Survey Reveals Biggest Fears Among Home Buyers

Napa, CA – U.S. Housing News — A recent survey by the Home Buying Institute revealed the greatest fears and concerns among home buyers. On the top of the list: an overwhelming mortgage payment.

We asked thousands of home buyers what their biggest fears were, with regard to the home-buying process. The majority of respondents said they were afraid of having a mortgage payment that’s too big for them. These results seem to suggest that many home buyers don’t set a budget for themselves, before talking to lenders.

Survey details: This survey was presented to more than 7,000 readers, through the Home Buying Institute website. The survey started with a simple question: “What is your biggest fear about buying a home?” Respondents were able to choose one of seven responses, which covered most concerns of the average home buyer. Of the home buyers who responded, most said they were afraid of taking on too much of a mortgage payment. Many were also concerned about overpaying for a home.

Home Buyer Fears
Chart: Home buyers are afraid of overwhelming mortgage payments. Image permission

As shown above, the responses broke down as such:

  • 36.4% said they were afraid of ending up with a mortgage payment that’s too big.
  • 22.7% feared they might pay more for a home than it’s worth.
  • 15.9% were afraid of losing their jobs after taking on a mortgage loan.
  • 10.2% were concerned about buying a home with major structural problems.
  • 4.5% were afraid of choosing the wrong type of mortgage loan.
  • 4.5% feared another housing bubble-and-bust cycle, like the one we just went through.

Addressing Home Buyer Fears

Brandon Cornett, publisher of the Home Buying Institute, explained his company’s motivations for running the survey. “More than anything, we wanted to identify the knowledge gaps among our readers. By understanding what scares home buyers the most, we are better able to publish meaningful content. We can write articles and tutorials that address these fears.”

If you’re afraid of having a mortgage payment that’s too large:

Home buyers who are concerned about an over-sized mortgage payment should establish a budget for themselves. By reviewing your monthly income and debt expenses, you can set a monthly limit for your housing costs. It’s important to do this before you apply for a mortgage loan. Believe it or not, you can be approved for a mortgage amount that exceeds your comfort level. So do the math for yourself. Find out what you can comfortably afford to spend each month. You can learn more about mortgage affordability here and here.

If you’re afraid of paying more than the home is worth:

Home buyers should know it’s called an “asking price” for a reason. Just because a home is listed for a certain amount doesn’t mean it’s worth that much. Our research shows that many homes are initially listed above their market values. Call it wishful thinking on the seller’s part. As a home buyer, the last thing you want to do is overpay for a house. It erodes your equity from day one. But this situation can easily be avoided. You should base your offer on recent sales in the area.

If you’re afraid of losing a job (and your ability to make payments):

Double-income couples need to consider the impact of one spouse losing a job. If you can’t cover the mortgage payments on a single income for a few months, you may be buying too much house. Make sure you have an emergency fund to protect you in such scenarios. This means having enough money in your savings account to cover up to six months worth of mortgage payments. It’s a slow job market, after all. The emergency fund is even more important for single-income families.

If you’re afraid of buying a home with major flaws:

Every home buyer should pay for a home inspection. It only costs a few hundred dollars, and it gives you the peace of mind of knowing what lies beneath. A home inspector will slap on a pair of coveralls and get into the guts of the house. He will examine the foundation, the attic, the roof, and all of the installed systems (plumbing, electrical, HVAC, etc.). If there’s a major problem with the house, a professional home inspector will find it. You can learn more about home inspections in this FAQ article.

If you’re afraid of choosing the wrong type of mortgage loan:

Research is the key to success here. You should start by learning the key differences between adjustable and fixed-rate mortgages. This is where a lot of first-time buyers get into trouble, choosing the riskier ARM loan for a long-term stay. You should also consider the pros and cons of FHA home loans, one of the most popular financing methods today. You can learn more about the different types of mortgage loans on this page.

Image permission: You may use this chart graphic to write a news piece of your own, provided that you cite the source. A link back to this story would be appreciated.

Upside Down Mortgage Help for Homeowners

upside down houseAs of August 2010, when this article was published, approximately 11 million homeowners were upside down in their mortgage loans. Much of this results from the housing crisis that came to a head in 2008. In the wake of that financial crisis, property values began dropping all across the country. In places like California, Arizona and Florida, they dropped considerably.

This leaves many homeowners scratching their heads over what to do next. What can you do about an upside down mortgage loan? Can you sell or refinance the home when you’re in this boat? Is there any help for upside down homeowners? These are the questions we will address below.

A Resource for Upside Down Homeowners

As the number of upside down homeowners has grown, so too have the number of programs available to them. But this creates a dilemma. With so many program updates and announcements, the average consumer is left feeling overwhelmed and confused. There is help for homeowners with upside down mortgage loans — it’s just hard to find the right path. Our goal is to compile information and resources related to upside down mortgage loans. We will update this page as needed, to ensure it stays current.

The Upside Down Mortgage, Defined

What is an upside down mortgage loan? Here’s a simple definition: If you owe more on your mortgage than your home is currently worth, you are upside down in the loan.

Here’s an example. If my home is worth $185,000 in the current market, but I owe $195,000 on my mortgage loan, I am upside down. My loan balance exceeds the value of my property. This is also referred to as being underwater in the loan. The two terms are interchangeable.

Why Is This a Problem?

Upside down homeowners have a hard time selling or refinancing their homes. If you sell the house for less than what you owe to the lender, you’ll probably have to pay the difference out of pocket. On the refinancing side, the lack of equity makes it hard to qualify for a mortgage refinance loan. Upside mortgage loans can create a situation where the homeowner is “stuck” — can’t sell the house, can’t refinance the loan.

When homeowners plan to stay in the home for a long time, being upside down is less of a concern. They can simply stay put, continue making their mortgage payments, and hope that their property values rise again in the future. But for those who want to sell or refinance their homes, an upside down mortgage will put up a financial roadblock.

Refinancing Options Through the FHA

Underwater homeowners are often unable to refinance their homes. They lack the equity that most lenders require. But there is help for upside down homeowners who want to refinance.

In May 2010, the Department of Housing and Urban Development (HUD) announced changes to the FHA’s loan-backing program that would make refinancing possible for underwater homeowners. This new program will be rolled out in the fall of 2010. To qualify, homeowners must (1) have a loan that is not currently insured by the FHA, (2) be current on their mortgage payments, and (3) be upside down in their mortgage loan. TARP funds are being used to give incentives to lenders, encouraging them to participate in the program.

This program is being referred to as the FHA short refi for underwater homeowners, and you can learn more about it through the links below:

Other Programs to Help Homeowners

If your mortgage loan is currently owned or guaranteed by Freddie Mac or Fannie Mae, you may have additional options for underwater refinancing. This would be through the federal government’s Making Home Affordable program. Here again, you need to be current on your mortgage payments to pursue this option.

You can learn more through the links below:

Upside Down Mortgages in the News

It is our goal to make this resource page as useful as possible. So we will be tracking the various programs and topics mentioned above. Here is some recent (2010) news regarding upside down mortgages and help for homeowners.

Fannie Mae and Freddie Mac – Past, Present and Future

Mortgage buyers Fannie Mae and Freddie Mac could be restructured in the near future. We just don’t know how. There are currently dozens of proposals on the table, and a meeting of the minds recently concluded in Washington. Still, the question remains: What should we do with Fannie Mae and Freddie Mac?

These two organizations affect every home buyer in the country. But many people don’t even know what Fannie and Freddie do. Sure, they’ve heard their names thrown around — it’s hard to read a newspaper without hearing about them. But they still remain a mystery to the average American. So we thought it was time to create a retrospective. We call it Fannie Mae and Freddie Mac – Past, Present and Future.

Housing History: The Birth of Fannie and Freddie

fannie mae logoHistory gives us a certain perspective we would otherwise lack. So let’s take a walk down memory lane.

The year was 1938. The United States economy was in terrible shape, in the wake of the Great Depression. Housing was unaffordable for many Americans. So Congress created an organization to make home ownership easier to reach. That organization was the Federal National Mortgage Association — Fannie Mae for short.

The rise of Fannie Mae created what is now known as the secondary mortgage market. Back then (and still today), Fannie Mae purchased mortgage loans from lenders. This increased liquidity within the mortgage market, and made lenders willing to give more loans to more people.

Fannie Mae enjoyed three decades of being a government-sponsored monopoly. It was the only organization that bought (and sold) loans from banks and lenders. In 1968, Lyndon B. Johnson privatized Fannie Mae to get it off the “government books.”
freddie mac logo
So now you had a private company that received federal support and monopolized a certain area of the American economy. Talk about Frankenstein’s monster!

To “solve” this dilemma, the government created a competitor for Fannie Mae. Thus, the Federal Home Loan Mortgage Corporation — a.k.a. Freddie Mac — was born in 1970.

Fast Forward: Fannie Mae and Freddie Mac Today

For years, Freddie Mac and Fannie Mae were private corporations that enjoyed tremendous profits (from buying, bundling and selling mortgage loans). But that status quo changed in 2008, at the height of the mortgage and credit crisis.

Today, Fannie and Freddie are being managed by the Federal Housing Finance Agency, or FHFA. They were seized by the government in 2008, and placed into a “conservatorship” status. This means that Uncle Sam took over the management (and much of the cost) of running the two organizations. Furthermore, the federal government has pledged unlimited Treasury support to keep Fannie and Freddie afloat.

Freddie recently asked for an additional $1.8 billion in August 2010. Including this request, the two government-sponsored enterprises have soaked up more than $148 billion in government aid since April 2009. They are still posting losses, too, mostly resulting from mortgage defaults. So the government will likely spend more money on Fannie Mae and Freddie Mac in the near future. How much more remains to be seen.

What Does the Future Hold?

The Obama administration is currently seeking proposals on how to restructure Freddie Mac and Fannie Mae. Meanwhile, many people are arguing that we should pull the plug instead. In August 2010, a high-level conference was held in Washington D.C. to discuss the different options for reshaping Fannie and Freddie. There are many ideas on the table, but no singular direction at the moment.

  • On the one side, you have supporters who stress the importance of governmental guarantees on home loans. Their argument is that, without Fannie Mae and Freddie Mac, fewer Americans would be able to buy homes. They say that mortgage rates would be higher, as well.
  • On the other side, you have the opponents who feel that Fannie and Freddie are part of the problem — not the solution. The Home Buying Institute falls into this camp. We feel that these organizations encourage reckless lending, by removing the long-term financial burden from lenders.

Regardless of which camp you fall into, we can all agree on one thing. The system is broken. We cannot afford to spend billions of dollars a year to keep Freddie Mac and Fannie Mae on life support.

How to Sell Your House Fast in a Slow Market – A Case Study

Exclusive Report: Our editor-in-chief recently sold his home in a slow market. Within eight days, he had multiple offers for the full asking price. The home went under contract on day nine. This is the kind of home-selling success that most homeowners can only dream of right now. In this article, Brandon explains how we was able to sell his house so fast in a slow market.

Selling Your House in a Slow Market

by Brandon Cornett

Chapter 1 – Remembering the Good Old Days

In 2003, my wife and I sold our home in Maryland. Those were the days! It was a classic seller’s market. City planners had placed a limit on residential construction, so there weren’t many homes going up in our area. At the same time, there was a lot of urban “spillover” from Baltimore and Washington D.C. Long-distance commuters were moving into our part of town in droves. This high demand and low supply made it easy to sell a home fast.

Chapter 2 – Selling a House After the Recession

Fast forward five years. We lived in Texas before, during and after the housing crisis of 2008. We didn’t have a real estate bubble like California or Arizona, but we still experienced a major slowdown in market activity. For a while there, it seemed like the only houses that were selling fast were the
short sale properties. All of the regular listings were sitting on the market for months, in most cases.

We wanted to sell our house and move to Napa, California (a long story), but we were concerned about the lack of sales activity in our neighborhood. The one advantage we did have was the rapid population growth of Round Rock, Texas. As the second-fastest-growing city in the nation, our city had a steady stream of new residents and home buyers. But it was still unnerving to list the home for sale in this kind of market. So we took it very seriously.

Here’s what we did to sell the house fast in a slow market…

Chapter 3 – Let the Staging Begin

Many of the people in our neighborhood who were trying to sell their homes had failed to stage them properly. This is a big mistake when trying to sell a house in a slow market. When the inventory is higher than the demand (a buyer’s market), you have to do all you can to make your home stand out. This is where home staging and preparation come into the picture.

We put a lot of time and energy into this step of the process. The out-of-pocket cost was a little over $2,000. That might seem like a lot of money to spend on home preparation, but you’ll soon realize how well it paid off. We landscaped, cleaned, painted, de-cluttered, upgraded, staged … you name it.

Here are some of the things we did to get the house ready to show:

  • Hired landscapers to do a clean sweep of the entire yard. They removed weeds, shaped bushes, trimmed trees, put down fresh mulch, and cleaned up the flagstone path. ($1,500)
  • Painted one of our bold “accent walls” to create a more neutral living room. Painted all scrapes and scuff marks throughout the entire house. ($100)
  • Upgraded the lighting in all three bathrooms. Before this, we had those ugly “Hollywood lights” that mid-level builders often use — basically a white rectangle with naked bulbs. We installed some brushed-nickel light fixtures with frosted glass shades. This gave the bathrooms a more modern look. ($300)
  • We sanded and re-stained the front door. The door faces west, so it had been severely weathered by six years of sunsets. We also painted the iron crossbars. You can see the end result in the yard picture below. ($150)
  • We had the upstairs carpet professionally cleaned. ($150)
  • We had all of the windows cleaned inside and out. ($185)
  • We brought a Pod unit to our house, so we could pack up much of our stuff. This is a great way to de-clutter your home. We removed almost everything from closets, shelves, cabinets, etc. The house seemed larger when it was all done. Staging the home was a lot easier with all of that stuff out of the way.
  • We bought a few pieces of staging furniture for the back patio, and also for the newly created sitting area in the master bedroom. The cost is irrelevant here, because we took those items with us when we moved.

Here are some photos of the interior, after all of the staging was done:

staging the living room

staging the bedroom

office / study

Starting the previous fall, I began to get my grass into shape. This was a challenge, because we had two droughts in a row leading up to this. It’s Texas, after all. I had to de-thatch and aerate the lawn, and give it a good dose of “weed and feed.” When it came out of its winter dormancy a few weeks later, I fertilized again and began watering once a week. This picture shows how healthy the lawn was by the time we listed the home. You can hire a lawn care service to do all of this for you, if you don’t have time.

nice green grass

The above picture also shows how we staged the front porch with some brand-new rocking chairs. The people who eventually bought the house wanted the chairs too. So they obviously had the desired effect.

It bears repeating. If you want to sell your house fast in a bad market, you need to blow people away with the curb appeal. In my case, that involved the grass, the bushes, and the flagstone path that wraps around the house (among other things). Even if you don’t have grass, you have something for people to see when they visit the home. Curb appeal is extremely important. If people have a good first impression when pulling up to your house, they’ll take that impression inside with them. The reverse is true, as well.

Chapter 4 – Pricing the Home

This is where a lot of homeowners fall on their faces, and it can kill your chances of selling the house. You have to price your home based on its value in the current market. Forget about what you paid five, seven or ten years ago. That number is irrelevant. Realistic pricing is always important when selling, but especially when you’re trying to sell in a slow market.

To set the asking price for our house, we looked at the recent sales data for our area. We weren’t too concerned with listing prices — we wanted to know what homes were actually selling for in our neighborhood. We reviewed data for the previous six months, with a special focus on the more recent sales. To be honest, we could have priced it higher and still brought in buyers. But we were trying to sell it fast in a slow market. So we erred on the more conservative side. We wanted people to see it as a true value, so we could avoid all of the price haggling. It worked.

Chapter 5 – Marketing the Home

If you want to sell your home fast, you need to put it in front of the largest possible audience. The easiest ways to do this are to (A) list it on the Multiple Listing Service and (B) put it on There are plenty of other ways to market your house. But these two methods will put in front of thousands of buyers, virtually overnight. We did this, and we also put it on

The more pictures you can include with your listing, the better. This helps you in two ways. First, it helps you weed out the buyers who simply won’t like your house — and there will always be such buyers. You don’t want to waste your time showing the property to people who are looking for something different. So be transparent from the start. Use plenty of pictures. This also helps you create interest among buyers who are seeking a house like yours. We took about 20 pictures of the house, inside and out. This allowed us to show off the home staging and curb appeal we worked so hard on.

We also created a flyer that people could pick up as they walked into the house. It pointed out some of the features they might not have noticed otherwise. Examples: The downstairs is wired for sound, with two speaker locations in the kitchen and entryway. The surround system in the media room conveys with the property. The pool is a saltwater pool, which is easier on the skin and eyes than regular chlorine. You get the idea. Don’t assume that people will know these sorts of things — tell them! To sell your house fast in a slow market, you have to convey everything that’s great about your home. And I mean everything.

Chapter 6 – Success!

So, was all of this effort worthwhile? I think so. But I’ll let the results speak for themselves. Within eight days of listing the home, we had multiple / competing offers for the full asking price. We accepted one of the offers the very next day.

We were also able to choose our buyers, which is a big deal. We chose the buyers with the strongest financial picture. It’s common for buyers to lose their financing at the last minute, as the result of some extra scrutiny on the lender’s part. This was a major concern for us. So we went with the buyers who seemed to have their ducks in a row.

Planning to sell your house in 2011?

Our success can be attributed to the three P’s of home selling. Price, preparation and promotion. We realized the importance of these things in the beginning, and we worked hard to get them right. We priced the home realistically. We prepared it well. And we promoted it through high-visibility channels. Two out of three is not good enough. You need to get all three of these things right.

So there you have it. How to sell your house fast in a slow market. It worked for us!

In Round Rock, Texas, Real Estate Values Bring Growth

Austin, TX – U.S. Housing News — Every few years, a little-known city or town will start to get national attention, followed by rapid growth. Someone in the media will “discover” the place and write about it favorably. This puts it on the radar of folks who are looking to relocate. And before you know it, you have a population bubble. Such is the case with the Round Rock, Texas real estate market, as of 2010.

Couple in neighborhoodIn July of 2009, the Census Bureau reported that Round Rock, Texas was the second-fastest growing city in the United States. New Orleans was #1 in terms of growth, but that city is in a different category altogether.

So you could say that out of all the cities in the U.S. that didn’t suffer a hurricane-fueled exodus, Round Rock is the fastest growing.

Rankings aside, we are talking about some serious growth. The population of Round Rock grew by 8.16% from 2007 to 2008, and the rate of growth has slowed only slightly in subsequent years.

So what’s driving this growth, and how does it affect the Round Rock real estate market? These are questions worth asking, because they make for a good case study in housing markets and population trends. Here are some of the factors that are attracting people to this Central Texas location:

Round Rock at a Glance

Home prices. By and large, Texas avoided the housing bubble that recently burst over the rest of the United States. From the late 90s to the early 2000s, much of the country was swept up by housing mania. Fueled by speculation (and a touch of lunacy), home prices shot up across the nation. But not so in Round Rock, Texas. Appreciation in that city could be described as slow and steady. As a result, the Round Rock real estate market is one of the most affordable in the country. For now, at least.

Bedroom community. Round Rock is located about 15 miles north of Austin, the state capital and the Live Music Capital of the World. And Austin has plenty to offer, from restaurants to recreation. Homeowners in Round Rock have the convenience of living close to Austin, without the cost of living in the city.

Infrastructure. It recently got a lot easier to drive to Austin from Round Rock. In fact, you don’t even have to drive. A brand-new MetroRail began running in March of 2010, and it links Austin to several stations located near Round Rock. Several new toll roads have also made north-and-south transportation a lot easier.

Media. In 2008, Money magazine listed Round Rock as the seventh-best American small city in which to live. In March 2010, Forbes magazine published a list of ten cities where the recession is easing the most. The Austin / Round Rock metro area tied for first place, along with the Washington DC.

This kind of coverage has put the city on the radar of relocation-minded people from all over the United States (especially Californians who cashed out before and during the bust).

Family Friendly. This phrase gets tossed around quite a bit in marketing pieces, but Round Rock truly measures up. The city offers solid schools, plenty of parks and rec, and one of the lowest crime rates in the country.

Attention home buyers: If you have questions about buying real estate in Round Rock, Texas, you can visit our main website. There, you’ll find hundreds of tutorials on the home-buying process.

How to Sell a House in 2010 – Special Report

Austin, TX – U.S. Housing News — It’s a buyer’s market in most cities across the country. So if you want to sell your house, you need to go the extra mile. You can start by focusing on the three P’s of home selling.

Reader Question: “I’m trying to sell my house, but it’s been on the market for a long time. A few people have looked at it so far, but only one person made an offer. That deal fell through because the buyer could not get their financing. Now the home is back on the market. How do I sell my house quickly in this kind of economy?”

soldThis is a common question among homeowners right now, and it’s easy to understand why. Housing inventories are high, buyers are having trouble getting loans, and foreclosures are dragging down property values. This is the recipe for a buyer’s market, and that’s exactly what we are seeing in most cities across the United States.

So let’s revisit the question at hand. What does it take to sell a home in this kind of environment? What steps must a homeowner take to get it right? In short, you must go through the same steps that have always worked. You just have to do them better. This is what separates the houses that sell quickly from those that stay on the market for months.

But let’s get specific. Here’s how to sell a house in a buyer’s market.

Pricing, Prepping and Promoting – The Three P’s

When a person can’t sell a house, it’s usually due to one of the following reasons. Let’s call them the three P’s.

1. Pricing — If the home is priced too high based on current market values, it will be less likely to sell. This is one of the biggest mistakes sellers are making right now, and it has a lot to do with our economic downturn. Home values have declined over the last few years, in almost every city in America. But some homeowners don’t realize this, so they base their asking price on the amount they paid for the house a few years ago. Others homeowners are simply in denial and refuse to accept the market reality. Either way, it leads to an overpricing situation. And that’s the number-one reason why homes don’t sell.

You (or your agent) should review comparable sales in the area for the last three months. This will tell you what people are willing to pay for your house. Buyers today are more savvy about listing prices, and they’re on the lookout for overpriced properties. Some will make a reduced offer for such a home — others will dismiss it entirely. This is not the kind of scenario you want. If you want to sell your house in a buyer’s market, you need to price it accordingly.

2. Prepping — Up the street from where I live, there’s a home for sale. The sign on the yard says “Priced to Sell.” The house has been on the market for about eight months now. It might be priced to sell, but it’s clearly not prepared for the market. The front yard is a jungle. The shutters are in desperate need of a paint job. And based on what a local agent has told me, the inside is just as bad — outdated, ill prepared, and unimpressive.

Pricing is the most important factor when selling a house, but preparation comes in second. If you want to sell a house in a buyer’s market, you need to make it outshine similar homes for sale. This means staging, painting, cleaning, landscaping, and updating the fixtures and features. Compare these small expenses to the extra mortgage payments you’ll make if it doesn’t sell, and the path becomes clear.

3. Promoting — Let’s assume you’ve set a realistic asking price, and you’ve worked hard to make the home look its best. What’s next? Now is the time for marketing. You must promote the home in every way possible, in order to bring in qualified buyers.

Remember, there are fewer buyers right now, as a result of soaring unemployment and tighter lending standards. Your audience has shrunk. This means you must market the home more effectively, to bring in as many buyers as possible. At a minimum, you should list the house on the Multiple Listing Service (MLS). You should also put it on at least one of the big real estate listing websites. It helps to have a yard sign too — simple but effective.

Old advice … with a new twist. The three P’s have always been important when selling a house. But in a buyer’s market such as 2010, you have to go the extra mile in all three areas. You must price the home competitively, prepare it for the market, and then promote the heck out of it. This will bring in the highest number of buyers, which is the first step to getting an offer. This is how to sell a house in a buyer’s market.

How to Sell a House in 2010 – Lessons from the Field

You can learn a lot from the folks who deal with these challenges for a living. Here’s what real estate agents across the country are saying about this subject:

  • San Antonio real estate agent Matt Stigliano reiterates the pricing point: “A bad price can label a home with the dreaded ‘overpriced’ stigma very quickly — and that stigma is hard to wash off.”
  • Joe Manausa, a Tallahassee real estate broker for Century 21, talks about the importance of online visibility: “To successfully market a home on the internet, the home must be positioned on a highly trafficked real estate web site where … home buyers are shopping.”
  • The folks at McMillin Realty also stress the importance of property photos: “The more photos of your home are associated with the listing, the longer time buyers will spend looking, and they will be more likely to come see your home.”
  • 512 Developing, an Austin home builder, explains how shoppers become more picky in a slower market: “In a transition from a sellers to a buyers market, buyers become much more sensitive to things like dated light fixtures and other things that you might over look.”

Recent Home Sales in My Area – Hot Topic for Homeowners

Lately, a lot of homeowners want to find recent home sales in their neighborhoods. More so than usual. Google queries for this topic have skyrocketed in recent months. Here are three websites you can use to find recently sold homes near you.

soldWe review Internet search trends on a regular basis, as part of our publishing process. This helps us identify the topics that are most important to home buyers and homeowners. Here’s what we recently discovered: The phrase recent home sales in my area has skyrocketed in popularity over the last few months.

According to Google’s keyword research tool, there are thousands of searches for this phrase every day. When you add in similar phrases, such as “recently sold homes” and “home prices in my area,” the number of Google searches exceeds 10,000 per day. And this doesn’t even account for the other search sites, like Yahoo and Bing.

This is a relatively new trend, driven by economic events. Over the last three years, we have seen a dramatic decline in property values across the country. As a result, homeowners have lost a lot of equity in what they thought was a safe investment. Now, people are going online by the thousands to research recent home sales (and prices) in their areas.

How to Find Recent Sales in Your Area

In the “old days” before the Internet came along, you had to visit your friendly county officials to retrieve this kind of data. These days, you can visit any of the websites listed below to pull up recent sales. It’s a great way to find out what the market is doing in your area. It’s also a good starting point for pricing your home effectively.

Trulia has expanded its horizons quite a bit, since it first went online in 2005. Today, the real estate website offers a wealth of information, search tools and other resources. They also give you easy access to recent sales data on homes. You can see the “recently sold” tab in the image above.

Zillow started off primarily as a home value website, where you could get an estimate of your property value. But like most of the sites in this niche, it has broadened its content offering. It now offers a comprehensive search tool that allows you to find recent home sales in a particular area (among other things). When you’re presented with a map or a list of results, you can check certain boxes to tailor the data. In the image above, you can see that the box is checked for recently sold homes.

sold-corner is owned by the same company that owns, and other realty websites. It’s easy to find information about recently sold homes on this site, because that’s their primary offering. The name says it all. You don’t have to check any boxes or click on any tabs. You just do a search by address or city, and you’ll be presented with a list of sold homes.

Getting Your Home Appraised

If you’re planning to sell in the near future, you might want to have your home appraised by a real estate appraiser. The websites listed above are helpful, in the sense of giving you sales data for your neighborhood. But they don’t take other variables into account, such as the upgrades you might have made to your house.

You should also realize there are still plenty of foreclosures on the market, in most cities across the U.S. This has a negative effect on property values, and it could drag down the appraised value of your home as well.

Low Property Appraisals – The Hottest Topic in Real Estate?

There is much ado about low property appraisals lately. Many home builders, sellers and real estate agents complain that appraisals are skewed by foreclosure homes.

Low property appraisals are the topic du jour in the real estate world. Today, for example, nearly a dozen major news outlets ran stories about low appraisals on their real-estate front pages. It’s also generating a lot of discussion, such as this recent Q&A session on the MarketWatch website.

We are going to throw our hat into this ring as well, but from a different angle. In true DHN fashion, we will put this news into perspective for first-time home buyers. Here’s what a first-time buyer should know about property appraisals, and what it means when they “come in low.”

What is a Property Appraisal?

When you buy a home, the mortgage lender will send a professional appraiser out to review the property. He or she will compare the house you’re buying to recent sales in the area. They also consider upgrades to the property, such as swimming pools and kitchen renovations. Based on all of this, the appraiser will come up with a property appraisal — an educated guess of the home’s current value. The lender does this to protect its own financial interests. If the appraisal comes in lower than the amount you’ve agreed to pay, there’s a problem.

When the Appraisal is Below the Purchase Price

Let’s say you’re interested in a home that’s listed for $270,000. Your real estate agent reviews some comparable sales in the area and advises you to offer $250,000. You do this, and the sellers accept your offer. If you’re paying cash, the deal is nearly done. But if you’re using a mortgage lender, like most people, you have to get their take on the home’s value. So the lender sends an appraiser out to evaluate the home, and he says it’s only worth $210,000. Based on the low appraisal, the lender is only willing to give you a loan for the lower amount — $210,000.

This kind of scenario happens often, especially in the current economy. High foreclosure rates have a lot to do with it. Many real estate agents don’t use foreclosure sales when they evaluate pricing. But a lot of home appraisers do consider foreclosures. Thus, we have a discrepancy in values. In the current real estate market, this a common reason for low property appraisals.

How it Affects Home Buyers

A low appraisal actually works in favor of the home buyer. In the end, it can help you save money on your purchase. It can also prevent you from paying more for a home than it’s worth. The down side is that it can add some hiccups to the process.

For example, if your initial offer gets accepted, a low property appraisal could delay (or even derail) the whole transaction. It all comes down to what the sellers do in response to the lower appraisal. If they agree to lower the asking price to reflect the appraisal, then the deal is back on. If they stick to their original / higher asking price, then you’ve got a problem.

Here’s the bottom line. It’s never a good idea to pay more for a home than it’s worth. This puts you in a negative-equity situation, right from the start. But it’s not always easy to determine the “true” value of a home, especially when different players are looking at different data. If you’re presented with two different appraisals from two real estate professionals, you should base your offer on the lower of the two.

Home Prices in Your Area are the Only Ones that Matter

If you only read the news headlines right now, you’d think every real estate market in the country was experiencing an upswing. For example: “Home Prices Rise for the Fifth Month in a Row.” That’s the headline making the rounds today. But this is based on national trends and averages, so it’s essentially useless to an individual home buyer.

home prices seesawTake Denver and Las Vegas, for example. From a home-value standpoint, these two cities are on opposite ends of the seesaw. Prices in Denver have been rising pretty steadily for the last few months. On the contrary, home prices in the Las Vegas metro area continue to fall, with no “bottom” in site.

So a headline proclaiming a rise in home values would be irrelevant to a buyer in Las Vegas (or one of the many other declining markets in the United States).

As a first-time home buyer, there is only one real estate market you need to worry about, and that’s the market where you plan to buy. Here are some of the key factors you need to know about home prices and other factors, before you buy a house in a particular area.

5 Things to Know About Your Real Estate Market

  1. Home-value trends for the last 12 – 18 months. This will give you a general sense of what has happened in your area (bubble or no bubble), and will also help you understand the other items below.
  2. Changes to home prices in recent months. This gives you a more accurate idea of what’s happening in your real estate market right now. Combine this with item #1 above, and you’ll know whether a home purchase is a good or bad investment right now. If you buy a house in a declining market, you could be losing equity from day one.
  3. Price differentiation for the neighborhoods / areas you are considering. In some areas, prices are fairly consistent across the board. But in other cities (like San Francisco), you can pay 25% more for the same house just by going across the street. You need to know how neighborhoods affect pricing in your area, in order to make an educated decision.
  4. Foreclosure rates in your area. Do you live in a high-foreclosure area? If so, home prices are less likely to rise (due to the increased surplus). Also, if you’re up for the challenge of buying a foreclosure home, you could save money by purchasing below market value. The first step, as always, is to understand what’s happening in your local real estate market.
  5. Property taxes in different neighborhoods and communities. I live in Round Rock, Texas, which was recently named the second-fastest growing city in the U.S. Property taxes here are ridiculously high. But if I had purchased a home in the subdivision across the street (a Municipal Utility District), my taxes would have been much higher. Taxes are the ‘T’ in the PITI acronym that makes up your mortgage payments — principal, interest, taxes and insurance. So a higher tax rate means a larger mortgage payment each month. You need to research this for your area.

National real estate trends help us understand what’s happening in the country as a whole. And that’s all well and good — there’s certainly a need for that kind of information. But for an individual home buyer, they are not nearly as important as local real estate trends in the desired area.

Reminder: Housing Tax Credit Expires in April 2010

If you are thinking about buying a home in 2010, you might want to do it before the end of April. That way, you can qualify for a tax credit of up to $8,000 (if you meet the other requirements).

The federal housing tax credit gives first-time home buyers some added incentive to buy a home. Granted, you should never purchase a home until you’re financially ready to do so. But it certainly helps to get a tax credit of up $8,000. The program has been extended until April 30, 2010, and it could even be extended beyond that cutoff. As of right now, however, you must buy a home by April 30 to qualify for the credit.

Here are some notable dates, straight from the horse’s mouth (the horse being the IRS):

“You must buy the home after April 8, 2008, and before May 1, 2010 (with closing to take place before July 1).” –Source

Housing Tax Credit Q&A

Here are some frequently asked questions about the program:

1. Who can claim the $8,000 housing tax credit?

Anyone that meets the loose definition of “first-time home buyer” is eligible for the federal tax-credit program. I put it in quotes because it has a broad definition. If you have not owned a home (as your primary residence) in the three years prior to your home purchase, then you meet the IRS definition of “first-time” buyer.

Example: Let’s say that I buy a house in February, and my closing date is on March 3, 2010. If I have not owned a home as my principal residence between March 3, 2007 and my 2010 closing date, then I’m eligible for the $8,000 housing tax-credit program. Of course, I might not qualify for the maximum $8,000 amount — that would depend on the purchase price of the home I bought. But I would qualify for a credit of some kind. Remember, you must purchase by the end of April, but your closing date can later than that (before July 1, 2010).

2. Are there any other restrictions, such as income?

Yes. Rich people are excluded from the tax-credit program. But seriously, there are some specific income limits for the program. Single filers must make less than $125,000 per year, and joint filers must make less than $225,000. Please note the publication date of this article (December 2009). This program could very well change in the future, so you’ll need to visit the IRS website for current details.

3. Is there anything for homeowners buying a new home?

Yes! Under the expanded tax-credit program, homeowners who sell their current home and then buy another one qualify for a credit as well. In this case, the credit amount is up $6,500. The same deadline applies.

4. Where can I learn more about the credit?

I recommend visiting the IRS website. There’s a lot of misinformation floating around about this program, especially on the Internet. I have seen some frightfully inaccurate information posted on blogs and websites. So start with this IRS explanation of the federal housing tax credit, and you’ll know exactly how it works.