Searching for your first home: Rent or buy?

MANILA - Choosing your first home is likely to be one of the biggest financial decisions that you will make. As with all purchases, you can either feel you made the right choice, or regret the investment.

This is why some prefer to initially rent or lease, and then decide whether the neighborhood is right for them. But they could also miss out on the opportunity to buy when the price is more affordable.

So should you rent or buy your first home? The quick answer to this question is it depends. The decision to buy or rent depends on so many factors that varies per individual: your lifestyle, finances, future plans, and even the current real estate market.

What is right for one person may not be suitable for another. For instance, a newly married couple whose career plans include moving abroad would be in a totally different position from a large family with an entrenched business in a specific location.

There are pros and cons for each option. Here’s a run-down of the upsides and downside of buying and renting.

Buying a house means being able to hold on to a hard asset that almost always appreciates in value.

It also lets you and your family establish roots in the community.

Plus it allows you to plan out your life--where your kids will study, where you will work--for the long term.

But expect this to put a dent on your cash flow, since you will need to put in equity, which could go anywhere from 20-60% of the property value.

It also means paying real estate taxes and maintenance costs.

Should you need to dispose of it at some point, you will find this may not always be easy, and you could be at the mercy of market conditions.

Renting is easier on the pocket--you only need to worry about a downpayment and security deposit.

It also gives you a measure of flexibility. If you’re unhappy with the place or your landlord, you can simply end your contract.

 It also means not having to worry about taxes and maintenance costs, which are the landlord’s concerns.

However, property rentals rise, and it means you have to be ready to deal with increasing rental fees, depending on market conditions.

Rent is an outright monthly expense, and does not enhance your asset base.

You have to live with the terms set by the landlord. For instance, the landlord may prohibit you from keeping pets, or may not allow you to drill holes for your pictures on walls.

Still not decided? Look at each of these five factors for more help:

1. Your current life stage and lifestyle. How old are you? The younger you are, it’s more likely that your options are wide open. Career-wise, there’s a possibility of finding a new job, within or outside the city you are now in, which means renting might be better for you. Are you single or do you have a growing family that needs more space? If it’s the latter, consider how owning or renting a home affects their lifestyle.

2. Your future plans. Do you have any plans of moving abroad? If so, then you might be better off renting a starter home. Otherwise, you will have to deal with selling off your home when you leave the country. This may not come easy when you’re about to migrate, and this may not even be at a price acceptable to you. Don’t forget your significant other, if you have one. If you purchase that starter home, do you think your prospective spouse, whose parents live far away, would be happy to move there?

3. Your financial status. Can you afford to pay the down payment for the starter home that you want? If you are thinking of taking out a loan for this home, do you have enough income to support the monthly payments? Note that your expenses as a homeowner will not be limited to just the mortgage payments, but will also include maintenance costs, real estate taxes, and in some cases, condominium dues and homeowner’s fees.

4. The neighborhood where the property is located. It’s been said that there are three things to consider when you buy property, that’s location, location and location. Let’s say you have identified the neighborhood where you intend to stay for the medium term. Evaluate the neighborhood and determine if it has good potential to become a growth center. What are planned developments being undertaken by the government and other private companies in the area? If the area’s potentials look promising, and if your finances permit, then it may be worth purchasing your starter home here. On the other hand, if the neighborhood is riddled with problems such as flooding, security issues, and urban blight, you may wish to simply rent a place for the time being.

5. The current real estate market. Don’t forget to consider the current real estate market before deciding if you would purchase or just rent a property. It is always better to buy when it is a buyer’s market than a seller’s market. Plus, look at interest rates if you intend to take out a loan for this purpose. The lower the rates, the cheaper it is to buy a starter home.

source: www.abs-cbnnews.com

4 Reasons Buyers Need Their Own Agent

The old saying “no one has your best interest at heart except you” is often true, but in a real estate transaction it does not have to be that way.

In fact, buyers have an opportunity to sign a buyers agency agreement (it outlines the services provided by the agent, their compensation, exclusivity details, and how they will work on your behalf). It is logical to want to work directly with a real estate agent who can provide a wealth of information they otherwise would not be able to divulge to consumers.

Things like school district questions, neighborhood details, and even specific details about a property are all available to you under this arrangement. Your buyers agent clearly has your best interest in mind and will do everything possible to provide quality service while answering your questions as intimately as they possibly can. It is a win-win, because the more quality information you have available to you, the better home buying decisions you can make. The better decisions you make, the better chance you have of getting a great deal.

Whether you are a first-time, next time, or last time buyer, you want to know you are getting a good deal and will be safe, secure, and happy with the property you choose. All the more reason to do some upfront homework and choose an agent to represent you that has the qualities you are looking for.

Here are 4 reasons why buyers need their own agent when looking to purchase a home.

Market Knowledge

No one knows the local real estate market better than an agent! They are hitting the streets to check out the existing and new inventory, they have seen the neighborhoods, know which homes are likely to sell fast and those that may require some tender care to get under contract, they have a good understanding of the school districts, may know details about upcoming commercial construction in the area, and have a wealth of other information readily available to them.

While you may glean a few tidbits from the large national real estate websites, there is absolutely no substitute to discussing home details with an agent who has physically been inside the house and can tell you specific details about the property. Trust their market knowledge, and ability to discern what you need, to parlay that into a viable home viewing list.

Help with Hazards

While some buyers are very astute and have a keen attention to detail, many walk into a home with rose colored glasses on and fail to see some of the hazards that could end up being red flags or deal breakers. It is understandable you are excited and want to see if this house is “the one” and in doing so you may miss some of the finer points of the property.

Did you notice the roof, structure, and yard while walking up to the home? Your agent should be on alert to spot any imperfections or potential issues before you cross the threshold. Did you spot any leaks? Notice cracks in the floor, walls, or ceiling? You may have noticed all those things but chances are you were too busy checking out room sizes, trying to figure which room would be the office, determining if there was a place for your prized bar stools, helping the kids decide which rooms they may get, or you were mesmerized or appalled at the current owners “stuff”. No worries, an agent worth their salt should be pointing out all the intangibles so you can concentrate on the details important to you.

Your Own Representation

It is sometimes overlooked just how important this can be for buyers. Without your own buyer representation you are either being shown homes by an agent who legally cannot divulge information to you, or worse yet, you call the agent on the sign to see their listing. The listing agent works for the seller and will ALWAYS have the sellers best interest in mind, not yours. Remember, when you think you can get a better deal without having your own representation, it rarely works out in your favor.

The local agent is the local real estate expert so it makes good sense to utilize their expertise by getting their opinion about the area, crime, schools, each home you visit, specific pricing options, whether the property appears to be a good or bad deal, neighborhood nuances, and anything else that comes to mind. The point is, when you have your own buyer representation, you have an advocate in your corner who will share everything they can to help you make the best home buying decision.

Negotiation Power

This is one of the likeliest real estate areas where not having your own agent can cost you a lot of money. Unless you are skilled at determining which property imperfections or home inspection issues typically equate to a lower price, or know when the time is right to ask for additional assistance (i.e. closing costs, maintenance, updates, warranties, etc.), it is best to let a skilled agent handle this for you. Sometimes making a small concession in one area can reap big benefits overall, such as foregoing getting appliances updated and instead netting a lower sales price.

Agents will typically keep their emotions in check during the negotiations and may have additional insight about the home, listing agent, seller, or builder they can leverage to get you the best terms possible. Staying calm and collected reduces the likelihood of making a rash decision or snap judgement which could cost you in the long run. Getting the best deal on the home of your dreams is what you should be after!

Final Thoughts

In short, a buyer’s agent is much more than someone who just opens doors to let you view houses. They want to help you get a great deal, close quickly, and be happy with both their service and your new home. The better job they do on your behalf the more likely you are to refer them to your local sphere of influence and utilize their services again when you decide it is time to sell your home.

Whatever your reasons are for buying a home, there is no better option than working with your own buyers agent. Do your homework, choose a great agent to represent you, and begin the journey towards owning your own home. It really is that simple…happy house hunting buyers!

source:  totalmortgage.com

How to Tell if Your Local Real Estate Market Is Healthy

At its simplest level, real estate economics is a matter of supply and demand. Too few houses for sale to meet demand and prices rise. Conversely, if the local for sale inventory exceeds demand, prices will fall.

If supply and demand are in balance, though, prices will stabilize and homes will sell at prices closer to their true values without the unhealthy side effects of an unbalanced market—bidding wars and prices so high that they shut out first-time buyers or so low that they suck away equity from homeowners.

During the current recovery, rapidly rising prices have created bubble-like conditions, threatening some Western markets and raising the specter of the crash that contributed to the default of more than 5 million families.

Markets can change quickly, but it is not hard to tell when supply and demand are so out of balance that they create abnormal changes in the market that make it difficult for buyer or sellers.

Here some ways to assess a market’s health.

Rapidly rising or falling prices.

These are the symptoms that the market is out of balance and is causing damage to either sellers, buyers, or move-up buyers. Generally, an annual increase of 5 percent is a very healthy rate of appreciation.

Prices above that level and prices that are depreciating on annual basis suggest that they market is out of balance. Over the past three years, national average price has risen about 20 percent, according to CoreLogic.

Months’ supply.

Housing economists track the balance between supply and demand with metric known as “months’ supply.” It presents how many months it would take to use up the current supply of homes at the current rate of demand.  It takes into account current inventory, rate of replacement and the rate of disappearance. A six-month supply is considered healthy.

Time on market or days on market. 

This metric is simply the median time that homes are selling in a market. For a specific listing, it’s the number of days a listing is active in a multiple listing service before a buyer makes an offer that the seller accepts.

It is less accurate than months’ supply because MLSs reset the clock tracking time on market if the property is delisted and then listed again, often by another broker. “Time on site” a similar measure, also can be confusing since it measures only the days a listing has been on an aggregator site like Zillow or Realtor.com. It might have been listed on its MLS for s longer period of time than on an aggregator site.

When days on market exceed 90 days, it’s a good sign that either there is something wrong with the property or it is priced too high for the market.

List-to-sale, sale-to-list, or list-to-close ratio.

This is a sales metric used by real estate professionals to measure whether homes are selling more or less than the asking price in the local market. To calculate the metric, divide the actual sale price by the property’s final list price and express the result as a percentage. It can also be calculated using recent sales prices in a market.

Buyers, sellers and real estate agents can use the ratio to determine a strategy for price negotiation. A ratio above 100 percent means that it is a strong sellers’ market and homes are selling for more than their list price, suggesting mufti bid situations. If a home’s ratio is below 100 percent, the property may have had serious repair issues or was overpriced initially. When the ratio is below 100 percent on a market-wide basis, it suggests demand is soft and still softening, forcing owners to lower their prices after they listed their homes.

The bottom line? There are plenty of ways to get a feel for the housing market in your area as long as you’re willing to do a little research.

source: totalmortgage.com

What’s Your Outlook on the Real Estate Market?

So here’s a true story. Yesterday, a good friend of mine asked the following question via text message: “What’s your outlook on the real estate market…we are looking to buy a place soon.”

That’s the exact message he sent over last night; there weren’t any emoticons by the way, sadly.

I saw the message but did my best to avoid answering it for about half an hour. Then I finally cracked and responded with the following:

“In a word, overpriced. But if you really want to buy a home that’s your deal. It’s not always about the investment.”



Now in the past I may have just left it at “overpriced,” but I’ve learned that such remarks are often met with resistance. I also don’t want to ruin anyone’s grand plans.

And it’s true, buying a home isn’t just about the investment. It’s not simply about timing the market and making a killer profit, that is, unless you’re a real estate investor.

For most people it’s a home. It’s a place to live. There are reasons to buy other than turning a profit.
So my outlook has changed, or perhaps broadened, to include benefits beyond making money.

But my point was basically that it’s not an ideal time to buy in terms of investment, but it could be a great time to buy a home if there’s one you really like and want to own.

At the end of the day, if he gets the home he wants, he’ll probably be happy, even if it doesn’t double in value in five years. Even if it flat lines or drops, he’ll probably still be happy if he truly loves the home.

And over time, he’ll surely build equity and come out ahead as home prices reach new heights.


National Median Sales Price Reaches All-Time High


Yesterday, the National Association of Realtors reported that the national median sales price reached an all-time high.

The price of a median existing home climbed to $236,400 in June, a 6.5% increase from a year earlier, enough to surpass the previous peak median sales price reached in July 2006 ($230,400).

For the record, the median sales price has increased year-over-year for 40 consecutive months, so yes, home prices have been on a tear.

Home sales have also been white-hot, with existing sales hitting their highest level in over eight years (February 2007).

Properties are also being scooped up faster than ever, with the average time on market only 34 days in June, down from 40 days in May, making it the shortest amount of time since NAR began tracking in 2011.

I also got word from a real estate agent friend that new home sales are picking up again. Recently, builders were offering discounts, but now that inventory is so low, they’re increasing prices and slashing discounts.

This is basically a testament to the supply/demand imbalance that is causing home prices to keep rising, and making bidding wars a common situation.

It’s for these reasons that I don’t love the current market as a buyer. At the same time, selling isn’t ideal either because there’s a good chance home prices will continue to increase.

In fact, if you look at real prices adjusted for inflation, home prices aren’t really at new all-time highs. In today’s dollars, the median would have to be closer to $260,000.

So buying because you love a home still makes sense today, as it always will. And you’ll probably do just fine if you can afford the home and stay in it for several years.

But if I had to take a side, I’d say that home prices are bloated and the competition is fierce. That certainly makes it a lot less attractive to buy today than in the very recent past. I’m taking a wait and see approach.

source: thetruthaboutmortgage.com

How to Spot a Bad Realtor—And then Part Ways Properly

Just because real estate agents have guidelines to follow and tests to pass doesn’t mean they’re all the same, quality-wise. Whether you’re putting your home on the market or about to start the search, here are the hallmarks of a realtor you should stay away from.

The agent is difficult to get a hold of

Communication is a super important part of home selling and buying process. If your realtor takes longer than 24 hours to get back to you, or won’t give you weekly status updates, then it just isn’t going to work out and you might want to consider switching.

The agent is part-time.

Nothing against people who have other commitments, but if this isn’t your realtor’s full time job, you might want to look elsewhere. Having an agent on the outskirts of the industry usually means you’re the one missing out.

On the same note, don’t feel like you need to work with a friend or relative just because they happen to have a real estate license. If they’re not working actively and familiar with your area, they’re really not qualified to be helping you sell or buy.

The agent makes too-good-to-be true promises

In a down market, or even one that’s just starting to pick back up again, you’re going to have to face certain realities, and a good realtor won’t sugarcoat them for you.

So what sort of things should you hear from a good agent? That the longer your home is on the market, the more you will have to drop the price. That you may need to make some improvements before your home is attractive to buyers. That you may not be able to get exactly what you want for what you’re willing to pay.

The agent pushes you toward homes that don’t fit

Occasionally, you’ll run into realtors who are more concerned about their bottom line than yours.  If your agent is herding you in the direction of properties that are out of your price range or not in your neighborhood, be wary. They may be pushing you toward a friend or associate’s listing, or putting their commission ahead of your needs.

These warning signs are all well and good, but what should you do when you miss them?

The first thing to remember is that your real estate agent is working for you. This isn’t a partnership, and they aren’t lending you their services out of the goodness of their heart. Other than that:

Be upfront. Every real estate agent has broken up with a client at one point or another—you shouldn’t need to tiptoe around their feelings. Lay it out for them.

Don’t hesitate. You’re making this decision for a reason. Don’t let yourself get talked into giving the agent a second chance.

Be respectful. When you point fingers and get angry, no one comes out of the situation looking good. Not to mention that you may need to, or even want to, work with this agent again in the future.

source: totalmortgage.com