Downsizing

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  Downsizers typically want less space but not fewer amenities.

  Primp for Sale – Clear out the clutter (this will help when you move). Add newer bedding and towels.  For higher priced homes, a professional stager can add more contemporary furnishings.  Staging services can vary in price but the median cost is approximately $675.  90% of selling agents and 81% of buying agents said staging increased the price buyers would pay.

• Share the Walls – Townhouses and condos can get you a better deal. Their prices rose 3.1% in 2015 versus 7.2% growth among single family homes. They also require less up keep.  Just be wary of high homeowner’s fees and other surprise costs.  Ask the seller for the building’s financials and meeting minutes, look for red flags:  a history of assessments, problems raised by owners or reserves that look too small to cover planned work.
• Rightsize Your Mortgage – with money from the sale of your home, you can afford a bigger down payment which improves your buying position against rival bids, and cuts your ongoing costs. With 30 year loans still below 4%, financial advisors consider it prudent to still have some housing debt even in retirement.  If you are still working, mortgage payments should top out at 28% of gross income.  If you are retired, aim closer to 15%.
• Take on a face-lift – downsizers typically want less space but not fewer amenities. You will find houses in need of cosmetic upgrades.  Fixer discounts can range from 15% to 55% in several big U.S. cities.  So, even if you factor in remodeling costs – you will still come out ahead.  Remember to give Pacific Kitchens a call for a free in-home estimate on kitchen refacing!
• Test Drive a New Locale – if you are thinking about a big change – a move to another city – don’t buy immediately. Sell first and rent something to make sure that it’s really the square footage you need.

Trading up and planning your move

Sell first to remove many contingencies.

You face the trickiest balancing act – getting the most for your house and shopping for a new place.  The forces that work against you as a buyer – tight inventory, rising prices – – are in your favor as a seller.

• Sell First – to remove as many contingencies as possible. If you have to rent for a while, experts say that’s better than juggling two mortgages.  You should be able to sell quickly.  The national median time on the market was 59 days in February, NAR says, a 5% drop from the previous year.  Continue to shop around while you are marketing your home so you can move quickly to bid on your next home.
• Don’t Overprice – As a trade-up buyer, you’ll need flexibility as well as a high price, so you should try and get multiple bids – which will give you more room to negotiate your exit. Don’t be more than 1% to 2% higher than comparable recent sales.  To find comps, ask your agent or check a site like Zillow or Redfin for several sales from the last two to six months.
• Look at New Homes – Most new developments are sold on a first-come, first-served basis. This can simplify your buying process.  There are no bidding wars.  You will pay a deposit up front (usually 1% to 2% of the purchase price) and the balance won’t be due until you close on your mortgage. This gives you time to sell your current house.
• Consider the Burbs – Americans have been moving back into urban areas since the recovery began six years ago… according to the U.S. Census Bureau. Millennials in particular are living in cities at higher rates and intend to stay there.  You should head in the opposite direction – – for the bargains.

Benefits of staying put in your own home

By staying in your existing home, you get to enjoy your home’s growing equity and move thoughtfully about your next moves without feeling market pressure.

• Scale Your Upgrades. Kitchen and bath remodels are the most popular improvements. You should choose your upgrades based partly on need and also on how long you plan to stay in your home.  If you plan on selling in two years, favor projects with a higher return on investment. Owners planning to move soon should choose exterior projects that boost curb appeal.  Another way to improve your odds of recouping costs is to make sure your upgrades fit your neighborhood. Keep a file of all your receipts.  If you will have taxable gains when you sell, you can add to your cost basis by proving what you spent on improvements.  And, be sure to give us a call at Pacific Kitchens for a free estimate on refacing your kitchen cabinetry!
• Keep Financing to a Minimum. Unless you can get a low interest rate (below 4%) and pay it off within a couple of years – it is best to cover your improvements with cash.  If you are going to borrow, choose a Home Equity Line of Credit because you can usually get a lower interest rate for a short term loan.
• Pare Your Payments. Mortgage rates have been falling so refinance soon. Don’t bother if you are selling within two years, you probably won’t get back the closing costs. If you are staying put longer, lock in a lower rate and shorten your time frame.
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  Solar panel technician with drill installing solar panels on roof

  Look for Energy Savings. A federal energy-efficiency tax credit is going to expire at the end of 2016. You can get up to $500 off your taxes for some energy saving projects including installation of energy efficient windows and doors, replacing older furnace and water heaters. Insulating the attic and basement also get you a tax credit of almost $6,000 for each.  And it shaves 20-25% off your utility bills. Without the credit new LED fixtures, ceiling fans and energy-efficient window treatments can yield big short term savings on heating, cooling and other utility bills.  If you plan on staying longer, consider solar panels.  Solar pays off within 7 to 12 years. They qualify for a separate tax credit.

• Keep Things Up. Routine maintenance is a must for preserving your home’s value.  Fixing a small foundation crack now can help prevent a major rehab later.  Have major appliances serviced twice and year and inspect the roof annually for damage.

Our tips for first time home buyers

Whether you are a first time home buyer, staying put, trading up or an empty nester planning to down size, you have a few challenges and advantages unique to your position.

Consider the following strategies (from Money Magazine Spring 2016) to max out your purchasing power and settle into the home that suits you.

As a first time buyer, your big challenge is that you are probably bringing less cash to the table making it harder to compete with seasoned buyers. But your competitive edge is flexibility – you aren’t dependent on selling your current place to fund the deal.

 Your best moves:

• Lock up your financials. Clean up your credit before you start shopping and save for a bigger down payment to help you qualify for a better mortgage rate. Putting 20% down helps avoid costly private mortgage insurance and positions you to beat the competing offers. Start a dedicated account to amass a down payment.
• Check for errors on your credit reports (free at AnnualCreditReport.com) and get your FICO score.  Many credit cards offer it for free or you can get one report for $19.95 at Myfico.com. For the best loan rates, you will need a score of 740 or better. To boost your score, pay down credit cards so your balance is less than 30% of the limit and avoid late payments.
• Investigate Alternatives. If you can’t get close to 20% down or have a credit score less than 740, the Federal Housing Administration (FHA) loans allow you to put down 3.5% and offer better rates for those with less than perfect credit.  But know the tradeoffs – with a 30 year FHA loan, you’ll pay an extra 1.75% of the purchase price plus at least 0.8% in annual insurance for the life of the loan.
• Get Pre-Approved. A mortgage lender has checked your credit and verified your income and assets.  Pre-approval gives you an edge with sellers who want a quick, smooth deal.
• Find a True Advocate. A good buyer’s agent can help you find listings and guide you through price negotiations. Bargaining skills are key so ask agents for sale-to-list price ratios for their last 12 deals. The lower the better.
• Make Unsolicited Offers. Look for homes not yet on the market to avoid competing with more established buyers.  Looks at rental ads or note new listings that look overpriced and revisit them in a month.  Unsold homes usually drop in price after about six weeks.
• Play Up Your Flexibility. One advantage you have over more well-heeled buyers is the ability to delay move-in. Have your agent reach out to the seller’s agent to find out exactly what they need – like a longer closing window or an option to rent back.