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                      How Do I Know I'm Making a Good Investment on My Home Purchase?

Here's the bottom line, you will never know for 100% certainty that you are making a good investment on your home purchase. The truth is, the Real Estate Market is and will always be extremely volatile. Ultimately we have no control nor are we able to predict successfully the investment in the long run. But, there are ways to curb the somewhat inconsistent behavior of the market by making good choices for yourself when picking a home. There are several things to keep in mind when owning a home, I have compiled a brief list:

1. Area, Area, Area!

Although there will always be some dips in the market, generally speaking, the values in real estate have been continuing to rise over time. The first thing that you may want to consider is the neighborhood. Choose a neighborhood that has been rising in value over time, a good realtor can help you do this research.  Some neighborhoods may rise at a slower pace and some quicker. And then there are those neighborhoods which continue to decrease in value, with hardly an end in sight. Those are typically the crime ridden or the severely dilapidated areas.  But, you can encourage the steady rise in the value of your purchase with the best neighborhood you can choose within your budget. Most anything can be changed about a house but you can't change the neighborhood itself. You will get the best return on your investment by buying a less expensive home in a great neighborhood than the most expensive house in an ok neighborhood.

2. Maintenance

Another thing you want to look at is the maintenance on your property. Over time it is important to keep up with regular fixes and updates, such as; plumbing, electrical, flooring, paint, roof and any outside maintenance. Although you may not be considering moving for a long while, you will not want to wait until the last minute and spend a ton of money and time on doing those things. If you defer, you may only have two options, to sell "as is" which means that all of those fixes and updates will be on the new owner, with a cost to you in the form of a lower sales price, or the other option will be to invest a lot of time and money into updating and fixing the deferred maintenance, hopefully getting the money out that you put in at the last minute. Like anything else, if you take care of a property, it will hold it's value in the long run.

3. Upgrades and Remodeling

While upgrading and remodeling are usually good things, some people do not stop to consider what their changes could do to the value of the home. For instance, deciding to make a four bedroom family home, in a family neighborhood, a two bedroom home. I have seen this done! This couple, wanting to update to their taste and needs went a little overboard by not considering the long term ramifications of their choices. While they clearly spent a great deal of money upgrading their kitchen by expanding it, upgrading the flooring to expensive tile and adding a "dressing room" in their master suite, they also thought it a good idea to tear down the walls to a bedroom to make a larger entry way and cut another bedroom in half, enlarging their master bathroom and making a separate dressing room. Now, although they updated to their ultimate vision, they failed to consider what the eventual resale value would be, in the eyes of the vast majority of people purchasing in that neighborhood. The result was that when it came time to sell their, now 2 bedroom 2 bathroom, home, it sat on the market for several months. This was in a highly desired neighborhood with low inventory! A 4 bedroom 2 bath, with a lot of square footage, home would've been snapped up immediately had they not deleted bedrooms. This couple eventually lowered the selling price considerably in order to get it sold. My guess is that they lost some money on their home because of their large investment in upgrades that would not be appealing to most buyers.

Something also to keep in mind is that everything is relative. If you plan on staying in a house until the day you die, you may not care about it's future resale value. But for the majority of people, do your homework when picking a neighborhood, do your regular maintenance and consider resale value when making major changes to your home. If you think about your asset for the long haul, you'll help to control the value of your investment in the future.

Why is it a Seller's Market?

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        You may have heard over the years, "It's a Seller's Market". But a lot of people are uncertain of what that means. The actual definition is this: A market which has more Buyers than Sellers. High prices result from this excess of demand over supply. This means that when there are more people seeking to buy a home than there is inventory, there may be several buyers who will want to bid on the same property. This, in most cases, will drive up the price of a home's value.

As you may have noticed, in the past several months that the real estate market trends have been shifting. For much of 2015, the market was a bit more balanced, the supply and demand were weighted about the same. Inventory in quite a few areas in Southern California has been declining recently. So again, most real estate analysis' are predicting that 2016 will be a "seller's market."

Generally, here are the characteristics of a sellers' market, according to Reality Times:


1. Booming local economy. Local businesses are hiring at a brisk pace. New companies are opening up shop.

2. Low existing housing inventory. More jobs are coming into a market where there's not enough inventory to house all the workers, thus creating financial pressure on local resale units.

3.  Home sales prices are escalating. Over the last several years, the national increase has been in the five to seven percent range. In a seller's market, it's not unusual to experience double digit increases. Some communities could double in price in just a year or two.

4. Buyer contracts begin to come in non-contingent. Buyers want to purchase a house, period. They no longer offer under list price, ask to sell their house first before settlement, or try to buy without financing already approved. There is no negotiating for the "perfect" terms. Getting the house, is the perfect term.

5. Seller subsidies disappear. While buyers used to ask for some sort of assistance -- lower price, points paid, closing costs -- the buyers must come to the table without any help from the seller.

6. High down payments become the norm. Buyers benefit from high appreciation and begin bringing down payments such as 25-plus percent to the transaction.

Does any of this ring true in your area?


While we are starting to see this trend emerging, it is still not too late for buyers to benefit from buying now. The rates are still at an all time low. The Feds are expected to slowly raise the interest rates over the next year or two, but we are not there yet. Buyers are in a very good position to take advantage of rates that may never be this low again. Another way buyers are still in a good position is the season. Typically we find that most people who are wanting to buy do so more often in the spring and summer. The benefit to a buyer who makes a purchase in the off season, is that even though inventory may be low, your competition with others buyers for the same home will also be extremely minimal. It's time to buy some Real Estate!