5 Down Payment Savings Tips

From the National Association of REALTORS® (NAR).

For more articles, information and helpful tips, see my web site www.CALLDAVE.com

The 10 Worst Money Mistakes You Can Make

The 10 Worst Money Mistakes You Can Make

By Barbara Pronin

RISMEDIA, Tuesday, September 12, 2017— Successful money managers share a simple strategy: spend less than you make over a long period of time and invest the difference. The author of ESI Money, an online blog written by a reclusive “50-something retiree who has amassed a sizable net worth,” suggests a list of the 10 worst things you can do to sabotage your financial independence: Not Having an Emergency Fund – Emergencies arise in every life, and not being prepared to cover them can throw you into debt. A rule of thumb is to sock away six months of living expenses. Not Having a Will – Money Magazine reports 57 percent of Americans don’t have a will, including 69 percent of parents with kids under 18. But without a will, the state decides what happens with your finances. Make a will and update it regularly as your life situation changes. Not Having Enough Insurance – Like an emergency fund, insurance can protect or replace your assets in the event of almost any misfortune. In addition to life insurance, you should have health, auto, homeowners or renters, long-term disability, and, arguably, long-term care insurance. Marrying the Wrong Person – Spouses should have similar financial goals and habits. If one is a spendthrift, you’re in trouble. It’s a good idea to discuss your financial objectives before you tie the knot. Not Saving – Putting money aside is essential if you are going to be able to invest. Experts suggest saving 10 percent of your salary. Buying Too Much House – It’s well-known that Warren Buffet lives in the same modest home he purchased many years ago. Don’t buy a home that requires a mortgage that is more than twice your household’s annual realized income. Waiting to Invest – The factors that determine how well your investments turn out are the amount you invest, the return rate, and how long you are invested. The longer you wait to invest, the more you are costing yourself. Being in Debt – Paying interest on debt can cost you big time over the years. Avoid it like the plague. Not Maximizing Your Career – Develop and execute a plan to make the most of your working life. Your earning potential is dependent on your good health and initiative. Overspending – It’s tempting to splurge, but develop a budget and stick with it. Copyright© 2017 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission. For more useful information, visit my website at www.CALLDAVE.com.

Staging the Most Important Rooms in Your Listing

Staging the Most Important Rooms in Your Listing

By Mark Mathis, General Manager of Broker and Agent Sales for Homes.com

RISMEDIA, Friday, September 08, 2017— Staging every room in a for-sale listing may sound ideal; however, it may be a daunting task to both the seller and the listing agent. If your seller can’t afford to invest in staging the entire home, it’s OK to scale down—after all, it’s better to do a good job on a few rooms than to do nothing at all. When deciding which rooms to cut and which to keep, remember that not every room is created equally and that half the battle is decluttering. Why Stage? Because it’s primarily individuals rather than companies who buy homes, it’s important to appeal to the largest number and widest range of buyers possible. Even the most basic DIY staging (like having your client pack up their extensive porcelain doll collection or take down their numerous hunting trophies) can help buyers without those specific interests envision themselves in the home. When buyers can picture themselves in the home, they’re willing to pay more. NAR’s 2017 Profile of Home Staging reported that 29 percent of seller’s agents reported a 1 to 5 percent increase in offer amount compared to similar homes. A further 21 percent reported a 6 to 10 percent increase in their offer amount. Staging also decreases the amount of time a listing will spend on the market. Photos of a nicely staged home make people more willing to walk through a property they found online. What to Stage You don’t have to stage every room in a house to get good results. For example, it’s far more important to stage the living room than the laundry room. Here are the most popular rooms to stage, according to the 2017 Profile of Home Staging, as well as some ideas of what you can do in each: Living Room Remove the oversized couch and other bulky furniture and substitute smaller, narrower options. This will make the whole room feel larger. Also, remove all personal photos and enough books, movies and knickknacks to give the shelves extra room, emphasizing how the home offers plenty of “room to grow.” Kitchen Pack up all the small appliances and do-dads cluttering up the counter, from the coffee pot to the can opener. Clear off the top of the fridge and get rid of all coupons, magnets, personal bulletins, etc. Once all the useful but non-decorative clutter is gone, consider adding a fruit bowl or flowers to add some color to the kitchen. It’s also important to declutter inside the cabinets to make them seem more spacious when interested buyers start poking around. Master Bedroom Again, start by decluttering. The only things on the floor should be furniture and maybe a rug. Most bedrooms don’t need much more than the bed, dresser, end tables, and a mirror. Make sure the surfaces of the furniture are cleared of all personal items. Remove any laundry baskets, TVs, and items visible under the bed. Dress the end tables up with a nice decorative lamp and make sure the bed is neatly and attractively made. If the master bedroom is particularly large, you can also add a comfy sitting area. Dining Room Dress the table up with a nice centerpiece and some simple but attractive place settings, but don’t make the table feel cluttered. If the table sits six, lay out four places. If it sits four, lay out two. This will ensure the table looks spacious and inviting. Remove any extra chairs that are gathered around the room, and make sure there is plenty of light, as well. Bathroom If you want the bathroom to appeal to buyers, make sure it is spotless. Everything from the tub to the walls should look fresh and clean. You should also remove any medications from the bathroom and put out fresh rugs and towels. Adding a few decorative candles or jars to the shelves will help create a more spa-like environment, as well. Outside The first thing a buyer sees when they visit your listing is the outside. Make sure the lawn is freshly mown, the bushes are trimmed, the driveway is clear of leaves and weeds, the windows are clean, and you have an inviting threshold. Child’s Bedroom Start by packing up anything that will identify who the child in the room is, such as school memorabilia, sports jerseys, trophies or photos. Most of the toys and all electronics devices should go, as well. Try to emphasize the child’s bedroom as a creative space. A desk or table can help with this. Keep the center of the room clear to emphasize plenty of play space, and use a gender-neutral color scheme to help buyers imagine their children in the room. . . . Copyright© 2017 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission.

14 Essential Benefits When Considering the Purchase of a Home

The Advertising Industry spent millions of dollars studying what are the essential underlying ingredients that cause someone to make a buying decision.  The industry was able to narrow the motivations of buyer decisions down to 14 Essential Benefits.

This can be extremely helpful when looking to purchase a home.  The reason?  People often get caught up in trying to match the desired features, instead of trying to satisfy the need for benefits.

Almost no one ever gets all the features they are looking for.  If they can afford $600,000 home, they would really like $800,000 in features.  If they can afford $1,000,000 home, they would really like $1,400,000 in features.  And so it goes…

If instead, each of the buyers examines the 14 essential benefits and chooses their top 3 benefits, in priority order, they will typically be very pleased with the selection of their new home.

I encourage anyone looking to purchase a home to look to this list (each individual separately), and choose the top 3, in order of importance, and MEASURE EVERY HOME OF INTEREST against their desired benefits.

• CONVENIENCE              
• RECREATION               
• PRIVACY             
• PRESTIGE            
• ENTERTAINMENT         
• HEALTH                    
• ECONOMY                        
• VALUE                         
• SAFETY                
• SECURITY
• SELF-ACTUALIZATION                        
• ROMANCE                        
• COMFORT                         
• AESTHETICS 

Definitions of the 14 Benefits link.

For more useful information, visit my website at CALLDAVE.com.

What is a “Short Sale”?

Wikipedia defines a  short sale as “a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.”

The bank has to agree to allow the sale to close and accept less than is owed.  Fortunately the market has recovered to point where we are not seeing many of these distressed situations, because the market value of the homes have significantly recovered.

From a seller’s perspective, it can be a very stressful and emotionally trying process.

From a buyer’s perspective, it can be an exercise in futility, wherein a buyer chases the possible purchase for months and months, only to find out that the bank is not willing to agree, or the seller has convinced the bank to complete the transaction.  On the positive side, they can be GREAT deals for a buyer, if successful.  My suggestion:  If you see a potentially great deal on a short sale, go for it but don’t get emotionally connected, and keep looking if you need a home.  If it is just a discretionary purchase, you can wait through the process, if your nerves can take it!

For more useful information, visit my website at CALLDAVE.com.

Buyer, Seller, or Neutral Market?

Are We Experiencing a Buyer, Seller, or Neutral Market?

We determine which type of market we are experiencing by the amount of available inventory is on the market.  If we made the (ridiculous) assumption that no other properties were to come on the market, and how long it would take to exhaust the existing inventory.

For example: In a specific market or area, we have seen an average of 30 sales per month for the last year, and there are 60 active listings, we have 2 months of inventory.

The definitions are as follows:

• Sellers’ Market – Less than 3 months of inventory;
• Neutral Market – 3 – 6 months of inventory;
• Buyers’ Market – 6 months or more.

In the example of 2 months worth of inventory above, we have a Sellers’ Market.

If you’d like to know what is happening in your area, or in that of your rental property, contact me (you can call or click the contact menu) and request a complimentary “Market Activity Index” report.

For more useful information, visit my website at CALLDAVE.com.

What is ‘Fixed-Rate Mortgage’?

Investopedia.com defines a fixed-rate mortgage as “a mortgage that has a fixed interest rate for the entire term of the loan. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.”

In our current environment, with near historic rates, this is generally the type of loan I recommend.  If an owner will not keep a loan for a long period of time, like more than 5-7 years as an example, it may be smart to examine other options to compare.  Typically fixed rate loans have an amortization period that pays off the entire balance in a 30-year (or sometimes 15 or 10-year) period.  It is as though one is paying for the security of consistent and steady payments to last 30 years.  If you won’t be there that long, you may be able to save money with a different program.  MOST PEOPLE CAN’T PREDICT how long they will be in their home, so this is the most common choice in today’s low interest rate environment (with the likelihood of increasing rates).

For more useful information, visit my website at CALLDAVE.com.

What is an Adjustable-Rate Mortgage – ARM?

Investopedia.com defines an adjustable-rate mortgage as “a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly. The interest rate resets based on a benchmark or index plus an additional spread, called an ARM margin.”

The borrower assumes the risk of interest rate fluctuations, as opposed to a fixed-rate mortgage, which does not change for the length of the loan.  In a market where fixed-rate loans are very low or increasing, like the current market, I LOVE FIXED-RATE.  I only like adjustable when the borrower fully understands them and how to use them.  They are a tool.  There are times when they can save you money.  (One example is if you are going to own the home for substantially less time than the fully amortized fixed-rate term.)

With an ARM, the early payments can be substantially lower, but can increase up to a given rate cap.  Sometimes the loans are structured in such a way that the payments do not increase quickly enough to offset the increasing loan balance, and the loan principle is actually INCREASING.  These are called “negative amortization” loans.  Many people have gotten in trouble with these loans when not understanding the underlying structure.

These loans can be a good tool when you need flexibility in your payment schedule, like sales people paid on commission.  They commonly have four payment options:

• Minimum payment (less than amortized amount)
• Interest only (does not reduce principal)
• 30-year payment (will pay off loan on a 30-year schedule)
• 15-year payment (will pay off loan on a 15-year schedule)

The other attractive feature of these loans is demonstrated by the example of the commissioned sales person that has big year and pays extra on the mortgage.  The salesperson has the benefit of lower payments required every month for the balance of time left in the loan, because they are essentially re-cast to be amortized over the remainder of the 30-year term.

I once used an ARM in purchasing an apartment building that needed upgrading and some change in the tenant base.  The arm allowed lower payments while the vacancies and repairs were happening.

Again, the typical homebuyer or homeowner plans on staying a long time, are the logical choice in a low-interest rate environment with an expectation of higher rates to come, is absolutely a fixed-rate product.

See my blog post on Fixed-Rate Mortgages.

For more useful information, visit my website at CALLDAVE.com.

What is a FICO Score?

Investopedia.com defines a “FICO score” as “a type of credit score created by the Fair Isaac Corporation. Lenders use borrowers’ FICO scores along with other details on borrowers’ credit reports to assess credit risk and determine whether to extend credit.”

FICO scores range for home loans range between 300 and 850 (for automotive and other purchases, the ranges and scores vary).

Different loan products are available/unavailable, and rates and terms are affected based on a borrowers FICO score.  The higher the better.

If you’d like more information or need home loan information for purchase or refi, let me know and I’ll give you contact information for lenders that I trust and have proven themselves.

For more useful information, visit my website at CALLDAVE.com.

What is Bi-Weekly Mortgage

Investopedia.com defines a Bi-Weekly Mortgage as “a mortgage payment plan where payments are made every two weeks, as opposed to the more traditional monthly payment plan. Making mortgage payments every two weeks, as opposed to monthly, will result in the equivalent of one additional monthly payment being made each year. This extra payment is applied toward the principal balance of the mortgage, and will lead to substantial interest savings over the life of a long-term mortgage.”

Because there are 52 weeks in a year, a half-payment every two weeks results in 26 half-payments, or 13 full payments per year.

The bottom line is: Understand your mortgage, track your mortgage, control your mortgage, and you’ll likely get to the end more quickly.

If you have questions, or you’d like a spread sheet that allows you to track the data, along with extra payments, contact me.  I’ll send you one that you can have and use at no charge.

For more useful information, visit my website at CALLDAVE.com.