Real Estate Advice

[FRPLG]

I will probably echo a lot of what has been said but may have some other things to add.

First off I am 28 and live in my third primary home. I also several real estate investments properties and I am constantly traversing the real estate market in search for more. Basically I have been where you are enough to have some good insight into the more subjective aspects or your questions.

First, is there any sort of generalized formula for determining whether a house is a "good buy" based the home's assessed value?

These projected values almost always means little to nothing. There are two different types of projected values of a house.

Assessed value=the value assigned by the local government for tax purposes. It is almost always signicantly lower than the real market price since reassessments are done on a yearly or bi-yearly basis using an inexact comparable type system on old figures. Never pay attention to this assessed value beyond what it will do in terms of taxes for the property. It has no bearing on what the house is really worth.

Appraised value=this is a much closer figure to actual value as it done by an independent evaluator. Banks use it to make sure they property they are going to finance is actually worth what the buyers have offered. If a appraisal comes in lower than the offer price then usually the offer price is contractually reduced to the appraisal price. These appraisers are more accurate because they use a stronger model for comps and have much more recent data. The value though is very often skewed though because the data they use can be as old as 6 months and if the appraisal is set up by the selling agent then the buyers need to be wary. Basically I don't trust the appraisal for one reason alone. Most appraisers see the purchase contract before they appraise and almost always the appraisal comes in pretty darn close to the offer price. It is amazing how that works! Finding an appraiser who wont just finagle a way to justify a price is hard. Most know if they start under cutting offers then agents won't use them anymore.

Second, to what extent are buyer's agents useful? I know that buyer's agents owe fiduciary duties to their principals, but do such duties actually compel the agent to do what is in the principal's best interests given that their commission is based on the home's purchase price?

I find buying agents to have a few good uses.
First, they know the market inherently if they are any good.
Second, they know properties much better. You'll waste a little less time with worthless properties if you have an agent who can weed them out
Third, they take care of paper work and most offer a safety net in that they are on the hook for some stuff if the deal goes wrong. If you are your own agent then you better know what you are doing otherwise there are lots of little things that you need to have done as buyers to make this deal go smoothly.

I alwasy use a buying agent. They cost nothing and do work for you. I don't know why anyone wouldn't.

Third, how many home inspectors do people typically retain? Is there any way to determine if a home inspector is qualified, other than asking friends? For example, do they have certifications that might indicate that certain inspectors are more qualified than others?

Home Inspector - The National Association of Certified Home Inspectors
Home Inspector at American Society of Home Inspectors: American Society Of Home Inspectors, ASHI, ASHI Home Inspection, ASHI Inspector

Both orgs have a find a home inspector deal on their sites. Get a certified one for sure. You need more than a contractor. You need someone trained to know what to look for. The inspection, depending on property size, should take an hour or more. It should look like they are being uber picky. If it is a property older than 2 or 3 years you should end up with a list. Most of the list will be cosmetic but there still should be a list. If there isn't one then either the property is magically perfect or the inspector didn't do a thorugh job. You can guess which I'd assume.

Fourth, what is a good percentage of your gross income to spend on mortgage payments (including escrow)? I know this percentage will vary based on the individual and his outstanding debt, but is there a range for the "conservative" buyer and the less risk-averse buyer?

Figure out what you can afford in payment and that will point you toward what to do. Payment is the biggest key. I like to have my payment as big as I can afford. That means I have put less equity down meaning I will make a higher percentage on my equity when I sell. I still try and always put down at least 20% to avoid the aforementioned PMI. I avoid anything but fixed mortages. ARMs just make no sense to me.

Finally, what kind of "hidden costs" can I expect to incur? Obviously there is the down payment, loan origination fee, and inspection fees, but what other fees can I expect to pay?

Any title company should be able to give you the exact charges they are going to charge you. If they cannot then don't use them. The only thing variable on the HUD sheet should be, taxes, escrow, inspection fees and so forth. Do a Google on what things should be on the HUD in your state. If there any 'other' fees that don't make sense then go somewhere else. Title companies will put administrative fees on there that shouldn't be there.

[jsarno]

Sorry to use his thread for my own question, but I talked about PMI insurance earlier and realized that my new house is under 80% LTV. I owe around 75k and the house is now worth roughly 110K (I know it probably makes you guys sick to know that housing costs are so low out here, but remember this place sucks)...I'm still paying PMI. How do I get rid of this? I have yet to do this in my homeowner experiences. Any advice?

ps- I have a very good friend that does appraisals if this helps.

[FRPLG]

Originally Posted by jsarno

Sorry to use his thread for my own question, but I talked about PMI insurance earlier and realized that my new house is under 80% LTV. I owe around 75k and the house is now worth roughly 110K (I know it probably makes you guys sick to know that housing costs are so low out here, but remember this place sucks)...I'm still paying PMI. How do I get rid of this? I have yet to do this in my homeowner experiences. Any advice?

ps- I have a very good friend that does appraisals if this helps.

You'll need to refi and depending on your current rate it may not be worth it.

[jsarno]

Originally Posted by FRPLG

You'll need to refi and depending on your current rate it may not be worth it.

There is no other way out of it? So I'll be throwing that money away forever?

[724Skinsfan]

Originally Posted by FRPLG

You'll need to refi and depending on your current rate it may not be worth it.

You may be right, but I was under the impression that PMI is cancelled after reaching 22% of LTV. If that's not the case, then I thought you could request in writing to have PMI cancelled once sufficient proof (ie, appraisal) is provided. I had never heard of having to refinance, but then again it's not something I keep up to date on.

[FRPLG]

Originally Posted by 724Skinsfan

You may be right, but I was under the impression that PMI is cancelled after reaching 22% of LTV. If that's not the case, then I thought you could request in writing to have PMI cancelled once sufficient proof (ie, appraisal) is provided. I had never heard of having to refinance, but then again it's not something I keep up to date on.

Partially correct. I assumed you meant based on an increased market appraisal.

The HPA of 98 mandates that PMI is cancelled immediately upon reaching 22% equity based on original purchase price.

After some research I realized I was wrong. With the super low rates most people have been refinancing to create higher equity, cancel PMI and reduce rates and payments. Now with rates leveling out it is probably not in your best interest to refi so you can request PMI be cancelled once you reach 20%equity or if you provide sufficient evidence that you now have 20% equity due to market value increase. I have never heard of someone doing this but I don't think it is terribly uncommon. Just lately it has been because of market conditions. Usually there will be some type of wait time involved before PMI can be cancelled. I guess 2 years is the norm. That is wait time from loan origination.

[firstdown]

Originally Posted by jsarno

Sorry to use his thread for my own question, but I talked about PMI insurance earlier and realized that my new house is under 80% LTV. I owe around 75k and the house is now worth roughly 110K (I know it probably makes you guys sick to know that housing costs are so low out here, but remember this place sucks)...I'm still paying PMI. How do I get rid of this? I have yet to do this in my homeowner experiences. Any advice?

ps- I have a very good friend that does appraisals if this helps.

I'm
with Wells Fargo (not a job my mortgage Co) and there is 3 different ways to have PMI removed from your loan. The 20% rule is from the purchase or appraised amount at the time of purchase.Then if you make a big enough improvement like a garage, addition etc.. if it increasees the value enough. Stuff like upgrading a bathroom painting do not count. Then there is another way which I cant think of but just call your mortgage co and they should send you the papper work and if you qualify they have to remove your PMI.

[jsarno]

Originally Posted by firstdown

I'm
with Wells Fargo (not a job my mortgage Co) and there is 3 different ways to have PMI removed from your loan. The 20% rule is from the purchase or appraised amount at the time of purchase.Then if you make a big enough improvement like a garage, addition etc.. if it increasees the value enough. Stuff like upgrading a bathroom painting do not count. Then there is another way which I cant think of but just call your mortgage co and they should send you the papper work and if you qualify they have to remove your PMI.

Well, I put in a hot tub, and built a new deck as well as put in new electrical service and redid the kitchen with granite tile tops and new sink with new plumbing.
Not only that, but the market has jumped considerably out here. A house that was 100k 3 years ago, is now worth 150-167k. It's quite a jump.

[EternalEnigma21]

Originally Posted by jsarno

Well, I put in a hot tub, and built a new deck as well as put in new electrical service and redid the kitchen with granite tile tops and new sink with new plumbing.
Not only that, but the market has jumped considerably out here. A house that was 100k 3 years ago, is now worth 150-167k. It's quite a jump.

I'm excited. I close this week on my new house and were spending 280k. Our appraisal came back at 370...

I know its a weak market here, but its nice to know Im starting out with a little bit of equity, according to all comps and data...

[FRPLG]

Originally Posted by canthetuna

I'm excited. I close this week on my new house and were spending 280k. Our appraisal came back at 370...

I know its a weak market here, but its nice to know Im starting out with a little bit of equity, according to all comps and data...

Sounds like you are stealing that house. Good job.

We did that with our second house in Woodbridge. Saw it at an open house an offered 10K less than asking price because we thought they were so off in their price(too low) that maybe they'd go lower. They countered 5k more and we took it. Sold it 14 months later for 115K profit. They missed the price piont so badly on it. There was major development going on just two blocks away on the Occoquan. Building like a mini downtown Alexandria and everything was going to sky-rocket. I still can't believe they sold it for what they did.

[EternalEnigma21]

Originally Posted by FRPLG

Sounds like you are stealing that house. Good job.

We did that with our second house in Woodbridge. Saw it at an open house an offered 10K less than asking price because we thought they were so off in their price(too low) that maybe they'd go lower. They countered 5k more and we took it. Sold it 14 months later for 115K profit. They missed the price piont so badly on it. There was major development going on just two blocks away on the Occoquan. Building like a mini downtown Alexandria and everything was going to sky-rocket. I still can't believe they sold it for what they did.

This house is a forclosure. The bank, however is taking a bath and we sent in a lowball offer 30k off their recently reduced asking price and they countered... then we re-sent the origninal with a 24 hour expiration date and they just accepted...

we took a shot and it paid off... We've put in 6 other offers on other forclosed homes in the area that we didn't get, but we liked this house the most anyway...

The market right now is soft because of all of the ARMs and people getting into houses they couldn't afford and getting forclosed on. Banks are looking to move houses out of their possession and new forclosures are hitting the market daily....

[jsarno]

Originally Posted by canthetuna

I'm excited. I close this week on my new house and were spending 280k. Our appraisal came back at 370...

I know its a weak market here, but its nice to know Im starting out with a little bit of equity, according to all comps and data...

WOW...that's a great deal for you.
Fix it up a little, add some things here and there that make it more appealing to others, and you could easily get a return of 100-120k. Congrats man, you hit the jack pot there!

[Southpaw]

This is all great info. I'm in a similar boat as SGG, but about six months off from actually buying a house. I've done a ton of research, but it seems like the best info comes from unbiased people that've been through the process.

This thread could be helpful to a lot of people around here, since the majority of us are 20 something's. I don't know if it's worthy of a sticky, but it should at least be archived so it doesn't get buried.