How to Buy a Home Without Going Broke

	By: Dave Ramsey - published in Dave Ramsey's Real Estate Minute Newsletter
	Don't forget to build long-term costs like repair and maintenance into your budget when buying a home.

 

Buying a home is one of life's most exciting milestones, and it's a major cornerstone of the American dream. But according to the National Association of Realtors, even though most people consider home ownership a good financial decision, 43% feel strained by their monthly payment. Nothing kills the dream quicker than feeling like your home owns you! Fortunately, with a little foresight and budgeting, you can turn your home ownership dreams into an affordable reality. The Good Faith Estimate You Won't Get Once you apply for a loan, you'll receive estimates for things like closing costs, homeowner's insurance and property taxes. While these costs certainly add up, they're usually easy to work into your budget with a little planning. And as long as you can make that monthly payment, you're good, right? Wrong. Actually, closing costs and the monthly mortgage payment are just the tip of the iceberg. Homebuyers often overlook the long-term costs when determining how much home they can afford. Experts estimate that homeowners spend between 1–4% of their home's value on maintenance and repair annually. For a $200,000 property, that translates into $2,000–8,000 on average every year. There's no landlord to call when Murphy moves in. If it can go wrong, it will—and it's all on you to foot the bill. That's why it's important to budget for the "what-ifs" like clogged gutters, leaky pipes or the A/C going out. A qualified home inspector should examine the property before you buy so you can make an informed decision. Just keep in mind that a home inspection can't predict every problem that may pop up down the road. Get Your Financial House in Order So how do you ensure your home is a blessing and not a curse? Start with a rock-solid financial foundation. If you're not out of debt with a fully funded emergency fund, you're not ready to buy a home. Period. It doesn't matter if it's a buyer's market and you can get a great deal on your dream home. A bargain's not a bargain if you can't afford to keep up with the upkeep. Make your emergency fund your best friend, and you'll be Murphy's worst enemy. And if you really want to make Murphy mad, buy your home Dave's way with 100% down. That's right—pay cash for your home! If you do get a mortgage, you should put at least 10% (preferably 20%) down on a 15-year fixed-rate mortgage. Keep your monthly payment to 25% or less of your monthly take-home pay to give yourself a little extra room for whatever comes your way. Don't forget to set aside a portion each month to cover standard maintenance expenses like yard work and appliance replacement. Looking to Buy a Home? Finding the right home can be the most difficult step for many homebuyers. Dave recommends working with an expert real estate agent to guide you through the process. If you don't have a pro you can trust, try one of Dave's real estate Endorsed Local Providers (ELPs). Contact your ELP today!

Flood Insurance Reform Will Be a Top Priority in 2014

Flood Insurance Reform Will Be a Top Priority in 2014

by: Cathy Armstrong / December 28, 2013

 

The Problem: Congress provided a five-year reauthorization of the National Flood Insurance Program (NFIP), but severe implementation problems threaten to undermine real estate transactions where flood insurance is required to obtain a mortgage.

• New NFIP rate structures have caused serious confusion and hardship for property owners.
• The Federal Emergency Management Agency (FEMA) continues to delay and miss deadlines.
• The legally required transition to true risk rates has plagued consumers with increases in rates beyond what anyone imagined possible.

The Solution: A four-year time-out. Congress has legislation in the House, H.R. 3370 and Senate, S. 1610, to delay changes to the NFIP. These bills would:

• prudently defer rate increases until FEMA completes the affordability study mandated by law
• create a system for targeted rate relief
• establish an office of the Advocate for flood insurance rate and mapping concerns.

In 2014 the National Association of REALTORS® will make flood insurance a top priority.

3 Advantages of Selling Your Home During the Holidays

We all know—or maybe we assume—that spring and summer are the best times to sell a home. And it's true that many buyers do plan their new home purchases during the warmer months. But that doesn't mean all the serious buyers evaporate after Labor Day. If your home is for sale now, you're actually in a great position to sell your home faster and for more money by taking advantage of the unique characteristics of the holiday selling season. 1. Less Competition You're not the only homeowner who's considered taking your home off the market during the holidays—most don't want the hassle. And most new sellers will decide to wait until the first of the year or even springtime to put their homes up for sale. That's great news for you because you won't have to compete with dozens of other homes just like yours to get buyers' attention. Reduced inventory means more buyers checking out your home, either online or in person. Keep their attention by making sure your home is priced to sell and that your home is in "show" condition at all times. 2. Motivated Buyers Anyone who takes time out of their busy holiday schedule to shop for a new home is serious about buying now. Perhaps they are buying a home for tax reasons or are relocating to start a new job in the new year. Maybe they've been looking for months and just haven't found that perfect home yet. Whatever their reason, make it easy for these folks to get a good look at your home by staying flexible with your showing times and be open to negotiating contract terms that work with their schedules. 3. Your Home Looks Great Emotion plays a huge role in which home a buyer purchases, and you can capitalize on that by making your home cozy and cheery during showings. Tasteful decorations and a minimum of clutter will allow buyers to see their own families celebrating the holidays in your home next year. Make sure your decorations enhance rather than detract from your home's best features, and remember to remove them as soon as the season is over.

Dave Ramsey published this article in the Dave Ramsey Real Estate Minute Newsletter

For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html

Advantages to Buying a Home with Cash

Buying a home with cash has definite advantages in today’s market. National Association of Realtors® research on cash sales shows that about 30 percent of residential sales are cash transactions. Among investors and international buyers, more than 70 percent of properties are bought outright. If you can afford to buy up front, the advantages are many:

§  Sellers are likely to favor buyers who can pay in cash.

§  The home price may be reduced for those who pay in full up front.

§  All-cash purchases streamline the home-buying process: No loans means less paperwork and no delays for mortgage approval.

§  Cash buyers can save money on closing costs, bank appraisals, mortgage applications and fees, title insurance, and so on.

§  Cash purchases eliminate the risk of loan denial.

§  Cash buyers pay much less for their homes in the long run: No loans means no interest.

§  Cash buyers never have to worry about losing their homes because they can’t afford to repay their mortgage loans.

§  Cash buyers gain full, immediate equity in their home.

Financially and emotionally, paying with cash benefits the home buyer.

Sellers prefer cash buyers
Home sellers generally prefer quick, smooth sales. They know that even buyers who have been preapproved for mortgages might be denied by the lender later on. For example, a buyer who is an independent contractor might have difficulty proving two years of regular employment, or a buyer depending on a family member for a personal loan might later opt out (or the relative might). Therefore, when possible, sellers prefer to steer clear of buyers who have to apply for a mortgage. If you are buying with all cash, you have greater negotiating power on price, closing time, repairs, and more. Sellers are often willing to reduce the house’s price for cash buyers.

Cash purchases avoid the risk of low appraisals
Home appraisals are notoriously fickle. Lenders determine a home’s worth by weighing it against comparable sales — other homes in the neighborhood that may have sold at low prices for unknown reasons. A low appraisal could lead the lender to reduce the amount of the loan offer, even after seller and buyer have agreed on a price. If the loan amount comes up short, the buyer often cannot afford to buy the home. All-cash buyers sidestep mortgage applications, avoiding the need for a potentially deal-breaking home appraisal.

Cash purchases save money and time
Indisputably, cash purchases carry lower costs. Mortgage interest on a 30-year loan can double or triple the original purchase price. Additionally, closing costs are significantly lower when purchases are made with cash. Cash purchases also save buyers valuable time, eliminating the need to gather elusive documents and search for the optimal lender.

Peace of mind is priceless
Most importantly, all-cash purchases bring an inviolable sense of security. Owning your home outright means never having to worry about covering your mortgage. In the face of disaster, such as job loss or injury, full ownership eliminates the risk of losing your home to foreclosure. Moreover, if you have paid cash, you will have excellent equity in the house. In case of financial emergency, you can draw on that equity for quick cash.

Figure out how to pay in cash 
Buying your house with cash might seem like an impossible dream. Here are some tips to help you achieve it:

§  Set aside unexpected windfalls, such as work bonuses or inheritances.

§  Lock money in a long-term CD to earn interest.

§  Once you have accrued cash, look for a house you can afford without borrowing extra money.

§  Consider moving to a less populated area, further from a big city, where home prices are likely to be lower.

§  Avoid the temptation to waste money. Tell your friends and family about your goal of buying a home; they will help keep your spending on track.

 

Gilan Gertz wrote this article as a contributing journalist for the Texas Association of REALTORS®

For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html

Home Building & Rehabilitation Trends/Ideas

Last weekend, I attended the Texas Home and Garden Show at Reliant Center in Houston to pick up new trends and ideas, as I dive into residential custom home building and continue home rehabilitations.  These shows are allows filled with vendors who have the latest in technology and energy saving ideas; which  is the direction  I am headed  as I start to build.  Building a highly efficient low maintenance home with a livable (functional) floor plan are my main objectives; as well as making existing homes more energy efficient wherever and whenever possible.

 

I would like to share a few of the things I picked up, and recognize a few vendors & individuals who were more than willing to share their products, services, and knowledge with me.

Probably the most fascinating feature I saw was the “Solar Air Conditioning Systems” offered by Brazos Valley Services.  This unit requires a relatively small solar panel that helps increase the efficiency of your unit when you need it most – during the sunniest times of the day!  I wished I would have gotten the name of the gentleman that explained this system in great detail to me, because he was very knowledgeable and courteous.  You can find out more about these systems at: http://brazosvalleyservices.reachlocal.net/solar-ac-systems/

Speaking of HVAC Systems – I would like to recognize Henry Newsom with One-Hour Air Conditioning & Heating.  Henry listened to my HVAC questions regarding tonnage, zoning, etc. and spent a good 30-45 minutes explaining, educating, and  demonstrating how a system works and how to make  it the most efficient.  Henry also spent time to tell me about the gadgets that are not really necessary, but will generally be “up-sold” to uninformed customers.  Integrity and honesty go a long way in my book, and Henry represented himself and One-Hour Air in both of these areas.  Learn more about One-Hour Air Conditioning & Heating at http://www.onehourhoustonac.com/

Attics are obvious where most of our homes hold heat that make our HVAC systems work hard.  I spent some time talking with Greg Pruitt’s wife with www.rock-cretefoam.com  about the advantages and disadvantages of completely sealing your home with foam insulation; primarily under the roof decking versus radiant barrier.  Although I am still not 100% convinced to go the complete sealed envelope route, I am convinced foam in the walls and ceiling are the only way to go in new construction.

I spent some time with Jim Decker  with  Attic Innovations www.atticinnovations.com speaking about the application of a radiant barrier to preexisting homes – a must if your home does not have a radiant barrier decking, or if you don’t choose to retrofit with foam (my opinion, only use foam  in new construction).  Jim also demonstrated their solar powered attic fans – and speaking of honesty and integrity – he admitted that the fans will most likely need to be replaced every 7-10 years.  Not bad when  you consider the savings, though.

Lastly, I would like to recognize Doc Greene with Pet Floors of Houston www.petfloors.com.  You have seen these floors in many places, but just didn’t know it!  They look like real wood, and are just as beautiful – however, they are much more durable and virtually maintenance free with a lifespan that will outlive any other flooring I have seen.  I plan on using these floors in most of my rehabilitation projects, whether there are pets in the house, or not!

I hope you take the time to go through these vendors’ web sites and learn more about their products.  I don't get any referral fees or kickbacks from them – in fact, they didn’t even know I was going to mention them in my blog!  I just enjoy sharing information about individuals and companies that appear to be upfront and  honest – they  were all out at the home show just trying to earn a living – rather than sitting at home waiting for the government to give them food, clothes, or healthcare.  Any chance I get to recognize hard working honest Americans, I love to do so.

 

For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html

Franchises vs. Independents

There will always be discussions and comparisons of agents that belong to large franchised firms and agents that belong to independent firms.  As an independent broker that formally managed a Coldwell Banker branch office and owned two RE/MAX franchises during my first 10 years in the industry, I feel I am qualified to debate the topic with clarity and competency.

In years past, prior to the internet, it was important for agents to belong to large franchised firms so that their listings would get the most exposure.  Listings were kept in large MLS books that may or may not have been updated, regularly, and firms always tried to show potential buyers their own listings. 

After the internet, it was still important for agents to belong to large franchised firms because basically the firm’s web sites simply replaced the listing books; but updating and other office listings were still few, if any, and the large firms had the most listings. 

However, a few years ago, many MLS’s such as HAR and most real estate firms became a part of IDX (Internet Data Exchange) which changed everything!  Now, when an agent enters a listing in HAR, regardless of what firm they belong to, it is automatically seen on thousands of web sites – like REALTOR.com, Zillow, Trulia, Homes.com, etc.!  For example: as an independent broker, when I enter a property in HAR; it can be seen on the same thousands of web sites as a large franchised firm’s listings – AND, it is also  seen on most of the large firms web sites,  as well; such as Coldwell  Banker, RE/MAX,  Keller Williams, Better Homes & Gardens, etc.  As long as the firm, and most do, participates in IDX technology.

Therefore, no longer is belonging to a franchise a highly important criteria when a potential buyer or seller is looking for an agent or broker to represent them; what is more important is competency, character, trustworthiness, and capability.

For agents however, there are some definite times in their career when they should seek to join a large franchised firm; especially if they have been in the business for less than five years.  Large firms can offer valuable training and guidance that I feel our industry should manage more closely.  Another area I feel extremely confident in discussing; mainly because I mentored, coached, and trained a large portion of the successful agents in the Southwest Fort Bend County area.

 

For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html

Selecting your Real Estate Agent - What most Agents don't want you to know!

When selecting a real estate professional, there are several questions you should ask yourself and several you should ask the agents you interview.  Much like retaining an attorney, a CPA, or Financial Advisor; retaining a real estate professional should be approached with caution and with great care.  The real estate professional you select is going to assist you with one of your largest financial purchases or sells, if not your largest, so this step should not be taken lightly.

According to the NAR Members surveyed by NAR in 2013:

Ø  Only 77% stated real estate is their only occupation

Ø  56% are affiliated with an Independent firm, and 44% are members of a franchised subsidiary of a national or regional corporation

 

Ø  The average years of experience of sales agents is 13, and brokers average 20 or more years

 

Ø  The average residential specialist averaged just 12 transactions in past 12 months

 

Ø  8% did not have single transaction in 2012

 

Ø  83% did not have more than 20 transactions in 2012

 

Ø  Primary Specialty: 79% Residential, 7 % Commercial, 2% Land/Development, 1% Relocation

 

Ø  In the past 12 months, 51% had a transaction involving a foreclosure and 44% had a short sale transaction, but only 21% have received certification in either of these areas

Five Critical Questions to ask a real estate professional:

1.       Are you familiar with this area?  If so, how many transactions have you closed in the past 36 months in this area and can I get a list of these transactions?

2.       Do you specialize in (residential, commercial, farm & ranch, etc.) transactions?  If so, how many (residential, commercial, farm & ranch, etc.) transactions have you closed in the past 36 months and can I get a list of these transactions?

3.       How many years (not months, weeks, or hours) have you been in the real estate business, full-time?  Or, how many years has real estate been your only full-time career?

4.       Is real estate your primary job?

5.       Is real estate your only job?

Summary

·         Choose your agent wisely – one that is familiar, very familiar, with the area

·         Choose an agent that specializes in the type of real estate you plan to sell or acquire.

·         Choose an agent that has closed at least 24 transactions in the past 12 months and has been in business for at least 3 years.

·         Choose an agent whose primary occupation is real estate. 

This was an excerpt from Chapter 2 of Julius' book entitled “The Truths and Myths of Real Estate”  - For the complete commentary pick up a copy of his book available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html