3 Questions You Need To Ask Yourself Before Buying A Home

3 Questions You Need To Ask Before Buying A Home

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Ask yourself the following three questions to help determine if now is a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This is truly the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a study by realtor.com found that “73% said buying in a good school district was “important” in their search.

This report supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. The actual reasons are:

  • A good place to raise children and provide them with a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in February (the latest data available) was $249,500. This is up 3.6% from last year. The increase also marks the 84th consecutive month with year-over-year gains.

Looking at home prices year over year, CoreLogic is forecasting an increase of 4.6%. In other words, a home that costs you $250,000 today will cost you an additional $11,500 if you wait until next year to buy it.

What does that mean to you?

Simply put, with prices increasing, it may cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long-term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

Freddie MacFannie Maethe Mortgage Bankers Association and NAR have all projected that mortgage interest rates will increase over the next twelve months, as you can see in the chart below:

3 Questions You Need To Ask Before Buying A Home | MyKCM

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

 

Contact me today if you have any questions regarding buying/or selling your home:

303.359.9229

chad@redocgroup.com

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How to Put Your Housing Cost to Work for You!

How to Put Your Housing Cost to Work for You | MyKCM

There has been a lot written about the benefits of homeownership. One benefit that continues to rise to the top is the added wealth homeowners gain simply by paying their mortgage while their home increases in value over time.

The National Association of Realtors (NAR) recently broke down the equity gained from price appreciation and principal payments in their Economists Outlook Blog. Homeowners who purchased their homes five years ago have already gained almost $80,000 in equity over that time with 80% of the gains coming from price appreciation.

For a homeowner who purchased their home 30 years ago, they have gained nearly $250,000 in equity with 70% coming from price increases. The full results can be seen in the chart below.

How to Put Your Housing Cost to Work for You | MyKCM

According to the Home Price Expectation Survey, a family who purchased a median priced home this January can expect to gain more than $42,000 over the next five years simply from price appreciation alone on the national level.  In cities such as mine (Denver), appreciation rates year-to-year have hit double digits!

Bottom Line

Your home is one of the only investments you can live inside as you pay it off over time. If you are ready to use your housing costs to build wealth, let’s get together to discuss how to make your dream a reality.

Getting a Tax Refund? Get a Headstart on Homeownership!

According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $3,143 this year when filing their taxes. This is down slightly from the average refund of $3,436 last year.

Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals. For anyone looking to buy a home in 2019, this can be a great jump start toward a down payment!

The map below shows the average tax refund Americans received last year by state.

Your Tax Refund Is The Key To Homeownership! | MyKCM

Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.

If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?

The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.Your Tax Refund Is The Key To Homeownership! | MyKCM

The darker the blue, the closer your tax refund gets you to homeownership! For those in Oklahoma looking to purchase their first homes, their tax refund could potentially get them 85% closer to that dream!

Bottom Line

Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!

 

Ready to chat about your real estate dreams and aspirations?

Website: http://www.redocgroup.com

Phone: 303.359.9229

Email: chad@redocgroup.com

What’s Going on With the Bidding Wars?

What’s Going On with Bidding Wars? | MyKCM

In a strong seller’s market, like the one we have experienced over the past few years, bidding wars are common and expected. This makes sense! A seller’s market is defined as a market in which the inventory of homes for sale cannot satisfy the number of buyers who want to purchase a home.

According to the Cambridge English Dictionarybidding wars occur when two or more parties repeatedly outbid each other as they compete to purchase something- in this case, a home.

In some areas of the country, first-time buyers have been met with fierce competition throughout their experience. Some have been out-bid multiple times before finally winning a bid on a home to call their own.

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), there is currently a 3.7-month supply of homes for sale.

With the current number of houses listed for sale and the level of demand from buyers, this means it would take 3.7 months for all the homes listed to sell if no additional listings came to market. Any supply number under a 6-month supply is considered a seller’s market. According to NAR, the housing market hasn’t had a 6-month supply of homes for sale since August 2012.

Good News for Buyers

A recent report shows that the percentage of houses sold including a bidding war before settling on a final price decreased from 53% in January of 2018 to 13% this year.

One reason for the decline is an influx of homes being listed for sale. Even though the month’s supply number is not increasing, the number of homes for sale is. The chart below shows the year-over-year change in inventory over the last 12 months.

What’s Going On with Bidding Wars? | MyKCM

As you can see, the number of homes for sale has started to build over the last eight months. Prior to this reversal, inventory levels had fallen for 36 consecutive months when compared to the year before.

Danielle Hale, realtor.com’s Chief Economist, gave some insight into why bidding wars are less common on a local level this year,

“[Last year] you might have been the only listing in your neighborhood, and you could put your home up at a certain list price and you would likely see multiple offers at or above that list price. That tide is turning this year.

It’s going to depend on what neighborhood you’re in, but we expect it to be more common this year that you won’t be the only listing.”

Inventory in the luxury and premium markets (the top 25% of listings in an area by price), is increasing at a greater rate than the starter home market. As the choices buyers have continued to increase, the likelihood of a bidding war will decrease.

Bottom Line

For sellers.  If you are debating listing your house for sale this year, you may not want to wait for additional competition as inventory continues to rise!  Contact me if you have any questions at all regarding the home selling our buying prces

What’s Going on With the Bidding Wars?

What’s Going On with Bidding Wars? | MyKCM

In a strong seller’s market, like the one we have experienced over the past few years, bidding wars are common and expected. This makes sense! A seller’s market is defined as a market in which the inventory of homes for sale cannot satisfy the number of buyers who want to purchase a home.

According to the Cambridge English Dictionarybidding wars occur when two or more parties repeatedly outbid each other as they compete to purchase something- in this case, a home.

In some areas of the country, first-time buyers have been met with fierce competition throughout their experience. Some have been out-bid multiple times before finally winning a bid on a home to call their own.

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), there is currently a 3.7-month supply of homes for sale.

With the current number of houses listed for sale and the level of demand from buyers, this means it would take 3.7 months for all the homes listed to sell if no additional listings came to market. Any supply number under a 6-month supply is considered a seller’s market. According to NAR, the housing market hasn’t had a 6-month supply of homes for sale since August 2012.

Good News for Buyers

A recent report shows that the percentage of houses sold including a bidding war before settling on a final price decreased from 53% in January of 2018 to 13% this year.

One reason for the decline is an influx of homes being listed for sale. Even though the month’s supply number is not increasing, the number of homes for sale is. The chart below shows the year-over-year change in inventory over the last 12 months.

What’s Going On with Bidding Wars? | MyKCM

As you can see, the number of homes for sale has started to build over the last eight months. Prior to this reversal, inventory levels had fallen for 36 consecutive months when compared to the year before.

Danielle Hale, realtor.com’s Chief Economist, gave some insight into why bidding wars are less common on a local level this year,

“[Last year] you might have been the only listing in your neighborhood, and you could put your home up at a certain list price and you would likely see multiple offers at or above that list price. That tide is turning this year.

It’s going to depend on what neighborhood you’re in, but we expect it to be more common this year that you won’t be the only listing.”

Inventory in the luxury and premium markets (the top 25% of listings in an area by price), is increasing at a greater rate than the starter home market. As the choices buyers have continued to increase, the likelihood of a bidding war will decrease.

Bottom Line

For sellers.  If you are debating listing your house for sale this year, you may not want to wait for additional competition as inventory continues to rise!  Contact me if you have any questions at all regarding the home selling our buying prces

Top Interview Questions to Ask a Buyer’s Agent!

 

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Savvy home buyers, like you, interview multiple buyer’s agents before deciding on whom to hire. It’s in your best interest to ask them some or all of the following questions to gauge their knowledge and whether or not they fit with your needs.

Take a look below at our list of the best questions to ask a real estate agent and let us know if there are any additional questions that you have found valuable when interviewing agents.  

Basic Questions

Are you full time?
You don’t want someone doing this as a hobby. Ask which MLS the realtor belongs to.

How long have you been in residential real estate sales?
While newer agents can do a great job for buying (especially if they are part of a reputable team), a good standard is at least 3 years of experience of buying in your area.

How many homes have you bought or sold in my area in the past year? Are you knowledgeable about my area?
There is no right or wrong answer to this question either, but you probably don’t want someone who has sold 1-2 properties in an area that has hundreds of listings a year. There’s no issue with people learning, but it probably shouldn’t be at at your expense.

Do you typically work in my price range?
Most agents can work across a wide variety of prices, but if they typically help home buyers purchase $2 million homes or more and you have a strict budget at $600,000 home, then they might not make you a top priority. Similarly, if you want to purchase a luxury condo but they typically work with single family homes, they might not know the market or have the right connections to buy your dream home.

What is your strategy to meet my needs?
There are a multitude of sub-questions to ask within this question. There are basic questions such as “How will you help me search for my home?” to advanced questions such as “How do you handle multiple offers in a seller’s market?” Here is where you will be given the widest variation in answers that will help you separate the strong agents from weak ones. The local experts we bring you will customize their search based on your needs. In addition, we only work with buyer’s agents who are well connected with top listing agents, and may even be able to connect you with pre-MLS homes before they’re officially listed.

What other professionals do you typically partner with to help me buy a home?
A good agent doesn’t do everything on their own. They are well-connected, and have a team of other professionals like a preferred mortgage broker, home inspector, or contractor.

Do I have to work with the lender, inspector, or other service providers you recommend?
If they say “yes” here, then this is a big red flag. Good agents should have solid recommendations for lenders, inspectors, or other service providers, but you should never feel pressured to use their recommendation. On top of that, it’s illegal for an agent to force you to use their lender or other service provider.

If I choose to work with my own lender, how would you coordinate with them?
After an offer has been submitted, one of the most important aspects is to then secure financing, and a good lender is key to this. Agents have their favorite lenders, not because they make some type of referral fee (that’s illegal) but because they have a high degree of trust that their preferred lender can get the job done and on time. Hence, there may be some trepidation in working with a buyer’s own lender. However, a good agent will maintain open communication with your lender, and partner with them to help you obtain financing and close on time.

How will you keep me informed? By what method and how frequently?
This comes down to personal preference. However, if you prefer to communicate over email in a timely manner but they prefer to call or are not responsive, then they will not be a good fit. All of our partner agents are tech savvy and will respond to your requests in a timely manner.

How many clients (both sellers and buyers) are you currently representing?
While there’s no magic number for how many clients an agent can effectively handle, a number that’s staggeringly high, like 40 listings or 15 buyer clients, could indicate that their time will be divided and you won’t get much one-on-one attention.

How much time will I have to review documents before I have to sign them?
A good agent will work with you and provide you with ample time to review important documents. Some agents are genuinely busy and don’t have time during business hours to prep documents. However, it’s a bad thing when agents show you documents at the last minute to try and minimize the number of questions they have to answer. Buying a home is a big endeavor and stressful. A good agent will minimize any stress in reviewing and updating documents by doing it ahead of time, rather than at the eleventh hour.

Do you use e-signature?
An electronic signature, or e-signature, is an electronic indication of intent to agree to or approve the contents of a document. In asking this question, you can gauge how tech savvy an agent is or not. Time and money are saved because you eliminate the need to print, fax, scan, and ship documents. On top of that, you’ll get faster results and create a complete audit trail and tamper-proof virtual seal of the signed documents.

Are you on Zillow and Trulia? Do you have your own website? Why not?
This question can be used to assess how marketing savvy an agent is. If they don’t have their own website or are listed on popular sites like Zillow and Trulia, then how can you expect them to market your property? Online presence is extremely important, and it is also a great way to view an agent’s past reviews from buyers and sellers. At UpNest, all of our partner agents profiles can be viewed online. You can easily view their biography, local expertise, and even check out their Yelp reviews.

Will you provide me with at least 3 references?
Three is a good rule of thumb, but you may not want to talk to 3 (or feel 3 is not enough). A good agent has nothing to hide, and if they have a good track record, they should have more than enough previous clients to vouch for them.

Intermediate Questions

What form of buyer’s broker agreement do you work under?
A buyer’s broker agreement, or buyer representation, defines the terms that a real estate agent represents a home buyer. There are several types, and each has their pros & cons

  1. Non-Exclusive / Not for Compensation: Typically this type of agreement stipulates that a buyer may hire more than one broker or agent to find a property. There is no obligation to compensate the broker or agent, and as a buyer you have the right to demand single agency. Single agency means this broker/agent cannot show the buyer properties listed by the broker’s agency, without the buyer’s express permission. Although such an agreement is very advantageous to a buyer, it is likely that most good realtors will not work under this agreement. The risk is high that the agent does a lot of work, but never gets paid for their work.
  2. Non-Exclusive, Right to Represent: This type of agreement is similar to the previous, but it does provide for compensation. It also removes the buyer’s responsibility to pay a commission if the broker is paid by the seller. It still gives a buyer flexibility to purchase a property through another broker as long as the property isn’t introduced by the first broker.
  3. Exclusive Right to Represent: This is the most restrictive to the buyer out of the three listed, but provides the most value. The key difference is that the buyer agrees to work exclusively with the broker. It stipulates that you cannot hire more than one broker/agent to represent you, and exclusivity means that you would be obligated to pay a commission, even if you found a property by yourself. Fear not, of course, because buyer’s agent’s commission in almost all cases are paid by the seller. However, one of the biggest benefits of this type of agreement is that it allows for the commission (and a commission rebate to you) to be negotiable. This is the type of agreement that we ask for on UpNest, and gives you the best leverage to get a bigger rebate.

How do you typically negotiate? What’s your negotiation style?
Negotiation strategy is one of the most important ways your agent can add value. Some agents are overly aggressive, which doesn’t always benefit the buyer. Some are too passive and will sadly leave money on the table. As a buyer, you want to assess your agent’s level of competence and whether their approach is a good fit for you. Ultimately, choose to work with an agent that you trust.

Do you know of home buying programs that can help me with my purchase or with making post-purchase improvements?
An experienced agent can help you understand the laws and public programs regarding any purchase assistance programs. Whether public or private, these could include funds and loans to help with the purchase, or to help you make repairs and improvements once the sale is complete.

What makes you different from other buyer’s agents?
A lot can be gleaned from an agent’s answer to this question. It’s how they answer this question that truly sets them apart. It is a great way to see what they specialize in and what they’re passionate about. For example, if you are looking for someone who has extensive experience working with first time home buyers, but the agent specializes in working with investors & flippers, then they may not be the best fit for you. Not only can you easily browse our partner agent’s online profile, but they can also send you a personalized voice introduction that summarizes their biography and specialty, making it easy for you to compare and select the right agent for you.

What type of real estate certification or secondary education have you gone through?
This could be as basic as being a Realtor, which is a real estate agent who is a member of the National Association of Realtors® , and simply means this real estate agent has vowed to uphold the standards of the association and its code of ethics.

When clients are unhappy with your service, what has gone wrong?
Asking why a client has been a bad fit for an agent can help you figure out if you’re a good fit. Perhaps the client preferred to communicate over email in a timely manner, but your agent prefers to call instead. This may seem small, but may be very important to you.

Do you have a buyer checklist or provide me task reminders to keep me on track?
A good agent knows that there are many tasks involved in searching and buying a home, and should have access to (or be willing to create) a home buyer checklist. In addition, an agent can provide value by reminding you of deadlines of important key tasks.

How much of a buyer’s real estate rebate do you offer?
Some agents will be personally offended if you ask them this question, as it implies they should be taking a pay cut for the work that they do. More agents today understand that savvy buyers have been doing more of the home search & touring on their own. As such, smart agents may be willing to rebate a portion of their commission to get these more savvy, self-sufficient buyers and really add value where they need it more, which is during the home offer & negotiation phase.

How will you help me compete for a home in today’s seller’s market without overpaying or putting myself at risk (ie. no home contingencies)?
A good agent will tell you that preparation and speed to act will be your primary weapons to create a winning offer in a competitive market. There are many things to prepare, and a good agent will help you have all of them ready to go before an offer goes out. Basics include having a pre-approval document and a lender who can issue an approval document specific to the property at a drop of a hat.

More advanced advice might include preparing documentation on your financial information sheet detailing your job history, salary and bonuses, 401(k) balance, or shortening the loan contingency to ten days by working with a lender who can provide proof quickly. Lastly, a good agent will educate you on what is likely needed to win a bid, but will not create unnecessary pressure just to close the sale.

I need to sell my primary home before purchasing a new one. How would you work with me to ensure I can sell my home before closing on a new one?
There is no right or wrong answer here, it’s very dependent on your situation. In any market, however, a good agent should not hesitate to tell you the reality of the situation. This may include advising you that selling your primary home before searching is necessary if you do not have the funds to secure financing quickly. Or it may mean working creatively to gain the necessary funds without creating undue risk. Ultimately, in a seller’s market, any offer contingencies put you at a disadvantage.

If you or your brokerage are listing a property that I want to buy, how will you ensure that I can get the best price possible?
This is an example of dual agency, where a buyer and seller agent are listed under the same brokerage. Dual agencies can create a conflict of interest, thus, explicit agreement to this situation should be made up front with the buyer’s agent. This conflict of interest may arise because a buyer’s agent could give you a “tip” on an optimal price point to win the bid, which happens to be much higher than the next best offer.

A good, honest real estate agent will provide assurances that they will treat the negotiation in the same manner they would with an outside agent. On the flip side, effective buyer’s agents are highly connected with top listing agents, helping to smooth the way to win a bid that otherwise would be very difficult to win. Not all agents are created equal.

What inspections do you recommend?
In addition to a basic property inspection, an agent might advise you to request and pay for additional inspections depending on the age, property type, and location of the home. In a hot seller’s market, many homes sell without any contingencies in place, meaning the buyer will be shouldering most of the risk post-purchase. A good buyer’s agent will educate you on the most likely offer to win, but will not push you towards something you are not comfortable with.

How do you handle inspection issues?
Many homes will have issues arise during inspections, even brand new homes. A good agent will educate you on their approach to help manage issues. In some cases, this may mean asking the seller to make the repairs before handing the house over, or simply requesting a cash credit. In the latter case, your lender may push back and require that the problem get fixed before closing. If that’s the case, a good buyer’s agent will insist on giving the buyer selection over a contractor.

If I like two homes and the offer dates occur over the same week, how would you handle this?
A good agent will help you understand your different options, lay out the pros and cons, provide a recommendation, but ultimately let you select the path forward. One strategy could be making an offer on the first home, waiting for a response, and then work on the second home if the first is a no go. Another could involve making two offers simultaneously, but putting in some type of contingency that allows you to legally back out with little to no penalty. A good agent will know how to execute several scenarios, or at the least, pull in the right people (ie. contract lawyer) to help you decide.

Do you plan on taking any vacations or leaves that could affect my home buying search? If so, do you have a team in place that can still help me?
Agents are normal people, and vacations or sick leaves could happen at any time. A trustworthy agent will never leave you in the dark. If planned, they should be up front in telling you their situation. But if not planned, you should be ensured that an agent has a team behind them, or a seamless passing to another agent to take their place.

So, there you have it!  Finding an agent is easy.  But finding the RIGHT agent for you will be a tedious process that I strongly encourage you to invest your time and energy into.  As always, reach out to me with any questions that you might have (or 2nd opinions that you might need). 

Chad Nash, Ph.D. – The Real Estate Doctor

303.359.9229 or chad@redocgroup.com

 

 

3 Reasons Why We Are Not Heading Toward Another Housing Crash

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With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.

MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.  There will always be ups and downs in any market.  But, do not hold your breathe waiting on the next “Great Depression” to ease the real estate market.

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