Archive for January, 2016

To List or Not to List: 7 Strategies To Help With That Decision

Saturday, January 30th, 2016
To list or not to list

To list or not to list? Together we can help you decide.

To list or not to list? Should you or shouldn’t you? When a new year arrives, the desire for change usually does, too: health, finances, job, home, education, etc. If you’re wondering whether or not you should take on a change of address in Brooklyn this year, here are 7 strategies to help with that decision:

1. Examine the elements of your home to help you decide to list or not to list

Think about the traffic pattern, how dark your home might be and if you could use a mud room that isn’t there, for example. Now, answer these questions:

  • What really bothers you about your home?
  • What’s missing?

Often the perfect changes can be made without adding a single square foot. Simply taking down a wall or partial wall, removing or changing doors and adding or enlarging windows, can convince you not to list. Eliminating an unproductive traffic pattern, brightening up your home or adding a missing feature can increase your home’s value as well. In his book Staying Put: Remodel Your House to Get the Home You Want (Taunton Press, 2011) architect Duo Dickinson “offers guidance on looking before you leap, ways to avoid pitfalls (and money pits), strategies for staying green or going geriatric, and moves you can make so you don’t have to move out.”

2. Study the land your home is sitting on

The landscape, condition and size of the property can’t be ignored. It’s a good decision to list if the land your home is sitting on:

  • property too small for your gardening passion
  • needs more yard for your growing family and summer entertainment (i.e. barbecues, pool, backyard get-togethers …)
  • lack of parking on or around your property

Remodeling can’t fix those issues!

3. Discuss and weigh your neighborhood’s plusses

Remodeling to fix your home’s issues might outweigh the option to list your Brooklyn home if your neighborhood offers:

  • Shopping for every budget
  • Excellent schools
  • Safety and family entertainment
  • Beautiful parks and walkability
  • Special memories (ie: your kids grew up in that house, your daughter got married in the backyard of that house)

4. Think about how long you plan to stay put

If you plan to stay put for at least 5 to 10 years, adding on or finishing a basement, may be worth the time, effort and expense. It will increase your home’s resale value, too. But if empty nesters needing to downsize are more likely to buy in your neighborhood, adding on or finishing your basement probably won’t help you sell in the future.

This is where a good financial planner and a mortgage lender can help. A good financial planner will help you gauge your home’s value in relationship to your assets and the needs of your family. A mortgage lender will discuss the costs of a new mortgage and whether or not you need one.

5. Get estimates from contractors, designers, architects or structural engineers

It’s worth paying to get multiple bids from remodeling professionals. Some even offer free estimates! They will:

  • Listen to what you want
  • Appraise your home’s present condition
  • Point out things you may not have seen or thought about
  • Estimate what remodeling could cost realistically

If your house is over 30-years-old and hasn’t been updated, the wiring, plumbing, HVAC system, roof and insulation may need attention. Whether you decide to list or not to list, these things will need to be updated.

6. Compare the resale price and remodeling costs of your home with other homes in your neighborhood

Yes, remodeling isn’t solely done for resale value, and it shouldn’t be. You should consider how much enjoyment adding on or remodeling will give you and your family, but don’t overbuild for your neighborhood. Think of it a little like this: If you live in a neighborhood full of “Volkwagen Bugs,” don’t try to renovate your VW into a “Cadillac.” Changes made to your home will affect its resale value in comparison to other homes in the area. This must be considered. Most people would rather buy a decent home in a great neighborhood than pay for a nicer house in a not-so-great neighborhood. Rismedia.com shares the following great informationThe 2016 Cost vs. Value Report compares, across 100 markets, the average cost of 30 popular remodeling projects with their average value at resale one year later. Average resale value is calculated based on estimates provided by real estate professionals. View the full report, including project descriptions and city-level data, here.

Something else to note here: Improvements can affect the value of your home when it comes to taxes. Depending on whether you are knocking down a wall or adding on to your home, your real estate taxes will or will not change. Look into this before you decide to list or not to list.

7. Walk through homes that are available in your price range in neighborhoods you like

You may find a home with a better floor plan. You may discover one with the just the right number of bedrooms and bathrooms, a great kitchen and a great yard, too. It may need some paint, new carpet or a renovated master bathroom, but compared to the costs of remodeling your current home, you should list.

Sometimes it makes better financial sense to list. Sometimes it makes better financial sense not to list. Before deciding to list or not to list, consider the cost and time of remodeling your home and all the facts.

Get estimates. Talk with a financial advisor and mortgage lender. Call me, Charles D’Alessandro, your Brooklyn real estate agent with Fillmore Real Estate at  (718) 253-9600 ext. 206 or send your questions to [email protected]. I’ll provide you with comps for your neighborhood. Together we can help you decide to list or not to list.

 

Interest Rates, Credit Scores And Down Payments – Should I?

Friday, January 15th, 2016
Interest rates

Rising interest rates affect buyers and sellers differently. Find out how!

Interest rates are on the rise. Rates fell from their highest in over five months last week, but home mortgage lending rates are up again this week. They rose from 4.15% to 4.18%. That’s not all that much higher than the 4% rates on a 30-year mortgage a year ago, but the upward path concerns lenders. How does a rise in interest rates affect you as a buyer? How does it affect you as a seller?

How does a rise in interest rates affect you as a homebuyer?

Buying a house involves a large initial expense. It also involves knowing what you’re getting into long-term before you buy. Knowing what you’re getting into before you buy will help you avoid the disaster of foreclosure.

Do yourself a favor and open this free amortization schedule calculator. Plug in the amount you’ll need to borrow and the interest rate at 4%. Repeat what you just plugged into the amortization schedule calculator using the same amount you’ll need to borrow, but plug in an interest rate of 4.15%. See what a difference an increase in interest rates can make in a monthly mortgage payment?

Listed below, are monthly payments for 15-year and 30-year $100,000 mortgages at different interest rates, not including any fees, like private mortgage insurance or property taxes. Notice how a 1% increase in interest rates from 4% to 5% on a 30-year mortgage results in a 13% increase in monthly payments. A 2% increase results in an incredible 26% increase in monthly payments!

Term4% Interest4.5% Interest5% Interest6% Interest
15-Year Mortgage$740$765$791$844
30-Year Mortgage$477$507$537$600

Source data: Google mortgage calculator

A note on adjustable mortgages here. Don’t fall into the trap of an adjustable mortgage. Adjustable mortgages make it seem like you can afford a mortgage when you really can’t. If you need creative financing in order to afford a house, you can’t afford it. Don’t do it.

Is now a good time to buy?

Answer the following questions to help you determine whether or not now is a good time to buy a home:

  • Is your credit score above 720? A mortgage lender will give you a loan and determine the rate based on your credit score. If your credit score is low, you can expect a higher interest rate. It would be wise to wait to buy a home until you improve your credit score. While you are waiting:
    • Pay down debt
    • Remove inaccuracies from your credit report
    • Make payments on time every month
    • Avoid applying for new credit cards or new loans
  • Do you have money set aside for a down payment? Putting down at least 20% of the cost of the home is ideal. This amount down will help you avoid having to pay private mortgage insurance (PMI). Since PMI protects the bank’s investment in case you default on the loan, it is a huge waste of money.
  • Do you have money set aside to pay the closing costs? The closing costs associated with your mortgage can total several thousand dollars.
  • What are the current interest rates? If interest rates are low, it may be a good time to buy.
  • What are the experts saying about property values? Accurately predicting what interest rates or property values will do can be tough to do. Ask an expert if property values are on the rise, or if they are likely to fall. If property values are falling, it may be a good time to wait on buying a home.
  • Do you plan on staying put for three to five years, two at the least? If not, refrain from buying. Now is not the time to buy a home.
  • Do you have an emergency fund? This is important! If you don’t have at least six months’ worth of your current income tucked away in case of emergency, you should wait to buy a home. You need to have money in the bank to pay your mortgage if a layoff or major medical problem were to happen.
  • when determining whether you should buy a house now or wait until the future. If you have recently changed jobs, if you are thinking about changing jobs, or if you are expecting any major changes to your income, it is not a good idea to buy a house until you are on more solid footing. Banks and mortgage lenders typically require you to have been with your employer for at least a year or two before they will consider you for a loan.

Are you truly ready to buy?

How does a rise in interest rates affect you as the seller?

When interest rates rise, even just a little, home prices and home values lower. This happens because higher interest rates reduce a buyer’s ability to pay for a home. Higher interest rates make financing a home purchase a lot more expensive. Low interest rates boost home prices because more buyers enter the market

Is now a good time to sell?

The answer to this question is, “Yes!” Higher interest rates equate to lower borrowing power for the buyer, so the sooner you sell, the better. Interest rates are creeping upward!

Read these blog posts for other insights on why you should consider buying or selling your home:

Whether buying or selling a home, start thinking about how a rise in interest rates will impact you in the future.

Make sure you consider the facts of this important financial decision with your head, not your emotions. You don’t want to struggle making your mortgage payments to find yourself in foreclosure down the road.

Call me, Charles D’Alessandro, your Brooklyn real estate agent with Fillmore Real Estate at (718) 253-9600 ext. 206 or send your questions to [email protected]. I can help you determine whether or not now is a good time to buy or sell your home.