Real Estate • December 6, 2024

BUYING A HOME IN YOUR 20s or 30s?

by Jennifer Daring

Thinking about buying a house? In your 20s or 30s, this might feel both exciting and a bit overwhelming, especially with today’s housing prices. But here’s a secret to help you start: the 28/36 rule. This simple budgeting guideline can make sure you’re set up for success without feeling financially stretched. Let’s dive into this cheat sheet and break it down in easy steps!

Step 1: Calculate Your Monthly Income for Budgeting

Budgeting starts with knowing how much you can afford comfortably each month. Here’s a quick method to help you calculate a recommended monthly mortgage payment:

Take your pre-tax salary.
Add your partner’s pre-tax salary (if applicable).
Divide the total by 12 (for monthly income).
Multiply that number by 0.28.

This gives you a rough idea of what 28% of your gross monthly income looks like. The idea here is that your housing payment shouldn’t exceed this amount.

For example, if you and your partner make $120,000 annually combined, you’d divide that by 12, getting $10,000 monthly income. Multiply that by 0.28, and you get $2,800 as a recommended limit for your mortgage payment. This calculation helps keep your monthly payment manageable and within budget.

What is the 28/36 Rule?

The 28/36 rule is a financial guideline that can help you budget effectively for your mortgage and total debt. Here’s how it works:

28%: The portion of your monthly income that should go toward housing costs, including your mortgage, property taxes, and insurance.
36%: The total portion of your monthly income that should go toward all debts—this includes your mortgage, car loans, student loans, and any credit card payments.

This rule, created decades ago, was designed to help people buy homes without getting too financially stretched. While today’s housing market has changed a lot, the 28/36 rule is still a great starting point, especially for first-time buyers trying to create a comfortable budget.

Why Should You Stick to 28%?

Lenders might approve you for a mortgage that’s higher than 28% of your income. So why should you aim to stick to this rule? It’s simple: your financial comfort matters more than what a lender says you can afford. Just because a bank offers you a bigger loan doesn’t mean it’s the best choice for you. Staying within 28% helps ensure you’ll have room in your budget for other life expenses, emergencies, and even fun!

Debt Beyond the Mortgage: Understanding the 36% Limit

Housing is just one part of your monthly financial picture. The 36% rule accounts for all your debt obligations combined. So, if you have a car loan, student loans, or credit card payments, make sure these don’t push your debt payments above 36% of your monthly income.

If you’re carrying a bit more debt, you may need to adjust your housing budget accordingly. The 28/36 rule gives you a solid foundation, but flexibility is key—especially if you have other financial goals, like saving for retirement, travel, or future family expenses.

Adapting the 28/36 Rule to Today’s Reality

The 28/36 rule is a great guide, but let’s be honest: it was developed in a very different time. Housing prices, student debt, and overall costs have risen, which means this rule might need a few adjustments to suit today’s market. Here are some tips to make it work for you:

Consider Your Lifestyle: If you’re big on travel or planning for early retirement, you might want to keep your housing costs even lower.
Factor in Extra Costs: Homeownership often means expenses like maintenance, repairs, and home upgrades. Add a buffer for these costs in your monthly budget.
Prioritize Your Comfort Level: Even if you qualify for a higher mortgage, think about your monthly comfort. Would you rather have extra spending flexibility? Let that guide your decision more than a pre-set rule.

Your Guide to Comfortable Homeownership

As you budget for your new home, think of the 28/36 rule as a starting point, not a hard limit. Your home should be a place that adds value to your life, not a source of financial stress. By keeping your mortgage within 28% of your monthly income and your total debt under 36%, you’ll create a balance that supports both homeownership and a fulfilling lifestyle.

Before you jump in, take a moment to envision what “comfortable” means to you. Your budget isn’t just numbers—it’s about creating a home within your means, where you can thrive and enjoy all the other parts of life.

Buying a home in your 20s or 30s is an exciting milestone, and with the right planning, it can also be financially smart. Stick to the cheat sheet, keep your goals in focus, and remember: your financial journey is yours to define!

Real Estate • June 22, 2024

Think Zillow’s got your home’s value on point? Think again—those Zestimates could be off by 9.9%

by Jennifer Daring

Hey there, homeowners and future sellers! Today, I want to dive into something that might surprise you: the accuracy of Zillow’s Zestimates. If you’ve ever checked your home’s value on Zillow, you’ve likely seen their estimate, called a Zestimate. But did you know these Zestimates can have a significant margin of error? Let’s talk about it!

The Zestimate Error Rate

So, here’s the scoop. According to Zillow, their Zestimates have a median error rate of 9.9% for off-market properties. Yep, you read that right—9.9%! Now, that might not sound like much at first, but let’s break it down.

Imagine you’re looking at a home valued at $650,000. With a 9.9% error rate, the actual value could be off by as much as $64,350. That’s a huge difference! Whether you’re buying or selling, that kind of discrepancy can have a major impact on your finances.

Why the Error?

You might be wondering why there’s such a large error margin. Well, Zestimates rely on algorithms and publicly available data to come up with their figures. While this can give a general idea of a home’s value, it’s not foolproof. There are many factors that an algorithm just can’t account for, such as recent renovations, the condition of the property, or unique neighborhood characteristics.

For example, two homes on the same street might look similar on paper, but if one has a newly renovated kitchen and the other doesn’t, their values will differ significantly. An algorithm might not catch these nuances, leading to that 9.9% error rate.

The Importance of Professional Advice

This brings us to an essential lesson: before you sell your home, it’s crucial to consult with a real estate professional. As someone who’s been in the real estate game for a while, I can’t stress this enough. A real estate agent can provide a much more accurate assessment of your home’s value, considering all those little details that an algorithm might miss.

I’ve seen firsthand how relying solely on Zestimates can lead to disappointment. Sellers often get excited about a high Zestimate, only to find out from a real estate agent that their home is worth less. On the flip side, some sellers undervalue their homes based on a low Zestimate and miss out on potential profit.

The Bottom Line

So, what’s the bottom line here? While Zillow’s Zestimates can be a useful starting point, they’re not the gold standard. Treat them as a rough estimate rather than a definitive value. Always get a professional appraisal or a comparative market analysis (CMA) from a trusted real estate agent to get the most accurate picture of your home’s worth.

In the world of real estate, knowledge is power. Understanding the limitations of tools like Zestimates can save you from potential pitfalls. Whether you’re buying or selling, make sure you have all the information you need to make informed decisions.

A Real-Life Example

Let me share a real-life example to illustrate this point. I had a client who was ready to sell their home, relying on the Zestimate, which put their home value at $700,000. Excited about this figure, they started planning their next move. However, after a thorough market analysis, we found out their home was actually worth $630,000. It was a tough pill to swallow, but it was better to know the truth upfront rather than face disappointments later.

On the flip side, I’ve had clients who thought their home was worth less than its actual value. A proper assessment revealed a higher worth, leading to a better sale price and more money in their pocket. These experiences underscore the importance of getting professional advice.

Final Thoughts

In conclusion, while Zillow’s Zestimates can give you a ballpark figure, they’re not infallible. A 9.9% median error rate is significant and can mean a big difference in the actual value of your home. Before making any decisions, consult with a real estate professional who can provide a detailed and accurate assessment.

So, next time you’re curious about your home’s value, remember to take that Zestimate with a grain of salt and reach out to a pro for the real deal. Happy home selling (or buying)!

Real Estate • October 31, 2023

4 WAYS TENANTS LOSE MONEY

by Jennifer Daring

Ah, the joys of renting! No property taxes, no maintenance worries, and the freedom to pack up and move when you feel like it. But let’s be real—renting isn’t always a walk in the park. Despite the perks, many tenants find themselves losing money in ways that could be totally avoided. Yep, we’re talking about those “gotcha!” moments that have you screaming, “I wish I knew this sooner!” So, sit back, grab a cup of coffee, and let’s dive into the three main ways tenants lose money.

1. Skipping the Fine Print on the Lease

Imagine this—you’ve just found your dream apartment, and you’re so excited that you barely skim through the lease before signing it. Big mistake. Leases are legally binding documents, and they contain clauses that could cost you big time. For instance, your lease might have an “automatic renewal” clause that keeps you locked in for another term unless you give notice within a specific period. Fail to read this, and you might end up paying for months you didn’t intend to stay.

Then, there are those pesky “additional charges.” Some leases require tenants to pay for things like garbage collection, pest control, or even common area maintenance. These costs add up, and before you know it, you’re spending way more than you budgeted for.

2. Ignoring Apartment Flaws and Failing to Document Them

So you’ve moved in, and you’re just itching to unpack and decorate. But hang on a minute. Before you settle in, make sure you do a thorough walkthrough of the apartment and document any pre-existing damage. I’m talking about chipped paint, leaky faucets, cracked tiles—you name it. Take photos and make a list, then share it with your landlord.

Why is this so crucial? Because at the end of your lease, your landlord will do another walkthrough. If they find damages you didn’t report when moving in, guess who’s paying for them? Yep, that’s right—you. Even if you didn’t cause those damages, you could lose your entire security deposit, and maybe even incur additional charges.

3. Underestimating the Cost of Moving Out

I get it—moving is exhausting. And when the time comes to leave your rented space, you might be tempted to rush through the process just to get it over with. But moving out can be a minefield of hidden costs. Some leases charge a “cleaning fee” if you don’t leave the apartment in a specific condition. You may also face penalties for not giving sufficient notice before vacating.

And don’t forget about the cost of moving itself. Whether you’re hiring professional movers or renting a truck, the costs can spiral if you’re not careful. And let’s not even talk about the potential costs of breaking a lease early. Trust me, it’s not a route you want to go down if you can help it.

4. Breaking a Lease Early

Sometimes life throws curveballs at you. Maybe you got a new job in a different city, or perhaps you just can’t stand your noisy neighbors anymore. Whatever the reason, you’re considering breaking your lease early. But before you make that decision, you should be fully aware of the financial implications.

First, take another good look at that lease agreement—remember the one you carefully read before signing? Many leases contain clauses that specify the penalties for breaking it early. These penalties can range from losing your security deposit to being required to pay rent for the remaining months on your lease. Yikes!

Even if your lease has a more “lenient” early termination clause, there’s often still a cost involved. You might have to pay a fee equivalent to one or two months’ rent, or cover the cost of advertising the property until a new tenant is found. And let’s not forget, some landlords require a 30 or 60-day notice, during which you’re responsible for the rent even if you’ve already moved out.

Breaking a lease can also have long-term financial consequences. A broken lease can show up on your rental history, making it more difficult—and potentially more expensive—to rent a new place. Some landlords check rental history as stringently as they do credit scores, so a blemish like this can cost you in the long run.

So there you have it—four pitfalls that can have you unnecessarily losing money as a tenant. But knowledge is power, my friends. By understanding these traps, you can take steps to avoid them and save yourself some hard-earned cash. Read that lease carefully, document any issues upfront, and be smart about your move-out strategy. Your wallet will thank you!

Real Estate • March 1, 2023

The home inspection process: What to expect and how to prepare

by Jennifer Daring

Buying a home can be a complex and overwhelming process, and one of the most critical steps in this process is the home inspection. A home inspection is a thorough evaluation of a property’s condition to identify any potential issues or defects that could impact the safety or value of the property. In this blog post, we’ll discuss what to expect during the home inspection process and how to prepare for it.

What to Expect During the Home Inspection

The home inspection typically takes between 2-4 hours, depending on the size and condition of the property. During the inspection, the inspector will evaluate the following areas of the property:

Structural components: This includes the foundation, walls, and roof of the property.
Mechanical systems: This includes the HVAC, plumbing, and electrical systems of the property.
Exterior features: This includes the siding, doors, windows, and any outdoor structures like patios, decks, or pools.
Interior features: This includes the walls, floors, ceilings, doors, windows, and any appliances that will remain with the property after the sale.

The inspector will also look for signs of water damage, pest infestations, and other issues that could impact the safety or value of the property. Once the inspection is complete, the inspector will provide a detailed report of their findings, including any recommendations for repairs or further evaluations.

How to Prepare for the Home Inspection

To ensure a smooth and efficient home inspection, there are several steps you can take to prepare:

Make sure the property is accessible: The inspector will need to access every part of the property, so make sure that all areas are accessible, including the attic, crawl spaces, and any outdoor structures.
Clear away any clutter: The inspector needs to be able to see every area of the property clearly, so clear away any clutter or personal items that may obstruct their view.
Provide access to all utilities: The inspector will need to evaluate the HVAC, plumbing, and electrical systems, so make sure that all utilities are turned on and accessible.
Be present during the inspection: While not required, it’s a good idea to be present during the inspection so you can ask any questions and address any concerns that may arise.
Review the inspection report: Once the inspection is complete, review the report carefully and follow up with the inspector if you have any questions or concerns.

In conclusion, being knowledgeable about the home inspection and taking the necessary steps to prepare can help you navigate this critical step in the home buying process with ease. Keep in mind that the purpose of the inspection is to uncover any potential issues or defects that could affect the safety or value of the property. Therefore, it is important to review the inspection report thoroughly and follow up with the inspector if you have any questions or concerns. By being prepared and informed, you can ensure a successful and stress-free home inspection experience.

Real Estate • December 3, 2022

How to Review and Negotiate Offers

by Jennifer Daring

How to Review and Negotiate Offers

When you’re selling a house, you’ll likely get several offers, sometimes all at the same time. So knowing what to look for in the offers and when to negotiate is important. Here’s what you should consider.

Review the Entire Offer

Don’t just look at the dollar signs when you receive an offer. There’s a lot more to it, and if you focus on price alone, you may end up with the short end of the deal.

Look at all conditions the buyer requests, such as any contingencies, seller concessions, or even closing date requests. Then, look at the big picture and see how it fits into your plans.

Assess the Earnest Money and Down Payment

The earnest money and down payment is important to the real estate offer. They prove whether a buyer is serious about buying the home. A buyer that won’t make an earnest money deposit is likely less serious about buying your home than the buyer willing to put down 3% – 5%.

Also, look at their down payment on their pre-approval letter. Are they making the minimum down payment or making a larger investment in the home? The larger the investment, the more serious they are.

Closely Review What the Buyer Wants

A buyer’s offer will include many stipulations or requests. Pay close attention to them and see how they affect your bottom line. For example, are they asking for more personal belongings than you intended to include?

Even if they ask for more than you want to leave, consider the dollar amount they’re offering and compare it to what you’d lose if you provide the personal belongings.

Calculate Seller Concessions

If the buyer asks you to help with their closing costs, mortgage insurance, or to fix certain issues with the house, determine how much it reduces your profits from selling your home. Even if they offer the amount you want for the home, any help you provide the buyer reduces your profits.

Before agreeing to help with closing costs or cover the cost of certain repairs because that’s what the buyer wants, consider how it affects your bottom line. Sometimes it’s better to pass on the offer and accept the offer without as many concessions.

Consider the Contingencies

Many buyers will include contingencies in their offers. Contingencies are ways out of the contract without losing earnest money. This means the buyer will only buy the house if certain conditions occur. Evaluate the contingencies and determine which (if any) you want to accept.

Final Thoughts

Knowing how to review and negotiate offers is important. If you don’t like something in an offer, don’t be afraid to negotiate it. You don’t have to accept an offer at face value. Instead, decide what you want from the sale and evaluate your options.

Even if you only have one offer on your house, don’t rush into an offer. Instead, evaluate it and how it affects your bottom line before accepting any offers.