3 tips for first-time homebuyers
Navigating today’s competitive market
By METRO CREATIVE
Real estate has garnered considerable attention since 2020, and for good reason. Though speculators and real estate professionals may point to a number of variables that have affected the market for homes in recent years, the pandemic certainly was among those factors. Real estate prices and mortgage interest rates increased significantly during the pandemic and have remained well above pre-pandemic levels ever since.
The spike in home prices and interest rates has had a significant impact on young homebuyers, some of whom feel as though their dream of home ownership may never be realized. And data from the National Association of Realtors indicates the median age of homebuyers is now significantly higher than it was two decades ago. In 2023, the median age of buyers was 49, which marked an increase of 10 years compared to the average buyer age 20 years ago.
First-time homebuyers may face a more challenging real estate market than they would have encountered just a half decade ago. The following three tips can help such buyers successfully navigate the market as they look to purchase their first home.
1. Expect to move quickly
Inventory remains very low, which means buyers are in heated competition for the few homes that are on the market. In late 2023, NAR data indicated the rate of home sales were the lowest they had been in 13 years, so buyers will likely need to move quickly and make an offer if they see a home they like, as chances are the property won’t be on the market too long before it’s sold.
2. Apply for mortgage preapproval
The competitive nature of the market for buyers means it’s in their best interests to arrange financing prior to beginning their home search. A mortgage preapproval can be a competitive advantage, as it indicates to sellers
that buyers won’t be denied a mortgage or lack financing after making an offer. The financial experts at NerdWallet note that buyers will be asked to provide details about their employment, income, debt and financial accounts when applying for mortgage preapproval. Gather this information and clear up any issues, such as credit disputes or delinquent accounts, prior to applying for preapproval.
3. Set a realistic budget and expect to offer over asking price
A financial planner and/or real estate professional can help first-time buyers determine how much they should be spending on a home. In the current market, buyers should know that they will likely need to pay more than asking price for a home. For example, the NAR reports that 28% of homes sold for above list price in October 2023. With that in mind, first-time buyers may do well to look for homes that are under budget in anticipation of offering more than list price after seeing a property.
The real estate market remains competitive for buyers. First-time buyers can utilize three strategies to increase their chances of realizing their dream of home ownership.
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Landscape lighting: A budget-friendly upgrade that enhances curb appeal
By METRO CREATIVE
Landscape lighting has become increasingly popular in recent years.
Such lighting can extend living spaces, and many homeowners report that a well-lit landscape helps them feel more safe at home.
Though the final cost to light up a home’s exterior will depend on the size of a property, landscape lighting is among the more budget-friendly home renovations homeowners can consider.
According to the renovation experts at Angi.com, the average cost of a landscape lighting project is $4,000. Consid-
ering how much landscape lighting transforms the look of a property at night, that’s a lot of bang for homeowners’ bucks.
Solar lights are popular, but homeowners may want to consider electrical wiring that ensures lights maintain their awe-inspiring glow throughout the night. Electrical work requires additional labor, and thus a higher price tag.
However, Angi notes that modern LED bulbs consume just 25% of the energy used by incandescent alternatives, which can make them a more reliable option than self-installed solar lights.
Sienna Coats joins McColly Bennett
SHAW LOCAL NEWS NETWORK contact@shawmedia.com
McColly Bennett Real Estate in Bourbonnais recently announced the addition of Realtor Sienna Coats to its team.
Coats was born and raised in Bourbonnais. Throughout her school years, she trained in martial arts and boxing, developing self-discipline for success mentally, physically and spiritually, while receiving her black belt as a
Sienna Coats
13-year-old. Coats’ passion for real estate and determination will benefit those interested in buying a new home for themselves and their family. Contact her at SiennaCoats@mccolly. com or by calling 815-507-4865.
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What to know about investing in real estate
By METRO CREATIVE
Investors look for various opportunities they hope will help them grow their wealth. Some invest in the stock market directly by buying stocks and bonds, while others choose a more passive form of investing like index funds. Certain investors prefer to back enterprising entrepreneurs, and some people determine that real estate is the avenue to pursue.
There are several different ways to invest in real estate, including buying a home. Investing in real estate can be lucrative, although the return on such investments can be affected by high interest rates. When interest rates fall, investors often come out of the woodwork. According to a 2022 Bankrate survey, 29% of Americans said that real estate was their prime pick for investing money they won’t need for at least 10 years. Investors considering real estate have many options to choose from.
Become a landlord
NerdWallet says buying a property with the intention of renting it out is one of the most common ways to invest in real estate. However, this could be one of the more labor-intensive real estate investment options, as it requires property owners to field calls from renters and always be available to tackle issues that inevitably arise. Plus, if renters are not properly vetted, landlords may end up with less-than-ideal tenants. While there are management services that can offset some of the work, farming out tasks comes with expenses that can cut into profits. Still, when a successful renter-landlord
dynamic is established, this option can provide significant long-term income.
Flipping properties
Buying a property and “flipping it,” which means renovating and putting it up for sale shortly after, is another real estate investment venture. Flipping requires a lot of work and perhaps even some extraordinary skills. First, it involves finding up-and-coming neighborhoods and then renovating within a reasonable budget so that you can sell the home at a premium. Remodeling costs can run high, and the time involved in flipping may be longer than investors anticipated.
Buying your own home
Building equity in a home creates a nest egg that homeowners can tap into at a later time, particularly when they choose to sell. Bankrate says banks treat owner-occupied properties more favorably, giving borrowers lower mortgage rates and requiring lower down payments.
Purchase REITs
REITs are real estate investment trusts that enable investors to invest in real estate without actually touching physical real estate properties, advises NerdWallet. REITs are like the mutual funds of the real estate realm, and include companies that own commercial real estate. REITs can pay out high dividends, making them popular retirement investments. Dividends can be reinvested to grow your money further. Investing in real estate can be a worthwhile option for people who want a tried-and-true vehicle for seeing their money grow.
CONSUMER GUIDE
FLOOD INSURANCE
Flooding is the most common and costly natural disaster in the United States. Even a few inches of water can cause devastating damage. A licensed insurance agent can advise you on purchasing the right flood insurance to protect your assets. Here’s what you need to know:
Does my homeowners insurance cover flood damage? Most homeowners insurance policies do not cover flood damage. While federal disaster assistance may be available to you when a flood occurs, it may be limited and is not guaranteed. The best way to ensure your assets are protected is to purchase flood insurance.
What is flood insurance? Flood insurance covers a property for damage caused by flooding, including from incidents such as heavy or prolonged rain, melting snow, coastal storm surges, blocked storm drainage systems, or levee dam failure. Is flood insurance required? If you own a home or business in a “high-risk” flood area—any area with a 1% or higher chance of experiencing a flood each year, as defined by the Federal Emergency Management Agency (“FEMA”)—and have a federally backed mortgage, your lender will require you to have flood insurance. However, even where your lender does not require flood insurance, it does not mean your home is not at risk. According to FEMA, wherever it rains, it can flood. Consult an insurance agent for guidance on your specific circumstances.
How much does flood insurance cost?
The average cost of flood insurance is about $1,000 per year, according to FEMA. However, the cost can vary widely depending on many property-specific factors and the flood risk for each individual property. Your premium is also influenced by your deductible, or the portion of a claim
that you must pay out of pocket.
What are my options for purchasing flood insurance? Depending on where you live, you have two options:
• The National Flood Insurance Program (“NFIP”): The NFIP, managed by FEMA, offers flood insurance to property owners, renters, and businesses in participating communities. In return for access to flood insurance, participating communities agree to adopt and implement local floodplain management regulations that help protect lives and properties from flooding. For residential dwellings, NFIP policies offer coverage up to $250,000 for building repairs and up to $100,000 for personal property; non-residential properties are covered up to $500,000 for building repairs and $500,000 for damaged contents. Check your community’s status on FEMA’s website to determine if you are eligible. You can also get an NFIP rate quote online here.
• Private Insurance: Private flood insurance is provided by private companies rather than the federal government. Private insurers may charge comparable rates but offer more coverage than the NFIP, such as higher protection limits, policy enhancements, and payments for temporary living expenses if you are displaced. You can also supplement an NFIP policy with private insurance to extend your coverage further.
How long does it take for my policy to take effect? Typically, there is a 30-day waiting period from the date of purchase until an NFIP policy goes into effect. There are exceptions if you purchase flood insurance in connection with a mortgage loan. Private flood insurance can vary.
HOMEOWNERS INSURANCE
Understanding homeowners insurance is essential for anyone looking to purchase a home. Start looking at policies early and ask an agent who is a REALTOR® to connect you with a licensed insurance agent for assistance. A detailed industry overview of available coverage is here, and below are some of the basics: What is homeowners insurance? Homeowners insurance covers you for unexpected losses at your home or property. It can include provisions to repair or rebuild the property or other structures not attached to your house (e.g., fences or detached garages), replace assets within the home, cover legal and/or medical fees for accidents that happen to you or someone else on the property, or even pay for living expenses if a covered incident forces you to live elsewhere temporarily.
What are perils, and which are covered?
“Peril” is an insurance term for a specific risk or reason for a loss. Your insurance will cover a loss only if it is caused by a peril that your policy covers. Policies can vary in which perils are covered, but the most common policy type, HO-3 or the “Special Form,” covers the home structure and personal belongings for disasters including fire, hail, lightning, freezing, theft, and vandalism. Most policies exclude floods and earthquakes. Is homeowners insurance required? If you are taking out a mortgage on your new home, your lender will require you to have a homeowners insurance policy for the duration of your mortgage. If your mortgage is paid off, or if you’ve paid for the home in cash, no laws require you to maintain insurance. However, having insurance is generally a good idea to ensure your assets are protected.
How much does homeowners insurance cost, and how do I pay it? The cost of homeowners insurance depends on several factors, such as the house’s age, square footage, condition of the property, and location. You may have the option to pay your premium on a monthly, quarterly, or annual basis. Some lenders collect the insurance premium as part of your monthly mortgage payment, place it in an escrow account, and pay the insurer on your behalf.
How much will my insurer pay me?
In the event of a loss, there are two common types of reimbursement:
• Replacement cost value is the amount needed to buy a new,
similar version of something you own. Insurers often cover this for your dwelling or property up to the limit of the insurance policy. If your home is insured for at least 80% of its replacement cost, and it gets damaged or destroyed, the insurer will reimburse you to have it repaired or replaced with similar materials of like kind and quality. Replacement cost is not the same as market value. For example, if you bought a $500,000 home five years ago, it is destroyed by a fire, and the actual cost today to restore it using similar materials is $375,000, you may be paid $300,000 after the deductible.
• Actual cash value is the current value of an item that loses value over time due to use and/or age (depreciation). The insurer pays out the cost to make repairs, minus any depreciation. This reimbursement type is most often used for replacing personal property but could also be applied to your dwelling if your property is significantly underinsured (less than 80% of replacement cost). In this case, if you bought a new table five years ago for $1,500, but due to normal wear and tear, it’s only worth $750 at the time of the covered incident, then your insurer will only pay out up to $750. You can, however, purchase replacement cost coverage for your personal property for an additional charge.
In addition, some insurers may offer add-on options to extend your dwelling coverage. For example, an extended replacement cost policy option gives extra coverage above the policy limit up to a set percentage. For example, if a home insured for $500,000 takes $750,000 to rebuild, an extended coverage policy at 20% would mean the insurer pays 120% ($600,000), or $100,000 above the limit.
Are homeowners insurance premiums tax deductible? If the property in question is your main home, then your home insurance is generally not deductible. However, people who run a business from their home or those intending to rent out their property may be able to claim a deduction. Additionally, if you suffered a loss to your property caused by a presidentially declared disaster, you may be able to claim a casualty loss deduction. Discuss your unique needs with a tax professional.
Practices may vary based on state and local law. Consult your real estate professional and/or an attorney for details about state law where you are purchasing a home. Please visit facts.realtor for more information and resources.
How to decide between a deck or pavers in an outdoor remodel
By METRO CREATIVE
Outdoor living spaces have become sought-after commodities among homeowners. A 2022 survey of homeowners conducted by the New Home Trends Institute found that open yards are less appealing to homebuyers than they once were. The survey noted that just 28% of respondents chose open yards, while 65% preferred patios and 55% chose decks. Green spaces remain popular, but the survey indicates that many would-be homebuyers also want an outdoor living area to make the most of their home exteriors.
Homeowners aspiring to transform their home exterior spaces typically must decide between a deck or pavers when the time comes to plan such areas. That’s a personal choice homeowners must make, but those without strong feelings on either option can consider these tips as they
try to decide if a deck or pavers are for them.
Determine your budget
Budget is a notable variable with any home renovation project, and the addition of an outdoor living space is no exception. The materials homeowners choose will ultimately determine the cost of each project. For example, composite decking materials tend to cost significantly more than wood decks, but that higher price tag also comes with less maintenance and typically a longer life span. Pavers may prove less expensive than composite decking, but those cost savings may be negligible if a yard requires extensive excavation to prepare an area for a new patio. It requires patience, but gathering estimates of the various materials can serve as a good starting point when planning an outdoor living space. In addition, homeowners must
recognize that material costs can fluctuate considerably over time, as such prices are often contingent on a range of variables, including supply chain issues. So it’s best to gather estimates in a short period of time to make the most accurate price comparisons.
Identify your vision for the space
Homeowners who have a vision for their outdoor living space, even if they are not sure about which material they prefer, may find the process goes more quickly and even more smoothly than those who are unsure about what they want. Those who prefer a flexible multiuse space may be best going with pavers, as the spaces can be easily converted and areas simply designated as one might differentiate between rooms inside the home. For example, an outdoor living room can be separated with the installation of a pavillion and fireplace, while kitchen and dining areas can be separate
spaces on the same patio. Decks tend to be less flexible, which might make them ideal for homeowners who prefer an outdoor dining area but don’t need a more expansive entertaining space. Of course, decks can be as big as homeowners choose, which can make the spaces more multi-functional.
Recognize both may be in your best interest
Homeowners also should know that many outdoor living spaces feature both a deck and a paver patio. Homeowners may like an elevated deck that steps down to a patio, which can easily distinguish between the spaces and establish the area as a multifunctional space. Homeowners planning outdoor living space projects may find themselves choosing between a deck and pavers. Each option can work, and homeowners may even want to combine the two.
