CategoriesBuyers First Time Home Buyer Real Estate

How Home Buyers Can Navigate Inventory Challenges


Whether you’re in the process of buying or selling a home, or just keep up with real estate news, you’ve probably heard about the lack of inventory in housing markets throughout the country.

While fewer properties on the market means increased competition for buyers, there are still ways for home shoppers to navigate inventory challenges and have an edge in the marketplace. Here are a few tips :

Tap into Pre-Market Opportunities

Pre-market (or private market) listings are homes that are for sale (i.e., there is a signed listing agreement), but are not yet publicly listed on the MLS. As a result, buyers won’t find these listings on major search portals like Zillow, Trulia, or Realtor.com, or national brokerage sites such as Redfin.

This could be for a variety of reasons. For example, a seller may want to do some prep work to get their home ready for sale or may be waiting for spring market. In some cases, it’s the desire for more privacy.

Pre-market listings make up a growing segment of the market, and they are typically on networks only available to real estate agents. And when inventory is low and there is strong competition among buyers, it’s so important to work with an agent that can tap into these networks and keep you informed on new opportunities.

All of my clients have access to Zenlist, a home search app that includes both active listings from the MLS and pre-market listings, all in one collaborative platform. Meanwhile, @properties’ internal @agent app is another resource that helps match my buyers with homes for sale. Reach out to me to learn more about these networks.

Get Pre-Approved

An up-to-date mortgage pre-approval (or proof of funds if you’re a cash buyer) is essential if you’re looking to purchase a home nowadays. As a buyer, this not only lets you know what you can afford, but also lets the seller know that you’re a qualified buyer, which is especially important in today’s environment if in-person showings are involved.

Talk to your mortgage broker to make sure your pre-approval is current, and if you don’t have a mortgage broker, your agent can share recommendations.

Request a Digital CMA

Whether you’re just starting your home search or preparing to make an offer on a property, a Comparative Market Analysis (CMA) will give you insights into pricing and market activity in your specific area.

@properties’ proprietary Digital CMA takes the traditional CMA (think paper printouts and PDFs) to the next level by providing real-time MLS data in an interactive, digital platform that you can access on the fly. You can also add properties to the report and leave comments for me to review.

Ultimately the Digital CMA ensures you always have the most accurate data to make the most informed offer on a property.

Make Your Offer Stand Out

When inventory is low, multiple offer scenarios are more common. If you’re ready to make an offer on a home you love, work with your agent to do everything you can to make your offer stand out, especially if the seller has other offers.

Beyond being pre-approved, there are other ways to make your offer more appealing, but it’s case by case basis – reach out to me to learn more about my buyer strategy!

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A portion of this post originally appeared on @home, an @properties blog.

Regret proof your home purchase
CategoriesBuyers First Time Home Buyer Uncategorized

How to ‘Regret-Proof’ Your Home Purchase

I’ve found that one of the biggest hurdles first time buyers or purchasers in general face is the idea of *regret* or having cold feet. Are you making the right decision? Is this the property for you? Are you sure you are ready for this commitment? Will something better come on the market? What if you need to move next year? So many questions. While I don’t have the exact answer to these questions, I have complied a list of ‘regret-proof’ steps to help you be confident in the purchase of your first or next home.

Step 1: Talk to your Lender

If you’re getting a loan, this is a very crucial first step. While I know everyone loves a little online house shopping, if you are planning to purchase you need to get serious about your budget & understand your limits. Your lender will work with you on a pre-approval, discuss loan options & programs, & establish an ideal monthly payment that makes sense for you, your lifestyle, & your comfort level.

Step 2: Understand Unexpected Costs

The biggest regret I see buyers have is not understanding the unexpected costs & general costs of home ownership. While it’s easy to say owning > renting because your $2000/mo can go towards your mortgage & equity!! BUT, trading your monthly rent towards your mortgage doesn’t always translate that cleanly. You need to take into account HOA fees, taxes, PMI, etc. While your Realtor & lender will calculate & work within those limits, don’t forget about the cost of homeownership. I usually tell my clients to budget 1-3% of their home purchase on yearly maintenance. That may be a conservative number, but you need to be prepared to make necessary repairs when/if they are needed.

Step 3: Don’t Max Out your Pre-approved Limit

You are pre-approved up to $750,000 – Congratulations!! People can often ‘afford’ much more house than they should comfortably be spending. A common theme I see with first time buyers is maxing out their limits & becoming house poor. Meaning they save & save for the down payment to afford the dream condo or single family home, but upon closing can’t afford to furnish it, sacrifice their gym membership, or give up the next few family vacations. While the pride of homeownership is an amazing feeling, don’t over extend you or your budget beyond your comfortability.

Step 4: Work Backwards Towards your Home Budget

Home buying can get emotional quickly, but don’t let it. Be dedicated to your budget by understanding your limits, your income, your current obligations, & honor whatever current/upcoming debt you may have. While your pre-approval is great, I always recommend my client be painstakingly pragmatic when home shopping. Don’t get me wrong, if you are looking for a dream house with no budget, I am more than happy to assist 😉

Nobody who ever gave his best regretted it. – George Halas

Terms You Need to Know
CategoriesBuyers First Time Home Buyer Real Estate Uncategorized

Terms You Need to Know When Purchasing Your Home

Welcome back to my #homebuyerseries! After last weeks all encompassing guide, I am excited to continue to virtually educate on the in’s & out’s of buying your next home! I am going to post smaller bits & pieces that are quick reads. This week’s focus is on all of the real estate terms you are likely to encounter throughout your purchase.

Pre-approval vs. Pre-qualification – A mortgage pre-approval is an estimate of the amount you can borrow based on a lender’s verification of your financial documents, employment and credit history. Pre-approval is essential in a competitive home-buying environment because it immediately demonstrates to a seller that you are a qualified buyer (keep in mind it is not an actual loan commitment, but it gives you an important head start on the process). Pre-qualification, on the other hand, is an informal, preliminary assessment of your borrowing power based on basic information you provide to a lender.

Comps – Short for “comparable properties”, comps help determine the current value of a property. They are chosen based on property attributes like price, location, condition, features and other criteria.

CMA – Also known as a Comparative Market Analysis, this pricing tool is an evaluation of a home’s current value based on recent comps. Once you’ve found a home you love, your broker will prepare a CMA to help you formulate an offer.

@tip: @properties has an exclusive, interactive CMA that is the first continuously-updating CMA platform in our local market. Contact me if you want an up-to-the-minute, accurate CMA sent directly to your inbox.

Appraisal – If you are obtaining bank financing, the bank will order an appraisal, which is an opinion of a home’s value. Unlike a CMA, an appraisal is performed by a licensed appraiser who must follow a number of established guidelines. While appraisers use the same data as real estate agents to find comparables, they have additional guidelines to follow in order to protect the lender.

Pocket Listing – Also known as an exempt listing, a pocket listing is a property that has a signed listing agreement but is not yet listed on the Multiple Listing Service (MLS). This approach is typically used by sellers who want to protect their privacy or pre-market their home before it’s ready to show.

@tip: With the help of @gent – @properties’ exclusive internal communications app – our brokers are alerted to pocket listings that match your preferences before anyone else!

Contingency – A condition that must be satisfied before closing occurs. These conditions are written into the contract and typically include things like a home inspection, mortgage financing or the appraisal. If you include a home inspection contingency with your purchase agreement, for example, you have the right to have the property inspected within a specified time period, and can cancel the contract or negotiate repairs depending on the results.

As-Is – When a home is listed for sale “as is”, it means the property is being offered in its present condition and the seller does not intend to make any repairs or improvements. As a buyer, you are usually advised to include an inspection contingency as part of the contract, giving you the option to walk away from the deal based on the inspector’s findings.

Fixed Rate vs. Adjustable Rate Mortgage – Two types of mortgages available to homebuyers. A fixed-rate mortgage has the same interest rate through the entire term of the loan, while an Adjustable Rate Mortgage (ARM) is a loan in which the interest rate periodically adjusts based on a specified index. Also, what is PMI.. more on that here.

Earnest Money – A deposit, given by the buyer to the seller, which secures the contract until closing and lets the seller know you are serious about the transaction. An initial deposit must be given with the contract, and the balance of the earnest money is usually due upon attorney approval. Earnest money is typically held in an escrow account until the closing, when it may be applied to the down payment and/or closing costs.

Closing Costs – Expenses and fees associated with a real estate transaction that are paid at the closing. Examples of buyer closing costs include a loan origination fee, title insurance, survey, attorney’s fee, home inspection fee, appraisal and credit report fees, and prepaid items such as escrow deposits for taxes prorations and insurance.

Title Insurance – An insurance policy that protects the buyer or lender against defects or problems with the title when property ownership is transferred. Title insurance protects against claims for past occurrences, while other forms of insurance protect against future events.

Of course, there are SO many more terms to know, more details to be aware of, and steps involved in purchasing your first home. This is just a quick guide to get the conversation started. As always, if you have any questions – I’m here to help!

What is PMI?
CategoriesBuyers Chicago Real Estate Renters

What is private mortgage insurance?

What is PMI?

As the first post in the First Time Home Buyer Series, I want to address the initial question clients always have when looking to get a mortgage: What is private mortgage insurance?

Private mortgage insurance, PMI, is a type of mortgage insurance from private insurance companies used with conventional loans. Similar to other kinds of mortgage insurance policies, PMI protects the lender if you stop making payments on your home loan. PMI can be arranged by the lender and provided by private insurance companies.

So, what is PMI? The ultimate catch 22**

Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home’s purchase price – or, in mortgage-speak, the mortgage’s loan-to-value (LTV) ratio is in excess of 80% (the higher the LTV ratio, the higher the risk profile of the mortgage) – https://www.investopedia.com/mortgage/insurance/

While it helps borrowers attain a loan with a lesser down payment & potentially become a home owner sooner, its purpose is to protect the lender. Important to note: Similar to interest, property tax, and homeowners insurance, payment of your PMI does not build equity in your home.

You may be thinking that buying insurance on your mortgage may sound a little strange, but it protects the lender’s investment in the home. While yes… it’s another fee you need to pay, it’s advantageous to homeowners as it makes home affordability a reality sooner.

PMI MISCONCEPTIONS

  • PMI isn’t just for people who can’t afford a 20% down payment. It’s also for people who don’t want to put down 20%, so they have more cash on hand for repairs, remodeling, furnishings, emergencies, etc.
  • PMI isn’t forever. Borrowers pay their PMI until they have accumulated enough equity in the home that the lender no longer considers them high-risk.
  • The rate of your PMI depends on the size of the down payment and mortgage, the loan term and your credit score. The greater your risk factors, the higher the rate you pay.

 

**Disclaimer: I am not a mortgage professional, always consult with your lender regarding mortgage decisions. If you are wanting to get connected with some of my highly suggested lenders in Chicago (& elsewhere) contact me.

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