Finance

Are Open Houses Worth It?

Before Covid-19, open houses seemed to be a Sunday staple activity for would-be homebuyers. However, as the pandemic put a halt to almost all in-person activities, the number of open houses dwindled—sellers didn’t want strangers in their homes and buyers didn’t want to be in the company of too many people.

Although just 4 percent of buyers purchase their homes through open houses, 41 percent still visit open houses as their first step in the home-buying process. To overcome this hurdle, agents began providing virtual open houses for their clients. And due to the lack of inventory, during these past two years, it surprisingly became more commonplace for buyers to purchase a home sight unseen.

With the recent slowdown in the real estate sales market, listing inventory has declined. This slowdown has impacted the number of days a home has been on the market forcing price reductions, which has resulted in an increase of available inventory in some real estate markets. Additionally, 44 percent of agents have reported that with this increase, they have observed a downturn in bidding wars. Hence, buyers who had been sitting on the sidelines waiting for a shift for more favorable market conditions, are now beginning to return to the home buying process and agents are realizing the need to conduct open houses on a more regular basis.

Making the Most of Open Houses

Buyers
With busy schedules and juggling day-to-day activities, attending open houses may be more suitable for a buyer’s lifestyle as they begin the homebuying process. The flexibility it offers to view homes at their own pace is often a desirable option. Open houses are great tools for homebuyers to obtain as much information about a home in a more relaxed, stress-free environment.

Ask pertinent questions
Viewing a home on the internet is not the same as visiting it in person, so before you attend an open house, come prepared with questions to ask the real estate agent to obtain in-depth knowledge of the home. Questions like, when was the home built? What is the age and condition of the roof? How old are the water heater and other mechanical systems within the home? These items can be costly to replace, so knowing can help you assess possible future repairs and replacement costs. By asking the right questions, the buyer can obtain the necessary information about the home.

Take notes
When visiting several open houses, make a list in order to make your day as efficient as possible. Keep a notebook handy to jot down information about each property since it’s easy to forget details when visiting multiple homes in a short span of time. Later, you can look over the information with the notes you have gathered to help in your decision-making process.

Revisit the home
This is an opportune time to revisit a home you are on the fence about. It enables you to walk through the home at your leisure, weighing the pros and cons, and if you can envision you and your family living there. Note: Be sure to alert the listing agent at the open house that you have previously toured this home with another real estate agent.

Sellers
The benefits of having an open house will increase the overall foot traffic into your home and create more visibility. The more exposure your home receives, the more likely you’ll receive multiple offers, possibly driving the sales price higher.

Stage to sell
Staging is a key part of the home selling process. Preparing your home for sale is essential to fetching the highest and best price. NAR reports that 82 percent of buyers find it easier to envision themselves living in the home when it is staged. Things like rearranging furniture, placing floral bouquets around the home, decluttering, and doing a deep clean, will help exemplify your home’s best features for potential buyers to see.

Elevate curb appeal
The appearance of your home’s exterior is critical to creating a positive first impression. In fact, elevated curb appeal can increase the price of your home by an average of 7 percent. Be sure the exterior of your home is well-manicured, bushes are trimmed, weeds are pulled, a fresh coat of paint has been applied, and the entryway is free of dirt and grime.

Scheduling an open house
You and your real estate agent should agree on the best days and times to have an open house. If possible, ask your agent to schedule your first open house the week your home is listed which typically generates a lot of traffic. Tip: Sellers should do all they can to be absent from the home during an open house— buyers are more apt to explore and ask the agent more pointed questions when sellers are not present.

To make the most of an open house remember:

Buyers should come prepared with questions to ask the listing agent essential information about the home and take copious notes for later review to help in the decision-making process.
Staging and elevating the home’s curb appeal is critical to creating a lasting positive first impression which has been shown to increase the sale price by an average of 7 percent.

Filed under: Blog, Brooklyn, Buying, Condominium, Cooperative, Douglas Elliman Real Estate, Finance, Heating and Cooling, Home Buyer, Home Value, Homeownership, Open House, Real Estate, Real Estate Questions, Real Estate Tips, Selling, Staging by Ryan Roberts
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How To Shop For A Home Loan

One of the first steps in the home buying process is gaining pre-approval for a mortgage loan. This gives you a realistic idea of the home prices that you can afford and allows you to make a strong offer when you do find the right house. While there are a lot of factors that impact your loan approval and the interest rates that lenders will offer, there are a few steps you can take to make sure that you’re getting the best home loan and mortgage rate.

A look at mortgage rates

As of mid-September of 2022, the average national mortgage rate for a 30-year fixed rate loan broke 6 percent for the first time since 2008. We’re seeing the continued effects of inflation on the housing market, with mortgage rates and prices rising throughout the nation. These higher rates and prices have begun to slow the housing frenzy. In July, the median home sale price in New York City was $775K, a -1% change year-over-year. There were a total of 3342 transactions, down 21% compared to the same month last year. However, according to NAR, determined homebuyers are still purchasing homes, mostly because buyers can lock in a fixed monthly payment that is no longer susceptible to inflation like rent prices are.

Because of the stability that homeownership offers; units that are priced right, at least according to today’s standards of home prices, are attracting more potential buyers and receive more than one offer. To help buyers stand out in the market, it’s more important than ever to get preapproved for a home loan. Lenders look at a variety of factors when determining if you qualify for a loan, including your credit score and the amount of your potential down payment. These factors can positively or negatively impact the mortgage rate and amount that you’re approved for, so before settling on one rate and lender, here are some important steps to take to find the right loan for you.

Don’t just look at the rates online

Most mortgage lenders list their current average rate on their websites. But the key word here is average. This number does not reflect each borrower’s current financial situation, so you can’t know if that is the exact rate that you would get approved for if you applied to that lender. To know what rate you would get, you need to go through the preapproval application process. Lenders will look at your debts, assets, and income to determine what you can afford and offer a loan amount and interest rate that reflects your financial situation. To know which lenders to apply to, talk with your real estate agent, look at the loan types that lenders offer, and consider expanding your search to different banks, credit unions, and online lenders.

Apply to multiple lenders

Once you’re ready to start the preapproval application process, you’ll want to apply for loans through multiple lenders. It’s recommended that you apply to three to five different lenders to save the most money. According to Freddie Mac, for a home priced at $250,000, getting one additional rate quote can save an average of $1,500 over the life of the loan, with the number rising to $3,000 for comparing five lender options. These savings are dependent upon the price of the home, so for a house worth double that of the example, the savings would be doubled.

As a note, lenders do a hard credit pull when you apply for a loan, which can lower your credit score. However, when you apply for multiple lenders within a fifteen-to-thirty-day period, they’ll count as one single inquiry, so your score shouldn’t be dinged multiple times.

Compare loan estimates

After applying for a loan with multiple lenders, you’ll receive loan estimates from those lenders. This document will list the loan amount, interest rate, closing costs, lenders fees, and other important factors that will help you see exactly what they’re offering you as the borrower. You can compare rates and payments across the lenders to ultimately determine which one works the best for you. This is a good opportunity to ask the lenders to clarify anything that you’re uncertain of since it is a big decision that you don’t want to make lightly.

While it might take a little time to find the best mortgage loan and rate for you, weighing your options can help you save thousands of dollars on your loan.

Filed under: Blog, Brooklyn, Buying, Condominium, Cooperative, Finance, Financial Tips, Home Buyer, Homeownership, Interest Rates, Investing, Mortgage, Real Estate, Real Estate Questions, Real Estate Tips by Ryan Roberts
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What’s The Difference Between Prequalified and PreApproved?

The home buying process comes with a language all its own, and two of the terms you may have heard are prequalified and preapproved. While both can be essential parts of obtaining a mortgage and buying a home, you may not know what they mean. Check out the information below to learn how each term may benefit you during your home search.

What Does it Mean to Prequalify?

When you prequalify for a home loan, it means you’re getting an estimate of how much you may be able to borrow based on the information you provide about your finances and your credit check. While it isn’t as formal as being preapproved, getting prequalified is an excellent first step when you begin your home search, as it will help you establish your budget and know how much you may be able to borrow. This process will also introduce you to the various mortgage options you have to choose from.

Information needed for prequalification includes:

Credit check
Income information
Debts and assets
Bank account information
Down payment amount

The prequalification can be completed online, over the phone, or in person. You’ll receive a prequalification letter, which you can use to show an agent or seller that you’re serious about buying. Although it can be helpful, a prequalification isn’t seen as being as serious as a preapproval. The lender goes off the information you provided and does not verify everything you’ve given them is correct, up to date, and comprehensive. Meaning, that while you may get a loan for the amount stated, it can also change when a lender does a more thorough check.

What Does it Mean to be Preapproved?

The pre-approval process involves a lender investigating your income, assets, credit history, and debts before providing you with an amount they believe you can afford. Getting preapproved confirms to the seller that you’re serious about buying their home and that you can secure a mortgage, making you more likely to complete the purchase. Being preapproved can be extremely valuable in a competitive market, as it will help you stand out from the other home buyers.

You don’t have to receive prequalification for preapproval. If you know you’re financially prepared to buy, you can decide to move ahead with the preapproval process.

Information needed for preapproval may include:

Credit check
Paystubs from the last thirty days
Bank statements from the previous two months from all accounts
Investment account statements from the last two months
W-2 and 1099 statements from the previous two years
Federal tax returns from the last two years
Driver’s license
Social security number
Total monthly expenses
Down payment amount

Additionally, if someone is helping you pay for the home, you’ll need a gift letter signed and dated by the individual assisting you.

Once you submit this information to a lender, you should receive their decision within ten business days. If you are preapproved, you’ll receive a preapproval letter informing you of the offer to lend you a specific amount for sixty or ninety days, along with the type of mortgage the lender is willing to offer. Since the lender verifies the information you provided, this is a much more serious step than prequalification.

While you may receive preapproval for a mortgage, it’s important to remember it does not guarantee a mortgage. If there is a change to your income, assets, or debt level before the closing date, a lender may decide to deny the loan.

Filed under: Blog, Buying, Condominium, Cooperative, Finance, Financial Tips, Home Buyer, Homeownership, Investing, Mortgage, Multi Family, Real Estate, Real Estate Questions, Real Estate Tips, Uncategorized by Ryan Roberts
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Debt-To-Income Ratio Explained

If you’re considering purchasing a home, debt-to-income ratio (DTI) is an important term to familiarize yourself with. Your DTI can ultimately make it easier or harder for you to qualify for a mortgage. So knowing your DTI can help you better understand how you can best move forward into homeownership.

What is debt-to-income ratio?

Your DTI compares the amount of money you spend each month paying off your debts to your monthly gross income. It gives the lenders an idea of how much money you have to put toward your mortgage and what kind of debt you can handle. Lenders want to be sure you can make your monthly house payment, whatever it might be.

Back-end and front-end DTI

There are two types of DTI: back and front end.

Front-end DTI is entirely focused on housing related expenses. It’s calculated by adding your future monthly mortgage payment with mortgage insurance, property taxes, and maintenance/ common charge fees if applicable. That number is then divided by your gross monthly income.

Back-end DTI is the percentage of your monthly gross income that goes toward all additional debts. These debts include anything on your credit report such as student loans, credit card debt, car loans, back taxes, alimony, child support, and personal loans.

Lenders typically look for DTIs lower than 30 percent, though that number and possible exceptions differ from case to case. Higher percentages signal to lenders that your finances are stretched too thin and that you’ll potentially struggle to make your monthly mortgage payments.

How to calculate your DTI

To calculate your DTI, add up all your recurring monthly debt payments. This includes mortgage (if you currently have one), maintenance/ common charge fees, car loan, student loans, child support, and alimony, credit card payments, and any other personal loans. Once you’ve totaled all these expenses, divide that number by your gross monthly income, which is your pre-taxed income. Convert that number to your DTI percentage by multiplying it by 100.

Bottom line

You can improve your DTI by paying off your existing debts or decreasing your monthly housing expenses. Reducing your DTI can help you qualify for a better mortgage rate. And if it’s not possible for you to reduce your DTI in time, a cosigner can always help get you qualified. You’ll just have to be sure your payments are made in full and on time, otherwise your cosigner will share in the consequences.

Filed under: Blog, Buying, Condominium, Cooperative, Debt, Finance, Financial Tips, Home Buyer, Home Value, Homeownership, Investing, Mortgage, Multi Family, Real Estate, Real Estate Questions, Real Estate Tips by Ryan Roberts
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Inflation And The Housing Market

We’ve all felt the effects of inflation, whether through higher gas prices or spending more on food at the grocery store, but it’s left many of us wondering what it means for the housing market. While inflation can be somewhat unpredictable, we can look at a few key ways it’s been known to impact the housing market and also can better understand what it means for homeowner and homebuyers.

What is inflation?

Inflation is the increase in the prices of goods and services over time. The level of inflation is determined by the broader impact of higher prices and is measured through a few different indexes, with the most common being the Consumer Price Index (CPI). CPI looks at the average cost of living, including goods and services such as transportation, food and medical care. It helps to identify periods of inflation and how it influences the affordability of the cost of living.

Ultimately, a rise in inflation means a decrease in purchasing power, as the dollar doesn’t go as far as it did before. Deflation, on the other hand, comes with an increase in purchasing power as prices of goods and services drop. Therefore, home prices and the cost of rent fluctuate with the level of inflation, influencing the housing market.

Supply and Demand

The law of supply and demand examines the relationship between buyers and sellers, specifically the price of a good and the willingness of a buyer to pay that price. Inflation has a direct impact on supply and demand. Historically, the demand for houses may be lower during higher periods of inflation because of higher mortgage rates, something that can cause houses to sit unsold for longer periods of time and their prices to sometimes drop. While that might not seem like great news for homeowners, it’s worth noting that the overall value of houses steadily increases over time, meaning that houses will still likely sell for more that what homeowners initially paid for them. And if time isn’t of the essence and homeowners can wait longer to sell, then the market would eventually balance out.

On the other hand, this can be good news for homebuyers since there’s less competition for homes as more people may wait for mortgage rates to drop again. Since inflation can be somewhat unpredictable, it’s not always easy to determine when exactly rates will rise or fall. Ultimately, homeownership is still a highly valuable investment for a variety of reasons.

Why homeownership is valuable

As mentioned earlier, inflations causes the cost of all goods to rise, thereby impacting the general affordability of the cost of living. Gas prices rise, groceries cost more, the cost of materials are higher, and housing costs increase. It’s not necessarily a one-to-one relationship, but inflation has broad reach. Higher mortgage rates might deter people from their pursuit of homeownership, leading more people to look into rental options. However, rent is always fluctuating. The price you pay for a rental will continually be susceptible to the current economic market, so you’ll rarely have a long-term fixed monthly payment. Brooklyn median rents with concessions hit a new high at $3,206, a 7% increase from the month prior and a 21% increase from this time last year. On the other hand, when you buy a home with a fixed mortgage rate, you’ll have one steady payment that will not change even as inflation increases or decreases. The house would also appreciate over time, meaning the value of the property will increase. Any initial down payment ends up being worth more since that number was determined by the cost of the house and the mortgage rate when purchased. Homeownership is an investment, but it’s well worth it. And in the long term, mortgage rates as of August 2022 are still lower that the historical average of 8 percent.

Inflation isn’t forever

The good news for both buyers and sellers is that inflation doesn’t last forever. It eventually must end, otherwise money would continue to be devalued which would have a greater negative impact both nationally and on individuals. So for the benefit of everyone, you can trust that inflation will decrease over time.

Filed under: Blog, Brooklyn, Buying, Condominium, Douglas Elliman Real Estate, Finance, Home Buyer, Home Value, Homeownership, Inflation, Interest Rates, Investing, Mortgage, Real Estate, Real Estate Questions, Real Estate Tips, Renting, Selling, Supply and Demand, Uncategorized by Ryan Roberts
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Your 2022 Home Buying Game Plan

Over the past year, the real estate market has been marked by unpredictability and, at times, overheated competition. This has resulted in some buyers bowing out after one too many disappointments while other potential buyers put off their home buying plans, hoping that things would settle down.

Whichever type of buyer you are, you may be thinking ahead to the new year and planning to begin a search for a new home. If so, it’s vital to prepare for the challenges and opportunities that lie ahead.

Financial Preparations

Preparing yourself financially will be one of the most important aspects of your homebuying plan. While many potential buyers have a good grasp of the savings required for a down payment, they may not be prepared for the other expenses associated with home buying, including:

Earnest money deposit (EMD)
Closing costs
Application, origination, and underwriting fees
Home inspection
Appraisal
Moving expenses

Of course, one of the factors that has made the housing market so active over the past year and a half has been the record-low interest rates for home loans. As you prepare to purchase a home in the near future, you’ll want to keep track of those rates. While they are not projected to rise significantly, they are projected to rise, so it’s important to gauge the impact that upcoming changes will have on your bottom line.

Remember, the terms of your mortgage can be highly variable depending on your overall financial history and your creditworthiness. A lower credit score can have a significant impact on your interest rate and chances of approval. Be sure to check your credit report well ahead of time to ensure that there are no surprises and to make any needed adjustments.

In addition, be mindful that a lower down payment mortgage option may result in the need for additional mortgage insurance, raising your monthly payments. Take this into consideration as you plan your homebuying budget.

Market Research

Planning ahead for your home purchase gives you a great chance to do some research on your chosen neighborhoods. While this includes proximity to work and neighborhood amenities, it also includes tracking the prices of comparable properties in your target area.

Talk with a real estate agent or broker to develop a baseline for current comps and historic trends in the neighborhood you’re interested in. Remember that there has been significant market movement over the past year and a half, with home prices rising at a record pace in many communities. Understanding the change in home values over the past several years can give you a more realistic perspective.

In addition, work with a real estate professional now to develop a targeted search based on your neighborhood and property preferences. This will allow you to see when new properties come on the market that fit your criteria so that you can begin to develop a sense of how values are changing over the next few months.

Real estate inventory has been low in many places, driving home prices higher and resulting in multiple offers for most new listings. You may have experienced some of these competitive situations and backed off from your home search temporarily. If you continue to see low inventory levels in the months ahead, talk to a real estate agent about alternatives, including:

Alternative neighborhoods
Adjustments to your wish list
Availability of fixer-upper properties
New construction in your market
Changes to your financing to make your offer more competitive

Wish List Creation

Once you have honed in on your chosen neighborhood and put together your numbers, it’s time to take a look at your wish list for your next home. You may find that your preferences are out of step with homes in your chosen neighborhood or that you are underestimating the cost of some of the bells and whistles you have in mind. It’s important to consult with an agent or broker to make sure that your wish list makes sense for the neighborhood and budget you’ve targeted.

Remember, while you may be hoping for a turnkey situation with no repairs or improvements needed, that may not be realistic in the current market. Consider what changes you might be willing to make either before your move-in date or after. Think about your budget and see if you can stretch it to make some desired updates and upgrades on your own dime.

In the long run, it may be better for you to add some flexibility to your wish list. You don’t want to overlook a great property just because it doesn’t check off every single box. You also don’t want to overpay for a property in lieu of making some minor changes on your own.

Mindset Shifts

The home buying process can be mentally and emotionally draining, especially if you have had some difficulties in the past with a previous offer. Consider the following mindset shifts to set you up for a more positive experience this time around.

Instead of focusing on easy fixes like paint color or appliances, focus on the bones of the house, the location, and other factors that aren’t as easy to change.
Remember to set a budget that makes sense for your lifestyle. You don’t want to overextend your homebuying budget if you normally spend a fair amount of money on travel and entertaining, for example.
Understand that creating your home is a process that can take months or even years. You don’t have to replace all your furniture when you buy your new house or have two new cars in the driveway. Take your time and make changes that are meaningful to you without the financial pressure of a full-scale transformation.
Know that there are always twists and turns on any worthwhile journey, and buying a home is no exception. Delays and setbacks may come. Prepare for them emotionally in advance, and remember that the only thing to expect is the unexpected.

A trusted real estate professional is a valuable resource who will be with you every step of the way to the closing table and beyond. Start early collaborating with an agent or broker so that you are better prepared for your 2022 home purchase.

Filed under: Appraisal, Blog, Brooklyn, Buying, Douglas Elliman Real Estate, Finance, Home Inspections, Interest Rates, Investing, Market Research, Mortgage, Real Estate, Uncategorized by Ryan Roberts
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Preparing For A 2021 Home Purchase

While you may have been ready to buy a home during the 2020 spring market, the uncertainties caused by the pandemic may have put a damper on your plans. At this point, you may be uncertain about your post COVID 19 real estate goals and unsure whether the opportunity to work from home will inspire you to move to another market or another type of home.

If you’re looking to get ready for a home purchase down the road, this plan will help ensure you’ve covered all your bases. From finance to logistics, it’s important to think through the changes on the horizon to streamline your 2021 home purchase.

Preparing to finance your purchase

One of the first things you’ll want to think about is the financing for your home purchase. Talk to a real estate professional and ask for an introduction to a mortgage lender, if you don’t already have one in mind.

Talk to your lender about the pre-approval process. When it’s time to begin seriously looking for your new home, you will want to have a pre-approval in place so that you can show sellers that you are serious about any offer you may make and that you are approved for a home mortgage.

In the meantime, you’ll want to check your credit score and your credit report to ensure that there are no mistakes. If your score is less than optimal, explore strategies for raising it in the months ahead. These can include:

Paying bills on time
Having rent and utility payments added to your credit report
Paying down debt and avoiding accruing new debt

In addition, talk to your lender about the types of home mortgage products you qualify for—VA, FHA, and conventional, among others—and the credit score range you’ll need so that you can be approved for each.

Determining your price range

By working with your lender you’ll be able to come up with a ballpark price range for your home search. This will be important as it will help you to narrow down the neighborhoods, home types, and home sizes you should be considering.

Remember, just because you qualify for a certain amount, you don’t have to shop at the top of your budget. Consider your lifestyle, other debt, future plans, and disposable income needs when determining your home purchasing power.

Comparing potential markets for your search

This is a good time to begin looking at markets where you might be inclined to move. Talk to your real estate agent to find out what features you’ll find in the areas you’re considering. Determine what you are looking for so that you can narrow down your search. Do you care more about:

Recreational opportunities?
Children’s programming?
Dining and nightlife?
Convenient shopping and services?
Commute times?
Larger lot sizes?
Larger homes?
Resale potential?

If possible, spend some time in your potential neighborhoods. Shop at the stores, eat in a local restaurant, and visit a nearby attraction. Check out the people to see if they seem like good future neighbors for you and your family.

Comparing potential home styles and features

Spend some time looking over listings to determine what home styles and features are most important to you. Put together a wish list and prioritize with must-have, nice-to-have, and optional items. Determine how different updates, upgrades, and other features impact price. Consider what you might be willing to add or change after the purchase and what you’ll want to have completed before you move in.

Preparing for associated expenses

Buying a home brings with it a large number of expenses before, during, and after the purchase process. It’s important for you to have an idea of these ahead of time so you can ensure that your savings are adequate. Remember, you won’t be able to run up additional debt while your mortgage is in underwriting, so it’s important to have a budget in mind before you begin.

Expenses for your home purchase may include any or all of the following:

Earnest Money Deposit (EMD): 1–5% of the purchase price
Down Payment: Generally 3–20% of the purchase price
Closing Costs: Variable (discuss with a real estate professional or lender)
Moving Costs: Variable
New furniture and design elements
Needed repairs and improvements

Planning for your upcoming move

Once you’ve determined where you’re moving and the type of home you’ll move into, you’ll need to begin planning for the move itself. If you’re in a rental home, check with your landlord to determine how much notice you’ll need to give before ending your lease as well as what information needs to be included in that notice. You’ll also want to check on month-to-month rental options, in case you are not ready to close at the end of your current lease.

You’ll want to save up money for your upcoming move but the budget can vary widely depending on the services you require. While you may be able to manage a do-it-yourself move for only the cost of a rental truck, a professional move can cost thousands of dollars. This price can be further increased depending on the distance of the move as well as services like packing and unpacking.

If you’re moving with children, you’ll want to spend some time preparing them for the emotional impact. If possible, take them to visit their new neighborhood, play in the park, or spend a day with classmates at their new school. The more you can do to communicate and demystify the process, the more comfortable (and excited) the youngest members of your family will be on moving day.

Filed under: Blog, Buying, Finance, Investing, Mortgage, Real Estate, Selling by Ryan Roberts
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