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Top Five Words of Advice for a Buyer Today
Do you want to find your perfect home for a fair price and make your move in a reasonable amount of time? With inventory lower than it was four months ago and buyers coming out of the woodwork to take advantage of the tax credit before it ends, you may want to think about what you can do to prepare so you’re ready to take action when the time is right for you.
We asked a few of our Windermere agents what top five pieces of advice they would give to a buyer in today’s market.
Top five by Bruce McKinnon Windermere Mukilteo
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- Get pre-approved with a “known” lender.
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- Learn the market. Pay attention to price per square foot, be realistic on pricing and observe short sales and foreclosures.
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- Understand “showing” protocol such as scheduling viewing appointments and a respect for privacy.
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- Identify your location preference. Initially focus your search there for efficient time utilization. Think about your ideal community, neighborhood and school district.
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- Mini buying process overview. For example, to minimize surprises, get a five minute explanation of offer, inspection, appraisal, closing, etc. by a professional or two.
Top five by Erin Mitchell Windermere Bellevue Commons
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- Work with a great agent that specializes in the area that you want to live. Meet with them prior to looking at homes to make sure you ‘fit’ each other’s personalities, they really listen to your wants and needs and that they ask you questions about what is important to you.
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- Ask your agent for a good referral to a great loan officer. Call them now and get pre-approved.
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- Make a top 10 list of the most important things you want in a home. If you find one that has at least eight of them, strongly consider the home.
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- When you find a home that fits, your agent will run a market analysis to determine appropriate value. Value is not always price related.
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- Write a good offer that includes a fair price, good terms and is realistic. If you want the house, buy it. If there is more than one offer, use an escalation clause in the offer.
Get pre-approved with a “known” Lender
Learn the market (e.g., price / sq ft, be realistic on pricing; short sale and foreclosure observations)
Understand “showing” protocol (e.g., appointments, respect for privacy)
Identify location preference (e.g., to initially focus search for efficient time utilization — community, neighborhood and school district – where possible)
Mini Buying process overview (e.g., 5 minutes – to minimize surprises — offer, inspection, appraisal, closing)
Vegas Baby!
The results are in from FHFA.gov’s latest ranking of the top performing markets in the U.S.
Each quarter they track 245 cities across the country and rank their real estate markets by home price appreciation.
What’s the highest performing city the the U.S.
Vegas! Their prices have gone up 17.63% in the last year.
How about the worst?
Bloomington, Illinois sits in dead last where prices went down 3.58%
Here’s how Colorado cities are ranked:
• #10 Colo. Springs = 11.41%
• #16 Greeley = 10.68%
• #59 Fort Collins = 8.29%
• #64 Denver = 8.15%
• #97 Boulder = 6.85%
Are You Better Off Paying Your Mortgage Earlier or Investing Your Money?
Posted in Buying, Selling, and Living by Guest Author
Photo Credit: Rawpixel via Unsplash
Few topics cause more division among economists than the age-old debate of whether you’re better off paying off your mortgage earlier, or investing that money instead. And there’s a good reason why that debate continues; both sides make compelling arguments.
For many people, their mortgage is the largest expense they will ever incur in their lives. So if given the chance, it only makes logical sense you would want to pay it off as quickly as possible. On the other hand, a mortgage is also the cheapest money you will ever borrow, and it’s generally considered good debt. Any extra money you obtain could be definitely be put to good use elsewhere.
The reality is, however, a little less cut and clear. For some homeowners, paying off their mortgage earlier is the right answer. While for others, it would be far more advantageous to invest their money.
Advantages of paying off your mortgage earlier
- You’ll pay less interest: Each time you make a mortgage payment, a portion is dedicated towards interest, and another towards principal (we’ll ignore other costs for now). Interest is calculated monthly by taking your remaining balance, the length of your amortization period, and the interest rate agreed upon with your lending institution.
If you have a $300,000 mortgage, at a 4% fixed rate over 30 years, your monthly payment would be around $1,432.25. By the time you finish paying off your mortgage, you would have paid a total of $515,609, of which $215,609 were interest.
If you wanted to lower the total amount you pay on interest, you don’t need to make a large lump sum to make a difference. If you were to increase your monthly mortgage payment to $1,632.25 (a $200 a month increase), you would be saving $50,298 in interest, and you’ll pay off your mortgage 6 years and 3 months earlier.
Though this is an oversimplified example, it shows how even a small increase in monthly payments makes a big difference in the long run.
- Every additional dollar towards your principal has a guaranteed return on investment: Every additional payment you make towards your mortgage has a direct effect in lowering the amount you pay in interest. In fact, each additional payment is, in fact, an investment. And unlike stocks, bonds, and other investment vehicles, you are guaranteed to have a return on your investment.
- Enforced discipline: It takes real commitment to invest your money wisely each month instead of spending it elsewhere.
Your monthly mortgage payments are a form of enforced discipline since you know you can’t afford to miss them. It’s far easier to set a higher monthly payment towards your mortgage and stick to it than making regular investments on your own.
Besides, once your home is completely paid off, you can dedicate a larger portion of your income towards investments, your children or grandchildren’s education, or simply cut down on your working hours.
Advantages of investing your money
- A greater return on your investment: The biggest reason why you should invest your money instead comes down to a simple, green truth: there’s more money to be made in investments.
Suppose that instead of dedicating an additional $200 towards your monthly mortgage payment, you decide to invest it in a conservative index fund which tracks S&P 500’s index. You start your investment today with $200 and add an additional $200 each month for the next 30 years. By the end of the term, if the index fund had a modest yield of 5% per year, you will have earned $91,739 in interest, and the total value of your investment would be $163,939.
If you think that 5% per year is a little too optimistic, all we have to do is see the S&P 500 performance between December 2002 and December 2012, which averaged an annual yield of 7.10%.
- A greater level of diversification: Real estate has historically been one of the safest vehicles of investment available, but it’s still subject to market forces and changes in government policies. The forces that affect the stock and bonds markets are not always the same that affect real estate, because the former are subject to their issuer’s economic performance, while property values could change due to local events.
By putting your extra money towards investments, you are diversifying your investment portfolio and spreading out your risk. If you are relying exclusively on the value of your home, you are in essence putting all your eggs in one basket.
- Greater liquidity: Homes are a great investment, but it takes time to sell a home even in the best of circumstances. So if you need emergency funds now, it’s a lot easier to sell stocks and bonds than a home.
Misael Lizarraga is a real estate writer with a passion for teaching real estate concepts to first time buyers and investors. He runs realestatecontentguy.com and is a contributing writer for several leading real estate blogs in North America.
