FHA or Conventional?

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Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan.  article 2With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue.

The two loan programs have mortgage fees that can differ greatly.  FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.

FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers.  A borrower with a good credit score will be charged less than a borrower with a marginal credit score.

Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%.  FHA mortgage insurance in most cases, is paid for the life of the mortgage.  Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.

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If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score.

FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income.  FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.

The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees.  A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.

A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process.  Your real estate professional is uniquely qualified to make such a recommendation.

Selling a Property with a Tenant

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Trying to Sell Your Home With a Tenant in Place May Bring Back Visions of the movie “Pacific Heights”

pacific heightsIf you rented out your home to a tenant instead of selling the house you might be ready now to put it on the market. The effort to sell a home can be complicated by the presence of a renter.

Many real estate agents recommend waiting until your lease expires and selling your home without a renter in residence, not all landlords can afford to have their home vacant during the transition.

There are some great tenants that are cooperative. But in general, having a tenant can have a negative impact on a home that’s on the market. Normally, the home drops in value because of the condition of the home and the lack of access for agents and prospective buyers.”

Many real estate agents are reluctant to show buyers a tenant-occupied home because they expect resistance to allowing visitors into the property and assume the condition will be less than optimal. Smart tenants can hold up a sale for as long as year if they don’t want to move.

Tenant cooperation

For those homeowners who do choose to sell with a tenant in residence, landlords need to try to get the tenant to cooperate.

It’s one thing if the tenant already wants to move, but a tenant who doesn’t want to move can be down right hostile.

It is a difficult situation when a tenant denies access to Realtors and prospective purchasers. Some renters deny access to protect privacy, to hide who really lives in the unit, or to kill deals.

Are You Really Losing Money Leaving The House Unrented During The Sale?

With a tenant in place you basically reduce the pool of potential buyers significantly. A reduction in potential buyers also reduces the potential for a higher sales price. The amount of rent you’ll receive while the house is on the market could be much less than the overall drop in the sales price. At the end of the day, you’ll either breakeven in rent-vs-price drop or lose money depending on the market, condition of the house and cooperation of the tenant.

In the end, if the tenant is on a month to month lease, you should consider giving the tenant notice to move so that you can sell your home for the most money in the shortest period of time.

 

Invisible, Odor-free and Potentially Hazardous

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RadonMost people’s first introduction to Radon is during the inspections of a home. It can be as much a surprise to a seller as it is a buyer. Radon is an invisible and odor-free, cancer-causing radioactive gas.

Radon can get into a home through cracks in solid floors, construction joints, cracks in walls, gaps in suspended floors, gaps around service pipes, cavities inside walls and even the water supply.

It is estimated that one out of every fifteen homes in the United States has elevated radon levels. The EPA recommends that you test your home which is the only way to find out if you and your family are at risk. If the level found is 4 picocuries per liter or higher, the EPA suggests that you make repairs or install a radon reduction system. Even lower levels can have health risks.

The EPA’s interactive map is available to find state and county information but still recommends that all homes should test for radon. More information can be found from the EPA in A Citizen’s Guide to Radon.

Test kits are inexpensive and can be purchased at stores like Lowe’s or Home Depot if you choose to do it yourself. If levels indicate a high enough level, you can contact a qualified radon service professional for another test or to mitigate your home. You can get information on identifying these professionals at www.nrpp.info and www.nrsb.org.

Let Your Tenants Send Your Kids to College

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Most people have lots of reasons to save but not always enough discretionary income after the family essentials have been met.

A relatively small investment in a rental home can control a good home that will rent easily, generate positive cash flows and pay for itself.  The borrowed funds create leverage that earns a return on the total value of the home and not just the amount of cash you have invested.

The strategy is simple.  Find a slightly below average priced home that will rent well.  It will appeal to a larger group of people while it’s rented and when it’s ready to be sold.

Rent the home and maintain its condition over the years.  As the loan amortizes and the value increases, the equity will grow.  When your student is ready to start college, you’ll actually have several options.

You can sell the property; pay the tax on the gain at the reduced capital gains rate and fund the education.  Another option would be to refinance and take the proceeds to pay for the tuition.  This would allow you to continue to own the asset but would free your equity and under current tax laws is a non-taxable event.

Regardless of whether you’re trying to plan for your children’s education or your own retirement, rental property offers many solid investment opportunities.  All investments contain risk.  Knowledge and expert advice from tax professionals can reduce the risk.  Contact me if you want more information.

 

What Your Home Is Worth _ The Automated Value

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There are sites all over the web that offer to tell you what your home is worth. Simply plug in your address and email and you’ll get a value.  It’s fast; it’s easy but is it accurate?

There are sites all over the web that offer to tell you what your home is worth. Simply plug in your address and email and you’ll get a value.  It’s fast; it’s easy but is it accurate?

The value is determined by what is called an Automated Valuation Model (AVM) that analyzes public record data with computer decision logic.  Square footage, age, number of bedrooms and location are easily definable objective data.  The challenge is identifying, measuring and comparing the subjective data.

An AVM cannot identify how unique features might add or detract from the value, if the market is declining or why the comparable sales apply or don’t apply to the subject property.  Is a home worth more because it is near shopping or less because it is across the street from a high-traffic commercially zoned property?

Experienced professionals are more likely to make proper adjustments for condition, market appeal and positive and negative influences.

Imagine that you’re going out for dinner and you consult HamburgerAVM.com to tell you how much a hamburger is worth.  It might be accurate based on condiments, vegetables and weight but can it address things like taste, quality, cleanliness, service, convenience or atmosphere.  You certainly couldn’t present the printout to the waiter to negotiate a lower price.

An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.

Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate.  Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately.

Allow me to help you determine the value of your Triangle home.  Contact me to prepare a complimentary home evaluation.

Home is Worth the Sacrifice

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There are many reasons people want a home with the most frequent responses being a place of their own, to raise their family, share with their friends and feel safe and secure.  These are all strong motivations fueling the American Dream of owning your own home.

The motivation is so dominant that buyers are willing to make sacrifices to have their dream come true.  According to the 2014 National Association of REALTORS® Home Buyers and Sellers Survey, 72% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home is more important than the immediate gratification of things that are considered less important.  While qualifying guidelines were increased last year, there are still more buyers purchasing homes at near record-low mortgage rates.

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13,808 Houses Sold Yesterday! Did Yours?

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There are some homeowners that have been waiting for months to get a price they hoped for when they originally listed their house for sale. The only thing they might want to consider is… If it hasn’t sold yet, maybe it’s not priced properly.

After all 13,808 houses sold yesterday, 13,808 will sell today and 13,808 will sell tomorrow.

13,808!

That is the average number of homes that sell each and every day in this country according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales are at an annual rate of 5.04 million. Divide that number by 365 (days in a year) and we can see that, on average, over 13,800 homes sell every day.

The report from NAR also revealed that there is currently only a 4.4 months supply of inventory available for sale, (6 months inventory is considered ‘historically normal’).

That means less competition for buyers who are out in the market now, but more houses will hit the market soon with spring right around the corner.

Bottom Line

We realize that you want to get the fair market value for your home. However, if it hasn’t sold in today’s active real estate market, perhaps you should reconsider your current asking price.