage” of if the buyer is willing to pay it then the appraisal should reflect it is no longer true. Bottom line: if the comps are not there, it will not appraise.
- What You Don’t Know WILL Hurt You– Buyers using inexperienced loan officers (or bank or call center “order takers”) to handle the most important financial transaction of their life is like having a 1st year med student perform open heart surgery on them. Don’t let inexperienced loan officers and call center order takers “practice” on your loans. Trust only experienced and knowable loans officers that are highly competent and passionate about their commitment to their buyers and know what it takes to close smoothly.
- Wastin’ Time– Even (and especially because) in this volatile time period in our market, we are continually amazed when realtors and buyers write up contracts on properties without having the buyer be pre-approved through a knowledgeable mortgage professional. Speaking first (not after) with an experienced loan officer before writing up a contract is so important and eliminates wasting the time of everyone involved.
- Calculate This– To make certain that closings go smoothly, it is important to ensure that buyers AND sellers understand their cost involved before agreeing to a contract. This seems to be so simple, yet we see the opposite on a daily basis. It is important for the buyer (or agent) to contact us once they have found a specific home so that we can run the numbers again to make certain that they are comfortable with the out of pocket and estimated monthly payment (and can then call the listing agent and let them know that they have been pre-underwritten as part of our First Assure Program).
- It is NOT Like The Old Days– Currently, Conventional Loans Are Not a “Catch-All” for Distressed Properties– We still hear on a weekly basis “The property has foundation issues; The property is distressed; The property is in bad condition…… so we need to go Conventional”. Did you know that PMI companies (needed on Conventional loans with less than 20% down) are just as strict on property condition as FHA?
- Flip This House– According to FHA and USDA guidelines, a re-sale of property occurring 90 days or less from the date the seller acquired the property is not eligible for FHA insurance. In addition, the contract to purchase this home, using FHA or USDA financing CANNOT be executed until the 91st day. It is very important to understand the Flipping Guidelines so that the closing is not delayed or comes to a screeching halt.
- The Times They Are ‘A-Changin’– It is so important to understand that we are in a market unlike most of us have ever experienced. Guidelines are tighter for credit, income, employment, assets, ratios, down payment as well as other factors. A perfect example of this is that lease agreements are typically not allowed to offset current house payments for those buyers wanting to purchase but keep another property. You need a lender who has the latest information on all guidelines involved in processing and closing a loan.
I’d love to hear from you if you’re wanting to start the pre-approval process or if you have questions about home buying or selling, and I know that Kristy Osborn is also ready to help in any way she can!
The process of buying a home is such a mystery to most people. It’s this overwhelming “thing” with all these moving parts and strange lingo, not to mention the legalese of the documentation (thank you, attorneys!). For my buyers, I’ve wanted to break down the process into easy-to-understand steps, so I created a flowchart to help. The terms are described along with the timing of the different things – like the inspection, financing, appraisal, etc. – that have to happen to get to the closing table, and to get those keys!
Believe it or not, I can’t get all the ins and outs of home buying into one flowchart, even one that spans three pages. But, if you’re looking for a quick guide to the process, I hope this is helpful. If you’d like to receive this flowchart in PDF or a cleaner jpeg format, just let me know and I’m happy to send it to you!
As always, if you need anything house-related, I’m here for you – give me a call, shoot me a text or e-mail, just don’t tweet, because I’m not on twitter (yet!).
February is the month of LOVE…so, if you’ve loved your house in the past, but are ready to leave it, this blog post is for you! A big part of the selling process is to get top-dollar for you when you sell your house. I consider that a big part of my job, which is why I feel so strongly about professional staging and photography. But the other part of the equation is what a home seller can do – prior to putting a house on the market – to also help ensure they get the most money out of their home sale.
When I go on a listing appointment, I walk around the house and take notes. I ask the potential sellers what made them buy this house…what features did they love about it when they purchased the home? I find out what upgrades and updates they’ve done, both visible (like granite countertops, wood flooring, etc.) and behind the walls (new AC unit, new water heater). An important part of this walk-thru is identifying what things the potential seller should do to get ready to sell. This is not the time for big renovations! It’s the time to freshen things up a bit. Here are the top five ways I advise sellers that they can quickly and inexpensively get a home ready to sell for the most money (in the least amount of time), because that’s the goal!
- #1 CLEAN UP – De-clutter by doing it yourself, or hire a realtor (like me!) who provides this as a service to you! Buyers want to see the house, not the stuff inside it.
- #2 KITCHEN DUTY – The kitchen is the heart of the home, and it alone can sell a house! Consider painting, upgrading cabinet pulls, updating to stainless steel appliances.
- #3 BATHROOM BEAUTY – Master baths are especially important, so anything you can do to make it spa-like, such as painting, updating lighting, even fresh towels, can make a big difference with little time and money!
- #4 MAKE-UP FOR WALLS – The scuff marks and evidence of years of living in a home, especially with dogs and kids, can vanish with a fresh coat of paint to walls – grays and beige are best. And don’t forget those baseboards – make them stark white for a great finishing touch!
- #5 DRESS IT UP – Add some curb appeal with masses of flowers, trimmed up landscaping, and a painted door. Make buyers excited when they drive up to your house, so they can’t wait to see what’s inside!
I tell sellers that the most important thing – which is very appropriate for February, the month of Valentines Day – is that a home should feel loved and cherished, and like the sellers take great care of it. These things make it easier for a buyer to fall in love with it too. Want to know more? I’m always here for you, just get in touch!