First Time Home-Buyer Secrets

1st Time Home-Buyer Secrets

 “Spoiled,” “unrealistic,” and “demanding” proceed “first time home-buyer” in the daily banter of many Realtors.  You’ll find them commiserating around water-coolers and coffee-stations from coast to coast, mourning the good old days of real estate before the internet and HGTV.  I say today's first time home-buyers are Sacrificial.  Wait . . .   What?

 

No generation is immune from sacrifice.  Like their parents and grandparents, the vast majority of millennials want the American Dream of steady employment, a loving family, a Home of their own  -- and they routinely make sacrifices to achieve their goals.  

It appears every generation receives access to something new that’s designed to make lives “easier” and as each new advance emerges so do greater expectations of what we can accomplish, what we should know, and how long it should take us to reach our goals.  Perhaps these generational changes make it difficult for older generations to truly see and understand the very real sacrifices today’s first time home-buyers make in pursuit of their dreams. 

 

Contrary to what popular myths, today's millennial generation isn't waiting for easy-fixes and get-rich-quick schemes.  Like other generations, they work hard for what they have.  An overwhelming majority use financing to buy their homes.  The majority of their down-payments come from good old-fashioned saving.

As professionals, it is our duty to understand our home buyer clients so we can help them in their pursuits.

The tools and information available to Realtors in 2014, when shared with first time home-buyers and utilized to help them reach their real estate goals, produces transactions with less stress and provides home-buyers the opportunity to have a great home on great terms.   Anticipating a first time or repeat home-buyer of any age to expect less of me as a Realtor is “unrealistic” and I'd be a “spoiled . . . demanding” Realtor expecting today’s home buyers to be satisfied with the norms of the past. 

  

Rising mortgage rates are the top concern for homebuyers

 In the current housing market, prices are high, the supply of homes is low and credit is tight. But the number one concern for potential homebuyers is rising mortgage rates, according to a recent online survey by real estate research firm Trulia.

More than 40 percent of people who planned to eventually buy a home said they were worried about rising rates, followed by rising home prices and low inventory. Among those homeowners who were planning to buy a home within the next year, inventory just edged out rising rates, the survey said.

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The 30-year fixed rate touched 4.5 percent last week, according to data from Freddie Mac, and there appears to be no turning back, economists say. If rates rise too fast, they have the potential to hurt the housing recovery by pricing homebuyers out of the market.

More than half of homebuyers also said that they would be discouraged from entering the market if rates reached 6 percent. Rates are still low by historical standards, but people have grown accustomed to them being below 4 percent, said Jed Kolko, chief economist at Trulia.

Mortgage rates have been under the spotlight lately following the Federal Reserve’s statements that it could wind down its stimulus program early if the economy keeps improving. The Fed’s bond-buying program has kept rates artificially low since the housing crash. As Fed Chairman Ben S. Bernanke testifies this week before Congress, his remarks will be carefully scrutinized to get a sense of the central bank’s policy direction for the rest of the year.

It’s logical for people to be worried about rising rates, Kolko said, but what they should really concentrate on is credit.

“Low mortgage rates don’t do much good if you can’t get a mortgage,” he said.
There are some signs that banks have started to loosen credit standards, Kolko said, but rising mortgage rates may actually help further loosen them. Mortgage credit availability increased in June compared with last year, according to data from the Mortgage Bankers Association.
“Some banks will look to do more home purchase lending as their refinancing business shrinks,” he said.

Homeowners who want to refinance their mortgages — to take advantage of low rates — are immediately affected by rising rates. The number of refinancing applications has fallen to its lowest level in two years over the past few weeks, according to data from the Mortgage Bankers Association.

In the near future, rising rates are more likely to push demand higher, Kolko and other economists say.

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Real estate investors are optimistic about housing market

By Justin Pierce

Despite some shifts in the housing market that make it more difficult to earn money investing in residential real estate, a large majority of people in that field plan to buy as many or more properties in the next 12 months to rent out or sell for profit.

That’s one of the findings of a study released last month that attempted to measure the impact people involved in income or speculative real estate are having on the housing market .

The survey — sponsored by BiggerPockets.com, the nation’s leading social Web site for real estate investors, and Memphis Invest, one of the largest providers of single-family rentals — shows that 65 percent of investors plan to buy a lot more homes during the next 12 months.
Still, from my experience in the Washington area, business conditions are changing with rising home prices, stiffening competition and shrinking margins. Anyone seeking to get into real estate investing should proceed with caution and not expect to earn the same money that has been made in the past few years.

The report points out that investors played a fairly substantial role in the housing recovery. The housing crisis pushed nearly 4 million foreclosures onto the open market, devastating home values. This and the coinciding financial crisis squashed homebuyers’ confidence and their ability to buy. At that time, real estate investors began buying up the foreclosures when few other people could enter the market. They bought up so many properties that they established single-family rentals as a $100 billion business. In fact, the report says that single-family rentals now outnumber apartment units.
They are also renovating the homes they buy and spending an average of $7,500 per home. That totals more than $9.2 billion every year in construction-related spending, according to the report. This is critical business for an industry that was hit hard by the recession.

In 2008, Congress approved the Neighborhood Stabilization Program to provide funds to municipalities and not-for-profit organizations to repair damage to foreclosed homes. Up to this point, they have spent a total of $7 billion of tax payer money.

Real estate investors are doing more than this every year with their own money or money that they borrow. Surprisingly, the report finds that only one in four real estate investors are cash buyers. In fact, slightly more than half make down payments and finance the rest of the purchase amount. If you read my last post, you’ll see just how much most real estate investors pay for financing.
This strikes at one of the prevailing myths about real estate investors. Very few have cash for their projects. I can also tell you that most real estate investors are more afraid of you, the retail buyer, than you are of them. Real estate investors have to pay higher interest rates than owner occupants and they have many more additional costs. Back in 2006, real estate investors would come in and buy properties at market value and then gamble that they would make their profit within a year on appreciation alone. I can tell you that most all of those investors are out of business now or they’ve learned very painful lessons.

Some 3 percent of American adults or 7 million people are active real estate investors, according to the report. These people are actively looking to buy more property and about half of them make more than five purchases each year. This is a diverse group of people. About 76 percent are under the age 55. They are more likely to live in the South or West of the country and about two-thirds of them make less than $75,000 per year.

Even more interesting, the report tells us that this group of active investors does not plan to slow down despite rising home prices and increased competition. About 65 percent of the active investors plan to buy as many or more properties in the next 12 months as they did in the past 12 months. This is big news considering that fact that real estate investors accounted for as much as 25.3 percent of all home purchases as of May 2012. This indicates that investors have confidence that the housing recovery will continue and their robust activity will help ensure it.

Keep in mind that this is a national survey. The Washington area doesn’t exactly fall in line with national trends. But real estate investors are very optimistic creatures. When the report says 65 percent of investors plan to buy more property in the next 12 months, I believe it. But the key word is plan. I’ve never met an investor who plans to do less this year than last year.

The real estate market in this area has been on a steady climb for a while. New waves of foreclosures have provided targets and opportunities for investors over the past few years. But as illustrated by data from RealEstate Business Intelligence and MRIS, inventories are down and prices are up. Prices in some areas are up to 90 percent of where they were at the peak. Investors will be pressured to pay way more than they’d like for fixer upper homes and many of them will get in trouble if they’re not careful. Nothing throws cold water on investors like a bad deal.

I would expect investor activity to stay fairly strong in this area but I think demand for rentals will slow a bit as home prices increase. I also think rehabbers and home flippers will face stiff competition and less opportunity. I’m already seeing that in my business. I’m getting tighter on my budgets and spending more time and money to find viable projects. If interest rates stay low and prices continue to rise, investors will likely move to land development, commercial real estate or possibly other markets. At some point, we might also see investors become sellers as we did in the late 1990s and beyond as they liquidated holdings they’d accumulated in the down market 20 years ago.

This market should continue to be strong but I would advise investors to begin reassessing their business models. I would also recommend extreme caution to those looking to begin a real estate investing career. You are probably not going to make money in the next few years in the same manner it was made in the last few years.

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How To Spot A Home That Might Sell Below Its Real Estate Value

Want to increase your chances of buying a home below current real estate value? Just look for a seller who didn’t listen to his agent.

The best real estate agents encourage their sellers to do whatever it takes to get the home in its absolute best condition before going to market. The better the home shows, the more likely the seller will get top dollar.

Sometimes, this could be as simple as removing personal items or decluttering. Other times, an agent will suggest bigger fixes, such as painting, replacing carpet or upgrading countertops or cabinets. Savvy sellers listen to their agents, make the changes suggested and go to market in top form. That’s not always how it plays out, however.

For any number of reasons, many sellers protest suggested fixes. Either they don’t want to be inconvenienced, don’t believe the fixes will matter or don’t have the financial resources to make it happen. Inevitably, this means the buyer will get a discount on that property.

How to spot a home that might sell below its value
Is there a home for sale in a good neighborhood and in the desired school district that seems to be well-priced but for some reason isn’t selling? This is the home you want to investigate, because chances are the seller didn’t listen to his agent. Specifically, here are some tell-tale signs to look for.

Big furniture or a lot of furniture
Most people don’t buy furniture to use when staging their home. Often a seller may have a lot of furniture in one room, which makes the room look small to potential buyers. Real estate agents and professional home stagers know this all too well. For example, stagers always suggest a small loveseat over a full-blown couch or sectional sofa. Also, in the bedrooms, king beds often take up too much space. So a stager will often push the seller to swap it out for a queen or full-sized bed.
When you enter a house that seems crowded with furniture, imagine the rooms with fewer or smaller pieces. Be aware that plenty of potential buyers won’t get past the sense that the rooms are too small, and they’re likely to move on to a home that feels bigger. In turn, this could give you room to negotiate a good deal with the seller.

Dark rooms
There was a home in West Hartford, CT on a great block, but the interior was dark. Three large French doors in the living room led to a deck, but the doors were stained black, and the carpet was brown. On top of that, the window coverings were big, heavy and overtook the room.
The house sat on the market for months, even though the price wasn’t far off the real estate market value. Here’s why: Every buyer walked in and out because the house was so dark. After the home had been on the market for three months, a smart buyer made an offer $40,000 below asking and ended up getting it.
Before the buyer moved in, he removed the window coverings, stripped the stain on the doors and painted them white, pulled up the old carpet and had the floors stained to a lighter oak. Right away, the dark room became light, bright and welcoming. The buyer’s total cost: $9,000, which instantly added $31,000 to his equity.

Grandma or Bambi staring down from the walls
Buyers are looking to see themselves — and not the current owners — in a home. Too often, however, the seller hasn’t “depersonalized” his home enough, or at all. Even though the listing agent may have told the seller to clear the house of his possessions, the seller may be proud of his accomplishments and resist.
And so potential buyers are treated to walls decorated with diplomas, family photos, awards and trophies. Moose and deer heads hanging on walls are surefire deal killers, especially when the hunting rifle used to kill Bambi is proudly displayed, too. At best, buyers tend to see such highly personal stuff as clutter that takes the focus away from the home. They’re turned off by it all, and they walk away.
They might also be walking away from a great deal. Are the bones of the home good? Does it have the floor plan you like? Are the kitchens and baths in acceptable condition? Is it in the area where you want to live? If you say “yes” to all of these, hang around a little longer. Imagine the home without the seller’s junk. Picture yourself living there, without Bambi.

A good home that doesn’t show well = a great opportunity
Ultimately, sellers who don’t listen to their agents or stagers inadvertently give savvy buyers a discount. For you to see that potential, try to understand as much as you can about why the seller is selling. Look for sellers who have ignored their agent’s advice. While conventional wisdom says that a buyer would be turned off by a home that shows poorly, go against this. Imagine the potential. And then, once the home is yours, make those small changes the seller should have made. Right away, you’ll have a little bit (maybe even a lot) of equity, thanks to the seller.


Read more: http://www.zillow.com/blog/2012-10-22/how-to-buy-a-home-below-current-real-estate-value/#ixzz2ADulUmkK

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