Awareness is Key to Safeguarding Against Scams

When it comes to safeguarding against scams, awareness is key. By being vigilant and recognizing consistent red flags, you can effectively thwart scammers in their tracks. Stay one step ahead and keep an eye out for these warning signs to protect yourself from falling victim to fraudulent schemes.

Unexpected contact - You receive unanticipated contact by phone, text, or email from an individual or organization regarding an invoice, order, delivery, or charge that you don't know about.

Sense of Urgency - Scammers employ tactics to manipulate and create a fabricated sense of urgency, resorting to rude or aggressive language to pressure you into taking immediate action.

Unusual Payment Requests - Be cautious if someone asks you to make payments or send money through unconventional methods such as gift cards, cryptocurrency, payment apps, or online wire transfers to deceive you into paying for something, resolving a fabricated issue, claiming fake sweepstakes winnings, or promising unrealistically high returns on investments. .

Coercive Communication - threatening language, claiming that you owe money and using scare tactics like threatening to involve the police if immediate payment is not made.

Love Scam Trap - Watch out for a potential online love interest who showers you with romantic words but avoids meeting face-to-face. Be cautious of these "romantic emergencies" and avoid sending money to someone you haven't met in person.

Homebuyers Specific ... Particularly during the closing process, scammers employ deceptive tactics by sending fraudulent emails to homebuyers, impersonating trusted individuals such as the real estate agent, settlement agent, or legal representative. These spoofed emails contain fictitious instructions for wiring closing funds, putting unsuspecting homebuyers at risk of financial loss.

Always verify with your agent and another trusted individual like a settlement or mortgage officer that the request for funds is legitimate before transferring money.

If you feel that you have become a victim of such a scam, contact your bank or wire-transfer company immediately to ask for a wire recall.  Responding as soon as possible may increase the likelihood you'll be able to stop the transfer and/or recover your funds.

For more information, see Mortgage Closing Scams on the Consumer Financial Protection Bureau website.

If you want to report a suspected crime, contact the Internet Crime Complaint Center or IC3.  The nation's central hub for reporting cyber crime is run by the FBI, the leading federal agency for investigating cybercrime.  Go to their website for more information and to file a complaint.

How to Buy Your First Home as an Investment and Retire Rich

As young people enter the full-time workforce and begin to think about living on their own, it may not seem practical or wise to consider buying a home.  However, it may be a pivotal decision for your financial security and future retirement.

Rents are going to increase based on the shortage of rental units needed for the demand of the market.  Buying a home is a way to control those costs and even provide income by converting it to a rental as you decide to move up into another home.

There is an advantage to buying a home before a person gets married, starts a family, and has their standard of living at a higher pace.  Their expenses are lower, and it is easier to not only qualify for a loan but possibly, take advantage of programs for down payment assistance, grants, or other options like gift funds or co-signers.

Purchasing a home is a significant financial decision, particularly for first-time homebuyers. However, there are several benefits to buying a home early in your career, even if it is not your dream home.

One of the most significant benefits of buying a home as an investment is that it can help you build equity. Equity is the difference between the value of your home and the amount you owe on your mortgage. As your home's value increases, so does your equity. This can be a valuable asset in the future, as you can use it to finance other investments or retirement expenses.

Another benefit of buying a home as an investment is that it can generate passive income. If you rent out a room or two in your home, you can use the rent to help cover your mortgage payments and other expenses. This can free up your disposable income to invest in other areas, such as your retirement savings.

Of course, there are some risks associated with buying a home as an investment. The value of your home may not always increase, and you may have to deal with unexpected expenses, such as repairs or maintenance. However, the potential benefits of homeownership can outweigh the risks, particularly if you are strategic about your investment.

When choosing a home to purchase as an investment, it is important to consider the location. A home in a desirable area that is likely to appreciate in value over time is a wise investment. It is also important to consider the size of the home. A home with three or four bedrooms will be easier to rent than a property with less.

The strategy can be as simple as:

1. Buy a house when you enter the workforce and take on paying roommates.  Declare the income on your income tax.
2. It doesn't have to be the perfect home, but it does need to be a good home in a good area.
3. Never sell the home; instead, convert it to a rental when you move up in the near future as your income goes up.

If you have young adult children who would benefit from this advice, please share it with them along with our Buyer's Guide.  If they would like to learn more specifics, we would love the opportunity to meet with them.

Negotiate with the Seller Like a PRO

Having a negotiation plan is paramount when it comes to navigating the complex world of real estate as a homebuyer. It's no secret that buying a home involves a significant financial investment and numerous variables that can impact the outcome of the transaction. By formulating a well-thought-out negotiation plan, homebuyers can approach the process with confidence, a strategy, and a clear understanding of their goals and boundaries.

A negotiation plan allows buyers to effectively communicate their needs, explore potential compromises, and ultimately secure a favorable deal. In this competitive market, where multiple offers and bidding wars are common, having a solid negotiation plan can be the key to achieving a successful outcome and obtaining the home of your dreams at the best possible terms.

Research the Market - Before making an offer, thoroughly research the local real estate market. Understand recent sales data, current inventory levels, and the average time homes spend on the market. This knowledge will empower you during negotiations.

Determine Your Budget - Set a realistic budget based on your financial situation and pre-approval from a lender. Knowing your limits will help you make strong and confident offers.

Understand Seller Motivation - Try to gain insight into the seller's motivation for selling. Are they looking for a quick sale, or are they more concerned about maximizing profit? Understanding their motivation can give you an advantage when negotiating.

Work with an Experienced Real Estate Agent - Partner with an experienced real estate agent who has strong negotiation skills. They can guide you through the negotiation process, provide valuable advice, and help you structure a compelling offer.

Focus on More Than Just Price - While price is important, it's not the only factor to consider. Consider other terms, such as the closing timeline, contingencies, and included appliances or furniture. By being flexible on certain terms, you may have a better chance of securing a favorable deal.

Request a Home Inspection - Include a contingency in your offer for a professional home inspection. This allows you to identify any potential issues or repairs needed and can give you leverage for negotiating a lower price or requesting repairs.

Be Prepared to Compromise - Negotiations involve give and take. Be open to compromising on certain terms to reach a mutually beneficial agreement. Flexibility can improve your chances of finding common ground with the seller.

Stay Emotionally Detached - While buying a home can be an emotional process, it's important to stay level-headed during negotiations. Avoid getting too attached to a specific property and be willing to walk away if the terms don't align with your goals. This mindset can empower you to negotiate from a position of strength.

Remember, effective negotiation is a skill that improves with experience. By employing these tips and working closely with your real estate agent, you can increase your chances of securing a favorable offer as a homebuyer.

Evaluate Your Mortgage Loan Types

Making an informed decision about securing a mortgage loan is vital, as it involves understanding the available options and considering relevant factors. With a range of mortgage types designed to cater to diverse needs, it is essential to carefully evaluate your circumstances and goals to select the most suitable option. By taking the time to gain a broad understanding of the mortgage landscape, you can make a confident and well-informed choice that aligns perfectly with your unique situation.

Primary Types of Mortgages

Fixed-Rate Mortgage (FRM) - With a fixed-rate mortgage, the interest rate remains constant throughout the loan's duration. This ensures that your monthly principal and interest payments remain unchanged, providing stability. While taxes and homeowner insurance costs may fluctuate, your mortgage payment remains steady. This mortgage type is ideal for long-term homeownership, typically spanning a decade or more.

Adjustable-Rate Mortgage (ARM) - An ARM offers an initial fixed interest rate for a specific period, after which the rate adjusts periodically. These mortgages often commence with lower interest rates, resulting in lower initial monthly payments. The adjustment periods can vary, with some ARMs remaining fixed for several years before adjustments occur. ARMs are suitable when long-term fixed rates are high or if you plan to sell the property within a shorter timeframe.

Other Mortgage Loan Types

Balloon Mortgage - This mortgage involves monthly payments based on a 30-year term, with the remaining balance due in a lump sum after a specific period. It may include options to reset the interest rate and extend the due date based on specific conditions.

Conventional Conforming Loans - These loans adhere to standards set by Government Sponsored Enterprises (GSEs) like Freddie Mac or Fannie Mae, allowing lenders to sell them. Conventional loans can be fixed- or adjustable-rate and finance various property types.

Conventional Non-Conforming Loans - Unlike conforming loans, these conventional loans do not conform to GSE standards, making them less standardized. Their terms and pricing may vary based on property price or creditworthiness.

Government-Guaranteed Loans - Designed to increase homeownership accessibility, government agencies offer mortgage loan guarantees for specific populations.

FHA Loans - These loans offer low down payment options, as low as 3.5%, to eligible homebuyers. They are insured by the federal government and allow lower credit scores, though they tend to be slightly more expensive than conventional loans.

USDA Loans - Aimed at low- and moderate-income buyers, the USDA offers programs for purchasing or building homes in rural areas. These programs include options for down payment assistance.

VA Loans - Exclusively for eligible military personnel, veterans, and their spouses, VA loans provide favorable terms, often without down payment requirements or private mortgage insurance.

HUD 184 and HUD 184A Loans: - The HUD 184 loan program supports American Indian and Alaska Native families, while the HUD 184A loan program assists Native Hawaiians on Hawaiian homelands. These loans offer low down payment options, flexible underwriting, and unique benefits for eligible borrowers.

Interest-Only Loans - With interest-only mortgages, homeowners initially make payments on interest only, typically for a fixed period. After this period, payments include both principal and interest. This type can be suitable if you plan to sell or refinance before the interest-only period ends.

Manufactured Home Loans - Designed for affordable housing, manufactured home loans require lower down payments and are specifically tailored to finance manufactured homes built to national safety standards.

Hard Money Loans ... Hard money loans are a type of short-term financing option secured by the property itself, rather than the borrower's creditworthiness. Hard money lenders are private individuals or companies that provide these loans based on the value of the property and its potential for profitability.

Owner Carried Loans - Owner carried loans, also known as seller financing, are a type of financing arrangement in which the seller of a property acts as the lender.  Owner carried loans can benefit both parties, providing the buyer with an opportunity to acquire the property and the seller with a steady income stream from the loan payments.

Choosing the right mortgage loan involves evaluating your financial circumstances, long-term plans, and personal preferences. By understanding the diverse range of mortgage options available, you can make an informed decision that aligns with your homeownership goals. Consult with a reputable mortgage professional to explore these options further and determine the best mortgage type for your specific needs.  We would be pleased to recommend a trusted mortgage professional to you.

Proven techniques to shorten your market time

Are you in a hurry to sell your house? Whether it's due to relocation or a desire to streamline the selling process, selling your home quickly doesn't have to be a daunting task. With extensive experience in assisting homeowners, our expert team has identified three key strategies that can help secure a fast and favorable sale. Let's explore these techniques in detail.

Maximizing the appeal of your home is key to generating interest from potential buyers. Take the time to clean, declutter, and depersonalize your space before listing it. By storing away family photos and neatly packing your belongings into boxes, you create a blank canvas that allows buyers to envision themselves in the space. Consider hiring a professional cleaner to ensure your home is in impeccable condition. A pristine presentation will entice buyers to submit attractive offers promptly.

Don't let minor repair issues become obstacles during negotiations. Prior to listing your house, proactively take care of any small repairs that may arise. Fix faulty light sockets, replace worn-out door handles, and address other minor issues that could potentially delay the sales process. By resolving these matters upfront, you can facilitate a smoother inspection and negotiation phase.

To expedite the sale while maintaining a favorable asking price, consider providing incentives to potential buyers. This strategy can greatly enhance buyer motivation. Explore options such as covering closing costs, offering an interest rate buydown, a repair allowance, or including essential appliances as part of the sale. By offering enticing incentives, you'll likely attract buyers who are willing to expedite the closing process, even if it means paying a higher price.

For homeowners looking to sell their property quickly, employing these three effective strategies can significantly expedite the sale without compromising the final sales price. By preparing the home meticulously, addressing minor repairs proactively, and offering appealing incentives to potential buyers, sellers can create an enticing package that encourages prompt and attractive offers. Collaborating with an experienced real estate agent further enhances the chances of a smooth and successful transaction. Embrace these strategies today to pave the way for a swift and favorable home sale.

For more information, download our Seller's Guide. If you have any questions regarding these techniques or any other aspect of the selling process, reach out to me and we'll talk.

Tips to Achieve Your Full Potential Equity

The real estate market is constantly evolving, presenting homeowners with challenges in determining the accurate value of their properties. In today's era of rapid fluctuations, it is essential to equip yourself with the right knowledge and tools to make informed pricing decisions. There are three crucial factors to consider when assessing your home's worth.

Online estimators offer a convenient starting point for obtaining a rough estimate of your home's value. While they may not provide pinpoint accuracy, these tools, readily available on reputable real estate agents' websites and portals, can provide a general idea of where your property stands in the market.

Traditionally, real estate professionals would consider comparative home sales data from the past six months. However, the current market volatility demands a shift towards using more recent comps. Notably, 2022 and 2023 witnessed a significant doubling of mortgage interest rates within a six-month span, causing home prices to respond accordingly. To ensure accurate pricing, it is crucial to work with a seasoned real estate agent who can identify and leverage the most recent comparable sales.

While research and analysis are valuable, nothing compares to the expertise of a professional real estate team. Their experience and training enable them to price your home accurately from the outset. A skilled agent can identify the key amenities and upgrades that will yield the highest return on investment, as well as develop a tailored marketing plan to outshine competitors.

Evaluating the obvious and the subtle differences between your home and the comparable sales can make the difference in achieving your full potential equity in the least market time with the fewest deterrents or not.

In the ever-changing real estate market, determining your home's value requires a multifaceted approach. By utilizing reliable online tools, considering recent comps, and collaborating with an experienced real estate team, you can confidently navigate the dynamic market and price your home appropriately. If you have any questions or need assistance with real estate matters, please feel free to reach out to me. I am here to serve as your dedicated resource for all your real estate needs.

How Appreciation and Amortization Benefit Homeowners

Owning a home is not only a place to live but also a valuable asset that can contribute to long-term wealth accumulation. Two key factors that play a vital role in increasing a homeowner's wealth are appreciation and amortization. Understanding how these factors work can provide homeowners with insights into building substantial financial equity over time.

Appreciation refers to the increase in the value of a property over time. Real estate markets tend to experience appreciation in the long run, although it can fluctuate in the short term. This appreciation can significantly benefit homeowners' wealth accumulation in several ways.

As a property appreciates, the homeowner's equity, which is the difference between the property value and the mortgage balance, increases. This equity serves as an asset that can be leveraged for future financial endeavors.

Capital Gains: When homeowners decide to sell their property, the appreciation becomes recognizable. The difference between the purchase price and the selling price results in a capital gain, which can be taxed at favorable rates. Homeowners benefit from an exclusion of up to $500,000 of capital gain for married taxpayers filing jointly.  If the gains exceed the exclusion, they are taxed at a lower capital gains rate.

Amortization refers to the gradual repayment of a mortgage loan over time. It is facilitated through monthly mortgage payments, which consist of both principal and interest. With each mortgage payment, a portion goes towards reducing the principal balance of the loan. This reduction in debt increases the homeowner's equity in the property, effectively building wealth over time.

Amortization acts as a form of forced savings. Homeowners are essentially paying themselves by building equity with each payment, rather than paying rent to a landlord. As the mortgage balance decreases, homeowners gain ownership of a more significant portion of the property, leading to increased wealth.

As equity grows, homeowners can access it through home equity loans or lines of credit, allowing them to invest in other ventures or make home improvements that can further enhance the value of their property.

Understanding the dynamics of appreciation and amortization is crucial for homeowners looking to accumulate wealth through their real estate investments whether it be a home or a rental. Appreciation allows for capital gains and the growth of equity, while amortization steadily reduces debt and builds equity over time. By leveraging these two factors effectively, homeowners can secure their financial future and take advantage of the long-term wealth-building potential of homeownership.

Protect your belongings with a Home Inventory

As a homeowner, you invest time and money into creating a comfortable and secure living space for you and your loved ones. However, unforeseen events such as natural disasters or burglaries can occur, resulting in the loss of your personal belongings. To protect your investment, it's crucial to create a home inventory of your personal belongings. In this article, we will discuss the benefits of having a home inventory and how to construct one.

Benefits of a Home Inventory

• Insurance Claims: In case of a natural disaster or burglary, a home inventory can be used to file an insurance claim for lost or stolen items. Having a detailed inventory will help expedite the claim process and ensure you receive the full value of your lost belongings.
• Estate Planning: A home inventory can also be used for estate planning purposes. It can help identify and distribute personal belongings to heirs or beneficiaries in the event of your passing.
• Peace of Mind: Knowing that you have a detailed inventory of your personal belongings can provide peace of mind. It ensures that you are aware of what you own and can help you prioritize what to protect in case of an emergency.

How to Construct a Home Inventory

• Start with a List: Begin by creating a list of all your personal belongings. This list should include items such as electronics, furniture, jewelry, and artwork.
• Document the Details: Once you have a list, document the details of each item. This should include the make and model, serial number, purchase date, and purchase price. For high-value items such as jewelry and artwork, consider including photographs.
• Organize Your Inventory: Keep your home inventory organized and easily accessible. Consider storing it in a safe or secure digital location, such as cloud storage or a password-protected computer.
• Update Your Inventory: Review and update your inventory regularly. This should include adding new items as you acquire them, removing items you no longer own, and updating the details of existing items.

In conclusion, creating a home inventory of your personal belongings is a smart and practical way to protect your investment as a homeowner. It provides peace of mind, helps with insurance claims and estate planning, and ensures you are aware of what you own. By following these simple steps, you can easily construct a home inventory and safeguard your personal belongings.

If you'd like some more tips and forms to use, download our Home Inventory.

Exploring Down Payment Sources for First-Time Homebuyers

Aspiring homeowners can overcome the challenge of saving for a down payment by taking advantage of various sources of assistance.  Discover a variety of down payment sources available to first-time homebuyers, from family gifts and retirement account withdrawals to tax refunds and down payment assistance programs, empowering them to achieve their dream of homeownership. 

Implementing effective savings strategies is paramount for first-time homebuyers. Setting a budget, reducing unnecessary expenses, and establishing an automated savings plan can accelerate down payment savings. Additionally, consistently monitoring spending habits and adjusting can help maximize savings potential.  Saving for a down payment takes time and there may be some other alternatives available to you.

One possible source of down payment funds is a generous gift from family members. Through the annual gift tax exclusion, individuals can receive up to $17,000 per year from each family member without incurring gift tax obligations. This can significantly contribute to a first-time homebuyer's down payment, making homeownership more attainable.

For instance, a husband and wife can each gift $17,000 to their child and the child's spouse to make a total of $68,000.  This is a substantial amount that may allow the borrower to avoid PMI. If the child is going to be the heir ultimately, should the parents not currently need the money, it allows them to see the enjoyment of the gift now.

First-time homebuyers who have been diligently saving in their retirement accounts may have the option to tap into their 401(k) or IRA funds for their down payment. Certain retirement plans allow penalty-free withdrawals for qualified home purchases. However, it's crucial to consider the long-term impact on retirement savings and potential tax implications. Consulting with a financial or tax advisor is recommended to understand the specifics and make an informed decision.

Buyers with permanent life insurance policies may have accumulated cash value over time. This cash value can be accessed and used towards a down payment. However, it's important to evaluate the impact on the policy's death benefit and to consider the long-term implications before making any decisions. Consulting with an insurance professional is advisable to fully understand the terms and consequences associated with tapping into life insurance cash value.

Tax refunds can provide a boost to first-time homebuyers' down payment savings. By planning ahead and adjusting tax withholdings, individuals can aim to receive a substantial refund at tax time, which can then be allocated toward the down payment.

Many governments, employers, and non-profit organizations offer down payment assistance programs to support first-time homebuyers. These programs can provide grants, loans, or matching funds to help bridge the gap between savings and the required down payment amount. Eligibility criteria and program specifics vary, so researching and exploring available options in your area is essential. Working with a knowledgeable real estate agent or loan officer can help identify suitable programs and navigate the application process effectively.

Silent second programs are offered by certain local governments or housing authorities. These programs provide a second loan, often at a low or zero-interest rate, to supplement the homebuyer's down payment. The loan is "silent" because no monthly payments are typically required. However, repayment may be required when the home is sold or refinanced. Understanding the terms and conditions of such programs is crucial to ensure compliance and avoid unexpected financial obligations.

In recent years, crowdfunding has gained popularity to raise funds for various purposes, including down payments. Dedicated platforms allow individuals to create campaigns and seek contributions from family, friends, and even strangers who support their homeownership journey. While crowdfunding can be a viable option, it's vital to carefully read platform policies, consider potential tax implications, and approach the process with transparency and integrity. 

First-time homebuyers have multiple options when it comes to down payment sources. From receiving family gifts and utilizing retirement savings to exploring down payment assistance programs and implementing effective savings strategies, aspiring homeowners can find ways to turn their dreams of homeownership into a reality.

By understanding the available resources and seeking professional guidance, first-time buyers can navigate the path to homeownership with greater confidence and financial stability.  Your real estate professional can be very helpful in guiding you through which programs may be available.  They can guide you to a lender who specializes in down payment assistance and other special programs.

For more information, download the Buyers Guide.

Understanding How Homeowner's Property Taxes are Calculated

Property taxes are an essential part of homeownership, but understanding how they are calculated can feel like unraveling a complex puzzle. However, by unlocking the secrets of property tax calculation, homeowners can gain valuable insights into their tax obligations and make more informed financial decisions. In this article, we will demystify the property tax calculation process, providing homeowners with a comprehensive understanding of the factors involved.

Understanding Assessed Value - The first piece of the property tax puzzle is the assessed value of your home. Assessed value refers to the value assigned to your property by the local taxing authority for tax purposes. It is typically determined by professional assessors who consider various factors such as property size, location, improvements, and recent sales of comparable properties. Understanding how assessed value is determined is crucial, as it forms the foundation for calculating your property tax.

Individual states will adjust and publish the assessed value for the upcoming year.  This is usually done in advance of the tax rates being set by the different tax authorities.  The property owner will be notified of the valuation and may challenge it.  Reasons that could affect the valuation include material mistakes like square footage or others, the deteriorated condition of the property, comparable sales not known to the assessor, and other possible things.

In the assessment notification, there will be timelines for challenging, as well as specific information on the different remedies that may be available.

Knowing the Tax Rate - Once your home's assessed value is established, the next step is to determine the tax rate which is set by local taxing authorities, which can be multiple ones like city, county, school, hospital, and other special districts. The rate is expressed as a percentage of the assessed value. Tax rates can vary from one jurisdiction to another, and they are often determined based on the needs of the local government to fund public services and infrastructure projects.

The tax rate usually varies annually and even if the property valuation goes up, it doesn't mean that the property taxes for that year will necessarily be higher.

Accounting for Exemptions and Deductions - Many jurisdictions offer property tax exemptions and deductions that can help reduce your tax liability. Common examples include homestead exemptions, which provide tax relief to homeowners who use the property as their primary residence, and exemptions for senior citizens, veterans, or individuals with disabilities. These exemptions can significantly reduce the amount of property tax you owe. It's crucial to research and understand the available exemptions in your area to maximize your tax savings.

There may be deadlines for qualifying for a particular exemption for a particular tax year.

Performing the Calculation - Now that we have the assessed value and tax rate, let's put the pieces together and calculate your property tax. Multiply your home's assessed value by the tax rate (expressed as a decimal) to determine the preliminary tax amount. For example, if your assessed value is $200,000 and the tax rate is 1.5%, your preliminary tax would be $3,000. Remember to consider any exemptions or deductions you are eligible for, as they will directly impact your final tax amount.

Anticipating Changes and Planning Ahead - Property taxes are not static, and they can change over time. Factors such as reassessments, improvements, changes in tax rates, or modifications to exemptions can influence your future tax bills. Staying informed about potential changes and planning can help you anticipate and manage fluctuations in your property tax obligations. Keep an eye on local tax policies, attend public hearings, and consult with local tax authorities or professionals to stay ahead of any potential changes that may impact your finances.

Conclusion - Understanding the secrets of property tax calculation empowers homeowners to make informed decisions and better manage their finances. By following this step-by-step guide, you can gain clarity on the factors involved in property tax calculation, such as assessed value, tax rates, and exemptions. Your real estate professional can be a resource to help you understand the process and provide comparable sales data and other recommendations.

Retirement Dreams to Reality with Rental Properties

Planning for a comfortable and secure retirement is a priority for many individuals. While traditional investment options like stocks and bonds play a crucial role, there's another avenue that holds great potential, rental real estate. Let's explore the 12 key benefits of investing in rental real estate for retirement, shedding light on why it is a smart strategy to consider.

Steady Passive Income - Rental real estate offers a consistent stream of passive income, providing a reliable source of cash flow during your retirement years. This income can serve as a supplement to other retirement funds, ensuring financial stability and peace of mind.

Inflation Hedge - Rental income has the unique advantage of increasing with inflation. As living costs rise, rental prices can be adjusted accordingly, safeguarding your purchasing power, and allowing you to maintain your desired lifestyle.

Potential for Appreciation - Investing in rental properties allows you to benefit from potential long-term capital appreciation. Over time, your properties can increase in value, presenting the opportunity for substantial gains and a higher return on investment.

Tax Benefits - One of the significant advantages of rental real estate is the array of tax benefits available to investors. Deductions for property expenses, mortgage interest, and depreciation can help lower your annual tax liability, effectively maximizing your income in retirement.  Tax deferred exchanges and favorable long-term capital gains rates are also significant advantages.

Diversification - Including rental properties in your investment portfolio provides diversification, reducing the risk associated with relying solely on traditional investments. Real estate often performs independently of the stock market, adding a valuable layer of stability to your retirement plan.

Tangible Asset - Unlike intangible investments, rental real estate is a tangible asset that you can see and touch. Owning physical properties provides a sense of security, especially during turbulent economic times, and serves as a valuable asset that can be refinanced without triggering tax on the mortgage proceeds.

Equity Buildup - As tenants pay down the mortgage on your rental property, your equity in the property increases. By the time you retire, you can have a significant amount of equity built up, offering a potential source of additional retirement income through refinancing, selling, or leveraging that equity.

Control Over Investment - Investing in rental real estate grants you control over your investment. You can make decisions regarding property management, rental rates, and property improvements, allowing you to align your investment strategy with your retirement goals and preferences.

Downsizing Options - Rental property investments provide flexibility and options for downsizing in retirement. If you own multiple properties, you have the choice to sell some and generate income while simplifying your responsibilities as a landlord.  Another option could be to sell your personal home, take the capital gain exclusion, reinvest the proceeds for more retirement income, and move into one of your current, smaller rentals.

Legacy Building - Rental real estate offers a unique opportunity to create a lasting legacy. You can pass down your property to your heirs, with the tax advantage of a step up in basis, providing them with a valuable inheritance and potentially securing their financial future.

Ability to Leverage - Investing in rental properties allows you to leverage your investment. By utilizing financing options, you can multiply your returns, potentially amplifying your wealth accumulation and retirement income.

Flexibility - Rental real estate offers flexibility throughout retirement. You have the freedom to adapt your investment strategy to match your changing lifestyle and financial goals. Whether it's adjusting rental rates, exploring different property types, or exploring new markets, you can customize your approach to maximize your returns.

Investing in rental real estate for retirement can unlock a range of benefits that contribute to financial security, steady income, and a comfortable lifestyle. From passive income to potential appreciation, tax advantages to legacy building, rental properties offer a path to a blissful retirement. By carefully considering the advantages discussed, you can make informed decisions investing in real estate for your retirement.

Download our Rental Income Properties guide.  If you want more information, and your agent is not familiar with rental investments, we would love to work with you to better understand the opportunities.

The Top 5 Benefits of Owning a Home

Purchasing a home can feel like an overwhelming project, but the long-term advantages of homeownership make it a smart investment to secure your future where the benefits extend beyond simply having a place to live.

Building equity is one of the most significant advantages of owning a home. As you make mortgage payments, your equity increases, and over time, your home can become a valuable asset to use the equity to finance home improvements, pay for college tuition, or even as a down payment on a second home.

Two factors determine equity; the home going up in value and the unpaid balance of the mortgage being paid down.  Appreciation is the increase in value expressed in an annual amount.  Homes have averaged 4% nationally for the past 50 years.  Amortization is the systematic principal reduction that occurs with each house payment made.

Another advantage of buying a house is the stability of housing costs. With a fixed-rate mortgage, your monthly principal and interest payments remain the same for the life of the loan, giving you predictable and stable housing costs. This can help in your financial planning.

Control over your living space is also a significant benefit of owning a home. You can make changes and improvements to your home to suit your needs and preferences without having to get permission from a landlord. This can help you create a space that truly feels like your own and can contribute to your overall sense of well-being and satisfaction.

Finally, homeownership also offers several tax benefits that can contribute to long-term financial savings. You may benefit from itemizing deductions for interest and property taxes that would exceed a person's normal standard deduction.  Regardless of which deduction a homeowner takes, additional tax advantages apply to home ownership like an exclusion of up to $500,000 of capital gain for married, filing jointly taxpayers and $250,000 for single filers who meet the occupancy and use requirement.  

The long-term advantages of buying a house are significant, including building equity, stable housing costs, potential appreciation, control over your living space, and tax benefits. Although the process of purchasing a home can seem overwhelming, the benefits of homeownership make it worth considering. Ensure that you do your research, get pre-approved for a mortgage, and work with a qualified real estate agent to find the right home for your needs and budget.

For more information, download our Buyers Guide and Homeowners Tax Guide.

Talking Points to Identify an Agent

Having a list of talking points prepared before meeting with a real estate agent can be incredibly valuable in guiding the conversation and helping you make an informed decision about who will represent you in the sale of your home. Whether you're a first-time seller or it has been a while since you last sold a property, asking these questions can reveal important information about the experience and expertise of your candidate.

Even if you already have a trusted friend who is a real estate agent, it's still appropriate to understand how different issues will be handled. A true professional should not feel challenged to discuss these important concerns.

1. Tell me about your experience and training.
2. Do you work in real estate full-time?
3. Are you a REALTOR� and a member of MLS?
4. What is the average price of the homes you have sold and how many did you sell last year?
5. Which neighborhoods do you primarily work?
6. How many homes have you sold in my neighborhood?
7. What is your list price to sales price ratio?
8. How many buyers and sellers are you currently working with?
9. Tell me about the positives and negatives of my home.
10. How will market preparation and staging affect my sales?
11. Describe your marketing plan for my home and if you will use outside professionals.
12. Specifically address Internet exposure, open houses, and showings.
13. Describe how you'll keep me informed all along the way.
14. Will I work directly with you or with team members?
15. Can you provide me with three recent references?

It's important to note that price was not included in the list of talking points. As the seller, you ultimately set the price, but the market and the buyer will determine the value. The agent can advise you about the proper range that will ensure activity and ultimately affect your final proceeds. This advice should be based on facts that are available to all agents as well as prospective buyers and appraisers.

In other words, the decision to list your home with a particular agent and company should never be based on the listing price suggested by a prospective agent. Trust a reputable agent to provide sound advice and guidance throughout the selling process.  You may find more helpful information in our Sellers Guide.

Protect Your Belongings with a Home Inventory

As a homeowner, you've likely invested a significant amount of time and money into furnishing and decorating your home with items that are important to you. Unfortunately, unexpected events like natural disasters or burglaries can result in the loss or damage of these belongings.

That's why it's important to create a home inventory to document everything you own. This can help ensure that you're properly insured and can help speed up the recovery process if the worst were to happen. Here's how to construct a home inventory.

First, gather your supplies. You'll need a camera, a notebook, and a computer or storage device to keep track of your inventory.

Next, start in one room of your house and systematically go through all your belongings, one item at a time, focusing on the more expensive items. Take a photo of each item and make a note of its make and model, serial number (if applicable), and the date and location of purchase. Don't forget to include the purchase price or current value of the item as well.

If you're using video, the image and description are on one medium.  It's helpful to have someone assist so that one person can shoot the video while the other is holding the object and describing it.

It's important to be as detailed as possible when creating your inventory. This means opening drawers, cabinets, and closets to take photos of everything inside. Be sure to also take photos of any valuable items that may not be stored in your home, such as jewelry or collectibles.

Once you've completed your inventory, make sure to store it in a safe place. This could be a secure digital file, or a physical copy kept in a safe or off-site location.

Having a home inventory can make the claims process easier and less stressful. It can also help ensure that you're properly insured and can help you recover quickly from a loss. In the case of theft or burglary, this kind of detailed report can be helpful to the police in recovering your property.  So, take the time to create a home inventory and protect your belongings today.

Download a Home Inventory to help you with the process.

Avoid Taxes by Keeping Track of Improvements

Keeping track of capital improvements to your home can help you avoid taxes later down the road when you sell it.

Some homeowners don't even consider such a thing because they are aware of the capital gain exclusion of up to $500,000 for married homeowners and $250,000 for single filers.  Possibly, the gain in a past sale didn't exhaust the limit that has remained the same since 1997.

Today, homes are much more expensive and appreciation in the past few years has been exceptionally high.  It is now possible and maybe more likely, based on the price of the home, for a homeowner to have gains more than these limits.

A $250,000 home in 1997 based on an annual appreciation of 4% would be worth almost $700,000 today.  Capital improvements made to a home raise the basis, or cost, of the home which will affect the gain on the sale.

Improvements must add value to your home, prolong its useful life or adapt it to new uses.  Repairs, not considered improvements, are routine in nature to maintain the value and keep the property in an ordinary, operating condition.

The addition of decks, pools, fences, and permanent landscaping add value to a home as well as new floor covering, counter-tops and other updates.  Replacing a roof, appliances or heating and cooling systems would be considered to extend the useful life of the home.  Completing an unfinished basement or converting a garage to living space are common examples of adapting a portion of the home to a new use.

Other items that can raise the basis in your home are special assessments for local improvements like sidewalks or curbs and money spent to restore damage from casualty losses not covered by insurance.

There can be multiple ways to create a capital improvement register.  Homeowners could use a spreadsheet where they record the date, description, and the amount of each improvement while they own the home.  It is also necessary to keep receipts for the expenditures and cancelled checks for proof.

Just keeping the receipts and cancelled checks would be helpful and could be sorted through by yourself or an accountant at the time of filing the tax return after the sale of the home.  Since most banks don't return cancelled checks any longer and the sale could be years after you've closed an account, it would be prudent to acquire a 'substitute check" which is a paper copy of the canceled check.  Another option that may be available through your bank is to download a picture of the cancelled check.

For more information on Capital Gains and Section 121 Capital Gain Exclusion, download IRS Publication 523 and our Homeowners Tax Guide which includes a capital gains register.

Laying the groundwork for the best mortgage

With mortgage rates having doubled what they were in early 2022, getting the lowest rate possible could mean the difference in being able to buy a home or at the very least, makes it much more affordable.  Some people are waiting for rates to come down and while they are expected to come down some this year, most experts agree that they'll never return to the three or even four percent range. 

There are things that a buyer can do to be eligible for the best rate available.  Obtaining the most favorable terms is based on the loan-to-value, your credit rating, and your ability to repay the mortgage.

While lenders can impose their own underwriting criteria, the basic qualifying guidelines are identified as the 4 Cs:

• Capital - money and savings, plus other investments providing for down payment, closing costs, and reserves for unexpected expenses in the future.  It could also include gifts from family members, grants, and down payment assistance.
• Capacity - ability to pay back the loan.  Lenders look at income, job stability, savings, monthly debt payments, and other obligations to approve a borrower for a mortgage.  They'll ask for several years of tax returns, W2s, and current pay stubs.  Self-employed borrowers require additional documentation.  Some of the recurring debt can include car payments, student loans, credit card payments, personal loans, child support, alimony, and other debts which could include co-signing for another's debt.
• Credit - your credit history and score exhibit your experience for paying bills and debts on time.  While there are minimum credit scores for different types of mortgages, the best rates are only available to borrowers with the best credit scores.  Credit ratings are established over time and borrowers need to improve their scores before they need to use them.
• Collateral ... lenders look to the value of the home and other possessions when pledged as security for the loan.

Based on the Ability-To-Repay Rule, effective 1/10/2014, financial information must be supplied and verified; borrower must have sufficient assets or income to pay back the loan; and, teaser rates can no longer hide a mortgage's true cost.  Even after a lender gives a loan approval to a borrower, they will generally run additional verifications a few days prior to the closing to make sure that nothing has changed that would affect their underwriting decision.

The financial preparation for homebuyers begins long before they start looking at homes.  They need to be aware of their credit by asking for copies of their credit reports from the three major reporting agencies: Experian, TransUnion, and Equifax. Congress mandated consumers be provided this free service through AnnualCreditReport.com.  Other websites may offer free services, but their real objective may be to encourage you to purchase additional services.

Once you've received the credit reports, read them to discover errors that could negatively affect your credit score.  The website will tell you the process of correcting the errors which includes notifying both the credit bureau and the reporting party of the error.

Most borrowers understand that payment history is the major contributor to a credit score; it is expected of borrowers to pay on time and as agreed.  Sometimes, borrowers are surprised to find out that if their borrowing approaches their available credit that it could actually hurt their score.

The credit utilization ratio is the percentage of credit used to that which is available.  If you had $10,000 credit available and your balance of a credit card was $2,500, the ratio would be 25%.  Ideally, lenders want your credit utilization to be below 25%.  Again, this could be one of the things you work on before you meet with a mortgage officer.

Once you have an accurate credit report and have saved for the down payment and closing costs, you're ready to meet with a trusted mortgage professional who can take you through the process of preapproval.  They may be able to suggest things you can do to raise your credit score to be eligible for a lower mortgage rate.

All lenders are not the same and there is a significant difference with the online lenders who have limited counselling advice and working with a local mortgage officer you can discuss face-to-face what your situation is and if it can be improved.  

You may feel comfortable with more than one recommendation and your agent will be able to supply you with lenders who they are familiar with from their experience in situations like yours.

Handling an Appraisal Gap

An appraisal gap describes the difference between the sales price and the lower amount of the appraisal required by the mortgage being obtained by the buyer.  It becomes an issue if the seller is not willing to lower the price or the buyer is not willing to pay the difference in cash.

Looking at the issue from the seller's perspective, "if the buyer wants my home and he can't get the loan he wants, he'll have to make up the difference in cash."  The buyer might have a different view like "If an independent appraiser can't justify the price, I'm not going to pay more than appraised value."

1. Pay the difference in the appraised value and the purchase price in cash. 
   Solution - Assuming the buyer has adequate cash reserves and is willing to pay above appraised value, this will satisfy the lender.
2. Decrease your down payment percentage to apply toward the appraisal gap.  It may trigger mortgage insurance which will increase your payment.
   Example:
   $400,000 Sales Price with 20% down payment of $80,000; Home appraises for $390,000
   Possible solution ... buyer could take $10,000 of the $80,000 he was going to use for the down payment and make up the gap.  That only leaves him $70,000 which is a good downpayment for this size home, but it may require that he pay mortgage insurance because the loan-to-value is more than 80%.
3. Renegotiate the contract with the seller.  Assuming both parties are willing to negotiate on the terms, the seller could lower the price to the appraised value, or any other number of possibilities.
4. Include an appraisal gap clause - "Buyer and seller agree that if the appraised value comes in lower than the purchase price, buyer agrees to pay up to $XX,000 above appraised value, but not exceeding the purchase price."
   
   An appraisal gap clause addresses what the buyer is willing to do within the parameters included.  It provides limited comfort to both the seller and buyer to address the issue of the home appraising for a lower amount than necessary.  This clause provides a way for the buyer to compete in a seller's market.
5. Terminate the contract.

Appraisals can be a confusing but necessary part of the process when the buyer needs a mortgage.  I'm available to answer any questions and share our experience with you. Our goal is to be your source of real estate information.

Make your home offer the most appealing

Sales in March 2023 were down 2.4% month over month and still down 22.0% year over year according to the NAR Housing Snapshot.  The median sales price dipped 0.9% to $375,700 and there are 2.6 months supply of homes on the market compared to 2 months a year ago.

"Inventory levels are still at historic lows, and consequently, multiple offers are returning on 28% of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�.

It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.  The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.

Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.  Include the written pre-approval letter along with the offer.  When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey assurance to the seller.

If you're concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer.  Starting with a low offer and gradually coming up doesn't work in highly competitive situations.  In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.

The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract.  Some types of financing have more costs incurred to the seller.  Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.

From a buyer's standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things.  To the seller, they are obstacles that may invalidate the contract causing the home to go back on the market.  If the contingencies are necessary, try to make them as palatable to the seller as possible.

Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo.  Instead of asking for repairs, provide a simple "accept or reject" once the inspections have been made.

Try to accommodate the seller's desired closing and possession dates.  Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they'll be moving into.  Your agent can do some research and find a flexible alternative that may appeal to the seller.

Increase your earnest money deposit more than the minimum.  It is a pecuniary indication that you are serious.  Your agent can tell you what the amount should be and alternatives like increasing the earnest money after certain contingencies have been met.

Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted.  Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.

You as a buyer and your offer to purchase need to be seen as the solution to the seller's situation in price, terms, and reliability to close.  Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment. 

Protect yourself with a new construction inspection

Builders of new homes offer or are required to warrant their work for a specified period.  Municipal inspections are generally required during different stages to "ensure the life, health, safety, and welfare of the public" but even if something is missed, the ultimate responsibility for building to code belongs to the builder, even if the municipal inspector misses something.

There are four basic stages of residential construction including:

1. The foundation stage begins with excavation, footings, foundation walls or slab, waterproofing, backfill, compaction and underground rough plumbing and electricity.  Municipal inspections are done prior to pouring the foundation while items are visible.
2. The framing stage includes the wood or steel framing, exterior walls and roof sheathing, exterior trim and siding, windows, doors, and roofing.  Depending on the municipality, there could be inspections of the rough framing separate from the roofing. 
   Next in this stage comes rough plumbing including water, waste, and vent piping, rough electrical, rough mechanical, ductwork, wiring, and electrical panel installation.  Municipalities will usually inspect plumbing and electrical separately.
3. The wall insulation and drywall installation are done and inspected depending on the municipality before tape and texturing are done. 
4. The final stage of construction includes flooring, cabinets, millwork, countertops, tile, mirrors, electrical trim, plumbing trim, and mechanical.  Some builders will not install appliances and HVAC until the last stage to protect against theft.  Municipal inspections are made in the final electric, plumbing, and mechanical.

A "Final Inspection" is done after all the periodic inspections have been completed and passed.

Defects that manifest themselves during the warranty period are the responsibility of the builder.  Unfortunately, some things may go undetected until after the warranty expires leaving the repair expense as the sole burden of the buyer/owner.

A safeguard that the purchaser will not be out of pocket for repair expenses is a home warranty which shifts the liability to the warranty or service contract company.  This is a negotiable item that can be paid for by the builder or the buyer.  However, this warranty will have a time limit on it and to continue the coverage, the buyer/owner will have to renew it by paying the additional annual premium.

One more safeguard for the purchaser is to hire their own inspector, to conduct periodic inspections during the different phases of construction.  Unlike an inspection made on an existing home, the inspector will have to visit the site multiple times during the process.  For that reason, constructions inspections are more expensive.

When hiring an inspector for new construction, ask at what stages do they inspect.  A typical new construction inspection might be at the end of the foundation stage, another at the end of the framing and rough plumbing, electrical, and mechanical, and the final inspection after the home is completed.

A provision allowing a buyer to hire their own inspector for periodic inspections should be included in the sales contract.  Your agent can not only help you get that included but assist in negotiation of any issues that arise because of the periodic inspections.

If you value this extra level of protection in the purchase of a new home, it is important that you have your agent first accompany you to the models so they will be registered as your agent.

Higher Interest Rates May be the Help You Need

Like opening and closing a faucet increases and decreases the water flow, lowering interest rates increases home sales and raising interest rates decreases home sales.

When home sales increase during periods of limited inventory, demand increases and prices go up.  Contrarily, when home sales decrease, demand could lessen and prices moderate. 

There is opportunity with higher rates because it affects sales and demand, which in turn keeps prices in check.  By waiting for rates to come down, and no one knows by how much but certainly not to the 3-4% range, buyers' pent-up demand will affect the already low supply and cause prices to increase.

Let's look at a scenario where you could buy a home today for $400,000 with a 90% loan at 6.5% for 30-years with P&I payments of $2,275.44.  If interest rates drop to 5.5% in one year but in that same period, the price goes up by 10%, the price would be $440,000 with a 90% loan at 5.5% for 30-years with P&I payments of $2,248.44.

The payment would go down by $27 a month but the price would have risen by $40,000 which would be equity of twice the down payment for the person who purchased a year earlier with a higher rate.

 

Purchase Price	Mortgage	P& I Payment	Equity EOY1
$400,000	$360,000 @ 6.5%/30 yr	$2,275.44	$84,023
$440,000	$396,000 @ 5.5%/30 yr	$2,248.44	$44,000

 

The takeaway in this example is that a person may experience more loss from unrealized equity during periods of high appreciation than waiting for a nominal drop in the interest rate.  With rates being a deterrent to buyers that have led to sales slipping 22% year over year in March 2023, sellers may be willing to negotiate.

It seems counterintuitive but higher interest rates may be the help you need to buy a home.

Shopping Mortgage Rates

Nobel Prize recipient, Richard Thaler, in his research into seemingly irrational economic behaviors, "found that consumers generally search too little, get confused while evaluating complex alternatives, and are slow to switch from past choices, even if it costs them." "Why are consumers leaving money on the table?"

Based on this behavior, a borrower securing a mortgage might depend on their existing banking relationship or a single referral from a friend or agent rather than shopping multiple lenders.

When shopping for a lower mortgage rate, consider that not all lenders share the same business practices.  Some may lure unsuspecting borrowers to a rate, knowing full well that they cannot deliver on it.  After making a loan application and supplying information necessary for approval, they reveal that the rate is not available for "whatever" reason.

They're counting on the borrower wanting to get into the home because the closing date is near and they'll compromise by accepting the higher than quoted rate.

Shopping for a mortgage rate can result in savings because rates are set by individual lenders.  To get an apples-to-apples comparison, the terms of the mortgage being shopped should be consistent among the lender candidates.

Consumers can make additional savings by not only shopping for better rates but for better terms and fees, which can vary widely among lenders.

The amount of savings can be affected not only by the difference in rates, but the size of the mortgage and the length of time borrowers expect to keep it without refinancing or selling.

• Advertised rates are generally for A++ borrowers and the determination is the lender's based on many factors.  It may be unlikely those rates are offered to you. 
• A recommendation for the best lender from a friend or family member will not necessarily be the best for you.
• Instead of accepting the first offer received, shop for at least three to five offers.
• Your personal bank may be convenient but it may not offer you the best rate, terms, and fees.
• Ask if there is room to negotiate the rate or fees.

Ask your real estate professional for recommendations of several trusted lenders for you to shop a rate, terms, and fees. 

Who Benefits from Selling a Home "As Is"?

A person's decision to sell their home comes with a lot of other decisions causing an owner to stress or procrastinate.  Early in the process, the owner will consider selling the home "As Is" to avoid the looming issues that accompany selling a home.

From a seller's standpoint, "as is" means the buyer will purchase the home in its current condition without asking for any repairs.  While it is convenient for the seller to take this approach, the normal trade out is the property will not result in the highest possible sales price.

Regardless of how the home is sold, the seller is required to disclose all defects which include repair history, condition of systems and appliances, water damage, pest infestation, radon, and other things that affect the value and livability of the home.

From a buyer's point of view, they may think there is something wrong with the home which could result in them avoiding the home completely or making a substantially lower offer to cover not only the known issues but also the unknown ones.

It would be reasonable for a seller to allow a buyer to make inspections to determine what the condition of the home and what kind of expenses they might be faced with.  In some situations, based on provisions in the sales contract, the buyer, after making inspections, may decide not to continue with the contract which could extend the marketing time for the seller by having to find another buyer.

Selling a home "as is" is like wholesaling the property.  A comparison could be trading your car to a dealer when buying a new one.  The dealer will usually give you the best price for the new car but won't offer you a retail price for the trade-in.  If the dealer were to give you a "retail" price for the trade-in, they would probably expect a "retail" price for the new purchase.

Even if the seller doesn't want to go through the effort to make major improvements, they still need to consider things that will ease the buyers' concerns about the home.  These include a thorough cleaning, decluttering, yard cleanup, and repairs on known issues like leaking faucets, lighting, doors, and appliances to name a few examples.

If this path is taken, the cost to the seller will be not realizing the maximum sales price compared to comparable homes that have sold recently in the area that have been updated.

Sellers Pros & Cons	Buyer Pros & Cons
Not spend money to prepare the home	Lower purchase price
Won't maximize proceeds from the sale	Less competition from other buyers
Could sell quickly if priced properly	Financing could be challenging
May take longer to sell	Looking for an opportunity to build sweat equity
Effort finding/negotiating with contractors	Improve the property to your preferences
Investors looking to make a profit	There may be hidden problems
Making decisions on what the public wants

There are companies who will buy your home for cash.  Their ads are very appealing to sellers because it solves their concerns about putting the home on the market.  Realize these companies are not charities but "for profit" who expect to be able to recoup the money paid to you, pay all repairs, renovations, and sales expenses plus make a profit for the risk taken.

As a homeowner, you will always realize more of your equity by approaching it with a risk/reward analysis to determine how to sell it for the highest price with the least expenses.  Your real estate professional will act as a fiduciary to put your best interests ahead of their own.  It is worth the effort before embarking on an "as is" scenario.

A Lesson on Housing from the 80's

Doing nothing may be a lot more costly than doing something.  With rates twice what they were in 2021 and the first half of 2022, many buyers are sitting on the sideline.  For some, it has to do with not being able to afford the home they want at today's mortgage rates and for others, it is not willing to accept that the low rates that were available are not only gone, but may never be available again.

In the late 70's, rates were around 10% and in the early 80's went up to 18%.  Interestingly, many buyers went ahead and purchased at those record level highs and refinanced a few years later when rates came down.  By the end of the decade, prices had continued to increase so that buyers had a significant equity in their home.

Tenants who waited for the rates to go down didn't see savings because the price of homes had gone up.  More importantly, they missed the opportunity to build equity in their home through amortization and appreciation.

If you purchased a $400,000 home today on an FHA loan at 6.3% for 30 years, your total payment with taxes, insurance, and mortgage insurance premium would be about $3,459 a month.

That payment could save you a little bit if you were paying $3,500 for rent.  However, when you consider the monthly appreciation, assuming a 3% annual rate, and the monthly principal reduction due to amortization, the net cost of housing would be $2,229.  You would be paying $1,270 more each month to continue to rent which would amount to over $15,000 in one year alone. 

That loss would be about twice the amount of the down payment to get into the home.  Furthermore, in seven years, at the same 3% appreciation, your $7,500 investment in a down payment would grow to $138,000 in equity in seven years.  If the appreciation is greater than that, the equity would be much more.

You're going to be paying rent to live in a home; you might as well benefit from the equity buildup from amortization and appreciation that is only available to the owner.

The benefit of acting now is that sales are down which are affecting prices, although not dramatically.  When the Fed gets a handle on inflation, and interest rates do moderate some, more buyers will be in the market and supply and demand will again cause prices to rise.  Then, you can refinance to a lower rate but your investment in the home will be at a lower basis.

To run your own numbers, use our Rent vs. Own.  If you have questions, call me and I'll explain how to use it and what to expect for the home you'd like to have.

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot.  The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago.

"Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�.

It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.  The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.

Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.  Include the written pre-approval letter along with the offer.  When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey that to the seller.

If you're concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer.  Starting with a low offer and gradually coming up doesn't work in highly competitive situations.  In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.

The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract.  Some types of financing have more costs incurred to the seller.  Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.

From a buyer's standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things.  To the seller, they are obstacles that may invalidate the contract causing the home back on the market.  If the contingencies are necessary, try to make them as palatable to the seller as possible.

Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo.  Instead of asking for repairs, provide a simple "accept or reject" once the inspections have been made.

Try to accommodate the seller's desired closing and possession dates.  Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they'll be moving into.  Your agent can do some research and find a flexible alternative that may appeal to the seller.

Increase your earnest money deposit more than the minimum.  It is a pecuniary indication that you are serious.  Your agent can tell you what that amount should be and alternatives like increasing the earnest money after certain contingencies have been met.

Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted.  Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.

You as a buyer and your offer to purchase need to be seen as the solution to the seller's situation in price, terms, and reliability to close.  Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment.   Download our Buyers Guide.