Thinking About Buying Your First House - November 2011

By: Crissy Knibbe
With interest rates low, many renters are starting to think about purchasing a home of their own. While simple rental cost vs. mortgage cost comparisons can be very attractive, buying a home is a serious commitment, and there are many factors to consider:

How long you plan to live in the home

    Selling a home costs money. If you potentially may have to move in the short term, the value of your home may not have appreciated enough to cover the costs of buying and selling.

The length of time that it will take to cover those costs depends on various economic factors. Average appreciation tends to sit at around 5% per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs. The real estate market can be particularly volatile, however, and dramatic swings up and down are not uncommon.

How long the home will meet your needs

    What features do you require in a home to satisfy your lifestyle now? Five years from now? People tend to remain in homes longer than they initially intend, primarily due to the work and expense associated with moving. Therefore it is worth considering a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.

Your financial health - your credit and home affordability

    Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, people with poor credit tend to pay far more to borrow.

    Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. It is, however, important to stay within your comfort zone. Purchasing a house involves many up-front and ongoing costs, and the stress of worrying about those costs often outweighs the satisfaction that may come from owning a slightly nicer home.
    To determine how much home you can afford, talk to a lender or go online and use a home affordability calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the "28/36" rule applies, in today's home mortgage market, lenders are making loans customized to a particular person's situation.
    The "28/36" rule means that your monthly housing costs can't exceed 28 percent of your income and your total debt load can't exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios up to 40-60% or higher. While we're not advocating you purchase a home utilizing the higher ratios, it's important for you to know your options.

Where the money for the transaction will come from

    Typically, homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk for a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender. High-ratio mortgages can be a good option for those who haven't managed to save a large chunk of money (who has?), but naturally, these have additional costs associated with them.

The ongoing costs of home ownership.

    Maintenance, improvements, taxes, and insurance are all costs that are added to a monthly house payment. If you buy a condominium or townhouse, a monthly homeowner's association or maintenance fee will be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your Realtor® and your lender aware of your desire to limit these costs.



    If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.
    You can find a mortgage calculator at my website and also a rent vs. buy analysis.

There are still 100% financing loans available! There are loans for people with lower incomes and there are openings for "self help" homes. (ask me about it).

So, don't be scared to get what you want. Call me and

I'll help you get it!

 
 

Summer Fix-Ups - August 2011

By: Crissy Knibbe

    After this unusual weather, you're probably more ready for summer than usual. Now is the perfect time to get your house ready for warmer temperatures too. Kick off the summer with 3 easy projects and a few inexpensive ways to spruce up your home.

     GUTTERS Cold weather can cause gutter seams to leak and fasteners to pop loose. A leaf blower works great for blasting out leaves and other debris. Finish by sealing leaks with gutter sealant and replacing loose spikes with gutter screws.

    AIR CONDITIONER Get your central air conditioner system ready for summer by cleaning the condensation drain line. This small plastic pipe running from your AC unit outside is a magnet for algae and other gunk. To keep it from clogging, pour a cup of bleach through a funnel into the drain line's access hole (near the air handler unit located inside your house), let it stand 20 minutes, then flush the line with water.

    WINDOW SCREENS Before you hang your screens, give them a good scrubbing. First lay four 2x4's on the ground to create a frame, staple a sheet of plastic over it to make a homemade "tub." Fill it with warm soapy water and use a soft scrub brush to gently clean both sides of each screen. Rinse screens with hose and allow to dry. ~Info provided by BHG.
Have you wandered around in your house and wondered what would give it just a little boost, something that won't break the bank or take up a lot of time to accomplish? These ideas may not seem like it would put that spark in your spring, but trust me, it will.

    FIND FRESH FLOWERS Fresh flowers are an automatic room booster. Not only are fresh flowers visibly appealing, but most of the time, the aroma stimulates the appeal of the room, as well. You don't have to spend $100 on flowers from the florist either. Take your family for a drive up the mountain and pick some wild flowers alongside the road and make a family outing out of it. Grab your favorite silk flowers and make your own arrangement and then you can save them and make new ones for each season. Or sit down with your kid's make a bouquet of flowers out of paper, but whatever you do, DON'T pick them out of your neighbor's flower garden.

    CONCEAL THE CLUTTER A bread box can hold more than just bread! Put your sandwich bags and peanut butter in there to cut clutter in your cupboard or pantry and it will make it easier for you to just grab it for a quick breakfast or to make a sandwich for the kids' lunches. A simple island or cart with wheels adds storage and usable surface space to a modest size kitchen. Give your remote controls good homes and they'll be less likely to wander. Most importantly, train everybody to put remotes back in their homes and nowhere else. Store bulky gaming gear (balance boards, guitars, etc) in a storage ottoman. Tired of looking at your shelves lined with DVD's? Put them in decorative storage bins or baskets. Label them kids' movies, mom & dad movies and video games. That way, you will know exactly where to find the movie you're looking for. If you don't want to use the baskets or bins, there are media storage containers that hang on the back of doors or small enough to hide under the bed. If you just have outgrown certain DVD's or games, try downsizing by swapping them with friends or selling them (swapadvd.com, swaptree.com or bookins.com).

    CHANGE UP THE CURTAINS Simply changing the curtains will transform the room that you're bored with. Put up sheers with a neutral bright color to let the most natural light in or get creative and unite colors and layer patterns for a more updated visual appeal.

Just remember, you don't need to spend a million to look like a million.

 
 

The Market is Hot, Hot, Hot - June 2011

By: Crissy Knibbe

    June is the start of summer and, usually, one of the hottest months in real estate, however, the real estate market is already HOT HOT HOT! Market valued homes are selling faster than we can put them up for sale. With reasonable prices and interest rates still low, buyers that have been sitting on the fence the past year or so, have hopped off and are enjoying the benefits of homeownership. Those of you still teetering on the edge of that fence, you may want to climb off and reap the benefits yourselves. There are some things you must do before you list or buy.

    One of the hardest, most important decisions homebuyers face is how much to offer for their home and the glut of information on the web about real estate only makes buyers even crazier than the decision itself does.  Supply, demand, foreclosure rates, mortgage rates – buyers think they need to run spreadsheets and do fancy math to make a smart offer.  And THAT can be super intimidating. But the fact is there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don't get the house!)  And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash!)

Step 1:
What do the "comps" say?

    First things first. When it comes to pricing a home, or making an offer to buy one, the 'first thing" is the home's fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home's value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood, called the comparable sales, or comps.
    Ideally, look for comparables that are very recent sales (3 months or less before you're listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can: (a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and (b) result in a sale price at which the property will actually appraise, later on - avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.
    Also, looking at comps is the first step for locating a home's seller and prospective buyer in the reality-based universe of current home values.  The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it's worth today, as is the buyer's belief that the place was worth $100K less at the trough of the market, in 2009.

Step 2: 
What can you afford?

    This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.)
    Buyers – it's a must to make sure that your offer price for any given home falls within the range of what is affordable for you.  This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you'll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you'll need to conserve cash, or has HOA dues you hadn't planned on, you may need to rejigger your offer accordingly.

Step 3:
What's your competition? (And what's theirs?)

    This is another step at which it's critical to check in with your agent. You need to know what level of competition you'll face – whether you are a buyer, or a seller.  As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this).  Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold. The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!)
    Buyers should also be cognizant of the competition level they will face for homes.  Believe it or not, even on today's market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home's neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers.
    Your agent can also brief you on: (1)  The number of offers – if any - that have been presented on "your" property (which the listing agent will usually, gladly tell).  If there are other offers, you'll want to make a higher offer to compete successfully against them; and
(2) The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have.  (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result!)

Step 4: 

How much do they need to sell (or buy) it?

    Buyers: Has the listing in which you're interested been reduced at all?  By how much?  Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell? Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work.  Of course, all of real estate is hyper local, so it's important to understand how motivated buyers are in our local market, generally speaking, before you set your list price.
    There's a number of clues to critical indicators of buyer and seller motivations: * how many homes in your target property's area have had at least one price reduction, * how likely a home in the area is to have multiple price reductions. The higher these numbers are, the stronger of a buyer's market it is, and the more bargaining power buyers likely have. And if you're the seller, the higher these numbers are for your area, the lower you may need to price your home to be successful at getting it sold.

Step 5. 

How much do you want to buy, or sell, the place?

    Step #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price.  This step is all about you – what's your level of motivation?  Now, buyers, you certainly shouldn't offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around.  But within the range of the home's fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.

    Sellers: think of your list price as the most powerful marketing tool at your disposal. If you really want or need to sell, get aggressive about setting your price as low as what makes sense for your home's value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.

    If you need a professional to help you sell your home or help you buy a new one, I am available. I take buying and selling real estate seriously and so should you. I am driven to provide the best possible care and service to all my clients, old and new. I am caring, creative and committed in everything I do.