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3-Step Plan for Finding and Buying Your Next Home

Chances are you’ve considered buying a home — maybe you even attended a couple of open houses and ran the numbers. But once you get serious, there are a few points you need to consider before signing a contract and heading to your closing. Buying a home takes more time and research than, say, buying a tablet or smartphone. Before diving in, it’s important to understand the process. Every home buyer’s journey happens on a slightly different timeline, but here are some steps every prospective buyer should take.

1. Search and discover

The home-buying process often occurs organically and may begin a year or more before the actual purchase. You’ll get started by viewing home listings online to discover what types of homes you can get in different price ranges.

Look at homes in your favorite neighborhoods, and review statistics and reports on home values. Use this time to dream about some of your favorite home features, and start to put together your list of priorities. Most buyers will find a property during this phase that prompts them to move to the next stage.

2. Do the math and your required homework

Most would-be home buyers need a mortgage to purchase a home. While the process has gotten easier as we’ve moved farther away from the financial and lending crisis, it can still be challenging if you’re not prepared. You need to know what you can afford, the types of loans available and how what you can afford will affect your home search. Pull your credit report, and understand your financial situation. Then you can get pre-approved.

Many buyers need to repair their credit score, save more money or allow cash to the season for some time before buying. Use the next few months to address any financial issues.

3. Dive in and have fun

At some point along the way, you should connect with a local real estate agent. These relationships form early, and having that person beside you during your search should be invaluable. Go to open houses, make appointments and see as many homes as possible. Before making an offer, you’ll need to know the market inside and out. The more homes you see, the more you will know about your local real estate market, and the more confidence you will have when that dream house comes along.

And if you miss out on a deal or two, it’s okay. It’s all part of the process. Don’t feel rushed, and realize that the home search often becomes a part-time job. Have fun with it. If you find yourself in the real estate market prior to doing significant research, you may be jumping the gun. Unlike a tablet, smartphone or even a car, a home is a long-term investment — and a special one at that. It’s where your life will happen. Move too quickly and buyer’s remorse can creep in.

The Counteroffer: Negotiating a Real Estate Deal

Buying a home is rarely as simple as making an offer and paying that offer out. Negotiations can go back and forth for weeks before the seller and buyer are both satisfied. The vehicle for this negotiation is the counteroffer — a vital and complex rejection and counter to an offer made by either party. Counteroffers are typically handled between real estate agents and are time-sensitive.

Selling or buying a home is more of a process than a transaction, so it’s important to understand counteroffers before you make your first offer.

Why was I countered?

As a home buyer, if you make an offer below list price, the seller may choose to reject, accept or simply let the offer expire. If there are multiple offers, the listing agent will lay out the options for their client and then notify all buyers’ agents of the choices. Sellers may also counter your proposed closing date. If they need to move out quickly, they may want to push it earlier. They may also ask to rent the property for a time after the settlement.

Price and closing date negotiations are common from both parties, but there are even more reasons sellers can potentially get countered. The condition of the home is likely the biggest factor here. As home buyers conduct ongoing research into the home, any problems with the condition of the house can result in a counteroffer.

If you’ve chosen to take appliances with you when you move, buyers may also look to negotiate for those. Appraisals are another reason for counteroffers. If an appraisal comes in below the agreed-upon sale price, it will affect the amount the mortgage company will lend to the buyer.

Negotiation power

When reviewing a counteroffer, it’s important to have an experienced real estate agent who can capitalize on your advantages in a negotiation. Both sellers and buyers can take steps to put themselves in an advantageous position through planning and smart counteroffers.

Knowledge is power in negotiations, so try to glean as much information about the seller or buyer as you can. Your agent will also seek information from the other agent on your behalf. Sometimes sellers use the pending sale of their home to finance another, meaning they have a truncated timeline and could be more eager to make a deal. Similarly, buyers who have terminated a lease may be desperate for a place to live and more willing to negotiate.

If you’re selling a home with known issues, anticipate how these problems may put you at a disadvantage during negotiations. A leaky roof may not be discovered until after buyers order a home inspection. Depending on the cost, they may ask the seller to either fix the roof or deduct the cost of a new roof from the sale price.

These types of issues put sellers at a distinct disadvantage because they have to either pay for repairs, lower the selling price, or reject the counteroffer and hope the next buyer doesn’t notice or care about repairs. This is why it’s worth the money (around $500) to pay for an inspection before listing a house. Preparation can save you headaches and money down the road.

Responding to a counteroffer

If you’ve received a counteroffer as a buyer or a seller, carefully review every aspect. Real estate agents, apart from yours, are under no obligation to ensure you read the full contract. So make sure you read everything carefully before you sign. With each counteroffer, consider every aspect of the sale, including old and new information. If you made an offer above the list price, an appraisal always can come in low.

If you are responding to a counteroffer before an appraisal or inspection, keep those at the forefront of your mind. Prepare yourself for future counteroffers once they are completed. Whether you’re selling or buying a home, establish a baseline for when you will walk away from a sale. As a buyer, you don’t want to spend so much on a home that you move in with no cash for improvements and repairs. And as a seller, you should know how much you want to make off the sale.

With a measured and informed approach, counteroffers can be your friend. Communicate often with your agent to let them know what you want from the sale, and never be afraid to walk away if things go south.

6 Smart Ways to Build Home Equity

Home equity is the percentage of your home’s value that you own, and it’s key to building wealth through homeownership. Let’s take a closer look at how to build home equity without blowing your budget — and how to access it when you need it.

How much equity do you have?

Equity is easy to calculate when you first buy a home because it’s your down payment. For example, if you put $11,250 down on a $225,000 home, your down payment is 5 percent and so is your equity.

From 2016 to the first quarter of 2018, most first-time homebuyers in the U.S. started with about 7-percent equity, according to Inside Mortgage Finance. This is encouraging because it shows you don’t need to spend years saving for 20 percent down or more before you buy. Repeat home buyers started with more equity, at about 17 percent.

How to build your equity

Here are six ways your home can create wealth for you. Some require time, money — or both. A lender can help you decide what works best for you.

1. Let your home appreciate

Building equity through appreciation can take little time or a lot, depending on the market. With home prices going up as they have in recent years, appreciation has been a boon for many homeowners. Zillow’s research indicates that the median home value grew from $185,000 in April 2016 to $216,000 in April 2018. If you bought a home for $185,000 in April 2016 with a down payment of $12,950, your beginning 7-percent equity would have grown to 23 percent by April 2018.

We calculate this by subtracting your current loan balance ($165,600) from your home’s current value ($216,000). Then we divide the difference by your home’s current value. One-eighth of this additional 16 percent equity is from paying down your mortgage, and the rest is market appreciation.

If you waited two years and bought the same home in April 2018 with a 20-percent down payment of $43,200, you started with 20-percent equity. You also used 3.3 times more cash to make the purchase. And here’s the kicker: Your total monthly housing cost would be the same — about $1,050 in both cases.

This example illustrates two things: First, the power of home appreciation. It’s a lot like buying stock and benefitting as its value goes up. But there’s also a difference: While you’ll pay capital gains on rising stock value, you’re exempt from paying taxes on primary-home capital gains up to $250,000, or $500,000 for married couples.

Second, waiting to “save enough” isn’t the primary factor in determining if you can afford to buy a home. When it comes to qualifying for a loan, lenders do indeed look at your down payment. They’ll also want to know how much you’ll have in cash reserves after closing. But there are lots of options for low down payments that require minimal reserves.

Your monthly budget is the primary factor lenders consider when deciding whether you can afford a home. Lenders will allow you to spend between 43 percent and 49 percent of your income on monthly bills, which is actually on the high side and could strain your budget. Since 2016, most first-time buyers have spent about 38 percent of their income on housing and other debt, which is a pretty safe cap for budgeting.

2. Make a larger down payment

You can do this but, as we’ve seen, waiting to save extra cash can go against your broader financial interests if you lose the chance to build equity through appreciation. Therefore, you must strike a balance among down payment, monthly budget and savings for other priorities. A good lender can provide rate and market insight to help you do this.

3. Use financial windfalls

Take advantage of work bonuses, family gifts and inheritances to pay down your mortgage. If you do pay down in lump sums, see if your lender will recalculate (or “recast”) your payment based on the new, lower balance.

4. Make biweekly payments

Make mortgage payments every two weeks instead of once a month. Over a year, this will add up to 13 monthly payments instead of 12. You’ll build equity faster and shave five to six years off a 30-year mortgage. Just make sure your lender isn’t charging extra for processing semimonthly payments.

5. Cut your loan term in half

Take out a 15-year mortgage instead of a 30-year mortgage, and you’ll build equity twice as fast. Two caveats here: You’ll have a significantly higher monthly payment and, because of that, you may have a tougher time qualifying.

6. Make home improvements

New appliances or cosmetic features like paint are unlikely to increase value. Only big improvements like new kitchens, or additional bathrooms or other rooms will add meaningful value. Make sure the cost of such improvements will create the added value you’re looking for.

How to use your equity

You must borrow or sell your home to use your equity. The three most well-known ways to get to your equity through borrowing are a home equity line of credit (HELOC), home equity loan or cash-out refinance. Compare the pros and cons of each. Rates are rising right now, so these borrowing options might cost more in the future. Talk to your lender to determine the best approach for you.

How to Perform a Landlord Background Check

You’ve found the perfect new apartment or rental house. You love the neighborhood. Your application has been approved. You’re ready to sign on the dotted line, right? Not so fast. How much do you know about your soon-to-be landlord, property manager or property management company?

There are lots of reasons why you should take the time to ask yourself, “Who is my landlord?” before you commit. Your rent payment is likely one of your biggest monthly expenses, and if you’re signing a lengthy lease, you should find out as much as you can about the person who owns and operates the place you’ll call home. Check out these five easy ways to check your landlord’s reputation before signing your lease.

1. Google them

The internet has a way of quickly uncovering all kinds of misdeeds, so start with a simple Google search of your landlord’s name or property management company, as well as the property address.

Hell hath no fury as a renter scorned, so you’ll also want to peruse some of the many apartments and landlord review sites online that let tenants anonymously review their apartment complex, landlord or property management company.

2. Search public records

There’s a wealth of information about properties and landlords available via your local government agencies, and you’re usually able to check your landlord for free. Consider it your landlord background check!

Your county courthouse should have ownership records searchable by address, so you can find the legal name of the person or company that owns the property — it may not be your landlord directly. You can also search for code violations, foreclosure proceedings, evictions, and small claims court settlements, all of which should be red flags for renters.

3. Get to know your (future) neighbors

If you’re moving into an apartment complex with multiple units, take a few minutes to walk around the grounds out of earshot of the landlord. If you see any tenants out and about, strike up a conversation about what it’s like to live there. Ask how long they’ve lived there — renewed leases are a good sign of a positive landlord-tenant relationship. Get a few pros and cons, ask how complaints are handled, and find out if they have any gripes about management.

If you’re moving into a single-family home, ask the landlord if they’d mind you having a conversation with the current tenants. If you don’t have access to any other tenants, find a neighborhood-specific blog or Facebook group to join. Tell people you’re thinking of moving into the area, and ask if they know anything about the property manager.

4. Be the interviewer

Landlords ask you questions when you apply to live in their property, so why shouldn’t you ask them questions too? Ask them how they handle repair requests. Find out if the landlord lives on-site, nearby or in a different state. Ask how the move-in and the move-out process goes. Learn more about their process for requesting entry to your unit. They should be able to easily answer your questions and address all of your concerns.

5. Go with your gut

When in doubt, trust your instincts. If you experience any of the following:

The price seems too low for the apartment size, amenities or neighborhood
The lease terms are unclear
The landlord is hesitant to answer your questions
The landlord tries to rush you through the rental process

Kategorie-Archiv: Immovable