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Thursday, March 8, 2018

Pros & Cons: Buying vs. Renting a Home

Is it better to buy or rent a home? I have a few things to consider when it comes to that question.

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Is it smarter to buy a home or rent in the market right now? The answer to that question will always depend on your situation. So, today, I’ll give you a couple things to think about as you’re trying to make that decision. A recent Fed report said that long-term homeowners have as much as a 36x higher net worth than long-term renters. The important thing to know is that if you put yourself in the right situation when buying a house for long-term residence, it’s usually a good decision. On the flip side of that, there are times when you absolutely should not be a buyer and when renting is a much better option. The first thing you need to consider before doing anything else is whether or not you are financially ready. A preliminary call with a lender can help you figure out what your credit looks like and how your current debts may affect your mortgage qualification. At the lender’s recommendation, you may want to work on paying down debts or making some changes to your credit situation before starting the home buying process. If that means renting for a couple of years while you work through that, then that might ultimately be a good financial decision for you. Next, are you in an overall stable financial position? Do you have an emergency fund that enables you to take care of certain issues that might pop up without warning? The great thing about renting is that the landlord takes on that responsibility if the issue is with the property itself. With renting, you don’t have the long-term gain that you would with owning a home, but you also don’t have the short-term pain of having to pay for the repair of an appliance or roof for example.

A lender can help you figure out what your credit looks like and how your current debts may affect your mortgage qualification.
When you feel you’re ready, talk to a lender to get pre-approved. A great lender is there to help you make good financial decisions. They can tell you about the state of your credit, whether your income is large enough to make purchasing affordable, and other critical specifics about your finances. Another benefit that comes from speaking with a lender is that they can answer your questions about down payments. We’ve got a huge military presence locally and the VA loan allows a lot of people purchasing in our area to purchase without the requirement of a down payment. If you aren’t a veteran or an active service member, your lender can discuss different loan options with you that offer flexible down payment amounts; you won’t necessarily need to put 20% down. With cash-on-hand being a barrier to homeownership for many, this is an important call to make. Finally, consider how long you plan to live in that home. You might be in a great financial position now, with qualifications for a good loan and down payment, but if you’re only going to live there for a couple years, you might want to consider your long-term goal before moving forward. During that short period, the market may not have increased enough to cover the expenses to sell. You may be buying with the plan to rent the home and hold it as an investment. This can be a great decision as long as you have spoken with your agent about what’s involved with being a landlord and how to set things up to be successful. If you have any questions about buying or renting or would like to review your current situation, feel free to give us a call. We’d love to help you through the process.

Tuesday, February 13, 2018

6 Questions That Will Help You Choose a Listing Agent

When interviewing listing agents for the right to sell your home, there are six important questions you must ask to ensure they can sell your house quickly and for top dollar.

Looking to buy in the Stafford/Fredericksburg area? Perform a full home search 
Looking to sell in the Stafford/Fredericksburg area? Get a free Home Price Evaluation

There are six questions you must ask a listing agent when interviewing them: 1. How many homes have you sold in the last year? This will tell you how active the agent is in the market. If they’re only selling one or two homes a year, that might bring up more questions about how involved they are in your market. Inside of that question, ask how many homes they’ve sold in your community. If everything they’re selling is two counties away, they may be a great agent, but they may not have the experience they need in your community to give you the advice you need. 2. What percentage of your listings actually sell? This is critical because if someone is listing 30 homes a year but only selling 15 or 20 of those homes, you have to ask what’s happening with the other homes that aren’t being sold. Look at this ratio and make sure the agent does everything they can to sell their listings. 3. What is your list-to-sale price ratio? When they list a home, are they typically getting 95% of the price their seller asked? Are they getting 96% or 97%? Or is their ratio perhaps lower than that, like 93%? Whatever the percentage is will tell you a number of different things. First, it will tell you how well they typically price homes. It will also tell you how well they can market homes and generate the kind of traffic they need to sell them quickly and for top dollar.

Don’t lose out on any hot inquiries because your agent doesn’t have a follow-up plan.

4. What’s the average time it takes you to sell a listing compared to the market average? Again, this will tell you a lot about what the agent does to market homes and how well they do against the competition. If the average home sale in your price range takes about 30 days and the agent’s average is two weeks, they’re probably doing a great job. On the flip side, if they average 90 days to sell a home in a market when most homes take only 30 days, there might be something wrong. 5. What is your advertising budget? Marketing a home involves more than just putting it on the MLS. There are websites that your home needs to be advertised on and get great exposure. Ask the agent about their marketing budget and where that budget is spent. Also, make sure they have an advertising and marketing plan. Doing the data entry into the MLS is part of what your agent needs to do to get your home exposed, but if that’s all they’re doing, there may be a piece of the puzzle that’s missing. 6. What is your follow-up plan when someone inquires about my house? In a lot of cases, if an agent gets an inquiry from Zillow, it goes to their email and they can respond to it whenever they finish an appointment or as soon as they get to that email. The thing is, though, if you look at studies about online consumers, you need to find a way to get back to them as soon as possible. MIT did a study declaring that you need to get back to an inquiry like that within five minutes. This is really hard to do, so you have to ask the agent what their plan is to get back to online consumers who want information about your home within five minutes. A lot of times, it takes a combination of technology, manpower, and good follow-up plan. We have a full list of 25 important questions you should ask a listing agent before hiring them. If you'd like a copy of that list or if you have any other questions about this topic, don't hesitate to reach out to us. We’d be happy to help you.

Wednesday, January 17, 2018

How Will the New Tax Bill Affect Us Locally?

With the new tax bill coming into effect, many are wondering how it will affect our local market. Here are four ways the bill will and won’t impact us.

Looking to buy in the Stafford/Fredericksburg area? Perform a full home search 
Looking to sell in the Stafford/Fredericksburg area? Get a free Home Price Evaluation

I’m sure that many of you are aware that a new tax law has been passed. There is a lot of uncertainty about how it may affect real estate, so today I’m going to talk about four relevant changes and how they may affect us in our local market. The first of those changes is that the deduction allowed for what you pay toward state and local taxes (SALT) is being capped at $10,000. The important thing to note is that if you pay more than $10,000 in state and local taxes (including property taxes), you won’t be able to deduct any more than the capped amount. Here’s the positive side: the cap won’t affect a large percentage of home sellers or homeowners in the area. This is partially due to our average sales price, so while this may affect a small portion, especially on the high end of the market, it’s not likely to cause sweeping change. Take a look at how much you pay in state and local taxes to get an idea on how you may be affected. The second important change is that the amount that can be deducted for mortgage interest paid throughout the year is reducing as well. Under the previous tax code, mortgage interest could be deducted on loan balances up to $1 million. This has been reduced to loan balances up to $750,000.

Like the first change, this will mostly affect buyers looking to buy in the upper price ranges for our area. The thing to keep in mind is if you have one or more mortgages with total balances of up to $1 million, you are grandfathered into this $1 million legacy cap. Also, you can refinance your balance(s) and still be taxed based on the previous rules. New mortgages taken out after mid-December will be subject to the new cap. If you are looking to purchase and will have total loan balances under $750,000, you will be unaffected by this change.


The third item on the list is the new tax bill’s effect on capital gains—it won’t change at all. In previous versions of the bill, congress looked at changing the amount of time that someone would have to live in their home as a primary residence to be exempt from capital gains on the sale. Until the last minute, many thought this would change from from a primary residence requirement for two of the last five years to five of the last eight years. This would have been a massive change because one of the biggest benefits to homeownership in any area is that if you live in a home as a qualifying primary residence, your gains on the sale of that home aren’t taxable as capital gains. Our area is very transient; we’ve got a huge military contingent, tons of federal workers, and a lot of contractors that move regularly and often in less than 5 years. Large numbers of homeowners having to pay taxes for selling before the proposed five-year mark could have had a devastating impact on the local market. Sellers could have been forced to hold their homes off the market and it would have made it a lot more expensive for many in our area to sell their home. Targeted lobbying efforts from the real estate industry contributed to the final bill keeping the time frame at two of the past five years. This was a big victory. The last item is something that can affect sellers anywhere. Deductions for moving expenses are no longer allowed, with the caveat that if the seller is a member of the military, those deductions can still be factored in. Keep this in mind as your factoring in your moving costs. The big thing to keep in mind as we look at these changes is that you’re going to hear quite a bit of negative reporting. Even the National Association of Realtors has said that some of these changes could have an effect of up to 10% on prices. The key here is that locally, our average sales price will mitigate the effect of the first two changes. It won’t hit our local market as hard as areas with higher taxes or higher average sales prices. Going into 2018, things still look really positive. There are many things that are still going our way, and for our area in particular, I don’t anticipate these changes having a big negative impact. Since I’m a real estate agent and not a CPA, I can’t give you tax advice, just my opinion as it relates to real estate. If you do have further questions about the tax bill, I can put you in contact with a CPA to provide you with more details and insight. For any other questions regarding real estate, feel free to reach out to us. We’d be glad to help you.