Absorption Rates – October 2011

"I think we'll need more paper towels ("buyers")!"

Absorption rate are a calculation of supply and demand. Absorption rate is calculated by dividing the total number of active sales by the number of homes sold in a month. The resulting answer let’s us know how many months it will take to sell the entire inventory of homes. I love numbers and have started to calculate the absorption rate for the DC Metro Area, more specifically, I will be focusing on Northern Virginia since that’s my area of expertise and state of licensure.

The numbers used for my calculations are  Continue reading

Benefits of a Home Warranty!

It’s only a matter of time before your dishwasher starts to leak, the dryer overheats or a pipe breaks and floods the basement. With the current economy, most of us don’t have money laying around to be able to pay for a new dishwasher, dryer or fix the basement pipes and replace the carpet! In times like these it’s important to have home warranty! A home warranty is a type of insurance that covers different types of household items, major appliances and pay for the repair of the covered items in case they break down. Some types of home warranties may even pay for replacing the damaged appliances with new ones.

A home warranty can be beneficial for both buyers and sellers.  Before I start discussing the benefits for each, here are some of the appliances that are routinely covered by most home warranties: Continue reading

Stop Throwing Away Money On Rent!

It’s a well known fact that when you make your rent payment, the money is gone forever. If you rent a townhouse for three years at $1,500 per month, you’ve spent $54,000 that you will never see again.  However, the decision to buy a house is never an easy one. No one knows what the future holds for you, your family, your job or your finances but I’m going to help you understand whether it is better for you to buy or rent.

There are many online calculators that you can use to compare the costs of renting vs buying. The calculator will take many things into consideration (i.e. interest, property taxes, tax savings, appreciation, opportunity costs, closings costs, selling cost, etc.) when comparing the two prices.

Over the years, people have given me many reasons on why they would rather rent than buy. Here are the top questions and answers to them:

“My credit is bad!”  Most people think their credit is bad but in reality it is in fairly decent condition. Others have collections on their credit and think that will hurt them from buying. Please remember that most credit repairs are just minor fixes and can be fixed in a short time period. Also, there are a few lenders that will offer financing with credit scores as low as 580 and only 3.5% down payment.

“I don’t have the down payment!” With current FHA loan programs, you can purchase a home with down payment as low as 3.5% of sales prices. If you have good credit scores, you may qualify for programs that offer 100% financing. There are also some grants that will offer first time buyer $7,500 to help towards closing cost and down payment. With many of these programs combined, you may be eligible to purchase a home by paying less than your security deposit.

“I will have to pay taxes and insurance and it will exceed my monthly rent!” This is an incorrect statement in most cases. Currently the interest rates are and house prices are low which means that your principal and interest will be low also. For most buyers, the principal, interest, taxes and insurance (PITI) is typically lower by a few hundred dollars for a comparable home that they would rent.

“I would rather rent because I don’t have to worry about maintenance!” Even though it is true that you have less maintenance when you rent but it should not be deciding factor to limit your purchase. You can get home warranty for a full year for less than $500. For a small deductible, you can have “others” take of the maintenance of your home and don’t have to worry about extensive repairs.

Each area is different and in some areas it is better to rent than buy so make sure to consult a Realtor. Our Northern Virginia market offers a great deal of benefits for buyers. Just remember you can spend the same $1,500/month to buy a home valued around $230,000*. In five years, you will pay $14,405* towards principal and your home should appreciate at least $63,545** in value. Therefore, if you sell your home after five years, it should be worth $293,545 (or more) and your loan balance will be $215,595, which means you will OWN $77,950 in equity!

IF YOU’RE READY TO RECEIVE EXPERT ADVISE FOR YOU NEXT HOME PURCHASE, CONTACT NOUMAN MIRZA AT 703-577-4320.

*Based on 30 year fixed rate loan at 4.75%. Does not include down payment, closing costs, pre-paids/impounds or origination fee.
**Based on 5% appreciation per year which is the approximate national average from 2000 to 2007.

BPO’s Gone Wrong!

BPOI was recently contacted by a company to do a BPO (Broker Price Opinion). A BPO helps the bank determine the price of the home. Usually they are trying to determine the price because the homeowner applied for a loan modification, short sale or is going into foreclosure. The most common BPO is called a driveby. It is where you drive by the house, take picture of the front, side, address and of the street sign. While doing this you need to assess if the house is occupied or vacant and any damage that can be seen from the road. In theory this sounds like an easy task, right?

I’ve done many BPO’s but this had to be one of the worst ones.  Typically, something that takes me 30 minutes to 1 hour took me 3 days to complete. I did everything I needed to do, go to the house, take photos and submit 3 “active” comparable listings and 3 “sold” comparable listings. This house was a one level, 2 bedroom, 1 bath log home with 684 sq. ft. and no comparables nearby (bank requires max 5 miles radius). After finding nothing, I did some extra work and expanded my search to 40 miles to get good comparables. I submitted what I thought was a fair market value of the home before repairs ($50k-$60k) and after repairs ($70k-80k).

Lo and behold, the bank Continue reading