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.

Is the Bottom Falling Out of U.S. Real Estate?

A dominant theme as of late in the real estate news has been the idea that the bubble is about to burst. Depending on who you read and what you believe, it’s either going to be a minor speed bump that only a few investors will even feel, or it’s going to be a elevator drop straight down, accompanied with a nuclear winter that will last until demand once again passes up supply.

While no one can see the future, a recent prediction by the National Association of Realtors paints a gloomy picture. For the first time since 1991, prices on new houses will actually fall this year. Prices on existing homes are still predicted to rise, but it will be the smallest rise ever. The main cause of this shift it thought to be a glut of supply and not enough demand.

This fall in price, while not steep by anyone’s definition is expected to be around 0.2 percent, which would put the median price for a new home in the US at $240,500. The drop seen in 1991, 2.4%, was much worse.

The five-year boom is housing in the US is expected to come to an end this year, and the almost unchecked about of building during that time is what’s causing it. The amount of business many of the industry leaders have done this year in new home building is down sharply, compared to sky rocking business over the previous few years.

While no one likes a downturn in business, many investors have a nice nest egg, thanks to the 11 percent increase in new home prices over the last 11 years. Just to give you some perspective, the average over the last 50 years is an increase of 5 percent.

Although final numbers aren’t in yet, the drop in previously owned homes is looking to be down almost nine percent this year, while the drop in new-home sales is down a whopping 17.3 percent. And while the drop isn’t good news, the final numbers at the end of this year will still be the fourth most ever.

So, this leaves us with the question, how far will it fall? That is the billion dollar question. No one knows for sure, but be warned if you’re looking to invest in real estate over the next few years, the elevator may continue to fall for years.

Is Discount Real Estate Brokers For Real?

When most people think about real estate, the first thing that comes to their minds is dollar signs. And usually not just one. Several. And it’s just not the actual land or structures that cause the dollar signs to start flashing, it’s the usual 6 percent real estate commission that goes along with hiring a legitimate real estate agent. But does it have to be that way? Are there cheaper ways to buy and sell real estate that can be trusted?

Well, it really depends on how much you know about the real estate game. There are hundreds of companies out there, many of them based on the Internet, that offer discounted real estate services, but they only do part of the job. But can they save you money? Without a doubt. Most of the online real estate companies only charge a few hundred dollars for their services, while the usual six percent charged by a full service real estate broker can stretch into the thousands of dollars.

In Texas recently, major real estate companies have begun to play hardball. The Federal Trade Commission charged a local realtors board with not playing fair with their competition, so clearly, major real estate companies see these cheaper alternatives as a threat. Not to be outdone, there are similar realtor boards in other states, such as Utah, Michigan and Colorado that have done the same thing. They are expecting a review by the FTC sooner rather than later.

The big difference between the way that things have always been done (through a realtor) and the way things are done now is all about availability of information. Many online sites that offer discount house or property listings don’t assist you outright in trying to figure out what points are or try to figure how much your closing costs are going to be, but they do provide the groundwork for how to figure all that out for yourself. They have primers detailing dirty tricks the bank might pull. They have FAQs about the basics of dealing in real estate. Essentially, they have all the information that a real estate agent is going to tell you on their sites so they don’t have to charge you extra.

The ongoing battle between online and “legitimate” full-service realtors is something that is going to be around for a long time. As long as there are self-motivated people who believe that they can do it themselves, online realtors will continue to thrive. The big question to ask yourself is how much do you know about the real estate business and how much responsibility are you willing to take on.

How to Unpack without Exploding

One of the forgotten steps in moving is the fact that physically moving your belongings from one spot to another is only part of the deal. Once you get your boxes and your mattress and your desk to its final destination, you still have to be able to find everything and put everything where it belongs. A rule of thumb when surveying your house is that no matter how many box-fulls you think you have, a good idea is to at least increase your most generous estimate by at least 50 percent. And remember, for every box you pack, that’s a box you have to unpack.

According to data from the US Census, 14 percent of all American households last year moved. That translates to somewhere around 40 million people switching addresses.

Most of us take weeks, sometimes months to slowly and painstakingly categorize, wrap and pack all of our belongings. We spend months looking at prospective houses, arguing with our real estate agent and we spend days with our fingers crossed hoping we got the property we wanted.

But once you do get your dream house, then what? You took all this time to get everything ready and then you leave yourself….
… move everything. Yup, it’s just about as crazy as it sounds. But fear not, there are some common sense tips to keep your head from exploding. If you have the money, there are several companies out there that will help you pack up everything, and then once the movers do their thing, they will unpack pretty much everything. They will even take the boxes with them when they go. They will hang pictures, put your toothbrush in the bathroom and put the sheets on the bed. They will even get the computer up and running.

But, as you can imagine, these types of services aren’t cheap. If they aren’t in your budget, here are some good tips for do-it-yourselfers.

See-through is your friend. Stay away from opaque brown cardboard boxes and try to use as much clear packing material as you can. Clear plastic bins, Ziploc bags for small things, anything that you can think of that is clear and can hold large amounts of stuff.

Lists Lists Lists. Write down what goes in every single box, so when you wake up that first morning in your beautiful new home and you want that first cup of coffee, all you have to do is grab that list and see that it’s in box 91.

Have the utilities turned on before you move in. This is especially important if you have kids. Moves are traumatic enough for adults, but when little Johnny is having his universe ripped apart, it helps to be able to plop the kids in front of Dora the Explorer for a bit while you try to recover from exhaustion.

While nothing can really prepare you for the mental and physical stress of moving day, being prepared and taking a few common sense steps can help keep things from getting too out of hand.

Sunday, August 23, 2009

Home Affordability: Myth or Reality?

For many young couples, the idea of owning their own house just like their parents is an attractive idea, but it’s not very realistic. A recent poll conducted by the Associated Press and America On Line Real Estate showed that 80 percent of respondents believe that it is hard for first-time buyers to afford a home. A majority of those polled – 59 percent – also said that they believe it is harder to buy a home now than it was five years ago.

Taking a closer look at the poll reveals that young adults and those that classify themselves as minorities consider the affordability of homes a bigger problem now than five years ago, compared to those over the age of 50 and those that identify themselves as white.

Broken down by region, almost 70 percent of those living in the western United States and almost 65 percent of those living in the Northeastern US say that it’s harder to buy now than five years ago, compared to only 54 percent of those living in the South and 51 percent of those living in the Midwest.

The poll also found that almost half of those surveyed thought that the real estate market in their home area was overpriced.

A recent report by the census bureau seems to back up the findings of the AP/AOL survey. The census report found that approximately one third of all homeowners in the US that have mortgages spent at least 30 percent of their income on housing and housing related costs. It’s widely considered excessive if your housing costs make up more than one third of your income. The census took things like mortgage payments, insurance and utilities and taxes into account.

The biggest reason for this lack of faith in new home ownership can be directly attributed to the recent housing boom over the last five years. Also, a recent increase in mortgage rates has also dampened optimism. And while incomes are up, as well, most don’t even keep up with inflation.

Another recent trend that has kept optimism for first time home buyers down is the 32 percent jump in median home value from 2000 to the end of 2005. The current median price is around $167,500.
While buying your first home is never easy, things may be a bit harder now than they have ever been. But bargains so still exist, and if you’re patient, a first home can still be yours.

Gulf Markets Experience Slow Recovery

After the disaster that was Hurricane Katrina last year, many who lived in the affected areas in Louisiana, Alabama and Mississippi packed up and left. It is only now, over a full year after the flooding subsided that a comprehensive look at the future of gulf real estate can be made. There is a recovery going on, but it’s slow.

According to sources in the affected areas, the biggest problem facing reconstruction is labour. A catch-22 has the New Orleans construction market treading water. More hands are needed to build more homes, but the bodies attached to those hands have no place to live in New Orleans, so they don’t come.

The housing market isn’t doing much better. Predictably, the price of undamaged homes shot up during the immediate aftermath of Hurricane Katrina, and are still anywhere between 10-40 percent higher than pre-storm levels throughout most of the gulf coast area.

The amount of inventory is most of the storm-ravaged area is still very small, and the areas that did manage to escape damage tended to absorb a large amount of homeless from areas that were harder hit. This influx of demand has kept supply very, very low.

Areas such as Pearl River County in Mississippi found themselves with a doubled population almost overnight as people from flooded areas flocked there. The area had been reporting just over 400 properties for sale at any given time before the storm, but the influx in population has shrunk housing availability down to 275. As for prices, they are up significantly, from around $90,000 to $150,000.

A much larger area that took in hundreds of thousands of people was Houston, Texas. Unlike many of its counterparts, Houston has taken the influx of people quite well. New home construction is way up, and the inventory is only down from 45,000 to 40,000.

Middle-of-the-road areas like Baton Rouge essentially doubled in population, much like Pearl River. Today, the population is still 50% higher than it was before Katrina hit. There is almost no inventory here, as soon as a house goes up on the market, it is inundated with offers and sells very quickly.

Hurricane Katrina was a legendary storm that changed the lives of millions of people. The real estate market will recover there, especially in a magical city like New Orleans, but it is going to take years. The surrounding areas may not be as lucky.

Getting Real Estate Advice From Uncle Sam?

As anyone who has decided to buy or sell a piece of property can tell you, the entire process can seem daunting and intimidating. Many who seek the help of a professional real estate broker spend many a sleepless night trying to decide who is taking advantage of them more: the broker or the bank? While there is no cure-all to this ages-old dilemma, there is a new pamphlet available that helps real estate newbies navigate their way through some of the red tape that comes with buying or selling real estate.

And it’s from the United States Government.

No, really.

The Federal Trade Commission has recently issued a helpful guide that helps new buyers or sellers with some frequently asked questions concerning real estate. Titled Selling Your Home? Tips for Selecting a Real Estate Professional, the guide focuses on the proper amount you should expect to pay for a real estate commission, the ins and outs of contracts as well as business models.

While the guide is a bit slim, weighing in at only four pages, it does come with some useful info. Under the section about commissions, the guide explains that while six percent is the industry standard, it is negotiable, and if your real estate agent tells you there is a local or federal law on the books that says the commission must stay at that rate, they are lying and it’s probably a good sign to find a different broker who will be honest with you.

The guide goes on to encourage prospective clients to try to negotiate for a lower commission, since the broker needs your business just as much as you need theirs.

In the next section, the guide explains the difference between full-service real estate brokers, and discount brokers and emphasizes that if you go with a discount broker, you may have to do more of the leg work yourself. The guide also says that while a full-service agent usually provides all needed services for one flat rate, the discount broker is more likely to have an “a la carte” approach, where for each additional bit of help, there is an additional cost.

The guide goes on to provide advice on negotiating contracts in your favour and not the banks, as well as info on hiring a trustworthy real estate broker.

While taking advice from the federal government on, say, invading Iraq may not be a good idea, this pamphlet may end up being a godsend for those needing basic real estate advice. The pamphlet can be picket up at the FTC’s website

Gated Communities – Are they for you?

There is something uniquely American about gated communities. Usually tucked away in the suburbs, they are given majestic titles, such as Yosemite Rivers or Acadia Meadows. They feature narrow, winding streets that also have cutsey names like Bubbling Brook Circle. If you can stand the naming, you have the actual houses. While many of them tend to be large 3-bedrooms or bigger, they do tend to all look the same. Most of them feature manicured lawns that look better than the local municipal golf course. But for some people, this is a snapshot of the American Dream. Should you buy a home in a gated community? Let’s take a look at some of the plusses and minuses.

A big plus for most potential homeowners is that houses in gated communities keep their value. Since maintenance rules for most gated communities are so strict and there is very little through-traffic, the values of homes in most gated communities tends to stay high. Reselling your home if you have to move away is also easier.

A minus for many is the evil homeowners association. The scope of what a homeowners association asks of its homeowners has become the stuff of legend. The ridiculous standards to which a home and lawn must be kept can drive a person crazy. Everything from the color you’re allowed to paint your home, to how you decorate it, to what you’re allowed to keep on your lawn are all up to the local homeowners association, not you. This is more than most people can stomach after paying a few hundred grand for a house. But some find the conformity comforting.

A plus if you have kids is the safety of a gated community. Of course, the community is much safer if your gate is guarded and the gate mechanism deters people from following the car in front into the community. But there is little doubt that little Johnny and Sarah will be safer riding their bikes on streets with very little traffic and excruciatingly slow speed limits found in most gated communities.

Just like the guard at the gate can work in your favour to keep riff raff out as well as drunk drivers targeting your kids, the gate guard can work against you, too. Every time you order a pizza, or if you need an emergency visit from the plumber, you have to let the gate guard know and have them buzzed in. This can be a hassle, and more times than not, you’ll probably forget and this will leave your visitor stranded.

Buying a house is a stressful enough decision in life but when you factor in the pros and cons of living in a gated community, the process can seem overwhelming. The best piece of advice of all is to talk to those that already live in a gated community and see what it’s really like before you take the plunge.

Flipping a House – Is it Right for You?

Of all the reality TV shows that have come and gone since the fad started, very few have caused people to sit up and say, “hey, I can do that, and I can make a mint!” like the house-flipping shows that seem to be everywhere on cable these days. But is what you see on TV accurate? Can the process really be that easy? Let’s take a closer look.

The first step is analysing your finances to see if you can afford to take on a second home and remodel it. You should have an idea as to how much your total budget is going to be for the project, and make sure to factor in closing costs on the project home, contractor overruns because things are bound to take longer than you thought, and then money for incidentals and accidentals, as well.

Once you’ve got an iron clad budget, the next step is to find a home that you think is flappable. Most people go into these projects with a property already in mind, but for some, searching for a saveable house that is within their budget and at the same time will be sellable can be extremely difficult. There are many people out there looking to flip houses, so finding one for yourself can be a real chore.

Once you’ve picked your property, you have to go through the buying process. Expect delays and make sure you have the property appraised by an independent appraiser. Also, be aware that closing costs can fluctuate dramatically.

So, the house is all yours. Now what? The best thing to do is to bring in an expert to help you see everything that needs to be done. From electrical to plumbing to interior design, flipping a house right is a huge job, and you have to be prepared to spend the money.

Once renovations have started, be prepared to dedicate as much time as needed to the project. The things that you can do yourself will save you money, but don’t be afraid to call in an expert for the big jobs.

Once the property looks like it should, have it reappraised, and once you’re ready to sell, don’t be afraid to embrace non-traditional methods of selling it, like the Internet or out-of-town newspapers. You need as many eyes on your flipped house so you can unload it as quickly as possible and stop making payments on it. The longer the property sits there, the less successful your house flip will be.

House-flipping has become one of the most fashionable ways to make money for hard working people. But be prepared to go into your investment with your eyes, and your wallet, wide open.

Monday, August 10, 2009

A Second Home: Take it or Leave it?

For many, wanderlust is just a part of life. You buy a beautiful home somewhere, settle down, have a family, but there is always a part of you that’s itching to get away. Vacations are part of that wanderlust; the chance to get away someplace beautiful. And then you see it. The local newspaper at your vacation destination, and lo and behold, there is a real estate section right there. Dare you even look? You can’t afford it, can you? Two homes? Is dual home ownership for you?

A second home can work for you, but you have to go into the process knowing what to expect. If you’re looking to get rich quick, don’t count on it. According to recent data, the price of real estate in areas that are deemed “Vacation Markets” has risen twice as fast as real estate in other areas. So, not only is a second home in your destination of choice going to cost you a pretty penny, it’s no longer a well-kept secret anymore and the chances of you flipping it to make a quick buck are slim.

The best piece of advice a possible vacation home buyer can heed right now is to buy for love not for money. Recent sharp downturns in vacation markets like Naples, Florida, Lake Tahoe, Nevada and Cape Cod, Massachusetts, have shown that trying to turn a profit in a vacation market is close to impossible. But there is a bright side to all of this. With the housing bubble going poof all across the country, those that are looking to sell will be doing so at lower prices. Now could be a great time to buy a place that you’re planning on keeping for a long while.

But how do you know if you have your head on straight about the whole thing? Well, take some time and evaluate the pluses and minuses of buying another home. Once you’ve decided on a area, spend some time there to make sure you like it. If it’s going to be a vacation home, you’ll want the scenery to be relaxing (if that’s what you’re looking for) or exciting (if that’s what you go on vacation to experience). A final check should be the bottom-line cost. If the price of the two houses makes up more than one third of your total income, you’ve spent too much.

Buying property is a huge investment for everyone, even the rich. Take the time to properly evaluate the pros and cons before you decide to own a second home or you could find yourself on a permanent vacation.

Are you House Poor?

The great American Dream has always revolved around owning a home. Sure, having the 2.3 kids, the cushy corporate job and the stylish car to drive to work everyday are part of the myth, too, but nothing quite summed up Americana quite like the white picket fence. But if recent economic numbers are any clue, this dream is becoming a nightmare for many in the US.

According to date released by the United States Census Bureau, an increasing number of homeowners are spending a larger and larger amount of their incomes on housing than in previous years. People in 49 out of 50 states reported an increase. The only state that didn’t, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.

This is a huge problem for first-time buyers who may now be priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages over the same period.

While everyone seems to be in agreement that the housing “bubble” is either bursting, or getting ready to burst depending on where you live, housing prices are still up a remarkable 32 percent since the beginning of the decade.

Household incomes, on the other hand, haven’t done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.

Maybe the worst news in the report was the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy.

What does this mean in the long run?

Most experts agree that until income can catch up to housing, the real estate market will remain lifeless. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.

Things appear to be the worst in California. Not only do they have the most expensive real estate in the nation, 48 percent of California homeowners spend more than 30% of their income on housing related costs.

Until income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. Which could mean that the upcoming real estate slump could last much longer than anyone predicted.

Buying a Home Overseas: Practical?

For those of us that have been lucky enough to travel to Europe, Asia or Australia from North America, we have seen some of the most beautiful land on Earth. The people, the sights and especially the food make international travel one of the most exotic and special things you can do. But what about making that trip to another country permanent? If you can afford a second home and the thought of spending your summers in the Hamptons isn’t doing it for you, what about buying a little place in Italy? Or Ireland? Here are some tips on making your dream a reality.

First off, rest assured that you’re not the first person to do this. It’s estimated that about four million US citizens live abroad right now. The first thing you should do is check the local country’s property rights. There are websites run by the International Real Estate Association that can tell you if it’s even legal for non-residents of a country to own land there. You should also check with the US Government about the stability of a particular region. Remember, if you vacationed somewhere nice, that doesn’t mean it’s necessarily safe once you leave the resort.

The next step would be to seek out a real estate broker in that particular country for help. This is when a possible language barrier could be a problem. Luckily, there are websites available that will have links to international brokers who do speak English. A broker who is familiar with the local laws and customs of the region you’re looking to move to will be able to help you find out how the local laws work when it comes to real estate.

Another good tip is that you should expect to pay cash. Most countries don’t have as sophisticated a system for loans and mortgages as the US and Canada, so you are looking at either paying cash or if you are looking to move somewhere where you might be able to get a loan, a down payment of almost 50 percent wouldn’t be unusual. If that’s too rich for your blood, you might want to think twice about the whole thing.

Being able to retire in that pretty Tuscan villa overlooking the vineyards is a dream millions of Americans have, and while it may only become a reality for a select few, you CAN make it happen with proper planning, a helpful heaping of common sense and a few tips to help you on your way.

Canadian Markets Hot and Cold

For many Americans, Canada has been a refuge from instability for generations. Canada was the final destination for thousands of runaway slaves before the American Civil war, and then later during Viet Nam, for draftees that felt the war was unjust. The slow and steady migration to Canada continues to this day, although it’s mostly to get away from gun violence and George W. Bush. For those looking to buy real estate in Canada, the third quarter numbers had both good and bad news.

The good news? Canadian real estate is on a record pace in 2006.

The bad news? The third quarter numbers are down sharply from the second quarter of this year, and even down from the third quarter of last year. What does all this mean?

It basically means that Canada’s sizzling real estate market is still hotter than ever, but that it can’t keep up the incredible pace that it’s been on.

Breaking down the numbers, Canadian real estate is down 6 percent compared to the same quarter last year, and down 2.5 percent from the second quarter of this year, according to the Canadian Real Estate Association.

Overall, sales during the first nine months of this year are still up over the same nine months from last year, but things do appear to be slowing down.

The hardest hit cities during the third quarter slow down were Vancouver, home of the 2010 Winter Olympic Games, red-hot Calgary, which is still booming thanks to the local oil industry, and Toronto. Sales in Edmonton, Alberta and Hamilton, Ontario are actually up for the third quarter, helping to offset the losses in other cities.

Proving that the incredible Canadian real estate market is still on fire, year-to-date sales records were set in various cities all across the country in the third quarter. Montreal, Winnipeg, Ottawa, Saskatoon, Edmonton and Calgary all reported record sales for this year.

The average price for a home in Canada has been sky rocketing in recent years, with the total now at $258,000 (US dollars) up from $234.000 just in the last calendar year.

This real estate frenzy is being led by the province of Alberta and their incredible economy. The cities of Calgary and Edmonton, which reported their highest level of new real estate listings ever in the third quarter. Montreal and Toronto reported their second highest amounts of new listings for any quarter, as well.

The Canadian real estate market is still breaking records and making money despite the third quarter downturn. The breakneck pace simply couldn’t be sustained. But if you’re looking to move north of the border, do so knowing that it might cost you a few more loonies than you thought.

Credit History can Bite you in the Butt

A recent study has shown that the number of people who pay more than they should for their mortgage is rising. And if you look at the surface, the number one reason this rise is happening is because of race.

A study done by the Federal Reserve shows that around 55 percent of African-American borrowers pay higher than normal interest on their mortgages. But it’s not just the African-American community. The same study showed that 46 percent of people who identify as Latino also pay more due to a higher than average interest rate on their loan. As for Caucasians, only 17 percent of borrowers fell into that category.

The overall numbers of people who pay more than the average interest rate is up considerably, from 11.5 to 24.6 percent in the last two years.

While these numbers appear to be caused by rampant racism amongst seemingly all lenders, there might be another explanation. The connection between the interest rate offered and the borrowers credit history.

The interest rate that is offered on a mortgage loan is directly proportional to the amount of risk the lender feels that they are taking. If you have sparkling credit, the chances of you getting the best possible interest rate are fantastic. On the other hand, if you have declared bankruptcy or if there are any other black marks on your credit history, the chances of you getting a great loan are almost zero.

Another possible culprit is the rise in speciality loans that have gained in popularity over the last few years. While the idea of buying a house without a down payment was once a rarity, these days, it’s fairly common. And in almost all cases when this happens, the interest rates are higher because the lender is taking an additional risk by not having a down payment.

Sometimes, home buyers are agreeing to let the closing costs associated with buying a home be figured into the interest rate. Again, this is a less than honest way for a family to buy a home with very little to no cash on hand. The catch is, of course, that you will end up paying significantly more over time than if you had just paid the closing costs up front.

While no one can suggest that racism is dead in America, it is possible that while African-Americans and Latinos pay more for their mortgages, it could be caused by various other factors that may or may not be connected to a persons’ race.