Author: Shannon

Jack and Betty Ayers fixed it up, raised their kids in it, and still cherished the many memories it held. But the couple knew they no longer needed their two-story, 3,000-square-foot Colonial.

Those three empty bedrooms still needed routine dusting and window-washing, the extra one and one-half bathrooms sat unused and the 3-car garage had transformed into a giant junk drawer.

The couple dreamed of traveling more and keeping up on the house and yard less. Plus, Jack’s arthritis was making climbing the stairs increasingly difficult.

They sold their home of 27 years and found a more manageable two-bedroom, 1,400-square-foot ranch. They still have space for entertaining and a spare bedroom for when their kids visit, but they love living on one floor and maintaining less space.

The Ayers aren’t alone. Only 7 percent of retirees surveyed said they had moved into age-restricted retirement communities, according to a Merrill Lynch/Age Wave study. That study also found that 51 percent of retirees had moved into smaller homes.

Sixty-four percent said they had downsized to lower their housing costs. With the proceeds from the sale of their home, the mortgage on which had almost been paid off, the Ayers were able to pay cash for the new home. They took what was left and invested it in their retirement portfolio.

Downsizing: It’s not just for retirees

Downsizing isn’t just for big corporations like GM, nor is it something unique to empty nesters. The urge to minimalize can happen at any age and at any stage in life.

Sure, leaving behind a home in which you may have built decades of memories is gut-wrenching; but moving to a smaller home does offer some exciting advantages. Smaller homes cost less to maintain and to heat and cool. Going petite also may mean a lower property tax bill, cheaper insurance and lower house payments.

Things went smoothly for the Ayers, but like any major life transition, there are some important things to consider when making this move. Here are four things to think about when downsizing.

1. Increase your leverage – Consider selling your home and temporarily renting, putting your things in storage, until you buy your new home. Without pressure to buy quickly, you’ll be in a better position to negotiate a lower price.
2. House or condo – Do you want your next home to be a house or condo? Condos usually cost less and you don’t have to worry about mowing grass or cleaning out the roof’s gutters–the ideal solution for those who dream of traveling. But condo associations can charge sizeable monthly fees, sometimes higher than buyers expect. If you find a condo development you like, we’ll be happy to find out the current HOA dues.
3. Find something special. Leaving a home that holds so many memories, having to shed some belongings such as heirloom furniture, and saying good-bye to neighbors you love can be emotionally difficult.

In choosing your new home, try to find one that has a quality that is special enough to help ease that pain. It might be that newly remodeled kitchen you’ve always wanted, or an attractive fireplace.

4. Get rid of furniture. Too many people try to take all of their furniture to their new, smaller home. Technically, yes, they can make it all fit, but too often, doing so gives the new home a cramped feeling, making it seem even smaller than it is.

Make it easy on yourself

Downsizing doesn’t have to be a marathon event. Start slow by tackling one room, or even one part of a room, at a time. Different variations of this theme include starting with your DVD collection, paperwork or beginning in a room that doesn’t hold items of sentimental value, such as the kitchen – the junk drawer specifically.

One of the initial steps to getting a home ready to sell involves de-cluttering, which may require making some tough decisions.

Think of the first steps in downsizing as de-cluttering on steroids and yourself as a multi-tasking ace as you start this process.

First, make decisions about what you will take with you to the new home and what you’ll part with. Items in the latter category require additional decisions: will you give them away, sell them or trash them?

To effectively use the following tips requires having a good idea of how much space you’ll have in the new home. Try to compare the size of the rooms in your current home with those in a substantially smaller home to make it easier to determine how much of your current furniture can make the move with you.

Use large boxes, bins or even designated floor space to separate your belongings in each room according to the decisions you’ve made about them. The giveaway items will need to be further categorized as to whom they will go, for instance “kids,” “charity,” and “friends.”

When handling an item, ask yourself first, how important it is to you. If it’s a “must keep,” then you’re finished with that item and you can pack it. If not, ask yourself how it fits with your new lifestyle. “If you don’t entertain anymore, don’t bring a ton of serving platters to your new home,” Ann Bass, a senior-move manager in Asheville, N.C. tells the Wall Street Journal.

There’s a lot to like about a more minimalist lifestyle. For some, the pursuit is liberating, for others it’s terrifying. If the thought of ditching your belongings and moving into a smaller space makes your heart beat quicken and your palms moist, don’t think of it as “downsizing,” suggests the National Association of Senior Move Managers. Instead, consider it “rightsizing.”

We hope you have found these tips for downsizing helpful, and we eagerly look forward to helping you enter the next exciting phase of your life.

 

“Seventy-four million people in the United States (27% of the population)” live in condominiums, according to Sa El at SimplyInsurance.com. Many of these homeowners downsized because of the heavy maintenance needs of single-family houses.

While there is no such thing as a completely maintenance-free home, condos come mighty close. If you’re tired of keeping up the yard and cleaning out the rain gutters, read on for how to live a maintenance-light lifestyle.

Oh, those homeowner associations

There are roughly 358,000 homeowner associations in the U.S., according to the Community Associations Institute.

While we frequently hear the horror stories about homeowner associations (HOAs), we seldom hear about the perks of living in a community managed by one.

Whether your aim is to buy a townhome, co-op or a condo, life in a common interest development (CID) means that you own not only your home, but also an interest in the common areas (community pool, etc.). You also share in the costs of maintaining the community, typically including the exterior of the buildings.

So, you can have a pool but not have to pay to keep it clean and ensure the chemicals are balanced. You can have irrigated and maintained landscaping without paying a gardener.

Maintenance isn’t actually “free”

While you won’t be doing the maintenance, someone will and that someone needs to get paid. Enter, the HOA monthly dues or fees. “Some studies suggest that you can expect to pay HOA monthly fees between $200 and $300. But the real answer is: It depends,” claims Javier Simon, CEPF®, at SmartAsset.com.

“Some HOA fees can drop to $100 a month and some can climb to more than $6,000,” he concludes.

A rule of thumb is to plan on paying from 1.5 percent to 1.8 percent of the value of your home per year.

Part of that money goes into the HOA’s reserve fund to help pay for big problems, such as roofing or pool repairs. Many associations are underfunded for any number of reasons so if reserves are low and an emergency pops up, you may be assessed an additional fee.

This is why it’s so important to read every word of the HOA documents before purchasing a home in a managed community.

Tricking out a single-family home instead

If you just can’t stand the thought of living in a condo or townhome and have your heart set on buying a single-family home there are ways to ensure that it isn’t a constant maintenance headache.

It will never be maintenance-free, but these tips go a long way toward making a house maintenance-light.

• Fiber-cement siding: House Logic’s John Riha claims that fiber-cement siding is not only “the curb appeal champ,” but it doesn’t age, like wood. It requires re-painting every 15 years and has an average life expectancy of at least 50 years.
• Metal roofing: Tough and maintenance-free, Riha says that most come with a 40- or 50-year warranty. He suggests that you “look for baked-on enamel finishes with rust-proof undercoating.”
• Quartz countertops: Homebuyers haven’t quite caught on yet that quartz is a far better choice than granite for the kitchen countertops. They don’t require sealing, they resist scratching and staining and they last about 30 years.
• Ditch the carpet and opt for hardwood or vinyl plank flooring.
• Replace your current gutters with LeafGuard gutters, recommended at BobVilla.com.
• Go low-maintenance with the landscaping by adding more hardscaping in place of high-maintenance plants. Get ideas online at Gardenista.com.

While none of these “fixes” will allow you to get rid of the lawn mower, they will help avoid some of the more common single-family home maintenance headaches.

The most important step to take before you begin searching for a home is to get your financing in order. Depending on your credit, this may be just a matter of seeing a lender for a mortgage pre-approval letter, or it may entail a longer process: correcting issues with your credit to raise your credit score.

Understanding how your credit score is compiled is an important aspect of learning how to raise it. The Fair Isaac Corporation (FICO®) is the company that compiles our three-digit credit scores and underwriters at lending institutions then use the score to determine our credit worthiness.

Consumers with low scores are considered to be at a higher risk for non-payment than those with high FICO scores. The scoring range is from 300 to 850. Generally, a score below 620 is considered low, while anything above 720 is considered high and if your score is above 800 you have an excellent FICO score. An 850 score is considered ‘perfect.’

Don’t feel bad if your score isn’t perfect. According to Kailey Hagan at NASDAQ, citing a report from Experian, “… just 1.2% of Americans have a perfect 850 score.”

How does FICO compile our credit scores?

The corporation tends to keep their formula a secret, but they are forthcoming with certain elements of the process.

When determining your credit score FICO looks at your payment history, how much you owe and the highest amount owed, the type of credit you use (installment loans, credit cards, etc.) and the length of your credit history.

In fact, 35% of your FICO score is based on payment history – late payments are a significant drag on your score. Recent late payments count against you more than older late payments.

Open account balances make up 30 percent of your FICO score. Balances that are within 30 to 40 percent of your credit limit work in your favor, while those that are at or over the limit count against you.

While lenders have tightened credit requirements, it is still possible to obtain a mortgage loan with a less-than-perfect FICO score. However, you will pay more for the loan, with a higher interest rate.

How do I find out my FICO score?

Before seeing a mortgage broker or bank about a loan, check your scores from all three major credit reporting agencies. These are:

• Experian
• Trans Union
• Equifax

Every American is entitled, by law, to a free report from each agency every 365 days. “Only one website — AnnualCreditReport.com — is authorized to fill orders for the free annual credit report you are entitled to under law,” according to the U.S. Federal Trade Commission.

How to raise your FICO credit score

Sometimes, making just a few easy changes can have a big impact on raising your score:

• The experts at FannieMae.com recommend that if you don’t yet have credit, open a credit card account. Use the card and pay the balance off every month.
• Lowering your credit card balances – not paying them off, but lowering them to within 30 percent of your credit limit – is a quick way to realize an increase in your FICO score.
• Making timely payments for six or more months before applying for a mortgage may also raise your score a few points.

Determining your credit score is an important first step toward purchasing a home. Repairing damaged credit may be time-consuming but will pay off in the end when you receive an amazing interest rate on your mortgage.

Most American homebuyers at the turn of the 20th century were forced to pony up 50 percent of the home’s appraised value to get a mortgage. Needless to say, most low- and middle-income folks’ version of the American Dream didn’t include homeownership.

Today, it’s not at all uncommon for cash-strapped homebuyers to put down far less than the “standard” 20 percent of the home’s appraised value – but the privilege comes with a price in the form of monthly private mortgage insurance (PMI) premiums.

What is PMI?

PMI (or MIP, short for “mortgage insurance premium,” when dealing with an FHA loan) is a policy that covers the lender if the borrower defaults on the loan. Although the borrower derives no direct benefit from the policy (other than that low down payment), he or she pays the premium.

Since borrowers with less than 20 percent equity in the home are considered high risk, PMI is mandatory, according to Fannie Mae and Freddy Mac.

The price you’ll pay

“The average cost of private mortgage insurance, or PMI, for a conventional home loan ranges from 0.58% to 1.86% of the original loan amount per year,” according to the editors at NerdWallet.com, citing Genworth Mortgage Insurance, Ginnie Mae and the Urban Institute.

With an FHA loan, the borrower on a 30-year loan, with a 10 percent down payment is required to pay an upfront fee of 1.75 percent of the loan amount and then between 1.3 percent and 1.55 percent of the loan amount annually.

Most lenders allow the annual fee to be paid monthly, and it’s tacked on to your mortgage payment.

When can I cancel PMI? 

If you took out a conventional loan after July 29, 1999, you can request a cancellation of PMI once your loan-to-value ratio (LTV) reaches 80 percent.

By law, however, the lender must cancel PMI when the ratio is scheduled to reach 78 percent, according to the original amortization schedule, or when the loan reaches its midpoint, regardless of LTV.

So, how do you know when you’ve reached any of the aforementioned milestones? Divide your current loan balance by the current appraised value of the home. If you suspect that your home’s value has increased or you’ve paid the principle down significantly it may be worth it to pay to have the home appraised.

Can I cancel MIP on a FHA loan?

The Federal Housing Administration (FHA) calls its mortgage insurance MIP, for Mortgage Insurance Premium.

Ridding yourself of the MIP payment on a FHA-backed loan is a bit tougher than it is with a conventional loan. If you put 10 percent to 19 percent down on the home you must wait 11 years to be relieved of the MIP requirement.

If you pay less than 10 percent down, the MIP payment remains for the life of the loan.

Now, this only applies to borrowers with FHA-backed loans granted after June 3, 2013. If you have an earlier loan, the MIP termination requirements are different.

With a 15-year FHA-backed loan, you can get rid of MIP when the loan reaches 78 percent LTV. With a 30-year mortgage MIP will also terminate when the LTV reaches 78 percent if you’ve been paying the premium for at least 60 months.

By the way, FHA bases the home’s value on their last appraisal, not its current market value. Typically, the value used to calculate LTV will be what the home was worth when you purchased it.

Additional ways to ditch mortgage insurance 

Change your LTV ratio

Changing either side of the LTV ratio may result in the cancellation of mortgage insurance. Either make extra payments, or a lump sum payment to bring down the “loan” portion of the ratio or make improvements to the home or wait for area values to rise to increase the “value” side of the ratio.

The home improvement projects that add the most value to the home are, unfortunately, the most expensive. A minor kitchen remodel will get you the most bang for your buck according to Remodeling magazine’s Cost vs. Value Survey.

Although the national average cost for this project is $28,279, it will add $20,125 in home value.

Yes, that’s a big chunk of change, but if you make this improvement you may raise the value of the home enough to be rid of the PMI payment every month. As a bonus, when you sell the home you’ll make more money than you would have otherwise, and recoup 71.2 percent of the cost of the addition.

Refinance

If the above seems too costly or time consuming, consider refinancing the home. This option isn’t ideal for all borrowers so have your financial advisor crunch the numbers for you.

Keep in mind that a new loan will require closing costs, so your financial advisor will need to take those into account as well.

While it may seem unfair to be forced to pay for an insurance policy that only benefits someone else, PMI does provide an advantage to the cash-poor borrower—the ability to qualify for a home loan.

Once upon a time, not too terribly long ago, homebuyers wouldn’t even dream of submitting an offer for less than what a home was listed.

That, however, is so last year. We are moving into a time where it appears that buyers will have more homes from which to choose, more time to shop for a home and more leeway in asking for concessions. They will also not hesitate to submit an offer lower than asking price.

Lowball offers, those that are 10% or more off the list price, aren’t common. Yet. That doesn’t mean, however, that you won’t receive one when your home is on the market.

It’s insulting, right? It takes a lot of nerve, as some sellers claim.

Others feel a sense of panic.

When homes begin to sit on the market longer than they did in the previous hot sellers’ market, some homeowners may feel a sense of desperation when faced with a very low offer. They may suffer from that gnawing feeling that anything is better than nothing.

Let’s take a look at how you can deal with such an offer without being sucked into common knee-jerk emotional responses.

Take a deep breath

As mentioned earlier, you may not get a lowball offer. But being prepared for one, emotionally at least, will help you deal with it should it come to pass.

There are two primary reasons that some homebuyers may submit a low offer on your home.

First, there are all those “news” stories claiming that home prices are falling, rapidly and dramatically. While that may be true in some markets, it is untrue in most. Misinformation rules the day when it comes to the current housing market.

But the average person in the market to buy a home doesn’t know that.

The truth is, “… home prices in August [were] still 13.5% higher than August 2021,” according to CNBC.com’s Diana Olick, citing a report from property data giant CoreLogic.

Then, understand that the buyer is most likely not intentionally insulting your home or you, as the seller. Many buyers treat the homebuying process as a business transaction, which it is. Others are adept at haggling over prices in other areas of their lives and aren’t about to stop when it comes to such a huge purchase.

In other words, put yourself in their shoes. Appreciate that they made an offer at all and the valiant effort put forth to get the home at a bargain price.

You don’t have to accept the offer

How you respond to the offer depends a lot on the type of market we are in. In a market such as the one we’ve seen in the past few years, with multiple offers on homes, often over asking price, and homes selling as soon as they hit the market, it makes no sense to waste time on a lowball offer.

In slower markets, however, you may want to entertain the offer by counteroffering at a price that’s more palatable to you. You might also consider countering any concessions the buyer has requested, such as paying for a percentage of the buyers closing costs.

Or, you may want to ignore the offer altogether and that’s okay as well. The buyer’s offer will simply expire on the date specified in the purchase agreement.

If, on the other hand, the offer is acceptable to you, in both price and terms, you will sign it and we’ll send it back to the buyer’s agent. We now have an executed contract with clearly defined tasks and time limits. It’s time to take the next step towards closing.

“Frankly, I don’t think a Realtor does much that I can’t do myself,” a New Jersey homeowner tells CBS News.

It’s understandable that many real estate consumers feel this way; after all, the only part of the process that they see is an agent pounding a sign into the yard, hanging a lockbox on the door and then sitting around for a couple of hours during open houses, right?

Surely it can’t be that hard to sell a house. And just think of the money you’ll save if you sell it yourself.

Lots of jobs look easy to outsiders. But, before you head to hunt for real estate contracts, before you join one of those nifty For-Sale-By-Owner (FSBO) websites, read on for three things you should consider.

 1. Can you get the price right?

Every year, the National Association of REALTORS ® (NAR) surveys FSBOs about the types of problems they encountered when selling their homes.

Thirteen percent of them said that setting the right price was very challenging.

Of course it is. Determining the market value of a home isn’t something someone learns overnight – it takes years of experience and neighborhood knowledge to get it right.

Because crunching these numbers is something we do back at the office and not in front of the public, it seldom ends up on the short list of “things a real estate agent can do for me.”

A home should typically be priced at or close to its market value. So, how does a homeowner with no real estate experience come up with the appropriate listing price?

You’ll need access to recent home sales in your area and for that you’ll need a real estate agent. Sure, you can jump onto Zillow and get one of their lame “Zestimates,” but since they don’t have access to many of our MLS statistics their valuations are pretty much worthless.

In fact, a few years ago the CEO of Zillow relied on his company’s Zestimate, known in the industry as an automated valuation model (AVM),  when pricing his Seattle home.

The home was priced at the Zestimate (of $1.75 million) and eventually sold, for 40% less, or $1.05 million.

Think of the Multiple Listing Service as the Kelly Blue Book of the real estate world. Just as you wouldn’t dream of putting your car on the market without learning what similar cars have actually sold for recently, so should you not rely on an AVM or take a wild guess about your home’s current market value.

 2. Getting the word out

While the best listing agents wear many hats and perform a variety of jobs for their clients, the number one most important job is marketing. Gone are the days when an ad in the Sunday paper was all that was needed to generate interest in a home. And, as valuable as an MLS listing is to let real estate buyer’s agents know your home is for sale, it too is not enough.

Today, marketing a home for sale requires multiple platforms and, since most homebuyers begin their search for a home on the Internet, online marketing is critical. A homeowner lacking in marketing expertise may leave valuable equity on the table with a DIY marketing plan.

 3. That pesky legal paperwork

Completing the contracts and other paperwork is one of the most challenging aspects of the home sale for most FSBOs, according to the NAR survey.

Hey, we don’t blame them for being confused. Real estate contracts are written by attorneys and anyone without real estate sales experience is bound to think they were written in Greek.

From the offer to purchase to the addendum, disclosures and amendments, the average real estate deal is loaded with legal paperwork.

Do you know what to look for in the purchase agreement? Do you know how to structure your response to a potential buyer to your benefit? What form will you use if you need to make changes or additions?

There are far too many places to run afoul of your best interests when it comes to the paperwork. Why take the chance?

Selling a home when you don’t do so for a living is complicated. While it’s not impossible to do so without a real estate agent, it isn’t wise. Not if you hope to make the most amount of money possible in the shortest amount of time. We’re happy to speak more with you about this – give us a call.