Low Housing Inventory Means Buyers Must Be Smart When Making Offers

In areas all over the country, the supply of available homes for sale is down… way down in many areas. It’s down about 50% here in parts of California. That means fewer homes for buyers to buy, and fewer buyers to actually get their offers accepted.

It’s like 2002 – 2005 all over again, which means very few homes on the market and LOTS of buyers. That means multiple offers are received on most homes, even the fixers. The net result is that many buyers are frustrated with the market because, of course, only ONE buyer “wins” on each house.

It’s interesting, though, because even though Realtors counsel their buyers about this market (low inventory and multiple offers on each property), buyers often “don’t get it” and still want to write low-ball offers. The market is changing, again, and that means buyers have to be “smart”, along with their agents, and write good offers that will get accepted. So, what does that all mean? Read on.

While I strongly recommend buyers work closely with their Realtors in this area, here are some basic guidelines when submitting offers in the current market:

1. Listen to your Realtor. Realtors work the market every day. They know the market. They know what works and what doesn’t.

2. Don’t think you can low-ball the seller and win the property. While this works occasionally, it’s working less and less in today’s competitive marketplace… even with fixer-uppers. Offer a reasonable price. In our current competitive market, it’s not uncommon for properties to sell for ABOVE the list price. I’ve seen properties with 20+ offers, so you can imagine, many of those offers end up well-above list price. Work with your agent to determine a “smart” price, since too high an offer can hurt you, too (because of appraisal – ask your agent to explain this).

3. Don’t ask for “everything”. There are many different items on a contract that are negotiable and paid by either seller or buyer. Sellers like it when buyers pick up many of the “additional costs” that accompany the selling process. The more that buyers offer to pay for, the more attractive those offers are to sellers.

4. Get pre-approved by a lender… and not just pre-qualified. The more “solid” the buyer looks in the seller’s eyes, the better the offer.

5. Put down a larger deposit. This shows the seller the buyer is more serious. Ask your agent what a good deposit is in your market.

6. Listen to your Realtor. No, writing this a second time was not a mistake. I write it again because it’s important to listen to your agent and take his/her advice when writing an offer. They have a vested interest in ensuring you get the property, so listen to their advice.

If you have questions about how best to compete in the current market, please contact me today.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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Is Buying a Home Right Now a Smart Plan?

With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.

The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.

Savings & Investment

Five percent may not seem like a great return on investment, but you have to think about it in the context of the situation. For example, let’s say you put 10% down on a $200,000 house. That’s a $20,000 down payment, or initial investment. At a 5% annual appreciation rate, your $200,000 home would gain $10,000 in value during the first year. Earning $10,000 on an investment of $20,000 is a whopping 50% return.

For further perspective, let’s say instead of spending that $20,000 on a down payment, you invested it in the stock market. With a 5% return, you would gain only $1,000 in profit.

Tax Benefits

So now you’re saying that a home may have a higher return, but that’s before you consider all of the costs of home ownership, such as taxes, etc. Well, think of it this way: your property taxes as well as the interest on your mortgage are both tax deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.

Other Benefits

It’s easy to get carried away with all of the economic reasons for home ownership, but it’s important to remember that not every reason is financial. Have you ever wanted to paint the walls of your apartment? Well when you’re renting, you can’t. Has anything in your apartment ever needed updating, but the landlord refused to do it? When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status.

So when you’re considering buying a home, consider the broad range of benefits that owning a home can have. And always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.

 

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending.

If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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Renters, Take Note: You Have Rights if Your Landlord Faces Foreclosure

ImageRenters across the country have been in dismay over the past few years as wave after wave of foreclosures has crashed upon the market. The reason is obvious: If the landlord enters the foreclosure process and loses the mortgage, then the lender can evict the present occupant – regardless of any previous rental agreements between the former owner and the current tenant.

This has led to a lot of fear from renters who view their living situation as uncertain – particularly those who rent because they cannot otherwise afford to buy a home. Fortunately, renters have rights even if their landlords are facing foreclosure.

One key law that renters should know is the Protecting Tenants at Foreclosure Act, a measure signed into law in 2009 by President Obama. This law says that any renter caught in the middle during the foreclosure process can stay in the home for the duration of the lease. (There is one exception: If the buyer of the home at the foreclosure auction intends to live in the premises, the lease can be terminated with 90 days’ notice.)

If you are a month-to-month tenant, you will have no less than a 90 day notice before the lender clears the home through eviction. And if you have a lease agreement with a “just cause” protection from eviction clause, you are safe even if the home changes hands.

From a practical standpoint, renters also benefit from a clogged foreclosure process that is so weighed down with home foreclosures and distressed properties that the average tenant can stay there for months, even years, before having to leave.

This is especially true in states like Florida and New York, who both have judicial foreclosure procedures in place with an average timeline numbering in the years instead of months or weeks.

There is also the consideration that the lender – or even the new owner – does not want to evict you at all. Instead, the owner may prefer to keep a paying tenant in place, instead of having to find a new one or do something else with an investment property.

Finally, if a home is lost to foreclosure and the tenant has to leave, the tenant can sue the former landlord for damages in a small claims court because the landlord would have violated a clause known as “covenant of quiet enjoyment”. This basically means that the landlord will take all measures to ensure the tenant can enjoy and use the property without interference – including breaking the lease agreement. Foreclosure would accomplish exactly that, thus opening the landlord up to damages.

Renters, take note: You do have rights even if your landlord cannot stop foreclosure and loses the home.

Call Us if you or a loved on find yourself in this situation. We may be able to help: Don Johnson Realty Group 714-856-3992; www.DJRealtyGroup.com

How Much Home Can You Afford? You May Be Pleasantly Surprised…

Provided by Lending Tree

If you’re like many first-time homebuyers, chances are you’ve been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn’t always what you should get.

Before you start touring homes for sale, it’s important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don’t waste precious time touring homes that are out of your reach.

Where to begin

The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it’s expressed as a percentage.

The ideal ratio

Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.

Doing the math

First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. READ MORE OF THIS ARTICLE

Renters Have Much to Gain by Pursuing Home Ownership

By Don Johnson, Broker/Owner/CEO
The Don Johnson Realty Group

MURRIETA, CA – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be on your way toward building equity. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop lower than the rate you’d currently be locked in at, and this would cause your monthly mortgage commitment to go down.

And not only would your own home give you added space, your own back yard and overall privacy—home ownership would also give you some tax advantages. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” down payment mortgage programs. The most common and beneficial loan for people buying their first home is the FHA loan, which only requires a 3.5% down payment. In addition, FHA allows a seller to cover up to 6% of a buyer’s closing costs which really helps decrease the amount of money it takes to buy a home. Many people also don’t know that FHA allows the lowest credit scores of any loan available today, only needing a 640 score in most cases.

If there is any time to buy it is NOW! Why? Because home prices are low today. Low home values are surely not good for people selling homes but they are great news for people wanting to buy a home. Don’t miss this opportunity to take advantage of the current market before home values rise. Call me today for a free consultation: 714-856-3992.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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How to Avoid the Roommate From You Know Where….

When it comes to renting a place to live, tenants often find it easy to team up with a friend or roommate to share the cost of rent and expenses as well as have someone to talk with in the downtime spent at home.

Assuming that you have a full time job and no social life, you spend approximately 128 hours per week in your home.  Of those 128 hours, 56 are probably spent sleeping, leaving you with 72 hours of downtime spent in your home cooking, cleaning, watching television, surfing the Internet or just killing time chatting with your roommate.

Life is good until you find yourself at odds with your roomie because they won’t pay their share of the expenses.  Or maybe they pay their part of the rent late all of the time, hurting your good credit rating.  Or perhaps they are just downright annoying and leave a mess everywhere in the house.  This can leave you frustrated and ready to pack up and leave.  However, you need to think it through before you throw in the towel.

There are a few ways to avoid the roommate fallout if you plan ahead.

  • First, write out a pros and cons list of having a roommate vs. living alone.
  • If you decide to go ahead with pursuing a joint lease, then have a heart-to-heart chat with your potential roommate about how the bills will be paid and when.  Discuss who will take care of what household responsibilities and have a general understanding BEFORE signing the lease.
  • And last, understand that your landlord is not your referee, mediator, judge or jury if you end up having a dispute with your roommate.  Keep in mind that if you do have a parting of the ways, you may still be liable for the remainder of the lease and fulfilling the terms.  This includes any damages that are done to the property, whether or not you lived there.  If your name is still on the lease, you are still responsible for the rent being paid on time and the property being taken care of.

It may be best if you just suck it up and call a truce with your roommate until the lease is up.  After all, part of the security deposit refund is probably on the line and 72 hours of downtime a week is a lot of time.

Don Johnson is a REALTOR® Broker with the Don Johnson Realty Group. (www.DJRealtyGroup.com) in Murrieta, California. He can also be found on Twitter as @DJRealtyGroup.

Builders highlight often-hidden costs of buying a foreclosed home

By Kenneth R. Harney
February 19, 2012
Reporting from Orlando, Fla.—

Home builders are switching tactics and confronting head-on one of their biggest nemeses: foreclosed houses that not only lure buyers away with deeply discounted prices but simultaneously depress the appraisal values of newly built homes.

At a packed session at the International Builders’ Show expo Feb. 8-11 in Orlando, consultants and builders said that with gluts of foreclosures in major markets around the country — and more forecast to arrive in the next two years — the time has come to stop being passive and to begin aggressively educating buyers about the often hidden costs of buying foreclosures… Read More of This Article

The Don Johnson Realty Group is located in the Inland Empire, California. We specialize in new and pre-owned home sales. For more information please visit www.DJRealtyGroup.com or call us at 714-856-3992