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How Much Home Can You Really Afford?

So, you’re getting ready to buy your first home, and you feel like you’re at the mercy of the market. And your mortgage lender. In some ways, it might even feel like they’re working against each other – especially if you’re in a really hot market in which you can’t qualify for the amount you’d need to buy what you want.

When it comes to providing pre-approvals for would-be homebuyers, lenders today are more careful than they were in the years leading up to the market crash, and that means your financial picture will be more rigorously scrutinized to determine your credit-worthiness and develop your max approval amount. Trust us, that’s a good thing. The last thing you want is to be house poor. Having a great place to live that you can’t enjoy or furnish or even leave because you have no money left won’t be fun.

“Just because a lender says you can afford a certain mortgage doesn’t mean you should,” said TIME: Money. “Consider your take-home pay – what actually goes into the bank after taxes, health insurance, and savings for retirement and college. Then add up all your monthly bills, not just debt but also things like utilities, phone, and groceries. You want to feel comfortable that you can cover all your household obligations while still meeting your other financial goals and keeping six months of expenses in an emergency fund.”

That’s why it’s so important to consider all of your monthly expenses related to buying a home. Beyond the principal, interest, taxes, and insurance that the lender, there are other line items to weave in that will help you determine your purchasing power and also help you to be comfortable from month to month.

Increased commuter costs

Are you moving out to the ‘burbs? That hour-long commute each way is going to add to your bottom line. Of course you’ll be using more gas. Will you also incur tolls? Then there is the wear and tear on your car, which could mean additional costs. You can estimate your commuter costs here.

Higher utility bills

A larger place could mean higher utility bills. Then again, more energy-efficient appliances, windows and doors, and HVAC could potentially result in lower bills, which could be a reason to look for a newer home over something older. It’s not out of line to inquire about utility bill costs from the existing owner (through your Realtor is probably best). This information could be critical in helping to make the best decision when buying a new home.

Homeowner’s association

Your pre-approval amount is an all-in number, but that number only includes principal, interest, taxes, and insurance. If you are buying in a community that has a Homeowner’s Association, your fee will be a separate cost that needs to be considered. An HOA fee can range greatly depending on your location, the number of homes in the community, and the amenities and services included.

Home improvements

You’re likely going to have a mailbox full of credit card pre-approvals and offers from places like Home Depot and Lowe’s after you close escrow – and they can be tempting. Reeeaaallly tempting, especially if you need new appliances or countertops or flooring (or all of the above). Ditto for furniture stores, because, like Lowe’s and Home Depot, those offers are often zero-interest deals. It may make sense to take advantage of one (or more) of them to make some necessary or wanted updates to your home – if you can swing the payments. They obviously add to your monthly obligations, even at no interest. And keep in mind that if you miss, or are late on, a payment, that zero interest is replaced with a much larger number, and that means you’ll face a much larger balance to pay.

Landscaping

If you’re coming from an apartment or a rental where the outside maintenance is taken care of by someone else, get ready to either: buy a lawnmower and an edger and spend your Saturday mornings in the yard, or pay someone else to take care of it.

Warranty

If you’re buying a brand-new home, you’ll typically have a warranty provided by the builder or developer, often for one year. You have the option of extending that, or buying/extending an existing warranty on an older home, and all of those options will cost you.

Creative Ways To Save For A Down Payment

You’d love to buy a house, and if it weren’t for that pesky down payment, you’d be sitting pretty in a place of your own, right? You’re not alone. Not surprisingly, the “top challenge for would-be homebuyers is the down payment requirement,” said The Mortgage Reports. In a recent study, “Over half of potential buyers claimed saving a down payment was a bigger issue than credit scores, income needed or housing prices.”

There are some creative ways to get there.

Look for down payment assistance

Many homebuyers don’t realize that these programs even exist. “Down payment grants are designed to help eligible buyers bridge the gap between their savings and the required down payment for a mortgage,” said The Mortgage Reports. “This money doesn’t usually have to be repaid.”

Grants are available through the Department of Housing and Urban Development (HUD) and typically have eligibility requirements that are tied to income. In addition, “You must be a first-time buyer purchasing a primary residence,” they said. You can check for available grants here.

Save your pennies

Every little bit helps! Get used to paying for things with cash, which is another tip financial analysts recommend to keep track of spending. At the end of the day or week, put aside any change. You’ll be surprised how it can add up over a few months.

Shop for a better savings account

Some banks offer special rates or even kick in money if you open a new account and maintain a certain balance. If you already have a good head start on your down payment, this could be a great way to get a bump. Also pay attention to any fees you are currently paying at your bank just to have your savings and checking accounts. If you can’t negotiate to get them removed, it might make sense to open fee-free accounts elsewhere.

Among the best out there: “Discover Online Savings has no minimum deposit requirement and offers a competitive APY of 1.40%. In addition, there’s no monthly fee and no minimum balance requirement,” said NerdWallet in their review of the best savings accounts of 2018. “Discover is a decent choice for simple, stress-free savings.” Discover also offers bonuses that are tied to a $15,000 minimum deposit.

Do automatic transfers

Setting up an auto transfer from your checking to your savings on payday is a relatively painless way to pump up your down payment. You’ll want to keep track of what’s coming out, and when. This is no time to get hit with an overdraft fee.

Get a gift

For many types of loans, the down payment can come via a gift. Just make sure you know the rules so you don’t run into trouble. “Even though lenders do allow gift funds, they also require mortgage applicants to disclose the source of these funds,” said Cherry Creek Mortgage. “There are specific rules for using gift funds as a down payment. For starters, your lender will need information about the donor. Donor requirements vary by lender and mortgage program. Some programs only allow gifts from a blood relative, or in some cases, a godparent. Other programs, however, will also allow gifts from a charitable organization or a non-blood relative. Speak with your lender for information on acceptable donors.”

Save all raises and bonuses

If you get a raise or a bonus during your saving period, don’t celebrate by blowing it on a new living room set. Pretending it didn’t happen and socking the money away will pay off in the end. “For a set period of time, consider saving all extra income you receive from work,” said Quick and Dirty Tips. “For instance, if you get a 3% raise, increase your down payment savings percentage by at least that amount. Or if you get quarterly or annual bonuses, transfer the full amounts to savings.”

Shift some money toward repairing your credit

That might seem counterintuitive if you’re trying to get together as much cash as possible to buy your house, but it might just be that doing a little credit repair can improve your buying position, which could lower your interest rate and lower the amount of money required by the bank for your down payment. A conversation with your lender or broker and a detailed look at your credit history may yield some surprising suggestions.

Pare down

This is a great time to take a good look at your stuff and decide what’s going with you, and what’s not making the trip to your new place. “You likely have some used furniture you no longer use or old clothes that are no longer in style. Sell it to make a few more bucks to use for your down payment,” said Bankrate. “You can sell your items on sites like Craigslist, eBay, Facebook and Amazon to turn your trash into someone else’s treasure.”

Call your cable, Internet, and phone providers

There may be lost money floating around out there. Bundling your services with one provider can create dramatic savings. It might also be time to look at new providers – just make sure you won’t incur a penalty or cost when you move and have to have your services set up again.

Make your coffee – and your lunch – at home

“If there are two people buying one coffee each at $4 every day, or $8 total, that adds up to $240 per month! So by getting a good coffee maker and putting it in a TO GO cup, you can potentially save more than $2,880 over the course of a year,” said Blue Water Credit. “If you think coffee was expensive, add up all of those $12, $20, and $25 lunches at restaurants when you step out from work. Even if you only buy lunch three times a week, that could easily end up with $50 a week in savings per person, or about $400 a month, or $4,800 per year!”

How to Keep Your Mortgage Approval Approved

You know how tough it is to qualify for a mortgage.

Proof you’ve got a long-term job with ample income. A credit score to the moon. Your life’s savings as a down payment. More cash stashed away. A debt-to-income ratio to die for. For some, tax returns for the last two years.

You’ve been there, done that. For weeks now. Maybe a month or more.

You’ve fought the good fight, you’ve run the gauntlet of mortgage qualifications and you have your signature-tired hands on that coveted home loan approval.

Now, all you have to do is not blow it.

For goodness sake, don’t make any surprise financial moves that could cost you your home loan.

Your mortgage approval is primarily based on documenting your income and assets, your equity stake or down payment, your credit and the cash you’ll have left over after the deal is done.

Once you have a mortgage approval, if you change the profile of any one of those qualifiers, you could have to kiss your mortgage goodbye.

Lenders today don’t just check your qualifying information once or even twice. Three, four or more checks, of one document or another, aren’t out of the question in today’s tight lending market.

Avoid big purchases – If you buy a new car, change the lease, or acquire another large possession, it could show up on your credit report or bank statement.

The lender could think you’ve gone beyond the risk the lender is willing to accept on your mortgage – especially if you qualified by a hair.

If the new loan or purchase amount upsets the debt-to-income ratio the lender used to approve your home loan, your mortgage could go “poof.”

No new credit – Likewise, don’t open new credit cards, even for a zero interest rate. Those credit card offers will come streaming in after you close your mortgage. Just wait. The lender didn’t approve you based on the additional card or extra loan.

Pay your bills – Also, pay your bills on time, even if there’s a dispute. Stop paying a bill and the blotch on your credit report can block your mortgage.

Keep your job – Be kind to your boss and don’t get fired. Also, don’t go looking for new work right now, unless it’s a second job to make more money.

Certain job changes also can affect how the lender rates your creditworthiness.

That includes a job change between industries, a job change to start a new company and changing from a job with a salary to a job that pays by commission.

On the other hand, get a promotion and a raise and you should be fine.

Don’t cash out – Leave your stashes of cash alone. Don’t transfer large sums of money between bank accounts. Don’t make random, undocumented deposits to or withdrawals from your bank account.

Don’t be stupid – It should go without saying, but criminal activity, trying to buy a second home and trying to add a co-signer or name to the loan, after approval, could all also get your mortgage canned.

Remember, stuff happens. There are events beyond your control that could cost you your mortgage. A pink slip. A divorce. Hospitalization. The co-signer bails.

However, once your mortgage is approved, do keep tight reigns on what you can control.

8 Ways To Up Your Chances Of Buying Your First Home

Between rising prices, tough loan limits, and massive competition among other eager would-be buyers, it can seem like an impossible feat to purchase your first home. Homes in first-time buyer ranges are highly coveted and stories abound of buyers having made offers on numerous homes, only to be shut out time and again by multiple offers that drive prices up and out of their budget. But, there are ways you can put yourself ahead, even if the situation seems desperate.

Work with a good REALTOR®

Everyone has a real estate agent in their neighborhood or in their family or friend group (or all three!). And, while you would undoubtedly love to give business to someone you know and care for, you have to balance your sense of loyalty against your goal. This may not be the time to entrust your financial future to a brand-new agent or one who simply dabbles in the industry in his or her spare time. You’ll likely need a seasoned agent to buy your first home, especially if you’re looking in an area where the market is highly competitive. An agent with extensive experience and good industry relationships can help find you homes that may not be listed yet and then negotiate a winning offer.

Get that preapproval

It goes without saying today that you need a preapproval to buy a house. Many real estate agents won’t even take clients out to tour homes unless they have received their preapproval amount from a lender. Even if you are just casually looking, make sure you talk to a lender before you head out on a househunt. You don’t want to fall in love with something and lose out on owning it because someone else was already preapproved and you first had to start pulling your paperwork together. Nor do you want to fall in love with a house that’s out of your budget because you didn’t know what your purchasing power was.

Talk to landlords

If there are rental homes in your target area (and there probably are!), you might have an opportunity to buy a home that isn’t even on the market yet—and might not be listed for sale anytime soon. Your real estate agent should be able to locate some homes and initiate a conversation about the potential of purchasing. Some rental home owners may want to sell but be reluctant to take the steps to update the home and get it on the market. You may be able to slide right in there, which would be a win-win!

Consider a home that needs work

You might have better luck buying a home that isn’t updated and/or staged because they can tend to stay on the market longer. But, a home that’s a real fixer-upper can be a great buy thanks to the 203(k) loan, which packages the home loan and money for needed repairs.

“An FHA 203k loan allows you to borrow money, using only one loan, for both home improvement and a home purchase,” said The Balance. “203k loans are guaranteed by the FHA, which means lenders take less risk when offering this loan. As a result, it’s easier to get approved (especially with a lower interest rate).”

There are a number of improvements that can be made with a 203(k) loan, including bathroom and kitchen remodels, additions, HVAC, plumbing, and flooring, but if you’re looking to add a pool, you’ll have to do that on your own dime. “Luxury improvements” are not allowed under the terms of the loan.

Look just outside your target neighborhood

In the city of Frisco, TX, a suburb of Dallas and one of the fastest-growing cities in the nation, home prices have climbed to levels that can put even the smallest and oldest homes out of reach for many first-time buyers. In the adjacent city of Little Elm, however, home prices are lower – even though it’s also a desirable, growing city—and many of the neighborhoods feed into the preferred Frisco ISD schools. For young families that are looking to get their foot in the door and make sure their kids have access to great schools, looking just outside your target neighborhood can be a great way to go.

Consider a transitioning neighborhood

Buying in a neighborhood that is transitioning can be tricky…you’ll have to depend a lot on your real estate agent’s knowledge and your own gut to make sure you’re buying in an area that is going to appreciate—and is also going to meet your needs now. The current state of the the neighborhood might not fit that dream home idea you’ve had in your head, but, if you’re in it for the long haul, you could be making a smart move by looking in an area that isn’t exactly top of your list in its current state. The obvious draws of buying a home in a transitioning neighborhood are: more affordability or more home for the money, and the possibility to make some money as the neighborhood changes.

“Getting a lot of bang for your buck is one of the benefits of buying in a so-called transitional neighborhood,” said LearnVest. “Keys to finding such a place: “The area’s proximity to public transportation is one of the most revealing factors. Pinpoint your favorite trendy neighborhood – and then take the local train or subway one or two stops past it. That’s how you’re most likely to spot emerging areas because they’re already linked to established routes of transit.” Also, a neighborhood “that’s adjacent to a much-desired one is much more likely to gentrify than one that’s surrounded by less prime areas.” Paying attention to decreasing local crime and DOM (days on market) for real estate listings in the area, and noting whether there is a vibrant art scene in the area, are additional tips to locating an up-and-coming neighborhood.

Raise your budget

Some people get a number in their head and decide that’s the most they’re comfortable with spending. Say you’ve decided you can’t spend more than $300,000 on a home, but you’re not having any luck finding anything in your target neighborhoods and you’re not willing to look elsewhere. Consider this: Is your preapproval from your lender higher than that magic $300,000 number? If so, consider upping it. That $20,000 difference could open up your search to numerous additional properties, and would cost you only about $100 per month. Bring a lunch to work instead of eating out a couple days a week or skip one night out at the movies and dinner per month and you’ve got it covered.

Go back to your lender

If you’re already looking for homes at your max approval amount and not having any luck, have a conversation with your lender. There might be a way to reconfigure your loan options to get you more money to spend.

Position Realty
Office: 480-213-5251

Slaying That Credit Score – New Tips For A New Year

Getting ready to buy a house or just thinking about it? Where to buy, what to buy, and how you’ll afford it are probably top of mind. But if you’re not also concentrating on your credit score – and by concentrating on, we mean actively trying to raise your scores as much as possible – you’re not looking at the whole homebuying picture.

Not only does your credit score factor greatly into what you’ll pay for your house, it can keep you from being able to buy one, period. “Your credit history determines what loans you will qualify for and the interest rate you will pay,” said eloan. “A credit score provides an easy way for lenders to numerically judge your credit at a point in time. It gauges how likely you are to repay your loan in a timely manner. The better your history appears, the more attractive you become as a loan customer.”

Thankfully, your credit score is not static; it can (and does) change all the time, and there are all kinds of ways to improve it, some better than others. We’re running down the smartest options to boost your score in the new year.

Shoot for perfection

850 is the best score you can possibly get, and, while it may seem completely out of reach, there are people who actually crest that credit mountain and reach the top. “It’s the Holy Grail of all credit scores: 850. On the widely used FICO credit score scale, approximately one in every 200 people achieves perfection, at least as of a 2010 estimate by the Fair Isaac Corporation,” said The Motley Fool. Careful budgeting and detailed attention to every aspect of their financial picture are the umbrella tactics they use to get and maintain that score – and they’re ones you should be using, too.

Or, shoot for 750

If 850 is out of reach within a reasonable timeframe (reasonable being the maximum amount of time you want to wait before buying a home), try for 750. This is the magic number for many lenders and creditors. “It puts the ball completely in the corner of the consumer rather than the lender, said The Motley Fool. “You’ll often have lenders fighting for your business, and in nearly all instances, you’ll be offered the best interest rate by lenders, meaning you’ll have the lowest possible long-term mortgage and loan costs of any consumer.”

Talking to your lender about the items on your credit report that have the best chance of raising your score is key. You may think that paying off that old unpaid account from six years ago is an easy way to get a score bump, but is it about to fall off of your report on its own?

Set up automatic payments

According to CreditCards.com, a good 35 percent of your credit score is taken from your payment history. You may have missed payments in the past that you need to deal with now, but you certainly don’t want to make another mistake while you’re trying to get homebuyer-ready. Almost every creditor, from your utilities to your car payment to any outstanding student loans you may have, offers the option of automatic payments. This is the easiest way to ensure you never miss a payment because you got busy or spaced on the due date.

But, just remember to make sure there is enough cash in your account to cover the payments on the day the money will be coming out. If you have been busy moving funds into savings for your down payment, you’ll want to set a reminder to put money back into whatever account your auto payments are attached to.

Ask before you shut down credit cards

The amount of credit you have is a factor in qualifying – or not – for a mortgage. Too much debt is a bad thing. But, long-term credit use that has been managed properly can be helpful to your score. If your lender does recommend getting rid of some of your available credit, it likely won’t be older cards. “Length of credit history is considered when determining your score – so the longer you’ve had a credit card, the better,” said CNN Money.

Also beware that closing any card triggers a change in your “utilization,” and that might not be a positive. Be sure to consult with your lender first.

Watch your credit limits

Banks don’t look kindly on those who have used all of their available credit because it gives the appearance that you’re not living within your means. “The amount of available credit you use is the second most important factor in your score,” said NerdWallet. “Experts recommend you keep your balance on each card below 30% of your limit — if your limit is $5,000, your balance should be under $1,500.”

Of course, even lower is better. Get to 20% or even 10%, and you’ll be in great shape. But don’t go below that. While it may seem like a zero balance would indicate that you are financially savvy, banks like to see responsible credit management. That means using your cards and paying down the balance to a reasonable level every month.

Pay down your debt…but check with your lender first

If you’re trying to weigh the best tactics for improving your credit and you don’t have the funds to take care of every outstanding wrinkle on your credit report and pay down your existing debt at the same time, you definitely want to check with your lender before you make any move. Every dollar is important, and while NerdWallet notes that your credit score will “soar” as you “pay off your debt as aggressively as possible without acquiring more,” it could be that your lender has a strategy that places more importance on other credit issues in your report, or has structured your credit repair according to a different timeline.

This underscores the importance of working with a lender who is skilled and experienced in credit repair. Using the tools our lender gave us, we were able to improve our score by almost 100 points in four months, allowing us to qualify for the home we wanted and get a great interest rate.

Don’t be afraid to refinance

You may end up buying a home before you get your credit score exactly where you want it to be. If you’re in an appreciating market, which much of the country is, and your score continues to rise after you close escrow, you might be in a position to refinance sooner than you think. Especially if you buy your home with an FHA loan, their streamline refinance program can potentially lower your rate without an appraisal, a credit check, or job/income verification.

Position Realty
Office: 480-213-5251

Financial Don’ts When Getting Ready To Buy A Home

If you’re in the process of buying a home, you’ve probably already met with a lender who advised you on what to do and what not to do during the escrow process. But if you’re just getting ready to buy or plan on doing so in the near future, following a few financial tips can mean the difference between qualifying…and not, and also getting a decent rate. These are a few universal “don’ts” that will help you stay on track, even before you get a lender involved.

Don’t take out more credit

If you’re thinking you’re going to buy a house in a matter of a few months, forget that new laptop on the Best Buy card, forget that new car, and forget that Old Navy card. Sure, it’s only a $30 pair of pants. But, taking out more credit can harm your debt-to-income ratios, which can make you look like a credit risk. And that’s not worth it, no matter how cute the pants are.

Don’t pay off all your current credit cards

Your lender will tell you specifically what you should pay down and what you should leave alone, but banks tend to like responsible credit management. In some cases, that may mean carrying a small balance on one or more cards.

Don’t charge up all your cards to the limit

“Responsible credit management” does not mean running every available card up to the limit and/or only making minimum monthly payments. Banks will not look kindly on this when you go to get approved for a loan.

Be careful with old debts

You may think that in order to qualify for a mortgage or get the best possible rate you have to pull your credit and go back through every single entry to identify and take care of anything negative. You’re right about the first part. Pulling your credit so you know what you’re working with is critical, and financial experts recommend doing it annually, regardless of what you’re planning (or not planning) to buy. But be careful with old debts. It doesn’t hurt to ask a lender what should and should not be taken care of. But, in general, you’ll want to:

Pay in full instead of making settlement arrangements – It’s not uncommon for debt collection companies to send out settlement offers that allow you to settle debts for less than the total amount. While this can sound tempting, it likely won’t yield the results you’re looking for. Yes, it’ll stop the harassing phone calls and persistent letters. But if your goal is to get the debt to disappear from your credit report, you’ll be disappointed.

“When you settle your debt, the activity usually shows up on your credit report as ‘debt settled’ or ‘partial payment’ or ‘paid in settlement.’ You can talk to the settlement company about the specific language they use, but the bottom line is: this is a red flag on your report,” said clearpoint. “FICO doesn’t reveal how much your score will drop, exactly, and your report doesn’t indicate how much of the original debt was forgiven; it simply shows you settled. Either way, it still points to the fact that you may be a credit risk.”

Stick to newer debts – Older debts that are getting close to falling off your report should be the last thing you pay. “You also want to consider the statute of limitations on your debt,” they said. “Most past debts remain on your credit report for seven years, so if you’re close to the time frame when the debt falls off, settling it may not make much of a difference. There’s an ethical argument to be made here, but practically, you might just be settling a debt that was about to disappear anyway.”

Be careful with debt consolidation

If you have a lot of outstanding debt, are in over your head with credit cards and store cards, and can only manage the minimum monthly payment on all your existing loans, you’re likely going to have a hard time qualifying for a mortgage. You may be tempted to lump your debt together into one payment through a credit consolidation company, but beware the consequences. There may be startup fees, interest rates on the consolidation loan could skyrocket after an initial teaser rate expires, and, in some cases, an improvement in credit is years away.

Don’t get lax with your payments

Your lender will reinforce this, but it bears repeating that even after you’ve been prequalified, you need to keep your payments current on your car, your Visa, etc. Your lender will do a recheck before closing just to make sure nothing has changed in your credit report, and if you have new issues, it could impact your loan.

Don’t move money around

“We know a story of one homebuyer who almost lost his home because he had stated on his application that the down payment was coming from a mutual fund account. Then, two days before closing, he decided to sell a baseball card collection instead,” said HSH.com. “The loan had to be underwritten all over, his ownership of the collection, its value and its sale had to be verified, the closing was delayed and the fees increased.”

Don’t change jobs before you buy your home

This is a big no-no don’t if you’re in the process of buying a home or are about to. Among all the other financial information your lender will be collecting in consideration of your loan, they will also be asking about your employment history. You’re obviously less likely to be approved if you’re unemployed (unless you’re independently wealthy, and, in that case, Congratulations!). A recent job change may also be problematic if the bank is feeling jumpy about your job security.

Position Realty
Office: 480-213-5251

New Tax Bill ~ Things You Might Want To Do Before The End of The Year

There are some pretty straight-forward money moves people make every year at this time to protect what they have and lower their tax obligation. Many of them are still in play, however, the new tax bill that was just signed has also complicated a few things.

“Add another item to your holiday shopping list: last-minute tax planning,” said the Los Angeles Times. “Congress has passed the most sweeping overhaul of the federal tax code in three decades. The Republican legislation…delivers most of its benefits to corporations and the wealthy, but there are key changes that affect individuals. Unlike the corporate tax cuts, the revisions to the individual code are temporary and expire in 2026. Most of them kick in on Jan. 1, and there are steps you could take in the coming days to maximize new advantages and minimize the potential hit from other changes.”

Make an extra mortgage payment

With the new tax bill, standard deductions for those who don’t itemize on their taxes will almost double next year, going “from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for couples,” said the L.A. Times. “Taxpayers who anticipate itemizing on their 2017 returns might want to consider making their January mortgage payment before the end of the year. Doing so would allow you to deduct an extra month of mortgage interest that you might not be able to deduct on your 2018 return if you don’t end up itemizing because of the higher standard deduction.”

If possible, pay your 2018 property taxes early

“Taxpayers who itemize their deductions may want to consider prepaying their 2018 property taxes before Dec. 31,” said CBS News. “Because the tax bill will cap the deduction for state and local taxes (SALT) at $10,000 starting next year, homeowners in high-tax regions like New York or New Jersey can maximize their SALT deductions in 2017 by prepaying next year’s property taxes before Dec. 31.”

Beware of prepayment from an escrow account, however, as this could create “the potential for crossed wires with the bank.”

Defer income until 2018

Many families will end up in a lower tax bracket next year, which should increase take-home pay. If you are expecting another paycheck or a bonus before the end of the year, delaying it until 2018 could mean more money in your pocket.

Give more to charity

Charitable contributions are not affected by the new tax bill per se, but because the number of itemizations is expected to drop sharply next year, there may be a reduced financial benefit to giving to charity in 2018. Loading up on charitable donations now will allow you to take advantage of the deduction before the new year, and do a good deed.

“This might be the year, if they can no longer itemize their charitable donations, to clean out the closet and donate to Goodwill or the Salvation Army or make that extra contribution to your church,” Kathy Pickering, executive director of the Tax Institute at H&R Block, which provides research and analysis to the company’s tax preparers, told the L.A. Times.

Check your contribution limits

Contribution limits were unchanged by the new tax bill, but the importance of maximizing those contributions by the end of the year remains. “In 2017, people can choose to have $18,000 of their pre-tax income placed into their 401(k) accounts,” said CheatSheet. “Participants aged 50 and older are allowed an additional $6,000 catch-up contribution. You may wish to check how much you have contributed to date in 2017 and increase contributions accordingly. If you have an Individual Retirement Account, or IRA, check to see if there’s room there as well for last-minute savings. The 2017 limit for both Roth and traditional IRA accounts is $5,500.”

Position Realty
Office: 480-213-5251

What To Do When Your Home Isn’t Selling

When sellers start the home-selling process, no one wants to think “What would happen if my home doesn’t sell?” But before you panic, recognize that there are many things that you can do so you don’t wind up in that position.

Tip 1: Understanding the real estate market and the value of your home will help you avoid this dilemma. The first key point is to get educated about the market. Read your newspapers, online real estate sites, and consult with the best experts in real estate for your area to determine the sales price.

While all that may seem basic, you’d be surprised how many sellers rely on emotion to dream up a selling price for their home. Some have done little, if any, research on even their own neighborhood. Instead, their strong ties to their homes cause them to imagine that their home should sell for the price they want. Or they base the selling price on how much they owe which is, of course, of no significance to buyers.

Tip 2: Fix up your home. Most buyers don’t want to purchase a big list of must-do fixes in order to live in the home they just bought. Yet, some sellers think that it’s a waste to spend money on a home that they’re moving out of soon. That’s quite a predicament. Both sides have valid points but buyers might be in a stronger position. The seller wants out and if the home is a mess, many buyers will simply move on to the next best house.

Yet, if a buyer wants it badly enough, he/she might agree to purchase your home but it’s guaranteed you’ll take a financial hit as the buyer will want to discount the price for the problems that need fixing. In the end, you might have to fix the issues before the sale anyway. So, starting with a house that is in relatively good order is the best way to begin. Read some of my other columns to see which renovations give a good return.

Tip 3: If you need to sell your home, don’t pull it off the market because you think the season isn’t right. Buyers who need to buy a home will keep hunting through all the seasons. There may be some slow times but if people need a house, they’ll keep looking even in the unlikely times.

Tip 4: Consider incentives. Yes, you can make your home more appealing by tossing in some incentives. It’s best to speak with your REALTOR® about which incentives are best for you to offer. Even practical incentives can help get buyers to your home to view it. These incentives can help encourage the buyer to move forward, especially if other challenges arise.

Tip 5: Stage your home. This is not the same thing as fixing up your home. Fixing up your home includes daily maintenance and repairs. Staging your home involves using experts to make your home showroom-ready–like a model home. I know you might say that all your friends tell you that you have fantastic taste but, trust me, if you’re serious about selling your home, then it’s worth at least having a consultation with an expert in the industry.

Here’s why: They are trained to stay on top of the trends that have mass appeal. They also offer a fresh set of eyes on your home. They might easily point out something that you never saw before because you’ve been living in your home for a long time. They will look at your home from an “outsider’s” perspective and that’s exactly what you need.

Taking the time to, at least consult with experts, allows you to gain knowledge and information about your home and the market place. What you do with that is up to you, but it may just be the difference between a For Sale sign and a Sold sign hanging outside your home.

Position Realty
Office: 480-213-5251

The Probate Real Estate Sale Process Explained

The process of selling real estate (real property) through probate or trust is a series of court-regulated steps that must be carefully monitored and managed. Deadlines are unforgiving, documentation is specialized and the court’s oversight must be honored throughout the marketing, offers, negotiations and sale of the property.

In addition to the personnel of the court, the sale generally involves the Executor or Administrator of the estate, the attorney representing the estate, a real estate agent representing the seller (the estate), one or more buyers who place bids with the court and the buyers’ real estate agents. Each of these individuals must follow the guidelines and deadlines of the court.

Because of the involvement of the court, probate and trust sales have a vocabulary all their own. They also involve various disclosure documents and contracts that are not used in other real estate transactions.

If you are selling or buying real property through such a transaction, your real estate agent should be experienced in probate and trust sales and be able to explain the language, the documentation and the steps in the process. Clear communications are vital.

To help you understand the probate and trust sale process, here is a list of some of the steps involved in a typical transaction:

Appointment of the Administrator or Executor of the estate.

In most cases, the decedent’s will names an Executor who is designated to handle the distribution of assets, including real property. If no Executor is named, if the named Executor is unwilling to serve or if there is no will, the court appoints an Administrator to carry out these duties. The Executor or Administrator is the person who has the authority to list and sell the property; the sale cannot proceed until that person has been identified.

As provided in the Independent Administration of Estates Act (IAEA), the Executor establishes a list price for the real property. The price takes into account the appraisal by the Probate Referee and is usually determined with the assistance of a real estate agent experienced in probate and trust sales. The property is then listed for sale through that agent/broker.

The real estate agent markets the real property to the public as aggressively as possible to attract the highest offer. This generally involves a number of approaches, including signage, newspaper advertising, listing on one or more real estate websites and hosting open houses for other real estate agents and potential home buyers. The real estate agent will also schedule appointments to show the property to interested parties who inquire directly.

While buyers of probate and trust real estate may be looking for a bargain, their range of offers are limited by the court. An accepted offer must be 90% or more of the Probate Referee’s appraised value. Once a buyer is found, the real estate agent assists the seller in negotiating terms that are satisfactory to both parties.

When the property has an accepted offer, a Notice of Proposed Action is mailed to all heirs, simply stating the terms of the proposed sale. The heirs have 15 days to review the notice and pose any objections. If there are no objections, the sale may proceed without a court hearing.

If the Executor/Administrator does not have full independent powers under IAEA, or if one of the heirs poses an objection to the Notice of Proposed Action, notice of the sale must be published in a generally distributed local newspaper (unless the will does not mandate such action).

The attorney for the estate then applies for a court date (the “confirmation hearing”) when the sale will be executed. The court date is usually within 30 to 45 days of the date the application is filed. A copy of the application and details concerning the sale are mailed to all interested parties.

Even after the court date has been set, the real estate broker should continue to show the property and advertise the home to potential buyers in the hope of securing an “over-bidder” and thereby raising the sale price.

During the court confirmation hearing, the previously accepted bid may be overbid by another interested party. In such a case, the overbidding party must appear at the hearing with a cashier’s check (no personal checks accepted!) in an amount totaling at least 10% of the minimum overbid price in order to successfully overbid. The minimum overbid is determined by the following formula: 10% of the first $10,000 plus 5% of the balance of the accepted offer.

EXAMPLE: A property is listed at $200,000. The accepted offer is $175,000.
The minimum overbid is calculated as follows:
Accepted offer = $175,000
+.10 x $10,000 = $1,000

+ .05 x $165,000 = $8,250
Minimum overbid = $184,250
x .10 = $18,425 amount of cashier’s check

If there is more than one over bidder, the highest bid ‘wins.’ The winning bidder gives a cashier’s check to the Executor/Administrator and escrow is opened. Escrow will close approximately 30 to 45 days from the court hearing.

Position Realty
Office: 480-213-5251

How Much Do Home Alarm Systems Affect Resale?

Home alarm systems can be particularly hard to calculate into resale value or return on investment (ROI) because their job is to prevent loss rather than achieve gains. You purchase a home alarm system with the hope that you never need to use it.

The reality is that a burglary is reported to police every 14.5 seconds. But robbery isn’t the only thing that alarms can save you from. Smart alarms can detect smoke and hazards.

More than ever, homeowners want to feel safe in their homes. A built-in alarm system may be just what it takes to get your house off the market.

1. Alarm Systems Aren’t as Expensive as They Used to Be

According to HomeAdvisor’s survey, most homeowners invest between $330-$1,040 when purchasing and installing home alarm systems. However, with the advent of smart, connected technology, home security is more affordable than ever.

Products like the Nest Cam Outdoor monitor your home in 1080p high definition video that you can access from your smartphone 24/7. This monitor also has a two-way audio feature, meaning you can use your voice to scare off intruders or give live instructions to a delivery service. Smart products allow you to monitor your home yourself, which cuts down the cost of hiring a security company to do the monitoring for you.

Smart products send security alerts right to your phone, allowing you to act fast and take control. Monthly security subscriptions on smart products are usually a fraction of the cost of subscribing to a traditional security service.

2. Add Resale Value

Owning a safe and secure home is appealing to every home buyer, from frequent travelers to families. That means pre-installed cameras, smoke detectors, and smart locks can be huge selling points. The more convenient and easy-to-use the security, the better.

One of the most desired security features for homeowners is motion sensor lighting over the driveway. Not only does it scare away late-night intruders, it also helps homeowners navigate in the dark. Buyers want added safety and convenience in their everyday lives, and the right security system can provide both.

3. Home Security Lowers Neighborhood Crime

In 2016, Rutgers University released a study that found that neighborhood crime rates dropped significantly when alarm systems were installed in multiple neighborhood homes.

Burglars are less likely to break into homes that are protected with home security, and that fact carries over when applied to entire neighborhoods. Safe neighborhoods are highly desirable to homeowners and can help your home sell faster and at a higher price.

4. Alarm Systems Can Reduce Your Homeowners Insurance

If you financed your home with a mortgage, you are most likely required to have home insurance. While the price of home insurance varies, most companies offer discounts to homes with security systems.

With a home monitoring system installed, you can save up to 20% on home insurance. Those savings can amount to hundreds of dollars per year or the cost of the security system all together.

5. They Save Money in the Long Run

Burglaries can cost you, not only in the possessions stolen from your home, but also in the damage that many homes incur during a burglary.

Most burglars enter homes through the front or back door or first-floor windows, usually breaking them in the process. The cost of fixing a broken window or kicked-in door can be even more expensive than the valuables taken.

It was found that when burglars enter homes with security systems, they are much more likely to leave quickly, taking fewer items with them.

While security systems aren’t foolproof, they do offer the benefit of safety and security. Whether you’re installing a system for yourself or for future homeowners, the peace of mind it offers is the ultimate ROI.

Position Realty
Office: 480-213-5251

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