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What Retirees Need to Know about Buying a Vacation Home

June 15, 2019 by Paul Schrick (Post Export User)

Many retirees decide to purchase a vacation home as their ideal place to rest and relax. A second home can be a gathering place for friends and family, and a supplement to your retirement income via future renting potential. Plus, any mortgage interest you pay is tax deductible as long as it’s a personal residence, meaning you occupy the home at least 14 days a year. Two weeks of vacation doesn’t sound so bad, does it? Renting comes with tax deductions and other benefits to consider as well. If you think a vacation home might be right for you, check out these home-buying tips.

Spend Some Time There

You’ll be using the property regardless of whether you choose to rent it out part of the year. It’s important that you actually get a true feel for the area. Consider visiting during every season, taking rental demands into consideration. Whether it’s peak season or off season, you’ll want to be sure your property has features that appeal to renters in order to help keep your home occupied and your rent paid. Since you don’t live there, you probably won’t be able to do the work yourself. Instead, you’ll need to hire a pro.

Caring for the Property

Renovations and upgrades can be difficult to manage from afar, so building a good relationship with your contractor helps. Just remember to communicate your desires and budget effectively, and be prepared to compromise. In the end, the job will be done to professional standards and you may even save money.

Budget Properly

It’s no surprise that homes come at a price. When you factor in beautiful weather, proximity to large cities or nature’s beauty, you can have high potential for rentals. You’ll find that it all pays off in the long-run. Of course, you still need to budget carefully. Find a real estate agent who is familiar with the area and can be honest with you about price histories and resale potential. You’ll need to factor in costs such as maintenance, insurance, and a second mortgage. Additionally, if the location of the home is a good distance away, you’ll need to budget money for gas or plane tickets.

Plan for Away Time

A vacation home is a second home, so you won’t always be living there. Unfortunately, your home doesn’t go into a protective bubble when you are away, so you’ll need to make plans for upkeep. If your home is a condominium, you can usually count on the maintenance being provided. If not, then it’s up to you to take care of repairs. This upkeep includes yard work, interior cleaning, and general home maintenance. You’ll also need the right tools and equipment as well as a place to store everything when it’s not in use. Many people turn to storage sheds so extra equipment is not an eyesore for renters.

If time is a factor, the alternative is to have someone else tackle the upkeep. A property management firm can provide weekly visits, maintenance, repairs, housekeeping (for renters), security checks, and overall peace of mind. You need a point of contact in order to remain informed on what is happening to your home so that it is a positive in your life rather than a source of stress. In addition to a professional, get to know the neighbors so that you have an extra layer of security. They can let you know about any issues, including suspicious activity or a rambunctious renter.

Retirement is the perfect time to start thinking about buying a vacation home. A home away from home can be the perfect escape for you, as well as a way to earn some income on the side. Before you jump right in, spend some time there, take a fine-tooth comb to your finances, and determine how you’ll take care of your home when you can’t be there.

This article was provided by Jim McKinley, a former banker who uses his background and skills to provide advice and valuable resources to anyone who needs help with their financial literacy.

Money With Jim

Hidden Costs of Buying a Home

May 14, 2019 by Paul Schrick (Post Export User)

You've saved and planned and you are finally ready to buy your first home or move up to a larger one. It's fairly easy to figure out how large a mortgage you can fit into your budget. Your real estate agent has tables and formulas that can determine the percentage of your income that's reasonable for a home. However, be aware of the numerous other costs that must be considered, both for the home purchase and for the monthly payment.

Loan Origination Fee
This is the fee paid to your lender for the work involved with making the loan. It can be a large expense, depending on the lender and the size of your mortgage. Figure it will be between a half and one percent of the total mortgage. The loan origination fee must be paid to the lender up front, so budget accordingly.

Agent Fee
You need a good real estate agent with a proven track record to help you navigate the market. Your agent should know about housing trends and availability, as well as lead you through all the paperwork and requirements for making a purchase. In most cases, the sellers pay the fees, so you won't pay this expense yourself. However, the sellers should have figured the agents' fees into their listing price. Hire a reputable agent and you can be sure you will get your money's worth.

Inspections
Your first big expense after your offer on the home is accepted will be inspections. Your lender will likely require a thorough inspection, but it will be money well spent for you to find any major problems with the property before concluding the sale. Your agent will help you hire an inspector whose report will include structural components, interior plumbing and electrical systems, foundation, air conditioning and heating, roof, basement, attic and insulation, ceilings, walls, floors, doors and windows. You may be required to get a separate termite inspection. Depending on the age of the home, you also may need a sewer inspection.

In some states, if an inspection was conducted by a buyer who then backed out of the purchase, you may be able to skip paying for another. All the inspections will add hundreds of dollars to your home-buying budget.

Insurance and Taxes
You will be paying several different insurance fees that will add up quickly. You can figure your mortgage payment with a mortgage calculator, but it might not include taxes and insurance costs. You'll pay the title insurance at the time of purchase, and homeowners insurance payments will go on as long as you own the home. You may also need flood and/or natural disaster coverage depending on where your home is located. Insurance and property taxes can be paid into an escrow account with your lender who will make those payments for you. Remember, both insurance and taxes will go up through the years of your loan payment, so be aware of the growing total you will have to pay in addition to your mortgage.

Closing Costs
Typically, home buyers will pay between 2 to 5 percent of the purchase price of their home in closing fees, according to Zillow. So for a house costing $150,000, the fees will be between $3,000 and $7,500. You will receive a loan estimate from the lender three days before closing. There might be some negotiations in these fees. Ask your real estate agent to help walk you through all the items on the closing cost list. Feel free to shop around for another lender if you want to look for a better deal. Also, you can request that the seller incur some of this cost.

Don't let these additional costs surprise you. Ask lots of questions to your agent and lender to be prepared for the price you'll really pay. Factor in these expenses, and you should be on track with a budget that will allow you to enjoy your new home for years to come.

Counteroffer Tips for Sellers

March 15, 2019 by Paul Schrick (Post Export User)

You’re selling your home at a price decided upon with the help of your real estate agent. Together you have researched the market and prepared to list your home at a price you believe to be viable and suited to the condition of the property. A potential buyer makes an offer, but it’s lower than the asking price. What do you do next?

When an offer is made, negotiations are underway. Your real estate agent will be invaluable to help you decide how to proceed. The buyer may be checking to see if you’ll accept a lower price. They might also want other conditions to be met – frequently home repair. You will need to determine if it’s a serious offer or if it’s unrealistically low. By industry standards, any offer that is 20 to 25 percent below asking price is a low-ball offer. You may choose to ignore it or to make a counteroffer.

In advance of the counteroffer, you want to recheck the property values of other homes in your area. To continue negotiations, discuss the price range you are willing to consider with your agent. Rely on the agent’s knowledge of the market to help you set a counteroffer price back to the buyer. Set it too high and they may leave to find a different seller. Set it too low and you might be leaving money on the table. You may consider lowering the price just a little, but add an incentive, such as a flexible closing date. Your agent will handle the counteroffer for you.

Knowledge is power in negotiations and you want to put yourself in the best position to make smart counteroffers. Perhaps you’re already in negotiations to purchase your next home. Maybe the buyers are facing a pressing timetable because of an imminent job transfer or because they want to be settled before a new school year begins. Have your agent discuss the situation with the buyer’s agent to gain as much information as you can.

With an informed approach and a reasonable attitude, you can quite likely reach an agreement that is acceptable to everyone. Don’t take the negotiation personally. This is a business transaction. Remember, if you don’t reach an outcome you want, you can always walk away from negotiations and wait for the next opportunity.

What Agents Consider When Pricing Your Home

December 15, 2018 by Paul Schrick (Post Export User)

Although there is a great deal of information on the Internet that can help you decide how to set the price on your house, it takes a real estate professional to evaluate the data to your best advantage. A deep knowledge of your surrounding area and current market conditions is a big part of an agent’s expertise, and their sales experience working with many different clients gives them valuable insight into the psychology of buyers.

Finding the right price for your home is vital if you expect a quick sale. If potential buyers think your property is overpriced, they may move on, leaving your home on the market too long. A house that sits without an offer in the first two or three weeks will lead buyers to speculate why it hasn’t sold and assume there are problems. Studies show that homes priced 10% above market value are far less likely to sell within the first 30 days than those priced within 5% of market value.

Of course, if you price the home too low, you will probably be leaving money on the table. In either case, a real estate agent can help you find the sweet spot to price your property correctly the first time and make your sale as quickly and painlessly as possible. Here are the things to consider:

Sales History of the Area
Your agent will pull comparable listings and sales from your immediate neighborhood for the past three months. The radius of the search will be about ¼ to ½ mile from your home. Pay attention to dividing lines such a highways or other major dividing streets. Comps from “the other side of the track” will not apply to your home. The comps will only be effective when comparing apples to apples, including age of the property, square footage, and desirability (dream homes might be able to tack on a premium). Other considerations include lot size and configuration, amenities and upgrades. Your agent can also compare final sales prices against original list prices.

Check Out Your Competition
Your agent can find out the details on pending sales in your neighborhood and how long these homes have been on the market. Take a careful look at the active listings as well. Remember that sellers can ask whatever they like, so the prices you see might not reflect the final sales amount. Tour the homes if possible to experience what buyers will find when they visit. Your agent will help you evaluate what makes your home preferable to these and adjust your asking price accordingly.

Market Trends and Micro Trends
Your agent will consider national, regional and local market trends when setting the price for your home. National factors could include possible rising interest rates. Locally, consider whether sales prices in your neighborhood have been rising or falling. Micro trends are changes that could directly affect your neighborhood. For example, is a new shopping center or park being built nearby? These sorts of things can increase the value of your home.

Be Aware of Your Immediate Neighbors
Even the most luxurious house can be adversely affected if the people living across the street never mow the lawn or have a fence that is falling down. On the other hand, if they have a lovely garden and pristine curb appeal, that could help you as you determine the asking price for your home.

Your agent will be invaluable to you as you evaluate all of these details. Working with a reputable, experienced agent will make all the difference as you negotiate the entire sales process. Lean on your agent to guide you successfully to set just the right price and meet your goal for the sale of your home.

Debunking Mortgage Myths

November 15, 2018 by Paul Schrick (Post Export User)

Almost all adults in this country believe that home ownership is an important part of the American dream and that it increases financial stability. But many Americans think that owning a home is out of their reach. In truth, many perceived obstacles are simply misconceptions about what is required to purchase a home. After reviewing the list here, you may discover that you’re more prepared than you think.

“Renting is always cheaper than buying a home”
Renting may be your best choice if you plan to move frequently. It usually takes up to seven years of home ownership to offset the cost of renting. However, if you plan to stay in your home for a longer period of time, buying is likely the better financial choice. Assuming that your home appreciates in value, you should realize a good profit when you finally decide to sell. Also, you can have a fixed-rate mortgage that won’t change instead of facing the risk of a surprise price hike in a monthly rental fee.

“You need to have 20% for the down payment”
The average American thinks they must have between 17% and 21% of the purchase price for a down payment. While 20% is the industry standard, many people with high credit scores are approved for a mortgage loan that requires much less down. Discuss with your lender what is possible in your case. Loan programs through the VA, FHA and USDA all have low down payment programs if you qualify.

“Once you’re pre-qualified you’re guaranteed the loan”
Although pre-qualification is not the same as pre-approval, it does give you a chance to see what loan amount you should expect from your lender. This is helpful when you are house hunting and need to know how high an offer you can make. However, pre-qualification usually does not include a credit report analysis, so you may still be denied a loan. Pre-approval for a loan amount is better that pre-qualification.

“30-year fixed-rate mortgages are the best option”
A traditional fixed-rate mortgage is likely the best choice for buyers who intend to stay in their home for many years. However, an adjustable rate mortgage may be a better choice for those who know they will move within a few years. Additionally, there are shorter fixed rate mortgages that will have a higher monthly payment, but will save a lot in interest charges. This may be a good choice for buyers expecting to retire soon. Look at all options. A traditional 30-year loan may not be your best choice.

“Mortgages are the same with every lender”
All lenders offer a variety of products, interest rates and fees for mortgage loans. Not all lenders are right for every customer, so be careful to choose one that fits your needs. The lender with the lowest interest rate may not be best because they may be new to the business or have a reputation for instability. You want a company that you can trust to deliver the mortgage package they promised and provide consistent service. As always, you should be able to turn to your real estate agent for advice. They quite likely have a mortgage company that they work with regularly who they depend upon to give their clients good deals and excellent service.

Homeownership Benefits Aren’t Just Financial

September 14, 2018 by Paul Schrick (Post Export User)

Your home is more than just a roof over your head. Homeownership has long been a big part of the American Dream. A great majority of people in this country believe that owning their own home is either essential or important to achieving a feeling of success and prosperity. Of course, there are many financial benefits to homeownership. But having a permanent place to raise a family, to establish your own traditions, to host gatherings, and to plan for the future are also real benefits of owning.

Your life becomes more stable once you own a home. Unless you choose to move again, you shouldn’t be forced to do it. Moving is hard, aggravating, and definitely expensive. Many renters who find themselves moving from one rental to another know what a hassle it can be. With your own home, you can make long-term plans.

Owning means you can suit your own tastes, not follow rules set by a landlord. Whether you want to decorate in a modern style, rustic, or shabby chic, the choice is yours. You can tear out the hedge or plant a tree. Choose paint colors or wallpaper. Bring in any size pet that you like. Tear down walls or gut the kitchen for a complete remodel. Now you are the landlord, so you get to make the decisions.

You may sleep better and enjoy your leisure time more. You may even be a better cook when you become a homeowner. Well, those improvements may not exactly be the ones that you notice. But studies and reports found on the National Association of REALTORS^® (NAR) website make some rather wonderful claims about the benefits realized with homeownership. These include:

Improved mental and physical health: Studies show that homeowners and their children are generally happier and healthier than renters. Many factors play a part, such as a strengthened sense of privacy. People also feel more secure knowing that a landlord cannot ask you to move or demand a significantly higher monthly rent payment.
More engagement within your community: Homeownership gives you a chance to put down roots within your new neighborhood and town. You can build strong relationships with new friends and neighbors, teachers at the local schools, and shop keepers. You may also find more desire for volunteer opportunities. The support system you will build makes life easier and more pleasant.
Higher educational achievement by your children: NAR studies show that children of homeowners are significantly more likely to achieve a higher level of education. An increase in their future earning potential follows. This holds true in both high income and low income neighborhoods.

These results may be due to a better sense of control and self-worth that homeowners enjoy versus renters. It’s human nature to yearn deeply to have our own turf. Although the results may be difficult to measure, the desire to own a home and to build a better future surely push people to want to want to achieve more. You and your family will have to discover the particular benefits that owning brings you. One fact is obvious: homeownership matters.