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Georgetown Real Estate Law Blog

What to consider when buying a home

Those who are currently renting in Delaware may long to be homeowners. Considering the current state of the housing market, however, it could make more sense for renters to put off making a home purchase. Those who are interested in buying a first home should make sure that they won't be house poor. This means that a homeowner is constantly at risk of losing the property.

Other factors to consider are the impact of other debts on one's finances before accounting for a mortgage payment. Ideally, an individual will spend no more than 30 percent of his or her monthly income on car, student loan and similar types of payments. Assuming that a potential buyer is in good shape financially, it is a good idea to consider the extra costs associated with acquiring a home.

An overview of closing costs for homebuyers and sellers

Homebuyers in Delaware often focus on the prices listed for properties, but price alone does not represent the total amount that a person will spend when purchasing a home. Numerous fees, insurance premiums and commissions create what are known as closing costs. Closing costs routinely total several thousand dollars. A typical property transaction will split these costs between the buyer and seller, although the parties can negotiate the details and shift some expenses one way or the other.

In general, a property transaction will obligate buyers to pay fees for mortgage loan processing, home inspection, home appraisal and title search. Additionally, home property insurance, points charged by a lender and credit screening will add to a buyer's costs. He or she also must pay local government recording fees and escrow fees that create a fund to cover property taxes and insurance for several months. If a buyer chooses to consult a lawyer, then the closing costs will include legal fees.

The pros and cons of having a tree

While many people in Delaware would like a home with a tree in the yard, this could be more trouble than it is worth. For instance, if the tree begins to rot, there could be a higher risk for extensive property damage or bodily injury. Furthermore, those that have holes, fractures or lean to one side might need to be removed.

Individuals who choose to keep a tree in their yard should understand that it will result in extra cleaning. Leaves and pine needles that fall on the grass, patio and driveway will need to be removed on a regular basis. Anyone who is looking to buy a property with a tree on it should be ready for birds to sit on the branches and the chance for their droppings to land on cars or other objects.

Purchasing short sales

Delaware residents who are interested in real estate investments might want to consider short sales. These transactions involve the owners selling their properties for less than the amounts that they owe and can offer the potential for good profits.

People who are interested in making short sale offers will need to convince the sellers and their lenders that the short sales are in their best interests. Getting a comparative market analysis completed by a real estate professional that shows that the property is worth less than what is owed can help. It is also helpful in situations in which the sellers are in danger of default or foreclosure.

The importance of listing a home at the right time

Those looking to buy or sell a home in Delaware should consider how the time of year influences the market. A market analysis by the real estate tracking website Zillow has identified May as the month when homes sell the fastest and demand the best prices on average.

After looking at data from 24 large markets nationwide, the first half of May emerged as an ideal time to list a property in 14 regions. Sellers who listed during this peak window for sales enjoyed an average premium of $2,400. Current market conditions tracked by Zillow indicated that inventory is tight as of Spring 2018. This situation will likely apply upward pressure on prices.

What to avoid when looking for a home

Most Delaware homebuyers get pretty excited when they find a property they believe fits all of their needs. Upon further research, however, a property could be more of a nightmare than a dream home. One sign that a home may not be worth buying is if the price was reduced significantly by the current owner. This could be a sign of a structural or other issue that needs to be looked into.

Someone who is going to buy a home should never close on a deal without doing a home inspection first. The inspection can reveal flaws that aren't easy to spot during a showing or an open house. If there are problems with the title, the buyer might not acquire full ownership of a home. Therefore, it can be a good idea to look closely at the title before closing on a property.

What to know about the current housing market

The mortgage on a median-priced home in America is up 13 percent from the first part of 2017. This could make it more challenging for Delaware homebuyers this spring season. When a buyer takes taxes and other costs into account, a total mortgage payment can easily exceed 30 percent of a person's income. Ideally, housing should constitute no more than 30 percent of a person's take-home pay.

A combination of increased interest rates and a lack of inventory have resulted in the higher home prices. The interest rate for a 30-year fixed-rate loan was 4.46 percent as of March 16, the highest since January 2014. It's important to note that home prices haven't appreciated equally throughout the country. In cities such as San Francisco and Seattle, a mortgage now costs $378 and $449 more a month than a year ago.

Residential real estate sales fall as mortgage rates rise

People in Delaware may be closely following trends in the residential real estate market as they look to purchase a home or relocate by selling their home and searching for a new residence. Across the United States, mortgage rates are rising, and it appears that fewer people are selling their homes. In January 2018, pending home sales, a measure of signed contracts, went down 4.7 percent in comparison with the previous month, December 2017.

In fact, the residential real estate numbers that had already been projected for December were revised down following confirmation. The National Association of Realtors, or NAR, tracks trends in the American housing market. While the economy in general is doing well, the NAR said, housing supply on the market is limited and mortgage rates are rising, leading to fewer people deciding to purchase homes at this time. In addition, they said, the effect of these issues is felt most strongly in the lower or entry level of the housing market.

The commitment of buying a home together

Buying a home may be one of the most significant purchases a person makes. For Delaware couples who decide to purchase a home together, it can turn out to be more of a commitment than getting married. Engaged couples who decide that they no longer want to get married can simply end their engagement. However, if they have purchased a home together, the financial entanglements can make getting rid of the home a complicated process and might result in a major financial loss.

The financial costs for improving the condition of a home can be much higher than for counseling for a troubled marriage. If a couple is unhappy with the state of the electrical wiring, plumbing, size or layout of the home, they should expect to pay thousands of dollars. Homes also require maintenance and repair, and homeowners do not have the luxury of ignoring issues with the home, some of which could develop into substantial and expensive problems to solve.

Mortgage rates continue to increase

Delaware homeowners may soon be paying more on long-term mortgage rates. Interest rates are rising because the Federal Reserve is taking action to keep inflation at a reasonable level. It is expected that the Fed will raise rates at its March meeting. The national bank raised rates three times in the previous year. The 30-year rate was 4.22 percent as of Feb. 1, which was the highest since March 2016.

The rate for 15-year fixed-rate loans was 3.68 percent as of Feb. 1, which was the highest since July 2011. These loans tend to be widely used by those who are looking to refinance their current loans. The rate for a five-year adjustable mortgage was also at its highest since April 2011. It is important to note that these rates do not include points that some borrowers may pay ahead of time to get the lowest possible interest rate.