Archives for May 2019

So When Is The Best Time To Buy A House?

When you go out to buy a house, you’re going to want to buy the best house possible for the least amount that you need to spend. It’s a good idea to be cautious because you know that you’re going to be making one of the biggest purchase of your entire life when you sign the dotted line. So, when's the best time to buy a house?

Even if it looks like you’re getting a great price for your home, there are other ways that you can still try to find other advantages. Knowing when the best time to buy a house is one of the many advantages to get the best deal for the home you’ve always wanted.

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Factors That Make an Impact on the Best Time to Buy a House

Understanding Seasonal Supply and Demand

Knowing When to Start Looking at Houses

Taking the Plunge and Buying a Home

Factors That Make an Impact on the Best Time to Buy a House

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There are two main factors that you think about when you’re deciding on the best time to buy. More specifically, you should look at the surrounding market as well as your personal circumstances. You need to go into this decision-making process realizing that there are some in each case that you will have no control over.

What Are Market Factors?

Market factors include interest rates, knowing the difference between a buyer’s or seller’s market, and what you’re looking to do. Lower interest rates are better when you’re trying to pay off your mortgage in a reasonable amount of time.

When you’ve decided you want to buy a house, then you’re going to pay attention to what’s happening in the market regarding selling and buying. A buyer’s market is when the conditions are ideal for home buyers. You’ll find plenty of homes for sale and sellers typically drop prices to get their homes sold.

Seller’s markets are different in that sellers control the strings so to speak. That means that the demand for homes outranks the supply of available inventory and sellers know they can ask more for the home they are selling. In this situation, a seller can demand a high price and often get what they want.

What Are Personal Factors?

Many personal factors can influence whether or not it’s the right time to purchase a home. You need to think about your financial situation as well as your lifestyle expectations. You might not realize that maybe it’s not the best time to buy a house until you take some time and think about these things.

When you think about your financial situation, you need to consider your income and whether or not you make enough to qualify for a house payment. Your credit score will also impact whether or not you’re going to be approved for a mortgage loan. Do you have a down payment? Will you be able to afford typical home maintenance expenses along with the times when the big things die like your air conditioner or other major appliances?

Then there is your lifestyle to think about. Do you have the availability to maintain your home? That means taking the time to mow the lawn, paint the sides, and generally take care of your home inside and out. What about plans to move in the foreseeable future? Do you see yourself settling down or will you be moving somewhere else?

Understanding Seasonal Supply and Demand

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Finding the best time to buy a house isn’t exactly cut and dry. There are other factors to consider when you’re trying to figure out whether or not you’re going to move forward. Supply of homes versus demand for homes in your area of choice make a significant impact on the price you can expect to pay, but did you know that each up and down is seasonal? It’s true!

Spring and Summer

Warmer weather and longer daylight lead to more people putting their homes up for sale in the spring and summer. The supply increases, but it does not cause the price to go down. This time of year is actually more competitive, and sellers will demand higher prices.

It makes sense, though, when you think about people and their personal situations. It’s easier to move during this time of the year when you do not have to deal with potential snowfall or cold weather. Moving during the summer is also easier for families with school-age children because it offers a time of year where a clean break can be made before starting over the following school year.

Fall and Winter

When you think about cooler days, moving doesn’t seem quite so appealing. Fewer homes are available, and buyers seem to fizzle out. That doesn’t mean the buyers aren’t out there, but it does mean that homes are more likely to sit longer. As a result, prices may be more negotiable with sellers.

In the fall, families are busier with school schedules, holiday planning, all combined with weather that can be a pain to deal with. No one wants to be planning a cross-country move when little Johnny still has his Christmas concert or when little Susie is working to perform in a dance recital.

Knowing When to Start Looking at Houses

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Each month brings different challenges, so you need to know what you’re willing to do and what you’re dead set against doing at all. You want to choose buying times that are off-season, so months like January or towards the end of August present excellent opportunities to purchase a home and save money doing it.

Backtrack from your targeted home purchase time to determine a timeline that is going to work for you. Remember, your home-buying experience is going to be different from others because there may be multiple factors that are important to you compared to anyone else.

What Kind of Buyer Are You?

If you are a first-time buyer or someone that is on a strict budget, then you want to aim for a January closing, or maybe even over the Christmas holidays. To meet your deadline, you want to look sometime in the fall and give yourself a good couple of months to explore without feeling pressured.

Experienced buyers or those with a budget range may have a better experience in the summertime because there are more homes to choose from. You may be the type that is looking to move to a different neighborhood or for an upgrade from your existing house.

Another common scenario is needing to sell a home before being able to purchase a different home. If that’s the case, you’ll want to list your house towards the end of April or beginning of May. The reason for doing so is the busy time that happens at the start of June, so chances are that your home will sell faster.

You’ll need to be ready to partake in the busy time, too, to buy your home, but it may be the perfect storm that you need. Not only will you get your house sold quickly, but you’ll also be in a better place to find the home you really want to call your own.

Taking the Plunge and Buying a Home

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There’s no way around it – buying a house is a massive decision to make. It will impact your family, your future, and your very existence as you know it. A purchase like this quite literally can change your life.

When you decide to take the plunge, you need to know that you can’t control every facet of the market around you. At the same time, that doesn’t mean you can’t find the best time to buy a house if you do some legwork along the way. You’ll be better equipped to make the right choice, and as a result, you’ll be less likely to experience buyer’s remorse or wonder if there was something better out there after the fact.

Do some research for the seasonal ups and downs for the area that you’re looking for. Consider contacting a real estate agent that is local to your final destination and asking questions. If you are willing to work the market and understand when the time is right for you, it becomes possible to save thousands of dollars on the home you want. Your bank account will thank you.

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What’s the Cost of Building A House vs Buying It?

Residential Property: Cost of Building A House vs Buying

Just about all home-buyers have this question when they start considering buying a home. It makes sense, too, because who wouldn’t want to know the difference between the cost of building a house vs buying an existing home?

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Is Building a House More Expensive Than Buying?

Other Expenses You Don’t Always Think About

Landscaping Costs Money, Too

How Much Can It Cost to Buy Land and Build a House?

What About Building a House or Buying a Manufactured Home?

Is Remodeling an Older Home a Cost-Effective Alternative?

Considering Your Budget

Creating a Checklist for the Cost of Building a House vs Buying One

Making Your Decision

There are a lot of factors that go into your decision and the more knowledge you have about your options, the better it will be for you.

Is Building a House More Expensive Than Buying?

This is an interesting question because the truth of the matter is that the answer varies widely depending on your area. What we can tell you is what the average person can expect coming from an average area of the country.

Buying an existing home is typically less than buying a new home on a per-home basis, but not necessarily per square foot. As an example, on Realtor.com, it appears that a 1,500 square foot is going to run somewhere around $148 per square foot. Alternatively, a new home of the same size is going to be around $103 per square foot.

With that said, most older homes are smaller than the newest, more spacious homes. When you take that under consideration, an older home will be priced at approximately $220k. A newer home that is typically over 2,200 square feet, you can expect to pay upwards of $250k or more depending on upgrades. That’s a considerable amount over the older home.

Other Expenses You Don’t Always Think About

Older homes also have more costs associated with them as time goes by compared to a newer home. That means that you’re going to have to pay more in maintenance costs for older homes, and that can include an HVAC system, water heater, furnace, or possibly a roof.

Each of these extra repairs that are part of owning an older home can result in costs of more than $5000 per replacement depending on unit, size, or brand. With a newer home, none of these are expenses that you’ll have to pay out of pocket as they are all covered under builder warranties.

Landscaping Costs Money, Too

Existing homes have mature landscaping. Trees and shrubbery have had time to establish themselves in older neighborhoods and therefore look far more attractive than new builder landscaping. That alone can add a significant amount to your property value.

New homes, however, do not have that kind of landscaping without some extra money and input from you. Quite literally, you have to pay for any improvements on your own if you want to add vegetation to your home and it isn’t cheap.

How Much Can It Cost to Buy Land and Build a House?

image showing price tags on different parts of the house

According to Home Advisor, the average cost to build a new 2,000 square foot home is approximately $290,110. There is a whole list of issues that can cost some serious cash in everything from land and excavation through stories, shape, roof, appliances, and more.

Home Advisor offers a fabulous breakdown of the average costs you can expect to include labor costs, too. If you’re interested in custom-building a home, you need to hire an architect, engineers, and land surveyors to the tune of a few thousand dollars just to get started.

Foundations cost several thousand all by themselves. Then you add framing, walls, roofing, windows, and major systems installation. The systems installations are going to be where you will spend the most money next to the interior finishing that includes insulation, lighting, appliances, and more.

What About Building a House or Buying a Manufactured Home?

Manufactured homes are not the mobile homes of decades past. There has been a huge improvement to the way manufactured homes have become an opportunity for homeownership since the 1970s. Before then, there were no real regulations to provide safety standards for people.

Over time, manufactured homes have evolved to look like site-built homes. They have garages, second stories, and energy-efficient appliances just like a standard home. Manufactured homes are also considerably less expensive as many are under $100,000 for homes of comparable size.

Unfortunately, the stereotype still exists when manufactured homes are discussed, and trailer parks still have a negative connotation. Research indicates that the perceived property value and actual property value are markedly different. Manufactured homes don’t actually impact property value the way older mobile homes did before.

Is Remodeling an Older Home a Cost-Effective Alternative?

picturing the future home improvement project

This is another common question as homeowners discuss the cost of building a house vs buying an existing house. The question revolves around whether or not they should renovate the home they are currently in, move to an older home and renovate, or build a new home and make it the way you want it.

Other circumstances can dictate what you decide, too. Do you want to stay in your current neighborhood? Do you want to move to a different neighborhood? Can you make the improvements that you’d like in your existing home?

Considering Your Budget

Once you answer those questions, the next thing you need to consider is your budget. Is it going to cost more or less for you to renovate your existing home? Is the work worth the cost to the home, or would it make more sense for you to purchase an existing home?

This is a significant concept to think about. Just because you want to pour $35,000 into a home renovation, that doesn’t mean that it will add value to your home. If your home is only capable of appraising for $250k at the most and you owe $230k, if you spend $35k in renovations, then you will probably never make all of that money back.

On the other hand, you could always sell your existing house without renovations and get several thousand back. Then you can add those thousands to the $35k you have set aside for renovations and instead add it to a down payment for a different house that has what you want.

Once you have that figured, you’ll be well on your way to deciding which route is more cost-effective for your particular situation.

Creating a Checklist for the Cost of Building a House vs Buying One

We’ve compiled and borrowed a checklist of questions you need to ask yourself to help you decide if you want to take on the cost of building a new house, buying one, or renovating the one you have. Read through them and answer them as truthfully as you can to help you go in the right direction.

Are the renovations legal? Different locations may determine whether or not you can renovate your home at all, so you’ll want to check on that.
Is renovation proportionate to your home value? It doesn’t make sense to do major renovations to a home that won’t appraise at a higher value.
What is the market value of your existing home? If your existing home has a higher market value, it may be worth selling to buy or build a new home depending on your return.
Can your home handle the renovations you want to make? Some homes can’t structurally handle the renovations you’d like to see, so you have to be realistic here.
Do you plan to stick around for a while? Major renovations indicate a time investment, too, so if you plan on moving in a couple of years, it may not be worth the headache and hassle.
Are you prepared for the unforeseen? That could mean other problems like plumbing could pop up, or it could mean an increase in your property taxes with the change.
Is an extensive renovation something you really want? If you’re sitting at the top of a hill in a location you can’t duplicate, then a renovation may be a better option. If you’re in a cookie-cut neighborhood, it may not be worth the noise and disruption for months on end.

These questions should at least get you started, but feel free to add extra questions as you go along because more are bound to pop up.

Making Your Decision

The decision to build or buy is not one that should be taken lightly. After some discussion, you may realize that you don’t want to do either, and instead, you’d prefer to renovate.

Each situation is as unique as the people that own the home, so you need to find the answers that work for you. Don’t let someone else tell you what to do because ultimately, you’re going to have to live with the choice you make, so better make sure you and your family are happy with your decision.

Dissecting What’s Included in the Reserve Price of a House

open house sign and understanding the reserve price

If you’ve ever searched for any kind of product online, you’ve probably seen online auction sites like eBay, but have you ever seen auctions for homes? They do exist, both online and in-person.

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What is a Real Estate Reserve Price?

Making an Offer on Home with a Real Estate Reserve

What Happens When the Reserve is Met?

What Happens When the Reserve is Not Met?

Buying Real Estate in an Auction

Establishing an Account or Presenting Cash

Understanding How Earnest Money Works

The Short Sale Auction

Making the Bid and Meeting the Reserve Price

Chances are that you’ve even seen the perfect house as you search listings with something in the description that says it’s available at auction with a reserve price. What exactly does that mean?

What is a Real Estate Reserve Price?

Over on Realtor.com, someone had the same question. The individual was interested in a foreclosed property that was owned by a bank. Originally, the asking price was $34,900, and later the price was dropped to $31,410.

The property reportedly had a lien and was up for auction. According to the individual, the reserve was met, but there was no indication of what the reserve price was. In the end, there were questions about how much to offer.

A real estate reserve price is a price that the lender, or bank, is willing to accept on a given property. It isn’t always public, and it can be difficult to guess what an appropriate amount would be when making an offer.

Making an Offer on Home with a Real Estate Reserve

If the reserve isn’t met, then the owner can refuse any and all offers that were made. When deciding what to request as a reserve price, that depends mainly on what the owner is willing to do. Banks that own foreclosures typically let homes go at values that are much lower than market price but are still fair to the property and the situation.

When the reserve is not public, then you need to be fair and put out the highest number you’d be willing to pay for that property. Consider what is fair given the condition of the home if you can see it, and compare market values in the area.

In making an offer, you do need to realize that if you offer a lower price than the asking price, you may or may not get the property. It’s all a risk and a chance that you’re participating in when you make an offer on a home that is up for auction. If you make a fair offer, then you’re likely to fair better, but it’s still no guarantee your offer will be the one that is accepted.

What Happens When the Reserve is Met?

As discussed, the reserve is the absolute lowest price that the seller, most often a bank, is willing to accept for a given property. Once that reserve has been met, the seller is legally obliged to sell that property at the highest bid that exceeds the reserve price.

If the offer only just makes the reserve price, the seller is still legally bound to sell the auctioned property. With that, it’s in the best interest of the seller to set the reserve price for an amount that they will be satisfied with receiving.

Generally speaking, reserve prices remain hidden, and the only person that actually knows the reserve is the seller. In setting the reserve price, it has to be equal to or greater than the starting price. In the scenario mentioned above, it is entirely possible that the reserve price was $34,110, and hence the reserve was met. More often, the starting price is lower than the reserve to encourage higher bids.

At the same time, the reserve could have been $60,000 if that would have been fair for the condition of the house. Fairness includes taking into account the lien that would have had to be paid and the surrounding market value of the property. The bottom line is it’s a risk you have to be willing to take.

What Happens When the Reserve is Not Met?

The simple side of things is that if the reserve is not met, then the seller is not obligated to accept any offers. The seller has the opportunity to accept the highest offer, but they are not legally forced to do so.

Instead, the seller is more likely to offer the house in a subsequent auction in hopes of receiving better offers. If this happens again and the reserve is not met, it is possible to continue the cycle for as long as the seller chooses. The alternative is to have the house listed with an agent.

At the same time, if there is a house that has been on the market before in the same situation, the seller may be more willing to accept a lower offer just to be rid of the property. If you come across a house for auction, check the history to see if it has been foreclosed on and how long ago that happened.

If a house was foreclosed on a while back, then there is a good chance that this house has been up for auction before. Like any seller, the longer a house or other property stays on the market, the more likely is that the seller will be willing to accept a lower offer.

Buying Real Estate in an Auction

The process is reasonably straightforward, even if it seems complicated at first. Most sites and auction houses list properties as “as-is” which means that if you bid on one, you’re going to receive the property exactly as it stands. You may not get to see it, so you’re putting your faith in something you’ve never laid eyes on.

That also means you can’t renegotiate on price if you find something afterward like something significantly wrong with the property. It doesn’t matter if you find black mold in the walls because you agreed to buy the house as it stood. That’s what makes it scary and uncertain.

Once you’ve come to terms knowing that you have no control over the final condition of the property, you can start by getting to know the auction process.

Establishing an Account or Presenting Cash

If you’re bidding on a property online, then you’ll need to open an account and have some way to prove that you have your earnest money ready if your offer is accepted. You may require financing before getting to this point, so check with your auction site to see what their policies are regarding financial requirements.

If you’re bidding in an auction at a brick-and-mortar auction house, you’ll need to have your earnest money available right then and there along with the remainder in full. Typically, you’ll go up to a counter and present your funds as proof that you have the finances available should you win the auction.

Understanding How Earnest Money Works

In some cases, they will hold your funds for you as their guarantee that you will not back out of your bid if you were to win. Many auction sites and houses will require you to present your earnest money before being allowed to bid to protect themselves, too.

You may have even read situations where people lose their earnest money at auction sites or auction houses, but that’s generally not entirely true. Earnest money is only lost if someone makes a bid, wins the auction, and then chooses to cancel the offer.

The Short Sale Auction

Short sale auctions are auctions where the bank may not necessarily own the property, but the property might be in foreclosure proceedings. The seller, which is not the bank in this instance, could have already accepted an offer pending the bank’s final approval.

This is where it feels like things get shady. The bank can actually place the home in an auction with the purpose of getting a higher offer. It is entirely legal and allowed as the bank is legally entitled to the highest offer it can get. In short sale auctions, the bank makes the decisions even though it does not yet own the property.

If the bank puts down a reserve price on the auction, but the price is not met, then the previous offer accepted by the seller becomes the selling price. This is markedly different from a normal auction that can be placed on the market repeatedly if the reserve price isn’t met.

Making the Bid and Meeting the Reserve Price

Understanding the difference between bidding on a bank-owned, foreclosed property and a privately-owned property in foreclosure has an impact in how auctions take place, especially where reserves are concerned. It can be the difference in keeping or losing your earnest money if you don’t understand what type of auction you’re participating in and the rules that govern.

Even though sometimes these types of sales seem complicated, it’s an excellent opportunity to purchase homes well below market value, therefore, saving you thousands of dollars. It might take a little more work on your behalf, but if you’re prepared, you could walk away the proud owner of a steal of a home.