Aug. 27, 2016

Are You Ready to Buy?

BEFORE YOU SHOP:

Be a smart consumer. Learn the financing basics. Know how to shop for a home loan that's right for you.

Get pre-approved.This takes very little time and lets you know the price range that fits your lifestyle.

Know what you want. The last thing you need is to close a deal and realize you bought a house you don't want. Ask yourself what you're looking for in a home before you shop. Think about size, commute time and necessary repairs.

Keep your debt load to a minimum. Don't make major purchases or incur any additional debt until after your purchase. Pay down credit cards and don't apply for new ones. Remember, financial institutions evaluate your financial situation on your gross monthly income. Your total monthly house costs should not exceed 28 percent of your gross monthly income.

Be prepared to view new properties quickly. Sometimes homes sell quickly, so be ready to make fast decisions.Be accessible to change the terms.

Have instant access to your agent. Instant communication can mean the difference in purchasing the property of your choice. You and your agent should exchange cell phone numbers and email addresses, so you can stay in touch and on top of the market.

BEFORE YOU BUY:

Submit a strong competitive offer. Your agent can help you assess the market and submit a solid offer.

Include a substantial earnest money deposit. Sometimes offers are accepted based on the amount of the deposit.

Try to minimize the number of contingencies. Fewer contingencies mean a stronger offer.

Hire an inspector. A professional building inspector or appraiser will make sure the house of your choice is in satisfactory condition.

Check zoning regulations and covenants. Good residential neighborhoods will be zoned to keep out commercial and industrial users.

Read any restrictive covenants and make sure they fit your lifestyle.

Request an updated property survey. Be sure it clearly marks boundaries. Check for problems.

Make sure you know what stays or goes. Your contract should be very specific about which items (appliances, etc) are included in the sale.

Get agreements in writing. Make certain verbal agreements are written into the final contract to avoid any stressful and expensive issues later.

Contact us for any questions you might have about buying, selling or renting. 253-292-1132

Sue Larsen

~Sue Larsen

Posted in Buying
Aug. 19, 2016

Should You Rent or Sell Your Home? 4 Questions to Ask

To Rent or Sell Your Home? Answer these four big questions.

Whether you’re a homeowner who suddenly needs to relocate, or a multi-property investor, you’re in good company if you’re struggling to decide between selling and renting.

While it might be tempting to immediately turn to a spreadsheet, remember it’s not all about the numbers. It’s important to weigh in your reasons for originally buying the property, your likelihood of living in the house in the future, its current and potential overall effect on your financial situation, as well as many other considerations.

Evaluating a house as an investment and potential rental requires both a monetary and very personal assessment. At the end of the day, the decision is subjective and there is no specific formula for success, as it depends on your unique situation and tolerance for risk.

As you start to evaluate your unique situation and options, consider the following: 

1. If you’re living in the home, why are you moving?

If you’re moving for work-related reasons, and can foresee yourself coming back within a set amount of time, accepting a renter may initially seem like a no-brainer. For example, a military family who has a high likelihood of returning to a particular duty station may want to put in the effort to keep their home for likely future use.

However, if you’re relocating due to non-emergent, personal choices, such as upsizing or downsizing, a desire to upgrade or to address issues with the layout or yard size, try to take a step back to ensure your emotions about your property aren’t clouding your judgement. It’s important to really shift your thinking and reevaluate your property in terms of its potential as a business and financial asset.

In either scenario, if you purchased your home as your personal residence, you might have an emotional attachment to the property, and that can contribute to a rough start to your new role as landlord.

2. Will the property hold up as a rental?

Owners who bought a property as an investment upfront probably already researched its rental potential, but it’s still wise to regularly reevaluate and take changes into consideration. Things like school re-zoning, neighborhood changes, nearby foreclosures, and new safety issues that pop up can quickly change the landscape of your rental opportunity.

Research the overall rental market in your area, scope out the competition, and then take another long, hard look at the home.

If finding a renter seems like it’ll be a breeze, and the dollars seem to work out on paper, then think about how difficult the property will be to manage.

  • Will your HOA allow a renter in the house?

  • Are you going to advertise or will you hire someone to fill the vacancy?

  • Is the maintenance on the home easy, or will it require a lot of work on the landlord or tenant’s part?

  • Are there surfaces, like special flooring or custom details that could be easily damaged and expensive to replace or fix?

  • Will yard debris or other outdoor care, like pool maintenance, need to be included in the lease cost?

If you purchased the home to live in, many maintenance issues that were part of daily life and long-term planning may not be easy to leave to tenants to handle. For example, living in a home with a huge yard or one surrounded by trees may provide you with great privacy, shade and enjoyment. Yet, such features also come with a fair amount of upkeep to protect the integrity of your home. While managing upkeep tasks as a watchful homeowner may be second-nature, these kinds of issues can easily snowball with renters who are not vigilant.

Here’s the part where you should break out your spreadsheet. The big money-related questions that should be looming in your mind include:

3. Can you afford to sell?

Based on your competition, what is a realistic asking price for your home for sale? And how much can you sell your home compared to what you still owe? If you’re underwater and don’t have the cash to get out, renting for a while may be your only logical option. If you expect to make a profit from your sale, double check and be sure it’s a true profit after you pay real estate agent fees, capital gains, closing costs and inspection-mandated repairs – it’ll likely be 8-11% of your sale price!

Consider the area the home is in – where is the local market going? Is it appreciating or depreciating?

If the market isn’t hot, how long can you afford to keep it listed without selling?

And finally, do you need to buy another home? And will owning your home hamper your purchasing power? For example, if you have a VA Loan with no money down, you might need to come up with a sizeable down payment if you want to use it to purchase another home.

If all the math works out on paper, and you have a solid plan for any funds you gain for the sale, maybe now is the time to jump ship.

4. Can you afford to make it a rental?

If you’re converting your home to a rental, check your math and ensure you realistically cover your mortgage, taxes, insurance (which is generally more expensive than homeowners insurance) and upkeep. Many people are surprised to see they’ll still have to cover a difference every month. Also consider what kind of fixes need to be done to both prepare it for sale now, or long-term to keep it maintained and appealing as a rental.

If you’re not making a little bit of money on your rental every month, saving for those sorts of issues need to come from somewhere else. However, if you do have a positive cash flow and plan for profit goes back into the property for repairs, maintenance, emergency funds and to paying down the mortgage, then becoming a landlord will look more appealing.

Another financial question that many people overlook are the inevitable costs of tenant turnover and repairs. If you’re not local and cannot fix issues yourself, you’ll need to have a handyman on call. You’ll also need to fill your vacancy, potentially going a month or two without rent, repaint, clean carpets, repair or replace flooring, and treat wear and tear.  You’ll also need to be prepared for legal counsel to prepare leases and, potentially, deal with tenant eviction and damages. 

These costs add up quickly – especially if your tenants do not stay long-term. If your tenants do stay long-term, you still need to plan for large, long-term repairs like HVAC, roofing, siding, landscaping projects and more.

Then there are tax implications to consider. Although owning a rental can entitle you to some tax deductions, any income you make will also be taxable. Additionally, when you convert a home from a personal property to an investment, you could face potential future capital gains taxes if the house’s value increases before you sell.  If you’re not already, you may need to seek counsel with someone who can prepare your taxes professionally, to be sure you’re making the most of potential deductions. 

Deciding between selling and renting a property is a complicated decision that involves risk assessment, math, emotions and more. Before you make your final decision, it’s best to talk to a real estate agent who can advise you, and guide you, and keep your emotions in check as you assess your options.

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We can help you make this big decision and answer your questions. Give us a call at 253-292-1132 or click here to send us a message!

Aug. 5, 2016

4 Questions to Ask Yourself Before You Decide to Buy or Rent a Home

The choice between renting and buying a home is among the most important and most complicated decisions many people make in their lifetimes.

Conventional wisdom holds that if you’re planning to stay put for more than a few years, buying is the way to go. However, local market trends and economics lend some additional insight into the decision making process, and prove it’s far from cut and dry.  

The costs of buying are varied and more complicated than those renters face, and it can be tricky to identify the better choice. While many experts appreciate a mortgage’s unique ability to help a family build equity and save, there are plenty of other studies that find renters who invest their down payment money can also have a positive long-term financial future.

When you add the emotional considerations to the financial aspects, the picture gets even murkier.

Making the smartest decision may take months of soul searching,research and insight into your local market, as well as sound advice from a real estate agent and financial advisor, but these 5 questions are a good place to start your research.

1. How long will you be staying put?

In many cases, if you’re staying put for at least four years (or will be converting a home into a rental after a few years), you’re more likely to break even when it comes time to sell the home and leave.

You’ll increase your changes of coming out on top if the neighborhood has higher than average appreciation rates for the area. At least #1155cc;">5% annual appreciation will help ensure that the home will maintain its value and you’re more likely to be compensated for both upfront costs and maintenance. However, this does not take into account major hidden problems in the home that need fixes, issues that may pop up in the neighborhood, or economic changes. You can look at the Federal Housing Enterprise Oversight’s #1155cc;">House Price Index  for location trends.

Additionally, if you’re worried about “throwing money away” in the form of rent, remember that a great deal of your money will be going toward the interest, not the loan principal, for the first few years of ownership.  

2. How important do you consider the non-financial aspects of owning?

While homeownership has and will lead to long-term wealth and stability for many people, it’s far from a guarantee. Your tolerance for risk, your individual market and your appreciation for the non-financial aspects of owning can definitely reinforce your decision.

If you’re planning to stay in one area for more than a few years, you will probably enjoy not answering to a landlord, the ability to change things around the home and call your own shots. Many feel purchasing makes a house really “feel” like a home. Stability, pride of ownership and security are difficult concepts to evaluate, but they’re real.

3. Can you (really) afford all the costs associated with buying?

In addition to saving for a down payment, consider the annual cost of owning: taxes, insurance, yard maintenance, emergency repair funds, HOA fees and necessary improvements. Your home may also need updating. If not now, perhaps in 5 years. Be sure to take into consideration big expenses like roofing and HVAC.

You may be surprised to see that, in some areas of the country, these amount to more than the cost of renting a similar property.

4. Can you (really) afford to rent?

In response to wide-reaching economic fluctuation, rental prices are still growing at a faster pace than renters’ income. The gap #1155cc;">is becoming unsustainable in some markets, making mortgages much more affordable than monthly rents in many areas in the country.

Double-check your math with these tests - Does it work out?

Tax and Financial benefits

There are a number of #1155cc;">tax and financial benefits that could tip the scale in favor of buying: As long as your mortgage is smaller than the price of your home, it’s deductible on your taxes. You may also receive Property Tax Deductions, write off the interest on your mortagage, and potentially qualify for capital gain exclusions upon your home’s sale. You’ll also be building equity.

Take a look at the Price to Rent (P/R) Ratio

The #1155cc;">P/R Ratio can help you put simple, numerical values on your choices.

To calculate the P/R Ratio, identify two similar homes – one for rent and one that is for sale. Then, divide the sale price of the home for sale by the annual cost of rent for the rental home.

If this number is higher than 16, #1155cc;">some experts would argue that the cost of owning will exceed the cost of renting. In other words, the higher the number, the harder you should think about renting.

Try the Family Income Test

While home prices compared to family income has fluctuated over the years and in response to market changes, long-term trends suggest most families should spend #1155cc;">no more than 2.5 times their annual income on their home. So, if your annual household income is 100,000, you should be looking to spend around 250,000 on a home.

Try a calculator

There are some helpful online calculators available that can help you quickly run the numbers. The

New York Times Rent Or Buy Calculator allows you to input the most important costs associated with buying a house (Home Price, length of your stay in the home, Mortgage Details, Future investments, Taxes, Closing Costs, Maintenance and Fees, Additional Renting Costs and more. Then, it computes the equivalent monthly rent. The Realtor.com Rent or Buy Calculator presets values bases on location, and then gives an estimate of when buying will become cheaper than renting. The Zillow Calculator also shows how many years it will take before the cost of buying equals the cost of renting

As you weigh all your options and make your long lists of pros and cons, remember there is no guaranteed formula for success. A knowledgeable real estate agent can help to shed some additional light on your choices, and offer supporting advice and information that is relevant to your market.

 

Call us or click this link to send us a message with any questions you have about buying or renting in DuPont, Lacey or Steilacoom! 253-292-1132

Posted in Buying
July 18, 2016

Let's Talk Financing Basics

Financing

The way you approach mortgage shopping can literally save thousands of dollars. Take time to understand the system and make educated decisions. Doing so may very well cost you less over a shorter period of time.

The Steps to Successful Financing

Get pre-approved. Don't skip this step. Getting pre-approved is fast, easy and free. A written pre-approval includes a completed credit application and a certificate guaranteeing you a mortgage to a specified amount. With one in your pocket, you won't waste time looking at homes you can't afford. 

Instead, you can invest your time shopping for the home of your dreams - and in your price range.

Examine your finances. How much can you afford to spend? While a lender will tell you how much you qualify for, it's up to you to figure how big a payment fits into your budget. What monthly dollar amount do you feel comfortable committing to? Remember to consider related costs such as insurance and taxes, as well as interest and principle.

Consider what type of loan is best for you. Compare fixed-rate with adjustable rate mortgages. Look down the road. Where will you be in 15 years, 30 years? What obligations might you have? Take those things into consideration as you choose a loan.

Check your Credit Report. A lender will run a credit report on you (it only takes a few minutes), but you'll be ahead of the game if you acquire a copy first. You'll know exactly what's on it and be able to correct any inaccuracies.

Shop Around. When you're ready to get a loan, explore your options. You can choose either a direct lender or a mortgage broker.

A direct lender has money to lend and makes the final decision on your loan. Brokers are intermediaries who choose from many lenders. A broker may be able to help find you a loan if you have special financing needs, but he or she will also receive a percentage of what you borrow.

While you're shopping for a loan, also look for the best loan costs. These may include:

  • Interest rates
  • Broker fees
  • Points (each point is one percent of the amount you borrow)
  • Prepayment penalties
  • Loan term application fees
  • Credit report fees
  • Appraisal costs

Be aware. Don't let hidden costs sneak up on you. Ask your lender for a written estimate.

Apply for a loan. Gather all the documents you'll need to verify your loan application. Lenders will want to know your job tenure, employment stability, income, assets (property, cars, bank accounts and investments) and your liabilities (auto loans, mortgages, installment loans, credit-card debt, household expenses and others).

You'll need to provide documents such as paycheck stubs, bank account statements and tax returns. Check with your lender or broker for more information.

Lock it down. With interest rates changing daily, locking down your rate can prove a big money saver. A rate lock - in writing - guarantees you a certain rate and terms for a specified period of time. Lock in all the costs you can, including interest rates and points. And try to set the lock at the time of application, not at approval. This will protect you from rising rates.

Your lock-in period should be long enough to allow for all processing time. Most lock periods range from 15 to 60 days. Make sure to check with your lender or broker about the average time it takes them to process a loan.

Ask about Pre-payment. You can shave years off the length of your mortgage by restructuring the way you pay back your loan. Simply paying more frequently can save thousands in interest. So can making a lump payment toward the principle - or paying a little more each month. These methods are called pre-payment.

Not all loans allow for pre-payment. If you want the option, discuss it with your lender or broker.

Clear up any financial problems. Do you have credit problems or owe money to the IRS? Buying a new home may still be a possiblity. Contact a financial advisor or tax resolution service to find solutions.

 

Contributed by Sue Larsen

Posted in Buying
July 8, 2016

Tips and Tricks for Sellers

SELLER TIPS

Make first impressions count. Without a doubt, a visually appealing house will attract buyers, who can't help but respond to the look and "feel" of a home. Take time to carefully prepare for showings. Don't forget the following:

  • Cut the grass
  • Remove any clutter from the yard
  • Trim hedges
  • Weed gardens
  • Wash steps, windows, railings, doors, etc
  • Paint if needed
  • Remove unnecessary clutter from garages

Scrub, dust and fix up the works. Buyers will notice details. Get rid of the clutter, repair leaky faucets, wage war on dust and clean until your home shines. Small things can make a potential buyer walk away. When you prepare your house for showing, remember to:

  • Shampoo carpets
  • Clean tubs, toilets and showers and hang fresh towels
  • Oil squeaky doors
  • Fix things like broken hinges and light switches

Listen to suggestions. As you prepare your home, don't rely solely on your own judgement. It's hard to be objective when you're the owner. You are emotionally invested in your home, so now is the time to take a step back. Your real estate broker will have helpful, professional tips on how to make your home more marketable.

Take a whiff. Nothing will turn a buyer away faster than an odd smell. Try to eliminate smoking, food and pet odors. Remember not to leave any clues! If potential buyers see a dog kennel or an ashtray, they'll be on the high alert and searching for smells and stains.

Turn on the lights. Open the shades, blinds, and draperies before a viewing. Open all interior doors. Turn on interior and exterior lights.

Let potential buyers "see" themselves in your home. Too many personal items can make buyers feel like they're intruding in someone else's home. Keep things clean and simple. Remove personal photos and decorate in neutral colors.

Get out of the house. When buyers view your home, they'll be more comfortable and spend more time envisioning it as their own if you're not there. If you must be present, be as unobtrusive as possible. Let your agent do the work.

Keep a level head during negotiations. Selling your home can be emotionally charged, but don't let that stand in the way of making a deal. Have a business-like attitude during the process.

Choose a Real Estate Professional you like and trust.

Sue Larsen

~Sue Larsen

Posted in Selling