Changing Housing Needs As We Grow Older

 What I discovered in caring for my 87 year old mother when she moved into a senior living community was that over time, services and security or feeling safe were far more important than space.  Initially, when my mother moved in to a very nice senior community, she had a larger one bedroom apartment while she was pretty much in independent living for the first 3 years of the 7 she lived in the senior community.  Once she needed more care, which added monthly expense, it became pretty obvious that it was time to downsize her apartment to a smaller one bedroom so we could buy her more care.  

During the last year of her life at about 93, we downsized her again to a much smaller apartment because at that point she needed around the clock care with staff right outside her door rather than the larger apartment.  Fortunately, we were able to do all of this within the same senior community that offered independent living, various stages of assisted living and memory care.  Of course, more care came with much higher monthly fees. 

As we all grow older and even before the need to move into a senior community, the odds are pretty good that many people over the age of 55 are probably living in a lot more space than they really need.  Certainly, once the kids move out and couples become empty nesters, it may be time to downsize to a home that meets current needs.  That may mean fewer bedrooms and maybe a great room instead of both a living room and family room.  And, just maybe at that point, the need for a formal dining room no longer exists.  The trend is moving away from formal living to a more open concept that combines space. 

It could be too that in planning for retirement cutting housing expenses long before age 65 is logical for typical working people.  Clearly none of this matters much for the rich that have more than enough money to last them to age 90 or older; but to most people, it could be necessary to stretch savings to cover additional medical and other expenses that will occur as we all grow older. 

At Paragon, we assist clients with selling and buying homes through all the stages of life.  We understand that needs change as we grow older.  What made sense at 40 years old may not make any sense at 55 years old.  Ultimately, it is about living a great life to the very end.  Housing decisions are important to making this happen.    

Beware Pocket Or Whisper Real Estate Listings

 Since we have a very hot real estate market in many parts of the country, in some cases real estate agents are not even putting listings on the MLS, the multiple list service and or they are not even listing the property for sale.  In essence, they are hoarding sellers in an attempt to get both sides of the sale to increase their commission income.  There is nothing illegal about doing this; but once a property is officially for sale as a listing, it really should be put on the MLS to get maximum exposure.  

In some cases a real estate agent may know of someone that might be interested in selling the property at the right price; but is not actively looking to sell the property for the moment.  In that situation, if an agent brings a buyer to the table without listing the property at all, there is nothing illegitimate about that transaction.  Of course, the commission will be subject to negotiation when that happens.  It is not likely that a seller will pay a full commission in that quick sale scenario. 

Greed is obviously at play in Pocket or Whisper listing.  The real estate agent is attempting to keep a great home that will sell quickly off the market even though it may have officially been listed.  Sometimes, the real estate agent will wait a week or two before putting it on the MLS to work with any potential buyers that they know of.  Again, nothing illegal; but in this market where listing sometimes get multiple offers above the list price; not listing on the MLS would prevent a bidding war, which is not in the best interest of the seller.  In any case, real estate agents often get creative to maximize their commission earnings, which is all fine provided they abide by the law.  

At Paragon, we work clients to sell and buy homes all over the country.  When selling a home, we work to get our clients the highest price possible so we would insist that the property after listing be placed on the MLS because we know that competition is the best way to get the highest price.  

Preparing For A Natural Disaster

If you live in an area prone to forest fires, hurricanes, tornadoes, or floods as many do, are you prepared if you need to evacuate and or be without electricity for days or weeks.   Since we live in an area that has forest fires and earthquakes, we have had to evacuate more than once.  And, we have been without electricity for a number of days and it is not fun.  If you think it will never happen to you, think again. 

When growing up, we lived through the Sylmar and Northridge earthquakes in California and they were both devastating.  Matter of fact the apartment building I lived in while going to university completely collapsed as did many buildings on my university campus.  We have had to evacuate three times for fires that burned right up to our homes in three different locations and two states; California and Nevada.  In another case, we were visiting our son and family in Dallas when the tornado sirens went off, which required moving to the middle of the house, since they have no basement.  It was pretty scary.  

If the day comes when you have to evacuate, you better know what you are going to take with you because you will not have much time to react.  So, things like important documents should all be in one place.  Family photographs that may be irreplaceable should be in one big box.  If you own valuable jewelry or art that you can be put in an SUV or car get ready to take it with you.  And by the way, take all cars, since if your home burns down the last thing you need is your cars lost too.  Clothing can all be replaced; but you will need enough things to get you by for a week or two.  

If you plan to stay in your home after the natural disaster occurs, there is a pretty good chance that you may not have drinking water so having several gallons of bottled water in storage is a good idea.  This also means that toilets may not be functional so staying in your home may be impossible.  And, if you own a generator make sure it is operating outside your home to avoid asphyxiation from the smoke it releases.  

Most important, if you live in an area where natural disaster frequently occur, you better make sure you have insurance to cover the complete destruction of your home.  Regular home insurance does not cover floods or earthquakes.  You must buy specific insurance to cover damage from those events.  And, make sure you have enough coverage to rebuild your home.  It is a good idea to meet with your insurance agent every few years to determine if your coverage is currently sufficient to cover building cost.  We see terrible things happen in various areas of the country and we assume it could never happen to us.  Well think again because natural disasters can impact anyone.   

Real Estate Values & Public Schools

 90% of children in the United States attend public schools.  10% attend private or non-government controlled charter schools.  Generally, areas with the best public schools and or neighborhood schools tend to have the highest home values.  So, when searching for a home even if you don't have children, it is a good idea to buy in an area with a great school district, or at least great neighborhood schools that would service the area where the home is located even you don't have children.  One day you may choose to sell that home and so though you will pay more to be in a good school district,  resale value will also be higher because many people shop school districts.  

The good news is that there is lots of information on the Internet related to public schools.  You can check out the Great Schools Rating for the school district, or even individual schools.  If the rating is below 8 out of 10, it means that the particular school may have some issues that cause a lower score.  It may be a good reason to buy in another area.  

We could see public schools become even more important in the future because there is talk in Congress of funding pre-school for children as young as 3 years old.  If that happens, local public schools could end up with more children attending them.  

Public Schools have become controversial as of late.  Some school districts are making curriculum decisions that are opposed by parents.  We are seeing parents show up at school board meetings in some cases for the first time to voice their opinions.  That is a good thing.  However,  you should be aware of what is happening in your local school district before you make a buy decision to be sure you agree with whatever curriculum design is being proposed.   Because of all of this, there is a movement to allow for School Choice so that parents have more say as to the schools their children attend.  That is a good thing.  Parent should have options.  In any case, real estate values are directly tied to public schools in the area.  Before buying a home, do your homework. 

Understanding All The Rules That Drive Real Estate Values

 In every real estate class, the question is always posed, "What Are The Three Most Important Elements of Real Estate Value"?   And, the answer is always, Location, Location, Location.  And, while it is absolutely true that location is critical, there are also other rules that are just as important as follows:

1. If you buy crap, you will own crap.  

2. There are no bargains in real estate.

3. Buying in a great school district is critical.

4. Real Estate always go to it highest and best use.

5. Land values drive total value.

6. Once real estate becomes a non performing asset, it is time for redevelopment.

7. Crazy government regulations result in higher home prices.  

8. If it is cheaper to own a home in terms of the payment than renting, it is time to buy.

Each of these rules have their own reasoning.  Buying a home on a busy street, too near commercial property, or in view of power lines will be cheaper, but you will be buying crap.  If the home is cheaper than surrounding homes, it is because it has a fatal flaw.  Good schools matter and add to value.  So even if you don't have children buying in a good school district is all about resale value.  Eventually, when land values are very high, it is probable that higher density housing will be built on the land because single family homes are no longer practical.  Very old homes that become tear downs happen when it is cheaper to tear down the home than repair it.  In those cases, you are really just buying the land.  Some cities, counties and states have crazy regulations that significantly add to the cost of building a new home driving up prices.  And, finally today with mortgage interest rates so low, it may be cheaper to own than to rent.  

There are many rules related to real estate value beyond just location, location, location.  Understanding them all will help you get a better deal when buying or selling a home.  Paragon works with customers all over the country to sell and buy homes.  We understand all of these factors to help our customers get the best price when selling or buying.  

California Not The Golden State Any More

Between 2015 and 2019, 3.3 million people have moved out of California.  The go to states have been Texas, Arizona, Nevada, Washington, Oregon, Colorado and Florida.  Las Vegas and Phoenix in particular have been big winners.   The loss in people is so bad that California for the first time in its history has actually lost a congressional seat with some of the other states gaining seats.  People are leaving for several reasons; very high taxes of all kinds, very high cost of living driven by crazy regulations, high energy prices, crime, homelessness and in many large cities bad public schools.  

Clearly, moving to any of these other states will allow someone to buy a home for half the cost it would be in California.  And, if moving to one of the no income tax states, the person or family immediately increases their disposable income.  Of course, people who can now work from home can live anywhere; but even if not possible, jobs are plentiful in these growing states.  

California has been losing people and companies for years.  A dwindling number of large companies still headquartered in California do their manufacturing in other states or overseas and or maintain large employee populations in no income tax states to avoid California corporate income taxes.  California is still a very large economy because agriculture and Silicon Valley make up a big part of state revenues; but that source of tax income is threatened because of dwindling water supply.  California has not built a new dam since 1985 so when monsoon rains do come most of that water just runs out to the ocean. 

The Golden States is not so golden any more because of very bad political decisions that drive people away.  Taxes of all kinds are the highest in the nations.  Regulations drive up the cost of new home building, which then creates less supply causing higher home prices.   Energy costs are also among the highest in the nation because of environmental requirements.  California can be fixed; but not if the state continues down the same path, business as usual.  It will take a new direction and some common sense.  

 

State Income Taxes Drive Behaviors

 Studies show that high income taxes in California and New York are driving the Texas real estate market as more and more people and companies leave high tax states and move to low tax states.  The big winners states like Texas, Florida, Arizona, Nevada and Tennessee continue to grow population because they offer a great quality of life and low or no state income taxes.  And, even though home prices have gone up in low or no income tax states, they are still much lower than home prices in California and New York.  So homebuyers are taking their equity when they move to buy more house in these low or no income tax states.  

Clearly, now that so many people are working from home and can live anywhere, they are looking for a greater quality of life, which not only includes the ability to buy a nice home at a reasonable price; but also more disposable income.  It is not about how much you earn so much; but how much you get to keep.  We can't avoid federal taxes no matter which state we live in; but choosing a low or no income tax state raises the amount of money we get to keep. 

People vote with their feet and it has been happening for years.  But now people are even more mobile since jobs are plentiful and or people are choosing to work from home.  Elected representatives in high tax states should heed the warning signs.  They are turning people away by high tax policies.  They could be left with few people paying taxes since generally lower income people in those states pay little or no income taxes.  Then what?

Consider Refinancing Your Mortgage To Lower Your Payments

If you plan to remain in your current home for at least five years and your current mortgage interest rate is 1% or more higher than current rates, you probably should consider refinancing your mortgage.  For most people, it is not too horrible a process.  You will have to choose between Interest only loans, adjustable rate mortgages, or 15, 20 or 30 year fixed rate mortgages.  Interest only loans will usually result in the lowest monthly payments, since no monies are going to pay down principal.  They could make sense for many people that have other expenses that will hit them in the next 5 to 10 years like child care expenses.  

Personally, I prefer mortgage companies to the big banks to fund a mortgage because they tend to be easier to work with and the service is often better.  You can find them on the Internet and they will provide you a mortgage consultant to help you figure out if refinancing makes sense for you.  You have to compare the cost to refinance with the lower payments you may realize to see if it makes sense.  Certainly, if you do plan to stay in your home for 5 years or more, it could make very good sense.  

I don't believe it makes sense to pay points, which are really prepaid interest to get a lower mortgage interest rate, since rates are so low now even without paying points.  And, just know if the mortgage company is offering you a no cost deal, it just means that the interest rate will be higher.  Further, your credit rating will determine the mortgage interest rate you are offered.  So, ideally if your credit rating is 750 or higher, you should be in great shape.  If your credit rating is below 700, the mortgage interest rate you can get may be a little higher.  In any case, it is worth the time to see if refinancing your mortgage makes sense for you.   

US Home Prices - Buyer Beware

 We have seen unprecedented increases in home values and prices all over the United States primarily driven my very low mortgage interest rates and increased demand way beyond supply.  Having lived through at least 3 real estate cycles, I start to get very nervous when I seen prices this high.  It is great for sellers and not so great for buyers.  Certainly, any buyer with a short term horizon is at risk if suddenly it becomes necessary to sell the home in a down market.  It probably should not be a problem provided the buyer has put at least 30% down; but if the market shifts badly, with much less down payment, the owner could find themselves upside down meaning that they owe more than the mortgage amount. 

It is bad enough to lose some or most of a down payment; but it would be much worse to owe money to close out the mortgage.  In those instances, sometimes it is possible to do a short sale where the lender agrees to take the hit beyond the monies the owner may have lost to stop a foreclosure from happening.  Let us hope we don't get there; but if markets fall dramatically for those buyers who purchased with very little down payment, it is possible. 

In the next few years because we are still short 5 million housing units, the market should stay relatively strong; but buyers just need to be very careful.  Condos tend to fall in value in down markets more than single family homes so buyer beware.  And remember, location, location, location and if you buy crap you will own crap.  So, make a wise decision when choosing a home to buy.  In down markets, crap will be go down even more.  There are no bargains in real estate.  Homes in good locations, with great curb appeal in good school districts will always be worth more than homes without these attributes.  

The Value Of A Full Service Real Estate Agent & Broker

 We often hear television commercials advertising selling your home for as little as a 2% real estate commission instead of the traditional 6 or even 7% in some markets.  The reality of those offers is that what they are doing is simply listing your home for sale with the multiple list agency in your area.  And, then just hoping that a buyer comes along.  

Since real estate commissions are usually split between a listing agent and a selling agent if the commission is 2%; that would mean that each side would earn just 1% of the sale price of the home.  If the listing agent and the selling agent are the same person, they would keep both sides of the commission.  This 1% is then split between the agent and his or her managing broker.  If the agent is also an independent broker, he or she may be able to keep the entire 1%.  But here is the problem.  Why would any real estate agent show your home, when he can show the one down the street that is paying a full commission.   

In essence, if you list your home for sale through a discount broker, you are basically doing a for sale by owner because there will be very little service provided for so little money.  Real Estate agents earn their money.  They make sure that the potential buyer is pre qualified for a mortgage if the deal is not all cash.  They don't waste time on looky lou's, people who just want to tour your home with no intention of buying it.  They manage the negotiations to get you the best price possible because their earnings are predicated on the sale price.  And, once you do have a signed purchase agreement, the real estate agent deals with any problems that come up during the escrow period to make sure that the sale is closed and you get your money.  

At Paragon, we work with clients to sell and buy homes are all over the country.  We work with the best real estate agents and brokers in the nation committed to providing high quality services to achieve the best sale price for our clients.  Discount real estate agents and brokers are just looking to earn a quick buck.  It may be possible in some cases in a seller's market.  It is definitely not possible in a buyer's market market when it takes hard work to sell a home.  

Time To Deal With Forest Fires - Putting Politics Aside

 Many of us living in the West seem to deal with smoke every summer and fall from forest fires that happen in various Western states.   It is now so bad in many areas from fires in California that it is not safe to go outside.  These levels of smoke not only have respiratory health implications; but also economic ramifications.  Many businesses with outdoor activities must close in what is often peak season costing them millions of dollars.  And, of course what is worse is that many homes and other structures end up in the path of the fire.  Entire little cities have burned to the ground during this fire season.  

Like everything these days even forest fires are being politicized.  Environmentalists claim these fires are happening because of drought caused by climate change, which is the result of carbon emissions.  Others say we are experiencing normal cyclical climatic change not something necessarily caused by carbon emissions.  We need to get past the politics and solve the problem, please.  First, we must have comprehensive forest management, which means cutting down dead trees often impacted by a beetle that is killing these trees.  And, we must have clear cutting of big swatches of forest to create fire breaks.  That means allowing lumbering again in many of these forests.  

Further, electric companies must be forced to put their lines either underground or above ground in pipes because many of these fires are caused from power lines sparking.  We are hear talk about infrastructure projects.  Well this should be one of them.  And, we must build more dams to collect water rather than allowing it to run out to sea.   We can't control fires caused by lightening strikes; but we can control these man made issues.  

Forest fires have an immense impact on people and businesses.  Many people lose their homes because of these forest fires.  Some even lose their lives.  We have to put politics aside and solve the problem.  We cannot continue business as usual because every summer and fall seems to get worse.   

Government Eviction Moratorium - More The Problem Than The Solution

The best of intentions of Government very often hurts the very people they are trying to help.  53% of 1 - 4 unit rental properties are owned by Mom and Pop investors.  58% of renters have failed to pay rent during the pandemic.  Since only $3 Billion of the $47 Billion of the rental assistance payments approved by the federal government has actually been paid out, landlords have not been paid back rents.  And, in many instances when tenants either got increased unemployment insurance and or rental assistance, they simply did not pay the rent anyway because they knew they could not be evicted.

This has caused some landlords to refinance their loans to take money out if they could, which eventually will lead to higher rents.  And, or they sold their rental properties to other investors who are likely to increase rents sometime soon.  Since we are experiencing inflation, rents are going up anyway.  While higher rents hit all renters, they will be most painful for low income renters.  

Further, smart landlords use comprehensive rental applications to screen out deadbeats and further will not rent to tenants with lower than a 600 credit score.  Tenants who failed to pay rent could very well see their credit scores go down as landlords eventually file to evict them.  Further, rental applications ask for references including past landlords.  When called, the landlord is likely to reference the eviction, or failure to pay rent.  When that happens, the next landlord is not likely to rent to the tenant with a bad credit history.  

Federal and state government programs to deal with rental assistance during the pandemic have failed miserably.  The money for back rents owed should have gone directly to the landlords not the tenants to insure payment.  In the end, this failure will hurt lower income people and the poor most.  There may still be time to fix it; but unfortunately government bureaucracy often gets in the way.  This is another classic case where government is the problem not the solution.   

Choosing A Place To Live - Town, City or State

 Now that more people are working from home and can live anywhere and or older people are looking to move where they want to retire before they are 65,  sometimes the question arises as to where the best town, city or state is the place to go.  Considering the following 14 factors will help people arrive at an right answer to the question.  

1. Do you want to move to a state with no personal income taxes to lower your tax burden.  Currently, there are nine including Alaska, Washington, Nevada, Wyoming, Texas, South Dakota, Tennessee, New Hampshire and Florida.  New Hampshire does tax dividend and interest income.  Keep in mind that some states with no personal income taxes often have higher property and sales taxes.  

2. How about weather.  If you don't want snow and cold, or extreme heat some of the states with no personal income taxes should be eliminated. 

3.  Do you want to be near family and existing friends?

4.  Do you have any chronic diseases?  If so, you will want to be near a big city with great medical facilities and doctors.

5.  Are you into professional sports.

6. Are you into the performing arts?

7. Are you a shopper that needs to be near major stores?

8. Are you a Foodie that needs to be near great restaurants?

9. Are you limited by home price in terms of your budget?

10.  Do you need to be near a major international airport to get non stop flights?

11.  Do you want or need to be near a major university to continue your education?

12. Are you influenced by Politics, Red State Versus Blue State?

13. Do you want to be in a gated master planned community with amenities and an HOA?

14. Are you a golfer?

Answering the  questions listed, will get you to just the right town, city or state.  Do your homework and research to make sure that the must have's on your list exist in the location you end up focusing on to buy your next home.  

People Retiring To The Villages in Florida

The Villages in Florida, a 55 or older master planned community about an hour Northwest of Orlando was the fastest growing city in the United States in the last 10 years growing by 39%.  This should be no surprise because Florida has become the go to state for many people retiring from all over the country.  Currently, there are about 90,000 people living in the Villages with many more new homes coming on line.  Since the Villages is inland, it would not be as subject to the devastating hurricanes that hit the East and West coasts of Florida every year.  And, with the proximity to Tampa and Orlando, it means two good airports nearby and lots of amenities are just down the road.  The Villages is about 40 miles from the West coast of Florida and 70 miles from the East Coast of Florida so beaches are not too far away.  

Average home value in the Villages is $335,000, which is reasonable.  With more than 54 golf courses and lots to do and amenities in the Villages, it is a perfect retirement location.  Since Baby Boomers are turning 65 at the rate of 10,000 a day for the next 15 - 20 years, there is no doubt that communities like the Villages in many parts of the Sunbelt will be in demand.  

There are many positives to living in a place like the Villages in terms of amenities.  However, there are some negatives too.  All of these amenities come with fairly high HOA and other membership fees.  And, then there is the weather.  Summers in Florida are very hot and humid.  Being inland means even hotter weather, since ocean breezes are not there to mitigate the heat.  And then because Florida is swampy, there are big bugs including termites, snakes including some that are poisonous and even alligators wherever there are standing ponds. So, lots of bug spraying is needed monthly.   Finally parts of Florida, including in the Villages sometimes have sink holes because the water table can vary.  However, all in all none of this is stopping retired people from moving to the Villages.  For me, I prefer Arizona because at least the summers that are hot as hell are dry heat.  

Things To Consider Before Investing In A Rental Home

53% of 1 - 4 unit rental properties are owned by Mom and Pop investors.  Many right now are being hammered by the government's Eviction Moratorium; but eventually things will get back to normal.  People invest in Rental homes presumably for income potential and long term appreciation.  Investment in Real Estate also provides certain tax benefits, which may lower someone's overall income taxes.  However, there are many things to think about related to being a landlord.  

First, if you buy crap, you will own crap.  There are no bargains in real estate.  In many parts of the country, it may be possible to buy older homes for under $150,000.  The problem is that unless they have been fully renovated including new plumbing and electrical, the odds are pretty good that expensive repairs will eat into any potential income or even appreciation gain that may occur over many years.  Stay away from older homes unless they have been renovated.  

It is also possible to get "deals' on homes in poor locations; next to a railroad track, near power lines, near commercial properties, or on a busy street.  Just remember all of those objections will limit the number of renters interested in living in the home.  Fewer renters will mean lower rents possible. 

Most important, the way to increase return on investment is to manage the property personally rather than hire a property management company.  That does not necessarily mean doing actual repairs; but it does mean having a good plumber, electrician etc. on call when things go wrong.  It also means the tenant calling you directly to solve a problem.  

Finally, it is absolutely critical to screen tenants.  That means a very lengthy rental application to scare away dead beats and running a credit report.  Rental applications are available on the Internet.  An owner should not rent to anyone that has a credit score below 600.  Anything less mans a bad credit history, which is a pretty good indicator that you may not be paid the rent.  To avoid all of this, you can invest in a Real Estate Investment Trust that owns rental properties all over the country.  The returns may not be quite as good; but then you won't be getting a call from a tenant at 2 am in the morning.  Investing in a REIT, will give you the advantages of owning rental properties without the hassle.   

Selling Your Home For The Highest Price

 Even though real estate markets are hot in many areas and it is still a seller's market, to get the highest price possible, you need to get your home ready for sale.  Ideally, it would be great to create a biding war with multiple offers to get even more than your list price.   For that to happen, you need to do some things.  First, get rid of clutter.  Your home needs to be neater and cleaner than it has ever been.  If you have old furniture you plan to get rid of anyway, donate or sell it now to make your place look bigger.  

If you have painted your walls purple, it might be a good idea to paint them a neutral color.  I know painting involves some cost or work, but it could pay off in getting you a higher price.  And, then there are the smells.  If you have indoor pets, there are smells in your home that you don't smell anymore.  And, or if you cook with certain spices, you could have the same problem. To get rid of the offensive smells, you have to do a deep clean of any carpets, drapes, upholstered furniture etc. and at a minimum as long as your home is on the market, stop cooking with those spices and or you either need to board your pets, or keep them outside once the cleaning has occurred.  This is necessary because the smells are offensive and some people are actually allergic to dogs or cats.  

There is the easy stuff related to curb appeal.  Plant some flowers to spruce up the front of your home.   If you have stained wood work outside, have it stained.   Otherwise, paint the front door a bright color.  For some reason, blue seems resonate with buyers.  Get rid of dead or over grown plants that may be covering a view of your home from the street.  The outside of your home will determine if a potential buyer will even get out of the car to see the inside, so spending a few bucks to spruce things up will get you a higher price. 

Then there is the tougher stuff.  If you have a neighbor on either side of your home whose front yard is an eyesore, having a talk with the neighbor to clean it up should happen.  If they won't do it.  Offer to pay to have it done.  Nobody will buy your home if they see that your neighbor is a slob.  If you live in a community with an HOA and rules are being violated, let the HOA handle it.  Otherwise, tactfully, you will have to deal with the problem to get the highest price for your home.  Doing the things I have listed will not only help you sell your home quicker, in this market, it will get you more money,  

Doing Home Renovations With Borrowed Money

Since home values have gone up so much in the last year and mortgage interest rates are so low, it may make sense to borrow money to do a home renovation; but be careful.   First, don't go crazy.  Kitchen and bathroom renovations are the best return on investment.  They add value to a home, particularly over the long term.  If you are planning on selling your home and doing a renovation to increase the sale price, you must be very aware of what comparables in the neighborhood are selling for so that you will get back your investment and more otherwise why bother.   

I know, I know, you have seen all the shows on HTDV showing great renovations of fixer upper homes that they then sell for a lot more money than the cost of the home.  Yes, it can work that way, or not. But, believe me, they are not showing you the deals they lost money on.  Having done a major renovation, what I learned is that it cost a lot more than I originally intended and it took twice as much time than what was promised.  And, specific to older homes, once you start opening up walls, you will find plumbing, electrical and sometimes foundation work that needs to be done even before you get to the great kitchen or bathrooms.   If the home is more than 20 years old, plan on it.  

These days on HTDV, we are seeing a lot of bold tiles with busy patterns installed.   They look nice; but from an investment perspective, I question how wise that really is because I am always focused on when it comes time to sell the home.  You want to attract as many potential buyers as possible.  So stick to tiles and flooring that will work for most people.  You can get bold with paint colors and or other décor that are easy to change.  Buyers can deal with those kinds of changes because they are not incredibly expensive; but changing out tiles and flooring is very expensive. 

So, it could make sense to borrow money to do a major renovation particularly if you plan to live in the home for at least 5 more years.  But, remember the market is crazy right now with prices that may not be sustainable.  Try not to have total debt on your home of more than 70% of its current value so that if the market goes down and you have to sell, you will not owe more than the home is worth. Think ahead.  Be smart about your decisions.  

Live Within 5 - 10 miles Of Things That Matter

 If you live in a small town, the five - ten mile rule should be easy to achieve.  That is, it is best if everything you need for daily life is within 5 - 10  miles of your home.  Living in a big city may make the five - ten mile rule harder to achieve; but at least implementing a 10 mile rule would be a good substitute.  Aside from just the convenience of having everything close by, we are likely to see higher gas and even electric prices, for those that have electric cars go up in the next few years.  The federal government is currently implementing polices that will raise all energy costs. 

If you are buying a home, consider the 5 or at most 10 mile rule.  Sometimes people buy homes in the middle of nowhere to get lower sale prices; but doing so could be short sighted.  What ever you save in house payments could be eaten up by additional energy costs not to mention time on the road.   With interest rates being so low, it would be better to have a higher tax deductible mortgage in order to move closer in to amenities and or your job, if not already working from home.  

As someone who drove 40 miles to work each way years ago, I would never do that again.  The bumper to bumper traffic seriously impacted my quality of life.  I hated it.  Many times of the year, I never saw my home during day light hours except on weekends.  It was miserable, which is why today I implement the 5 to 10 mile rule.  I want everything I need close by.  So, think about the amenities that are important to you and buy a home near them.  

At Paragon, we work with customers to sell and buy homes for the best price possible.  We take the stress out of moving by providing counseling concerning every aspect of the process.  We love the 5 - 10 mile rule and can make it happen for you.  

President Biden's Illegal Eviction Moratorium

Joe Biden has extended the Eviction Moratorium by Executive Order.  The Supreme Court ruled that this was only possible through an act of Congress.  Joe Biden did it anyway.  This is the 7th time the Eviction Moratorium has been extended, which is killing mom and pop landlords.  What many do not understand is that 53% of rentals are 1 - 4 units owned by small investors many times as part of their retirement portfolio.  While billions have been approved to assist tenants and landlords, the states have been slow to get the money out.  

And, in many instances tenants have gotten the rent money from the government; but not paid the rent to the landlord because they knew they could not be evicted.  The landlords who still must make mortgage payments along with paying other expenses have gotten the short end of the stick.  This money in lost income should have gone directly to the landlords not the tenants; but that is not what is happening.  

However, landlords have three options to deal with this as follows:

1. Apply for Federal Aid - Good luck with that in terms of timing.  If it works anything like other government agencies, it could take months for the money to come through. 

2. Refinance the Mortgage - Good luck with that unless the landlord has significant assets and is not relying on rents for income.  

3. Ask the current Mortgage Lender for Forbearance - This may be the best option in terms of timing.  Lenders will work with landlords to delay mortgage payments because they really don't want to foreclose because it takes months.  

23% of Mom and Pop landlords have been forced to sell their rental properties to big investors with deep pockets who can see this crisis through.  This is another example of government good intentions gone bad.  Unfortunately, huge bureaucracies get in the way of success.  This is just one more example of government failure.  As Ronald Reagan often said, "Government is not the solution to our problems, government is the problem."  

Things To Consider When Buying A Home

 Before you start searching for a home to buy, it might be a good idea to sit down and actually write down your needs and wants before you start working with a real estate agent to actually view homes.  Couples need to be on the same page, which sometimes is not the case.  Argue it out before you start looking for homes.  If this is going to be your first home or your retirement home, needs and wants could be very different.  Most people will end up living in 3 or more homes during their lifetimes as personal needs change.  It is probably not a bad idea to buy a little more home than you need; but not a lot more home than you need right now because you will be paying for square footage, maintenance, utilities, property taxes etc. for a home that may be too big at this stage of your life. 

Whatever you buy always look at location.  If you buy crap, you will own crap.  And always remember, there are no bargains in real estate.  A home that sells for less than others in the neighborhood usually has some bad features related to location of the property and or the need for major repairs.  Don't buy on a busy street. Don't buy with high voltage wires in sight.  Don't buy too near commercial property.  Curb appeal matters.  If the home is an ugly architectural style, it will be harder to sell when you want to sell it.  And, schools matter so even if you don't have kids of school age; buy in an area with highly rated public schools.  You will pay more for the home; but you will get more when it comes time to sell the home years down the road.  

Specific to a fixer upper, just remember what you see on the surface may be much worse once the walls are opened up.  The odds are pretty good if you are buying an older home, it will require plumbing, electrical and maybe even some foundation work before you even get to the new kitchen or bathrooms.  Assume the cost will be much higher than you might think and that the renovation will take more time than originally promised.  

Buy enough bedrooms so that one can be used for a home office unless the home already comes with a den.  Today everybody wants "open concept", which is actually historically pretty funny because in the old days the kitchen was usually in the back of the house to be hidden from your guests.   Now when people have guests visiting, they often cook together as part of the entertainment for the evening.  

In any case, make a check of list of your must have's and nice to have's to provide the real estate agent.  Of course, budget is critical.  Fortunately, you can get pre qualified for a mortgage so you will know exactly what you can afford.  It is best if you can put at least 20% down to avoid Private Mortgage Insurance, which will add to your monthly house payment.  Buying a home can be both fun and stressful.  At Paragon, we work with couples to sell and buy homes all over the country.  We make it as stress free as possible because we provide counseling on all the issues that come up in the process.  

Guard Against Identity Theft - Read The Fine Print - Keep All Documents

There is rampant Identity Theft happening in the United States.  Apparently, crooks are able to steal someone's identity to take out presumably a second mortgage against the home.  Once they get the money, they are long gone.  The Homeowner may not even be aware that there is a second mortgage on the home with another lender until they start getting delinquent payment notices from the lender.  If the payments are not made, it could lead to foreclosure, which would be a nightmare scenario.  There are security firms people can retain to help prevent something like this from happening.  These companies monitor any potential change in title, which might prevent the theft from happening.  

In a case we encountered just today, one of our past customers had obtained a loan with our assistance from one of the major banks.  Sometime later, they decided to refinance the mortgage again with our assistance because interest rates had dropped.  In the process, the initial mortgage on the home was paid off by the new lender.  However, the pay off apparently never got recorded.  The good news is that the initial lender did send a lender indicating that the pay off had occurred.  And, the customer still has the original loan number.  This is all coming up because this couple is selling their home and the encumbrance related to the initial mortgage is still listed on title.  This one is an easy fix.  Either the title company that closed the deal needs to record the loan as paid off and or the mortgage company just needs to record the pay off.  This was a simple error that should be resolved quickly.

What is important is that this transaction took place in 2015.  The couple kept all documents so it should be very easy to get this cloud on title removed so that they can close the sale with their buyers.  The lesson here is read the fine print and keep all documents for many years.  In this case, the problem has come up 6 years later.  The most important thing is that the initial mortgage was paid off at the closing table so this money is not floating around somewhere in somebody else's hands.  Sadly, we live in a world full of crooks.  We can't be too careful.  Never give out Social Security numbers or a Driver's License number over the phone to anybody, or company you don't know.   

Scams are happening every day.  One that occurs shows your computer locked up and requires you to call Microsoft, which is not Microsoft; but rather scammers.  They require you to give them your password to open up your computer.  Never, Never do it.  They are attempting to get into your computer to steal any information that may be of value to them.  They are crooks.  

Making Monthly House Payments - The Whole Picture

 Very often you will hear realtors, lenders and others talk about (PITI) to determine affordability.  They are referring to your mortgage payment, which will include Principal to pay off the loan, unless it is interest only, interest on the debt, property taxes and insurance and then very often a monthly Home Owners Association payments.   It is the total of these expenses that make up your monthly home expense.  Of course, you still must pay utilities and maintenance to see the rest of the picture.  But, it suffices to say that if you can't afford PITI, you probably do not have the income to buy the particular home.  

Usually, no more than 33% of your income should be going to make your total house payment.  Generally, lenders will not approve loans for more than 33% of your income.   You will need the other 67% to buy things like food, clothing, medical services and many other things.   We sometime hear the term being "house poor".   It means that people want to own a home so badly that they are willing to pay a large share of their monthly income for the privilege.  In the long run it may make sense.  In the short run, it could be painful.

The good news is that mortgage interest rates are so low today that owning a home can be pretty affordable for many people especially dual income couples.  The problem is often the down payment.  First time home buyers can purchase a home with as little as 3% down; but naturally the lower the down payment the higher the monthly payment.  Buying a home with less than 20% down will usually require private mortgage insurance or PMI, which will raise the payment $100 or more a month depending on the amount of the loan.  

In any case, when buying a home, you must focus on PITI plus HOA to understand the full impact of monthly payments.  Some people prefer impounds meaning that they pay the mortgage company for taxes and insurance to include it as a monthly payment.  Property taxes depending on local jurisdiction are usually due 2 to 4 times a year.  Insurance can be paid monthly, quarterly or semi-annually,  People who choose impounds sometimes just prefer to make one payment each month to cover it all.  When you do that, the lender holds the money and then pays the amounts due when they are due.   It does make it easier from a budgeting standpoint.  

Barbeque As American As Apple Pie

Barbeque has been a tradition in the United States since long before the founding of our country.  People have been cooking food outdoors on open fires since prehistoric times.  In the case of frontier America, cooking outdoors was integral to our Westward expansion across the country.  There is a reason they were called Cowboys.  And, this is something Men just do; though frankly probably because it is a lot easier than cooking complex meals in the kitchen that require a lot of preparation.  I like to do both because as an Italian cooking comes naturally.  

People living in apartments often have something as small as a hibachi to barbeque foods, or propane barbecues on tiny terraces.  Of course, those with large backyards and big budgets may have incredible outdoor kitchens that include all sort of appliances from the large barbeque itself to refrigerators, ice makers, sinks etc.  Either way, barbeque is extremely popular in the United States. 

For the most part, many people have moved away from charcoal because it can cause cancer to either natural gas or propane barbeques.  They both provide for cleaner, safer cooking.  Cooking all types of meats, chicken, fish and vegetables all work great on the barbeque.  Food cooks fast on a barbeque so turning ones back is not the best idea if avoiding burnt food is the objective.  Slow cooking usually works best on lower heat.  And, don't forget to spray the grill with oil.  

Barbeque is a great source of backyard entertainment.  People often gather around the barbeque, with beer or a wine glass in hand. Barbeque is a great excuse to entertain family and friends.  So, any time of year is a good time to barbeque unless of course it is raining, or snowing outside.  Otherwise, heat up the barbeque and cook up some great food to have some fun.     

Buying Home Insurance - Read The Fine Print

If you have a mortgage on your home, the lender will require that you have home insurance to protect them in the event of a total loss.  However, getting home insurance is not always easy.  If you live in an area prone to wild fires and particularly if you live too near a canyon, it is possible that it will be very difficult to get home insurance.  Insurance companies can Google Earth your home to see how close you are to a natural open brush area and if you are too close, they will decline to provide home insurance. 

Further if you own a dog on the vicious dog list like a pit bull, some insurance companies will not provide home insurance.  What you also may not know is that any time you file a claim to repair some damage to your home, your home ends up on a liability list that all insurance companies can access.  Your home's claim history remains available for years so if there are too many claims, conceivably an insurance company may turn you down and or the premiums will be higher. 

Finally, with building cost going up dramatically, it is time to check with your insurance agent to make sure you have enough insurance coverage on your home to rebuild it in the event of total destruction.  If you don't have specific earthquake or flood insurance and your home is destroyed from one of these events, you may have little or no coverage.  So, you need to make sure you are covered for events that are likely in your area.  Buying home insurance is not so simple.  Make sure you understand what is covered and what is not covered.  The fine print matters.    

Eviction Moratorium - Bad Government Policy

 President Biden has extended the moratorium on eviction of renters as a result of Covid impact, even though the Supreme Court has declared it unconstitutional.  Apparently, there are billions of dollars that have not been paid out either to renters or landlords because of the bureaucratic morass to get it done.  This particular program is a mess.  First of all, renters who got the money in many cases have just kept it and not paid back rents to landlords.  

Many do not realize that many landlords are Mom and Pop investors that may own one or a few rental homes.  They have to make mortgage payments on those properties, plus pay insurance, property taxes, maintenance etc.  Without rent money coming in, landlords are out of pocket for these monies and or cannot make their payments.  The reality is that landlords should have been able alone to apply for their losses not the tenants because there was no guarantee that tenants living rent free so to speak would pay landlords the monies owed if they were provided government assistance.  That said, local and state governments have failed miserably to get the money out the door either way. 

But this is all part of a bigger problem.  Because the extra $300 a week in federal unemployment insurance does not expire in many states until September, even though there are jobs available, about 10 million across the country, many people have chosen not to go back to work because they are making more money staying home than going to work.  Further, getting a job might require them to pay rent.  The money they are getting in unemployment insurance in addition to living rent free makes not working a better deal for them than going back to work.  This is a classic case of well intentioned government programs gone wrong.  

In all probability, Biden's executive order will be challenged again in court and he will probably loose again.  And, an act of Congress would have been necessary to extend the Eviction Moratorium and the votes were not there to do it because it is bad policy.   All President Biden did was add to the uncertainly and confusion making things worse for landlords already in trouble.  

Buying A Home As Community Property Or Tenants In Common

 Most married couples own their homes as Community Property.  That means if one dies, the other inherits 100% of the property automatically generally with no tax implications.  Tenants In Common is used when two people buy a property together based on the percentage of down payment each has contributed.  So, if each person puts 50% down, they each person owns 50% of the property.  If one dies, the percentage of ownership goes to that person's heirs not the other partner.  This also means that both partners are on the mortgage application and both must qualify for the mortgage.  

The Community Property designation is very straight forward.  The remaining person gets the property in the event to death.  It is Tenants In Common that probably requires a separate operating agreement to deal with the What If's.  What if one of the owners wants out of the deal.  One of two things would have to happen.  Either the home would have to be sold and the proceeds distributed to both owners, or the other partner would have to buy out the other owner, which probably means refinancing the loan.  Death of a partner could be more complicated because the ownership position could be left to his or her heirs.  That means that now the remaining partner will own the home with other people.  

In all likelihood, once again the partner would have to buy out the heirs, one way or another, or sell the property to distribute the proceeds to all owners.  If the property was bought as an investment, there probably should be a time window that requires a sale to say either the earlier of the partner's agreeing to sell the home, or perhaps ten years, which ever comes first.  

In any case, if a property is purchased as Tenants in Common, there does need to be an operating agreement to deal with the What If's.  It may be that an attorney should help in drafting this document to make sure both partners are clear as to eventualities.  

Living In A 55 Or Older Community - Advantages

Once the kids leave the nest and people approach 55 or older, it may be time to think of buying in a 55 or older community.  There are many advantages.  It could be a good time to downsize because supporting a big home is costly.  Two or three bedrooms with a home office could be plenty.  Open concept with a great room and dining area and a nice yard could be sufficient for entertaining.  Most important will be all the things that you have in common with other people who live in the community.  There is a good likelihood that you all will be at similar stages in life, which causes commonality.  And usually because of it, it is easy to make new friends because you have so much in common. 

One thing to beware of is making sure the community is grandchildren friendly, if you have some, so that when you have family visits, you can take your grandchildren to the community pools.  Some 55 or older communities do not allow visitors to use the facilities, which for us anyway would be a problem.  

I recommend gated communities as best.  You will pay a little more both in home price and in HOA dues; but as we get older security is paramount.  Next are amenities and activities.  Buy in a community with a great club house with pools, pickle ball, bocce etc.  Using a common area pool is preferable to having your own pool in the backyard to avoid the maintenance expense.  

We are seeing many 55 or older communities springing up all over the country.  They are growing in popularity because 78 million baby boomers are turning 65 at the rate of 10,000 a day for the next 15 to 20 years.  The demand is there and builders know it.  Paragon can work with you to make the move.  We specialize in assisting customers with selling and buying homes, moving household good etc. to make moving as easy as possible.  Maybe now is the time to make the move.  Think about it.  

New Approaches To Creating More Affordable Housing

There is a housing crisis in the United States and I am not just talking about the homeless living in tents in many cities.  We are short 5 million housing units to meet demand.  In other words, supply is not keeping up with demand, which is the reason that home prices are going through the roof.  The only way to get there is higher density housing in the suburbs.  It is not uncommon to see high rise apartment and condo buildings in some major cities where land is scarce.  And, while we don't need 20 story buildings in the suburbs, it is likely that we do need to see 4 - 6 story buildings on available land. 

Further, excess commercial property needs to be torn down and redeveloped into housing.  This will mean rezoning to include multi use residential; but using the land differently is essential to filling our nation's housing needs.  Clearly, when apartments are built whether for all age groups or 55 or older some number of apartments must be set aside for government subsided housing to provide for more affordable living.  This approach would be far more preferable to building government projects that often turn into slums 10 or more years later.  

As a country, we have to rethink housing to create more affordable housing.  The key is land use.  Getting more units on less land with parks and other amenities nearby.  This also means getting rid of burdensome regulations that can add up to 30% to building cost.  We see the impact in places like California where home prices are extremely high thanks to land values and regulations that add to costs.  

We need 5 million more affordable housing units in the United States.  With some creative approaches we can get there; but business as usual is not working.   

Ways To End Private Mortgage Insurance (PMI) On Your Loan

Home buyers who purchased a home with less than 20% down likely were required by the lender to have Private Mortgage Insurance on your loan often referred to as PMI.  This will increase your monthly house payment sometimes by a few hundred dollars a month.  The good news is that there are ways to get rid of it.  First, it goes away automatically, once you are half way through the mortgage provided you are up to date on your payments, but that could take years.

More likely, one of two other ways are more probable.  If your home has appreciated in value in the last five years, which is likely given the escalating real estate markets, you can do one of two things.  You can refinance your loan perhaps today at a lower interest rate assuming you now have more equity in the home.  Or, you can go to the lender with an appraisal to prove the higher value and request that they remove the PMI from your loan. 

First, just Zillow your home to get an idea of its current value.  If there has been significant appreciation, which in many cases may have occurred, choose the best option for you.  Since it cost money to refinance your loan, unless current mortgage interest rates are 1% or more below what you are paying now and you plan on staying in your home for 5 years or more, the best option may just be to have your current lender remove the PMI if you qualify.  PMI can be eliminated.  Take the first opportunity to get rid of it to lower your monthly payments.     

Bacon Is Under Attack

Since there is nothing better than the smell of bacon cooking on a stove in the morning probably in most homes in the country, all should know that bacon is under attack.  A new law in California, surprise, surprise requires that Pig farmers house pigs in bigger pens, basically 4 square feet bigger to give Pigs more room to spread out.  Get the pun.  So instead of 20 square feet 24 square feet.  Supposedly, the extra 4 square feet is more humane.  Let's remember, these pigs are being raised for food not pets.  

Since Pig farmers based in California cannot supply the 250 million pounds of bacon consumed in California each year, most of the bacon needed will come from Iowa and other states.  I say the hell with California.  Don't take my bacon away. This means that Pig farmers would have to make a major investment to supply California with bacon.  Even if they choose to do so, which is questionable, they can't meet the time frame.  So, not only will bacon be 30% more expensive in California going forward, we could all end up paying more.  This is a national disaster.  The reality is we can't live without bacon.  

It is time for bacon lovers to fight back.  Contact your members of Congress to demand national bacon laws.  Since federal laws overrule state laws, if the Feds keep the same standards in place,  the California law, which makes little sense, will be null and void.   4 square feet is just 2 feet by 2 feet bigger.  I doubt the Pigs can tell the difference.  We just can't have a bacon shortage in our country.  It would be a national emergency.