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Tuesday, April 22, 2014

A Lower Payment is Your Choice

Mortgage acquired 250.png94% of purchasers last year opted for a fixed-rate mortgage at some of the lowest rates in home buying history.  Yet, some of them will pay more in interest than necessary based on the time they’ll own the home.

If a person only plans to be in the home a few years, the adjustable-rate can offer significant savings.

Not only is the interest rate on the adjustable-rate lower than the fixed in the initial period, amortization on a lower interest rate amortizes faster than a higher interest rate.

In the example shown below, a $200,000 mortgage for 30 years is compared using a 4.25% fixed-rate to a 3.25% 5/1 FHA adjustable rate.  The first five years of the ARM generates a $113.47 a month savings which accumulates to $6,808.20.  In addition, due to faster amortization on lower interest rate loans, the unpaid balance at the end of five years will be $3,001 lower on the ARM for a total savings of $9,801.

Assuming the adjustable-rate mortgage was to escalate the maximum allowed at each period, the breakeven would occur in 8 years and 6 months. If a person were to sell the home prior to this point, the ARM would provide a lower cost of housing for the homeowner.

For some people, the uncertainty of how the interest rate may change is not acceptable.  On the other hand, for the risk tolerant individual who may be more confident in financial matters or who may know when they’ll be moving next, the ARM can be a smart choice.

To make projections using your individual numbers, see the Adjustable Rate Comparison.

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Tuesday, April 15, 2014

An Exchange Means More to Reinvest

Section 1031 exchange for rental and investment real estate is a tool that allows investors to move the gain from one property to another without immediate income tax consequences. 

An instant benefit is to postpone the tax due which gives the investor a larger amount of proceeds to invest.  In the example shown, the investor has 21% more proceeds to invest and grow over time than if he had paid the taxes due instead of exchanging.

A legitimate long-term goal might be to make qualified exchanges from one property to another until the investor dies.  The heirs would then receive a stepped-up basis on the property based on the market value at the time of the decedent’s death and possibly avoiding taxes altogether.

There are specific requirements to be met in order for the exchange to qualify. For more information on exchanges, see IRS publication 544.  In addition to enlisting the services of a real estate professional familiar with investment property, seek the help of Qualified Intermediary to facilitate the intricacies of the exchange.  Your real estate agent can help you locate one.

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Tuesday, April 08, 2014

Is the Window Closing?

iStock_000011016597Small 250.jpgWith interest rates lower than they’ve been in over 40 years, it may be difficult to think of a “window of opportunity” closing.  However, it isn’t difficult to understand that it may very probably cost more to live in a home in the near future due to rising interest rates and prices.

Zillow recently reported results from a nationwide study that home values are expected to appreciate by 4.5% through the end of the year.  Coupled with Freddie Mac’s projection that rates are going up, the cost of housing for buyers by the end of the year will be higher than it is now.

While uncertainty of the future can stagnate some people, the fear of loss can be much more devastating when a person realizes that the amount they pay to live and enjoy a home could have been considerably lower had they acted when prices and mortgage rates were lower.

The following example considers a $250,000 purchase today with a FHA mortgage compared to what it might be at the end of the year with a higher price and interest rate as discussed earlier.  The net effect is that it will cost $191.87 more each month to live in the very same home based on the cost of waiting to buy.

To see what the cost might be for your price range, use this Cost of Waiting to Buy spreadsheet.

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Sudbury Real Estate: March Home Sale Prices Up 14%

Great news for home sellers in Sudbury. Sale prices were up 14% for single-family homes. Inventory in Sudbury MA remains low; less competition makes this a good time to put your house on the market for sale. Check out the video for more.

Visit for additional details about the Sudbury real estate market including condominium/townhouses. You can also view reports for Wayland, Concord, Maynard, and Stow MA.

Monday, April 07, 2014

Home Buying: Buyer Agency Agreements

Most consumers know that if they want to “hire” a real estate broker/agent to sell their home and represent

their interests, they are going to sign a contract. Realtors® are not allowed to list a property without one. The contract clearly spells out the terms of the agreement including length of time, compensation, who the agent represents and each party’s responsibility.

While buyer agency is not a new concept - it has been legal in MA for almost two decades and a few years ago the law that governs agent-consumer relationships was updated to further ensure consumer protection - many buyers and some agents still don’t understand the benefits of a written Buyer Agency Agreement/contract.

Buyers often call me to ask for help finding a home and many tell me they have had disappointing experiences with "their buyer agent." When I ask if they had a contract with the agent, they answer is almost always “no”.  Well, of course they are disappointed! How did the agent know what the buyer expected? And were the buyer(s)' expectations realistic?

The benefit of a contract is that both the buyer and the agent know what to expect and that each is accountable. The buyer knows which geographic areas the agent covers, they know how the agent is going to be compensated, and that the agent is legally obligated to act in their behalf.

Happy Home Buyers!
Buying a home is a process that takes time, effort and tenacity; it's a long way from finding a house that suits your needs to getting to the closing table. Successful negotiations are based on trust, confidentiality, and mutual respect. Buyers, you are entitled to have a qualified buyer agent on your side to ensure you get the representation you deserve and a written agreement is the first step.

While any agent can call themselves a buyer's agent, an ABR, Accredited Buyer's Representative, has additional training and is a member of the Real Estate Buyer Agency Council, the network that provides ongoing education and resources for representing buyers.

Before you start looking for a house find a qualified buyer broker/agent who will listen to you and respect your needs; one who knows the market in the area, knows how to negotiate, has a network of resources - lenders, home inspectors, attorneys, movers, etc.; and who will educate you so you can make the best decisions about your new home. Real estate is about relationships, so make sure you have your own agent who knows and cares about your well-being.

Visit for easy homes searches and get the latest real estate news and community information about about Wayland, Sudbury, Concord, Maynard, Stow from your local real estate specialist. 
Marilyn Messenger is an Accredited Buyer Representative/Buyer Agent and is an active member of the Real Estate Buyer Agent Council (REBAC). She has been representing home buyers and sellers for 20+ years. Marilyn Messenger is a top recommended agent/broker on Trulia. 

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