Category: home purchase

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Buyer and seller attitudes about real estate market

Economists are officially pessimistic about the housing market.  This is the general sentiment following another month of declining home sales.  Experts are pointing to a number of factors for the slowdown, including increased interest rates and housing affordability.  But what are home buyer and seller attitudes about real estate? The National Association of Realtors’ most recent Housing Opportunities and Market Experience survey hints at a busy spring!

Economic attitudes about real estate market

attitudes about real estate
Attitudes about real estate market (infographic from nar.realtor)

An October 19th NAR news release (nar.realtor) reported that September’s home sales were the weakest in several years.  The nationwide trend affected all regions.  NAR chief economist Lawrence Yun stated:

“This is the lowest existing home sales level since November 2015…A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”

First-time-home-buyers are finding the housing market increasingly challenging.  This segment’s participation needs to be strong for a healthy home sales.  September’s low thirty-two percent first-time-home-buyer participation is attributed to rising interest rates and home prices.

But low housing inventory is also an issue.  September’s housing inventory decreased to 1.88 million existing homes available for sale (from the 1.91 available during the previous month).  NAR President Elizabeth Mendenhall stated:

“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”

Economists at Fannie Mae believe that the housing market will continue to disappoint.  In an October 18th press release (fanniemae.com) Fannie Mae Chief Economist Doug Duncan stated:

“Our expectations for housing have become more pessimistic. Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”

But what do economists really know about the future?  Let’s hear it directly from the consumer!

Home buyer and seller attitudes about real estate

NAR’s Housing Opportunities and Market Experience survey tracks opinions from renters and homeowners about homeownership, economy, and the housing market.  The release of their third quarter 2018 survey indicates that sixty-three percent of respondents strongly or moderately believe that it’s a good time to buy a home.  Although optimism is somewhat diminished from the second quarter’s survey, there continues to be a positive sentiment about buying a home.  The survey’s positive sentiment continues even though a majority of respondents believed that home prices will continue to increase in the immediate six months.  Additionally, a majority of respondents believe that qualifying for a mortgage may be an obstacle to a home purchase.

The survey also concurs with other metrics indicating high consumer sentiment for the economy.  In light of the recent slide in home sales, NAR’s recent Housing Opportunities and Market Experience survey reveals “a near-record high of sixty percent of households believe that the economy is improving.”  Adding to the strong sentiment is the survey’s increased monthly Personal Financial Outlook Index, which indicates that respondents believe that their financial situation will be better in six months.

The survey also indicates a record high of home sellers who believe it is a good time to sell a home.  But given the seasonal decline of housing inventory, it is likely this will translate to a surge of home listings in the spring.  The added inventory combined with high consumer sentiment will boost the housing market. So sayeth the consumer.

By Dan Krell    
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/11/01/attitudes-real-estate-market/

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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.

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Property Brothers option to home buying

If you’re looking for the perfect turn-key home, you may find that the already limited home inventory is further limited by the many homes with deferred maintenance and those that are in need of updates.  If you’re like the many frustrated home buyers in today’s market, you may decide to take the route of buying a home that includes the Property Brothers option.

As you know, HGTV’s Property Brothers is one of the most popular real estate shows on cable.  What makes the show work is the concept of transformation; creating a model home from one that is crying out for TLC.  Of course, the magic of TV makes it seem easy; home buyers appearing on the show put their trust into the dynamic duo to find the right home and to make it perfect.

A warning, however, this process is not for everyone.  Undergoing this type of project (buying and rehabbing a home) is taking an already exasperating process and making it an emotional and financial challenge.  It is also a time consuming, as you’re totally involved – from buying to rehabbing the home.  Your experience may be similar to those on TV, nevertheless it is more likely to feel like the movie “The Money Pit” or somewhere in between.

Unlike the Property Brothers, you don’t need your real estate agent and your contractor to know each other.  Each has a distinct role; one is helping you acquire the home, and the other is remaking it.  However, it’s a good idea to make sure each is licensed and experienced in this type of process.  Ask for references; some contractors will even have a portfolio of their work.

Before you begin taking the Property Brothers option, make sure you have the funding and your real estate agent and contractors are ready for action.

Talk to a lender about a renovation loan.  Besides providing the money to buy the home, a renovation loan will provide funding for renovations.  Loan programs and mortgage limits vary, so it’s a good idea to get qualified before you write a contract to buy a home.  Make sure your contractor can provide details about the renovation, as the underwriter will review the plans.  Consider a FHA 203K program, which also offers a “streamline” version for less expensive renovations.

Working with a top notch real estate agent is key in not only finding a home, but also negotiating a price.  The ability to think outside the box is very helpful in this phase.  They should be able to find the “diamond in the rough,” that provides suitable space at the right price.  If you’re communicating well with your agent, they will understand your requirements.

Once you identify a home (and before you write the offer), meeting with the contractor will determine if your vision is possible, and its price.  Be realistic and flexible.  Be prepared for bad news and to move on to another home.  Sometimes the home needs too much work and/or the cost of the renovation could be beyond your budget.

Even if you have lots of cash to spare, it’s recommended that you start by creating a budget.  Besides the acquisition cost, consider the renovation costs and carrying costs (if the project is long term).  Also decide on your limitations.  You may decide on limiting renovations to kitchen and bathrooms; or you could broaden the project to be more ambitious.  Consider creating a short term and long term plan for the house; focusing on critical repairs immediately, and making other updates over time.

By Dan Krell
Copyright © 2016

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Preparations before you buy a home

House - Chevy Chase MDSo, you’ve been checking out homes online and have been bitten by the “bug.” You’ve patiently waited out the market and feel it’s time to jump in but not sure where to start. Whether you’re a seasoned or first time home buyer; don’t make the common mistake of overlooking the essential preliminary activities of the home buying process.

Experts agree that checking your credit report prior to starting the home buying process is essential. Your credit report is the basis for the credit score that is often used by mortgage lenders to decide if you qualify for a loan, and it may also be used as a means to decide your interest rate. If your credit report is inaccurate, it can cost you time and money.

Believe it or not, mistakes on credit reports are more common than you might think. According to the Consumer Financial Protection Bureau (CFPB), you’re entitled to a free annual credit report, which can be obtained for free from the “official” credit report website (annualcreditreport.com). The free report does not include a credit score, however, you can get it from the credit repositories for a fee; the CFPB cautions that the scores you receive may not be the same scores that lenders use for decisions on extending credit.

I often talk about doing due diligence, and many home buyers are attentive and thorough in negotiation, and home inspections; but many are not as careful when choosing their real estate agent and lender. Although buyers tend to work with the first or second agent they meet; there is a consensus that you should interview several real estate agents so as to know what to expect and to ensure you receive the service and attention you require. The same goes for any service provider you may use in the process, including the mortgage lender. And even though it has become more common for buyers to talk with several loan officers about mortgage programs and interest rates; however, it is recommended that you ask about lender fees as well.

Don’t be shy in choosing in choosing other service providers either – it’s going to be your home after all. Choosing a home inspector, pest inspector, and title company can take a little time, and it may seem easier to go with whomever your agent recommends; but sometimes price or proficiency is sacrificed for convenience. For example, a few moments of time to interview home inspectors can be the difference between having an adequate home inspection or a very thorough one.

Before you spend time visiting homes, it is highly recommended that you get qualified for a mortgage by a lender. An approval indicating that your income and asset documents and credit report were reviewed by the loan officer gives added credence to any purchase offer.

Don’t forget to make a housing budget. In addition to your mortgage payment, insurance, and property taxes, the budget should include utilities, maintenance and other expected expenses. The budget should also project increases in these payments as well. Rather than keeping to the maximum loan qualification, a realistic budget can reveal your comfort level on the price you’re willing to pay for a home.

Besides your real estate agent, more information about credit reports, mortgages and the home buying process is available from the CFPB (consumerfinance.gov) and HUD (hud.gov). With preparation, your home buying journey will be more enjoyable!

by 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. This article was originally published the week of April 21, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

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Title insurance history, perspective, and necessity

Homes

Home buyers would like to consider themselves as being financially savvy. Of course, I often hear the question about buying a home without title insurance, which usually arises from the advice they may receive from some questionable source debating the necessity of title insurance. However, the importance of title insurance is highlighted by recent ownership disputes that have occurred in the last five years due to foreclosures, improperly recorded deeds and mortgage modifications.

Historically, title insurance came about as a necessity. According to the American Land Title Association (alta.org), title insurance resulted from a landmark court case in Pennsylvania in 1868, which found that home seller was not be responsible for a erroneous title opinion. Subsequently, the first title insurance company was formed in 1876 in Philadelphia. The company promoted itself by claiming that they would insure “the purchasers of real estate and mortgages against losses from defective title, liens and encumbrances;” thus increasing the speed and accuracy of the property transfer process.

Prior to the availability of title insurance, title examinations were conducted similarly to how they are today with the purpose of ensuring title marketability (ensuring title is free of unpaid liens, mortgages, and other encumbrances). However, prior to the offering of title insurance, property owners were often held responsible for title blemishes. Of course, unresolved tile disputes were often settled in court.

Initially, title insurance was often a local process. However, the title insurance industry surged along with an expanded housing market after World War II ended. Additionally, the use of lender’s title insurance grew along with the secondary mortgage market; because as the number of nationwide mortgage holders increased, lenders found that title insurance was necessary to protect their interests.

Researching a property’s title relies on the “recordation system.” Although the recordation system has been in use in most of United States in some cases before the formation of the country, many countries use a land registration. Land registration systems used in some countries typically do not provide the same recourse as does the recordation system when disputes arise; where the registering government may resolve these disputes.

Title insurance is a result of our recordation system that continues to this day, where property ownership can usually be determined by conveyance. Although the recordation system relies on transfer instruments that indicate a grantor, grantee, and property description; the system is not perfect. Issues can arise from unrecorded deeds, as well as erroneously recorded documents; fraud may also occur by recording falsified transfer documents with a complicit or unsuspecting clerk.

There are two types of title insurance that are offered: lender’s and owner’s. A lender’s policy is usually required by a mortgage lender and is thought to protect the interests of the lender by validating the lender’s validity and enforceability of the mortgage. The lender’s policy is typically issued for the mortgage amount and coverage decreases as the principal is paid down.

An owner’s title insurance policy is understood to protect the owner’s interest in the property, however there may be limitations. You should consult with your title attorney about the policy coverage and limitations. Policy coverage varies– so check with your title agent for pricing and coverage levels.

A Consumer Guide to Title Insurance is available from the Maryland Insurance Administration, the local State agency that regulates title insurance producers (insurance.maryland.gov).

By Dan Krell
Copyright © 2013

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Original published at https://dankrell.com

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Unusual considerations when owning an unusual home

by Dan Krell © 2013
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Luxury Real Estate“Be different and be damned…” is a telling quote from Margaret Mitchell’s Gone With The Wind.  Social commentary aside, the quote can be somewhat of a warning to those who build or purchase that unique, unusual, and one of a kind home.  Although it is just a quote from one of the highly celebrated novels of the twentieth century, “damned” is a strong word to use in a real estate column.  However, because of the many considerations of owning a unique home, there may be an occasion or two you might feel “damned.”

When would you consider a home as being unique?  Mostly, the degree of uniqueness can be to a person’s perception of a home as well as what they consider to be unusual.  However, there is some consensus to what is generally accepted as “mainstream” in the real estate industry; and if a home falls outside these norms through its construction, size, floor plan, etc – it may be considered as unusual/unique.

Some homes are so extreme in their construction, either in size and/or building materials, that it is clear they are unique and one of a kind; there are other homes that may have been converted from commercial or industrial buildings that may also indicate a unique flair.  However, there are many homes that appear to fit in their respective neighborhood, but the custom nature expresses a specific style and preference; which is often found in the luxury home market.

Some considerations you might think about when purchasing a unique home include: financing, insurance, maintenance, and resale.

If you’re set on purchasing a home that is unique, check with your mortgage lender about financing; lenders may have objections on lending on an unusual home.  It is also not unheard of that extreme unusual homes appraise lower than market value due to uncertainty of value.  Unusual homes, including the “Über-luxury” market, may require specialized loan products that are offered by specialized lenders.

Additionally, you should consult with your insurance agent as the home may not meet your underwriting guidelines for home owners insurance.  Many people don’t realize that insurance carriers may rate your home based on construction materials, zoning, size, etc, which can affect the premium.  And it’s not unheard of that an insurance carrier may also limit or even deny coverage because the home does not meet their underwriting standards.

Maintaining a unique home can sometimes be challenging too.  Many unique homes are constructed with materials that may be exotic, uncommon, and/or can be found in commercial applications.   Repairs and labor costs can be much more than the typically constructed home.  Finding replacement materials and qualified contractors to work with those materials may also be difficult.

Home ownership is often a labor of love for the home, and that emotion can be carried into the resale.  You could easily be disappointed in the time it takes to sell the home as well as the sale price.  Be prepared for an extended time on the market because your unusual home may have a very limited pool of buyers, and negotiation could be long and dragged out due to variances in perception of value.

“Doing it your way” may be the theme of a popular song and an advertising campaign for burger joint; but when it comes to building or buying a home – being unique and unusual can sometimes come at a cost.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of June 3, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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