Lee Morof's Real Estate Blog

After raising the target range for the federal funds rate in 2018, the Fed’s Federal Open Market Committee did not raise the Central Bank’s key interest rate at its meeting of January 29 and 30. While Committee members did not raise the Fed’s key rate, members were divided on the interest rate decision.

FOMC Members Divided On Interest Rate Decision

Minutes of January’s FOMC meeting indicated that member viewpoints varied about how the Fed should deal with the Fed’s target interest rate range. One group said that interest rate increases may be necessary if inflation increases above the Federal Reserve’s baseline forecast.

Other FOMC members supported raising the Fed’s interest rate range later in 2019 if economic conditions move as expected. Overall, FOMC members said that there were “few risks” in the Committee’s current position of patience, but they were open to reassessing that position according to how economic conditions change.

FOMC Cites Reasons For Halting Rate Increases

Committee members provided several reasons for reversing their 2018 policy of consistent rate hikes including declining economic conditions since early 2018. Global and domestic economic conditions slowed; deteriorating conditions were supported by lower readings on consumer and business sentiment. Federal government policies including the partial government shutdown and then-current trade policy contributed to the deteriorating economic outlook in late 2018.

Ongoing influences driving FOMC monetary policy decisions include the Fed’s mandate for achieving maximum employment, stable prices and moderate long-term interest rates. Because short-term data change frequently, Fed monetary policy reflects long-term goals, medium-term outlook and the Committee’s risk assessments in multiple financial and economic sectors. The Committee said that long-term inflation of two percent indicates stable pricing as required by federal mandate; any prolonged deviation above or below the two percent reading would concern Committee members.

FOMC indicated progress with its maximum employment mandate by changing its long-run unemployment outlook from 4.60 percent to 4.40 percent, which suggests a strong outlook for job markets. Fourth quarter Gross Domestic Product was described as “solid”. The meeting minutes indicated that some data typically used by Committee members was limited by the government shutdown.

Bridge loans, which are also commonly referred to as interim financing, gap financing or swing loans, help a motivated home buyer to secure financing before their home or investment property sells. Lenders can usually modify these flexible loans to accommodate a person’s unique needs.

Current real estate market conditions allow savvy investors to make big profits as long as they can move quickly on good opportunities. Low inventories of existing homes and slower than normal construction developments have combined to drive the median home price across the US to $223,900. This represents a 7.6% national average increase through 2018. Market experts expect prices to rise by another 6.3% over the next 12 months which may present very good opportunities for home buyers. 

Bridge loans are a short-term funding solution with some unique features.

• They usually include payback terms between 2 months to 1 year.
• Most bridge loan options gain approval in about 15 days.
• May receive up to 70% of the property’s value in the loan.

Bridge loans are a tool real estate investors can use to increase their holdings in this hot market. How can these funds be used to help you make more money from your properties?

• When prime properties come up for sale, investors need to be ready to take advantage. If most of your cash is already tied up in other properties, a bridge loan is a perfect way to get the quick cash you need to win the bid.
• While a property is up for sale, investors can use bridge loans to continue financing new projects. When the sale is complete, the funds can be used to pay off the bridge loan.
• Hard money loans are a popular option for real estate investors who can’t wait for the normal bank loan process. However, these funds usually come with higher interest rates. Bridge loans are a lower cost alternative, as lenders generally charge less interest for these accounts.
• Not sure what you’re going to do with your new property? If you wait too long to make your decision, chances are good that the property will be gone. Use a flexible bridge loan to secure your property. If your plans change, it’s simple to convert the funds into a more conventional loan structure.
• For flippers who buy properties, perform renovations, and put the properties back up for sale for a profit can use bridge loans to quickly increase their holdings without sacrificing the liquid assets they need for material, labors, and other renovation costs.

In order to qualify for these funds, investors need to prove that they can afford double mortgage payments, present a clear plan on how they intend to pay for the loan (either through resale or refinance), and have a property that can be used as collateral with at least 20% existing equity.

When used as part of an overall investment plan, bridge loans help real estate investors buy more properties, which can mean more money in their pockets. Call your trusted home mortgage professional to discuss bridge loan and other financing options that best suit your personal situation. Most importantly, be sure to utilize the skillset of your trusted real estate professional to find ideal investment properties in your area. 

Many new buyers start looking for homes in the spring. The question in 2019 is whether buyers can afford available inventory or want to buy given changes to the tax code and increase in natural disasters. 

Interest Rates

The 30-year-fixed interest rates have been trending lower recently. This reduction in interest rates, coupled with a slowdown in the resale housing market, is working in the buyer’s favor in some areas. Talk with your trusted real estate professional and mortgage lender to get the specifics for your area and situation. 

Affordability

Inventories of available homes are on the rise, but still out of reach for many Millennials and other first-time buyers. This has been the case for the past five years. One of the biggest factors some buyers second guess in a home purchase is the commission fees paid to real estate agents. Remember, the real estate commission is paid for by the seller of the home, not the buyer.

With advances in technology, the role of the real estate agent is changing. Many customers think they might be able to their own home online. However, agents still have valuable expertise in individual markets which may lead to a more competitive sales process. They also have helpful experience with the closing process which can significantly lower the anxiety throughout the home buying process.

Tax Code Changes

The 2018 tax code changes have big implications for current and prospective homeowners. The cutoff on home mortgage interest deductions dropped from $1 million to $750,000, and there’s a new $10,000 cap on state and local tax deductions.

It may take a few years for the full impact to play out. However, it could mean an unfavorable combination of higher taxes, higher interest rates and higher prices. One favorable solution to this trifecta is new home construction. An increase in the number of homes could help to bring down housing costs, but zoning laws hinder a fast ramp up in many areas.

Hurricanes And Other Natural Disasters

In 2017, Hurricane Harvey decimated the Houston area and revealed a lack of adequate coverage for many homes. This should serve as a wakeup call since natural disasters seem to be on the rise. 

New buyers are more concerned with what the interests rate will be and whether they can afford the down payment. Many don’t even ask if the property is in a flood zone. That may change if the streak of hurricanes, floods, wildfires and other natural disaster events continues.

Even with all of these considerations, 2019 continues to look like a great time to invest in a new home. Contact your trusted real estate professional to discuss these issues and how they might affect your local area and personal financial situation.

Now that you have a beautiful new home with a garage, the fun of organizing can begin. When your garage is well organized, everything is much easier. You can get home projects finished faster, get out the door quicker and better enjoy all your sporting activities.

Here are some tips to organize your new garage. 

Make Use Of The Walls

A lot of homeowners overlook the wall space when organizing the garage. If your garage has exposed studs, this is actually a benefit in terms of storage space. You can easily create shallow shelves in between the studs using 2 x 4 and shelf brackets. Use these shelves to store smaller items that tend to get lost on larger shelves. You can also create an effective space for hanging garden tools. Screw extra large hooks onto the outside edge of one of the 2 x 4s. Hang brooms, rakes and shovels from the hooks.

Utilize The Ceiling

You can also utilize the back area of the ceiling, beyond the area where the garage door stops when it’s raised. Install hanging systems that you can source from a local hardware store. You’ll be able to hang things like bicycles, skis, kayaks and more. Some homeowners even hang small lawnmowers and spreaders during off-season.

Invest In A Workbench

Even if you don’t do carpentry, a garage workbench is a useful part of an organized garage. This is the place where you can do small repairs on household items or add to your garage organizational systems. You’re more likely to repair an item when it’s sitting on your workbench and you have all the needed parts within reach. Install some smaller clear storage drawer units above the workbench to hold screws, nails and nuts and bolts in various sizes.

Hang A Pegboard

A pegboard provides a central place for your garage tools. Hang the pegboard on the wall within reach of your workbench. Outline the spaces on the pegboard for hammers and screwdrivers so they always get put back where they belong.

It’s never fun to have to endlessly search every time you need something from the garage. These garage organization ideas will make your new home and garage even more enjoyable.

Your trusted real estate agent is a great resource for information about organizing and staging your home in a way that will appeal to buyers. If you are interested in putting your home on the market, be sure to set up an appointment as soon as possible.

Your real estate agent will likely give you 24 hours’ notice before bringing over interested buyers to see your home. Sometimes eager buyers may request less of an advance, or even ask for a last minute showing.

Since you’re eager to be accommodating, you may agree to consider such requests. Whether you have 24 hours to prepare for a showing or 15 minutes, these tips will make showings easier for your family.

Keep The Family Pet Carrier By The Door

Real estate agents advise not leaving your family pet at home during showings. Make it easy to bring along Fido or Fluffy by keeping their carrier right by the door. You’ll be able to quickly place him in the carrier and carry him out to the car with you.

Use Under-Bed Storage

The one place homebuyers won’t look is under your bed. Equip each bedroom with a large under-bed storage container; get the kind with wheels if possible. When you receive notice of a showing, just place any loose odds and ends, clothing, magazines, etc. into the tote and hide it under the bed. 

Have Extra Laundry Baskets On Hand

Invest in two or three extra laundry baskets and keep them near the door. When you have to leave for a showing, have each family member scour the kitchen and living room for things that are out of place. Fill the baskets and just bring them with you in the car.

Stock The Kitchen With Cleanup Supplies

The kitchen is the biggest challenge with showings. It’s both the place that gets messiest and the room that can sell your home. Get it spotless in a jiffy with popup wipes. Make it a habit to clean the kitchen immediately after meals, including sweeping the floor. Consider using paper plates to dine on while your home is listed. Keep a scented jar candle in the kitchen that you can light to mask odors.

Make The Car Comfortable

Your family will likely take a drive or go to a movie while the house is being shown. Stock it with a few snacks and bottles of water as well as any medication that a family member may need.

These tips will make house showings much easier no matter how large your house is, or how many family members you have. And one day, you just might return to find that you have a great offer on your house!

Your trusted real estate agent is a key partner in your successful home sale! 

Kids of all ages often have a hard time dealing with moving. They may not be able to understand why the family can’t stay in the same place forever. Even with explanations, children often can’t readily envision how amazing the new place will be.

Here are some ideas for helping your kids deal with the move.

1. Make It Easy To Stay In Touch

For a lot of kids, a big sore spot with moving is having to say goodbye to friends and schoolmates. They may even feel like you’re intentionally wresting them away from their friends. To demonstrate how much you understand the sacrifice, make a gift of a cute set of note cards, stamps included. Even if your child chooses to text or email old friends instead of write, they’ll appreciate your gesture.

2. Visit The New Community

If possible, bring your kids to visit the new neighborhood where you’ll be moving. Encourage positive anticipation by signing them up for things like a library card, pool membership or a community event such as an Easter egg hunt, relay race or something similar. Consider enrolling them in a fun local class such as pottery, horseback riding, or something else they would enjoy. This helps your kids to focus on the upcoming activities instead of leaving their friends behind.

3. Strive To Keep Old Routines

When you’re busy packing and readying for the big move, old routines often fall by the wayside. But children need routines to feel safe. Strive to keep as many old routines as possible in the preliminary days and weeks before the big move. For example, if Wednesday is always family game night, stick to the plan. Your kids will feel more secure knowing that some things will stay the same, even in a new location.

Above all, make the time to listen. Your child might have concerns that you hadn’t thought of, like having to give up their dog or cat in order to move to the new house. Don’t worry, though. Kids tend to adjust very well to new situations. With your support and a few tips like the ones mentioned above, your children will make a happy transition to your new home.

A trusted real estate agent can be a wonderful resource who can point you toward family activities in the area of your new home. Be sure to make contact as soon as you are ready to start your new home search.

You have lots of choices when it comes to choosing a real estate agent. Aside from deciding if you’d prefer to work with a man or woman, and what age range you’d like them to be, here are some tips to help ensure that you pick one that is best suited for your needs.

Signs In Their Bio

The first thing to do is read the bios of any real estate agents you’re considering. Bios tell a lot about an agent, including what certifications they hold and how long they’ve been an agent. Some bios even have some personal information such as charitable interests or a little about their family life. Look for signs that the agent’s interests and certifications align with your needs.

Relevant Experience

A lot of real estate agents specialize in a certain area such as short sales or helping first-time homebuyers. If your situation falls into a particular category, you could look for a real estate agent who caters to your particular needs. This can simplify the experience, since the real estate agent will have some expertise in navigating the details of the transaction. Look for relevant experience in their bio, or ask them personally.

Good Rapport

You’ll likely be working with your real estate agent for a long time. The relationship between you and your agent should be pleasant. Not only should you have a good rapport with your agent, but you should be able to feel like they understand the human aspect of what you’re trying to achieve with your home buying or selling. You can gauge the rapport with a prospective agent with a simple phone call or brief in-person interview before you hire them.

Presentation

Make sure that your real estate agent makes a good personal presentation. They should comport themselves in a professional manner and dress accordingly. Remember that your agent will be representing your home and your interests to others. You’ll get the best results when your agent professionally reflects your goals in the transaction.

Your partnership with a trusted real estate agent is an important part of a successful real estate experience and transaction. A number of real estate agents will be vying for your business. Use these tips to make sure that you choose the one who best matches up with your needs, personality and style.

Savvy home buyers often get great deals on new home constructions by asking for deals and discounts and doing some up-front research. 

Home builders often dislike offering steep discounts in sales prices because they want everyone in the community to feel like they bought their property at a fair price. Maintaining sales prices also helps with future home appraisal values. It helps all of the buyers in a neighborhood to keep sales prices consistent and growing. 

Fortunately, you can still get great discounts that can reduce the cost of your new home.

Ask the builder if they can do the following:

Settle Closing Costs 

Closing costs vary depending on your state. On average, the costs can be as high as $10,000. In Colorado, for example, a standard closing is about 3 percent of the selling price.

It’s important to note that closing costs vary widely and can be structured in many ways. Make sure to consult a trusted mortgage finance professional to get the best information on your situation. But if the builder pays the bill, that money remains in your pocket. Isn’t that a great discount? 

Buy Down Your Interest Rate 

Although interest rates are low, if a builder is willing to buy down your rate further as part of the closing, it would reduce the amount you pay monthly in interest on your mortgage payment. That makes it manageable in the long run. Once again, your mortgage professional can give you the best details on this idea.

Offer Free Upgrades 

Most homes have standard built in appliances. To get high-end appliances, home buyers normally have to pay for upgrades. Ask your builder if you can get the upgraded home appliances or other upgrades without paying extra. It’s a great strategy to move into an improved new home. 

Additional Discounts 

To sweeten the deal, home builders can throw in additional discounts such as automated garage doors, landscaping, finished basements and window coverings. These discounts are worth asking about.

Although these strategies are great, there are some situations that make it more difficult to get sales concessions. Therefore, as you negotiate, keep the following in mind: 

• If business is going great, deals become more unlikely as builders have little motivation to give discounts. 
• You may not end up with the perfect home you want since you may be buying a home that’s near completion or already built. 
• The best home locations may be taken because properties in prime lots are usually the first to sell. 

Knowledgeable buyers are most capable to cut great deals. Therefore, research new construction homes in your preferred neighborhood, visit some homes and compare what deals you can get. Above all, don’t hesitate to ask questions of your trusted real estate and mortgage professionals.

The Tax Cuts and Jobs Act of 2017 instituted some of the most dramatic changes to the financial landscape in the United States in over 30 years. These adjustments to the IRS code have an effect on everyone who earns and spends money in this country.

What changes can real estate investors expect to see from the new legal standards?

Higher Standard Deduction, Less Itemized Deductions

Before the reforms, single tax filers were allowed a standard deduction of $6,350. Married couples filing jointly were given $12,700. The standard deduction is the amount of income you can earn before any income taxes are applied. If a married couple made $50,000 in one year, they would only pay taxes on $37,300. With the new laws, single filers receive a $12,000 deduction and married couples get $24,000. 

However, with the increased standard deduction comes significant decreases in itemized deductions. Many smaller real estate investors depend on tax credits for homebuyers to make their purchases more profitable. Those have been removed from the list of approved deductions. 

Real estate investors need to adjust their strategy to take full advantage of new tax trends. Rather than focusing on flipping homes for profit, investors may consider holding on to properties and leasing them as rental units.

Mortgage Tax Deduction Changes

Homeowners who live in their primary property are still allowed to deduct a portion of the interest paid on their monthly mortgage. However, those who have taken out home equity lines of credit are no longer able to claim a deduction for those interest payments.

This is a big change for some real estate investors. It’s a common strategy to use home equity lines of credit to finance other projects. Without the extra deduction, these loans are still a great option for quick cash. However, investors will take more time to realize profits with this strategy.

Decrease In State And Local Tax Deductions

Investors use state and local tax deductions to increase their return on investment. Under the new rules, property owners are limited to a $10,000 maximum deduction. Real estate investors who operate in high-income areas will see a significant increase in their yearly tax bill. The $10,000 limit is unlikely to offset the high price of property taxes in places like California and New Jersey.

Newer investors who don’t hold a lot of properties can consider buying in markets with lower state and local tax rates. Those who are currently invested could sell some of their lower-producing properties to lighten the burden on their tax bills.

The new tax laws are a challenge for real estate investors. But with some planning and the right information, your business can still produce a generous profit.

If you are interested in investing in a new property, be sure to partner with a trusted real estate agent. 

With the right combination of strategy, knowledge, and luck, flipping houses can create big profits for short-term investors. However, your path to success starts at your first auction.

For first-timers who are intimidated by their lack of experience at public auctions, follow these steps to ease the confusion of your first property purchase.

Locate Auctions In Your Area

Finding live auctions is as simple as an internet search. Websites run by government agencies list homes that have been seized due to tax liens or foreclosures. Try searching databases maintained by:

• Fannie Mae
• The FDIC
• The US Department of Housing and Urban Development

Another option is your local newspaper. Banks publish foreclosure notices in the public notice section. You can also find advertisements from auction companies and information from the sheriff’s or county tax collector’s office that helps you hunt down low-cost properties.

For busy investors who plan to use real estate as an extra income, be certain to enlist the help of a professional real estate agent. They often keep lists of homes in foreclosure in the surrounding area.

Assess Available Properties

All properties are not created equal. To find the right fit for your project, find the following information for each potential listing.

• Current bid price
• Previous purchase price
• Length of time property has been unoccupied
• Property condition
• Number of bedrooms and bathrooms
• Sales history of homes in the surrounding neighborhood

This information isn’t always readily available. You may be able to find more information via an MLS search, public lands records, or various real estate websites that publish property data. Of course, if you’re working with a real estate agent, they will provide all the data you need to make the right decision.

Some auction sites include pictures and map data. At other auctions, bidders may be allowed to visit the property or hold open houses before the sale occurs.

Perform A Title Search

When you’ve found a few properties that you like, take some time to do a thorough title search. This process ensures your property doesn’t come with some unfortunate surprises.

During your search, you’ll need to:

• Obtain records from the tax assessor to verify the tax status of the property.
• Locate the property’s deed either physically or online.
• Investigate the property’s sales history to ensure no one else can claim ownership.
• Check for liens, unpaid mortgage commitments, and legal judgments against the property.

Once a property has cleared these steps, you’ll be ready to start placing bids on your first investment property.

Trying new things can be daunting as well as exciting. Don’t forget to rely on your trusted and reliable real estate professional to guide you along your home buying venture.