Better Homeowner – Page 11 – Montgomery Real Estate Guy

Can You See the Savings?

January 28, 2014 By admin

If you’ve considered changing your light bulbs to energy-saving LED bulbs but decided not to make the investment because the prices were too high, you might want to investigate again. The prices have come down considerably.

An initial investment now will generate immediate returns through energy costs and because they last longer, you won’t need to replace them for years.

The life of LED bulbs is projected to be from 35,000 to 50,000 hours compared to an incandescent bulb at 750 to 2,000 hours. For normal home use, a LED bulb could last more than 20 years.

80-90% of the energy used by fluorescent and incandescent bulbs is wasted by the heat generated. In contrast, cool LED bulbs converts 80% of the electrical energy to light energy.

• The color of LED lights is bright white, more like daylight, instead of the warm yellow of incandescent or the greenish tint of fluorescent bulbs.

• LEDs light up instantly instead of building to their intensity like some of the fluorescent bulbs.

• LEDs are more durable because they don’t have filaments or thin-glass bulbs like incandescent and fluorescent bulbs.

Shop around to find the best price on LEDs. If the LED only lasted 20,000 hours, you might have to purchase 20 incandescent bulbs during that same period of time. Using the chart below, you can see that the LED uses about 10% of the wattage without compromising on the brightness.

Filed Under: Better Homeowner, Blog

Up to $500 for Doing Home “Work”

December 18, 2013 By admin

The energy-efficient home upgrades tax credit is scheduled to expire on December 31st this year. If you need to make improvements to your home, this could be an incentive to do it before the end of the year. If you have already made qualifying improvements without realizing the tax credit is available, it may seem like a holiday gift you weren’t expecting.

The equipment must be installed to qualify for the credit which can put you under a time crunch. Heating and cooling systems, insulation, windows, doors, skylights, water heaters and home weatherization may qualify.

The Residential Energy Efficiency Tax Credit has been available for purchases since January 1, 2011. The tax credit is 10% of up to $5,000 of qualifying improvements which would make a maximum of $500 tax credit.

The cumulative maximum amount of tax credit that can be claimed by a taxpayer in the different years this law has been in effect is $500. If it has been claimed in previous years, the taxpayer is not eligible for this credit for additional new purchases.

For more information, see energy.gov or talk to your tax professional.

Filed Under: Better Homeowner, Blog Tagged With: energy-efficient home upgrades tax credit, energy.gov, Home Improvements, Residential Energy Efficiency Tax Credit

Winter Maintenance

December 9, 2013 By admin

With a 2,000+ mile long winter storm affecting much of the country, there are plenty of home owners who wish they were better prepared. Even when you live in warm climates, some of these things are important to check periodically.

Preparing for the change of seasons can make your home more comfortable and protect your investment. Regular maintenance extends the various components of a home and can generate savings in operating costs while avoiding expensive replacements.

Weather strips around doors and windows should be checked for possible air leaks.
Caulking around windows and doors should seal out moisture and air leaks.
HVAC should be inspected and serviced by a professional annually.
Smoke and carbon monoxide detectors should be tested regularly.
Ductwork and supply lines from water heaters should be insulated.
Fireplace chimneys should be cleaned regularly and fireplaces should be inspected for cracks in mortar and to see if the damper closes properly.
Gutters should be free of leaves and debris to prevent rainwater build-up.
Tree branches touching or hanging over your roof should be trimmed.

Please contact us if you need a service provider recommendation.

Filed Under: Better Homeowner Tagged With: Better Homeowners, Winter Maintenance

Motivated Sellers, Better Prices and Less Competition

December 9, 2013 By admin

The Winter Home Buyer Report conducted in the second week of November by REALTOR.com^® revealed the sentiments of current home buyers expecting to buy a house during the winter months. It appears that there is pent-up demand with buyers who were unable to purchase a home recently.

Most cited as an impediment to purchase was the challenge of low inventory. Strong demand coupled with short supply explains why home prices have been increasing.

“This summer and spring home buying season was particularly challenging for buyers, especially first-time home buyers trying to compete with all-cash offers and bidding wars because of reduced inventory. In fact, a quarter of the winter home buyers revealed they are in the market now because they were unable to find a home during this last home buying season,” said Alison Schwartz, vice president of corporate communications at REALTOR.com^®. “While buyers are still experiencing challenges with inventory and approximately one in five buyers plan to put down all cash, there are advantages to looking for a home in the winter. Motivated sellers, better prices and less competition between buyers are some of the top reasons winter home buyers are interested in purchasing a home during the colder months of the year.”

Some interesting statistics taken from the report are:

Biggest challenges when searching for a home during winter:

• 34 percent shared that there is not enough inventory on the market
• 29 percent believe that winter weather makes house hunting unpleasant

Traditionally, the industry has found that the fourth quarter of the year has a lower sales volume and is generally attributed to distractions from the holidays and not wanting to make a move during consistently inclement weather. Even in areas that are not affected by extreme winter weather, there seems to be a mindset about moving in the winter.

Indications are that it may be advantageous for sellers to put their home on the market now rather than wait until after the first of the year.

Filed Under: Better Homeowner Tagged With: Better Homeowners, Winter Home Buyers

Refinance to Remove a Person

December 9, 2013 By admin

Most people are familiar with the various reasons a homeowner refinances their home which generally result in two major benefits: saving interest and building equity.

There is however another reason to refinance which may not be as common which is to remove a person from the loan. In the case of a divorce, when one party wants to keep the home and the other party wants their equity out of the home, it is possible for the remaining party to refinance the home. If the equity is sufficient to justify it and the remaining owner can qualify for the new loan, the refinance can provide the proceeds to buy out the other spouse.

Refinancing to remove a person from the loan could also involve a situation where two or more heirs jointly own a property and have differing opinions on when to sell. The same situation could apply to a rental property with multiple owners and the refinance would provide a way to buy out a partner.

Sometimes, it’s not about taking cash out of the home to buy out the other party. If a person’s name is on the mortgage, they’re responsible if it goes to default. One party may be willing to deed the home to the other party but it doesn’t necessarily relieve them of the liability of the mortgage they originated.

Many times, once a person has made their mind to move on, they’ll take the fastest and easiest way out. Removing a person from the deed or a mortgage is a reason to consider obtaining legal advice to protect your interests. Refinance Analysis calculator.

Reasons to Refinance

1. Lower the rate
2. Shorten the term
3. Take cash out of the equity
4. Combine loans
5. Remove a person from a loan

Filed Under: Better Homeowner Tagged With: Better Homeowners, Divorce, Refinancing

Who’s Paying Your Mortgage?

December 9, 2013 By admin

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does. Equity build-up is a significant benefit of mortgaged rental property. As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property. Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down. It can be accelerated by making additional contributions to the principal each month along with the normal payment. Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years. The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses.

Notice that both properties have a positive cash flow before tax. The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property. The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that. A simple definition of an investment is to put away today so you’ll have more tomorrow. Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities.

Filed Under: Better Homeowner Tagged With: Benefits of Rental Property, Better Homeowners

All Dollars Not Equal

December 9, 2013 By admin

The division of assets between the spouses is an important decision to finalize a divorce. The exercise looks relatively simple: assign a value for each of the assets and divide them based on a mutual agreement between the parties.

The challenge is to make a fair division which requires an analysis to determine their value after they’re converted to cash.

Assume the two major assets in the example, a retirement account and the equity in the home, are equal at $100,000. It might seem logical to give the home to one spouse and the retirement account to the other. However, if the person receiving the home decides to sell the home, the net proceeds could be considerably less than the spouse receiving the retirement account.

Let’s pretend that the spouse with the home negotiates a lower price of $475,000 due to current market conditions. The former couple had owned the home for many years and refinanced several times, pulling money out of the home each time. When the remaining spouse sells the home, there could be a considerable gain that was never recognized.

As a single person, he or she is now only entitled to $250,000 exclusion and would have to pay tax on the excess gain. After paying the sales costs, outstanding mortgage balance and the taxes due on the gain, the remaining spouse would have net proceeds of $24,375 compared to the $100,000 that the former spouse received in the settlement.

The message in an example like this is to examine and consider the potential expenses that may be involved with converting the assets to cash after the divorce. Obviously, expert tax advice is valuable in making such decisions.

Filed Under: Better Homeowner Tagged With: Better Homeowners, Divorce

Real Estate 411

December 9, 2013 By admin

When you’re buying or selling, the obvious source to get your real estate question answered is your agent but where do you go the rest of the time? As a homeowner for many years to come, you’ll need reliable help and solid suggestions.

Our business goal is to have a select group of our friends and past customers who consider us their lifelong real estate professional. We want to earn that trusted position so they’ll enthusiastically refer their friends to us. Our plan to achieve this is simply to help these people with all of their real estate needs not just when they buy or sell but for all the years in between.

Throughout the year, we offer reminders and suggestions by email and social media that benefit your homeowner experience. When we find good articles to help you be a better homeowner, we’ll pass them along. You’ll discover new ways to maintain your property, minimize expenses and manage debt and risk.

We want to be your “Go-To” person for everything to do with real estate. If we don’t have the answer you need, we’ll point you in the right direction to find it.

We’re here for you and your friends…now and in the future. Please let us know how we can help you.

Filed Under: Better Homeowner Tagged With: Better Homeowners, Real Estate Agent

Why Borrowers Pay Different Rates

December 9, 2013 By admin

Lenders, like any business, have to make a profit. The cost of acquiring the funds, the operating costs to service and the expected profit margin are easily identified. The variable in pricing is the type of mortgage and the credit worthiness of the borrower.

A loan with a 3.5% down payment is riskier than a loan with 20% down payment. If the lender has to take the property back to recover their expense, the margin is greater between what is owed and what the property is worth on an 80% mortgage.

Credit scoring is a risk-based pricing method that allows a lender to be competitive in the market for the best loans from different borrower groups. Individual lenders set their own levels for what they consider “A” credit which is reserved for the best rates. If good credit is approximately 710 to 740, scores below that are considered higher risk and will have higher rates.

Risk must be assessed for both the borrower and the property that collateralizes the loan. The borrower’s credit history and income stability are strongly evaluated by the lender but if a default should occur, the property must secure the loan to avoid a loss to the lender.

The challenge for some buyers is they are unaware of what their credit score is and how it will affect the interest rate offered by the lender. It is to the buyer’s advantage to be pre-approved by a reputable lender prior to starting the process of looking for a home. In some cases, the lender can actually improve the borrower’s credit score to help them qualify for a lower interest rate.

Contact me for a recommendation of a trusted mortgage professional –
Judd@MontgomeryRealEstateGuy.com

Filed Under: Better Homeowner Tagged With: Better Homeowners, Credit Score

Lower Anxieties/Improve Marketability

December 9, 2013 By admin

One of the anxiety highpoints during the sale of a home is waiting for the buyer’s home inspection report. Most sellers willingly disclose what they know about their home to any potential buyers. The concern stems from the inspector finding something that they’re totally unaware of and that it will either cost them a lot of money to correct or the buyer will simply use it to void the contract.

If the inspection does reveal some unknown problem with the home, it’s probably as big a surprise to the buyer who is not as emotionally or financially invested as the seller. It is human nature to fear what you don’t understand and when a report identifies defects, they may simply opt-out of the home.

The solution to the situation may be for the seller to have the home inspected prior to putting it on the market. There is still a risk of becoming surprised by an unknown defect which at that point, would have to be disclosed to potential buyers or repaired by the seller. The advantage is that it creates a baseline to compare discrepancies that may arise when a future buyer has the home inspected.

If the seller’s inspection report is made available during the marketing process, it could give buyers a sense of confidence about the home even though they may still choose to have the home checked by their own inspector.

The cost of the inspection, possibly $500, keeps some sellers from taking this initiative when selling their home. In an effort to minimize their expenses, they forego getting valuable, disinterested 3rd party advice that could help sell their home. On a $175,000 home, the fee for the inspection will probably be less than 3/10 of one percent of the sales price.

Another option to the seller to increase marketability of the property and bolster buyer confidence in the home would be to offer a home protection plan. Generally, the seller doesn’t incur cost for this coverage until the home is sold and there may even be some coverage for the seller during the listing period. The benefit to the buyer is avoiding unanticipated expenses for specific items that are covered during their first year of ownership.

Contact me for recommendations of home inspectors or home protection plans.

Filed Under: Better Homeowner Tagged With: Better Homeowners, Home Inspections, Home Warranty

Judd Welch