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5 Reasons Millennials Choose to Buy

  • “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
  • The top reason millennials choose to buy is to have control over their living space, at 93%.
  • Many millennials who rent a home or apartment prior to buying their own homes dream of the day when they will be able to paint the walls whatever color they’d like, or renovate an outdated part of their living space.
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Why Getting Pre-Approved Should Be Your First Step

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.” 

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

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Top 5 Reasons You Shouldn’t FSBO

In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.

Here are the top five reasons:

1. Exposure to Prospective Buyers

Recent studies have shown that 95% of buyers search online for a home. That is in comparison to only 17% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

2. Results Come from the Internet

Where did buyers find the home they actually purchased?

  • 49% on the internet
  • 31% from a Real Estate Agent
  • 7% from a yard sign
  • 1% from newspapers

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

3. There Are Too Many People to Negotiate With

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:

  • The buyer who wants the best deal possible
  • The buyer’s agent who solely represents the best interest of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies, which work for the buyer and will almost always find some problems with the house
  • The appraiser if there is a question of value

4. FSBOing Has Become More And More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.

5. You Net More Money When Using an Agent

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

A study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases, may be costing themselves more, by not listing with an agent. One of the main reasons for the price difference at the time of sale is: 

“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6% this year.

Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more?

Bottom Line

Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

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Real Estate Industry News: Tax Reform Plan Affects Housing

Housing experts point out the irrelevancy of mortgage deduction risks due to a tax reform plan that encourages homeowners to take a standard deduction instead of itemizing. At the same time, landlords and investment property owners continue to receive a property tax and mortgage interest deduction.

If predictions come true that more people will rent instead of buying a home, it’s a better time than ever to buy an investment property. The latest real estate industry news points out the mortgage interest deduction has often spurred home buying, particularly with people who reduce their tax liability by itemizing deductions. According to an article by therealdeal.com, homes throughout the United States are selling at the fastest clip in the last three decades.

However, the latest tax reform measures would likely shake up the housing market.

Reducing the inventory of homes

The inventory of homes is already at a low, but tax reform will likely cause an even greater inventory crisis. Experts point out the new tax rules would say people don’t have to pay capital gains on home sales if they’ve resided in a home for 5 of the last 8 years. A person may only sell once every five years in order to reap the capital gains exclusion.

Currently, homeowners simply need to live in a home 2 years in the past 5 year period immediately preceding the sale. Home flippers who waited the full 2 years will have to come up with a new plan for overcoming the capital gains taxes.

Catering to the rental market

While wealthy people grabbed a lot of the inexpensive homes for sale during the housing decline, a number of everyday investors got into the landlord business in recent years. People who own rental properties continue to deduct mortgage interest and property taxes as part of their expenses. Landlords that provide their tenants with utilities also deduct electric, water, and other utilities.

With tax reform protecting landlords, it’s a great time to hunt for an investment property. Some of the most lucrative rentals are starter homes with three or four bedrooms, at least two bathrooms, and between 1,000 and 2,000 square feet of living space. When buying a rental, look for fenced backyards and laundry rooms.

While tax reform will likely impact the housing market, experts point out that it’s still better to own than to rent. Homeowners continue to build equity which creates greater wealth. Although most middle-class people will take the standard deduction instead of itemizing, tax reform is not likely to derail the American dream of home-ownership.

At Sunbelt Real Estate, we show aspiring homeowners the steps on the “housing ladder” so they can build wealth. For more of the latest real estate industry news, please contact us.