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Home Ownership is Key to Wealth Building

Home Ownership is Key to Wealth Building

Home Ownership in America

It has been an established financial principle that home ownership is key to wealth building. While the economy has been in recovery and the housing industry is making a comeback, it is a good time to reevaluate whether home ownership is the right choice for you, if you’ve been on the fence.

The Joint Study for the Nation’s Housing of Harvard University is an institution that studies and reports on housing’s critical role in the American economy and in communities. Here are some key points from the most recent study of housing:

homeownership is key to wealth building

 

A Home of One’s Own

Owning a “place of one’s own” has long been integral to the American Dream. Among every demographic today, home ownership is a desirable path for the majority of people. When most of us investigate the potential of buying a home, we have intrinsic, esoteric reasons, and we have analytically calculated reasons. We use both sides of our brains to make housing decisions.

What Americans Think About Buying A Home

The Case-Shiller Report of Home Affordability shows that in 2017 it is cheaper to buy than to rent in ALL of the 100 metropolitan areas in the country. Add to that the fact that rents have increased over the last few years, and are projected to increase another 3% – 6% throughout 2018. Rents are increasing more than home values.

According to the Federal Reserve’s Survey of Consumer Finances, a typical homeowner’s net worth was $197,500, while that of renter’s was $5,200 as of 2017 (a decrease from $5500 in 2013). Given that home prices have risen by nearly 20% since then, according to Federal Housing Finance Agency the wealth of home owning Americans would have grown even more.  That is, a typical homeowner will be ahead of a typical renter by 45 times, on a lifetime financial achievement scale.

Historically low interest rates combined with reasonable home values has maintained the affordability of real estate. While home values have increased by 4% nationally over last year, which is a normal, healthy percentage, these values will only continue to increase. Buying a home is a better option for those who are capable.

*While news outlets love to fret over a looming “housing bubble”, the statistics clearly show that home values are increasing in a healthy fashion.

Home appreciation is happening in most areas of the country, at a pace that is normal and healthy, and also at a pace that is double that of wage growth in most of the U.S. As economic conditions improve, more Americans have job stability and savings to seriously consider home ownership.

What Americans Feel About Home Ownership

The Harvard housing study reveals the top five reasons why home ownership is a value to Americans.

  • Home is a place to raise children and provide a good education.
  • Home is a place of safety.
  • Owning a home provides more space for your family.
  • Owning a home provides control over your own living space.
  • Home ownership is a good way to build wealth to pass on to your family.

Home buying motivations for most Americans include having control and freedom to create the home they want. To paint the walls and choose the flooring, and to decorate to their heart’s content. Parents want a yard for their children (including the fur children). They want to choose a home in a desirable school district. In short, they want more control over the lifestyle they want to live. Homeownership facilitates all of the above.

Wealth-building is a value that crosses from right-brain to left-brain very easily. Having wealth to pass on to family makes sense to both the rational mind and the heart. The number one way to build wealth for most Americans has been and continues to be home ownership. Homeownership is key to wealth building, and will continue to be so in the future.

Homeownership is Key to Wealth Building

Case Study: Karen’s Parents

When my dad retired from the Navy, my parents bought a 2.5 acre parcel in a small town in Florida. They built a house, then subdivided the lot, then built another house. They sold the first house. Then they sold the 2nd house, bought a fixer-upper (for cash) and moved into it, and fixed it up. Two years later, they sold that house for double what they paid for it. (it was 2006, the top of the market…what excellent timing!) They bought a home that my mother now lives in, and all along the way invested extra money in stocks. (the stocks haven’t done as well…the real estate did!) All of this took place over 35 years, of course, but that’s what real estate is…a long-term wealth-building asset. It’s not an ATM, to be refinanced at every opportunity.”

 

Helpful Resources Regarding the Benefits of Homeownership:

If you’re ready to make the step to homeownership, give us a call, we can help you through the process. Chris Highland, 301-401-5119. Or Contact Us Here.

 

Top Homeowner Regrets – How to Avoid Buyer Remorse

Top Homeowner Regrets – How to Avoid Buyer Remorse

Homeowner Regrets (a.k.a. Buyer’s Remorse)

A recent survey of thousands of Americans found what many of us refer to as “buyer’s remorse” among homebuyers. While I’m not fond of rehearsing people’s pain, the top five homeowner regrets are instructive to those who are considering a home purchase. The latest survey shows that 51% of homeowners had regrets about their current home. That’s worth listening to.

Today, 44% of Americans have a regret about the process they went through when buying their home, a slight decrease from 46% five years go, When Trulia first conducted this survey. When buyer’s are competing for a limited inventory, as we have seen this year in Frederick and central Maryland, they need to resist some of the temptations to “settle” for something that they will regret later.

Top 5 Homeowner Regrets

Incidently… (41%) Renters wish they had purchased a home instead of renting.
1. (33%) Homeowners wish they had purchased a larger home.
2. (26%) Homeowners wish they had done more remodeling when they bought the home.
3. (16%) Homeowners under age 34 wish they had been more financially stable.
4. (15%) Homeowners wish they had had more information about the home before buying.
      (down from 22% 4 years ago.)
5. (13%) Homeowners who are parents wish they had chosen a home in a different school district.

If you are ready to enter the real estate market, knowing the right questions is the best way to minimize the chances of home buyer’s remorse. You will do well to ask yourself these questions before you even start your home search:

How Soon Might We Outgrow the Home?

1. Will we outgrow this home in a couple of years? In today’s real estate climate, it’s become standard advice to plan to be in your home a minimum of five to seven years. When the market is healthy, homes appreciate an average of 3% to 6% a year. home buyers remorseYou can estimate that the length of time it will take to build enough equity to be able to sell the home in a healthy market will be around five years at a minimum. If you are more conservative, you may want to consider seven to eight years as a better estimate.

Whether newlyweds, or a growing family, or a family with older children, it’s always wise to think about the “What-ifs” in life. While we don’t have a crystal ball, we can take a look at future possibilities and consider what life may throw at us.

How Likely Are We to Do the Necessary Renovations or Remodeling?

2. Do you have the budget or skills to do the maintenance, repairs or remodeling that a home might need? If you plan on selling sometime, the home will need to be current with the market standards for the neighborhood or area. Make sure that you can afford to invest in your home. Maintaining and repairing your home is the best way to get top dollar when it’s time to sell.

Many times over the years we have seen home buyers who fall in love with a home that has a major flaw. As we point out the difficulty they might find when they want to sell, they promise that they will do the work to correct the flaw. Good intentions. But far too often, the work needed to remedy the problem never happens. Life is busy, money is invested elsewhere. So, we like to say, “really, ask yourself, how likely are you to get it done?”

How Stable is Our Situation…Really?

3. Are you comfortable with the amount of your down payment? With your monthly payments? When you sell in the foreseeable future, will you have enough equity? Are you comfortable with your employment situation? Are you comfortable with the upward momentum, or lack of, that your employment situation will bear out? Although no one can know for sure, you need to feel confident in your future.

Do We Have The Complete Story?

4. Do you have all the information you need about the house? the neighborhood? Do you have information on the utility bills, the taxes and the general maintenance the home will need? Are you clear on the details of your mortgage? Have you made a budget that reflects the true expenses of owning the home?

home owner regretsRemember, if you are a new homeowner, there will be expenses you didn’t carry as a renter. First-time home buyers can often be surprised by important issues simply because they haven’t had the experience of home ownership.

Make sure you use an experienced buyer’s agent who will give you good advice, and keep you from the major first-time home buyer mistakes.  Make sure you have everything you need to make an informed decision.

Have We Checked Out the Schools?

5. More than in the past, school districts make a big impact on home buying decisions. Although no  one can guarantee that districts won’t be reconfigured as populations change and grow, checking out the school district of a home is an important step for parents.

Many studies show that school districts can impact home prices. A Redfin study from 2013 found that there is a correlation between home values and school districts:

“Using a huge database of about 407,000 home sales and nearly 11,000 elementary school districts in 57 metropolitan markets, the study concluded that, on average, buyers pay $50 more per square foot for homes in top-rated school districts compared with homes served by average-rated schools.” See the Washington Post Article.

Not all neighborhoods and communities are subject to these correlations between school districts and home values, but it is important to research. Home buyers who don’t have children living with them will also want to pay attention to this data, if the area where they are considering a home purchase is affected by school district variations. Make sure you choose a Realtor® who knows the local neighborhoods and can point you to the right resources.

Use A Qualified Buyer’s Agent

There are a lot of factors that affect home values in a community, from home construction, to local amenities, neighborhood location, to commuting availability…the list is long and varies. It is in a buyer’s favor to use a qualified buyer’s agent to help them purchase a home that will not only suit them today, but continue to be a great asset. Home buyers should never forget to think of resale while they shop.

 

As much as possible, make sure you get your questions answered by all real estate professionals involved in your purchase. Even though you’ll probably need to move quickly in a competitive market, don’t let anyone rush you into anything that will make you have homeowner regrets of your own. Doing your research ahead of time can save you some #facepalm moments! Make sure you can count on your real estate agent as a trusted adviser, so you will not have home buyer remorse.

See the report at Trulia.com.


Contact Chris Highland for Buyer Representation. 301-401-5119. His 25+ years of real estate experience serve as a great resource to clients as they maneuver through today’s complex real estate transaction.


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What’s My Home Worth?


 

What Does A REALTOR Do?

What Does A REALTOR Do?

A Day in the Life of A Realtor®

What Does A Realtor® Do For You?
A Realtor.com survey found that for every hour a real estate agent spends in your presence, he/she will spend an average of nine hours out of eyesight working on your behalf. What does a Realtor® do all day, anyway? Unlike a lot of professions, where people are paid hourly or are on a salary with weekly or bi-weekly pay checks, in most situations real estate agents don’t get paid until the home sale/purchase closes. In the mean time, they are doing multiple tasks behind the scenes for weeks, sometimes even months, to get a home transaction to the settlement table. In today’s complicated real estate environment, there are hundreds of tasks. While each client and each home sale is different, here’s a look into the what, when, where and why in the day of a real estate agent.

Knowledge of the Local Market

Both buyer’s agents and seller’s agents must keep up with the inventory of the homes that are on the market. They must know details of homes that have recently sold, and the latest market statistics. This includes every neighborhood, community and area in which they work. Proficient agents must know the market trends, like how long homes are taking to sell, what the average and median prices are, how much seller’s are getting in sales price compared to their list price…and much more.

Staying on top of the local market takes hours of research, whether it’s combing the multiple list service daily to see what’s new on the market, or seeing what the sales prices were, or how much homes are selling for on average compared to their list price, or conducting numerous comparative market analyses (CMA). The inventory and data is changing every day and requires constant review.

Market knowledge also requires that agents personally tour homes, whether through broker’s opens or by previewing the home personally. Real estate agents must be familiar with nuances in home styles, floor plans, construction details, and much more, to provide information to their buyers and their sellers. Knowledge of the lifestyle and amenities afforded by various neighborhoods and communities is crucial to help buyers find their dream home.

Knowledge of Real Estate Laws and Practices

To protect consumers, the Maryland Real Estate Commission has oversight of roughly 46,000 licensed real estate agents. Federal oversight includes the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission, and various Fair Housing laws. Buying and selling real estate is complicated in 2017 and is governed by state and local contracts and addenda. Incidentally, Maryland contracts are upwards of 35 to 50 pages these days, depending on the jurisdiction. A Realtor® must stay aware and informed on all real estate laws and forms used in the process.

Today’s constantly advancing technologies affect real estate like virtually no other industry. Real estate agents must stay on top of the latest technology tools available to best serve their clients. In an effort to be a trusted adviser to their clients, Realtors® take hours of required continuing education every two years. As well as credited classes, many take untold hours of non-accredited education to enhance their business acumen, and their skills.

Communication and Follow-up

Much of a real estate agent’s day is spent communicating. The mobile phone is a constant companion. Text messages, emails, and yes, old fashioned phone calls are an ever-present aspect of business. Communication can come from buyers, sellers, cooperating agents, lenders, title services, inspectors, office personnel, or third party vendors. Follow-up is vital in today’s on-demand world of business. For a real estate agent, the work day rarely, or dare we see never, ends at 5 pm Friday afternoon.

Managing the Real Estate Process

Buying and selling real estate is never an event. It’s a process. Like an orchestra, the real estate process has many moving parts and many human beings playing their parts. The Realtor® is the conductor. what does a realtor doFrom the first connection with the home buyer or home seller to the crescendo moment when they hand over the keys, the agent manages numerous aspects of the real estate transaction. There are literally hundreds of tasks that go into ensuring a successful outcome.

A Realtor® is a rare breed of business person, motivated by the desire to help people. Buying and selling a home is often the most complicated and expensive purchase of their lifetime. Buying or selling a home can be among the top stressful life events for people. Additionally, it is often accompanied by stressful life circumstances, like a new relationship, a divorce, new marriage, new baby, downsizing, change in job, relocation, and many other positive and negative life changes. Realtors® regularly find themselves in the role of manager, scheduler, concierge, researcher, paper-pusher, negotiator, coordinator, mediator, shrink/marriage counselor, child entertainer, messenger, problem-solver, and all-around chief cook and bottle washer, to name only a few!

Local Realtors® offer their buyers and sellers the benefit that comes from immersing themselves in every aspect of their local market. Every day of the year. To assure the best possible outcome in your real estate goals, take advantage of the expertise of a local qualified Realtor®. Make sure you choose a real estate professional that you can use as a trusted adviser.

For more information on choosing a REALTOR®, check out this list from some of my favorite bloggers:

Documentation for Your Frederick MD Mortgage Lender

Documentation for Your Frederick MD Mortgage Lender

Gather Your Documentation

Before you make a loan application, you’ll need to gather up some documentation for your Frederick Md mortgage lender. Each lender has their list of needed items, but most lists include these basic things:

  • Your landlord’s ( for the last 2 years) contact information. (First-Time Buyers)
  • W-2’s for each one on the mortgage
  • Recent paystubs for each borrower
  • The last 2 years tax returns for each borrower
  • If you are self-employed, an up-to-date Profit & Loss statement with the 2 previous years’ tax returns
  • Information on all outstanding loans, including credit cards
  • The last 3 months’ bank statements for all bank accounts
  • If you filed Bankruptcy within the last 7 years: You’ll need discharge documents, a written explanation of why you filed bankruptcy and proof of clean credit after filing.

Come Clean from the Beginning

Sometimes buyers try to withhold financial information from the lender, or forget about information that should be disclosed. With today’s record-keeping, it’s fairly certain that the information is going to surface during the loan process, so it’s really best to bring everything to the lender.

documentation for your frederick md mortgage lender

If you don’t disclose everything and some damaging information comes out during the process, it just creates a lot of drama along the way, and can have a negative effect on the loan process. Better to know upfront. Lenders are well-versed in the various problems borrowers can face and if they know in advance, they can come up with a possible solution that much sooner.

Two Main Players in the Loan Process

There are basically two parts to the loan process, the loan officer and the underwriter. Kind of a Yin and Yang. The loan officer is the salesman. He is “packaging” you so that you look your best to the underwriter. The underwriter is trying to find anything about your file that would warrant his denial of your loan. The checks and balances of this system work to make sure both parties, the bank and the borrower, are getting the best consideration.

Know Your Credit Scores

Before you begin the house hunting process, make sure to keep a close eye on your credit score. Credit is now more important than ever in getting the loan and getting the best rates. Remember that the credit score that a lender pulls is going to be different than the score you get from a service like Credit Karma, or similar tools.

Additional Reading: Credit Score Articles Credit Score first time buyers

You can and should get your free credit report from each of the three credit reporting bureaus every year. (Experian, TransUnion, and Equifax.) If you time them correctly, you can get a report every 4 months, which is sufficient to keep up with your credit. Checking periodically for fraud is just one reason to keep up with your report.

If you find that your score needs improvement, you can take steps to improve your score, with what is known as Credit Score Enhancement. By taking the correct steps, you can often improve your credit score in 6 months.

Getting a head start on the documentation for your Frederick MD mortgage lender will help you move through the process much more efficiently and quickly.

 


Contact Us for our list of preferred Frederick Md lenders. Chris Highland
301-401-5119
Additional Reading:

Tips for Making A Mortgage Application

Tips for Making A Mortgage Application

Many first time buyers may not be familiar with much of the mortgage application process. There is some preparation involved, usually starting weeks or even months before a buyer decides to purchase a home. Here are 5 helpful tips for making a mortgage application that will end in success:

Five Tips For Making A Mortgage Application

1. Credit Scores Count. Before making a loan application, probably months before, do everything you can to shore up your credit scores. If you see an error on your report, get it corrected immediately. If you’ve made a late payment, contact the creditor to see if you can resolve the issue.

Sometimes buyers need professional help in credit enhancement. A credit specialist can make a difference in a relatively short amount of time. Sometimes hiring a specialist, who has the experience and knowledge of the credit industry, can make a big difference in your ability to get financing, as well as your ability to get better mortgage rates. (We know a very good credit specialist who has helped a few of our clients.)

You should be monitoring your credit report regularly. With each of the three credit bureaus you may have one free credit report per year, so getting a free report every four months is advisable. Checking for errors and fraud is now a task that must be accomplished regularly.

See today’s mortgage rates

2.  Be prepared with documentation when you apply. At the first meeting with the lender, they’ll give you a list of items you’ll need to bring when you make the formal loan application. You should bring everything they ask, and be prepared to supply more information later, if required.

Sometimes buyers get weary of the amount of paperwork that is often required. If you start to feel encumbered, remember that the lender is about to put a lot of money out and they want to be assured that you are creditworthy, and that the home is worth what they are lending. (Remember the Golden Rule – He who has the gold makes the rules:)

Disclose: to make known; reveal or uncover; allow to be seen

tips for making loan application


3.  Disclose Everything when making a mortgage application.
Lenders will find out everything, so it doesn’t do any good to withhold information, thinking it may not come out. The loan officer will submit an IRS form 4506 (tax return request) and will know all about your income and deductions. To ensure a successful loan approval, it’s better that they find out any issues early on, rather than along the way or even worse, days before settlement. Then they will have time to figure out how to handle the issue. Loan officers are problem-solvers. You might as well be upfront and avoid any last minute problems.

Additional Reading:

Here’s a good checklist of documents you may need when you apply for a mortgage: Mortgage Checklist, from Gene Mundt, American Portfolio Mortgage


4. Be Patient.
Mortgage underwriting has become more complicated during these “post-bubble” days. It can take longer to be approved and it definitely takes more paperwork. Don’t add to the process with delays caused by dragging your feet on paperwork. The number one tip for making a mortgage application is timeliness.

tips for mortgage application


5. Be ready
to provide more documentation. Lenders often ask for more information, beyond what Fannie Mae, Freddie Mac or FHA/VA require. It doesn’t mean anything is wrong, or that your loan is in danger, necessarily. It just means the lender needs to document something else. Don’t stress about it and keep your eye on the prize.

Bonus Tip: Do not make any big credit purchases between the time you make loan application and settlement! No furniture, no cars, nada. These kinds of purchases will often knock your credit score down, just at the time when you don’t want to do anything to rock the boat.

Related:

Choose a reputable local lender, with a loan program that fits your needs. Contact us for our list of preferred local lenders.

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photo credit to miong on Flickr creative commons 2.0

What’s Going On with Mortgage Interest Rates?

What’s Going On with Mortgage Interest Rates?

Mortgage rates have been up and down between the high-3% and low-4% numbers recently. We often hear the question from potential buyers (and those refinancing) asking what the near future is for mortgage interest rates.  Disclaimer: Neither Chris nor I are mortgage experts. But we know a few people who are, and like to pass the question on to them. I reached out to one of our favorite lenders for some info:

What About These Historic Interest Rates?

“We have seen mortgage interest rates reach new historic LOWS this last two years,” explained Bob Drake, Branch Manager of Integrity Home Mortgage in Frederick, one of our preferred lenders. “Thanks in part to world events like Brexit, we watched rates bounce around in the mid-3% ranges last year, unheard of since rates have been tracked.”

And how does that affect the market?

“Due to historically low rates, we’re seeing a continual stream of buyers enter the market. We’re doing our best to educate buyers, especially Millennial home buyers, on how low these rates really are,” says Bob. “We haven’t seen rates this low in 60 years…and then, our grandparents were paying 4%, which is still higher than today’s 3.7% rates. People need to understand that their buying power is the highest it will probably ever be.”

What About the Future of Interest Rates?

The Fed raised the benchmark interest rate at the end of last year, and we’ve been hearing for months that the Fed is going to raise it again, that we should be ready for higher mortgage rates. But it hasn’t really happened, at least not significantly. And when rates have moved up, they’ve come back down again.

What can we expect for the near future? Most experts agree that there are reasons why rates are not higher and probably won’t be going up significantly for the remainder of 2017:  “Even if the Fed raises rates,” explains Bob, “it most likely won’t raise mortgage rates. Rates will remain low until the international market becomes stable. Honestly, predicting mortgage rates is nearly impossible these days because so many factors influence our financial system today.”

Internationally, things are not resembling stability.

For your research

Here are several sources of information on mortgage rate activity:

Bankrate.com has an interactive graphing tool that shows you what rates have done over a period of time. When you compare rates to several years ago…wow, you see what Bob was talking about above!

In most years, rates rise in the summer, and drift lower in the fall and winter.   Without big economic news, this holds true, according to the writers at The Mortgage Reports Blog. One has to admit, we’ve had some big economic news recently and often.

Generally, mortgage rates go down when the economy is performing weaker than expected, and they go up when the economy heats up.

Some news that will affect mortgage rates:

  • Housing markets are up in sales, and many markets are reporting increasing values.
  • Consumer Confidence is not only up, but more than predicted.
  • Builders Confidence is up.
  • The Fed is positive about economic activity improving.
  • Interest rates and oil prices tend to move closely together, according to Dan Green at The Mortgage Reports.

See Today’s Rates

Advice for Buyers When the Real Estate Market is HOT!

Advice for Buyers When the Real Estate Market is HOT!

In many towns and cities across America right now (Spring 2017) the market is hot… meaning the demand is high and the inventory is low. It can be a tough market for buyers, so here’s some advice for homebuyers in a hot market from industry veterans:

Setting the Stage for Homebuying Advice

Before I even begin, let me give you a word picture to get you in the right frame of mind: You set out on a nice day-trip from Frederick County, to visit some sights in Washington D.C. You know, take in some monuments or the Smithsonian. You head south at a nice leisurely pace, because, you know…Frederick County. As you get deeper into Montgomery County, you notice the traffic picks up, but that’s ok. You can maneuver just fine in the right lane, pass a slow-poke here and there.

Eventually, though, you’re going to have to face I-270, or the “Big-Ugly”, and then the beltway…I-495.  As you merge into oncoming traffic, it can feel like you’re about to enter the Indy-500…cars are whizzing by.. You (should) realize that if you don’t step into it, you’ll end up in a ditch.

Entering into a hot real estate market is very much like a NASCAR driver coming out of a pit stop at top speed. When competition is high and the number of available homes are low, you must be ready for a fast-paced market. You have to be ready to act quickly and decisively. You Must Bring Your A-Game!  What does it mean to bring your A-Game?

Proper Expectations

When buyers know what to expect in the market, they are better equipped to get the house they want. When they don’t give heed to their agent’s advice, we (agents) often resign ourselves to the fact that we’re going to write a couple of offers with them. We’ll watch them lose out a couple of times in a competitive market. Tip: If you believe that your agent is unqualified to provide you with strategic advice, get a different agent.

  • “No,” we tell them, “you’re probably not going to win in a competitive situation when you offer that much below list price. You might even have to offer more than list price to win.”
  • “Well,” we say, “you need to at least have your house listed on the market if you expect to win in a multiple offer situation. You’ll probably even stand a better chance if it is already sold.”
  • “Ok, but if you wait until next week to see it, I can’t promise that house is even going to be on the market anymore.”
  • Actually,” we try to counsel ahead of time, “the inventory is pretty low, so there might not be another one like this next week. Keep that in mind when you write up this offer.”

We get it. You need to learn to trust us. We will work hard to earn your trust. We know that often, the third time is a charm (most of us figure it out by then, no matter what we’re trying to accomplish.) In a hot market, the best homes, when priced well, will go in days. And they’ll most likely have multiple offers. That’s the way it is.

Additional Reading:

  • Lynn Pineda, real estate agent and blogger in South Florida, among many good tips, also agrees with me, “When you locate a home that meets your wants and needs, don’t lollygag…” in her blog post, How to Buy a Home in a Seller’s Market.
  • Angela Duong, Northern Utah real estate agent, in her article 13 Things Buyers Need to Know in a Seller’s Market, has some good tips, like staying flexible and creative. Thinking outside the box can help you win in a competitive situation.
  • In his article Buying a Home in a Seller’s Market, Kyle Hiscock, real estate agent in Rochester NY, points out several considerations buyers should make to help them decide whether buying a home during a sellers market makes sense.

Pre-Approval

When you might face a multiple offer situation, you need to have every advantage. We advise buyers to speak to a local lender (we know a few good ones) before you even start your house hunting. Start the approval process, get your paperwork to the lender and at the very least get a pre-qualification…preferably even a pre-approval. When a seller gets 3 offers and one of them is from a buyer who is already approved, that buyer stands out and is a safer bet for the seller. Take the time to talk to a lender before you begin. You’ll know what you can afford, and you’ll know which loan product is right for you and for each situation. Take time to get your A-game on.

What about cash offers? It’s true, sometimes you’ll get beat out by a cash offer. But not always. It depends on the offer and the situation. The cash offer, as long as it’s within the seller’s expected price range, will be the winner. Everyone has different motivations, and they all play out in the negotiations.

Additional Reading:

  • Joe Samson, Calgary real estate agent, explains that if you’re serious about buying a home in this market, you’ll need to consider getting a mortgage pre-approval, in his article, Reasons Why You Need A Mortgage Pre-Approval
  • Tony Mariotti, mortgage lender and founder of RubyHome, explains the difference between a mortgage pre-approval and a pre-qualification, and why a buyer will be at an advantage with a pre-approval in his article, Mortgage Commitment Letter: How to Seal the Deal

Offer Your Highest and Best

When a buyer is in a multiple offer situation, we always ask them, “if you miss out on this house because you didn’t offer $5,000 or $10,000 more, will you be ok with it next week, or will you be upset? Because the difference of $5000 may only mean $25 to $50 on your monthly mortgage payment.”

If you really want the house, you’ll need to offer your highest and best. When there are multiple offers you can bet that someone else really wants the house, too. This won’t be the time when you get a bargain. You will need to offer current market value to win. This is the time when you have to know your mind, and decide, “how much do I want it?”

Additional Reading:

House to Sell?

If you have a house to sell before you can buy, many times in a hot market, you will find yourself competing with buyers who don’t have a house to sell. Certainly in price ranges below the median, which is about $300,000 in Frederick County right now. Often, in the move-up price ranges, you will find other buyers putting their best foot forward, many times with their home already on the market, maybe even already sold. Again, you’ll want to have every advantage on your side.

real estate successWe advise having your home listed on the market, or at the very least scheduled to go on the market within a certain time frame. Better yet, having the home sold gives you an even greater advantage. In a market with high demand, you can rest assured that your home will probably sell, given it’s in good condition and priced well for the market.

We understand that it is difficult to sell and buy at the same time. But remember, an experienced real estate agent has been helping people buy and sell for years, day in and day out, in all kinds of markets. We can help you thread that needle and maneuver through the process with the best possible results.

Additional Reading:

  • As Jeff Knox points out in his helpful article, Best Tips to Win in a Bidding War, having the strongest possible offer is the only way to win in a bidding war, which means you’re less likely to win it with a long list of contingencies.
  • Being as prepared as you can be ahead of time will always work to your advantage when buying a home in a hot seller’s market. Bill Gassett, Realtor in Greater Metrowest MA, has 20 tips for buyers in his article, 20 Things to Do Before Buying a House.

Trust Your Agent

The average consumer buys and sells a home every seven years. I’ll bet each time they buy or sell, the market is different, so their previous experience is often not relevant to the current market. An industry expert has helped people buy and sell hundreds of times, in all kinds of situations. Find a buyer’s agent who you can trust to guide you through the process. Your agent wants to be your trusted adviser, because they don’t win unless you win. In fact, they don’t even get paid unless you win!real estate agent trusted adviser

Work with an agent you have confidence in. If you aren’t convinced that they know how to navigate the rapids of a hot market, then move on. You need to work with someone you can trust. You need to trust that they have the knowledge and experience to help you get where you want to go, no matter what the current market looks like. You need to trust that they are giving their best to help you win. You need to trust their advice.

Get a good referral. Ask friends, co-workers and, yes, even family. Read online reviews and do your homework. This is probably the most expensive purchase most people make in their lifetime. Choose a trusted adviser. Choose wisely.

Use an Experienced Buyer’s Agent

Interview agents about their understanding of the current trends in the market. Are they familiar with the inventory, time on the market, and year over year trends? Your local real estate market is always changing. A veteran buyer’s agent has helped homebuyers in many different types of markets, whether a buyer’s market or a seller’s market, or transitioning markets. A buyer’s agent will negotiate on your behalf, representing your best interest. The best part is, the seller pays for the buyer’s agent in most situations.

Today’s consumers have a huge number of resources at their disposal with the many real estate portals on the internet, with handy apps and demographics at their fingertips. Many want to keep their anonymity until they are absolutely ready. But far too often, that anonymity costs them when they haven’t gotten ready to “merge onto the real estate highway.” They find the house they love, but they haven’t even talked to a lender, they don’t know what they qualify for, and if they have to sell their home first, they’re not ready.

Buying and selling real estate is a process, not an event. There is no need to go it alone. You can take the advice of a buyer’s agent from the beginning. They can help you find the home that is right for you. They can help you get the loan product that is right for you. They can help you navigate through the best offer strategy. They can help you negotiate in a hot market. Let a buyer’s agent do the heavy lifting for you!

Additional Reading:


Building Trust

The Highland Group has over 25 years of experience helping homebuyers and homesellers in the Central Maryland Area. Our specialty is helping clients successfully navigate the ever-changing real estate journey.


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About the Author: The above Real Estate article, Advice for Buyers When the Real Estate Market is HOT! was provided by Chris Highland, Realtor® and Regional Leader for eXp Realty. Chris can be reached via our contact form, or by phone at 301-401-5119. Chris has helped people move in and out of Central Maryland for the last 25+ Years.

Thinking of selling your home? Put our team’s marketing expertise to work for you, to get your home sold.

Real Estate Terminology – What is Absorption Rate?

Real Estate Terminology – What is Absorption Rate?

What is “Absorption Rate”?

The Absorption rate is roughly how long it will take the current homes on the market to sell. It’s an estimate, based on  the current number of listings and current sales. Because those two factors fluctuate from month to month,  absorption rate is a rough estimate. It’s an average of how many homes sell each month, based on a 6-month calculation, because anything less than 6 months is too small a sample, and anything greater than 6 months wouldn’t give an accurate picture of what’s going on with values in an area.

If I get the total number of homes that have sold for the last 6 months in an area, say a Frederick zip code or a Frederick County town or, better yet, a neighborhood, and then divide by 6, I’ve got an absorption rateAverage number of homes that sell each month.

If I take the total inventory, or how many homes are on the market in a given area, and divide by the absorption rate, I get the months of inventory, or how long it will take to sell all of the homes in the chosen area (if no more homes were listed).

Why is Absorption and Months of Inventory important?

These numbers are important to buyers as well as sellers. An absorption rate of about four to six months indicates a balanced real estate market.   Balanced means a market that does not favor the buyer or the seller.  An absorption rate of less than four months indicates a seller’s market.   An absorption rate of more than 6 months indicates a buyer’s market.

Home Sellers

To a seller, these numbers tell them whether their home is positioned correctly in the market. If they need to sell in 3 months and the absorption rate in their neighborhood is 6 months, then they will need to price their home to sell, without taking months to adjust the price as they test the market.

The absorption rate tells the seller what the normal time on market is for their current market. If their home doesn’t sell in the time that the average comparable home sells, then they know that something is amiss. They will know how accurate, or inaccurate, their pricing is when they find themselves still on the market after the average time for their area.

Home Buyers

For a buyer, the opposite can be discerned. If they see a home that has been on the market for longer than the average time for that neighborhood or community, they will think either two thoughts: 1) something is wrong with the house, or 2) the house is overpriced.  These homes often receive low-ball offers because of these perceptions.

Understanding real estate terminology, absorption rate for one, helps to navigate the market, negotiate and have proper expectations. Both buyers and sellers can learn how to get the best possible outcome in their market by understanding local market trends.

Contact us for a consultation to find out how much your home is worth in today’s Frederick Real Estate Market.

The Highland Group
Chris & Karen Highland 
301-401-5119
eXp Realty – 410-777-5714

Should I Get A 15 Year Or 30 Year Mortgage?

Should I Get A 15 Year Or 30 Year Mortgage?

Should I Get A 15 Year or 30 Year Mortgage?

This past year has continued to be a time of new lows in mortgage rates; the 30-year fixed-rate mortgage averaged below 4% for last year (2016), setting a new all-time record lows. The 15-year fixed rate also averaged at historic lows, under 3%. With these super low rates, should you consider the difference in a 15-year or 30-year mortgage?

In 2017, rates are projected to go toward the mid- to upper-4% range. Even so, these are still super low rates historically.

There are many choices in mortgage products today, not just the 30-year mortgage and a 15-year mortgage. When rates are so low, many buyers can take a second look at something other than the typical 30-year mortgage. Many buyers, after seeing the list of mortgage rates, wonder, should I get a 15 year or 30 year mortgage? Good Question.

What is the difference between the 15-year mortgage and the 30-year mortgage?

Besides the obvious pay-off being half the number of years, the difference between the two is mostly experienced by home owners in the monthly mortgage payment. An example of a $300,000 home:

Sample Scenario of two $300,000 mortgages:

$300,000 Home Monthly Payment Life of Loan
Total Interest Paid
30-year-fixed mortgage = 3.5%   $1,347    $484,968   $184,968
15-year-fixed mortgage = 2.8%    $2,043    $367,741     $67,741
% Difference 48% higher payment 24%  savings  63% savings

 

You can use this handy mortgage calculator from Bankrate to see the difference in the two mortgage products. You can see that this 30-year fixed mortgage has the advantage of more reasonable payments, while the 15-year fixed mortgage is geared towards long-term savings overall.

The choice between a 15-year or 30-year mortgage comes down to your comfortable monthly tolerances. Some people tell me they don’t want to be “house poor”, or to say they don’t want to have only a little left at the end of the month after paying their mortgage. The 30-year fixed mortgage is the tool that will give you the lowest monthly payment possible by stretching out those payments over 30 years. The cost is more money payed to interest over those 30 years.

With a 15-year mortgage you are paying more towards the balance each month than you would with a 30-year mortgage. Some people live comfortably with higher mortgage payments and less expendable income. Some people buy well below the maximum of what they can afford, using a 15-year mortgage. There is an advantage to having your mortgage paid off in 15 years. The caveat to this payment arrangement is that your tax write-off will be less with a lower amount going toward interest each month.

It’s a lifestyle choice. It’s a subjective choice.

Paying Off Other Things

Part of the decision of which mortgage to choose is the consideration of other obligations you may have. If you have other debts with higher interest rates, you may want to consider paying those first, saving money in interest and payments the long run. In our example, the $700 extra you’d have each month by choosing a 30-year mortgage could be used to pay down debt.

Investing Elsewhere

Another consideration is the choice of investing that $700. Could you invest somewhere with a greater return than in your home? Using this IRA Investment Calculator from Bankrate, you would have $147,884 in your IRA after investing the maximum $5,500 a year for 15 years. (Subtract the $67,000 you might have saved if you had a 15-year mortgage and you’re still ahead.)

***This is where our DISCLAIMER goes…we are not financial advisers, we are REALTORS®. We’re just raising questions for you to ask your accountant or financial adviser.***

Colin Robertson writes a very informative blog, The Truth About Mortgage, with 10+ years of news about the mortgage industry. He has some great charts to compare the payments with different interest rates. Use his handy charts to compare rates: [click image to enlarge]

15 year mortgage rates

30 year fixed mortgage rates

“Should I Get A 15 Year Or 30 Year Mortgage?” It’s nice knowing you have choices, right? Knowing the numbers helps in making the choice.

Thanks to The Truth About Mortgage for these excellent interest rate charts! Be sure to read Colin Robertson’s blog for great information about mortgages.

Colin makes some other points that make sense when you consider them, but might not think about at first:

  • It is also possible to choose a rate for a 15-year mortgage.
  • The lower the interest rate, the smaller the difference in monthly payment. As rates move higher, the difference in payment becomes more substantial.
  • Higher mortgage rates are more damaging to larger loan amounts. If you look at the 30-year chart, the payment on a $400,000 loan amount at 3.50% is cheaper than the payment on a $300,000 loan at 6%.
  • Remember, this chart shows principal and interest only. There are often other items to consider, like Mortgage Insurance, property taxes and homeowners insurance. HOA fees and condo fees can also add to the monthly amount you need to consider.

Check out Colin’s blog for more great information. Another good read for those who want to dive deeper:  learn how are mortgages calculated.

Thanks, Colin, for these useful charts!


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The Highland  Group
Chris & Karen Highland   cell   301-401-5119
eXp Realty  410-777-5714

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