By Brooke L. Willmes
It’s just a long period of sitting around and waiting right now for so many of us. If you’re like many renters and homeowners, you’ve decided when this ends you need a new place to call home. You’re looking at the MLS listings we are sending you or –gasp–going on Zillow 700 times a day and you’re not seeing many houses. Why? People are holding off listing their homes because it’s actually illegal to show/see homes right now. So the inventory is being held back until Governor Wolf either considers real estate essential OR the state is opened back up again.
So if there are no homes to see right now, what can you do? You can “meet” with a real estate agent and choose your “team” to work with during the process. We are meeting with lots of buyers on Zoom, Facetime or other formats. Sure, you’re not meeting in person but talking with that agent will determine if you’re a good fit and we can get you teed up with a search so that when new homes do hit the market, you’ll be ready to go. Some of my clients are buying now sight unseen through virtual tours and while that may seem like a far fetched idea, there are now bidding wars going on for the most desirable houses and you may find yourself buying sooner than you anticipated during a pandemic!
You can get preapproved! This is the process of reaching out to a lender and giving that lender the required information to figure out what you qualify for as well as pull your credit. Credit score and your debt to income ratio will likely present you with a few options to sort through and a great lender will offer side by side comparisons of those options. You could seek max approval or seek an approval with a monthly payment that meets your comfortable level–a lot of my clients base this off what monthly rent they currently pay–and what $100 or $200 more a month might feel like…something like that. From there, you can get a sense of the loan you’d want to take and what your price range should be. Most people come up with an “ideal” price point and one that they could go up to if the perfect thing came along. From there, your agent can set up your search and you’re not overshooting or undershooting what homes you are receiving.
You can also become educated as to the process. A good agent will explain the process of buying a house and what to expect–but there are also a lot of resources out there that are helpful. Pennsylvania makes a great “Consumer Guide to the Agreement of Sale” your agent can provide that breaks down the eventual “offer” you will put in. You can google local homebuyer grants and seminars–you may just find a free few hundred dollars sitting around for you if you take a class…that’s like paying yourself during this time!
By Mary Hogan:
Since the dot-com explosion of the late 1990s, online mortgage companies have become an increasingly significant force in the home loan industry. We now have so many options both online and traditional brick and mortar. As consumers, we need to evaluate what is best for us and can start by asking a few questions:
- Do you care about speed and certainty?
- Do you care about affordability and rates?
- Do you care about transparency and accessibility?
- Do you care about face-to-face interactions?
Brick and Mortar Loans
- Local expertise and connections: Smaller banks argue that there is an advantage to working with people who know the area and sometimes have an existing relationship with the realtor. This can put them in a better position to resolve conflicts during the loan approval process.
- Simplicity: Most people lead busy lives, so there is something to be said for eliminating as many hassles as possible. For example, if you apply for a mortgage at your local bank, you might have the opportunity to manage all your accounts using a single log-in. That can make paying your monthly bill easier, too.
- Local ties: When you make payments to a nearby bank, there is a good chance it will take that money and lend it to other individuals and businesses in the area. Smaller banks also tend to support local events and charities, thus bolstering the local community.
- Personalized service: No matter how you look at it, using an online mortgage lender just doesn’t provide the same kind of one-on-one service you get when you work with a local mortgage lender. For a number of home buyers, that kind of face-to-face customer service is invaluable. And yes, many online mortgage lenders do have loan officers you can speak to on the phone, but they are often available only during business hours. Alternatively, loan officers at brick and mortar banks may be available during nights and weekends, which can be helpful when you need that pre-approval to put that offer in on a Sunday by 4pm. In a competitive market, that accessibility and timeliness can be a serious advantage.
- Online lenders may be limited in expertise-IMPORTANT: Many online lenders don’t employ mortgage specialists who know the ins and outs of your local market. Online mortgage lenders aren’t typically as well-versed in local home buyer’s incentive programs, or such programs that could reduce closing costs or interest rates. Its also a big disadvantage if you’re applying for a complicated loan, such as an FHA, VA or self-employed loan. Keep in mind online lenders are great for conventional scenarios: salaried borrowers without financial or rough credit, and like properties that are typical or similar for the area. Working with and having access to the same loan officer throughout the process and able to evaluate your particular financial position is invaluable. Additionally, your real estate agent may want discuss the various options that would work well for you with your lender depending on the regional market.
Going with an online lender has certain benefits, especially if you are someone who likes to feel in control of the loan process.Younger home buyers tend to be keen on online mortgages: A recent survey by NerdWallet found that a full 64% of millennial mortgage applicants would prefer to get it all done digitally.
- Convenience: Online mortgage lenders such as LendingTree and Quicken Loan’s Rocket Mortgage allow home buyers to complete the entire mortgage application on their laptop or phone and can be done in a matter of minutes.
- Anonymity: Many customers like the anonymity of electronic communication, which sometimes makes it easier to disclose one’s financial situation.
- Selection: Bigger mortgage companies may provide more financial products. For example, Quicken Loans offers specialized products such as the Federal Housing Administration (FHA) and VA loans. However, brick and mortar banks and brokerage generally always offer these and more and provide easily accessible loan advice.
- Comparing: It always makes sense to check out a minimum of three lenders, and online is the easiest way to compare rates and terms. You’ll want to get a good-faith estimate that breaks down the mortgage’s terms, including the interest rate and fees, in order to make an apples-to-apples comparison for the best deal.
- Possible Lower Rates: Online mortgage lenders don’t have the overhead costs that brick-and-mortar banks do, some will pass a portion of the savings onto their customers in the form of lower mortgage rates and/or lower fees.
- Online Scams Are Rampant: Keep in mind, the internet is filled with scams and fraudulent predatory lenders. Remember, if a home loan offer sounds like it’s too good to be true, it probably is.
At the end of the day choosing the right mortgage process is specific to the consumer. So you should think about what works best for you and the level of buyer you may be, i.e., first time, repeat, FHA, VA, investor. Additionally, consider your comfort zone in terms of conducting business…online vs. in person. You want to consult your real estate agent as they know the market and may have insight into various lenders having done transactions with them in the past. The good news is that we have lots of options!
By Sal Gardner:
You’ve decided to buy a house…you think it’s going to take a long time and you’re excited for the process. But what happen when you find a home you see yourself living in? Should you take time to think it over or move forward with making an offer right away? If you see a house you like, should you sleep on it?
The first question to ask is, “How would I feel if I don’t get this house?” Even if a home has been sitting on the market for a while, someone else can still get it before you get the chance. If this is the right house, you could be letting the right one get away. It’s best to make the offer and move forward so you won’t regret it later—if you’d be upset. If you wouldn’t, it might not be the right house.
The next question to ask is, “How much do I actually like it?” Does this house have all the features you want? Is the neighborhood where you want to be? Is it accessible to work via highways or public transportation? Not every home will have everything you want-there will always be compromises. Most times it’s a balance of wants and needs, along with a feeling of seeing yourself living there. If it’s a good fit and you like it, why take the chance of it getting away?
What about getting cold feet? If you truly regret making that offer, there is a way out during the home inspection process. It will cost the price of the inspection, but at least you secured the property and gave yourself time to think before taking the next steps. This will allow you to look again for the right house.It’s best not to wait before making an offer on a house you like. With good homes going fast, it’s better to move forward, than to take time to think it over. By the time you decide, it could be gone.
By Rich Bruder:
Moving into a rental property should be the easiest type of real estate transaction possible. In renting a home, it is true you do not get the tax relief, financial stability or equity that is the fruit of homeownership, but you do have the luxury of being the “customer.” As a renter, you remain a consumer paying a monthly fee for a valuable service. A renter has the luxury of a lease that can be negotiated by his or her realtor that spells out what property maintenance they never need to worry about. Generally speaking, a renter need never call a plumber, a roofer or any such general contractor.
So, if renting a property sounds like your cup of tea, how do you get started? All that’s needed is approval from the property manager, owner or landlord. This approval starts with an application. It’s a lot like applying for a job: in fact I would recommend dressing like you were applying for a job when meeting potential landlords. Just as you are sizing up their property to rent, they are sizing you up as their potential source of income. The application will request ID including your Social Security number, they may ask for 2 or 3 personal references, proof of income, proof of employment, rental history, and a brief list of assets and liabilities.
In most cases, they’ll ask permission to pull your credit score. In some cases, they may ask for 2-3 months of bank statements. It may look like a lot but it’s much less invasive than what is required to borrow funds for home purchase.
I would also recommend an introductory letter to go along with your rental application. Much like an employment cover letter, it is a great way to humanize all the basic facts, dates and numbers provided. Also, if there are gaps in your rental history, employment history, or blemishes to your credit, this is a great way to explain yourself. Perhaps you’ve never rented before. Maybe you’ve taken off time from work to go back to school, or suffered through a messy divorce that may have impacted your credit score. Everybody has a story; in many cases potential landlords may be more sympathetic to them than a bank would.
Last, you will need a down payment of at least 3 months rent. These monies will be your first month’s rent, your last month’s rent and security deposit. If you have a pet, a landlord may request an additional security deposit, which may be refundable if the pet does no damage it may be additional rent. Bring a checkbook: the best places go quickly and if you have a check in place, a landlord will view you as highly motivated and if approved, secures the place for you in a first come, first serve mindset.
The typical lease commitment on a rental home is a year. Should you choose to move out at the end of your rental agreement and you’ve maintained your rental property in the condition you originally leased it, you have the luxury of not paying rent for the last month you are living there and you would get your security deposit back to have some money to put towards your next real estate transaction.
By Jenn Bazydlo:
Coming up with enough money for a down payment and closing cost can be a major obstacle for many homebuyers, especially many first time homebuyers. In Philadelphia, closing costs alone can run between 5% and 6% of the purchase price of the home. For a $250,000 home that means coming up with an additional $12-15k on top of your down payment. Luckily, if you are purchasing a home with an FHA, VA, or conventional mortgage underwritten by Fannie Mae and Freddie Mac, there is an opportunity to have the seller pay some or all of your closing costs through something called a “seller assist.”
The amount of seller assist permitted is based on the type of mortgage and the down payment percentage. For an FHA loan, a buyer could make as little as a 3.5% down payment and have the seller cover up to 6% of their closing costs. For conventional loans, the buyer is eligible for up to a 3% seller assist when making a down payment of less than 10% and up to 6% if making a down payment above 10%. (Conventional down payments can be as little as 3%).
Even if you are not short on funds, there are some other reasons a seller assist might be useful. For example, having the seller pay your closing costs may allow you to put more money down. This is especially helpful if you are close to a benchmark down payment that would lower your interest rate. Maybe you have come up with an 18% down payment, but are struggling to get to 20% down which would allow you to avoid private mortgage insurance (PMI) and get you a better interest rate. If the seller covers part of the closing costs, you can now put that money towards your down payment. Conventional loans tend to have lower PMI costs than FHA and unlike FHA loans, PMI can be eliminated when your equity reaches 20%, saving your thousands of dollars over the life of the loan.
But seller assist is not right for everyone. In a seller’s market with low inventory, asking for a seller assist might cause you to lose out on your dream home to a competing with offer without seller assist or because the home needs to appraise for the inflated amount (net to seller PLUS the seller assist), the home may not appraise if you submit an above market price offer to compensate for the sellers assistance. Additionally, your variable costs (the closing costs dependent upon the cost of the house) will go up when you take an assist. Typically these are transfer tax and title insurance. You’re adding money to what you need to pay off on your mortgage by rolling in your costs so it typically isn’t done unless you need to take it.
So how do you know if a seller assist is right for you? Talk to one of the expert realtors with Brooke + Co. They, along with our trusted lending partners, can discuss all your options and come up with solutions that get you in your desired home with a mortgage that best suits your needs.
By Rich Bruder:
During these crazy times with COVID-19 quarantines not allowing the majority of our population to be able to go about our usual business, shopping for real estate is also impacted. April should be smack in the middle of what would traditionally be the real estate market’s busiest season. Virus or no virus, buildings still stand, so it stands to reason an investment in real estate is still a smart one. You can’t quarantine yourself in your home without a home!
So the traditional way of shopping for a home has morphed into virtual online shopping just like everything else.
GPAR, (The Greater Pennsylvania Association of Realtors) released the following;
“Given the substantial problems Governor Wolf’s order will create with ongoing transactions, PAR is releasing a brand new COVID-19 addendum to the agreement of sale (Form COVID) so parties can agree to postpone contractual deadlines while the impacts of this situation can be
assessed. This form allows the buyer and seller to agree that in the event performance becomes impossible or impractical either party can unilaterally invoke an automatic extension of all deadlines (the default is 30 days) that have not yet passed, including the settlement date. For example, if the Agreement was signed just a few days ago, pretty much every deadline would have 30 days added. If the parties are just a few days from settlement the addendum extends settlement by 30 days but doesn’t reach back and reset the inspection contingency or other deadlines that have already passed.”
This form is basically a pause button. It gives the parties a set time to figure out a backup plan without being under the gun with immediate deadlines, but it doesn’t change anything else in the agreement.
So by all means while you’re sitting at home looking online at properties thinking about how someday you might like to start looking at investing in real estate, keep in mind, you still can.
By Sal Gardner:
When buying a home, there are many choices to make. Things like the number of bedrooms, city vs. suburbs, or a finished basement may come to mind. But one of the most important decisions to make is the size of that home. There are a number of factors to consider when choosing how much house you’ll actually need.
The first thing to consider is how long you plan on living here. Many times homeowners seek their “forever” home and try to anticipate their needs before they arise. Will you need that home office? Will you be starting a family and need room for the kids as well as visiting parents? Will your parents move in with you as they age?
Others choose a “for a few years” home. The average homeowner stays for about 4-6 years. By considering your current needs, it frees people up
to make choices that work better with future plans. Since home values go up over time, any gained equity can be used for the next place. It can be larger, or in a different city. This gives owners more flexibility down the road.
Another consideration is cost. Does a first time buyer want to be saddled with a payment they are reaching to afford? By choosing a more reasonable home now, it can give peace of mind while adjusting to homeownership, while preparing for any future “what if” scenarios. Utility costs are typically cheaper on a smaller home, so that may free up funds for other things.
A third consideration when choosing what size of home to buy is lifestyle. Is the buyer savvy with yard work? Do they want to spend their weekends doing home repairs/improvements? Perhaps they like to travel or go out during the week. Maybe a smaller, less burdensome house may be better. A condo may even work here to reduce responsibilities. The cost of condo fees may be worth the peace of mind both that someone else is maintaining the exterior of the home.
When choosing a home, size does matter. Be sure to do your homework and truly consider how you live, how much you realistically want to spend, and know that your first home doesn’t have to be forever.
By Brooke L. Willmes
Rowhomes are narrow and their basement stairs are no different. Hardly the wide, ADA accessible basement stairs found in newer construction, these narrow sets of stairs have often been relocated in old homes and sometimes get even more narrow and treacherous with turns, uneven risers and missing and broken risers. They were often custom built by the homeowners or tradespeople. Treacherous to some, charming to others but an accepted part of life for rowhouse dwellers…so what do you need to think about when you’re looking at these homes?
First, they’re very narrow. The width varies from home to home. The door frames leading into the basements are very narrow as well. Why does this matter?
If laundry is in your basement, eventually those machines will die and you’ll need to replace them. Buying a rehab with no washer/dryer? Perhaps the contractor was trying to save the cost or decision as to what model/type to choose but very possibly, it was too narrow to get a conventional set down the steps. A tape measure will be your friend on your house hunt! You’ll want the measurements of the smallest area of the opening–noting that doors and trim can be removed as well as basement railings. I always like to get the width of everything intact as well as subtract out the trim and railings measurements for the widest possible measurement so I know if I’m getting into a project!
So let’s say you measure and you find out like so many other countless Philadelphians that your basement is too narrow for a conventional washer or dryer. What are your options? You could easily go with a mini-washer/dryer with the downside being they hold far less laundry. That may be okay if you’re single but if you’re anything like I was when I didn’t have children, I didn’t want to spend my days doing mini-loads. I wanted to do a dark and light load each week–period! You don’t need to give up that dream. There is a specific brand that is designed to be taken apart and reassembled: a Speed Queen. Speed Queens are the workhorses of laundry. They have very few frills, are commercial machines, have LARGE capacities and get the job done. They usually run about $900-1100 each, meaning a larger initial investment but they will last probably far beyond your time in the home with very few repairs needed ever because of how simple the machines are built. When they do reach their demise, they can easily be disassembled rather than destroyed!
Other options include moving your laundry upstairs–if you’re next to a bathroom or inside a bathroom, the cost will be far less. It’s a tricky proposition in a small rowhome to find a location where laundry can fit so people usually go for stackable units. Make sure the capacity is full size–otherwise you may be stuck with the same “load a day” lifestyle! If you’re not near a water source, this becomes infinitely more expensive. It can be a nice value add to your house if you already have enough closets, it doesn’t kill a bedroom, etc.
One last option is installing a trap in the first floor–a portion of the floor that opens usually with a circle pull that sits flush into the floor and the homeowner usually covers up with an area rug. It’s a complicated job for a contractor–joists must be cut and thus may require structural support and typically will cost more than getting a Speed Queen but if you’re someone who frequently moves things in and out of your basement, it might be a useful consideration.
Next, rowhouse basement stairs often do not have railings. The simple reason behind this is while that adds to safety in holding a railing going down, it will greatly inhibit the ease of getting things in and out of your basement. Sometimes homeowners take down railings to move something and never replace them. If you’re getting a VA or FHA loan, your appraiser will require one to be installed and it’s one of the considerations the seller must budget for when accepting a VA or an FHA loan.
Lastly, rowhouses were built for much shorter people. If you’re even average height, plan to avoid hitting your head on the way down them. As I’m 6’0″, I have become less sensitized to smacking my head against joists and pipes! Homeowners will often add some padding or paint particularly gruesome spots with a fluorescent paint. For every joist that is removed, a structural support needs to be most likely added and if you decide to give yourself more head clearance, make sure you consult a qualified structural engineer and hire a competent carpenter to do the work!
By: Mary Hogan
It sounds crazy during a national pandemic, but I have continued to consistently get requests for showings for my rental listings. Leases end, inventory is low, relocations, and a myriad of other reasons cause folks to find new housing…again, life and time continues to move forward no matter what the obstacles we may face.
So, this would be a great time to really consider becoming an investor and purchasing rental properties rather than placing your money in the market that doesn’t translate to tangible needs. If we are headed for a recession, real estate can be one of the safest ways to invest your money and renting for a while may be a safer bet for some if their financial situation has changed, driving demand up and then rental prices. When fewer people are buying, more are renting: everyone needs a place to live. Conversely, if we are not in a recession but housing purchase costs are high, with inventory low, folks turn to renting as well, in order to buy time until purchasing is more within their grasp.
There are two kinds of investment properties to consider: multi-family and single family. Rental income will be diversified for multi family homes (more tenants=more rental income, less possibility for full vacancy) unless the investor already has multiple single family homes.
A single family home may be manageable and economical for the individual investor to take care of themselves. With a single family, there is more to singley maintain: one roof, one basement, one yard, one sidewalk per rent check. With a multi-unit, you still only have one roof, one basement, one yard and one sidewalk. If you hire a rental management company, the fee is usually per unit and runs about 7-12% of the rental management fee. While their repair people usually charge less than you’d find on your own, they do charge to manage those repair people and/or keep them on salary so those costs aren’t included in that management fee.
Multi-units aren’t usually maintained like you’d find single family homes maintained–typically investors will put bandaids on things to make them most profitable. That may or may not be how you will proceed, but you should lower your expectations of what to expect during an inspection if you’re purchasing something that’s been rented. Some areas may have different costs for multi-unit buildings as well like licensure, tax rates and in Philadelphia County, landlords must pay a $300 trash fee that single family homes don’t require. Your agent is a great place to start to ask these questions.
Typically single family homes have a broader base for resale. There are far fewer buyers for multi-unit homes than single family houses. If short-term appreciation is your goal, it may be easier and cheaper to both buy and sell a single family home. Maintenance, as noted above, will be typically more though because it’s standalone. Beyond that, certain types of homes make more sense to buy than others: skip the ornate, unique houses that everyone loves and go for easy to maintain, easy to update and in desirable or soon to be desirable neighborhoods close to public transportation and amenities.
If it’s your first go at investment properties, a single family home may be the easiest starting point. Ask yourself the following questions to help determine the best investment strategy for you:
- How much rental income do I hope to get every month, if any, or is appreciation my goal?
- What can I afford in terms of a down payment? (Multi-units may require 25% down, single families usually require just 20% down, over 4 units require commercial financing and those terms are quite different than residential mortgages)
- Can I handle rental property management on my own or do I need a professional?
- Do I want to buy and hold the rental property or am I seeking appreciation to sell it in the real estate market sooner rather than later?
Once you have answered these questions, you can begin your search for the right properties for you. If we are headed into a recession, know that homeownership definitely decreases and the demand for rentals increases. Being flexible with your renters in terms of lease length and reasonable market rents will also help retain good tenants to carry you through. If we aren’t and the market stabilizes, more and more tenants will continue to not be able to afford increasing prices and stay tenants longer.
So, in conclusion, stay optimistic, use this down time to do some research and figure out what works best for you and your long term goals. We are here to advise and guide your search into becoming an investor.
By Consuela Franks
Many of us are spending a lot more time in their homes than ever before. We have dogs, cats, the random gerbil, bird or ferret as well as children and significant others sharing our space. While it can be a time of connection, it can also be pretty eye-opening about what needs we have that our current homes just can’t provide. That dog is constantly underfoot with no yard, these kids really need to have a space of their own to retreat to, that corner in the living room for a home office just doesn’t cut it. These now sometimes glaring needs may have been previously glossed over in our rush to get from one place to another and check off our to-do lists.
During these uncertain times the thought of moving, even for the second or third time, may seem daunting. It doesn’t have to be. While the safety and well-being of ourselves and our families has never been more at the forefront of our psyches, taking the time now to think about and plan for what you are looking for in a new home and how to best situate your current home to sell quickly and at the best price now could pay off down the line when life is back to full swing. Whether that looks like being at work all day and a calendar full of social events or running to and from kid’s activities and appointments, we are all in a space where we have more at home time to consider the steps involved in gaining a home that we love.
If you have already decided that it is time for a larger space or a house with a yard or to be closer family, the first consideration is budget. There are fees and costs involved in the transaction to consider and speaking with a knowledgeable Realtor and lender will help you navigate the best way forward for your particular situation. The amount that you are able and willing to spend can vary greatly per individual, so getting a handle on that now is a great idea. In order to make the best move financially, things to consider include whether this is seen as a step up to your next home and you plan on moving in a few years or whether you’d like to consider your next buy your forever home. You and your agent can craft a plan to get you into a home that meets your physical and financial needs best if you have some idea of what you want from the start.
Selling a home is a process. You need to consider many factors that range from removing clutter and possibly staging to making sure that any updates you decide to undertake will pay you back for your efforts. Although a home consultation from an agent is not currently possible in person, a facetime or video conference can be just as valuable in helping you and your agent converse about your current home and how to present it in the best possible light to buyers. Small projects that can be done now may be a great way to occupy downtime and start getting things lined up and ready.
Making the decision on whether to buy a home first, sell your current home first or try to tee it up so both can be done in conjunction with one another varies greatly depending on your home and financial situation. If you have a house full of people that would make keeping the home show ready difficult and have the financial means to do so, buying first may be the best option. If you find yourself in a situation where it would be a financial hardship to purchase first, there are plenty of other options that your agent can explain. Hope that you are staying safe and healthy in these uncertain times. Feel free to reach out with any questions, I’m happy to help no matter where you are in the process, dreaming, planning or otherwise!