Home Buyer Blunders

4 Mental Traps to Avoid When Buying Your Next Home

You’ve decided that you’re ready to buy a home — but you find yourself overcome with fears and anxieties. Or, on the other hand, perhaps you’re bubbling with a bit too much excitement.

Before you sign on the dotted line, pause for a moment and ask yourself if you’re falling into one of these common homeowner mental traps:

Trap #1: Assuming That Buying is Always Better Than Renting

The idea that renting a home equals “throwing money away” is one of the most pervasive myths floating around.

In reality, the decision to buy vs. rent should be based on factors such as the average housing and rent prices in your location, the amount of time you’ll live in that dwelling, your tax bracket, the mortgage rate for which you qualify, property tax, HOA and insurance rates in your area, projected appreciation in your area, inflation assumptions, and more.

Here’s a simple example: Assuming you’ll live somewhere for three years, if you can buy a home for $100,000 that would otherwise cost $1,000 per month in rent, buying may be the better option. If, however, you need to pay $650,000 to buy a home you could rent for $1,000, renting might truly be the better choice.

Trap #2: Believing Your Current Needs Reflect Your Future Needs

Let’s imagine that you’re part of a child-free couple that likes to travel, lives with minimal possessions, and doesn’t want to spend too much time maintaining your home. You might choose a small home that fits your lifestyle, while disregarding the school district during your decision-making process.

But will you still have the same priorities in five years?

Remember that you’re buying a home to suit your future needs, not just your current ones. Purchase a home that you’ll be able to “grow into” or “shrink into” as the size of your family either expands or contracts. Anticipate other factors such as maintenance, HOA fees, proximity to jobs (and potential future job sites), school district, yard size, neighborhood safety and walkability.

Perhaps today, you want a swimming pool — but in three years, when your youngest child moves off to college, you want the freedom to travel without needing to worry about pool and yard maintenance. Or maybe you don’t need a yard today, but in a few years, you’d like to adopt a dog.

Trap #3: Fear of Getting “Priced Out of the Market”

Home prices have skyrocketed in the past five years. It can be tempting to believe that prices will continue to rise indefinitely, and that if you don’t purchase a home today, you’ll get “priced out” of the housing market.

Conversely, it’s also tempting to believe that if you buy now, you’ll definitely flip your home for a profit when it’s time to sell.

Neither of those are foregone conclusions. The housing market, like all industries, is cyclical: Prices rise and fall. In addition, housing is local: price and appreciation activity in Kansas City, Missouri doesn’t necessarily reflect activity in Jacksonville, Florida.

Leave speculation aside. Purchase a home based on your family’s budget and needs, not your guesses about what the future may or may not hold.

Trap #4: Believing All Renovations Are Profitable

Are you selling your current home in order to move into a different one? If so, you might be in the midst of renovating. Many homeowners update their kitchen, bathrooms, landscaping, and other features in order to make their home more attractive to buyers.

But that doesn’t mean you’ll recoup the cost of your renovations. While some updates might fetch you a higher price, other updates simply lack a return-on-investment. Replacing peeling laminate countertops with builder-grade granite might help you house sell faster, but upgrading to a rare style of granite with an ornate beveled edge probably won’t translate to a thicker bottom line.

Bottom Line

There are plenty of myths and assumptions about the housing market. If you believe too deeply into these ideas, you run the risk of overspending.

Don’t fall into the trap of thinking “housing prices will always rise,” “renovations will always pay off,” or — worst of all —”this time, it’s different.” Focus on purchasing a home that you cherish that fulfills your needs and wants, both now and in the future. And enjoy your new space!

Where do renters plan on buying a home?

New Homeowners and Remodeling Projects

 

 

Gen Y Is Ready To Buy

 

 

What is important to buyers?

 

 

10 Hottest Cities For Millennial New-Home Buyers

Most people in the 18-to-34 age bracket spend the bulk of their time trying to get their foot in the door at work and in life. However, a lucky few have managed to put their foot in the door of their very own home.

While saving for a down payment and making mortgage payments may seem out of reach for many Millennials, a recent Builder Online study cited demographic data to show that twenty-somethings are purchasing new homes. The site analyzed home sales from 2012 and 2013 to pinpoint the cities with the largest year-over-year increase in new-home sales among Millennials.

Popular vacation destination Honolulu topped Builder’s list, and while the cost of living in Hawaii is steep, there are other factors to consider when it comes to popular Millennial new-home buyers markets.

“Honolulu was ranked highly by Builder due to growth in new home sales among the 50 largest new-home markets for millennials, meaning that Honolulu has a big base of demand, and it’s growing,” said Jonathan Smoke, Chief Economist for realtor.com®. “That may surprise some because of the high cost of living, but it isn’t always about the lowest cost places to own a home.”

“Markets can be attractive for many reasons to Millennials—and this list screams variety,” Smoke added. “In some places, it’s affordability, but in others it’s jobs, and for Honolulu, I would expect it’s about a lifestyle that appeals to today’s 20-somethings. Be careful in making assumptions that millennials are all challenged by income—some of the fastest-growing companies in the world are headed by Millennials.”

1. Honolulu, HI

2. Birmingham, AL

3. Palm Bay, FL

4. Daphne, AL

5. Madison, WI

6. Sacramento, CA

7. Fort Collins, CO

8. Stockton, CA

9. Cape Coral, FL

10. Spokane, WA

 

 

The 5 Most Popular LA Neighborhoods

From celebrity sightings to basking on beaches in November, Los Angeles living provides year-round outdoor fun. However, Los Angeles residents enjoy more than just warm weather – their city is home to some of the most upscale neighborhoods in the country.

While it may sound like a great idea, moving to LA can be an intimidating, expensive transition for non-natives. The LA metro area encompasses multiple districts, each with individual benefits and drawbacks. Interested in becoming a SoCal transplant? Consider these five top neighborhoods.

 

Beverly Hills

It’s no surprise Beverly Hills real estate is consistently among the best in the United States. The median home value is a steep $2.58 million, which stretches far beyond most house hunters’ budgets. Correspondingly, the median household income is $70,945, which is a far cry from the $44,512 national median. Aside from the rich and famous, most residents here fall into one of three categories: urban dwellers from foreign countries, educated professionals with high incomes and college graduates with high expenses. The cost of living in Beverly Hills is extremely high, making it an impractical choice for many – except those who are heir to a corporate fortune or relatives of entertainment industry royalty.

Highland Park

Often referred to as the West coast’s Brooklyn, Highland Park is home to a diverse mix of urban families and wealthy singles. Highland Park dwellers make about $34,791 per year. Highland Park homes have consistent increasing values, rendering it a smart neighborhood for home purchases. The median home value in Highland Park is $518,900, which is a 19.2 percent increase from 2013. Highland Park features upscale shopping and dining, as well as access to the Gold Line for a no-hassle commute to downtown.

 

 

Los Feliz

A bit more on the expensive side than some other LA districts, Los Feliz’s median home value is $1.09 million. Los Feliz home values have increased 8.8 percent over the last year, and Zillow projects a 4.1 percent increase by March of 2015. Compared to Los Angeles homes for sale, which have a median list price of $540,000, Los Feliz homes for sale are listed for about $1.33 million. The majority of residents are in their 30s without children. In fact, 82.9 percent of the homeowners in the region do not have children, so consider other neighborhoods when searching for family-oriented atmospheres. The median household income in Los Feliz surpasses the national median at $46,113. Most residents here enjoy post-graduate educations, mid-management professions and higher incomes.

 

Silver Lake

Silver Lake is most well-known for its eclectic culture and unique residents, thanks to Forbes’ “Best Hipster Neighborhood” designation two years ago. In addition to an abundance of coffee shops and artsy occupations, Silver Lake has some of the best food carts and locally-owned bars in the city. Silver Lake’s median home value is $800,600. The 15 percent increase in home values since last year indicates a strong, ascending housing market and great investing opportunities. The typical income in Silver Lake falls around $44,949, which is slightly higher than the national median. Most residents here are urban, young professional singles with mid-range incomes. Silver Lake’s living expenses are less than other areas, yet the neighborhood is still considered upscale.

 

West Hollywood

Also known as WeHo, this neighborhood is Beverly Hills’ more frugal and trendy younger sister. West Hollywood real estate features a median home value of $640,700, which is an 18.3 percent increase year-over-year. Most WeHo residents are big-spending young professionals and urban singles with a median income of $38,914. The majority (52.9 percent) of residents here are not married, so families might consider more kid-friendly locales. Like all city neighborhoods, there are good and bad areas, so make sure to research specific apartment buildings and sub-neighborhoods before blindly relocating.

Although these neighborhoods differ in their economic makeup, they are all fantastic options for future LA residents. The most important aspect of searching for homes in any city is ensuring that surrounding areas fit individual needs. Investigate parks, schools, nightlife and commute times to determine the best neighborhoods.

New listing: Beautiful modern 2 bedroom/3bathroom condo in the heart of Westwood-Century City $639,000

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Escrow, step by step.

The first step in the home buying process is for you to get approved for a home loan.

 

After finding a property that interests you, I will show you the comps (comparable sales) to help us determine the value of the property. The best comps are in the same building (if a condo/townhome) or in the surrounding area (if a single family home or income property).

 

 

Appraisers are generally required to focus on the past 6 months when reviewing area sales so I try to do the same when verifying the property’s value.

 

At this point we are ready to make our offer, which will consist of 4 separate items:

1. The offer contract itself. It is written on a standard California Association of Realtor’s contract, which I complete and then review with you either in person or over the phone. I offer my clients the option of signing electronically, which can save a lot of time and paperwork hassles.

2. A pre-approval letter from your lender (let me know if you would like me to e-mail you contact information for the local lender that my clients most highly recommend).
3. Verification of funds (copies of bank and/or investment statements showing liquid funds to cover the down payment and closing costs).

4. Buyer’s intro letter. This explains who you are, what you do and what you like about the property. I usually write about 95% of this letter for you and then e-mail it to you for final editing and approval.

The offer is presented to the sellers and we wait for their response. Often times they may not sign off on our offer initially but instead write a counter offer which addresses items in the contract that they would like changed (price is the item that is countered most often). It may take several counter offers before the price and terms are agreeable to both parties.

After the offer is accepted, escrow is opened. Escrow is a neutral 3rd party and their job is to make sure all obligations of the contract are fulfilled before the seller gets their money and the buyer gets keys to the property. The most standard escrow length is 30-45 days.

 

I will send a copy of the completed contract to the lender and you will need to promptly provide them with any additional information and/or paperwork that they require. The lender takes care of scheduling the appraisal.

You will schedule the physical inspection with an inspector of your choice. I can give you a list of inspectors that my clients have been very happy with. The physical inspector checks all the major systems in the property (plumbing, electrical, heating, etc) and also looks for cosmetic damage and problems (sloping floors, doors that stick, cracks in walls/ceilings, etc). For a condo/townhome inspection, the inspector only inspects the unit and not the common areas (building, hallways, pool, etc) but if you are purchasing a home the inspection will also check out the exterior (roof, foundation, garage, etc.). I recommend that my clients always get a mold inspection done and if the property has a fireplace then you should also have that inspected. Whenever purchasing a single-family home it is very important to have a sewer inspection. Geotechnical inspections are especially important if you are buying a home in a hillside area. You can also schedule additional specialty inspections if you would like. After reviewing all inspection reports we will usually complete a Request for Repairs form (asking for a credit and/or repairs)… depending on what was found in the inspections.

You will also need to call an insurance company to verify that the property is insurable and get quotes for the cost of insuring the property. For a condo/townhome you are generally just insuring your personal contents (the building is almost always insured by the Homeowners Association).

The other inspections that take place during escrow include the termite inspection, which is usually paid for by the seller. A retrofitting inspection will also take place to make sure the property is up to code with smoke detectors/carbon menoxide detectors, water heater strapping and the gas shut-off valve (retrofitting requirements vary from city to city).

If the property you are purchasing is a condo/townhome, you will receive copies of all the homeowner’s documents to review. You generally have 5 days to review this paperwork which includes: copies of the meeting minutes for the past year, budget and financial information (including the amount currently in the HOA reserves) and a copy of the CC&R’s (Covenants, Conditions and Restrictions).

Loan docs are usually signed as early as a week prior to closing.

Five days or less prior to closing we do a walk-thru of the property. This gives us a chance to verify that any seller repairs were completed and we also make sure the property is in the same condition as is was when we initially wrote our offer.

Two days prior to closing you wire any additional down payment & closing costs to escrow. The loan proceeds are wired to escrow one or two days prior to closing.

On closing day we wait to hear from the title company that you are listed on the county records as the new owner and then you get keys to your new home.

 

 

 

 

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