The First Thing to Do Before Buying a Home By Gerri Detweiler | Credit.com – Fri, Feb 22, 2013 6:00 AM EST m/b?P=m.hr0grHg2.qY0BJUWdrUgAPYw6jw1Fq.O0AD0AE&T=1ev7so20u%2fX%3d1365965039%2fE%3d1183311986%2fR%3dfin-glob%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d3102362489%2fH%3dX2lkPSIxYmU0NDUyYy1iMGJlLTM2ZjYtOTI1Yy0zMTJhZTQyNzQ0ZWQiIGNhbl9zdXBwcmVzc191Z2M9IjEiIGNvbnRlbnQ9ImZpbmFuY2UiIHJlZnVybD0icmVmdXJsX2ZpbmFuY2VfeWFob29fY29tIiBycz0ibG1zaWQ6YTA3NzAwMDAwME1EWWNSQUFYIiBzZXJ2ZUlkPSJtLmhyMGdySGcyLnFZMEJKVVdkclVnQVBZdzZqdzFGcS5PMEFEMEFFIiBzaXRlSWQ9IjQ0NTEwNTEiIHRTdG1wPSIxMzY1OTY1MDM5MDc2OTQ5IiB0b3BpYz0icGYtQnV5aW5nIiA-%2fQ%3d-1%2fS%3d1%2fJ%3d4281C70A&U=12b1hdoee%2fN%3d9vXekGKL5Uw-%2fC%3d-1%2fD%3dREC%2fB%3d-1%2fV%3d0″> Home prices in most parts of the country are just about as affordable as they are likely to get, and mortgage rates remain super low. Together, those factors mean that many people are thinking about buying a home. Some will be first-time homebuyers, while others will be “boomerang” buyers who lost their homes in the housing meltdown but are now hoping to get back in. Still others may see this as the best time to upgrade to a larger home, downsize to a smaller one, or to move to the retirement locale of their dreams. Whatever your motivation for buying a home, unless you are going to pay cash for the property, there’s one essential step you must take first: get your credit reports and credit scores. The reason? Your credit scores will help determine what type of home loan financing you can get, and the interest rate you’ll pay. You’ll want to have plenty of time to dispute credit report errors if you find any, and get them fixed. The last thing you want is to find out at the last minute that you can’t buy your dream home because of something on your credit report that shouldn’t be there. If you will be buying and financing a home with someone else — a partner or spouse, for example — you’ll each want to get your credit reports and scores. Get them from all three major credit reporting agencies; Equifax, Experian and TransUnion, as they each collect their own data and don’t share corrections with each other. You can do this for free once annually at AnnualCreditReport.com. You’re Not Just a Number The three-digit number that represents your credit score will be important when it comes to buying and financing a home. A difference of a few points could make a difference in the rate you’ll pay for your mortgage. Mortgage lenders will typically use the middle of the three credit scores to determine the rate/program for which you qualify. But that doesn’t mean you need to obsess about your score. Doing so can cause you unnecessary grief. After all: Trying to tweak your scores based on what you think may help improve them can sometimes have the opposite effect. There are many different loan programs with different credit score requirements. A loan officer can help you shop around to find the right program to meet your needs. Keep in mind that you have many scores, not just one, so trying to figure out which scores matter most can be an exercise in futility. When it comes time to apply, your lender will pull the credit scores needed to process your application. In the meantime, you can find out where you stand and get an idea of what factors may be strong, and which may not be. Again, no need to obsess over the number. In fact, when we recently included a free credit score with our free Credit Report Card — one of our most popular tools — since we wanted to make sure that consumers understand that they don’t have a single score. That’s why we provide an Experian Scorex Plus score, but also show consumers their estimated VantageScore and FICO scores along with it. After all, there are dozens of scores available at any given time, and if you focus on just a single number, you may miss the bigger picture. What’s in a Number? If focusing on the number that represents your credit score isn’t the most important thing, then what is? Understanding the elements that make up your scores can be much more important. Our Credit Report Card, for example, assigns a grade to each of the main factors that go into a score: Payment History Debt Usage Credit Age Account Mix Inquiries Within those, we recommend you put your efforts toward the things you can control. If you get a “C” or “D” for a particular factor, you’ll get suggestions for things you may do to address that grade. Some of these may be things you can address immediately while some may not be under your direct control. If you earn a “D” for debt usage because your balances on one or more of your credit cards is close to your limits, you may want to pay some of them down if you have the cash available to do so. On the other hand, if you have a large student loan balance that you can’t afford to pay off, you may want to simply focus on making your payments on time rather than taking all the money you’ve saved for a down payment to pay it off. [Related Article: What’s a Credit Score? Really] What Can Your Score Do For You? When it comes to buying a home, your credit scores can help you secure the financing you need to buy the property and pay it off over time. Your credit scores are a tool to help you achieve your personal and financial goals. If you can get the loan you need with the credit scores you have, then be satisfied with that — even if you don’t have the best score your loan officer has seen! And finally, it’s important to put your scores in context. Mortgage lenders will look at other factors, like your debt-to-income ratios, employment history, and down payment. As any loan officer can tell you, even a perfect score can’t get you a loan if — for example — the appraisal comes in too low, or if you can’t document your income.
Renovate or relocate? 5 key questions to ask By Sarah Max @Money April 8, 2013: 4:37 PM The Hildebrandts found a new house without having to leave their Seattle neighborhood. (Money Magazine) With baby no. 2 on the way, Jonathan and Andrea Hildebrandt had to face an expensive reality. They needed more room. Their home had only two bedrooms, and nowhere for their 2-year-old to play without waking up her future little brother. Moving didn’t seem viable. The family loved their Queen Anne neighborhood in Seattle, and given that home prices had fallen 20% since they had bought four years earlier in 2007, they doubted they would recoup the $530,000 they paid. So they started talking seriously with builders about refinishing their basement or adding a second floor. Those conversations came to an abrupt halt, though, when the Hildebrandts found their perfect house, a $618,000 three-bedroom just blocks away. When they got a $520,750 offer two days after putting their home up for sale, they decided to move. “We essentially got the house that we would have ended up with 18 months later, but for a third of the cost,” says Jonathan. A RELOCATION BALANCE SHEET What the Hildebrandts gained in the move: Square feet: 1,000 Bedrooms: 1 Baths: 1 What it cost them: Sales price of the old house: $520,750 Cost of new house: $618,000 Sales commission: $32,000 Closing costs: $1,900 Moving: $1,200 To move or to improve? For the first time since the housing market went bust, homeowners are seriously contemplating that question. Until recently, selling a home was a dicey proposition. Even those who were lucky enough to find a buyer often walked away with far less than the home’s previous value, and in some cases even less than what they owed the bank. Related: Home prices – Your local market forecast Owners also put off renovation projects, causing home-improvement spending to fall 16% from 2007 to 2011, says the Joint Center for Housing Studies of Harvard University. Little wonder — who wanted to sink more cash into a home whose value had already plummeted? Now the market has turned the corner. Houses are selling faster, and prices are climbing. In a Coldwell Banker survey, 82% of agents said they expect more home shoppers this spring, singling out trade-up buyers for playing a “significant role.” Remodeling, too, is surging as owners, reassured by rising property values, tackle postponed projects. Spending on improvements hit $131 billion in 2012, its highest mark since 2006. “There seems to be a lot of pent-up demand,” says Paul Sullivan of the Sullivan Co., a Newton, Mass., remodeling firm. But just as today’s market looks nothing like it did during the bubble, the decision to list or fix your home has changed dramatically. Buyers have become more conservative. The recovery is progressing unevenly, so where you live can have a huge impact on your options. And a limited supply of new homes means the relocation pickings are slim. Are you grappling with the decision to fix up or trade up? Consider these factors, and ask yourself five key questions. MOVING: Is selling a realistic option? Start by assessing the prospects of your local housing market. While the biggest rebounds have come in places that were walloped by the real estate crash, they’re not necessarily the best bets for long-term gains. Instead, experts say, many buyers are gravitating toward areas with key quality-of-life features. Good school districts have long been equated with strong home values, says David Figlio, director of Northwestern University’s Institute for Policy Research, adding that “people pay more attention to these things during times of tighter housing values than they do in go-go periods of real estate.” The far-flung exurbs thrived in the boom years, but now an easy commute drives sales. “People want to live in closer to the city and in more walkable neighborhoods,” says Jessica Wilkie, an associate broker at M Squared Real Estate in Washington, D.C. Related: 5 best markets to buy a home To see how your neighborhood stacks up against others in the area, compare three key metrics: price increases, speed with which homes are selling, and inventory of places for sale (you want a number that’s higher than that of nearby neighborhoods for the first two, lower on the last). You can ask a community real estate agent to run these statistics for you, or do your own investigative work on Trulia.com or Zillow.com, both of which have tools for making comparisons. If your area fares better than those around you, you’re in a good position to sell. Are you among the 22% of homeowners with a mortgage who, according to real estate research firm CoreLogic, are underwater, or one of the 23% who have 20% or less equity in their homes? If so, your choices are limited. Even if you can sell, you will probably walk away empty-handed, or at least without the 10% to 20% cash needed to put down a deposit on a new place. Renovating is the better choice. Assuming that it will cost you less than moving, that you plan to stay in your home for at least five years, and that you can pay for the project without borrowing, it’s a good bet for improving the long-term value of your home. Related: 5 best markets to sell a home Lisa and Josh Herman’s Palm Springs three-bedroom was recently valued around $300,000 — a far cry from the $495,000 they paid in 2008. Still, with two kids, the Hermans could no longer live with the home’s open floor plan. “All you saw when you walked in the front door were toys everywhere,” says Lisa. Rather than sell at a loss, the couple opted to pull together $20,000 in savings and bonus money and started updating their bathrooms, converting an office into a fourth bedroom and turning their formal living room into a space for the kids. The project’s nearly finished now, and the Hermans say it was money well spent. It may take years for the market to get back to pre-bust levels, and that’s fine, says Lisa: “I think we’ll be happy here for a very long time.”
Inventory Crunch Easing As Sellers Jump Back In The Market Real Estate News | Apr 10, 2013 | By: Scott Garner Are the days of low housing inventory coming to a close? There are definitely encouraging signs: the number of listings on realtor.com increased 2.36% in March, a welcome change from the -15.22% inventory free fall the market has been in for the past year. Bolstering the positive news is a .05% increase in listing prices and a sizable 20% decrease in the median age of inventory since February. The national average list price of $190,000 seems to have changed the calculus for homeowners thinking of selling, tempting them off the sidelines with prices that may be break even – or even profit-making – depending on the structure of their current mortgage. As more homeowners are pulled out of the quicksand of negative equity by appreciating prices, a key roadblock to a widespread housing recovery could dissolve as the inventory crunch gives way to pent-up demand from sellers and buyers. Some markets are already showing strong signs of life. California continues its rebound, and Denver, Detroit and Seattle are experiencing promising growth. The median age of inventory has dropped to 24 days in Denver, Detroit’s list prices have increased at a faster rate than San Diego and are just behind San Fransisco, and Seattle’s median list price has jumped 15.9% since last year. National Data In March, the total number of single-family homes, condos, townhomes and co-ops for sale in the U.S. (1,529,432) increased by 2.36 percent month-over-month. On an annual basis, however, inventory decreased by 15.22 percent. The national median list price for single-family homes, condos, townhomes and co-ops ($190,000) increased by .05 percent both year-over-year and month-over-month in March. The median age of inventory of for sale listings fell to 78 days in March, down 20.41 percent from February and 12.35 percent below the median age one year ago (March 2012). Local Data California continues to lead the list of the country’s top performing housing markets with largest year-over-year decline in for-sale inventories. Seattle is the only market outside of California in the top 10, and experienced a decline of 40.17 percent in for-sale inventories year-over-year. The 10 markets with the largest year-over-year declines in inventory include Stockton-Lodi, Sacramento, Orange County, Oakland, San Jose, Los Angeles-Long Beach, Ventura, San Diego, Riverside-San Bernardino and Seattle, WA. Out of the 146 markets realtor.com monitors, only nine experienced an increase in for-sale inventory. On an annual basis, March median list prices were up by 5 percent or more in 52 markets, while only six markets experienced a decline of more than 5 percent. California markets continue to experience the largest median list prices year-over-year, in addition to the Phoenix market. While Detroit and Fresno did not make the list of top 10 performers for median list price, both markets did see list prices increase more than 40 percent year-over-year. The 10 areas with the longest time on market continued to include the coastal areas of the Carolinas and the resort communities of Santa Fe, NM, and Asheville, NC. In addition, four older industrialized areas also appear on the list: Reading, PA, Portland, ME, Albany, NY, and Philadelphia. However, with the exceptions of Albany and Philadelphia, the average age of the inventory in the remaining areas is down compared to one year ago.
Low Mortgage Interest Rates Masking High Home Price-to-Income Ratios Date:April 9, 2013|Category:Home Values|Author:Cory Hopkins Zillow has noticed a trend that could become problematic for both the U.S. housing market and policymakers in coming months. By looking at two metrics — an affordability index and a price-to-income ratio — Zillow researchers have determined that low mortgage rates that make homes appear incredibly affordable are overshadowing a bigger overall trend in which the overall prices of homes are actually significantly more expensive than historic norms relative to annual incomes. The affordability index measures the percentage of a homeowner’s monthly income devoted to housing (mortgage) payments. In the pre-bubble period from 1985 through 1999, homeowners spent 19.9 percent of their monthly income on mortgage payments. But because of historically low interest rates currently in the 3 to 4 percent range, at the end of Q4 2012, homeowners were spending only 12.6 percent of their monthly incomes on housing payments — or roughly 37 percent below historic norms. Low interest rates have translated into more purchasing power for homeowners, as the cost to finance homes has gone down. The price-to-income ratio looks at the total cost/price of a home relative to median annual incomes. Historically, the typical, median home in the U.S. cost 2.6 times as much as the median annual income (so if the median income in an area was $100,000, the median price of a home would typically be about $260,000: $100,000 * 2.6). While historically low mortgage rates are translating into big savings for homeowners, those same low monthly payments are masking a troubling trend. While home values have been on the rise for the past year — in some areas appreciating by 15 percent or more annually — median wages haven’t kept pace. As a result, home price-to-income ratios in many areas are climbing. Because wage appreciation has failed to keep pace with home value appreciation, once rates rise and the illusion of affordability driven by smaller monthly payments disappears, the market will be left with homes that could potentially be too expensive to afford on the typical median wage. “The days of historically high levels of housing affordability are numbered,” said Zillow Chief Economist Stan Humphries. “Current affordability is almost entirely dependent on low interest rates, and there’s no doubt that rates will begin to rise in the next few years. This will have an undeniable effect on demand for housing, as home buyers will have to spend more of their incomes to buy a home. Home values will have to either remain stagnant while incomes catch up or, quite possibly, home values will have to fall in some markets. This will especially be the case in some markets that have seen strong home value appreciation.” Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose (52.1 percent more), Los Angeles (48.8 percent more), Portland, OR, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more). Of the 30 largest metros covered by Zillow, only Cincinnati (3.1 percent less), Chicago (3.9 percent less), Cleveland (6.7 percent less), Atlanta (13.9 percent less), Las Vegas (14.6 percent less) and Detroit (25.5 percent less) posted price-to-income ratios in the fourth quarter of 2012 that were less than historic norms. Metro Area % Of Monthly Income Dedicated to Mortgage Payments, 1985-1999 % Of Monthly Income Dedicated to Mortgage Payments, 2012 Q4 Median Home Price Relative To Median Annual Income, 1985-1999 Median Home Price Relative To Median Annual Income, 2012 Q4 UNITED STATES 19.9% 12.6% 2.6 3.0 New York 30.7% 21.9% 4.0 5.2 Los Angeles 35.3% 29.0% 4.6 6.8 Chicago 21.4% 11.4% 2.8 2.7 Dallas 16.6% 9.3% 2.1 2.2 Philadelphia 17.5% 12.4% 2.3 2.9 Washington, DC 20.4% 14.9% 2.7 3.5 Miami 18.9% 13.5% 2.5 3.2 Atlanta 17.3% 8.1% 2.2 1.9 Boston 27.0% 19.0% 3.5 4.5 San Francisco 38.0% 28.8% 4.9 6.8 Detroit 15.8% 6.5% 2.1 1.5 Riverside 23.1% 14.9% 3.0 3.5 Phoenix 20.1% 12.7% 2.6 3.0 Seattle 25.0% 17.2% 3.3 4.1 Minneapolis-St. Paul 18.3% 11.2% 2.4 2.6 San Diego 31.3% 25.0% 4.1 5.9 Tampa, FL 17.5% 10.4% 2.3 2.5 St. Louis 15.6% 10.0% 2.0 2.4 Baltimore 19.5% 13.6% 2.5 3.2 Denver 20.2% 15.7% 2.6 3.7 Pittsburgh 14.3% 9.7% 1.9 2.3 Portland, OR 21.3% 17.3% 2.8 4.1 Sacramento, CA 25.9% 15.8% 3.4 3.7 Orlando, FL 18.5% 10.7% 2.4 2.5 Cincinnati 18.0% 9.6% 2.3 2.3 Cleveland 18.7% 9.7% 2.5 2.3 Las Vegas 21.7% 10.2% 2.8 2.4 San Jose, CA 35.2% 29.5% 4.6 7.0 Columbus, OH 17.5% 9.9% 2.3 2.3 Charlotte, NC 16.2% 10.9% 2.1 2.6
Why Buyers Should Consider Foreclosures or Short Sales Date:April 12, 2013|Category:Tips & Advice|Author:Brendon DeSimone For years, many buyers routinely steered clear of foreclosures and short sales. In their minds, such properties were “damaged goods” — real estate remainders that were likely to be dumps and money pits. Why risk such a big investment on a property sold in distress? We’re now in a housing market unlike any we’ve seen in years. Inventory is tight in many areas. Meanwhile, the poor economy of the past few years has produced more properties in foreclosure or offered as short sales. And so, as you enter the market either for the first time or as a seasoned buyer, you should be on the lookout for “distressed” sales. You might find a great property you’d otherwise have overlooked if you categorically disqualified foreclosures and short sales. And when the market is tight, looking at distressed properties makes even more sense. The risks to buyers of foreclosures & short sales Foreclosures and short sales aren’t just your typical buyer/seller situation. They involve more layers. In a bank foreclosure sale, also called real estate owned (REO), the bank is the seller. Because the bank employees have never lived at the home, they know nothing about the property. To them, the home you’re considering buying is simply a statistic — a cell within a large spreadsheet viewed by a worker behind a desk halfway around the country. In the case of a foreclosure, the bank sells the home “as-is” and requires the buyer to sign dozens of documents releasing the bank of any liability. The worst-case scenario: You buy a foreclosure only to discover a major problem, such as a property line dispute or previous leaks that caused mold or dry rot. When purchasing a short sale, the seller needs to go to their lender to “approve” the sale. In essence, the owner is trying to sell for less than the loan amount, so they need the bank to approve the sale. Historically, banks are slow to give the thumps-up. This can lead to a situation in which a buyer waits for months for the bank to approve the short sale, only to have the bank reject it. Meanwhile, the buyer has missed out on countless other properties. Reasons to consider a foreclosure or short sale home While there are clearly risks in buying a distressed property, we have so much more information now on homes than previous generations. Today’s Internet-connected, savvy buyer can learn a great deal about foreclosed and short sale properties before signing on the dotted line. The old saying “no risk, no reward” certainly applies to foreclosures and short sale properties. Distressed sales tend to be priced from 5 percent to as much as 15 percent below the current market value. Also, keep in mind that foreclosures aren’t necessarily dumps. The recession impacted people in all income brackets. It’s not unusual to find multi-million dollar homes in excellent condition and in good locations in foreclosure or offered in a short sale. How to minimize the risks If you’re looking for a home in a market where inventory is tight, buying a home in foreclosure or short sale can be a great option. There are many ways to mitigate the potential risks: Search town records for past building permits to see if anything out of the ordinary was completed or planned for the property. Have the home inspected top to bottom before getting too far along in the process. Knock on neighbors’ doors to see what information they have about the home, the neighborhood or the previous owners. Look at the home’s previous sales records. Many times the homeowner tried to sell once or twice before becoming distressed. If that’s the case, review the home’s sales history. If there was ever a contract on it, chances are there might be an inspection report somewhere. Have your agent call the previous listing agent to find out more about the former owners or the property. Look for hidden values There may be absolutely nothing wrong with the property in foreclosure or sold in a short sale. The bank has discounted the home because it sells such properties as-is, without disclosures. If you do your homework, you can use this situation to your advantage. And should you learn of a major problem with the house, negotiate with the bank for a lower price. Don’t forget: Banks aren’t in the business of owning homes. They want these properties off their hands as soon as possible. Banks will take seriously any buyer who’s well-qualified and ready to close a deal. Related: Why Do Short Sales Take So Long? How to Spot a Home That Might Sell Below Asking Price Buying a Foreclosure? Watch Out for These 5 Landmines Brendon DeSimone is a Realtor & HGTV real estate expert. He has collaborated on multiple real estate books and his expert advice is regularly sought out by print, online and television media outlets like FOX News, CNBC and Forbes. An avid investor, Brendon owns real estate around the US and abroad and is licensed to sell in two states. You can find Brendon online or follow him on Facebook or Twitter. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
Prep Essential to Exterior Paint Success Date:April 10, 2013|Category:Tips & Advice|Author:Mary Boone Painting your house might look simple — at first glance. Look again. Before you take on any exterior painting project, it’s important to conduct a thorough examination of your home. Here’s what to look for and how to properly prepare your home for a face-lift. Banish mildew Peeling, blistering and chalking are significant indicators of problems with your house paint. Water leaks will show up as discolored areas, often mildew or rot. The experts at the Paint Quality Institute say mildew can be removed with a solution of one part bleach to three parts water. Apply the mixture to the surface, and let it sit for at least 20 minutes, applying more as it dries; rinse well. Be sure to wear eye and skin protection during this process and protect nearby plantings. Clean the surface Because paint won’t stick to dust or grime, you must wash your entire house, either scrubbing by hand or with a power washer. A power washer uses water from your hose and increases the water pressure as it leaves the wand to between 2,300 and 3,500 psi (pounds per square inch). In the hands of an experienced user, the power washer can be very useful. Inexperienced users, however, should know that this tool’s power can wreak havoc if it’s not used correctly. At high pressure, the water jet can etch wood, break glass and blast mortar from joints; the water also can soak the wall and requires time to dry out before painting. Sand and patch Once the dust and gunk are gone, you’ll need to follow up with hand scraping and sanding. On wood siding, you should fill in any gouges or holes with an exterior-grade patching compound, or “plastic wood.” Larger damaged areas should really be replaced with new siding. Cracks, seams and gaps will need to be caulked with a top-quality, paintable exterior caulk. Be sure to caulk the spots where siding meets windows and doors, corners and the edges of exterior trim. Cover edges, trim Next, mask off areas that you are not going to paint. You might want to place painter’s tape along the edge of house trim, and around window and door frames and trim if you plan on painting these in a different color or different type of paint. You can also tape newspaper or plastic drop cloth material over windows and doors, including sliding glass doors, to protect them from drips. Place drop cloths over plants and shrubs, or where paint may drip on porches, roof sections, sidewalks, driveways or other surfaces. Apply primer In order to get the best exterior painting results, it’s often necessary to use a primer or sealer before applying the paint. Primers help paint adhere better to the surface that’s being painted. Experts say almost any exterior painting project will benefit from the use of a top-quality primer, but there are certain applications where a primer is essential, namely, when painting new wood, bare stucco or any surface that has not been previously painted. You should also use a primer when repainting an uneven or deteriorated surface or a surface that has been stripped or is worn down to the original material. If this list of sounds extensive, it is; preparation can amount to 50 percent or more of the time it takes to paint a house. But it’s crucial; a quality job done with proper preparation and quality materials will last seven to 15 years. Hiring a pro If painting your home’s exterior is beyond your scope of expertise — or the project will take longer than you’re willing to invest — hire a pro to do the job. To ensure you’re hiring a reputable paint contractor, meet with a number of contractors personally and ask these questions: What materials do they plan to use? Who specifies the paint — you or the contractor? If the contractor selects the paint, does he or she recommend top-quality paint? Ask for — and check — references. Ask these previous customers if they were pleased with their work and how the paint job is performing. You may even want to take a look at their homes to see the results for yourself. Ask if the contractor is licensed, bonded and insured (ask to see their certificate of insurance). How many years has the company been in business? Is the business affiliated with an industry trade association? Call the Better Business Bureau to make sure there are no complaints against the business. Ask about payment terms. Don’t pay for work before it’s done. Get it in writing. The bid should include specifics about surface preparation, how shrubs and plantings near the house will be protected, the exact paints to be applied, payment terms and more. Related: Is Blue for You? How to Choose Exterior Paint Colors 7 Steps to Face Your Color Fears What to Do With Leftover Paint
Getting Approved: How Lenders Judge You Date:April 10, 2013|Category:Finance|Author:Rick Grant As a consumer, you’re used to being the one with the power to judge the products and services you purchase and the companies that offer them. But when it comes to financing your new home or refinancing the one you already own, you hand that power over to the mortgage lenders and, more specifically, the underwriting department. A mortgage loan underwriter is tasked with carefully analyzing every bit of information the loan officer asks you to provide as part of the loan application process as well as the collection of “trailing documents” that you send in later to substantiate the information you’ve already provided. In general, the underwriter will attempt to verify two primary things in order to meet the bank’s criteria for offering you a loan: general creditworthiness and debt-to-income ratio. Evaluating creditworthiness The first thing the underwriter is concerned with is your general creditworthiness. This will give the lender an idea of your general willingness to repay your debts. There are many ways to determine this, but the most common way is to use a mortgage credit score. This score is based on an analysis of your various credit files. The most popular score is the FICO score offered by Fair Isaac Corporation, but there are others in use as well. The mortgage credit score uses consumer data stored by the three major credit repositories, Experian, TransUnion and Equifax. Income is generally not part of this calculation, but it is important, as we shall discuss shortly. Early in the loan origination process, the lender will request your permission to pull your credit scores and then purchase a credit score as part of the underwriting process. This number is used to determine how much risk you pose and, in some cases, to match you with the right mortgage loan product. The cost of these reports is generally passed back to you at closing. Debt-to-income ratio The second thing the underwriter will want to know is how the new mortgage payment will impact your ability to repay. The traditional calculation for this is the debt-to-income ratio, or DTI. The DTI is a comparison of your monthly gross income (before taxes) and your monthly debts. The debts in question include any consumer debt that would appear on your credit report, such as car loans, credit card debt and installment loans, as well as additional debt such as alimony or child support payments. DTI requirements vary by loan program, but typically underwriters are looking to see if the ratio of debt to income — after the cost of your mortgage principal, interest, real estate taxes, insurance and private mortgage insurance (if required) are all added in — is lower than about 40 percent. Some lenders require it to be even lower. Many other considerations go into the underwriting of a new mortgage loan, but these areas are generally where underwriters focus. Related: Mortgage Financing: Loan Products 101 Using Gift Money for a Down Payment Self-Employed? Avoid These Common Borrower Traps Rick Grant has been covering financial services for the trade press for more than 15 years. He specializes in home finance and technology. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
The home bidding wars are back! By Les Christie @CNNMoney April 5, 2013: 10:01 AM ET The competition has been most intense in California, where 9 out of 10 homes sold in San Francisco, Sacramento and cities in Southern California have been drawing competing bids. NEW YORK (CNNMoney) The bidding wars are back. Seemingly overnight, many of the nation’s major housing markets have gone from stagnant to sizzling, with for-sale listings drawing offers from a large number of house hunters. In March, 75% of agents with broker Redfin said their clients’ offers were countered by rival bids, up from 56% who said so in late 2011. The competition has been most intense in California, where 9 out of 10 homes sold in San Francisco, Sacramento and cities in Southern California drew competing bids during the month. And at least two-third of listings in Boston, Washington D.C., Seattle and New York generated bidding wars. “The only question is not whether a new listing will get multiple bids but how many it will get,” said Kris Vogt, who manages 14 Coldwell Banker offices in the Sacramento area. One home in an Elk Grove, Calif., subdivision recently received 62 separate bids. The final sale price was for more than $150,000, well above its $129,000 asking price. In Cambridge, Mass., two condos that could be combined into one large home hit the market two weeks ago for $800,000 each, according to Pat Villani, president of Coldwell Banker Residential Brokerage in New England. “The brokers stopped taking names after the number of bidders reached 250,” she said. The winning bidder offered $2 million for both units. Related: Five best markets to buy a home Homebuyers eager to purchase before home prices and mortgage rates rise are finding few homes for sale as sellers hold out for better deals, said Glenn Kelman, Redfin’s CEO. Many homeowners are still underwater, owing more on their mortgages than their homes are worth, and they want to wait until selling becomes profitable again. By doing so, they can avoid short sales, which carry big hits on credit scores, 85 to 160 points, according to FICO. “Many people have been holding on for a profit and they’re just now getting their heads above water,” said Kelman. Those who want to sell and buy a new home are encountering a market where it’s difficult to find a new place of their own, said Vogt. Related: Five best markets to sell a home Over the past few months, Jackie and Cliff Kaufman have bid on four different homes in St. Petersburg, Fla., including one short sale and a foreclosure. The pair, who have two adult children and run an online jewelry business, said they bid $5,000 more than the $495,000 asking price on the first home they had their eye on and never heard back from the seller’s agent. They were later told the house sold for nearly $550,000. Next, they bid on a short sale listed for $600,000. This time, they came in $10,000 above the asking price and again, they were beaten out. The house was only on the market for two days. The third attempt to make an offer on a bank-owned property was also met with silence. Related: Buy or rent? 10 major cities “It was very frustrating,” said Jackie Kaufman. “We felt we were always on the outside of the loop and that people who won the homes had the inside track.” By the fourth try, the couple successfully bid through a listing agent, who they believe pushed their bid harder in order to earn a double commission since she was representing both the buyer and seller in the deal. And they managed to get the place for $30,000 less than the asking price. They were lucky. Inventories of homes for sale continue to shrink. In February, the National Association of Realtors reported a 19.2% decline in inventory year-over-year. While the number of homes for sale should rise with the onset of the spring selling season, housing inventory is expected to remain low, pushing prices higher. Related: Fastest growing boomtowns And new home construction, especially in markets hit hard by the housing bust, is still moving forward at a snail’s pace, since the cost to build the homes is often more than what the property ends up selling for, said Jeff Culbertson, president of Coldwell Banker’s Southern California operations. Even though home prices are on the rise, the balance between buyers and sellers has been thrown off balance, said Kelman. “With buyers out in force and sellers cautious, the market is in an awkward ‘tweener’ phase,” he said.
Real Estate Q&A: Revocable Trusts and Wrap-Around Mortgages Date:March 29, 2013 | Category:Tips & Advice | Author:ProfessorBaron.com Each month, San Diego State University lecturer and Zillow Blog contributor Leonard Baron answers two questions from readers regarding buying, selling and investing. Have a question? Send it to Leonard@ProfessorBaron.com Revocable trusts Hi Professor — I keep hearing about trusts and that forming one can be a good idea to save money on taxes and maybe provide liability protection to my assets. What are the basics? Bob. N., Toledo, OH Hi Bob — It depends. Here are the basics on the most common trust, a revocable living trust (RLT). State laws differ, but an RLT is set up to allow the trustor (forming the trust) to skip probate court at death. The trustor would title all their real estate, bank accounts, etc., into the RLT, and when they pass away the assets are distributed via what the trustor detailed in the trust. This can also occur via a will, but a will is “probated” in state court, which takes a big chunk of fees for administering the estate. If you have an RLT, which costs about $2,500, the assets in the trust skip being probated, and your estate skips those probate fees — but talk to an estate attorney in your state for more information. An RLT does not give any liability protection or save money on taxes during the life of the trustor. Other trusts — expensive ones starting at $20,000 and up — could save you money on taxes, hide or protect your assets, etc. But your estate would probably have to be several million dollars to consider these types of arrangements. Wrap-around mortgages Hi Leonard — My daughter is considering buying a property with a wrap-around mortgage because she can’t get a regular bank loan. I’m concerned because isn’t the seller violating their mortgage by selling the property and not paying off the mortgage? Any suggestions? Aaron S., Salt Lake City, UT Hi Aaron — You should be concerned. Yes, the seller could be violating their mortgage terms. There also could be insurance issues, higher transaction/legal costs and all kinds of other issues with a wrap-around loan. Many times rent-to-own or wrap-around deals are purchased by people who don’t have the financial wherewithal to do a traditional mortgage from a bank. They mistakenly think that buying “any” property is better than not buying at all — which it’s not! Renting is not throwing away money; buying a bad real estate deal probably is throwing away money. You should coach your daughter to get into financial shape to qualify for a traditional mortgage, shop all the available inventory in the area and buy when she finds a great property and is ready to become a homeowner. Related: Mortgage Shopping: How to Compare Good Faith Estimates Tips for Preparing to Buy in 2013 Offer Accepted: What Happens During Escrow? Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
Don’t Be Fooled By These 3 Real Estate Myths Date:March 31, 2013 | Category:Tips & Advice | Author:Brendon DeSimone As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works. Their assumptions may come from TV reality shows or watching their parents’ house-hunting experiences. Maybe they’ve learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized “real estate myths.” Here are three such myths that many less-seasoned home buyers and sellers assume are true. Myth No. 1: Spring is the best time to sell a home Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn’t necessarily the best time to sell a home anymore. The reality: The best time to sell is during the holidays and right after Today, more than half of buyers aren’t married, and their decisions aren’t based upon school schedules. So spring isn’t as relevant as it used to be. Instead, the best time to sell a home is in November, December and January. It’s a supply-and-demand issue. Most sellers assume buyers aren’t seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note. After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn’t even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell. Myth No. 2: Always start with your lowest offer There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying “never offer the full asking price.” That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed. The reality: A low offer may get you nowhere fast A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent to understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere. Myth No. 3: A cash offer trumps all There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted. The reality: A savvy seller may be more tempted by a solid financed offer Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods. A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender. Learn your market When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year. Related: 5 Ways to Find Your Home During an Inventory Shortage Tips for Gen X and Gen Y Home Buyers Is Pricing Low the Way to Go? Brendon DeSimone is a Realtor & HGTV real estate expert. He has collaborated on multiple real estate books and his expert advice is regularly sought out by print, online and television media outlets like FOX News, CNBC and Forbes. An avid investor, Brendon owns real estate around the US and abroad and is licensed to sell in two states. You can find Brendon online or follow him on Facebook or Twitter. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.