Buying a Home

Timing the Market as a Buyer

There's always the thought that timing the market to when it's at its lowest point, or at least at a discounted value, is the right time to jump in and buy. Even if you could get it right, is it actually worth it? The trouble with this strategy, is that there are just too many factors to consider.

How much drop are you expecting? Will that drop be recognizable? At 1-3%, there's so many variables when comparing houses, you likely won't even notice. Is a higher drop even likely to happen?

What if you wait for the drop, but in turn, prices go up? Specific to right now, in the Charlottesville area, prices are mostly still going up despite what the news is telling us.

How will you know when you've found the bottom? Suppose you did find the bottom, or at least are satisfied with...

An overlooked tool to make your home purchase more affordable

With interest rates much higher now than they have been over the past few years, your monthly payment is higher, forcing you to make a tough decision about the home you're buying. A way to drop your rate down is with an ARM, or adjustable rate mortgage. This could be the solution needed to get your rate back down and shop for the home you really desire. These loans start with a low fixed rate for an initial period of time from 5, 7 or 10 years, and will then adjust, usually higher. You can pick the fixed rate period that coincides with the amount of time you plan to be in the home. You sell before the rate adjusts up and reap the benefits. Alternatively, if you decide to stay beyond the initial fixed period, you have the option to refinance into another loan program that is more attractive at the time. 
Each lender will...

A stronger offer with appraisal gap coverage

When a home is purchased with a loan, the bank will conduct an appraisal. Essentially, they want to know the true market value and make sure the purchaser has adequate equity in the home. Sometimes the appraisal comes below the contracted purchase price.

The bank will only loan on an amount based upon the lower of purchase price or appraisal. Purchase price is $400k but appraisal is $385k, then they use $385k. At this point you need to account for the extra $15k the bank will not loan you. You have options. Walk away from the deal. Pay the $15k in cash. Negotiate a lower purchase price. 

This situation, while not new, has come into play more over the past couple years as home values have grown rapidly. Sellers today are receiving multiple offers and combing through for the best one. Knowing a potential low appraisal could send the deal sideways, purchasers are looking for ways to appease the seller and assure a low appraisal is not a concern. 

Enter Appraisal Gap...

The Impact of Buying at the Top of the Market

There's concern of buying a home at the top of the market before things come tumbling you might see during a housing bubble or recession. I only know what is happening at this moment. Any of us can make a prediction on what is to come, but we don't actually know. If I was highly certain of an impending crash, I would tell all buyers to wait. I do not believe that is the case. I believe it is inevitable price appreciation slows down, and when that happens it will come back to a normal rate. Not a crash. The demand still outpaces supply. This article is meant to share some insight on the "what if" scenario of a drop in current values. 
The Charlottesville market is no different than what every one else is experiencing across the nation. Values continue to rise at levels not seen before. During this time a lot of...

Home Inspection Red Flags

A home inspection can turn up a whole lot of things. Honestly, many of them will be minor and require little to correct. This doesn’t mean you should discount them, though. It just depends on the temperature of the market and whether or not you’ll be able to get a credit for those items. It’s when you come across something that seems suspect and there isn’t a clear remedy, that should cause concern. The concern being “How much will this cost?”. Ideally you’ll have a more qualified professional take a look when possible.

I’d like to share a few of those things that you can either be on the lookout for while looking at a home, or those that may be discovered during an inspection.

1. Water stains on ceilings and walls

There’s a wide array of reasons these stains could develop. Plumbing leak, roofing leak, improper grading, clogged gutters, lack of waterproofing, etc. Depending on the location and evidence present, will determine...

Back of the Napkin Property Investment Analysis

A quick and easy method to understand the quality of an investment is to take the rental income, divide it by the price of the home (don’t forget to add repair costs), multiply by 100, and the # you're left with is called a Cap Rate. The more homes you analyze like this, the better you’ll understand what Cap Rate is common throughout any market. Currently here in Charlottesville it is about 5%. 6% is attainable though. Both are pretty tight in regards to cash flow ($ left over after paying all expenses and mortgage).
There is more to understanding whether or not a potential investment property is a good one. The Cap Rate offers an easy method to compare properties on the surface level. Although it's a great thought provoking process and helps you to understand the numbers a bit more, do not get stuck on this one tool for your evaluation. If you're considering buying an investment, I highly recommend the practice of calculating...

Are there any deals out there?

First, what is a deal? If you pay more for something than the seller asks for it, did you still get a deal?

Typically, we think of a deal as something we spent less on than what it's actually worth. A piece of clothing that is on sale. Haggling a car dealer down on his price. But is that really the true deciding factor? Who sets the "worth" of that item? The worth of something is not determined by the person setting the price, it's value is determined by what someone is actually willing to pay for it. 

When it comes to houses, we use a formula...we look at similar homes that have sold nearby within the past few months, make comparisons that drag the price up or down, and settle on a #. Using this logic we haven't seen many "deals" in a couple years because most things sell for at, or over, this price.

I'd like to look at this from alternative view, though. Another way of calculating a deal. A home is an asset, and most other purchases...

Will Increasing Mortgage Rates Impact Home Prices?

There has been some discussion recently on home prices in relation to mortgage rates. Some believe if there is a rapid rise of mortgage rates, home prices should decrease. Logically it makes the most sense for the price of the house to drop when interest rates are rising, but this is not always the case.

This theory of home prices decreasing is typically discussed by future home buyers. As a buyer you would like to think if you are paying higher rates on your mortgage, you should be able to see a decrease in cost somewhere else. Unfortunately, these rates are rising because the economy is in better shape. As the economy succeeds, incomes rise, rates go up, as well as the price of the home.

A recent study by the John Burns Real Estate Consulting found mortgage rates have very little impact on the cost of the home. The housing market and price increases are affected by things like job growth in the area and rising wages. Coincidentally, these same factors are causing the rise in the mortgage rates since...

Common Things to Look Out for Before Buying Your Home

It is easy to become overwhelmed when you enter the home buying market. Friends, family, colleagues, and even acquaintances will give you their opinions if you are a first time home buyer. While most of them are looking out for your best interest, they are not fully aware of what is happening in the housing market.

It is important for you to be prepared and have your own questions ready. No matter what other opinions you are getting, you are the one buying the home and your comfort level will help make your final decision. Here are three important questions to ask before you purchase a home.

1. Why am I Buying a Home?

Regardless of the finances, it is important to think about what made you want to buy a home in the first place. Usually the reasons don’t have to do with money. Instead, home buyers are focused on how the house will impact their family in the future. A study done by the Joint Center for House Studies at Harvard found there are four reasons people buy a home. Those reasons include...