Archive for the 'Home Buying' Category

A First-Time Homebuyer in 2009 Part 2: The Five Stages of Grief

Published
by
Editor
on June 29, 2009
in Home Buying
. 8 Comments

If only New York didn’t have to be so special. If only the rent-versus-buy calculator gave me a more concrete answer — I wouldn’t have jumped off the Renter ship so quickly. And so, I mourn a little.

Okay, a lot.

When the sponsor of my future potential condo accepted my offer, I was shocked. Shocked because I got an answer within two hours. Shocked because — for all I know — buying property in New York could be a secret, terrible money pit of which I am completely unaware. “No,” I thought. “There must be something wrong. There has to be a catch.” Renting is something I know. I don’t have any first-hand experience with owning. Which led to…

Anger! Renting is so easy. Real estate people make me mad. You’re telling me I have to stay in one place for more than five years? That makes my young, restless heart tremble.

And so I bargained with myself (before I’d have to bargain with my landlord). I understand that I could have a nice hedge against inflation and an $8,000 gift from the government, but my heat and hot water is currently included in my rent. Can I take that with me to my new place? Can I?

Nah. I have to leave my tolerable, slightly annoying rented apartment, just slightly too far from public transportation and amenities. I have to give up the cockroaches. I have to leave my quirky Sicilian landlord. I must abandon my cheap rent and carefree lifestyle for one that’s slightly more you’ll-thank-yourself-later.

And so, I accepted it. I am no longer a renter; I am, as some friends have called me, an “adult”. I am crossing the threshold into an unknown world at the signing of a contract and a down-payment check. And now: real estate lawyers.

Editor’s Confession: I’m A Buyer

Published
by
Editor
on June 8, 2009
in Home Buying
. 3 Comments

We all make mistakes.

I simply forgot the three things that could turn my die-hard renting self into a motivated buyer:

1) No closing costs.
2) Local 25 year tax abatements.
3) Defeated developers making fire-sales.
4) $8k tax credit for first-time buyers this year.

When you put these three things together, my hypothetical mortgage and fee payment looks a lot more like my monthly rent. In other words, it’s finally happening — you know it’s the bottom when buying makes sense again.

Rapidly gentrifying, YUPPIE misgivings aside, I am completely enthralled by a particular new development. Right in the center of my favorite neighborhood in Brooklyn (not for the faint of heart, by the way) and 3 blocks from a superior subway line, the local amenities make it a no-brainer. After putting in an honest effort to find anything structurally wrong with the place, I’ve found myself defeated. Defeated in my stubbornness not not to buy a place while the getting’s good.

Evaluating the Next “Hot Neighborhood”

Published
by
preynolds
on May 19, 2009
in Home Buying
. 207 Comments

When is an up-and-coming neighborhood truly coming up, and when is it all just hype?

I asked myself this question last weekend, while touring open houses in a working-class neighborhood of Boston that has recently been touted as the next great thing in real estate investment. East Boston, in fact, has gained so much attention that it even got a write-up in the London Financial Times .

 “It’s a cool little neighborhood, full of young, hard-working, motivated people from diverse backgrounds, great for entry-level buyers and you can get a house with some good appreciation,” said one realtor quoted in the Financial Times article.

The main attraction for Eastie, as the neighborhood is affectionately called by its residents, is it’s cheapness combined with water views and proximity to downtown Boston. The disadvantages of the neighborhood are not few, and include its relative isolation (East Boston is separated from downtown by water. In order to get downtown or any other part of Boston, you must take the subway or drive through a long, tolled tunnel). Other disadvantages include the neighborhoods’s proximity to the noisy comings and goings of jumbo jets at Logan Airport, as well as hardscrabble housing stock with small rooms, low ceilings and non-existent yards.

So is the real estate buzz in East Boston and neighborhoods like it, real? Or is it just hype?

Here’s my take:  Neighborhoods appreciate in value when there is something of value in the neighborhood to appreciate. That explains why abandoned but still elegant brick rowhouses in Boston’s South End were eventually reclaimed and rehabilitated and why the Back Bay, with its gracious brownstone mansions, has always been a pricey place to live. If a neighborhood is ever to become “hot,” in my opinion, it has to have:

1) Great housing stock that has been ignored or neglected. This means well-built stylish homes, with high ceilings, big windows, architectural detail or some other overwhelmingly appealing feature.
2) Accessibility — in all forms, from public and private transit to walking and biking. Accessibility is especially important in areas where the housing stock is not particularly attractive. For example, many areas of Cambridge and Boston’s North End are filled with tiny little walk-ups in so-so buildings, but both areas have proven sound real estate investments and “hot” neighborhoods to live because they are easily accessible by subway, car, bike, or foot.

That’s it. If the area doesn’t have these two factors in place, in my book, it will never be the next great real estate investment. East Boston, charming as it may be, doesn’t have these things.  

And what about the up-and-coming neighborhood that you’re thinking of buying into?

Which Came First?

Published
by
kmunsell
on May 13, 2009
in Home Buying, Home Selling and Market Conditions
. 242 Comments

The age old debate of which came first, the chicken or the egg, has never been actually decided. And in the real estate market, I’ve always wondered, what comes first, the purchases or the press? (Today, I guess it really doesn’t matter — I just hope they continue to feed off each other until we’re out of this festering economic mess. )

Case in point. The most recent headlines tell us that things are on the mend, and it’s occurring across the nation. In Orlando, there is a surge in sales of lower priced homes, in Santa Clara, April stats showed an increase in activity, and in Fort Worth, signs of healing are starting to show.  Of course, some areas are still slow to pick up, but there is hope that they simply lag behind. For example, in Oneida County, New York, sales are still down, but spirits are high.

Keep it coming. Keep it coming, press people. Focus on the positives and let’s hope that we can create a bandwagon that potential homebuyers will be eager to jump on to. It seems that new buyers are finally taking the plunge. Momentum provided by a perfect storm of big tax credits, ultra low interest rates, motivated sellers and inventory extraordinaire are causing lower priced condos and houses to actually sell again. 

Is this enough to call it over? Probably not, but it is certainly a good first step, and an upturn in the real estate market is likely to generate some momentum that can potentially affect other key economic indicators, including the job market, the stock market, retail sales and travel and tourism.  I for one, am quite happy to see that this new media attitude and regardless of whether the purchases or the press came first — keep it moving, people!

Negotiating With A Pre-Approval Letter

Published
by
preynolds
on May 5, 2009
in Home Buying and Home Selling
. 28 Comments

Start searching for a home, and the first thing you’ll hear from your realtor is how you should get a pre-approval letter from a bank.

The pre-approval letter is supposed to tell you and the seller of a home that a bank would be willing to lend up to a certain amount on the purchase of a home. More than just a pre-qualifying letter (which can usually be handled in about a five-minute phone conversation with your lender), a pre-approval letter goes an extra step.  The bank will actually ask for documentation confirming your employment and the source of your down payment, along with other aspects of your financial circumstances. In a pre-qualification letter, the bank mostly just accepts whatever you tell them.

Now lets be honest. Pre-approval letters are mostly for the benefit of realtors. Realtors feel better showing homes to clients with pre-approval letters because they feel less like they’re wasting their time. Banks, however, make no guarantees, and by now, both buyers and sellers know that. Just because a buyer may have a piece of paper stating they are “pre-approved” does not mean he or she will necessarily get  financing once an offer has been made and accepted. In fact, after a diligent search, one couple I know was denied financing for a home — even though they had received a pre-approval letter from the bank just a few weeks earlier. Nothing in their circumstances had changed.

How can you make a pre-approval letter actually mean something? You can’t really. But you can try to have your letter written in such a way that you’ll obtain the best price for any home you’re making an offer on.  Here’s what the strategists say:

1) Have the pre-approval letter match your offering price and not more. If a seller sees you are approved to offer more, they may reject your offer and hold out for a higher bid.

2) Try submitting a “low” low-ball offer along with a preapproval letter for a slightly higher amount. The amount in your preapproval is your “real” low-ball price. The seller will likely counter with your maximum price, which is really what you were aiming for in the first place. If you’re lucky, the seller may even accept your originial lowball offer.

3) Get your preapproval letter from a recognized local lender. Both listing agents and sellers will feel more comfortable with a trusted lender, rather than a fly-by-night online or long-distance operation that may change the terms of the loan, threatening the deal altogether.

4) Try having your preapproval letter state that you are preapproved to buy a certain house, rather than a certain amount. In other words, you are preapproved to buy 1 Oak Lane, MSL # xxxxx. According to some realtors, this implies that you have been approved to pay full asking price, but still provides for more flexibility during negotiations.

Test Drive Before You Buy

Published
by
kmunsell
on April 9, 2009
in Home Buying
. 21 Comments

You try on clothes, you test drive cars – you even sample food before you buy the bulk package from the warehouse store. So why wouldn’t you test drive a home before you buy? A home is one of the single, largest purchases you will  make in your lifetime.

Particularly if the budget is tight, consider taking a test whirl in a comparable home to what you’re angling to buy before making the actual purchase. By spending 6 months to a year living in the neighborhood and tracking actual housing expenses, you can gain a better understanding of the nature and scope of your purchase before you sign on that dotted line. 

Among those little details that you will discover:

  • A more accurate estimate of homeowner expenses. In addition to mortgage payments, keep an expense diary and track all costs that you would have had to pay, had you owned the home. This includes your utilities, property taxes, insurance, and repair or upgrade expenses that you would have incurred during your time, if you owned the home. For example, if the water heater goes out, log the cost. If the heater is serviced, log the cost.
  • The maintenance and responsibility required in having the home. Yards are beautiful to look at and many homeowner’s dream. But in addition to the expense of watering and care, are you willing to take on the yard work? Living in a home and getting an up close look of what type of yard maintenance is needed during the year can be an eye-opening experience.
  • The commute to here, there and everywhere. Regardless of whether you drive to work on your own or use public transportation, you’ll learn what the actual commute would be like–day in, day out and in different weather conditions.  In addition, you’ll gain firsthand experience as to proximity of shopping, doctors and the other amenities are in relation to your home.
  • The neighborhood setting. By living in the area, you’ll notice the traffic and the people patterns, and you’ll learn more about particular lots and locations than any realtor could ever tell you, and perhaps you can avoid buying the lot where parents, children and dogs congregate every morning for the 7:30 am bus stop!

Pink Slip Phobia Got You Down?

Published
by
kmunsell
on April 1, 2009
in Home Buying and Progressive Trends
. 3 Comments

It started in the auto industry, snaked its way through cruises, men’s clothing, and now it’s hitting the real estate industry. Will this new trend in layoff protection boost consumer confidence? 

In January of this year, Hyundai Motor of America implemented a broad, new strategy, aimed directly at the ailing economy and loss of jobs. Under their new Assurance program, Hyundai said that U.S. customers who buy new cars and lose their jobs within a year of purchase can return their vehicle–as easy as that! Next to follow, JetBlue began promising full-fare refunds to customers who are laid off before their planned trip. And next came BookSafe Travel from Norwegian Cruise Lines, The Risk-Free Suit from men’s clothing retailer, Jos. A. Bank, and more auto payment protection for Florida car purchases.

So, it’s only natural that these programs designed to alleviate consumer job worries would extend to real estate. In the rental market, Western National Property Management and Goldberg Companies offer layoff protection plans, giving some assistance to laid off tenants in Florida, Ohio, Texas, and North Carolina. And most recently, condominium complex Thornton Place in Seattle jumped on the bandwagon with their Safety Net Program. Under this program, if you buy a condo and lose your job, they will pay your mortgage for six months. The company believes this is the first program of its kind in the country, though others have offered up smaller incentives such as homeowners’ association dues. To start, Thornton Place is offering 27 condos, starting at $299,950 for a one-bedroom 595 sq. foot unit. 

The details of each program vary of course, so buyer beware. However, layoff protection is catching the eye of worried consumers and addressing pink slip phobia head on. Is it working? It’s still too soon to tell, but initial signs are good. Hyundai’s sales were reportedly up by 14% for the first two months of the year, compared to last year, however the jury’s just starting deliberations on those condos.

Realtor-Buyer Disconnect and How to Avoid It

Published
by
preynolds
on March 31, 2009
in Home Buying and Home Selling
. 131 Comments

Have you ever worked with a realtor, who just doesn’t “get” you?

If you don’t know what I mean, picture dating someone who doesn’t fit into the kind of life you envision for yourself.  Perhaps you’re a homebody who likes to cook and snuggle on the couch. But the guy you’re dating isn’t the nesting type and gets restless at home. Or perhaps you consider yourself an urban sophisticate in love with sidewalk cafes, independent boutiques and neighborhood ethnic restaurants. Well, the woman you’re dating likes suburbia, big box stores and Applebee’s.

In my case, I’m an urban soul, content to walk everywhere. I gave up owning a car a few years back in favor of Zipcar. But my realtor kept pushing me to condos that came with parking spaces, even though they were often $40-$50,000 more than condos without parking. Why? Resale value, he said. Even if I don’t own a car and intend to stay in my condo for years if not decades, he thought I should find a nice condo with parking. Kind of like mom who wants you to find a nice guy with a stable job, even though the unstable artist makes you feel more alive.

Sometimes, mismatched realtors don’t understand your lifestyle because they have a predictable life pattern stuck in their head: Buy a starter home. Move to a larger home. Start a family. Raise a family in a home with good school districts, etc. Or maybe they have lived this kind of life, and so it’s hard to relate to anyone who hasn’t.

So what’s the best way to fix the realtor-buyer disconnect?

For realtors, my advice is to focus less on resale and more on what your clients want, no matter how insane it may seem. If you can’t fathom why a client would want a huge McMansion stuck in the middle of nowhere, perhaps it’s better to be honest and point your clients to some realtor who can.

For buyers, my advice is to go with a realtor who reflects your demographic. Someone who’s about your age with a lifestyle similar to your own will inherently understand why you want to live on a ground floor when most people want an upper floor, or why you want an older building with character rather than a modern complex. If you’re an artist, find a realtor who specializes in finding homes for artists. If you’re an urban pioneer, find a realtor who is an urban pioneer himself. You won’t have to convince your realtor that your lifestyle needs trump resale value. And just like your best chance of meeting a nice companion often lie with friends who have similar interests and lifestyles, so does your best chance of finding the right realtor. Get recommendations from like-minded friends.

Finding the right realtor isn’t easy, but you shouldn’t have to live through months of frustration and disappointment hoping that one day, your realtor will finally understand you.

Spring Offers Hope But Will it Last?

Published
by
kmunsell
on March 26, 2009
in Home Buying, Home Selling and Market Conditions
. 104 Comments

The official start of spring pounced on the scene just days ago. From the winter trodden areas of the country, bulbs peer out from under ground, cherry trees poise to burst, and tiny, new leaves prepare to invade winter beaten branches.

Spring, the traditional start of prime real estate season, is here. This year, however, is an extraordinary year.  Will the traditional spring real estate jolt happen this year? If you sell, will they come?

Have faith. The lookers are already beginning to emerge from their quiet, hiding places, waiting to blossom into healthy, thriving buyers. So far:

  • New home starts jumped 22% in February, compared to one month prior. Though this number is still significantly below where it was one year ago, it does offer some hope.
  • Sales of existing homes rose 5.1% from January figures, again still lower than same time last year, but a move in the right direction, nonetheless. 
  • New home buyers can obtain up to $8,000 in tax credit from a qualified purchase.
  • Fixed rate mortgages are as low as 4 3/4% for qualified buyers.

This year, spring is needed more than any year before, but we don’t know how long this new burst of life will last. Is the market now poised for a turnaround or is it just a spot of sunshine that will shrink in the dark clouds ahead. Nobody knows what lies ahead, but if a move in on your mind, there may be no better time. 

Sellers clean up, price well, and play nice to make a sale, and lookers, buy now or prepare to stick it out for the long haul. Right now, the time is right for both sides of the deal. Let’s just hope this lasts.

Readers, share your thoughts below. Do you believe we’ve reached the bottom and clearer skies lie ahead, or do you believe this is a short term, transient burst of energy?

Musings on Touching Bottom

Published
by
preynolds
on March 24, 2009
in Home Buying and Market Conditions
. 25 Comments

Last week, the New York Times ran an article entitled “Has the Economy Hit Bottom Yet?”

One of the economists cited in the article said that as far as housing prices go, you can say we’ve hit bottom when a young couple earning two modest incomes can afford to buy  a two- or three-bedroom starter home in a middle-income neighborhood in their city. 

An interesting measure, but is it realistic?

In many midwestern cities in the United States, a couple of modest incomes is truly all it takes. But in my experience on the East and West Coasts in the last 30 years, this is no longer a realistic baseline measure in our changed economy.  Yes, my parents were able to afford a three-bedroom Los Angeles starter home on two modest salaries back in the mid-60s, but that was about the last time a couple of “modest” salaries could get you anywhere near a house in L.A.  That’s not just because home prices have gone up, but because real income has stayed absolutely flat since about 1973 while education and healthcare costs have skyrocketed. Most families have tried to keep up by adding a second wage earner and by borrowing more heavily to get into a home. A lot of homebuyers have compensated by buying smaller condos as their “starter homes.” But the cold hard reality is that raging income inequality  has a few of us making a whole lot more (read the executives over at AIG) and many more of us making a whole lot less. And that has forever changed the homeownership model of a nice three-bedroom starter home bought and paid for on two modest incomes. (Incidentally, back in the 1960s, this was doable on ONE modest income.)

Don’t forget, after all, that a young couple making $25,000 each will likely have hefty student loans to repay, as well as steep healthcare premiums to foot each month. Years ago, their parents buying their first home wouldn’t have had these costs. In order to compensate for increased daycare, healthcare and education costs at a stagnant salary, a home’s price would practically have to drop to what it might have been in 1973, and that’s just not going to happen.

Will the median household income of about $50,000 a year ever buy the American Dream again? It’s my guess that in many large American cities, even after we hit bottom, those days may be over — unless something remarkable happens to make the rest of life affordable for families.