New Year's Resolutions?

Now that we are at the end of January, are you on track with your New Year's Resolutions?

Did you, like many others, decide that this year, for sure, you are going to purchase a home and stop renting?

Oh, yeah. ;)

I know, I know. Fortunately, I have a link to get you started, compliments of CNN Money: The Top 10 Things ou Need to Know When Buying A House. And they are easy to start today!

Ten Signs it's Time to Sell Your Home

YES, a couple of these are silly. But a couple might hit it right on the head...

1. The kids have all graduated from college.  You and your husband finally have time to yourselves…then they move back home!
   
2. You have three spare rooms in a four bedroom house.
   
3. You have to shuffle your cars each morning to leave for work.
   
4. You spend more time driving to work than you do with your family.
   
5. You spend more money each month for storage than you do for your mortgage.
   
6. Your neighbor found a loophole in the homeowner's association rules and is raising donkeys.
   
7. You keep hearing faint voices telling you to "get out" and they're getting louder.
   
8. Grandpa Jed just struck oil while hunting in your back yard.
   
9. The dog’s house doubles as a guest room.
   
10. You have to take a number to use the bathroom.

If you would like a FREE, NO OBLIGATION consultation on selling your home, contact me today. And don't forget to ask about my "Hassle-Free Guarantee!"

It bears repeating...

I posted this about a month ago, but just had a presentation to a Seller yesterday and pulled this up as an example.

Because they are so low, interest rates have a greater impact on affordability than either appreciation or depreciation factors at this point. Every 1% change in interest rate impacts affordability by 11%. Here is an illustration to consider.

At 3.75% (30 year fixed) the principal and interest portion of a $200,000 is $926.23

If the rate goes to 4.75% you can only borrow $178,000 for a principal and interest payment of $928.53

If the rate goes to 5.75% you can only borrow $159,000 for a principal and interest payment of $927.88

These numbers are incredibly enlightening! Consider that as a Seller, you bought into our local market in 2007-2008 (at our peak) and purchased a home for $159k and have not refinanced. You are considering listing your home and buying and buying a larger home, but the value for your current house is below what you are expecting, say $135k, so you will be taking a loss. Should you stay, or should you go?

Considering you will be re-buying into the same value-depressed market, for the same payment you can now afford to buy a $200k home (which 4-5 years ago sold for $240k) compared to 4-5 years ago!

Same payment, larger (possibly newer) step-up home. Did you lose or gain?

Homebuyer Deadline Looms

Homebuyers Deadline Looms
There are only 6 weeks remaining for homebuyers who plan to take advantage of the Federal tax credits to identify their next home and successfully negotiate a contract!

The extended 1st-Time Buyer Tax Credit and the expanded "Move-up" Credit both require qualified Buyers to be in contract by April 30, 2010 in order to qualify for the credits, according to the bill signed into law by President Obama in November 2009.

Do you have a roadmap?
Buying a home is no small matter. Besides being the largest financial transaction you may ever undertake, it’s probably also the most complex. It’s essential to learn more about the process and seek out qualified assistance.

Let me be your guide! As an Accredited Buyer's Representative (ABR®), I have the training and experience to guide you through the process, assist in negotiating the transaction and developing a negotiation strategy, provide vendor referrals and keep track of all the details throughout the transaction.

Time is running out!
Call me today for more information and a free consultation!

Chris Pelkola Lee, REALTOR®
ABR, CDPE, GRI, ePRO

208.201.2034
Chris@IFListings.com
http://www.iflistings.com/
www.Twitter.com/IFListings
www.Facebook.com/IFListings

10 Things to Take the Trauma Out Of Homebuying - Installment 3

Why should I get pre-qualified?
One of the questions I often address up-front with my Buyer clients is the importance of being pre-qualified by a local lender. While you may have an idea of what you would qualify for by using online calculators or by speaking with friends, there are several reasons to go ahead and take the hour to meet with a local lender before beginning your home shopping.

• Determine how much home (and mortgage payments) you can afford and how much you want to afford – these may be different numbers! You may find you qualify for a much larger mortgage and payment than you are willing to make or comfortable making each month. It is okay to be conservative here!

• You will also be given an estimate of your down payment and closing costs, which you will need in the form of a cashier’s check at closing. Have you saved enough? Will you need to structure an offer that requires or requests the Seller contribute toward your closing costs (for which a higher offer must be considered to cover the difference)?

• With the lending changes the last year or so, your credit score now factors in significantly as far as the program you can qualify for and the interest rate. Some programs and rates are not available unless the borrowers’ credit score is over 740. That’s not to say that if you are under 740 you cannot get a loan. However, it may affect your monthly payment and, by extension to some extent, the price range in which you decide to shop. You do not want to begin to shop only to find out that the home you just fell in love with is just beyond your payment’s reach!

• Similarly, if you find the best product for you is a Rural Development (RD) loan, this will affect the location in which you may purchase, as RD has fixed physical boundaries in which they will invest and in which the property must lie. If you determine that an IHFA loan is best for you, you will need to complete the Finally Home! borrower education class prior to the loan closing. These are typically offered only once to twice a month locally; not having it completed will delay your closing.

• Once you are pre-qualified with a local lender, as you shop with your REALTOR® you are ready to move on a home when you find one you would like to buy. And if you are competing with other Buyers, you will be better prepared to write a thoughtful offer, putting you in a stronger negotiating position (a Buyer who has already taken the time to personally pre-qualify shows to a Seller to be a serious Buyer – not one that might change their minds and try to back out). The idea of competing Buyers seems silly on the onset in this market, but consider: if the majority of Buyers looking right now are first-time homebuyers due to the tax credit, they are largely looking in the same price range and they ALL have the same deadline to be in contract to qualify, therefore they are creating competition by the laws of supply and demand. (Another way to lessen your competition is to not wait until April to get into contract, but beat the majority of the Buyers to the market.)

• You may find that REALTORS® are less willing to spend their time showing you homes if you have not shown the personal commitment to at least get pre-qualified. With all the recent lending changes and constrictions, Agents can no longer assume a Buyer will qualify for some kind of loan, and are reluctant to spend time showing homes to Buyers who, in the end, may not actually qualify. While it is a service business, Agents are finding they need to be more certain their potential clients are actually potential clients. Future clients are always welcome and advice is always free, but unless a client is actually in the market to buy, REALTORS® have a fiduciary responsibility to the Seller to not inconvenience them and show their home to people who have not been properly vetted and are not active Buyers (it’s not an open tour to the general public, which I’m sure you can appreciate).

• Lastly, but not least, getting pre-qualified will help you to determine your true costs of homeownership, including property taxes, insurance, homeowner/association fees (if applicable), etc. Do remember, as your eyes glaze over with the initial sticker shock, the financial BENEFITS of homeownership as well, which will not be shown to you by the bank – the tax deductions available to you through your mortgage interest paid, property taxes paid, etc (contact a tax advisor for details and tax advice).


NEXT: The Perfect Home?

10 Things to Take the Trauma Out Of Homebuying - Installment 2

So after only a *short* break from my new blog series, here is the second installment. I know you are all loyal readers and fans, and will forward this to anyone you know who might benefit from it. Hopefully, I have all the *math* right!

2. The Right Time to Buy?

While in most price ranges home prices have fallen locally over the last two years, I am seeing signs that Buyers are still afraid to buy. Mortgage rates remain at the lowest rates in decades, first-time Buyers and now qualified “move-up” Buyers can benefit from an $8000 and $6500 tax credit respectively, and yet Buyers are still leery to pull the trigger. How will they know when to buy?

The tax credit for first-time Buyers has enough media coverage and Buyer attention to get the word out on the financial benefits of homeownership: not only the potential of equity growth over time, but the ability to deduct mortgage interest and property taxes and that any gains made on sale are tax-free if you occupied the home two of the last five years.

Even with the recent value drop, the common consensus among investors is that real estate remains one of the best performing long-term investments. Yet what about the near-term? No one wants to feel like they made one of the largest purchases of their life only to wonder if they could have gotten the same home for $10,000 less in six months!

So, let’s create a scenario. Say you are looking to buy a home for $200,000 with 3.5% down. Your loan amount would be $193,000 and your down payment $7000, your Principal and Interest Payment $1036/mo.

But you were not sure it was the right time, so you waited. Six months later the Seller reduced the price to $190,000 (a 5% price reduction). Your loan amount now is $183,350 and your down payment $6650 (saving you $350). But the rate in the mean time has gone up to 5.5%. Still incredibly low! However, your payment now is $1041/mo.

Yes, it’s only $5/mo more, and you saved $350 in down payment. But if you plan to live in the home 5 years, that is an extra $300 in payments, and while you were waiting the six months for the price to drop, you were still paying rent! If your rent is $500/mo – that’s $3000 out of your pocket that you could have used for a down payment! Or to build equity in YOUR home instead of someone else’s. And you cannot deduct ANY of that $3000, while if it was being applied to your mortgage payment, the bulk of that would be deductible on your Federal Taxes (please consult a tax advisor for information). Is it possible rates won't rise 0.5%? Yes. But what is more likely: a Seller reduces the asking price by 5% or rates rise 0.5%?


Consider further the chart to the right, as provided by the National Association of REALTORS®. This assumes a purchase price of $200,000 with 10% down at a rate of 5.5% vs $1000/mo in rent (a bit high for this area, but comparable to a mortgage payment in this price range). Not considering any equity gain from payments made toward the principal, in a year of no growth the annual cost of the loan is $9,673 vs $12,000 renting. That means even with no market value growth, the homeowner would still have an extra $2327 in his pocketbook vs. renting. Who couldn’t use that? Even at a 1% depreciation in value, the homeowner would be up $327 on the investment vs. renting. And obviously even better off with below trend growth.

So is it a good time to buy? Yes! Most price ranges currently have increased inventory to choose from. And if you are a first-time or “move-up” buyer, the scenario above does not even take into account the added tax credit available – which is refundable – cash in hand! And this time, it is NOT likely to be extended again.

Think you are interested in more? Call me today!

NEXT: Why Should I Get Pre-qualified?

10 Things to Take the Trauma Out of Homebuying - Installment 1

You a first-time buyer, or perhaps it's just been awhile since you've been in the market. Buying a home is one of the largest financial transactions you will likely undertake in your life. Knowing this can create a cloud of fear and hesitation in your mind and around the transaction; it is only natural.

How do you work through it and fulfill your plans to reach your goal of homeownership?

Consider these points below to help focus your search and set your goals within your financial plan for 2010.


1. The Inside Scoop to Hiring a REALTOR

Find a REALTOR that will represent you as a Buyer, and consider a Buyer's Representative contract to align your interests; The Argument for a Buyer's Representative Agreement Contract

In Idaho, without a Buyer's Rep Contract (Buyer Agency), your information does not need to be held confidential by your agent in negotiating...which can certainly work against you in the wrong situation! It guarantees the Buyer their personal information will be held confidential, surviving the transaction itself, and allows the REALTOR to negotiate on behalf of the Buyer. For example, when the REALTOR presents an offer to a Seller without a Buyer’s Rep in place, if the Seller’s Agent asks, “Can they offer more?” and the Agent knows they can and their circumstances, the Agent can respond, “Yes, I believe so, they have just received a large inheritance!” This obviously does not help the Buyer in negotiating! (More details of the Agency relationships in Idaho are in the Agency Disclosure Brochure, which may be found on my website here.)

Have you been in touch with a REALTOR and wondered why they stopped communicating with you? It may be they will not work without a Buyer's Rep contract in place. In addition to protecting the Buyer, the Buyer’s Rep contract also assures the REALTOR that the Buyer has committed to working with them, and is not still shopping other Agents or working with more than one. When an Agent puts the time into finding and showing homes to a Buyer and advising them along the way, the Agent is not going to be compensated for his/her time unless a transaction closes.

The Buyers Rep also sets out a clear set of expectations for both parties. If either party is dissatisfied with the service, typically either party may cancel the contract in writing. Confirm with your REALTOR that they have and support this policy.


Will I have to pay my Buyer's Agent?

If the home you are buying is listed in the MLS, the Buyer's Agent's commission is being paid by the Seller; therein, FREE to you, the Buyer. Sellers agree to pay this fee because this assures the Seller that the Buyer is represented, will be appropriately advised and pre-qualified, and once an offer is accepted it will be less likely to fall through as all the appropriate steps are being taken along the way. It also reassures them that the people who come into their home are “real” potential Buyers, that the Sellers are not taking the time to clean and prepare their home (disrupting their schedules) for a showing that is in fact just a curious looky-loo. Even For Sale by Owners are almost always willing to pay a Buyer’s Agent, as often they aren’t educated about the entire process anyway, and do not know the laws about what they are required to disclose about their home, etc, where to find forms, etc. 

Check for any designations the REALTOR has earned.


For example, are they an Accredited Buyer’s Representative (ABR)? Designations are additional education pursued by the REALTOR beyond the minimum continuing education credits required by the State of Idaho. The quality of their knowledge and education is an asset to you!


Consider your personality and your comunication style
 
Be sure you find a REALTOR with whom you are compatible. Homebuying is not only a big financial commitment, but also an emotional one. Do you prefer frequent phonecalls? Are you email and text only? Are you a numbers and charts person?
 
It’s critical that the agent you chose is both skilled and a good fit with your personality and that you bond with your agent in a way that you feel you can trust them. Remember, your agent has guided many transactions in his/her career, and will likely have some insight into the transaction options for you along the way.
 
NEXT: The Right Time to Buy?

New Homebuyer "Move-up" Tax Credit

Do you currently own your home? Have you been considering taking advantage of the lower pricing in the local market and "moving up" to a larger space?

> IT IS TRUE: a larger home is less expensive today that it was 2 years ago.

Have you owned your current home as your primary residence for at least 5 years?

If the answer to all of the above is 'yes', then you may qualify for the NEW tax credit! Not heard of it? As part of the extended first-time buyer credit that passed last month, the homebuyer credit has been expanded to include "move up" buyers that have been in their home at least 5 years. This tax credit is up to $6500 and is also refundable, meaning if you were to file your taxes after purchasing a new home and have a refund of $200 owed to you, you would with this credit have a refund of and additional $6500....in otherwords a $6700 refund!

Certainly, this tax credit alone is not a reason to sell your home and buy a new one, as there are transaction costs involved in buying and selling which are likely above $6500. HOWEVER, if you are considering trading up anyway to take advantage of market pricing, certainly it is worth getting it done in time to use this credit to offset some of these costs.

You have only until April 30th to be in contract on your new home to qualify. Not to sound dire, but while considering this, please also consider that the first offer you make on a home often does not go through! If you were to make your first offer on a home on April 20th and it was not accepted by the Seller, you may not find another home that satisfies your needs in time to qualify for this credit! Please do not leave yourself in a time pinch and "setttling" for your next home just to qualify.

PLAN AHEAD! Start today by contacting your tax advisor and me, your REALTOR!

View the document on my website for more details from the National Association of REALTORS.

Thinking of a friend or relative that may wish to take advantage of the tax credit? I am pleased to offer no-obligation, free consultations...please pass along my information and have them contact me today!

The worst they can say is 'no'....but it might be just what they need!

Tax Credit Update-Bill Passes!

The House has also passed the tax credit extension by a vote of 403-12! The President is signing the bill tomorrow, Friday.

The $8000 first-time buyer credit is extended, and a "move-up" provision for homeowners who have been in their home as a primary residence for 5 consecutive years of the last 8 years can qualify for $6500. All purchases must be in contract by April 30, 2010 and close by July 1, 2010.

Don't miss out on this one! Call me today to learn how this can benfit you!

Tax Credit Update

The Senate has voted 98-0 to pass the extension of the First-Time Homebuyer Tax Credit. Now on to the House...which should fast-track it...possibly to the President by Friday!

The Tax Credit is attached to the Unemployment Bill and includes the provision to extend a smaller credit to move-up buyers....more as it is finalized...stay tuned!