DebtFreeGuru.com's - Tip of the Week - Monday, February 28, 2005
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I recently received the following from Rev. Pat Bessy, the Unity Minister in Virginia Beach, VA. Having lost my Grandfather and Mother to diabetes and my Father has diabetes, I thought it appropriate to ask you to consider the impact it has had on your life and consider supporting Rev. Pat in this event.
Love & Light - John Moore
Greetings Folks,
I recently accepted the challenge of cycling 100 miles in the American
Diabetes Association's Tour de Cure fund raising event. I am taking part
in this event because my brother, Dick has diabetes and so do many of my
friends. I believe in and support the Association's mission: to prevent
and cure diabetes and to improve the lives of all people affected by
diabetes.
You too can help me by supporting my fund raising efforts with a
generous contribution. Your tax-deductible gift will make a difference
to my brother Dick and the 18 million Americans who suffer from diabetes
and the 20 million people in the United States with Pre-Diabetes. It is
faster and easier than ever to support this great cause - you can make
your donation online by simply clicking on the link at the bottom of
this message. If you would prefer, you can also send your tax-deductible
contribution to the address listed below. More information on the
American Diabetes Association, its programs, and diabetes in general can
be found at the Association's website: www.diabetes.org
Whatever you can give will help! I greatly appreciate your support and
will keep you posted on my progress.
I hold you as I do myself-- Always In His Love,
Rev. Patricia Bessey
1516 Galvani Drive
Virginia Beach, VA 23443
Click here to Sponsor Me
If the text above does not appear as a clickable
link, you can visit the web address:
http://main.diabetes.org/site/TR?px=1724206&fl=en_US&s_tafId=5001&pg=personal&fr_id=2304
Click here to view the team page for Cyclists For Christ
If the text above does not appear as a clickable
link, you can visit the web address:
http://main.diabetes.org/site/TR?team_id=45368&fl=en_US&s_tafId=5001&pg=team&fr_id=2304
Bidding Strategies for First-Time Homebuyers
Buyers looking for
their first homes in many hot markets may be overwhelmed by bidding and
prices. Here’s how to snare the house you want without overpaying.
By Liz Pulliam
Weston
Renters Lisa
and Fred Flynn are about to dip their toes into the bubbling-hot New
Jersey real-estate market. But they aren’t sure how to proceed.
They know
they want a single-family home in a safe neighborhood, one close to
public transportation so Fred can easily get to his job at a grocery
store. When it comes to making an offer, though, the couple isn’t sure
how much under the asking price they should bid.
“This may
sound silly, but I watch ‘House Hunters’ on HGTV, and they say 6% under
the [asking] price,” said Lisa, a school bus driver. “I don’t want to
pay the whole price, but I'm not sure how much to bid.”
Actually, in
the areas the Flynns are house-hunting -- Woodbridge and Avenel -- they
should be prepared to pay more than the asking price, said
Realtor Frank Nicolato of Century 21.
“The old
rules of thumb are out the window,” Nicolato said. “A home that’s priced
right will have 10 or 15 offers -- and sell for $10,000 to $15,000 over
the asking price.”
The good
news? The Flynns don’t have to sell a current home to buy another one --
a potential delay that’s causing many trade-up buyers in the area to
lose out in bidding wars.
“The perfect
buyer,” Nicolato said, “is the first-time buyer with a mortgage
commitment in hand who is willing to close in 30 to 60 days.”
Competition
in hot real-estate markets can upend house-hunting strategies for every
buyer, but it can be particularly daunting for first-timers or those,
like the Flynns, who are re-entering the market after a long hiatus.
Wish lists
and hardball negotiating tactics often have to give way to bottom-line
realism about what you can pay, what that will buy and what will make
your bid rise to the top.
Figure out
what you can afford
Lots of
first-time buyers incorrectly assume that this is the easiest piece of
the house hunting puzzle: They just have to find a lender to tell them
how much they can borrow.
But as I
discussed in “Don’t bite off too much house,” lenders don’t know what
you really can afford. That depends on too many factors that aren’t
covered in their applications, such as how many kids you want to have,
how much you need to save for retirement and how tied down to your house
you want to be.
So you need
to decide for yourself how much you can pay -- and how much you can
stretch if you get into a bidding war. If the homes you’re bidding on
are already listed at the top of your range, you’re in for a lot of
frustration or the possibility that you’ll stretch too far trying to
snag a home that ultimately will sink you financially.
You’ll also
want to talk to your agent about closing costs and get some ballpark
estimate of how much cash you’re likely to need. That could affect the
amount you’re able to bid and put down as earnest money.
Decide on
the type of home you want
The hotter
the market, the more likely that your dream home is moving out of reach.
Most buyers want a perfectly-maintained, detached, single-family house
in a great neighborhood, but fewer and fewer first-timers can qualify
for these desirable properties as prices rise.
The
techniques I outlined in “Find a bargain in a hot housing market” might
help you snag that perfect bungalow in the best school district, but, if
not, you still have plenty of options. Among the most popular for
first-timers:
- Condos and
townhouses.
Yes, you have to share some walls, but condos have appreciated faster
than single-family homes in the last decade. Median prices for condos
nationwide doubled between 1993 and 2003, to $174,700, according to the
National Association of Realtors, while median prices for single-family
homes rose 66% to $171,600.
Will that
trend continue? It depends. I think higher interest rates will dampen
the demand for starter housing of all kinds, but luxury condos for
downsizing boomers are likely to remain popular.
- New construction in the boonies. Most new homes are built in ever-expanding rings around central cities. The bigger the city, the farther away the new construction -- and the longer the potential commute. New homes built 10 years ago also haven’t appreciated quite as fast as condos in many markets, as the figures below show. On the other hand, you’re more likely to get modern amenities and have lower maintenance and repair bills than if you had purchased an existing home.
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Condo appreciation vs. new single-family home appreciation |
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Note: All prices are median prices. Source: DataQuick
- Urban pioneers.
Buying a fixer in an up-and-coming neighborhood is a strategy fraught
with risk -- and enormous potential reward.
The Buena
Vista neighborhood of Miami a decade ago was “scary,” said real estate
broker Tony Cho of Majestic Properties. In fact, the neighborhood of old
Miami estates and more modest bungalows was still pretty edgy 13 months
ago when Cho moved in.
“Someone was
shot right next door to my house,” Cho said.
That hasn’t
kept his home from appreciating more than 50%, from the $200,000 he paid
to the $325,000 or so it’s worth now. Those who got in three to five
years ago have seen their home values more than double.
“South Beach
became overexposed, so all the trendier, cooler people moved here,”
explained Cho, a former nightclub promoter. “It’s five minutes from the
new Performing Arts Center, five minutes from the airport, and the
nightclub market just blew up.”
Once-depressed areas like West Town in Chicago and Alameda Terrace near
downtown Los Angeles also have sprung back with a vengeance in recent
years. Here’s how average prices have changed in all three areas.
|
Median home price changes in three recovering neighborhoods |
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|
Source: DataQuick
Contrast that
experience with Los Angeles’ South Central neighborhoods, which have
largely recovered from the 1992 riots but which still trail the rest of
the region in appreciation. The median South Central home sold for
$220,000 in March, according to real estate research firm DataQuick, up
about 80% from a decade earlier.
Predicting
which neighborhoods will take off and which won’t is tricky business.
Proximity to an area that’s already gentrified can help, as can an
influx of hipsters, increased investments by business and beefed-up
police patrols.
Decide
your bidding strategy
This is where
an experienced real-estate agent -- one who really knows the
neighborhood -- can be invaluable. A pro can help you evaluate the home
and the asking price to see if a bidding war is likely to erupt, or if
you might have the field all to yourself. In the meantime, here are some
tips to give your bid the best chances to succeed.
- Make yourself a strong candidate. You want to be pre-approved, not just pre-qualified, for a mortgage. Having a lender committed to granting you a mortgage will help you compete against people who have cash in hand. Your agent also can advise you about earnest money amounts. Typically 2% to 3% is enough, but, in some markets, fat earnest money payments can help your bid rise to the top.
- Be prepared to make a strong first offer. And follow up with your best possible bid. In a multiple-bid situation, the seller will often counter the best offers to see who’s willing to pay more. Don’t expect several rounds of these counters, however. This isn’t an auction, and you won’t have unlimited opportunities to raise your bid. The seller will typically snatch the most attractive counter to her counter. If you haven’t made your best showing, you’ll lose out to someone who did.
- Make as “clean” a
bid as possible.
In a slow market, your bid might include all sorts of contingencies,
such as requesting a long escrow, demanding that the seller make certain
repairs or preserving your option to back out if your current home
doesn’t sell.
In a hot
market, those contingencies are likely to bump your bid out of
contention. In the most frenzied markets, some buyers even forgo an
inspection contingency -- the clause that says they can walk away from
the deal if an inspection turns up serious problems.
Personally, I
think it’s nuts not to have an inspection. But you may be desperate
enough for a house to try it. If you do, check out a do-it-yourself
inspection book from the library so you’re at least prepared to spot the
obvious problems.
DebtFreeGuru.com - Tip of the Week - Monday, February 28, 2005
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