What Happens to Your Deposit if a Condo Developer Goes Bankrupt?

Lots of buyers consider purchasing pre-construction condos for a variety of reasons, but perhaps the biggest one is to lock in at the current price per square foot before prices start to rise. By the time the development is complete, buyers will have the exact condo they want designed to their tastes, all while taking advantage of a better price should the market trend upward.

But as advantageous as buying pre-construction condos might be, it also comes with some disadvantages, and perhaps the biggest risk is the potential for the condo developer to bail out of the development.

It can happen, and has happened in the past, which leaves buyers with no condo, no interest-growing opportunities for the deposit put down with the developer, and right back at square one looking for a new place to call home. Only this time, the price per square foot will likely be higher than when they originally purchased.

It’s an unfortunate situation, but thankfully it’s quite a rare occurrence. That said, it’s important that you be aware of potential risks associated with condo developers backing out before the development even gets off the ground.

More specifically, you’ll want to know that your deposit is still safe even if the condo developer backs out on the development.

What Happens to Your Deposit?

When a developer goes bankrupt while tens of thousands of dollars in deposit money is tied up, one of the first questions that buyers may have is, “What happens to my deposit?”

This is a valid concerned, considering the fact that builder deposits are usually for quite a large chunk of change. The answer, however, will differ depending on who’s holding the deposit money.

Ideally, the money should be heald with an escrow company or title company, in which case the funds are being protected and should be paid back to each buyer affected. In this case, buyers would have to get in touch with the escrow or title company in order to have the funds released.

Any real estate agreements between buyers and builders should contain a clause that outlines what will happen to the deposit money should the developer fold. That’s why it’s so important to have representation from a real estate agent when entering these agreements, as they will know to look for such clauses and ensure that they are included and enforced.

If, however, the deposit money was paid directly to the builder, this could be a major issue and would require legal action filed against the builder in order to have the deposit money refunded. In this case, a real estate lawyer would be required.

It’s never advised to leave a deposit directly with a builder, much like it’s not recommended to pay a seller the deposit in a traditional real estate deal. In case either one of them goes bankrupt, you could be left high and dry.

What About Interest on the Deposit Money?

From the time that the deposit is made to the time that a developer bails on a development, any interest that could have been made on  that deposit money is basically lost.

Even if the money just sat in a bank account, it would still collect interest. But when a builder files for bankruptcy, buyers are simply at a loss when it comes to any interest that could have been collected while the funds were in the developer’s hands.

Suing the Developer

It’s not uncommon for there to be a class action lawsuit against the offending developer set by angry buyers who are left in the dust. The purpose of these lawsuits is typically to sue the developer for the lost appreciation from the time that they bought the units to when the deposits were returned.

Buyers should be aware that the result of a class action lawsuit could take years to achieve.

What Can Buyers Do to Protect Themselves?

If you’re considering buying a pre-construction condo unit from a developer, there are some things you can and should do to protect yourself from headaches and disappointment.

For starters, thoroughly review the contract and be on the lookout for any clauses that indicate that buyers will be forced to buy the unit even if the entire complex’s construction completion is delayed. Also, as already mentioned, be sure that a clause is inserted that dictates that the deposit will be repaid in full in case the developer is unable to complete the complex.

Do your homework on the builder’s track record and look for any history of bankruptcies or failed developments in the past.

The Bottom Line

It can be incredibly disheartening to find out that the condo you invested in and looked forward to moving into when construction is complete falls through. While this is not a very common occurrence, it can and does happen. When it does, buyers are left wondering what will happen to the deposit money they’ve tied up in such developments.

The silver lining is that if buyers are represented by a seasoned real estate agent who knows what a sound contract looks like, their deposits will be protected, though any opportunity to collect interest on these funds is likely lost.

7 Must-Do’s When House Hunting

House hunting is an exciting time. When you’re finally ready to buy a home, the next logical step would be to scope out different homes on the market in order to find the one that you fall in love with and meets all your needs. But as fun as it can be to hop from one home to another, it’s also a task that you need to make the most of.

When visiting homes on the market, be sure to keep the following in mind.

1. Get Pre-Approved For a Mortgage

How do you know how much you can afford to pay for a home? Are you planning to just arbitrarily visit homes regardless of their price? Not only is this a waste of time it can also set you up for disappointment.

But you can make the most of your time house-hunting by getting pre-approved for a mortgage. While this is not a guarantee that you will definitely get approved, it is a foot in the door.

Your mortgage broker will assess your current finances on a surface level and will pre-approve you for a certain loan amount. From there, you’ll have a better idea of what price range you should focus on when searching for a new home.

2. Hire a Seasoned Real Estate Professional

Once you’ve made a visit to your mortgage broker, the next professional that obviously needs to be recruited is a real estate agent. Hiring a professional with experience in the neighborhoods you’re interested in will give you a leg up in the process.

They’ll make sure you spend your time wisely searching for homes that match your criteria and will help you make sense of potentially complex real estate contracts. Your agent will be sure to include the right contingencies to protect you and will negotiate on your behalf to help get you the best price possible.

3. Don’t Let Minor Repairs Scare You

Most buyers prefer to buy a home that’s in move-in condition, with nothing to do except move their belongings in. But it’s not uncommon for resale homes to have minor little issues here and there that might need some attention.

Don’t let these little issues deter you from potentially landing a great home at a great price. Try to look past things that can be easily rectified, especially if you love the home and the neighborhood it’s in, and the price fits within your budget. Unless you build the home yourself from scratch and it’s brand new, it’s likely that there may be things that might need some tweaking to make the home perfect.

4. Keep a Look-Out For Signs of Major Problems

While little issues might not be such a big deal, more serious problems could cost you a lot more than you’d care to spend. During your showing appointment, be sure to pay attention to any red flags that could be signs of much bigger issues that you may have to deal with, including the following:

  • Musty smells, which could be a sign of water infestation and even mold;
  • Stains on ceilings, floors, and walls, which could also point to water problems;
  • Uneven floors, ‘sticky’ doors and windows, and large cracks in the foundation wall, which could be signs of a faulty foundation;
  • Gnaw marks on trim and other wooden components, which could be a sign of a termite infestation.

Your home inspector will be able to uncover any issues you may not have noticed during your viewings, so be sure to include a home inspection contingency in your real estate agreement.

5. Make a List of Must-Haves

Who wouldn’t love a huge lot, a gorgeous view, 10′ ceilings, granite counters, multiple walk-in closets, and Sub Zero kitchen appliances? While you just might be able to get all of these things, it’s important to be realistic about what your budget can get you. Although there may certainly be things you’d love to have, be sure to differentiate between your “needs” versus your “wants.”

Before you visit your first home, go in armed with a list of absolute must-haves in order for the home to suit your lifestyle. While you may be open to compensating certain traits, others might be ones that you won’t be so open about sacrificing.

6. Scope Out Different Neighborhoods

You might have a good idea of exactly where you’d like to live, but keep an open mind about other communities that you might not have thought about. Your real estate agent may have some neighborhoods in mind for you to check out that they think might be places that would suit your tastes and lifestyle.

The location of the home you buy is even more important than the actual house. The structure itself can be changed, but there’s nothing you can do about the location. Think about important things such as the types of schools in the area, proximity to your place of work, noise pollution, future developments, and businesses in the area before settling on a specific neighborhood and lot.

7. Book Second Showings on Homes That Make the Short List

Don’t put in an offer after only visiting a home once. Even if you believe you’ve found “the one,” it’s still important to check the place out one more time before signing off on an offer. There may be things that you might not have noticed the first time around, and viewing the home a second time around will give you another opportunity to see the place in a different light.

When you do book a second showing, consider going at a different time of day than the first time around. The way a neighborhood seems during the day might be totally different than how the area is at night. Things such as traffic and how neighbors behave could differ at various times of the day.

The Bottom Line

Buying a house is a huge deal and a major expense. The last thing you want is to suffer from the dreaded “buyer’s remorse.” But you don’t have to. With careful planning, sound house-hunting tactics, and a seasoned real estate agent by your side, you can make the most of your house-hunting trips and buy the home of your dreams.

How to Make the Most of Downsizing

Having plenty of space in a home is a luxury. But what might be enough space for some may be too much for others.

While many buyers are trading up in the word of real estate, many others have reached the point where downsizing makes sense. Whether you’re an empty nester or are simply looking for something more affordable and less work to maintain, downsizing may be the right thing for you to do.

But before you start enjoying cheaper utility bills and less space to clean, having a specific plan in place before you start moving your stuff can help ensure the process is a smooth one. Here are some things you should consider to make the most of downsizing.

Figure Out Your Lifestyle Needs

Before you buy a smaller place, consider a few things first. Figure out what type of lifestyle you’re going for that may be different than the one you’re leading now.

How much smaller should you go? What type of amenities do you want to have within close proximity? Would you prefer something with only one level? Are you open to condo living? Are you looking for a community with a certain age demographic?

The answers to these questions will help you figure out not only how much smaller you want to go, but also what factors will also play a role in helping you live the lifestyle you’re looking to lead.

Make a List of All Your Belongings

No matter what type of dwelling you’re moving to, it’s always important to take inventory of all of your belongings before you even call the moving company. Take the time well in advance of the big move to make note of all of your things and decide what you should keep and what you can toss.

This might seem like a pesky, overwhelming task, but it’s an important one that shouldn’t be skipped. Take your time with it, and go room by room so it doesn’t seem as though you’re taking inventory of the whole house at once, which can certainly be daunting.

While you’re taking inventory, be sure to make a distinction between your wants versus your needs. Quite often we assume that something is a necessity when it’s more of a luxury. And when you’re downsizing to a smaller place, having a distinct list of each can help you wean out things that are just taking up space when you actually don’t need or even use them. 

Sell/Donate/Trash Some of Your Things

After you’ve taken inventory of all of your stuff, decide what to do with them. During your list-taking task, consider placing items in specific columns, including things you should keep, donate, or throw out. Whatever you choose to keep, start boxing them up. Everything else should either be given away or tossed in the trash.

Consider having a yard sale to help you whittle down your belongings. Sell things on online classified sites or on garage sale apps. Whatever you don’t sell, consider donating it to the local charity. Anything that isn’t worth donating should be trashed. And the sooner you do this, the better, as it will help to clear the place out and making moving day much more streamlined.

Consider How Your Furniture Will Fit

The way your furniture may fit in your current home doesn’t necessarily mean that it will fit just as well in your new, smaller home. It’s quite possible that you might not have enough space to fit all of the furniture that you might want to keep. When downsizing, be sure to measure your furniture to see if it will fit well with the dimensions of your new home.

You certainly don’t want to be in a position to have made the effort to move your furniture, only to realize that it doesn’t fit in your new space. Measuring your furniture long before moving day will give you an idea of which pieces you’ll be able to take with you and which ones you might have to leave behind.

Choose Double-Duty Furniture

If you’ve decided that new furniture is the way to go after careful measuring, consider choosing pieces that can serve more than one function. For instance, consoles with shelving, coffee tables with storage space underneath, dressers as bedside tables, and shelving units as room dividers are only a handful of examples of pieces that serve more than one purpose.

If the place you’re moving into is particularly short on square footage, pieces like these can make the perfect choice to help you avoid taking up precious space while offering plenty of function.

Make Good Use of Storage Space

Once you’ve made it to your new place, be sure to make smart use of storage. This will help you keep as many of your precious belongings as you can from your old home. The following are great ways to house your things without having to take up so much space in your closets, attic, or shed:

  • Hanging shelves
  • Storage ottomans
  • Built-in shelving units
  • Drawers under beds
  • Garage shelving

Get creative with your storage space to help you neatly tuck your belongings away and avoiding clutter that typically comes with inadequate storage solutions.

The Bottom Line

Downsizing is a rather common phenomenon among people who no longer have use for so much space in their current homes. Rather than spending so much extra time, cleaning and maintaining larger homes and paying more in utility bills and property taxes, homeowners with no more use for extra space choose to downsize. If you fit into this category, consider keeping the above-mentioned tips in mind to help make your downsizing process a success.

Things to Consider Before Deciding on a Resale or Pre-Construction Condo

Condos are great options for buyers who may be looking for something more affordable than traditional single-family homes. They’re also great for people who like the idea of less maintenance and more built-in amenities. Further, condos tend to be in close proximity to transportation and city centers, making the live-work-play environment an ideal one.

But when it comes to buying a condo, should you choose resale or pre-construction? The truth is, there are pros and cons to both, so you’d be well-advised to consider them all before deciding on one over the other.

Pros and Cons of Buying Pre-Construction

There are some obvious perks of buying brand new construction, but there are a few drawbacks as well.

PROS

Flexibility

With any pre-construction project, you’ll have the freedom to choose your finishes and sometimes even your layout. This will allow you to fully customize the look and functionality of the condo and appease your tastes in terms of decor and style.

Energy Efficiency

Obviously, new construction tends to be more energy efficient simply because of newer and more modern materials being used. If you buy a unit in an old building, you might not be awarded such benefits.

Everything’s New

Because all materials and finishes are new, the odds of something breaking down or requiring repair shortly after you move in are minimal.

Build Equity Through Appreciation

Many buyers purchase pre-construction condos in order to take advantage of appreciation. By the time they take possession, the odds of the unit being more valuable than what they paid for it are pretty good. As long as the market continues to be healthy, there’s a good chance that you can build instant equity this way.

CONS

Smaller Size

It seems that with each new development, developers tend to build units that are smaller and smaller in size. Condo developers are in the market to make money, so if they can increase their profits by reducing square footage, they’ll probably do just that.

Noise and Dust

If your condo happens to be the first phase of many, odds are you’ll have to live in a construction site until the entire development is complete. In the meantime, expect a lot of mess and noise.

Delayed Move-in Date

Like any other type of new development, there is always the chance of delays. Anything can happen, and it usually does, leaving condo purchasers waiting for their ultimate move-in day.

Development Charges

Developers tend to charge condo buyers a sizeable one-time development charge to cover the cost of new infrastructure. Developers have to pay the city for these fees, which they will then pass on to buyers.

Pros and Cons of Buying Resale

Resale condos also come with their own set of perks and drawbacks, including the following.

PROS

Move in Right Away

Rather than having to wait until the condo is complete, as is the case with pre-construction, your unit is ready for you to take, depending on the closing date agreed upon with the seller. There’s no risk of delays and having to wait around for development completion, which can be a real nuisance if you have to coordinate the sale of your current home. You won’t have to deal with such nuisances with resale.

Get a Feel For the Neighborhood

You’ll also be able to get to know the neighborhood and the people who live in the building, which is not something you’d get to do with pre-construction. Resale will allow you to get familiar with the amenities in the area as well, which can help you determine if the area and the building suit your lifestyle.

Units Are Larger

Generally speaking, older buildings tend to have larger units, as explained above. For the same price, you can have a much larger unit that affords you with more space to do with as you please. These days, condo developers are hesitant to build larger units with multiple bedrooms because of shortages in affordability. Why should they take that chance when they can make more money on a per-square-foot basis with smaller units?

CONS

Older Finishes and Materials

There’s something to be said about something that’s brand new. But with older condos comes older materials and finishes, which not only means that they may be more likely to be outdated, but they’ll also require more maintenance and repairs.

Little Flexibility

You won’t be able to customize your unit with a resale as you would be able to with pre-construction. While you might be able to make certain upgrades and changes (as long as you’ve been approved by the condo board), you won’t be able to make more in-depth changes that you could with pre-construction.

Potential to Dish Out For Repairs

If the building you buy in happens to be on the brink of requiring a new roof, newly paved parking lot, or anything else that requires replacement or repair, that money’s got to come from somewhere. If the building’s association is not managing money properly, you could be stuck with major condo fee hikes to cover these costs.

The Bottom Line

Both resale and pre-construction condos have their own set of advantages and disadvantages, and the one you choose should closely align with your lifestyle, tastes, and needs. Work with a seasoned real estate agent who can show you examples of both and go over some of the units available in the area you’re looking in before making your ultimate decision.

How to Decide Between a Conventional or FHA Home Loan

When it comes time to apply for a mortgage, which avenue should you take? There are several types of home loan products available, but the one you decide on should closely match your needs and financial position.

More specifically, should you apply for a conventional mortgage, or does an FHA home loan work best for you? How can you decide between the two?

What is a Conventional Loan?

Before you decide which product is best for you, it’s important to understand what each one is and what they can provide you with.

A conventional loan is a mortgage that requires a 20% down payment. They also tend to be the more challenging types of mortgages to get approved for, as the loan criteria that borrowers must have to get approved are pretty stringent. To get approved for a conventional loan, you’ll typically require the following:

  • A good credit score (at least 650)
  • A low debt-to-income ratio (DTI), which should be no more than 43%
  • A down payment of at least 20%, which will allow you to avoid paying private mortgage insurance (PMI)

These loans are not backed by the government like FHA loans are.

It should be noted that although conventional mortgages require a 20% down payment, there are high-ratio conventional mortgages available that allow borrowers to put down as little as 5%. They’re named so because the loan-to-value ratio (LTV) is more than 80%.

In this case, the lender is more at risk in case the borrower defaults on the loan because the loan amount is much higher. In this case, PMI would be charged as a means to protect the lender should the borrower default on the mortgage payments.

What is an FHA Loan?

FHA loans are those that are backed by the Federal Housing Administration (FHA) and has less stringent loan criteria. For this reason, FHA loans tend to be pretty popular among first-time homebuyers and borrowers with a less-than-perfect credit score. Borrowers with a score of at least 580 should be able to qualify for an FHA loan.

These types of mortgages are also attractive for those who can’t come up with a sizeable down payment, as they allow a minimum down payment amount of 3.5% of the purchase price of a home. Like high-ratio conventional loans, FHA loans require mortgage insurance to be paid given the low down payment and high loan amounts.

Which Loan Type is Right For You?

In order to help you decide between these two loan types, let’s dive deeper and get more detailed into the factors listed above.

Credit score.

In order to qualify for a conventional loan, you’ll need a good credit score. More specifically, a score of at least 650 would be required for approval. A higher credit score will not only increase your chances of approval, but it will also help you obtain a lower interest rate, which can make your overall home loan more affordable.

If your credit is suffering somewhat, a conventional loan might not work in your favor. In this case, an FHA loan might work better for you. Generally speaking, a score of 580 should be enough to get you approved, as long as all other factors align with home loan approval. That said, every lender will have their own specific criteria when it comes to credit scores required.

Down payment and mortgage insurance.

As mentioned earlier, an FHA loan requires a minimum down payment amount of 3.5% of the purchase price of the home. If you’re having a tough time coming up with a sizeable down payment for a mortgage, an FHA loan might be easier for you.

It should be noted, however, that Mortgage Insurance (MIP) will be required on down payments that are less than 10% with FHA loans. Even though you are responsible for making these premium payments, it’s the lender that’s protected, not you. If you ever default on your loan payments, the insurance policy will kick in to reimburse the lender.

Conventional loans require a 20% down payment, which can be a hefty amount with a more expensive home purchase. But with a 20% down payment, you can avoid having to pay Private Mortgage Insurance (PMI), which works similar to MIP. However, high-ratio conventional loans allow as little as 5% down, though PMI would have to be paid in this case.

That said, you can eventually eliminate PMI payments once you’ve paid down the loan balance to 80% of your home’s original appraised value. With FHA loans, mortgage insurance can’t be eliminated.

Debt-to-income ratio (DTI).

No matter what type of loan you apply for, your lender will look at your income and debt load. More specifically, they’ll assess how much of your monthly income is dedicated to paying down your monthly debt obligations. A debt-to-income ratio is calculated by dividing your debt by your income. For example, if your monthly debt is $3,000 per month and your monthly income is $7,000, your DTI would be 43%.

Conventional lenders like to see DTIs of no more than 43% before agreeing to approve a mortgage application. However, DTIs that are lower than 36% are preferred.

With FHA loans, you may be able to get approved with a DTI as high as 50% as long as all other factors check out.

Refinancing process.

Refinancing basically involves replacing your existing loan with a new one, in which the new loan pays off the current debt. If you want to take advantage of refinancing at some point throughout your mortgage, you might find that the process is much more streamlined with FHA loans compared to conventional mortgages.

With a conventional mortgage, you’ll likely have to go through the entire loan application process over again and pay all the associated closing costs, which can wind up taking up a lot of time and money. With FHA loans, you can refinance your FHA loan through the Streamline Refinance process without having to fill out all the same amount of paperwork and paying all the fees that would be associated with refinancing a conventional loan.

The Bottom Line

Depending on your credit score, debt load, down payment amount, and income, one specific loan type might be better than the other for you. It’s important to assess your current financial situation and your eligibility criteria, which will then help guide to which loan product you might be better suited for. Speak with a licensed mortgage specialist to help you make the right decision for you.

Home Features That May Not Add Any Value to Your Home

Certain features in a home have stood the test of time in terms of adding value to a property, while others often don’t bring in the type of ROI that sellers usually look for when they sell.

As a seller, you’ll obviously want to prep your home accordingly in order to attract the masses of buyers out there. That’s precisely why many sellers employ professional home stagers. But in many cases, taking on certain home improvement or upgrading projects might be warranted to bring your home up to par.

That said, you’ll need to be very careful about the type of projects that you undertake.  More specifically, the following projects might not add as much value as you’d like and probably won’t allow you to fully recoup what you spend on them.

Upgraded Utilities

When it comes to adding perceived value to a home, features that buyers can actually see are what really matters. While things like the electrical panel and wiring or new plumbing pipes are certainly nice to have, buyers might not always associate the importance of such upgrades with offering more money.

Even though you may have spent thousands of dollars upgrading the wiring and pipes, you may not see all that money recouped in the offers that buyers submit.

Of course, making the necessary improvements in these areas isn’t necessarily a bad idea, and it may sometimes be needed in order to actually sell your home. That said, don’t assume that such upgrades will allow you to hike up your asking price.

New HVAC System

Like the utilities in your home, the HVAC system isn’t something that buyers will notice. Of course, if the A/C is completely dead and the inside of the home is boiling hot, buyers will notice. In this case, you’ll have little choice but to repair or replace the unit before you sell.

But simply upgrading your entire HVAC system isn’t necessarily going to allow you to recoup all the money you may spend on it when it comes time to sell. Buyers are not likely to pay more for it.

Adding a Swimming Pool

Many buyers in California expect a home to have a pool when they buy. But if your home doesn’t already have one, adding one now isn’t exactly going to bring you a high ROI. In fact, you could lose money by taking on such a huge project.

Installing a pool is a very expensive job. You’ll likely spend no less than $30,000 on a pool installation, but you probably won’t be able to tack on that extra $30,000 to the asking price.

Buyers who really want a pool can always install one themselves and design it in the way they like. If other homes on the block have a pool, you’ll need to make the appropriate price adjustment to your asking price, which might be the better way to go than installing (and paying) for a pool installation that will likely cost much more than you’ll get back for it.

Solar Panel Installation

An increasing number of buyers – especially those in the millennial demographic – appreciate “green” homes that are easy on the environment – and their pocketbooks. And solar paneling is certainly a great feature for a home to have that can save energy and money.

But the installation cost is extremely high. People who install solar panels usually do so if they are planning to remain in their homes for the long haul, as they won’t see any recouping for years to come. Installing them today will definitely not add the kind of value that you’ll be able to get back when you sell.

New Bathrooms

Bathrooms might be small in size, but they play a key role in the value of a home. A home with three updated bathrooms is obviously better than a home with one old and outdated bathroom, for example. But while you might want to spruce up a tired-looking space, installing a brand new bathroom might not bring you back what you spend on such a project.

In fact, you can expect to get back no more than half of what you spend on a new bathroom installation. If anything, consider updating the one(s) you already have, within reason.

Landscaping Overkill

Your home’s landscaping plays a key role in curb appeal, which is crucial when selling your home. Your lawn should be mowed and free of weeds, your flowers should be healthy, and your bushes should be trimmed. But going overboard with your landscaping will risk losing money when you finally sell.

Not only will you probably spend a lot more on your landscaping that you’ll get back, but you might even turn some buyers off who prefer to personalize their landscaping without so many extensive intricacies.

High-End Features

When prepping your home for the market, it’s important that you stay in line with what the majority of homes in the area offer. A home that’s been overloaded with high-end upgrades on a block that has more modest homes might not make sense. You’ll probably do nothing more than make your home stand out like a sore thumb.

You may have spent some good money on ornate lighting, extensive crown molding, decorative wainscoting, innovative kitchen appliances, or Italian marble countertops, but are buyers in the area willing to spend the big bucks to have all that? These types of features are super expensive, and it’s unlikely that you’ll find a buyer who would be willing to pay as much for your home as what you spent on it.

The Bottom Line

Upgrading your home is certainly a good thing when prepping your home for the market. But the types of projects you take on and the amount of money you spend on them should be carefully considered. While you want your home to impress buyers, you also want to make sure the ROI is worth it. Speak with your real estate agent to find out which projects make more financial sense, and which ones you should steer clear of.

These Are Things That Millennial Buyers Look at When Searching For a Home

Millennials are a unique demographic. They’re well-informed and are very sophisticated when it comes to what they want, particularly when it comes to the home they plan to buy.

These “Generation Yers” have plenty of expectations that the generations before them may not have had when it comes to buying real estate. Knowing this, sellers should take the time to understand exactly what the specific needs and desires of this group are when they’re searching for a home. That way, sellers can be more competitive.

So, what exactly is this particular group of homebuyers looking for in a property to call home before they decide to put in an offer?

“Smart” Homes

Considering the fact that millennials practically grew up with digital devices in their hands and the internet at their fingertips, it should come as no surprise that this group of buyers would want their homes to come equipped with some level of automation.

“Smart” homes are basically those that can be controlled to some degree by technology. With the simple touch of a button, homeowners can command various components of their homes to do exactly what they want them to. Whether it’s changing the temperature, locking or unlocking doors, or adjusting the lighting, such functions can be operated through their mobile devices no matter where they happen to.

Any property on the market that is already equipped with such functionality will likely be attractive to millennial buyers.

Energy Efficiency

The younger generations tend to be quite focused on minimizing their carbon footprint on the plant. That’s not to say that older generations don’t, but millennials are more likely to place more emphasis on “green” homes that don’t waste energy.

This demographic appreciates structures that make very good use of energy and water and are not wasteful in any way. Features such as energy-efficient windows, low-flow toilets, LED lights, programmable thermostats, and rainwater reservoirs go a long way at impressing millennial buyers. Besides, such features will end up saving them money in utility bills too.

Spacious Laundry Rooms

Seemingly unimportant little spaces, laundry rooms are very important to buyers, including millennials. Not only do they want laundry rooms to be well-defined and located in a convenient spot, but they also want them to be spacious enough so that family members aren’t stepping over each other.

They also want to have plenty of space to fold their laundry and even rinse in a tub if possible. Lots of counter space, cabinetry, and a sink can make a laundry room much more convenient, which is what millennials like to see.

Hardwood Flooring

Just about every homebuyer demographic likes to see hardwood flooring in the homes they visit. Vinyl, laminate, and carpeting are considered outdated features that many buyers will end up ripping out after they take possession. Not only is hardwood flooring much more attractive than other flooring materials, but it’s also rather low in maintenance.

Open Concept Layouts

While some buyers still appreciate compartmentalization of homes to provide defined spaces for different uses, many others like the idea of an open floor plan. This is especially true of millennials, who like the idea of being able to entertain and be in view of everyone on the floor regardless of whether they’re in the kitchen or living room.

Open concepts are not only more modern, but they also make a space feel brighter and more spacious.

Updated Kitchens and Bathrooms

These two particular rooms very important and are typically the main selling points of homes. The majority of millennial buyers look for turn-key homes that don’t require much work at all, and the kitchen and bathroom are typically spaces that would require any work to update.

But homes with kitchens and bathrooms that are already upgraded and modern will be more likely to attract the attention of Gen Yers during the house hunting process. They appreciate upgraded cabinets, granite counters, sophisticated lighting, and modern appliances.

Space For an Office

Thanks to the internet, more and more people are able to work remotely, and many of them are choosing to work from home as opposed to anywhere else. As such, having a dedicated office space that provides them with plenty of room for a desk, computer, phone, filing cabinets, and anything else that they need to conduct their work is a highly coveted feature in a home.

The Bottom Line

As a seller, it’s always important to understand who your target buyers are. This will help you get a sense of what they’re looking for in a home and can give you some ideas of how to stage or present your home appropriately to attract these buyers. And when it comes to the millennial buyer, this particular group tends to have very sophisticated tastes and needs in a home they plan to purchase.

Work with your real estate agent and home stager to help position your house in the best light possible to attract the masses of buyers looking for a place to call home.

Multi-Family Homes: The Pros and Cons

There are plenty of ways to invest in real estate, and multi-family housing is a popular one.

Multi-family properties are basically homes that are incorporated into one larger complex, whether it’s an apartment building, duplex, triplex, or multiplex. Essentially, the homes are structured in such as way that they are able to house multiple families in the same complexes, though all separate from one another.

Multi-family housing investments can be a great option for many investors instead of just investing in a single family home, but perhaps not so much for others. There are obviously certain advantages to investing in this type of real estate, but there are also a few drawbacks as well. That’s why it’s so important for investors to weigh both the pros and cons of such investments before jumping in with both feet.

Pros of Multi-Family Housing Investments

Let’s get into the advantages of investing in a multi-family complex:

Bigger profits. Obviously, the more families living in the complex that you purchase, the bigger your cash flow is going to be. Collecting rent from several units as opposed to just one will bring in a larger flow of income. As long as the rent is paid on time and the amount you charge more than covers the operating costs, you stand to make a bigger profit with a multi-family complex as opposed to owing just one unit or a single-family home.

Less risk with tenants. If you only have one unit, the risk of vacancy is much higher. You’re depending on that one unit for rent collection. But with a multi-family complex, you’ll have a number of units on your hands. Even if you’ve got one vacancy, it doesn’t represent the entire makeup of your vacancy rate.

Even if one unit becomes vacant, there are still other units that are filled and bringing in rent money every month. And if one of the tenants happens to neglect to pay rent on time or is difficult to deal with, a multiple tenant situation probably won’t result in all tenants being a problem all at the same time. In this way, you won’t be putting all your eggs in one basket.

The value will hold over time. Multi-family properties are usually valued according to how much potential they have to generate a positive income every month. They’re typically purchased exclusively by investors, and if these properties are able to prove a decent income through rent, they’re usually able to maintain their value over the long haul.

Mortgage are easier to get. If you’re planning to buy a number of investment properties, you might find it easier to get one mortgage for a multi-family property as opposed to buying many single-family properties. Not only will it be easier to get approved, but it will also be easier to manage one loan under one lender instead of many if you were to purchase several separate properties.

Cons of Multi-Family Housing Investments

As great as multi-family property investing may be, it’s not without its drawbacks.

Cost. You can always buy just one single family home to rent out and collect income on. This will still bring in some level of income while costing you far less to purchase. Obviously, buying a multi-family complex is a much larger financial transaction than a single-family property.

Many first-time investors might choose to start smaller and get in the market with a single-family property at first before jumping into a multi-family property investment simply because of the high price tag attached to such an investment.

More tenants equal more hassles. A single-family home investment means you’ll only be dealing with one family With a multi-family complex, on the other hand, you’ll be dealing with multiple tenants. While this can mean your profits will be higher, it also means dealing with several tenants at once which can be more time-consuming and more of a hassle.

Further, if there’s an issue with the structure, you’ll have to deal with complaints from all tenants at once, which can translate in more headaches and higher maintenance/repair costs. That said, you can always hire a property manager to tackle these issues for you. While there is a cost associated with this type of assistance, it is typically tax-deductible.

Fewer properties available. It’s a lot easier to find a decent single family home to buy for investment purposes than it is to find a multi-family complex that checks off all the boxes. Multi-family homes are not as readily available to as single-family homes for a number of reasons, including less demand and higher purchase prices. As such, it can be more of a challenge to find the perfect property at the right price that meets all of your needs and wants.

The Bottom Line

Investing in any type of real estate can prove to be highly profitable and provide long-term wealth when done right. And multi-family properties provide investors with just one of many ways to realize a profit and bring in a handsome income every month. But there are always considerations to make before choosing this type of investment over others. Work with an experienced real estate professional to help you navigate the realm of multi-family home investments to make sure this is the right path for you.