Reflecting on My Homeownership Mistakes
As I sit here eating my corndog {I know – ew} 10 minutes before I have to leave for my volleyball game {double-ew: jumping up and down on with a stomach full of corndog}, I’m reflecting on all of the decisions and surprises we have had when owning property. I thought I’d just jot them down really quickly to see if others agree.
- Clouded Judgement: Looking for houses can get so exciting that we sometimes overlook important features: square footage, number of bathrooms, and above all, price. It’s easy to get talked into paying a higher price than you had initially set as your budget. Through our three home purchases, we stayed WELL below our budget. This was one of the few things that I know we did RIGHT.
- The neighborhood: When we first moved to Sacramento, we hadn’t visited there longer than a weekend. We really didn’t know anything about the different neighborhoods. We were feeling like we couldn’t wait to buy the house. In retrospect, we probably should have rented for a few months to get to know the areas before we purchased.
- DIY home renovating: Two words-LAME. I’m a painter, and I have no problem painting, or even some light tile work, but professional work is always better. It goes quicker, there is less mess, it looks better and is more attractive to the next potential buyer than your shoddy attempt.
- Know EVERYTHING about your loan: Seemingly impossible, but it’s very important to ask all the important questions about your loan. What are the terms? Does it adjust? How many points will it cost? Is there a prepayment penalty? There is a steep learning curve with loans, especially during the craziness of the most recent housing market crash, where my husband and I spent time paying 11% on our ARM loan. Ouch.
- Keep track of ALL your receipts: If your home becomes a rental property and then is sold, you can write off ALL those major improvements. Keep the proof!
Well, I know we’ve made PLENTY of mistakes with our three properties, but these are the few that come to mind now.
The Real Story Blog: All things Real Estate
At my 9-to-5 job, I have been working incessantly on this project. Despite layoffs and paycuts, I’ve had my nose to the grindstone slamming out this project with my colleagues.
This is a wordpress based blog that features housing predictions, market analysis, and podcasts with some of the industry’s big boys and girls. This was not my design, but a production that I spearheaded with the help of my fun and inspirational colleagues, Terry, ML and Jim.
Why I think this is pertinent to ohbrooke, is that it has really relative content. All the posts and podcasts have been of interest to me as we all feel our way through the dips and peaks of the Real Estate market. I am always trying to keep up with great Real Estate advice, and this is a great resource. You can check it out at www.therealstoryblog.com.
Some questions I have in general about Real Estate:
1. I’ve bought low, now how do I sell high and ensure that I’m not buying high on the next house?
2. Can you put an offer on multiple short sale properties, only to drop out after being accepted by one?
3. Will owners who have sold their home through a short sale be 1099′ed by the lender?
Sue McKinley’s Real Estate Update
Sue McKinley, last year’s “Top Sales Agent” for Alain Pinel Realtors, is watching the trends and has offered some words as to why now might be a good time for you to buy.
Sue says, “Bay area home sales are up 45% over 2007 and the median home price fell to $400,000. There have been two interest rate reductions in the last few weeks, along with home prices ‘on sale 30% off‘. Now is a great time to buy. Why wait for the market to bottom? You might just miss the bandwagon! Call me for more details or if you’d like to know how much home you qualify for.”
Sue helped my husband and I get into our recent investment, and she was very helpful and knowledgeable. She will help you every step of the way and keep you updated during the process. You can contact Sue at suemckinley[at]apr.com or 925.413.2866. Visit her website here.
Builder Incentives
This article about a Taylor Woodrow community proves that almost anything can be negotiated when purchasing a new home. A few negotiable incentives include:
Discounts: Asking price can be negotiated.
Upgrades/Credits: Others ask for credits for upgrades or furnishings.
Closing Costs: Mainly for those who are short on cash, the builder can pay closing costs.
Rate Buy-Down: The builder will pay a premium to lower the interest rate of a buyer’s loan.
Here are the highlights from the article:
Jim Hammett, 64, was the first person to move into Taylor Morrison’s 76-unit Sendera development in Concord in November. His three-bedroom, two-and-a-half-bath, Plan 1 home was $597,000, but in a phone call from the builder he found out that prices dropped $50,000.
“I asked if that was going to include me because I was already in contract,” he said. “They said yes.”
But Taylor Morrison didn’t stop there. When Hammett couldn’t pay more than $3,000 a month, the builder kicked in money to lower his monthly mortgage payment from $3,800 to less than $2,500 a month.
“They really wanted me to buy out here and gave me what I wanted,” Hammett, a retired police officer, said.
Sendera in Concord, is now starting in the upper $400,000s.
Return on Home Improvements
Remodeling magazine’s report on average return on home improvements is as follows:
| Improvement | Project Cost | Value at Resale | Rate of Return |
| Bathroom Remodel | $12,918 | $10,970 | 84.9 percent |
| Home Office | $20,057 | $12,707 | 63.4 percent |
| Kitchen Remodel (minor) | $17,928 | $15,278 | 85.2 percent |
| Kitchen Remodel (major) | $54,241 | $43,630 | 80.4 percent |
| Roofing | $14,276 | $10,553 | 73.9 percent |
| Sunroom Addition | $49,551 | $32,854 | 66.3 percent |
| Window Replacement (vinyl) | $10,160 | $8,500 | 83.7 percen |
Today’s Market
Though families already in homes may be experiencing some turmoil thanks to the downturn in the housing market, first-time homebuyers and couples looking for starter homes (like me) may be able to take advantage of the market. My husband and I just bought a new home for a great price in a great location—an area we couldn’t even consider a couple of years ago. We had to wait in line for over 24-hours to get this great deal, but that was a small price to pay for a great investment.
If you are considering buying a new home in today’s (2008) market, here are a few tips from my own experience:
- Read up on the real estate market. You can find blogs in your area or set a Google Alert for “Bay Area Housing Market” or terms that pertain to your area. Jason and I have been renting in the Bay Area for sometime, with little hope of buying anytime soon. But we paid attention to the market anyway, read some great advice from local experts, and continually weighed the advantages and disadvantages of owning a home in this area. When the opportunity arose to buy our new home, we already knew the investment would be wise, how much we could afford to spend, and that the pricing we got was lower than anything we’d seen in months, if not years.
- Buy new. We discovered that many new home builders are having trouble selling all of the units they’ve built. Since they are in the business of building and selling homes, excess inventory prevents them completing the process and moving to the next property. To fix the disparity, they will offer incentives or be receptive to negotiations that could help you purchase a home. For example, in negotiating our deal, we got closing costs paid and great financing without any money down. You might not get what you ask for, but if it’s the difference between buying now and waiting, then it’s at least worth asking.
- Stay within your means. If you’re going to stretch yourself to get into a new home, now would be the time, but do so responsibly. Families currently experiencing difficulties making their mortgage are the ones who stretched to get into a home when prices were at an all-time high. Now that the market has dropped, they are upside down on the loan—meaning they owe more than the property is worth. Another reason for difficulties making payments is that they may have taken out an adjustable rate loan to ensure monthly minimum payments were manageable, hoping their income would grow before interest rates would increase. Now that interest rates have gone up, they’re unable to refinance into a lower, more affordable payment plan.
- Factor in all of the numbers. The mortgage payment is only one of the obligations you take on with a new house. Little things like property taxes, homeowner’s insurance, mortgage insurance, HOA, utilities, and upgrades can increase the amount of money you need to spend each month to be in a home. Plus, there is ALWAYS something to fix when owning a home – dishwasher repair, roof leak, broken lawnmower, etc. To better anticipate monthly expenses, talk to a realtor or other homeowners in the area you’re considering.
- Love the house, not just the price. Chances are that your first home won’t be your last, so go into the deal knowing that one day you’ll be trying to convince other families to buy the very house you’re going to be living in. Besides price, what else does the home have to offer? Consider: Proximity to grocery store, school districts, public transportation, the year the home was built, quirky features, size of the yard, status of the neighborhood, etc.
- Focus on the Big Stuff. Carpets can be changed out and walls can be painted fairly inexpensively. Replacing a heater, adding an air conditioner, upgrading a roof, and so forth are bigger investments. Think about the ones you’re willing to make versus those you hope to pass on to the next home buyer. And remember, new home buyers expect a house to have functioning appliances and a good roof—they don’t pay extra for those things.