Cash for Buying a House

For the past two weeks or so, there have been rumors galore that first time home buyers will be able to borrow their federal tax credit in order to use that money for closing costs and down payment towards the purchase of a home. The details have not yet been worked out but I think this is going to happen. There are some technicalities that have to be worked out because basically you are not suppose to borrow money in order to have the funds necessary to qualify for a mortgage. Hopefully this will be worked out soon because there is not a lot of time left in order to qualify for the tax credit. The purchase must be closed before December 1, 2009.


I have also heard rumors of homebuyers amending their 2008 tax returns to claim the credit before they close on a home in order to get the money early and use it at closing. I’m not a lawyer and this is not legal advice BUT I don’t recommend you doing this. Lying to the federal government so that they will send you thousands of dollars doesn't seem like a prudent advice for individuals that enjoy the simple things in life, like freedom.

Anyway, I’m working with plenty of first time home buyers right now and questions keep coming up about the disbursement of money, i.e., when and how much. Here are some general guidelines.

When you write a purchase offer for a property, you need to be willing and able to make a good faith deposit within 48 hours of when your offer is accepted. Deposits are a minimum of $1000 and are made payable to the listing broker. That money is held in escrow (not given to the seller), is refundable if the contract is canceled due to contingences, and is used towards the closing costs or down payment of the property.

Generally, the buyer has up to one week to conduct inspections of the property and these are done at the buyer’s expense. Inspections include a home inspection ($300 to $500), radon test ($150 to $200), mold inspection ($200 - $500), chimney inspection ($125 0 $200) ect. In addition, if the house is on septic system and/or has a well, they will need to be inspected. It is not unusual for the seller to pay for these inspections but occasionally the buyer will prefer to pay for these themselves just so that the inspector works strictly for the buyer. Well inspections and water testing can run from $35 to $250 and septic pumping and inspection is $200 to $400.

The next outlay of cash is usually to the mortgage lender. Some lenders will collect an application fee at the time the mortgage application is made ($200 - $300). Nearly all lenders will require that the appraisal be paid up front ($250 - $400).

Things get quiet after mortgage application and the next big expense is homeowner’s insurance. Mortgage companies require that you pay for the first year of insurance up front and that the insurance binder is faxed to your attorney before closing. Insurance premiums are based on the replacement cost of the property plus there is consideration of personal possessions, so I won't dare to quote a range for homeowner’s insurance, but do encourage you to shop around.

The day before closing, you will receive a call for your attorney’s office telling you how much money to bring to closing. Hopefully, any surprises with this phone call are good ones, as you will have received and signed a “Good Faith Estimate” at the time of mortgage application. Some of the language on the GFE is confusing to the layman. The GFE will give a total of closing costs, prepaid items which includes interest and mortgage insurance and the down payment. The GFE should include “Total Estimated Funds Needed to Close” and this should be fairly close to what you are asked to bring to the attorney’s office.


I hope this helps clarify how much money is needed when in the home buying process. If you’d like more information or a consolation, don’t hesitate to give me a call.

My Favorite Helpers!

Property is selling in Rochester, NY, thanks in part to the federal first time home buyer tax credit. I've been struggling to keep up but Colin and Sean were a big help in putting a sold sign in front of their home in Southeast Rochester. Thanks guys.

Hopefully, I'll be able to squeeze out a little time over the next couple of days to catch up on blogging!

The Purpose of the Home Inspection

Okay, I'm getting grumpy! I'm tired and have not had a day off in a while. With that being said, let me get this off my chest!

The purpose of the home inspection is NOT to renegotiate the terms of the sale. If you put in a purchase offer on a house with a tarp over the garage roof, don't expect $5000 concession because the inspector says the garage is a piece of crap.

The purpose of the home inspection is to discover defects that were not obvious at the time of purchase. There is no such thing as a perfect house. The inspector will let you know what is imperfect about it and you decide if you can live with that imperfection. Sometimes the seller will fix the imperfection. Sometimes the seller will offer a credit so the buyer can fix the imperfection. But the inspection is not intended to renegotiate the terms of the purchase.

There! I feel better! Now, hopefully I can go back to my normal smiling self.

The Lilacs are Coming But the Magnolias are Here!!!

At some parks, there are signs telling you not to leave the walkway. But not so at

Rochester's Highland Park. In fact, they have many park benches well off the beaten path just beckoning you to come and sit and ponder. What a delightful way to spend a spring day.

Highland Park might be best know for its lilacs but I believe the magnolias are just as spectacular, if not more so. The warm temperatures of the past few days have brought them almost to peak so if you get a chance to take a stroll, do so soon. Enjoy the photos.

And about real estate, well, it's been busy. My two new listings this week both sold in a week or less. I have many buyer clients that still can't find a place to buy. Now is a good time to sell in Rochester.

54 Westmoreland Dr. - Great deal for U of R Employees

54 Westmoreland Drive. Cute house in a wonderful location. This property qualifies for up to $9000 in grants for full and part time employees of the University of Rochester. In addition, if you have not owned a home in the past three years, you may qualify for the $8000 federal tax credit if you close before December 1, 2009. Stop by and see me today at my open house from 1 to 3 or call me for details. 585-414-5513

How Quickly are Houses Selling In Rochester?

Very, very, very quickly!

Case in point, a new listing came up Friday afternoon. There were no photos but my clients decided to drive by anyway. They called me from the driveway and said we want want to see this. I pull up the listing and there is not even a flowery description of the property and call to get the appointment. There is no sign in the yard so I drive right by it but we get to see it first thing Sunday morning. They really, really like it but we decide to look at an open house that afternoon to compare the properties. No comparison!

We sit down last evening and write an offer. I don't even call the agent ahead of time because, heck, he hasn't even posted photos yet so no one is going to find this property, right? WRONG! Full price offer accepted just hours before ours was submitted.

This was not a starter home either. It was 2500 sq feet in the $200,000 range. So, yes, houses in Rochester are selling very, very quickly.

How Much House Can I Afford to Buy?

I've got a very good feeling that young people have been watching the news and learning from the messy financial situation facing the country and world these days. While they are enticed by the excellent market conditions (very low mortgage rates, lower house prices and a tax credit!!) there is a lot of concern and conservatism regarding personal finances. Hooray! I am meeting more and more people in their 20's that have little to no debt, aside from student loans. I'm optimistic that this next generation gets it.

As I meet with first time home buyers, they struggle with the decision over how much house to buy. They don't want to get in trouble. That is excellent but I also counsel buyers not to buy too little. It is very expensive to buy and sell houses and with houses appreciating at a slower rate these days, you can expect it to take 4 to 7 years to recoup your closing costs.
So how do you know how much house to buy? Conventional wisdom is that a 30 year mortgage payment (PITI) should fall in the range of 28 to 33 percent of personal income. Here is a link to a handy calculator that can help you figure this range. http://cgi.money.cnn.com/tools/houseafford/houseafford.html .

Keep in mind, this is a very simplistic approach to deciding how much to spend. A more comprehensive approach is to chart out all your monthly expenses, set goals for savings (long term and short term) and actually formulate a budget. I know that "budget" is often considered a dirty word but a budget will help you analysis your spending habits and prioritize where you want your money to go, i.e., would you rather travel or have a more expensive home? Visa, the credit card company, has an excellent web site on practical money skills that includes a budget tool. If you want to check it out, go to http://practicalmoneyskills.com/english/wizards/downloadtool.php


Houses in the lower price ranges continue to sell very, very quickly in Rochester right now and luxury homes are beginning to get more attention. I'm looking forward to seeing the numbers for our first quarter.

Already Sold!

The only reason I have time to update my blog this week is that more than half of the houses that I've called on to schedule a showing have already been sold.  In fact, one house had an accepted offer at 6 pm on the very day it was put on the market.  I think it is safe to say that the $8000 first time home buyer tax credit is doing it's job to stimulate the real estate market.

I did a quick check of houses that went pending today in the MLS system.  At 4 pm, we had 37 new pendings, with an average sale price of $133,900 and average days on market is 62. 

The Seach for the Ugly House

Some of my clients think I'm a little crazy when I advocate for buying ugly houses. Now I'm not talking butt-ugly. I'm talking about the type of ugly that a coat of paint or perhaps new carpet will fix. And I advocate for that type of house because that is where the best deals are.

Houses with "Pottery Barn Decor" are fun to look at but you will "ohh and ahh" all the way to the bank if you purchase this type of house. Sparkling clean and tastefully decorated houses command top dollar but keep in mind that the furniture and art work will be gone when you move in.

Everybody wants to buy a beautiful house. It's just not as exciting to tell all your friends, "Well, it has green and orange shag carpeting from the '70's BUT the roof is new and the furnace is only a couple of years old!"

Here are a few tips for ugly house shopping.

1. Do your homework so you can budget for remodeling jobs. Kitchens, for example, and be remodeled for a few thousand dollars or tens of thousands, depending on your standards. Even wall-to-wall carpeting comes in a wide variety of designs and quality and so no real estate agent can honestly give you a ball-park figure for these projects.

2. Have a checklist so that you are certain to check all the mechanicals, such as electric, hotwater heater, roof. It would be down-right depressing to have an ugly house that also leaks every time it rains. This is not to say you won't have the house inspected, but you should check for obvious problems before you put in an offer.

3. Analyze the layout. This is especially important in kitchens. You may be able to improve its looks but it also needs to function well.

4. Don't be afraid to ask for help. If you'd don't know how to decorate, hire an interior designer. Generally, they charge a few hundred dollars for an initial consultation which is a bargain if you saved thousands on the purchase.

Want to go ugly house shopping? Give me a call. I don't mind showing you beautiful houses as well.

www.RochestersBestHomes.com

Lobbyist For a Day

I spent the day in Albany yesterday with approximately 50 other Realtors from both Rochester and Buffalo to meet with several of our state legislators to discuss upcoming legislation that affects local homeowners and the real estate market.

The most important item on our agenda was the need for property tax relief. New Yorkers pay an exorbitant amount of property taxes and Western New Yorkers pay more in taxes relative to their property value than the rest of the state. For example, the New York State Comptroller's Office reports that approximate property taxes on a home in Rochester valued at $100,000 are just under $4,000. In comparison, taxes on a $100,000 home in Yonkers are less than half of that ($1,773) and in Southampton, they are almost a tenth of that ($456).

As real estate agents, we were able to give real life experiences about how homebuyers and homeowners struggle to purchase or keep their homes due to high taxes. I had a fun conversation with Assemblyman Bob Oaks (Cayuga, Oswego and Wayne Counties) telling him about trying to explain NY state property taxes with STAR deductions and STAR rebates to individuals moving here from another state. Property tax relief needs to be a top legislative priority for lawmakers!

Some of the other items we discussed was to request support of a bill that would simplify the language on the state's property condition disclosure and to vote against a bill that would restrict the availability of real property information for consumers as well as licensed real estate practitioners. If you'd like information on these bills or others that we discussed with legislators, don't hesitate to give me a call at 585-414-5513.

One of the best things about the trip yesterday was the feeling that our elected officials do want to hear from their constituents. If you'd like to contact your elected state officials, the state has put together an excellent web site that allows you to type in your address and receive a complete list of who represents you. http://nymap.elections.state.ny.us/nysboe/ From there, you can make a few clicks to get everything from a biography to sponsored legislation to contact information for your officials. It's pretty painless to become informed and involved through this site.

With this trip behind me, I hope to get back on the blogging bandwagon and do a much better job of keeping this source of information up to date.

Another Detail on the Stimulus Bill

The American Recovery and Reinvestment Act has plenty of good news for first time home buyers that buy between January 1 and November 3, 2009. See yesterday's post for more information. One new detail has emerged that I didn't know yesterday. If a buyer takes the tax credit, it doesn't need to be repaid if they stay in the house for three years or more. If they sell before three years, the tax credit will be repaid from proceeds of the sale of the property.

Don't hesitate to contact me if you have not owned a house in the past three years and are considering a purchase.

Real Estate and the Stimulus Bill

Unless you've been hiding out in a dark cave for the past month or so, you probably know that President Obama is signing into law a huge economic package designed to rescue the economy. Since real estate is a major part of the U.S. economy there are several important provisions that hopefully will stimulate the U.S. and Rochester real estate markets.

Since this is still a bill and not yet a law, a lot of the information out there is still vague. For example, rumor has it that the bill will provide an $8000 credit for first time home buyers that purchase a home before December 1, 2009. No one has been able to tell me yet if that means they need to close the transaction before December 1 or simply have an offer accepted.

Here is what we do know. A first time homebuyer is defined as someone who has not owned property in the past three years. There are income restrictions; the credit is available to individuals making $75,000 a year or less or couples making $150,000 or less per year. As a tax credit, this should not be confused with grants or closing cost assistance. The tax credit will be taken in 2010 when homebuyers file their income tax returns for 2009.

I had wished that the bill will include all home buyers, not just first time home buyers. You see, in Rochester we have a shortage of inventory. I am currently working with 4 first time homebuyers that are looking in the $130,000 to $150,000 range and they are having a difficult time finding homes to look at much less purchase. One couple, in particular, had 4 houses purchased out from under them, several before they even were able to go see them and one before they could do a second walk through. I do believe that a credit to all buyers would motivate more sellers to move up or even down size.

Why is that good? Well, of course it means a payday for me but there are many other individuals that derive their income from the housing market, i.e., inspectors, appraisers, attorneys, surveyors, mortgage loan officers, title companies, etc. The government makes a few dollars as well with transfer tax, mortgage tax, recording fees, etc. and most new home owners pump additional dollars into the economy by hanging out at Lowes, Home Depot and other home improvement shops as well as potentially buying furniture, curtains and other items to make that house their home. In other words, a good real estate market stimulates the economy.

Getting a Mortgage in 2009

I am running into buyers that cannot be convinced to sit down with a mortgage loan officer to be pre-approved for financing early in the home searching process. Perhaps if I share a true life story about getting a mortgage in 2009, they will be more receptive to my nagging!

A client that I've worked with for several years was pre-approved for financing with a score approaching 800. During the time that he was shopping around for investment property, he made a major purchase on a deferred payment plan. The payment plan was a new line of credit and adversely effected his credit score by 70 points! He no longer qualified for the mortgage because his credit score was 7 points too low and he was stunned. He assumed that because he paid all his bills on time his credit was excellent. To make this even harder to understand, this buyer has enough cash in the bank to make a cash purchase but the lenders absolutely will not give him a mortgage.

In another situation, I had a client who's credit card company simply reduced the line of credit because of the credit crunch. Initially, my client was not the least bit concerned because she doesn't carry high balances but when she applied for a mortgage, she didn't qualify for as good of a rate as she had three months earlier. Her credit scores increased significantly because the reduction in the line of credit meant suddenly she had a higher debt ratio to credit available. It was the same effect as if she had made a major purchase on credit but this was totally not a result of her actions!!!!

There are many things that effect the FICO score that is used to qualify an individual for financing. Payment history is very important but so is the amount of debt owed as well as the number of new credit accounts opened and the length of the credit history. And from time to time, I still run into buyers that do not have any credit history which makes it just as difficult to get a mortgage as bad credit.

If you are thinking about buying real estate and have not recently won the lottery, please, please, pretty please start the process with a meeting with a mortgage loan officer. Not only will you avoid waisting a lot of time, you will be much less likely to have surprises and disappointments when you find a property that you want to purchase.

Rochester Best Buy: 1165 Bay Street

Here's a house that definitely should be sale pending! This 3 bedroom colonial with finished basement needs painting and other cosmetics but is a steal at the current list price of $63,000. Details and inside photos at Bay St .

What makes this such a good deal? Similar properties in this neighborhood have sold for prices in the $73,000 to $83,000 range. Here are the recent sales: Customer Full Report

For an appointment, give me a call at 585-756-7457.

Mary

New York State Property Taxes

This should come as no surprise. New York homeowners pay highest property taxes in nation


According to a recent report by the Washington-based Tax Foundation, New Yorkers are saddled with the highest property tax burden in the nation. The counties paying the highest actual property taxes in the nation are Westchester and Nassau with average burdens nearing $8,000 per year. Monroe County ranks 80th in the nation with an average tax bill of $3,486.

An interesting twist to the data is that when taxes are compared to their homes' value, Monroe County ranks 5th in the nation with median real estate taxes running at 2.84% of median home values. Neighboring Orleans County tops the list!! I guess the eternal optimists in me wants to report this as good news. I mean, we could be paying more than a quarter of a million dollars for a starter home and have huge taxes too.

Anyway, I'm working with a reporter who is doing a story about the impact on the local real estate market of Governor Patterson's proposal to eliminate the STAR rebate checks. If you have some thoughts to share on this subject, either leave a comment on the blog (with contact information) or send me an e-mail at MShelsby@gmail.com. We'd love to hear from you.

Million Dollar Real Estate

It's a new year and time for new dreams.

Just a few years ago, it was very rare to find a property for sale in the Rochester area for $1,000,000 or more. Currently, there are more than 30 listings of luxury homes with a million dollar or higher price tag. And with today's difficult economic climate, these prices are dropping faster than a brick out of a 3rd floor window.

Here is a link to current Million Dollar Listings. Enjoy and stay warm!

Rochester Real Estate - The Year in Review

Happy New Year Everyone! This is a perfect time of the year to reflect back and plan for the future. As I look back over 2008, the thing that keeps coming to mind is "The Day the Phone Stopped Ringing!" Literally! I was having a little slower than average year with about 20 sales when suddenly, around September 1, 2008 no one wanted to look at real estate, no one wanted to sell real estate, no one even wanted to talk about real estate.


Things have improved, somewhat. Since Thanksgiving 2008, I've been busy. I showed property the day before Thanksgiving, Christmas Eve (two different clients) and even to three different clients this week and just about every day in between. My phone is ringing like crazy. Buy I'm not selling property. People are skittish! Buyers are not writing and when they do, the offers are so low that the sellers aren't biting. And sellers are wanting more for their property than they will probably get. It is tough to make a living in real estate these days.

The other striking thing about 2008, was how difficult it was to work with the banks. My first canceled contract came the first week of January in which the bank simply changed its mind about giving a mortgage for a two family property because it was in a neighborhood zoned low-density residential. It was sad as the family had everything packed and were ready to move when the bank backed out. Some of the other frustrations came from banks requiring two appraisals on properties owned less than 6 months and a few incidences of the appraiser acting more like an inspector. Some of the bank changes are good. An individual should have a job and a history of paying their bills on time before a bank loans them a ton of money. That only makes sense.

There was, fortunately, more to 2008 than our financial crisis. I got to work with lots of wonderful people. I got to help young couples like Megan & Ev, Marci & Paul and Lynn & Jason purchase their first homes. I helped several families transition from a long time residence to something new. And I worked with numerous investors that decided they liked the return on real estate much better than the stock market. I guess more than anything, I feel like I made lots of new friends this year as I assisted them with their real estate business. It's not been an easy year, but very rewarding, if not financial.


I'm headed to North Carolina for a little R&R with my husband, Jim, but best wishes to you and yours for the New Year. Please don't hesitate to call if I can assist with your 2009 real estate needs.

It's Beginning to Look A Lot Like Christmas!

Santa's sled should have no problem swooping from roof top to roof top here in the Rochester area as we have about 2 feet of snow on the ground. And once he gets inside, boy what treasures for his eyes! I put out an invite to my former clients and all blog readers to submit photos of their holiday decoration, and boy, what a treat it has been.

I received several entries from Mendon, including this nicely decorated fireplace in a beautiful farmhouse on Lanning Road from Jeff and Jeanne. Another Mendon family put their angels in front of the tree instead of on the tree. Lexie, Addy and Mia look gorgeous in front of the tree, don't you agree?

The furthermost entry received was from Wanakena, NY in the Adirondacks. Patty and Roy reported that they simply decorate their fence and the local deer pose as ornaments!

I also received an entry from the very block in which I live. Vern and Joan sent a very nice photo of their Alberta spruce they decorated in their yard. And my neighbors Geri and Joe invited me over to photograph their beautiful home all decked out for the annual Sector 6 Holiday Buffet.

Fran and Pat (yes, the one and only from http://www.patandfran.com/ fame!) from the neighborhood of the arts e-mailed me a beautiful photo of their Christmas tree. It's been several years since I've been inside their home so it was nice to get a glimpse of it from the photo.

I received several entries from the suburbs as well! Mark and Tricia of Mumford sent a photo of their beautiful red Isaac Memorial Tree which they set up in memory of their beautiful baby boy who went to Heaven before his first Christmas.

From Gates, Juanita and Derrick sent this photo of the beautiful table setting for the holidays. Boy, doesn't that look like a great spot to spend Christmas dinner?

Giovanni & Elizabeth also sent in a photo of a very beautiful Christmas tree set up in their home in Greece. Giovanni, a fairly recent U.S. citizen, is from Cuba and some day I'd like to tell his story of arriving in the U.S. on a small boat and making a very nice life for himself and his family here.

My very favorite Christmas tree photo was taken at L.David Salon in East Rochester, which by the way, is a great place to go if you need to get spiffed up for your New Year celebration or any other celebration, for that matter.

     And now, the moment everyone has been waiting for. As promised, I put all the names in a hat and had a random drawing for a $50 gift certificate to the restaurant of their choice. And the winner is.....

Pat and Fran Reed! Congratulations. And to everyone else, thank you for taking the time during this busy season to e-mail photos to me and better luck next year.

     Best wishes for a safe and happy holiday season.

Mary Shelsby

Buying and Selling Real Estate During the Holiday Season

It is a question that comes up a lot this time of year, “should we keep our house on the market through the holidays?” One for thing is certain, you have a much better chance of selling it if it is on the market than off. That being said, keep in mind that there are fewer home shoppers during late November and the month of December. Those that are out there are generally pretty serious shoppers. Another consideration in making this decision is how do you feel about keeping your home in ready-to-show condition throughout the holiday season?

The holiday season can be a great time to buy a house if you are willing to squeeze house shopping into your busy schedule. Just last year, I negotiated nearly $50,000 off the asking price of a waterfront property during Thanksgiving weekend and for another client submitted an aggressive purchase offer on Christmas Eve for an East Ave condo that was accepted without a counter. In both of these instances, the properties had been on the market for a while and the sellers had moved on to new homes and not interested in maintaining the property over the cold winter months. Not all sellers are that eager to sell but there are good deals to be had over the holidays.

If you are interested in buying or selling real estate during the holiday season, please don’t hesitate to give me a call.