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Fournier Law Blog

Intelligent legal insight from our team of experienced attorneys.

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Why Are More Americans Choosing to Rent instead of Buy Homes?

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The debate over why households choose renting over purchasing a home in the United States has been a hot topic lately.  Analysts have indicated the young generation of millennials are not interested in being tied down to home ownership and prefer renting over buying. However, an article published by CNN by Daniel B. Kline, points out that it is not just millennials who are opting to rent instead of making a home purchase.  Kline also notes that the decision to rent may not be a lifestyle choice, but a financially driven decision.

It is true that the number of households renting a home has increased over the past decade; almost by 10 million.  It is also true that 65 percent of household headed by those 35 years old and younger rent their homes.  However, it’s the heads of households aged 35-44 that made the biggest increase over the past decade.  In this age group, “the percentage of renters jumped from 31% in 2006 to 41% in 2016”.   Heads of households between 45-65 renting homes also increased over the past decade.

However, these households may not all be renting based on lifestyle choices.  In fact, research indicates that many who rent homes would actually like to purchase a home someday.  Further, surveys show that 65% of renters indicated that they are renting homes due to circumstances, not purely by choice.  Circumstances such as increased home prices and tougher mortgage standards may be partially to blame.

Read the entire article.

 

 

 

Photo Credit:  Mark Moz

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How Is Student Debt Affecting Real Estate Trends?

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Student debt is a thorn in the side of many college students years after they receive their diploma.  The rising cost of tuition and debates as to whether students should be responsible for paying for their college education have been hot topics for several years.   According to an article published by Bloomberg, written by Chris Bryant, “In the U.S., where aggregate student debt has surged 170 percent in a decade, recent graduates owe $34,000 on average. About 5 percent owe more than $100,000. “

This may not seem like an issue that older generations would be worried about.  Their student loans have long been paid off, they may have even helped finance their children’s college education, leaving them debt free from college loans.  However, as the article points out, this mounting debt is a factor in some negative economic trends that affect many, even older generations.

Because the generation of millennials will be dedicating funds to pay their student loans off, with salaries that have not rebounded from the 2008 recession, their focus will not be on purchasing a home.  They are struggling to set money aside for a down payment.  Missed loan payments for student loans can affect credit scores, making mortgages harder to come by.    As baby boomers look to downsize homes in retirement, it might be difficult to find buyer from the next generation who can afford to purchase it.

Read the entire article.

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Zillow’s Instant Offers: Should We Be Concerned?

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Many home owners and those shopping for homes are familiar with the popular real estate website Zillow.com.  It provides information on not only homes for sale, but estimated values of homes, called “zestimates”, based on a combination of factors.  These zestimates have recently come under fire; nonetheless, Zillow has begun to introduce a new feature, “instant offers”, and some real estate professionals are sounding warning alarms.

In an article published in LinkedIn by Greg Hague, “Zillow’s Secret Plan”, concerns about Zillow’s business model are detailed.  Specifically, Hague warns that the instant offers will most likely come from real estate investors looking to purchase a home at a below market value, only to turn around and sell for a profit.  Further, the seller will have to pay a hefty service fee that does not include professional services such as appraisers, attorneys and real estate agents.

Hague summarizes that ultimately, Zillow is “…trying to commoditize real estate so that homeowners sell to online investors who then sell to retail buyers. If that happens, millions in homeowner equity will be transferred into the pockets of middleman institutional investors. The big winners will be these firms’ shareholders.”

Read the entire article.

 

 

 

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Sound Advice for First Time Home Buyers

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The real estate market has been improving significantly over the past several months.  Home prices are on the rise and homes aren’t sitting on the market for very long before going under contract.  This is great news for home sellers, but challenging for those looking to purchase a home.  First-time homeowners might find the conditions overwhelming and intimidating.

CNN Money published an article written by Beth Braverman which outlines several mistakes first-time home buyers make and tips for avoiding these pitfalls.  Important reminders noted include getting pre-approved for a mortgage early in the home buying process, not maxing out the mortgage limit provided by the lender and keeping emotions out of the decision making process.

It is highly recommended that all prospective home buyers get pre-approved for a mortgage early in the home buying process.  It allows the buyer to have an idea of how much money a bank is willing to lend them for a home.  As Braverman points out, “Second, it shows sellers that you’re serious and gives you slightly more standing if you’re competing for homes with all-cash buyers.”  This can be an important advantage in a competitive market.

However, upon receiving a pre-approval, home buyers maybe anxious to bump their budget up to the maximum amount the bank has approved.  It is wise to review a detailed budget to be sure the monthly budget can handle the mortgage payment, including potential income changes and other unexpected housing expenses.

As the home search continues, there will be bumps in the road, houses lost to other buyers or dream homes priced just outside the budget.  Braverman warns, “In that kind of environment, it’s easy to fall in love with a house that’s out of your budget, or get caught up in the heat of a bidding war and end up paying more than you expected.”  Being level headed and taking emotions out of the decision making process will ensure financially wise decisions are made.

For more details and additional tips, read the entire article.

 

 

 

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Cook County Property Valuations Cause for Concern?

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Each year home owners receive a new property tax bill and have the opportunity to see what value their county assessor’s office has assigned to their property. The property value on tax bills should be an accurate representation of the home’s true market value.   However, residents of Cook County, according to the Chicago Tribune, are not receiving accurate property values. Sadly, inaccurate valuations are negatively impacting many home owners in lower income communities. Worse yet, it seems as though wealthy home owners are benefiting from their properties being undervalued by the assessor’s office.

After analyzing millions of property tax records over a period of 12 tax cycles, the Chicago Tribune determined, “Residential assessments have been so far off the mark for so many years that the credibility of the entire property tax system is in doubt.”  Despite his announcement in 2015 that his office would be using new technology and models to improve the accuracy of property valuations, Cook County Assessor Joseph Berrios continued to utilize old computer models were still until at least 2015.

A detailed breakdown of the property values, according to their geographic locations, shows that homeowners in some of Cook County’s most affluent neighborhoods are receiving tax bills based on properties that are undervalued by 10 percent or more.  “Meanwhile, home owners in poorer areas of Cook County have properties significantly overvalued by the county.  As a result, people living in poorer areas tended to pay more in taxes as a percentage of their home’s value than residents in more affluent communities,” says Jason Grotto from the Chicago Tribune.

Want to fight your valuation and reduce your real estate tax bill? Contact our office for a free review of your property.

Read the entire article published by the Chicago tribune.

 

 

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Low Inventory is Concerning Real Estate Professionals

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The low inventory of homes for sale is causing some real estate companies to panic a bit.  The number of homes for sale March 2017 compared to March 2016 fell seven percent according to the National Association of Realtors.  In an article published by CNBC by Dian Olick, she quotes Glenn Kelman, CEO of Seattle-based Redfin, a real estate firm, “”The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out — it’s affecting our business; it’s limiting our sales.”  

The cause of this low inventory issue can be attributed to a few factors.  To begin, many homeowners are deciding to become landlords.  Instead of selling a home when moving on, homeowners are holding on to their home and renting it out.  Another reason is new home construction is declining.  On average, home builders are building about 18 percent fewer homes than the historic average.

The good news for home owners looking to sell, homes are selling quickly and some are even selling above list price.  Homes in April 2016 went under contract in 50 days, as of April 2017, that number decreased to 40 days.

Read the entire article.

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Zillow Estimates Under Fire: Website Responds with a Contest

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Earlier this year, a Chicago-land home owner and real estate attorney filed a law suit against the website Zillow. She felt the home estimate quoted on the popular real estate website was significantly lower her home’s actual value.  Further, she argued, it was deterring buyers and irresponsible of the website to publish unreliable information.  “If it’s not reliable, you shouldn’t put it out there,” she stated in references to the website “Zestimates”.

Zillow emerged on the web about eleven years ago and has about 171 million virtual visitors a month, according to an article published in the New York Times, written by Nick Wingfield.  The market values quoted on the site are calculated using algorithms that factor in common appraisal data such as the home’s square footage, location, recent home sales and tax assessments.  According to the New York Times article, the site has an error rate of about five percent.  Although down from the earlier error rate of 14 percent in Zillow’s earlier years, the error rate is still not satisfactory for many home homeowners who feel it is affecting their ability to sell their home at its true value.

Zillow believes there is room for improvement as well.  Last week they announced that they are not only open to suggestions but willing to pay for the best idea.  The “Zillow Prize” is $1 million dollars and will be awarded to the party able to present Zillow with the most improved algorithm.

To read the entire article and get more info on how to get in on the competition for the million dollar Zillow Prize, click here.

 

 

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Options for Financing a Home Improvement Project

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Many homeowners have big ideas and dreams about home improvement projects.  Perhaps you have finally decided to move forward with a creating your chef’s kitchen or a spa-like master bathroom, or even upgrading your home’s siding or roof.  An important factor to consider before you begin the work or order any materials is how the project will be financed.

According to an article in RealtorMag published by realtor.com, “One-third of affluent homeowners—those who earn at least $100,000 a year—plan to use credit cards to pay for home renovation projects…”, according to a survey conducted by a division of Sun Trust Banks.  This option may be a perfect solution for a homeowner who has the means to pay off the balance as soon as it is due, while earning reward points offered by their credit card company.  However, many homeowners may not be able to pay off a large sum within that time frame and would, therefore, begin to be charged possibly double digit interest on their balance.

A home equity line of credit may be a wiser decision for some homeowner’s needing to finance their renovations.  Often, the interest rates are significantly lower and possibly tax-deductible.  Homeowners with home equity could consider a HELOC or even a cash-out refinance, “where borrowers refinance for more than what they owe on the property and then take the difference out in cash.” These options can come with refinance fees or closing costs which would need to be factored into any comparisons.   Nevertheless, it is advisable to fully investigate all financing options to ensure you are not paying more than you need to complete your home improvement project.

Read the entire article.

 

 

Photo Credit:  Mateusz Kapciak
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What to Consider When Purchasing Homeowner’s Insurance

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You have made the decision to purchase a home!  It is a major commitment and quite a financial investment.  It is important to protect that investment and homeowner’s insurance will provide coverage for a variety of different situations.  In an article published by Yahoo Finance, Jeanie Ahn reviews some basic guidelines for purchasing the correct insurance coverage for your home and belongings.

Obviously, it is important to purchase coverage that provides the funds to repair or rebuild a home that is damaged by disasters such as severe weather and fire.  However, depending on the location of your home, you may need to also consider additional coverage such as flood insurance or earthquake insurance.  It is vital that homeowners understand what types of situations are and are not covered by their homeowner’s insurance policy and secure the appropriate protection

Not only do you need to protect the structure of your home, you also need to have coverage for your personal belongings inside of the home such as furniture and clothing.  According to Ahn, “To estimate how much your policy will cover for your belongings, it’s typically 50-70% of what your home’s structure is insured for.”

Aha goes on to discuss two additional areas of homeowner’s insurance that should considered when purchasing a policy. Liability coverage protects a homeowner in a cases of personal injury that takes place on your property.  The last piece of the homeowner’s insurance policy provides financial assistance when homeowners are displaced from their home and is called Additional Living Expenses.

Read the entire article for more details.

 

 

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Looking for a Bargain on a Home? How to Spot a Motivated Seller

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House hunters looking to purchase their first or next home are, undoubtedly, looking for a good deal on the home and a sales transaction void of big surprises or delays.  It can be exhausting to get into back and forth negotiations over price.  Not to mention potential discoveries in an inspection that need to be agreed upon before the sale moves forward.  It can appear, at times, that the home owner is not in any hurry to sell their home and is not willing to budge on their conditions.

In an article by Stephanie Booth, published by realtor.com, she provides seven signs that a homeowner is anxious to sell their home quickly and willing to work out a good deal with a prospective buyer.  For example, a home that is listed for sale by an estate might be a sign that the home can be purchased for a bargain price and be a candidate for a quick sale; the people who inherited the home might be out of town residents and/or looking to quickly liquidate the assets of the home.

Similarly, homes that appear to need some minor work such as landscaping and basic maintenance and are overall, just not spruced up to attract buyers, may indicate distress for the homeowner.  They may not have the means or resources to make minor repairs or updates to the home and are just looking to move on.  A home buyer might find an offer to be quickly accepted and be able to negotiate a quick close with a homeowner motivated to unload the burden of owning a home they can no longer afford to maintain.

Read the entire article for other signs that a home owner is desperate to sell their home.

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