Homebuyer's Guide

HOMEBUYER’S GUIDEAPRIL 25, 2014

MOVE ON,

MOVE UP

MEET YOUR MATCH

Don’t sit on the fence: It’s time to fi nd your dream home

The perfect real estate partner for you

PLUS: STAGING TIPS | FOUR STEPS TO YOUR BIG MOVE

INSIDE:Understanding new mortgage

rules

Friday, April 25, 2014 SPecial Section

CTW FEATURES

Don’t take it personally. Some buyers simply won’t like the way your space looks. That’s why staging a home can make a big difference.

If you can’t get expert help to stage your home (some real estate agents provide staging services), consider hiring a stager or enlisting the help of a friend to view your home through a stranger’s eyes.

In the meantime, follow these five basic rules to market your property to poten-tial buyers.

1 CASH IN ON ‘CLEAN’

Clean, tidy homes are enormously more attrac-tive than cluttered spaces.

Especially for people who’ve lived in their space for a long time, accumu-lated clutter can obscure the value of a home by making it look smaller, dirtier and less functional.

Either embark on a de-cluttering mission or com-mit the majority of your possessions to storage (or a relative’s home) in order to remove all extrane-ous details.

For essential items, store behind closet doors or inside decorative baskets.

With so few items in place, it might not look natural, but that’s fine. You’re aiming for the look of a catalogue or furni-ture storeroom.

2 MAXIMIZE LIGHT

Once your place is clean, you shouldn’t be shy about throwing light into every corner.

Open all the windows and blinds and have at least two sources of light available in every room.

Nothing’s worse than an empty room lit by a single overhead light. It makes a space feel sterile and small.

Buy or borrow standing lamps to fill corners with light. Move table lamps to maximize the light they cast in a room.

Use the illumination as a tool to highlight features in the home, such as a reading corner or a task area in the kitchen.

3 USE WHAT YOU HAVE

Take that assortment of vases, set of fine china and candle collection out of storage and put them to use. While you don’t want to increase clutter, a well-placed design touch on empty countertops and tables could provide a

homey feeling.Use those beautiful

vases for fresh flowers, which will smell great and brighten the room. Just remember to refresh them when they start to droop.

Most importantly, don’t go out and buy a new set of décor just for staging, unless you intend to use them in your new home.

4 SHOW POSSIBILITIES

The aim is not to create the perfect model home, but rather to showcase all the possibilities of the space.

Make note of features that could be selling points that you don’t personally use. Clean an unused grill or put some bar glasses by an enter-taining sink.

You may need to edit down your furniture. Most homes have too much. Place the remaining pieces in functional ways by cre-ating a conversation area adjacent to the kitchen or a sitting area on the patio.

Any room that you’re using mostly to store

miscellaneous items should be emptied.

5 STAY TRUE TO THE ‘HOOD

Most real estate agents will recommend home sellers stick with neutral colors and furnishings. While that’s true most of the time, there are certain locations and neighbor-hoods that attract cer-tain buyers.

For instance, in an art-ists’ enclave, colorful walls and large displays of artwork can play well. These listings tend to attract buyers who are interested in art.

Keep in mind, the money you spend on neutralizing your home could have a low return on investment. In a study by Johns Hopkins University in March 2012, people did not significantly value a home with a neutral wall color over a home with “unattractive” wall colors.

In that case, keeping an interesting design choice could help your home stand out in the midst of property viewings.

Amateur’s guide to home stagingTop five tips to make sure a home is dressed to impress when it goes for sale

CTW phoToS

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Real estate 2014: By the numbersGet a sense of the housing market by looking at the hard numberscoMPileD BY MaGGie FlYnn, CTW FEATURES

THE HOMEBUYERS THE MARKET

THE MORTGAGES

Average age of a first-time homebuyer

SOURcES: 1 National Association of Realtors, 2013 Profile of Homebuyers and Sellers, November 2013 | 2 U.S. census Bureau report, Nov. 5, 2013 | 3 Zillow.com, Real Estate Predictions 2014, Dec. 2013 | 4 HOA-USA.com, About section | 5 consumer Financial Protection Bureau, guidelines for Qualified Residential Mortgage | 6 Mortgage Bankers Association, Forecast commentary, Dec. 2013

31 65.3%

4.9%

53

43%

3%

42Number of homes the typical homebuyer views in a 12-week period

Percentage of buyers who find an agent through friends or family

10Homeownership rate in the U.S.

Projection of how much U.S. home values are expected to increase in 2014

Percentage of owner-occupied households in U.S. with homeowner associations, which are essential when getting a loan approved

Expected average mortgage rate in 2014

The debt-to-income ratio cap for borrowers set by cFPB

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eRiK J. MaRtinCTW FEATURES

The good news is that residential real estate val-ues increased impressively in 2013. The even better news is that, if you’re eager to trade up to a bigger, bet-ter home, but have been waiting for market condi-tions to improve, 2014 is shaping up to be a great year to make that move.

Just consider the num-bers: Property prices in 20 key cities rose 13.6 percent from October 2012 through September 2013, according to the S&P/Case-Shiller home price index — the biggest 12-month jump since February 2006.

What’s more, recent data released by the Federal Reserve indicates that net equity in household real estate increased $2.2 tril-lion from the third quarter of 2012 to the third quarter of 2013.

Rob Levy, principal broker with Keller Wil-liams Realty Professionals in Portland, Ore., says now is an ideal time for a move-up purchase for sev-eral reasons.

“In most cases, more expensive move-up homes have dropped more in value than more modest or average homes,” Levy says. “Also, many larger homes are owned by Baby

Boomers who are now downsizing, so there are more of them available or becoming available on the market.”

At the same time, the starter homes that many move-up buyers come from are in high demand from first-time buyers and investors looking for rental properties.

Moreover, would-be move-up buyers sitting on the fence may never again get such opportune timing.

“This may be the last time [a move-up purchase]

is this affordable for many. As mortgage interest rates and prices increase, it becomes increasingly less affordable,” says Bruce Ailion, broker and attorney with RE/MAX Greater Atlanta in Marietta, Ga.

“Consider that the approximately 4.5 percent interest rates of today remain historically very low,” he says. “Almost universally, economists and analysts expect rates to rise to 5 percent by the end of 2015, and prices to continue to increase.”

It’s tIme to move on & upHome equity is rising, the economy is stabilizing and many regions are seeing sustained growth; this may be the time to sell your property and move on to your dream home

The difference between a property’s current value and the amount owed on any mortgage. Properties where the value is less than the amount of debt owed are known as “underwater.”

Home equity:

Special Section Friday, April 25, 2014 page 5

Nobody wants to get saddled with paying two mortgages.

That’s why people pre-fer to sell their current home before complet-ing the purchase on a move-up property, the experts say.

But real estate transac-tions – like life – don’t always proceed smoothly and according to preferred timetables.

Keep in mind that many lenders require homeowners to sell their residence or make an offer contingent on its sale before purchasing another home, which makes mat-ters fairly cut and dry for most sellers.

On the other hand, those who have the earn-ing power and resources to qualify for two mort-gages are afforded a lot more flexibility.

Consider that, in mar-kets favorable to sellers, many sellers would select an offer from a party without any contingen-cies, rather than accept an offer in which they’ll have to wait for the buyer’s former residence to sell.

However, move-up buyers have some leverage for their own home sale.

They can make the sale of their house contin-gent on finding a home to purchase, and they can include a rent-back agreement in the contract that enables them to reside in their old house while they get ready to move.

Renting briefly from a buyer not only grants extra time to find a new residence, it means the

seller will not have to move twice (although lenders limit the rent-back term to no longer than 60 days).

How do you carefully time such a complicated dual transaction within a limited window of oppor-tunity?

Enlist the help of an experienced team of real estate professionals, including a savvy agent, trusted mortgage broker/lender, and a responsive property attorney, says Ken Maes, with Skyline Home Loans in Clacka-mas, Ore.

“Make sure you are pre-approved for your next mortgage before you list your home, look at move-up homes well ahead of time and not after you get an offer on your current home, and have everything ready to move,” Maes says. “Also, structure your closing date for as long away as possible to give yourself extra time.”

The best circumstance is to have simultaneous closings on your sale and purchase properties, which a good real estate agent should be able to facilitate, says Bruce Ail-ion, broker/attorney in Marietta, Ga. “You may also want to be prepared to lease your former home to avoid paying two mort-gages.”

Dan Gjeldum, at Guar-anteed Rate in Chicago, says a simultaneous clos-ing involves structuring the contracts to occur on the same day, “which is typically set up as a morning sale and an afternoon purchase.”

— CTW

Decided to sell your current home to upgrade to a new one? Shopping around for the right residence is only one part of the process.

You’ll also need to shop around for the right mort-gage deal to finance that bigger, better house you’ve been dreaming about.

If it’s been a few years since you’ve applied for a mortgage loan, be prepared for changes. That’s because banks and lenders today have to abide by tighter financial restrictions and are much pickier about whom they approve.

“If you purchased your cur-rent home before 2008, there’s a good chance that you really didn’t have to provide much documentation when applying for a mortgage,” says Dan Gjeldum, senior vice presi-dent of mortgage lending at Guaranteed Rate in Chi-cago. “The current mortgage environment is heavy on documentation, and mortgage professionals review every buyers’ ability to repay the loan carefully before granting a mortgage now, so be prepared for that.”

That means doing some extra homework.To be ready, gather at least three years of tax

returns plus several months of bank statements and pay stubs.

Also, check your credit report and make sure your FICO credit score is better than it was the last time you applied for a loan, Portland, Ore.-based broker Rob Levy says.

While you can always try financing your new mort-gage with your current mort-gage lender, it pays to compare loan offers from several dif-ferent lenders and to compare total loan costs – including rates, points, fees and closing cost – carefully.

“Using the same mortgage representative or broker makes sense if you had a positive experience,” says Marietta, Ga.-based broker/attorney Bruce Ailion. “When comparing the rates you are quoted, they

should not vary more than an eighth of a percent.”For a referral to a reputable mortgage broker or

lender, ask your real estate agent, family, friends and other people you trust.

Lastly, “make sure you are pre-approved for a mort-gage before you list [your current home for sale], which is different than getting pre-qualified,” says Ken Maes, northwest divisional vice president for Skyline Home Loans in Clackamas, Ore.

— CTW

Good timingHow to schedule your purchase and sale for a harmonious transition

Mortgage MattersBe prepared: Getting a home loan will be different your second time around


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Yena leeCTW FEATURES

After the negotiation and closing, homebuyers might breathe a big sigh of relief. But don’t get

too comfortable. Moving can be a huge stressor.

To streamline your moving process and get it under control, follow these four steps.

1 PLAN AHEAD

Summer and the end of each month are high-demand periods for most mov-ing companies. Prices are more expen-sive, and it can be difficult to hire a truck or a moving company at these times.

Consider moving during the “shoul-der” season — spring or fall — when weather is good and there’s less com-petition, recommends Diane Schmidt, moving adviser at About.com.

To hire a reliable mover, you should do research first on the company’s repu-tation. Ask friends for recommenda-tions. Check reviews on websites such as the Better Business Bureau, Yelp or Angie’s List.

If you decide to move yourself, research truck rental companies first. Calculate the right size of truck and make sure some trustworthy friends are available to help you on moving day.

Remember to ask the rental truck

agency for extra tools like a dolly and moving straps, Schmidt adds.

2 DECLUTTER AND GIVE AWAY

Here is a golden rule to decide whether to keep or throw your stuff: “If you haven’t used it in the last year, toss it. A pair of jeans you’ve never worn or a set of weights you swore you’d use regularly — everything adds up,” Schmidt says.

For a long-distance move, get rid of junk you’re not using to save money, since moving companies usually charge by weight.

Giving away your stuff can be another way to declutter, advises Laura McHolm, co-founder of NorthStar Moving in Los

Angeles. Extra clothes, home accesso-ries, decorations or media can be gifted to neighbors or friends. If you have more time and patience, arrange to sell them at a garage sale. Another option, if the items are in good condition, is to donate them to a local charity.

3 PACK WISELY

Set aside at least two weeks before moving day for packing. Lisa Taylor, vice president of Florida-based Taylor & Sons Moving, recommends only doing a couple of hours a day because the work can be hard on your back.

Start from the least-used room like a guest room or laundry room, and then

pack up each room in turn so you are not putting away items that you’ll need before you move.

Taylor recommends leaving the kitchen for last, since it’s always the hub of your household activity.

When packing, beware the common mistakes of over-stuffing boxes and not adequately wrapping the items, Taylor says. Get the proper packing material for each item. Roll up paper into balls and put it on the bottom and top of each box for additional protection of valu-able items.

If you are moving a long distance, pack a suitcase for each family member with items he or she will need for the next few days, including clothes, toiletries and medications, McHolm suggests.

4 LAST-MINUTE TIPS

You’ve heard the axiom that any-thing that can go wrong, will go wrong. McHolm says that the best way to be prepared is to plan, plan and plan more.

Here’s a brief checklist of just some of the things you’ll need to do to be pre-pared for the truck’s arrival:

√ Go over to your new house a day before and check if it is clean and ready to greet a new family.

√ Make sure your moving truck has a good place to park at your old home and new.

√ Measure all walls and furniture and have a layout in mind for your new house. If you have a huge piece of fur-niture, check if it can make it through doorways and up stairways.

√ Lastly, don’t forget to change your address, McHolm adds.

The big moveChanging addresses can be stressful beyond the real estate transaction itself; take these four essential steps to make your big move as smooth as possible


MaGGie FlYnnCTW FEATURES

To make lenders more accountable, the mortgage application process is getting more stringent.

According to regulations stemming from the Dodd-Frank Wall Street and Consumer Protection Act of 2010, mort-gage lenders must be more thorough in their documentation of loans and limit risky lending behavior.

As of Jan. 10, 2014, lenders must follow the qualified residential mortgage rules; otherwise, they cannot make a loan and sell off their stake in the secondary loan market, which is their preferred practice.

The QRM rules align closely with the “qualified mortgage” rules released earlier last year by the Consumer Financial Pro-tection Bureau. Because of this precedent, many banks already adhere to the require-ments. CFPB Director Richard Cordray estimated that 95 percent of loans in the current market qualify.

The rules are as follows: z Fees and points — additional charges

that increase the cost of the loan — can equal at most 3 percent of the loan, except loans less than $100,000.

z The CFPB will not qualify loans with risky features such as negative amortiza-tion, interest-only and balloon payments.

z The loan term can be no more than 30 years.

z Lenders must obtain extensive paper-work to verify that borrowers have the abil-ity to repay loans by the Ability to Repay Rule. A borrower’s total debt-to-income ratio can be no more than 43 percent.

This last point is the most impactful, and it puts more burden upon banks to ensure a borrower is in sufficient financial health to repay the mortgage.

For homebuyers, those at extreme ends of the income scale are likely to feel the pinch. Low-income borrowers and those with debt or credit problems may be denied mortgages that they could have obtained in the free-wheeling financial years preceding the housing crisis.

High-net-worth individuals seeking large mortgages for luxury properties may also find it difficult to meet the debt-to-income requirement.

However, the new mortgage rules are not more stringent than the majority of current mortgage loans, so the average homebuyer is less likely to feel immediate differences in the housing market.

And, the qualified residential mortgage rules don’t apply to loans from federal programs such as the Federal Housing Administration and the Veterans Admin-istration.

New year,

new rulesThe much-discussed, oft-misunderstood ‘qualified mortgage’ rules primarily impact banks, not buyers

CTW To make lenders more accountable, the mortgage application process is getting more stringent.

Pre-qualified: Often received via mail or phone call, pre-qualifications are based on the most basic financial information about a potential borrower and do not commit a lender to any loan details.

Pre-aPProved: After providing a banker with thorough documentation of finances, a pre-approval will state how much the bank is willing to lend and at

what interest rate. This is an essential step before going to a real estate agent.

loan committal: This occurs after a buyer has been pre-approved and chosen a home. The loan committal is dependent on several factors including an appraisal or review of homeowner association, if one exists, to ensure the loan is a smart choice for both borrower and lender.

— CTw

essential mortgage lingo


RacHel StaRKCTW FeaTures

You’ve heard it before: Buying a home is one of the biggest financial transactions you’ll ever make. Talk about pressure.

Before you proceed to make that weighty deci-sion, if you’re like most buyers, you’ll first want to decide on a real estate agent who will help you through the process.

WHY USE AN AGENT?

A 2013 survey from the National Association of Realtors reveals that 88 percent of buyers in the previous year purchased their home through a real estate agent or broker. Especially for first-timers, a trusted, knowl-edgeable ally can reduce stress and leave buyers feeling confident.

“With the Internet, it’s easy to find properties that match your needs today,” says Bob Larson, real estate agent with First Weber Group in Milwaukee. “The value of a real estate agent or broker is to get through all the paperwork and negotiations, working with lenders, inspectors,

title companies… Finding a house is not the biggest part. It’s crossing all the t’s and dotting all the i’s.”

It’s important to shop around before settling on a real estate agent. Referrals from family and friends are a good start-ing point, Larson says. Prospective buyers should also consider interviewing

Meet your matchA real estate agent is a sounding board who guides you through selling or buying a home; here’s what you need to know about finding the perfect (real estate) partner

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SPECIAL SECTION Friday, April 25, 2014

How do you know if a real estate agent is the right fit? Real estate professionals recommend you start by asking these questions

1 Why are you a real estate agent?

“I would find out what that person’s value system is,” says Kelly Marsh, with Atlanta-based Keller Williams Realty. “You don’t want to work with someone who’s just doing it because they think they can make a lot of money; you want to hire someone who loves what they do.”

2 Will you be representing me,

the buyer, exclusively?For agents representing both the

buyer and the seller, it can be dif-ficult to get the optimal price for both parties. “Always understand who the agent is representing,”

recommends Bob Larson, with First Weber Group, Milwaukee.

3 How many houses did you sell last year?

“The answer you’re looking for is not necessarily how many houses they sold, but what they say about how many houses they sold,” Marsh says. If their num-bers are lower because they’re not a full-time agent, that could mean the buyer won’t get the time and attention he or she wants.

4 Those houses that you sold, what parts

of town were they in? Especially in bigger cities,

buyers will want an agent who is not just local, but hyperlocal. They will benefit the most from a professional who has worked and sold homes in the specific area of the city in which the

buyer is looking, Marsh says.

5 How will you keep me updated throughout

this process?Does the buyer want to be con-

tacted once or twice a week? By phone or text message? Setting these expectations will keep both

parties happy. “The number one thing we know to be important in any service industry is com-munication,” says Elizabeth Men-denhall, RE/MAX Boone Realty, Columbia, Mo., and regional vice president of the National Associa-tion of Realtors. “It’s critical in a complex real estate transaction.”

— CTW

Five questions for a potential real estate agent

a few different agents and asking if they can con-tact some of the agents’ past clients.

GETTING CHOOSEY

“Look for an agent who is making the client’s pri-orities their priorities, not one who is just looking for commission,” Larson says. “One who actually gets satisfaction from help-ing people accomplish their dreams.”

The top real estate agent might not always be the best fit. Like any busi-ness relationship, a good synergy between the two parties is key.

Conversely, buyers should be wary of pick-ing professionals simply because they are friends or family, says Kelly Marsh, a real estate pro-fessional with Atlanta-based Keller Williams Realty. There needs to be a balance of personal con-nection and professional experience, as well as room for honesty.

STAYING LOCALThe general consensus

is that buyers should also go local when it comes to real estate agents.

“Oftentimes in San Francisco, we’ll have an agent come in who is not familiar with San Francisco homes and val-ues,” says Patrick Barber, president of Pacific Union International’s San Fran-cisco region. “I’ve heard of so many people over-paying for properties.”

Instead, the most valu-able real estate agent is one who is familiar with the specific mar-ket in which the buyer is looking, he says, and can negotiate for the best price.

“There’s so many pieces to this puzzle of purchas-ing the largest investment these people are making,” Barber says. “It’s crucial you have an advocate.”

TO-DO LIST√ To make the most of their

time with a real estate agent, prospective homebuyers will need to do a little homework.

Get pre-approved: Real estate professionals say the first step is to consult a reputable mortgage lender for a loan pre-approval. Once buyers know the price range they qualify for, Atlanta-based real estate professional Kelly Marsh suggests people evalu-ate their financial comfort levels. What you can pay on a house can differ from what you should pay.

Understand your limits: Buy-ers should have a thorough understanding of their finan-cial situation and their limits before any planning begins. A mortgage lender will need verification of your assets and

income to issue you a loan. Also, homebuyers need to know how much they’re willing to spend. It’s best to begin with a conservative price range so there is some room to increase the allowance if the available properties aren’t up to par.

“Many people will qualify for a certain amount and then go to the top of that range,” Marsh says. “Sometimes their payment is more than they’re comfortable with.”

Decide on a time frame:Financials aside, buyers should also share with their real estate agent the time frame in which they’re hoping to move and clearly communicate their expectations.

Separate ‘needs’ from ‘wants’: Patrick Barber, president of Pacific Union

International’s San Francisco region, says he asks his new clients to create a “need” list and a “wish” list before begin-ning the house search. Having this separation of crucial char-acteristics from desires written down on paper from the get-go can keep buyers grounded later on.

“Those two things can sometimes conflict,” Barber says. “When we’re looking at a property, we can say, ‘hey, pull out the list… does it meet all your needs? Does it have some on your wish list?’ That keeps them from an emotional stand-point a little more centered.”

With the pre-planning out of the way, Barber says, then “you can really enjoy the act of find-ing a home.”

— CTW


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