The RE/MAX Associates Louisville Real Estate Blog

Reasons to Avoid PMI, and How to Skip it

Private Mortgage Insurance doesn’t seem to be a costly expense, but it definitely adds up over the life of your loan. Commonly known as PMI, private mortgage insurance is an extra fee on top of your monthly mortgage payment as well as escrow and taxes. It’s an insurance that protects the lender in case the borrower defaults on the loan. Whoever gave you the loan is the entity handling the PMI. PMI doesn’t do a single thing for the homeowner other than cost you $100 a month. Here’s why and how you should avoid paying PMI.

You don’t have to pay PMI

PMI isn’t mandatory for all homeowners. Lenders charge PMI when borrowers finance more than a certain percentage of a home purchase, it’s usually less than 20%. It makes no difference what you look like on paper, this is the lenders duty to protect themselves. Usually when you reach around 80% equity, you can drop the PMI. Avoid having to pay PMI by putting down a bigger down payment, and expect to pay it if you put down less than 20%.

PMI mortgage insurance does nothing for you

Yes it’s true, you are basically throwing money away. This payment strictly protects the lender, it doesn’t go towards the equity of your home, and it can’t be recouped from the sale of the house. It’s not tax-deductible like your interest, and doesn’t affect your loan balance.  It’s simply a fee to pay if your home-loan-to-home-value ratio is less than 80%.

It’s difficult to get rid of

You build equity as you pay down the principal amount on your mortgage. Even if you financed more than 20% of the purchase price of your home, you should eventually pay down your loan, or your home will increase in value, so that you owe less than 80% of what your home is...

Capital Gains Tax on Real Estate: The Misconeptions

Knowing the rules before you begin is important in any task you to decide to undertake. It doesn’t matter how you gained value on your property, whether the market naturally made your home value rise, you completed a few big time renovations, or whatever, it’s still exciting. The only thing that can diminish your excitement is taxes on your gain. This is called the capital gains tax.

The law passed in 1997 called the Taxpayer Relief Act helps homeowners keep much of the gains on their home sale. Before 1997 homeowners could only “pull out the once-in-a-lifetime card” that exempted them from taxes up to $125,000 on a home sale, or their home earnings were expected to roll into the purchase of their next home. Today’s rules aren’t so strict, so let’s take a look at those loopholes.

Tax Treatment: house flippers vs. homeowners

A common misconception is that all house sales are treated equally. This is not the case for house flippers. In order to receive the best tax treatment on your gains, you need to use that house as your permanent residency for at least two years. For professional house flippers, houses are considered inventory as opposed to capital assets, and the profit is taxes as income. The long-term capital gains tax is 15% for most people, and 20% for those in the top tier tax brackets. If your gains are taxes as income (professional flippers) your taxes could span from 10% to 40% depending on the rest of your income. House flippers cannot simple avoid the tax by rolling their profits into the next house.

Exemption Limits: Filing married vs. single

The Taxpayer Relief Act voided the once-in-a-lifetime tax exemption of $125,000, exemption limits haven’t completely fallen by the wayside. You are now allowed to keep up to half a million dollars of each home sale profit...

3 Signs to Keep Your Home Off the Market

A handful of sellers think they’re ready to sell their house, but often times they are pressured to make a move. Most real estate contracts only offer “outs” for buyers, and not sellers; so it is a smart move to sit still if contemplating selling your house.

If your home sits on the market for too long, buyers will begin to think there is something wrong with it. If you are going to list your home, and any one of these three things applies to you, you should seriously wait.

Haven’t let emotional attachment go

Selling your home and selling your car are two different things, there is much more emotion involved. Did you make incredible, irreplaceable memories in your home? Is the home sale a result of a major life event like a death, or divorce?

If this is the case, allowing strangers to inspect every inch can be gut-wrenching and painful, but to make the pain better, consider holding off. Take your time to accept the loss of whatever is passing, and list the property when you are ready to move on with your life. If you don’t, it’s going to be an agonizing process.

Your desired price is more than 10% of what agents are telling you

Homes get the most attention in the first couple weeks it is on the market. If you priced your home too high, it could still be on the market months later. At this point you will have few options, and your best tone is to drop the price, and the buyers will get you for a lot less than what you had in mind.

If you get a second opinion from another agent, and they say it will sell for 10 percent below what you were expecting, you should probably wait on selling your home. Try doing some quick renovations to bump the price up a little.

You don’t have a solid exit strategy if you get a deal...

How to Warm Your Bathroom In Style

Winter can be a hard time for your house, especially when it comes to comfortability. Sometimes bathrooms can be one of the most treacherous parts of your house, especially in the morning!

There’s a good chance your bathroom is made of tile, marble, or porcelain, and they aren’t conducive to warmth. With a little innovation and some sweat, you can make your bathroom enjoyable in the winter mornings by filling it with heat. Here are a few ways to heat up the bathroom

Heated floors

Warm bathrooms begin at the ground and heat is known to rise. Heated floors are one of the best things to step on in the morning. It keeps your toes warm, but also keeps the temperature of the room warm. The greatest benefit is it adds significant value to the home, so when you are ready to sell, expect a decent price increase!

This isn’t exactly easy, you will have to rip up the existing floor and lay electric cables or hydronic tubing. Once it is installed though, you’ll wonder how you went without it your whole life. These work really well because bathrooms are typically smaller, and can contain the heater better than a wide open room.

Towel Warmer

Everyone knows the second the shower turns off, it’s a race to grab the towel and get warm. Heated towel racks make getting out of the shower not so painful. They look like miniature ladders with heat-emitting rungs, and are large enough to hold several towels and maybe a robe.

Adding a heated towel rack can be easy or difficult, it’s essentially up to you. You can buy a freestanding one that has to be plugged in, or you can mount one to the wall or floor. The mounted ones tend to be hydronic based, and are connected to the homes plumbing.

Different models come with different options, like a timer, temperature control, how many towels, etc. Regardless,...

Fixtures, Furniture, and Finishes. Misunderstandings that Kill Home Sales

Most sellers know that staging a home exponentially increases the odds of selling it. This means spending time, effort, and money, to get the house looking the way it needs to be to catch a potential buyer’s eye. Most of the time people hire a professional to stage their house, and the professional moves out a few of your items and brings their own in pace of them.

Sometimes when buyers see a home and they fall in love with it, they want it as is, furniture included. It’s not always the seller’s items to provide with the sale. Sellers often times have to lay out what items can stay, and what goes with them. Some items can be confusing, like light fixtures, built-in objects, etc. and will need reasoning why they will be staying or going.

What’s a fixture, and what’s its significance

A fixture is anything inside the home as long as it is attached to the property, meaning if it was removed it could cause damage. Typically, if it requires a screwdriver to uninstall, it’s a fixture.

Appliances

Dishwashers, microwaves, cooktops, and sinks usually stay with the house. The fridge and washer/dryer are often up for negotiation. If it is built into the cabinets, it stays, if it stands on its own, it goes with the seller. Everything is up for negotiation though; this is just the general rule.

Light fixtures

The chandelier in the foyer is often a point of question. These usually will remain with the home, but don’t be surprised of the seller makes a quick swap between your last walk through and signing day. If it’s something you really want, make sure to get it in writing which items stay.

Window treatments

Blinds and shades should stay since they are fitted for...

Boosting Cell Signals in Your Home

Are you living in an apartment with terrible cell phone reception? No matter where you stand inside your calls always seem to fail. The lobby or hallways have full bars, but the moment you step inside your place the magic bars suddenly drop to one bar. Everyone knows how frustrating flakey cellphone service can be. There are explanations on why this happens, and the solutions are right here.

Problems

Your buildings cellphone antenna

Cell providers put their cell sites near or close to the ground, because that’s where people are usually. Sometimes they are on the corners of buildings 20-30 feet up, angled facing the street. If you live on the 40th floor, you might be out of luck.

Building materials can block radio signals

Big bulky metal objects, tinted windows, concrete, all interfere with your cellphone reception. Often times, stepping outside on the balcony or holding your phone out the window will improve your reception.

Living in a densely populated area

Have you ever noticed service tends to slowdown during nights and/or on the weekends, or when you attend a big event half the city is going to? The more people who use the network, the slower it runs. Each tower has a finite amount of radio channels it can use, so the endless amount of people drawing from it slows it down considerably. Once it has reached its capacity, you will have all the bars you need, but it won’t provide you with any data or call service.

Solutions

Buy a cellphone booster

This is truly an investment because these things are not cheap. They usually run anywhere from $400 - $1,000....

15 Easy Feng Shui Tricks for Your Home

Could the right feng shui in your living space result in better in better living conditions, from sleeping to your bank account? You bet! Feng shui is the ancient Chinese art that we as humans are connected to our environment. The objects we bring into our homes and the placement of them affect the energy that surrounds us. It can affect everything from our health, to our happiness.

Most people think feng shui is achieved by adding a bunch of Chinese items in your home, but this isn’t true. Here are some easy steps to improving your feng shui around your house.

Maintain a 6-foot clearance – All surfaces within six feet of the front door, inside and outside, need to be clutter free. This allows energy to flow in and out without running into clutter. Floor mats are fine, but avoid objects like coat and shoe racks right at the door.

Add plants – Potted plants on balconies, patios, and near windows can help energy flow around the home. Plants are living objects that have energy despite how still they are.

Choose your palette carefully – Red happens to be feng shui’s color for 2016, but it is highly discouraged to paint your walls and/or doors red. It is noted as bad luck to have them red, but do what you will. It’s better to have smaller items red, like rugs, pillows, blankets etc.

Add living objects – pets and plants are alive and well, and they move energy throughout the house.

Shape and scale - Feng shui doesn’t limit itself to furniture with round edges. A variety of shapes are your best bet here. Your furniture should be large enough to fit in proportion with your room. Don’t get massive...

What to Know When Shopping for Homeowner Insurance

There are so many parts to buying a home; we often pay attention to certain parts more than others. One area you want to pay attention to is getting home insurance. If anything happens to your home, the right insurance can be the world of a difference. Before you sign up for a plan, here are a few tips to help make this easier.

Shop for insurance from at least three providers

Mortgages typically require you to have homeowner insurance, and you will also have to buy other insurance for disasters. The market is yours to shop in, and there’s no one specific place you are supposed to go. You will want to look around the market and compare coverages, prices, and customer reviews. When shopping, keep in mind you want to shop for quality, not the best price you can get. Be sure to read their customer reviews because you mostly deal with insurance companies during times of disaster, and you will want to be companies with the bets reviews.

Escrow insurance payments with mortgage payments

Most homeowners tack their monthly insurance payments onto their mortgage check. The lender pays your insurance premiums (sometimes property taxes too) out of your escrow account. Lenders like this option because they know your premiums are being paid, and they are protected. You will probably pay for one year of insurance at closing. Bring information about your insurance policy and the money to cover the first year’s premium.

Get adequate coverage

You should know the most important part of homeowner insurance is the level of coverage. Don’t pay for more than you need. Here are the most common types of coverage.

HO-2 – Broad policy that protects against 16 perils that are named in the policy.

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How to Manage Winter Lawns

Winter isn’t always a break from lawn care, often times depending on where you live in the United States. Generally, lawn care comes down to the three needs, keeping your grass protected, short, and fed.
In between snows, make sure you pick up any branches your lawn might have, and leave the leaves as long as they’re not piling up. Mow them up to spread them around as they will act as a good mulch to protect and nourish the lawn.

Dormant lawns

If your lawn is brown in the winter, it means it’s dormant, and not growing. It’s best to keep this type of lawn short and let the earth water it. Don’t waste your time trying to water your dormant grass. You will essentially be preventing any diseases and pests that could benefit from dead blades of grass. Dormant laws are low maintenance; just do your best to protect it from debris, people walking on it, road salt, and anything else that could bother it while it sleeps.

Active growing lawns

If your lawn is somehow still growing green grass, then it’s obviously still growing. If you have over seeded your lawn with a cool-season lawn like Kentucky bluegrass, then water it regularly. Pretty much water it as needed to keep it green.  If you don’t want to tend to it, there’s always the option of letting it go brown. This is a good option if you want to save water, and don’t feel like mowing.

Fertilizing is only needed when you live in the southern states where it’s usually warm. Only feed them during winter, before it frosts over. Pull what weeds you can find, and spray herbicide in late winter.

Any lawns

These tips help, but leaving your lawn alone doesn’t hurt either. Here’s what you don’t want to do.

Do not let heavy foot traffic stamp...

How to Unpack in Your New Home

After you’ve made all the preparations for moving, packed everything in the truck, and unloaded your belongings into your new home, there’s only one thing left to do, unpack. With boxes galore in almost every room, where do you start?

No matter how badly you want this process to be over with, it will never get finished without rolling up your sleeves and just doing it. Here’s the best way to get started

Clean and prepare your new home – It’s easier to find everything’s proper place when spaces are clean. Wipe down shelves, windows, mop the floors, and start thinking where your belongings would fit best. If time is a factor you don’t have, consider hiring a cleaning service.

Inspect and organize your stuff – check all your boxes against your inventory sheet to make sure you have all your stuff, and it’s intact. Then put all the boxes in the rooms where it belongs. If your boxes are all marked and labeled, this won’t be a big chore.

Open the boxes of essentials – Your essentials are your tools, toiletries, clothes, medicines, packed foods, basic kitchenware, and other lifesaving things you need.

Set major furniture and appliances – place your large furniture and household appliances first. This way, any smaller items you unpack later directly into their right places. It’s helpful to plan your interior design well in advance, so you aren’t moving things around several times.

You want to make sure right after you unpack your necessities, is that they are readily accessible. So prioritize, and unpack the necessities first.

Bedding – Chances are you won’t be able to unpack the entire bedroom right away, but you will need to set up that bed right when you move in. Put it together, put on the sheets, and unpack the pillows, and make the bed, because without it, you’ll be sleeping on the floor.

Bathroom...

Mortgage Rate 2/3/2016

Mortgage rates fell this week. For the 30-year fixed mortgage, the rate settled at 3.5% after falling 11 basis points from last week. Rates fell throughout last week and rise on Sunday to 3.47%. This was the lowest they’ve been since 2013, before creeping up to the current point. Friday’s monthly job report will give a better indication of where the market will move.  

The 15-year fixed mortgage settled on 2.72%, and for 5/1 ARMs, the rate was 2.73%. 

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Most Common Secrets Sellers Hide

You have finally found the home you want to buy, but beware before signing your name. Sellers can often mislead buyers by not disclosing the serious problems that may inhabit the house. If you fail to notice these issues until after the closing, you are in trouble. Here are a few of the problems sellers most commonly try to hide, and the questions that will expose the truth.

Leaks

Pipes, faucets, radiators, ceilings, roofs, whatever, real estate agents, brokers, and sellers could try to pull a fast one and quick (and cheap) fix that drip to attract offers. The only thing that will 100% work is honesty and admitting faults can benefit the seller. Leaks are never a major problem, and as long as they are honest about it, they can be fixed quickly.

Pests

To love a house is to know what’s behind the walls. Any house that looks amazing on the outside could still hold termites eating away at the walls. It’s important to know that pest laws vary from state to state. If you think there could be pests invading or living in your new home, don’t risk it and just get a pest inspection.

Emotional defects

This one comes down to the state law, some states allow for sellers to leave out if a house is “haunted” or if a death, or murder happened in their house. This may not be a deal breaker for some, but for others, they can’t sleep at night knowing someone has died in the other room. As the new home owner you also have the right to know. If the state you live in keeps sellers from telling you, DiedinHouse.com can give you a heads up.

Issues with the roof or foundation

Knowing if a house has major issues with the foundation or roof can really kill the deal quickly. These repairs are always costly...

The Right Way to Stage a Home for a Photo Shoot

First impressions last forever, and when it comes to selling your house, you only have one shot to impress the potential buyer. Their attention span only last a few seconds when scrolling through pictures, and if left unimpressed, they’ll gladly click to the next home. If you fail to stage your home properly you could lose out on a sale without ever knowing it.

Most buyers today search online first. Photos happen to be the primary factors in letting buyers decide which homes they like or dislike.  Once they see a home online they like, they’re more likely to ask to see it in person. Staging a home can be highly beneficial and can bring you a tremendous return on investment. There have been homes that look better staged than when families were living in them, which gives the home a little more value than they intended to sell it for.

Follow these home staging tips to help you in your sale.

Accessorize smartly

Accessorizing a room is quite easy, and gives it a fresh up-to-date look.  A new couch pillow, and some coffee table books or magazines can go a long way. Having tasteful art hanging above your fireplace and on your walls brings color to the rooms. For some reason, having an odd number of art pieces is better than having an even number.

Do not over-accessorize

Accessories are nice, but don’t over- do it. In this instance think, “less is more”. If you have too many books on a table, or too much art, it can really turn buyers off, making them feel cramped and cluttered. If you want to make it perfect, try organizing them by size and color. Professional home stagers will have a pile of items that they don’t want buyers to see, so take this stuff out of the home and into a storage unit or somewhere out of sight. Your home will look much more spacious without all this stuff in it.

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Louisville's Real Estate Outlook for 2016

The first two stages in the four stages of learning are: You don’t know you don’t know, and you know you don’t know. Knowing this, we can offer a little input to what is expected for the Louisville housing market this year.

Since inventory in Louisville isn’t available at every corner, it will probably be a sellers’ market. The absorption rate is measured by the rate at which available homes are sold in particular real estate marketing during a given period of time. You divide the total number of homes by the total number of sales for that month. The balanced market says the absorption rate is 6 months, and it doesn’t favor the buyer or the seller.

One main principle of economics is supply and demand, and in our case, if Louisville’s supply is low, the prices are higher. This does not account for homes hitting their appreciation limit. Homes are supposed to rise 3% in the next two years, but that all depends on the state of the national economy.

In December of 2015 the FED raised interest rates, which is a strong sign that the historically low interest rates are behind us. We surely don’t expect the rates to rise sky high, but most experts believe the rate will increase a quarter of a point every quarter, making it rise one point for the year.

This year’s housing market will largely depend on three groups, millennials, GenXers, and older baby boomers. The millennials make up a third of all home buyers, and they will continue to hold their place as a significant part of the conversation. The GenXers are entering the point in the lives when they are making real money, enough that they can afford big items. The older baby boomers are approaching, and some have hit, retirement. This group is looking to downsize and reduce their monthly expenditures.

We cannot separate the local housing market from the local economy holistically, because one is a significant part of the other. The positive side is that Ford...

7 Ways Buyers Can Compete with Investors

If you are in the market to buy a house and are worried if you can go toe-to-toe with real estate investors, worry no longer; there are multiple tools to gain to competitive edge. Investors main goal is to get a house for a great deal by offering all-cash offers, while submitting a lowball bid. If you can muster the funds to offer a realistic offer, be preapproved, and show this is your dream house, you can surely stand against them and win.

Offer strong

Buying a house more-than-not turns into a bidding war, and the simplest way to win, is to offer more money.  Cash buyers always want to offer less because they have cash. If you are competing with a cash offer, you will have to offer more than the competition, maybe even above the asking price.  

Don’t skimp on earnest money

The word “earnest” might seem a bit dated, but the concept it represents of “putting your money where your mouth is” will never grow old. This money is sent into your escrow account shortly after signing the purchase agreement, and will tell the seller you are serious. You stand apart because investors don’t often put down their earnest money, because their money is spread across multiple deals and they want to keep as much as they can on hand.  Usually this earnest money will cost you 1% of the purchase price, but it’s not uncommon for buyers to offer 3%.

Get a preapproval, or a pre-underwriting letter

Being preapproved for a loan is essential if you are competing with an all-cash buyer. Your lender will write you a preapproval letter stating you are qualified to borrow and certain amount of money. You can take it up a step by presenting a personalized letter from your mortgage adviser stating what great people you are.

To speed it up even further, get...

To Claim or Not to Claim, That is the Question

Disasters in your home happen when you are ready for them or not, but that is why you have homeowners insurance, and hopefully the premiums you pay will come in handy. What will happen when your pipes burst in your new home, or your roof falls in and destroys an entire room? You have two options, make a claim and risk having higher premiums, or tough it out and pay for it out of your pocket. How will you know which road to take? Let us help you.

Burst Pipes

This is one of the worst things that can happen to your home in the winter. The plumbing systems are exposed to the elements of outside, and with poor insulation this can do major damage to your home. Your pipes could explode leaving you with a hell of a mess. This is one example that you will have to use your insurance policy. There will be damaged wood, maybe floors, cabinets, and you will be staying in a hotel for the duration of the repair. If it’s a small PVC pip3e and a small leak, you can fix that by yourself, or have a contractor repair it.

Leaky Roof

Leaky roofs leave bold stain marks on ceilings or walls, and can be much more troublesome when ignored. Be sure to check your roof to make sure there’s not a huge hole. Most roofs are covered under your homeowners insurance, but the cause of the repair is typically out of pocket. This is one you may want to pay for yourself.

Damage from a natural disaster

Natural disasters are surely worth filing a claim. If your home is damaged by a tornado, tsunami, earthquake, forest fire, etc. assuming you have the proper coverage. If the damage is substantial then you won’t have a choice, because most people don’t have cash on hand to repair their entire home. If you have a small side of your house blown off, you can probably afford to fix it yourself. The thing here is...

5 Tax Deductions for Home Sellers

We all know the IRS sucks, and they’ll take however much they can get. The IRS doesn’t typically care about your home sale unless you profit drastically from it. On the other hand, the IRS will grant home sellers tax deductions. In order to receive this you must itemize your taxes, as tedious as it is, it will be worth it in the end. Here are five tax deductions you ca n take advantage of when selling your home.

  1. 1.       Selling costs

If you fail to qualify for the 121 exclusion, you will surely owe taxes on whatever profit you happen to gain. So be sure to deduct all selling costs from your gain. And you can (and should) deduct your real estate agent’s commission, legal fees, title insurance, inspection fees, advertising costs, and escrow fees.

You can also qualify for a partial exclusion if you must sell your home due to certain circumstances like divorce, health problems, change in employment, or any other drastic life changing event.

  1. 2.       Moving Deduction

Moving expenses are on the table to deduct if you have to relocate for work. This includes transportation costs, storage costs, and lodging costs.

  1. 3.       Property tax deduction

Deducting your property taxes for the year you owned the home is fair game! Deduct the taxes every day you lived there, but not of the day the home sold.

  1. Home improvement

Every home could use an improvement somewhere, unless it’s perfectly built, which is super rare. If you make an improvement that will help sell your home, like replacing the HVAC system, a new roof, or new plumbing, they best be within...

How to Buy a House with Bad Credit

Numbers can dictate the path of our lives whether they are real or superficial. The same way we need high GPA’s in high school to get into college, we need high credit scores to get a loan. It’s no secret life happens and people make mistakes with damaging effects to that score.

In today’s market, bad credit isn’t only a three digit number. It can be timing too, like overdue late charges, or a somewhat recent short sale or foreclosure. Here are a few ways to get around this life-report card in order to get a loan.

Save a large down payment

Buyers with a credit score of 580 or below will need a large down payment. IF you’ve got a score that’s a bit higher, you can use that large down payment to compensate for your score, meaning you will need a minimum of 20% down.

With a large down payment, you are telling the lender you have sizeable cash, despite what your credit history says. Your loan-to-value ratio is lowered, and you instantly have more equity than you would have with a lesser down payment. They want to see buyers with large down payments because the more they have invested in the home, the less likely they are to default, at least in theory. All this makes you less of a risk.

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5 Mortgage Misconceptions

 

At some point, we all will likely need a mortgage, but it doesn’t have to be a potential deal breaker. IF you are organized and have the right expectations, you won’t have a problem. While we are at it, let’s debunk some common mortgage myths.

Only your best credit scores are used in your loan approval

If you happen to be applying for a mortgage with a co-borrower, you would assume the lender would use the higher credit score among you both, but this is not the case. The lender uses the middle of three credit scores (from Equifax, TransUnion, and Experian), and the lowest score between both borrowers middle score. It’s not exactly leaning your way, but you shouldn’t have a problem if you’re responsible.

Your rate is connected to your credit score, so with a lower credit score comes a higher rate. There are exceptions though. Sometimes, if you have the higher credit score, and earn more money, some lenders will use your high credit score. This is usually only for gigantic loans around $415,000.

It’s always worth it to ask your lender if there are any exceptions, but just know that they are rare.

The rate you’re quoted is the rate you will receive

Rate quotes can change unless you have locked the rate in the moment it’s quoted. Rates are affected by the trading of mortgage bonds, so rates change several times a day.

If you are refinancing, you can lock the rate at which it’s quoted, but only if you’ve given the lender ample information and documentation to determine if you qualify for the quoted rate.

When a homebuyer is trying to get a quote, it happens at the beginning of your pre-approval process. The rate lock runs with a borrower and a property, so without a property to buy, you cannot be quoted. Rates will be changing while you’re hunting for your home,...

Is It a Good Idea to Buy in a Foreclosed Neighborhood?

If you are considering real estate investments, one option is always foreclosed homes. REO homes are real estate owned homes that have been foreclosed upon and are often significantly cheaper. Here are some reasons you may (or may not) want to buy in areas with high level s of foreclosed homes.

Benefits

Affordability – when banks own these homes, they don’t want to hold on to them for as short as possible.  Every month they own it, is another month spent paying taxes, upkeep, and whatever else the home might need. They usually will offer these homes at greater discounts in order to get rid of it, often meaning smaller mortgage payments.

If the neighborhood is filled with REO’s, then the surrounding houses will be sold cheaper, even if they aren’t REO’s.

Options – REO’s come at a variety of prices, and sizes. You will be able to find almost anything in your price range when shopping through REO’s.

Value appreciation  Buying a foreclosed home that needs some work will surely benefit from the repairs and upgrades you install. As long as the repairs hold up, you can sell the home for considerably more than you bought it for.

Even buying a non-foreclosed home in a high foreclosure area has benefits. You might have to wait a while for other buyers to buy those homes in order to see price appreciation.

Giving back – it’s no secret foreclosures hurt the overall neighborhoods value, so when you put the work in your foreclosure with the aims to improve it, you are helping out the community. You are a key part in leading the recovery. If your neighbors...