Archive for May, 2009

The Jones’ family found their dream home and moved into it with all of the excitement and enthusiasm of a kid on Christmas morning.  After a long and hectic day of unpacking, they collapsed into bed anticipating a good night’s rest.  Unfortunately, they were shocked and dismayed when they began to hear the very obvious noise of trucks roaring along the inter-state highway situated less than a half mile to the rear of their home.  Too late!

This unfortunate situation exemplifies the need to focus on location when contemplating the purchase of a home.  A ten million dollar mansion isn’t worth a dime if it’s sitting next to a toxic waste dump.  This example is far-fetched and outrageous, but it makes the point that finding the right location is certainly as important as finding the right house.

How do you investigate a potential neighborhood?  There are a number of factors and issues to be considered in your evaluation.  Some of them can be covered merely through visual observation; others will have to be explored with the assistance of community and government organizations.

One of your first and most significant concerns should be the crime rate.  If every other house on the block is being burglarized every other month, you might want to look elsewhere.  Talk to a spokesperson of the local law enforcement agency.  Ask for a listing of their monthly crime stats and a copy of their year ending report.  When talking to the spokesperson about crime rates, ask about their response times in your area.  If it’s over five minutes, ask why.   If the community has a neighborhood watch group or a neighborhood citizens’ security patrol, attend one of their meetings or speak with their group representatives.

How far is your new neighborhood from your place of employment?  How far is too far?  Bottom line: check the driving time and traffic patterns, both coming and going, by driving the route you’ll take.  Are there any activities or facilities in the area that will make the trip more unpleasant or time consuming on specific days of the week?  As an example, is there a bridge that backs up on Friday afternoons as people rush to their weekend retreats?

If you have children, or anticipate having them, you’ll want to check out the schools in the area.  Visit the schools and talk to the Principals or school counselors.  Ask about class sizes, bus service, curriculum and even school menus.  If your child is a gifted student, you’ll want to inquire about accelerated courses.  If your child needs special Ed opportunities, ask about them.  Knowing about your child’s school is one of your primary responsibilities as a parent.

This may sound a bit picky, but you should visit and evaluate your local markets, shops and restaurants.  Do they sell quality products?  Is there a convenient place to purchase daily necessities such as milk, luncheon items, coffee, etc.?  Do the local restaurants suit your taste?  The answers to these questions may not factor substantially into your moving decision, but they are part of the equation and should at least be recognized and considered.

Availability of community services should not be overlooked.  Is there a good hospital in the immediate vicinity?  Do they have an emergency room?  How about parks and a library?

You should visit the neighborhood at various times of the day and night to check for sounds, smells, heavy traffic and the presence of any activities that you might find offensive as a resident.  Sometimes the complexion of a neighborhood changes at night.  Drive around after dark and look for the presence of undesirables lounging about in public places.  Try to get a sense and feeling of the neighborhood.

Finally, you will want to find out if the community has a community association.  If so, visit the association and ask about membership dues, restrictions and covenants.  If the representative is forthcoming, ask if there are any problems in the area that you as a prospective new resident should consider.

You are about to make one of the biggest financial decisions of your life.  Don’t be timid.  Ask questions, make notes and weigh all the pro’s and con’s before deciding.

Buying a home represents the most significant financial decision most people will ever make during their lifetime.  From a person’s first home, which often establishes the foundation for future home purchases, to the purchase of the home where they’ll spend their senior years, there are definite pitfalls to avoid and suggested steps to take to assist one in making the right decisions.

One of the first mistakes people make is not getting pre-approved or pre-qualified by a bank or lending institution.  Sellers and their agents are often skeptical of a prospective buyer’s ability to obtain a mortgage loan when the buyer has not been pre-qualified.  When choosing between two comparable offers, or when contemplating countering a buyer’s offer, a seller will always look more favorably upon the pre-qualified buyer.

Employing the services of a realtor makes great sense, since navigating through the home purchase process is both complex and fraught with financial dangers.  However, as the buyer, you should have your own realtor who will be fully committed to representing your best interests.  The seller’s realtor will often favor the interests of the seller, with an eye to the commission involved.  Your agent will be inclined to do a “comparative market analysis”, which will establish property values and selling prices of homes in the area of your targeted purchase.

Take your time!  It happens all too frequently that people rush into signing a contract to purchase a particular home and then for any number of reasons, regret their hasty decision.  Remember… if you enter into a contract to buy a home, your chances of rescinding that contract are very slim.  It doesn’t help that you’ve found another home you prefer, when you’re under contract to make a purchase you’re expected to follow through and buy it.

In addition to finding a home they like better than the one they’ve contracted to buy, another reason people try to cancel a contract is that they realize too late that they’ve over-purchased.  The mere fact that you can qualify to purchase a particular property doesn’t speak the full story.  Being “house poor” is the pits.  Putting the bulk of your earnings into your mortgage payment obviously detracts from your quality of life.  Things you used to enjoy, such as vacation trips, going out to dinner or splurging on an expensive piece of clothing will have to be curtailed.

Some people have specific requirements for their dream home and unfortunately sometimes wait too long for that home to present itself.  While waiting for utopia, people pass up excellent homes that are good bargains and would fulfill a majority of their demands.  Also, in many cases, market prices and mortgage rates continue to rise.

The potential buyer should be aware that there are many types of mortgages being offered by lenders; therefore, they should explore all of their options before “locking in.”  Interest only loans allow the buyer to pay only the interest on their mortgage for a period of usually up to five years.  This is an attractive option for young buyers who want to establish themselves in a home of their own, but have not reached their full earning potential.  Hopefully and assumedly, at the end of the prescribed 1-5 year period the buyers will be better able to meet full mortgage payments.  All other options should be explored as well.

Failing to require a comprehensive home inspection, or relying on the knowledge of a friend, is a penny-wise/pound-foolish thing to do.  The relatively minor expense of the full inspection is definitely cost-effective.  The inspection should include a review of electrical system, condition of the roof, plumbing, heating and air conditioning, septic system, water quality, etc. etc. etc.  This is a very important process that can save untold heartache in the future.

When selecting a home, don’t forget that your quality of life in that home extends into the surrounding community.  Your new home can be a showplace, but if it’s surrounded by run down properties and neighbors who don’t fit into your preferred social structure, you aren’t going to be happy.  Be sure that the school system meets with your approval; inquire about the crime rate and consider the quality of the stores and services available in the area.

Sometimes it’s hard to look into the future, but when buying a home it’s good to think about resale value.  Not that this should be the final consideration, but when touring your prospective new home you should look for things that would be a deterrent to another buyer.

Finally, before signing the contract you should be aware of any restrictions imposed by your new community association.  Such restrictions can include: fencing guidelines, parking restrictions (no RV’s in the driveway), no boats in the yard, landscaping requirements, and even certain occupancy restrictions.  Blindly buying into a heavily restricted community is a very common mistake.

The ten common buying errors mentioned here are by no means an exhaustive list of things to avoid.  Buying a home should be done systematically and carefully.  Checklists are available from reputable realtors and should be consulted and utilized throughout the searching and buying process.

If you’ve been trying to buy a house you may have noticed there are a lot of numbers to consider: the price of the house, your savings, the amounts of the down payment and monthly payments you can afford, as well as a host of other figures and fees. Trying to find a mortgage that meets your needs is another numbers game, but this one can work in your favor.

You may not realize it, but there is great variety available to home buyers shopping around for a suitable mortgage. Different banks, brokers and other lending institutions all offer their own mix of short-term and long-term mortgages, as well as both fixed rate and adjustable rate mortgages.

So how do you know which combination is the best for you? That depends on your circumstances.

Traditional fixed rate mortgages allow you the security and stability of knowing that your mortgage interest rate will not fluctuate with market conditions. This means that if interest rates spike, you will be protected. Conversely, if interest rates drop, you will not be able to take advantage of the potential savings without transferring your mortgage to another institution or making other possibly complicated arrangements.

Adjustable rate mortgages (also known as variable rate mortgages), are different than fixed mortgages in that the interest rate you pay on the outstanding principal of your loan fluctuates according to changes in the posted index rate. There is a certain amount of risk involved with an adjustable rate mortgage in that you may end up paying more money in the long run if interest rates rise and stay high. You also have the potential to take advantage of savings if interest rates fall. An additional bonus to adjustable rate mortgage is the lower initial interest rate. You may be risking higher or unstable payments, but you are rewarded with a lower interest rate when your loan is at its fullest point. Unless interest rates rise dramatically, this advantage is likely to save you more money than if you had chosen a fixed rate mortgage.

There are advantages and disadvantage to securing an adjustable rate mortgage loan. However, you may find an adjustable rate mortgage worthwhile if you intend to pay off a large portion of your outstanding balance early into your loan period. By doing so, you reduce the bulk of your loan while paying the initially lower interest rate. An adjustable rate mortgage may also be the best choice for you if you anticipate greater future income or if you intend to pay off the entire mortgage loan quickly – again due to the lower initial interest rate. Even if rates were to increase early into your mortgage period, the fluctuation would unlikely be so great that it negated the difference in interest rates between a fixed rate plan and a variable rate plan.

You can reduce the financial risks associated with an adjustable rate mortgage by asking your lender about interest rate ceilings or caps that protect mortgage holders from sharp increases in the amount of money they must pay each month (or whatever their payment period is: monthly, weekly, bi-weekly, etc.). The overall ‘ceiling’ restriction is legislated in almost all cases, and it limits the total possible interest rate increases over the period you hold the loan. Periodic caps help control interest rate hikes between adjustment periods.

Your lender may also be willing to consider payment caps, which stabilize your monthly or periodic payments so any interest rate fluctuations are worked into your payment by way of adjusting the ratio of principal to interest each payment covers. This is a great option if you have limited income flexibility, but could result in a negative amortization period over the long haul. This happens when the balance of your mortgage is actually growing rather than shrinking because your regular payments are not large enough to pay all the interest plus a portion of your outstanding principal.

A final option to consider is arranging to have the ability to convert your adjustable rate mortgage into a fixed rate mortgage at a designated time. You may pay a fee for converting your mortgage, but if you find yourself in a situation where interest rates are rising rapidly, it may be worthwhile to stabilize your payments and balance by switching to a fixed rate plan.

Speak to your financial advisor to find a mortgage plan that fits your budget and your needs.

A home is more than a place to live. It also represents a major financial investment. Most of us will buy and sell several homes over the course of our lifetime, so it is important to consider the resale potential of each home you purchase —before you buy it.

Consider your intentions when you go looking for a new or new-to-you home. Are you searching for your dream home, a place you hope to hang your coat for a long time? Or perhaps you are looking for smaller, lower-maintenance place to ease you into retirement? Maybe you’ve spotted a hot market and are hoping to turn a profit with a fast buy and a fast sell sometime in the near future. Your plans for your new house and how long you intend to stay there can affect its re-sale potential. For example, the trendy new neighborhood where your house is located may not be so trendy and popular ten years from now.

Regardless of your intentions, there are several other factors that will affect the re-sale potential of your home. First among these is location. You’ve probably seen house-for-sale advertisements boasting about a home’s location, and it’s true, location is very important. Today’s preferred location may not be the same five or ten years from now, but many of the elements that make it desirable will be the same. Large lots, mature trees, wide sidewalks, proximity to schools, shopping and public transit are all features that increase an area’s lasting appeal and will therefore fetch higher re-sale prices than homes in areas that do not offer the same advantages. When thinking about location, you should also consider the population and economic growth trends in your city or town, and in which direction growth appears to be moving.

Demographics can also come into play when it comes to home re-sale value. With baby boomers heading into retirement and their ‘golden years’, one-level homes with wide passage ways and rooms large enough to accommodate wheelchairs may become more popular in certain areas, while suburbs filled with young families may put more of an emphasis on large yards and ample public green space and playground facilities. Try to learn about a town or city’s population before you purchase a home there.

Be aware of the features that sell. Peruse local real estate advertising to find out the most desirable attributes in the area in which you want to buy. You may notice that homes with one bathroom sell for less than homes that have more bathrooms, or that homes with old, inefficient windows sell for less than those with newer, vinyl-clad windows and energy-efficient panes. The same can be said about a variety of features including closets, number of bedrooms, fireplaces, swimming pools and kitchen functionality. Don’t despair, however, if a dated or less desirable home is all you can afford: outdated houses present an opportunity for renovations and upgrades that can vastly increase their value and re-sale potential. With a small investment and a little work, you can turn a fixer-upper into cash in your bank account. The profit margin increase can be significant enough to justify enlisting the help of a professional to help with major projects.

A residential building inspector can also help you identify the ‘shelf life’ of a home you are considering buying. A thorough inspection report will give estimates on the lifespan of major home components such as the roof, furnace and driveway. If several of these components are reaching maturity at or near the time you want to sell, the re-sale potential of the home could be devalued as a result of the impending repairs. Take these timelines into consideration if you plan on moving in the near future, or if your cash flow will be compromised during the same period in which upgrades will become necessary.

Buying a house should be about meeting your needs and desires, but a little forward-thinking can mean an easier sell, and even a profit, a few years in the future if your needs change or you want to move on. A purchase designed to meet your current needs while accommodating future re-sale potential is a smart investment that will help you fund a bigger, better house when the time comes, or to create a little nest egg for future investments or retirement. Considering the re-sale value of a home before you buy it takes little effort but produces great routines – all in all, a logical thing to do.

Just as there are many things you can do to improve your chances of selling your house at a great price, there is an equal number of things that will drive away potential buyers and leave you scratching your head.

If you are working with a realtor, he or she will be able to make suggestions on how to make your particular home more saleable, but addressing the following problem areas is always a great place to start.

1.    A smelly house is not an attractive house to potential buyers.  The problem with odors such as cigarette smoke and pet smells is that you live with them day in and day out and may not notice them.  To an outsider, however, the smell will be pungent and noticeable. You can get rid of these odors by smoking outside, keeping litter boxes fresh and in a contained area, repainting walls, shampooing and steam-cleaning carpets and opening your windows to let in fresh air. Don’t try to cover odors with an air freshener without taking steps to eliminate the problem; it won’t work and your house will still be smelly and unwelcoming to potential buyers. Removing odors from mold and mildew can be a little tougher and may require professional intervention if the affected area is not easily accessible (between walls for example).

2.    Pets: you love them and think of them as part of the family. Your potential buyer may not share your sentiment, so like other members of the family, your furry companions should not be on site while someone is inspecting your house. Pile everyone in the family vehicle, or crate your pets in the yard so potential buyers can look around without being barked at, snarled at or pounced on.

3.    Bathrooms are associated with hygiene, so unclean bathrooms are a major turn-off for most buyers. Make sure your toilet, tub, and sink are sparkling clean and that the drains are clear and free of wet hair and other odor-trapping debris. Shine your faucets and mirrors, de-clutter the medicine chest, empty the trash pail and launder your towels, shower curtain and floor mats.

4.    Dark rooms look dingy and uninviting. Increase the brightness factor of your rooms by adding brighter bulbs (if appropriate), installing extra fixtures, or by placing accent lamps or cabinet lighting throughout the room. An even simpler fix is to pull back heavy curtains and lift your blinds. Trimming low-hanging branches from nearby trees can also help.

5.    Busy wallpaper is a no-no. Too many patterns can be distracting and can date your décor. Consider removing busy wallpaper, but don’t paint over it because that will look even worse.

6.    Wet basements are a cause for concern as they can indicate foundation leaks. More often however, damp basements are a sign of poor ventilation, plugged drains, or improperly positioned downspouts. Remove any mold or mildew that may have appeared as a result of dampness.

7.    Bugs; they’re usually harmless, but still an obstacle to home sales. Squash what you can, clear cobwebs, and enlist professional help if you have an infestation.

8.    Low curb appeal can discourage potential buyers from taking a closer look at your home. Spruce up your yard, entry and façade. Make sure your paint isn’t peeling, and that gardens look their best, even if out of season. Bicycles, lawn mowers and tools should be neatly stored in a shed or in the garage if necessary.

9.    Plugged Gutters. Potential buyers may not notice blocked gutters during an initial showing, but they will turn up during a professional building or home inspection, which could be the difference between a conditional sale going ahead or not.

10.    Clear out when someone is looking at your house. Potential buyers may feel awkward looking around your house if you are hovering over their shoulder. Working with a realtor to sell your house eliminates this problem, as they act as chaperone during the showing without intimidating your buyer.

Most of these fixes are simple and inexpensive to implement, yet can have a major impact on the saleability of your house. If possible, address any of the issues that are present in your home before you list it for sale.