Real Estate Information

The two most frequently quoted constants in life are death and taxes.  Two more things would-be homeowners can expect in the near future are increases in mortgage rates and housing prices.

Interest rates have been kept artificially low for several years by the Federal Reserve in an effort to strengthen the economy. Policy is shifting to allow them to seek their own natural level and that will surely result in higher mortgage rates.  Rates on 30 year fixed mortgages are up over 1% from January, 2013.

Foreclosure activity is down, new home starts are up and prices have been increasing in most markets for two years.  Most experts agree that the cost of housing is going up.

If the price were to go up by 2% and the mortgage rate by 1% while a buyer is “sitting on the fence” making a decision, the payment would go up by almost $175.00 each and every month for the term of the mortgage.  Even if a person can afford to make the higher payments, what could they have done with that extra $175.00 a month?  Buy furniture?  Car payment?  Principal reduction?  Retirement contribution?  Save for a rainy day?

Click here to determine what the cost of waiting to buy will be using your price home.

One of the most frequent calls from homeowners to their agents is about the listing’s inactivity due to the lack of showings.  The homeowner commonly believes that the home is shown only when a buyer walks through the house with an agent.

Today’s buyers are more sophisticated than in the past due to the abundance of information available to the public on the Internet.  There are seemingly inexhaustible sites with homes for sale, valuation estimates and virtual tours.  There are extensive mapping sites with satellite images, traffic conditions, entertainment, shopping and other points of interest.

There are actually three legitimate types of property showings.  A knowledgeable buyer can view a home for sale online and make a reasonable determination of whether the home will fit their needs.  Occasionally, buyers will drive by a home to get a feel for the home and also the neighborhood which might cause them to eliminate any further examination or consideration.

The third type, the physical showing, certainly gives the buyer the opportunity for the closest scrutiny but is generally reserved for properties that have passed the inspections of at least one other type of showing.

Sellers should be aware of the different types of showings and that a sales agent’s job is to help the buyer find the right home.  The listing agent’s job is to market the home so that the right buyer finds it either through their own efforts or that of the buyer’s agent. 

Can You See the Savings?

If you’ve considered changing your light bulbs to energy-saving LED bulbs but decided not to make the investment because the prices were too high, you might want to investigate again.  The prices have come down considerably.

An initial investment now will generate immediate returns through energy costs and because they last longer, you won’t need to replace them for years.

The life of LED bulbs is projected to be from 35,000 to 50,000 hours compared to an incandescent bulb at 750 to 2,000 hours.  For normal home use, a LED bulb could last more than 20 years.

80-90% of the energy used by fluorescent and incandescent bulbs is wasted by the heat generated.  In contrast, cool LED bulbs converts 80% of the electrical energy to light energy.

• The color of LED lights is bright white, more like daylight, instead of the warm yellow of incandescent or the greenish tint of fluorescent bulbs.

• LEDs light up instantly instead of building to their intensity like some of the fluorescent bulbs.

• LEDs are more durable because they don’t have filaments or thin-glass bulbs like incandescent and fluorescent bulbs.

Shop around to find the best price on LEDs. If the LED only lasted 20,000 hours, you might have to purchase 20 incandescent bulbs during that same period of time.  Using the chart below, you can see that the LED uses about 10% of the wattage without compromising on the brightness.

The Perfect Last Minute Gift

It’s part of holiday tradition to celebrate with family and friends and to share gifts with our loved ones.  There’s no measuring how much is spent on the combined effort and money to find the perfect gift. 

The challenge is to identify the right gift in the right color and size; something they really want and need; and something that won’t break the budget. 

“Eight Gifts That Do Not Cost a Cent” are suggestions that have been offered on numerous Internet sites attributed to an anonymous writer.  They may be just what you need to find the perfect gift. 

• THE GIFT OF LISTENING...but you must really listen. No interrupting; no daydreaming; no planning your response; just listening.

• THE GIFT OF AFFECTION...be generous with appropriate hugs, kisses, pats on the back and handholds.  Let these small actions demonstrate the love you have for family and friends.

• THE GIFT OF LAUGHTER...clip cartoons and share articles and funny stories.  Your gift will say “I love to laugh with you."

• THE GIFT OF A WRITTEN NOTE...it can be a simple "thanks for the help" note or a full letter.  A brief, handwritten note may be remembered for a lifetime and may even change a life.

• THE GIFT OF A COMPLIMENT...a simple and sincere, "you look great in red" or "you did a super job" or "that was a wonderful meal" can make someone's day.

• THE GIFT OF A FAVOR... go out of your way every day to do something kind.

• THE GIFT OF SOLITUDE...there are times when a person wants nothing more than to be left alone.  Be sensitive to those times and give the gift of solitude to others.

• THE GIFT OF A CHEERFUL DISPOSITION...the easiest way to feel good is to extend a kind word to someone.  It’s really not that hard to say, Hello or Thank You. 

The energy-efficient home upgrades tax credit is scheduled to expire on December 31st this year.  If you need to make improvements to your home, this could be an incentive to do it before the end of the year.  If you have already made qualifying improvements without realizing the tax credit is available, it may seem like a holiday gift you weren't expecting.

The equipment must be installed to qualify for the credit which can put you under a time crunch.  Heating and cooling systems, insulation, windows, doors, skylights, water heaters and home weatherization may qualify.

The Residential Energy Efficiency Tax Credit has been available for purchases since January 1, 2011.  The tax credit is 10% of up to $5,000 of qualifying improvements which would make a maximum of $500 tax credit.

The cumulative maximum amount of tax credit that can be claimed by a taxpayer in the different years this law has been in effect is $500.  If it has been claimed in previous years, the taxpayer is not eligible for this credit for additional new purchases.

For more information, see energy.gov or talk to your tax professional.

Most school children would probably say that Thanksgiving dates back to the Pilgrims at Plymouth as early as 1621. By the late 1660’s, it had become traditional to hold a harvest festival in New England.

President George Washington declared the first nation-wide thanksgiving in 1789 “as a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favours of Almighty God.”

One hundred fifty years ago during the Civil War, in October, 1863, President Abraham Lincoln proclaimed the first national day of Thanksgiving.

William Seward, Lincoln’s secretary of state, drafted the proclamation: “No human counsel hath devised not hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God…they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.”

Even though the country was in the middle of the costly Civil War, the people of America started an enduring tradition to give thanks. In 1941, Congress determined that Thanksgiving will be celebrated on the fourth Thursday in November.

Most people are familiar with the various reasons a homeowner refinances their home which generally result in two major benefits: saving interest and building equity. 

There is however another reason to refinance which may not be as common which is to remove a person from the loan. In the case of a divorce, when one party wants to keep the home and the other party wants their equity out of the home, it is possible for the remaining party to refinance the home. If the equity is sufficient to justify it and the remaining owner can qualify for the new loan, the refinance can provide the proceeds to buy out the other spouse.

Refinancing to remove a person from the loan could also involve a situation where two or more heirs jointly own a property and have differing opinions on when to sell. The same situation could apply to a rental property with multiple owners and the refinance would provide a way to buy out a partner.

Sometimes, it’s not about taking cash out of the home to buy out the other party. If a person’s name is on the mortgage, they’re responsible if it goes to default. One party may be willing to deed the home to the other party but it doesn’t necessarily relieve them of the liability of the mortgage they originated.

Many times, once a person has made their mind to move on, they’ll take the fastest and easiest way out. Removing a person from the deed or a mortgage is a reason to consider obtaining legal advice to protect your interests. Refinance Analysis calculator.

Reasons to Refinance

1. Lower the rate
2. Shorten the term
3. Take cash out of the equity
4. Combine loans
5. Remove a person from a loan

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does.  Equity build-up is a significant benefit of mortgaged rental property.  As the investor, collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property.  Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down.  It can be accelerated by making additional contributions to the principal each month along with the normal payment.  Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years.  The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses. 

Notice that both properties have a positive cash flow before tax.  The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property.  The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that.  A simple definition of an investment is to put away today so you’ll have more tomorrow.  Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities.  Mike@MikeParker.com or 859-647-0700.

When you pay your landlord every month do you ever feel like you could be living in a place of your own for less then your rent payment?  You could be right.  Check out these fantastic homes today:

4385 Kidwell Ln., Taylor Mill, KY
$150,000

* FHA 3.5% Down, 4.125% Rate, 5.732% APR, P&I-$713.81, MIP-$875.41, RE Tax-$162.25, Insurance-$56.25, TOTAL - $1093.91
* 3 Bedrooms, 2.5 Bathrooms
* Bella Laminate & Ceramic Tile Thru-Out
* Open Great Room, Kitchen & Breakfast Area with Cathedral Ceilings
* Kithen features Stainless Appliances, Island, Counterbar & Walkout to Deck
* Finished Lower Level Family Room with Walkout to Patio, Half Bath and Laundry
* Cul-de-sac, Extrememly Convenient Location
* Immediate Possession
* Fowler Ridge Subdivision
* Boone County Schools

6836 Highridge Ave., Florence, KY
$109,900

* FHA 3.5% Down, 4.25% Rate, 5.763% APR, P&I-$530.85, MIP-$118.39, RE Tax-$104.17, Insurance- $41.67, TOTAL - $795.08
* 2-3 Bedroom, 2 Full Baths
* 1 Car Garage
* Big Backyard
* Finished Lower Level wih Walkout & Full Bath
* All Appliances in Kitchen Stay
* Security System, Newer Roof, Updates Thru-Out
* Possible Quick Possession
* Boone County Schools
* Located in the Heart of Florence, Easy Access to Everything

** This scenario is an estimate, and actual interest rate will depend on the specific characteristics of the loan transaction and credit profile up until the time of closing. The displayed APRs include total points and additional prepaid finance charges but do not include other closing costs. For an Adjustable Rate Mortgage (ARM), the Monthly Principal and Interest payment is based on the initial interest rate, which is subject to change after consummation, which may result in a different monthly payment amount. Rates available as of date of printing and subject to change without notice. ** Total Est. Initial Payment (PITI) includes principal and interest as well as tax, insurance, homeowner dues. Mortgage insurance has been included in the initial payment for loans with less than a 20% down payment or if the loan is FHA. For FHA loans, the Upfront Mortgage Insurance Premium amount has been included in the loan amount. HUFF Realty is an affiliate of HomeServices Lending. Please speak to your real estate agent for more information on this affiliation. All first mortgage products are provided by HomeServices Lending, LLC. HomeServices Lending, LLC may not be available in your area. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. Georgia Residential Mortgage License Number: 32253. Kansas Licensed Mortgage Company, License Number: SL.0026321. 333 South 7th St. 27th Floor Minneapolis, MN 55402.

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Contact Colleen Parsons - Home Services Lending
Colleen.r.parsons@hslcincinnti.com - 513-647-5582

For more information feel free to contact Mike Parker/HUFF Realty.  Mike@MikeParker.com.  859-647-0700