New Homes Series: The Septic System

Many of the new homes being built are not connected to city water and sewer.  Here’s what you need to know about septic systems.

Conventional Septic System: 

All interior drains run into a single wastewater pipe that carries the used water out of the house and into the septic tank.  Solids sink to the bottom of the tank and are referred to as sludge.  Lighter waste, like fats and oils float to the top and form the scum layer.  The clarified middle layer of liquid wastewater runs out into the leach field or drain field through perforated pipes or tubing.  The liquid wastewater is filtered by the sand and soil before reaching the groundwater supply.

The two main types of conventional systems are gravity systems and pressurized systems which use a pump to regulate water flow into the leach field.

Alternative Septic Systems

There are more than a dozen different types of alternative septic systems for properties with different needs.  Unique geography, proximity to lakes, streams, ponds, rivers, and oceans, various local laws, environmentally conscious consumers, or whole community systems rather than individual systems account for many of the reasons an alternative system may be needed.

For more information on alternative septic systems, please visit Home Plans Advisor or contact your local company specializing in septic system installation and repair.

New Homes Series: Construction Process

Building a new home takes time.  Depending on the level of customization and the builder’s schedule, building a new home can take a few months to a year or more.  Here is a general outline of the process for purchasing a new home.

  1. Prepare the site – Trees, shrubs, and grasses need to be cleared, the site is leveled and the ground compressed, septic system and basement prepared
  2. Pour the foundation – first floor plumbing roughed in, sometimes the driveway and walkways poured
  3. Frame the walls
  4. Rough plumbing, electrical, and HVAC – 
  5. Roofing
  6. Finishing rough plumbing, electrical, and HVAC
  7. Insulation Installed
  8. Drywall hung and painted
  9. Exterior finishes installed
  10. Interior trim installed
  11. Exterior walkways and driveway – This step may come early or late in the process depending on the builder’s preferences.
  12. Flooring and countertops
  13. Light fixtures, outlets, switches
  14. Finish plumbing
  15. Carpet installed
  16. Landscaping
  17. Builder walkthrough/pre-settlement walkthrough
  • Inspections: foundation, framing, electrical, plumbing, HVAC
  • Good idea to have extra inspections done by an unaffiliated third party
  • Ask if you can attend inspections to learn more about the mechanical features of the home
  • Do not drop by unannounced!  Builders will allow you to check on progress as long as an appointment is made ahead of time.
  • Expect problems and builder cooperation after move-in.

New Homes Series: Types of Builders

  1. Custom
  2. Semi-Custom
  3. Production

Custom Builders

  • One of a kind homes
  • Built the suit the specific client
  • Particular location
  • Plans drafted by an architect
  • Land may be owned by the client or the builder

Semi-Custom Builders

  • Some flexibility in pre-drafted floor plans.
    • Moving some interior walls
    • Adding a bonus room or extra bedroom
    • Upgrading finishes
    • Adding decks or screened porches
  • Typically the builder already owns the site

Production Homes

  • Homes
  • Townhomes
  • Condos
  • For-rent properties
  • Designed by architect
  • Can be personalized by selecting from pre-set finishes
  • Do not allow changes in floor plans, windows, or other structural elements

Renting vs. Buying: Part 2 – Advantages and Disadvantages of Renting

In today’s market, renting an apartment or house can be a wise decision in certain circumstances, but typically is not a good long term solution.  See Renting vs. Buying: Part 1-Which Is Better? to help determine which may be the better option for you.

Benefits of Renting

  • Maintenance is included in the cost of rent. If the stove stops working, you are not responsible for fixing the stove or for purchasing a new one.
  • Yard Work is included in the cost of rent.  While this is also the case in many condos and townhomes with HOA dues, it is generally not the case with houses.
  • Amenities are often abundant in apartment complexes.  Gyms, pools, meeting rooms, coffee bars, etc. are usually included in the cost of rent.  While some neighborhood communities may also have these, they tend to come at a price.
  • Utility Bills tend to be lower in apartments due to the smaller size of each unit.
  • Moving is quick and easy.  No need to put a home on the market and wait for it to sell.  A 30-60 day notice is all that is usually required in order to vacate the property and move elsewhere.
  • No Down Payment is required when renting.  Though a security deposit, pet deposit, and one or two month’s rent may be required upfront, this cost is usually significantly less than a down payment.

Disadvantages of Renting

  • Noise may be an issue in apartment complexes because you often have neighbors on either side of you, above you, and below you.
  • Rent Increases often occur annually.  Short term leases and month to month leases are generally considerably more expensive than a one year lease.  Want to stay for three months after your lease expires?  That could be billed at the much higher monthly rate.
  • Parking may be a daily struggle.  With so many people living in such a small area, a convenient parking spot may be hard to find.
  • Rules about what colors you can paint (if any), how you can mount a TV, how you can hang drapes, which pets you can keep (often for a fee), where you can park, when you can pick up packages from the office, etc.
  • Equity is not built via rent payments.  In other words, at the end of the day, your payments are not helping you own anything that can be sold later.
  • Landlords can be hit or miss.  An apartment complex or management company can be researched, whereas many individual landlords cannot.  They may live out of state, may have hundreds of properties they manage, or may be easy and responsive.  It’s hard to know ahead of time.

There are also advantages and disadvantages to purchasing a home.  See Renting vs. Buying: Part 3 – Advantages and Disadvantages of Buying

Renting vs. Buying: Part 1 – Which is better?

It’s time to move.  Do you rent or do you buy?  This age-old dilemma faces professionals relocating for a job, empty-nesters that are downsizing, young people moving out of the family home, newlyweds starting a life together, and growing families in need of more space.

How long do you expect to live in your new residence?

The longer you plan to stay, the more sense it makes to buy a home.  Generally, if you plan to stay more than five years, you should consider buying.

While this may be a good rule for most situations, there are instances where even a one year home purchase makes sense.  For example, in purchasing a home that needs cosmetic updating, you’ve given yourself the possibility to build equity in your home faster than simple appreciation.  By this same token, buying a new construction home, living in it for five years, then selling may not be a good decision.

If you’ll be moving within the first few years and are not interested in building sweat equity in your home, renting may be the best move for you.

The current stability of your life is another thing to consider.  Is your job stable?  Are you expecting that you’ll continue to earn raises and bonuses?  Will you be getting married, having children, or relocating to be with aging parents in the near future?

How do the monthly costs compare?

There are hidden costs in both buying and renting.

In buying, you need to consider property taxes, insurance, HOA fees, utility costs, and building a slush fund for unexpected repairs (dishwasher, stove, water heater, HVAC, refrigerator, etc).

In renting, you need to consider annual rent hikes, moving costs if you plan on moving often, pet fees, and security deposits.

Do you have savings for a down payment?

While it’s true that you do not need a 20% down payment, you will typically need money for a down payment (may be as low as 3.5% of the purchase price), closing costs, and moving expenses.

Renting vs. Buying: Part 2 – Advantages and Disadvantages of Renting

Renting vs. Buying: Part 3 – Advantages and Disadvantages of Buying

Not All Agents Are Created Equal – How to Pick the Right Agent for YOU!

Selecting the right agent is important.  Everyone’s needs are different.  This guide will help you find the agent that will best meet your needs, and it may not be what you expect!  Depending on your personality, experience, and expectations, where you fall on the experience vs. availability scale will determine which type of agent may be ideal for you.

Experienced Agents: 

Top producing agents are leaders in the real estate field.  They have more clients, more listings, more sales, and more experience than the majority of their competition.  It has likely taken that top producing agent years of hard work and dedication to get to this point.

These agents are always on the go!  Showings, appointments, research, all of these things take time, therefore top producing agents often employ newer agents or form teams to meet the needs of their customers.  Depending on the skill and devotion of the people working with that agent, clients may receive an excellent level of service from either the top producing agent or one of the members of his or her team that takes over your transaction.

New Agents:

A new agent lacks experience.  They have few, if any listings, clients, and sales.  They have plenty of time to devote to their clients, are up to date on real estate laws, and are eager to prove themselves and get started in this market.  They will likely provide more time and attention than any other agent, but his or her lack of experience may result in hiccups along the way.

Goldilocks Agents:

The goldilocks agent has been in the business long enough to have some experience with listings, clients, sales, attorneys, photographers, inspectors, etc.  They are probably working with a few clients at any given time, but would be able to handle a couple more without a drop in service.  They can often answer your calls or return them within a couple hours, and are usually able to go see a new listing on short notice.

Which is right for you?

Realtors are human.  They still only get 24 hours per day regardless of whether they’re working with one client or 30 clients.

That experienced agent may be phenomenal at his or her job, but at some point, the time devoted to each customer is reduced.

The new agent can call and email you multiple times per day.  They have the time to look at 30 houses and are eager to earn your business and future referral business.

The goldilocks agent is at the equilibrium of experience and attention.  They have some experience and are able to spent more time and attention than an experienced agent.

Questions consumers should ask themselves:

  • Do I expect my agent to be available to talk to all day?

The new agent may be for you.  Top producers may not be ideal for you.

  • Do I expect my agent to be available to go see a new listing with short notice?

The new or goldilocks agent may be for you.  Top producers may not be ideal for you.

  • Do I expect my agent to have the experience of having closed hundreds of transactions?

The top producing, experienced agent may be for you.

  • Do I expect my agent to get in touch with me daily?

If you want to be in touch daily, the new or goldilocks agent will be able to meet this need better than a top producer.

  • Am I going to want to see houses before I really know what I’m looking for?

A newer or goldilocks agent may be ideal as they may be more willing to spend time showing you houses and helping you determine your needs.

  • Do I know exactly what I want and expect that my agent understands my unique needs and will find my new home quickly?

The experienced agent or the goldilocks agent may be ideal for you.  Their knowledge of neighborhoods and current inventory may speed up the process.

Types of Investment Property

Almost any type of property can be an investment property.  From condos, townhouses, and single family homes to apartment complexes and commercial property, almost anything can be an investment.

Intended Term

  1. Short Term – Many investors, buy, renovate, and sell the property at a profit.  This allows them to move on an reinvest their money quickly while minimizing or avoiding paying major interest charges on leveraged money.
  2. Long Term – Some investors buy properties to use as rentals.  Using the collected rent to pay down loans frees up equity to leverage other projects or if saved, results in property owned free and clear that can continue to be rented for almost 100% profit or can be sold for a lump sum that can be used as a down payment on another investment.
  3. Medium Term – This involves a blend of the first two options.  Generally, this will involve renovating the property and renting it for a limited time.  This is often done in apartment complexes or condo buildings where renovations can be completed to one unit or building at a time, yielding a higher return for renovated units and resulting in a higher class property, fetching a higher sale price.

Type of Structure

  1. Single Family Home – This is the traditional house.  All one unit, when purchased as an investment property, single family homes are typically renovated and either rented or sold.
  2. Duplex/Triplex/Quadplex – These homes are independent structures split into multiple units that each have a separate exterior entrance.  Most often, these properties are renovated and rented at a profit.  The owner may or may not occupy one of the units.
  3. Condo/Townhouse – These can make great investment properties as the exterior maintenance is usually the responsibility of the Home Owners Association (HOA) and is paid for via a monthly fee.  They are very similar to single family homes and are an affordable way to get into the investment property market.  They make wonderful first homes (with investment property potential) as well.
  4. Apartment Complex – This would be a commercial transaction.  There are many options for investing in an apartment complex.  To determine what is the highest and best use, speak with a commercial real estate broker.

* The definition of residential properties varies by state.  In North Carolina, a single structure with 1-4 units is considered residential.  Five or more units puts a property into the commercial category.

Buyers & Agents Shouldn’t Forget About Resale Value

Whether new construction, recently renovated, or in need of some TLC, resale value should be one of the top conversations between a buyer and an agent.  Unfortunately, it’s often overlooked.  Why should you consider resale value before even making an offer?  Your future may depend on it!

Minimizing risk while maximizing returns through an analysis of current market data yields wise investments and more importantly, knowledgable homeowners and investors.  This resale-centric approach continues to encourage astute purchases for families and investors alike.

Three Types of Homes:

New Construction – Upgrade costs in new construction can pile up.  Builders often have limited finishing options, but an unaffiliated contractor can provide a greater variety.  Discussing upgrade options before making any decisions is the key to a well informed purchase.

Recently Renovated – These homes typically sell at the upper limit of their market range.  Homes that show very well (clutter free, fresh paint, new/refinished flooring, updated lighting, etc) sell very well.  Buyers looking to settle down for the long haul are in good shape here, but growing families or people who move every 5-7 years, may need to consider the resale value more seriously.

Fixer Uppers – Finally, in a home needing TLC, agents can offer important insight into what values a neighborhood can support.  This helps everyone involved by maintaining realistic expectations of resale value, and not over-improving for the neighborhood.   This is particularly important for buyers who plan on spending fewer than 5 years in the property.

Types of Updates:

Things that cannot easily be changed include the location of the home and the view.  These two factors, particularly the location, greatly affect market value.

Things like the layout, square footage, and number of bedrooms and bathrooms can be changed with fairly significant renovations, which if well researched and budgeted can earn a profit.  Adding a third bedroom will typically yield a far greater return than adding a sixth bedroom.

Lastly, the easiest update is the finishes.  Finishes include the flooring, cabinets, paint, countertops, doorknobs, moldings, etc.  These updates vary greatly in their budget, but again, well researched and budgeted renovations of the finishes can yield a significant return on your investment.  This is where the law of diminishing returns applies to real estate and as a result, each individual property needs to be uniquely analyzed for it’s current value and it’s potential resale value.

9 Must-Do’s for the First Time Homebuyer

Congratulations on planning for your future and looking into purchasing a home.  There are things prospective first time homeowners can to make your first transaction go as smoothly as possible.

  1. Talk to a Lender – This step is essential!  Not only will a lender be able to give you a price range, they will also be able to talk to you about the different loan options.  There are often first time home buyer incentives that can help minimize or even eliminate the down payment and/or closing costs.
  2. Start Saving Today – The more you save before purchasing a home, the less interest you’ll pay for the life of the loan.  Even $50-$100 per month makes a difference.  Also, though not required, saving enough to make a 20% down payment means not having to pay for mortgage insurance, saving you money in the long run.  First time homebuyer may qualify for loan programs with lower down payments.
  3. Improve Your Credit – Any lender should be able to look at your current credit situation and give you tips for improving your credit score.  These tips may be as simple as making a large payment on only one card for this month and putting your expenses on different cards to diversify your credit across multiple cards.  The better your credit score, the better chance you have of getting the best possible interest rate.
  4. Prioritize – You have been to a lender and received a pre-approval, now it’s time to get realistic.  You have lots of options and your search will go more smooth if you are able to narrow things down a bit before beginning your search.  Do you want to live in a smaller house that’s full of character or condo in a swanky neighborhood downtown that is close to all the great restaurants, festivals, and boutiques?  Do you prefer to be in the suburbs where homes are larger but all quite similar, yards are larger than in the city but more manageable than a rural lot, and shopping is convenient?  Or is a rural location with a large lot and few neighbors your ideal?
  5. Establish a Budget – How much you’re comfortable spending and how much you’re approved to spend are probably two different figures.  Think about how much you spend on housing now, include utilities, cable, internet, etc.  Now realistically, can you comfortably afford to spend more than that and still have enough money to contribute to a rainy day fund, retirement fund, etc.?  Write down the total amount you are comfortable spending each month.  If this number is lower than your pre-approval amount, this is what you should use to set your price point.
  6. Choose a Realtor – Ask friends or coworkers for recommendations if you don’t already have one picked out.  Set up an initial meeting to make sure your personalities mesh.  You may or may not talk about real estate much at all during this getting to know one another meeting.
  7. Sweat Equity – Yes, you can hire people to move your furniture, paint your home, professionally clean your home, etc.  But those costs may be unnecessary.  Sweat equity can save you money.  If you can devote a couple days to painting, a day to renting a carpet cleaner, and a few days to packing your own moving boxes, you can save hundreds if not thousands of dollars.  Start helping your friends move today, then you’ll be able to ask them for a hand when it’s your turn to move.  All that extra money can be used to start a rainy day fund or for furniture and decor.
  8. Trust Your Instincts – When you find the perfect home for you, you’ll know.  The location, price, and home itself will just feel right.  You may know it’s the one for you before you even go look.  Go look anyways.
  9. Take Your Time – There’s always another house.  Take comfort in that.  If for whatever reason the first one does not work out, there is always another house.  Buying a new home is emotional.  All too often, eager buyers want to bite at the first property they think they love.  If you find that first property in the first week of your search, chances are you’ll find others that fit your criteria as well, and you may end up liking them more.  Relax.  Hope for the best, but know that there’s always another house.

You MUST Get Pre-Approved! Why?

Your Realtor is not just making you jump through hoops.  Pre-Approval serves two VERY important purposes.

Price Range

Take recently engaged couple Monica and Greg.  Monica is a teacher and Greg is in sales and is very busy.  Monica is going to do most of the home search and when she finds the right house, Greg will take a look and they’ll agree to purchase it.

Monica’s credit is not very good, so only Greg will be on the mortgage.

Monica says, “Greg has excellent credit and will easily qualify to purchase a $350,000 house, but we’d like to stay around $300,000.”

Two months later at house #30 – “We love it!  It’s priced at $295,000!  We want to make an offer of $290,000!”

Pre-approval is required to submit the offer, so they oblige and go to the bank.  They are approved to purchase a home up to $250,000 and are heartbroken they cannot afford that beautiful house in the perfect location with the fenced backyard for their dogs.  Monica had already started looking for a new sectional to put in the 3rd floor media room.

Over the next month, we look at another 15 properties that are in their price range.  Nothing compares to that perfect one with the yard, and the granite and hardwoods, in move-in condition.  No media rooms.  It’s all disappointing.  They wanted that other house.

Monica and Greg decide to just keep renting their current apartment.  Five years later, Monica and Greg are still living in that same apartment.

For your own sake, please get pre-approved so this doesn’t happen to you.

Offer Submission

Another story.  Lillian and Jason want to purchase a home.  They find the perfect house! Unfortunately, many people agreed that this was the perfect home, and we are now in a multiple offer situation.

We submit an offer at $3,000 over asking with no concessions and a 20% down payment / 80% conventional loan.  Our offer is not accepted.  The seller went with a lower offer (also a conventional loan) potentially because it was accompanied by a pre-approval letter.

A pre-approval is a free bargaining document.  It qualifies you as a legitimate and serious buyer.  Without it, you may have to offer thousands of dollars more and still your offer may not be considered.

Do yourself a favor.  Get in touch with a lender to get pre-approved before starting the home search.  It costs you nothing and can prevent a major headache when you find that perfect home.