What are the most common changes in circumstances that send buyers out looking for homes for sale? What are the events that trigger typical prospects to comb through the Herndon listings, contact Herndon REALTORS®, set out on house tours—and ultimately make the offer that results in the move to a new home?
The answer to that question may be different for everyone, but some in-depth research has come up with interesting similarities among groups of active homebuyers. It matches a conclusion that also conforms with common sense: namely, that the motivating events (or “triggers”) sometimes vary by age group. In other words, when we humans reach similar milestones in life, we often make the same housing decisions—even though the reasons for a couple of them may be mysterious.
I came across the details buried in a report put out this past spring by economist Lawrence Guo in Realtor magazine. The top line of the piece—the part that got the most attention—dealt with the homeownership goals of active home shoppers. “Privacy” was the leading goal; “physical comfort” was second; “stability,” third. Of the styles of homes for sale, “ranch homes” were the most sought-after; the kitchen was considered the most important room, etc. None of these findings were at all mysterious or unexpected.
But when it came to revealing the impetus for a move in the first place—the life event or changed condition that set people checking out the current crop of homes for sale—a few could definitely be tied to the age group of the prospects. Since more than 20 triggering events were identified—each broken down into five different age groups—the resulting graphic was so complicated that most readers’ eyes probably glazed over before many conclusions could be drawn. Most of the findings were unremarkable—as when youngsters weren’t as likely as oldsters to cite “considering retirement” as a triggering event, or when some events were equally named by all age groups. But some were less predictable:
It doesn’t take a rocket scientist to figure out why home prices are most important to the youngest group, but the greater importance of interest rates to the 45-54 group but not the 35-44s? That one will take some thought. Not a surprise is the across-the-board Number One triggering factor among every age group: “tired of current home”!
If you fit in with that extremely common group, right now there are extraordinary values to be had among today’s homes for sale in Herndon. Give me a call to lay out an itinerary for visits to the ones that match up with your own specific wish list requirements!
My 5-year Tesla Plan is fanciful, but based on what could be the situation some Herndon renters can probably relate to.
The imaginary 5-year Tesla Plan participant could be any gainfully employed Herndon renter who has been living comfortably in a nice rental for the past few years. It’s either a comfortable home or a nice apartment: that doesn’t matter. What’s important is that the monthly rent has been rising. It’s now $1,570. This is now gobbling up just about every spare dollar of the Herndon renter’s income, perhaps leaving only an annual $6,000 bonus for savings, which the tenant has banked religiously for the past five years. The renter is driving a seen-better-days sedan, newly paid-off. In fact, the renter has recently been tempted to take that $30,000 bonus savings and buy a brand new Tesla Model 3 sports sedan—but so far, prudence has won out (besides, the trove is $5,000 short of the Tesla’s price tag).
The 5-year Tesla Plan gets started with a call to my office (actually, any Herndon REALTOR® could be called—but this is my Tesla Plan, after all!) The object is to find a suitable Herndon home to buy. This we accomplish with a spacious 3-bedroom 2 1⁄2 bath in an out-of-the way location. Its asking price is low because the motivated seller has been absent for months and now, in July, the yard looks terrible. So it’s a real buy at the just-reduced asking price of $210,000. (Whether the actual number is $210,000 or $2,100,000—the logic remains).
The average nearby comps come in at $240,000, so the bank has no trouble offering a home loan at that week’s rate of 3.835%. The bonus trove will cover nearly 15% as a down payment (saving those annual bonuses instead of buying the Tesla was certainly a good idea)! Because the down payment was less than 20%, the new homeowner will have to add about $65 a month extra for private mortgage insurance (PMI)—but even so, it’s still a great deal.
The bottom line is a monthly mortgage payment of $1,137 including property tax, house insurance, and the PMI insurance. So the proud new Herndon homeowner is now saving $433 every month. This might seem to be an annual saving of $5,200—but that’s not so! There are two other financially lucrative things going on that weren’t available to renters.
First is the appreciation in the value of the house once the yard is back in shape. But that’s not part of the 5-year Tesla Plan—it’s just a long-term bonus.
The second advantage most definitely is: a hefty income tax break. During those first five years, the mortgage interest paid equals $32,636—the entirety of which is a federal income tax deduction. So is the $3,900 in PMI payments. In the 25% tax bracket, that comes to $9,134 less headed to Uncle Sam. When you add everything together, during the first five years, the new homeowner will have pocketed about $35,134.
That’s good because it just so happens that the Tesla Model 3 is being advertised at a starting price of $35,000. So who needs to even trade in the now-rusty sedan?
That’s my fanciful 5-year Tesla Plan—which gets you your new Tesla at the same time you are establishing a long-term Herndon real estate investment. Individual tax situations differ, and should always be referred to a tax professional—but you don’t have to be driving a rattletrap car to benefit from the moral of this story—which is the undeniable financial advantage in store for Herndon renters who make the arithmetic work for them when they choose to become Herndon owners. Also, it’s easy to start: just give me a call!
When the Herndon weather turns sizzling, you might think that house showings might go better by holding off for milder weather. After all, as the mercury rises, energy levels tend to wilt, so prospective buyers willing to take on a big initiative—like lining up a new house—might seem to be in short supply. You might think that—but the evidence actually points in the opposite direction.
It seems that the hottest weather invites more home buying instead of less. At least that’s what the National Bureau of Economic Research suggests—and experts at Fannie Mae agree.
The NBER finds that “warm weather may have a positive impact on home sales.” In warm weather, if a home has features like access to a swimming pool or A/C, “buyers can see themselves enjoying the home on a nice day.”
Indeed, Fannie Mae’s research into how consumers feel about buying a home at different times of the year points to a similar seasonal effect. Part of Fannie’s Economic & Strategic Research Group’s findings line up with real estate’s well-known seasonal bias. Part of the strength of Herndon’s traditional spring and summer selling season may be due to prospective buyers’ need to make a change before the new school year starts, but if so, it’s a strong enough incentive to obscure any discomfort brought on by the July and August heat.
It’s all welcome news for homeowners planning Herndon house showings at this time of year—but it’s still a good idea to make some weather-wise adjustments. Here are 5 tips for hot weather house showings:
If your Herndon home has excellent cooling systems or an inviting swimming pool setup, now is the time to make the most of it. Give me a call to see if we can get started before summer starts to slip away!
From our earliest days, everybody in Herndon is inundated with tale of transformations. It started with those grade school day trips to science places with exhibits showing the improbable progression of fish (well, pollywogs) into frogs. There were nature TV shows with sped-up motion films demonstrating the unlikely truth that icky caterpillars DO turn into graceful butterflies. In fact, Herndon cable TV is littered with the Discovery Channel and the Science Channel and PBS and the NatGeo Channel—all of which seem to be dedicated into making sure we won’t forget that Nature is full of every day metamorphoses and how ugly ducklings will one day become swans.
We’ve been brainwashed into accepting that transformations are unstoppable.
So it’s only natural that when some Herndon homeowners have found themselves a new home, they don’t hesitate to assume it would be no big deal if they decide to change themselves from homeowner into landlord. Since Herndon rental rates are projected to keep rising, renting the current house out rather than just selling it surely makes sense. If Nature is any guide, the transformation from homeowner to landlord doesn’t seem like there’s much to think about. Their Herndon home has been a good investment, so why not try renting it? It’s a natural progression, isn’t it?
The answer is yes and no. Renting your Herndon home can be a terrific move if you are ready to add the landlord’s role to all the other activities that currently fill your day. It starts with making a stream of decisions: Will you allow pets? Chihuahuas? Rottweilers? What will your deposit agreement look like? When will you be available to take repair calls? What happens in emergencies?
Decisions are one thing, but once the rules are set, not everyone is comfortable being the person who has to enforce tough business realities—even if they are perfectly fair. How comfortable will you be about having to insist on inspections now that your house is another family’s home? How often? And if back-to-school time expenses cause your tenant to have trouble scraping up September’s rent, how will you feel when you have to hold them to their obligation?
Pollywogs don’t consider their temperamental disposition before they turn into frogs, but renting—the homeowner-to-landlord transition—is more complicated. Even if the financial equation will allow hiring a professional management company to handle the day-to-day supervisory details, the renting decision—transforming the family homestead into an investment vehicle—can have overtones that aren’t immediately obvious.
I’m here to help you in all your Herndon real estate matters—starting with arriving at decisions that let you feel comfortable. I hope you’ll give me a call!
The content the National Association of REALTORS® publishes is usually staid and non-controversial. After all, what they put out there has to ring true for the real estate industry in every nook and cranny of the country: in communities large and small, coast to coast—from Podunk to Peoria, Manhattan to Herndon. Real estate is, after all, the most massive industry in the country, so you’d expect the Association that represents its professionals to be hyper-cautious in its pronouncements.
So it was eye-widening to come across an article in the REALTOR website that was a how-to on buying a luxury home without having to pay a lot of money for it. I’m of the opinion that Herndon luxury homes are more expensive than less-luxurious homes—so I was eager to see what in the world they were talking about.
Surprisingly, they had a point—in fact, several good ones. In truth, the “6 Sneaky Tips for Buying a Luxury Home Without Wads of Cash” are mainly variations on becoming a shrewd shopper, but putting them in one list was a clever way of presenting that idea. And I can add a few more along the same lines for future Herndon luxury home shoppers.
Their six tips started with timing: waiting for the darkest, dankest days of winter, possibly around Christmastime, when few other prospects are out there competing. Then look for evidence of a motivated luxury home seller who has recently reduced price a couple of times. Then see if the motivated seller will finance at least a piece of the mortgage (although this slightly contradicts a previous tip, which was to “make your bid straightforward”).
Both of the last two tips call for disclaimers: to check out foreclosure listings and to be ready to borrow from your retirement funds. The first tip is not “sneaky” at all—but should carry a disclaimer that, as with all foreclosure buys, it’s a good idea to check that the property won’t ultimately involve “wads of cash” to rehabilitate. Likewise, raiding your retirement plan requires the utmost of caution (and probably professional guidance).
A (non-sneaky) tip I would add is to be realistic when budgeting the upkeep costs your Herndon luxury home will generate. Maintaining luxury can be relatively expensive—and allowing it to deteriorate, even more so. Another tip: be patient, and think long term. Be willing to start with a non-luxury home you can improve, and start the process of working your way up. It’s non-sneaky in the extreme—and it’s the way most Herndon luxury home owners wind up luxuriating!
One last tip is equally non-controversial: reach out to an experienced Herndon real estate professional who understands your goals and stands ready to help—not just now, but for the future, as well. Call me to start that process!
Last week there was another interest rate development—though it was a slightly whipsawed kind of development. Since mortgage interest rates are so important to the bottom line in all but all-cash Herndon residential home sales, the direction rates are headed is something worth watching closely.
Last Wednesday was one of those days that come about twice a year. It was the occasion when the Federal Reserve Chairman is called upon to testify before Congress. The date is set as a biannual marker for revealing what’s likely to lie ahead for interest rates. If the Fed is going to decide to raise the Fed Funds rate, it’s usually the single strongest pointer to higher mortgage interest rates. All things being equal, that would eventually slow Herndon’s real estate market activity by making mortgage payments more expensive.
As the appointed hour for the testimony neared, Reuters weighed in early. At about 8:30 in the morning, they reacted to the advance copy of Chairman Yellen’s prepared remarks. Reuters reported on some key paragraphs citing the continued gathering strength of the economy—which would, therefore, “warrant gradual increases in the federal funds rate over time.”
Not great news for Herndon mortgage rate watchers—or was it? Reading more closely, there were those “gradual” and “over time” phrases. Wouldn’t that lead one to think the raises would be slow and gradual? Possibly more slow and gradual than previous Fed hints had led us to believe?
Ninety minutes later came the actual testimony, followed by questioning from the congressional committee. CNBC saw good news for Herndon mortgage applicants: “Fed stands ready to slow down rate hikes” was their takeaway. Sooooo, the Fed was going to raise the Fed funds rate (bad), but more slowly than expected (good).
But by the end of the week, the picture was a little clearer. Summing up last Friday, the Mortgage News Daily pointed to newly released retail sales and consumer inflation reports as “economic data that coincides with rates moving lower.” And despite anything the public hearing had produced, in MND’s opinion, “the Fed is less likely to flip the switch on those plans.”
Sure enough, by the close of business, they were able to headline “Mortgage Rates End Week at Best Levels.” So Herndon buyers and sellers could head into the weekend with few worries about interest rates, which remain at appetizingly low levels. If you are thinking of taking a look at some of the terrifically affordable Herndon home buys they make possible, today would be a good time give me a call!
There’s news on the real estate value estimating front (robotic version).
For any kind of Herndon real estate activity—whether you are buying or selling; financing or refinancing; whether for your family residence or as an investment—there are at least two value estimation figures that determine how the Herndon transaction is likely to fare.
The first is a value estimate that you come up with: a dollar amount that reflects what the subject property is worth to you. That’s a calculation likely to be based on some mix of the property’s features, your own personal tastes, and your financial profile and outlook. If I’m your REALTOR®, it will also be greatly influenced by the research I prepare for you: the real-world values of all the latest comparable transactions that have been taking place locally—along with the asking prices of similar properties.
That figure is one thing, but the second kind is an actual appraisal—the estimate that lenders use as the collateral value for the Herndon property. That estimate is the one a professional appraiser calculates using guidelines and formulas that have been painstakingly developed over time. It’s fortuitous when the first number comes close to the professional estimate—and I’m happy to say that it’s often the case.
But since 2006 there has been a third kind of Herndon real estate value estimate—one that’s increasingly mentioned in news of real estate controversies. This is the “Zestimate” offered by the website data company Zillow: a number that is arrived at via an automated system that assembles publicly available data. It’s stated purpose is “to aid potential buyers in assessing market value of a given property.” Unlike the painstaking reports that certified assessors create for a fee, Zestimates are widely disseminated to everyone for free. There is one problem, which I’ve mentioned before: the figures may be misleading.
Although Zillow claims an “incredibly low” national median error rate of 5%, last June they hailed a new improved algorithm that dropped the rate to 6.1%” [that’s not a typo: 6.1% is indeed a larger error rate than the still-claimed 5%]. Worse yet, research shows that in 10% of the cases examined, the error was 20% plus or minus...so a home with an actual fair market value of $300,000 could show a Zestimate of anywhere from $240,000 to $360,000!
Given that possibility, it’s probably no wonder that Zillow has announced a $1 million prize “to the person or team who can most improve the Zestimate” formula. MarketWatch points out that the contest was announced “just a week after a class action suit was filed against them” for offering unlicensed appraisals that hurt business—but the company claims the timing is just a coincidence.
Herndon real estate buyers and sellers will undoubtedly continue to be amused by those Zestimates when they see them, but the more knowledgeable keep in mind that they can constitute eye-rolling mistakes. When your own Herndon real world real estate affairs are in the offing, better to give me a call for information that won’t include any misleading automated miscalculations.
If you see the letters “PST!” in connection with selling a house in Herndon, don’t think it’s someone whispering to get your attention (that would be spelled “psst!”).
The selling-a-house kind of “PST” isn’t something whispered by a black marketeer to keep an off-the-books deal under wraps. There’s no need to speak in hushed tones about PST in polite conversation. When speaking about selling your Herndon house, its meaning is right out there in the open. It may not be on the tip of every homeowner’s tongue as they prepare their home for sale, but its import is undeniable in formulating one of your listing’s most important ingredients: the asking price.
Before any Herndon house can be put on the market, zeroing in on the dollar amount the ultimate buyer will be willing to pay is always a kind of high-stakes guessing game. This mysterious buyer could be anyone. He or she could appear at any time. Even so, picking an asking price that attracts the greatest number of possible ultimate buyers isn’t pure guesswork, nor is it some number that’s plucked out of the air. And it definitely isn’t a large number that’s chosen “just to see what happens.”
The most reliable way to arrive at an effective asking price is to do some serious investigation into the current Herndon market by seeking what previous buyers have been willing to pay. That’s where PST! comes in.
This “PST” is an acronym for Proximity, Similarity, and Timeliness—the three main ingredients that measure the quality of Herndon “comps”—the comparable sales figures that buyers, their agents, lenders, and sellers rely upon to develop asking and offering prices.
P—proximity: how physically close was the sale? Next door is best; in the neighborhood also good; 50 miles away, pretty worthless.
S—similarity: how do the layout and features compare with your house? With a slight adjustment, a 4 bedroom 3 1⁄2 bath comp is useful for your own 4 bedroom 3 bath property. For a 1 bedroom condo, not useful. It’s important to account for level of finish, too. If a neighbor’s home sold for X dollars including its brand new $80,000 kitchen remodel, a similar house that’s straight out of the 80s shouldn’t expect the same.
T—timeliness: how recent was the sale? A March sale would be terrific right now; January 2015, not so terrific.
Researching and analyzing a good sampling of comps accomplishes more than just establishing the asking price. Being able to furnish a solid selection of comps convinces buyers that you are selling your house for a reasonable price. And lenders can use them to verify a property’s collateral value in today’s Herndon marketplace.
When you are selling your Herndon house, a good first move is to partner with an experienced local real estate agent. When you give me the nod, from the outset, you will be the beneficiary of the most comprehensive PST research available. That’s a solid place to start!
An overstuffed curbside mailbox, blazing porch light at noon, or a pile of newspapers out there by your front door all indicate a couple of things Herndon homeowners would do well to avoid. For burglars and housebreakers of all stripes, these are like lighted billboards announcing:
For vacation-bound locals, a few precautionary steps will do much to avoid a miserable discovery on your return home. If your home is currently listed, I think it’s a good idea to notify your agent to add a “Do Not Disturb Occupants” rider under the “For Sale” sign (whether it’s occupied or not!). In general, here are another six good vacation safety tips:
Even for Herndon neighborhoods that are safer than most, vacation time burglaries can happen anywhere and anytime that basic vacation safety precautions aren’t observed. A few minutes of prevention should yield added peace of mind while you’re on the road as well as a pleasant return to a safely secured home. I’ll be standing by to help when you start planning the more extended kind of outing: to your next Herndon home!
All of a sudden last month Herndon readers might have come across a number of new articles dealing with the same topic: the problem young first time home buyers are encountering due to outstanding student loans. The target group is the millennials—everyone born between the early 1980s and 2000s. If you are one of them, you are frequently reminded that there are millions and millions of you out there. And millions who also share the same student loan problem.
There are conflicting accounts of the precise size of the issue, but it seems that the average college graduate now carries somewhere between $30,000 - $50,000 in debt upon graduation. The Federal Reserve says that the amount of student debt has more than doubled since 2007, to something like $1.3 trillion, at this point!
Nobody would deny that this appears to be a roadblock to young adults contemplating applying for their first Herndon mortgage. Dealing with banks or any lending institutions for the first time always has the aura of stepping into alien territory. A major unknown is the detail known as the debt-to-income ratio.
Apparently many would-be first-time homebuyers who are thinking about qualifying for Herndon mortgages automatically assume that their own debt-to-income ratios disqualify them from consideration, even though that’s not necessarily the case. At least according to the folks at Equifax, the debt reporting company, that perception is at odds with the reality.
The debt-to-income ratio is the monthly dollar amount an individual must produce in order to service his or her combined debts in relation to their total income. It is not the total amount of debt (no matter how soberingly large that number might be). Rather, it’s the ratio between the cash in and cash out per month. That becomes a considerably less daunting proposition because it’s a measure that can be improved much more rapidly. A recent survey showed that most respondents assumed that they had to reduce their debt payments by more than $300 per month in order to qualify for a mortgage, but an actual analysis showed that the real number was most often less than $300—and sometimes as little as $150.
Qualifying for Herndon mortgages differs for everyone, so the takeaway for Herndon Millennials (as for every other first time home buyer) is that assumptions shouldn’t get in the way of real fact-finding. Give me a call if you’d like to get a broad view of today’s Herndon starter home offerings. It could be that you are closer to moving into a home of your than you think!
Mom. Mother-in-law. Chef's Wife. Navy Chief's Wife. Realtor. Christian. Connector. Empty Nester. Business Woman. Foodie.