Gratefully, the nation’s housing market for 2018 is looking good, but we continue to see first-time millennial buyers struggling with affordability, especially in high-priced areas like Los Angeles, San Francisco, Boston, New York and Washington DC.
Various Florida residential real estate markets continue to be affordable markets. Interest rates and home prices are both rising, so first-time home-buyers, a majority of which are Millennials, are encouraged to make the switch from renting to owning sooner, rather than later.
Mortgage rates will inevitably rise, and this increase will only result in existing borrowers/homeowners STAYING PUT. Rising rates may also lead to homeowners seeking home improvement loans or home equity lines of credit instead of moving. Less movement in real estate, means less inventory.
So, what’s driving the housing market? Strong buyer demand, limited inventory, and first-time buyers. The first two factors being the more important for setting the real estate industry’s tone.
There is definitely a shortage of “good properties” and finding that perfect property tends to be the problem for most Millennials. That’s a large part of the reason we are recommending that Millennials try to be realistic, not have expectations of moving away from renting right into the home of their dreams. The home of their dreams will come with time, but buying something affordable is a great way to start the home-buying process
With increased demand and good appreciation, first-time home-buyers can eventually move up to the property of their dreams. This all doesn’t happen overnight and that can sometimes be frustrating for people who may be used to getting instant gratification.
So, what’s the bottom line here? Take baby steps. Buy your first home, but be realistic and find something affordable. Don’t live for your house, but live in your house. The American dream will follow, but whatever you do….STOP RENTING!
At Khani & Auerbach, we are dedicated to providing as much information to assist you in becoming a home buyer. Please be sure to follow us on Facebook, Twitter, Instagram, LinkedIn and Google+ for additional useful information.
Easy to say, hard to do, but there are things you can do now to get you closer to residential home ownership. For years, you have been paying rent to your Landlord or even worse, living with your parents. Here are some things you can do right now to prepare for home ownership.
1. Save Money. Put away a minimum of $50 week. (That’s approximately 2 items at Starbucks per week) If you do this for at least 2 years, you will have saved up $5,200. You can do it!
2. Check Your Credit. Don’t do this often, but make sure you get a gander at your credit report history and see what’s going on there. Stop applying for revolving credit accounts, like department stores, they don’t help, they hurt your score. Only spend what you have. If you do use a credit card, always pay off the balance in full every month. If you already have a balance on your credit card, pay that off as soon as humanly possible. The only ones who benefit from a balance on your credit card are the credit card companies. You don’t want to end up paying $100 for a $5 cup of coffee, you just don’t.
3. Talk with a Mortgage Professional. Find out exactly what it takes to qualify for a mortgage these days. These qualifying requirements change, almost on a daily basis. If you know what you need to do to qualify for a mortgage, it takes the mystery out of the process and gives you a goal. The goal being, getting a mortgage to buy a home of your own.
4. Talk with a Real Estate Agent. Learn what the market is out there and what you think you can realistically afford. Make sure your proverbial eyes are not bigger than your stomach. Don’t try to keep up with everyone else, but rather look in communities that are close to work that you can realistically afford.
5. Stop Accumulating Debt. These days, people are less interested in accumulating things and more interested in accumulating experiences, but keep in mind, both can be costly. Before you take that expensive vacation to hike in Colorado or the Grand Canyon, think about what might be available in your own backyard and accumulate your experiences there so you can stop accumulating debt.
6. Get a Job. Yes, you want to help others and be charitable. It’s an honorable thing to do, but charity begins at home. Be employed and always make money. It’s good to be self-employed, but the problem with self-employment is that you don’t always show a healthy income and that’s what lenders are looking for when they decide whether you qualify for a loan or not. You have to show at least two years of qualified income in order to qualify for a loan. Sometimes, you don’t get that dream job, with that dream income right away, but it’s a step in the right direction and can ultimately lead to home ownership. If you have stable employment, it’s going to make a difference. Remember, home ownership is the goal.
7. Don’t Fear Fluctuating Rates. Mortgage Rates will never be as low as they have been in the past few years, but have no fear! Rates won’t be so high that you will be precluded from obtaining a loan at a reasonable rate.
8. Inventory Will Increase. Yes, for the past few years, it has been a Seller’s market and inventory was definitely scarce. In 2017, however, you will see a change in that scenario. The prediction among most real estate professionals is now shifting and the feeling is that we are moving away from the limited housing inventory and towards a Buyer’s market. The bargains are already popping up in the most unusual places, but you have to be willing to shop.
At Khani & Auerbach, we are doing our very best to remain at the forefront of the real estate market. We will continue to educate ourselves, our clients and real estate professionals. If you have any questions, please feel free to ask us!
I like to call this, “Story Time with Khani & Auerbach”. Yesterday, I received a phone call from a lovely lady regarding a Time Share transfer. The transfer to our caller was conducted back in 2007, but she had some concerns about her ownership interest and wanted to know where she stood. She wanted to ensure that she was in fact the owner and had an ownership interest that she thought she purchased. After doing very light research in the public records, I uncovered two transfers that gave me pause.
The first transfer was conducted in 2001, a Quit-Claim Deed. This Quit-Claim Deed, at first blush, looked really official, as it had been prepared by an attorney. But, as a real estate attorney practicing for 20 years in this field, I never quite trust that any document is prepared accurately, regardless if it’s prepared by an attorney or not. As luck would have it, the document was poorly drafted and the intentions of the transferor/grantor are really unclear. I would do the next best thing and reach out to the attorney that prepared the document. What do you think I would find next? The phone number provided on the Deed was disconnected and after some further inquiry, I found that the attorney was suspended several years ago, had never reapplied to the Bar and was no longer licensed to practice law in the State of Florida. So, the first brick wall in my research was erected. What now?
I wanted to look at the second transfer made in 2007 to my client and found that the preparation of this document was even worse than the one made in 2001. This document looked like someone found a form at Office Depot and just filled in whatever they felt might look right. Well, nothing was right about it and it was ALL WRONG. The second brick wall in my research had now been erected. Now, you might say to yourself, “But, the County recorded this document, so it must be accurate.” Let me be clear when I say, the County will record ANYTHING you put in front of them as long you pay the required fees. They are an administrative agency and they do NOT practice real estate law and do not know anything about the history of the subject property. Furthermore, they have no obligation to know these things. All they do is record documents and collect taxes and fees.
So, now I am reviewing two poorly prepared documents/transfers and have the honor of telling the caller that not only are the transfers poorly prepared, but she may not even have ownership. The next question on your mind may be, “How could any of this been prevented?” Simply, by hiring a Real Estate attorney. A Real Estate attorney has the knowledge and experience to do the job accurately in the first place, avoiding the exact same situation we are presented with in this case.
Now, the first deed prepared in 2001 was, in fact, drafted by an attorney licensed to practice law in the State of Florida, but what I don’t know is how this attorney was found and whether he focused his practice on real estate or not. In addition to hiring an attorney, knowing whether an attorney focuses on real estate is even more important than just hiring any attorney. In this case, I just couldn’t determine this attorney’s area of practice and had to assume he just didn’t know what he was doing. As for the second deed prepared in 2007, well, that was just two parties trying to save a buck. Look where we are now. Unraveling these terrible transfers and correcting these poorly drafted deeds will take more effort, more time and certainly cost more money than all the parties could have ever imagined. All of this could have been prevented just by hiring a real estate attorney in the first place.
About the Writer
Khila Khani is a partner with Khani & Auerbach. Her practice focus has been in Real Estate law for 20 years.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. Should you wish to discuss any potential matters with her or her partner, you can contact them here.
According to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) indicates that February resulted in a slight increase in mortgage credit availability.
The MCAI increased 0.7 percent to 118.6 in February. This slight increase in the index indicates that credit is loosening, while a decrease would indicate that lending standards would tighten.
The MBA’s Chief Economist stated, “Credit availability improved marginally in February, led by further increases in jumbo loan programs, and additional take-up of Fannie Mae’s 97 LTV program. More than half of investors are now offering a 97 LTV program, and Freddie Mac announced that their program will be available in mid-March. In terms of conforming credit, this was offset by somewhat tighter constraints on cash-out loans and investors with multiple financed properties.”
It’s good news for consumers seeking to borrow money in order to buy real estate and that’s good news for everyone!
As 2015 has comfortably settled in, we are beginning to notice an increase in the Millennial’s (ages 18-34) becoming first-time home buyers. As rents are continuing to increase faster than incomes can keep up, it should come as no surprise that in 2015, Millennials are choosing to buy real estate rather than rent, as rents in large cities like New York, Chicago, Miami and Los Angles have continually increased since the “great real estate crash” a/k/a GREC of 2008. The GREC left a bad taste in every person’s mouth, and rather than have the confidence to invest in real estate at all, this entire generation basically chose to rent. Yes, this is a generalization, but it’s a generalization based on statistical information from a variety of sources. It would seem that the choice to flee-from-purchase created an overnight demand for rentals causing higher than normal monthly payments, far outside the reach of the Millennials.
During this “supply and demand” situation in the rental market, banks made it more difficult for first-time home buyers to borrow money, leaving them with very few mortgage options and tons of restrictions on down payment resources. The good news is, however, over the past few years, lenders have now relaxed their lending requirements, the real estate market has improved and Millennials are finally seeing the light at the end of the tunnel. They can discard the chains of rent and embrace home ownership.
With these possibilities before them, Millennials can actually buy a residential home. But keep in mind, buying a home is usually largest purchase anyone will probably make in a lifetime. So, before plopping down the down payment on the dream home, we suggest every home buyer do their homework, be prepared and have this handy-dandy 8 item checklist that includes the following: (Click this link, BUYING RESIDENTIAL, to receive concise .pdf handout version of this article. If you are mobile, it will download to your device for easy future reference)
#1 KNOW YOUR CREDIT SCORE
If you don’t already know your credit score, go and find out what it is. You will be better off knowing what your score is BEFORE looking at homes, finding your dream home and later finding out that what you want is not even within your reach. The heartbreak and disappointment can be avoided. Finding out your credit score is also helpful before speaking with lenders. It’s like being prepared for the biggest test of your life. Would you feel good going in unprepared?
#2 GET PRE-APPROVED
After finding out your credit score, but before even looking at properties, get a pre-approval from a qualified lender or mortgage broker. Better to find out what a lender is willing to give you before looking. Find out what you can afford, how much you might spend in monthly mortgage payments, property taxes and insurance BEFORE looking. Again, this avoids disappointment and the epic fail that follows when you find out that you can’t get a loan on a home you fell in love with.
The pre-approval process requires that you submit current tax documentation, typically from the last 2 years, and additional information. During this time, you’ll also have the ability to get an understanding of your spending habits and make an honest assessment of your budget. It may seem like a cumbersome process, but you will appreciate the fact that you did this before a contract is signed. Be sure to go through this process with a qualified mortgage broker or lender. Having clarity on your financial picture will allow you to have clarity about your assets and liabilities and then, you’ll know what you can comfortably spend on a home. In the end, the pre-approval process will result in knowing the amount you are able to borrow and knowing this information before you look at properties will save you a ton of time.
#3-DON’T BUY THE BEST HOUSE IN THE NEIGHBORHOOD
I wouldn’t necessarily recommend that you buy the worst home in the neighborhood, but you definitely do NOT want to buy the best. Buying the best home in any neighborhood puts you at the top of the home-buying food chain. Should you wish to refinance your home in the future, it’s likely that there will be few, or no, comparable sales in the neighborhood that you can use as leverage to obtain the best loan and pull the most equity out of your home. Buying an “average” home in any neighborhood will put you in a better position to see the greatest value appreciation, even over a short amount of time. You may have to put a little TLC into the property, but a little renovation can go a long way. Watch those home-improvement TV shows and you can learn how to invest very little, but get back a lot of value in return.
#4-MAKE A WISH LIST
What do you want? Before you even think about emailing, calling or even texting a real estate agent, put your wish list together. Again, watch those home-improvement TV shows to get an idea of what you want. Remember, KEEP IT REAL and keep your numbers in mind when you are putting this list together. If you know you can’t even afford the home in a gated community with high monthly maintenance requirements, put yourself outside the gate. If you know there are extra costs for living in a community on the water, don’t put the home on the water on your list. Make two lists, name them however your wish. On one list, put the “must haves” and on the other list, put the things you “wish” to have. Be willing to give up the items on “wish” list. Be practical and don’t let this process become too emotional for you. Remember, it’s just DIRT!
#5-FIND A REAL ESTATE EXPERT YOU HAVE CONFIDENCE IN
Yes, the handsome agent on the billboard in front of your office looks good and yes, the gorgeous agent on the bus bench you pass every day is tempting to hire on the spot, but choose your real estate agent wisely. Find out which agent has the most experience in the neighborhood you are looking into. Getting a referral from someone you know and trust is probably the best way to find an agent. Make sure they have patience to explain the process, details and the contract. If they rely upon too many other people for things you expect a realtor to know, you might be better off finding someone else. You will be spending a large amount of time with this person in a very short amount of time. Make sure you like them because you really want to enjoy the process. If they don’t seem that into you, don’t take it personally and move on. If the relationship works out, then you will both benefit. You can search for agents online, but again, the very best way to find an agent is through your own network or a personal referral. You can always check reviews online using services like Zillow, an agent’s own website, their YouTube videos and various search engines, such as Google, Bing or Yahoo.
#6-MEET THE NEIGHBORS
Be a Social Butterfly, get the skinny on the fat and speak to the people in the neighborhood. This process might reveal information about everything you want or need to know, but sometimes, you might find out things you don’t want to know. Like calling a previous employer that has been referred as a resource, however, this may not result in the revelation of any information. But, if you are lucky, you’ll find that person who loves to gossip and maybe, that neighbor can share what it’s like to live in a specific neighborhood.
#7-HIRE AN EXPERIENCED REAL ESTATE ATTORNEY TO REVIEW CONTRACTS BEFORE THEY ARE SIGNED
Before you bind yourself to the largest purchase you will every make during your life, have an experienced and qualified real estate attorney review the real estate contract BEFORE you sign the contract. Unfortunately, once you sign the contract, your ability modify or make changes to the major terms of the agreement are diminished, greatly. We have seen this too many times where a client comes to us AFTER the contract is signed and they wish to make changes. Unfortunately, after the contract is fully executed by all parties, it’s usually more difficult to make changes to the major terms, such as the purchase price. Get a real estate attorney involved early on in the process to avoid any unhappiness later.
#8-GET A HOME INSPECTION AFTER THE CONTRACT IS SIGNED
You can’t really do a physical inspection of the home until after the contract is signed, but this is an integral part of home buying and should be done early on in the process. What is a home inspection? A home inspection is where the potential buyer gets an opportunity to analyze the structure and integrity of the real estate. You may see a visually appealing home on the outside or something with awesome curb appeal, but unless you have a qualified inspector go through the property with a fine-tooth comb, you may never know that the plumbing is failing, the air-conditioner is on its last leg, that the foundation is cracking or that the roof has leaks that are not easily identifiable. A qualified inspector will make every effort to determine the integrity of all the major aspects of the property.
So, after reviewing this checklist, you will be armed with the tools you need to find the right home. But remember, before you sign that contract, let a real estate attorney review the terms to make sure you get what you bargained for. Khani & Auerbach is a law firm with experienced real estate attorneys and we are here to help.
Looking to see the estimated value of a potential real estate purchase or real property you presently own? Check out our partners at Zillow for more information.
