by Neil Kearney | Nov 30, 2016 | For Buyers, General Real Estate Advice, Real Estate 101 |
If you have determined that you are ready to buy a house (click here for more information about determining if you are ready) the next question to ask is how do I do it? What is the smartest way to go about buying a home? What are the first steps in a home search? This article will show how to begin the process of buying a home as well as point out some common pitfalls that can be avoided.
Step 1 – Finding a Really Good Realtor
It’s easy enough to start browsing houses on the internet or going to the random open house, but at some point you will want to get more serious about looking at homes. The first step towards getting more serious about looking for a home is finding a good Realtor who has been through the process time and time again. Most people end up working with a Realtor, so why not engage one early on in the process? Realtor’s have tools that will save you time and put you on track to finding the right home more quickly. A good Realtor is much more than a person who shows you the houses that you have found online, they serve as an information source, an advocate and a guide through the process. Make sure you are working with a Realtor who is more interested in helping you find a great house for the long term rather than a quick sale for them. It takes patience and persistence to make sure you end up in the right home.
Note: A Realtor is a member of the National Association of Realtors and is bound to abide by a code of ethics. Not all real estate agents are Realtors. Make sure your’s is one.
Step 2 – Get Pre-Approved
One of the most important steps in a home search is to find a good lender and get pre-approved. Your Realtor should be able to recommend a few local lenders who have proven themselves to be responsive and know how to get the job done. Using a local lender is important, not only are they accountable but they are there to solve problems at the closing table if anything comes up at the last minute. Your earnest money is at stake! If your lender is delayed at the last minute or their money doesn’t make it to the closing table on time and the seller chooses not to give you an extension, you lose your earnest money. You cannot go back to your lender and recover those lost funds. Choosing a lender is more than finding the lowest interest rate, it is finding an advisor who will help you make a sound financial decision given your unique circumstances. The credit rules change often and it is important to use an experienced lender to help you get the job done in a timely manner.
Step 3 – Looking at Homes Online – The First Showing
The internet is a great tool when searching for homes. When you view internet sites such as Zillow.com, Realtor.com, Redfin.com and Coloproperty.com you are able to easily find and view homes for sale by putting in any search criteria. The results are quick and beautiful. It’s easy to get caught up in the great houses that are available.
But here are the pitfalls of the national home search sites:
- Many of the popular home search sites don’t have all of the properties listed for sale. Listing brokers determine who gets to display those listings and some don’t send to all of the available sites. Many company sites just get feeds from one MLS system so if a listing is listed in another (which is often the case in the Boulder area) those other listings are not displayed.
- The goal of the big national sites is to get as many views and clicks as possible. So properties show up as “active” until they are sold. Don’t fall in love with an active house on Zillow until you check with your agent to make sure that it isn’t already under contract.
- The agent who is listed in conjunction with a given property many not be the listing agent. So if you click on a “more information” button you will most likely be contacted by an agent who has paid for that opportunity and knows nothing about the house.
Now a word about search criteria. When clients tell me their “wish list” I write down every bit of it, but I then explain that it might be better to keep our search wide so that we don’t miss a house that meets 95% of what they want. In a market characterized by low inventory this is especially important.
Note – www.Coloproperty.com is the public site for the local MLS system IRES. This site changes the status of a property (active, under contract, sold) on their display right when it happens. So to get the true scoop go to this site. Disclaimer – I have served on their Board of Managers for 9 years now.
Step 4 – Viewing Homes In Person
How soon is too soon to start actually looking at houses looking? For example, if your lease is up in July and you don’t want to have rent and mortgage payments for more than 1 month, January is usually too soon. However, when to start depends upon how particular you are, how many homes are likely to come on the market during a particular time etc. This is a good conversation to have with your Realtor.
Once you and your agent have identified some properties to view the next step in your home search is that your agent will set the showings with each listing agent (through them, their company or a showing service). Sometimes homes can be viewed immediately but often times the owners require a few hours to 24 hours notice. Sometimes the listing agent needs to be at the showing and that complicates the timing.
Once you are inside a home you will have already begun to judge the house on these criteria; “could I live here?”, “how does it compare with other homes?”, “is this the one?”. If you quickly realize that this isn’t “the one” it’s still good to see the rest of the house but in my experience it’s not necessary to see every little thing. Who cares what the second basement closet looks like! You only have so much memory available and if you fill it up with the tiniest details of a house that you have already determined you won’t buy you end up confusing houses. Was it the yellow house that had the gold faucets or was it the one next to the park?
Once you find the one that you think you want to pursue you will want to go back for a closer look. This is the time to “kick the tires” and make sure you know what you’re in for. Hopefully the second time through will only make the heart grow fonder.
In the next installment in this series I will go through the process of what happens once you find a house that you love.
by Neil Kearney | Nov 28, 2016 | General Real Estate Advice, Real Estate 101 |
Am I ready to buy a house? It starts as a subtle suggestion in the back of your mind. You might hear yourself thinking; “this is ridiculous, rents are so high and I’m throwing my money away” or “now that I’ve landed that job I’m ready to settle down” or “we’ve been saving for years and now is the time to buy before prices go up any more”, or “all of my friends are buying places and they seem to be doing great”. Whatever dialog is whispering in your ear, there comes a time when it may make sense for you to buy a home of your own. But are you truly ready? This article will help first time home buyers to analyze that question and help get you ready to make the purchase.
Is it smart to buy a house? (when I say house I mean any residential real estate) If done correctly, owning a home is for many people best financial decision they ever make. According to the 2014 Survey of Consumer Financing by the Federal Reserve the median net worth of a homeowner was $194,500 compared to $5,400 for renters. During the time frame of 2008 – 2012 many homeowners were adversely affected by the housing crisis and economic downturn that resulted in a record number of foreclosures and short sales nationally. For those who bought just before the crisis or those who needed to sell when prices dropped in many areas (click here to see why Boulder County was named the most stable market in the country) owning a home may not seem like a wealth enhancing endeavor. But over time and for most people real estate is a great investment. Here’s why:
When you buy a home you tap into these three powerful methods of increasing wealth.
- Home appreciation – the prices of homes rise with inflation and local supply/demand factors. Prices rise over time.
- Principle reduction – as opposed to a rent payment, a portion of each payment goes towards paying down the principle balance. With each payment your wealth is increasing a little bit.
- Tax benefits of ownership – the mortgage interest deduction allows those who itemize their deductions on their income taxes to write off the interest paid on their mortgage payment. In effect you get a discount off of your payments made at the end of the year.
You may ask, “if it’s such a great deal why is the homeownership rate in America at just 63% and falling?” The truth is that homeownership isn’t for everyone. Here are some the reasons why it may not be a good idea to buy a house.
- Location instability – Homeownership is a longterm proposition. Buying a house now and then moving six months from now is a sure fire way to lose money. There are costs associated with both buying and selling and it takes time to recoup those costs. I usually recommend that you plan to be in the house a minimum of two years. Any less than that and you are speculating, hoping instead of playing it smart.
- Financial instability – In order to stay in a house you must have the financial wherewithal to withstand some unexpected expenses. If you are one paycheck away from being broke it’s best to save up a nest egg before buying. If you already have a list of debts it might be a good idea to pay those off before taking on another large debt. The more ready you are financially the better chance you have for making homeownership work for you.
- Ready for the responsibility? – When you own a house you must be willing to take care of the maintenance and any problems that come up. There are many items that need attention on an ongoing basis that take time and money and there will no longer be a landlord to call. Once you make the purchase you are in charge of anything that comes up.
Getting Your Financial House In Order
When you determine that in principle you are ready to take take the plunge into homeownership, you must then determine if your financial house is in order enough to make the purchase. Here is what I mean by having your financial house in order: down payment money in the bank (anything less than a 20% downpayment requires mortgage insurance which results in a larger monthly payment with no added benefit to you), in addition to the down payment you need to have a savings account that has 3 to 6 months of your household expenses as a cushion for the unexpected, minimize other debt – for most people they think it’s normal to carry car payment(s), student loan(s), and credit card debt, even if you qualify for all of these payments it may be a smart idea for you to delay a home purchase until these other debts are paid off. The more debt you have the more susceptible you are to losing your house in the case of a layoff or other unexpected financial hardship.
Another facet of having your financial house in order is your credit score. Credit scores have a huge impact on your ability to buy a house. If you have a credit score of less than 760 your qualification or the interest rate you are offered will be negatively affected. To check your credit score for free (with no strings attached) go to www.AnnualCreditReport.com. If you find out that your credit score will negatively impact you, figure out why your have a low score and start fixing your FICO score. This may take time so pay your bills on time and plan ahead.
How much should I spend on a house? There are a few rules of thumb regarding how much you should spend. Some say the total price shouldn’t exceed 2.5 times your household annual gross income. Another commonly heard standard is that your mortgage payment plus other debt payments shouldn’t exceed 40% of your income. However, in my experience I find that many people qualify for more than they should do. The term for allocating too much of your income to your house payment is “house poor”. Being “house poor” means that you are a slave to your monthly payment and don’t have the money to do the other things you enjoy.
My advice is to buy a house that allows you to be very comfortable in your payment. This will allow you to enjoy life and meet your other financial goals. Have a firm grasp of your budget and be sure to add into it the expenses that will come with buying a home, like new window coverings, increased utility expenses, needed upgrades, etc. Many times the actual answer to “how much should I spend on a house” is different than what your lender will qualify you for. Know your budget and think for yourself. Don’t keep up with the Jones’.
It all comes down to what you can comfortably afford and interest rates have a huge impact on what you can afford. My article The Impact of Interest Rates on Home Affordability delves deeply into the subject, but basically as interest rates rise the amount of the mortgage you can qualify for decreases. For example, if you qualify for a $355,000 mortgage and then interest rates rise by .5% you will need to drop your budget by at least $20,000 to keep the same payment. My advice is to pay attention and know that it makes a difference.
This article helps you think about if you are ready to buy a house. In the next article I will start to outline the how to go about buying a home in a smart way, the process.
by Neil Kearney | Nov 16, 2016 | For Buyers, For Sellers |
One of the most satisfying parts of my career is that I get to work with the nicest people in the world! I get to interact with them consistently over an exciting and emotionally charged and sometimes intense period in their lives. Selling or buying a home means change, sometimes it’s great (yay! new job, new baby…) and sometimes it’s not a change you look forward to (divorce, change in finances…). But through it all I love to bring my best to every situation and provide exactly what my clients need at the time. Sometimes it is a calm voice of reason through the inspection process. Sometimes it’s a cheerleader when your fifth offer just got accepted. Sometimes I’m the one who has to take some bad news and chart a new path to your goal. Sometimes I’m just there for you providing the expertise you need. Sometimes I’m the one who gives you the nudge that points you in the direction that turns out to be the “best” move for you. Regardless of the situation I’m happy to be of service – it’s what has kept me happily going for 25 years now.
So when a client takes the time to write a testimonial for me it’s a much appreciated cherry on top. Here are a few recent testimonials that my clients have posted on my behalf. Aw shucks, you guys are the best!
“We could not have a better agent than Neil Kearney. He was very patient, answering all our questions and addressing all our concerns. He provided all the support we needed, as we are living out of the state by the time we decided to put the house in the market. Something very important: The communication was always very good. We strongly recommend Neil to prospective buyers and sellers. The best!”
“Neil was great to work with! He has a comprehensive knowledge of the market, and was committed to our home search with patience and enthusiasm during a difficult buying process. I highly recommend Neil!”
“Neil did a great job helping us find and purchase our new home. He was always quick to respond, and not only guided us through the process but made it really easy. Thanks Neil!”
“If you’re looking for someone who knows the Boulder market inside and out, Neil is the realtor you want. Honest, reliable, Neil was always available to answer questions or arrange a last minute showings. We can’t recommend him enough.”
“Neil is a fantastic realtor. I have used his family business for several real estate transactions over the years and have always been impressed with his professionalism, competence, and diligence. He was always available to answer questions and he explained the nuances of selling property in today’s market extremely patiently! I recommend him to anyone looking to buy or sell. Thanks Neil!”
To see more testimonials go to this page and this site.
by Neil Kearney | May 26, 2016 | Boulder Real Estate, Colorado Lifestyle, Visiting Boulder |
I stumbled across this video produced by The City of Boulder about the Boulder Comprehensive Plan. The video is not only well produced and beautiful, it gives some historical insight as to the creation and maintenance of the open space that surrounds our fair city. When I am showing around someone from out of town for the first time I always tell them about the foresight of our city forefathers (just over 40 years ago) who started preserving what was unique and great about our area. Can you imagine if market forces were allowed to prevail and there was a sea of houses and strip malls in an unending swath from the foothills to the city limits? If you appreciate the lifestyle in Boulder it’s well worth a watch.
by Neil Kearney | May 25, 2016 | For Buyers, For Sellers, Real Estate 101 |
Do you know what PITI is? If you have a loan on your home you probably know that these are the four elements of a mortgage payment. P stands for principal; the first I stands for Interest; T stands for taxes and I stands for insurance. Together they make up the amount you pay for your home on a monthly basis. If your PITI payment is comfortable for you, you will have extra funds available to pay for all of your living expenses, be able to save some money on a monthly basis and have some left over for some fun. But many times as we consider how much of a house we can afford we key in on the price of a home and the interest rate (these go into determining the ‘P” and first ‘I’) without much considering the ‘T’ and the ‘I’.
Before I get started talking about property taxes I want to make it clear that this is not a comprehensive article on taxation. There are many elements that go into the discussion of total taxation that include income tax, various sales taxes, car registration fees, use fees, transfer taxes, etc., this article just focuses on one element and is therefore not a comprehensive picture. It doesn’t fairly compare apples to apples across states. However, I think it’s an interesting and relevant topic because it comes up often in my discussions when I am showing property.
Corelogic recently did a study ranking the median property tax rate across the country. The highest property tax percentage is in Illinois where taxes are 2.67% of the assessed valuation and lowest in Hawaii where the property tax burden is just .31%. Colorado is ranked 5th from the bottom with .66%, meaning that we have the 5th lowest property tax burden in the United States. Despite the arguments* that there are too many elements not included in this study I think in general it’s true that the cost of ownership in places like Illinois, New York, New Jersey are much higher than they are in Colorado. In Colorado the “T” portion of our payments is much lower than other states and therefore, all things being equal, we can afford more expensive homes with the same payment.
Local Property Tax Comparison
Now let’s get more granular. Within my market area buyers need to look closely at property tax rates within the different localities. Here is a quick comparison of homes currently on the market. I have tried to choose homes that are similar in price and similar in assessed value.
- Boulder – 4616 Talbot Dr. | List Price $574,000 | Assessed Value $423,900 | 2015 Taxes $2,766 | Tax/Assessed .648%
- Louisville – 453 Centennial | List Price $599,900 | Assessed Value $450,200 | 2015 Taxes $2,988 | Tax/Assessed .664%
- Lafayette – 369 Caribou Pass | List price $580,000 | Assessed Value $464,300 | 2015 Taxes $3,180 | Tax/Assessed .685%
- Longmont – 5712 Clover Basin | List Price $575,000 | Assessed Value $409,700 | 2015 Taxes $2,971 | Tax/Assessed .725%
- Superior – 3103 Castle Peak | List Price $599,900 | Assessed Value $464,100 | 2015 Taxes $3,881 | Tax/Assessed .836%
- Erie – 1276 Greening | List Price $560,000 | Assessed Value $399,950 | 2015 Taxes $3,483 | Tax/Assessed .871%
- Broomfield – 4630 Nelson | List Price $569,000 | Assessed Value $466,710 | 2015 Taxes $4,490 | Tax/Assessed .962%
The order listed is ranks the local communities for property tax burden as a percentage of the assessed value of the property. Boulder has the lowest tax rates and Superior, Erie and Broomfield have the highest. If a buyer were to be comparing homes in Boulder and Broomfield, the taxes make a difference. The differential in the monthly payment is around $100 per month, definitely worth looking at.
*Some of the arguments that invalidate this report are: a) Different states base taxes on different amounts. Assessed value vs. actual value. b) Some states give a homestead exemption. c) Some states assessed value doesn’t change until a sale and then it goes to the purchase price. d) The report doesn’t take into account special assessments or the prevalence thereof within states.
If you have determined that you are ready to buy a house (click here for more information about determining if you are ready) the next question to ask is how do I do it? What is the smartest way to go about buying a home? What are the first steps in a home search? This article will show how to begin the process of buying a home as well as point out some common pitfalls that can be avoided.
The internet is a great tool when searching for homes. When you view internet sites such as Zillow.com, Realtor.com, Redfin.com and Coloproperty.com you are able to easily find and view homes for sale by putting in any search criteria. The results are quick and beautiful. It’s easy to get caught up in the great houses that are available.
How soon is too soon to start actually looking at houses looking? For example, if your lease is up in July and you don’t want to have rent and mortgage payments for more than 1 month, January is usually too soon. However, when to start depends upon how particular you are, how many homes are likely to come on the market during a particular time etc. This is a good conversation to have with your Realtor.
