Category: Real Estate News & Tips

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Negotiation Process of Selling a Home

Selling a Home

The negotiation process can be one of the most exciting parts of selling a home, but until you get there, you may be wringing your hands, worried that you won’t be able to secure the deal. Will you be deluged with offers, or will your home be pervaded by the lulling but ever-so-unnerving sound of crickets?

And if you do get just one or two offers, and they’re not as high as you’d hoped, what do you do?

Here’s how to navigate the real estate negotiation process and come to a deal that will make you happy. More than happy, even.

Getting those offers in

If you’re not in a rush to sell your house, it may make sense to see what offers roll in over a few months. But if you need to sell quickly (or just don’t want to wait), your real estate agent (here’s how to find a real estate agent in your area) might be able to push things along by setting a deadline—usually within a week or two of listing.

“When you expect multiple offers because your price is competitive or your home is in a popular neighborhood, you should always set a deadline,” says Cathy Baumbusch, a real estate agent with Re/Max Executives in Arlington, VA.

But you’ll need to be confident that your home is priced right, relative to its appeal. If all goes well, you can sell for over asking.

The negotiation process begins

Once you have an offer in hand, you’re probably scanning for one thing: the price.

“In our area, houses rarely sell for less than 90% to 95% of the asking price,” Baumbusch says. The offers on your home may fall in that range, but don’t rely on price alone. According to Baumbusch, every offer has five important components:

    • Price
    • Closing assistance
    • Closing date
    • Buyer financing
    • Contingencies

Some offers may seem great on the surface, but significantly less so once you dig in. For instance: Is the buyer asking for closing assistance? Often first-time buyers don’t have enough money to cover the down payment and the closing costs, so they’ll ask the seller to foot some of the bill—about 2% to 3% of the total closing costs is a common request. If you agree, any assistance you give will lower your bottom line, so factor this amount into the asking price.

The buyer’s time frame to close may not seem like a big deal on the surface, but it can actually matter a lot, especially if you give the buyer a long leash. If the deal falls through, you’ll have to put the house back on the market and wait for more offers. On the other hand, if the buyer wants to move in right away, you might be left scrambling (and, quite possibly, temporarily homeless). Make sure the timing works for you.

Good so far? Now make sure the buyer has financing. Hopefully, the buyer’s agent included a note verifying the buyer’s financing and how much the buyer will put toward the down payment and earnest money. The last thing you want is to accept an offer, only to find out afterward that the buyer can’t come up with the necessary cash.

Finally, look over contingencies, which give the buyer the option to back out of the deal if something goes wrong. The buyer may say the final sale is contingent on a home inspection, or he may want to move in early. Both requests are fairly standard and acceptable. But keep an eye out for buyers asking for too much. For example, “it would be over the line for a buyer to ask a seller to wait more than 30 to 60 days for the property to go under contract,” Baumbusch says.

When to counteroffer

The negotiation process doesn’t end here. You always have the option to return the buyer’s offer with a counteroffer of your own.

“You should always counter if the price is not what you are looking for, or if you can’t support the amount of closing cost help they are looking for,” Baumbusch says. But if you do, keep it reasonable. If the buyer was 15% below asking, he probably won’t go up to full asking amount. Consider being flexible with your price; you can always make it up in other ways. For example, submitting a counter with a slightly higher price and contingencies that may help you—like having the buyer waive an inspection to speed things along—might pay off in the end.

If you don’t agree with the buyer’s contingencies, consider your position first before making the next step in the negotiation process.

“If your home is in a popular area, [you] have an advantage,” Baumbusch says. Keep in mind, the buyer may not accept your counter outright. You can play “Let’s Make a Deal,” but always consider your bottom line.

Is it worth it to keep countering for a small amount of money or single contingency?

Don’t get trapped in a loop; consider the buyer’s side of things. These prospective buyers may be maxed out. To help you decide, ask your listing agent to call the buyer’s agent and hash it out it with them. Get some insight into the buyer’s state of mind, and whether they can budge.

Source: realtor.com ~ Image: Canva Pro

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How to Downsize Your Home Before a Move

Downsizing Home

How to Downsize Your Home Before a Move

Living in a large house is great for some families, but for others, the cost and effort of maintenance is a burden. This is especially true after your kids have grown up and moved out. If you’re overwhelmed in your current home, moving to a smaller space can be a great move both financially and mentally.

However, decluttering and downsizing can be a daunting task. Downsizing to a smaller home and need some help getting started? Follow our best tips for a stress-free move.

7 Most Effective Downsizing and Decluttering Tips

1. Take Inventory of Your Belongings

When you’re downsizing to a smaller home, you naturally won’t have as much space for all the items you’ve accumulated throughout the years. Before you start packing, you’ll need to take inventory of your belongings.

As you sort through everything, it’s important to separate aspirational items from the ones you actually need. If you come across something you haven’t used in the last year, you should probably get rid of it. And if you didn’t even know you still had an item in question, it’s definitely time to let it go. The purpose of downsizing is to simplify your life, so take only what you need with you.

Downsizing Tip

Start decluttering in 3 simple steps. First, set a timeline and goals for your project. Then, create a sorting system for going through your belongings. Once you’ve decided what to keep and what to part ways with, you can purge your house of the clutter. Find more expert tips on room-by-room organizing and decluttering in our ridiculously thorough home declutter guide.

Three-Box Decluttering Method With Boxes Labeled “Keep,” “Donate,” and “Store”

2. Sort Through Items Room-by-Room and Minimize Duplicates

As you go through your belongings, you’ll need to set up a system to stay organized. We recommend the Three-Box Method, which forces you to make a decision item-by-item. Gather three boxes or bins and label them as “Keep,” “Get Rid Of,” and “Put In Storage.”

You should keep items that are useful in your daily life. Once you’ve filled your “Keep” box in each room, you can pack it up and label it to make moving and unpacking easier.

Get rid of items that you no longer have a use for. Once you’ve defined the items you’re getting rid of in each room, you can sort them further by identifying what will be donated or passed down to family members, and what is worn or broken and should be thrown away.

Sentimental or seasonal items should be put in storage. After you complete each space, empty the “Put In Storage” box into neatly labeled storage containers.

Downsizing Tip

In each space, look at which items you have multiples of and only keep your favorites, or the ones that aren’t damaged. The kitchen is typically a clutter hotspot for duplicate items, so pay extra attention when decluttering this area.

3. Create a Plan to Get Rid of Unwanted Items

Once you’ve identified which items aren’t coming with you to your new home, you have several options for getting rid of them:

  • Donate or Freecycle: Give something you no longer need to someone who does. Local charities usually accept clothing, shoes, and other household items that are in good condition. You can also try posting to freecycle.org or a Facebook resale group.
  • Have a Yard Sale: One person’s trash is often another person’s treasure. If you’re downsizing a lot of your belongings before the move, consider having a yard sale to make some extra cash. Furniture, toys, books, kids’ clothes, power tools, and lawn equipment are usually popular items at a garage sale.
  • Rent a Dumpster: Chances are, not everything you’re getting rid of will be in good enough condition to donate or sell. Renting a dumpster is a stress-free option if you have a lot to downsize and declutter, or if you’re throwing away larger household items, like broken appliances or tattered furniture.
  • Pass Down to Loved Ones: It’s difficult to declutter sentimental items you no longer have use for but that hold years of memories. If there are family heirlooms in good condition that you feel a family member or friend would enjoy, offer to give them as a gift.

4. Go Digital When Possible

Over the years, paper clutter can really add up. Make time to sort through old bills, receipts, and other documents, and recycle anything you don’t need. Store older paper files, such as taxes from the last decade, in a plastic bin. Scan any other records and receipts you may need in the future so you have a digital copy, then shred and throw them away.

Home movies, music, and photos can also be converted into digital files. This will free up a lot of valuable real estate in your living room and office without having to part with things you’d otherwise keep. In the world of endless streaming services, it’s probably not worthwhile to hang onto VHS tapes, scratched DVDs, or CDs. When in doubt, throw them out (or recycle them).

5. Make the Most of Your Storage Spaces

When you’re downsizing to a smaller home, it’s important to maximize any storage space you have. While not every home has designated storage areas like a basement, attic or garage, here are some general tips to keep in mind:

  • Create built-in storage options whenever you can. Multifunctional furniture such as storage ottomans, platform beds with drawers, entertainment centers, wardrobes, bookshelves and baskets are all helpful for hiding and minimizing clutter, but traditional shelving units are always a great option too.
  • Use open wall space. Floating shelves are great for displaying knickknacks around the house, as well as adding storage in your kitchen, bedroom, and bathroom.
  • Take advantage of hidden storage spaces. Utilize extra areas in your new home, such as under the stairs, closets, and crawl spaces to store seasonal or sentimental items. Add floating shelves or cubbies, and stack clear plastic bins in these hidden spots to make the most of the space and easily find what you need. You can also get creative with adding storage to small bathrooms by adding over-the-door hooks, towel racks, standalone shelves and bins for under-counter storage, an over-the-toilet shelving unit and a medicine cabinet.

6. Measure Furniture and Wait to Buy New Things

You may not have enough room in your new, smaller home to fit all of your current furniture. While taking inventory of your belongings, measure your furniture to see if and how it will fit in your new space, or if you’ll need to part with any of it. It’s much easier to figure this out ahead of time, rather than moving a sectional couch into your new home to find it doesn’t fit.

For this same reason, you should also avoid buying new items until you get a sense of the space you’re working within the new home.

7. Give Yourself Plenty of Time

Part of figuring out how to downsize is figuring out when to downsize. Decluttering is a journey, so give yourself more time than you think you’ll need to plan for the move and downsize your belongings. Eliminate the stress of rushing to purge everything, and allow yourself to reflect and make rational decisions on what to downsize and declutter.

Finally, don’t be afraid to ask for help while downsizing. Recruit family and friends, or even hire a professional service to assist with clearing out your house and moving into your new home.

Source: budgetdumpster.com ~ By: Liz Kane ~ Image: Canva Pro

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What do home inspectors look for? 6 key things

Home Inspection

When you’re under contract on a new house, it’s easy to fall in love with its potential. But before you linger on cloud nine too long, you’ll need the reality check of a home inspection. During a home inspection, a professionally trained inspector visually and physically evaluates the entire structure, from the foundation up to the roof, looking for potential defects, safety issues, environmental issues, or other red flags.

In particularly competitive markets, some buyers consider waiving the home inspection to make their offer stand out. But think very carefully before doing so: A house is most likely the largest purchase you’ll ever make. The last thing you want to do is invest a ton of money only to find out your new home needs extensive repairs or remediation. 

That’s why a home inspection is important: A good inspector can spot minor problems before they become major ones, and speak to the quality of construction and maintenance the home has been through. A home inspection helps you know as much as you can about the property before buying it, says Kenneth Carr of Precision Inspections, a licensed home inspector in New York, Connecticut, and Massachusetts. “It is part of due diligence,” Carr says. “Just as you have your attorney review the contracts, you should have your home inspector review the property, because there may be something there that you don’t have the expertise to know.”

What do home inspectors look for?

“We are looking for things that aren’t working as designed,” says Carr. “We have to describe what’s there, what may be missing, and things that are either not working as they should or not working at all, and bring it to the attention of the buyer.” Many inspectors even recommend that homebuyers attend the inspection, which allows them to see things for themselves and ask questions.

While each state provides minimum requirements that must be checked out, “how an inspector goes about inspecting the property is up to each inspector,” he says. “If you belong to an organization like ASHI [the American Society of Home Inspectors], there is greater training specialization needed, as inspectors are expected to take continuing education classes as part of their membership and state licensing.”

Here are the top six things an inspector will always look for when assessing a property.

1. Basic safety features

Whether a home is safe to live in is a primary concern for any home inspector, which is why many of the things on the home inspector’s standard checklist are safety items. Things they’re on the lookout for include:

    • Smoke detectors: Does the home have them? Are they installed correctly and in the right places (in or near sleeping areas, not too close to the stove)?
    • Ground fault interrupters: These are the special plugs that protect you from shock in areas where water and electricity are in proximity, such as bathrooms and kitchens.
    • Safety glass: Are the glass features installed near stairs or water (like tubs and showers), made of tempered safety glass?
    • Indoor and outdoor stairs: Are the steps a uniform, safe height and angle? Are they built to code? Do they have handrails and guardrails correctly installed and in the right places?

2. The foundation and exterior ‘envelope’

No matter how old the home is, your inspector will look at the basic “envelope” that shields the structure from weather and water. The inspector will walk the property to check for cracks in the foundation and look at rain gutters and flashings, drainage, and window seals.

He or she will also inspect how the walls and roof intersect. For example, an inspector doesn’t want to see lots of caulk there, because that usually means it’s not properly waterproofed. When done right, waterproofing is part of the home design — not something added after the fact. If signs of prior water penetration are found, he or she will also check whether the issue was fixed properly.

3. The roof

An inspector can tell if a roof was done properly by a professional, or sloppily by an amateur. They’ll want to make sure your roof is well constructed, isn’t showing signs of age or deterioration, and will protect you from the elements. They’ll also check to see that any openings — like a chimney or skylights — are properly sealed, flashed, and free of moss growth and debris.

The older the house, the more likely it is that the roof has already been resurfaced at least once, and roofs do need replacement from time to time, which can be an expensive process. As part of their inspection report, an inspector will typically provide an estimate of how many good years the roof has left before you should consider replacing it.

4. Major systems: electrical, plumbing, etc.

The inspector will check out all of your home’s most important interior systems, from electrical and plumbing to heating and air conditioning.

    • Heating and air: How well does the heating and cooling work? Do they serve every area in the home evenly? Is there good airflow in every room? If there’s an air return, is it properly located and sized to serve the house efficiently?
    • Plumbing: The inspector will check to see that the plumbing is in good shape, provides enough water to the house, and drains as it should — no one wants leaky pipes letting water into their home and causing flooding or mold problems. He or she will also ensure there is sufficient water flow and pressure. If the house uses well water, ask to have the pump and water quality checked.
    • Electrical: Electricity is essential for modern life, but it can also be dangerous. An inspector will make sure that your electrical system is safe, provides enough power for the house, and is installed and grounded correctly. They’ll also check to make sure there are enough outlets and look at the electrical panel — an old or obsolete panel may become a fire hazard. 

5. Ventilation

Dangerous fumes can build up in a house if appliances that run on oil or natural gas, like water heaters for example, aren’t installed and configured the right way. Proper ventilation is crucial. Many of these appliances have safety features built-in, but an inspector will make sure the safety equipment is correctly enabled.

Besides checking the water heater’s ventilation, the inspector will also check its maximum temperature to make sure your tap water can’t get hot enough to burn anyone. Additionally, he or she will make sure that clothes dryers are properly vented to catch lint and expel hot air, which helps prevent house fires and may also test for radon.

6. Signs a specialist is needed

Some areas or conditions might need further examination, often by a specific type of pro with specialized equipment. A good inspector will know when to call in the heavy hitters, and may even have a network of specialists they can refer you to.

For example, a fireplace is one feature that always gets careful evaluation. The inspector wants to see that it vents well and doesn’t have any conditions that could become a hazard, like cracks, blockages, or excessive buildup. If they see something concerning, your inspector might recommend a fireplace inspector, who will use a specialized camera to scope out the interior of the chimney and flue.

Sewers are another area that calls for extra care, especially in an older house. A septic problem hidden beneath your yard can be one of the most expensive repairs a homeowner must make. If you’re buying a home that has sewer service, consider calling in a specialist to have the whole system (from the main house to the street) video scoped or a video inspection that goes through pipes, holes, and other areas.

Source: bankrate.com ~ By: Dori Zinn & Grace Kim ~ Image: Canva Pro

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How to buy a house in 2024

Buying home in 2024

Last year may go down in real estate history as the year of correction. After a pandemic-fueled, seller-benefitting boom — with bidding wars, inventory shortages, and spiraling prices all over the country — the housing market began to cool down in 2022. The impact of inflation and fast-rising interest rates dampened buyers’ interest, causing sales to slow and price appreciation to decelerate.

All this made 2023 something of a transitional year. And now, in 2024, inflation is much lower but home prices and mortgage rates are both still high. Sellers still have an edge in many areas, thanks to a continued scarcity of houses, and no one expects a dramatic housing market crash. Still, many analysts see a shift coming toward a more balanced market, which would benefit buyers.

Whatever the economic state of the real estate market, buying a house can be an exciting and emotional process. Before starting your search, be sure you understand the ins and outs of homebuying, so you can make the best decisions for your family — and your wallet. Here’s what to know when buying a house, one step at a time.

Buying a house: A step-by-step guide

1. Determine why you want to buy a house

Purchasing a home is a major decision that shouldn’t be taken lightly. If you’re not clear on exactly what you want out of homeownership, you could end up regretting your choice.

Get started: Define your personal and financial goals. “Buyers should think about when they intend on moving and what they want in a home — amenities, ideal location, and how long it could take them to save for a down payment,” says Edwence Georges, a real estate agent with RE/MAX in Westfield, New Jersey. “These are all important to help define the goals they would like to meet.”

    • Make a list of what’s important to you in a home. Is location the top priority? Any must-have amenities?
    • Analyze whether it makes sense for you financially. Would renting for another year or two improve your financial standing?
    • Be sure you’re prepared for the ongoing expenses of maintaining a home.

2. Check your credit score

Your credit score will help you determine your financing options; lenders use it (among other factors) to set the terms and rates of your loan. The higher your score, the lower the interest rate you will be eligible for — lower scores equate to more expensive mortgages.

Get started: You can get your credit report and score from each of the three major credit reporting agencies, Equifax, Experian, and TransUnion, for free once a year. Your bank or credit card company might offer free access to your score or credit report, too. If you discover any discrepancies, contact each agency and report the error.

    • Consider how different credit score ranges impact your interest rate, monthly payments, and total interest.
    • Pull your credit reports from each of the credit bureaus for free every 12 months at AnnualCreditReport.com.
    • Learn other ways to get your free credit report and score.

3. Save for a down payment

To avoid having to pay private mortgage insurance or PMI, you’ll need to put down at least 20 percent of the home’s purchase price for a down payment. Some lenders offer mortgages without PMI with lower down payments but expect to pay a higher interest rate. Be sure to do your research: Many types of loans require a much lower minimum down payment, and there are many government programs to help cover down payment costs for qualified buyers. Shop around carefully based on how much you’re able to pay upfront.

Get started: Research the requirements for the loan you want so you know exactly how much you’ll need to save for a down payment. If a friend, relative, or employer has offered to provide a down payment gift, initiate a conversation early on to learn how much they plan to contribute and if there’s any shortfall you’ll need to cover — and secure a gift letter from them well in advance.

    • Consider options backed by the federal government. If you qualify for an FHA, VA or USDA loan, your down payment minimum will be considerably lower than 20 percent.
    • Conventional loans offered by Fannie Mae and Freddie Mac, meanwhile, require just 3 percent down.
    • Look into local and state down payment assistance programs to see if you’re eligible for a cost-saving loan or grant.

4. Create a housing budget

The purchase price and down payment aren’t the whole picture. Setting a realistic budget for your new home will help inform how much you can afford and what your all-in costs will be.

Get started: Carefully consider other expenses to determine what you can afford long-term. “Buyers tend to forget to factor in other costs, like homeowners association fees and maintenance,” says Paige Kruger, Realtor and founder of Signal Real Estate in Jacksonville Beach, Florida. “Just because you can afford a mortgage and a down payment doesn’t mean you can afford those long-term costs after you move.”

    • Figure out how much you can set aside for a down payment, plus a buffer fund for ongoing or unexpected maintenance costs.
    • Determine the maximum loan you qualify for. Getting pre-approved can help (see Step 5).
    • Analyze your monthly budget to make sure you can handle mortgage payments along with your other day-to-day bills.

5. Shop for a mortgage

Getting pre-approved for a mortgage gives you a firmer handle on how much you can afford, and it’s helpful when you make an offer on a house because it shows sellers you’re financially qualified. Once you’re ready to apply for official approval, you’re not obligated to stick with the same lender that issued your preapproval — compare the terms and rates offered by several companies.

Get started: Shop around with at least three lenders or a mortgage broker to increase your chances of getting a low-interest rate. Sign up for a Bankrate account to determine the right time to strike on your mortgage with our daily rate trends.

    • Work with an experienced mortgage lender who can walk you through all the options and overall costs.
    • If you’re a first-time homebuyer, inquire about what programs or incentives might be available to you.

6. Hire a real estate agent

An experienced real estate agent can save you time and money by helping you find the right home and negotiating with the seller on your behalf. Agents are licensed professionals who know their markets well and can guide you through your homebuying journey.

Get started: Contact several local real estate agents and talk with them about your needs before choosing one. “Someone with knowledge of an area can tell if your budget is realistic or not, depending on the features you desire in a home,” Kruger says. “They can also point you to adjacent areas in your desired neighborhood or other types of considerations to help you find a house.”

    • Before hiring an agent, ask about their track record and knowledge of your desired neighborhood.
    • Inquire about their workload as well. You don’t want someone who is over-scheduled.
    • Bankrate can help match you with a qualified agent in your area.

7. Go house-hunting

Viewing listing photos online is helpful, but isn’t a substitute for visiting homes in person and getting to know the area and its amenities. In some cases, the right neighborhood might be even more important than the home itself.

Get started: Be specific with your agent about exactly what kinds of homes you want to see, so they can more effectively find options that meet your criteria. Keep an open mind: You may not be able to check off everything on your wish list, so prioritize must-haves over things that are nice to have but not crucial.

    • Explore neighborhoods you like to see what’s for sale, and attend open houses for homes that pique your interest.
    • Take notes on each property you visit — after a few, they can start to blend together in your mind.
    • Keep your schedule open so you can pounce when a great home is listed, especially in a competitive market.

8. Make an offer

Understanding how to make an attractive offer on a home can help increase the chance of it being accepted, putting you one step closer to getting those coveted keys. Confer with your agent and let their expertise lead the way.

Get started: Once you find “the one,” your real estate agent will help you prepare a complete offer package, including your offer price, your preapproval letter, proof of funds for a down payment (this helps in competitive markets), and terms or contingencies.

    • Think carefully about what contingency clauses to include in your contract. Common real estate contingencies can hinge on financing, appraisal, home inspection, and more.
    • It’s not unusual for sellers to make a counteroffer. You can respond if you wish to keep negotiating, or reject it and move on.
    • Once an offer is accepted, you’ll sign a purchase agreement and pay an earnest money deposit, typically 1 to 2 percent of the purchase price. The funds will be held in escrow until closing.

9. Get a home inspection

A home inspection provides an overall picture of the property’s condition and any mechanical or structural issues it might have. This will help you determine how to proceed with the closing process: If major problems are found, you might want to ask the seller for repairs — or, if there’s an inspection contingency in the contract, you might even decide to back out of the deal.

Get started: Your agent can probably recommend a home inspector, but do your homework before choosing one. Depending on your contract and what state you’re in, you’ll generally need to complete the inspection within 10 to 14 days of signing a purchase agreement.

    • Check the inspector’s experience by reading online reviews, asking for client references, and looking at their credentials.
    • To understand what is and isn’t covered, read Bankrate’s home inspection checklist.
    • Fees can vary, but according to HomeAdvisor, you’ll likely pay somewhere between $281 and $403. The average is $342.

10. Negotiate repairs and credits

Your home inspection may reveal a few issues, especially if it’s an older home. Major problems might need to be dealt with before your mortgage lender will finalize your loan, and it’s common to negotiate for the seller to either pay for the repair or offer the buyer a credit to cover the cost.

Get started: Enlist your agent’s help with this — the need for repairs is not unusual, but negotiation can be delicate work and is best left to the pros. They will work with the seller’s agent to come to an agreement about repairs or credits.

    • Hazardous problems like structural damage or improper electrical wiring could keep your lender from approving your loan, so take the solutions very seriously.
    • Some sellers won’t agree to extensive repairs. That’s why a home inspection contingency is important — it gives you a way out of the deal if you need it.

11. Secure your financing

A preapproval is not the same thing as official approval. Getting final loan approval means you need to keep your finances and credit in line during the underwriting phase. Don’t open new credit lines or make any major purchases until the paperwork is signed, and avoid changing jobs before closing too, if possible.

Get started: Respond promptly to requests or questions from the lender, and double-check your loan estimate to ensure all the details are correct. You may need to submit additional paperwork as your lender completes the process, such as bank statements, tax returns or additional proof of income, so keep your paperwork organized.

    • Being preapproved doesn’t mean you’re in the clear — that’s not the case until a lender has given your loan the final stamp of approval.
    • Keep your finances and credit in good shape from preapproval until closing day.
    • Avoid running up credit cards, taking out new loans or closing credit accounts too. These things can hurt your credit score or impact your debt-to-income ratio, which can imperil your final loan approval.

12. Do a final walk-through

A final walk-through is your opportunity to view the property one last time before it becomes yours. This is your last chance to address any outstanding issues before the house becomes your responsibility.

Get started: Your agent will schedule the walk-through for shortly before closing. Bring your home inspection checklist and other documents, like repair invoices and receipts, to ensure everything was done as agreed and that the home is move-in ready.

    • Ask your agent to attend with you — they can act as a witness and help answer any questions.
    • If any problems remain, have your agent communicate immediately with the seller and your lender. Your closing date might have to be delayed to ensure those issues are remedied first.

13. Close on your house

Once all contingencies have been met, you’re happy with the final walk-through and your lender has declared your loan “clear to close,” it’s finally time to make it official and close on your new home. After all of the paperwork has been signed, the home is officially yours and you’ll get the keys. Congratulations!

Get started: Three business days before your closing date, the lender will provide you with a closing disclosure that outlines your loan details, such as the monthly payment, loan type and term, interest rate, loan fees and how much money you must bring to closing. You will attend the closing along with your real estate agent, possibly the seller and their agent, and the closing agent, who may be a representative from the escrow or title company or a real estate attorney. This is also when you’ll wire your closing costs and down payment, depending on the escrow company’s procedures.

    • When you get your closing disclosure, compare it to your loan estimate to ensure the terms are the same. Ask any questions and correct any errors before you sign the paperwork.
    • On closing day, review all the documents you sign carefully, and ask for clarification on anything you don’t understand.
    • Make sure you’re given all house keys, entry codes, and garage door openers before leaving the closing.

Other things to consider

Is it the right time to buy?

Traditionally, spring is the start of the homebuying season, with many listings hitting the market and activity peaking over late spring/early summer. However, your own financial readiness is more important than the time of year.

Mortgage rates recently hit highs not seen in more than 20 years. Meanwhile, strong demand for homes has pushed prices higher and frustrated many potential homebuyers. This combination of high rates and high prices has plenty of people wondering whether they should try to buy a home now, or wait for things to settle down.

The answer likely depends on your own personal circumstances more than the condition of the housing market. If you’re financially stable, you have enough in savings to cover the down payment and other expenses, your employment and income are secure, and you’re ready to stay in one place for a while, then now is a perfectly fine time to buy a house. You can always refinance if rates drop significantly. On the other hand, if your savings are tight or your credit score is less than stellar, it might make more sense to take time to build those before buying.

One thing to keep in mind: Be sure to exercise caution anytime there’s a spike in home prices. “Be careful about buying near the top of the market, especially if you want to be in the home for only a few years,” says Ken H. Johnson, a real estate economist at Florida Atlantic University and co-author of the Beracha, Hardin & Johnson Buy vs. Rent Index. If you’re looking to buy under these conditions, says Johnson, “bargain aggressively and be willing to walk away.”

What’s your local market like?

The area you’re house-hunting in has a major impact on what to brace for as a homebuyer. Each market has its own quirks to consider: For example, the taxes, cost of living, job market and housing situation in California will yield different buying conditions than in Texas or Ohio. And even within the same city, real estate is very localized — you might be surprised by how drastically market conditions can vary from one neighborhood to the next. This is why partnering with a knowledgeable local agent who understands the intricacies of their market is so important.

How prepared are you for extra costs?

The down payment is often considered the biggest homebuying expense, since it’s a large amount that the buyer has to actually pay upfront. But homeownership involves plenty of additional costs that you should be ready for. Before you even close on the purchase, you’ll need to make sure you have enough money set aside to cover closing costs. These fees will vary by state and by individual transaction, but they will almost certainly range into the thousands of dollars.

When budgeting for your monthly housing costs, factor in not only the principal and interest amounts of your mortgage payment, but also property taxes, home insurance premiums, and homeowners association fees (if applicable), plus private mortgage insurance if you’re putting down less than 20 percent. And don’t forget to set aside money for ongoing maintenance and unexpected repairs, too.

Source: bankrate.com ~ By: Jeff Ostrowski ~ Image: Canva Pro

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Is Reprieve in Mortgage Rates Enough to Move Buyers?

Mortgage Interate Rates

Mortgage rates are starting to cool off after nearly hitting 7% in recent weeks. Borrowing costs have eased somewhat and housing affordability is showing signs of improvement—just in time for the spring selling season.

The 30-year fixed-rate mortgage averaged 6.74% this week, Freddie Mac reports. Over the last two weeks, rates have fallen by nearly a quarter of a percentage point. Potential home buyers are responding: Mortgage applications for a home purchase—a gauge of future homebuying activity—rose by 5% in the latest week and have been increasing over the last two weeks as rates have moved lower, the Mortgage Bankers Association reports.

For home buyers looking to purchase a $400,000 home with a 20% down payment, the estimated monthly mortgage payment at this week’s rate equates to about $2,073, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. Compared to October, when rates surged to a 7.79% average, home buyers can now save about $228 per month, she says.

Mortgage rates in the mid-6% range are encouraging more home buyers to return to the market. “Homebuying activity is showing an increase in buyer demand from last year when buyers were apprehensive of rising rates,” Lautz says. But “more housing inventory is needed to meet the demand.” House hunters are still facing multiple-offer situations as they scramble to compete for low inventory.

Home buyers will continue to watch rates carefully, as they also continue to face record-high home prices. While economists have largely predicted rates to stay in the 6.5% or 6.3% range for most of 2024, week-to-week fluctuations remain a wild card for the housing market. Plus, “despite the recent dip, mortgage rates remain high as the market contends with the pressure of sticky inflation,” says Sam Khater, Freddie Mac’s chief economist. “In this environment, there is a good possibility that rates will stay higher for a longer period of time.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 14:

  • 30-year fixed-rate mortgages: averaged 6.74%, dropping from last week’s 6.88% average. Last year at this time, 30-year rates averaged 6.6%.
  • 15-year fixed-rate mortgages: averaged 6.16%, falling from a 6.22% average last week. A year ago, 15-year rates averaged 5.9%.

Source: nar.realtor ~ By: Melissa Dittmann Tracey ~ Image: Canva Pro

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The Guide to a Real Estate Bidding War

Real Estate Bidding

Many real estate markets across the country right now are marked by low inventory. This is due in large part to higher interest rates, making new mortgages more expensive and hindering construction starts. Homeowners who might like to move (and thus put their home on the market) are not willing to give up a lower interest rate on their mortgage to take on a notably higher rate for a mortgage on the property they might buy. Many people are feeling locked in; there are fewer sellers, and thus, inventory is significantly reduced.

In a low inventory environment, even when fewer active buyers are pounding the pavement, it’s common for a well-priced and well-presented property to attract attention and possibly receive multiple bids. So buyers today should be prepared for competition when they’re ready to make an offer on a well-priced property. And if sellers have truly priced their property in line with today’s nuanced market conditions, they should prepare for the possibility of multiple bids. Most sellers hope for a bidding war when they list, but a competitive bidding situation can fall apart quickly if not handled properly by all parties.

Will We See Bidding Wars This Spring?

Each year, spring brings new market activity, even in a high interest rate environment. “With seasonal demand starting to tick up, we are seeing more bidding wars than expected, given the generally low volume of the market,” says John Walkup, co-founder of Urban Digs, a New York City data and analytics company that tracks Manhattan and Brooklyn real estate. “For many people, there is only so long you can postpone a move, so as those forces run into continual tight supply, you’re going to see bidding wars spring up where, on paper, at least, there should be easy deals for buyers.”

With the spring market almost upon us and interest rates ticking down, it’s likely that many buyers will come off the sidelines, adding to the competition in this low inventory market. “It’s a question of alternatives,” says Walkup. “In a ‘normal’ market, a buyer might be able to find an alternative home within a few weeks as more listings come on. In a tight supply market, that timeline could be extended to months, so a ‘finders keepers’ mindset takes over because the opportunity cost of losing a deal is much higher. That focuses conversations on the cost of not bidding aggressively when the time comes. In a nutshell, agents need to help their buyers understand that lowball bids will likely fail in today’s lower inventory environment.”

If a buyer loves a property and wants to beat out the competition, there are certain strategies they may employ. Additionally, and perhaps less obviously, the seller and listing agent need to handle the bidding war properly, or they run the risk of upsetting all of their suitors and ending up with nothing. A badly managed bidding war can end in disappointment for the seller if the potential buyers feel misled or used – after all, no one wants their offer shopped around.

If you are in the market right now, here are a few evergreen best practices for buyers and for sellers to navigate a bidding war, no matter the market conditions. “Four walls and a roof don’t change,” says Gail Roberts, a realtor with Coldwell Banker in Cambridge, Massachusetts. “The rules of the game haven’t changed, even if market conditions have. When properties are priced well and show well, there’s a good chance they will get multiple bids. The market will always tell us what a property is worth.”

How to Navigate a Bidding War as a Buyer

For buyers, a proper offer on a home includes a strategic number (offer price), a proposed closing date, and financing terms. A buyer should arrive at each of these three terms based on the comps, as well as timing and financial needs. Arming yourself with current and relevant data and information will help you approach the process with confidence and efficiency, which can work to your advantage. And when it’s time to make an offer, being flexible and friendly are two of the best ways to win over the seller and/or the listing agent.

Get smart. The buyer or the buyer’s agent should schmooze with the listing agent and get some intel. Who are the sellers and what are the factors that will influence their decision? Is the seller an investor looking to cash out? An older couple selling their long-held nest egg? If the seller is moving, do they know where yet? And have they emotionally moved on to this new property and chapter of life? If the seller has flexibility on a closing date versus a need to sell quickly, this timeline may greatly influence how they assess offers. And who are the other buyers? Are the other offers all cash? Are there contingencies you can waive to strengthen your position in comparison with the other bidders? Information gathered about the seller and about competition helps a buyer craft a more compelling offer.

Jump in early and come prepared. If you love a property, make an offer. That offer should include not only your bid but also accompanying documentation like a loan preapproval letter or proof of funds. This shows that you’re serious, and should give the sellers confidence that your financing won’t fall through. Start the negotiation quickly, before another shark enters the water. Being first in the swimming pool has its advantages, as many sellers feel a sense of loyalty to the first bidder. Even if someone else comes along, a smart listing agent will circle back to the first buyers who submitted an offer to see if they can improve their bid. If you start a negotiation before another buyer, you won’t be negotiating against the competition (yet).

If you can, drop contingencies and be flexible. “For a buyer, the cleaner your offer, the better,” says Roberts. “This includes a certain amount of flexibility with dates and terms, especially in a competitive market.”

Sometimes, the best offer isn’t the highest. If two offers come in and the higher bid comes with many contingencies (financing, appraisal, inspection contingencies, etc.), the seller may go with the lower number. Talking with the listing agent can give you some insight as to which contingencies can be dropped, and a window into what the competition’s offer comes with.

Decide beforehand when you’re OK walking away. If you’ve done your homework, then you know the comps and you have a good idea of the subject property’s value. Are the sellers being overly ambitious with their asking price? Or did they price it tightly, so if you bid above the asking price you’re still in the ballpark of market value? More importantly, how much can you afford? At a certain number, the property won’t be attractive anymore, so identify that number beforehand and be ready to walk away without regret. Stay cool-headed and don’t let your emotions get the best of you – buying a home is an emotional process, so make sure you understand the numbers and the math beforehand.

Take note also: “How bad will you feel if someone else gets it for just a small amount more than your bid?” asks Roberts. “A good agent helps a buyer understand the market, and can educate you to say ‘this is the value for me’ and to not regret losing a property.”

Make it personal. It may sound silly, but a flowery personalized letter to the sellers along with your offer can add a human touch and differentiate you from the competition. A warm and fuzzy letter may appeal to the sellers, making them feel good about choosing you over the other bidders. Perhaps you remind them of themselves 20 years ago, passing along a dream home from one family to the next. Flattery can go a long way. That said, “your offer should speak for itself,” Roberts says.

Strategize. One tool that buyers can call upon in a bidding war is something called an escalation clause. An escalation clause is “a tool to stay above other offers coming in, while not potentially going over budget, or wildly outbidding any other offers,” says Kate Jay Zweifler, a realtor with Berkshire Hathaway HomeServices Fox & Roach in Philadelphia. “An escalation clause is an addendum to an agreement of sale that will automatically increase the amount of the purchase price above any other offers in competition, up to a certain amount set by the buyer.”

“However,” says Zweifler, “this is a strategy that comes with its own risks. In a bidding war, sellers are looking for a decisive and strong best and final offer, and they don’t want to drag the process out in small increments. And if there’s emotion wrapped up in the sale, it can be tricky to use an escalation clause. In those cases, sellers want to feel that the buyer really wants the home and isn’t playing games.”

End with an odd number. If your offer is almost identical to another offer, add a few dollars to your offer to tip you over the edge.

How to Navigate a Bidding War as a Seller

Pricing a home correctly is the first step in laying the groundwork for a bidding war. “To get the right buyers, you need to nail the right asking price,” says Roberts. Pricing too ambitiously is often a turnoff for many buyers, but “pricing too low doesn’t help buyers understand how high they need to go. Price with energy that makes buyers say: ‘This seems fair. I don’t want to lose out.’ ”

Roberts adds: “I want to hear buyers say to their broker: ‘How high do you think we have to go?’ I don’t want to hear them say: ‘What do you think they’ll take?’ or ‘What’s it really worth?’ I don’t want them to question the value.”

For sellers, properly handling this exciting but likely stressful process is paramount and an experienced real estate agent should be able to guide you. Above all, it is important to manage the offers and buyers so nobody feels misled. Sellers and their agents must keep in mind that many buyers who enter a bidding war might have already lost out on another property, so their emotions may be running high. This is especially true when inventory is low. You should be timely in your response to each offer, and also do the following:

Get smart: Who are the prospective purchasers? Sellers and their agents should gather as much information as possible about each buyer. Are they financing or all cash, and if they’re taking out mortgages, have they submitted preapproval letters from reputable financial institutions to accompany their bids? What is the debt-to-income ratio for each party? Are these buyers flexible on the closing date? All of this is relevant in helping to choose not just the right buyer from the pack, but also the best backup offer just in case the first deal falls through. Sometimes the winning bidder gets cold feet, so keep those backups in play.

Maintain a schedule and deadlines. In a multiple bid situation, it’s important to set a schedule and keep to it. Determine the deadline for receiving new offers, and clearly communicate this to all interested parties. If you plan to go an additional round with your potential buyers, often referred to as “best and final” offers, set the deadline and be disciplined about this. Once the initial offers are submitted, a “best and final” round allows the buyers to improve their offers. If the market is very active, it makes sense to end the bidding process and make a deal before new inventory comes onto the market. In certain particularly active markets, new properties may be listed on Thursdays, with open houses over the weekend and offers submitted by Sunday night or Monday. If this is the case, for example, “wrap it up before new stuff comes onto the market, ideally by Tuesday,” says Roberts.

During the process, stay in close communication with all bidders. “We need to get back to our prospective buyers in a timely fashion,” Roberts says. “Sellers should not be unreachable during this process, even if they’re in another time zone.”

Know that the best offer might not be the highest. Even if one party is offering you more money, it might not be the best offer. Money is money, but a cash offer is generally stronger than an offer that comes with financing. An offer that includes a mortgage will take longer to close than a cash deal, and if the buyers’ financial profile is at all questionable (for example, how is their credit?) there’s a chance they might not secure their financing, especially if they are heavily invested in unstable assets. And do these offers come with contingencies? Offers that have an inspection contingency waived might be particularly attractive, for example.

If financing is involved, the seller must understand the buyer’s financial profile and their likely ability to secure a loan. But if the purchase requires further approval, perhaps from a homeowners association or from a co-op or condo board, then vetting each buyer is even more relevant and imperative. It’s possible that the second-highest bidder might have a more straightforward and simple financial profile, and thus be more of a slam dunk to make it to the closing table. For example, if the highest bidder is taking out a large mortgage and presents a financial profile that includes student debt, outstanding child support payments or a lackluster credit score, it might be wiser to accept a lower bid that might be all cash from a buyer with no debt.

Leave the door open with your backups. In a competitive bidding situation, buyers can become overly enthusiastic, get caught up in the moment and bid above their comfort level or well above their perceived value of the property. There is always a good chance that the winning bidder may walk away for any number of reasons, including buyer’s remorse or a reassessment of value after a few nights of sleep while the contract is being drawn up. It is prudent to stay in touch with the backup bids and keep them in play, if possible, to be called upon if needed.

Even if the market is slow, in low inventory environments bidding wars should be expected for well-priced properties. The New York City market, for example, seems sluggish, but the data tells a different story. “About 20% of deals are trading at or above the asking price,” says Walkup. “In a true buyer’s market, this would be lower. Historically, discounts for deals signed within 30 days remain very low, including for Q4 2023. This is a sign that the market remains robust and transactional.”

Of course bidding wars are more common under certain housing market conditions than others, but a great property that is priced well will almost always get the attention it deserves. And for buyers, it’s important to note that just because there isn’t a bidding war and you’re the only interested party, it doesn’t mean it’s not a great home. If it’s meant to be, well, it’s meant to be.

Source: realestate.usnews.com ~ By: Steven Gottlieb ~ Image: Canva Pro

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Down Payment on a House: How Much Do You Really Need?

Down Payment on a House

Your minimum down payment depends on the type of mortgage, the lender and your finances.

Coming up with enough cash for a down payment to buy a house can be the single biggest roadblock for prospective home buyers. But how much of a down payment do you really need? That depends on the type of loan, your lender and your priorities.

What is a down payment?

A down payment is the cash you pay upfront to make a large purchase, such as a home. You use a loan to pay the rest of the purchase price over time. Down payments are usually shown as a percentage of the price. A 10% down payment on a $350,000 home would be $35,000.

When applying for a mortgage to buy a house, the down payment is your contribution toward the purchase and represents your initial ownership stake in the home. The mortgage lender provides the rest of the money to buy the property.

Lenders require a down payment for most mortgages. However, some types of loans backed by the federal government may not require down payments. (More on that below.)

Do you need to put 20% down on a house?

You may have heard that you need to make a 20% down payment on a home, but that’s really just the threshold many lenders use for requiring mortgage insurance on a conventional loan. You don’t have to make a 20% down payment to buy a house.

In 2023, the typical down payment for first-time home buyers was 8%, according to the National Association of Realtors. The typical down payment was 19% for repeat buyers.

Minimum down payment requirements

The minimum down payment required for a house varies depending on the type of mortgage you plan to apply for to purchase a home.

Loan type

Minimum down payment required

Conventional

3%

FHA

3.5% (with a credit score of at least 580)

10% (with a credit score of 500-579)

VA

0%

USDA

0%

Jumbo

5-10%

Second homes or investment properties

Varies

VA and USDA loans: 0% down payment

Guaranteed by the U.S. Department of Veterans Affairs, VA loans usually do not require a down payment. VA loans are for current and veteran military service members and eligible surviving spouses.

USDA loans, backed by the U.S. Department of Agriculture’s Rural Development program, also have no down payment requirement. USDA loans are for rural and suburban home buyers who meet the program’s income limits and other requirements.

Conventional mortgages: As low as 3% down payment

Some conventional mortgages, such as HomeReady and Home Possible, require as little as 3% down, provided you meet certain income limits. Conventional loans are not backed by the government, but they follow the down payment guidelines set by the government-sponsored enterprises — or GSEs — Fannie Mae and Freddie Mac.

FHA loans: As low as 3.5% down payment

FHA loans, which are backed by the Federal Housing Administration, require as little as 3.5% down if you have a credit score that’s at least 580. If you have a credit score that’s between 500 and 579, FHA loans require a 10% down payment.

Jumbo loans: As low as 5%-10% down payment (varies)

Jumbo loans are home loans that fall outside of the Federal Housing Finance Agency’s conforming loan limits. Because these outsized loans can’t be guaranteed by the GSEs, lenders tend to ask for higher down payments to offset some of the risk.

With low- or no-down-payment loans, you pay for the guarantee through fees or mortgage insurance, depending on the program.

Benefits of a larger down payment

Saving enough money for a substantial down payment takes time, so a zero- or low-down-payment requirement may speed up your ability to buy a home. But making a larger down payment has advantages that include:

  • A better mortgage interest rate. Lenders may shave a few fractions of a percentage point off your interest rate if you make a larger down payment. When you borrow less of the home’s price, there’s less risk for lenders, and they tend to reward this with more favorable terms.

  • More equity in your home right away. Your home equity is your home’s value minus the amount you owe on your mortgage. In other words, it’s the extent to which your home is an asset rather than a debt. More equity means more wealth.

  • A lower monthly mortgage payment. Borrowing less of your home’s price lowers your principal, which also means you’ll pay less interest over the life of the loan.

  • Lower upfront and ongoing fees. Low- or no-down-payment government-backed mortgage programs reduce lenders’ risk by guaranteeing a portion of the loans. If a borrower defaults on one of these loans, the associated government agency will reimburse the lender. To offset some of that cost, these loans can come with significant one-time costs, like the VA funding fee, or added ongoing costs like FHA mortgage insurance.

How much should you put down on a house?

The right down payment for you depends on your goals and financial situation. While there are plenty of pluses with a larger down payment, putting down too much could leave you strapped for cash after you move in.

Conventional mortgages usually require you to pay for private mortgage insurance if you put down less than 20%. Once you start making mortgage payments, you can ask to cancel PMI after you have over 20% equity in your home.

Try out some different scenarios to help you better understand how changing the size of your down payment can affect other costs.

Other considerations to determine your down payment

Your mortgage payment is just one piece of your overall household budget. With that in mind, here are some other factors to consider when planning for the size of your down payment:

  • Keep some savings in the bank. Avoid using your entire savings for a down payment. You could end up “house poor,” spending too much of your income servicing your mortgage or depleting your emergency fund.

  • Don’t forget about closing costs. It’s also important to make sure you have enough cash on hand to cover closing costs, which are usually 2%-6% of the home’s purchase price.

  • Plan for the ongoing costs of homeownership. Leaving a cushion for home maintenance and repairs, as well as potential emergencies, is a good idea even if you’re purchasing a move-in-ready home. In all, you want to be sure your down payment leaves you with enough room to cover all the costs of buying a house — and furnishing it once you’ve moved in.

  • Shop around. Do your research and compare mortgage rates from three to five lenders. Don’t forget to look into programs offered by lenders and consider down payment assistance options, especially if you’re a first-time home buyer.

    Source: nerdwallet.com ~ By: Kate Wood ~ Image: Canva Pro

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Insider Insights: 12 Housing Market Experts Highlight Key Strategies For Home-Buying Success In 2024

Strategies For Home-Buying Success

Aspiring homeowners experienced a lot of challenges in 2023. Elevated interest rates, eye-watering home prices, and abysmal housing stock resulted in inflated costs that stymied buyers. While experts say the housing market should see some easing in 2024, don’t expect much.

If you plan to dive into the housing market in 2024, you’ll need to plan strategically to outpace the competition and attain a home that meets your preferences and goals.

Forbes Advisor spoke with 12 top industry experts to weigh in on what hopeful buyers should do as they pursue homeownership in 2024.

1. Watch Interest Rate Trends To Get the Best Mortgage Rate in 2024

Mortgage rates are steadily declining after flirting with 8% in late October. Most housing market experts agree that rates will trend down further in 2024 but remain elevated.

Nonetheless, rates can jump around quickly, and even a fraction of a percentage point change can impact the cost of a monthly mortgage payment.

Given this, Michael Merritt, senior vice president of mortgage servicing at BOK Financial, advises buyers to monitor the news and the Federal Reserve’s interest rate decisions to stay on top of trends.

Merritt explains that keeping an eye on the Fed’s monetary policy moves can give borrowers a heads-up for where mortgage rates will go in 2024, as the central bank’s policy rate actions tend to impact mortgage rate movements indirectly.

“It’s hard to forecast rates in a volatile market, but most indicators predict lower rates by the end of 2024,” Merritt says.

Pro Tip
Bonus Advice: “The first step in getting the best mortgage is understanding what you want to achieve. The best mortgage product might be different for a purchase than a refinance or for a home you plan to own five years versus 10 years.” — Michael Merritt, senior vice president of mortgage servicing at BOK Financial

2. Attend Local Real Estate Investor Meetings

The housing market remains competitive mostly due to historically low inventory. However, house hunters can stay ahead by using less conventional methods to track down available homes—especially those that buyers won’t find in traditional listings.

Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm, suggests attending real estate investor meetings in areas where you’re interested in buying.

“Almost every city or county across the country has investor groups made up of people who are more or less your neighbors,” Sharga says. “A lot of these investors fix and flip properties and might be willing to give a buyer a little bit of a break if they can save the investor the time and money involved in marketing the property.”

Pro Tip
Bonus Advice: “Focus on homeowners who need to sell, not on homeowners who might want to sell. About 70% of homeowners with a mortgage have an interest rate of 4% or lower and just aren’t going to put their home up for sale unless they have to.” — Rick Sharga, founder and CEO of CJ Patrick Company

3. Investigate Expired or Withdrawn House Listings

Blake Blahut, a broker associate and real estate agent at Realty ONE Group Inspiration in Florida, offers a unique tactic to uncover unidentified for-sale homes—asking real estate agents to scour local neighborhoods for expired or withdrawn listings.

“They can also do mailers or door-knocking in those same areas in the hope of finding someone that is looking to sell,” Blahut says. “In a market with unique challenges, it’ll sometimes require a unique method to overcome them.”

Pro Tip
Bonus Advice: “Be patient and start your search early. … [B]eginning your search at least 75 to 90 days before your lease ends or you need to move would take a lot of unnecessary pressure off [you].” — Blake Blahut, broker associate and real estate agent at Realty ONE Group Inspiration

4. Consider an Adjustable-Rate Mortgage (ARM)

Hybrid ARMs are mortgages that start with a low fixed interest rate and change to a variable rate at the end of the fixed term. For example, a 5/1 ARM has a low fixed rate for five years, and then the rate resets once a year until the end of the loan term. Each rate adjustment could move higher or lower.

While ARMs gained a bad reputation due to their role in the 2008 housing crisis, they’re considered less risky now due to higher lending standards. Mark Fleming, chief economist at First American Financial Corporation, suggests an ARM can be a good fit for some people.

“While we are all familiar with the 30-year fixed-rate mortgage, remember that we rarely live in one home for 30 years,” Fleming says. “Why pay for the privilege of fixing the rate for 30 years when you’re likely not going to use it? And you get an affordability boost now when you need it.”

Pro Tip
Bonus Advice: “They say to date the rate and marry the house because you can refinance later. But beware, that [assumes] the rate will be lower in the future and there are costs associated with refinancing—it’s not free.” — Mark Fleming, chief economist at First American Financial Corporation

5. Don’t Wait Until Spring to House Hunt

Spring can be a busy time for the housing market, as listings often climb when the weather warms up.

Louis Gordon, a broker at Century 21 Revolution in Massachusetts, says to get out there early in the year before the temperature—and home prices—start rising.

“The best deals are usually found in winter when inventory is limited and sellers are more desperate to get a deal done,” Gordon says. While on the hunt, Gordon advises you to keep your eyes open for homes already a few weeks on the market and need a little TLC.

“Those sellers are more willing to negotiate on price and terms, like offering a rate buydown,” he says.

Pro Tip
Bonus Advice: “[D]on’t wait until the rates come down. If the rates go back into the 6’s or 5’s, the prices will shoot up like they did in 2021 and early 2022.” — Louis Gordon, a broker at Century 21 Revolution

6. Review Your ‘Must-Haves’ Before Home Shopping

As you embark on your house-hunting journey, Bob Driscoll, senior vice president and director of residential lending at Rockland Trust Bank, advises buyers first to take stock of the home features most essential to them.

“Not every house will become a home to everyone—something that one person may consider a need, like a yard for a pet, could be a want for someone else.”

Though you understandably want to keep costs down, Driscoll says buying a home because it’s affordable is not the best approach.

“For example, if hosting large gatherings is a priority for a certain home buyer, they shouldn’t let the frustrating market pressure them into settling for a home without the space needed to accommodate those activities,” Driscoll says.

Ultimately, homeownership is a major purchase that is as much a financial investment as it is about investing in a home that aligns with your priorities and values.

Pro Tip
Bonus Advice: “Instead of focusing on external factors beyond their control in 2024, prospective buyers should be focusing on their personal timelines, goals, and desires.” — Bob Driscoll, senior vice president and director of residential lending at Rockland Trust Bank

7. Research New Construction Options

With resale housing stock hovering at historic lows—and expected to remain there for the foreseeable future—Nick Bailey, president and CEO of RE/MAX, says buyers should consider researching new construction homes.

“Given such low supply and demand softening, builders have returned to offering competitive mortgage rates through their partner lenders and offering builder incentives and complimentary upgrades to entice buyers,” Bailey says.

Moreover, between October 2022 and 2023, the national median price of new homes dropped over 17%, maintaining a narrow enough gap between new home prices and existing home prices that could prove attractive to some buyers.

Bailey points out that buyers should also consider building a new custom home, which you can finance with a construction loan.

“With the crazy lack of inventory still causing headaches in the market, building a home becomes an attractive option, and with spec homes and semi-custom-building options, it’s easier than most consumers think,” Bailey says.

Pro Tip
Bonus Advice: “I wouldn’t write off older or outdated homes and would encourage buyers to picture what something could look like. For (sometimes) simple repairs and few upgrades, you could turn a house with potential into the house of your dreams.” — Nick Bailey, president and CEO of Re/Max

8. Shop for Homes Outside City Centers

If your dream is to live in a place that offers plenty of culture, sports, entertainment, and dining options, but the housing prices and cost of living exceed your budget, Danielle Hale, chief economist at Realtor.com, advises you to look outside city centers.

“Buyers will generally find that they get more value for their dollar further away from city centers, so shoppers with flexibility should consider expanding the geography of their home search,” Hale says.

For example, if you want to put down roots in the Los Angeles metro area where the median home price was $1,159,000 in October 2023, according to Realtor.com data, consider expanding your search to Riverside, where the median home price during the same period was $580,000.

Pro Tip
Bonus Advice: “No matter how buyers decide to compete, it’s important to make sure that they understand the terms and implications of waiving contingencies, which may be more likely to help them win the bid but may put them on the hook for more financial risk.” — Danielle Hale, chief economist at Realtor.com

9. Pre-qualify Yourself

Before becoming attached to a home that requires a loan you can’t afford, Keith Gumbinger, vice president at mortgage website HSH.com, encourages prospective buyers to determine their income and debt loads ahead of time to get a sense of how much financing they qualify for.

“Borrowers should pre-qualify themselves at a few different interest rates to see whether or not a rate that is likely to appear in the next year is sufficient to allow them to participate in their housing market,” Gumbinger says.

Plugging various rates into a mortgage prequalification calculator can help borrowers determine their maximum loan amount.

Pro Tip
Bonus Advice: “[B]e both opportunistic and flexible. A great house that checks 80% of the boxes and is available at a price you can afford with a mortgage rate that works well enough is likely to be better than waiting for a 100% match.” — Keith Gumbinger, vice president at mortgage website HSH.com

10. Look Into House Hacking

High mortgage rates and house prices may keep homeownership out of reach for some would-be buyers in 2024.

If that’s the case for you, Sherry Chen, a real estate agent with Kappel Realty Group at Compass in California, says house hacking could be the answer.

For instance, Chen says you could buy a four-bedroom house and rent out the other three rooms. She also suggests buying a home with an accessory dwelling unit, or ADU, to generate rental income.

“These strategies can oftentimes cut your mortgage in half or even allow you to live for free,” Chen says.

Pro Tip
Bonus Advice: “Get a fully underwritten preapproval.” — Sherry Chen, real estate agent with Kappel Realty Group at Compass

11. Be Prepared To Bid Over Asking Price

Though bidding wars are less common than they were a few years ago, demand will likely continue to outpace supply, and borrowers will still face plenty of competition in the coming year.

Consequently, Glenn Brunker, president of Ally Home, says to expect to make offers a little over the asking price to improve your chances of landing a home in 2024.

“You may be competing with buyers that have more cash to put towards a house, but if you have a plan in place and know your budget, you’ll be better equipped to make a decision that you’re comfortable with, ” Brunker says.

Pro Tip
Bonus Advice: “Buyers must do their homework in advance by researching lenders and securing a preapproval so you have a competitive advantage when making offers.” — Glenn Brunker, president of Ally Home

12. Build Your Home Buying Team Early

Shopping for a home can be an overwhelming experience, especially for first-time home buyers. To minimize the stress, Cerita Battles, managing director, and head of community and affordable lending at JPMorgan Chase, recommends assembling your team sooner rather than later.

“You don’t have to go through the home-buying process alone—in fact, it’s best to get help very early in the process,” Battles says. She advises buyers to prioritize working with a lending advisor team “because they can help you navigate the home-buying process, with everything from considering homeownership to walking through your new front door to getting connected with a reputable real estate agent.”

Battles also says a trusted lender can guide you through the current rate environment, and educate you on loan products, terms, and fees.

Pro Tip
Bonus Advice: “It’s important to keep in mind that this will be your first home! Even if it lacks some bells and whistles, you can still add more features in the future or use the property as a stepping stone for your dream home.” — Cerita Battles, managing director, head of community and affordable lending at JPMorgan Chase

How To Prepare for Your 2024 Home-Buying Journey

Perhaps the first bit of advice that most housing experts offer hopeful buyers is to confirm you can afford this big step.

“[M]ake sure your financial house is in order and that you’ve factored in all of the costs associated with homeownership beyond a mortgage, like insurance, maintenance, and HOA fees,” Merritt says.

Using a home affordability calculator prior to beginning your search can help you determine a home price range based on your income, debts, mortgage rate, desired loan term, and down payment capability.

Taking these preparatory steps will also improve your borrowing strength, reduce stress, and keep you a few steps ahead of the competition in this fast-moving market:

    1. Create a realistic housing budget that considers all monthly costs
    2. Boost your credit score to help secure a lower mortgage rate and better loan terms
    3. Lower your debt-to-income (DTI) ratio to increase borrowing power
    4. Set aside savings for a down payment
    5. Research and compare loan products
    6. Look into down payment assistance programs in the state where you plan to buy
    7. Gather financial and personal documents lenders require for your mortgage application
    8. Explore different neighborhoods in person to optimize your time when you’re ready to check out homes
    9. Get to know the local real estate agents

Experts Reveal How To Get the Best Mortgage Rate in 2024

Qualifying for the most competitive mortgage rate requires a multi-pronged approach.

Besides keeping on top of mortgage rate trends, here are some other essential actions experts advise you to take to increase your chances of locking in a solid mortgage rate:

    • Save for a larger down payment. “Remember: the higher your down payment, the more likely that you’ll be approved for the loan, the less likely you’ll need to get a loan with mortgage insurance, and the lower your monthly payment will be,” Sharga says.
    • Boost your credit score. “There are dozens of factors that influence a borrower’s mortgage interest rate, and credit score is one of the most important,” Chen says.
    • Shop multiple lenders. “Today’s market is very challenging for mortgage companies who are all hungry for business,” Sharga explains. “[T]hat’s a perfect environment for a consumer to do comparison shopping in.”
    • Strategize and consider points. Blahut advises buyers to budget for mortgage points or to “strategize with their trusted real estate professional” and figure out how to get the seller to contribute closing concessions.
    • Determine the best loan product for your situation. “Discussion about rates typically focuses on the 30-year fixed rate,” Bailey says. However, the average homeowner lives in their home for eight years, so Bailey suggests buyers weigh all their lending options, including ARMs.

Source: Forbes.com ~ By Robin Rothstein ~ Image: Canva Pro

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How Do LLC Tax Benefits Work? A Guide for Small Businesses

How LLC Tax Benefits Work

Here’s a look at the LLC tax rate, which can be lower for small businesses in some cases.

Taxation is one element to consider when choosing a business structure for your company. One unique aspect of Limited Liability Companies (LLCs) is your ability to decide how they will be taxed. That choice determines which LLC tax benefits you get – and how you will file your taxes. Either way, you gain more tax advantages with an LLC than you will if you choose a sole proprietorship. This overview reviews the tax advantages of LLCs and how you might be able to take advantage of them.

How Is an LLC Taxed?

Generally, the IRS does not tax LLCs directly. Unlike a corporation, an LLC does not need its own tax return. Its profits are disbursed to its members, who report them as self-employment income. This setup is known as a “pass-through entity,” meaning business income is treated as members’ personal income. A pass-through entity is the LLC default tax status.

The LLC tax rate is then based on the member’s individual income tax rate. So, tax brackets for LLCs depend on the member’s filing status and combined income.

However, the pass-through entity approach is not the only way to tax an LLC. One of the advantages of LLCs is flexibility with tax classification.

Tax Classification for LLC Structures

Tax classification is one of your LLC tax benefits. Your LLC is not limited to pass-through taxation. You and any other members charged with governing your LLC can elect to tax the LLC as an S corporation. This election classifies the LLC as a corporation for tax purposes and requires the LLC to file a return as an entity. You can change the tax classification by completing Form 8832, Entity Classification Election.

Mainly, the S corporation classification allows you to save on Social Security and Medicare taxes since members and managers gain employee status. The members and managers also avoid paying self-employment tax. However, it introduces the double taxation issue; the LLC must pay a corporate tax rate, and the members must pay personal income taxes on their LLC income.

If you choose pass-through taxation, your return requires a Schedule C for single-member LLCs or a 1065 Partnership Return for multiple-member LLCs. In some cases, going the pass-through route produces fewer taxes than if you file as an S corporation and pay corporate income tax rates. Since every business is different, you can’t know which route is best for you unless you audit your financial records.

Tax Advantages of LLCs

LLC tax benefits are most evident if you switch from a sole proprietorship to an LLC. Here are the advantages business owners discover when they form an LLC.

Flexibility

LLCs are different; you can treat LLC profits as self-employment income and file a personal income tax return. Or you can elect to have your LLC treated as an S corporation for income tax purposes and enjoy corporate tax benefits. When you choose a sole proprietorship or a corporation, you don’t have options regarding how you are taxed.

Corporate Tax Deductions

If they choose S corporation status, LLC tax benefits include the same corporate tax deductions. Popular deductions include:

  • Insurance: Premiums paid for health or disability insurance are deductible. These policies can be available to members, managers, executives or employees. If the LLC pays for the premiums, it can deduct that cost.
  • Vehicles: Vehicle deductions apply to company fleet vehicles and reimbursements to employees when they use those vehicles. You can also receive the deduction if you lease vehicles for company purposes. The requirement is the vehicle, and any expenses tied to it must be for business use only.
  • Home office: LLCs are an excellent entity for at-home businesses, and now the IRS allows reimbursement for those expenses. However, there are requirements. For example, the home office must be reserved for business use, including administration and management. Reimbursable home office expenses include maintenance, cleaning, telephone, utilities and insurance. The IRS determines the deduction by the square footage in your home used by the LLC.

Other relevant business expenses may also be deductible. Since excessive deductions lead to audits, you must discuss deductions with your tax professional before finalizing them in a tax return.

Pass-Through Deduction

The Tax Cuts and Jobs Act (TCJA) added the latest LLC tax benefits. This act allows LLC members to deduct up to 20% of their business income before calculating tax. If you don’t choose S corporation tax status for your LLC, members can often avoid higher self-employment and income taxes with this deduction. It’s just another benefit to weigh when deciding between S corporation and pass-through taxation.

Legal Disclaimer: This article contains general legal information but does not constitute professional legal advice for your particular situation and should not be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed in your jurisdiction.

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How to Get Your Finances Ready to Buy a House

Home Buying Financial Readiness

In fact, your finances are so important that you’ll want to start working on them well before you’re ready to apply for a mortgage. That way, if you need to improve your finances or your credit, you’ll have some time.

We’ll delve into tips about how to get your finances ready to buy a home so you can prepare for the process.

Step 1: Know what lenders are looking at when assessing your finances

When you apply for a home loan, lenders want to assess whether you’ll be able to pay them back. They’ll check to see that you have a steady income and look at how much cash you have available to cover a down payment, closing costs, taxes, and other expenses. Recent banking activity, investments, and other aspects of your finances will come under the microscope too.

If you’re a candidate for a no-down-payment loan, such as a VA loan through the Department of Veterans Affairs, you’ll need documentation to prove it.

Lenders will also check your credit to assess your history of paying your debts and look at how much outstanding debt you have.

Different lenders may look at different things when checking your finances, but the goal is the same — to help decide whether to risk lending you money and how much interest to charge. Here’s a list of what lenders are likely to consider.

    • FICO® credit scores and credit history
    • Down payment amount
    • List of assets (stocks, real estate, etc.)
    • Income and employment history
    • Tax returns
    • Bank statements for two to three months
    • Desired loan amount compared to the value of a home
    • Total debt compared to income — your debt-to-income ratio
    • Rental history (if you’re currently renting or have rented in the past)

To improve your chances of getting a home loan with the best possible terms, you should save as much as you can for your down payment, get your debt-to-income ratio under 43%, and do what you can to improve your credit scores. Specifically, we’re talking about the scores compiled by Fair Isaac Corp., known as FICO, which are the mortgage industry benchmark.

Step 2: Take stock of your credit scores and credit reports

It’s not possible to say exactly how to raise your FICO® scores — everyone’s personal situation is different — but there are a few practices that can usually help, especially if you adopt them a year or more before you apply for a mortgage.

    • Pay your bills on time — Your credit scores will fall if you’ve missed payments on a credit card or another debt.
    • Use less of your available credit — Your credit utilization ratio, which measures how much debt you’ve taken on compared to what’s available to you, is an important factor in your scores. Using less than 30% of your available credit may lift your scores. Paying down your debts may also lower your debt-to-income ratio, another measure that doesn’t affect your credit scores but is used by banks to assess your creditworthiness. (We’ll explain later.)
    • Hold off on opening new credit accounts — When you apply for credit, a lender will initiate a hard credit inquiry, which will have a temporary negative effect on your scores.
    • Maintain a mix of credit accounts — Your credit scores are affected by what kinds of credit accounts you have, how old they are, and how many of them you have. If you’re managing a mix of different types of credit without trouble, you’ll look less risky to lenders. Note that you shouldn’t open new accounts just for the sake of creating this mix (see point above).

If you have poor credit and stick with these approaches, your credit scores are likely to rise over a period of months. If your credit improves, lenders may see you as a better risk and charge you a lower interest rate on your mortgage.

Why should you worry about your credit scores? Imagine getting a $250,000 mortgage that lasts 30 years and has a fixed interest rate. Take a look at the table below to see how credit scores affect how much you could pay just in interest (not counting the actual money you borrowed) over the life of the loan. You can plug in your own information on FICO’s site to get a better idea of what your interest payments could be.

FICO® score APR Total interest paid
760 to 850 2.422% $101,970
700 to 759 2.644% $112,384
680 to 699 2.821% $120,811
660 to 679 3.035% $131,145
640 to 659 3.465% $152,384
620 to 639 4.011% $180,245
Note: Rates change frequently. The rates in this example were selected on Oct. 7, 2020.

Step 3: Save for your down payment: Bigger is better

You should save as much as you can for a down payment. A bigger down payment means you’ll own more of your new home from the start. This makes you a lower-risk borrower in the eyes of lenders and usually translates into a lower interest rate on your home loan.

Another reason to put down more cash is to avoid private mortgage insurance or PMI. Most lenders will require you to buy PMI — which protects the lender in case you default on your loan — if your down payment is less than 20% of the purchase price of your home.

The cost of PMI depends on the type of mortgage you get, how much you put down and some other factors, but usually costs between 0.5% and 1.5% of the loan amount each year and can add up to thousands of dollars.

Plus, you’ll want to factor in additional closing costs, which can include home inspections, an appraisal, and escrow costs, like homeowners insurance and property tax payments.

Step 4: Measure your debt-to-income ratio: Getting to 43%

Your debt-to-income ratio, or DTI, — which measures your outstanding debt as a percentage of your income before taxes — is used by lenders as another way to gauge your ability to repay your mortgage.

Your DTI ratio is calculated by adding up all your current monthly debt payments (think student loans, personal loans, credit cards) and your proposed mortgage principal, interest, taxes, and insurance payments, and then dividing that number by your gross monthly income (your income before taxes and other deductions).

For a qualified mortgage — a home loan that meets certain regulatory requirements put in place in 2014 to protect lenders and borrowers — you’ll need to have a DTI ratio of 43% or less.

Lenders can extend loans to borrowers who have a DTI ratio higher than 43%, but you generally need a compensating factor like high cash reserves, and even then it’s rare. Lenders consider a higher DTI risky for both you and the lender, as it suggests to them that you may struggle to pay your mortgage and keep up with all your other debts.

If your DTI ratio is too high for lenders’ comfort, you’ll need to lower your debt increase your income, or both. Since changing jobs or demanding a raise mid-mortgage application may not be practical, you may want to focus on paying down debt.

There are differing opinions about the best way to tackle the job. Some experts recommend paying off your smallest debt first — which research has shown can be effective. Some say it’s better to start with the highest-interest loans — that way you pay less interest over the long term. Still, others say that paying down your debt with the biggest monthly bill is the best way to lower your DTI quickly.

Whichever way you decide to go, keep in mind that the goal is to lower the amount of debt you have as a percentage of your income, so choose a method that you can commit to and that effectively moves you in that direction.

Tips for choosing a home you can afford

It may take a while for you to save for a down payment, lower your DTI ratio, or improve your credit scores. But if you work hard and stick with it over time, you may begin to see some rewards, like easier loan approval and better loan terms.

In the meantime, here are some things to consider as you think about what home you’d like once your finances are ready.

Set a budget

To figure out how much you can afford, consider getting preapproved for a mortgage. But when you do, remember that the lender is making a mostly mathematical calculation and not taking into account your comfort level or preferences. Make sure you’re comfortable with the amount you plan to borrow, even if the lender says you can borrow more.

Your mortgage payment isn’t the only expense you’re responsible for.

Narrow down location and neighborhood

Before you begin looking for a home, take some time to think about the type of environment you want to live in — city, suburbs or rural.

Next, narrow your search to a few neighborhoods. Here are some things to consider.

    • Safety — Some websites offer crime statistics by area. If you’re especially concerned about crime, check with the local police department.
    • School district — Houses in good school districts typically have higher property values. Look up ratings of schools in the area. But don’t rely on ratings alone. Check out online reviews or talk to parents who send their children to local schools.
    • Activities — Find out whether there’s a park nearby. Can you get to hiking trails quickly? What about playgrounds, pools or playing fields?
    • Convenience — Do a test run of your morning commute and check the drive time to the local grocery store. Time spent on the bus or driving to the store adds up and will affect how you spend your time when you move into your new home.

Type of home and other considerations

You’ve got the location and neighborhoods. But what type of home do you want — single-family, townhouse, condo or apartment? Here are some other considerations.

    • Condition — Move-in ready or fixer-upper? Consider how much you’re spending, whether you’re handy or hate the sight of a screwdriver, and how long you’re willing to wait to move in.
    • Resale — If you’re planning to stay in your home for a shorter time period, resale value will be more important than if you’re planning to stay long-term.
    • Other features — Central air conditioning, swimming pool, garage, granite countertops, hardwood floors, walk-in closets. Have some fun figuring out what you can and can’t live without — and how much it will cost you.

Source: creditkarma.com ~ By: Erin Dunn ~ Image: Canva Pro

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