Buying Your First Home This Fall? Your First Three Must-Do Tasks

September 4, 2012 By 2 Comments

Boston real estate agents are making their way back from the Cape getting ready to put up some For Sale signs. The Fall real estate market is here. According to Realtors, it officially begins the day after Labor Day. The general expectation is for a vibrant, busy and tight real estate market in Brookline, Boston and Newton in the coming months.

First time home buyers lead the market, and more them are taking the plunge. Going about it correctly will make the difference between a good or bad investment, a positive or negative experience. If you are considering making this fall market your opportunity to buy, here are your three must-do tasks. Do these three things, and you’ll be well positioned in the busy market.

  1. Hire a buyer’s agent. There are many ways to find an buyer’s agent, and trust me; there are a lot of us. You can ask a friend for a recommendation, meet agents at open houses or call on some advertising. But whatever you do, hire someone after a thorough interview and once you’ve made a genuine connection. It is more important you work with an agent you feel understands your needs and respects your pace, rather than your friends’ recommendation for his cousin’s neighbor’s mom.
  2. Get Pre-Approved! A pre-qualification does not count. Speak with a human mortgage broker (rather than simple online forms), and learn what you need to do to finance a home. Once you speak with a professional and knowledgeable mortgage broker, you’ll be much wiser. Furthermore, having a pre-approval in hand is a solid foundation for making offers. Don’t guess how much you can spend and hope to get everything done later. It doesn’t work.
  3. Prepare for a big change in your life. I’ve worked with many first time home buyers over the past ten years. Buying your first home is a time of great change. And although it is a change for the better, the task can be daunting. Break it down to small pieces. Focus on each stage of the home buying process, such as looking at homes, or inspection. If you’ve done task one and two, the whole process will feel manageable, and you will have a team working with you to make it all happen.

If you are ready to take advantage of low mortgage rates and a rising real estate market, buying your first home can prove a terrific investment. Take a deep breath, and say hello to the Boston real estate.

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The #1 Deal Killer for Newton and Brookline Houses

July 2, 2012 By Leave a Comment

Last Spring market, which ended roughly a week ago, looked something like this: buyers want to buy, sellers unsure they want to sell, plenty multiple-offer situations and many deals falling apart mid-way to closing. This is the nature of a market with rising prices.

Homeowners, believing prices will rise, stay on the sidelines and don’t feel a need to sell their homes. On the flip side, there are not enough homes on the market to satisfy all the buyers, who are bidding up the prices of homes.

But many of the home sale transactions don’t make it to closing, or at least not without some disappointments and fighting. The dreaded appraisal is the culprit!

The appraisal is a third party evaluation of the home which the bank requires for a mortgage approval. An appraiser comes to the home and compares it to recent sales. In our market, the appraiser has a difficult job because there may not be enough recent sales of similar properties, and the price buyers are willing to pay is higher than it was just a few months ago.

Because of the formulas, regulations and rules the appraisers must follow; their evaluation is often coming short of the offer price, which the buyer and seller already agreed upon. What does this mean? Here’s an example:

Four offers are submitted on a house in Newton, and the best offer was accepted at $800,000. The buyer agrees to pay a 30% down payment, $240,000 and submits a mortgage application for a 70% loan, $560,000.

The appraiser uses the limited recent sales data for similar houses nearby, and comes up with an appraised value of $750,000. The mortgage company will still fund 70% of the appraised value, but now this number dropped to $525,000.

Once of several things may happen next:

  • The buyer may demand the price reduced to the appraised value. Why should he pay more than that?
  • The buyer can make up the difference in cash.
  • The buyer and seller can negotiate a price between the $800,000 and $750,000. The buyer will pay cash for anything over $750,000.
  • The buyer and seller may terminate the agreement, (if there is an appraisal contingency in the agreement, which I’ll discuss in another posting).

Whatever the decision, it is never a romantic time during a real estate transaction process. Both parties are usually upset – buyer fearing he is over paying and dreading the added cash expenditure and seller annoyed she is making less than expected. This is especially disappointing when there were several offers, four buyers is willing to pay more than the appraised value!

Five years ago appraisals were rarely a problem. But are and will continue to be an issue everywhere prices are going up, inventories are low, and buyers are ready, willing and able to buy.

Buyers and sellers must prepare themselves for the appraisal. I’ll discuss that in upcoming posts.

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How Landlords Save the World

January 18, 2012 By Leave a Comment

The title of this entry is over-the-top, I admit, but I am just here to stick up for the landlords out there who are trying to do some good. The word “landlord” in itself has some negativity associated with it, and the use of “lord” in this context is distasteful in our American sensibility. In media, landlords are portrayed as misers ready to make a buck on the poor and take advantage of families.

Please!

Let me tell you about the landlords, the real estate investors, I know.

First and foremost, there is a commitment to maintain the property and keeping the tenant happy and comfortable, even with the high occupancy rate and the increasing rents. I am not suggesting any altruism here, but it is cheaper to keep than replace tenants. It only makes sense that tenants stay for a long-run, and take care of the property, as it is their home. Fostering that environment is essential for positive tenant-landlord relations, which is the relationship you want in between any consumer and supplier.

A rental property is a huge financial commitment and a landlord idiot enough to not take care of it and ensure it’s livability is ill suited for the job.

Yes, there are many terrible landlords out there. The worse of them are the ones who neglect their properties, fail to keep up with safety codes, and don’t treat their tenants with the respect they deserve. Just like in any occupation, in any aspect of humanity, there are some bad apples.

For more on tenant-landlord rights in Massachusetts, go to http://www.mass.gov/ago/docs/consumer/landlordtenant073007.pdf

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Three Ways to Invest in Real Estate

January 11, 2012 By Leave a Comment

Investing in real estate can seem overwhelming and reserved for the very rich. In the current economic conditions and marketplace, it may even feel a bit too risky. But if you’ve ever thought real estate investing may be right for you, this is a great time to learn about your options and how it can be done by almost anyone.

Before we learn about our options, though, let me say that I believe real estate investing can be a long a cumbersome process if you are new to it. That is not a bad thing, and I think of a lengthy process as a series of checkpoints that will make me very sure of my decision at the end. But it does mean that you have to have a critical eye, some good research skills and an a greater-than-average supply of patience. If this sounds like you, then let’s review how you can get into the lucrative business of real estate investing.

Whatever your budget, real estate can be your investment vehicle.

1. All cash deal. If you have lots of cash, you may be able to find an investment property in your area and buy it without a mortgage. The advantage of this is that you will be a highly qualified buyer and you can probably secure a property for a bit of savings over a buyer who has to get a mortgage. Another advantage of a cash buyer is that her expenses are much lower, as there is no monthly mortgage payment. This enables her to be more flexible on the rent, giving her more options in choosing tenants.

The disadvantage of an all cash deal is that it is not taking advantage of very low mortgage rates. Borrowing is pretty cheap, and if all your cash is in one place, you can’t use it elsewhere. Leverage is a real estate investor’s friend.

2. Part cash, part mortgage. The down payment minimum is 20-30%, depending on various circumstances and your financial qualifications. My rule of thumb is that you should make money, or at least break even, with this kind of down payment. If you lose money on a monthly basis, the property is not worth the price, (at least not not for an investor). Your mortgage payments, any association fees and taxes should be covered by the rent.

The advantage here is that you’ll be taking advantage of the cheap borrowing costs, and you’ll own a property with an income without the whole cash outlay.

The disadvantage is, obviously, the cost of borrowing money and the higher cost due to your mortgage payment - same as the mortgage on your home.

3. Pool of investors with little cash. Gather a few friends and family, and pool your money together to buy one property. It can even be a small property at first, but at least get into the market. If ten friends get together with $15,000 each…you do the math. The advantage is that you are in the real estate market, getting a piece of the pie, however small. It is a start, or a great single investment you have. You can hire a real estate broker and an attorney to help maybe for a stake in the property instead of commission and fees.

The disadvantage is finding like-minded individuals and putting it all together in a legally binding agreement. To me, this is just a bit of leg-work, and not so much a disadvantage, but it does add to the complexity of the transaction.

Entering the real estate market as an investor is not simple at first, but once you are in, it gets easier and easier. If you’ve ever considered investing in real estate, this is a great time to get in. Just choose your strategy and do it!

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Top Three Reasons Why Property Investment Is King

January 4, 2012 By Leave a Comment

No one wants to hear this, but I’m saying it anyway. Real estate is the best long-term financial investment. Phew…that’s a relief.

With the real estate market in the dumps for several years now, it is not easy to get back into the pro-property mind-set. But, it is exactly at these times that you should be considering expanding your real estate portfolio.

One reason I know this is because while the real estate market is dragging in most of the country, it is dominated by the professional real estate investors. Don’t you want to learn a lesson or two from them?

The professional investor loves real estate above all other investments. There are three main reasons for this.

First, real estate investing can come in many forms, just like any other investments. There are small condos, multi-family buildings, commercial, residential, mixed use properties, different towns, neighborhoods, etc. For every budget, preference and style, there is an investment instrument.

Second, real estate has a certain tangible value that you just don’t see in other investments. Property investors love that there is an asset they can visit, fix and maintain. There is a satisfaction in knowing that you have some control and responsibility in the relative value of the property.

Third, although real estate is illiquid - meaning it takes relatively a lot of time and effort to sell it - it is a versatile investment. You can hold it, or resell it when the market turns your way. You can do extensive renovations and have a quick resell, or you can hold it with tenants for years to come. Whatever it is, you have options and you can make decisions based on the best scenarios for your needs and the market conditions.

All of this assumes that you have sufficient funds for a down payment and that your expenses on the property are covered. The major drawback in investment real estate are the unavoidable expenses in maintaining it and the difficulty of selling it if you need the cash.

But this said, it may be time to consider an investment property, especially in such a critical time in the market. Opportunities and possibilities are present, and real estate investing can be a perfect fit for long-term financial goals.

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Creative Ways to Save for a Down Payment

June 15, 2011 By Leave a Comment

Now is a great time to buy. Homes are affordable and interest rates are at historical lows. Lending is tight, however. You need a stellar credit score and a clean credit report to even get your foot in the door.

And long gone are the days of zero-down down payments. You need money down to venture into the housing market. Some financial experts recommend at least a 20 percent down payment.

Here are some creative ways to curb spending so you can save up for the house of your dreams.

The first rule of saving is to be patient. Large nest eggs are built up over time. We live in a society that thrives on instant gratification. This is partially responsible for the housing crisis we now find ourselves in. Buyers who should have waited until they could truly afford their dream house took advantage of a flawed system that allowed them to instantly gratify their desires. So, be patient. It may take months or years before you have saved enough.

The next key is to cut out unnecessary spending. It can be easy to give into our wants, or to confuse them with needs. For example, you need food to survive. What you don’t need is to go out to lunch or dinner multiple times a week. It may be time to change habits and learn to pack a lunch for work and to cook meals at home. The same goes for the morning coffee. A home brewed cup can be just as satisfying as a $4 cup from a coffee house. And you just might save yourself $500 a year.

Don’t use credit cards. Credit cards charge exorbitant interest rates. It can take decades to pay off balances when you only make minimum payments.
A great way to avoid overspending is to avoid going to stores. It sounds extreme, but if you go to a store, you’ll buy something. Find fun things to do at home, instead of using shopping as a hobby. Even $20 a week can add up to $1,000 a year.

Substitute spending is another tactic for saving. Let’s say, for example, that you have a gym membership charging $40 a month. That translates to $480 a year. You can buy a simple elliptical, recumbent bike, or treadmill for less than that. Add in a few workout DVD’s and weights and you have a home gym for a fraction of the cost.

Lastly, automatic savings transfers can help procrastinators save. You have to remember to transfer money to savings to build up your account! Most banks allow for automatic savings amounts to be set. You can choose what amount works best for you. $100 a month will translate to $1,200 a year!

With just a few of these scenarios we discussed today, our example saver could save at least $3,000 a year!

Stick to your plans and budget and the dream of homeownership can become a reality.

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Stop Wasting Time and Use This Checklist to Find the Right Home

May 18, 2011 By Leave a Comment

There are many variables making a home right for you. It is a big task making the right decision and ensuring all your needs are met. Although buyer’s remorse is relatively uncommon in homebuying, you want to do your due diligence to make sure you’ll be happy the day you move in, and the years that follow.

A home has many functions and purposes, and it is important to make a practical decision. But do not overlook the emotional role in all of this. If a home is purely practical but you are not excited about it, it may not be the right one for you. It is important to realize that you are unlikely to find a home that fits every single criteria and desire. Use a prioritized checklist to help you organize your thoughts.

1. Neighborhood: Deciding on what neighborhood you desire is tricky. You must consider your wants and needs. They vary by person. Do you have children and need to live within the boundaries of a specific school district? You might want a short commute, a neighborhood with historic homes, or homes that are near night life and restaurants.
2. Square footage: What size of home fits your needs? The average home in the United States is 2,195 square feet. Thirty years ago the average size was just 1,645. The trend has been for larger and larger homes, with special purpose spaces, such as exercise rooms, offices, studies, and media rooms. This trend is now receding.
3. Floorplan: Architectural styles offer a wide range of choices! Open floor plans might appeal to you, with their great flow for entertaining. Or you may have a more traditional aesthetic, preferring cozy rooms. Think about how you live your life and what style best fits your needs.
4. Finishes: There are different grades of homes. Take your kitchen, for example. You can find a wide range of beautiful laminate counters, just as you can find a wide range of beautiful granite ones. These choices dramatically affect price. Think carefully about what you want in your dream home. Do you want stone floors or will ceramic suffice? Are you looking for green building materials, such as zero-voc paint, bamboo floors, and recycled counters?
5. Amenities: Our homes extend past the borders of our property. We live in the parks, shopping, and restaurants that surround us. Be sure to think outside the “box” of your house when you buy.
6. Landscaping: A large yard can mean lots of entertaining potential, but it can also mean a lot of work. Be sure to consider your needs now and down the road when it comes to yard maintenance. Many buyers prefer a townhouse or condo as their “dream home”. These options afford buyers with much less responsibility when it comes to upkeep!

Be sure to discuss all of these topics with your real estate agent. They can help you decide on a happy compromise among the long list of choices. They’ll also help you know what items on your wish list you can get in your price range. Good luck on your dream home search!

Written by Carla Hill

What is your top location for your next home?

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Benefits of a Lousy Economy

May 13, 2011 By Leave a Comment

It is hard to believe but, yes, there is something quiet wonderful happening as a result of this depressing economy.

Our tight budgets are forcing builders to rethink the size and functionality of new homes, and buyers are being forced to rethink their needs.

Six years ago, when you were out there looking at many houses, comparing them, you would have probably appreciated the extra office space upstairs, perhaps the third full bath and the extra large open living room. Common real estate boasts would be, “Open floor plan, large living room for entertaining, three full baths….”

But today, with less money, efficiency trumps vastness. Your guests no longer think, “Oh, I am so jealous of your jacuzzi for four,” but instead start calculating the cost of filling the useless tub, and heating the extra space. Maybe they’ll even be offended by the disregard for the environment when you have lights and heat for an oversized and underused home.

Priorities are changing, not only in our needs as home buyers, but how we view and think of various features. What used to be luxury, now seems frivolous.

Today we find that builders are taking all of this into consideration. On average, you can expect new homes to be 10% smaller and much greener by 2015.

Think smaller - smaller home, smaller energy bills, smaller neighborhood. The National Association of Home Builders new study called, “The New Home in 2015,” alludes to the economic downturn for ratcheting up a “less is more” movement that includes everything from homes designed with fewer frivolities to small “pocket neighborhoods” with small homes.

If you are a home buyer, consider your needs and also the resale value in the long run. Look for a more efficient home, and worry less about the size of it. It is likely that less rooms will be appreciated. For example, a living room takes up a lot of space but is barely used. Why buy a home centered around a useless room?

As a seller, have your home set-up to be the most efficient it can be to reduce your energy bills. Furthermore, show that all rooms are in use and that your space is useful and liveable.

If we take some mercy on the environment in the meantime, then we are on to something big.

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People Love Their Homes, Now It’s Your Turn

May 6, 2011 By Leave a Comment

My clients often ask me, “is it a good time to buy / sell?” My reply is usually the same, “It depends on your needs.”

Buying and selling homes is a major life decision first, and an investment second. Most often my advice to my clients is to follow their plans and do what they need to do in order to live where they want to be and in a home which meets their need.

Usually this is the case. But things have been different the past few years and the decision making of home buying and selling different. I found myself advising many clients against selling homes a couple years ago - unless a major move was necessary and holding on to the property impossible.

As for buyers, I’ve never stopped encouraging home ownership. Some may say that as a real estate agent that is self-serving advice, but I stand by it, even today. Here is why.

The recent “Allstate-National Journal Heartland Monitor Poll: The American Dream” revealed that nearly 90% homeowners say they would buy their same homes again.
Even those home owners who’s home lost value agree! Still, almost nine of ten of them would still make the same home ownership decision, and buy the same home.

Buying a home is a long-term investment, and most people really love their homes. The process of choosing a home can be sufficiently elaborate that you are almost assured a home with which you’ll be happy for a long time. The alternative is renting, which is money you are guaranteed to never see again. People understand this, even in this challenging real estate market.

This Spring, my advice to buyers remains a firm BUY! In fact, it is a golden opportunity for buyers this season. Between the low home prices and the very low mortgage rates, your affordability as a buyer goes way up.

Chief Economist of the National Association of Realtors, Lawrence Yun, says, “Housing affordability conditions have been at record levels and the economy has been improving.” He does remain cautious, though as the housing market has some problems.

Between the tight credit and strict appraisals, you may run into some bumps along the road of a home purchase. So start your home purchase well ahead of your moving schedule (if you have one), in case you have to cancel a transaction and look for a new property. Furthermore, have you pre-approval ready from your mortgage lender so you know how much you can afford and avoid disappointments later.

Go confidently in the direction of home ownership. You’ll love it!

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Cash In on Spring Market, Before Prices Go Back Up

May 2, 2011 By Leave a Comment

Prices are down, all the way down to the levels of 2002. Ouch!

Despite this, nearly 90% of homeowner say they would still buy the same house they live in, according to the eighth quarterly “Allstate-National Journal Heartland Monitor Poll: The American Dream.” Isn’t it your time to get your slice of the American Pie?
This Spring, with the prices so low, markets slow, and most people still a bit nervous about the market and economy, it is a perfect opportunity for a savvy buyer to jump in and find a bargain. Here are five reasons why now is the time:
1. Prices are low! They have gone down further just this past year, with a 2.8% drop between February 2010 and February 2011. This can translate into more house, or just a better bargain. Think they’ll go down lower? Do the math of how much rent you will be throwing out the window while waiting.

2. Rates are low! That means affordability is way up. ,Lawrence Yun, the chief economist of the National Association of Realtors says, “Housing affordability conditions have been at record levels and the economy has been improving.”

Improving economy may also mean rising mortgage rates in the near future. With rates so low, you’ll have low monthly payments and spend much less on interest.

3. 70% of Americans say they’ll recommend a friend to buy a home. In this economy? In the midst of a housing crisis? Yes!

4. Home ownership is a long term asset. A survey named the “ Allstate-National Journal Heartland Monitor Poll: The American Dream,” reveals that buying a home had a much better return (24%) than saving money in the bank (20%) or investing in the stock market (6%).

5. Owning a home is much more than an asset. Homeowners love and care for their homes much more than those renting. It is not only about the money, but also about a sense of security and warmth we find in home ownership.

It is no wonder that 90% of homeowners would buy their homes again, and it is no wonder that 58% of those who believe we are still in a housing crisis would buy their homes again.

Home ownership has always been seen as an essential part of living the American Dream, and this Spring it is your turn to jump into the housing market and find your dream home. Almost everyone agrees – you won’t regret it.

Are you ready to buy? Why or why not?

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