Home buyer life hacks

home buyer life hacks
5 Home Buyer Life Hacks

“Life hacks” have been trending everywhere the last few years, from the internet to social media.  Life hacks are typically actions or “wisdoms” to make life easier.  However, home buyer life hacks are not easy to find.

The home buying experience can be time consuming and stressful.  Over time, the home buyer’s responsibilities change.  In fact, the home buying experience has drastically changed in the last decade.  Consider that mortgage programs and Realtor® contracts changed and continue to evolve.  Which includes the TILA-RESPA Integrated Disclosure (TRID) rule that went into effect last fall, which changed how a transaction settles.  Here are a five home buyer life hacks to make the experience straightforward and more enjoyable.

The first home buyer life hack is to learn about the home buying process.  Certainly a must for first time home buyers.  However, even experienced home buyers may find themselves in strange waters if they’ve not bought or sold a home in the last couple of years.  Becoming acquainted with home buying process can help you anticipate and prevent most surprises that can upset the flow of the transaction.

Home buyer life hack number 2 – make a budget.  Creating a budget may take the romance out of the buying process, but will help you with your home search and contract decisions down the road.  Consult a professional if necessary.  In making your budget, consider your income, debts and other financial obligations, as well as your life style.  Make a housing budget that includes mortgage, property taxes, HOA or condo fees (if any), homeowner’s insurance, utilities and maintenance.  In creating your budget, also consider future changes to income and home related cost increases.

Home buyer life hack number 3 – know what to expect from the housing market.  Knowing whether the housing market is benefiting the seller or buyer can help decide on a winning home buying strategy.  Understanding that a low inventory market may necessitate you and your agent to do a little more leg work to find homes for sale.  Know the current housing trends for the neighborhoods you are perusing, so you can prepare for competition and multiple offer scenarios.

Home buyer life hack number 4 – hire a professional.  The process isn’t rocket science, however, you can easily find yourself in over your head if you’re not experienced in buying a home in today’s market.  Although some home buyers believe they can get a better deal by not using an agent to help them buy a home, it could end up costing more because of poor negotiating in price, home inspection, and other add-ons.  Hiring a buyer agent can also free up time that is necessary to conduct the process.  Experts know the market such that they can help you determine the best offer price.  They can also package your offer in a way that facilitates the transaction.

Most home buyers will follow home buyer life hacks 1 through 4.  However, they will take for granted that everything they are told is true.  Which brings us to home buyer life hack number 5 – do your due diligence.  As you can imagine, not everything you are told is true or depicted accurately.  “Trust and verify” can help you identify and reduce hidden and obscure risks by verifying the truth.  Conduct your due diligence throughout the home buying process; from the veracity of a seller’s statements about their home to vetting the professionals you hire.

Original published at https://dankrell.com/blog/2016/07/07/5-home-buyer-life-hacks/

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Vacation home buying

Buying a vacation home

Vacation Home
Vacation Homes (infographic from realtor.org)

A trip to the beach or mountains may have you wondering about owning your own vacation home.  And as it happened you’re not alone!  An April 1st 2015 National Association of Realtors® press release estimated that vacation home sales bounced back to peak levels in 2014.  There was a massive 57.4% increase over 2013 sales!  In contrast, during the same period there was an estimated 7.4% decrease in investment home sales. And an estimated 12.8% decrease in owner occupied home sales (realtor.org).

Although your motivations may be personal, the NAR’s 2015 Investment and Vacation Home Buyers Survey revealed that there are various reasons to buy a vacation home.  Not a surprise, a majority of those surveyed (33% of respondents) indicated the primary reason they bought was to use for vacations or family retreats.  However, 19% of respondents indicated their purchase was for a future retirement home, while 11% or respondents bought for the home to be used as a rental property.

Do the research

You’ll find vacation homes in different styles, sizes and prices.  However, your favorite destination may dictate the price range and style.  You may realize that although you are able to afford the week’s rental at your favorite retreat, you can’t afford to buy a vacation home there.  However, if you broaden the search area, you may find suitable and lower priced vacation home nearby.

Benefits

You may have heard others talk about the benefits of their vacation home, such as being able to visit any time they desire without having to worry about reservations, or restrictive check-in and check-out times.  They usually don’t have to worry about having too many guests either, as they can invite whomever they wish to keep them company.  And they don’t have to worry about special accommodations – it’s their home after all!

Disadvantages

There are benefits of owning your own vacation to be sure.  However, it’s probable that you may not hear vacation home owners talk about the downside.  Jeff Brown, writing for US News and World Report, stated: “A second home can produce a wonderful family tradition or turn into a stress-inducing money pit.” (The Pros and Cons of Investing in a Vacation Home; usnews.com; February 10, 2016).  Brown quoted Alison Bernstein, founder of Suburban Jungle, saying: “It is less expensive to stay in hotels in various destinations than it is to upkeep a home, including the hidden expenses of caretaking, overall operations of a home and property taxes…However, for those that are able to enjoy it, it is definitely worth it.”

Brown points out the increasing costs of ownership.  Property taxes, insurance, and possibly a condo or HOA fee can increase.  Additionally, the vacation home requires regular maintenance just like your primary residence.  Repairs may compel you to make extra trips to work on the home rather than being a relaxing holiday.

Brown cautions that a vacation home may not be the best vehicle for investment because of the volatility of resort property.  Additionally, if you need the money, it’s more difficult to tap the equity in a second home.  Applying the tax advantages can be tricky too, so consulting with a tax professional before buying a vacation home would be wise.  Self-managing the property can become aggravating, as it can be difficult to find tenants during the off season; however, hiring a management company can be pricey.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real estate agent robots

Are real estate agent robots the future of home sales?
Are robot real estate agents the future of home sales? (infographic from techspot.com).

Many erroneously describe Gordon Moore’s prediction as the doubling of computing power every two years.  “Moore’s Law” is more accurately described as the doubling of transistors on a chip every two years.  The point is that computer power is on steep path of improvements; and the prediction has been accurate since Moore’s 1965 paper “Cramming more components onto integrated circuits” (Electronics; April 19, 1965).  What does Moore’s Law have to do with real estate? Everything.  Many industries have benefited as computer processing power increased – including real estate.   Will we see real estate agent robots in the future?

It is often said that a smart phone has thousands more computing power than the Apollo guidance computer.  Consider how far computing power has increased over the last fifty years; common computer processors today exceed 1 billion transistors per chip with average clock speeds over 2.5 GHz (the Mac Plus I had in graduate school had an 8MHz processor with only 68,000 transistors!).  The ever growing processor power has allowed major developments in artificial intelligence (AI) and robotic applications we are witnessing today.  And the promise of quantum computing is expected to make our current computers seem like abacuses.

A cutting edge 2013 paper by Carl Benedikt Frey and Michael Osborne, of the University of Oxford, discussed the effects of advancements computerization and robotics on employment and the labor market (The Future of Employment: How susceptible are jobs to computerisation? Oxford Martin School – University of Oxford; September 2013).  The authors concluded that about 47% of the US workforce is at risk of being “automated soon” (which is in the next ten to twenty years).  Workers expected to be affected include, “…transportation and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations…” The service industry, including real estate, was singled out as being affected by AI and robotics.

Included among the top occupations most at risk included: real estate broker, real estate agent, property manager, and real estate appraiser. The increasing reliance on automated property valuations by lenders, real estate agents, and consumers is a testament to the advancement of AI in the industry.  Back in April, Inman (a leading real estate information publisher) devised an experiment to see if a computer algorithm would best a real estate broker in choosing homes for potential home buyer.  The results announced May 10th revealed that the computer program did a better job than the real estate agent (Broker vs. bot: And the winner is…; inman.com; May 10, 2016).  Of course, there were limitations to Inman’s test; but still a notable result nonetheless demonstrating how AI is affecting the real estate industry. Robotics is making significant advances too.

Recent developments have made self-driving cars real, along with Honda’s Asimo; and even artificial companions.  You can now purchase your own service robot, if you can afford it.  Just like AI, robots may also take over real estate agent tasks in the near future.  Imagine walking into an open house and being greeting by a friendly and helpful robot! We often talk of how quickly the internet has developed and its impact on the real estate industry.  And it’s partly due to rapidly increasing computer processing power and Moore’s Law.  Imagine how AI and robotics will change home buying and selling in ten or twenty years.  And once quantum computing becomes commonplace, you may even experience a real virtual tour via a holodeck.

Original at https://dankrell.com/blog/2016/05/13/real-estate-agent-robots/

Copyright © Dan Krell If you like this post, do not copy; instead please: reference the article, like it at facebook or re-tweet.

Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

When transfer tax becomes controversial

The legislative process encourages discourse for proposed legislation.  The result is a bill that is passed or defeated.  Regardless, proposed housing market and real estate legislation is not typically exciting; and in fact the minutia of the bill can be downright boring and/or confusing.  However, there are occasions when proposed legislation has the potential to affect home owners and buyers such that it can create a brouhaha.

First, let’s review a few bills passed by the Maryland General Assembly: The first has to do with agency.  Currently, “licensees” are required to provide the Maryland Real Estate Commission’s Understanding Whom Real Estate Agents Represent at the time of first face to face meeting and is a notice to the consumer.  The disclosure explains seller’s agents, agents who represent the buyer, and dual agents.  For many home buyers, the first face to face meeting of an agent is at an open house, and are supposed to be given the disclosure by the agent sitting at the open house regardless if the buyer has an agent or not.  The new law is to simplify the disclosure, eliminating redundant notices and allowing agents at open houses to post who they represent instead of the asking every visitor to sign the disclosure.

Another change is how agents recommend service providers.  The current requirement is for agents to check the licensing status of all recommended service providers, ensuring that the provider is currently licensed in Maryland.  The new law will only require agents to annually check home improvement licenses of recommended contractors.

The General Assembly also passed legislation that will require home sellers throughout the state to disclose deferred water and sewer charges. Additionally, legislation was passed that adds requirements to the state brokerage licensing exemption for attorneys.

Still with me?  Good.  Local residents should be aware of the Montgomery County Council’s attempt to fast track a bill to increase the county’s recordation tax on real estate transactions.  On April 14th, Expedited Bill 15-16, Recordation Tax – Rates – Allocations – Amendments was introduced by Council President Nancy Floreen.  Recordation tax is collected when a home is sold, and when a home owner refinances a mortgage.  If passed, it will become effective July 1st 2016 (which is about 2 months from now!).

The Greater Capital Area Association of Realtors® issued an April 18th press release opposing the bill, stating that it unfairly targets home buyers and home owners by increasing a tax that is already among the highest in the state.

In an April 12th memorandum to Councilmembers (page 7 of pdf) Councilmember Floreen stated: “While nobody likes the idea of increasing taxes of any kind, our needs are great, and this tax is less likely to affect those Montgomery County residents who are struggling most. On the up side, it will generate millions of dollars to support our desperate need for new schools and educational facility improvements. What’s more, a portion of the recordation tax is earmarked for affordable housing.”

Although aspirations for certain projects may be well intentioned, Councilmember Floreen should consider that further burdening home buyers in an already high cost area for real estate could impact homeownership and make “affordable housing” less affordable.  Furthermore, the average Montgomery County home owner refinancing their mortgage may not be struggling, but they are trying to get by the best they can in a high cost of living area.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Build a case to make your lowball offer bulletproof

The process of making an offer to buy a home is fairly straightforward, provided that you don’t have competition from other buyers.  The offer basically conveys the price you want to pay, and which inspections you want to conduct. Once the documents and addenda are completed, your agent will present the offer to the listing agent, who in turn presents it to the seller. The seller can accept, reject, or counter your offer.

Of course, the best scenario is that the seller accepts your offer without any counter to price and terms. However, if your offer is below list price, chances are that the seller will counter your price. And if your offer is significantly lower than list, the seller may reject the offer outright.

Since the great recession, an increasing number of homes for sale have serious issues due to deferred maintenance. It’s routine for homes in need of repair and/or a total renovation to receive low ball offers. Real estate investors typically don’t attach emotion to their offers, and as such making low offers on property is business as usual. But if you’re like the average home buyer, you may shy away from making a low ball offer fearing being rejected.

You can increase your chances of engaging the seller in working out a deal by packaging your offer correctly. The conventional wisdom is to make a “cash” offer that is non-contingent. The reasoning is that the owner would be more apt to take your lower offer knowing they don’t have to wait for a lender to approve your loan or worry about appraised value; or hassle with negotiating home inspection repairs.

Home

This approach typically works in a buyer’s market, especially when home prices are declining (as we experienced from 2008 to 2010). However, this tactic may fall flat in today’s market for a number of reasons, including strong year-over-year home price gains, low listing inventory, and increased home buyer competition. Being confronted about their home’s value is a tough pill for a home seller to swallow, especially when they see other homes selling for more. Notwithstanding the seller’s ability to accurately interpret housing data; many sellers have high sale price expectations regardless of their homes’ condition, and rationalize a higher asking price – even when not justified.

Another reason this tactic has lost its effectiveness is that the enticement of a “cash” offer has lost its impact when in actuality it’s all about the sale price. Whether the sale is all cash or financed, the primary concern to the seller is the amount of money they net in the sale.

Non-contingent offers don’t go far enough when making a low offer on a home; you also need to build a case to help the seller understand the rationale of your offer. Have your agent comprehensively analyze the neighborhood market and include the analysis in your offer. The analysis should be detailed and point out differences that add and negate value to the comps and the subject property. Your offer should also include a detailed estimate on repairs and updates (from a licensed contractor).

Making the seller aware of the differences between their home and neighborhood comps, as well as educating them on the costs associated with repairs and updates goes a long way in getting a seller to better understand the value of their home, and moves you closer to making the deal.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.