Waiting to Buy a Home When Interest Rates are Rising Can Cost You

A recent New York Times article explained why mortgage interest rates are headed up. For specifics, check out:

http://www.nytimes.com/2010/04/11/business/economy/11rates.html?scp=1&sq=interest%20rates%20have%20no%20&st=cse

Since interest rates are near an all-time low and beginning to inch upwards, waiting to buy a home could cost you more than you might think.

FACT: Each .4% increase in mortgage interest results in roughly $25,000 less in purchasing power.
Look at the differences among purchase price versus interest rates:

If you choose a 30 year mortgage and put down 20%, the 80% loan, principal and interest payments are as follows:
$600,000 sales price, at 7.0% interest, payment is $3193.45
$625,000 sales price, at 6.6% interest, payment is $3193.29
$650,000 sales price, at 6.2% interest, payment is $3184.84
$675,000 sales price, at 5.8% interest, payment is $3168.47
$700,000 sales price, at 5.4% interest, payment is $3144.57
$725,000 sales price, at 5.0% interest, payment is $3113.57

Payments are similar. However, the home you can afford to buy at 7 % is approximately $125,000 less than the home you can afford to buy at 5 %. If you wait to purchase a home, higher interest rates may mean you will be able to buy less home in the future than you can afford right now. A wise strategy: talk to your lender and Realtor. Weigh all the pros and cons of real estate ownership; then make a well-informed decision.

Why sign a Buyer's Agency Agreement?

If you are in the market for a new home, you will likely be working with a Realtor. It is in your best interest to find an agent you feel comfortable with and within a few meetings, you should sign an agency agreement.

What is an agency agreement? In the state of Washington, we Realtors are required to disclose who we are working for when we buy or sell a property. If we do not have a Buyer's Agency agreement with a buyer, then it is implied that we are working for the seller. Why would that matter? When a Realtor signs a Buyer's Agency agreement with a client, they are pledging themselves to that buyer, saying "I work for you and your best interests." Information the buyer shares, such as financial history and resources, along with urgency for buying is then kept confidential. In addition, any information the Realtor learns about the seller or the seller's home is then freely shared with the client. Do you see how that would benefit you?

Let's say a buyer is working with a Realtor without an agency agreement. The Realtor is then working for the seller of the home and is going to do all they can to get the buyer to pay top dollar for the home. If an agency agreement is in place, that Realtor will be bound to work hard for the buyer. They will help the buyer find a home, and when they do, research the comparable homes that are for sale and also those that have recently sold to determine if the home is priced correctly. If the home is overpriced, they can advise their client how much they feel the home is really worth and negotiate a lower price.

In addition to the price consideration, there is the seller motivation. How long has the home been on the market? What is the reason the seller is moving? If the seller is very motivated to sell, a Realtor with a Buyer's Agency agreement will share that information and the reasons for the sale. Can you see where this would help in negotiations?

The Realtor with a Buyer Agency agreement is also motivated to educate their client on the local market. We watch trends in the marketplace, look at listings each day and are often finding great deals we want to pass on to our clients. We save the best deals for those clients we have a Buyer Agency agreement with. If they have committed themselves to working exclusively with us, it is our duty and pleasure to help our clients find a great value.

The Realtor working with a client who has signed an agency agreement can help that buyer save you time in looking for a home. We Realtors look at homes every day and know our service area well. When we look at homes together, we learn what features are most important to you. Then we refine the criteria on the search to eliminate homes that are not appealing to you. Can you see where that would benefit you?

The Buyer Agency agreement is really a "no brainer." There is no cost to the buyer to enlist the help of a Realtor in a Buyer Agency relationship and there are great benefits! The buyer gets a loyal Realtor whom they know is working exclusively for their best interests. The real benefit is in the time and money saved for the buyer. Who wouldn't appreciate that? Ask your Realtor about a Buyer Agency Agreement and don't hesitate to sign a contract.

The Value of Home Inspections

Home Inspections are essential when purchasing a home. Take it from one who knows from personal experience. Years ago, when buying a home, I wanted to save money, so I bought a home "For Sale by Owner," and skipped the inspection. After all, the seller seemed like such a nice guy and the home looked good. Well, as they say, "things are seldom what they seem," and the very first night in the home, I woke to the pitter patter of raindrops falling on my bed! Upon closer inspection, it became clear that the previous owner had a problem with the roof and had tried to cover up the problem by putting a bucket in the attic! Unfortunately, the bucket had filled with water and was spilling over on to the ceiling, then on to my bed. Needless to say, this was a problem that could have been avoided had I hired an inspector.

An inspector identifies the need for repairs and uncovers builder oversights, as well as educating a buyer as to how they should maintain their new home. The inspection for an average sized home generally takes about 2-3 hours. It is best if the seller is not present, but the buyers and their Realtor should stay for the duration of the inspection.

Generally, an inspection covers the following areas: roof, attic and insulation, heating,cooling, plumbing and electrical systems, walls, ceilings, floors, windows and doors, foundation, basement and structural components. Fees for an inspection vary, depending on the size of the home, its age, and what type of inspection is ordered.

How can you find a qualified inspector? It would be my pleasure to provide you with a list of reputable home inspectors. A thorough inspection could save you unpleasant surprises after you move in. It can also save you money if you require the seller make repairs before purchasing the home.

How long will it last?

I am often asked by home buyers and sellers how long home components will last. Finally, I’ve found a study of life expectancy of home components put out by the National Association of Home Builders and the Bank of America Home Equity. While the life expectancies of the components of a home depends on the quality of installation and how the item is used and maintained, there are some averages that were calculated after polling manufacturers, trade associations and researchers. Here are some of the findings:
Air conditioning unit: 10-15 years
Appliances: gas range:15 years
Asphalt driveway:15-20 years
Carpet: 8-10 years
Decks: wood-20 years
Dehumidifier: 8 years
Dishwashers: 9 years
Dryer: 13 years
Faucets: 15
Freezer: 11 years
Furnace: 15-20 years
Garage door openers:10-15 years
Gutters: aluminum-30 years, copper - 100
Humidifier: 8 years
Kitchen sink: 50
Linoleum flooring: 25 years
Microwave: 9 years
Paint: 15 years
Pool: concrete shell - over 25 years, interior plaster and tile - 10-25 years
Refrigerators: 13 years
Roofing: asphalt shingles - 20 years, fiber cement shingles - 25 years, wood shakes-30 years.
Sprinklers & valves: 20 years
Vinyl flooring: 50 years
Water heater: gas or electric-10 years, tankless-more than 20
Whirlpool tub: 20-50 years, depending on use
Windows: aluminum-15-20 years, wood-30 years+
Wood flooring: 100 years or more

For more details on life expectancies of home components, go to "publications" and "NAHB Reports" at www.nahb.org.

7 Things You Must Not Do Before Buying Your Next Home

When you finally find that perfect home and have an accepted offer in hand, it is easy to get excited about the future dwelling and forget a few caveats. If you are not careful, that wonderful deal you secured could easily fall apart. There are 7 potential deal breakers that could undo your home purchase. Here are 7 don'ts of mortgage funding:

1. Do not change your employment status.
2. Do not make any major purchases, ie, cars, furniture, home theater, vacations, etc.
3. Do not increase your credit card debt or miss any payments.
4. Do not change bank accounts or make undisclosed large deposits.
5. Do not apply for a credit card, co-sign a loan or make a credit inquiry.
6. Do not spend any money you have set aside for closing.
7. Do not delay in providing all paperwork asked for by your lender.

If you are careful to heed these warnings, you will be signing a hefty stack of documents at closing and enjoying your lovely new home in short order. If you do not, you could find that you no longer qualify for your loan, and therefore, cannot purchase your dream home. Being forewarned is being forearmed. Keep your credit in good order all the way through closing.