Sunday, October 18, 2009

Should you Refinance?

For homeowners, a great way to get some quick cash is with a home refinance loan. They are usually easy to get based on the amount of home equity you have and they are usually at a lower interest rate than most credit cards, making them idea for debt consolidation and paying for college for the kids. But with the recent hikes in mortgage rates, is it still a good choice or would you be better off seeking extra cash from other avenues?

The first step in seeing if a refinance is right for you is to take a look at your current mortgage. The Federal Reserve has raised rates 15 consecutive times, and if you already have an adjustable rate mortgage, or if you’re looking to refinance to get one, you may want to think twice. The best thing you can do is to check out the promissory note that came with your original loan and see when your locked in interest rate expires, how much the bank is allowed to raise your rate per year, and how much your rate can go up for the life of the loan. For almost all loans, there are caps on how much it can be raised. Make sure you know your limits since market analysts aren’t predicting mortgage rates will be going back down anytime soon.

If you’ve crunched the numbers and you see that it’s worth it, than the next step is to calculate the costs. Refinancing can get pricy with all the fees, so once you see how much you would be saving per month, if it’s not significant, you might just want to stick to the loan you have, since closing costs on some refinancing loans can be as much as 3,000, and that doesn’t even include things like appraisal fees and originating fees.

The next step if you’re still interested is shopping around. And don’t be afraid to use the home computer to do so. There are great sites that will offer lower rates than your local bank, and even sites that will get multiple offers from many different banks for you. It’s a buyers market right now, make sure you take full advantage of it.

Refinancing is a major decision during one’s life and it shouldn’t be entered into lightly. But if you approach it with eyes wide open and you know the process, it can be rewarding and help you meet your financial goals.

Protecting Yourself from Mortgage Fraud

It’s hard to believe, but there are people out there looking to prey on people’s ignorance when it comes to buying property. The mortgage fraud game is larger than you think, and every year, thousands of people fall victim to over appraised properties, higher than normal interest rates, and loan amounts that are way more than their budget allows. How do you know if you’re being hustled? It’s not as cut and dry as you might think, but here are some tips to help you see through the charade.

The first tip is to trust your gut. For this scam to be pulled off, you’re going to have to deal with a crooked real estate agent who points you to a piece of property, than an appraiser who will over-value the property, and then a bank officer who will validate that price. With all these dishonest people floating around, your gut should tell you something is wrong at some point. Keep your eyes open and if something starts to smell fishy (like the land they are trying to make you buy) than start asking questions.

Keep an eye out for scams like these targeting the elderly. They tend to be more trustworthy than younger people, and tend to take people at their word. These scams have also been known to target first-time buyers who don’t know how transactions like these are suppose to go. Also, if you live in Illinois, Florida, California, Nevada or Arizona than you’re more likely to run into one of these shysters.

So, how to protect yourself? Here are some warning signs to look for. If your real estate broker demands that you use a particular lender (i.e. the lender that’s in on the scam), just say no. Tell your broker that you’ll use whatever lender you want and that you’ve shopped around and you’ve chosen a different one. If your broker or agent gets a little testy at this, you might want to consider dumping them.

Another good sign that you’re dealing with less than honest people is that your lender is trying to talk you into borrowing more than what your budget allows. This is never, ever a good idea. You should go into every discussion with your lender knowing exactly what your limits are.

This one is just common sense, but make sure you get copies of everything you sign. If you don’t, demand them. Also, if you feel you’ve signed something less than honest, take the documents to another lender or to a lawyer to have them looked over.

Scammers have been a part of the real estate scene for as long as there has been swampland in Florida or a bridge in Brooklyn to sell. They aren’t going anywhere (except maybe to prison) so you have to equip yourself with the knowledge of how to deal with them.

New Home Buyers Look to Save Energy

With oil prices spiking to record highs in recent months, the home building industry is beginning to feel some repercussions. In a recent survey done by the American Institute of Architects, the number one request by prospective home owners is that their new home be as energy-efficient as possible.

The survey asked members of the AIA to list what people were asking for in a new home compared to requests from previous years. According to their findings, 54 percent said that they wanted a way to help manage their energy in their home. That is a significant jump from last year, when only 38 percent of respondents gave that answer. Maybe most telling is that not a single member who filled out the survey said that demands for that kind of system have dropped.

These energy management systems can be broken down into two different categories: high-tech and low-tech. The popular high-tech systems essentially employ smart house technology and use a series of computers and sensors to help manage and monitor the house’s energy usage. The various computer systems can tell residents if there is a leak that heat is escaping from somewhere in the home, it can automatically turn the thermostat down if the house is empty and alert residents if a window is left open in a room that’s empty.

But it’s not just high-tech solutions that are growing in demand. Low-tech, basic changes to house building and design are growing in popularity, as well. Simple changes such as an increase in insulation (an increase of 45 percent from last year) and water heaters that don’t use a tank so they don’t lose any heat during storage have become common. Requests for double-pane windows are up as well as appliances that qualify as energy efficient.

The AIA survey showed that people are also willing to put their money where their mouth is. Results showed that the average home builder would be willing to pony up an additional $5,000 dollars to help make their home more energy efficient.
Some jurisdictions give discounts or tax credits to home builders that meet energy conservation guidelines, so that can act as encouragement to incorporate these bits and pieces into a new home.

With heating oil and natural gas prices still at or near record highs, the trend of building more energy efficient homes looks to be here to stay. People are finally beginning to realize a few more dollars up front can save you thousands over the next few decades when it comes to energy conservation.

Moving Costs More than you Think

One of the single most stressful things a person can do in this day and age is move. Not only do you have to say goodbye to a place you lived and most likely loved, you have to find a trustworthy real estate agent, or if you decide to go it alone, you have to weigh the pros and cons of what you think you can do versus the reality of what you can and can’t do. If that wasn’t enough, the process of house hunting is exhausting and frustrating, and then you have the fun of closing costs and then once that’s over with, the actual move.

Well, here is another piece of good news. According to Move Inc, a company that operates many online home searching and buying sites, reports that the average home buyer spends approximately $9,000 on services and products related to their move. That’s nine grand per household, per move. If you factor that out to every move made in the United States in the past year, that’s $170 billion spent on moving expenses.

Move Inc broke down the survey into 40 different categories, and found that about half of the total moving expenses were eaten up by fixing up your old home in preparation to move. Things like repairs, improvements and decorating costs usually end up running higher than most people thought.

The rest of the money was spent on switching services that are used on a daily basis in the home. Things like switching the cable or satellite TV, switching banks, internet access, telephone service, as well as pharmacies, insurance companies and auto mechanics. All of these moves come with costs and fees that most prospective movers don’t figure into the budget.

The study showed that most of the purchases were impulse, last-minute buys and were concentrated around the last two weeks before a move and the first two weeks after a move.

The lesson to be learned here is that when you’ve finally decided that a new place to call home is needed, you might want to review your expenses for the move to include a few extra rolls of packing tape and a few more boxes.

Make Your Home the Best it can be by Staging

With the housing market groaning under its own weight these days, potential home sellers need every advantage they can get. One way that a family can help move their home faster is with a practice called home staging. The logic behind home staging is simple: try to make your home look as special as possible when people view it and you will have an increased chance of selling it.

Some tips on how to stage your home properly include simple things like picking up after yourself and taking out the garbage. But there are hundreds of other things that you can do to make your house more memorable.

Try baking a batch of cookies about 30 minutes before you show your home. The inviting and pleasant smell can make people remember your home over others they might have seen.

If you have pets, try to either board them at a shelter or groomer, or at the very least, have a neighbour watch them for an hour to have the home pet-free. You never know when you’ll show the house to someone who might be allergic or someone who simply doesn’t like pets.

The same can be said for a baby or kids. While you can’t board your children , see if a friend can watch them while you’re showing your house. You don’t need little Johnny creating a mess or baby Sue crying at the top of her lungs when you’re trying to show your place.

Vacuum everywhere. There probably isn’t a bigger turn off when viewing a home than dirt. Although logic would suggest that the first thing you do when you move into a new home is clean every last inch, the sight of a dirty floor or carpet can lower people’s opinions of your home.

If you have rooms that are barren, spend a few dollars on basic decorations or plants to give a room a warm, inviting look. The same goes for other rooms in your house. Stay away from clutter and dark, cool colours. Try to focus on warmth. You don’t want the people viewing your property to ever want to leave.

As you can see, the idea of staging your home for viewing makes perfect sense. Take away these added touches and the home becomes just a lifeless house. But integrate these basic steps into your house-showing routine, and you can expect to sell sooner rather than later.

Thursday, September 24, 2009

Letting the Sour Housing Market Work for You

With mortgage rates inching higher every month and the doom and gloom from the experts predicting the real estate market bubble is about to burst, just about everyone is staying away from buying new homes, at least until everyone can figure out if this recession has any legs or not.

So, what reason does anyone have to buy sooner rather than later?


According to the National Association of Home Buyers, somewhere around 75 percent of builders are offering incentives right now.

A recent CNN-Money article documented this curious trend in the housing market, as things get tighter, realtors and home builders are looking for any possible enticement to get people to buy now.

For instance:

No Closing Costs
No payments for six months (Yes, on your house, this isn’t a car ad).
$10,000 towards an in-ground pool
Upgraded appliances
Free expert landscaping
Plasma TVs
$5,000 gift certificates to upgrade your home.
New Cabinets
New Countertops (granite, of course)
Marble baths
Price cuts up to 6 percent
Price cuts of 10 percent or more on new homes
Lower mortgage rates

And those are just the incentives offered from realtors and builders. If you’re looking to buy direct without the aid of a realtor, you can still get in on the incentive deals. One couple in Colorado is offering round-trip airfare to any destination in Europe, or an expensive bottle of wine to anyone who will buy their condo.

Other offers in the same area included a month of professional massages or the use of a personal chef for a period of time.

Brokers across the country are reporting similarly strange behaviour, like sellers willing to give a 20 percent discount to anyone who bought by a certain date. Or others offering merchandize, like a Vespa scooter or plane tickets to anywhere in the US if their house was bought quickly.

One unique buyer in Rhode Island was actually offering a Lexus automobile with his property.

While it’s unknown if this trend will continue, these incentives are helping to move properties that might not other wise sell as quickly. Take it as a sign of desperation or a sign of sillyness, but as long as the housing market across the United States shows signs of slowing, incentives, big and small, serious and bizarre are here to stay.

Is Your Home Market Over-Valued?

In every industry, there are people that think positive and people that look at things from more of a negative point of view. Even when things are going their best and everyone involved is making money hand over fist, you always have a dedicated group of nay-sayers that are predicting doom and gloom.

A few months ago, those voices started to get louder and louder in the real estate market. The positive thinkers pointed to incredibly low mortgage rates and record sales and said everything was all right. Unfortunately, in this case, the doom and gloomers might have been on target.

A new survey shows that an increasing number of housing markets in the United States might be overvalued, and as the logic suggests, an overvalued real estate market translates into a slower real estate market.

The main culprit is rising interest rates.

The rate for fixed mortgages (30-year) is up over half a percent in the past year, and the rates on adjustable-rate mortgages is up even more.

The real estate market that was deemed to be the most overvalued was in Naples, Florida, where the study deemed to be 101.5% higher than what National City considered to be fair value.

The city of Bend, Oregon was second in the study, coming in at almost 90%.

If you’re looking for real estate markets that still have deals, head to the great state of Texas. All five of the most undervalued markets were in the Lone Star State, led by College Station (home of the Texas A&M Aggies) which was deemed to be over 22% undervalued. Dallas was second on the list at 21% undervalued.

But how do you know if your housing market is overvalued?

Chances are, if you live in California or Florida, it is. Nine of the top ten overvalued markets are in either Florida or California, with Salinas, Merced and Madera, California ranked 3, 4 and 5. Port St. Lucie, Florida is deemed to be 74% overvalued, good enough for number 6. Stockton and Santa Barbara, California take 7 and 8, while Florida takes the final two spots at 9 and 10 with Miami (70.8%) and Punta Gorda (70.2%).

While this may be a sure sign of a pending real estate slump, the best thing any potential investor can do is take a long, hard look at all available research before you decide to take a positive or negative outlook.