My lender says I can get a better rate if I pay some points.

With interest rates rising, buyers are looking for ways to ways to lower the interest rate and thereby lowering their monthly payment. When a loan officer is offering you a lower rate, you need to ask what is that rate going to cost you. This cost is often referred to as a discount point. However, I think you should think of it as prepaid interest. You will pay a certain percentage of the loan amount (points) in order to obtain the lower interest rate.

Let’s use this fictional example of how this works on a $200,000 loan. You the buyer agree to pay 2 points to obtain a savings of 1/2% which lowers the principle and interest on the loan by $59.94 a month. This means that at the time of closing you will pay a $4000 to the lender for reducing the interest rate. Let’s call this what it is prepaid interest.

It is important to then divide the amount of monthly savings ($59.94) into the cost of the discount points ($4000) to determine the number of months that you would need to make payments on the home without refinancing the loan before you would actually see any savings. In this case 66.73 months. So on your 67th payment is when you would actually see some savings.

If you know up front that you only plan on living in this house for 3 years and then you are going to move or you are betting the interest rates will drop enough that it makes since to refinance 2-3 years from now, you could end up paying more money up front that what you will save each month on the loan. This is why it is important to always do the math before buying the rate down.

So when the rate your lender is offering you is less than another lender is offering, or your lender is showing you various rate scenarios, ask the loan officer what the cost of that rate is and then determine if it is a good idea to buy the rate down or just pay a little more each month and keep the additional money in your pocket.

If you have questions regarding real estate, please feel free to reach out to me at 405-213-2992.

County Taxes are on the rise.

Taxable valuation X Millage rate= Yearly Property Tax amount

(A simplified mathematical formula)

Property is evaluated each year by the county to determine the taxable valuation. The taxable value is not the market value.  If either the valuation amount goes up or the millage rate (tax rate), we see an increase in the property tax amount. The legislature has capped valuations at 3% per year if homesteaded or 5% per year if not homesteaded.  However, when homes are sold the cap is removed and the taxable valuation increases to market value.

Why is this important for you the buyer to know?

Most buyers have an escrow account with their lender, as part of their loan. An escrow account collects money and disperses it for taxes, insurance, and any mortgage insurance when the payments are due. Once a year, every year, the mortgage company does an audit on your escrow account called an escrow analysis.  If there is not enough money in the escrow account to cover the taxes and insurance (these bills have gone up) it is called a shortage and the mortgage company will adjust your payment to recoup the increase as well as the money needed to correctly pay the amount next year.

After you purchase the home, the county will reassess your property.  If the seller has owned the property for a long time, or has a senior freeze, or property values have increased exponentially like we are currently seeing– the taxable valuation will go up.

 If your property taxes go up, your mortgage payment will increase when they do your first escrow analysis—a year after you purchase your home.  

The lender uses the property tax rate at time of sale to set up your escrow account, not the amount of property taxes after the current cap is removed. 

What does this look like?

Example only:  Owner is paying $2600 a year.  You purchase the property for $250,000 depending on the millage rate, your taxes increase to $3100 a year.  This is a difference of $500 a year.

The bank will spread the shortage of $500 over the next year by dividing the amount by 12 and adding it to your monthly payment.  In addition, they will need to collect an additional $500 divided by 12 in preparation for the following years taxes.  Therefore, your house payment is going to increase $84 a month if you don’t pay the shortage or $42 a month if you choose to pay the shortage.

The second year, your taxes and house payment should level out. Although, your house payment will continue to adjust yearly based upon increases for taxes and insurance.

Please note, this is a very simple way of explaining what could cause your house payment to rise after you have owned the house.  It is not meant to scare you. You might want to estimate what your property taxes should be and then start escrowing or saving that amount from the beginning on your own.  Thereby eliminating the possibility of getting a huge increase in your home mortgage and not being prepared.

Refinancing your FHA loan may save lots of money.

I am a licensed realtor and not a lender so I am writing this to inform my clients and others that they may want to sit down with a trusted lender and discuss whether it makes sense to refinance or not. With that being said, I want people to know and understand that if you financed your house with a FHA loan, you are currently paying mortgage insurance which you may now be able to avoid. Mortgage insurance also known as PMI protects the bank in case you default on the loan. It does nothing to protect you.

As of June 3, 2013, FHA changed their policies on mortgage insurance which required the borrower to pay the mortgage insurance  for the life of the loan unless you put 10% or more down  on a 30 year mortgage,  then it fall off after 11 years. On Conventional loans,  mortgage insurance automatically falls off after you have  achieved 78% loan to value based on the original  sales price.  It can be requested to be removed at 80% loan to value  if you call the lender and request it.

In recent years our market has seen great appreciation, especially in the first- time home buyer  market. First time buyers often use FHA loans, since they offer easier credit guidelines. For many borrowers, they invest the minimum 3-1/2% required down payment down, or they may even have obtained down payment assistance.

So, what do you need to do to stop paying the mortgage insurance?

1. Decide if you plan on stay in the home for at least a few more years or if  you will hire me to sell it.
2. You will need to know if you have enough equity in the property—at least 22% on a refinance. Call me I can help you with this.
3. You will need to look at your statement and see how much  monthly mortgage insurance you are paying. This amount could easily be $100-$200 a month maybe more depending on your loan amount.
4. Verify if there is a repayment or tax consequence for refinancing if you received down payment assistance. Sometimes down payment assistance requires you have the loan for a certain period of time to avoid a partial repayment.
5. Look at the interest rate you are paying now and have a lender decipher the difference in interest rate. Remember even if you are currently paying a slightly lower rate now, it still may be worth refinancing to avoid the PMI.   This is where you need good counsel , not just someone trying to sell you a refinance that you do NOT need.
6. Visit with a reputable lender who can give you good advice. You may be able to lower number of years from 30 to 20 or even 15 with your PMI savings.  So, don’t just think, I don’t want to start over on the 30-year note.

Refinancing your home mortgage costs money and with historic low interest rates over the past decade, I have been cautious about the thoughts of my buyers refinancing their home loans. However, it may be time to have a conversation with a reputable lender to see if it makes sense. Even if you don’t have the 22% equity, It may be that you can refinance with a conventional loan with only 10 or 15% equity knowing that in another year or so the PMI may drop off.

If I can be of assistance with your real estate needs or you know someone who is looking to buy, sell or invest in real estate, I would be happy to help them.

Maybe I should rent my house if it doesn’t Sell.

Continuation from my last blog….My House isn’t Selling in a Seller’s Market.

So what happens if you are one of the 439 homes that were removed from the market in the under $200,000 price range in the last 30 days. Perhaps you have decided to wait until the market improves (inflation catches up with your desired price) or you have decided to wait until you have paid more down on the house so you have more equity. 

But what if you really need to move and so you decide that it might be better to rent the house than sell at the current market value. I understand. I did that one time when we were young.  We bought a house in April of 1992 and got orders to move to Oklahoma in December of the same year.  We had no equity and no money to bring to closing, so we chose to rent the house for about 4 years.  At that time we were able to sell the property and walk away without bringing money to the table.  And while I currently own rental property, I never want to be a long distance landlord again.  Just too much stress.

First, you need to understand tax law.  If you own a house that you have lived in 2 out of the last 5 years and sell for less than $250,000 as a single person or $500,000 if you are filing married, you do not pay taxes on the money from the sale of your primary property. You do not have to reinvest this money. It is yours to keep.  If you turn this house into a rental, you will want to discuss the capital gains tax and the recapture tax of any depreciation you take from the house with you CPA. You could incur more in taxes than you pay to walk away, so please discuss this matter with a professional accountant.

Second, there will be maintenance. Things break in houses and tenants want those things repaired in a reasonable time frame. And some repairs like heating are mandated by law that you repair in a certain time frame. The tenant is not going to want to wait until you can save up for the new roof, air conditioner, plumbing repair. So make sure you have some savings to make those repairs.

Third, tenants don’t always take care of other’s people’s property the way you would. Not all of them are going to change the air filters regularly, clean up after themselves or take care of the yard the way you would.  When they move out of the house, you will most likely need to paint, clean or replace flooring, trim bushes, and other minor maintenance items.

Forth, it may take you some time to find a good tenant. I would advise you that it is better to wait to get a good tenant than to just take the first one with cash in their pocket who you may need to evict. So you will want to have some money saved to pay the mortgage while you wait to get that tenant. And hopefully they pay every month and on time.

Finally, If you are out of state you might consider hiring a property manager to look after your property.  Make sure the rent is sufficient to pay the management fees, mortgage and any repairs. Also make sure you get a good recommendation for the property manager, since some of them are better than others. Ask questions as to whether they have an in house maintenance person or other contractors.

After reviewing all the costs decide if you really want to become a landlord. I do believe there is money to be made in rental property if you that is what you want to do. It is a job. If that is not what you want to do as a job, I would suggest you cut your losses and sell the property at fair market value in this great market.

If you are looking for a great realtor with experience who can get your house sold, call me today. 405-213-2992 or visit my website at equityhomesteam.com.

My House isn’t Selling in a Seller’s Market

 

Our market is currently moving at a fast pace, especially for homes less than $200,000. Currently, as of this writing, there are 3292 active single family listings in the Multi-Listing Service (MLS) and 1512 listings sold in the last 30 days.  Meaning that we currently have 2.18 months worth of inventory. Since a balanced market is six month’s worth of inventory, you can clearly see that we have a strong seller’s market.  However during that same time frame we also had 439 homes which were removed from the MLS by expiring or being released or withdrawn. So if the market is so strong why are so many homes not selling.

I believe the expectations of sellers is that since there is so little to buy on the market and homes are going so fast that you can throw anything out there and it will sell.  The homes that are not selling are not priced right or correctly marketed in my professional opinion.  Several of these homes need repairs or a good cleaning. Most buyer’s want something that is move in ready.

Buyer’s are shopping on the internet and want to see a home virtually prior to taking their time to visit the house in person. They are drawn to properties with good pictures and aerial shots if the property warrants it. Although you need to know when to use aerials and when not to.  They want good floor plans, and updated features. And of course they are looking for a great price or at least a fair one.  If the price is out of whack they won’t make an offer.  If the home has outdated features like wall paper and a lot of gold fixtures then the buyer’s are wanting to reduce the price to compensate for the work.  And for the most part these buyer’s are over estimating the cost of these updates.  Too much HGTV in my opinion, or they just don’t know who to call to get a good price on making updates.

Sometimes Sellers seeing other homes in their subdivision selling quicker than their home start to question what their realtor is doing or not doing to get their house to sell.  They demand more open houses, another broker’s open, more fliers.  Surely more marketing will do the trick. Let me assure you that when a realtor, any realtor, enters the listing into the MLS it goes to all the different websites.  There are hundred’s of them that pick up the listing and help to market it. So if your realtor has inputted everything correctly and uploaded great pictures (I use professional ones) people are going to see it. The true issue is most likely price or condition.  And any condition can be fixed by price. Because if it is cheap enough someone will see value in it and buy it.

So if your house hasn’t sold and it is currently off the market and you would like some advise, please feel free to reach out to me. Sandi Walker 405-213-2992 or visit my website http://www.equityhomesteam.com.   This is not intended as an advertisement to list a property currently on the market with another realtor.

 

What causes a house to sell?

Houses sell because they meet the needs of buyers based on function and appearance and price. Most buyers want a home that has a logical floorplan and works for their family. Consequently, homes that have a more unique floorplan may be a little harder to sell. 

The other day I was out showing homes. This one house had you enter the large living area and then follow a long L shaped hall to the kitchen and dining area. I believe the house originally use to open at the back door into what is now the dining room. A little staging and having buyers come in the other door would change the entire presentation of this house.

Painting and cleaning can make a large difference on how people feel about the home they are touring.  Homes that are painted with wild paint or have odors are perceived differently than clean homes with natural paint. Prepacking your personal items and making the home ready for the buyer to envision living there will help the home sell quicker. A stager can often help make the home more appealing. Sometimes paying a professional cleaning person a few hundred dollars to deep clean will pay several times over.  

Pricing a home correctly to bring buyers into the home to see its charm is the most important job of the professional realtor. We want to price it so that buyers want to see the property.  If it is not getting shown, it is not going to sell. If a house has an odd floor plan or needs repairs, all of that can be overcome with price.  I have even sold homes that had had fires and flooding issues, I just had to get the pricing correct. As a professional realtor, I look at comparable homes in the area to price the home. And yet the market will always dictate if the house is priced correctly or not.  If it isn’t priced correctly, the house will not get showings. If you are getting showings and no offers, we need to listen to the feedback and change whatever is prohibiting a buyer from buying it. 

Photo by Pixabay on Pexels.com

 

When hiring a realtor look for someone who is going to help you know what to do to get the home ready for sale and where to price the home to cause it to sell. I would love to be of assistance when you are ready to sell. So please feel free to contact me at 405-213-2992

Estate Planning

Recently, I have been visiting with several people who are dealing with parents who are transitioning to senior living or who have recently passed, most of whom have not planned for this phase of their lives. That made me think that I should discuss this matter with my clients. It seems that it is easy to put off estate planning thinking we will always have time, or that we are too young to think about it, or it may be a matter of expense.
If someone passes and owns assets the heirs will normally need to probate the estate. Probate protects creditors and allows them to get paid and the taxes on the estate to be paid. It also identifies the beneficiaries of the estate and allows for the passing of wealth to whomever the deceased wanted it conveyed. You cannot sell real estate until it has been probated with the a few exceptions.
1. Property is held in joint tenancy
a. If you are married and both spouses are on deed, this is most likely
b. If you are siblings or friends, you are most likely tenants in common and not joint tenants
2. A Transfer of Death Deed has been filed
3. Trust exists and the property is in the Trust.
Simply putting your property in joint tenancy may open you up to tax implications or credit liabilities you could avoid. Estate planning can save your heirs thousands of dollars after you are gone.
It is important that you have a Will and/or Trust, especially if you have children or own property. Without a Will, the court is bound by state statue to disperse your assets according to the scheme the legislature has decided on.
In some cases, all you may need is a transfer on death deed (“TOD”). A TOD deed allows your property to transfer to a beneficiary of your choice at the time of your death without going through probate. The deed must be recorded prior to your death and can be rescinded at any time. An attorney can draw up the necessary paperwork for a nominal fee.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary. Additionally, if it is an irrevocable trust it may not be considered part of the taxable estate, so fewer taxes may be due upon your death. Assets in a trust may also be able to pass outside of probate.
Regardless of how you decide to handle your estate, I suggest you take the opportunity to meet with an attorney who specializes in estate planning. Estate planning makes it possible for your wishes to be carried out. It allows you to provide for your family and/or charity of your choice. You can also give instructions regarding your burial desires and any legal conditions for inheritance.
As a professional realtor, I have had the opportunity to visit and work with several attorneys. I’m always happy to recommend someone who I feel confident will provide you good service and expert knowledge.
Sincerely,
Sandi Walker
Walker1532@sbcglobal.net
405-213-2992

Why has this house been on the market so long?

A buyer said to me the other day they liked this one house.  I looked it up.  They then asked how long it had been on the market. As a realtor I can see this on the MLS (Multi-listing Service). I said, 4 days, which is what it said.  My buyer said, “oh no I have seen this house before. I am sure it has been on the market before.”  So, I checked the history and sure enough this particular house had been on and off the market 3 other times over the course of the last year.  My client then wanted to know what was wrong with the house.  She wasn’t sure she wanted to waste her time actually going to look at the property.  She just wanted to know what was wrong with the property because someone would have, should have bought it if it was a good house. 

In the course of my career I have heard this same scenario play out several times.  If other homes are selling in 45 to 60 days or less and the very best homes are sold in less than 30 days, why has this house been on the market for a year with three different realtors attempting to sell it. Or the other question I get is, it’s been on the market for awhile, do you think the owner will take a low offer?

As a seller you want it to sell quickly and for the most money.  The very best offers are those that come quickly.  If the house is just sitting there and not selling, buyers are going to be asking questions just like my client.  

So what is a seller to do?

Your house should look like it is the best house on the market.  You can do that by making sure it is clean and move in ready and priced correctly.  If you don’t want to make repairs and want to sell it as is, then price it accordingly.  Everything sells for a price.  If the house is priced correctly and marketed effectively, it will sell.  Overpricing the house will always cause it to sit and become stale.  Homes priced at market value or slightly under will cause buyers to make offers.  An underpriced home will cause people to see the value and create a bidding war to bring the price back up.  You cannot underprice the house provided it is listed for the market to see in the MLS and is marketed effectively.

If the house isn’t selling, it is for one of two reasons—price or condition. Feedback is a good tool to know if there are items you need to fix. And remember, price fixes everything.  Although, I still contend it is sometimes less expensive to make repairs than to drop the price so that someone else is willing to do the repairs.

If you are interested in getting your house sold, please contact me to find out how I get homes sold for the most money in the least amount of time.  Sandi Walker  405-213-2992  or www.equityhomesteam.com

I don’t want to give my house away.

Sellers seem to always want to list their homes for the most money possible.  They tell me, we can always come down, but you can’t go up.  Let’s start several thousand dollars higher than what the comparable homes are priced at and if we don’t sell it in a few weeks we can come down. Unfortunately, the sellers often don’t want to come down because at that point they have associated this inflated price as the value for their home.  The seller may decide to remain at that higher price for much longer than the realtor would suggest—holding out for the price they want.  Eventually the listing contract may expire and the seller feeling defeated and irritated with their current realtor who couldn’t get them the inflated price may employ another realtor.  Surely the second or third realtor will be able to get more money for them.

I tell sellers two things are true. First, something is only worth what someone else is willing to pay for it. Regardless of what you believe it is worth or what I believe it is worth or what the comparable say, the consumer will eventually decide what the value of a home is worth.  An experienced and educated realtor will be able to advise the seller where to price the home to sell in a reasonable amount of time.  Second, you cannot underprice a property.  If you list a property slightly below market value (I am not talking about listing it at 50 cents on the dollar) and market the home effectively you will have multiple offers on the house.  The consensus will be market value.  There have been times when I have listed a home slightly under list price and then marketed it to the public in a way that causes multiple offers and a majority of the offers are for the exact same price. 

Recently, I had a home that was listed at $130,000. It needed some cosmetic work however the bones of the house were good.  The house would have been worth more money if it was updated.  The seller did not have the money to do the repairs.  I listed the house and held it open that first weekend. The seller instructed me they would look at offers after the open house.  We had 4 offers.  One was a low offer, two were identical and the one we took was slightly higher than the two that were identical.  The seller closed the house at $123,000 with no closing costs or repairs.

Another time, I had a house which we listed for $ 50,000. It also needed work.  We received 17 offers on the house and sold it for $60,000.  We had several offers at or around $60,000. We accepted the one that was willing to take the house without any contingencies.   

The point is you cannot under price a house.  The market will correct for that.  You can overprice a house and the market will respond with it sitting there unsold. Regardless of condition or location, there is a market value for all homes. My job as a licensed realtor is to help you determine accurate value so you can get the house sold for the most money in the quickest amount of time. 

If you are looking for an experienced realtor to guide you through the buying or selling process please contact me at 405-213-2992  or visit my website:  www.equityhomesteam.com

Stability in Homeownership

Recently I have had the opportunity to be involved in a transaction where a tenant had been living in a home for 16 plus years.  That person felt like the home was their own. They raised kids there, entertained there, and lived a good portion of their lives in that house.  They did not however own the property. The owner had been renting this property to them at a rate which was far below the market value and they had become accustom to this rent rate. Unfortunately, for this tenant life came to a huge reality check one day.  The owner was getting up in years and decided it was in his best interest to sell.  He gave them more than the required time to move by law to help them locate a new home and yet when the tenant started looking for a new rental they quickly became aware that the rent they had been paying was half or less of what something else would cost them to rent.

The market value of the house these tenants were living in had appreciated out of their price range and the tenant who had not been saving or preparing for the day they may have to move did not have the means to purchase the house.

We look at home ownership as a way to build wealth.  People always assume property will appreciate and for the most part it does.  They want something  to leave to the kids, a legacy—the family home. Perhaps they are looking for a way to shelter income and save money on their taxes.  The new tax law may make it so fewer people can deduct the mortgage interest from their taxes. The freedom of renting does allow you the opportunity to move if you don’t like the area or the neighbor.  

I think people think less about stability.  The fact is that if this tenant had purchased the home on a fix rate mortgage 16 plus years ago, the house payment today may not have been much more than what they are currently paying and they would not have to move because someone else was making the decision to sell and now the current value of the home precludes them from buying it. They would be in control of this decision. I personally think the power to choose whether I sell and move or not, is priceless.

The value of being a homeowner is sometimes measured in things far beyond what is first presented.

If you are thinking about buying or selling, please feel free to contact me at 405-213-2992 or visit my website:  www.equityhomesteam.com.