Monday, April 23, 2012

The Truth About Realtors

Everybody knows at least one.  Whether it's your uncle's college roommate, your boss' daughter, or a sketchy, second cousin, everybody knows somebody in the real estate business.  Realtors are hard to miss, simply because we're always in the business of reminding the public that we're in the business.  We want to be "top of mind" whenever you or someone you know is thinking of buying or selling a home.  It's as simple as that.  Some Realtors can really go over the top with self promotion, beating it into your head, and others let their success, accomplishments and involvement in the community do the talking for them.  There are a lot of misconceptions about Realtors as well.  The public tends to generalize Realtors as super perky, money-hungry, "salesy" folks.  I'm here to shed some light on the subject.  I aim to show you the truth about Realtors and help you understand how life as a Realtor is much different than you might have thought.

All Realtors are NOT created equally...
Just like the rest of society, Realtors come in all sorts of shapes and sizes.  There are benefits and disadvantages to each type of realtor you work with, it's up to you to find a good fit.  Below are some of the differences you'll find:
  • Personable vs. Introverts:  Contrary to popular belief there are several introverted Realtors out there who do just as much business as the personable folks.  "People-persons" are experts in feeling out a client and truly understanding their needs, but when it comes to detail work and back end expertise, some fall short.  More reserved realtors may lack some people skills but more than make up for that in being dilgent in the details while managing your entire transaction. 
  • Commercial vs. Residential:  Predominately, there are two types of properties out there:  commercial and residential.  Some realtors can do a little bit of both, but that doesn't mean they are an expert in both. 
We love talking real estate...
Let's face it, our business is knowing our market and knowing our inventory.  Just like any other business, our product and our customers are consistently changing.  Trends develop, markets shift, demand wanes, economies develop...your Realtor will be monitoring these changes and interpreting data consistently so that you can be up to date.  We don't hoard opinions, we love to get them out to you.  When you leave the office, the last thing you'll want to do is talk shop, but realtors love it!  If you're at a party, at church, or maybe even a sporting event, if you know a realtor, ask them how the market is doing.  A true professional will be on top of their numbers and could give you great advice without blinking.

Not all Realtors are wealthy...
Not all Realtors are wealthy because not all Realtors are successful.  In most markets, Realtors are paid on a commission basis, which means, their income is largely based on their ambition, aptitude and sphere of influence.  The average income for a Realtor nationally is about $37,000 per year.  Subtract expenses, and Realtors may just be getting by.  Another thing to keep in mind is Realtors rarely get any medical, dental, or vision benefits, nor retirement plan options.  So when you see those folks on "Selling New York" with their $350,000 commissions, keep in mind this is not the norm.

How and why they're in business...
Each Realtor has a different motivation for being in the business.  Some saw a huge opportunity to leverage their skills in particular market or situation, while others are casual weekenders.  That being said, not all Realtors are full-time realtors.  Some carry a license just for a few extra bucks here and there.  Not all realtors got in to the business to help people either.  There are a handful of folks out there who might have seen a hot market and hopped in to make as much money as possible.  They get out when times get tough and hop right back in if things begin to heat up again.  There are highly educated, trained and qualified Realtors, and there are those without a high school diploma who backed in to real estate because they had few other options.  Some just love being in the business because they are in control of their time and their income, and that affords them opportunities typical 9-5 workers couldn't take advantage of.  Rest assured, the majority of Realtors are in business for the right reasons and have your best interests in mind.  They have a passion for what they do and they have the experience to get the job done right.  They are the true real estate professionals.

Tuesday, April 17, 2012

Inspection Minimums and Musts

Experience shows that people with the most complaints about their home are those who pass on a home inspection during the due diligence portion of the home buying process.  Home inspections are one of the cheapest ways to give yourself assurance that you're buying a sound home.  Inspections aren't meant to find every little issue, they're meant to see big, glaring faults in the major systems of the house so you're aware of the amount of money (or headache) you can expect.  After an inspection is complete, you can ask the seller to fix any amount of the issues, within reason, or walk away from the deal due to major complications.

A great home inspector doesn't need to be a specialist in every type of home process or system.  Just like the President, he doesn't need to be a specialist in foreign policy, energy, education and the like, but he does need to know when something is wrong so he can begin to take action and ask advice from the experts.  The cabinet members are the ones who are specialists.  Home inspectors can find problems, specialists can give advice and solve problems if necessary.  So don't think you need an inspector who is a professional contractor, electrician, plumber, HVAC technician, and structural engineer.  If you go searching for an inspector with all those credentials, you won't find one.

  • Check for exposed wires, illegal junctions, unprotected wires
  • Verify outlet conditions:  effective grounds, defective outlets, GFCI outlets
  • Examine breaker box, service voltage, panel layout and function
  • When possible, verify electrical work meets minimum code requirements
  • Inspect and verify fuel connections for furnace and water heater
  • Verify proper venting, air supply and function of mechanical systems
  • Test thermostat function, air flow at registers and other mechanical issues
  • When possible, verify mechanical work meets minimum code requirements
  • Check for leaky faucets and drains (both interior and exterior)
  • Examine exposed pipes for corrosion
  • Verify supply line is functioning
  • Examine general layout and design of plumbing system for function and purpose
  • Verify function and drainage of sinks, toilets, tubs and hose bibs 
  • Check for code and regulation adherence
  • Visually examine foundation, check for cracks, settlement issues, and heaving
  • Verify that construction meets minimum code requirements
  • Inspect structural framing for load path, and structural function. 
  • Verify roofing material and condition
  • Examine roof stacks/vents for proper installation and flashing
  • Inspect valleys for deterioration, improper drainage or poor condition
  • Verify drainage for all gutters and downspouts 
  • Verify function of all appliances and systems that stay with the house
  • Comment on condition and function of exterior siding, windows and proper drainage
  • Comment on any interior condition to the extent that it could effect the property
Enlisting the services of a quality home inspector can give you the peace of mind you need when purchasing your new home, without breaking the bank.

Tuesday, April 10, 2012

Learn the Mortgage Application Rules

If it's been a few years since you've applied for a mortgage, or if it's your first time, there are four key aspects to getting the best terms and best rates.   Each lender or broker will require their own guidelines, restrictions and rules, however, these four core concepts are standard throughout the mortgage world.  Keep in mind, THE LENDER IS LETTING YOU BORROW MONEY, you would be just as strict if an old college buddy came up and asked you for $250k...

1) Cash on Hand
I'm sure you think about it, but so does your lender (nowadays).  They want to make sure when all is said and done, after you close on your home, if you'll actually be able to afford it.  If after closing you have a good chunk of change still, you'll look a lot less risky than the applicant with $200 to his name post closing.  Also, your application will be stronger with a larger down payment, i.e. you've got more skin in the game, which is much less risky to the lender.  Along with down payment, they want to know where your money came from.  Was it a one time increase, like an inheritance, prize or gift?  Be honest and upfront with your lender and you won't have any surprises come closing.

2) Debt to Income Ratios 
Your lender will analyze two different debt to income ratios, often referred to as your front end and back end ratios.  Your front end ratio takes your entire monthly mortgage payment (including principal, interest, real estate taxes, insurance and private mortgage insurance) and divides that total by your entire monthly pre-tax income.  This helps to establish how big of a chunk your mortgage payment will take out of your monthly paycheck.  Your goal is to keep this ratio at or below 28%.  The back end ratio takes your entire mortgage payment used in the front end equation and adds it to all your other recurring debts, such as student loans, auto loans, credit card payments etc, and divides that by your total monthly pre-tax income.  This ratio measures how much other debt you have and your worthiness for credit.  Your goal is to keep your back end ratio at or below 40%.

3) Credit Score
Ah, your wonderful credit score.  The magical number that it seems your entire life is based.   This number is entirely based on past credit history, which predicts future credit behavior.  The factors at play here are your payment history, your total debt vs. total available credit and types of credit (revolving or installment).  The higher your number, the better your chances at getting a favorable loan.

4) Appraisal
To be able to let you borrow money, the lender will require that you use your home as collateral.  
Your lender will not lend you more money than they deem it to be worth.  That is why after you put a contract on your home, the appraisal will attempt to verify the value, so you can get your loan.   They need to be sure that if you default on your loan, they can at least reclaim a reasonable portion of the home's value.

Keep in mind, all of these aspects are important and work in combination with one another.  Working with an experienced and savvy lender will assure you get the mortgage you need, and be able to afford it after closing.

Tuesday, April 3, 2012

3 Ways You'll Know if it's "The One"

At offer time, buyers are always fearful of making a bad purchase, facing "buyer's remorse", or just getting into the wrong property.  Just like any other major purchase, you'll never know what the future will hold but you can take steps to ensure your homebuying success.  Below are three easy ways to know that it's "the one".

1)  Does it fit the majority of your needs?
The first thing I do before I even begin to search for homes is make sure all buyers are on the same page for their wants and needs.  Remember, needs have priorities over wants.  Needs are requirements that are deal-breakers, like number of bedrooms or bathrooms, square footage, location to schools or jobs.  Wants are things that can be easily fixed or solved with little or no effort like paint colors, landscaping and the like.  Wants are usually debatable, or non-deal breakers.  I usually tell couples to pick 10 'must haves' and if you get 7 of those, buy it.

2)  Is it within your budget?
One of the biggest regrets of new buyers is biting off a little more than they can chew.  Keep in mind that on top of your mortgage you may have mortgage insurance, HOA dues, property taxes, homeowners insurance, and utilities.  Make sure you understand how far your dollar will stretch and just what your total monthly payment you'll have.  It doesn't do you any good to be in a big, expensive house, if you're just struggling to get by that you can't enjoy anything else in life.  The happiest homebuyers buy within their budget and understand ALL the money involved.

3)  Does it feel like home?
If you're able to check off the first two points, you're in great shape, but how does the home feel?  If it doesn't feel like home, it may never feel like home.  A great sign that it feels like YOUR home is if you start picturing your furniture fitting in each room or picturing which rooms your family will enjoy the most.  If the picture you have in your head is confusing, then it might not be the home for you.  If you can imagine yourself being happy in the home, chances are your dreams will come true.

Keep these three issues in mind when starting off on your next home purchase.  Keep this in mind too...If you're still not happy with your home within the first six months, I'll sell your home without taking a commission and help you find that next great home that you are happy with.