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How To Do A Final Walkthrough
When the home buying process is nearly complete, many buyers start relaxing and focusing on other details, such as purchasing new furniture and looking at paint samples.
But there is one more crucial step to take before closing on the house: a final walkthrough. This is the last chance before closing to make sure everything is in working condition.
A final walkthrough can not only help you feel more confident about your purchase and avoid buyer's remorse, it can also pinpoint any last-minute problems that should be taken care of before settlement.
When to Schedule a Walkthrough
A house walkthrough should take roughly 30 minutes to complete, enough time for you to be extremely thorough. During this assessment, you should check for new issues that may have come up since the last time you viewed the home.
This is especially important if a major event, like a severe storm, occurred during that time period. Once you close on the home, previous owners are not obligated to fix new damages that may have occurred.
Be sure to schedule a timely walkthrough, about 24 hours before closing on a home, to address any potential problems.
What to Look For
You should check all major appliances to ensure they are in working condition. For example, consider turning on the dishwasher and washing machine, checking outlets and light switches and testing other basic operations. Don't forget to turn on water faucets and flush the toilets, providing water is on in the house. You might also request warranties and owners' manuals for appliances.
Look to see whether any fixtures the seller agreed to leave behind (a chandelier, for instance) are missing. Check to make sure any previously agreed-upon repairs have been made. Then, look over the general condition of the property, inside and out: Are there damages like scratched walls or floors that occurred when the homeowner moved out? Did they leave unwanted furniture or other things behind? Is the yard and overall property in good shape (or, rather, the condition it was when you last saw the home)?
Many industry professionals recommend buyers bring a home inspector with them to look for any problems, and to confirm that repairs were made as requested and to their satisfaction. For this kind of service, home inspectors will typically charge much less than their original inspection costs.
Take Action Quickly
If you do find problems, you have a few options. First, you could choose to walk away from the deal altogether. However, most professionals encourage buyers to consider how significant the problem is before walking away. Is avoiding a $500 fix worth losing your dream home?
You may choose to postpone the closing until the sellers fix the problem. If sellers balk at having the problem fixed, and the repair was agreed upon during negotiations, you do have legal recourse — although it is recommended the buyers and sellers try to reach an amicable agreement to make the closing go more smoothly.
Take your time during a final walkthrough to ensure there are no surprises after the closing. Once this important last step is complete, take a deep breath, relax and smile: You are about to be the proud owner of a new home!
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Signs of a New Housing Bubble?
In various parts of the country, people are starting to use terms to describe the real estate market such as "overheated" and "skyrocketing prices" and "buying frenzy".
The discussions are not all that isolated either. Housing has been a tricky industry to read, as economists fail to agree on where we are in the recovery process.
Home sales are up, inventory levels are tight, mortgage rates are low, housing starts and permits are up, and three in four major metros are considered improving markets. Various indicators imply that housing is improving as the crisis has come to an end and the nation is trying to catch its breath before it begins walking again.
The U.S. Census Bureau says housing starts have hit their highest level since 2008 (the year the economy crashed, by the way), and although construction of single-family homes fell slightly, total starts rose seven percent in March over February, rising 47 percent over March 2012.
Home values are rising faster than rent, and while national home values only rose 0.1 percent for the month in the most recent report, it still marks 17 consecutive months of home values increasing.
Home values took massive hits when the economy tanked, and many homeowners suddenly found themselves underwater on their mortgage.
While there are many indicators to take into consideration, this simply addresses the tip of the iceberg. The fact is that as a whole, housing is no longer plummeting into a hopeless abyss, rather is trying to climb its way out of one – but the industry is not out of the hole yet, and unless politicians interfere, the sector could see some substantial improvement (but not necessarily a full recovery) this year.
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Features Buyers Say They Will Pay Extra For
Some home shoppers say they are willing to spend thousands of dollars above the price of the home in order to have certain interior features.
The most coveted home features tend to center around the kitchen, such as stainless steel appliances and a kitchen island, says Errol Samuelson, president of realtor.com.
Here are eight features that made the list and how much extra, on average, buyers say they're willing to pay for having that feature in their home:
- Central air conditioning: $2,520
- New kitchen appliances: $1,840
- Walk-in closet in master bedroom: $1,350
- Granite countertops: $1,620
- Hardwood floors: $2,080
- Ensuite master bath: $2,030
- Kitchen island: $1,370
- Stainless steel appliances: $1,850
The features described are not necessarily the most important deciding factor for potential home buyers. When looking at a house, the first things people consider are factors such as the neighborhood, the school district and the difficulty of the commute to work.
There is a difference in people's preference and what they are willing to pay for things. Many people seem to want the steak but are on a hamburger budget.
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Housing Inventory Shortage Causing Problems
The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) fell 0.4 percent to 104.8 in January, the third month-over-month decline in the last four months.
NAR chief economist Lawrence Yun attributed the drop in the PHSI to weak inventory of existing homes for sale.
If more sellers don’t start listing homes for sale soon, the real estate comeback could be in trouble due to a lack of homes to be sold to prospects looking to buy. A lack of inventory has led to bidding wars in many markets as foreclosures have waned and cheap financing has lured a host of new buyers into the market. The competitiveness has resulted in rising prices.
Yun expects the inventory shortage will be relieved by an uptick in construction of new single-family homes, though single-family home completions regularly exceed new home sales. Government reports indicate builders have shifted from construction of single-family homes to multifamily, suggesting reluctance among younger, first-time homebuyers who witnessed the impact of the housing meltdown.
The month-over-month trend in sales correlates inversely with the movement in the median price; that is, when the median price falls, sales improve, as happened four times in the last 12 months.
According to the latest existing home sales report—which tracks closings—there were 1.94 million homes for sale at the end of February, a 4.7-month supply. The number of homes for sale has averaged 2.19 million for the last 12 months, down from an average of 2.8 million in the previous 12 months.
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Buying A Home: Should You Take The Plunge?
Spring is typically the busiest time of the year for homebuying, and this year the housing market is already showing signs of a strong comeback. Even though home prices are starting to rise, affordability continues to improve. The National Association of Realtors (NAR) first-time homebuyer affordability index reached a record high of 127.7 in 2012 (the higher the number, the better). In 2006, at the real estate market’s peak, the index stood at 71.3.
Low mortgage rates and an improving economy are helping make buying a home more attractive today. Should you take the plunge? Consider the following:
Rent vs. Own
In many areas it is now cheaper to own a home than it is to rent. But much of that advantage still depends on the size of your down payment, the interest rate you’ll pay on a mortgage and the amount of time you plan to stay put. If you’re a renter, it may pay you to sit down with a professional to see if your situation makes it more affordable for you to buy versus continuing to pay your landlord’s mortgage.
Finding the Right Home
Even if it’s more affordable to own rather than rent, whether you can find the right home for you could be a big question to answer. The number of homes for sale has dwindled in recent years. Inventory (excluding new construction) is back to 2005 levels, according to the NAR, and it may be another year before supply improves, as homeowners hold out to sell at higher prices.
Getting the Best Mortgage
Rates on home loans are still attractive. Currently, the average rate for a 30-year fixed-rate mortgage is around 3.6 percent, compared with an average rate of 5.4 percent for the last ten years.
But to qualify you’ll need a sizable down payment (generally 10 percent to 20 percent of the home’s value), a solid FICO credit score (720 or higher) and plenty of documentation to prove your income, among other things.
If you don’t clear those hurdles, you may be a good candidate for an FHA loan, which is a mortgage backed by the Federal Housing Administration.
The rates for these loans are 3.45 percent and require a down payment of only 3.5 percent. Also, you don’t need sterling credit. You may be approved with a FICO score as low as 580, though many lenders want a minimum of 620 today.
The catch is, you may owe more in fees.
FHA borrowers who put down less than 20 percent have to pay mortgage insurance. Starting today, April 1, the premium for new loans of up to $625,500, rises by 10 percentage points (for bigger loans, the fee goes up by 0.05 percentage points).
And beginning June 3, most new borrowers will have to pay the premiums for the life of the loan. Previously, mortgage insurance was dropped once the loan balance fell to 78 percent of the home’s original value.
Conventional loans also require mortgage insurance for small down payments, but lenders may be willing to waive the charge once you’ve paid down a chunk of the loan.
To decide whether you should “take the plunge” into the waters of home ownership, talk to us today for a free, no-obligation consultation on your particular financial situation for homebuying.
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5 Hidden Dangers In Your Home And How To Foil Them
Here are what we consider to be the top five hidden home dangers, along with our solutions for staying safe.
DANGER #1: Carbon monoxide
You can’t see it, and you can’t smell it, but carbon monoxide (CO) is the leading cause of accidental poisoning in the U.S. It’s produced by improperly working appliances, fireplaces, and it can even seep into the house from a running car in the garage. (See our article recently on ventless fireplaces)
SOLUTION #1: Carbon monoxide alarms
The only way to detect carbon monoxide? With an alarm. These should be installed on every level of the home, including the basement, and outside each sleeping area. Check with your fire department to see what local and state laws require in terms of placement. And be sure to have your appliances checked regularly.
DANGER #2: Kitchen gadgets and equipment
Cooking equipment is, and has long been, the leading cause of home fires, according to the National Fire Protection Association. The most common sources: stovetops, ovens, rotisseries, microwaves, portable cooking units, and barbecue or hibachi grills.
SOLUTION #2: Fire extinguishers
Unattended cooking is the main reason behind home fires, so start by staying in the kitchen when you’re using the stovetop, checking food frequently when it’s in the oven, and keeping the range clear of anything that can catch fire. But even for those who consider themselves Top Chef contenders, we recommend keeping a fire extinguisher or extinguishing spray on hand to prevent a small kitchen fire from growing out of control.
DANGER #3: Foundation cracks
If you’re like many homeowners, you’re probably unfamiliar with radon: the second leading cause of lung cancer (behind smoking). This odorless, radioactive gas can move up from the soil and enter the home through cracks in the foundation. Even if you don’t have a basement, radon can still enter your home through cracks around service pipes and construction joints.
SOLUTION #3: Radon test kits
You can’t see or smell radon, but you can easily test for it with an at-home kit. Rest assured, though, even if you come up with an elevated result, radon is fixable: the EPA says some radon reduction systems can reduce radon levels by up to 99 percent.
DANGER #4: Rapid fires
It’s little known how fast home fires can spread. From the time a smoke alarm sounds, your family can have as little as two minutes to escape safely before the fire spreads throughout your home, according to the National Fire Protection Association.
SOLUTION #4: Home escape plan
Your ability to escape from a home fire depends on advance warning from a smoke alarm but, also, from advance planning with an escape plan. Shockingly, though, only 29 percent of families have ever practiced their fire escape plan. It is recommended that you practice your plan regularly—at least twice a year—so everyone knows what to do in the event of a fire. You might even consider holding a drill at night.
DANGER #5: Home theft
While not exactly a “hidden” danger, home theft is something that’s frequently overlooked. You might think it’ll never happen to you, but the reality is that a home is broken into every 14 seconds in the United States, according to the FBI.
SOLUTION #5: Residential safes
There are basic ways to deter burglars from getting inside your home: install solid core entry doors with sturdy deadbolt locks; properly light entries; install metal grates over basement windows; and trim bushes so there are fewer places to hide. But you’ll enjoy extra piece of mind by storing your most valuable possessions in a safe (consider one that’s both waterproof and fireproof to keep items safe from the elements too).
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Home Buyers May Find Themselves in a Seller’s Market
Home buyers who have been sitting on the sidelines watching as the real estate market tanked, may soon find themselves right smack back in the middle of a sellers market. As we wrote in the May issue of this newsletter, some markets are already experiencing what may be the beginning of this very thing, believe it or not, where buyers are finding themselves caught in bidding wars for homes for sale.
Sales of previously owned homes rose at a robust clip in April, and prices jumped, the latest indications that the hard-hit housing market is recovering.
Existing home sales were up 3.4% from March, and if that pace holds up, 2012 could be the strongest year for home sales since 2007, just after the housing boom. The median home price, meanwhile, increased 10.1% from a year ago, the strongest year-to-year gain since January 2006.
Even more recent data shows that sales of newly built homes rose 3.3% in April from the March figures, and 9.9% from a year ago.
Home buyers would be wise not to sit and wait much longer, or they’ll find themselves suddenly in a seller’s market again like many homebuyers found themselves prior to the housing crisis. When sellers once again have the upper hand in negotiations because the market has turned in their favor, buyers will be kicking themselves for waiting so long and missing the bottom.
As most experts will tell you, cashing in on the bottom of any market, be it real estate, or any other, is a crapshoot. You’re playing a form of Russian Roulette with your finances to even try to time the bottom of the housing market.
With mortgage rates still breaking records, and the apparent bottom of the housing market either here, or already gone, now is the time to get into the real estate market and find your dream home, before it’s too late.
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Problem to Avoid When Buying a Home
There are all sorts of things you need to watch for when looking for a home. Since sellers often fail to disclose all the facts about their home, you need to have a watchful eye whenever you walk into a prospective property. If you could hire a home inspector to look over everything on each home you’re considering, you’d be keenly aware of most problems, but that of course is not financially feasible.
So we’ve put together this list of “Problems to Avoid When Looking for a New Home” to help you spot problems that may be lurking and waiting for you. Here they are, in no particular order:
1-Poor Upkeep
Look for the obvious signs that the current owners are not keeping up with maintenance. Things like a neglected lawn, gutters that are full of leaves and debris, paint that is peeling or in need of repair.
2-Foundation Damage
Glance at the slope of the yard and driveway. Does it slope towards, or away from the house? If it slopes toward the house, it could present a problem with water seeping into the foundation walls and basement area (if your area has basements). These problems can be expensive to repair, so look at the foundation of any home you’re considering for signs of buckling or cracking.
3-Archaic Wiring
You may not be a licensed electrician, but take the time to check switches and outlets. Make sure they are all in working order. Check to see if any of the switchplates are warm to the touch. If so, this could be a sign of wiring problems and you’ll want that checked before you buy.
4-One Newly Painted Wall
A fresh coat of paint can be a good thing, IF it’s the entire room. But if you detect one wall of a room with a fresh coat of paint, that could be a sign that the seller is trying to hide a problem like water damage, mildew, or mold. If you see any signs of water staining or sagging walls or ceilings, have a professional home inspector check that out.
5-Peculiar or Foul Odors
If you notice any peculiar or foul odors inside or outside the home, there could be a serious problem causing the smells. If you notice smells and you can’t figure out where they’re coming from, it could be serious. Don’t discount what your nose may be trying to tell you. Likewise, if you detect a strong scent of air freshener, this could be the sellers trying to cover up an issue.
6-Locked Doors
When you’re walking thorugh a home for sale, the sellers should never have any doors, closets or storage areas locked. If you encounter restricted areas, ask the sellers to open up. If an area is locked, there may very well be something the owner doesn’t want you to see.
7-Major Renovations
While additions may be nice, and renovations may have been made to modernize things, use caution here. If you detect that a home has had any major renovations, like a floor or structural wall removed or changed, proper adjustments may not have been made to ensure the home is sound. This could shift weight to other areas and repairs to fix this could be costly. If you suspect that any major renovations have been made, secure a structural engineer to check the home for safety.
While this list is far from complete, keeping these items in mind when looking for a home for sale could save you money after the purchase. And as always, we strongly recommend you get a complete home inspection on any home you are serious about buying, and make a satisfactory home inspection a contingency of your home purchase.
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Welcome to Another Hurricane Season
June 1st means the start of yet another Atlantic hurricane season. And even though tropical cyclone activity doesn’t usually peak until late summer/early fall, we’ve already had two named storms (Alberto and Beryl) this year before the season even officially begins. Next up is Chris.
Does this mean we’re in for a stronger storm season this year because of all the activity already?
According to the preseason forecast, we’re expected to get 11 named storms, 6 hurricanes, and 2 major hurricanes. These forecast numbers are below the long-term average from 1950-2011. However, don’t let your guard down. Forecasts simply cannot accurately predict critical details like, where or how many landfalls will occur.
Fewer hurricanes doesn’t necessarily mean less damage and destruction. In 1992, there were only 5 named storms. However, one of those was Hurricane Andrew, a Category 5 hurricane that devastated South Florida. In 1983 there were only 4 named storms. One of those was Alicia, a Category 3 storm which pounded the Houston-Galveston area and caused almost as many fatalities there as Andrew did in South Florida.
There are six lists of hurricane names that continue to rotate. The lists only change when there is a hurricane that is so devastating, the name is retired and another hurricane name replaces it. As there were no significant hurricanes in 2006, the 2012 hurricane name list is exactly the same as the 2006 hurricane name list.
Now is the time to make sure you have proper insurance coverage, because once a storm forms and is named, most insurance companies stop writing any new insurance coverage. Flood insurance has a 30 day waiting period before it goes into effect, so if you don’t have flood insurance, now is the time to be checking into that.
The Atlantic basin is not the only activity center for hurricanes, as many storms form in the Pacific as well. So no matter where you are along any of our U.S. shorelines, you are not 100% safe from the wrath of mother nature in the form of a hurricane or tropical cyclone. Be prepared.
How much home can I afford? This is the question every person thinking of buying a home should ask. Or better yet, how much home can I easily pay for?
Before you even start looking at homes on the Internet, or thinking about going to see a real estate agent, you should take a hard look at your finances. If you’re barely able to make your rent payment each month, buying a home may not be your best option.
Yes, sometimes a mortgage can be cheaper than rent, but don’t forget, as a homeowner, you’re also responsible for taxes, homeowners insurance, repairs, and sometimes association fees. So figure out how much you can pay, then how much you can “easily” pay.
Debt To Income Ratios
Lenders use ratios to determine what you can afford to pay for a home. To follow their example, figure out your debt to income ratio yourself. It’s a handy number to have whether you obtain a mortgage or not.
Front End Ratio
This will be shown as a percentage of your gross monthly income. This number reflects what the lender believes you can afford as a loan payment based on your gross monthly income.
Back End Ratio
This number is your new mortgage payment plus all recurring debt. For example, if you pay $300 per month on your car and you pay $150 per month on a credit card, the total of $450 plus your new mortgage payment makes up the back end ratio.
Most lenders want you to keep your debt to income ratio between 34 and 38 percent. Meaning, your total monthly debt should not exceed 34 to 38 percent of your monthly income.
Expect to pay anywhere from 2 to 3 percent of the sales price for closing costs. So for example a $150,000 home will run you closing costs of about $4500 in addition to your down payment.
Loan programs can vary greatly between lenders, so it’s helpful to enlist the aid of a mortgage broker when shopping for a mortgage because they know the requirements and guidelines of many different lenders. They can shorten your shopping time and potentially save you from getting a loan with less than desirable terms.
Different lenders will have different underwriting criteria to determine the risk they are willing to undertake by providing you with a mortgage. Part of that criteria is the down payment. Programs range from no money down, a/k/a “100% financing”, to 20% down or more, and a number of factors will determine which ones (if any) you will qualify for.
Determine Your Price Range
Now that you know how much of a mortgage you can likely be approved for, you can work backwards to determine what sales price range you need to focus your search efforts on.
Experts recommend that once you’ve determined how much you believe you can afford to pay, set aside the difference between what you’re paying now and what you would be paying as a homeowner, factoring in a set amount for any unforseen home repairs. Think of it as a “dry run” to see how well you do.
Interest rates will change how much your mortgage payment will be, and those rates change often – daily, and sometimes even hourly.
If things are too tight, consider eliminating debts and/or opting for a smaller home. Many individuals have started small and worked their way “up the ladder” of home ownership, buying successively larger homes until settling upon the one they want to live out their remaining years in.
Nothing stays the same forever – things happen, jobs are lost, people get sick, houses catch fire, whatever, so it’s a wise home buyer who plans for such contingencies, allowing plenty of breathing space between what they can afford and what they can easily pay for.
If you need help determining what that amount is, feel free to contact us for a no-obligation consultation, or find a reputable mortgage broker to help.
When buying a home, there are a lot of things to look at to ensure you make the right decision. It is a significant investment on your part as a buyer, so one of the things you need to be aware of is the cost involved in buying the home.
You’ll need to consider the down payment. While just a fraction of the selling price, it will still be a significant amount. Your lender will set the down payment they require, depending on the type of loan you’re seeking.
If you’re financing more than 80 percent of the value of the property, you may need to pay for private mortgage insurance. This is required by lenders as a form of protecting the property. If you do not want this extra cost, you can opt to put down a higher down payment which is usually 20 percent of the selling price to avoid PMI. Aside from saving money on private mortgage insurance, you can also request a better interest rate if you put down more cash up front.
You’ll also need to consider loan fees. This is labeled by different names by different lenders but it will usually be a form of payment for the processing of your loan. Be prepared for this as it will always be a part of what you will be paying once you take out a loan with a lender like a bank or any financial institution.
The lender may also require you to have the property inspected before you buy it. Of course, you would need to pay the person or firm that would do the inspection. You should also add other things like the money you would use when going around looking for a property or visiting your real estate agent.
Setting your budget is one of the first things you need to do when buying a house, so use these tips as a guideline for getting started.