Crystal's Blog Corner

Holiday Real Estate: A Seller’s Guide

12/16/2019


Looking to sell your home over the holidays? Maybe you’ve had a job change or need to relocate quickly. It’s not out of the question. Here are the tips to follow for an easy sale. 

Be realistic

There are naturally fewer buyers at this time of year, so a packed open house and hysteria that leads to multiple offers over the asking price is improbable. While no agent can guarantee when a home will sell or for how much, it’s their job to know the market. If you’re working with an experienced agent who’s done their research, you should have a good idea of what to expect. Realistic expectations will serve you well.

Price it right

The listing price is always important, but there is often more leeway during the prime selling seasons of spring and summer. With a reduced buyer pool, pricing the home to sell is more critical than ever. That might mean a lower price than you were envisioning. Regardless of how you feel about your home, how much money you’ve put into it, or what you think it’s worth, you don’t know the market better than your agent. Listen to them. Their sole goal is to get your home sold so you can move on.

Stage it to sell

You don’t have to make expensive updates or buy a houseful of furniture to appeal to buyers. Some of the best staging tips won’t cost you anything at all. At the top of the list: decluttering and depersonalizing. These two activities will help buyers envision themselves in the home instead of getting caught up in your stuff.

You also want to make sure you focus your efforts on the spaces that matter most. “Not all rooms are considered equal when it comes to home staging,” said Moving. com. “The rooms that hold the most importance for buyers are the living room, master bedroom, and kitchen. Don’t worry as much about the rooms that have less influence, such as guest bedrooms, children’s bedrooms, and bathrooms.”

Get smart with targeting

It might be more challenging to sell to families at this time of year because most are already settled, and kids are well into the school year. But you don’t need an abundance of buyers; You only need one. You’re relocating, so it’s not unheard of, right? 

If you’re in a family neighborhood and you’re trying to appeal to families, you already have an “in.” It wouldn’t hurt to emphasize the family attributes of the neighborhood. Maybe you can create a leave-behind flyer with information on the school district, local parks, or even babysitters in the neighborhood. 

Concentrate on curb appeal

This is not the time to let those leaves collect on the lawn. Fall and winter can be challenging when it comes to keeping the front of your home tidy, but it’s a must-do when selling. Be prepared for surprise showings by making it a daily habit to observe your home from the street so you can get the same perspective as buyers and clean up anything that’s dragging down the home’s appearance. 

Don't go holiday crazy

A tastefully decorated home will get noticed for all the right reasons. If your home is only memorable for looking like Christmas threw up all over the lawn, that’s probably not a good sign. “Back off on the decorations,” said The Balance. “Too many decorations can be overwhelming and distracting. Don't make the mistake of thinking buyers will ‘see past it,’ because they can't. As agents sometimes say, ‘the eye buys.’"

Be flexible

One of the drawbacks of selling your home over the holidays is having to be available for showings at the whim of buyers. That probably means limiting holiday get-togethers at your house this year and it definitely means making sure the home is clean and picked up all the time—which is definitely more challenging when kids are out of school. Because you never know when you’re going to get a call requesting a showing and because you have to maximize any opportunity to sell at this slower time of year, being flexible is key.

SOURCE: Realty Times- by Jaymi Naciri

ow to Give the Gift of Home This Year: Rules for Down Payment Funds

12/13/2019


Airpods, flannel jammies, and baby Yoda. They are among the most popular gifts for the holidays this year. But you know what would really turn someone’s head? The gift of a new home. 

No, you don’t have to spring for the whole $285,000—that’s the median list price of homes across the country. A down payment, which is typically the biggest deterrent for someone trying to buy their first place, will do nicely.

If you’re thinking about gifting someone with a down payment for the holidays, or any time of the year, you want to pay attention to the specific rules involved to get the loan through underwriting and keep from incurring tax consequences for yourself.

Types of loans

Down payment gift funds can be used for a wide variety of mortgage loans, include FHA, VA, and conventional loans. The buyer will want to be sure to check with their lender first to make sure the types of loans they are considering are good to go. 

Is it really a gift? 

Rules for most types of loans are explicit about the intent of the funds. Funds must really be a gift, with no expectation to pay them back at any time. “The money must be a true gift, not a disguised loan, and it must be documented properly through financial statements and a gift letter,” said NerdWallet. “If the gift is really a loan that you have to pay back, lenders won’t accept it.” 

Gift letter details


The gift letter is a critical element of any donated down payment. Do it wrong (or don’t do it at all), and your funds—and the mortgage—may be denied. 

The buyer’s lender should be able to provide you with a gift letter template, which will include: a space for your name, address, and phone number; your relationship to the buyer; amount of the gift; details about the property; a statement that expressly lays out that these are gift funds with no repayment requirement; and your signature. 

You will likely also need to include information about how the buyer received the funds.

“It’s important to understand that the gift letter in itself may not be enough evidence for the mortgage company,” said Quicken Loans. The lender will likely want to verify the funds “by asking for copies of the withdrawal and deposit slips, or something similar.”

Who can donate

Some loans allow donations from almost anyone, so long as the donor doesn’t have a financial interest in the property. That means people like the seller or real estate agent can’t gift the buyer the down payment. “Loans insured by the Federal Housing Administration allow for family, friends…employer or others” to gift the down payment,” said NerdWallet. The FHA is ‘not concerned’ with the origin of the gift, “according to the Department of Housing and Urban Development, as long as it’s not from someone who has a stake in the home sale.”

How much can you donate?

Technically, you can donate as much as you want, depending on the type of loan. With an FHA loan, the whole down payment can come from gift funds, whether that’s $5,000 or $50,000. But...the gift tax kicks in after $15,000. That’s the annual limit for 2019. A married couple who file jointly can donate up to $30,000 without triggering the gift tax. There are no tax consequences to the person receiving the gift funds, no matter the amount. 

SOURCE: REALTY TIMES- by Jaymi Naciri

Buying a New Home, Boomer? a Few Things to Consider

12/11/2019


In previous generations, when homeowners reached a certain age, they started thinking about reverse mortgages and even assisted living. But many of today’s seniors are looking to buy a home, opting to downsize or even buy their dream place.

New data from the National Association of Realtors® shows that, together, young baby boomers, older baby boomers, and the silent generation comprised 39 percent of the buyers in 2019. Senior-related housing only accounted “for 13 percent of buyers over the age of 50; that number was eight percent for buyers 54 to 63 years and 29 percent for buyers 73 years and older.”

If you're in one of these demographics and are weighing the pros and cons of buying a home, read on. There are a number of factors to consider as an older buyer.

New or existing?

The top reasons to purchase an existing home include a more established neighborhood and the kind of character and architectural detail you don’t often find in newer homes today. But, there are tradeoffs. You won’t get all the modern building features that make newer homes so ideal for those who don’t want to deal with updates and repairs. Newer homes are more energy-efficient and less drafty, for starters, and newer appliances and heating and cooling systems are less likely to break down. 

When you consider that older generations want to minimize the maintenance involved in their home, it’s no surprise that “Nineteen percent of buyers 64 to 72 years bought new homes, followed by buyers 54 to 63 years at 18 percent”—the two largest groups buying new construction last year, according to the NAR report.

It is a good financial move?

“If you're planning to take out a mortgage to make your home purchase when you're in or about to enter retirement, look carefully at the financial impact,” said The Motley Fool. “Consider your financial situation to be sure you will be able to make the payments throughout the life of the mortgage, even if your income drops after retirement or if a spouse passes away. Review any life insurance policies you have for you and your spouse or consider getting insurance.”

One story or two

For many older homebuyers, the desire to downsize isn’t so much a matter of square footage—although that is a factor—as it is a need to limit the risks associated with stairs. Buying a one-story home may not be feasible if they’re not as abundant as two-story homes, or if they’re not in budget. A home that has a master bedroom on the first floor is another alternative, allowing you to live as though you’re in a single-story home with room for guests upstairs. 

Where should you move?

Many moves among older demographics today are driven by the desire to be near loved ones. According to the NAR report, “Among the 63 and older age groups, the desire to be closer to friends and family was the top reason to purchase.”

But it’s also important to consider your lifestyle; Think about the things you enjoy, like hobbies, and the things you need, like quality medical care nearby. That will help you determine the best place to move. 

“Are you buying because you are moving to a new location to enjoy your retirement? If so, have you spent significant time in this new location to be sure you love it before making it a permanent home? It would be terrible to uproot your life and move to Florida only to realize you miss your grandkids or you don't really like the heat, bugs, or the company of other retirees,” said The Motley Fool. “If you plan to do significant traveling in retirement, consider how much it will cost to pay for lawn care and other maintenance while you are away. Moving to a condo or retirement community that does the lawn care for you may be a better plan.” 

SOURCE: REALTY TIMES- by Jaymi Naciri

Create A Home Office That Increases Your Property's Real Estate Value

12/5/2019



About 43 percent of Americans perform job activities from home, according to recent data from Gallup. Some are conducting business from home offices only half the week. Others occupy them full time. Many are Freelancers while a growing percentage of home-based workers are actually employed by companies that include Amazon, Dell, and Apple. The data makes it pretty clear that working from home is a spreading phenomenon, so having an attractive comfortable and functional office in a home when you're ready to sell, gives it even greater appeal. Not all home offices live up to the expectations of potential buyers who schedule visits, however. Here’s useful advice on how to increase the odds that yours will.

Decor

Give your home office an air of importance. Set it apart in appearance and functionality. Maybe you’re able to effectively complete tasks from a laptop you put any old where and don’t really need a dedicated room to work from, but someone who's looking to buy your home is going to be more impressed if they see a designated work area. Even if you're not knowledgeable at ergonomics and interior design, you can transform a casual work environment into a more polished one. Do a search on Instagram and other social media sites to check out images of stylish offices that look simple enough to duplicate without investing a ton of money. Nothing really helps a room to exude personality as much as lighting. It’s an important feature that sets a mood and makes a workspace unique. You don’t have to spend a fortune. A stylish desk lamp casts a warm halo. Overhead bulbs that run along tracks can allow for key areas of a workspace to be pleasantly illuminated. Home office decor doesn’t have to be formal and serious. It can be hip and eclectic. Toss colorful pillows across a futon. Put interesting art on the walls. Both hanging and potted plants give a home office energy and life.

Storage

Open shelves are all the rage. Line books along them both horizontally or stack them vertically, which can make your home office even more visually dynamic. Put unique knick-knacks on shelves that don’t contain reading material. Having dedicated containers for pens, pencils, and markers or paper clips will allow your home office to remain orderly. If you find it challenging to neatly store tools like staplers and scissors without making the room look cluttered or overly busy with too many points of interest, consider using the closet as an alternative storage space. Shelves and racks can easily be installed inside one and neatly contained. An interior storage space with a door that can enclose it will enable things like folders and paper files to be housed in an entirely separate area. 

Window Treatments

It doesn’t matter if you have lots of windows or just one. Take time to choose treatments that complement the size and style of the room you’re home office is in. What type of blinds or shades best complement the layout and design? There’s no shortage of choices. Bamboo shades lend a casual feeling. Metal blinds can take the mood of a home office in a sleek ultra-modern direction. Distressed wood shutters you can open by day and close at night might work. Use your imagination and you’ll find that you won’t rely so heavily on shopping at stores that are expensive.  

When prospective buyers walk through a home today, they have higher expectations than ever. They're looking for something they haven't seen yet that motivates them to take the next step. While it's not possible to trigger the same response from everyone a realtor ushers through your front door, there’s no doubt that renovating and thoughtfully decorating a room where business-related activities can be comfortably conducted will give your home greater value on the real estate market when you're ready to sell.

SOURCE: REALTY TIMES- by Craig Middleton

Should You Use the Builder’s Preferred Lender When Buying New Construction?

12/2/2019







If you’ve been looking at purchasing new construction, you may be aware that many of today’s builders have their own lender or one or more preferred lenders to whom they refer buyers. But do you have to use their lender? And is it a good idea? The short answers are, “No,” and “Maybe.” Let’s dig in further. 

First, let’s look at the law.

A builder can’t require you to use any specific lender, nor can they charge you more for the home you are buying for not using their preferred lender. They can, however, make it appealing to you to use their lender by offering incentives. 

About those incentives

The builder’s preferred lender may not have the lowest interest rate (more on that later). But they do have the flexibility to add incentives that may make using their lender worth it. That could mean throwing in thousands of dollars in appliances, upgrading your countertops or floors, including backyard landscaping, or helping with closing costs—all of which is enticing when buying a new home filled with “builder basic” items. Incentives can be worth up to 2–3% of the price of the home. 

Those incentives mean “it actually may be less expensive to buy a new home than a resale,” Ron Sozio, builder client relationship manager at Wells Fargo in Somerville, N.J., told NewHomeSource.

Are the rates better?

Back to the rates. “Those builder perks might have some strings attached,” said LendingTree. “Perhaps the preferred lender’s mortgage interest rate is higher than average or the origination fees cost more.”

Yes, the incentives being offered may be hard to resist, but it’s important to see past them in order to decide whether it’s worth for a higher interest rate. “It’s not always clear whether the builder’s package is a better deal than a loan from another lender without the incentive,” said NewHomeSource. “That means buyers must shop around and compare lenders’ offers. The interest rate is for 30 years and the difference (of a lower rate) versus the incentive can be quite substantial.”

In fact, according to LendingTree’s latest Mortgage Rate Competition Index, “The typical homebuyer could see a lifetime savings of nearly $30,000 on a $300,000 loan by shopping around for the best mortgage interest rate. That savings amount represents receiving a mortgage annual percentage rate that is 0.64 percentage points lower than the competition.”

Other reasons to use a preferred lender

Here’s another advantage to going with a builder’s preferred lender: You may also save time and streamline the homebuying process. “When you buy from a builder and use a lender who is not familiar with the development in which you are buying, there could be delays and confusion regarding closings costs, Deb Holloway, a senior loan originator with Christensen Financial Inc., told Bankrate. “If you have a lender that is unfamiliar with this particular builder and doesn’t do his due diligence, it could result in thousands due at closing if the buyer is not aware of it.”

SOURCE: REALTY TIMES- by Jaymi Naciri

New Appraisal Rule: What Does It Mean for You?

11/24/2019

A new home appraisal rule just went into effect—the first time in 25 years that “federal regulators have increased the property value limit of the homes that require an appraisal as part of the selling process,” said REALTOR® Magazine. The rule exempts some home sales priced at $400,000 and below from requiring an appraisal. That figure was previously capped at $250,000. “The new rules likely apply to about 40% of home sales, regulators estimate.”

So how will this affect home buyers and sellers? First, it should be noted that those homes that do receive the exemption still have to be evaluated “to provide an estimate of the market value of real estate collateral,” said Housingwire. “The agencies state that the evaluation must be ‘consistent with safe and sound banking practices.’ To that point, the rule establishes that an evaluation “should contain sufficient information and analysis to support the regulated institution’s decision to engage in the transaction.”

Also, the new exemption is not applicable for homes using FHA, HUD, VA, Fannie Mae, or Freddie Mac financing, which eliminates a huge percentage of homes right off the top. 

If you are in a position to buy or sell a home that no longer needs an appraisal, should you still proceed with one? Here’s why you may want to consider it.

What is an appraisal?

“A home appraisal is an unbiased determination of the fair market value of the home by a professionally-trained third party,” said Forbes. “While that may sound complicated, all it means is that it's a chance for someone who's not personally involved in the sale of the home to give a true representation of the home's worth. It's worth noting that an appraisal is entirely separate from a home inspection. The former deals with the financial value of your new home. The latter is an inspection of the functional quality of your home's systems, like HVAC and plumbing.”

There are a number of factors that contribute to that fair market value. “In a purchase-and-sale transaction, an appraisal is used to determine whether the home’s contract price is appropriate given the home’s condition, location, and features,” said Investopedia. While the evaluation process is intended to provide guidance when it comes to pricing, it is unknown at this point how those evaluations will compare to appraisals, if they will carry the same weight in terms of establishing home value, if they will disproportionately favor the lender, etc. 

Value protection

Buyers and sellers each have a vested interest (literally) in knowing how much the home they are buying or selling is worth. For sellers, an appraisal can help inform the listing price, and may also be able to help a seller justify a higher listing price because of improvements they have made to the home. 

On the other hand, if a home appraises for less than the sales price, buyers have a negotiating tool. “An appraisal is important because it protects your investment,” said Forbes. “It's there to ensure that, as the buyer, you don't pay more than the home is actually worth. It's also important for securing financing. In today's mortgage industry a bank will only give you a loan up to the fair market value of the home. Therefore, if an appraisal comes back lower than the purchase price, the lender may only issue you a loan for the appraised amount.”

REALTY TIMES- by Jaymi Naciri

How to Find a Real Estate Agent: A Few Things You Might Not Have Thought Of

11/21/2019

When it comes time to find a real estate agent, there are all kinds of ways you can go about it: Ask a friend. Call a number on a “for sale” sign in your neighborhood. Do a Google search. But, no matter which route you choose, there are some things you’ll want to look for—some that seem obvious, and a few you may not have thought of.

Their reviews

We live in an era where you can find as much information as you want about just about anyone, with just a few clicks. It’s imperative these days to read reviews, whether you’re looking for a good air conditioning technician or someone to help you buy or sell what is likely your largest asset. But don’t just depend on the reviews on the realtor’s website. Google any agent you’re considering, and check out what’s being said about them on Yelp and on social media. Look to see if any complaints have been made about them. And keep in mind that every Realtor—even the best of the best—can have a negative review here and there from a disgruntled client. What you’re looking for is an overwhelmingly positive consensus.

Their listings

If you’re selling your home, you want your agent to be active, and that means having listings. But the number of listings can be telling. If they just go on and on and on, it could be an indication that the agent doesn't have the time to give you the level of service you’re looking for. 

Their affiliation

Is the Realtor you’re considering affiliated with a real estate company you’ve never heard of? This may or may not be of importance to you, depending on their qualifications. But you will want to make sure you do your due diligence to make sure the company is legit.

Their experience

Are you thinking of using a real estate agent who is newly licensed and has never helped anyone buy or sell a house before? Everyone has to start somewhere, but you might not want to be the guinea pig. You may have pressure from family or friends to use their daughter/cousin/uncle/next-door neighbor, but it’s OK to politely tell them that you’re going with someone else—someone with many years of experience. 

Their area of expertise

Just because a Realtor has tons of experience doesn’t mean they have an experience that’s relevant to your specific situation. Maybe they generally deal with multi-million-dollar properties and you are a first-time buyer, or their geographic area is outside your ZIP Code. Either way, it may behoove you to find an agent who is better equipped to work within your specifications.

Their attitude

Even if the real estate agent in question checks all the other boxes, there may still be something off. Maybe they come off as aloof. Maybe they’re so serious you’re afraid to ask questions. Maybe they’re not serious enough. You don’t have to gel with your Realtor. It’s perfectly fine—and perfectly normal—to get through your transaction and never do business with that agent again. But an agent you really mesh with could end up becoming your agent for life, and maybe also become a friend. 

SOURCE: REALTY TIMES- by Jaymi Naciri

You Don’t Need 20% Down and Seven Other Myths That Are Getting in the Way of Homeownership

11/20/2019

Think you need to come up with 20% for a down payment in order to buy a house? It might surprise you to know that the median down payment for first-time buyers last year was just 7%, per the National Association of Realtors®. And there are plenty of loan programs out there that require far less. The 20% myth is just one of the things that’s keeping homeownership out of reach. We’re digging in to seven others.

You need to be well-established in your forever career

There has been a lot of discussion about how millennials are waiting longer and longer to purchase homes. “As a result of their consequent struggle to save, millennials are delaying major life milestones like getting married and buying a home,” said Business Insider.

Nonetheless, there are still millennials jumping into the market because, even know their name isn’t yet on the door, they’re excited to have a home in their name. Having a stable job, a comfortable salary, and the desire to own a home may just be enough. 

Sure, you might not be ready to buy the house of your dreams or move to the neighborhood where you can imagine raising kids and, someday, retiring, but that doesn't mean you’re completely out of the game. A smaller place closer to work or an attached property can, quite literally, get your foot in the homeownership door and allow you to start earning equity.

You have to be completely out of debt

Recent data shows that nearly half of all undergraduates are delaying homeownership because of student loans. “According to a recent Federal Reserve study, a $1,000 increase in student loan debt lowers the homeownership rate by about 1.5%, equivalent to an average delay of about 2.5 months in attaining homeownership,” said Clever Real Estate. “For the average college debt holder with $37,000 in debt, that ends up being about a 7.7-year delay in their path homeownership.”

Regardless of your debt, whether it’s from student loans or credit cards, it may still be possible to qualify for a mortgage and afford the payments, especially because rents are often comparable to mortgage payments. Mortgage underwriters don’t expect homebuyers to be debt-free; In fact, having no debt might actually work against you. They like to see responsible credit use and management.

You need to have a family

Yes, many would-be homebuyers hold off until parenthood is looming, because they’re not ready to move to the suburbs, get married, and have kids. But, a third of today’s new homeowners are unmarried, according to CITYLAB. “The shift is detailed in a new working paper from Harvard University’s Joint Center for Housing Studies, in which researchers crunched demographic data from HUD and from American Housing Surveys taken every other year between 1997 and 2017. Perhaps the most notable departure from 20 years ago is the marital status of new homeowners. According to the paper, the share of married buyers declined from 61 percent in 1997 to just over half by 2017. Meanwhile, 35 percent of first-time homebuyers in 2017 had never been married.”

You need to be a man

There was a time when single women wouldn’t even have considered buying a home on their own. That time has clearly passed. According to the National Association of Realtors® 2018 profile of home buyers and sellers, single women homebuyers outnumbered single male homebuyers by 2 to 1!

You need a 30-year conventional loan

There are tons of different loans that can help you purchase your first home, make payments more affordable and/or give you the flexibility you need to make homebuying affordable. FHA loans are among the most well-known and most popular loans for first-time buyers because they require just 3.5% down and have low credit score requirements. Other loans worth looking into depending on your circumstances include government VA loans for veterans; USDA loans for properties in rural areas; and loans like Fannie Mae’s HomeStyle Renovation loan, which gives buyers bundled funds to purchase and make improvements to their home. 

You need to have great credit

If your score isn’t in the 800s or even the 700s, it doesn’t mean you’re going to be living that apartment life forever. You might be surprised to see the credit score minimums for some loans. “While there is no official minimum credit score for a home loan approval, the minimum FICO credit score for conventional loan approval tends to be around 620,” said Credit.com.

It has to be your primary home

“Some rich urban millennials are choosing to rent in the city and buy a vacation home instead of a primary residence,” said Business Insider. Meanwhile, some other savvy investors are continuing to rent and plunking down money to purchase homes in tourist-friendly locations so they can take advantage of the Airbnb craze. “According to Priceonomics, hosts on Airbnb are earning more than anyone else in the gig economy and are raking in an average of $924 a month,” said Travel & Leisure. “Airbnb hosts make nearly three times as much as other workers…with some hosts making more than $10,000 per month.” 

SOURCE: REALTY TIMES- by Jaymi Naciri



Is New Construction for You? We’ve Got the Pros and Cons to Buying New

11/18/2019

The Federal Reserve recently stated that housing is “the bright spot in the economy,” and spotlighted the growth of new construction; New home sales “are 18% higher than a year earlier,” according to REALTOR Magazine. But how much do you really know about buying new construction? If you’re wondering if it’s for you or if you’re just curious about the differences between buying new and resale, we’re breaking down some key details in these pros and cons.

Con: No haggling allowed

Negotiating is a key part of buying a resale home. But if you’re looking to negotiate the price on something new, you may be disappointed. Builders and developers don’t generally like to lower the price of homes since it tends to aggravate those who purchased previously and didn’t get the benefit of a discount. 

Pro: But there may be different perks

That doesn't mean there isn’t room for negotiation. Working with real estate agents who have experience with new construction is key here because they can negotiate things like closing cost help and upgrades. 

Con: Principal, interest, taxes, and insurance aren’t everything.

New-home communities typically have homeowner’s associations (HOA), which means you’ll have to tack another payment onto your monthly tally. In return, you get some built-in protections for your home value, but if your budget is unforgiving, you’ll want to factor this in. 

Pro: You can personalize your floorplan.

Depending on the home and community, you might be able to make some changes to the floorplan to make it work better for your household. Perhaps you want to turn a den into a bedroom (or vice versa) or add a loft or extra garage bays. The floorplans online or in the community brochure will display the available options, but if there’s something specific you’re looking for that isn’t offered, be sure to ask. There may be more available than what you can see.

Con: Every change you make will cost you. 

If you’re planning to make floorplan changes, you can throw out that home price they gave you. 

Pro: You can upgrade pretty much everything.

One of the huge perks of buying new construction is being able to customize it to your liking. Want a fancy backsplash? Go for it. Hand-scraped wood floors? Yes, please. You want it, you got it—as long as the sales agent and design center says you can have it. And, you can pay for it, of course. 

Con: There goes your budget, and your cushion.

You may be surprised how much some of this stuff costs. That $350,000 house you thought you could afford? It’s now $100,000 more.

Pro: You can roll the extra costs into your mortgage. 

Even though the number might sound exorbitant, it’s not so bad when you consider the monthly difference it makes in your mortgage payment. 

Con: It’ll take a while to build.

The advantage to buying resale is that you get to move in as soon as you close escrow. Buy new and it can be many months before you get your keys. 

Pro: But you’ll be the first to live there

That makes it worth the wait, right?

Con: The neighborhood will be a mess for a while.

Unless you’re purchasing when few homes are left to build, expect to be living with construction trucks and construction dirt for a period of time. While this will likely be a blip compared to how long you’ll live in the home, it can feel interminable when trucks are making noise and kicking up dust. 

Pro: It can be easy to meet people when you’re all moving in at or around the same time. 

This is great for families with young kids or those relocating from other areas.

Con: Higher cost

“Most homebuyers won’t be surprised to learn that brand-new homes almost always cost more than resale ones,” said NewHomeSource. “Historically, newly built homes cost about 17 percent more than resale ones, based on national median price data that date back to the 1960s.”

Pro: There may be amenities

Having a community pool and maybe a park or other amenities can make it even more rewarding to live in a new-home community.

Con: Nothing comes for free. 

You’ll pay for those amenities through the HOA.

Pro: Your home may appreciate faster

Studies have shown that well-built homes in popular communities can earn equity faster than some homes in some older neighborhoods. 

Con: This could also make your property taxes go up. 

“Property taxes can rise due to reassessment of value after a home is purchased,” said Street Directory. “Property taxes on new construction are based upon the assessed value of the land until a certificate of occupancy for the home has been issued by the local government. Once this occurs the property will be re-assessed as a home for the next complete property tax billing cycle.”

SOURCE: REALTY TIMES- by Jaymi Naciri

Is This the Future of Rent-To-Buy?

11/15/2019

In theory, the idea behind a rent-to-buy arrangement is a good one for those who want to purchase a home but aren’t quite ready yet. More than anything, it gives buyers hope, and often a solution to their credit woes, while locking in a home that will, presumably, belong to them one day.

“One of the main reasons why rent-to-own agreements are attractive to renters is because they can engage to a contract even though they have a bad credit status,” said Passive Real Estate Investing. “He or she can improve their credit rating by renting the property and later on, they may be able to get a loan to purchase the property.”

Another benefit of renting to own is that it “allows buyers to lock in a purchase price, which can be especially beneficial in a time when home prices are on the rise,” said Quicken Loans. “If the option money or a percentage of the rent is applied to the home’s purchase price, you can also begin to build equity in the home before you even purchase it.”

Prospective buyers also get a test run of sorts to figure out if it’s the right house and the right area, or if they need to start their search over. “If that’s the case, they can walk away,” said Passive Real Estate Investing. “Of course, they lose whatever premium they’ve been paying above and beyond what the regular rent one of been.”

That premium is perhaps the biggest negative of entering into a rent-to-own arrangement. First, there’s the upfront money. “In a rent-to-own agreement, you (as the buyer) pay the seller a one-time, usually nonrefundable, upfront fee called the option fee, option money, or option consideration,” said Investopedia. “This fee is what gives you the option to buy the house by some date in the future. The option fee is often negotiable, as there’s no standard rate. Still, the fee typically ranges between 2.5% and 7% of the purchase price.”

You can expect to pay more per month, too. “Typically, the rent is slightly higher than the going rate for the area to make up for the rent credit you receive,” said Quicken Loans. “But be sure you know what you're getting for paying that premium.”

And that’s not the only downside. “In the end, when you decide not to buy the property, you will lose all the money you paid including the initial premium payment,” said Passive Real Estate Investing. “Also, in cases of missed or late payments, you may lose the option to buy the property.” 

You’ll also want to make sure you read the contract carefully so you know the terms. “Some landlords include a lease-purchase in their rent-to-own agreement, which legally obligates the renter to purchase the home at the end of the lease,” said Quicken Loans. 

A new way to rent-to-own

Divvy Homes is a new player on the rent-to-own scene that may be the answer for buyers looking to get into a home while mitigating some of the potential drawbacks to a more typical arrangement. Divvy works with buyers to figure out the budget that is comfortable for them and requires just 2% down while covering “all fees, closing costs, taxes, and insurance.” 

“You pick the house you want to buy—not just any house,” said Marketplace. “Around 20 percent of your monthly rent goes toward what Divvy calls ‘equity credits.’ “After three years, renters own 10 percent, typically enough to qualify for a mortgage and buy Divvy out.”

Divvy also refunds some of the money for those who opt not to purchase the home. “If they leave or default before three years, they’ll get back half of the equity they’ve built.”

SOURCE: REALTY TIMES- by Jaymi Naciri

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