by neil kearney | Jan 5, 2009 | For Buyers, For Sellers, Real Estate 101 |
Most of the buyer’s right now in the distressed markets across the country are either first time buyers or investors. Both of these 
categories recognize that this is a perfect opportunity in which to buy.
But what about move-up buyer’s? Those who already own a home but are ready to purchase a larger home or a different type of home. Many of these would-be buyers are waiting until the prospects of selling their homes are better. Let me explain why this may not be the best strategy.
According to the National Association of Realtors the average move-up buyer purchases a home that is 50% more expensive than the house they are selling. For our example let’s assume that the Smith’s currently own a home that they think should sell for $400,000. They came up with this price because their neighbor across the street sold their house last year for $390,000 and their house is “much nicer than that house”. They have their eyes on a house in the same school district that has been listed for four months at $600,000. After our initial consultation I inform them that their house would sell within a reasonable time for $380,000. They are obviously disappointed and initially feel that they should delay the move until their house will sell for what they think it is worth. Before I leave, I take them through the following two scenarios.
Sell and Buy Now (slow market)
Sell House $380,000
Buy New House $570,000
Amount Down $130,000
Payment at 5.25% $2,429
If they decide to sell now they will need to price their home competitively in order to get it sold in a reasonable amount of time. The good news is that the house they want to buy is in a similar situation. Let’s assume each seller needs to take 5% less than they think it is worth to get the deal done. The Smith’s end up with a great house that they were able to buy for $570,000 with a total monthly payment of $2,429 excluding taxes and insurance.
Sell and Buy Next Year (strong market)
Sell House $400,000
Buy New House $600,000
Amount Down $150,000
Payment at 6.25% $2,770
If they decide to wait until everyone else is buying and selling they trade certainty and price for overall financial soundness. As the tide moves it takes all boats with it. As they gain $20,000 on their home they end up paying $30,000 more on their new house. More importantly they pay 14% more each month in interest. They also get to enjoy their new home with family and friends for an extra year.I think you would agree that the Smith’s would do well to take advantage of the opportunity that is presenting itself.
by neil kearney | Dec 5, 2008 | For Buyers
An Opportunity
Amid all of the negative news on the economy there is a great opportunity out there for those ready to take advantage of the situation. Contrary to popular opinion, mortgage companies are still in business and have money to lend. The rates right now for a 30 year conventional loan are around 5.5%. This is a great rate! Take advantage of this opportunity and you could decrease your monthly payment significantly.
Please let me know if you need a referral to a professional mortgage professional. I work with many who will be able to help you navigate the loan process with ease.
by neil kearney | Aug 22, 2008 | Boulder County Housing Trends, For Buyers, For Sellers
Long Term or Short Term – That is the Question
Have you been watching the Olympics recently? I loved watching the swimming. After watching Michael Phelps exceed all expectations in a variety of events I got to thinking about how our market compares to swimming. Now before you tell me to jump in
a lake, let me take a bit of a leap to make a point. During the beginning stages of the distance races almost all of the swimmers were equal. Sometimes an unheralded swimmer would be in the lead for a time. The announces made sure to point out that it really didn’t matter what happened at the beginning of the race, the quality would show at the end of the race. When comparing distance swimmers and real estate markets what you are looking for is the ability to withstand the depletion of a tough time and come out strong in the end. Since the lending rules have changed and the stock market has been soft, real estate has been a tougher business than it normally is. The local market has been hit just like most other parts of the world have been affected. What we should be focusing on during this time is the resilience in the market. If you pay attention to the national scene you have heard stories of double-digit value decreases and huge percentages of short sale and foreclosures. Our market, while not immune has been swimming along fairly steady and looks better and better as the days move on and other markets falter. Thankfully, our market with all of its attributes is built for the long haul not just for short sprints. If you take a long term perspective you can see the value in our market and share with your clients what a great time this is to buy.
by neil kearney | May 13, 2008 | For Buyers, For Sellers
f you are confused about what caused the credit crunch listen to “The Giant Pool of Money” at http://www.thislife.org/ This American Life and NPR News teamed up to produce this report from a number of different perspectives. A great program from one of my favorite radio shows.
by neil kearney | Mar 27, 2008 | For Buyers, For Sellers, Real Estate 101
1031 Exchange of Vacation Property
The 1031 exchange is one of the greatest ways to grow real estate wealth. The 1031 is a fairly straight forward transaction used for “like kind” exchanges of property
with the goal of deferring capital gain taxes. I have personally used the 1031 exchange to sell one property and buy two a few years back. There are many great resources on the web, but I always go to
http://www.1031cpas.com/ because they have great resources and they are the intermediary I recommend.
The rules about non-owner occupied rental property are fairly straight forward and well documented. Until recently the rules about the exchange of vacation property has been vague. Here are the latest guidelines from the IRS published in February regarding the exchange of rental properties.
In order to avoid the possibility of your exchange being challenged by the IRS you must in the two year period prior to the sale:
- You must have rented the property; at a fair rental price, for at least 14 days during each 12 month period.
- You must not use the property personally for more than the greater of 14 days or 10% of the days the unit was rented during each 12 month period.
So obviously it will take some planning, bookkeeping and a paper trail to make this work. If done correctly it could save thousands in taxes and allow you to invest more into that next property.
by neil kearney | Mar 3, 2008 | For Buyers, For Sellers, Statistics
S&P/Case-Schiller vs. OFHEO
S&P/Case-Schiller and OFHEO (Office of Federal Housing Enterprise Oversight) both publish a “national” price index. The Case-Schiller index has been getting much play on national media lately. Their most recent index shows a huge drop in appreciation during the 4th quarter. Unfortunately, this index only represents data from 20 metropolitan areas in 13 states. It is weighted toward higher priced homes and it is designed to overstate housing up’s and down’s. OFHEO’s index contains data from 291 metropolitan areas in all 50 states. Real Estate is local and the more data points you have the better the focus. I think the OFHEO index should be used more by the media. It tempers the extremes and gives a clear picture at the local level. In my next post I will give the latest data for Boulder County presented by OFHEO.
