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April 7, 2021

Don’t Sell on Your Own Just Because It’s a Sellers’ Market

 

In a sellers’ market, some homeowners might be tempted to try to sell their house on their own (known as For Sale By Owner, or FSBO) instead of working with an agent. When the inventory of homes for sale is as low as it is today, buyers are eager to snatch up virtually any house that comes to market, and often don't pause just because the seller is unrepresented. This makes it even more tempting to FSBO. As a result, some sellers think selling their house will be a breeze and see today’s market as an opportunity to FSBO.

Let’s unpack why that’s a big mistake and may actually cost you more in the long run.  I share some of this information from direct experience working as a buyer's representative for FSBO properties, and have seen firsthand what the sellers often leave on the table.

 

According to the Profile of Home Buyers and Sellers published by the National Association of Realtors (NAR), 41% of homeowners who tried to sell their house as a FSBO did so to avoid paying a commission or fee. Seems obvious, right?  Well, in reality, even in a sellers’ market, selling on your own likely means you’ll net a lower profit than when you sell with the help of an agent.  I'm not simply talking about getting your price.

 

The NAR report explains:

“FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $217,900 in 2020 (up from $200,000 in 2019), and still far lower than the median selling price of all homes at $242,300. Agent-assisted homes sold for a median of $295,000…Sellers who began as a FSBO, then ended up working with an agent, received 98 percent of the asking price, but had to reduce their price the most before arriving at a final listing price.”

 

When the seller knew the buyer, that amount was even lower, coming in at $176,700 (See graph below):

That’s a lot of money to risk losing when you FSBO – far more than what you’d save on commission or other fees.  We haven't even discussed the negotiating experience an agent brings to the table.  Despite the advantages sellers have in today’s market, it’s still crucial to have the support of an expert to guide you through the process. We live and breathe this process for a living.  A good real estate professionals is a trained negotiators with a ton of housing market insights that average homeowners may never have, and cannot gain simply from tracking the market through third party sites. An agent’s expertise can alleviate much of the stress of selling your house and help you close the best possible deal when you do.

 

Bottom Line

If you’re ready to sell your house this year and you’re considering doing so on your own, be sure to think through that decision carefully. Odds are, you stand to gain the most by working with a knowledgeable and experienced real estate agent. Let’s connect to discuss how a trusted advisor can help you, especially in today’s market.  That way you'll be able to evaluate your decision with facts and inside information.

 

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Montana Good Life Properties Inc and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

March 30, 2021

What It Means To Be in a Sellers’ Market

 


Butch and Debbie worked with us to sell & buy at the same time

 

If you’ve given even a casual thought to selling your house in the near future, this is the time to really think seriously about making a move. Here’s why this season is the ultimate sellers’ market and the optimal time to make sure your house is available for buyers who are looking for homes to purchase.

The latest Existing Home Sales Report(1) from The National Association of Realtors (NAR) shows the inventory of houses for sale is still astonishingly low, sitting at just a 2-month supply at the current sales pace.

Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (See graph below):What It Means To Be in a Sellers’ Market | MyKCMWhen the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. As a result, competition among purchasers rises and more bidding wars take place, making it essential for buyers to submit very attractive offers.

As this happens, home prices rise and sellers are in the best position to negotiate deals that meet their ideal terms. If you put your house on the market while so few homes are available to buy, it will likely get a lot of attention from hopeful buyers.

Today, there are many buyers who are ready, willing, and able to purchase a home. Low mortgage rates and a year filled with unique changes have prompted buyers to think differently about where they live – and they’re taking action. The supply of homes for sale is not keeping up with this high demand, making now the optimal time to sell your house.

Bottom Line

Home prices are appreciating in today’s sellers’ market. Making your home available over the coming weeks will give you the most exposure to buyers who will actively compete against each other to purchase it.

 

Read more about buying and selling at the same time in our post on this topic.

 

(1) NAR Existing Home Sales Report 

Feb. 24, 2021

Taxes: How Long You Should Keep Important Documents

 

Tax time is upon us! Here's some info on how long you should keep important documents?

Is it time for you to hand over your bookkeeping to someone so you can be free to focus on what you do best?  I have referrals for bookeepers, CPA's and business bookkeeping services.  Get in touch and I'll share some of my resources with you.  

Here's the general rule set by the IRS: The IRS recommends keeping tax-related documents for at least six years. An audit can be performed up to six years after filing if an error is suspected.

 

One Month:

»receipts for non-deductible items

»deposits / ATM slips

» reconciled bank statements

 

1-3 Years:

»paystubs

»bank records

»insurance policies

»investment statements

»mortgage statements

»receipts for charitable contributions

»all business-related documents

 

7+ Years:

»income tax returns (federal and state)

»W-2s and 1099s

»medical bills

»contracts

»receipts for tax-deductible items

»mileage records »cancelled checks

»real estate tax forms

»credit cards statements that contain purchases used as tax deductions

»retirement plan contributions

 

FOREVER:

»birth certificates

»social security cards

»passports

»education records

»auto titles

»investment statements

»home improvement receipts*

»receipts from major purchases*

»wills

»current insurance policies

»medical records

»pension / retirement contracts

»property agreements

»IRA contribution records

»mortgage documents (INCLUDING payoff/reconveyances)

»life insurance policies

»safe deposit box inventory

 

*for insurance purposes

 

 

Download the printable file to keep in your tax folder here. 

 

Feb. 22, 2021

Title Insurance vs Homeowner's Insurance: What's the Deal?

As soon as you go under contract for a property, a lot of questions will be thrown at you very quickly.  Understand part of the process beforehand can make you better equipped to move towards closing less stressed and better informed.

Sign up for our homebuyer education emails for more tips and tricks.

 

Title Insurance protects you from things that have already happened but are unknown or hidden.  

Homeowners Insurance protects you from what might happen.

 

A defect in title caused by forgery, fraud, undue influence, duress, or incompetency
A defect in title caused by undisclosed prior mortgage or other liens
No right of access to and from the land
A defect in title caused by improper execution of documents
A defect in title caused by documents not being properly filed, recorded, or indexed in the Public Records
One time premium
Damage to the contents of your home
Theft of personal property in your home
Living expenses if your home is uninhabitable
Damage to your home caused by fire, hail, windstorm, and vandalism
Personal liability for bodily injury or accidents to guests in your home
Structural damage to your home or detached structures
Annual premium

 

Contact us to get buyer intellingence tips in your email.  Or visit that category of our blog here

Feb. 17, 2021

What To Do When You Can't Find Your Next Home?

Selling quickly is definitely something to get excited about, but what comes next in a busy market with low inventory If you're ready to sell, but having a hard time committing to the process because you're worried about inventory of homes to buy, you do have options!
 
You want to avoid: 
  • Price cuts because you are under contract to buy another property
  • Low ball offers when buyers know you are in a bind
  • Having to rent out of necessity so you can honor the closing date  of your buyer
We may see more homes coming on market as spring starts to show it's face, but there's still a challenge for sellers:  When you need to buy another home when you are selling, until our inventory increases, finding that next home might take longer than it used to. But, in a sellers market, there are still more pluses and benefits to selling your home quickly than possibly being in limbo, in between homes. 
 
It all comes down to the planning.  Here are three options (among others) we discuss with our sellers before we go on market: 
 
1.  Short-term (Bridge or HELOC) loan:  This type of financing allows you to purchase your next home without a contingency to sell your current home.  Offers contingent on a sale and closing are rarely accepted in our market, with other offers beating them out with better terms.  This also allows you to move out of your current home into the new one, without the stress of keeping the home tidy and available for showings (a major stressor for sellers). 
 
2.  Sale contingent upon finding a replacement home:  This is somewhat common in a seller's market, stating the seller must locate and go under contract for their next home before they will set the closing date.  This option will limit the potential buyers for your home, since most moves are time sensitive, but if you have a desirable property, many buyers will often accommodate this.  I always recommend starting your search before you go on market, so you have a better idea of what's out there right now. 
 
3.  AirBnB or other executive long term housing options:  This is become more popular in our area as people relocate here for jobs and cannot find a home to buy.  You'll pay a premium for this option, but if it's for a month or two, and makes the difference between selling now at the height of our market or waiting, this can be a great option. Connect with an agent in your new location: We offer concierge level agent connection services across the state and country if you are relocating.  Connecting with a good agent at your destination can help you understand the pace and pricing of that market, and we can coordinate with them and the title companies so it goes smoothly on both ends.  
Learn more about that service here
4.  Rent back after closing:  This option allows the seller to stay in the home and "rent back" from the buyer or new owner for a specified period of time.  This is becoming more popular, so the seller has time to either close on the next home or just needs a couple of weeks or a month (or more) to pack, to finish school, whatever they need.   A lease agreement specific to this situation is drafted and signed by all parties, sometimes with a lease fee and sometimes not, with all of the terms and expectations spelled out.
 
 
 
Let us do the heavy lifting for you in helping you get ready to sell your home and buy the next one.  What can we achieve together?

Schedule Appointment

 

Nov. 19, 2020

What’s Your Home Buying Power?

 

If you’re in the market for a new home, piece of land or investment property, one of the first questions you’ll probably ask is, “What can we afford?” Many buyers become so caught up in how much they can afford that they don’t realize their total buying powerthat is, the total amount of purchasing potential they actually have.

 

Buying Power Defined

Your buying power is comprised of the total amount of money you have available each month for a mortgage payment. This means the money you have each month after fixed bills and expenses. Any money you’ve saved for a down payment, the proceeds from the sale of your current home, if applicable, and the amount of money you’re qualified to borrow all impact your buying power as well. When you take all of this into account, you may find you are able to purchase a larger home or a home in a more desirable neighborhood, or you might realize you should be looking for homes in a lower price range.

 

What About Housing Affordability?

Housing affordability is a metric used by real estate experts to assess whether or not the average family earning an average wage could qualify for a mortgage on the average home.1 Although this figure is essential to creating a comprehensive overview of the real estate market, it’s not a factor you should consider in your home search. What may be considered affordable to you based on your income and other factors may be different than what’s affordable to the average buyer.

 

Why Buying Power Matters

A common misunderstanding is that a home’s list price determines whether or not you can purchase it. Sometimes buyers are basing their decision on what they want to pay each month for a mortgage payment.  There's more to it than that. 

Of course it’s important to look at the price tag, but additionally it’s essential to consider what your monthly payment will be if you own the home. After all, the purchase price doesn’t include the housing-related expenses, such as annual property taxes, homeowner insurance, associated monthly fees and any maintenance or repairs. Figuring out the payment will prevent you from overestimating or underestimating your buying power. After all, you’ll live with your monthly payment, not the sales price.

 

Once you have clarity on your buying power, you’ll be able to buy the home you want, instead of settling for a home because you feel it’s the only one you can afford. It will also prevent you from becoming “house poor,” a common term for someone who’s put all their money toward the down payment, leaving them nothing left over for fees outside of their monthly house payment. Both scenarios can negatively impact the lifestyle you want to live. Understanding your buying power can help you get the home you want without sacrificing the lifestyle you desire.

 

If you haven’t sold your current home yet, a Comparative Market Assessment (CMA) will give you a general idea of how much you may get for your home based on what other homes have sold for in your area. Contact our team for a FREE CMA, we are happy to churn that you for you.

 

Calculating Your Buying Power

You might be wondering, “How do I know what my buying power is?” Buying power is calculated by adding the money you’ve saved for a down payment and/or the money you made from selling your home (minus fees and mortgage payoff) to all of your sources of income and investments that could be used to make your monthly payment. Make sure to include your monthly pay, commissions or tips, dividends from investments, payments from rental properties or other monthly income you receive as well as the loan amount you’re willing to finance and qualify for.

 

Most lenders advised buyers to spend no more than 35 to 45 percent of their pretax income on housing, meaning all your income and sources of revenue prior to paying taxes. Make sure you factor in not only your mortgage payment, but also property tax and home insurance to the cost of housing.2 However, other financial experts advise spending no more than a very conservative 25 percent of your after-tax income on your housing expenses.2  Whether you plan to spend the average, play it conservative or split the difference is up to you. There are programs with different parameters, but this is a good general guide to start with.

 

Traditionally, mortgage lenders have targeted the ideal housing expense amount to be a ratio of 28 percent or less.3

 

However, these figures bring up an important point: you don’t have to spend all of your savings and available monthly income on a mortgage payment. It’s important to set money aside for regular home maintenance, unexpected repairs and monthly fees, such as a condominium or homeowners association fee. While the above ratios are commonly accepted, a lender will look at your total financial picture when they decide how much they’re willing to lend. It may be tempting to take out a large loan in order to purchase the home of your dreams, but keep in mind the less money you have to borrow, the stronger your buying power may be.

 

4 Things That Impact Buying Power

1. Credit score. A great score can help you lock into a lower interest rate.

 

2. Debt-to-income ratio. The lower the ratio, the better risk you may be to lenders as long as you have an established credit history.

 

3. Assets, including the documentation of where the money for the purchase is coming from and the mix of your investments.

 

4. Down payment. The more you’re able to put down, the less you will have to borrow. With a down payment of 20 percent or more, you won’t have to purchase private mortgage insurance (PMI) and you may also be able to negotiate a lower interest rate.

 

How to Save for a Down Payment

If you’re thinking of buying a home one day, one of the first steps to take is to start saving for a down payment. Here are some tips to make saving easier.

 

First-time buyers:

1. Set a savings goal. One way to figure out how much to save is to use the average sales price for homes that are similar to what you want and figure out your target down payment percentage. For example, if homes are selling for $200,000 in your area and you want to put 20 percent down, you’ll have to save $40,000. Set a goal to save that amount within a specific time frame; just keep in mind the longer you save, the more the average selling price will change. Although the majority of buyers saved for six months or less, 29 percent of all buyers (and 31 percent of first-time buyers) saved for more than two years for a down payment.4

 

2. Cut back on expenses. Review your monthly expenses and look for ways to save. Twenty-nine percent of buyers cut spending on non-essentials items and 22 percent cut spending on entertainment while they were saving for a home.4 Think about items you can live without or cut back on temporarily while you’re saving.

 

3. Look for ways to boost your income. Get a side job or sell items online or at a garage sale to increase your income in a short amount of time. Be sure to save any windfalls you get, including your annual income tax refund or work bonuses.

 

4.  Check out home-buying programs. Your state, county or local government may offer special programs, such as grants, for first-time buyers to use.

 

5. Ask your family. Thirteen percent of all buyers, and 24 percent of first-time buyers, were given money from family or friends to use toward the down payment of their home.4

 

Repeat buyers:

More than 52 percent of repeat buyers used the proceeds from the sale of their primary residence toward the down payment on their next home.4 Similarly, 76 percent tapped into their savings accounts.4 If you’re thinking of buying another home, here are more ways to save more money, in addition to the tips listed above:

 

1. Rent a room. If you have an income flat (or mother-in-law unit) attached to your home, rent it out and channel the income into a high-interest savings account.

 

2. Make your money work for you. If you don’t plan to buy for at least five years, invest it and let the compound interest work for you. Discuss this option with your financial planner or broker to see if this is ideal for you and your goals.

 

3. Tap into your 401(k). If you have a 401(k) plan, you may be allowed to borrow a portion of it, the lessor of up to $50,000 or half of its value, for your down payment. Remember, it’s a loan so you’ll have to pay it back. If you leave or lose your job before you’ve repaid the loan, you’ll have between 60 to 90 days to repay the balance or face stiff taxes and penalties.

 

If you want to buy an investment property

Whether you’re buying a second home or a rental property, here are a couple tips to save for a down payment.

 

1. Tap into your equity. If you’ve paid off or paid down your mortgage on your primary home, you may be able to tap into your equity to purchase another property. Contact your lender to learn more about a HELOC or home equity loan.

 

2. Get a partner. Find a friend or relative who’s willing to purchase property with you. Typically, you’ll split the costs and profits equally. Just make sure to work with an attorney to create a partnership agreement to fit your situation.

 

 

Work Out Your Buying Potential

What’s your buying potential? Fill out this worksheet to get an estimate.

 

Housing Expense Ratio:

1. Monthly income before taxes

$

2. Multiply line 1 by 0.28

X 0.28

3. Monthly mortgage payment (PITI) should not exceed this amount

= $

4. Monthly income before taxes

$

5. Multiply line 4 by 0.36

X 0.36

6. Total monthly payments on all debts (including mortgage) should not exceed this amount

= $

7.  Subtract the total monthly payments on all outstanding debts (e.g., car loans, credit cards, student loans, etc.)

- $

8. The monthly mortgage payment should not exceed this amount

$

9. Look at line 3 and line 8. The lower figure is an estimate of the maximum mortgage payment in consideration of your income and debts.

$

10. Multiply line 9 by 0.80

X 0.80

11. This equals portion of your mortgage payment that is the principal and interest only

$

12. Use the table below to see the size of the loan you may be able to obtain with this monthly mortgage payment.

 

Source: Iowa State University Extension, What is your house-buying power?

 

Monthly Payment on 30-Year Fixed Rate Mortgage

Loan amount

3%

3.5%

4%

4.5%

5%

5.5%

6%

$50,000

211

225

239

253

268

284

300

$75,000

316

337

358

380

402

426

450

$100,000

421

449

477

506

536

568

600

$150,000

632

674

716

759

804

852

900

$200,000

842

898

954

1012

1072

1136

1200

$250,000

1052

1123

1193

1265

1340

1420

1500

$300,000

1263

1347

1431

1518

1608

1704

1800

 

Didn’t see your desired loan amount? Use the table below to estimate your monthly payment (principal and interest) per $1,000 of your loan. To figure out an estimated loan payment, multiply the factor by the number of thousands in the amount of your mortgage.

 

For example, if you intend to borrow $400,000, with a loan term of 30 years at 4% interest, multiply 4.77x 400 = $1908 per month.

 

Interest Rate

15-Year Term

30-Year Term

 

Monthly Payment

Monthly Payment

3%

6.90

4.21

3.5%

7.14

4.49

4%

7.39

4.77

4.5%

7.64

5.06

5%

7.90

5.36

5.5%

8.18

5.68

6%

8.44

6.00

Source: HSH.com http://www.hsh.com/mopaytable-print.html)

 

Don’t forget to factor in property taxes and insurance. These are often added to your principal and interest of your mortgage paymentthe money used to pay down the balance of your loan and the charge for borrowing the money. Since these numbers vary, contact your county assessor’s office for the current property tax rate and your insurer for a home insurance quote. Once you have these figures, divide each by 12 to estimate how much they’ll add to the above payment amounts.

 

Do you want a clearer picture of your buying power? Would you like to see what kind of homes you can get with your buying power? Give us a call!

 

Sources: 1. National Association of REALTORS https://www.nar.realtor/topics/housing-affordability-index/methodology

                2. Moneyunder30.com https://www.moneyunder30.com/percentage-income-mortgage-payments

                3. Credit.com https://www.credit.com/loans/mortgage-questions/how-to-determine-your-monthly-housing-budget/

                4. National Association of REALTORS, 2016 Profile of Home Buyers and Sellers

                5. Iowa State University Extension, What is your house-buying power? https://store.extension.iastate.edu/product/pm1460-pdf

                6. HSH.com http://www.hsh.com/mopaytable-print.html

 

 

 

 

 

 

Sept. 30, 2020

Buyer Survival Kit: Seller's Market Hacks for Buyers

How to get your offer accepted in a seller's market

Within the past several months, nearly every property I've put an offer in for a buyer has had multiple offers.  But we were the winning bid on every single one of them!  How did this happen?  By using my Buyer's Cheat Sheet and working closely together my clients were armed and ready.  In a seller's market with low inventory (hello, southwest Montana) there are a few things a buyer needs to know and have ready at their disposal.  So when the right property surfaces...BOOM!  We are on it like ducks on a junebug.

It's a crazy market all across the country right now.  But as I always tell my clients, someone has to get the property. Why can't it be you?

Here's my cheat sheet for getting a competitive edge:

Know what a seller's market is.

You've heard the terms buyers market and sellers market thrown around, but what do they mean?  Here's why it's a seller's market right now:

  • Properties are selling quickly at multiple price points
  • Many are selling for over list price with multiple offers
  • Many properties under contract have a back-up offer in place (sometimes more than one)
  • Very few properties come on market within a week's time

Get your paperwork in order.

Buyers have often been tracking homes and the market in general using the internet long before they choose their agent.  This is helpful, but unless you take the next step and meet with a lender, you'll be behind the eight ball when you find the perfect home, and there's a good chance not having the right paperwork to accompany an offer can leave you empty handed and out of luck.   Meet with a lender (or ask me for local referrals) to get a mortgage pre-approval letter showing your information has been reviewed and you are eligible for a mortgage to purchase the property.  Paying all cash?  Alert your banker that you'll be needing a proof of funds.  I recommend asking them to draft one so it's ready to customize with a property address without much delay.  This way the seller, their agent and your agent all know you have skin in the game.  Many agents (hello) won't show properties without confirmation you've spoken with a lender in a busy market.  It's a waste of everyone's time.

Make a  commitment to be ready at a moment's notice.

I'm not suggesting you put life and work aside to devote yourself full-time to finding the perfect home.  But, just allotting an afternoon on weekend's or calling multiple listing agents for info on a property will definitely NOT get you the property you want in a low inventory seller's market. When you commit to working with an agent who will get you that home, they are setting aside time in their schedule to meet your needs.  When the right property surfaces, be ready to see it as quickly as possible.  (Stay tuned for my upcoming Buyer Success Story where we made this happen).

Remove the "if's."

In slower markets (or with clients that haven't been properly coached by their agent),  buyers often believe they can rely on contingencies to think things through:  I like it but if there's a problem with this or that in the inspection, or I'll move forward if my lender can get me the terms I want...you get the idea, right?  they do so only with contingencies. For instance, they’ll buy the home if the inspection goes well or if they can secure financing. But in a seller’s market, it may behoove you to drop one or two of these caveats to stand out to sellers, who generally would prefer as few hurdles on the way to closing as possible.

Your agent should be able to coach you on what contingencies you can leave out and what are crucial, based on your situation.

Understand you are not large and in charge.

Back in the olden days (whenever they were for you) buyers came into negotiations expecting to bargain.  "Let's start here (insert low number) to get the ball rolling and see what happens."  In a seller's active market, there is often little room for negotiating on price.  There are exceptions, when a property is overpriced or has flaws discovered later, but most properties are ending up in multiple bid situations in less than 24-48 hours of going on market (remember my suggestion about being ready to jump?) and often go for well over asking price.

Widen your search.

Not just geographically, but in other ways.  Perhaps there's a clogged intersection that people avoid nearby, or some easy updates you could hire a handyman to do that scare away the non-handy buyers.  Go to open houses, talk to friends and colleagues (and your trusty agent) about referrals and general costs if you see items cropping up on properties.  This will help keep you nimble and ready to jump, as you'll be armed with real information to help with your decision.

Make your agent work.

In a hot market, it's easy to get discouraged or feel like you may overpay for a property.   Ask your agent to run comparable research for properties you are interested in.  This is researching sold, pending and currently active properties that are similar in style and location.  This will give you good solid information on how prices are moving.

When you find a place that fits the bill, you'll both be able to assess it quickly.  If they are just showing you properties and waiting for you to decide, find another agent.  They should be able to brainstorm different scenarios and options to help you make a clear decision.  That's the fun part for me!

 

 Contact me to sign up for my Direct Access Program for buyers and more tips on buying property in Montana, as well as this cheat sheet in PDF form. 

 

 

 

______________

Some information for this post provided courtesy of http://realtormag.realtor.org/daily-news/

Sept. 29, 2020

Move-Up Home vs. Second Home: Which One Is The Right Way To Go?

The pandemic has changed the way many of us live, work, and attend school—and those changes have greatly impacted our priorities when it comes to choosing a home.

 

According to a recent survey by The Harris Poll, 75% of respondents who have begun working remotely would like to continue doing so—and 66% would strongly consider moving if they no longer had to commute as often. Some of the top reasons were:

 

  • To gain a dedicated office space (31%)
  • A larger home (30%)
  • More rooms overall (29%).1 

 

And now that virtual school has become a reality for many families, the need for additional space has only intensified. A growing number of buyers are choosing homes further from town as they seek out more room and less congestion. In fact, a recent survey found that nearly 40% of urban dwellers had considered leaving the city because of the COVID-19 outbreak.2

 

But not everyone is permanently sold on suburban or rural life. Instead, some people are beginning to research what it would take to purchase a second home as a co-primary residence or frequent getaway. 

 

Let’s explore each option to help you determine which one is right for you.

 

 

WHY CHOOSE A MOVE-UP HOME?

 

A move-up home is typically a larger or nicer home, or a home with a floor plan better suited to your new lifestyle. It’s a great option for families or individuals who simply need more space, a better location, or want features their current home doesn’t offer—like a dedicated home office. 

 

Most move-up buyers choose to sell their current home and use the proceeds as a down payment on their next one. If you’re struggling with a lack of functional or outdoor space in your current home, a move-up home can greatly improve your everyday life. And with mortgage rates at their lowest level in history, you may be surprised how much home you can afford to buy without increasing your monthly payment.3,4

 

To learn more about mortgage rates, contact us for a free copy of our recent report! 

“Lowest Mortgage Rates in History: What It Means for Homeowners and Buyers”

 

One major benefit of choosing a move-up home is that you can typically afford a nicer place if you spend your entire budget on one property. However, if you’re longing for that vacation vibe, a second home may be a better choice for you.

 

 

WHY CHOOSE A SECOND HOME?

 

Once reserved for the ultra-wealthy, second homes have become more mainstream. Home sales are surging in many resort and bedroom communities as city dwellers search for a place to escape the crowds and quarantine in comfort.5 With air travel on hold for many families, some are channeling their vacation budgets into vacation homes that can be utilized throughout the year. 

 

A second home can also be a good option if you’re preparing for retirement. By purchasing your retirement home now, you can lock in a low interest rate, start paying down the mortgage, and begin enjoying the perks of retirement living while you’re still fit and active. Plus, it’s easier to qualify for a mortgage while you’re employed, although you may be charged a slightly higher interest rate than on a primary home loan.6

 

One advantage of choosing a second home is that you can offset a portion of the costs—and in some cases turn a profit—by renting it out on a platform like Airbnb or Vrbo. However, be sure to consult with a real estate professional or rental management company to get a realistic sense of the property’s true income potential.

 

 

WHICH ONE IS RIGHT FOR ME?

 

You may read this and think: I’d really like both a move-up home AND a second home! But if you’re dealing with a limited budget (aren’t we all?), you’ll probably need to make a choice.  These three tactics can help you decide which option is right for you.

 

1. Determine Your Time and Financial Budget

 

You may meet the bank’s qualifications to purchase a home, but do you have the time, energy, and financial resources to maintain it? This is an important question to ask yourself, no matter what type of home you choose.

 

Most buyers realize that a second home will mean double mortgages, utilities, taxes, and insurance. But consider all the extra time and expense that goes into maintaining two properties. Two lawns to mow. Two houses to clean. Two sets of systems and appliances that can malfunction. Second homes aren’t always a vacation. Make sure you’re prepared for the labor and carrying costs that go into maintaining another residence.

 

Of course, some move-up homes require more work than a second home. For example, if your move-up option is a major fixer-upper, you’ll probably invest more energy and capital than you would on a small vacation condo by the beach. Have an honest discussion about how much time and money you want to spend on your new property. Would a move-up home or a second home be a better fit given your parameters?

 

2. Rank Your Priorities

 

If you’re still undecided, make a wish list of the characteristics you’d like in your new home. Then rank each item from most to least important. This exercise can help you determine your “must-have” features—and which ones you may need to sacrifice or delay. Here’s a sample to help you get started:

 

          FEATURE

  • Dedicated home office
  • Extra bedroom
  • Pool
  • Walk to the beach
  • Big backyard
  • Close to friends and family
  • Short commute to the office
  • Investment potential

 

 

3. Explore Your Options

 

Once you’ve determined your parameters and priorities, it’s time to begin your home search. 

If you’re still not sure whether a move-up home or a second home is right for you, we can help.

 

Contact us to schedule a free consultation. We’ll discuss your options and help you assess the pros and cons of each, given your unique circumstances. 

 

We can also send you property listings for both move-up homes and second homes within your budget so you can better envision each scenario. Sometimes, viewing listings of homes that meet your criteria can make the decision clear.

 

 

LET’S GET MOVING

 

Whether you’re ready to make a move or need help weighing your options, we’d love to help. We can determine your current home’s value and show you local properties that fit within your budget. Or, if your heart is set on a second home in another market, we can refer you to an agent in your dream locale. 

 

Sources:

1. Zillow -

https://www.zillow.com/research/coronavirus-remote-work-suburbs-27046/ 

2. The Harris Poll -

https://theharrispoll.com/should-you-flee-your-city-almost-40-have-considered-it-during-the-pandemic/

3. MarketWatch -

https://www.marketwatch.com/story/mortgage-rates-keeping-falling-so-will-they-finally-drop-to-0-2020-08-13

4. Toronto Star -

https://www.thestar.com/business/2020/08/07/you-can-get-a-fixed-rate-as-low-as-184-per-cent-which-is-unbelievable-low-mortgage-rates-driving-up-home-prices.html

5. Kiplinger -

https://www.kiplinger.com/real-estate/buying-a-home/601091/timely-reasons-to-buy-a-vacation-home

6. The Press-Enterprise -

https://www.pe.com/2018/11/17/5-tips-on-when-should-you-buy-a-retirement-house-hint-before-you-quit-work/

 

Feb. 19, 2020

Don’t Get Burned – Get a Home Inspection to Save Money on Your Next Purchase

Okay, you made one of the most important decisions in your life: you’re buying a home! You found your ideal home. It’s in your desired neighborhood, close to everything you love, you dig its design and feel, and you’re ready to finalize the deal.

But, whoa … wait a minute! Buying a home isn’t like buying a toaster. If you discover something’s wrong with your new home, you can’t return it for a refund or an even exchange. You’re stuck with your buying decision. Purchasing a home is an important investment and should be treated as such. Therefore, before finalizing anything, your “ideal” home needs an inspection to protect you from throwing your hard-earned money into a money pit.

A home inspection is a professional visual examination of the home’s roof, plumbing, heating and cooling system, electrical systems, and foundation.

There are really two types of home of inspections. There is a general home inspection and a specialized inspection. Most general inspections for a typical home cost between $350 and $475. The cost of the specialized inspection varies from type to type. If the inspector recommends a specialized inspection, take that advice because buying a home is the single most important investment you’ll make and you want extra assurance that you’re making a wise investment.

By having your prospective new home inspected, you can:

  • Negotiate with the home seller and get the home sale-ready at no cost to you
  • Prevent your insurance rates from rising
  • Opt-out of the purchase before you make a costly mistake
  • Save money in the short and long run

How Much Money Can a Home Inspection Save You?

A home inspection helps to find potential expenses beyond the sales price, which puts homebuyers in a powerful position for negotiation. If there are any issues discovered during the home inspection, buyers can stipulate that the sellers either repair them before closing or help cover the costs in some other way. If the sellers do not want to front the money to complete the repairs, buyers could negotiate a drop in the overall sales price of the home!

Perhaps even more importantly, a home inspection buys you peace of mind. Your first days and months in a new home will set the tone for your life there, and you don’t want to taint that time with worries about hidden problems and potential money pits.

To help you understand how much money a home inspection can save you, here are some numbers from HomeAdvisor to drive the point home … so to speak.

Roof – Roofing problems are one of the most common issues found by home inspections. Roof repair can range between $316 and $1046, but to replace a roof entirely can cost between $4,660 and $8,950.

Plumbing – Don’t underestimate the plumbing. Small leaks can cause damage that costs between $1,041 and $3,488 to repair. Your home inspector will look for visible problems with the plumbing such as leaky faucets, water stains around sinks and the shower, and noisy pipes. Stains on walls, ceilings, and warped floors show plumbing problems.

Heating and Cooling – Ensuring the home’s heating and cooling system is working properly is very important. Your home inspector will make you aware of any problems with the existing system and let know you whether the system is past its prime and needs replacing. You don’t want to throw down $3,919 to replace an aged furnace. Nor do you want to spend $5,238 replacing an ill-working air conditioner. Replacing and repairing a water heater gets pricey too. Wouldn’t you rather use your savings for a vacation?

Electrical Systems – When thinking of the electrical system, no problem is better than even a small problem. Electrical problems might seem small, but they can blossom into thousand-dollar catastrophes. Make sure your home inspector examines the electric meter, wires, circuit breaker, switches, and the GCFI outlets and electrical outlets.

Foundation – If your home inspector sees that the house is sinking, that means water is seeping into the foundation; cracks in walls, sticking windows, and sagging floor also indicate foundational problems. The foundation is so important that if the general inspection report shows foundation problems, lenders will not lend money on the home until those issues are solved. Foundation repairs can reach as high as $5,880 to repair.

As you can see, a small investment of a few hundred dollars for a general home inspection can save you tons of money and future headaches. To save even more money, you might consider investing in a specialized home inspection as well. A specialized inspection gets down to the nitty-gritty of all the trouble spots the general home inspection might have located.

How Much Money Can a Specialized Inspection Save You?

A general home inspection can trigger a need for a specialized inspection because the general home inspector spotted something off about the roof, sewer system, the heating and cooling system, and the foundation. If humidity is high where you’re buying your home, a pest inspection is recommended. Usually, a pest inspection will check for mold as well as pests. Most homebuyers have a Radon test done to ensure air quality.

Roof – Roof specialists examine the chimney and the flashing surrounding it. They also look at the level of wear and tear of the roof. They can tell you how long the roof will last before a new one is needed. They’ll inspect the downspouts and gutters. The average cost of a roof inspection is about $223. Most roof inspections will cost between $121 and $324.

Sewer System – Making sure your sewer system has no problems should happen before the closing because what might look like a small problem can turn into a large problem in the future. If any issues pop up, you can negotiate with the seller about needed repairs or replacements before closing. Cost of inspection will vary; on the low side, it might cost you around $95, and on the high side, it might cost you $790. Compare these numbers to repairing a septic tank, which can cost, on average, $1,435 (though it could reach as high as $4,459), and you can see that the cost of an inspection is worth it when you catch the problem before you buy.

Heating and Cooling System – A HVAC specialist will check the ducts for blockage and for consistent maintenance of the unit. The repairs needed might be small or they might be big, but this small investment will save you headaches and lots of money down the road.

Foundation – A foundation specialist will pinpoint the exact problem with the foundation. The specialist will look at the grade or slope of the home. The ground should slope away from the home in all directions a half inch per foot. Most homeowners have spent between $1,763 and $5,880 to repair their foundation. And the average cost to re-slope a lawn is at $1,705. Most homeowners paid between $933 and $2,558 to re-slope their lawn.

Pest Inspection – We don't typically have the pest issues that other milder climates have, but sometimes in older homes, rodent intrusion can be an issue.  Since it gets so cold in Montana, they'll seek out warm places whenever possible.  Your home inspection will look at the perimeter inside and out to look for any issues.

Radon Test – Radon is a naturally occurring invisible odorless gas that is the second leading cause of cancer. A radon test is a good test to have done as a good habit. The cost of radon test is low and its cost varies from state to state. Here’smore information about Radon.

Steps You Can Take to Save Money Using a Home Inspection

To help yourself save with a home inspection, you will need to:

Attend the inspection – Attending the inspection is important because it’s an opportunity for you to ask questions.

Check utilities – Checking utilities let’s know the energy efficiency of your potential home.

Hire a Qualified Home Inspector – We can recommend bona-fide home inspectors to you. You can compare our recommendation with all inspectors who belong to the American Society of Home Inspectors. While the decision of who you work with is always yours, we can educate you so that you make a wise homebuying decision.

 

Feb. 9, 2020

Understanding Residential Appraisals

The appraisal.  

Everyone waits for it to arrive on the lender's desk.  As days tick by, a slight sense of dread covers the land.  It's hard to put a finger on why, because there is so much mystery and uncertainty around the appraisal process. 

No one has any control over who does the appraisal, when it will be delivered, or even whether or not the appraiser is familiar with the area.  It's a big piece of the puzzle.

This PDF explains the process in detail, which can be helpful in interpreting your appraisal when it arrives in your inbox.

Have questions?  Email us.