Lately, many of my colleagues and friends have been asking me whether I think buying real estate is still a good investment. While it may seem like renting a property that is easier to get out of, costs less to maintain and is more easily negotiable to get into is a better choice than dealing with selling agents, competitive cash offers from investors and escrows and taxes; I firmly believe that it is NOT. You may think, “Sure, of course SHE doesn’t want us to rent, she wants us to buy – that’s how she makes money” so keep reading and decide for yourself.
First we need to define what is considered a “good” investment. There used to be a time when people would see huge returns on their investments, be they in stock, bonds or real estate. In a recession however, all kinds of earnings and returns are diminished. This leaves investors to re-define their idea of a “good” investment. Sometimes, they may consider an investment that does not lose value as a “good” investment, other times nothing less than doubled value would be considered “good.” Generally speaking, according to most economic theorists and financial advisors, any investment that is yielding a 5-8% annual return is considered a “good” return. This leads us to a discussion of ROI.
Often you will find people talking about ROI. Historically, ROI (Return On Investment) has been a common method for individuals and companies to measure how “good” of an investment they have made, based on the rate of return that they have enjoyed. When trying to determine whether a particular real estate purchase is a good one – one would need to consider a few things. Real estate’s value depends mainly on its location. (I know you’re heard it “location, location, location”) Often, communities that are built to support big educational institutions or employers (think big name colleges and the neighborhoods close to them, or big factories and suburbs created to house the families of the workers) tend to enjoy more stability in terms of price and rate of return than others, even in times of depression and recession. By looking at the location of the real estate, you will have more information about whether or not it is a good investment. Surveying historical values over time in the area will allow you to see the retention of prices in the area.
Ultimately, as an investor you will need to gather information not only about the property you are considering purchasing, but also the surrounding neighborhood, historical values and proximity of institutions that can contribute to the stability in price. Overall, investing in a home, even at this time in our economy can yield the same (if not better) return as investing in stocks or other types of investments. The key difference would be that you can live in, build a home in, create a family in and achieve your dreams in a piece of real estate whereas a stock certificate can not provide these intrinsically satisfying things for you.
Mitra Karimi
Realtor – Broker
Crestico Realty
www.CresticoRealty.com
Lately, I have been getting asked many questions about what it takes to buy a home and how to start the process. So, today, I thought I would write on what exactly an “offer” is comprised of. This year, the California Realtor Association has re-vamped the “offer” form, also know as the “Residential Purchase Agreement.” I thought it would be particularly helpful to go over some of the key components and aspects an offer to purchase a property.
In real estate, oral contracts are not legally binding. If you wish to bid on a property, you must make a formal, written offer or proposal. Your Crestico sales professional is experienced with the offer/counter-offer process, and will know which of a variety of standard proposal forms are suitable for your area. Once written, your Sales Professional will present your offer to the seller. (In some cases, this is all handled by the respective parties’ lawyers.) We have provided the basic information needed during this critical phase here.
What the Offer Contains – Your written proposal may include, but is not limited to, the property’s address and legal description, sale price, terms, earnest money, expiration date of the offer, prorating (adjustments) of utility bills, real estate taxes, insurance, contingencies, repairs and any other terms that you deem important.
Earnest money – Earnest money is a deposit given when making an offer. It demonstrates sincerity—“earnestness”—on the buyer’s part. If the offer is accepted, it becomes part of the down payment. If not, it is usually returned.
Contingencies – A contingency means that the purchase is subject to certain events occurring, such as the buyer’s loan being approved, or the property passing the termite inspection. If the contingencies aren’t met, the offer is void.
Response – If the seller accepts the offer, and signs an acceptance, you have a deal. If not, you are free to walk away, and cannot be held liable for the contract. The seller may make you a counter-offer, and you are free to accept it or not, or make your own counter-offer. Only when an offer is accepted and signed by both parties is the contract binding.
Withdrawing an offer – In most cases you can withdraw your offer up to the point when it is accepted. If you do wish to cancel the offer, it’s a good idea to consult with a real estate lawyer. You don’t want to lose your deposit, or be sued for damages perceived by the seller.
Mitra Karimi
Crestico, Inc.
http://www.crestico.com
[email protected]
Recent Developments Regarding Conforming Loans
Media outlets are constantly reporting on the state of the economy, the housing crisis and mortgage defaults and delinquencies. Amidst these reports is the constant use of many terms the average American (homeowner or not) may not be too familiar with or even have a complete understanding of their definitions. One of these terms is "conforming loan." Now, we all know what a loan is; generally a borrowed sum of money that is to be repaid with interest to a lender. A conforming loan however, is a specific type of loan. Loans are classified as meeting and not-meeting GSE guidelines. GSEs, Government Sponsored Entities, are financial services corporations that have been formed by congress, the most popular of which are Fannie Mae and Freddie Mac. These GSEs set guidelines for the types of loan programs that are available to homeowners. Conforming loans meet these guidelines and, as a result, are part of the uniform mortgage documents and national standards that have been set for loans.
On October 30, 2009 President Obama signed a congressional resolution regarding conforming loans. This resolution basically allows the loan limit of $729,750 (the limit for high-cost areas, such as Southern California) to be extended into next year. This means that there is now a longer time period available for potential buyers to seek and gain approval for government loans to purchase their homes. Government loans offer advantages such as lower interest rates, government guarantees and lower down payment requirements to homebuyers which make the purchase of a home a bit easier and more widely accessible. This extension is the result of a move by the government in 2008 Housing and Economic Recovery Act which was originally intended to be temporary. Homes are becoming increasingly affordable in the Southern California area, and this is one more step in that direction.
If you are considering buying a home or simply have questions regarding the process, a knowledgeable and qualified real estate agent is the best resource you can have to guide you in making your decisions. Real estate agents are on the cutting edge of breaking news and in the best position to explain your options and most beneficial decisions to you.
An Update on Recent News Surrounding the Homebuyer Tax Credit
Much discussion and controversy have been surrounding the impending end of the First Time Homebuyer Tax Credit. Initially set to expire in November, the government is now considering extending the credit into next year. In this article, you will find some of the recent developments in this topic.
In order to be eligible, the cost of the home may not be more than $800,000 and there would be $125,000 and $225,000 income limits for single and joint filers (over the age of 18), respectively. Additionally, as long as the new home is the buyer’s "principal residence" for at least 3 years after the date of purchase, the credit will not need to be repaid.
$8,000 is the amount of the credit for first time homebuyers and there is now talks of adding a $6,500 credit for move-up buyers (people who have been using the home they are leaving as their "principal residence" for at least 5 years) who purchase homes between December 1, 2009 and April 30, 2010, as long as the transaction closes by June 30. Any purchases made in 2010 would be acceptably filed on 2009 tax returns, as long as a HUD-1 settlement statement is attached when the credit is being claimed.
As always, buying a home is a big task and there are lots of questions anyone considering buying or selling will have. For this reason, it is a very good idea to get the assistance of a qualified, experienced and helpful real estate agent. Your real estate agent can mean the difference between happy holidays in your new home or spending the holidays stressed out and worried about just one more unnecessary thing!
For more information please visit http://www.crestico.com
Our country’s economy, like many things, is on a cycle and just like the old adage says, what goes up, must come down. We experienced a boom in real estate in the early 2000s and we are merely seeing the after effects of that boom now. While perhaps you may not be able to purchase a million-dollar oceanfront property this year, or even next; you will still be able to realize your very own version of the American dream.
The Mortgage Bankers Association issued a statement saying "Sales of existing homes will rise 11 percent in 2010, and sales of new homes will climb 21 percent over this year." This is great news for everyone, particularly future homeowners! What this means is that we are entering a part of the real estate cycle where things will start going back up. Just like everything else, you have to practice patience and good judgment when buying a home. Homes in the lower end of the market, also known as "entry level" or "starter" homes are a great place to start. Buying a starter home will not only ease you into the concept of owning a home, but will also familiarize you with the process of actually purchasing it. Additionally, while living in your new home, you will be able to experience the trials, tribulations and joys associated with being a homeowner.
Having a great real estate agent is the first step in this process. You will need someone to guide you through the market, not only in terms of prices and mortgages but also in terms of choosing a home that fits your lifestyle. Remember, your agent has access to multitudes of customers, buyers and sellers and the best way for you to take advantage of everyone else’s experience is to work with an agent who is experienced!
