Category Archives: Buying a Home

Norhill Subdivision

Norhill is an area of approximately 1200 homes within the Heights that was developed in the 1920s. It is made up of three sections that were developed at different times: Norhill, Norhill North, and Norhill East. Norhill North and Norhill East are joined by the Norhill Neighborhood Association and has been designated a historic district by the City of Houston. All areas of Norhill are subject to deed restrictions. However, the areas within Norhill Neighborhood Association have more restrictive requirements, especially as they relate to updating the exteriors of the homes. Most of the homes in the neighborhood are Craftsman bungalows with covered porches. Norhill is a highly walkable neighborhood.

Houston SkylineAs with all the areas within the Heights, Norhill is zoned to Houston Independent School District and is part of the City of Houston. The Heights comprises mixed use neighborhoods offering older and newer homes, shopping, and entertainment with easy access to downtown. It is most popular because of its proximity to downtown and because of the numerous historic neighborhoods and homes.

Over the last 12 months, 55 homes have been sold within Norhill with 45 of those homes built before 1930. For the homes built before 1930 and sold in the last 12 months, they averaged:

Listing Price: $496,187

Sales Price: $489,970

Sales Price per Square Foot: $334

Square Feet: 1466

Year Built: 1925

Of the 10 homes built in 1931 or later and sold in the last 12 months, they averaged:

Listing Price: $680,790

Sales Price: $678,750

Sales Price per Square Foot: $316

Square Feet: 2143

Year Built: 1974

If you like walking, a short commute to downtown and entertainment, historic neighborhoods, and a small town feel, Norhill may be a perfect neighborhood for you.

Downsizing

My Mom just moved from her home to a senior living facility. She cut her space by two-thirds, and she does not plan to move back to something larger. So, her downsizing was extreme and permanent. However, many of us have downsized over the years as we became empty nesters, moved from the suburbs to town, divorced, or tired of dealing with the yard. In many of these cases the change will not be “permanent.” However, in all these situations, there are steps to make the process more agreeable and successful. Broadly, those steps are:

Storage facility – For many, getting a storage facility is a first step. If you are going to attempt a new lifestyle that you are concerned you may regret (e.g., moving to a smaller space in town) or if you have furniture you are saving for your children’s homes, storing the extra furniture and china may make sense for a short period. However, after a relatively short period you will want to reconsider the storage facility and the extra items.

Start at least ninety or more days ahead of the move – Although not always possible, planning and working on the project over 3 to 6 months will help you make it a more successful move.

Think about your new lifestyle – Are you moving to town to be closer to social activities like restaurants and plays? If so, you may not need as much social gear as you had by your former pool or bar. Will you really need a bed in all the bedrooms or could one become office and TV space?

Involving your spouse or partner and others – The old sports gear you now want to trash may be your partner’s most sentimental item. And, an old Teddy Bear or baseball card collection may be something your kids want. Obviously, you and your spouse or partner and family members will have to be involved in the process. Also, make sure the furniture you want to save for the kids is something they will want.

Make a floor plan of your new space – Measure your new space and your major pieces of furniture. Envision where everything will go and map it on a floor plan. All you really need is a tape measure, and a ruler or straight edge. Determine if you will have enough space to add book shelves or other storage pieces.

Only take what fits – This may seem obvious. But, you do not want to create unhappiness with your new space because you are too cramped. If you love your books, but you only have room for one bookcase that will hold 100 books: limit yourself to 100 books. If you have half the cabinets, only take half of what your current cabinets hold.

Start making lists or piles – You will want to start with one closet or one room or one cabinet at a time. To the extent it is possible, go ahead and make it physical. If you can take your extra clothes from one closet to a local charity now: do it. But, if it is too difficult, such as thinking through the furniture in a bedroom, start making lists of where it will go.

Assignment of the items – The types or categories of piles or lists will be gifts to a relative, moving to new house, giving to charity, etc. Very little should go in a trash pile. Somebody will want it or someone needs it.

Heading HomeSentimental items – Some items have a sentimental value but cannot be moved. Maybe others involved will also find it sentimental or can use it. Certainly other relatives or friends may also find the items sentimental or possibly they need them. However, be careful in offering items as others may not find it as sentimental as you do. I have a friend who became a widow. Her husband had collected books, too many to take to her new home. Although she had no desire to sell them, she found selling them individually on eBay made her feel the new owners would love them like her husband had. I find donating items to charity always makes me feel better than putting it in the trash. Even if it creates more work, a solution may be much more satisfying. And, keeping a photograph of the item may be just as satisfying as keeping the item.

Do you really need it? – Empty-nesters moving from a suburban home to a patio home no longer need a mower or all the tools taking up space in the garage. Many people have 3 kinds of pots, 2 kinds of china, and 3 sets of knives. Over the period you are going through this downsizing process track what you actually use and get rid of the rest. Even if you think you are going to use something, can you borrow it or rent it later?

Decluttering – I have way too many files related to tax returns that are past the audit period, paperback books that I think I may read again, boxes of work documents from years ago, old electronics equipment, etc. that I would need to shred, give away and throw away. This may take longer than some of the other steps.

At your new home – Does the space work as you planned or do you need to “downsize” and “declutter” more? It probably makes sense to make one last try at your new home. If you have collections, it may make sense to store them under your bed and rotate a few pieces for showing. For kitchens and bathrooms, it may help to have shoe boxes or larger plastic containers to hold the items that used to cover the counters. The containers can be moved into and out of the cabinets when needed.

Multiple use furniture – In your new home, it may be beneficial to have a couch that makes into a bed, a coffee table that has drawers or other storage, and eating arrangements that can also work as office space.

We all have too much. Even if you are not downsizing to a new home, some of these steps may help you live a more comfortably. Best wishes for your new life.

Inside West Loop

The area I call Inside West Loop is the 77027 zip code. Obviously, the term could extend to other areas south of US 59. But, 77027 includes shopping, restaurants and high-rise living I most associate with the term. The zip code includes a sliver south of US 59, and a very small area just outside the Loop. It excludes an area of River Oaks and all of Greenway Plaza. But, broadly it goes from US 59 to Memorial Park and from the West Loop to Buffalo Speedway.

For shopping, Inside West Loop includes the many stores of Highland Village and the about to open upscale River Oaks District. Also, The Galleria is just outside the Loop. The excellent restaurants include Tiny Boxwood’s, Liberty Kitchen, Escalante’s, P.F. Chang’s, Ragin’ Cajun, Ouisie’s Table, and Grotto.

Neighborhoods –

But, the reasons I love the area are the neighborhoods. The following data is from two reports I have done this year relative to the area. According to the Houston Association of Realtors® (HAR), there are 38 neighborhoods in 77027. The seven neighborhoods with the most homes in 77027 from largest to smallest are Afton Oaks, Royden Oaks, West Lane Place, Lynn Park, Weslayan Plaza, Oak Estates, and Highland Village.

The neighborhoods in 77027 are in transition. Homes being sold may be a 1950s ranch with little updating or a tear down, include a new addition, be a complete remodel, or be a brand new home. As a result, while the statistics provide a useful benchmark, large variations will be seen in individual homes.

Although prices are up, there are fewer homes being sold in 2014 compared to 2013 because there are fewer homes for sale. During July 2014, there were 37 single family homes for sale for an average price of $1.45 million with 20 of these homes in the seven subdivisions. There were six town homes for sale for an average price of approximately $760,000 and seven condos for sale with an average price of approximately $150,000.

Average home sales price by subdivision during the first half of 2014 according to HAR:

Afton Oaks – $1,100,000

Highland Village – $259,000

Lynn Park and Annex – $606,000

Oak Estates – $2,106,000

Royden Oaks – $1,360,000

Weslayan Plaza – $395,000

West Lane Place – $1,179,000

High and Mid Rises –

With more being built over the next 3 years along Mid Lane and Westcreek between Westheimer and San Felipe, this area will have a significant portion of Houston’s high rises. According to HAR, there are currently six high and mid rises in 77027 that had unit sales during the first nine months of 2014. They are Briarglen, Briar Place, Highland Tower, Inwood Manor, Park Square and The Willowick.

Prices for units and buildings can be significantly impacted by the age of the building, status of updating the building and unit, size of unit, cost of amenities, view from unit and amount of maintenance fees.

Average high/mid rise two bedroom condo sales price by building during the first nine months of 2014 according to HAR:

Briarglen – $500,000

Briar Place – $512,000

Highland Tower – $763,000

Inwood Manor – $777,000

Park Square – $218,000

The Willowick – $553,000

For additional information –

Homes, town homes and condos currently for sale in 77027 can be found at www.insidewestloop.com. And, to get an automated estimate of the current value of your home, please go to www.insidewestloop.smarthomeprice.com. Or, if I can answer any questions or help you in any way, please contact me at your convenience.

Buying a Condo

There are many advantages to buying a condo, including: security, amenities, views, social community and included maintenance. However, there are also some potential negatives to consider before deciding to buy a condo. Some of the matters on which to focus as you consider a condo are discussed below.

Ownership Interest – Instead of owning the building and the land as one would in a single family home, the ownership interest is the space inside the condo and an undivided interest in the building and common areas. As a result, the condo owners will share substantial costs to maintain and insure the building and common areas, and others will have a say in the operation of your home outside your owned space.

Condo Owners Association – Similar to a homeowner’s association, the condo association will be responsible for enforcement of bylaws and collection of fees. However, because of the greater importance of a common building, maintenance, and amenities; the Condo Owners Association will likely have more “intrusive” rules and significantly higher fees. One will want to ensure the bylaws are in line with their expectations of the level of Association control. In addition, one will want to review minutes to ensure there are no issues, and the board functions in a professional manner.

Houston SkylineCommon Areas – Common areas include the land, floors, lobbies, elevators, common services infrastructure such as air conditioning and water, and amenities such as pools and exercise facilities.

Maintenance and Common Area Fees – As compared to a single family home, a condo will have significant fees for the maintenance of the building, common areas, security and amenities. When buying a condo, a consideration of the fees will be significantly impact the total price one is willing to pay for the condo.

Social Aspects – One of the advantages or disadvantages of living in a condo, depending on one’s perspective, is the social aspects of the building. Are there many organized activities? Do the activities reflect your lifestyle? Do the common areas support interaction?

Insurance – The Condo Owners Association will have insurance on the building and common areas. The unit owners will need insurance on their space, including furnishings and liability. Ensuring the Association and you have proper insurance will be important to you and your bank as you obtain financing.

Financing – Historically, banks have had greater losses financing condos than single family homes. As a result, financing rates are generally slightly higher than for single family homes and required down payments are generally higher. Most financing for condos will require 50% of the condos be owner occupied, monthly dues for nearly all units to be up to date, and other ownership requirements. In addition, the bank will insist on certain requirements for the Association such as: appropriate insurance, adequate budget reserves and no pending litigation.

Miscellaneous Considerations – With respect to parking, one will want to consider security and walking distance. For overall security, is the level of security and cost appropriate for your needs? In a condo, space is at a premium. So, is there adequate storage for your needs?

Living in a condo provides many benefits one may not have in other living arrangements. However, one will want to be sensitive to the associated issues.

Having Enough Money During Retirement

According to a recent Bankrate.com survey, 36% of the people in U.S. have no money saved for retirement. Even if you are saving, unless you are in the stock market, you are earning nothing on those savings. And, some of us are just cheap. So, whether you have no money, or have some money but want to make it last, this is information to help you have enough.

Work –

Of course, the best solution may be to keep working. The longer you work; the less money you will take out of retirement accounts or social security. I have also noticed, if I am working, I do not have time to shop.

Financial –

Social Security – Deciding when to start taking social security can be complicated. For a healthy single person, with no dependents under 18; delaying the start of social security increases the lifetime benefits you will receive. If you are married, disabled, have life threatening health issues, or dependents under 18; the answer is more complicated, and you should consult your local social security office. Also, there is also a very high marginal tax rate on social security payments if one works and takes social security. So, if you plan to work, it may be best not to start social security.

Medicare – Even if you are not taking social security, you can get on Medicare at 65. You should start the sign in process 90 days before the 1st of the month in which you will turn 65. Again, broadly, unless you never need a doctor, most people will save money by also buying a Medicare supplement plan and drug coverage.

Debts – You should plan to pay off all debts by the time you retire, especially a mortgage. If you have not paid off your mortgage, plan to keep working.

Early Withdrawals – If you have a deferred compensation plan or savings bonds or CDs, there are penalties and sometimes taxes associated with early withdrawals. And, they reduce how much you will have when you retire. They should be avoided.

Meeting Neighbors

Meeting Neighbors

Longevity Annuities If you have enough money for now, but are worried about outliving your money, consider a longevity annuity. In a longevity annuity, if you buy it at say 65 and do not take any payments until you are say 85, and set it up where your only returns are the payments after 85; the payments after 85 could cushion you from running out of money. Besides earning some rate of interest on the money, you earn a return on the “gamble” by the insurance company you will not live until 85. If you die before 85, you will not need the money. If you die after 85, you can depend on a cash flow.

Reverse Mortgage – After you turn 62, you can do a reverse mortgage which allows you to get money out of the equity in your home or buy a different home, and you never have to make a payment. One negative is interest rates are higher than a standard mortgage. Your heirs can assume the mortgage at your death or decline to take the home and the mortgage.  This may be best used by those who are not worried about their heirs inheriting the maximum amount of money.

Housing –

Size matters – The size of your home obviously impacts the cost of your home. But, it also impacts utilities, insurance, property taxes, maintenance and many other costs. Moving to a smaller home, can free up capital from the sale of the home and reduce all those costs associated with home ownership. And, there is a deduction of up to $250,000 on the gain from the sale of a home when you downsize or move to a rental. In Houston, just reducing water, electricity and property taxes can offer substantial savings.

Location in the US – Living in small towns is cheaper than living in big cities. MSN Money and AARP have recently had articles listing the least expensive cities. Their lists include smaller cities and towns with no big cities. The suburbs are also cheaper than the inner city. The state in which you live also impacts your costs because of taxes and other living costs. Inman News recently calculated tax per person with the states on the coasts being higher than the states in the middle of the country. The National Association of Realtors recently listed the cheapest states relative to price of total home ownership cost as a percent of total income by state based on Census Data. All the least expensive states (lowest percentage) were in the Midwest and South.

International locations – Many people are opting to live overseas to lower costs. You can easily Google several lists of the best places for expatriates to live. Most of the lists which consider price and quality of life have Latin American, Asian and Central European countries. There are many of the countries that have a thriving expatriate community, with low costs and good healthcare.

Property Tax Deferral – In Texas, if you are 65 or over, you can request an indefinite property tax deferral (not pay property taxes until death or you sell the home.) In Harris County, you submit the request form to the Harris County Appraisal District. However, the interest rates are high (8%). So, this will reduce the amount you plan to leave your heirs.

Renting – It may be cheaper to rent than buy. Go ahead; add up all your costs of home ownership. In most places it is cheaper to rent, if you just look at cash flow.

Miscellaneous –

Go Carless – Once you retire, especially if you live in a smaller town or area conducive to walking, it may be easier for a couple to get by with one car.

Bargains – You have time now. So, travel, eat and buy when it is cheaper. Accumulate discount cards.

Good Luck.

 

 

All Those Fees

There are many payments, costs and fees associated with buying and selling a home. Some are paid by the buyer and some are paid by the seller.

Costs and Fees Generally Paid by Buyer:

While there are a number of categories of costs and payments, the most significant buyer fees are related to financing.

Inspection fees – In the Houston area, these are generally mechanical, structural, foundation, termites and pool.

The warranty deed and deed of trust, if applicable, will be recorded with the County.

Escrow Fees are paid by both the buyer and seller to the title company for the services the title company is providing.

Survey cost is generally paid by the buyer. However, the seller may have an existing survey, which may be acceptable. Or, the seller could pay if that is negotiated.

Having Fun at Home

Having Fun at Home

Homeowners’ Association Dues and Fees are generally paid at the beginning of the year. As a result, the buyer will reimburse the seller for that remaining portion of the year for which the buyer will own the home.

Property taxes are paid at the end of the year. As a result, the seller will owe the buyer for that portion of the year for which the seller owned the house.

Optional Owner’s Title Policy additional coverage for discrepancies and shortages is negotiable but generally paid by the buyer, if purchased.

Homeowner’s Insurance and Flood Insurance may be paid directly to the insurance company if there is a cash transaction. If a loan is set up with an escrow account (meaning the bank pays these costs on behalf of the buyer), they are paid by the bank.

If financing is involved, there will be Lender Fees and Charges:

  • Lenders typically set up an escrow account to directly pay the buyers property taxes, homeowner’s insurance and flood insurance (if applicable). To set up the initial funding for that account, the bank will generally require a payment for three months’ insurance and at least a year of the estimated annual property tax amount.
  • Other lender fees and charges are loan origination, appraisal, document preparation, credit report, and mortgage insurance premium, if applicable. Mortgage insurance is paid if the down payment does not meet specific levels or on some government supported loans.
  • Interest for the period from closing to the date of the first payment.
  • Although not paid to the bank, the buyer will pay Title Insurance covering the bank for the amount of the initial loan.

Miscellaneous fees like courier fees are also charged.

Costs and Fees Generally Paid by Seller:

While there are a number of categories of costs and payments, other than debt payoff, most sellers’ payments, fees and costs are related to transaction commission to the broker, title insurance premium paid on behalf of the buyer, and property tax credit to the buyer.

Basic Title Policy for buyer – Although negotiable, this is almost always paid by seller.

Proration of Property Taxes – Property taxes are due at the end of the year. As a result, the sellers are charged for the portion of the year they owned the home. This amount is credited to the buyer who will be responsible for paying the tax at the end of the year (or their bank if there is an escrow account.)

Home Warranty –Typically, the seller pays an agreed amount for a substantial portion of a one year warranty on mechanical items in the home such as sprinkler systems, heaters and air conditioners.

Homeowners’ Association Dues and Fees are generally paid at the beginning of the year. As a result, the seller will be credited for the portion of the year related to the period of the year in which the buyer will own the home.

All commissions are the responsibility of the seller.

The payoff of all loans and liens will be charged to the seller.

Escrow Fees are paid by both the buyer and seller to the title company for the services the title company is providing.

Miscellaneous other fees and costs are related to recording the release of liens, document preparation fees, and homeowner’s transfer fees.

Home Buying Process – Part III of III

POST CONTRACT TO POSSESSION

This is Part III of three parts listing the broad steps in the home buying process. Parts I and II were included in prior posts. The steps listed are generally in order of occurrence. Although, some will occur at the same time or cross other steps.

Checks  – The checks you wrote when the offer was prepared are delivered by your REALTOR to the seller’s agent (option money) and to the title company (earnest money – generally 1% or so of purchase price.)

Option period – The standard contract provides an option period in which the buyer may back out of the contract with no reason required. During this option period you and your agent will complete the steps not completed during due diligence and have inspections performed. Your REALTOR can provide you names of general inspectors and those that can review for termites, foundation issues or other specialized concerns. You will need to obtain the inspection reports and negotiate repairs to be paid by the seller prior to the end of the option period.

In addition, you will want to complete due diligence with your insurance agent by obtaining the CLUE report if you have not previously done it, and obtain an estimate of homeowner’s insurance and flood insurance.

Loan Application – As soon as the contract is executed you will start the loan application process. As part of this, the bank will request an appraisal. Your REALTOR may provide data relative to comparable homes to the appraiser. The bank will also be concerned about the status of the title and will wait on the title commitment from the title company. The buyer can back out of the transaction if the financing is not approved.

Title Company – The title company holds the earnest money until release is approved by the parties to the contract or closing, depending on whether the contract closes. They also review the title for encumbrances (issues), provide title insurance to the buyer and the buyer’s bank, ensure all conditions of the contract are met and perform closing.

They will provide the preliminary title commitment (which notes any issues) to the bank, the buyer and the seller. Each party will have a chance to review it for issues. The bank or the buyer may back out of the transaction if there are issues with the title.

Insurance and Utilities – You will want to arrange for your homeowner’s and flood insurance to commence on your closing date. If it is hurricane season, it sometimes takes 30 days after purchase for flood insurance to be effective. So, you will want to discuss this issue with your insurance agent.

Having Fun at Home

Having Fun at Home

Walkthrough – You will perform a walkthrough the day of closing but prior to closing or the day before closing. The purpose is to ensure no major issues have arisen (e.g., a fire) and that repairs to which the seller committed have been made. The buyer may want an inspector to review repairs made.

HUD-1 – Also called an allocation or settlement statement, the HUD-1, or similar document if there is no financing, sets out the sales price, down payment, fees and other financial activity associated with the transaction. The buyer and seller and their REALTORS will review the statement in detail to ensure all amounts are appropriately calculated and allocated. It cannot be prepared until the bank provides the loan commitment. So, in many cases, this is right before closing.

Closing – Prior to closing the buyer will purchase a cashier’s check or arrange a wire transfer for the “down payment” (amount shown as paid at closing on the HUD-1.) At closing (which can be an event for each party or one event for both parties), each party signs numerous documents transferring title and setting up the loan. During closing or shortly after (could be the next day), the bank funds the loan to the title company. Once closing and funding have occurred, the buyer owns the house. Unless the seller enters into a short-term lease with the buyer, the buyers are given keys and can take possession.

Congratulations. It is now your home.