Las Vegas Real Estate News

The Truth About Home Down Payments

There is a myth in the world of homebuyers that you have to have 15% to 20% down payments to purchase a house. In 2017, the National Association of Realtors discovered that 40% of respondents felt that they would be required to pay at least a 15% down payment.

In truth, the median down payment is more like 6% for first time homebuyers and 14% for repeat homebuyers.

office desk

This idea of massive down payment can be a deterrent to first-time homebuyers even considering they can buy a house. If they think that they need to save up $30,000 to $60,000 to even begin looking at homes, they will simply not even start. Low income folks, as well as young women, perceive homeownership as being beyond their reach.

Many first time buyer loans only require 3% with an additional 3% in closing cost, etc. On a $200,000 house, that's $12,000 versus $40,000 and more.

People believe in home ownership, but they see the price of entry as too high. Most people feel that they have to save up for decades to be able to afford the down payment. This causes many young people, especially women, to simply not even consider the idea until they're in their thirties or forties.

The truth is that buying a home, especially for first-time buyers, is much easier than one might think. Working with a mortgage broker can help people who are unsure to find the right loan and better understand the affordable home-buying options that exist.

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Closing Costs for VA Loans

The Veterans Administration helps veterans and their families achieve the American dream of home ownership. As there are a lot of closing costs associated with buying a home, many of them must be paid, but others are not allowed by the Veterans Administration.

american flag

Costs that are not allowed by the VA

The homeowner may not pay certain costs. Among them are:

  • Lender's attorneys fees
  • Mortgage broker commissions or brokerage fees
  • Real estate agent or broker commissions
  • Lender or seller fees associated with appraisal for a Reconsideration of Value
  • The cost of lender appraisals

The costs can't be paid by the veteran, but they can be picked up by the lender or the real estate agent.

Costs that are allowed by the VA

There are two major divisions of expenses in closing costs: prepaid finance charges (PFC) and paid outside closing (POC).

PFC costs, related to the mortgage, that the veteran can be asked to pay include:

  • Escrow for prepaid interest, homeowner insurance, and property taxes
  • The VA Funding Fee, a cost the VA charges, but the veteran can include it in the loan or even ask the seller to pay
  • Points for buying down the interest rate
  • Homeowner association fees
  • Loan origination, underwriting, and processing fees
  • A survey
  • Title exam and insurance

Other costs that are allowed, the POC fees, that still need to be paid include:

  • Credit reports
  • Pest inspection fees
  • Home inspection if the buyer requests one
  • The mandatory VA appraisal

The most important thing to know is that veterans deserve to own their own homes and the VA, with many programs designed to make that easier, helps to make that possible.

There are also many lenders and even agents that specialize in assisting veterans to find the right home, the right loan, and the right help to make this dream a reality.

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Ready to Buy? Here's What You Need To Do

If you're ready to buy a home, here's a quick list of what you need to do to make your life easier:

  • How much house do you need? How many bedrooms and bathrooms? How many will you need in 5 years?
  • What amenities do you need? A pool, an office, a garden? What are mandatory and which ones would be nice?
  • Do you need good schools? Public transportation? Access to work?
  • What type of place do you want to live? Small town, suburb, in the city?
  • How much house can you afford? Start with mortgage broker and find the best deal you can in mortgages and down payments.
  • Make sure you have enough money for closing costs and moving costs.
  • Use a map to figure out where you want to live. If you're from the area, you might already know, but if you're coming from a long way away, you might need to look around.
  • Look online and drive the neighborhoods. Get a sense for what it's like.
  • Find a buyer's agent. You might find an agent that takes a flat fee and works just for you. This means they will work harder to get you the lowest price.
  • Make your offer. Don't get your heart set until it's accepted. It's not your house yet until the keys are in your hand and there are a lot of reasons that things can go wrong.

There might be other steps, but this quick checklist will help you get a clear understanding of where to start and help you get on the right track.

checklist for buying a home

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The Vegas Housing Market: Boom and Bust Again?

When the housing market went bust about 11 years ago, Las Vegas became a national cautionary tale. Houses were being sold for 4, 5, even 10 times their value from just a few years earlier. Builders were putting houses up as fast as they could because they were easy to sell. Bank and mortgage brokers just waited on street corners giving away money to anyone with a pulse. Everyone bet all the chips that the market would keep going.

housing bubble

And then, like a gambler who overplayed his hand, everyone lost. Thousands of people were foreclosed on. Builders were stuck with houses they couldn't sell. Some neighborhoods became ghost towns.

Today, home prices are near those same high prices and lots of people are moving to Vegas.

So the question is, are we in another housing bubble that will cost everything? The short answer is no with a caution.

Although the home prices are back to 2006 levels, much of that increase is due to inflation and is natural.

Loans are harder to get, but banks are loaning again. Mostly, only people who are qualified are getting mortgages.

While there are people who have overextended themselves, most homebuyers can handle their mortgages.

Today's Vegas market is healthy and doing well. As long as everyone pays attention to the lessons of the past, this is a great time to buy and sell homes in Las Vegas.

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Selling and Buying at the Same Time

If you’re considering selling your home at the same time as you might buy another one, there is a number of considerations to consider. You don’t want to get jammed up with two mortgages.

  • Calculate the real value of your current home. A real estate professional can help you decide what the house is worth.
  • Deduct known fees. Take from that number what the fees you will pay will be. This will include real estate fees, inspection fees, and even moving costs should be accounted for.

shaking hands

  • See lender about your loan. Look at how much you might get paid for your house and how much you owe. What remains is what you really have for money for a house.
  • Time to go out looking. You now have a sense of your buying power. This is what you can take out into the world and look for a new house for yourself.
  • Contingent sale. If you have a buyer that wants your house, you can make the sale contingent on your ability to find a home for yourself. Many buyers, such as renters, can wait an extra month. You might make a financial concession to make this happen, but it can take the pressure off of you.
  • Flexible buyers. You might need to limit your buyers to those who can be flexible. Tell buyers about this upfront and you can save everyone the pain of having to find out after they’re already excited about your house.

It’s all about timing when you’re buying and selling at the same time. It can be done with help of the right professionals and buyers who are flexible and understanding.

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What Should You Disclose About the Home You’re Selling?

There's an ongoing question about what you need to disclose about the home you're selling. Do you need to tell them about every squeaky door and sticky window?

signing contract

There are laws in most states that cover this issue for the home seller. Most states have some kind of law that requires certain items be disclosed to the buyer of your home.

In Nevada, here are some of the things that are required:

Fungi and mold - Has there been or is there currently an issue with mold or fungus? If so, be sure to disclose it to the buyer.

Roof leaks - If the roof is an issue, you might need to tell a buyer that. Since the roof is expensive to replace, it's a major factor in deciding to buy a house. This also falls under the things that a home inspector will report on.

Foundation cracks and sinking - If the foundation is compromised, this can cost many tens of thousands of dollars to fix. Not disclosing this can be a huge issue.

Lead-based paint, asbestos, and other toxins - No one wants to unknowingly move into a home that has deadly toxins in it. Lead-based paint is a required disclosure in every state. The same thing applies to asbestos and other toxins.

Water damage - Flooding and leaks can cause structural issues that can materialize years later or cause mold. This is something you should let the buyer know.

Death in the house - Actually, Nevada does not require the disclosure of death in the house, unless the death was caused by house itself. This is something you'll want to discuss with your listing agent about how to proceed if there was a death in the house.

What to say?

First, your listing agent will provide you with the Seller's Real Property Disclosure Form. As a seller, you must fill this out on your own, in its entirety, and truthfully. Failing to answer any questions or lying on this form can have legal ramifications.

Second, you can be sued for things, even if the law doesn't require that you disclose them. If you're selling the Amityville house, the new owners might get bombarded by strangers driving up or might see their property value plummet. Civil suits need not follow any law. If a jury thinks you should have said something, you may pay for not having done so.

Finally, ask yourself, "What would I want to know?" If someone tells you that a kitchen cabinet sticks, big deal. Conversely, you would want to know that 15 years ago your area was a cancer hotspot due to bad water from a toxic waste dump. Treat people like you would want to be treated and you're a lot less likely to end up in court defending your decision to take the money and run.

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Selling Your House In The "Off-Season"

For the creative home seller, there is no off-season, but fall and winter are notoriously slow times for selling homes. Homes have a less romantic appeal when there are no leaves on the trees and no flowers in the beds of dirt. Buyers have the holidays and other events planned which distract from home buying.

snow covered mountains

 

There are things you can do to make your home more appealing this autumn and winter.

  • Decorate for the season - You can use Halloween, fall, and Christmas as themes that can brighten your home in the gloom of winter. A splash of color will make the house stand out on the street.
  • Paint the front door - Red is typical, but blue, green, or even a bright yellow will draw the eye like a beacon. Even someone who doesn't like the color will be drawn to the bright door in the cold twilight of winter.
  • Insulate the attic - Most heat is lost through the attic of the house. Insulating the attic can reduce drafts.
  • Look for air leaks - The cold is when you notice drafts most. Look for places where the winter is getting into the house. Use caulk, insulation, and other winterizing tools to make the house warmer.
  • Put a fire pit in the backyard - Winter is a great time to showcase the fun of a warm fire. A nice fire pit, even one of those portable metal ones, is a great way to make the backyard feel less like a winter waste and more like a great place to sit and enjoy the fire.
  • Clean the yard - Leaves, branches, and other stuff can kill the lawn and the curb appeal of your home. Clean it up so that potential buyers can see how nice your house looks all year long.
  • Let light in - Trade out those killer blackout curtains for lighter, sheer curtains that let in as much light as possible. Lift the blinds and open rooms. Even putting light colored blankets and throw pillows on dark furniture can make a room feel much lighter.

It's not hard to sell your home in the fall and winter. The only thing you need to know is that you should put your best face forward. There's a lot less competition out there, so you might even have a better chance of selling the house.

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How To Find Trends In Real Estate

If you're a real estate agent, this might all be old news for you, but for home sellers and buyers, there are several ways to get ahead of your competition by seeing trends before they're common knowledge.

Here are some inside secrets to finding local housing trends without waiting for it to hit the newspaper:

MLS auto e-mail

Your real estate agent can set you up on an automatic e-mail of listings matching certain criteria. Work with your agent to narrow the type of property you're interested in and have them set up an auto e-mail for whenever that type of property goes up for sale (or sells), you'll be notified about it. This way, you'll know exactly what's going on with properties you're looking for. The MLS contains the most accurate information of listings.

Go to the building department

The local building department is a great place to look for trends, such as increased spending on construction. You can also check the HUD office, the Department of Labor, and other locations for information on where money is being spent (and equally important, where it's not). Using this information you can look for neighborhoods low on inventory, that can expect to see more inventory, and for neighborhoods that are untapped gems.

graphs on monitor

Look for business closures and openings

While the loss of 500 jobs in Los Angeles won't change much, it can have a devastating effect on many suburbs and rural communities. If you're looking for a home at a lower price, you might help someone whose job just left and left them unemployed. It might seem morbid, but offering someone a reasonable price is better than foreclosure. Conversely, a large business opening will draw people to the area. That can drive prices up. If you're thinking of selling your home, wait for an announced business to hire and you'll get a better price.

Look online for trends and data

There are lots of people online talking about local trends. Look for local real estate agents, mortgage brokers, and journalists discussing your area and read what they're saying. They're in the business already. If they're your professional peer, it can be a great way to know what other offices are doing. If you're thinking of selling or buying, this can be a resource for what to expect.

In short, information is power. Keep track of everything in your area so you can see what's happening and what's likely to happen. If you're a real estate professional, you can use that information in your work. If you're a buyer or a seller, you'll be able to decide what to pay and what to ask for.

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The Urban Land Institute's View on the Future of the Real Estate Market

The Urban Land Institute Real Estate Economic Forecast is one of the most respective forecasts in the industry.

Here are the highlights you need to know when considering buying, selling, or building a house:

  • 3% GDP in 2018 - They expect to end the year with a GDP growth of 3%. They are projecting 2019 at 2.4% and 1.7% in 2020. This means that the economy is as robust as it will get, but it will stay respectable for a few years.
  • Good job growth to 2020 - ULI forecasts an average 1.77 million new jobs each year until 2020. The long-term growth averages 1.15 million. Job growth will beat expectations at 2.4 million in 2018, but will drop to 1 million in 2020, primarily due to a labor shortage.
  • Slowing real estate market - RE transactions will drop about 3% from 2017's number to $475 billion. They are forecasting $450 billion and $415 billion for 2019 and 2020, respectively. This market peaked in 2015 at $569 billion, but is well ahead of the long-term average of $313 billion.

stack of money

  • Commercial RE prices growing - ULI is projecting a 5% growth in CRE prices in 2018 and 6, 5, and 4 percent over the next 3 years.
  • Apartments will stay stable - Vacancy and availability rates for apartments will remain on a steady increase. For the most part, there will be an increase from the current 4.8% to about 5% in 2020. Commercial vacancies will increase slightly as will office vacancies.
  • Single-family house construction weak - ULI is expecting 900,000 units for 2018, 930,000 units in 2019, then back to 900,000 units in 2020, all below the long-term average of 1 million annual units.

The real estate market and the financials behind it will remain solid with little chance of a massive downturn or a huge bubble. This means that everything will probably remain nice and predictable for a few years for both buyers and sellers.

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Macro-trends In Real Estate For 2018 And 2019

There are a lot of things that can affect the real estate market. Many of them are economic, such as interest rates, employment rates, and housing starts. There are other trends that are even more influential, but they are slower moving and less interesting to the economic news channels.

The biggest driver of housing is generations, the waves of people moving through their lives and needing homes. As much as every generation wants to be so different from their parents, most will do the same things: graduate school, get married, buy a house, buy a larger house, see the kids off to college, and then more to a smaller home again.

The generational pressures on the housing market right now are larger than they have been since the 1980s when the baby boomers came of age.

holding house keys

Here are the macro trends that are affecting the housing market:

  • Millennials - These are the children of the Baby Boomers, sometimes called EchoBoomers. They are settling down now to own homes. Some trends are different from their parents. More of them are buying their dream home right away rather than buying a starter home. Much of this has to do with watching millions of American lose their investments in their houses ten years ago. Buy now, get equity, and stay with the same house for years. All of these Millennials are putting a lot pressure on the market. Prices are rising and because home builders are reluctant to overbuild, there is a shortage of inventory on the market.
  • Generation Z - The Millennials aren't even done yet, but Generation Z, those born between 1995 and 2001, are entering the market. This half generation is many things, but foolish is not one of them. They know more about technology and economics than any generation before them. Even more than the Millennials, Gen Z knows how to find information and leverage it to their advantage. They are smart shoppers and will drive a hard bargain. There is a good chance that they will actually drive prices down by being demanding and skeptical.
  • Boomerangers - One group that can't be ignored are those who will re-enter the market after foreclosure. They were burned during the last housing bubble burst and now they are looking at needing a home. They will enter the market slowly and cautiously. Many will avoid strange financing schemes and will work to make sure they have a solid deal and can build equity quickly.
  • Fractional investing - One trend in investing is for a group of investors to get together to buy multiple properties, each listed as an owner. This will allow buyers to enter the luxury market they might not otherwise be able to afford. It allows other investors to put money into real estate for a passive investment that will grow over time. There is the risk of changes in the life of one partner affecting the others. Selling properties with many owners can be risky and lead to legal problems. On the other hand, the risk and the reward are spread out, so it makes it a solid investment for anyone who wants a guaranteed ROI over decades.
  • Fading of the Boomers - As the Millennials buy homes, their parents will be passing away and/or moving into smaller homes. Since Baby Boomers own 2 out of every 5 homes in the US, this may create a glut on the market in the coming years. That might drive home prices down and cause others to lose equity. In the long term, decades, real estate always goes up, but in the shorter term, watch for home prices to remain steady or even drop.
  • Shrinking X-ers - Generation X is getting older. The leading edge of the X-ers, born between 1965 and 1980, are now seeing their kids off to college. Not this year or next, you might see this generation sell off their larger family homes and move to smaller houses. They are also likely to be the first generation to take their retirement and later years of work on the road. The X-ers are comfortable with technology.In fact, this is the generation that built most of the tech you see. They might leverage that into unconventional retirement schemes.

While the decisions at the Federal Reserve or the White House have an effect this year or next, these generational changes are inevitable. They will happen no matter what the economy does.

Watch for these trends to manifest themselves in larger and larger proportions in the next few years.

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