“Refinancing” is a scary word for many people, but that shouldn’t be the case for you. For many homeowners, refinancing can not only lower your monthly payments and help with your monthly budget, but it can save you thousands of dollars in the long run.
YOU’RE NOT TOO LATE.
For years now, we’ve been hearing that interest rates will be on the rise, and although there have been some small increases, you’re still in a great position to drastically lower your interest rate. The general rule is if your mortgage interest rate is more than one percent above the current market rate, you should consider refinancing.
T’S NOT TOO TIME CONSUMING.
Don’t brush off refinancing just because it seems like a long and daunting process. An informational call with a lender to see how rates compare will only take a few minutes. There are also some programs for streamlining the application process. And besides, isn’t the amount of money you could save worth the time and effort?
ARMS CAN BE REFINANCED, TOO.
Seeing your Adjustable Rate Mortgage (ARM) increase after the introductory period can be incredibly stressful and place a squeeze on your budget. Many people assume they’re stuck, but ARMs can be refinanced, just like fixed-rate mortgages. You can even switch to a shorter term fixed-rate mortgage, such as 15 or 23 years. The longer you’re planning to stay in the home, the more sense it makes to look into refinancing.
Looking for a lender to talk to? Reach out & I'll share my preferred lender contacts with you! I'm always here to help!
September & October are the times to get your home ready for a New England winter. Get your furnace serviced! Heating Specialists are already booked into October---I just scheduled my annual cleaning service for my Navien furnaces & the soonest available was October 6. I'm happy to share my referral network so reach out!
I especially like tip number 2) Switch the direction of your ceiling fan! Your ceiling fan should rotate counterclockwise in the summer. so the blades push cooler air down in a column. This is the best ceiling fan direction for air conditioning since it makes the air feel cooler than it is. It allows you to turn your thermostat up a few degrees. Then in the cooler months switch directions & you can save on your heating bills!
An offer needs to include the following information:
Deposit/Amount of Escrow
Included or Waived Contingencies: sale is contingent upon securing financing (this is called the Mortgage Contingency), property appraising at purchase price, Inspections. These are all items you can include with your offer or state that you choose to waive any of these options.
Additional Terms to include: ex any property or items that are included in the sale (pool equipment); or if you're buying a multi family property do any of the units need to be vacated by the time of the closing.
How do you know how much to offer?
Here are questions that need to be answered:
1) How long has the property been listed & what's the condition of the property? If it's new to the market it's unlikely that the price is negotiable--especially if it's in pretty good condition. If it's a sellers market that will mean that there will likely be a lot of people looking at the property & it's highly likely there will be multiple offers. You and I will discuss how in demand this property is--if I think we can offer lower than the list price I'll certainly tell you that.
2) What are the neighborhood comps (comparable homes that have sold)? I may send you an overview of similar homes that have sold in the area. I'll advise you on what I think the market may be able to bear in terms of offering more than the list price. It's important that you also do your own research to understand the markets in particular neighborhoods as well--I'm certainly here to guide you and also share my expertise.
3) Does the math work? If you don't know how to use a mortgage calculator let me or your lender know. Or ask your lender to run the numbers for you. What's the difference in the down payment amount & total monthly mortgage when you offer $220k vs $230k? If the house is listed at $220k and you love it but there are multiple offers what's the difference in payments at $230k or $240k? You need to understand real estate math so that you can decide what's best for you.
4) Is there anything that you can do to increase your equity in the property--a basement that can be finished? A bathroom vanity and light fixtures that can be updated? When you purchase a property in a sellers market you should look for a property that has one or two things that you can do to increase or maintain its value in the future. That can impact how much you decide/are willing to offer.
What is an Escrow Deposit & how much do you have to submit?
I have a video on this topic that you can review. If you haven't subscribed to my channel please do so! You have to have some skin in the game, & it has to be substantial enough that you're not going to just walk away from the transaction. Typical escrow deposits (aka Good Faith Deposit) are 3-5% of the purchase price. A higher escrow deposit will be more appealing to a seller so that may be something to consider when crafting a competitive offer.
Here are common questions that I get:
Who holds the escrow deposit: The listing brokerage or the sellers Attorney
Can the seller keep the deposit: If the buyer breaches the contract then yes, the seller can keep the deposit but there are very specific ways that would happen.
Here's how a buyer can get their deposit back.
1) Terminate the Purchase Agreement during the inspections contingency. If you do not waive your right to the inspection then you will have 10 business days to have any inspection, at your cost, that you choose. I have a list of inspectors that I can recommend to you. If you're not satisfied with the inspection then you can terminate the Purchase Agreement & you will get all of your deposit back--as long as we're within the 10 business days. If we try to renegotiate with the sellers but cannot come to an agreement you can decide to terminate the contract.
2) Loan Denial. Known as the 'Mortgage Contingency', the Purchase Agreement will set a specific deadline that you will need a 'mortgage commitment' from the lender. You have a preapproval but you cannot actually apply for a loan until you have a specific property under contract. In order to issue a mortgage commitment, thereby satisfying the mortgage contingency deadline, you have to apply for the loan, submit paystubs, bank account info, tax documents, verify employment, go through an extensive credit check, & the appraisal has to be complete. The underwriter will review all of the information & determine if the bank is willing to underwrite the loan &, if so, will issue a mortgage commitment & then will submit for Clear To Close. If for some reason the bank issues a denial we want that on or before the commitment deadline. This is a date that both you & I will monitor. If we need an extension for that deadline we can make that request, in writing, & the seller needs to agree. If the denial is issued we can terminate the agreement & your deposit will be returned. If you waive the mortgage commitment but end up getting denied for the loan then you would be in breach of the contract because you would not be able to close & the seller would be able to keep the deposit.
When would someone be denied a loan: job loss while in the process of trying to get a loan, submitting incorrect information during the preapproval (this is why you should get a full pre-qualification), making a major purchase during the loan application (like buying a car---no new loans!!), etc. Your lender will give you a list of things NOT to do & it's important that you understand those guidelines.
Disclose your Financing Details
This info needs to be disclosed in your offer. Are you going with an FHA loan, VA (Veteran), or Rhode Island Housing (RIH) loan program? Or are you applying for a conventional loan & if so what is the down payment amount (3%, 5%, 10%, 20% etc). I also need to include a copy of your preapproval. Not only will a seller need to consider the offered Purchase Price, the type of financing is also important as it can impact the appraisal as well as indicate your ability to purchase. FHA loans & RIH loans take longer--45-60 days and have specific items that will not pass the appraisal: ex, a house that has peeling paint on the exterior or windows will not pass & those would have to be fixed before the loan would be approved; Knob & Tube wiring would not pass VA, FHA or RIH & would have to be removed prior to closing; Asbestos Wrapped heating pipes may need to be removed or wrapped prior to closing. These are all things that a seller may not be willing to address & that needs to be taken into consideration. In a sellers market you may want to improve your credit or save more for your down payment so that you can qualify for a 3% or 5% conventional loan as that may inhibit getting an offer approved. All things equal, a buyer with a conventional loan will have a competitive edge over FHA/RIH/VA loans simply because they can close sooner or have less hurdles. I don’t tell you this as a deterrent but simply that we will need to discuss your financing in the context of presenting your offer & the pros/cons of certain loan programs.
Disclose your Closing Date
Your offer will state your closing date. It's important that we understand the sellers motivation for moving & what their plans are. Do they have to find suitable housing or do they already have someplace else to go? Do they want a quick close or is a flexible timeline more appealing?
Once you & I have answered all of these questions I will draw up the offer. In certain instances I may decide that we should submit an executed Purchase Agreement rather than the one page offer. In some cases this may show that we are very serious buyers & that we're ready to go! In addition to your preapproval I will also have you sign the disclosures to include in the package.
The seller will respond in one of three ways: Accept, Counter, or Decline.
If your offer is accepted we will sign a Purchase & Sales Agreement, the formal contract, & you will submit your deposit right away--just like the offer we want to do this as quickly as possible because we don’t actually have a contract until both parties have signed & your deposit is submitted. If the seller makes a counter offer you can either accept, counter with a different offer, or decide to walk away. If the seller declines the offer (or your counter offer) you can try again to make a more appealing offer or move on to find another house.
Does a personal letter make a difference? Sometimes! It’s certainly worth submitting along with our offer. If it's a house that has been "flipped" I don't usually think it makes a difference--the sellers sole intent in that case is usually to maximize their profit.
Check out my video below to watch my video about the offer process!
Since moving to Rhode Island in 2001 I have grown to deeply love this small, quirky state! I love that all it takes is a quick 20 minute drive & I can be somewhere that seems very different. For example, it's twenty minutes for me to drive from rural Scituate, RI to be in the city center of Providence. Or I can drive twenty minutes to East Greenwich, a very quaint, New England-esque seaside community. Or thirty minutes to get to the beach! I've started this neighborhood series to help people that are considering moving from another state to RI & to give some insight into the unique aspects, & real estate market insights, to make the move a little easier! Plus! I love sharing all the things I love about Rhode Island. So far I've focused on two distinct areas in Providence: East Side & West End/Federal Hill. Next up: Elmhurst, Edgewood, East Greenwich (the E's are just a coincidence, lol!).
#federalhillprovidence #movetorhodeisland #rirealtor #rirealestate #providenceri
Owning a multi family property can be a GREAT financial decision but it's not ALL rainbows, butterflies, sparkles, & Unicorns! Check out this video to learn more about what you should keep in mind in you're thinking about buying a multi family property. #multifamilyproperty
SOLD! 70 Washington St CF featuring Lucy & Luis--a story about buying a Multi Family property & the ups & downs!
This is quite the story & worth the read, there are twists & turns. Lucy & Luis were referred by my past client Eric Tidd (THANK YOU!!) & they contacted me early January. We met at Sin Bakery (in person--remember when we could do that?!) & they had at least 100 questions & really put me through the wringer--it was great! No, really! I loved how prepared they were, the well-informed questions that they had, their clear determination & their plan.
Lucy & Luis have a plan together--they are going to purchase several more multi family properties over the next few years & they wanted to make sure that their Realtor would be able to not only help them through the process but also to help them to understand the market & how the numbers work.
We looked at A LOT of multi family properties. We put in SEVERAL offers (Lucy is super organized & is the Queen of Spreadsheets so she could probably tell me exactly how many offers & which houses). On March 25 we signed a contract for a 2 Family property on Manton Av in Pvd. It did not quite meet their goals but they felt they could make it work & I think that they were getting pretty frustrated by the market--multi's in particular get snatched up really quickly & because prices are so high it's difficult to find ones where the numbers work---PLUS we're competing with a lot of cash buyers right now.
We made it through Inspections, the Appraisal, & the Mortgage Comm----nope, we got an extension for the mortgage commitment. Why? Because in a weird turn of events the seller, who paid off the mortgage 13 years ago, did not have any written records of the mortgage being paid off & the lien was still in place so we could not get clear title which means no mortgage for Lucy & Luis. And we're in the middle of a pandemic so everything is shut down (we're mid-April in the timeline). Here's where it gets crazy. We submitted a Mortgage Extension which the seller signed but as that deadline was rapidly approaching with no sign of Chase Bank being willing to give the seller a letter confirming the mortgage payoff so that the lien could be discharged, Lucy & Luis began to really have doubts about this property. The listing agent wanted another extension. I encouraged a termination of the contract. Superstar Attorney Hugh Barry went directly to the Sellers Attorney & requested that the Seller sign the termination agreement---which he did. Here's where it's crazy---the Sellers Agent did not know that he was signing a termination & would have definitely advised against it & insisted on an extension.
Lo & behold a few days later--Chase Bank sent the letter. So then Lucy & Luis had a choice. But here's the thing--we looked at a 4 unit property that weekend & submitted an offer which we were pretty sure we could get accepted. Could we get out of the Manton Av contract--YES!!! We had a seller signed termination so they could not retain the deposit. Could they have moved forward with Manton Av if they had chosen to? Yes. So it really was the best case scenario by making sure that termination was signed by the buyers & seller.
But wait, this story doesn't end here. Let's move along to 70 Washington St, a four unit property in Central Falls, RI. Listed at $319k we were able to get it under contract at $315k. The property has two 1 bedroom units and two 3 bedroom units. Three units have current tenants & the vacant unit will soon by occupied by Lucy & Luis. It's in good condition but could use some cosmetic improvements in the units---the brown painted cabinets would be so much nicer if they were lighter, it would be smart to install vinyl plank flooring that looks like wood over the the sterile vinyl flooring that's better suited in a doctor's office from the 70's. We negotiated a $10k closing cost credit from the inspection results which frankly was about $5k more than I thought we'd get.
Did it close yet, Jess? This is a long story.........we're almost there. We were supposed to close July 17. Not August 11. And it's not uncommon for closings to get delayed but boy did this one drag on. Again, Superstar Attorney Hugh Barry worked with me to make sure that the Contract included language to make sure that the building is up to current Fire Code & that the inspection report be required for the sale (I didn't mention that the sellers insisted upon drawing up their own contract which did NOT include the standard boiler-plate requirement for Fire Code compliance).
Delay #1: The sellers (an investment company that owns 900+ rental units in RI & MA) scheduled the inspection at the last minute.
Delay #2: The Fire Marshall took longer to write up the report.
Delay #3: The property failed the inspection so the sellers had to make repairs/changes.
Delay #4: They had to schedule the re-inspection.
Delay #5: We had to wait for the report (again).
Delay #6: the lender is required to wait three days following clear to close.
Delay #7: we could have closed last Friday but the attorney's were both booked solid.
Delay #8: Monday was a holiday.
Needless to say, Lucy & Luis were pretty frustrated by the end. We didn't have any control over this timeline & so none of us (their Attorney, Lender, or Agent) couldn't really give them an idea of when this issue would be resolved. We were all very confident that it would be resolved--they were minor issues on the report--but the sellers weren't really in a rush, what with soooo many other properties to deal with. But today, after all of that craziness, we closed!
Did you make it to the end? Well I did & so did Lucy & Luis so CONGRATULATIONS! I'm looking forward to working on the next one with these two!
Single Family Market Report:
1359 Active Listings (this is 52% lower than this time last year!!)
296 New Listings as of Wednesday, July 29
176 Under Contract (Inspection Period)
What should you take away from this? Last week inventory was down 50% over last year, this week it's down 52%....So it's just getting more difficult for buyers to find a home & that means they just have to be as patient as possible (yes, I'm talking to you!!), hang in there (don't give up--we'll get one to stick), & be willing to put in competitive bids.
If you're holding onto a home that you've considered selling-----CALL ME!!!! I've been able to find buyers for two homes that we didn't put on MLS. If that's the best option for you I'll do it. There are pros & cons that we'll discuss but I don't advise that you wait! Let's chat!
Have people told you that being a landlord is awful or just too much work? I'm going to tell you 5 Reasons I think owning a multi family is a great idea!
I'm not a big time investor by any stretch but, I’ve learned enough over the past years to understand how the numbers work, the pros & cons of different types of properties, & what to look for when it comes to multi family properties. I got started by devouring as many books as I could on the topic & then through actually owning properties.
The first thing I love is that buying a multi family property as an owner-occupied investment can allow you to purchase in a neighborhood that you otherwise may be priced out of. For example, on the West End of Providence, single family properties are hard to find Unicorns & that means they're priced pretty high--simple supply & demand. In a single family I'd likely have a steep mortgage to pay on my own, but a property with rental income from a rental unit can allow me to either entirely cover the mortgage from the rental, or to have help covering the mortgage. That may give me an option to move to an area that I otherwise couldn't afford. In fact, that's how I was about to buy three properties on the West End of Providence.
I love that Multi family properties add income to reduce the burden of your monthly mortgage payments! Ideally, a three or four unit property that you live in will provide you with enough income to pay your entire monthly mortgage & escrows--if you're in a high rent area you may even net a little after your expenses! But a two unit property may provide you with more living space--many two unit properties in Rhode Island have one unit that is on one level & the second unit will have two floors of living space-- while the unit you decide to rent out may not cover the entire mortgage it should at least cut it down significantly.
On the other hand, If I’m buying an investment property that I’m not planning to live in, I’m looking for at least a net positive cash flow after all expenses of at least $1000 a month---some investors may expect a higher return but depending on the market & how much cash you have available to put down those numbers will change. You need to learn how to do the math to figure out how to meet your goals--I can help you with that! I’m more interested in specific numbers to set as a goal that I can help people who are getting started understand than cap rates & percentages--if you’re looking for that kind of talk go over to biggerpockets.com Super useful info over there by the way!
Another aspect I love is that you have an opportunity to provide safe & clean housing for people in your community. We all know that there are scumbag & absentee landlords who don’t care about their tenants much less the neighborhood. And believe it or not it can be really hard for people to find housing that is clean, safe, & affordable. You have an opportunity to invest in your community, make a smart financial decision, as well as make a difference in people’s lives.
Want to create your own micro-community? Buying a multi family property gives you an opportunity to buy a property with your friends or family members! Multi-generational living is gaining popularity & multi family properties suit these needs often much better than a single family property with in-law suite in the basement. Millennial buyers & their Boomer parents are pooling their resources to meet their needs while also keeping some individual space. Or close friends are forming business relationships to buy multi family properties together--especially three unit properties where one unit adds income to reduce expenses. The opportunities are only as limited as your creativity.
Number five on my list of things that I love about owning a multi family property is that you can leverage your property for more purchasing power to build financial stability & wealth. My first multi family property was a three unit that I lived in. The apartments were small but the math worked in my favor so that the total mortgage was paid for as well as my utilities. A year and a half later I was able to leverage that property in order to buy a two unit property---say what?
The only reason I was able to buy a second multi family was because I owned the first one. I was able to count the rental income from my current property towards my income plus the potential income of the property I was buying which gave me purchase power I wouldn’t otherwise have had given my meager income--this was when I worked for a non profit with a great mission but very low pay. My first property was obtained through a conventional loan and my second property, which I was going to move into, I was able to buy with a low down payment through an FHA loan. Between the two properties & the rental income from the units both of my mortgages, escrows, & property taxes were paid for. I was able to move from that tiny apartment into a property that was a lot nicer, had a lot more space for me & my kiddos--and it had a yard for the dog they wanted (a year later we got our second Husky!). Two years ago, I was able to purchase a third multi family with three units as an investment property. I had a plan & put those stepping stones in place.
So that's what I love: being able to buy in a neighborhood I'd be priced out of, having rental income to pay or offset my mortgage, having an opportunity to invest in my community & provide safe & affordable housing, creating an opportunity to invest in a property with my friends or family members, & creating an opportunity that builds wealth!
Stay tuned next week for part two: 5 Things I Hate about owning a multi family property! Spoiler alert--I don't really hate anything about it but there are definitely things I wish I had known when I started! Looking for a multi family to buy--let's get started! Reach out--I'm always here to help!
When it comes to figuring out the current market value of a property we want to make sure we’re comparing apples to apples & not just pulling a number out of our...um...thin air. The term "comps" refers to comparable properties that are used to figure out the current market value of a particular property.
For starters, Your real estate agent will look at similar homes to figure out how much a buyer is likely to want to pay for it. The homes your agent will look at will be:
Homes currently on the market including those that are pending or under contract; Homes that were on the market but never sold, so the owners took them off the market; & Homes that recently sold.
Generally speaking, your real estate agent will look at several factors to determine whether a home is similar to yours, including:
Location, Size, current condition,
Number of bedrooms and bathrooms,
Recent sale prices within the area,
Style and other important details.
Location is the highest priority. When it comes to location your agent isn’t going to compare your home in North Providence to a home on the East Side of Providence – it just doesn’t make sense because they’re two different markets. Likewise, even within the same city, prices can vary greatly. She will look at your home’s location and find homes within a short radius to compare it to.
Your home’s square footage has a lot to do with how much it’s worth, so your agent will look at similarly sized homes to help her arrive at a price. Likewise only homes with a similar number of bedrooms & bathrooms should be compared. The condition of your home & the age of your major systems will also carry a lot of weight. Is your roof 25 years old? Is the heating system, hot water tank, & AC compressor aging out? Is your kitchen 15 years old or more? Any buyer is going to have to take that into consideration & that can drastically affect your market value.
Often, the best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.
A good local real estate agent, leveraging her network, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.
When you’re deciding to sell your home you need an agent who can provide you with a Comparative Market Analysis---a comp report that will give you the best price range to get your home sold quickly. You want to make sure that the comps are strong to make sure that there are no hang ups when it comes to your buyer financing the property--if the lenders appraiser does not think the price is fair market value then the buyer will not be able to secure financing & you could end up having to start over.
Likewise, if you’re a buyer & you’re considering putting an offer on a property you should expect your agent to help you to determine the best price by providing you with neighborhood comps to either support the price, tell you how high over asking the market supports, or whether the property is overpriced & by how much. You also want to be confident that the bank appraisal is going to support the purchase price.
#whatarerealestatecomps #whatarecomps #jesspowers #jesspowersrealtor #rirealestate #rhodeisland