First Time Home Buyers

Leading In or Through A Desert

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Recently, I attended a real estate leadership conference hosted by Brad Inman and his Inman organization. The conference was by invitation only for real estate leaders across the United States and was branded Inman Disconnect in the Desert as there were no name badges or noted hierarchy, and was held in the desert of Palm Springs. To begin, Brad Inman did a tremendous job of setting the tone so the egos of executives whose organizations compete with each other would be set aside, and attendees could have an open discussion on topics that are of importance to, not only the real estate industry, but also the socio-economic future of our country.

The premise of the conference was to gather industry thought leaders and have them openly discuss concerns that many have with the transparency of the real estate transaction, appropriate standards for REALTOR® members, commitments to improving local communities and the lack of available affordable housing, to name 4 of the 12 issues discussed. I personally have not been to a conference that I was not responsible for putting on or speaking at in some time, so the ability to just attend and participate as a guest, along with great weather in March, made it enjoyable. As an observer and ongoing student of not only business principles but of human nature, it was easy to see that there were two types of disconnects that were occurring. One being the verb usage – where you “disengage”, isolate or separate yourself from an activity or a thought process. The other, disconnect the noun, which we hear too often from large companies about their customers or a government and its citizens who are “disconnected” from the realities of their individual needs and desires.

I witnessed both, but it is the disconnect from what customers and clients want from their leaders in real estate, and what the leaders take a stand on, that I’ll briefly write about. Prior to the event, Inman polled its large online audience to ask them questions about what their concerns are for the housing industry and what they have witnessed their leadership get involved with. Here are two example questions and the answers:

What are the biggest social and economic issues affecting the real estate industry right now?

Out of 22 possible answers; affordable housing received the largest percentage of votes with 38.98%

However, when asked What social and economic issues has your leadership taken a stand on?

Again with the same 22 possible answers only 8.87% of respondents responded with the answer of affordable housing.

That disconnect is troubling as there are not enough meaningful conversations happening about the construction of new affordable housing. As per realtor.com, in March of 2018, the median listing price is up 8%, number of days on the market is down 7% and active listings for sale are down 8% over the year. It’s even worse when you look behind the data and discover that it is mostly homes priced over $350,000 that are being newly listed for sale. The price of homes for entry level housing is increasing at a faster pace and continues to outpace wage growth. It is beginning to look like a desert of doubt for many individuals wanting to own part of their American dream and purchase their first home.

There was no shortage of quality leaders attending the conference as it pertains to the active role they have towards their company’s goals. Good leadership is about influencing individuals to move and take action on the way people think about what is achievable, desirable and also necessary. Those leadership traits tied together determine the direction of a business, an association, government entity or society. We need more leaders taking an active role to influence change on how we are addressing affordable housing for a growing population. Please view one of my previous posts on this topic.

To read more about the topics of discussion at the Inman Disconnect Conference visit here

All the best,

Peter

Will The Lack of Inventory Be the Real Estate Agent’s Downfall?

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Sales, like many high income potential careers, has always been competitive. In the residential real estate industry, where the value of homes sold is expected to exceed $2.5 trillion in 2018, market conditions are going to contribute to competitiveness for both real estate agents and homebuyers alike to reach their goals. For the first time, that I am aware of, there are more active Realtors than there are active listings to begin a new year. (See graph below. Data from realtor.com and NAR monthly membership report.)

The number of Realtors is slightly down from the peak of real estate market in 2006, but the inventory levels continue to decrease. We are now entering the 11th straight year of single family home construction being at historically low levels. (See graph – info from Census Bureau)

This decade of low activity in single family home construction is now affecting the 4+ million millennials who will continue to turn 31 (current average age of first time homebuyer) every year for the next 10 years. Prices will continue to rise and increase at a higher annual rate than wages. The good news is that unemployment is down, but wages are not growing at the same pace as housing prices. The projection for an 8% increase in 2018 of single family construction still leaves a big shortage and is lower than the actual building that occurred during the 1980 recession when unemployment was at 7.5% and would grow to 10%.

While financial advisors debate whether a home is a good investment, I’ll end the argument for them – it is. The median net worth of 65 year olds in this country is $194K, if you take out the equity in their home that drops to $43K. More importantly, the house is not a commodity, it’s a home that gives people freedom and is a part of the majority of American’s idea of living the dream. New business entrants need to enter the discussion with local and national government agencies on how to get more single family entry level homes built. That is currently not happening.

Knowing the competitive landscape, what should you do as a real estate professional who wants to grow their income in 2018? A massive amount of money has been invested in companies looking to change the dynamics of the real estate relationships between consumers and agents, and brokerages and agents. The quality and sources for accurate housing data for consumers continues to improve and is becoming easier to access. The consumer with the iPhone is in charge. But who will own the relationship to assist them with the biggest and most complicated investment in their life? It should remain the local, micro market expert. Potential homebuyers and sellers will do a lot of research, however, research doesn’t equate to knowledge and taking action to buy or sell.

What agents need to do immediately is have an aggressive plan to market themselves on social media (Facebook, Instagram, LinkedIn, Twitter), as well as through traditional online sources, and take massive action to build their local brand. If they wait, others will take advantage of their lethargy and position themselves as the go-to source for navigating the home purchase, and in the best scenario they charge the agent a 35+% referral fee. The worst case scenario is the new entrants keep them as their real estate customer. Forget the noisy discussions amongst the largest brands about who is going to own the real estate data. The reality is that agents who have owned the real estate consumer relationships have up to three years to make a commitment to establish themselves as the micro market expert and own their database. Who is going to succeed in the low inventory/high tech world? The agents who build, own and invest in building their brand reputation, will remain the trusted source.

This is your road map. The question for agents to ask themselves knowing this to be the true path is: Who Do You Want to Be in Real Estate?

5-4-3-2-1, Go!

All the best in investing in yourself!

Peter

Tax Changes and How to Increase Your Sales in 2018!

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While attending the National Association of REALTORS® (N.A.R.) conference this past November in Chicago, there was an air of uncertainty about housing that I have not seen since 2007 when it became evident that the housing crisis was real.  By the end of 2008, the Case-Shillar housing price index reported its largest price drop in its history. Housing prices in most urban and suburban areas struggled to recapture their value before starting to rebound in 2013.

The theme of the 2017 N.A.R. conference, “The Sky’s the Limit”, focused on raising attendees’ real estate careers to higher levels.  With a pending massive tax legislation being proposed, the idea of raising your income in 2018 was an immediate challenge to envision. This time, the uncertainty at the major real estate conference of the year was not about the financial stability of households, the economy, or the quality of mortgage underwriting.  It was legislation proposing the elimination of mortgage interest and property tax deductions. These deductions have helped to promote and incentivize homeownership, helping millions of families realize the American dream of owning their own home. Eliminating those deductions completely would have a major negative impact on housing markets across the United States.

Credit is certainly due to the N.A.R., as their efforts helped impact the decisions of congress. The deductions stayed in the tax reform that passed into law. However, there are now limitations that affect certain areas more than others. Specifically, high tax states such as California, New York, Connecticut and New Jersey, where it is estimated that 30% of homeowners pay more than $10,000 annually in property taxes. The limitation for interest deductions on mortgages above $750,000 will give pause to buyers in the luxury market, and the elimination of the interest deduction on home equity lines combined with the maximum mortgage deductions will also affect individuals who are considering buying a second home. If you are already close to the $750,000 mortgage cap on your primary residence, buying a second home will not have the same benefit of ownership, as the additional interest and property deductions would be eliminated and not tax deductible on that new residence. You also are less likely to take out an equity loan for a down payment on a vacation home.

How local real estate markets will be affected by the new law remains to be seen. What is clear for 2018 is a universal agreement amongst economists that there will be a modest, at best, increase in the number of home sales. This means more competition for real estate buyers trying to purchase an affordable home and an increase in competition amongst REALTORS to build their client base.

What will it take to grow your income in 2018? First, you will need to become an expert. Not an expert in your entire city, but an expert in a micro-market. Real estate consumers will do their research and will want to work with someone they like and trust. That trust will be gained in 2018 by agents who position themselves as micro-market experts, not generalists. Second, develop the thinking of an entrepreneur. Being an entrepreneur in real estate is not only a business model, it is a mindset. You need a mindset of positivity, growth, and personal accountability in 2018 to raise your income.

To learn more about the 2018 market, micro-markets, and developing a mindset of growth, please view my Facebook live interview with RealTrends at the N.A.R. conference.

https://www.facebook.com/realtrends/videos/10154962768797927/

Best wishes for growth in 2018!

Peter

The iPhone® Turned Ten in June and Changed How Real Estate Agents Operate

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Whether you are an AndroidTM fan or an individual like myself who could not bear to part with the iPhone, the disruptive impact that smartphones have had on many industries has been proven time and time again. Steve Jobs described the first iPhone as a “truly magical product.” Looking back, as well as into the future, it’s hard to imagine another device that will ever be more readily used each day by the majority of the population than our smartphones. In 2016, Apple® stated that the average iPhone user unlocked their phone 80 times a day and checked their phone over 150 times a day!

The mobile phone started as a way to increase communication and now the idea of owning just a “mobile phone” is considered ancient. It’s not only mobile phones that were replaced by the invention of the smartphone. Think of cameras, personal computers, GPS devices and even Apple’s own product, the iPod® – all have been replaced by smartphones. It’s not hardware makers alone that have been affected; new industries emerged and disrupted other traditional businesses with the invention of smartphone applications. You now have a computer, video camera, gaming device and movie studio in the palm of your hand. With those capabilities available on our phone, it is easy to get distracted. What are we doing when we constantly check our phones?

Yes, we still spend a lot of time talking and texting on our smartphones, but for many our phones have replaced our computers for website searches, email and have become the main vehicle for interacting on social media and with our community, in general.

A great deal of time and money has been spent by real estate brokers and agents to make their websites mobile friendly and responsive to help facilitate the interaction with buyers and sellers. This shift to mobile responsive websites was caused by the majority of real estate searches being performed on mobile devices. The amount of online research that potential home buyers and sellers conduct continues to increase each year as connectivity and the smartphone ease of use improves. Mobile search and key terms are definitely critical for an agent’s online success. But with the easy access to information and time on our hands, another search category has developed.

Home buyers and sellers are no longer looking at real estate properties, neighborhood demographics and valuation trends alone, they are researching prospective agents extensively too. Two out of three people interested in buying a home are researching prospective agents comprehensively online prior to working with them (see graph below).

It’s no longer enough for a REALTOR© to be proficient at their trade, they now need to pass the Google® test and be seen as the most competent choice online. The first step in this new process is being certain you, as a REALTOR©, dominate a consumer’s search. How do you accomplish this? First, you should own your own website domain with a personal URL and have a website with relevant content. You also need to have a professional profile on dominant national consumer real estate websites, a presence on social media (i.e., LinkedIn, Facebook) and participate on consumer review sites.

The next question to ask yourself is, have you shifted your mindset to that of a media company? The reality is that when you are being extensively searched online, you are your own brand! With the mindset of a media company, you move past checking the box and being found on the Internet or social media and move towards properly promoting and managing your brand. This means you have to develop content, distribute content and be readily seen as a market expert – you have to be someone people want to do business with. The impact of the smartphone will continue to be felt by all brands. Take this opportunity to promote your real estate brand beyond what your competition is willing to do. The rules for winning at this brand game have been already determined. You need to fully commit to the new personal promotion strategy to win.

As you finish this article, take a moment to search yourself using your smartphone and see what results appear on the first page. You would be prepared for an in-person meeting with a client – you need to be prepared for the client meetings that are happening online without you. Be certain to be Google and smartphone prepared because your customer base expects it.

Check out the United Intranet for the latest training on building your brand presence.

Peter

A Brief History of National Home Ownership Month

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June is National Home Ownership Month and if you missed it you weren’t the only one. Not only was there a lack of press coverage, there was also a large group of individuals who missed out on the opportunity to buy a home. In 2003, National Home Ownership Month was announced by President George W. Bush to promote awareness and policies to expand home ownership across the country. The awareness campaign and policies were not completely new, but rather an extension of President Bill Clinton’s National Home Ownership Day of 1995 and the Clinton 100-point action plan to increase home ownership to record levels.

Both the Democratic and Republican administrations’ plans had noble intentions, as they both recognized that home ownership is a part of the American dream. Home ownership does, in fact, promote civic responsibility and financial security for most Americans. I experienced this first-hand when I relocated my family to Dallas, Texas. We opted to rent for nearly a year while we learned more about the area. My family’s attitude towards our rental house and neighborhood were different than our current home. Our feelings toward our rental home were not bad or negative, we just did not experience the pride we feel now that we have purchased our own home.

Looking back now, we see that the President’s goal of increasing home ownership to record rates was met. However, it came at a great price as the “bubble” was created and real estate prices came crashing down shortly thereafter. The bubble bursting took most of the economy down with it which is now referred to as the “great recession.” The reality is that while most Americans dream is of owning a home, not everyone should or can afford own a home, due to all different kinds of circumstances.

Homeownership rates are now at the lowest levels in 50 years (see chart below) and there is pent up demand for affordable housing.

The term “home ownership rate” can be misleading. It is defined by the government as “the percentage of homes that are occupied by the owner.” It is not the percentage of adults that own their own home. The problem with this rate is it does not count adult individuals who are neither home owners nor are renters. Since the great recession of 2007, the group of young adults between the ages of 18-34 has increased dramatically. In fact, the individuals in this age group are opting more often to live with their parents than with a spouse, as marriage is being postponed to a later age. See chart below.

The home ownership rate alone can mislead you because if young adults don’t create a new household, then the percentage is skewed. Comparing number of actual historical households, it becomes clear that the number of young adults who are fulfilling the dream of home ownership is significantly less than the current home ownership rate states. Starting a new household is important for many factors, including the overall economic growth of the country. Owning your own home is equally important for most individuals’ financial security.

The month of May reached a new peak in the median price of homes. Unlike in 2007, this peak was not caused by government involvement but rather the laws of supply and demand.  May demonstrated a new low in listing inventory and a new record low of time on the market for a house to sell. The real estate headlines this summer will continue to highlight the shortage of affordable housing. Let’s hope by next June a plan is put into place that will spur new construction of homes that are priced to encourage more young adults to buy and afford buying their first home.

As June ends, it is the true beginning of summer.  Here’s to hoping that you have plans in place to enjoy both the benefits of home ownership, and enjoying the summer.

Peter

The One Chart That Explains Why You Can’t Find a Home to Purchase

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Summer is not only the time every school age child looks forward to, it is also the traditional time of year that many families eagerly look forward to buying a new home. In fact, historical home sales data shows that the month of June is typically the busiest month for buying and selling real estate. As the school year ends, families execute plans they made in the spring to move to a new school district or buy a larger home. This year the challenge that many will face is the shortage of affordable homes available to buy.

This shortage of available housing is not a short term problem. With an ever growing population and housing construction that lags way behind the country’s population growth, the lack of available housing will continue into the foreseeable future. While news headlines have covered the annual increase in housing over the past five years, the actual data shows that the number of homes for sale is still at record lows. When you look at the actual amount of new homes being built and take into consideration the continued population growth, a clear picture comes into view of what challenges still lie ahead for potential homebuyers (refer to graph below).

Keep in mind that the “increase” in new home construction in 2016, compares to the same actual levels of new construction in 1982, when the country was in the midst of a deep recession. However, after the 1982 recession, home construction immediately and significantly rose again in 1983. There is no such increase in new homes being constructed in 2017 and the population of the country has increased by over 100 million people since 1982.

Want to know why home prices keep going up and you can’t find a home to buy? It’s a simple matter of supply and demand. There is an ever increasing demand driven by a growing population and a lack of inventory of homes for those buyers in the market to make offers on.

With the current rate and foreseeable future of new home construction remaining stagnant, this won’t be a short-term problem but rather a systematic long-term challenge for many trying to buy their first home or next home. You can expect home prices will continue to rise and affordable housing options will be in high demand driving up prices to even higher levels. The supply of new and existing homes available for sale across the country will remain very tight.

Homeownership is not just part of the American dream of freedom and independence, but also the number one way for most people to improve their long-term financial security. While it may be costly this year to buy a home, more than most likely it will be even more expensive next year. The law of supply and demand won’t change. Your best bet is to sit down and build a personal plan to achieve your family’s home ownership goals and financial needs and begin to take action to achieve those goals. On this topic, time is of the essence.

Best wishes for a fantastic, fun-filled summer and a successful home buying season!

Peter

Are First-Time Homebuyers Back and Here to Stay?

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There were many positive headlines this month from various news outlets highlighting the continued growth in total number of real estate sales and growth in home prices. Aiding this growth is the percentage of potential buyers that will make up the next generation to influence the real estate industry and the economy – Generation Y, or the Millennials. The month of September was another solid month for real estate closings, according to the National Association of Realtors sales were up 2.8% over previous year with a total of 484K existing homes sold during the month. What drove the increase was the return of first-time homebuyers to a respectful level of 34% of all buyers being first-time purchasers during September, which is a level that has not been seen in over four years.

The three primary generations that made up over 90% of home purchases this year were the Baby Boomers, Generation X, and the Millennials.  The generation segments coincide with an explosion of growth in population after World War II, from 2.8 million annual U.S. births prior to the boom, to averaging over 4 million births for the period classified as the Boomer generation. The birth decline did not begin again until 1963, when the next demographic generation, Generation X, saw a decline in population growth through new births for a period that lasted until 1977.  Now, the Millennial generation has entered the prime years for buying a home and how they educate themselves about homeownership is very important to understand as they outnumber the amount of Baby Boomers with a total estimated population of over 83 million and are far more diverse than previous generations.

Millennials currently compose 35% of all homebuyers and I safely predict, from the stand point of the total number of them that percentage will increase in 2017 and beyond.  According to a recent survey published by Realtor.com, first-time buyers have increased to 52% of prospective buyers planning to buy a home in 2017.  This is up from 33% of prospective buyers that were first-time purchases when the company conducted the same survey the previous year. So, what makes this next generation of home owners different from previous generations but yet the same?

I am part of Generation X, which means I grew up with access to a computer in a classroom but the majority of learning took place from textbooks, and communication was in person or via the phone. Society and the media describes the Millennials as enthusiastic, tech-savvy, entrepreneurial and opportunistic – all good things!  Now for the negative labels: lazy, unproductive, and self-obsessed. I like the generation behind me, and hasn’t the label of being self-absorbed been a common description for everyone who is still growing up?

The ironic thing is those are the very similar descriptions that were placed on my generation.  We were the slacker generation because of the different music style, referred to as grunge or alternative rock, which was popular in the 1990’s. However, as a demographic group, Generation X became very independent and went to college at a higher percentage rate than the Baby Boomers before them.  We all age and mature, but the emotional needs of people that drive their behaviors remains the same.

So what will be different with the Millennials that will affect the housing market? They are delaying or eliminating marriage, but that is nothing new, as the average age of marriage and percentage of unmarried households has been going up since 1960. What is dramatically new is the way of communication. Since the introduction of the iPhone in 2007, people have been able to be connected online through a mobile device 24/7.  It has always been a critical skill in business to know how to communicate effectively with your customer. As the Millennials will continue to dominate home sale purchases, communicating effectively and expediently with them will all be about how well agents tap into technology to market and respond to them. While personal referrals are critical for an agent’s success to grow their business, the latest surveys conducted by Zillow showed that 29% of Millennials found their agent online, bypassing the personal referral process. I expect that number will increase, and the number of first-time homebuyers will continue to grow.

How do you communicate effectively with this population demographic?  It actually starts before they contact you, as they begin to research the market long before they speak with a Realtor. For starters, you need to have a mobile strategy, a video strategy, and be easily found online with your agent brand visible to them in multiple online formats. In targeting this group, just like with any marketing campaign, you should focus on the buyer’s interests.  I like what the Minneapolis Association of Realtors is doing with its first ever campaign targeting first-time homebuyers. They are creating humorous 30-second videos that will be available on social media.  You can see their ads at MatchMakersForHomes.com. This makes sense, as the Millennials consume information more and more through brief video segments.

To learn more about building your business, be sure to join the many Baby Boomers, Generation X’s, and Millennials who are all part of United Real Estate and register to attend the United Convention! Go to: Unitedpalooza.com.

Peter

Improve Your Credit, Avoid These Things

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When you’re purchasing a home, your credit score matters. After all, your score will play a major role in whether or not you will get approved for a mortgage at a rate you can afford.

But, what if you need to improve your credit prior to applying for a mortgage? Many potential homeowners find themselves in this position and as such, need to know what to do (and what not to do) to boost their credit. And in this article, we discuss the top five mistakes to avoid when you’re looking to boost your credit. Let’s get started!

 

  1. Cancel Old Credit Cards/Request Limit Reductions

Did you know that 15% of your credit score is determined from the length of your credit history? It is and as such, cancelling old cards will make it seem as if you have more debt than you actually do (because your amount of available credit will decrease).

Relatedly, you shouldn’t request to decrease your limits either. Doing so will also make it appear as if you have more debt than you do, having the same impact as cancelling old cards.

 

  1. Staying Current on Only Some of Your Cards

We all have months where we must prioritize where we spend our money to pay off debts but you can’t fall behind on your cards! Approximately one third of your score is determined by whether or not you pay your cards on time and as such, it’s vital to stay current on every card.

 

  1. Having Too Much Credit

Was there a point in your life where you had to open credit cards to balance all of your purchases? Doing so may not seem like a big deal at the time but unfortunately it will influence your overall credit score.

If you have too much credit, you may be viewed as a risk because you could accumulate a significant amount of debt rather quickly. As such, you should avoid signing up for new cards (particularly impulse decisions at stores for discounts) since doing so will further jeopardize your chances of receiving an attractive mortgage.

 

  1. Maxing Out Credit Cards

You never want to reach your credit limits when managing your debt. After all, maxing out cards will negatively affect your credit, even if you’re staying current on your payments.

Don’t buy what you don’t need. Doing so will help you pay down the cards and manage your debt more effectively (especially when you’re looking to improve your credit score.

 

  1. Never Avoid Opening Cards or Securing Loans

Some individuals have the opposite problem than many others: They don’t have enough credit to build up their score. As such, it’s important to not fear cards or loans and instead, open and use them effectively.

For example, you may want to open one credit card for a store you shop at regularly. By using it on a frequent basis and paying it off each month, you’ll build credit that will give you a much better deal once you’re ready to purchase your home.

 

United Real Estate Can Help You Purchase Your Home

If you’re building credit in the hopes of purchasing your first or next home, the team at United Real Estate can help!

Since 1925, our team has worked across the United States to provide guidance, support, and expertise to homeowners just like you. Contact us to begin the search for your home, today!

Buying Your First Home: How to Get Started

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Have you recently been feeling that now is the “right” time to purchase your first home? If so, it’s an incredibly exciting time in your life. However, there is also a lot of stress and anxiety that can come with the process.

If you’ve never purchased a home before, chances are that you have some questions. The most pressing of which is: “How do I even get started in my search?” And if you’ve been wondering the same thing, you’ve come to the right place.

Start the Process With a Few Key Questions

We’re going to answer your question with another question (or rather, questions). After all, it’s important to ensure you’re really ready to buy rather than doing so on a whim.

Some questions you should consider before going further in the process include:

  • Should I be purchasing a home at this time or is renting a better option/ Am I planning on staying in this area for the next three to five years?
  • What are my reasons for purchasing my home? Am I buying for the “right” reasons?
  • Am I at the right place in my life (relationships, job, financial stability) to purchase a home?

If these questions don’t slow you down or give you pause, it’s time to consider the next part of the process: Financing your home.

 

Get Your Finances in Line

Purchasing a home is one of the most significant investments you’ll make in your lifetime. And as such, it’s important to make sure your finances are in order before beginning the actual house hunt.

When you’re considering financing, it’s important to research available loan programs as well as potential mortgage rates and fees. Often, this means you should order your credit report, correct any errors, and pay down current loan balances before going to a lender.

Once your credit is in order, you can visit multiple lenders (beginning with your own financial institution) to interview mortgage brokers, determine potential loan programs, and figure out your potential monthly mortgage payment (depending on the home you can afford). You will want to get a preapproval letter since doing so will give you more leverage in negotiations with sellers once you find the home you want.

 

Next, the Home Search Can Begin

After these vital preparatory steps, you can begin the home search. It’s best to do so with an experienced real estate agent, helping you avoid common mistakes and get the best value for your money.

The best way to find a qualified agent is to ask for referrals from family members, friends or colleagues. By doing so, you can avoid the headache that comes with choosing an agent whose expertise might not fit your needs.

 

United Real Estate Can Help You Purchase Your First Home

If you’re interested in purchasing your first home and are looking for an agent to help you do so, the team at United Real Estate can help.

With decades of experience in helping individuals just like you, we can help find the perfect first home no matter your budget or needs. Contact us to begin the search for your home, today!

Home Warranties: What You Need to Know

When you purchase a home, your mortgage company requires homeowners insurance. But a home warranty? That’s an entirely different story.

Do home warranties really protect you?

Do home warranties really protect you?

Whereas homeowners insurance protects personal property (i.e. the contents within your home) as well as the structure of your home should an accident or disaster occur, a home warranty is optional insurance that protects major appliances within the home.

So what should you know about a home warranty before deciding whether or not to get one for your home? Read on to find out!

Home Warranties are Valid for a Limited Time

A home warranty typically lasts for just one year. And while it can be renewed, you must track when it expires on your own because a carrier won’t often notify you when it is expiring.

Coverage (and Cost) Varies Depending on Your Warranty

As is the case with standard insurance, warranties differ depending on the level of coverage you want to pay for. If you opt for basic coverage, you may have a few appliances covered like your furnace, heating and air conditioning, and a few other major appliances.

If you upgrade to a premium plan, you’ll enjoy more protection for other appliances in your home. It’s up to you to decide how much coverage you feel comfortable with (and can afford) as most plans will vary from $250 to $600 annually.

You Have to Pay a Deductible When You Make a Claim

Depending on your specific home warranty, you will have to pay a certain amount each time you make a claim. And in most cases, you can’t combine costs if two appliances break down at once; you must pay separate fees for each.

In Most Cases, You Can’t Choose Who Completes the Repairs

If you’re someone who is uncomfortable with being told who can enter your home to make the repairs, a home warranty may not be for you. In almost every case, your home warranty carrier will already have a list of contractors for all repairs, meaning you won’t be able to choose for yourself.

So, Should You Buy a Home Warranty?

Deciding whether or not to purchase a home warranty is a personal decision and one that you must make depending on the appliances in your home and whether or not you’re financially prepared to make major appliance repairs should something happen.

This makes it important to consider your options and make an informed decision when you’re purchasing your home. Many new homeowners don’t invest in a warranty if their home is less than 10 years old but will if it’s more than 10 years old. You may want to use these same guidelines or others as you make the decision for yourself.

If You’re Ready to Purchase a Home, United Real Estate Can Help

If you’re on the hunt for your dream home or have found it and need to take the next step, United Real Estate is here to support you along the way.

As a national leader, we’re able to guide new and experienced homeowners with our expertise. Contact us to find your dream home, today!