June 29, 2011
The real estate and mortgage industry have changed dynamically over the course of the last few years, and will hopefully never return to where it was during the boom of the market that took place a few years ago. Corrupt lending practice, bloated government spending in the secondary market, and irresponsible use of equity is what helped our housing market drop at a rate only rivaled by the Great Depression. From appraising to loan origination, the way businesses in this industry work has been altered to allow for more safe and secure practice.
Personally, I believe that the mortgage side of the real estate market has been affected the most. It is no secret that the indiscretions in the lending side of the market, as well as certain government entities allowing for almost limitless spending, played a big part in the housing bubble. Because of this, lending standards have been tightened, and there is much more due diligence being done on the part of the underwriter before a loan is approved. Also, systems within the lending offices themselves have been adjusted and updated. Believe it or not, many illegitimate foreclosures took place due to lack of communication between departments within lending companies. Much has been done to eliminate these problems, as well as dish out severe punishment for those not complying with federal lending regulations.
Appraisers are also having to alter the way they are conducting business. Many people blame appraisers for what happened in the housing market. Inflated appraised prices (often resulting in monetary kickbacks) on houses is what snowballed into an over priced real estate market. Appraisers are practicing more ethical appraisals, and are not over inflating the prices of homes.
Investors are switching their short term investment strategies into more long term ones. For instance, investors were making a killing by simply purchasing property, and then selling at an elevated price when the market went up. This allowed for more property flipping. Now, with the market maintaining low prices for the last two and a half years, investors are investing their money into long term rental properties that can be sold later on down the line. By purchasing a property and renting it, investors are capitalizing on a society that is calling for more rental properties, and well as setting themselves up in a good position when the market turns around. Real estate investors, however, are constantly altering their investment strategies to adhere to whatever the market is calling for at the time.
Anthony Flores is a real estate, mortgage, and investment consultant in Riverside, Ca. Houses for sale in Yorba Linda are remaining far above the rest in the housing market.
Article Source: http://EzineArticles.com/?expert=Anthony_Michael_Flores
Technorati Tags: housing market, real estate industry, Scotts Valley real estate
June 7, 2011
I recently went through the process of buying my first home about 6 months ago. While that does not make me an expert, I learned a few tips that might help others in the current market. Now that I’ve had time to reflect, these are some of the most important concepts in my opinion.
1. Consider doing without your own Realtor.
Doing the research yourself can save you 3% of the total price of your new home if you can do without your own Realtor. Each Realtor involved is paid 3% of the sale price at closing by the seller. The seller passes this cost onto you (the buyer) in the total price of the home. I was able to negotiate the seller down an extra 3% because I didn’t have a Realtor. 3% of my new home was a savings of about $4800! The catch is that I had to do all of my own research. I checked out school districts, neighborhoods, flood zones, etc. I had to find my own comps and determine the average price per square foot in each neighborhood that I was considering. I had to make every phone call to have the seller’s Realtor meet me at each house. It was a lot of work, but definitely worth saving $4800.
2. Consider a hybrid loan
The most common loans that I see are 30 year fixed loans. This means that your monthly payment never changes for 30 years. Another option is the adjustable rate loan which means your monthly payment will change yearly based on current interest rates. Younger home owners on a budget seem to stay away from adjustable rate loans because the monthly rate could potentially become higher than they could afford. Adjustable rate loans start cheaper than fixed loans, but could adjust higher. Risk is involved. I chose the middle ground called a hybrid loan in the form of a 5/1 loan. This means that my loan is fixed for 5 years, and then adjusts every 1 year based on current rates. My rate turned out to be 2.625% for the first 5 years, and after those 5 years, it can increase a maximum of 1% per year. It is also capped at 8.625%. I also asked about the current 30 year fixed rate which was 4.4% if I had chosen that. This means that a 5/1 hybrid loan is cheaper for at least the next 7 years in my case. If I move in the next 10 years, the hybrid loan will have saved me money. Can you guess how many years the average person stays in a home? It’s approximately 7. I love my new home, but I doubt I will be living in the same place 7 years from now, much less 10. Too much can change in 7 years. I may have octuplets in the next 10 years and need a bigger house. I hope not, but who knows what the future has in store for me. When it comes time to get a home loan, evaluate how long you believe you will keep that home. What are the odds you won’t need a bigger home or need to relocate for work in the next 10 years? There are also 7/1 hybrid loans available.
3. Shop for a cheap interest rate
I eventually went with the 2nd of 3 banks that I visited. I wanted a company/loan officer that was efficient, knowledgeable, and cheap. Make sure to speak with at least 2 banks to compare.
4. Don’t buy a home you can’t afford
I purchased my first home before marriage, and I was pre-approved for a crazy amount of money. I almost couldn’t believe it. I was pre-approved for a home that would cost 79% of my take-home pay. That would leave 21% of my salary to survive each month. SCARY! I ended up purchasing a home that was approximately 38% of my take-home pay each month which I still consider on the high end if I hadn’t gotten married. Dual income now makes the payments even easier.
5. Consider buying the cheapest home in the neighborhood
I purchased what is probably the cheapest and smallest home in my neighborhood. By doing so, I was able to purchase a home in the nicest neighborhood I could afford. Another benefit is that every house in the neighborhood is selling for more money. When I eventually put my home on the market, I will offer comps of other houses in the neighborhood – all of which are more expensive than mine. Therefore my home has a better chance of appreciating in value. The most expensive house in the neighborhood has no comp homes in the neighborhood to demonstrate its worth and likely will not appreciate as well as the cheaper homes.
6. Don’t get emotionally attached to a home before its yours
Getting emotional in the home buying business can cost you a lot of money. The first home I wanted to purchase was listed at $170k, only 4 years old, and was about 1900 square feet. It was beautiful, but overpriced. I put in an offer for $151k. It was a slightly lowball offer, but its a buyer’s market and the house was overpriced. The seller countered at $169k so I walked away. Had I been emotionally attached to the home I might have paid $169k for my dream home. That house is still on the market 6 months later. I ended up paying $156k for a home that is 8 years old with 2200 square feet. It was originally priced at $180k. My home is cheaper, bigger, and actually nicer than the first home I attempted to purchase. Walk away if you don’t get the right price. Don’t settle.
7. Don’t worry about insulting the seller with a low offer
The market is VERY much a buyer’s market. Offer less than a fair price and see how cheap you can get your new home. If the seller does become insulted, walk away. There are PLENTY of great homes on the market. You will find what is meant to be.
8. Have an attorney look at everything before closing.
Before I went to closing, my attorney found $2500 worth of fees/costs that were inappropriately placed in the closing contract. He was definitely worth the price I paid. When you are spending thousands and thousands of dollars on a house, it can’t hurt to have an attorney look over everything.
Jared Heathman MD
http://www.RichAsChocolate.com
I am a physician, private pilot, and ordained minister. I’m constantly learning and giving back to the community. Follow me and learn about personal finance at my website!
Article Source: http://EzineArticles.com/?expert=Jared_Heathman
Technorati Tags: home buying, Scotts Valley real estate, Scotts Valley Real Estate Market
The real estate and mortgage industry have changed dynamically over the course of the last few years, and will hopefully never return to where it was during the boom of the market that took place a few years ago. Corrupt lending practice, bloated government spending in the secondary market, and irresponsible use of equity is what helped our housing market drop at a rate only rivaled by the Great Depression. From appraising to loan origination, the way businesses in this industry work has been altered to allow for more safe and secure practice.