Tips For New Homeowners

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Change your Locks … As a new homeowner, you have no idea who may have a key to your new home. Re-keying the existing locks or installing new locksets will add an increased level of security and peace of mind.

Discarding boxes … Placing the box of a new TV on the curb could be an unintentional announcement to thieves.  Breaking those boxes down and putting them in your receptacles could be a safer way to dispose of them.

Displaying Your Name … Even though you may be very proud this is your home, it is probably better not to use name plates on your mailbox or door.  It may be more prudent to make it less convenient to tell strangers who you are.

HOA or Mail List … It is good to communicate with the neighbors because you have shared interests.  Recommendations of vendors, to local customs and posting for help locating a lost pet can be very easy through a website or by email.  It makes it easy to stay up to date with what is going on in the neighborhood.

Home Inventory … You’ve probably purchased some new things now that you have a new home and you may have gotten rid of some things that you had in your old home.  It is a good time to make a new inventory of your personal belongings.  You can do it with pictures or video or download this free Home Inventory.

Water Shut Off … Locate the main water shut off valve and learn how to use it.  If a water key or special tool is needed, purchase one and put it in a convenient spot so you can get to it quickly in an emergency.

Downsizing is an Alternative

 

Dream home concept

It is estimated that over 15% of the population in the U.S. are over 65 years of age.  With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.

Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their “big” home like they did before.  In other situations, their lifestyle might have changed, and the house just doesn’t “fit” anymore.

The benefits of a smaller home can include the following:

  • Easier to maintain
  • Lower utilities
  • Lower property taxes
  • Lower insurance
  • More convenient location
  • Single level
  • Possibly more energy efficient
  • Possibly lower maintenance

Like any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes.  Are they going to stay in the same area?  What type of property would suit their needs for the future?

The tax-free exclusion allows a homeowner to take up to $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers.  Part or all of this could be used to generate income for retirement.  Other uses for the equity could include paying off other debt, taking the trip of a lifetime or making a special gift.

There will be expenses involved in selling a home as well as the purchase of a new home.  These will lower the amount of net proceeds you’ll have to invest in the new home.

Homeowners should consult their tax professionals to see how this applies to their situation.  Please contact me at (206) 979-9632 or David@TheHarlanTeam.com if you have any questions about what your home is worth or how long it might take to sell it.  Other things that could be of value are our Homeowners Tax Guide or Sellers Guide.

Steps in Home Buying Process

showhome viewing

The process of buying a home can be different based on the price range and whether a mortgage is needed.  While some things are different, others are similar regardless of price, financing or local customs.

Each year, the National Association of REALTORS® surveys buyers and sellers who have purchased or sold in the previous twelve months in order to identify the process and steps taken.  It provides a lot of information for the people who will be going through the process now and in the near future.

44% of all buyers looked online for properties for sale.  This might be considered a logical first step to determine the prices of homes in certain areas and what features they offered.

17% of all buyers stated that their next step was to contact a real estate agent.  In another REALTOR study, it is reported that 87% of all buyers purchased their home through a real estate agent or broker.  Buyers identify a wide range of services the agents offer that is considered valuable in the purchase of a home.

The next step identified by most buyers is to look online for information about the home buying process.  In many cases, agents share this information in their first substantial meeting but since it is identified as the third highest steps taken by buyers, some people may not be getting adequate information from their agents or they are verifying the process as explained to them.

The fourth step identified by buyers is to contact a bank or mortgage lender.  The position this step takes place is interesting because many real estate professionals suggest that it be one of the first things buyers should do.  The reason is to find out how much mortgage they can qualify for, so they are looking for homes in the right price range.  This can save a lot of time and frustration.

The three next highest steps included driving by homes and neighborhoods, talking with a friend or relative about the home buying process and visiting open houses.

The buyers in this study mentioned that they depended on several sources for information during the home search.  The most frequently used were online website, their real estate agent, mobile search device, open houses and yard signs.

The three most difficult steps listed were finding the right property, the paperwork and understanding the process and steps.

You can download a Buyers Guide that has a lot of interesting information.  We have an array of Financial Apps that can provide insight on things like Rent vs. Own, Mortgage Payment and Your Best Investment.  And of course, I’d be happy to schedule an appointment with you to go over all these things and talk to you about finding your next home.  Call me at (206) 979-9632.

Invest in Equity Build-up

Which color do you like the most?

Equity build-up could be one of the biggest advantages to buying a home.  There are two distinct dynamics that take place to make this happen: each house payment applies an amount to reduce the mortgage owed and appreciation causes the value of the home to go up.

It is easy to make a projection based on the type of mortgage you get and your estimation of appreciation over the time you expect to own the home.  Even conservative estimates can produce impressive results.

Let’s look at an example of a home with a $270,000 mortgage at 4.5% for 30 years and a total payment of $2,047.55 payment including principal, interest, taxes and insurance.  The average monthly principal reduction for the first year is $362.98. If you assume a 3% appreciation on the $300,000 home, the average monthly appreciation is $750 a month.

The total payment of $2,047.55 less $1,112.98 for principal reduction and appreciation makes the net monthly cost of housing, excluding tax benefits, $934.57.  If this hypothetical person was paying $2,500 in rent, it would cost them $1,565.43 more to rent than to own.  In the first year, it would cost them over $18,000 more to rent.

Together, the items in this example contribute over $1,100 to the equity in the home .  This is one of the reasons a home is considered forced savings.  By making your house payments and enjoying increases in value, the equity grows and the net cost of housing decreases by the same amount.

In this same example, the $30,000 down payment grows to $133,991 in equity in seven years.  While this is equity build-up, the extraordinary growth is attributed to leverage.  Leverage is an investment principle involving the use of borrowed funds to control an asset.

To see what your net cost of housing and the effect of leverage will have on a home in your price range, see the Rent vs. Own.  If you have questions or need assistance, contact me at (206) 979-9632.

A Home Warranty Can Save Money

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Your income tax is probably filed for last year by now and you’ve been through your expenses for the year.  Money spent on repairs to your home is not deductible but being aware of how much you spent last year may help you make a decision that could save you money this year.

Sellers, often, provide a home warranty to buyers to give them peace of mind by limiting some of the out-of-pocket money spent on unexpected repairs for one year.  Home warranties can be renewed by the buyer by paying the annual fee and any homeowner can purchase one for their home whether they had one when they bought it or not.

A home service contract typically covers mechanical systems and built-in appliances in the home.  Many times, these items are not covered by the homeowner’s insurance policy.  They can also include other things such as pool and spa equipment, and free-standing appliances like refrigerators, washers and dryers.

The process is simple.  It doesn’t cover pre-existing conditions.  Once a plan is in effect, you call to report a claim.  The company will assign a local profession to assess the problem and if covered, they will repair or replace the item.  You will only pay a service fee.

Home protection plans can range in prices depending on area and coverages.  Most start around $400-500 a year which could easily cover the cost for one claim alone.

For more information on home warranties in general, you can go to HomeServiceContract.org which is an association representing some of the premier home service contract providers.  If you’d like to have a recommendation based on companies we work with in our area, give me a call at (206) 979-9632.

iBuyers – Convenient at a Price

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There are an increasing number of real estate companies, termed iBuyers, like Open Door, Offerpad, Zillow, Knock and others that market a service that has an appeal to homeowners.  The pitch for these quick cash offer companies will include some variation of “let us buy your home in days without the normal hassles of listing.”

This approach attempts to provide an alternative to selling a home in a normal manner at the expense of not realizing the full equity a homeowner is entitled. There is no fiduciary relationship requiring the broker to put a seller’s best interest above their own interest.  An iBuyer does not represent a seller and does not owe client-level services like loyalty, obedience disclosure among other things required by state license law.

The offer is based on an automated valuation model, many times, without a physical inspection of the home.  In some cases, a contract is written but there are provisions that allow iBuyers time to possibly “flip” the property to an investor or use an “out” in the contract to void the sale.

The reality is that a company cannot stay in business if they pay too much for the property.  The iBuyer becomes the Seller who now must be concerned with pricing the home properly to cover the normal selling expenses as well as repairs, improvements, and holding costs that will be incurred until the property sells.

There could be circumstances that make it necessary for a homeowner to sell their home at a discount.  The seller could be in a distressed situation needing immediate cash.  They might need a quick sale and don’t want to be bothered with repairs or marketing efforts.  Or possibly, they may have found their next home   and need to act quickly. The instant liquidity comes at a cost to the seller in lower proceeds from the sale.

To realize the maximum possible equity, a real estate professional in your area can advise you about the fair market value of your home, a reasonably expected sales price, the costs involved and how long it will take.  Before accepting a price to sell your home to a wholesaler, you owe it to yourself and your family to find out what you can expect if you take a conventional sales route.