How to Get Your Parents Help When Buying Your First Home

You probably thought you were done asking for your parent’s help.  But as you begin to get a feel for the housing market in Los Angeles you may realize that you are going to need some help to get the place you really want. I bought my house 18 years ago and without my dad’s help, I could not have done it.  Owning my home changed my life in a profound way and I continue to thank him to this day.

You may be lucky and your parents have offered to help without you having to ask.  But even under those circumstances, it’s best to understand the dynamics of asking for help in order to ensure you get what you need, not just what they are offering to do.

Keep in mind that there are tax implications for the gift.  Your parents can give up to $14,000 ($28,000 if the gift is for you and your spouse) without tax penalty.  You will want your parents to speak with a tax advisor before executing any plan.

The first thing you need to do is decide what exactly you are going to be asking for.  There are a number of ways parents can help their millennials purchase a home.

  • If the parents are financially well off, they can simply buy the house and gift it to you. There are ways to avoid paying the gift tax in this scenarios and having their cash can be a huge benefit to you when you make an offer on a property.
  • The parents can offer a loan
  • They can co-sign the mortgage
  • They can help with the down payment.

Having your parents contribute to your down payment is the most common and probably the easiest way to get your parents help.

Once you have decided on what you are going to ask your parents for, you need to prepare a plan of action. Be clear as to whether you are asking for a gift or a loan.

Understand why your parents would want to help you purchase a home.  They love you and probably want to see you settled and in a safe environment.  They may be motivated by the satisfaction of being able to help their adult children.  Or they may see the purchase of a home as a necessary step towards getting the grandchildren they so desperately want.

Your parents may be more inclined to help if it is presented as an investment that benefits them.  No matter what their motivations may be, approach them with their interests in mind.  Also keep in mind how this might impact your family dynamics, especially in regards to siblings.  Tread carefully and keep in mind you do not have to share any of this with other members of your family, though be prepared for your parents doing so.

Next, get prepared.  Treat this as though they are the loan officer at the bank. You should get prequalified for a loan by a lender.  Be honest with your folks about your financial situation,   share your income, debts and FICO scores; these are things you will need to do anyway and it will go a long way towards showing them you are serious

You should be knowledgeable about the real estate market in the areas you want to buy in.  Solicit help from your agent.  It’s a good idea to have an agent on your side before you approach your parents.  Depending on their level of involvement you will be in a better position to control the process if you have hired an agent. Your agent can prepare a market analysis showing what houses are selling for and how fast.

Finally, ask for their help in person.   Drop hints first, tell them you are looking at buying a house, but sit down with them to review what you are asking for.  Bring some listings, your prequalification letter, and market data to ensure they see that not only this is doable, but engage them in the process, they may enjoy the house hunting as much as you.

Contact me at www.LAandymay.com

I am looking for a home to purchase, when should I hire a real estate agent?

You have been searching online, going to a few open houses and you are feeling pretty good about your increasing knowledge of the local real estate market.    The last thing you want at this point is an annoying salesperson breathing down your neck, and tagging along with you as you pursue your dreams and search out the stage upon which your life will play out. But you know enough at this point to realize you will eventually have to work with an agent to represent you in the deal and you are wondering when you should hire one.

You can and should search online on your own for a while.  Go to open houses and talk with the agents you meet there.

Wait long enough to hire an agent until you have met a few and know what you like and don’t like.

You do not pay the agent; their fee is paid by the seller through a commission split with the seller’s agent. But you are hiring them and you should treat the process like any hire; interview the candidate.

Ask questions to ask to determine their level of enthusiasm, integrity, and local knowledge.  Let your intuitions drive you to where you can feel if there is any chemistry.

You should think of the agent as your coach.  She should be able to help you focus and narrow down the number of properties you want to see.   Most importantly he can help ensure you truly are ready to purchase a home.  Have you been pre-approved by a lender? If so you are probably ready to work with an agent.   An agent should assist you in getting ready to make a purchase offer and gently pressure you to get what you need to do, done.

House hunting is a time-consuming endeavor and as you get closer to actually making a purchase you will find it is increasingly difficult to manage your job and family life while every weekend is taken up with house hunting.  An agent can arrange to show you houses at your convenience, around your schedule.

A good agent will also help in the home search by alerting you to homes as they hit the market, instantly sharing relevant listings through the MLS & other sources.  They can also share information with you that is available only to agents; such as offer terms, property details, etc

And no matter what you think of your pricing skills, an agent will be immensely helpful in determining the fair market price of the homes you are interested in.  By showing you what similar properties sell for, they can guide you towards making a reasonable offer that you will feel good about.

So do not wait until you are ready to make an offer to hire an agent.  You will be rushed and likely end up with someone who does not have your best interests in mind.

Best of all, once you hire an agent you can blow off all those pesky real estate agents at open houses who are trying to get you to choose them to represent you.

Contact me at: www.LAandymay.com

Timing the Market: Should I list my home over the holidays or wait until spring?

Ask any almost real estate agent if you should list your home for sale during the holidays or wait until some better time, you will get an empathic response; sell now!   The answer is easy for the agent, it’s a slow time of year for Real Estate agents and they need the commission checks.

Aside from agent need, there are a few valid reasons to list over the holidays; a lot of homes come off the market during December and there is much less competition.  Buyers are still out there; some have to move, others may need to buy before the end of the year for tax purposes, are among the most common reasons buyers are active during the holidays.

But timing when to list your home for sale is a decision to be made only by sellers who do not really have to sell.  If you have a new job that requires you to move to another city, or you are about to get foreclosed, then you are not really able to time the market. For this seller, there are few reasons to put off to January what you really need to do now.  And as an upside, you will have the benefits of selling over the holiday. Buyers out there around the holidays can be more serious about their decisions and may be less likely to drag their feet or suffer decision anxiety.  If you do decide to list during the holidays, don’t leave the decorations in the attic; you can enhance the appearance of your home with tasteful holiday decorating.

But the larger question about how to time the market is a serious issue with a lot at stake.  There is seasonality to real estate sales.  In Los Angeles, over the past three years, the number of homes for sale has peaked each year between July and September.  The lowest number of homes for sale has traditionally been December.  Things pick up after the first of the year, and slowly climb to their peak and then fade.  The graph looks like this;

graph

Those  who are thinking of selling for other reasons; moving to a larger home, downsizing, taking profits etc,  you need to examine your reasoning, map out your plan of action, then move forward according to what makes the most sense.  There is data that supports early May as the best time to list your home for sale, but the increased competition can offset whatever statistical gains that the data identifies.

Just keep in mind, if you are thinking of selling, and then buying another property in the Los Angeles real estate market, the most important element of the timing decision is to avoid getting caught as a buyer in the heated summer market.  Whether you are moving up or downsizing you will face stiffer competition from other buyers and sellers in the market over the summer.

If you want to discuss timing with a real estate agent who will listen and offer pros & cons without pressure, contact LAandymay.

 

www.LAandymay.com

Will Solar Panels Kill the Deal? How to Get Through Escrow with a Solar Lease

I recently helped a young couple buy their first home.  As with all real estate transactions, there was one thing that came up during escrow that stands out as the “big deal”…  This home had solar panels on the roof.

The house met all of the buyers must have’s; good neighborhood, nice yard, and it had a pool.  It also had leased solar panels.  Since it was a trust sale and the trustee had not lived in the home recently, the seller only had a vague knowledge of the costs of the solar and what would be involved with taking over the lease.   I dug into it, did my homework, and worked with the buyer and seller to hash out the deal and get to closing.  Along the way, I learned a few things that I wanted to share.

If you own a home and are considering installing Solar panels, do your homework prior to deciding to lease or buy. The choice will have a significant impact when you decide to sell your home.  There are pros & cons to both leasing and purchasing a solar system so there is not one right answer for every situation.

On the good side, leasing usually requires no money down; with the Leasing Company retaining the tax credits and billing you a monthly fee over the life of the lease contract.  They cover maintenance and guarantee you a specific amount of energy production.  On the bad side, your lease is attached to the property and goes with the house when you sell it.  If you do decide to lease, you will have a few things to deal with when it comes time to sell your home.

When you sell your home with leased solar panels there are only two options; either the seller or the buyer buys out the lease, or the buyer must assume the lease.  Neither the buyer nor seller wants to spend in the neighborhood of $15,000 or $20,000 or more to buy out the lease.  The second option requires the buyer to qualify with the leasing company for the assumption of the lease.  If the Buyers’ debt to income ratio is near the top of what lenders allow, this could be a problem for the buyers and put the loan in jeopardy.

Did I mention the lender?  Well even if the buyer qualifies for the lease, the lenders have a say in this as well.  First, the lenders will view the lease as a lien against the property, even if it is technically not.  So for my deal go through, the buyers had to apply for the assumption of the lease, and then when they were approved, the leasing company had to work with escrow to get the “lien” removed from the title report so that escrow would close.  The lender held up the loan in order to get the assumption contract amended to include language that further protected the lender.  All of this involved working with a solar leasing company who would not assign a dedicated customer service rep and was not responsive or helpful.

At one point, after being on the phone with the solar company for over an hour, the buyer was ready to walk.  She felt it was a bad deal and hated the leasing company.    I reviewed the lease agreement, all of the lease bills as well as the Southern California Edison bills for the prior 2 years (including a period before the panels were installed) and crunched the numbers… It was not a bad deal; the buyer would definitely save money over not having the solar panels in place.

Lessons learned?  If you plan to install solar panels under a lease agreement, be aware this will make selling your home a little more difficult.  If you are buying a home with solar panels, you will need to do some due diligence; get copies of lease bills, electric bills & lease agreement and begin getting the lease assignment process started ASAP.  Also, find out if the solar panels were financed through the HERO program if so you will have even more problems on your hands.  It helps to work with a real estate agent who either knows about these issues or, one who will dig into the details with you and learn everything he or she can about the solar panels.  If your agent throws this in your lap, you chose the wrong one.

http://www.LAandymay.com

7 Tips for Handling the Stress of a Real Estate Transaction

The process of buying or selling a home can be one of the most stressful events in a person’s life.  All transactions involve the unknown and this more than any factor can drive both buyers and sellers into a state of heightened emotional chaos.

Throughout  the real estate transaction there are points where the stress is heightened for both buyers & sellers.  For buyers the stress really begins with deciding to make an offer and at what price.  Especially in a seller’s market this decision can feel rushed and lead to second thoughts.  Are there better houses? Am I paying too much? These questions haunt the buyer as they approach the decision to write an offer.  At the same time the seller is stressed over which offer to accept? Will this buyer perform?  Of if we hold out will a better offer come along?

Both sides of the same event are stressful due to the unknowns. The mind races through all the possibilities, filling in worst case scenarios where facts are missing. Dealing with these thoughts and sorting out what is a reasonable concern versus the imagining the worst is difficult absent good information.  That is a key reason why having a real estate agent who is a good communicator is essential.  Rather than running through all the possibilities in your mind, ask your agent questions and listen to her as she walks you through the uncertainties.  For buyers posed to make an offer, this means reviewing the comparative properties, understanding the prices houses are going for in the area and why the list price or the offer price is what it is.  This is real data, trust it, and it should assuage concerns about the price.  For sellers the agent can walk through all of the offers and explain the positive and negatives of each as well as provide comparative sales data to justify the offered price or what to counter.  A decent agent will not tell you what to do in either case but guide you through the decision making process so that you can put the demon questions to rest allowing you to make a decision.

They key to reducing stress is to keep in mind that once a decision is made the process moves along on a predictable path and although things arise that are unexpected, you now are being guided by a clear agenda and experienced professionals.  When things come up and the unknowns rear their ugly heads, try these tactics to reduce stress:

  • Are the thoughts and concerns I have reasonable?
  • What is the worst case scenario? Imagine it then put it in perspective and understand that you cannot control most outcomes. Once you do this, don’t continue to dwell on it.
  • Take care of the here and now. Do the things required of you and realize that most of what needs to happen will be handled by professionals.
  • Put yourself in the other side’s shoes. Are their concerns and requests reasonable from their perspective.
  • Ask the experts! If you worry about what the inspection reveals, talk to experts to get perspective on the information you receive.
  • Focus on the ultimate goal. You are moving and whether you are buying or selling the end result will be a new home and the goal you set when you began the process.
  • Go about your life; keep to your routine and continue to focus on the things that preoccupied you before you began this journey.

As a real estate agent I share the stress that’s involved in buying or selling a home.  I too am on pins & needles during the offer process.  Rather than spend the day worrying about what will happen next, I focus on the fact the decision is completely up to the sellers and I have done the best I can do to position the buyers offer in the best possible light.  I know that if we don’t get this one we will find a house that is just as good or better.  When unexpected hurdles come up during escrow, I focus on what I need to do to deal with it and remind myself that this is a learning process that will make me a better agent regardless of the outcome.  So despite doing this day in and day out, when my head hits the pillow, I am asleep before I have the time to fret over the problems of the day (most of the time!).

Contact me at http://www.LAandymay.com

Is it better to buy or sell your home first?

page cut out from a vintage 1956 issue of an architectural magazine etsy

When selling your home in order to buy another home, the question of which to do first comes up immediately.  Should I sell my current home first or should I buy my next home then sell?  This can be a tough decision to make.  If you currently own a home and are considering a move, you need to first examine the reasons you are moving.  Are you relocating for a new job? Have you out grown your current home?  Are you downsizing empty nesters?  Having a clear goal in mind will help make the decision of what to do first easier.  For example, if you own your home outright with no mortgage, it’s much easier to buy first as you do not have to pay two mortgages and you will be in a better position to decide which of your belongings fit in the new place and which need to be tossed out.

Pros of Selling First

Not paying mortgages on two house

You know exactly how much you have to spend on your new home.

You’re not tempted to take a lower offer because you are not the under pressure of multiple mortgages and the desire to get into your new home

 

Pros of Buying First

You don’t have to move twice, once to a temporary rental after your current home sells, then again to your new home.

You will be less likely to rush to choose your new home and possibly miss out on a better deal.

Not stuck in a temporary situation like a rental that could add stress to your daily life.

 

But right now, in Los Angeles and many other sought after urban areas, it’s a seller’s market, and that almost necessitates selling first. Unless you have a boat load of cash, or access to a bridge loan, you have to sell your home before you buy your new one in order to compete for the property of your dreams.   If you make your offer on the new home contingent upon the sale of your current home, you will likely find your offer at the bottom of the pile.

So if you really want to sell your home to buy a new one in the current hot  LA property market, keep in mind  that although you will benefit as a seller,  you will join all the other buyers competing for the low inventory of homes for sale at this time.

One way to work the seller’s market in your favor is to have the buyer agree to make the closing contingent upon finding and closing on your new home.  Buyers may be reluctant to agree to an open ended closing but might agree to an extended closing of 60 or 90 days.

Another tactic is to close on the house you are selling but rent back from the buyer until you have found your new home.  Again there are buyers who might find this option appealing especially if they have to sell their home as well.

As a final resort, you can always put you stuff in storage, and move to a short term rental.  It may be disruptive to your daily routine but it could also be viewed as a vacation, especially if you pick a place with a pool!

As soon as you feel you’re ready to get serious about moving, begin talking to a real estate agent.  You need an agent who will work with you on the best course of action, at your pace with your interests in mind (like me!).  Have the agent prepare a comparative market analysis for your home to give you a professional estimation of what your home will sell for and what you will net from the sale.  Then reach out to a Mortgage lender to discuss your financing options and how much new home you can afford.  Have your real estate agent set up searches based on your search criteria & start looking for your dream home.  Once you have found something you feel you would make an offer on, you know it’s time to put your house on the market and begin the search in earnest.

Know your motives, your desires and your personality type, hire a good realtor, and jump into the process.  It will be stressful, but it can be fun and exciting and in the end you can make your dreams come true.

www.LAandymay.com

Contact Me at: andymay@yahoo.com or txt or call 213-713-0385

Top 5 home buying myths in LA

The truth: it IS a seller’s market right now and that poses real challenges to buyers looking for a home.  But whether you are a first time buyer with limited funds or a seasoned pro looking for your dream estate, you need to keep in mind, not all common knowledge is 100% accurate

  1. I cannot afford to buy a house in this market: While it may be true you cannot afford the exact house in the exact neighborhood you have been dreaming about, sometimes close enough works.  Look outside your ideal location to find the house you can afford.  Can’t afford Silver Lake, try Altadena…  Consider condos, fixer-uppers or short sales… Work with an agent who can help you think outside the box and provide advice on locations and alternatives that will allow you to get the most for your money.

 

  1. I will get a better deal if I don’t use a buyer’s agent, its best to approach the listing agent and let her represent me in the transaction.  The thinking is, if the seller’s agent accepts the buyer as a client, he makes the full commission and is more likely to cut a deal with the buyer.  But keep in mind the buyer does not pay the agents, the seller does.  The listing agent is hired by the seller and has a fiduciary duty to the seller.  The half of the commission they would traditionally split with the buyer’s agent is not going to be handed over to the buyer.  It’s more likely the agent will keep the full commission and walk away happy to have found another misinformed buyer.

 

  1. It’s a housing bubble in LA and I should wait until the next downturn to buy. The truth is the signs present in the last bubble are not present today.  Pricing is at historic highs, but you could be waiting quite some time to catch the market on the downside. Your home is an investment you can live in.  Trying to time the market could leave you wasting more money on rent and loosing potential appreciation, than the possible future gain from buying when everyone else is selling.

 

  1. You need to have 20% for the down payment. There are a variety of ways buyers can reduce the amount of money required for the down payment; qualified borrowers can make down payments as low as 3% with private mortgage insurance, or the FHA offers a low-down option payment of 3.5% for people with imperfect credit histories.  In addition to these and other loan programs, there are sources of monies you may not have considered such as taking a loan from your retirement plan or you may also withdraw cash from an IRA for a home purchase.  Working with a real estate agent and loan officer early in the process will put folks on your side who want to help you make your home buying dreams happen.

 

  1. El Sereno is the next Highland Park. There are a number of locales that are being pushed as the next hot neighborhood but there is no one specific neighborhood that everyone agrees will become the next place the hipsters are moving to.  You can get great deals in “up and coming” neighborhoods throughout LA and with the guidance of an experienced real estate agent you should not find yourself in a place you are unhappy living.