Owning a Home - Cheaper Than Renting?

Across the country, at today's sales and rent prices, buying is cheaper than renting until the 30 year fixed rate reaches 10.5%. The recent rise in interest rates has made buying a home a little more expensive. The recent increase in the 30 year fixed rate raised the monthly payment on a $200k mortgage by $56, or 6%. However, because mortgage rates are still near historic lows, and because values fell so much after the housing bubble burst and remain low relative to rents, owning a home is still much cheaper than renting one. What this means that the recent jump in interest rates doesn't change the rent versus buy calculations very much.

Mortgage rates may keep rising, but how far must rates rise before buying DFW homes start to get expensive relative to renting? Answer; take the latest asking prices and rents from April, May, and June 2013. Following the standard approach calculating the cost of buying and renting for similar sets of homes, including insurance, insurance, taxes, closing costs, down payment, sales proceeds, and, the monthly mortgage payment on a 30 year fixed rate mortgage with 20% down and monthly rent. Most folks will stay in their Plano homes for 7 years, deduct their mortgage interest and property taxes at the 30% tax bracket, and get modest appreciation.

 

 

Buying Dallas real estate remains cheaper than renting as long as interest rates stay below 10.5%. At 3.9%, the current 30 year fixed rate according to Freddie Mac, buying is 41% cheaper than renting across the U.S. at a 5% interest rate, buying is still 34% cheaper than renting. Mortgage rates would have to rise a great amount, all the way to 10.5% to change this to make renting more favorable than owning. Rates were about that high through most of the 1980s, but have been consistently below 10.5% since May 1990. Each market area has its own mortgage rate tipping point where renting becomes cheaper than owning a home. At 3.9%, buying is cheaper than renting in all of the 100 largest metros areas, which means the tipping point is above 3.9% everywhere.

The tipping point also depends on how long you plan to stay in your next home and whether you itemize your tax deductions or not. If you don't itemize, or if the mortgage interest and property tax deductions were eliminated entirely, buying would still be 29% cheaper than renting at an interest rate of 3.9%, and the tipping point when renting becomes cheaper than buying would be at a 7.5% rate. Just because buying is cheaper than renting, it doesn't mean you can buy. Many folks who want to buy don't have enough down payment or have poor credit.

 

 

If the recent increase in interest rates doesn't change the rent versus buy equation substantially, why does it matter? The main effect is reducing refinancing demand. Unlike home buying, refinancing is a relatively straightforward financial decision: although refinancing has costs associated with it, refinancing doesn't require someone to find a home or move. Since rates have been low for so long, many people who were able to refinance, already have done so. For folks who haven't refinanced yet and for people looking to buy a home, rising rates do make housing more expensive. Rates are on the rise and are may keep rising, thanks to the strengthening economy. But it will take big rate increases to turn off prospective home buyers. At today's prices and rents, rates would have to rise to levels we haven't seen in 20 years before renting is cheaper than owning a home on average across the country.

4 Ridiculous Real Estate Seller Sayings

Volatile emotions give rise to a few seller sayings that seem simply silly when seen in the right light. Here are some examples, along with insights to help you ensure you don't let them confuse your home selling decisions.

1. We need to find buyers who understand our tastes. There are certainly occasions where there is truly a narrow niche of buyers that will have to find, understand and appreciate a particular house. In cases like this, with acreage, converted garages, horse properties, etc, this saying is not ridiculous at all. But this saying is absolutely ridiculous when it is said by the homeowner with potentially wide appeal as a reason for not staging or preparing their home for sale, or in the effort to avoid neutralizing highly and de-personalizing their design and decor choices. When it comes to buying Dallas foreclosure property, however, these things are not an issue because you get what you get when looking for a great value in a home.

If your home has been sitting on the market while the others are selling and your agent has suggested that you tone down the bright orange paint job or delete the forest mural on your dining room wall, think about how much time and money your decision to wait for the buyer who understands these design choices is really costing you.

2. But I spent a lot or years or a lot of money on that. The ability to customize your home to your personal tastes and your family's wants and needs is one of the biggest benefits of home ownership. Owners are encouraged to make changes to their homes that will improve their quality of life while they live there, rather than focusing on whether they will be able to recoup their investment when they sell it 15 years down the road. Not only were they not willing to pay a premium for it, they planned to rip it out and replace it with low-maintenance, low maintenance landscaping.

Give it up. When it comes to selling DFW real estate understand that other than the kitchen, bathroom, amenity and decor upgrades that appeal to many home buyers, if you have invested your time and money in customizations and upgrades for your personal enjoyment, then your enjoyment is the return on your investment. If your home's eventual buyer also happens to love them, fantastic! But don't approach the home selling process expecting every buyer to share your value system and pay through the nose for them. If you do, in just a few month you may find yourself selling your house to one of those I buy houses companies and selling at a discount.

3. I want to price it high, so I have room to negotiates and come down. When the market is slow enough that buyers are routinely paying below asking for homes, pricing your home above market value is actually dangerous. You run the risk of causing no one to even come look at your home as a good enough value to see it in the first place.

If other home sellers are pricing appropriately and yours is priced too high over many buyers won't even bother trying to negotiate you down. They will simply go find one of the homes on the market with a more realistic price, they'll wait until you lower the price or they'll wait until your home has been lagging so long they sense you might be a motivated seller. Even in a strong market like we are in today the aggressively priced homes get the most buyer traffic and get the most offers. This causes bidding wars and drives the sales price higher. Overpricing it might actually sabotage your success.

4. That offer is an insult - I will just reject it. Your home is very personal to you. It represents a large investment of your money, time, memories and dreams. But once it's on the market, grow some thick skin and decide not to take anything personally, it's just business at this point. If a buyer offers to pay so many thousands of dollars for your home, it's not an insult, even if the offer is far lower from what you are willing to sell the house for. They might be uneducated or misguided and not yet experienced enough in the market to know that their offer was unreasonable. Or they might just love your home and be going all out to get it, even though it's really outside of their scope of affordability. Also, they may be just trying to get you to come down some on the price.

You should always respond to any offer made by a qualified buyer. If you have another offer or offers that are more realistic, just respond with a nice decline to accept. If you have no other offers, respond with what you and your agent agree is an appropriate counter. You might be surprised at how even a very low offer can come together with a respectful, reality based counteroffer and a little negotiating.

How Much Money Should You Budget To Buy a Home?

You have made the decision to buy a home. Have you truly budgeted to actually afford a new home and have the money to move? When you meet with a loan officer, they will determine how much you can afford based on your credit worthiness. Just because you are approved for a certain dollar amount, does not mean you should buy at the top of your price range. The strategy to determine how much you can afford is to work backwards. Start with things you like to do and start tallying up daily expenses you occur and figure out what you can live without. Then work the other direction from your income and determine what you would be comfortable spending on housing. If you rent now, you are probably comfortable with that monthly expense. Usually home ownership will cost $500 more per month because you will have new expenses that you probably don't have now like taxes and additional insurance. Also factor in new purchases like a refrigerator, washer, dryer, and lawn mower.

 

When you think about purchasing a new home, we often forget about expenses it takes to actually purchase the home. Be prepared to get out your checkbook and write out 5 checks once you have an executed contract.

1. The title/escrow company for the earnest deposit

2. The seller for the option money

3. The inspector

4. The appraiser

5. Cashier's check for the remaining balance of down-payment prior to closing

 

When it comes to buying either Denton County real estate or the much sought after Collin County real estate the first 2 checks you will write will be for the earnest money and the option money. The earnest money is the money you deposit into an escrow account with the title company when you have found the home you want to purchase. The amount of the earnest money is usually around 1% of the purchase price. Treat earnest money as showing good faith to the seller that you have the money to purchase their house. The next check you will have to write is to the seller for an option period. It's usually anywhere from $100-$250 depending on the price of the home. That is the money given to the seller for them to take the house off the market while you get the home inspected. During the option period you decide if you want the home based on the inspections and remember, you can walk away if you don't like the house any reason; the seller keeps the option money.

 

As a buyer of Tarrant County Real Estate treat that money like your down-payment. Your loan officer will tell you how much money to bring to closing. The next check will be for the inspector. The inspector will inspect the house inside and out telling you if there are any major defects with the house. The cost of the inspection can vary based on the size of the house and costs around $400. The next check is for the appraiser. The appraiser works for the bank and will determine if the house is worth what you are purchasing the house for and costs about $400. Lastly, once you have determined you are moving forward with the purchase, you loan officer will tell you the amount of money you will need to bring to closing to make the actual purchase of your home.

Buying a house is exciting, but also scary when it's something new. Your real estate agent will guide you through the process, but it's nice to know ahead of time what to expect and how much you will have to pay during the process, so you can budget and be less stressed during the home buying experience.

~ Jennifer Clark VIP Realty Platinum

Ways to Get Found by Home Sellers

The year is more than halfway over, but there’s enough heat left in the market to make this the year that you take your real estate business to the next level. To do so, you will need to provide great client service and a great lead plan. Before you can put either of those into action, you need to make sure you are getting found by the seller clients that mean the most. A serious seller prospect is one of the most sought after commodities there is. Here are some strategies that can help land you your next listing. Even if you are just looking at DFW real estate careers you will find these ideas helpful in any business.

1. Get Vocal:

Potential home sellers aren’t just looking for signs that you are in the business. They want to know you are an expert in the business. Only having a profile, license, or website is not enough. Sellers want to see your expertise in action. Every day prospects are posing real estate questions that signal they’re serious sellers asking real questions like “Who is a Good Realtor?“.” and “How much should we spend renovating?“ That’s why you should study the neighborhoods you want to grow your business in.

2. Get Focused:

Sellers want to work with the agent they know who knows their market and the places where consumers realize they need an agent are many. Many times it’s an offline experience that makes them go online to find an agent. The reality for agents is that you have to live on multiple platforms. But, multiple platforms certainly doesn’t mean you should have multiple personalities. Having a focused presence online can give the same effect as the 25 yard signs and a billboard offline. I am talking about multiple placements, but only one personality. A good would be those We Buy Houses companies. Here are some target areas to make sure stay consistent everywhere you market:

Specialties – We know you can do it all, but show prospects the ones that reflect the business you’re after.

•             Service Areas – Make sure these are where you actually want to work. Whether it is selling Tarrant County homes or otherwise, you will end up with leads and prospects that ultimately need another agent, one that has expertise in their area.

•             Your Message – If you truly want to take over a neighborhood or niche, being repetitive is the best way to go about it. Research shows that people only retain about 10 percent of what they read and about 30 percent of what they hear. Say it, say it again, and then say it to the same audience some other way.

3. Real Information:

You should never just send a bunch of numbers out and assume your perspective clients will know how to interpret them. The right formula is to offer important data points and helpful analysis. While sharing, marketing, and creating information to generate new business, remember to add some color for your sellers. Don’t just add market data. Think about the key data points that provide key insights that are really going to motivate your sellers to list with you, like

·         Do your listings sell for more than other listings?

•             Do you sell homes faster than other agents?

•             How many transactions have you closed with similar homes?

4. Provide Proof:

Sellers are searchers of information and what they find will make or break your opportunity to list their house. Dollar figures, awards, and client accolades are great resume builders, but the key indicator that matters most to the one client looking for help with that one transaction is: “Can you close my transaction?” You can answer the question before you have your first client meeting.