The highs and lows of parenting and real estate.

Yearly Archives for 2008

The New House – Final Walk-Through

Things are utterly insane here with my clients, Christmas and our big move to our new house. We did our final walk through today and signed and closed! Tomorrow morning at 7am the movers arrive to transport our enormous amount of crud to the new house!

So until I have time to write again, if you want to see what we’re up to, here’s a video I took of our new house today:

So What Can YOU Afford?

I know there are lots of people out there who are thinking about buying a house but struggling at the starting line. The headlines on the news are screaming: INTEREST RATES ARE HISTORICALLY LOW!! IF YOU’RE NOT BUYING NOW YOU’RE AN IDIOT!! And you don’t want to be an idiot. You want to be a ‘smart buyer’. You want to get into the market at the ‘right time’. But you have just no clue where to start.

It’s complicated to get from the purchase price of the house to a monthly payment you can afford. How do you know when $200,000 is less than or equal to the $1500 a month you’re currently paying in rent?

I spoke with a new client (a first time buyer) last night who knows he wants to buy, knows he wants three bedrooms, knows he wants to live in the East Valley, but that’s pretty much it. My standard Realtor response to clients like this is to refer them to a lender who can prequalify them and give them all of the payment information they are looking for. Generally, I do this to save both them and me time. If they are serious enough about purchasing to contact me, then it’s in both of our interests to discover as quickly as possible if this is a viable option, and what price range we should be looking in.

That said, I know there are people out there who are afraid to call a mortgage professional. I get the fear. The fear comes from the idea that you will call the mortgage professional and give him all of your information (social security number, date of birth, income, debts, etc) and that he will put it all in his computer and then laugh at you. He will laugh and laugh and say, “What? You think we will give you money? Yeah right. Have a nice day, loser!’

I understand this fear because I have it. I was TERRIFIED to call a mortgage company when we bought our first house six years ago; as in, sick-to-my-stomach, pale and clammy, terrified. And even though I know mortgage reps personally, and I’ve been dealing with mortgages and money and all of this on a daily basis now for the last four years, this fear has not totally left me. Our new house is closing in less than a week, and I got the call yesterday that we received final mortgage funding approval and I was ridiculously relieved. I had this irrational fear that they were going to call me at the last minute and say, ‘Psyc!!’

So this post is for those mortgage-phobes like me. Here is a general breakdown of purchase price to monthly payment, to give you a better idea of what you can ‘afford’ (keeping in mind that credit and income are also a factor).

Let’s take for example this little cutie:

This is a home currently listed in Mesa for exactly $200,000 (yay, big round numbers!). Let’s pretend, just for the sake of argument that you wanted to buy this home for asking price. You are a first time buyer with not a huge amount of cash. You want to get into this house with as little out of pocket money as possible, and you want to know how much it will cost you on a monthly basis. And away we go:

As a first time buyer, the current mortgage restrictions require you to put down at least 3.5% of the purchase price. You can, however, ask the seller to pay for your closing costs. Therefore, when you come to the closing table, you will need a check for: $7000.

Your mortgage will be for $200,000 minus your down payment of $7000, or $193,000.

Five monthly fees come together to make up your mortgage payment.

1. P&I – Principle and Interest, which are the payments to the bank for your loan.
2. Home Owner’s Insurance – Generally paid to the bank on a monthly basis and the bank pays to the home owner’s insurance company on a biannually basis.
3. Taxes – Also paid monthly to the bank, who pays the government twice a year.
4. PMI – Private mortgage insurance (sometimes called MIP, for mortgage insurance premium), which is to insure the bank against you defaulting on your loan. This is required if you don’t put down at least 20% of the purchase price.
5. HOA – Home owner’s association, this is the only fee that is not paid to the bank and may not be applicable. But most banks will figure it in when they are putting together your costs because most homes in Arizona come with a home owner’s association.

Back to the cute little Mesa house for $200,000. Let’s break down the monthly payment.

Today, according to Wells Fargo the interest rate for a 30-year fixed FHA loan is 5.5%. According to this mortgage calculator the monthly P&I on that loan will be $1095.83.

Homeowner’s insurance should be less than $40 per month on a house of this size.

According to the tax records for this home, the taxes for 2008 were $1037.82, so the monthly taxes would be $86.49.

PMI for this home should be less than $80 per month.

According to the MLS, the HOA fees for this house are $32 per month.

So to recap:

1. P&I – $1095.83
2. Home owner’s insurance – $40
3. Taxes – $86.49
4. PMI – $80
5. HOA – $32

For a grand total of approximately: $1334.32 monthly payment and $7000 out of pocket at close of escrow.

Obviously this is just a general example. HOA fees can vary greatly, depending on what the community offers. PMI and home owner’s insurance depend heavily on the company contracted. Taxes depend on the city and the size and value of the home. P&I is greatly affected by interest rates. At least this gives you an idea and understanding of costs.

For more specific information, call your lender!! I swear, it’s silly to be scared. I’m silly. Don’t be like me.

Testing The New Toy

We went to Jason’s office holiday party Saturday night and his awesome boss handed out those little Flip Video cameras as gifts to all of the employees. I promptly swiped Jason’s. It’s AWESOME!!

Check out this video I just took of Jonas. This was the 325th time he did this today. (On time 327 he bonked his head and cried for 10 minutes.)

I love how simple this technology is! You can bet I’m currently brainstorming awesome uses for this little guy.

Things to Do – Holiday Stuff In Town

The latest from Amanda:

I know, it’s tempting to run up North will all those pictures on the news of snow in Pinetop. But, why not save that for the holiday break? Stay in town and take advantage of this gorgeous weather, and these great activities:

*The Nutcracker – We’re going Saturday! Ballet Arizona and The Phx Symphony, Symphony Hall

*The Nutcracker – Ballet Etudes at Mesa Arts Center. Through the 21st.

*Fantasy of Lights Boat Parade – Tempe Town Lake, Saturday, 4-9pm

*AZ Historical Society Museum – See The Night Before Christmas performed by the light of candles and lanterns. Saturday. 5 and 9pm.

*Handel’s Messiah – Mesa Arts Center, Phoenix Symphony and Chorus, Friday 7:30

*A Winnie the Pooh Christmas Tail – Valley Youth Theatre, Through Dec 23

*Santa Flies in! – Help Santa and the EV Firefighters and Police collect toys for kids. Saturday, 11am, AZ Wing Commemorative Air Force Museum. Free admission with a new toy, $1 off with a canned good.

*Alice Cooper’s Christmas Pudding – Saturday, Dodge Theatre, 7:30pm

*Roller Derby Charity Event – Teamed up With Phx Fire and Police. Saturday

*Tim & Willy’s Christmas Breakfast Show – Saturday, 7:30pm, Celebrity Theatre

*Green Holiday Arts Festival – for the Environmentalist on your list Saturday, 8:30am-4pm,

*Zoolights – Until 1/10

*Luminaria Festival – Botanical Gardens until 12/23

Restaurant of the Week:

Mary Coyle – You have got to check this place out. It’s the cheesiest 50s style ice cream parlor you’ll ever go to. Last weekend I was there for a birthday party and we had The Mountain. SEVEN POUNDS of ice cream shaped like a mountain. 4 toppings. Plus whipped cream, nuts, and cherries. Ohhhhhhh….. I’ve attached a picture (camera phone, don’t blame me for the quality, but check out the stranger and his kid in the

Volunteer Activity:

Chandler Salvation Army is still looking for bell-ringers and people to work the Angel Tree booths at Chandler Fashion Center. 480-963-0158

Hike of the Week:

Verde Hot Springs – Never been to one of our natural hot springs? Watch out though, some people think the far side of this area is clothing optional.

Value – A Definition

In real estate, we tend throw around the word ‘value’ on a regular basis without acknowledging that it is an extremely relative term. defines value as estimated or assigned worth. It does not, however, specify who estimates or assigns this worth. An appraiser will assign your house a value based on comparable properties in the area and what your house has and does not have in comparison. A buyer will assign your house a value based on what he needs, how much money he has and whether he thinks he is getting a good deal. When you attempt to place a value on a home you are selling, you will inevitably throw things like emotional attachments, memories, and your selling timeframe into the mix. These three people looking at the same house are going to come up with three radically different figures. This truth is inescapable.

This weekend I showed houses in Scottsdale and Fountain Hills to a client who is transferring his family out from California. Their house in California is just outside of the San Francisco area in the mountains that overlook the bay. He wants to purchase a house with city and mountain views and a feeling of elevation that is similar to where they live now. We have been looking in the $1-1.5 million price range.

In Scottsdale this weekend we saw three houses in McDowell Mountain Ranch. Although the first one did have a nice view of Camelback Mountain and the golf course up there, I was not overly impressed with what that price would get us in that area. The houses were basically beefed up tract homes. They had some nice touches, but nothing that would make me want to run out and spend over a million dollars on a home. My client tended to agree. I have, however, had clients who loved the McDowell Mountain Ranch community and weren’t interested in other areas.

Fountain Hills was a little bit of a different story. In the same price range we were in neighborhoods that had a distinctly more spacious and custom feel to them. Although, ‘custom’ is not always a fabulous thing… we did view one house that held a very creative point of view, decorating-wise. In fact, I think that most people would say that ‘creative’ is treating it nicely. It had high-gloss red, black and blue concrete floors, it had red silestone counters, it had diamond-plate steel as a backsplash and covering the stairs. It had orange and yellow and purple and green walls, a life-sized statue of Poseidon by the pool and giant painted metal sculptures of flowers in the front yard. It had whimsical touches everywhere that I can’t even describe. Whimsical, EXPENSIVE touches, I should add. You see, the problem with this house, was that although the layout was decent for my buyer, it would be so expensive to even neutralize half of the things this seller had done to the house that it would no longer be worth it to my client. The expensive specialized decor actually reduced the value of the house for my client (and probably 90% of the general public).

The other house of note that we saw in Fountain Hills was an open house that we happend upon. It was in a neighborhood my client liked and so even though it was priced up at $2 million, we stopped in to see just how much 25% more money would get us. We discovered that in this particular case, 25% more money actually upped the value of the house to my buyer even more than that. This was an amazingly well put together house. It had so many unique (and generally-market-friendly) details that my client (and I) just loved. I’ve seen $3 and $4 million properties that I would by far prefer this one to, if I had the capital to choose.

The point of all of this is that it is impossible for one person to accurately prescribe a singular value to a property. As an agent, it is my responsibility to take into account factors like the current market, the necessary timeframe of the seller, taste and desires of the ‘general public’ and attempt to find the price that a normal buyer would be willing to pay for the property, not assign its value or worth. The fact of the matter is that right now, the price that a buyer will likely be willing to pay is below (and in some cases SIGNIFICANTLY below) the value of a home as seen by both an appraiser and the seller. This is an upleasant and largely unexpected truth to many sellers these days, but one that has to be understood for a seller to be successful in this market.

Now if only I had Peewee Herman as a client and he wanted to buy in Fountain Hills… then I bet I could get a decent value for the seller of that one house!

Wait, Now What's This About 4.5% Interest Rates?

One of the big stories in the financial news today (that didn’t involved the car companies asking for LOTS of money) was the one about 4.5% mortgage interest rates.

I heard talk of this from a couple of sources before I actually went out and found the articles to read for myself. Most of the talk was in the, “Check it out, soon you’ll be able to get a home loan for 4.5%!” and, “Hey, who cares what your interest rate will be on your new home will be when you buy it, just refi for 4.5% after you close!”

When I actually went and read the articles, it was apparent that there was a little more to all of this than, Woo!!! Awesomely low interest rates!

I also gave Matt, my mortgage guy a call to run through it all with him; which was quite an enlightening experience. I came away from all of this research with the sense that everyone has more questions than answers about this entire proposal.

To begin with, the entire idea that the government will ‘set’ mortgage interest rates at 4.5% is revolutionary and extremely complicated. Currently, the government does not set interest rate, the market does. Rates can be affected by things the government does (dropping the prime rate, for one), but individual lenders who actually loan the money are the ones who dictate what they will charge you to borrow the money.

So how can the government force lenders to set their rates at what they want? Will they offer bailout program money to the banks who participate? Will they further insure loans taken at this rate?

The other bit of info floating around has been the idea that this interest rate may not apply to refinances, because the intention is to stimulate home purchases to reduce the current national surplus of houses.

Right now lenders do not differentiate between home purchases and refinances when setting interest rates. So again, how will this work? Will everything change? And how long will it take to implement all of this?

And the biggest question of all: Will they actually pass this idea? And will it stimulate the housing market?

So… everyone needs to sit tight for a little while and see what’s actually going to happen before getting any hopes set on things like interest rates lower than they’ve been in 45 years. And that is what I’m going to do for now.

Lasagna Rolls – Success!

I tried a new ‘kid friendly’ recipe last night that I really liked: Lasanga Rolls (from Giada on the Food Network).

The kids complained bitterly, as they always do when I make something new, but once I threatened them with no dessert ever until you die, they ate it, and actually liked it!

I loved it and will definitely make it again. Although next time I will cut the spinach in half, up the prosciutto by 25% and use an entire jar of marinara on top instead of on the side. I recommend you try it for your kids, or your dinner guests.

Mortgage News from Matt

I’m putting together another guest-blogger spot on my site. This one is going to be done by Matt Harshey, my office’s in-house lender with Century 21 Mortgage. Here’s his info about the mortgage market this week:

Due to the Thanksgiving holiday-shortened week, the economic calendar served up a veritable smorgasbord of economic news, setting the table for some bond-friendly trading. Wednesday’s news continued to show the economy is a train-wreck with weekly jobless claims at recessionary levels; personal spending falling by 1%, the largest since the 9/11 terrorist attacks; durable goods orders dropping by 6.2% , the most in 2 years. All of this was bond-friendly causing rates to drop from last week. The stock market finished higher with the DOW & S&P 500 both moving up for the fourth consecutive session after enough investors went bottom fishing for bargains. Recent market action suggests we may be seeing the beginning of a bear market rally that could extend into the first quarter of 2009. With this in mind, it’s very important to take advantage of the recent rate dip we have experienced. As you know from the past rate drops, these drops can be short-lived with rates spiking higher in a matter of minutes. If you currently have clients that are looking to purchase, it’s important to lock in while rates are again at historical levels. The last time rates were this low they lasted for 1 day in January of this year, before that you would have to go back to July, 2003. Floating for a lower rate is like gambling, when it’s gone, it’s gone. Lock in while you are ahead. I will be available all week and this weekend to answer any of your questions or inquiries, do not hesitate to contact me.

To get contact Matt:

480-636-6782 Mobile
480-452-1775 eFax

Highchair Hijinks

I was gone for the weekend on quick trip up to Northern Arizona (more on that later in the week) and when I got home this afternoon, I discovered that Jonas had learned a new trick while I was away. I like to call it “The Most Annoying Trick Ever”. It goes a little like this:

Hi, I’m just sitting here in my high-tech high chair with the awesome detachable trays that allow you to feed me and stick them in the dishwasher. I’m not doing anything fishy. Don’t mind my hand here, it’s not important. Just normal business here, no worries.

Didja see how I did that? With the food flying everywhere? It was awesome, right? You loved it, huh? I know, I totally just figured out how to do that by myself.

That’s fine, you can totally put it back. I swear I won’t do it again. It was a one-time thing. We’ll settle down now. Feel free to put more food on my tray, I’m going to eat it now. It’s ok, you can trust me.

BWAHAHAHA! I can’t believe you fell for that!!! That was hilarious. Seriously, you should have seen the look on your face, it was priceless. When that pea hit you in the forehead? I will never get tired of that one. Hee. Lean forward, you have a little hotdog in your hair.

Mommy? Um, I love you… please put down the matches and my blankie. We can work through this.

Yeah, I’m not promising his blankie made it through this one.