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What Home Buyers and Sellers Should Know About Housing Affordability

August 1, 2014
Photo: Zillow

Photo: Zillow

By: Jill Hamilton, ClientDirect


Is it the right time to buy a house? Is it the right time to sell? How do you know when to jump into the real estate market? The answer is….it depends. There’s no single answer that applies to everyone. A host of factors come into play, including the economy in general, whether home prices are rising or falling, the inventory of available homes, and the state of your own financial outlook. If you’re thinking about buying or selling a home, here are some factors to consider.

For buyers:
Improving Economy, Rising Prices, and Eager Buyers:

The rebound in the economy means more competition for homes because people who have been renting or staying put in their homes are now jumping into the housing market. This translates into quick turnover on home sales, multiple bids, and sometimes, buyers bidding over the asking price. The boost in housing prices is also fueling competition from buyers who want to get into the market before prices get too high. Even though prices are rising, many still consider some homes underpriced since prices had dipped so low. And buyers are looking to make a move while houses are still relatively a good deal.
FHA Fee Changes:

Loans through the Federal Housing Administration (FHA) were historically the best bet for people with low to moderate incomes and not much money to put toward a down payment. Generally, private lenders require a 5% down payment, while FHA only requires 3.5%. However, with several changes to loan terms, FHA may no longer be the smartest option.
FHA loans require mortgage insurance, a fee tacked onto the loan that provides the lender some protection in case the borrower defaults on the loan. In the past, the borrower only needed to carry the insurance until the loan reached 78% of the original loan amount. Under the new rules, the borrower is required to carry the insurance for the life of the loan.
The cost of mortgage insurance on FHA loans has also been on the rise, almost tripling since 2008. In 2013, the fee rose to 1.35% of the balance of the loan. Additionally, FHA loans require borrowers to pay an upfront fee of 1.75% when getting the loan. Between the upfront fee and the required mortgage insurance, saving up more for a down payment and getting a private mortgage may make more financial sense.
Beyond FHA:

Buyers with a low down payment have other options to consider. Fannie Mae HomePath loans, available only on Fannie Mae-owned properties, offer low down payments and no mortgage insurance requirement. Periodically, Fannie Mae also offers special deals in which they cover the buyer’s closing costs. There also loans available to people in various special circumstances. Veterans, for example, can get VA Mortgages, which offer good terms, low down payments, and easier qualification requirements. The USDA offers attractive mortgage terms to moderate-income families buying property in rural or semi-rural areas.
Check Other Affordability Programs:

The Good Neighbor Next Door program offers discounts of homes in “revitalization” areas of up to 50% for qualified fire fighters, law enforcement officers, EMTs, and teachers. Check with state and local housing agencies to see what programs are available in your area. Check for links and other home buying help and information.
Mind Your Debt:

Having a large amount of debt in relation to your income will lower your chances of getting a loan with favorable terms, or even getting a loan at all. Private lenders generally have more stringent rules for debt-to-income ratio (DTI). There are two kinds of DTI–how much personal debt you can carry in relation to your income (e.g. car loans, student loans, child care expenses) and income versus the amount you will be spending on housing debt (e.g. mortgage payments, property taxes, insurance and so forth.) Lenders take both into consideration. Would-be borrowers who want private financing generally need to have less than 45% of their income going towards personal debts, while FHA will finance borrowers who have up to about 56% of their income allocated for debt payment. Borrowers can qualify for an FHA loan with up to 47% of their income slated for housing costs, while conventional lenders generally allow only up to 38-40%.

For Sellers:
Rising Home Prices:

House prices are rebounding from the downturn, and 2014 is shaping up to be a seller’s market. Rising home prices are a boon to sellers who can expect faster sales, multiple full-price offers and even offers above their asking price.
Starter Homes in Demand:

If you have a starter home and are looking to upsize, the market is especially in your favor. Starter homes are in short supply because during the economic downturn, people were buying and selling less frequently. Now that the economy is improving, there’s a lot of pent-up demand, especially for people looking for inexpensive housing or a starter home.
Fewer Underwater Mortgages, More Equity:

The nationwide trend of rising home prices means other good news for sellers. The boost in prices is finally lifting many homeowners from their underwater mortgages and giving others more equity in their homes. More equity means more owners will have the money for a down payment and closing costs if they’d like to move up to something pricier.

Time to Refinance?:

Rising prices will also raise the appraised value of many homes, meaning it may be a good time for homeowners to refinance. Higher appraisals may help you get more favorable terms on a first mortgage or refinance the rolling of a second mortgage into one stable, fixed-rate mortgage.

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7 things home buyers love but sellers don’t list

July 25, 2014
home buyers love but sellers don't list
By:  Tara-Nicholle Nelson, The Motley Fool

If your home has commercial-grade European appliances, sits on acres of land, or is in the most prestigious neighborhood in town, it’s pretty easy to know what to lead with in your marketing when selling your home. But if you have a normal house in a normal neighborhood, there could very well be things you take for granted which a first-time or relocating buyer might be magnetically drawn to if you mention it in the listing.

Below are 7 things buyers love and seller’s fail to mention.

1. Storage. When aiming to avoid undermarketing, keep this in mind: showcasing your home in its best light is not just about what you love about it. You might already have outgrown the place, and started to see its flaws more than its finer points: that’s why you’re moving. But the goal of good marketing is to highlight the things that will allow your home to shine in the eyes of your target buyers and against the competition.

So, it’s important to know what buyers care about and how your home offers a more comfortable lifestyle than the competition. First-time buyers, for example, are not simply comparing your home to other homes, they are also comparing it to the lifestyle of being a renter and to every bad rental property that inspired them to move forward with becoming a homeowner. One very common beef of renters is that rental homes lack storage, which leads to belonging overflow and a cluttered life. The vision of having a place for storing everything is a big motivator for many first-time home buyers. So, if your home has been tricked out with extra closets, pantries or other built-in storage amenities that you plan to leave, make sure your agent boasts about that in your home’s marketing materials.

2. Organizing systems. In the same vein, if you have made the investment in upgrading your home with customized or built-in closet, kitchen or garage organizer systems, desks or bookshelves make sure buyers see and know this from your home’s online listing. From the first-timer craving to have a clutter-free existence to buyers who are moving up into a family home and want each family member’s space to have at least the possibility of order, built-in organizers can represent value and appeal to a wide range of prospective buyers.

3. Proximity. You might be thinking the right buyers for your home will be finding it online precisely because of where it’s located, so it’s silly to call out the property’s proximity to amenities and attractions. Not so fast. First, some buyers simply might not know to search for your zip code, or might not be aware that your hidden gem of a neighborhood also happens to be tucked within a half mile of a subway station, entrances to 3 freeways and 2 regional parks. Second, buyers’ proximity wishes might be different than the location requirements of their online search. They might be looking at all homes in town in their price range, but the fact that yours is walking distance to a major employer or university could push yours to the top of the list.

Finally, relocating buyers might not have the core knowledge of the area that would allow them to connect the dots about the property based on location basics you are assuming everyone in the market for a home like yours will know. Don’t assume: if your home is particularly well-located vis-a-vis major employers, universities, recreational amenities or walkable shopping and dining districts, talk with your agent about showcasing this in your home’s marketing.

4. Senior-friendly features. Boomers are not necessarily looking for homes with built-in disability features, but they are often looking for homes they could live in for the rest of their lives, ‘aging in-place,’ without necessarily being located in senior-only communities. That means homes with level-in entrances (no stairs to the front door), single story layouts and low-maintenance landscaping have a massive new audience attracted to these features which would otherwise not warrant a mention in a home’s marketing, especially if homes near yours tend to have loads of stairs or other features that are difficult for people to navigate as they age.

Similarly, the movement toward aging-in-place has caused many more families to move aging relatives in with them, versus moving them out to retirement homes. These extended families often are looking for homes with a very well-appointed ‘mother-in-law’ or ‘outlaw’ units or a second master suite located on the home’s ground floor. If your home has multiple bedrooms with bathrooms en suite or completely independent living quarters, marketing these features to extended families is a must.

5. Energy. If your home runs entirely off-the-grid or on graywater, chances are good you’ll be mentioning that. But even buyers who don’t identify as hunting for a ‘green’ home can be attracted to the budget-friendliness of energy-efficient features of the less extreme sort. So, if your home is a pretty no-frills property but has a tankless water heater, dual-paned windows and new insulation, mention it! If you’ve managed to get your energy bills down way below what’s normal in your area, this could be a selling point you don’t want to overlook; your agent can help you navigate how to broadcast this message to buyers.

6. ‘Light’ green lifestyle features. That said, if you have configured your home to allow inhabitants to live a greener life, beyond just the energy bills, these might warrant a mention in your marketing. You might think things like your little organic kitchen garden, backyard compost bin or that $50 recycling center you installed are so low in cash value they don’t rate a line in your listing materials. But there are loads of buyers out there who are attracted to these sorts of features already being in place in a home, so calling them out (especially if you’re in a market with tons of competition) can call your home to their attention.

7. Natural, chemical-free and hypoallergenic home maintenance. In a similar vein, if you have a hypoallergenic HVAC system or have only used non-chemical cleaning products for the last few years, you might want to call these sorts of things out, as well. Marketers say today’s consumers are careful about not just what they put into their bodies, but also what they put on and around their bodies. Your home and the cleaning and maintenance products you’ve used may implicate both ‘on’ and ‘around,’ so if you’ve taken care to create a home that works well for people with physical or philosophical sensitivities to common household chemicals, make sure light-green buyers know it!

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.




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Everything You Need to Know About Cash Buyers

July 17, 2014
From: Zillow Blog

Even as the share of all-cash sales falls in many areas, it’s pretty clear that cash is still king, especially at the lower end of the market. This makes it more difficult for traditional buyers to compete with cash offers, especially in a tight inventory environment. So who are these cash buyers, and where are they located? Here are answers to some of your questions.

Why is this happening now?

It’s happening now for a couple of reasons. Lending standards are still very restrictive, and buyer competition is intense, particularly in markets with lots of demand and not much supply. The thinking is: If I pay with cash, I’ll get to the front of the line and have a leg up on the competition.

Where is this trend most prevalent?

This trend is nationwide, and while the share of cash sales is higher than “normal” in many parts of the country (even in rural heartland states that never had a housing bust), it’s most prevalent in Florida and Midwest markets. In the first quarter of this year, Miami had the largest share of cash buyers in the country at nearly 65 percent of total sales, down from 71 percent in 2012. Tampa and Cleveland were close behind with 57.1 percent and 54.2 percent, respectively.

Who are these all-cash buyers, anyway?

They aren’t all institutional investors, necessarily. After all, they found their deals last year and have more or less exited the party as home prices have risen. Rather, they are baby boomers, empty nesters, wealthy families buying second homes/vacation properties and foreign buyers who are coming to the U.S. from all over the world and snatching up properties in places such as Miami, New York City and Las Vegas.

What does this mean to traditional buyers?

Traditional buyers are faced with greater hurdles when making offers because they are likely to have to compete with cash offers, especially in the tight inventory environment in the bottom tier of the market.

Zillow examined the share of cash sales made in the bottom, middle and top one-third of home values and found that in 27 of the top 30 metros, more than one-third of all sales of the lowest-priced homes were made with cash. In three of the top 30 metros — Tampa, Detroit and Miami — more than 80 percent of all sales in the lowest price bracket were cash deals.

The good news is the portion of home purchases made with all cash is down from last year, which will help even the playing field for first-time and low-income home buyers.

How can non-cash buyers possibly compete with all-cash buyers?

Your best defense is to be a well-qualified buyer. You’re gainfully employed, able to make a substantial down payment (20+ percent), have been pre-approved, and, of course, have good credit. You should also make a strong offer and ideally one without any contingencies.

Finally, sweeten the offer any way you can. Find out what’s motivating the sellers and give them what they want. Remember, at the end of the day, money is money, and many sellers may not be in a great rush to close; they are simply looking for clean offers that are going to go through, hassle-free.

Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at

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Young Optimism in Real Estate

July 11, 2014

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Young Optimism

How to Save 20% When You BIY Instead of DIY

July 2, 2014


You want to get projects done around the house, but you lack the skills, desire, or the time to DIY. The other side of the coin—hiring it all out—is an expensive option you’d like to avoid. What to do?

BIY, that’s what.

BIY—buy-it-yourself—is a smart, middle ground for those who want to upgrade their homes, be actively involved in the process, and keep a lid on the budget. BIY efforts can save up to 20% on home improvements by shopping for bargains and eliminating contractor markups on materials and finishes.

It’s a growing trend industry experts and big-box home improvement centers are watching closely, defining BIY as its own genre. Fred Miller, managing director of the Home Improvement Research Institute (HIRI), identifies BIY as a distinct subset of DIY.

“We’ve found that about 17% of homeowners have completed BIY projects,” Miller says.

Marketing expert Matt Carmichael, author of the book “Buyographics,” suggests demographics play a role.

“Many millennials don’t have the DIY mindset their parents had,” says Carmichael, “but they still want to be hands on when it comes to fixing up and improving their homes, and they know how to buy stuff.”

Mining online information is second nature for millennial BIYers, who eagerly search for price comparisons, peer product reviews, and instructional videos.

The BIY Basics

Buy-it-yourselfers research the materials, finishes, and appliances their project requires, then shop for the best deals possible on the items, purchase them, and have them delivered to the work site.

That way, they avoid markups that a contractor or subcontractor routinely applies to the materials they buy. A BIYer also does these things:

Avoids any hourly charges a contractor adds for picking up and delivering the BIY materials
Negotiates directly with suppliers for the best price on items
Is able to find bargains a contractor may overlook
Good BIYers work closely with their contractor or builder to decide which products and materials make sense for the BIYer to tackle—and which are best left to the contractor.

The BIY Skill Set

You might not know which end of a hammer to use, but you’ll still need a good set of skills that include the following:

A thorough understanding of the scope of your project
A shop-until-you-drop mind-set
An obsession with due dates and delivery schedules
A willingness to communicate tirelessly with your contractor or handyman
Understanding Your Contractor’s POV

Although it may sound like shopping and buying are your primary BIY duties, your No. 1 priority is to have good communication with your builder or subcontractor. Tell prospective contractors upfront about wanting to BIY.

Traditionally, contractors have purchased materials and scheduled delivery. They often have established relationships with suppliers that offer steep discounts to them. The contractor in turn marks up 50% or more on those discounted practices. It’s a standard practice in an industry where margins are narrow.

However, the recession was hard on the construction trades, and many contractors are willing to forgo traditional pricing in order to secure steady work—good news for BIY homeowners. Home improvement centers help by hooking up contractors with homeowners—a practice HIRI notes is on the rise over the past several years.

A contractor’s main concern is a BIYer hold up their end of the bargain by ensuring everything is delivered to the job site on time so that work proceeds smoothly.

For you, this means ordering exactly the right types and quantities of materials, and pinning down delivery dates and times. Let your contractor know of any changes (a delivery truck got stuck in Reno) right away.

The Remodeling Contract

Your remodeling contract should clearly state what materials, appliances, and finishes you will supply, and approximate delivery dates. Your contractor needs this information before he can prepare an accurate bid for the work.

Any changes to your responsibilities should be stated in writing and signed by both the contractor and you. You’ll want to make sure that any casual suggestions for changes to the scope of your project (and what you’ll provide) don’t result in a contractor dispute.

What to BIY and What Not To

Stick to buying items that will be visible when the project’s done and leave everything else for your contractor to get. Not only will you be in charge of high-profile finishes, materials, and appliances, but you’ll be assured of getting the look that makes you happy. Here are items that make sense for the BIYer to get.

In the kitchen, consider these for BIY:

Kitchen cabinets
Cabinet hardware (pulls and knobs)
Light fixtures
In the bathroom, these items are smart to BIY:

Tubs and modular shower enclosures
Wall tile
Faucets, shower heads, and tub fillers
Vanities and cabinets
Toilets and bidets
Light fixtures
Exhaust fans
Around the house, BIY is the way to go for these items:

Permanent light fixtures
Entry doors
Interior doors
Garage doors
Exterior light fixtures
Landscaping block and stone
Almost everything else is best left to your contractor, including lumber, fasteners, sheathing, concrete, plumbing pipes, electrical wiring, HVAC components, and insulation.

Other items are a matter of coordinating with your contractor or designer. Roofing, for example, requires specialized knowledge of how to measure roofs and estimate materials. Once estimated, however, you can choose the style and shop for the right price. Just be sure that you and your contractor are on the same page about your involvement.

Other items requiring these specialized knowledge include these home fixtures:

Windows. Between rough openings, replacement options, and window sizes themselves (Did you know that 3/0 means 36 inches?), leave the ordering to your pro.
Gutters and downspouts. Some runs of gutter may be too long to handle repeated expansion and contraction caused by temperature fluctuations. Have a pro advise.
Paving materials. Brick, stone, asphalt, and concrete require a good knowledge of thickness requirements for the base as well as the paving material itself. Let a pro help.
Insulation. This item doesn’t really benefit from BIY; your contractor will know local codes and installation techniques.
Masonry. For siding veneers and landscaping, you pick the type of stone or brick and let an experienced hand do the ordering and return unused materials.

How to Buy It Right

Ah! The fun part! If you’re working with a designer/builder or hiring an architect, you’ll have plans for the finished project. Those plans should include a materials take-off—a list of everything needed for the project.

Armed with that list, you’ll be able to shop for exactly the right amount of materials and calculate the price. Confer with your contractor so you’ll both agree on the items you’ll be buying.

Beware of making changes. For example, if plans call for a 36-inch gas range, but while shopping you find an amazing deal on a 36-inch electric range, you might gum up the works if you buy it. The size is right but your contractor may have already run a gas line—not an electrical circuit—to your range location.

Could you still make the switch? Sure, but you’ll pay for any extra work. In addition, the change takes time and may throw other subcontractors off their schedules.

What If There’s No Contractor?

If your job is fairly small and you’re planning on using a carpenter or handyman for the work, then you’ll have to do all the measuring and purchasing yourself.

Here’s helpful advice to get it right:

1. Measure twice and cut once is the old saying, and it’s a good one. Always double check measurements, and write everything down in a project notebook or in a notebook app you’ll always have with you on your mobile phone or tablet.

Your job is made easier by the many materials calculators available online, as well as home improvement apps you can download to your mobile device. Big-box stores offer them at their websites, and you can search according to your needs.

Lowe’s, for example, has helpful calculators for flooring, paint, mulch, wallpaper, and other materials.

2. Add 10% to measurements of walls, floors, ceilings, and other large surfaces. That ensures you’ll have enough materials to cover broken pieces and slip-ups.

3. Enlist help when measuring cabinets and countertops. Home improvement stores have design centers that will help you fit cabinets correctly. They’ll send out subcontractors—free of charge—to measure your space to ensure accuracy.

Ditto for countertop fabricators. Most insist on taking their own measurements and checking walls for squareness to ensure a good fit.

4. Watch out for oddballs. Not your handyman—your choices. If you’re picking one-of-a-kind items from overseas or the salvage yard, make sure your handyman is up for the challenge. And make sure you’re ready to cough up a few extra bucks for the extra work and creative solutions required.

5. Managing delivery. Keep the job running smoothly by managing delivery dates and times. Make sure you or someone you trust will be there to oversee arrival and storage.

6. Pinpoint delivery times. When ordering, try to establish exact times for delivery of materials and appliances. Record the vendor’s customer service number and give them a ring two or three days prior to delivery to make sure it’ll be on time.

Make sure your contractor or handyman knows those critical delivery dates and times.

7. Clear a space in your garage or spare room, or somewhere on site to stash materials and other goods. There’s nothing wrong with stockpiling materials ahead of installation dates if you have a place to put them.

One More Thing

It bears repeating—the BIY path is one of collaboration and communication. You’ve signed on to be part of a team, however small it may be. Be a good team player, make sure everything runs smoothly, and you’ll end up saving money on your remodel.

Written by: John Riha and was originally published on

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Common Mistakes Homebuyers Make

June 26, 2014


Written by: Jill Hamilton

Buying a new home is an exciting and sometimes demanding process. The heightened emotions and the high stakes make it extra important to find a home that fits your family financially and “feels right.” Knowing some of the most common mistakes home buyers make will put you in a better position to make the best choice. Here are some things to avoid.

–Being too in love with a house.
Yes, you should love a house, but stay realistic. Don’t get so smitten that you ignore your budget and overbid or refuse to accept major defects or problems with a house.

–Ignoring your instincts.
If a house doesn’t feel right, it probably never will. Instead of wasting time wavering over a not-quite-right house, just move on.

–Failing to research beyond the house itself.
Don’t forget to research the neighborhood, the quality of the local schools, and think about how commutes might work. Visit the house and neighborhood at different times of day, noting potential issues such as rundown houses, smells from local factories or businesses, and loud dogs.

–Waiting too long for the perfect deal or being too cautious.
Failure to make a move or procrastinating, especially in a rising market, results in missed opportunities and possibly paying more. Prices rise and fall, but the general trend is upward and waiting for a perfect deal will keep you out of the game.

–Not putting in a strong enough initial offer.
Make a strong initial offer to avoid losing out to other bidders or being rejected immediately by the seller.

–Not researching mortgages.
Know what kind of mortgage you can qualify for and get pre-approved before starting to seriously house hunt. Make sure you understand the various terms available and shop around to get the deal that’s best for you.

–Not knowing your FICO score.
If it’s low, make a concerted effort to raise it before seeking financing. A lower score can cost thousands of dollars in upfront fees and/or higher interest rates.

–Stretching the budget at the last minute
Some buyers get attached to a house and change their budget to make the deal happen. Decide on a budget beforehand and stick to it. If a major, unexpected problem shows up, it may be best to walk away.

–Choosing the cheapest home inspector.
The small initial money savings can result in missed problems and costly surprise repairs.

–Failing to add a contingency clause to contracts or accepting one that’s too limited.
Make sure there is language in the contract so can get your deposit or “earnest money” back in case of deal breaker-type problems, like major repairs being needed, financing falling through, or your current home not selling in a timely manner.

–Not budgeting for initial costs
Not matter how “turnkey” as house looks, there are going to be additional expenses for things like furnishings, window treatments, and utility deposits. Factor in moving expenses too. Don’t forget to add in other service fees for notaries, escrow, and loan applications. Many homes will also need extra insurance, such as earthquake or flood coverage.

–Not budgeting for predictable (and unpredictable) costs of homeownership.
First time home buyers often forget to factor in estimates of future major repairs and routine maintenance costs. There also may be higher utility bills, and monthly costs for things like lawn services or homeowner association dues.

–Failing to plan for the future.
Think about where you plan to be in a decade. Will you need more space for children, pets, or elderly relatives? Will the loan still be affordable for you in 10 years?

–Trying to save money by not hiring professionals.
Hiring experts during the process can save money by helping uncover or avoid problems. A buyer’s agent, for example, can help you navigate the process with their expertise about neighborhoods, pricing, contracts and listings. An agent’s connections can also help you in finding the best lenders and inspectors and other professionals, like contractors.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

How Do Buyers Evaluate Real Estate Crushes

June 19, 2014

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