Author: Shannon

I imagine we don’t need to tell you, but it’s a crazy, overheated real estate market out there. Some homebuyers are so desperate to land a deal that they’re waiving critical inspections and more.

It can be challenging to consider aspects of a home that need some time to ponder when you’re in the heat of a multiple offer situation in which the price of your dream home is escalating.

This is most likely why a recent survey by a nationwide real estate portal finds that “75% of people who bought a home during the pandemic have regrets.”

Fifteen percent of Millennial homebuyers ended up disappointed by the location of their new home.

Before you commit, remember that a home extends far beyond the walls of the physical house. When you purchase a home, you are actually buying into an entire neighborhood and the community that surrounds it.

Taking the time to gather neighborhood information goes a long way toward ensuring many years of happiness in your new home.

Getting around

While home may be where the heart is, we all need to get from home to work, school, shopping and other activities.

Step number one, then, is to ensure the homes you like are in areas with convenient roads, access to highways and freeways (if you commute) and good public transportation for yourself and children.

Drive around the neighborhoods and maybe even take a test drive to work during rush hour. Neighborhood information such as this is invaluable when buying a home.

Schools

Even if you don’t have children, schools are a vital factor in choosing neighborhoods because of the dramatic effect they have on home prices and resale value. The local school district should be able to provide you with information including:

• average class size
• percentage of students who graduate
• percentage of students who go on to college

Go online to the various school ranking sites for test scores, district and school boundaries rankings and more. Head to schooldigger.com and greatschools.org.

You may also want to visit local schools to see if they are in good condition and if teachers seem competent and motivated.

Community life

Every neighborhood has its own unique feel. Informed home buying involves spending some time in the neighborhoods you are considering so you can decide which is a good fit for you. Here are a few ideas to help you get a feel for a neighborhood:

• Check out the closest hospitals, houses of worship, museums, parks, sporting fields and theaters.
• Find out if the neighborhood has a community association with guidelines you will have to follow.
• Learn about interesting organizations you may want to get involved in, such as a community theater, 4-H club or historic trust.
• Have lunch in local restaurants and cafes.
• Shop in local stores, especially the supermarket.
• Take a walk around the neighborhood and chat with people you meet.
• Test your cell phone for area reception.

Neighborhoods and crime

Crime is up across the country. If this is a concern to you, a little research will help to ensure that you are considering homes in safe neighborhoods:

• Contact the local police department for a history of crime in the area, and crime statistics.
• Examine the neighborhood for signs of vandalism or neglect.
• Scan crime tracking websites, such as spotcrime.com, neighborhoodscout.com (there is a fee)
• Learn more about crime tracking for specific neighborhoods at areavibes.com and safewise.com.

Utilities

An often-overlooked factor in choosing a house to buy is utilities. The type of utilities available in a neighborhood will affect both your budget and quality of living.

• Does the house use a sewer, cesspool or a septic system?
• Is the house hooked up to town or well water?
• See if your prospective neighborhood is hooked up to natural gas or homes are heated by electricity, oil, propane or solar energy.
• Will you be cooking on a gas or electric stove?
• Don’t be afraid to ask the seller how much her average water, gas, electric sewer bills are.

Yes, we’re in a red-hot market and yes, it moves quickly. To avoid regret with your purchase, however, it pays to take a bit of time to consider the neighborhood and surrounding community.

A homeowners association (HOA), also known as a community management association, is a nonprofit organization that serves to:

• foster a sense of community
• govern rules in a particular community
• maintain common areas of the property
• provide services for the homeowners

If you buy a condo, townhouse or single-family home in a community managed by a homeowners association, you are required to become a member of this HOA and pay dues.

Types of Homeowners Associations

Homeowners associations typically fall into three categories:

Condominium: In a condominium, homeowners own their individual unit, but not the property boundaries or land. In addition, each resident owns a small percentage of the common area.

Cooperative: In a cooperative, a corporation owns the entire property, including the individual units. Homeowners have a shared interest in the property and exclusive rights to “rent” their individual unit. Cooperatives are rare, accounting for only 5 to 7 percent of all HOAs.

Planned community: Homeowners in a planned community own not only their individual unit, but the lot on which their property lies. The homeowners association maintains ownership of the common areas, such the grounds, roads and facilities. Planned communities are the most common type of HOA.

What to Expect from Homeowners Associations

People who own property run by a homeowners association agree to a set of covenants, conditions and restrictions (CC&R). The CC&R lays down the rules and establishes the monthly dues for all homeowners in the community. Some common restrictions in a CC&R include:

• limits on the number of residents allowed in a single unit
• noise ordinances
• operating times for common areas, pools and fitness centers
• property improvements that are allowed (painting, gardening, etc.)

The CC&R are usually reasonable, and it exists to supply all owners in the community with a pleasurable living experience. Naturally, there are those that contain unreasonable expectations, which is why you should always read all documents from the HOA before agreeing to purchase a home in the community.

Homeowners Association Advantages

Homeowners associations help maintain a pleasant community for their residents. The CC&R help regulate the appearance of properties, conduct of residents and their guests and noise levels.

Many community management associations offer amenities such as playgrounds, pools, clubhouses and gyms for their members to use. Others offer services such as landscaping and repairs.

Homeowners Association Drawbacks

An HOA exists to protect the rights of the residents in the community, but it can cause some inconveniences while doing so.

I also costs money. Homeowners association dues can be expensive. In Manhattan, NY, for instance, “Monthly maintenance fees … have soared to an average of $1.70 per square foot,” according to Robert Frank at msnbc.com.

We’ll do the math for you: “… a 1,200 square foot condo will cost you $2,000 a month in maintenance fees, on top of your mortgage, utilities and (usually) property taxes,” Frank concludes.

Another drawback is that some HOAs are intrusive and some homeowners feel that they take away too much of the homeowners’ freedoms.

To add insult to injury, the HOA can fine homeowners who break the rules. Furthermore, if these fines aren’t paid in a timely fashion, the HOA can put a lien on the property and threaten the owner with foreclosure.

It’s regulations such as these that created the nickname “Little Governments.”

Again, read each document from the HOA thoroughly and, if needed, consult with an attorney for clarification of anything you don’t understand.

Holding off your home sale until spring? Although winter homebuyers are out in droves, the spring market should prove to be even better.

Although spring is right around the corner, you still have some time to knock out at least one of the more time-consuming projects. That weekend Netflix binge will wait, so let’s get started on the house.

Set the stage

Staging a home for sale can get expensive, but it doesn’t have to. The first step in staging is to clean each room from top to bottom.

Then, go through each room and ensure that they advertise their purpose. Bedrooms should look like bedrooms and not bedroom-gym hybrids. The same goes for living rooms: No living room/kids playroom fusions.

What happens when you try to multi-purpose a room is that the home gives the impression that it’s cluttered and cramped. “There’s not enough room,” is definitely not the impression you want potential buyers to walk away with.

Curb appeal is what gets them out of the car

Give the landscaping a good cleanup, mow the lawn if the weather permits and consider fresh mulch for all of the beds.

Then, get busy planting. If you want spring color from bulbs you probably should’ve planted them in September. This doesn’t mean your landscaping will lack color. Head out to the nursery and look for the following plants:

Helleborus–Plants in this genus bloom in very early spring and sometimes even in February. Don’t try to start them from seed if you’re seeking instant curb appeal; they may take years to develop enough to bloom.

Primula–This genus includes the popular common primrose, the English primrose and cowslip. You’ll have a lot of choices when it comes to color.

Rhododendron–Get those buyers out of the car and into the front door by wowing them with two outstanding plants in the Rhododendron genus: ‘Stewartstonian’ or ‘Golden Oriole’ azaleas. The former blooms in show-stopping red while the latter is a more subtle yellow.

Is that a garage or an oversized junk drawer?

“Real estate men testify that the first question asked by the prospective buyer is about the garage,” say the folks at blueskybuilders.com, quoting “… a 1925 writer in the Atlantic Monthly.”

“The house without a garage is a slow seller.”

Today, a home without a garage, or at least a carport, is almost unheard of in many areas of the country. Buyers in these regions expect a place to store their cars (and all the other miscellaneous stuff they can’t find another place for).

How long it will take you to declutter the garage depends on whether yours resembles that kitchen catch-all drawer or it’s a bit tamer.

The important thing is to get cracking on giving buyers the impression that not only can they park their cars in this garage, but it has plenty of storage as well.

Hang the garden tools, stash smaller items in bins and consider overhead storage solutions.

Take it one project at a time and you’ll soon be the proud owner of the belle of the spring real estate market.

Think of what buying a house would be like without a real estate agent. Oh, I know – that sounds a little self-serving, right? But imagine finding a home for sale that you want to purchase . How do you know that it’s worth the asking price?

Do you know how to determine the market value of a home? Odds are good that you don’t.

But your real estate agent does and any agent worth their salt will quickly compile a comparative market analysis (CMA) to determine if the asking price of a home for sale is accurate.

Before we jump into the nuts and bolts of this, keep in mind that there are many factors that influence home value. These include, among others, the current economy, the economic outlook, the job market and the current inventory of available homes.

Then there are more specific factors, such as location and condition, which is what we’ll address here.

There are the two basic steps of the evaluation process:

Step 1: Research home sales within one mile of the home in question and compile a list. This list should, if possible, be restricted to homes which sold in the past 6 months.

Step 2: Compare the subject property to the homes on the list, known as “comparables.” Factors used in the comparisons include age, size, number of bedrooms and bathrooms, amenities and any improvements made to the home. Value is added or deducted from the subject home based on how it stacks up to each comparable.

As I said, these are the absolute basic steps and will give a rudimentary determination of value. To get as close as possible to what an appraiser might determine, however, takes a deeper dive into the data.

1. Location is paramount

All other factors being equal, the location of a home trumps everything. Now, this isn’t just where in the world the home is located, but the state, city, neighborhood and the actual physical location within the neighborhood.

A home located on a large lot is generally worth more than one on a small lot (remember, to filter this through the “all else being equal” lens) and one that is in a less-travelled part of the subdivision is worth more than one that is subjected to heavy traffic or backs up to a busy thoroughfare.

A home next door to a hoarder or a sex offender will experience diminished value compared to one in the same neighborhood that is located further away.

So, “location” includes many aspects, and each one should be examined.

2. Condition

Homes that have been cared for are worth more than dilapidated homes – that is obvious. But, you will also pay more for a home that’s been updated, especially with green features such as energy-efficient windows and ENERGY STAR appliances.

Remodeled homes are often more in-demand as well, thus upping their value, especially if the kitchens and bathrooms have been updated.

In the end, it’s the appraiser’s determination of value that matters and he or she will assign an “effective age” to the home.

Based on the updates and general condition of the home, this age has nothing to do with the home’s chronological age and everything to do with its value. So, the condition of a home is a key factor in determining home values.

Keep this in mind when you become a homeowner if you hope to maintain or even increase the home’s value.

From the moment you enter into the homebuying arena you’ll notice that you need to learn a whole new language. From the mortgage process to the title process and more, there is a lot to learn.

The mortgage process seems to offer up the most confusing terms, according to our clients. One of those is “conforming loan.” Yes, it sounds boring, but you really should know all about it. So, let’s dive in.

The definition

A conforming loan is, in a nutshell, a conventional loan. But there’s more to the definition.

“A conforming loan is a mortgage that meets the dollar limits set by the Federal Housing Finance Agency (FHFA) and the funding criteria of Freddie Mac and Fannie Mae,” according to Troy Segal, finance writer at Investopedia.com.

This basically means that conforming loans have a dollar limit and it adjusts annually.

Lenders love these loans because they’re sellable on the secondary mortgage market. Segal claims that they “… typically offer lower interest rates than other types of mortgages as well.”

Here comes the lingo

Let’s get to know the players in the conforming loan game.

The Federal National Mortgage Association, also known as FNMA or, more commonly, Fannie Mae. FNMA is a GSE, or government-sponsored enterprise.

The Federal Home Loan Mortgage Corporation, also known as FHLMC, or, again, more commonly as Freddie Mac. FHLMC is a GSE.

What is a GSE and why should you care?

Let’s take the last part of that question first. You should care because GSEs were created to “… help the American consumer,” according to the experts at Quicken Loans.

Like FHA loans, a GSE doesn’t underwrite mortgages. “Instead, a GSE can guarantee a third-party loan … to borrowers, rather than issue them directly,” say the experts at Quicken.

But here’s the real benefit, they say:

“By having that third-party guarantee the loan, banks can then lend money to home buyers who seek a mortgage, but may have lower credit or lower income than would typically be required.”

Also, because GSE mortgage loans have the power of the federal government behind them, many GSE mortgages come with lower interest rates as well.

Ok, back to conforming loans

As mentioned earlier, a conforming loan is also known as a conventional loan. It differs from a non-conforming loan, such as a jumbo loan, in that it meets the requirements to be sold by either Freddie Mac or Fannie Mae.

For you, the homebuyer, the conforming loan has one big advantage over its non-conforming cousin: Lower interest rates.

“For first-time homebuyers taking out Federal Housing Administration (FHA) loans, for example, the down payment can be as low as 3.5%,” according to Troy Segal at Investopedia.com.

Conforming loans are limited as to the amount a consumer can borrow. This limit changes every year. In 2022, for example, the limit is “$647,200 for most of the United States,” claims Segal.

In higher-cost markets such as New York City and San Francisco, the 2022 limit is $970,800. Then there are special “statutory provisions” which establish the loan limits for borrowers in Hawaii, Alaska, the U.S. Virgin Islands and Guam. Those limits, in 2022, are also $970,800.

Additional qualifying rules for a conforming loan include:

• Credit score
• Credit history
• Debt-to-income ratio
• Loan-to-value ratio

Yes, the mortgage process is confusing for newbies. But it pays to be informed.

If you’re in the market to buy a home you know what we mean when we say “Yikes!” First, there are so few homes available, especially in the more popular price ranges (such as those for first-time buyers) that those in good condition sell quickly, sometimes with multiple offers.

A tight inventory of available homes drives up prices. Now, if you’re a homeowner considering selling your home, this is good news because you’ll get top dollar (again, if your home is in good condition). For homebuyers, however, it’s beyond frustrating.

So, how long is this situation going to last and what needs to happen to stabilize this market for buyers?

One thing that would help is for builders to build more new homes. “Single-family home construction is running at the slowest pace since 1995,” says Diana Olick at cnbc.com.

“More housing construction will help — and it has been increasing — but the United States has been underbuilding for so long that it’ll take years to meet demand, according to Emily Badger with the New York Times.

So, why aren’t they building?

There are a number of reasons that developers have backed off residential construction. Money, of course, is at the root of most of them, but effects of the pandemic, such as the supply chain crunch are certainly contributing factors as well.

“Builders report shortages of windows and doors and flooring and appliances, and I’ve even heard stories of garage doors that are not going to arrive for months,” Robert Dietzhe with the Home Builders Association tells marketplace.org’s Mitchell Hartman.

Add a worker shortage to the supply chain issues and it’s understandable why the pace of new-home construction isn’t anywhere near where it should be.

“As more skilled workers retire from the industry … not enough young people are coming in,” Ed Brady, CEO of the Home Builders Institute tells Amy Scott at marketplace.org.

Additional challenges to the construction industry include “The pandemic, … growing inflation, … and the potential passage of all or part of the Build Back Better legislation …”  could have a dramatic impact on the construction sector this year,” said American Institute of Architects chief economist Kermit Baker.

Then, there is the existing home market.

When will prices come down?

Most of the factors that are encouraging a rise in home prices interact. So, if one factor changes, it may help the others to loosen their grip on the market. These factors include (but aren’t limited to):

• Not enough homeowners selling their homes
• Soft supply of newly constructed homes
• High demand for homes
• Low mortgage rates
• An improving labor market

The factor with the most impact right now is that there aren’t enough homes for sale to meet the demand. Even with the expected mortgage rate hikes this year, there won’t be homes to meet the demands of homebuyers left in the market, according to Ally Yale with The Motley Fool.

“… it’s likely that price growth will start to taper off as we get further into 2022,” she notes. “Make no mistake, though: Prices aren’t suddenly going to drop,” this year.

As you can see, when home prices will reverse their ascent is anybody’s guess. There are just too many variables to allow for an accurate prediction. Since we keep our eye on the economy, however, keep checking back for updates.

We recently read a survey of young Americans who want to buy homes but think they can’t. Their reasons for feeling this way are a bit shocking.

We assumed the number one reason they feel they can’t buy a home is because of the current, overheated market with rapidly escalating prices. That isn’t the case however.

So, today we unwrap the misconceptions and challenge them.

Misconception number one: To get a mortgage you must pay at least 10% for a down payment

We found this surprising mainly because the myth we hear most often is that down payments must be 20%. Where this group of young homebuyers came up with 10% is anyone’s guess.

The truth?

Down payment requirements range from zero to the sky-is-the-limit. The Veterans Administration-backed home loan and the USDA Rural Development program’s mortgage don’t require a down payment. For the latter, the caveat is “for those who qualify.”

We’ll dive into the down payment myth first and then tackle another that you may find surprising.

The truth about down payments

Yes, you’ll find mortgages on the market that require 10% and even 20% down. You’ll also find loans that require zero down, such as some USDA products and the VA mortgage.

Then, there is the loan backed by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration, or FHA. Qualified borrowers may pay as little as 3.5%.

Learn more about FHA-backed loans at themortgagereports.com, nerdwallet.com or chase.com.

Finally, don’t overlook the many government programs designed to help lower income Americans buy a home. Themortgagereports.com has compiled a state-by-state list of assistance programs.

Misconception 2: Current mortgage rates are too high

Currently, mortgage rates have hit a 22-month high, according to Brett Holzhauer at cnbc.com. Keep in mind, however, that we’re coming off of record low mortgage rates.

“… the average 30-year mortgage rate hit a low of 2.65% in Jan. 2021,” Holzhauer reminds us. “Since then, the average mortgage rate has climbed to 3.56% as of Jan. 21” of 2022.

Yet younger homebuyers assume they’re too high and many are prepared to wait until they go down again. This may not happen, if the Fed has its way, hinting at three rate hikes this year.

Now, for those with poor credit, yes, your mortgage rate will be higher than you may expect. The mortgage rate you will be offered is “… determined for the most part on two factors: credit score and equity/down payment,” notes Holzhauer.

If either or both of those factors are keeping you from jumping into homeownership right now, do yourself a favor and get to work fixing your credit problems and saving some money.

Pay special attention to your credit card debt. Pay it off until you’ve hit 30% of your credit limits, don’t take on new credit or close any accounts that appear on your credit reports and use credit as little as possible.

If you’ve still decided to put your homebuying dreams on hold, check out these common-sense steps to getting ready to buy in the future, at forbes.com.