Karp Residential

The Truths First-Time Homebuyers Need to Hear

Because they feel uncertain, many first-time homebuyers have given up on their search, or worse, they’ve decided homebuying isn’t for them and never started on their journey to begin with.

If you’re interested in buying but aren’t sure where to begin, here are three key concepts about homeownership you should understand before you get started.

1.  You Don't Need a 20% Down Payment

Saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As Freddie Mac says:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for homes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.

2. You May Be Able To Afford More Home Than You Think

Working remotely, exercising, and generally spending more time than ever in our homes has changed what many people are looking for in their living space. However, some young homebuyers don’t feel they can afford a home that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a home. As an article recently published by NAR points out:

“Many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years…”

Knowing how much home you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.

3. Homeownership Will Become Less Affordable the Longer You Wait

Finally, with mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:

“As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a home, there’s no time like the present.

Bottom Line

If you feel overwhelmed by the prospect of starting your home search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.

Spring Cleaning: What To Do With All Your Stuff

You’ve spent the last year stuck at home during the pandemic.  By this time you’ve probably cleaned out every closet, cabinet and drawer.  Maybe you’ve done the basement and the attic, too.  And if you haven’t gotten to these projects, spring is the perfect time to get started. 

But once you clean everything out, what do you do with it?  Many of the items you’ve grown tired of someone else may love.  People immediately think of donating, so I’ve compiled a list to get you started.  But there are also other options – places to sell and recycle all over the North Shore. Scroll down for some suggestions. Note:  Click on the link to any location for a direct link to their website for more information.

CHARITY/RESALE SHOPS  

. Goodwill Store & Donation Center   (Northbrook, Glenview, Evanston)
. ORT Resale Shop (Highland Park)
. Winnetka Thrift Shop (Winnetka)
. Salvation Army Thrift Store (Glenview)
. YWCA Shop for Good  (Evanston/North Shore)

 

SELL ON CONSIGNMENT

. Turn the Tables  (Northbrook) – high end consignment shop offering gently used and beautifully styled furniture, lighting, art, rugs, décor, and more.
. Twisted Trunk (Glenview) – consignment furniture store specializing in high-end pre-owned furnishings.
. Village Treasure House  (Northbrook) – nonprofit consignment home store featuring upscale and vintage furniture and home décor.
. Sharing Unlimited  (Highland Park) – resale boutique where they “refashion fashion,” featuring gently used clothing, shoes, bags, jewelry and other accessories.
. KMK Luxury Consignment  (Winnetka) – the finest authentic gently used high-end women’s apparel.
.Classy Closet Consignment  (Evanston) – resale shop selling everything from men’s suits and ties to vintage designer pieces.

 

RECYCLING and SHREDDING

Recycling - Contact your county for items you can’t include in the recycling bin, like electronics and household chemicals and paints.
. Solid Waste Agency of Lake County, IL
. Solid Waste Agency of Northern Cook County, IL

Shredding – Many communities and banks have annual shredding events, in addition to these vendors who provide shredding year-round.
. Office Depot 
. UPS Store
. Shred Spot (Northbrook)

The Evanston Rebuilding Warehouse is a wonderful non-profit organization that's really in a class by itself.  They promote the reduction of waste in landfills through sustainable deconstruction and renovation building practices.  Reclaimed building materials are sold at their warehouse at low cost to the community.  The proceeds support their education and job-training programs.  Renovating your kitchen or bath?  Donate cabinets, fixtures, and appliances. 

 

JUNK REMOVAL

If you can’t sell, donate, or recycle it, these companies will come to your home and pick up your junk.
.  1-800-Got-Junk
.  Gone Guys
.  Super Junk Removal Brothers (Northbrook) 

 

 

 

 

Don't Sell On Your Own Just Because it's a Seller's Market

In a seller's market, some homeowners might be tempted to try to sell their house on their own (known as For Sale By Owner, or FSBO) instead of working with a trusted real estate professional. When the inventory of homes for sale is low as as it is today, buyers are eager to snatch up virtually any house that comes to market. This makes it even more tempting to FSBO . As a result, some sellers think selling their house will be a breeze and see today’s market as an opportunity to FSBO. Let’s unpack why that’s a big mistake and may actually cost you more in the long run.

According to the Profile of Home Buyers and Sellers published by the National Association of Realtors (NAR), 41% of homeowners who tried to sell their house as a FSBO did so to avoid paying a commission or fee. In reality, even in a sellers’ market, selling on your own likely means you’ll net a lower profit than when you sell with the help of an agent.

The NAR report explains:

“FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $217,900 in 2020 (up from $200,000 in 2019), and still far lower than the median selling price of all homes at $242,300. Agent-assisted homes sold for a median of $295,000…Sellers who began as a FSBO, then ended up working with an agent, received 98 percent of the asking price, but had to reduce their price the most before arriving at a final listing price.”

When the seller knew the buyer, that amount was even lower, coming in at $176,700 (See graph below):

That’s a lot of money to risk losing when you FSBO – far more than what you’d save on commission or other fees. Despite the advantages sellers have in today’s market, it’s still crucial to have the support of an expert to guide you through the process. Real estate professionals are trained negotiators with a ton of housing market insights that average homeowners may never have. An agent’s expertise can alleviate much of the stress of selling your house and help you close the best possible deal when you do.

Bottom Line

If you’re ready to sell your house this year and you’re considering doing so on your own, be sure to think through that decision carefully. Odds are, you stand to gain the most by working with a knowledgeable and experienced real estate agent. 

Real Estate Q&A - Refinancing and Updating Your Home

I’m happy to have Brian Jessen, Senior Vice President of Mortgage Lending at Guaranteed Rate, Inc., join me for this Q&A.

Question from Fran L:  Is it too late to take advantage of the low interest rates to refinance my current mortgage loan?  What options are out there in the mortgage marketplace?

Brian’s Answer:  Great question, Fran!  Interest rates are predicted to be low for at least the next 12-24 months, so it is still a fantastic time to refinance your present mortgage loan.   You could save money on a monthly basis, with a much lower interest rate.  Or, you could accelerate or pay down the balance of your mortgage loan debt faster by selecting a 15- year or a 20-year fixed rate mortgage loan, saving you many tens of thousands of dollars of mortgage interest!

Additionally, with the strong housing market and rising house values, you could also refinance to pay off other outstanding debt (credit cards, student loans, or your auto loan), to increase your own personal cash flow and consolidate your debt into one lower overall monthly payment.

Lastly, you could refinance and take cash out to improve your home:  complete a new home office, consider an addition for more space, re-do your bathrooms or upgrade your kitchen and/or family room area.  A Realtor^Ⓡ can help you evaluate your potential home projects, to see which ones may bring you the most return for the money spent on improving and upgrading your home.

Question from Barry G:  My wife thinks we have to update our kitchen and baths and paint the whole house before we can sell it – I am concerned that the next owner will want to re-do all of it to their own taste anyhow, so isn’t that a waste of our time and money to do all the work before we sell it?

Nancy’s answer:  Barry, it sounds like you’ve been in your house for several years.  In the past there were many buyers that would prefer to redo everything themselves when purchasing a home that isn’t brand new.  While there are buyers out there that are willing to take on some remodeling projects, the majority of buyers today would prefer it if there were few, if any, projects to tackle.  In fact, these buyers will pay a premium for a home that doesn’t require much (or any) work after they move in. 

So, you have a choice to make.  You can sell your home in its current condition.  Keep in mind that it will take a little longer to get it sold, and you will get significantly less money for it than if you fix it up.

If, on the other hand, you update the kitchen and baths, refinish hardwood floors, replace worn carpeting, and paint, then your home will sell faster and for more money.  If you go this route, you need to make sure that you use a simple color palette and make selections that match the current style that buyers want.  Will you recoup every dime that you spend fixing the home up?  Maybe, maybe not.  It depends on what condition things are in right now (the worse things are now, the less money you’ll get by doing nothing).  And it depends on what projects you do – if you work with your Realtor^Ⓡ to help you determine which projects will give you the biggest bang for your buck, you have a better chance of coming out ahead of the game.  Your Realtor^Ⓡshould be able to give you an idea of what the house would sell for if you do nothing, and what it would sell for if you do certain updates (in the current market).  Then you can use numbers as a general guide when you set your budget for any projects.

If you aren’t planning to move in the next 12 months, I suggest you get to work on some of these projects now so that you can enjoy them for a few years before you are ready to move.  

Do you have a real estate or mortgage question you’d like answered?  Email us and we’ll address your question in an upcoming blog post:  nancy@nancykarp.com    brian@rate.com

This article originally appeared in Highland Park Neighbors magazine.

Real Estate Q&A

I’m happy to have Brian Jessen, Senior Vice President of Mortgage Lending at Guaranteed Rate, Inc., join me for this Q&A.

Question from Jody S: I heard that the limit for conforming mortgages in the Highland Park area was increased recently.  What does that mean?

Brian’s Answer:  A “conforming loan” is a mortgage with terms and conditions that meet the criteria of Fannie Mae and Freddie Mac (government-sponsored entities that insure mortgages issued by lenders).  These are fixed rate loans that typically have LOWER interest rates than other mortgages.

The Federal Housing Finance Agency (which oversees Fannie and Freddie) recently announced that it will raise loan limits for mortgages backed by Fannie Mae and Freddie Mac, giving some homebuyers greater purchasing power. In other words, you can borrow more at a super competitive rate. Starting in 2021, the maximum conforming loan limit will increase to $548,250 – a 7.4% increase from the 2020 current limit of $510,400.  Mortgage loan limits for multi-unit buildings (2-4 unit properties) are even higher.

Any loan amount above the conforming limit is considered a jumbo mortgage loan, which generally has more stringent requirements and tends to carry higher interest rates.

The exact conforming loan limit varies geographically. It will increase to $548,250 throughout most of the country including Illinois - for more information about your local market, contact Brian:  brian@rate.com. 

Question from Michele R:  Is Highland Park experiencing a seller’s market right now?  What are the implications for buyers or sellers?

Nancy’s answer:  Yes, Highland Park and Highwood are experiencing a seller’s market.  This means that there aren’t enough homes on the market to satisfy the number of buyers.  The number of homes available for sale this past year was down dramatically versus the past several years because many homeowners decided put off plans to sell their homes due to COVID.  Meanwhile, demand is strong because of historically low mortgage interest rates (well below 3% in many cases) and a desire for many young city dwellers to move to the suburbs.  Additionally, Highland Park has been particularly appealing because we just went through several years with flat or declining prices. 

In a seller’s market we see more multiple offer situations, especially on homes that are in move-in condition.  Sellers need to be prepared for this, which includes preparing a strong negotiation strategy, AND a plan for moving out quickly.  For buyers, it means that it may take longer to find what you want, and you may be competing with other buyers.  Buyers should be prepared with a mortgage pre-approval or proof of funds.  You should also be mentally prepared for some disappointments along the way. And, just like the sellers, you need to have a negotiation plan.    

Do you have a real estate or mortgage question you’d like answered?  Email me and we’ll address your question in an upcoming blog post:  nancy@nancykarp.com.

This article originally appeared in Highland Park Neighbors magazine.

The Do's and Don'ts after Applying for a Mortgage

Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You're undoubtedly excited about the opportunity to decorate your new place.  But before you make any large purchases, move your money around, or make any major life changes, do consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.

Below is a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.
3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Adapted from Keeping Current Matters.

Key Terms to Know When You are Buying a Home

Buying a home can be intimidating if you’re not familiar with the terms used throughout the process. To point you in the right direction, here’s a list of some of the most common language you’ll hear along the way.

Appraisal:  This is a professional analysis used to estimate the value of a home.  Getting an appraisal is a required step in validating a home's worth to you and your lender when you are getting a mortgage.  If you are purchasing with cash, an appraisal is optional.

Closing Costs:  This refers to all of the fees required to complete the real estate transaction and are paid at closing. As a buyer, most of your costs will be related to your mortgage.  But you will also pay your attorney (required in Illinois), title insurance, homeowner's insurance (this is just your first payment - your lender will require that you have continuous homeowner's insurance as part of the terms of your mortgage), local transfer taxes if any (this depends on the municipality), and recording fees (this puts information into the public record that you are the new owner of the property).

Credit Score:  Your credit score is a number ranging from 300 - 850 that's based on an analysis of your credit history.  This helps lenders determine the likelihood that you will repay future debts.

Down Payment:  When buying a house, usually the buyer pays a portion of the purchase price with cash and takes out a mortgage for the rest.  Down payments are typically 3% - 20% of the purchase price.  There are some programs that allow you to purchase with 0% down payment that may be available to you, depending on your situation.  Ask your lender for more information.

Home Inspection:  It is the responsibility of the buyer to hire an independent 3rd party (licensed by the State of Illinois) to perform a detailed inspection of the property.  Some optional services that you can include are radon testing, thermal imaging (to look for heat loss and plumbing leaks, for example), and a video of the sewer line.

Mortgage:  A loan that is specifically for purchasing a home is called a mortgage.  If you are a veteran (having served in the military), or a first-time home buyer, you may be able to get special terms for your mortgage.  Be sure to ask your lender if you qualify for any of these programs.

Mortgage Rate:  The interest rate you pay to borrow money when buying a home is your mortgage rate.  The lower the rate, the better.  Note that interest rates right now are at historically low levels.

Pre-Approval Letter:  Once your lender has checked your credit score and verified other key information, they can provide a pre-approval letter indicating that you qualify for a mortgage of a specific amount.  This is a critical step in today's competitive market.  Many sellers won't consider your offer unless you have a pre-approval letter.  This is much better than a pre-qualification letter, which is just based on what you've told the lender, without any verification.

Real Estate Professional:  Real estate professionals are licensed by the state to buy, sell or rent real estate.  They will help you understand and work through the confusing paperwork, find your dream home, negotiate any of the details that come up, and provide you with information so you know exactly what's going on in the housing market.

Real Estate Agent/Broker/Realtor® - what's the difference?  In Illinois if you have a professional real estate license you are a Real Estate Broker or a Residential Leasing Agent.  Real Estate Brokers help people buy, sell or rent residential real property. They act as an intermediary between sellers and buyers and help draw up the necessary legal paperwork to complete transactions.  A Residential Leasing Agent works with property owners to market and show their residential properties and attract good tenants.  Some people may refer to these professionals as “agents” but in Illinois that term is not a recognized licensed designation.

A REALTOR® is a real estate broker who belongs to their local and state association of realtors in addition to belonging to the National Association of REALTORS® (NAR).  The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NAR and subscribes to its strict Code of Ethics.  

To maintain your license in Illinois, you must regularly take and pass rigorous continuing education classes which cover new real estate legislation,  fair housing laws and practices, the NAR code of ethics and much more.

I am a broker and a REALTOR® and my business is based on relationships and trust.  I would love to help you find your dream home.  Please reach out to me with any questions.

Your House May Be High on the Buyer Wish List This Holiday Season

Around this time each year, many homeowners decide to wait until after the holidays to sell their houses. Similarly, others who already have their homes on the market remove their listings until the spring. Let’s unpack the top reasons why selling your house now, or keeping it on the market this season, is the best choice you can make. This year, buyers want to purchase homes for the holidays, and your house might be the perfect match.

Here are seven great reasons not to wait to sell your house this holiday season:

1. Buyers are active now. Mortgage rates are historically low, providing motivation for those who are ready to get more for their money over the life of their home loan.

2. Purchasers who look for homes during the holidays are serious ones, and they’re ready to buy.

3. You can restrict the showings in your house to days and times that are most convenient for you, or even select virtual options. You’ll remain in control, especially in today’s sellers’ market.

4. Homes decorated for the holidays appeal to many buyers.

5. Today, there’s minimal competition for you as a seller. There just aren’t enough houses on the market to satisfy buyer demand, meaning sellers are in the driver’s seat. Over the past year, inventory has declined to record lows, making it the opportune time to sell your house.

6. The desire to own a home doesn’t stop during the holidays. Buyers who have been searching throughout the fall and have been running into more and more bidding wars are still on the lookout. Your home may be the answer.

7. This season is the sweet spot for sellers, and the number of listings will increase after the holidays. In many parts of the country, more new construction will also be available for sale in 2021, which will lessen the demand for your house next year.

Bottom Line 

More than ever, this may be the year it makes the most sense to list your house during the holiday season. Let’s connect today to determine if selling now is your best move.

Winter Will Bring a Flurry of Activity to the Housing Market

In the second half of this year, the housing market surged with activity. Today, real estate experts are looking ahead to the winter season and the forecast is anything but chilly. As Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), notes:

“It will be one of the best winter sales years ever.”

The typical winter slowdown in the housing market is simply not on the radar. Here’s why.

Mortgage Rates Remain Low

While today’s historically low mortgage rates are expected to remain low, they won’t be this low for much longer. This could be the last chance for homebuyers to secure such low rates, and they’re ready to take action. In a recent article, Bankrate explained:

“If you’re looking to buy a home…expect mortgage rates to remain low into 2021. However, the possibility of rates falling to 2.5 percent or lower has faded as the U.S. economy has rebounded.”

As long as we continue to see low interest rates, we’ll see hopeful buyers on the hunt for their dream homes. Yun confirmed:

“The demand for home buying remains super strong…And we’re still likely to end the year with more homes sold overall in 2020 than in 2019…With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”

Should Sellers Wait for Spring?

The challenge, however, is the lack of homes available for sale. With that in mind, all eyes are on homeowners to see if they’ll sell this winter or wait until spring. Danielle Hale, Chief Economist for realtor.com, says it’s best for sellers to capitalize on this moment sooner rather than later:

“We currently see buyers sticking around in the housing market much later than we usually do this fall. If that trend continues, we will see more buyers in the market this winter, too. So, this winter is likely to be a good time to sell.”

With buyers ready to stay active this winter, sellers who want to close a deal on the best possible terms shouldn't wait until spring to put their homes on the market.

Bottom Line

Experts agree the winter housing market could potentially be bigger than ever. Whether you’re ready to buy or sell, let’s connect today so you can be in your dream home by the new year.

The #1 Reason Not to Wait to Sell Your Home

Many industries have been devastated by the economic shutdown caused by the COVID-19 virus. Real estate is not one of them.

Mark Fleming, Chief Economist for First American, just reported:

“Since hitting a low point during the initial stages of the pandemic, the only major industry to display immunity to the economic impacts of the coronavirus is the housing market. Housing has experienced a strong V-shaped recovery and is now exceeding pre-pandemic levels.”

Buyer demand is still strong heading into the fall. ShowingTime, which tracks the average number of buyer showings on residential properties, just announced that buyer showings are up 61.9% compared to the same time last year. They went on to say:

“Normally, real estate activity begins to slow down in the late summer, but this year it peaked in July, August and into September.”

There Is One Big Challenge

Purchaser demand is so high, the market is running out of available homes for sale. Just last week, realtor.com reported:

“Since the beginning of the COVID pandemic in March, nearly 400,000 fewer homes have been listed compared to last year, leaving a gaping hole in the U.S. housing inventory.”

The National Association of Realtors (NAR) revealed that, while home sales are skyrocketing, the inventory of existing homes for sale is dropping dramatically. Below is a graph of existing inventory (September numbers are not yet available):

Homebuilders are increasing construction, but they cannot keep up with the high demand. Bill McBride, founder of the Calculated Risk blog, in discussing inventory of newly constructed houses, notes:

“The months of supply decreased to 3.3 months…This is the all-time record low months of supply.”

What does this mean for sellers?

Anyone thinking of putting their home on the market should not wait. A seller will always negotiate the best deal when demand is high and supply is limited. That’s exactly the situation in the real estate market today.

Next year, when the pandemic is hopefully behind us, there will be many more properties coming to the market. Don’t wait for that increase in competition in your neighborhood. Now is the time to sell.

Bottom Line

Let’s connect today to get your house on the market at this optimal time to sell.