buying a home

8 Tips For First Time Homebuyers

December 1, 2021 by khproperties Leave a Comment

Being a first time homebuyer can feel quite intimidating – you’ve got to deal with agents, sellers, rival buyers, banks, and title companies. And it’s not always clear what role each of them plays in the process. We have worked with many first time homebuyers. It’s great to guide them on the journey of property ownership and help set them on the path to building their wealth through real estate.

Any first time homebuyer should appreciate that they always have access to many professionals who can help explain the various tasks and processes required to buy a home. It’s not like you’ll walk through the experience blindfolded.

To help you on your way, here’s a quick list of tips for first time homebuyers. You’ll find the act of buying property is not as intimidating as you might have feared.

Start saving: That means not only reducing your day-to-day spending but also working to reduce regular payments on debts for items such as a car or personal loan. These obligations will reduce the amount of money a lender will allow you to borrow.
Work out a budget: Investigate how much you might be able to borrow. Factor in the expenses of buying a home, such as closing costs and moving. You should then have an idea of what you can afford. Setting your expectations early on will focus your home hunting efforts and avoid disappointment.
Arrange financing: Spend time exploring your options. Some banks demand a 20% deposit; others are more flexible. Perhaps your parents will co-sign for the loan, or part of it. Consider using a local lender as they will guide you and recommend suitable loan options.
Pre-approval is good: A lender won’t give you a pile of cash based on your salary. They’ll grant “pre-approval,” which means you can make a monetary commitment with confidence. However, the lender will finalize its approval once they’ve valued and approved the property you intend to buy. Do not sign any document that waives your right to pull out of a transaction until you are approved or you risk your lender refusing you.
Get mentally prepared: With your finances lined up, you need to think about the dynamics of buying a home. If you find your dream place, you better believe others will love it, too. So, be prepared to move quickly to beat the competition.
Find a great agent: For a first time homebuyer, a great agent will make the experience smoother and less stressful. When selecting an agent, ask each one to share with you properties they’ve bought for other clients. This will indicate whether they can find what you’re seeking.
Go hunting: House hunting is fun but exhausting. In a hot market, it can get stressful because of buyer competition. Don’t be put off, and keep your focus. You may miss out on a few properties, but there are many more out there.
Be confident: When making an offer for a home, be confident. Don’t ask your agent to make low ball offers just to see if the seller bites. You risk being labelled a time waster and go to the back of the line. You have every right to make any offer, but be realistic if you want the property.

FIRPTA – The Foreign Investment in Real Property Tax Act of 1980

August 25, 2020 by khproperties Leave a Comment

The first time you hear someone say FIRPTA out loud (sound it out as if it was a word and not an acronym), you’re more than likely to think that person is making words up. Like many acts of the US government, FIRPTA has a much lengthier and descriptive name: The Foreign investment in Real Property Tax Act of 1980. The act allows for tax withholding and reporting when a “foreign person” (see below) sells real estate in the United States. FIRPTA puts the obligations for withholding and reporting onto the buyer, which can make it a little frightening if you’ve never dealt with it as a buyer. As with most things in real estate (as mentioned on the homepage), it’s all a matter of asking the right questions and talking to qualified people who understand FIRPTA and know how best to advise you when you find yourself in this situation.

First, let’s define “foreign person.” According to FIRPTA, a foreign person is 1) an individual that is not a US citizen or a resident alien, 2) a foreign corporation that is not being treated as a domestic corporation, or 3) a foreign partnership, trust, or estate.

Under FIRPTA, a buyer must withhold a percentage of the “amount realized” (purchase price) and within 20 days of closing report and pay the tax to the IRS. The percentage is determined by several conditions. If the buyer is acquiring property that is not intended to be their residence, FIRPTA requires the buyer to withhold 15%. If the property being acquired is going to be the buyer’s residence, then the percentage of withholding ranges from 0-15% and depends on the sales price. Up to $300,000 it is 0%, over $300,000 and up to $1,000,000 it is 10%, and over $1,000,000 it is 15%. Like many IRS regulations, there are exemptions.

If you are notified that your transaction has triggered FIRPTA, you should call an attorney, CPA, or other tax professional, preferably one familiar with The Foreign Investment in Real Property Tax Act of 1980. As there are exemptions, these professionals can guide you through your situation and recommend what your next steps will be. In many cases, a consultation with a tax professional will allow you to know the seller may be exempt and you as a buyer can move to closing without any further action. Exemptions include a sales price of less than $300,000, a seller able to provide an Affidavit of Non-Foreign Status, a seller providing a FIRPTA Withholding Certificate from IRS, and when sellers are participating in a 1031 exchange and can provide the appropriate information about the sale in writing. As with anything of this nature, the laws and how they work can change over time and we are not tax professionals, so it is best to ask your CPA for tax advice.

In our experience, many of the title companies will provide access and a free consultation with a tax professional who can advise you on your next steps and whether or not you will need to withhold. Further time may be required if it is decided that withholding is necessary as there are rules and as you well know with the IRS, there will be forms to be filled out.

As it is tax related, there are penalties for not withholding the appropriate amount, not reporting it, and not reporting it within the allowed amount of time. And the IRS can tag on interest as well – so you really want to make sure you follow the letter of the law on this one (which is why we highly recommend a tax professional, particularly one with experience with FIRPTA).

While FIRPTA can seem scary at first, with a little patience and consultation with the right people, you can get through the regulations and successfully close on your new home or other property.

image courtesy of cafecredit

Downpayments: How Much Should You Pay Up Front?

July 10, 2019 by khproperties Leave a Comment

If you’re going to be buying a home any time soon, you’re going to need to start thinking about your downpayment. Typically expressed as a percentage of the sales price, the downpayment is often one of the more difficult obstacles for people to overcome on their way to home ownership. You’ll need to budget your money and save up enough to make your downpayment, but how much will you need? You’ve probably heard the rule – you’ll need to save for a 20% downpayment before you buy a home. The logic behind saving 20% is solid, as it shows that you have the financial discipline and stability to save for a long term goal and it can also help you get favorable interest rates from your lender. Additionally, the bigger your downpayment, the less you need to borrow, so the less you’ll pay in interest in the long run.

But there can actually be financial benefits to putting down a smaller downpayment — as low as three percent – rather than parting with so much cash up front, even if you have the money available.

The Downside of a Small Downpayment

The downsides of a smaller downpayment are pretty well known. You’ll have to pay private mortgage insurance (often referred to as just PMI) for years, and the lower your downpayment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20% downpayment, which will put some higher priced homes out of reach for you when searching.

THe Upside of a Small Downpayment

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20% or three percent, the increase in equity is going to be the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

The Happy Medium

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20% and an investment focused, small downpayment. It’s always a good idea to talk with your Realtor and your lender to discuss the potential paths for you and to see what strategy works best for you and your personal needs.

image courtesy of AleXander Agopian

How To Create Real Estate FOMO

June 27, 2019 by Tatiana Delaserna 2 Comments

This week, we turn the keys over to agent Tatiana Delaserna and let her take over the blog. In this post, Tatiana discusses “FOMO” – we don’t want to spoil her article, but we have to say, it’s a very real thing and we love that she’s teaching her clients about it (and now, we benefit from it, because she’s sharing the knowledge with all of us).

FOMO – “Fear Of Missing Out” is real. It is especially real in real estate – it is the very reason we see multiple offers on a freshly listed home. The ability to leverage this emotional response from buyers has never been so powerful as it is today thanks to our integrated world of social media, websites like zillow.com, and instant satisfaction consumers crave on all aspects of life. Because buyers can see in real time when a home hits the market, the idea of “you only get one time to make a great first impression” is more impactful than ever. If a buyer sees a home that looks great on pictures, in an area they have been looking for, and for the right price, they start wondering who else saw it too and the race begins.

Unfortunately, the opposite has also never been more damaging to sellers. When a buyer disqualifies your property, they will never revisit it online (they can block that home permanently!). If they feel it is overpriced, they will save it, and wait on the sidelines to see when seller will drop the price.

The three components of creating the perfect FOMO are visual appeal, being at the right place at the right time, and price.

Visual appeal – Over 96% of all buyers start shopping online…and they will move on if you do not catch their attention within the first 3 seconds. If they cannot see how great your home is from the pictures, then you may have lost the “perfect buyer.” Taking the time to prepare your home before it hits the market is not a luxury, it’s a must if you want to ignite the desire of buyers. At Kimberly Howell Properties, many of our agents work closely with stagers for this exact reason.
Being at the right place at the right time – Your property has to be seen by the right people at the right time (when they are in the market to buy!). If a buyer sees your property popping up in all the places she has been looking, the reality that other buyers are seeing it too hits home quickly. Unlike at our favorite clothing store, there is no way the buyer can hide your home behind the out of season sweaters – the only way of hiding it from other buyers is to submit a competitive offer and take it off the market!
Price – There is that saying, “everything sells…at the right price.” The thing is, many times that “right price” is very different from what a seller has in mind and what the market will bear (what a buyer will ultimately be willing to pay for it). There are several pricing strategies for each seller situation but if we want to create that fear of missing out, there are some time tested principles successful listing agents utilize.

Remember, the biggest enemy of creating FOMO is days on market. The longer you property sits on the market, the less buyers worry someone will come and snag it from them. They have less and less desire to submit a strong offer and start to wonder why no one has bought it yet. It becomes a vicious cycle – they wonder what is wrong with it. Do not let your home become victim of “nobody wants what nobody wants,” let’s work together to create the perfect FOMO storm!

image courtesy of Jesper Sehested and PlusLexia.com

Things to Do After You Move In

April 30, 2019 by khproperties Leave a Comment

It’s move in day! Moving into a new home is an exciting time. So much to do; trying to remember where you put your spoons or your coffee mugs, running up and down steps, paying the movers, meeting the neighbors for the first time while your hair is sticking up and you look like you just rolled out of bed, calming the cat down because she’s probably freaking out right about now…whew. Who else is tired already? Now you’re probably daydreaming about decor and paint schemes and new furniture, but before you get into the fun stuff, there are some basics you should cover first.

Change the locks. Even if you’re promised that new locks have been installed in your home, you can never be too careful. You can check this site if you wish to get your locks changed. It’s worth the money to have the peace of mind that comes with knowing that no one else has the keys to your home. Even if the sellers handed you all of their keys, you never know if they made one for their uncle that time he stayed for a week or the maid and their best friend has one “just in case.” Changing the locks can be a DIY project, or you can call in a locksmith for a little extra money. It’s also advisable to change the garage door code if you have a keypad entry. Not sure how to do it? Find your model and then look up the manual at ManualsLib.

Steam clean the carpets. It’s always a good idea to get a fresh start with your floors before you start decorating. The previous owners may have had pets, young children, or just some plain old clumsiness. Take the time to steam clean the carpets so that your floors are free of stains and allergens. It will also help freshen up the smell of the new place – it’s amazing how much odor gets trapped in those carpets! It’s pretty easy and affordable to rent a steam cleaner – most HEBs carry them as well as the big box hardware stores. Not in the DIY mood? Call a steam cleaning company and have them arrive before your move in day.

Call an exterminator. Prior to move-in, you probably haven’t spent enough time in the house to get a view of any pests that may be lurking. You’ve probably had a WDI inspection, but those only look for wood destroying insects. Call an exterminator to take care of any mice, insects, and other critters that may be hiding in your home. Here in South Texas we have a lot of creepy crawlies and a good, regular pest control service like Prime Pest Control Brampton will help keep the insects at bay.

Clean out the kitchen. If the previous occupants wanted to skip on some of their cleaning duties when they moved out, the kitchen is where they probably cut corners. Wipe down the inside of cabinets or even get them redone or cleaned from kitchen cabinets from Gamma Cabinetry, clean out the refrigerator, clean the oven, and clean in the nooks and crannies underneath the appliances. If you’re feeling brave, see if you can pull out appliances like the refrigerator, stove/range, and dishwasher to get under and behind those. Be careful though, those appliances may be attached and can be heavy.

image courtesy of Genista

Which Down Payment Strategy is Right for You?

April 10, 2019 by khproperties Leave a Comment

You’ve most likely heard the rule or had one of your friends give you the advice: save for a 20 percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long term goal. As with any financial plan, you have to look at the pros and cons and determine which benefits you more both in the short and long term. It is always advisable to discuss with your lender and your CPA to see where and how you can maximize the benefits. Larger down payments can help you get favorable rates from lenders, but there can actually be financial benefits to putting down a smaller down payment, something as low as three and a half percent, rather than parting with so much cash up front, even when you have the extra money available.

THE DOWNSIDE

The downsides of a smaller down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20 percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three and a half percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment focused, smaller down payment. Your real estate agent can provide some answers and introduce you to a lender as you explore your financing options. Sitting down with the lender and discussing the finer details of your goals and your plans can help you make the best decision for you at this particular point in your life.

image courtesy of Mukumbura