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Ask Tara @Trulia

make smart decisions w/Tara's real estate + mortgage need-to-knows

By Tara-Nicholle Nelson | Broker in San Francisco, CA
  • 4 New Year’s Resolutions for 2014 Home Buyers

    Posted Under: Home Buying  |  December 19, 2013 10:46 AM  |  36,877 views  |  24 comments

    There are tons of different approaches to setting resolutions. A resolution can be a goal - an action or accomplishment you propose to achieve in the year to come. Or a resolution can be a declaration – a commitment you make, a stance you take.

    If you’re hoping or planning to buy a home in 2014, there are some action-type resolutions you’ll need to make, whether you call them that or not: getting your credit and money matters in order, linking up with the right real estate and mortgage pros - that sort of thing.

    But I propose that there are some declaration-style resolutions you should make as well, to make the very most out of your home buying experience. Here are the top four:

    1. Resolve to do your own reading, ‘r’ticulating and ‘rithmetic. If you plan to close escrow on your home in 2014, you’ll have plenty of documents to sign in the year to come. I encourage you to get out in front of all these commitments you make to others with 3 critical commitments to yourself:

    • #1: Read everything,
    • #2: Speak up for yourself, and
    • #3: Do your own math.

    Reading. Depending on how many homes you view and how many offers you make before you find “the one,” you could end up being asked to review and acknowledge thousands of pages of disclosures and contracts over the coming months. Do yourself a huge favor that seems obvious but is harder than it sounds: read them. All of them.

    Maybe you don’t have to read a completely pre-printed/boilerplate form you’ve signed 5 times before every single time you sign it. But even if you have made offers on 7 homes before, you do need to actually read the 8th home’s offer before you sign it. Same goes for seller’s disclosures, inspection reports, HOA documents and loan closing paperwork. 

    Ask your agent to help you get documents via email, throughout the process, as early as possible before the deadline for signing them. You can read them at your convenience, without feeling pressured, in the comfort of your own home. This allows you to make a list of your questions and concerns and to send them to the appropriate parties to be addressed while there’s ample time.

    ‘R’ticulating. Once you read documents, or even while you’re physically in a home or meeting with one of your professionals, make it a practice to speak up for yourself. That could mean simply asking questions, even when you think they should be obvious. It could mean asking the same question you’ve already asked twice, if you don’t understand the answers you were given. It could mean pushing back when you have strong, nagging concerns about moving forward with the deal for any reason - making sure you’re comfortable with the totality of the transaction before you remove contingencies, rendering your deposit non-refundable. 

    Whatever it looks like, no matter how mellow and non-confrontational your personality normally is, decide that in you’ll be an assertive advocate for your own interests and needs in the context of this transaction.

    ‘Rithmetic. Figure out your own monthly income and expenses, budget for what you can spend on housing every month without skimping on your savings and investing, and go into this home buying experience telling your professionals what you can afford. Don’t rely on others to do your math for you, no matter how much you hate math. Sit down and just do it. There’s a 90% chance it’ll be less painful and less time-consuming than you think.

    2. Resolve to take a long-term view. It’s super tempting, when a market is rising, to try to hurry up and buy out of the fear of being priced out. I’ve begun to hear some buyers take shortcuts in their planning process, counting on the rise in market values to make it easy for them to sell if they need to, in the short term. This is foolhardy – given the costs of simply doing a real estate transaction, in most markets, it’ll be difficult to sell and cover even transaction costs if you are forced to do it in the year or so following your purchase (even longer, in some areas).

    Don’t fall prey to this decision trap. Instead, resolve to buy a home based on:

    • how much space you’ll need
    • what sort of property will work for your family
    • where you’ll want to live, location-wise, and
    • what you’ll be able to afford for at least the next 5 to 7 years.

    If you think any of these things will change significantly in that time frame, and you know how you’ll expect them to change, buy your home for what you’ll need at the end of that period. If you think they’ll change significantly in that time frame and you have no idea how they’ll change, consider whether it’s sensible to buy at all – your agent, mortgage broker and financial planner can help you make a decision based on your market and your personal life.

    3. Resolve to respectfully ignore the peanut gallery. On real estate matters, you’ll find that everyone has an opinion. Doesn’t matter if they’ve never owned a home. Doesn’t matter if they live in your town. Doesn’t even matter if you know them or not. Even mention that you’re in the market for a home and you’ll find that even the most milquetoast, quiet folks in your life will chime in and have something to say, regardless of whether you requested their opinion.

    You might have certain folks in your life who know you well, who care about your best interests and whose opinions you respect. There’s certainly nothing wrong with that. But here’s the deal – everyone who offers an opinion is not qualified to give it. And many folks will attempt to spread their fear and cause you to second-guess your own plans out of their own personal traumas, dramas and poor past decision-making or – worse yet – out of their own views about you and how you might change if you move forward with becoming a home owner.

    My advice is to take in what’s helpful, benefit from others’ mistakes, and then ignore the rest. Take their opinions with a grain of salt. And take great pains to ensure you’re not attempting to escape the scariness of taking personal responsibility for this momentous decision by allowing your personal peanut gallery to pepper you with their opinions. If you already know the nervous Nellie in your life will try to talk you out of even the best-laid, smart home buying plan, protect your dream by not sharing it with them.
     
    4. Resolve to enjoy the ride. So many people brace themselves for tension, drama and upset before they buy a home. And you know what? They find it! It’s wise to expect the unexpected, commit to going with the flow, and build in cushions of time and money to all your estimates and expectations. That flexibility can help you to retain your sanity, and might even make the difference between the ability to close your transaction or not, in extreme cases.

    But I’m going to suggest you take it one step further and actually commit, in advance, to enjoying the home buying process. If you look for what you can be thankful for and excited about in every situation, you will encounter dozens, maybe even hundreds of insights and opportunities that you’d otherwise miss. Buying a home presents opportunities to:

    • learn a lot about yourself and your family
    • explore your town
    • grow closer to your spouse or co-buyer
    • level-up your financial knowledge and status
    • create and put into play a holistic vision and plan for your life. 

    Buying takes a long time, so deciding to enjoy it is to make a decision not to put your life on hold for months or years on end, but rather to flourish and thrive right where you’re planted, engaging with life and gathering up the multitude of powerful takeaways you can find in the process (on top of the home itself!). I know buyers who took advantage of the home buying experience and leveraged that momentum into changing careers, taking up new hobbies and skills, starting small businesses and rehabilitating longtime, chronically bad financial habits.

    So seize the moment (or the year), and make a resolution that if 2014 is going to be The Year of the Home for you, it’s going to be enjoyable, not just at the end – but throughout, come what may.

    ALL: Are you setting resolutions this year? What are they, and what do you need to be successful?

    PS: You should follow Trulia and Tara on Facebook!

  • 4 Home Buying Ducks to Get in a Row for 2014

    Posted Under: Home Buying  |  December 18, 2013 11:14 AM  |  54,052 views  |  11 comments

    Most Moms I know have a mental checklist they run through with military precision before they leave the house to take the kids to school:

    • Teeth and hair – check
    • Homework in backpacks – check
    • Jackets zipped – check
    • Lunch handled – check
    • Sports gear, musical instruments or (in my Mom’s case) oratorical soliloquies, drum major regalia and History Day accouterments – check, check, check, check and check.

     But never did I realize that this maternal preparation drill was a cross-species instinct until one day last Spring, at the lake near my home. I was bopping along, walking my pugs when they both stopped still and began looking quizzically from the shore to me, back and forth, heads on rotation. Finally I saw what had them completely barkless: a Mama duck, literally putting her ducklings in a row. These baby ducks, which looked something like what a loosely-packed cotton ball might resemble if it had legs, were being nudged and jostled into a surprisingly straight line by their Mom, who then led the whole adorable crew on a little promenade into the reeds.
     
    Now, when it comes to putting your own ducks in a row in advance of buying a home, a few things are key. First, start early. Whenever you think you should get started doing the actual prep steps, work backwards about 3 or 6 months before that on the calendar and start then.
     
    Secondly, be bold. I find that many buyers-to-be hesitate to get into the not-so-adorable territory of credit and savings, out of a fear that they’ll learn something that will kill their dreams. The bolder you are about going into scary territory, the faster you’ll learn the truth of what work lies ahead of you - and the more time you’ll have to do what it’ll take to overcome any challenges. Also, just the knowing will make anything scary less so. Here are four ducks you’ll want to start getting lined up and comfortable with now if you hope to buy a home in 2014.
     
    1. Get a vision. The real estate market is a complex system of constantly evolving dynamics, information and realities. Going in with a clear vision for the outcome you want to create is essential to helping you stay moving in the right direction, especially given that you’ll need to be flexible and make some compromises throughout the process. I encourage you to take a time-out from the busyness of your day-to-day life and devote an hour or an evening to putting, in writing, all the elements of your vision for the life you’ll have - and your family will have - once you move into your next home. 

    At this stage, don’t be too narrowly focused on what the house itself will look like. Instead, deal with everything you can think of in terms of how you want to experience your daily life, including things like where you work, how you get there, and how much you work - and how you would like this to change over time, and what you want to do with your spare time and money. Getting a vision for this will help you drill down into the more granular details of the specifications for a home that will successfully, sustainably serve as the backdrop for the life you’re trying to create, while allowing you to flex and flow with the realities of the real estate market.

    2. Put your team in place. I believe that the agent and mortgage broker you select are two of the most important decisions you’ll make in the course of buying a home. The right agent can create a transcendent experience in which you not only buy a home, but are exposed to possibilities for your life you would otherwise never have even considered. A great agent can coach you, advise you, mediate disputes for you and execute on your action plan with you. A great mortgage broker, similarly, can surface options and issues you would otherwise not have appreciated.

    And the opposite is true: being represented by professionals who don’t get you or don’t have the expertise you need can really sour your experience of buying a home. 

    So, work now - way in advance - to get your team in place. Ask your friends and family members if they have an agent or broker they just loved, and when someone says “yes!” ask for an intro. Check out your list of agent suggestions online: check their Trulia reviews and profiles, review any answers or blog posts they’ve put up on Trulia or elsewhere, follow them on Facebook to get a sense for their approach and personality flavor, and reach out to them via whatever communication medium you prefer (e.g., phone or email). Then book a few meetings and, while you have the luxury of time, get to know them each a bit better, essentially interviewing them for the position of your personal real estate or mortgage advisor. While you’re talking, look for a fit in terms of: the types of buyers they have served in the past, the types of recent successes they have had in representing buyers like you, the areas and property categories in which they have experience, and whether their approach to giving advice and education works well for you. It’s not overkill to check references, either, so ask your interviewees for a few recent references of buyers they have worked with.

    3. Credit check yourself before you wreck yourself. I know, I know, you’ve heard it a million times - go to AnnualCreditReport.com (the government-mandated free credit report site) and pull your credit at least a year before you buy. This gives you a chance to review all 3 reports, flag any inaccuracies, dispute them and get them corrected way before your home loan weighs in the balance. It also gives you the opportunity to have your mortgage broker flag any issues that might make it difficult for you to get a loan, so you can work on them with ample time to correct the situation. That might mean paying down some bills, resolving any outstanding collections, making sure you don’t create any new bills and even, in some cases, establishing credit lines.

    The challenge here is that we’ve all heard it so much, it’s quite easy to simply ignore this advice. Let me urge you not to do this. I’m not even in the market for a home, but I just ordered my own credit reports just to review them and follow my own advice. I was stunned - stunned! - to see about 7 – SEVEN – glaring inaccuracies. Multiple accounts that had long been paid off were still being reported as open and having balances due, and there was even one account I had never even heard of before! A woman in my office just did the same and realized that someone has been committing identity fraud in her name, opening accounts of which she was totally unaware.

    These sorts of findings are concerning no matter when you find them. But if you don’t find out about them until you’re already in love with a home, the 30 days it can take to resolve them can seem like an eternity - and can even be the deal-killer on allowing you to actually close on your dream home. The reality is that sometimes it can take much longer than that to resolve inaccuracies - and it will almost certainly take much longer than that to pay bills down and to execute on other line items on your mortgage pro’s action plan for you. 

    So, don’t wait until the last minute. Actually, do the reverse: pull your reports asap and spend your downtime over the holidays working through them, disputing anything you need to and calendaring a call with your mortgage pro to get a briefing on what you need to do to present yourself in the best light to lenders.

    Side note: For small issues, some lenders can facilitate what is called a rapid rescore, which allows you to dispute and correct inaccuracies within a shorter time frame, for a fee - but you should not count on it eliminating every inaccurate report in a couple of days. Sometimes it takes a couple of rounds of disputes.

    4. Cash to Close. Coming up with all the cash you need to close a home purchase simply takes time. And sometimes, it’s hard to know whether you’re truly ready to start your house hunt in earnest without knowing with some precision how much you’ll really need. You might be trying to save up 10% of your target purchase price, which is great, but that strategy overlooks the fact that you might also need to be stockpiling funds for additional fees and costs of closing the deal, like: inspections, appraisals, title insurance, escrow fees, mortgage closing costs and property transfer taxes, to name a few. When you pick your mortgage broker, work with them to get a better understanding of what your savings target should be for cash to close, given what sort of property you’re aiming to purchase and what you can afford to spend on it, from a purchase price perspective.

    AGENTS:  What are the most commonly overlooked preparation steps you see in incoming buyers?

    BUYERS:  Here’s a checklist to help you get an even more detailed preparation plan in place.

    SELLERS:  Want to get your own ducks in a row to sell your home next year? This checklist should help!

    PS: You should follow Trulia and Tara on Facebook!

  • 3 Costly Cases of Hot Market Wishful Thinking

    Posted Under: Home Buying  |  December 3, 2013 10:07 AM  |  99,304 views  |  54 comments

    “Oh, how I wish. . .” started no wise real estate decision ever. There’s a reason they call it real estate, folks. That’s because we’re dealing with the most tangible type of property around - land - and the buildings that, formally speaking, represent improvements to that land. 

    Attempting to apply fantasy-realm wishes to real-life, real land situations is never a setup for success. But when the market is hot and you have a goal or a timeline, engaging in wishful thinking is not just foolhardy - it can be costly.

    As evidence, here are three common, costly cases of wishful thinking that tend to arise in areas where the market is hot, offers are plentiful and prices are rising. Consider these red flags and take heed in the event you find yourself engaging in any of them:

    1. Wishing the house you’re seeing was in a different neighborhood. You’ve seen 2 dozens houses, and put in offers on a dozen. No dice. And your agent keeps pushing you to look in a lower price range, assuring you that you can find what you want. And then they show it to you: safe neighborhood, good school district, good commute to work, just the house you wanted, really - but not in the tony hills or hot downtown district you’ve been trying to get into.

    Wishing that you could “pick the place up and set it back down” in your desired neighborhood will not make it so, no matter how many times you say it. The reality is that when you have been outbid a double-digit number of times, something about your approach is not working. You either have to downgrade your specs in terms of the property you seek, maybe looking for something smaller, a condo instead of a single-family home or something in less-pristine condition or you need to shift your location criteria - and that can mean a neighborhood change.

    Part of the reason this wish is dangerous is that the white-hot markets in many towns are hyper-localized in the Most Desirable Neighborhood in Town. That’s where the competition among buyers and bidding wars are the most intense. If you’re not prepared to house hunt for homes quite a bit lower than your top dollar to set yourself up for success, or if there simply are no homes in that neighborhood listed below your top dollar, you might need to face the reality check that you simply can’t afford to buy there now.

    Stop wishing the home you can afford were in a different neighborhood, because if it were, chances are good you wouldn’t be able to afford it, either! Understand that you’ll be able to level-up your neighborhoods as time goes on and you buy your next home - and the one after that - and don’t let your inflexibility paralyze your house hunt so long that prices all over town rise even more.

    2. Hoping that perfect house gets no other offers, even though every other house you’ve bid on has had 54. There’s a fine line between wishing something were true and denying the reality of what actually is true. Facing reality, even when it’s painful or means you can’t have what you want, allows you to make your own action plan for getting the best possible results with the resources you have - or a plan for getting more resources, whichever route you choose to go.

    As a buyer in a seller’s market, actually as a buyer in any type of market, it’s ultimately up to you and only you how much you offer on a home. Your mortgage broker can try to get you qualified as high as your income will allow, your agent can get you the comps and give you strategic advice on the average list price-to-sale price ratio, but you are the be-all and end-all decision-maker on offer price, and that’s as it should be.

    But if you wield your weighty decision-making power to make lowball or at-asking offers in situations where you are virtually guaranteed to run into high levels of competition, that’s a poor use of your powers. Not only do you set yourself up for failure, you do so at the near-certain likelihood of adding to the demotivating, depressing, discouraging momentum of the times when you get overbid despite giving it your legitimate best efforts. That frustration often leads to analysis and calling a house hunting time-out. And that, in turn, often leads to buying at a time when prices are even higher, and getting ultimately even less home for your money.

    3. Wishing prices weren’t going up so fast. Here’s the deal: when prices were flat or falling, buyers were (understandably) stressed at the prospect of buying a depreciating asset. Now that they’re ascending, it’s not at all uncommon to hear buyers bemoan that, too. The fact is, the moment escrow closes and your Facebook status changes from house hunter to home owner the fact that prices are rising, and fast, will shift in your mind’s eye from curse to blessing, quick-like.

    Rising prices and a recovering market might be what emboldened you to buy, empowered you to sell a formerly underwater home, and certainly have been inextricably intertwined with the increase in jobs. If prices weren’t rising, many of these other things might not be materializing, either, and that wouldn’t be so great. 

    Wishing prices weren’t going up so fast contributes to a costly form of denial - denial of the reality that they are. This can cause buyers to persist in making lowball offers and wasting their precious time on homes they can’t compete for within in their budget range, all while their smart targets are appreciating rapidly - and that’s how people get priced out of the market, right under their noses.

    Don’t let your home buyer dreams fall prey to this costly wish-based pitfall. Work with your agent to stay in the loop about how prices are trending throughout your house hunt, and use that knowledge to power your decision-making about what price range to house hunt in and what price to offer for target properties.

    ALL: What are your real estate wishes, and how do you ground yourself in reality?

    PS: You should follow Trulia and Tara on Facebook!

  • 4 Questions To Surface the Best Neighborhood for You

    Posted Under: Home Buying  |  November 20, 2013 3:48 PM  |  72,188 views  |  40 comments

    I’m a bit of a logistics nerd when it comes to planning my days, even on the weekends. I try to pack my days to the gills with the projects and people I love, so I need things to run like clockwork, frictionlessly. I’m also a creature of habit, and pride myself on finding and working with the best local merchants.

    So, it’s fortunate for me that I live in a neighborhood that is all about the call-ahead. My favorite brunch spot has an hour-long wait - unless you call ahead (FYI: day-of calls only, no reservations in advance, ask for Sam). Same with my nail lady and my tire guy.

    They’re the best in town, so they’re very oversubscribed, but they give me VIP treatment because I’ve struck upon the VIP formula: long-time repeat business and calling ahead.

    But I didn’t really know this when I moved here - it just so happened to work out that my neighborhood and I are a perfect match. (Don’t even get me started about the regional park down the street, where the rangers take - and post! - almost as many pictures of my pugs as I do.) Of course, this is my third home, and the neighborhoods I landed in on my first two tries were decidedly less well-matched to my lifestyle. They weren’t bad neighborhoods, by any means. Just nowhere near as delightful on a daily basis as my current digs.

    When we house hunt, we spend so much time worrying about the basics, like home style, pricing and school district scores, that we don’t always notice the nuances that can differentiate a match made in heaven from something that’s decidedly more meh. If you’re in the process of vetting neighborhoods and want to optimize the match, here are 4 questions to ask yourself, your agent and your prospective neighbors:

    1. What do people around here like to do in their spare time? I’m not suggesting that you need to be every-weekend running buddies with your new BFF next door. But if you run into the neighbors while you’re viewing a property, this can be a very revealing question to ask. It’ll help you get a feel for the general connectedness of people in the area. If no one you ask knows what anyone else likes to do, it might be the sort of place where people keep to themselves, which might or might not jive with the sort of lifestyle you’re hoping to build.

    Even if people have very different interests, neighbors who talk to each other will know a little bit about each others’ interests. For example, I don’t spend a ton of time with my next door neighbors, and we are very different in age, ethnicity and household composition. But they know I go to yoga, dance a lot and walk my dogs on the regular. And I know they are active in their kids’ schools, run a catering side-business and have delightful-smelling extended family barbecues lots of weekends in the summertime.

    If you ask even a few people in the area this question, you might even uncover hidden treasures within a short walk or drive from the property which would have taken you months or even years after closing to find on your own. Maybe there’s a little pocket park on the next street over, a Master’s swim club that meets early AMs at the neighborhood high school, a Baby Boot Camp that meets at a neighbor’s house or a series of cooking classes that meets in the back of the tiny grocery store on the corner. I’ve known buyers-to-be who found everything from their future photography buddies to their future deck-builders simply by getting friendly and chatty with their future neighbors while they were visiting and viewing a home.

    2. What do you want your [your family’s] ecosystem to look and feel like? Get real with yourself about what you even want out of your neighborhood. I find it useful to think of your family or household as a living, multi-member, dynamic and ever-changing organism that will thrive in the right ecosystem.

    That “right ecosystem” is your neighborhood.

    If you are a busy career professional buying a home in a bedroom community of the urban area to which you commute, your biggest priorities might be convenience to the freeway, quiet, low-crime rates and neighbors who have just as much pride of ownership in their homes as you do. If you crave to be able to have your kids walk to school, walk to their extracurricular lessons and walk to their play dates with other kids who walk to the same school, that information will give you and your agent a great deal of direction to the neighborhoods that could be the right ecosystem for you - and a great deal of course-correction away from those that could never fit the bill.

    Whether you see your just-right ecosystem as one that will allow you to keep bees and goats in the backyard or one that will allow you to hail a cab or get to the subway at any time of day or night, this question can help you get an actionable vision in place for finding the just-right neighborhood.

    3. What do I need to know about this neighborhood that I’m not asking? What is not obvious? If you’re working with an agent who has experience in a neighborhood, they’re probably really good at breaking down the standard selling points about the area: great schools, great views, great local shops - that sort of thing. But when you’ve heard that basic briefing and you’re done getting your specific questions answered, I recommend that you ask your agent this open-ended question.

    Throughout the course of your house hunt, your agent will get to know your personality and will get a feel for whether the flavor of person you are is a good fit with the flavor of the neighborhood.  So asking them this open-ended question gives them a great opportunity to fill in the blanks in your understanding of the neighborhood based on what they know about both you and the neighborhood.

    If your agent has a particularly long history working in that part of town, this question can also sometime serve as the little prompt that reminds them to give you deeper, more nuanced information than you might not get otherwise, like:

    • sharing the colorful commentary about the past and present history and residents of the neighborhood
    • connecting you with former clients who live there, and even
    • telling you a deeper history of the home values in the neighborhood than might be evident from the comps, with the context of various homes they’ve worked with in the area over years and years.

    4. Are there any common issues you frequently see with homes in this area? Inspectors know so much more information than they can ever put on a page, some of it comforting and some not. One thing they often know is how the geography, topography, soils, climate and environmental factors tend to impact homes in an area or even on a street over time. 

    For example, my town’s soils tend to be clay, not rock, and because clay expands and contracts with the weather, homes tend to get little settlement cracks and fall out of plumb over time. Up the hill from here, many of the homes have bridge driveways that span the gap from the hill to the home, and those need to be replaced every 20 or 30 years. And just up the street, homes tend to be very different and have different issues as they are mostly new construction that was built after a major fire a decade ago - compared with the 50 year old average age of homes at the bottom of the street.

    Of course, by the time the average buyer talks to a home inspector, they’ve already tentatively settled on a neighborhood match. But occasionally, an inspector’s answers to this question can help you feel great about your choice. And on other, more rare occasions, their answers can help you get the right bids and improve your property preventively to avoid the area-specific issues that have caused nearby home owners to regret their choice of neighborhood.

    Home Owners: How did you find the just-right neighborhood for you?

    Agents: Beyond the basics, what neighborhood-finding questions do your clients find useful to help them pick the best match between two good neighborhoods?

    ALL: What do you think separates a ‘good’ neighborhood match from a GREAT one?

    PS: Don’t forget to like Trulia and Tara on Facebook!

  • 4 Soothing Insights for Anxious First-Time Buyers

    Posted Under: Home Buying  |  November 6, 2013 12:41 PM  |  64,531 views  |  42 comments

    Anxiety is an autonomic nervous system response that is hard-wired into every human being. It’s part of our instinctive reaction to sensing a danger or threat in the wild - and the wild world of real estate is no exception. Of course, buying a home doesn’t involve an actual, physical threat like the lions or tigers or bears our forebears faced. But during the home buying process, it’s not bizarre to feel like your dream home, your precious financial resources, your vision of your family’s future or your best interests are being threatened. 

    These anxiety-inducing “predators” range from the dangers of bad decisions, hidden home condition problems, and the other buyers who are bidding on your dream home.

    As with a threat in the wild, anxiety can cause a normally calm home buyer to have a fight or flight response - making panicked decisions or freezing entirely up, both of which deprive you of your most deliberate, wise decision-making power.

    If you’re experiencing low-grade anxiety around your first home purchase, that’s probably a sign that you take it seriously and that you understand the importance of the matter. But if your anxiety is rising to the level that it causes panic or paralysis, those reactions actually pose a bigger threat to your smart decision-making than any actual threat you’ll encounter in the wilds of the real estate market. 

    Here is a short list of truths about real estate that can soothe your first-time buyer anxiety down to a level at which it won’t foul up your decisions or your vision.

    1.  It’s only takes one.  House hunting is daunting by dint of the sheer magnitude of the numbers involved: all the specs and characteristics of a home, all the decisions you have to make, all the documents you have to provide just to get pre-approved, all the homes on the market, and all the buyers you might have to bid against.  (And of course, there are all those zeroes on the purchase price itself, probably more than were at the end of any other purchase you have ever made.)  

    But here’s a soothing number you can focus on: one. You only need to find one house that fits with your family, your future and your finances. And millions and millions of homebuyers before you have been able to do just that. The challenge ahead of you is the highly do-able task of narrowing down all of those numbers to the one, the just right fit. If you find a home you love, but the sellers want dramatically more for it than you can afford or it turns out to have some fatal flaw, it’s not a panic-worthy disaster: it’s just not the one.  

    2.  You are the boss of you. And you’re qualified for the job. Feeling like you’re at the mercy of the mortgage lender, your agent, the market or “your” home’s seller is another serious source of home buying anxiety. But it’s an illusion. Do you have 100% control over every step of the home buying process?  No. But you have far more control at every step than you might think. 

    Among other ways you can be the boss of yourself and your first home purchase, you can and should:

    • run your own personal budget and determine the maximum amount you can afford to spend on housing
    • build your own team of advisors that work with and for you, including real estate and mortgage pros, but also a financial planner, lawyer and/or tax advisor, if that’s what you need
    • craft your own vision for your life after you buy your home, and use it as a tool to ensureyou don’t buy a home you’ll regret later
    • research neighborhoods, cities, even states and the various factors that impact their future prosperity prospects
    • research the home buying process and ask questions (Trulia Voices is great for getting answers from local pros, but also from other local buyers who have gone before you)
    • work with your agent to understand market dynamics like list price-to-sale price ratio, and tweak your home search price range accordingly, looking at homes priced below your top dollar to give you room to go up, if that’s the norm in your area
    • work with you agent through your target home’s comparable sales
    • work with your agent and your mortgage broker to understand the cash you’ll need up front, at closing and monthly, based on your final offer price for any given home
    • attend your home inspections
    • read seller and HOA disclosures
    • read all the inspection reports and get follow-up inspections as needed
    • get bids for repairs and upgrades before you remove contingencies
    • request your loan docs in advance - and read them in advance
    • ask every question you have and keep asking, until you understand
    • back out of a transaction and recoup your deposit, if inspections or appraisals reveal serious issues, within your contingency period.

    So do these things. Remember that from the time you get the inspiration to buy a home until the time you close escrow, you are ultimately in charge.  You make the final call on a home, on a price, and on when to remove contingencies and make the transaction a done deal. But you also have a great deal of control at every phase of your house hunt - so exercise it.

    3.  Speaking up pays off.   No matter how timid or introverted you normally are, just for this experience of buying a home, embrace your inner advocate and make a commitment from the start to speak up for yourself freely and loudly.  

    Don’t understand something in your Good Faith Estimate? Say so - and ask your mortgage broker for an explanation. 

    Worried about something you see in your HOA disclosures?  Tell your agent - and work with them to get clarification or additional information.  

    Have questions or concerns about things you see in the home while you’re attending the inspector? Ask the inspector. And if they don’t know, ask the seller or get a specialist to come out and check it out. 

    Worried about how you’ll ever afford to fix the plumbing or deal with all the necessary repairs?  Say so, and work with your agent to make a wise decision about asking the seller to chip in or reduce the price, if that makes sense given the other details of your deal.

    I once saw a buyer catch a very significant error in loan closing docs before anyone else in the room did. Instead of second-guessing herself or assuming she was the one in error, she spoke up - and probably saved herself thousands of dollars and hours of time in the process. 

    4.  Almost no transaction goes precisely as planned. I hate to use the cliche, but you will truly experience much less anxiety throughout the course of your transaction if you expect the unexpected. It might take you longer than expected to find a home that works for your life and your budget. You might end up spending thousands beyond what you started out thinking was your top dollar. Maybe your closing date will get pushed out for reasons beyond your control (and beyond the seller’s control, too). Or it’s possible that the home inspector will recommend an electrical inspection, which reveals some updating that urgently needs to  happen (urgent, as in before you get those custom kitchen cabinets you were planning to have installed the day after closing).  

    It’s a very rare transaction in which everything comes off precisely as it was planned. Understanding this and being as flexible as possible will prevent the emotional roller-coaster of breath-holding, anger, outrage and complete lifestyle chaos that arises when first-time buyers expect every step of the transaction to happen with Swiss-watch precision.

    BUYERS:  What are your fears or anxieties about the home buying process?

    PAST-BUYERS:  What were yours?  And how did you handle them?

    P.S.: You should follow Trulia and Tara on Facebook!

  • 3 Home Buying Compromises To Never Make

    Posted Under: Home Buying  |  October 8, 2013 7:22 PM  |  154,505 views  |  58 comments

    Say the word compromise to two different people and you’ll get very different reactions. To perfectionists, compromise sounds like lowering standards, giving up or giving in.  To peacemakers, compromise implies a willingness to be flexible to make sure all sides get their needs met.

    And to homeowners, compromise can sound downright wrong – especially considering that you’re pouring thousands and thousands of your hard-earned dollars into this purchase.

    When buying a home, compromises are necessary - period. Ask any million dollar listing agent: there’s no such thing as a perfect house. Whether you’re spending millions on an amazing estate or starting out with a 5 figure tract home, there will undoubtedly be something you feel like you’re missing or could be better “if only it had been built like this.”  Even people who build their own houses have regrets and things they would do differently if they could do it over again.

    That said, there is a short list of items I believe home buyers should simply not compromise on – period.  This is mostly from having seen so many cases of buyer’s regret in the years after closing, in cases where no-no compromises were made.  Here are a few items I suggest you be a stickler on.

    1. Commutability of location. I have seen old house lovers buy mid-century moderns and learn to love them.  I have watched country folk embrace urban living and vice versa.  But never have I seen someone who wanted to be less than 10 minutes from work buy a home an hour’s drive away and have the commute grow on them.
     
    Some people simply don’t mind commuting. They might even like the mashup of having more suburban square feet, calm and quiet at home while working in a lively, urban environment.  By no means am I suggesting that a long commute is a bad thing, by definition.

    But if you’re the type of person who cringes at the prospect of taking a train, bus, or bike or even a long morning and afternoon drive, and you know this at the start of your house hunt - don’t talk yourself out of it.  Chances are slim that you’re going to grow to love a couple of extra hours of travel time added to your workday. Actually, chances are quite good that you’ll grow to hate them.
     
    2.  Saving and investing line items in your monthly budget. Sometimes compromise means deciding what things you can do without. When it comes to home buying, the lifestyle change of sacrificing things you were able to afford pre-ownership is so common there’s a name for it: "house poor." ("House poor" really refers to this sacrificing behavior at its most extreme. Many homeowners would happily trade a few dinners out and the occasional new pair of shoes for being able to afford their home, hands down.)
     
    Home ownership usually requires a shift in financial priorities, and that may impact the dollar amounts you would otherwise put toward savings and investing, even in best case scenarios.  If you believe that your home is a good investment, this can make total and complete sense.
     
    But the compromise home buyers should avoid is the total redirection of cash that was previously being invested or saved into the home’s monthly mortgage payment, décor and furnishing, remodeling or other upgrades.  When you run your own personal monthly budget before you meet with the mortgage broker, don’t eliminate these line items entirely to inflate what you can afford to spend on a monthly basis. 

    Being house poor is unpleasant.  Being house poor and without any savings or retirement plan is really unpleasant. To boot, it actually endangers your home over the long term.  Homeowners who have no cash cushion of savings are completely vulnerable to losing their homes if they experience even a temporary loss in income due to job loss or illness.
     
    3.  Home warranty. If you’re very flush with cash, the mere thought of going without a home warranty might seem crazy. But there are loads of buyers who are putting every cent they have into their transaction.  In those sorts of situations, every line item on the closing statement gets scrutiny, and the home warranty is one some people consider striking out.
     
    Whatever you do, don’t compromise on having a home warranty. If you think you’re strapped for cash at closing, chances are good it will take you a while to get used to the new financial obligations that are part and parcel of home ownership. The mortgage payment is just the beginning; there’s also property taxes, homeowner insurance, HOA dues (if applicable), special assessments, utilities you might not have been paying as a renter (e.g., garbage and water), and all the little personal touches you want to put on the place.
     
    Over the years, many home owners reflect wistfully back on the days when they had the ability to call the landlord to fix anything that ever broke down. Truth is, even as a homeowner, if you have a home warranty policy, you do have a go-to number to call if many of your home’s major systems break down – and depending on the repairs you need, the policy might cover what ails your home.
     
    If you decide to forego a home warranty for whatever reason, you are putting yourself in a situation where anything that goes wrong after closing is 100% your responsibility, whatever the cost.  Some buyers get confused, thinking the home warranty is redundant with their homeowners insurance, so they don’t need it. Don’t let confusion mislead you down a path of exposure:  ask your agent to include a term whereby the seller pays for your home warranty right in your offer.  Most sellers will.  If yours doesn’t, compromise on the flat-screen TV before you compromise on the home warranty.
     
    Buyers: What compromises are you considering making? 

    Agents: What compromises do you feel most buyers should prepare themselves to make? 

    PS: You should follow Trulia and Tara on Facebook!

  • 10 Cities Where Buying is a No-Brainer

    Posted Under: Market Conditions, Home Buying, Rent vs Buy  |  October 2, 2013 1:13 PM  |  129,164 views  |  75 comments

    Many of life’s transitions into adulthood are heralded by critical decision-making points. What major to select? What line of work to go into? Kids or no kids? I do - or I don’t? The way we make each of these decisions is a major driver for the direction of our lives.


    One of the most impactful financial and lifestyle decisions we ever have to make as adults is this: whether to rent or buy our home. Recently, Trulia released the most sophisticated online Rent vs. Buy calculator ever, to help smart would-be buyers understand the many economic factors that influence whether it is cheaper to rent or to buy in their area, including line items like:

    • how long you intend to stay in the home,

    • your income tax bracket

    • mortgage down payment, term and interest rate

    • property taxes

    • closing costs or selling closing costs

    • rental and homeowners insurance, and

    • utilities.


    Because smart buyers often factor in some future projections as they think through the decision of whether to rent or to buy a home, the calculator takes into account a number of economic assumptions, like rental rate increases, home price appreciation, inflation, the cost of renovations, and the opportunity costs of not being able to invest the cash you’d need to spend on upfront costs to buy a home.  


    You can use our basic assumptions (e.g., 1% every year for home maintenance) or customize them to your personal situation (e.g., 5% for the big kitchen remodel you plan to do as soon as escrow closes).


    Try it, here: http://www.trulia.com/rent_vs_buy/


    In addition to launching this new, useful tool for those trying to make a smart personal rent vs. buy decision, we recently released our Summer 2013 Rent vs. Buy report, which did the math to uncover which cities make sense to buy, versus rent, a home.  Overall across America, buying is 35% cheaper than renting today (versus being 45% cheaper than renting one year ago).  


    We asked Trulia’s economist Jed Kolko how it’s possible that buying is cheaper than renting, given the hot markets we keep hearing about nationwide.  He said, “the key reason is that both rates and prices are rising from very low levels and are still below their long-term historical norms. But the rent versus buy math depends on your local market, as rising rates and prices have pushed a handful of metros very close to the tipping point when renting becomes cheaper.”


    To be clear, whether any individual buyer (like you!) rents or buys a home at any given moment in time is a very personal life and financial decision, that should be made based on your own personal vision for your life, career, family and household needs and personal finances. For example, you might live in a place where it’s more expensive to buy than to rent, but your personal income tax situation and need for space might render it sensible to buy anyway.  


    On the other hand, you might live in a market where renting is much more costly than owning, but the job prospects are bleak and you’d prefer to retain a renter’s flexibility to move to another town for a better job.


    Here are the top 10 cities across the country where buying is much cheaper than renting - see how we calculated this list, here.  


    10 Cities Where Buying is a No-Brainer

    #

    U.S. Metro

    Cost of Buying vs. Renting (%),

    Summer 2013

    Cost of Buying vs. Renting (%),

    Summer 2012

    Mortgage Rate Tipping Point When Renting Becomes Cheaper Than Buying, Summer 2013

    1

    Detroit, MI

    -65%

    -70%

    32.8%

    2

    Gary, IN

    -58%

    -63%

    20.6%

    3

    Memphis, TN-MS-AR

    -55%

    -61%

    19.0%

    4

    Cleveland, OH

    -54%

    -60%

    20.0%

    5

    Kansas City, MO-KS

    -53%

    -57%

    18.0%

    6

    Warren-Troy-Farmington Hills, MI

    -53%

    -61%

    18.4%

    7

    Dayton, OH

    -53%

    -61%

    19.5%

    8

    Grand Rapids, MI

    -52%

    -57%

    17.7%

    9

    West Palm Beach, FL

    -52%

    -59%

    17.1%

    10

    Akron, OH

    -51%

    -55%

    18.2%



    Note: Negative numbers indicate that buying costs less than renting. For example, buying a home in Detroit is 65% cheaper than renting in 2013. Trulia’s rent vs. buy calculation assumes a 4.8% 30-year fixed-rate mortgage, 20% down, itemizing tax deductions at the 25% bracket, and 7 years in the home.


    Understanding how much cheaper or more costly it is to buy or rent in your town can serve as a temperature check on the market. It can also help you vividly understand the impact of mortgage rates on your own home buying timeline.


    Kolko explains, “The biggest factor narrowing the gap between the cost of buying and the cost of renting is rising mortgage rates – which affect the entire country. In fact, the benefit of buying relative to renting shrank in nearly all of the 100 largest metros over the past year: only in Springfield, MA did the gap widen, from buying being 47% cheaper than renting last year to being 49% cheaper than renting today.


    Nationally, rising mortgage rates account for about 8 points of the 10-point shift from buying being 45% cheaper than renting one year ago to being 35% cheaper now. The other 2 points are due to prices rising faster than rents. (How did we figure that out? If you used today’s prices and rents in the rent vs. buy calculation but used a 3.5% mortgage instead of a 4.8% mortgage, buying would be 43% cheaper than renting – 2 points less than last year.)”


    Kolko continued: “Because fluctuating mortgage rates can affect the rent versus buy math, we identified the mortgage rate “tipping point” at which renting becomes cheaper than buying, given current prices and rents. If rates keep rising, San Jose will tip first in favor of renting, at 5.2%. Already today, at 4.8%, buying is just 4% cheaper than renting in San Jose. The tipping point is below 6% in San Francisco and Honolulu as well, and below 8% in New York, Los Angeles, and seven other major metros. Nationally, the mortgage rate tipping point is 10.5%, and it’s 20% or higher in Detroit, Gary, and Cleveland.”


    With that in mind, here are the 10 cities where buying a home is a closer call.






    #

    U.S. Metro

    Cost of Buying vs. Renting (%),

    Summer 2013

    Cost of Buying vs. Renting (%),

    Summer 2012

    Mortgage Rate Tipping Point When Renting Becomes Cheaper Than Buying, Summer 2013

    1

    San Jose, CA

    -4%

    -31%

    5.2%

    2

    San Francisco, CA

    -9%

    -28%

    5.7%

    3

    Honolulu, HI

    -10%

    -24%

    5.8%

    4

    Orange County, CA

    -20%

    -34%

    7.0%

    5

    New York, NY-NJ

    -21%

    -31%

    7.5%

    6

    San Diego, CA

    -21%

    -34%

    7.3%

    7

    Los Angeles, CA

    -21%

    -32%

    7.3%

    8

    Ventura County, CA

    -22%

    -33%

    7.5%

    9

    Oakland, CA

    -23%

    -43%

    7.5%

    10

    Sacramento, CA

    -26%

    -39%

    8.2%


    And click here to download the full Rent vs. buy cost considerations for the 100 largest U.S. metro areas: (PDF) or (Excel)


    For full details on how these were calculated, the 10 cities where renting is much cheaper than owning and some insight on how your personal tax situation can impact your rent vs. buy math, see Kolko’s deep dive post on the Rent vs. Buy decision, here.

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