For instance, if you run into large medical bills or a costly home repair, you may not have the money to pay for it. Beyond that, being house-rich and cash-poor can lead to a downturn in your quality of life.
“You’re working constantly to hold onto the asset and not really enjoying the benefits of homeownership,” says Vosburgh.
How common is it to be house-rich and cash-poor?
These days, it’s a bit of a mixed bag: Thanks to a healthy economy, low unemployment, and stricter lending requirements put in place after 2008, many homeowners are house-rich, meaning they have good equity in their home. Yet many of these same homeowners are also cash-poor, lacking the reserves necessary to see them through life’s ups and downs.
“First-time buyers are saving up lots of money for the down payment—usually between 5% to 20%,” says Cedric Stewart, a residential and commercial sales consultant at Keller Williams in the Washington, DC, area. “But they often don’t leave any money for the ‘what if’ fund, such as emergency home maintenance.”
Another group vulnerable to becoming house-rich and cash-poor are buyers looking to trade up their current home.
“These buyers take the money from the sale of their current home and plunk it all down on the next one,” explains Stewart. That’s a risky move, he says, since it leaves you no financial wiggle room for whatever financial curveballs may come your way.
The bottom line: A buyer should never leave themselves cash-poor, says Ralph DiBugnara, vice president at Residential Home Funding.
“If it’s going to cost you every bit of savings just to acquire the house, you may not be ready for that specific home,” he says.
How you can avoid it
Deeply understand your finances before you buy a home, recommends Goldfeld. For starters, try entering your income and debts into a mortgage calculator to figure out what price you can afford on a home. Speak to a lender to find out how large a home loan you qualify for, too.
These moves will help you figure out what your monthly expenses would be if you had to pay for that mortgage. Take note: Even if you qualify for a large mortgage, you don’t want to get yourself into a position where every little expense is difficult to pay for.
So make sure you have at least a year of whatever your recurring monthly payments would be in reserve and shoot for a debt-to-income ratio under 30%. Then set a reasonable budget for the purchase price of a home. Look for a healthy balance between investing in a new home and creating your ideal quality of life after the home is bought. (It’s plain common sense to hold enough cash back to have a financial cushion in case of an emergency.)
Another option is to get a home warranty to cover any unexpected home expenses.
“I tell all my buyers to ask for one from the seller or pay for it themselves,” says Vosburgh.
Original Source: https://www.realtor.com/advice/finance/house-rich-cash-poor-meaning/
Original Date: Oct 12 2018
It is the Realtor’s job to protect consumers in the real estate transaction. Seller, particularly, can be vulnerable as they allow strangers into their home to view their property.
An open house can be a great tool for marketing a home, but it also exposes Realtors and their sellers to unfamiliar people for the first time. Thieves and assailants have been known to prey on open houses. The Silicon Valley Association of Realtors cautions its members and their clients to be watchful of suspicious behavior.
Practicing safety measures is the smart thing to do. As Realtors celebrate Realtor Safety Month in September, they share the following tips to protect their clients against crime, especially at an open house.
Sellers should remember that strangers will be walking through their home during showings or open houses. Sellers should hide any valuables in a safe place, including prescription medications and alcohol, as well as personal information, such as bank statements that could be used for identity theft.
Realtors warn their clients that not all agents are who they say they are. If a stranger stops by a listing unannounced, the seller should ask the person to make an appointment with their Realtor. Sellers should never show a home without their Realtor present; nor should they let a stranger, including an unfamiliar real estate agent, into their home unannounced.
Sellers are responsible for their pets. If possible, animals should be removed during showings. If buyers and agents are attacked by an animal, the owner will be held liable.
At an open house, be alert to the pattern of visitors’ arrivals, especially near the end of showing hours. In some cases, the modus operandi of thieves is to show up in a group near the end of an open house and, while the supposed buyer distracts the Realtor and the seller, if present, the rest of the group walks through the house and steals valuables.
Inform a neighbor that your Realtor will be showing your home and ask if he or she would keep an eye and ear open for anything out of the ordinary.
When leaving a property after an open house or a showing, the Realtor should make sure that all doors and windows of the home are locked. Thieves commonly use open houses to scout for valuables and possible points of entry, then return after the Realtor leaves.
While the Realtor will take all of the above safety precautions, their clients should know when they return home that they should immediately verify that all doors are locked and all valuables accounted for.
This article is part of the National Association of Realtors’ Realtor Safety Kit. Sources are the Nevada County Board of Realtors (CA) and Realty Times. For more ideas on how to protect your personal safety, visit NAR’s website at www.REALTOR.org/safety.
Original Source: https://www.mercurynews.com/2018/09/28/realdeal/
Original Date: Sept 28 2018
Written By: Rose Meily
Can’t Find Your Lake Of The Ozarks Dream Home? Buy A Fixer-Upper And Make It Your Own
Earning the designation of best recreational lake in the U.S. has made the Lake of the Ozarks even more popular among visitors and home buyers. Local businesses have enjoyed the benefits of booming tourism and it’s made for an incredibly hot real estate market.
On the other hand, with home buyers from across the country eager to own a slice of paradise at Lake of the Ozarks, local real estate listings are dwindling. The Property Shop at the Lake owner Tina Stotler said this dynamic has made it especially difficult for mid-level buyers to find Lake homes that fit their budget.
“Lake-wide, we are experiencing a very low inventory of homes, both waterfront and off the water,” Stotler said. “And homes under $400,000 are particularly hard to find.”
But all is not lost. Stotler says investing in a fixer-upper is a great opportunity to purchase a lake home without breaking the bank.
Check out some before/after fixer-upper photos from a home sold by The Property Shop at the Lake:
Lake Fixer Upper After Photos
“Fixer-uppers are an affordable way for buyers to get into a home and customize it to their lifestyle,” Stotler said, noting that obtaining a loan for renovation projects is easier today than in the past. She regularly works with lenders who understand the dynamics of renovation projects and have lengthy experience in helping borrowers navigate the approval process.
“Lenders now have a special loan program for purchasing a fixer-upper that includes additional funds to update and remodel. There is only one closing and one closing cost.”
Stotler stressed that financing is only one of many factors to consider when purchasing a fixer-upper property. Owners should take into account the location of the house, the type of lot it sits on, waterfront issues, foundation problems, things that can and cannot be changed, as well as the overall potential of the home.
“One of the most important things to consider when purchasing is to keep an open mind. If the location of a property is good and the lot is nice, you should consider the potential in the house,” Stotler said. “Buying a property that needs work gives you the opportunity to ‘make it’ what you want.”
Still, tackling a fixer-upper is not for the fainthearted: it can be a daunting task for even experienced renovators.
Renovation projects can cost more in time and money than anticipated; and Stotler emphasizes working with a real estate professional who has relationships with local contractors and sub-contractors along with experience in guiding buyers through the fixer-upper process, is a must.
Lake Fixer Upper 2 After Photos
“Your Real Estate Professional should be able to help guide you with more than just the purchasing aspects of buying the property,” Stotler said. “Ask them if they have information on permitting, recommendations for contractors, making sure you can permit your dock, or replace it with a bigger dock, etc. The list is long and you want a realtor who knows the answers.”
Herself nearing the end of a lengthy journey through renovating her family’s former Lake home, Stotler is well aware of the pitfalls and the rewards of bringing new life to older homes.
“When I decided it was time to move back into a lakefront home, I looked for several months to find the perfect ‘fixer upper,’“ Stotler said. “Based on purchase price, renovation costs and accomplishing my ideal results, I realized that nothing could replace the location and the memories of my parents’ lake house.”
Stotler purchased the house from her brother and began the renovation process utilizing the craftsmanship of local contractors and sub-contractors to add 1,340 square feet and a 2-car garage to her former childhood lake home.
Nine months later, she readily admits that renovating a fixer-upper can be an arduous process, but she stresses that the final result makes it well worthwhile.
“My ‘dream home’ and ‘fixer-upper’ will be done sometime in mid-September and I’ve experienced first hand how taking on renovations, big or small is not an easy decision or an easy task,” Stotler said. “It takes a lot of imagination, cooperation and patience. But the end result can be very rewarding.”
When shopping for a home to buy, it’s fairly easy to see warning signs as you walk through the house. Typically, good things such as a new roof or HVAC system and bad things such as water damage from leaks or the smell of mildew can be apparent.
But what about when you are in the market for land and there’s no house on it? Do you know what to look for? Is it worth even looking at an entire piece of land, or can you just go by the photos online?
Franklin Realtor Tim Thompson, who is often referred to as “the land man,” has some great tips on how to buy land and who to buy land from.
“Purchasing land is similar to buying a home, but different,” Thompson said. “One thing people need to do when looking at land is walk through it just like you would a house.”
He said the biggest mistake people make is not walking the land. He advises people to ride the with your Realtor, but then ask if you can go back and walk it.
“You need to find all the corners,” Thompson said. “See who your neighbors are. Look over the fence line. The last thing you want to do is buy a piece of land that has a big sinkhole in the middle of it.”
Below are Thompson’s tips on how to get the most out of a land purchase. Everything varies by county and state, but many of these tips cover any piece of land, no matter where it’s located.
1. Look at land in the fall.
Thompson says in the fall and winter when the leaves are down, it’s often much easier to see what’s around you than when the trees are in full bloom.
2. Ask about easements and restrictions.
Too often, Thompson says, people buy land assuming they can do whatever they want to on it. That’s not the case. “Sometimes there are deed restrictions on land that restricts the size of house you could build or ways you can use the land, so you should always check that by going to the county in addition to asking your Realtor.”
Thompson added that there can also be unrecorded easements, so it’s important to ask about that as well. “There have been times where one farmer will give another farmer the right to cross his land,” he said. “Maybe this has been going on for 15 years. Sometimes agreements like that can come back to bite you.”
3. Get a survey.
Anything larger than a 5-acre tract of land needs a new land survey, Thompson said. “You never know if someone crossed over the property line and built a barn or something. Another person’s property can be on your land and nobody knows it until a survey is done. Be sure to make sure the property isn’t in a flood zone as well. A survey will indicate that.
4. Have a larger down payment.
Banks typically won’t do loans on land for the same down payment as a house. “Banks typically want more like 25 percent down, so it’s important to be prepared for that.”
5. Build in due diligence time.
Thompson advises writing a minimum of 14 days of due diligence time into any contract, so that you have time to do your research before you sign. “It could be that it’s a tract already approved by the county, but I recommend up to 30 days due diligence period to check on water, septic and sewer. Fourteen days would be the bare minimum.”
6. Use a Realtor familiar with land sales.
Thompson said because land purchases are different than home purchases, it is important to buy land from a Realtor experienced in selling land. “I get a lot of contracts from agents that don’t know how to sell land, which is fine, but I have seen contracts where the Realtor didn’t ask for a survey or a due diligence period. I see it all the time. Realtors don’t always know how to sell land.”
He advises leaning on referrals from friends who have purchased land or looking online to seek out Realtors with a lot of land listings.
7. Be prepared to wait.
If you buy land in Williamson County with the intent to build a home on it, Thompson advises that it can be a lengthier process than many might expect. “If you buy property that isn’t already approved, there is a very long wait period to get approval to build on it. It can be a good year before you can put one brick in the ground.”
8. Check perk-ability.
If a piece of land doesn’t have sewer service, the soil underneath the ground can dictate what you are able to build. “Just because you have 50 acres doesn’t mean you can build whatever you want,” Thompson said. “If the soil on your land is clay, it won’t soil test out well and you may not be able to build a five-bedroom house, but be limited to a three-bedroom house just because of the soil.”
Thompson advises always doing a preliminary perk test with a licensed soil scientist in the area before buying land.
Original Date: June 11 2018
You are ecstatic because you have received seven offers on your home, many of them over the asking price. Your initial reaction is to choose the highest, but wait. The highest offer isn’t always the best one. You should scrutinize every bid before you make this important decision.
For example, if you receive an offer well above the asking price but the buyer has only a 5 percent down payment, this could become a problem if the bank does not appraise your home at the proposed purchase price. If the buyer can’t put more money down to bridge the difference between the offer and the appraised value, the deal could fall apart or have to be renegotiated — at a lower price. A slightly lower offer with a bigger down payment could be more appealing.
Have your agent show the components of each offer on a spreadsheet. Here are some conditions, other than price, that you will want to consider and possibly renegotiate:
■ Closing date
If closing at a particular time is important to you, make sure the date on the offer aligns with your desired one.
You may find that one buyer wants one, but the other has offered to waive it. What do you do? This is something to discuss with your agent, but it’s often in your best interest to take the lower offer without the home inspection contingency. If the inspection is waived, there will be no further negotiation prior to signing the purchase and sale agreement. If it is not waived, but you see the phrase “inspection for informational purposes only,’’ the buyers still will be having an inspection, but are using language to suggest that they will not try to renegotiate afterward. This however, is not always the case, and creates uncertainty for the seller. Also, by the time this happens, your property could be off the market for up to 10 days.
■ Cash or no financing contingency
Most sellers believe a cash offer is much better than a financed one, and many times it is. A cash offer may come in lower, however, because some buyers rationalize that if they are paying cash they can offer less. With a cash offer, your agent must make sure that the buyers submit a proof of funds, such as a recent letter or statement from a financial institution.
In my opinion, waiving the financing contingency can be just as attractive as a cash. This has become quite common. Most buyers cannot afford to pay cash, but they know their financing will be approved, and they want to do everything they can to make their offer as attractive as possible. This also means that they would forfeit their second deposit (typically 5 percent) if the financing does not come together.
Waiving this contingency also includes forgoing the bank appraisal (unless they have stated otherwise). If you decide to accept one of these offers, your agent should call the buyer’s lender to make sure the buyer has secured financing if the appraised price comes in lower.
■ Escalation clause
Such a clause states that a buyer will pay a certain amount over the highest bona fide offer that does not contain a home sale contingency. Not all agents use these, but I think they are a great way for buyers to ensure their bid stands out in a competitive situation. It’s also a way for a seller to make more money. Let’s use $5,000 as an example. Once all offers are reviewed, the seller’s agent contacts the agent who submitted an escalation clause, forwarding him or her the highest offer (and redacting all personal information). The buyer has a certain amount of time, normally half an hour, to accept or reject the highest bid, plus the $5,000 escalation. So if the highest offer is $525,000, the buyer must agree to $530,000. An escalation clause also permits the buyer to say no if the highest offer is too high.
Whatever you end up doing, remember that every term is negotiable — and as a seller you are in the driver’s seat in this market. A sharp seller’s agent will compare and leverage all offers to achieve your desired pricing and terms. This is the fun part, so enjoy.
Original Date: May 10 2018
Original Author: Marjorie Youngren
“It really depends on the type of buyer you are,” says Robert Garay, a broker associate and team leader of the Garay Group at Lifestyle International Realty in Miami.
For instance, a Federal Housing Administration (FHA) loan only requires 3.5% down. If either you or your spouse served in the military, you’re likely to be eligible for a Veterans Affairs (VA) loan, which can be approved for 0% down. The same goes for United States Department of Agriculture (USDA) loans.
And if you’re a qualified buyer, you can get approved for a conventional loan with less than 20% down, but there’s a catch: You’ll be on the hook for private mortgage insurance, or PMI. PMI is paid directly to your lender, not toward your principal. Think of it essentially as insurance you pay to prove to the lender you won’t default on your loan.
Myth No. 2: Paying mortgage insurance is smarter than paying a bigger down payment
Perhaps that mortgage insurance seems like a small price to pay in order not to deplete your bank account and win the house. So what if you make some additional payments for a while?
It might not be a big deal, but you’ll want to calculate what you’ll pay in the long run. Take, for example, conventional loans. If you put less than 20% down, you’ll get stuck with PMI, but only until the principal balance reaches 78% or less of the original purchase price.
FHA loans, on the other hand, require mortgage insurance for the life of the loan. That means you’ll be paying an extra monthly fee for as long as you live in the home (or until you pay off the mortgage).
Before you brush off mortgage insurance, compare your options—and know that paying less upfront could mean paying much more over the life of your loan.
Myth No. 3: Cash is king
If you’re shopping in a competitive market, you’ve likely heard horror stories about first-time buyers getting snubbed over investors or all-cash buyers. If you’re working with a loan and a small amount down, it might seem like your chances of getting picked over the other guys are slim to none.
There is some truth to this belief. Cash offers offer one big benefit to a seller: They’re guaranteed to close on time with no loan approval hiccups.
But on the flip side,“That myth assumes that sellers care most about a fast and certain close, and that’s not always true,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.”
Often, if you make the bigger offer, or you write a killer personal letter that resonates with the seller, you stand a better chance of getting approved over an all-cash offer.
Fleming’s seen it happen: “I’ve actually beat out all cash offers with 10% down because our offer price was a little higher,” he says. “I’ve also had deals where we were competing against a higher cash offer and the seller took ours because the buyers were a young family wanting to raise their kids in the home—and that meant something to the seller.”
Myth No. 4: Down payment assistance is easy!
We hate to burst your bubble—or discourage you from trying to get down payment assistance if you qualify—but finding, applying, and getting approved for help isn’t always easy.
First, there are no national, or even many state-run, assistance programs.
“Pretty much every program is locally run, sometimes by county or even by city,” Fleming says. You can check the Department of Housing and Urban Development’s website for a smattering of state-run “homeowner assistance” options, but you’ll have to do some digging.
And then there’s the other rub. “You have to be under a certain income to qualify, usually the median income in the county,” Fleming says.
Some programs may make special exceptions—say, for single parents—but in general, income is going to be a big factor.
For example, to be eligible for down payment assistance in Grand County, CO, applicants must work a minimum of 32 hours per week in the area and meet income limits. Nevada’s “Home Is Possible Down Payment Assistance Program” has a cap on income, credit score requirements, and the cost of the home bought. In Tamarac, FL, applicants must meet income requirements, wait until an open enrollment period and then get picked from a lottery system.
Still, if you think you might qualify, call your local housing authority office—it can usually point you in the right direction.
Myth No. 5: You shouldn’t put more than 20% down
Let’s say you’re lucky enough to have saved more than 20% down. Odds are good some well-meaning friend is going to tell you to put only 20% down—no more, no less. After all, now that you’ve successfully avoided PMI, why fork over more cash than you have to?
A couple of reasons, Fleming says: First, a higher down payment could signal to your lender that you’re a trustworthy borrower and get you a lower interest rate on your mortgage. Plus, the more you pay upfront, the less you’re borrowing—which means lower mortgage payments.
But you’ll have to put down at least 5% more to see that difference, according to Fleming.
“Your interest rate drops a little more with 25% down, and even more with 35% down,” he says.
Compare your options to see if it makes more sense to pay the extra down or to keep that money in investments that can work for you.
Myth No. 6: You can take out a loan for a down payment
Truth: There’s nothing wrong with getting help with your down payment, but it has to be a gift. If a lender suspects the money might be a loan, repaying said loan will be factored into your mortgage approval amount and you’ll qualify for less than you might have wanted.
In order to prove it’s a gift, you’ll have to get a letter from the gifters, swearing that they don’t plan on asking for the money back. And don’t try to game the system—lying on a mortgage application is a felony.
Original Source: https://www.realtor.com/advice/finance/down-payment-myths/
Original Author: Angela Colley
Original Date: April 26 2018
Buying a home is infinitely different than any other type of purchase you will ever make. With an investment this large, you not only need to rely on the advice of industry experts, but you’ll also need to do your own due diligence. The more you know, the less stressful the experience.
Here are some of the top things REALTORS® wish buyers knew about the homebuying process.
Your REALTOR® is Your Trusted Partner
When you choose to work with a REALTOR®, their fiduciary responsibility is to you. This means you have an experienced professional looking out for your best financial interests, and someone who subscribes to the National Association of REALTORS® strict Code of Ethics. Your REALTOR® is contractually bound to do everything they can to protect you while helping you find the home of your dreams.
REALTOR® Dawn Brewster, with RE/MAX Real Estate Professionals, says her goal is to build and maintain a strong partnership with all of her clients.
“I am deeply committed to my buyers and am passionate about educating them on the market and ensuring they are properly prepared,” she said. “I want to earn my clients’ trust so they can be open with me as far as what are looking for, what they can afford, and what their goals and expectations are. That honest, two-way communication is critical to the process.”
Pre-Approval is a Must
Most REALTORS® won’t even begin showing homes without a pre-approval letter. There are several reasons for this that benefit both the REALTOR® and the buyer. For one, a pre-approval letter provides proof of a buyer’s ability to obtain financing, and also a price range a buyer should stay within. This saves both parties a lot of time and frustration during the home search.
Brewster says this letter is an important first step for every buyer because it also strengthens their negotiation ability.
“This market is moving very quickly, and there is a lot of competition,” she said. “When I submit an offer for my client I need to have a complete package, and that letter is an important piece. In fact, many sellers won’t even entertain an offer without it.”
Every Home Has Issues
Today’s buyers are busy and most don’t have the time, energy, or finances to take on a fixer upper or a large remodeling project. While “move-in ready” may be on every house hunting wish list, Brewster says buyers need to be open-minded.
“As a homeowner, projects and repairs come with the territory,” she said. “So during your search, focus on big-ticket items, like the roof or the windows and try not to get too caught up in the little things. I have seen buyers walk away from some great properties over something as small as a paint color, which is really a minor fix.”
Buyers should also be prepared for the inspection process, keeping in mind that there will rarely be a perfect report. Even a brand new home may have something worth noting, so again, the focus needs to be on any major items in the report that are worth negotiating.
Always Think About Resale
When you’re searching for a home, especially if it’s your first, you are probably not thinking about the day you will sell it. But, any experienced REALTOR® will advise a buyer to always keep resale top-of-mind.
To maximize your value and ensure you are making a wise investment, pay attention to things like location, floorplan, number of bedrooms, storage and closet space, and the functionality of the kitchens and bathrooms.
Not Everything is as Simple as it Seems on TV
Real estate reality shows continue to top the ratings, but rookie buyers shouldn’t believe everything they see on TV. While these popular programs can make the buying or remodeling process seem pretty simple, there is much more going on behind the scenes that gets left on the cutting room floor.
But that doesn’t mean you should stop watching. Home improvement shows have provided buyers with great design inspiration and house hunting education. So, jot down your ideas and questions, and then rely on the professionals for sound advice.
Original Date: April 19 2018