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

By Tara-Nicholle Nelson | Broker in San Francisco, CA
  • 10 Cities Where Buying is a No-Brainer

    Posted Under: Market Conditions, Home Buying, Rent vs Buy  |  October 2, 2013 1:13 PM  |  133,024 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


    Detroit, MI





    Gary, IN





    Memphis, TN-MS-AR





    Cleveland, OH





    Kansas City, MO-KS





    Warren-Troy-Farmington Hills, MI





    Dayton, OH





    Grand Rapids, MI





    West Palm Beach, FL





    Akron, OH




    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


    San Jose, CA





    San Francisco, CA





    Honolulu, HI





    Orange County, CA





    New York, NY-NJ





    San Diego, CA





    Los Angeles, CA





    Ventura County, CA





    Oakland, CA





    Sacramento, CA




    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.

  • 5 Secret Sources of Down Payment Money

    Posted Under: General Area, Market Conditions, Home Buying, Rent vs Buy  |  May 9, 2012 9:02 AM  |  242,005 views  |  94 comments
    Down payment: the mere utterance of the term strikes dread in the hearts of many a homebuyer-to-be. Coming up with a down payment often seems like an obstacle that must be overcome, as it is the biggest test of our ability to save money most of us will ever face and it’s a test that stands between us and our ability to become a homeowner.

    I think it’s time to flip the script on how we think about down payments. What if we looked at them less as an obstacle, and more as an opportunity? Saving and collecting a down payment takes time, discipline and financial planning. It forces us into creating and practicing sound money management skills and habits, and into making clear choices about what’s important to us - things that will stand us in good stead throughout our tenure as home owners. To boot, the more money we have to put down, the more choice we have in terms of our purchase price range and the more control we have over our monthly payment.

    All that said, down payments can be take years to save for, and some buyers are concerned they might miss a good market opportunity by continuing to wait. If you count yourself in that number, here are a handful of less-well known sources for boosting your down payment stockpile:

    1. Your City.  Most of us remember the days of the zero-down loan, the federal home buyer tax credit era, and even have memories of when we could use tax credit funds toward our down payment and closing cost requirements. The keyword here is ‘memories’ - those days are long gone, as are the times when there were nationwide programs that allowed a home’s seller to ‘gift’ the buyer a down payment from the overall purchase price of the home.

    Where have all the down payment assistance programs gone? Local, that’s where.

    The best programs of this sort are now largely operated by local governments, primarily cities and counties. As such, the rules vary widely. Some are exclusively operated for buyers with low or moderate incomes. Others are dedicated to helping first-time home buyers, usually defined as someone who hasn’t owned a home in the past 3 years. Many of these programs have a limited pool of funds that may run out over the course of the fiscal or calendar year, and almost all of them require buyers to jump some major hoops in terms of:
    • bringing their own funds to the table
    • picking a home that meets certain minimum condition criteria and/or
    • completing a course of homeowner education classes

    in order to qualify for the funds.  Some state and local programs in areas which were particularly hard hit by the recession also offer big-time bonuses for buyers who agree to purchase a bank-owned home or a property in a designated economic recovery zone.

    To find these programs, just run a series of Google searches to find your city, county and state websites.  Most will have a link for Residents, Housing, Homebuyer Assistance or some similar category of resources. And here’s a hint - make sure you’re on a site that ends in .gov - scammers posing as governmental agencies abound.  Also, talk with your trusted, local real estate agent or mortgage broker; they often know the ins and outs of the local programs that can help a home buyer out.

    2. Your Parents, Family and Friends.  Many more home buyers than you might think get by with a little help from their friends (and relatives). Most mortgage programs will allow for some portion of your down payment to come in the form of ‘gift money,’ which is exactly what it sounds like: money someone gives you to help you buy a home. Check in with your mortgage pro about how much of your down payment needs you can satisfy with gift money - guidelines varies widely based on how much of your own cash you have to put down and what loan programs you’re applying for.

    While gift money sounds great, it’s far from a panacea to the problem of coming up with a down payment. Taking gift money from a relative may create relationship issues or come with emotional strings attached, something you should consider and evaluate before you even have conversations about it with your potential benefactors.

    And gift money generally also comes with lender strings attached, as well. Namely, lenders almost always require that gift money be contributed along with a gift letter that states that the giver is a relative and that the money is a gift, not a loan. The lender may also require to see a bank account statement from the giver showing that the money was theirs to give - just to be sure they didn’t go out and get some sort of loan that they expect you to help them repay.

    Most insiders think of gift money as large gifts exclusively allowable in the context of a familial relationship, but at least one program I know of allows any general well-wisher to contribute any amount to your cause, whether or not they are a relative. The FHA Bridal Registry program allows couples to open a down payment registry account with their lender, and to deposit checks into that account from anyone who wants to give any amount to help them become home owners. Talk to your FHA mortgage broker for more information on how to open such a registry account.

    3. Your Employer.  Universities and the municipal agencies that employ first responders like police and fire personnel frequently make available down payment and other home buying assistance programs to their staffers. So do some large employers or even smaller companies who are seeking to lure top-level recruits, in the form of relocation assistance programs. Check in with your employers’ Human Resource division to explore whether any such assistance is available - and if you happen to find yourself a hot prospect on the job market, consider trying to negotiate relocation or down payment assistance into your offer package.

    4. Your Income.  This is not about cutting out a cup of coffee here or there. Euro-style austerity measures are just too hard to keep up for the months or years it can take to save up a down payment. Rather, the idea is to get gut-level real with yourself about what’s really important to you. And if the answer is buying a home, then it’s time to go through your spending with a fine tooth comb and look for the leakage you can stop up  - cash you can redirect to your down payment savings.  

    If you spend $20 a workday on oatmeal and coffee at breakfast and your takeout lunch, that’s $400 per month - almost $5000 a year, you can save by simply bringing these things from home (not to mention the health and other benefits you’ll gain). And those numbers are not inflated, if you work in a big city.  Nor is the $100/month cable bill, the $15 yoga class or the $2,000 vacation.

    Fact is, you can have much of the enjoyment of these things for much, much less than you’re used to spending - at least while you’re in down payment-saving mode. Stream TV shows and movies online at Netflix, Hulu or Amazon - you can also find great workout videos on some of these channels for 10 percent of what you’d pay to go to a class! Bring the staycation back, or cut hotel costs by renting a private room or small apartment on a site like VRBO or Airbnb (you might be surprised at how nice the experience is if you stick with the vacation rentals that have rave reviews - I certainly was.)  

    Redirecting the dollars you would normally spend - whether intentionally or on autopilot - for some of these big-ticket items back into your down payment savings account is like pressing fast forward on your home buying timeline. The key is to click out of money-spending autopilot and to transfer the saved money, asap, into a  separate down payment savings account - ideally one that is online, so you have to think hard and wait a few days before pulling money out.

    5. Your Assets.  Some retirement accounts allow you to borrow against or pull out funds, penalty-free, to apply them toward your down payment on a home. Is it advisable for everyone, in every situation to deplete their 401K or IRA to plug that cash into a house?  Absolutely not. But there are situations in which it may make sense to get your down payment up to 20%, say, by borrowing a few thousand dollars from yourself.

    If getting your down payment to the 20 percent mark by borrowing from your 401K gets your mortgage interest rate down and allows you to repay that cash to your own retirement account (vs. to your mortgage lender) with interest, you and your financial advisor might agree that this move is the right move for you.  Or not - this is a highly personal decision that must be made strategically, but some home buyers should at least explore whether their retirement accounts are a sensible source of some portion of their down payment funds.

    And these aren’t the only assets that can help fund your down payment. I know a young family who has given themselves a complete financial makeover over the last few years by getting rid of unnecessary belongings and selling them at flea markets, yard sales and online. Don’t underestimate what reselling your stuff can yield; my own Mom has had a few four-figure yard sales over the years!

    Do you have ‘stuff’ you don’t need or use that someone else would love? Consider liquidating it online or taking it to a consignment store, and using the cash to fluff your down payment savings.  Side benefit: you’ll have less to move when you’re ready to move into your new home!

    Everyone:  What off-the-grid methods have you or your clients explored for coming up with down payment money?

    P.S. - You should follow Trulia and Tara on Facebook!      
  • 5 Surprise-Prevention Strategies for Home Buyers

    Posted Under: Market Conditions, Home Buying, Rent vs Buy  |  April 30, 2012 4:49 PM  |  42,667 views  |  35 comments
    I’ve long believed that the number one source of stress experienced by home buyers is all the unpredictability that lies along the home buying timeline: the prospect of unpleasant surprises that seems to lurk around every corner. Fact is, there are some commonly arising surprises that foul up buyers’ plans and expectations, killing deals and leaving expectations dashed and emotions frayed in their wake. These days, that list includes everything from homes turning out to cost more than the buyer expected to appraisals coming in below the agreed-upon purchase price.

    Here’s some good news: there are steps you can take to manage the risks of being taken by surprise while you’re in the process of buying a home.  As I see it, they fall into a handful of buckets. Here are the five big categories of actions you can take right now to minimize your chances of having an unpleasant home buying surprise:

    1. Study up. As a smart manager of your life and your finances, it’s your duty to get as detailed a primer on the ins and outs of home buying as you need to feel comfortable and confident as you move forward with the process: what lenders require, the nuts and bolts of a purchase transaction, that sort of thing. But when you’re specifically seeking to minimize the risk of unpleasant surprises, you’ve got to take your real estate education to the next level, and study up on some very specific subject matter: your local market, in real-time.

    What I mean is that markets vary a lot from place to place, and individual real estate markets change very quickly. If you’re the sort of savvy buyer that’s been stockpiling your cash for a year or more in preparation for buying, it’s entirely possible that the market dynamics you’ll face when you get out there will be very different from those dynamics which inspired you to buy in the first place. It’s a pretty unpleasant surprise to expect to have your pick of the market, then lose out on the first few ‘dream houses’ you find to other offers.

    Studying up on your local market empowers you to rejigger your search and offer strategies to be successful without having to first experience these sorts of traumas and dramas. It may also allow you to explore new alternatives for achieving the results you want, like buying via an online auction or

    Neighborhoods where homes lagged for months on end a couple of years ago are starting to seem some new life this spring, as buyers like you who have been waiting and saving have begun to sense the bottom of the market might actually have passed.  Anecdotally, I’m hearing many more local agents across the country reporting receiving 2 or 3 offers on homes they couldn’t sell at all 18 months ago, and many more buyers reporting that the ‘good’ homes come on and off the market much more quickly than anytime in recent years.

    But, again - this stuff is hyperlocal. So ask your agent to help you understand the actual data of the housing market in the neighborhood(s) you’ll be hunting in. Specifically, look at how the number of days a home stays on the market (DOM), inventory levels and the list price to sale price ratio have been trending over the last 6 months to 1 year.

    2. Team up. It never ceases to amaze me the amount of expertise and plain old help that goes untapped - and the avoidable stress and expense that are incurred - because buyers don’t even think to express certain concerns to their real estate and mortgage pros. If there are particular potential surprises or other issues that keep you up at night, you should clearly express those to your team of real estate and mortgage professionals, and enlist their help in keeping them at bay.    

    Obviously, not all surprises are within your agent or mortgage broker’s power to prevent; and many of the risks that you worry about are things they’re surely already making their best efforts to manage. But if your team knows that your closing cost cash is to-the-penny tight, or that your move-in timeline is hair-trigger touchy, that knowledge might inspire them to call in favors like a free rate-lock extension from their rep at your lender, or to set up a strategic solution, like negotiating your ability to move in a few days before closing.

    This knowledge also gives them the signal to educate you about what factors will impact the particular surprises you most dread.  And that, in turn, allows you to go from wondering in the wilderness of unknown fear factors, to being able to help them smartly spot issues before they snowball into badness.

    For example, the date on which you close your transaction during the month has an impact on how much cash you’ll need to bring to the closing table. Generally, the amount of prepaid interest you have to pay if your escrow closes the fourth week of the month is much less than what you’d have to pay if it closed, say, the second week of the month.  But think about that: if you’re aiming to close at month’s end to keep your closing costs low, and escrow closes even 10 days late (not at all uncommon, these days) you could end up with a big spike in the cash you’re required to bring in to close.  

    Letting your team know that this would break your heart - and your bank - can help them quickly act and react to either keep closing on track or, if that’s not possible, pushing it out to avoid jacking up your closing costs.

    3. Keep up.  Like this closing date/closing costs debacle-in-the-making, there are a number of critical dates and deadlines in a home buying transaction by which decisions and deliverables and course-corrections must be made or the seeds for a scary surprise take root.  And only some of the time are you, buyer, in control of making sure those timelines stay on track; many other times, loan underwriters, appraisers, inspectors and lenders are responsible for achieving these important must-meet dates. What you can control is your own awareness of all these calendar points, so that you can make more or less urgent nudges and check-ins, as needed, in order to ensure that things either (a) stay on track, or (b) don’t take you by surprise, if they get off track.  

    Ask your agent and mortgage broker to help you create and stay on top of an escrow calendar containing all the major and minor deadlines and tipping points of your transaction, as well as to leverage this tool to avoid surprises throughout the transaction.

    4. Fess up. It’s one thing to be surprised by something you have no control over. But imagine how you’d feel if your deal was killed by a surprise that you (and only you) could easily have avoided! I’ve personally seen this happen a number of times. One buyer I know ended up losing her dream home - and her deposit money - due to false information on her loan application. She’d apparently gotten away with it on a number of credit applications, but a mortgage is an entirely different animal.

    Another nearly had the same tragic outcome as a result of telling her team that she was divorced when, in fact, the divorce was not final. (The bank then wanted to vet her soon-to-be ex-husband’s qualifications for the loan. And his credit was really, really bad. Really.)

    When you are in the loan application process, keep in mind that it in the world of lending, technicalities matter - a lot. This is not just a conversation with friends; rather, it’s about as official as you get. So, the things you normally say and do to describe your life, the things that make up your aspirations and plans, the way you see things turning out in the near future - none of these things count as fodder for your loan application.  What does count?  The hard cold facts of your status quo situation - right now. So, be brutally honest about the state of your life and your finances, warts and all. This might creates obstacles you’ll have to workaround up front, but I assure you that is preferable to getting caught in a falsehood - intentional or otherwise - and having to scramble to try to salvage a deal days before closing.

    5. Fluff up. Your cash and time cushions, that is.  The reason home buying surprises are so stressful is that they threaten to do one of two things: (a) screw up our timelines for moving, or (b) force us to come up with more cash than we have at hand to close the deal.  If you get just a few days away from closing, bags and boxes packed, and are told you need to bring in just an extra few thousand dollars to close the deal, it can feel like your home - actually, your life! - is being held hostage for extra cash, on the one transaction you’ve already spent years saving up for.

    The least stressed-out buyers are those who have built in time and cash cushions to their home buying and moving plans. Give yourself the gift of a few weeks of planned overlap in your ability to occupy your last home and your future one; even if that means you wait to give your landlord notice until you’re well into escrow, it empowers you to avoid looking for hotel rooms and being distressed by the very predictable, very common occurrence of a late escrow closing.  Similarly, if your home buying-related financial plans involve maintaining a nice, fluffy cushion of so-called emergency cash even after your planned down payment and closing costs, you’ll be less likely to go off the deep end if the lender requires you to drop $500 on repairs to get the deal closed.

    Agents:  What are the most common, unpleasant surprises you see arise during home buying, and what advice do you give your clients for preventing them?

    Buyers:  What surprises do you most fear?

    P.S. - You should follow Trulia and Tara on Facebook!     
  • 5 Ways to Course-Correct When Your House Hunt Takes Too Long

    Posted Under: Home Buying, Foreclosure, Rent vs Buy  |  November 9, 2011 8:06 PM  |  36,247 views  |  52 comments
    Some people have home-finding stories that are the real estate equivalent of the skywritten marriage proposal tales. They drove by their dream home, knocked on the front door and the elderly owner offered it to them for a song. However, most recent home buyers have tales on the other end of the charming-and-easy spectrum; tales of year-long house hunts and fruitless offer after fruitless offer, followed by a nerve-wracking, hair-pulling, interminable negotiation with the bank are much more typical. 

    If you've been in the market for a home for what seems like a very long time to no avail, here are five strategies for getting things back on track.

    1.  Know how long is (truly) too long. If you've been saving up, primping your credit and fantasizing about your dream home for 5 years, then waiting for exact right moment in your life and the market to pull the trigger for 4, viewing 15 houses over 3 weeks might seem like an interminable amount of time.

    And if you make an offer that is rejected? The agony of that defeat is outweighed only by the pain of your dream (home) being deferred. 

    Be aware that today's market is a very slow-moving one. It's completely normal in some areas for buyers to view dozens of homes over as many months, and have several offers rejected before getting into contract. Talk with your agent about how long local buyers normally have to prowl today's market before getting some home buying satisfaction.

    2.  Identify where your process is breaking down. In order to course-correct your wayward house hunt, you first have to figure out what the problem actually is. If you're looking at lots of homes, but not finding anything that suits you, you might have an expectation issue. These range from having champagne tastes on a beer budget to being part of a pair of buyers with conflicting expectations that no home will ever be able to satisfy (e.g., husband wants a fixer, wife wants move-in ready). 

    If you're finding places you like, but your offers are consistently being shot down, you might need to work on bringing your home picks into alignment with your budget by increasing your price range, decreasing your wish list, or looking at a lower price range and making higher, more competitive offers.

    Fact: an experienced buyer's agent is an expert diagnostician of house hunt ailments. If your agent told you 7 months, 43 prospective homes and 9 offers ago that your expectations are out of whack or that you need to consider some compromises, you might circle back to that advice - and consider taking it.

    3.  Remember how many houses are in the world, but don't try to see them all. It's easy - but unproductive - to get upset about "the one that got away;" counter that frustration by reminding yourself that you are house hunting in a market relatively flooded with housing inventory.  On the other end of the getting-out-of-your-own-way spectrum, if you do find a home that really works for you in your price range, get over the idea that you have to see everything in town before you make an offer.

    One more mindset reset along these lines: understand that the *perfect* house does not exist - at any price range. Petra Ecclestone just dropped $80 million in cash to buy Candy Spelling's Hollywood home and reportedly had the whole place gutted because the decor was not to her taste. In the same way people with curly hair wish they had straight and vice versa, people who have hilltop vistas wish they lived nearer to the grocery store and people who can walk to the store wish they had better views. No single home will ever satisfy every single one of your preferences, so don't hold out waiting for one that will.

    4.  Rethink your deal-breakers. The greater the number of absolute deal-breakers you've communicated to your agent, the fewer prospective homes you'll see. And the more flexible you can be about which listings you'll look at, the higher the chances you'll find something you like.  I recently read an article in an architectural magazine about a woman who house hunted ad nauseum in a very small neighborhood she needed to be in, only finding success when her agent showed her a fourplex she could convert into the single family home she was looking for.

    If you think your agent simply doesn't understand what you want, ask them to remove all pricing filters and send you homes that reflect what they think your dream house really is.  Alternatively, drive around and find homes for sale or visit Open Houses that you think are closer to what you want - then investigate their list prices, or send the addresses of "suitable" homes that aren't for sale to your agent to find out what that house would go for today. 

    These exercises will get you and your agent communicating on the same page; will help you understand tradeoffs, wants and needs more concretely; and will very likely flick some of your mental switches around what you can expect from a property at various price ranges.  This strategy is especially useful for reality-checking the expectation of home buyers relocating to a town with a higher cost of living than their current hometown.

    5.  Ignore the peanut gallery. People who have not bought a home in your town, your desired neighborhood and your price range at the same moment in time you find yourself house hunting are not authorities on any of the following:
         (a) how dirt cheap 'those foreclosures' are,
         (b) how much of a discount you should be able to negotiate,
         (c) how much is too much for you to pay, or
         (d) how desperate the banks or sellers are to sell.

    That lack of authority, though, will not stop your family members, friends and neighbors from chiming in and offering their own critiques, exasperation, suggestions, or "what I would do if I were you is. . ."-style analyses of your own home buying strategies. Many a would-be homeowner has remained just that - a would-be homeowner - by following the advice or suggestions of someone who read a headline but has no idea of the real market dynamics you face.

    Depending on where you're buying, those dynamics might include:
    • banks that refuse to do repairs and may take 6 months to green-light a short sale,
    • sellers who are so upside down they can barely afford to sell for the list price -- and certainly can't afford to sell for less, and
    • areas in which the norm is for foreclosed homes to sell above asking after receiving multiple offers.
    So, check your own references - double and triple check where you are getting your information about what homes should cost and what you should offer, and make sure that the sources are expert and up-to-date, like the experienced local agents who answer questions on Trulia Voices. Don't let your home buying efforts be foiled by relying on the inaccurate advice of well-meaning loved ones.

    P.S. - You should follow Trulia and Tara on Facebook!
  • 4 Signals It Might be Time to Buy (vs. Rent) Your Home

    Posted Under: Home Buying, Rent vs Buy, Rentals  |  April 26, 2011 10:47 PM  |  48,666 views  |  71 comments
    To rent or to buy:  what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery.  Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing.  And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.

    Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

    Mortgage rates are going up.  Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

    While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come.  And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time. 

    Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

    Rents are going up.  Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so.  As a result, rental homes are in high demand – and rents are rising.

    Rising rents at a time when the prices of homes for sale are low and, in some places, falling?  One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell.  Read on for more on how to plan for the long term and minimize your homebuying risk.)

    Your income and career are stable for the foreseeable future.
      The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).

    When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

    You can reasonably predict the home you’ll need in the years to come.  Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire - and might not want to climb two flights of stairs to get to and from your bedroom - 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

    If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

    With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.

    It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one - are in a row before you make your move.

    P.S. - You should follow Trulia and Tara on Facebook, too!

  • 10 Hidden costs of owning AND renting a home

    Posted Under: Home Buying, Rent vs Buy, Rentals  |  January 18, 2011 10:52 AM  |  75,733 views  |  63 comments
    Everyone thinks that the costs of renting are limited to, well, rent! On the other hand, there is a laundry list of expenses we all know go along with owning a home.

    But many people aren't aware of the hidden, surprising costs associated with both owning AND renting a home, and it's what you don't know that has the potential to derail your rent vs. buy decision-making, so here are the Top 5 Hidden Costs of both renting and owning your home: 

    Top 5 Hidden Costs of Owning

    1.    Special assessments. HOA dues to maintain the complex come as no surprise to condo owners, but hefty special assessments to make unexpected (and unbudgeted) repairs to the roof, windows, boiler or even foundation often catch unit owners unawares. Even if your home doesn’t belong to an HOA, don’t be surprised to see special assessments tacked on top of your property tax bill, covering public services including things like street lighting, tree trimming, pest control, libraries, and even schools.

    2.    Utilities and services you didn’t need while renting. Many renters have never had to pay for things like gas, garbage, water and pest services, and they've also looked to their Electric, gas, garbage, alarm, water, pest, home warranty – which mitigates larger surprise costs of unexpected major repairs, gutter cleaning/maintenance, snow removal/winterizing, etc)

    3.    Private mortgage insurance. Today’s savvy homebuyers are well aware that they’ll have to pony up for private mortgage insurance, or PMI, if they’re putting less than 20 percent down on their mortgage.  But the cost of PMI has spiked over the last year, and the amount definitely catches buyers off guard.

    4.    Penalties and fines.  HOA rule violations, like parking in the wrong spot, installing hardwood floors in an upstairs unit, or painting your home a forbidden hue can result in surprising fines, on top of the costs of remediating the issue. Even single-family homeowners can get ticketed and/or fined by their city or town for violations like having overgrown weeds or other building code violations – especially those which create fire and safety hazards.

    5.    Items you didn't need while renting, but you do as a homeowner. This varies based on your climate and the type of home you own, as well as on the services you outsource, but can include landscaping equipment (e.g., lawn mower, snow/leaf blowers), washer/dryer, fridge, window treatments, and light fixtures.

    Top 5 Hidden Costs of Renting

    1.       Opportunity Costs.  When you rent, you lose out on the chance of equity – which can mean an increase in your home’s value but, even in a down market, can also mean the chance of ever owning the place you live free and clear.

    2.       Income taxes.  If you earn above a certain level of income, the income taxes you’re paying as a renter will be substantially higher than they would be if you owned a home and could deduct your property taxes and mortgage interest.

    3.      Storage.  Many a renter simply has too many personal belongings to stuff into their small apartment, so it’s not uncommon for tenants to also pay for a storage space, without calculating that expense into their “housing” budget.

    4.      Costs of improving the property. Long-term renters may paint, replace the flooring, and do other improvements to make the place livable.  But since it’s not technically “their” home, when they
     do move out, all the cash they invested is lost. In fact, some landlords may require them the pay or forfeit deposit money to bring the place back to its original, neutral décor.

    5.       Lost deposits.  Anyone who has rented more than a couple of apartments is well aware of the chances of losing some or all of your security or peet deposits, no matter how well you care for your home.

    P.S. - You should follow Trulia and Tara on Facebook, too!
  • 6.5 Reasons You Should Buy vs. Renting Your Home

    Posted Under: Home Buying, Rent vs Buy, For Rent  |  October 8, 2010 12:38 PM  |  12,530 views  |  6 comments

    Homeownership has its privileges, although until recently, discussions of what exactly they are have been overly focused on the obviously flawed, "always goes up" argument about the appreciation of American homes. Well, that bubble has burst - literally. The idea that you should buy a home if for no other reason than that it's a fabulous investment is a bit passé, in today's environment of rolled-back home values and upside down mortgages. Whether or not it's time to ditch the home-as-investment argument, there are oodles of other reasons it makes sense to buy your home, compared with renting, even assuming its value would stay fairly flat or increase only modestly over the years.

    Here are 6 other worthwhile reasons to own your home, versus renting it - assuming, of course, that your financials and credit make ownership a sensible and sustainable move for you to make.

    1.  You've always wanted to.  Many Americans simply believe in homeownership.  This holds true even after the bubble! In a recent study Trulia commissioned with Harris Interactive in August 2010, 72 percent of Americans surveyed stated that homeownership is still a part of their personal American Dream.  Owning a home because it's something you've always wanted to do - whether because you've got a vision of life in a home that belongs to your family, or because you've always dreamed of owning a fixer, or because it's simply a family or financial value you hold dear - is probably one of the better motivations for buying a home. (And it's certainly better than buying it because you think you're supposed to.)

    2.  You earn enough to need the tax break.  One-hundred percent of your mortgage interest (the largest part of your monthly mortgage payments) and your property taxes are tax deductible! That's right - Uncle Sam imposes a very strong tax incentive for those who do own their homes. However, even renters are able to take a standard tax deduction, so the true tax advantages of homeownership don't begin accruing unless and until you (a) earn enough to be able to benefit from a tax deduction greater than the standard, and (b) are paying enough mortgage interest and property taxes to accrue a tax deduction larger than the standard deduction.  This is definitely situation-specific; check in with your tax preparer or adviser to find out whether the tax advantages of homeownership would be of benefit to you.

    And, fyi - there are even some additional temporary tax incentives for homeowners: if you put less than 20 percent down on your home loan, the private mortgage insurance premium your lender will require you to pay is also fully or partially deductible (depending on your household income) through 2010.

    3.  You love a deal.   You might have heard by now that home price have rolled back to 2003 levels, and interest rates are bizarrely low - right around 4.45 percent on a 30-year-fixed rate mortgage.  If you've always had a house hankering and you're one of those types who just loves a good deal, it might be a good time to get serious about buying. Depending on your market, prices will probably stay relatively flat for a little while, so even if you need to put a savings-and-credit-building plan in place, you might have time to build up your reserves, boost your FICO score and still get a great deal.  Get to work!

    4.  You want your children to grow up in a home you own. The financial and life management skills required to be a homeowner - like budgeting, making a large financial goal - and meeting it, and staying in the same community over time - tend to get passed down to homeowners' children, as if by osmosis!  Kids whose parents own their home have a lower school dropout rate, teen pregnancy rate and even raises educational achievement and earnings.

    It's not clear whether this is due strictly to homeownership or to the fact that kids of homeowners tend to move around less than children of renters, but what is clear is that growing up in a home their parents own increases children's chances of doing well in life.

    5.  You plan to stay put.  Rents rise over time. Landlords can evict you - in many places - when they decide to sell the place or otherwise due to no fault of yours. If you know you plan to live in the same town or even neighborhood for years to come, owning your home may be one of the best hedges against being forced to move or pay higher rents - especially if you lock in a low-interest, 30-year fixed rate loan.  30 years from now, you could be without a housing payment at all, other than taxes and insurance, which are forever. 

    The ideal is to be committed to staying put for 7 years (plus or minus a year or two, depending on your market), before making the commitment to owning a home makes sense.

    6.  You Want to Customize Your Home.  Whether you want to invest your time, money and creativity into a backyard skate park for the neighborhood kids or you'd rather build an addition for a greenhouse/yoga room, whether your vision of home has always included extensive built-in shelving to showcase your sports memorabilia collection or that chef's kitchen so you can replicate the Top Chef contestants' latest creations, if you are looking to create a significantly customized home (for your significantly customized life!), there are some things you will only be able to do in a home that you own, rather than a rental home.

    6.5.  You want to eventually own your home free and clear.  If you ever want to own the place you live, free and clear of a mortgage or the obligation to pay rent, the only way to make that happen is to buy your home (and not keep refinancing or extending the term of your loan, once you do!).

    Psst - you should follow Trulia and Tara on Facebook, too!

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