Friday, February 17, 2012

10 Tips for Buying a Home

1. Don't buy if you can't stay put.
If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.
Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.
The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.
There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.

5. Buy in a district with good schools.
In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.
Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.
When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.
Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.
Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months.

10. Hire a home inspector.
Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

Of course we would love to help in this exciting search. Please give the Spouses Selling Houses a call. Until next time!! Ebbie :)

Thursday, February 16, 2012

Reasons To Consider a 2nd Home Now!

If you already own a house, you probably have a pretty good idea about the rights, responsibilities, and financial obligations of homeownership. And if your experience as a homeowner has been a generally positive one, you might have toyed with the idea of buying a second piece of property.

Why should you consider buying a second home? Four reasons spring to mind: finances, fun, family and the future.

A rental property can boost your finances, giving you cash flow each month. A vacation home can be loads of fun, serving as a nice getaway spot for you and your loved ones. Many people buy property for family members, too, including investment buildings that are rented out and later sold when their heirs come of age. Lastly, you can buy a second home for your golden years, locking in your future retirement home at today's prices.

Oh, and there's one other reason to purchase a second home sooner rather than later: With the soft real estate market nationwide, right now you can get a real bargain on a home.

According to the National Association of Realtors, in June 2010, the median national price for an existing home averaged $183,700.

"Buyers can still take advantage of today's low interest rates and competitive prices to get a home they may not have been able to purchase just a few years ago," says Bob Jones, chairman of the National Association of Home Builders.

Location, Location, Location

We've all heard the real estate maxim that location is everything. Well, that truism is especially important when it comes to buying a second home.

Nobody buys property with the expectation that it will decline in value. Unfortunately, however, that's a fate that can happen if you're not selective about where you purchase. To increase your odds of having great resale value, stick to properties in popular areas, like near beaches, lakes or mountains.

It's a Pity It's Not Just PITI

Of course, cost is a major consideration when contemplating a second home.

Mortgage interest rates are at historically low levels. However, interest rates on second homes typically run about half a percentage to a full percentage point above rates for your principal residence. Insurance costs can be higher too, particularly if you buy a vacation property in a hurricane-prone locale, such as Florida.

The most important cost consideration, however, is one that most people probably never think about. It's the overall true cost of owning and maintaining a second home. Don't make the mistake of underestimating the real cost of homeownership for a vacation property, or even a piece of rental real estate.

Common wisdom tells you to think about PITI – Principal, Interest, Taxes and Insurance – when purchasing a house. With a second home, however, you'll need to think well beyond those parameters. An additional home could mean that you'll have to pay for some, or all, of the following:

• Advertising for renters
• Appliances
• Carpets, flooring and rugs
• Chimney servicing
• Fees to a landlord or professional property manager
• Furniture
• Gardening supplies
• Home improvements (additions, renovations and upgrades)
• Lawn care
• Lighting fixtures
• Maintenance
• Moving costs
• Repairs
• Supplemental insurance (earthquake, flood, hurricane or tornado coverage)
• Utilities
• Window treatments

This laundry list of costs represents hidden expenses that all contribute to the true cost of homeownership. You'd be wise to set aside money in a Home Expense Fund each year. Stash away at least 2 percent of your home's value in order to pay for the items above without going into debt.

Don't Forget the Tax Man

When you rent out a second home, you'll have to adhere to strict IRS rules in order to reap the biggest possible tax benefits from your real estate investment. Tax laws concerning second homes are complicated, so you'll definitely want some professional advice in this area. However, you don't need an accountant to teach you the basics.

First off, there's the capital gains exemption. With your primary residence, you are allowed to exclude up to $250,000 in capital gains when you sell your house. The exemption is even larger ($500,000) if you are married. Unfortunately, that same capital gains exemption doesn't apply when you sell a vacation home. To get the tax break, you'd have to make that vacation property your primary residence for at least two years.

Then there's what I call the "14 day rule." This refers to the number of days that you rent out a second home. If it's 14 days or fewer, you don't have to report that rental income to the government; thus you don't pay taxes on that income. The downside, though, is that you can't write off any expenses you might incur for renting out your property.

If you rent out a second home for more than 14 days, you are legally permitted to deduct expenses. Your deduction is limited if you use the home for personal reasons for more than 14 days a year, or if at least 10% percent of the total rental days are for personal use.

As with most things tax-related, IRS rules can get complex, so be sure to enlist the services of an accountant to minimize your tax burdens – and stay on the right side of the law.

Armed with this information, and the above-mentioned financial tips, you can enjoy the benefits of not just your current home – but a second home as well.

Of course if the Lake of the Ozarks is where you wish to find that perfect 2nd home, just give us a call at the Spouses Selling Houses team. Until next time!! Ebbie :)

Monday, February 13, 2012

Make Home Repairs Before Selling

Quick fixes before selling a home always pay off, but which repairs bring the biggest return? Specific answers to this often-asked question largely depend on a variety of factors such as:
  • Time of year
  • Location of the home
  • Market temperature
  • Competing inventory
There is no hard and fast rule. But there are general guidelines that apply to most homes. For example, the National Association of Realtors publishes each year the "cost vs value" report with Remodeling Magazine, which features various home project costs and returns in four regions, including a national average.
Flooring Fixes
Wood floors are a hot item today, but preferences over the years have changed. Carpeting became popular -- like with lots of consumer products -- after somebody figured out how to get the government to pay for it. When vets returned home from WWII, housing was at a shortage. Homes were sold with newly installed carpeting because the cost for the carpeting could be rolled into government-insured (VA) loans.
Then carpeting became vogue in the 1960s. Some homes today, sadly, still sport '60's shag carpeting. The final movement away from hardwood happened when installing hardwood floors became too expensive. Plywood was easier to obtain and faster to install. Plus choices in carpeting were plenty. It's still relatively inexpensive to install carpeting.
  • Hardwood Floors
    If your home has hardwood floors, that's what buyers want, and it would pay to have the carpeting removed and the floors refinished.
  • Carpeting
    If your sub-floor is plywood, then replace the carpeting with light tan. Neutral carpeting is your best bet for resale.
  • Ceramic
    Replace chipped or cracked tiles. Clean or replace the grout. But don't install ceramic (it's too expensive) unless it's for aesthetic reasons in an entry way.

Paint Ceilings & Walls
Buyers spend more time than you would think staring at ceilings. They are looking for signs of a leaky roof, but what you don't want them to see are stains from grease or smoke and ceiling cracks. Ditto for walls. Nothing says freshness like new paint, and it's the most cost effective improvement. Use fiberglass tape on large cracks, cover with joint compound and sand. Paint a neutral color such as light tan - think of coffee with cream.

It's not that all buyers hate wallpaper. They hate your wallpaper - because it's your personal choice, not theirs. And they hate all dated wallpaper. Get rid of it. The easiest way is to steam it off by using an inexpensive wallpaper remover steamer.

Wood paneling
Even if your wood paneling is not real wood but composite, you can paint it. Dated paneling must go. Older wood paneling such as walnut, mahogany, cedar and pine, it's all gone out of style. Paint it a neutral and soft color after priming it.
  • Textured ceilings
    Older popcorn ceilings with the "sparkles" often contain asbestos and if disturbed are health hazards. Say goodbye to it. But even recently sprayed ceilings turn off buyers. It's not expensive but it is time consuming to remove. Lay down drop cloths and scrape it off. You will need to repaint.
Kitchen Improvements
Appliances and cabinets are typically the most expensive items to replace in a kitchen. If you don't have to replace them, you'll save a ton of money. However, if your cabinets are dated and beat-up, your house might not sell if the cabinets aren't replaced.
Kitchen remodels return nearly 100%. According to Remodeling Magazine, the high-end kitchens don't return as much as the mid-range or minor kitchen remodels. Most buyers won't pay extra for a built-in Sub Zero refrigerator, professional 8-burner stove, undermount sink or travertine floors. If you live in the Midwest, your return will be less than for those who live in other parts of the country.
  • Cabinets
    Resurfacing is your best option. This involves attaching a thin veneer to the surface of the cabinets and replacing the doors and hardware. If your cabinets are painted, add a fresh coat of paint and new hardware.
  • Counter tops, sinks & faucets
    Granite counters are not necessary. Simple laminates, newer faucets and sparkling sinks sell. Buyers don't want leaky faucets or stained sinks.
The national average of recouped cost is more than 100% for bathrooms. New floors, fixtures and lights payoff.
Roofs & Exterior
If your home needs a new roof, bite the bullet and do it. Even though most roofing tear-off jobs take one to two days, buyers shy away from buying a home if the roof needs to be replaced.

  • Patch cement cracks in sidewalks
  • Resurface asphalt driveways
  • Plant flowers
  • Caulk windows and doors
  • Replace doorknobs and locks
  • Fix or paint fences
Overall, buyers want to buy a home that has no deferred maintenance, newer appliances, updated plumbing, electrical and heating (including a/c), modern conveniences and is ready to occupy. When you need to sell your home please contact the Spouses Selling Houses team. Until next time!! Ebbie :)