Connecticut Real Estate Blog - Real Real Estate in CT

The earnest money deposit accompanies your offer to purchase real property and is a reflection of two things: your interest in the property and your financial ability to buy the property.  While there is no customary amount or percentage, I use the following guidelines when counseling clients on how much of an earnest money deposit to give.

When to Put Down the Minimum.  If you don’t have a lot of cash on hand, put down as little as possible.  I’ve had clients put down as little as $1,000, with the entire amount refunded at closing time.  These clients are almost always first time buyers, sometimes using FHA or VA insured loans.  Sellers in the lower to middle end of the market are accustomed to this amount and if the listing agent complains, too bad.

Another reason not to put a large downpayment down is if there is any chance you might change your mind about buying the house.  I have never had this happen but I always tell people that there is no contingency in the contract for mood swings.

When to Put More Money Down.  If you really want to communicate to the sellers that you want to buy their house, it’s a competitive seller’s market or if you’re asking the seller to come down on the price significantly, put a considerable deposit down.  I’ve had clients put down anywhere from 1% to 5% of the final purchase price. 

Putting more of a deposit down doesn’t impact the sellers directly.  However, a larger deposit can make you stand apart from other buyers, can increase the confidence the sellers have knowing that you have a substantial amount of money at stake, and convince sellers to take less money if they know you’re truly serious.

Essentially, your earnest money deposit depends on your interest in the property and your ability to come up with the money.  Talk to your agent who can help you figure out the best strategy.

Up until recently, an agent representing a buyer may have had to look in as many as six different databases (multiple listing service or MLS) for listings.  Log in, search, print/e-mail, log out.  Log in, search, print/e-mail, log out. Log in, search, print/e-mail, log out.  You get the idea.

For example, if I had a client looking to buy on the Connecticut shoreline - say, a 45-minute drive radius around New Haven, I would have had to look through listings in the Consolidated MLS (most of Fairfield County), the Co-op MLS (New Haven, Hartford, Tolland, Litchfield & Middlesex Counties) and the ECMLS (New London and Windham Counties).   There are also MLS services for three towns - Darien, Greenwich and New Canaan - all right next to each other.

While I haven’t had this scenario for one client, I do have access to three of the MLS services because I represent clients throughout most of Connecticut.  It’s not uncommon to have to access two MLS services to look for listings.  I’m not complaining that it’s been hard work for me.  The problem is that having three separate MLS services limits a property’s exposure which is bad for buyers, sellers and agents alike. 

The good news is that the local realtor boards are letting go of control- sort of.  On January 10, 2007, the ECMLS (Windham and New London counties) and the Co-op MLS (Litchfield, New Haven, Middlesex, Hartford & Tolland counties) joined together to form the new CT MLS.   One MLS for all of Connecticut - except Fairfield County. (more…)

I recently wrote this article which just appeared in the January/February edition of First-Time Homebuyer Magazine.  It’s no secret that I like multi-family investment for first-time homebuyers - I bought my first house this way and it’s ben a very positive experience overall and the house will give me a nice retirement nest egg.  This is a basic article for people who maybe never thought of multi-family ownership.

If you’re in the market for your first home, one option you should consider is an owner-occupied multi-family.  Buying and living in a multi-family has many benefits including:  the ability to afford a larger and more expensive house, tax breaks, help paying off the mortgage from tenants, using the equity in your multi-family to step-up to a single family and retirement income. 

These benefits come with plenty of risk and responsibility.  When you have tenants, you have risk in the form of losses from vacancies, costs to find good tenants or evict bad tenants, personal liability, extra expenses and headaches.  And as the owner, you’re responsible for everything.  If a tenant’s heat isn’t working, you have to get it fixed immediately. The risks of being a landlord can be managed with proper planning including setting aside a few months of rent in case of vacancies or eviction, adequate insurance, screening potential renters thoroughly and properly maintaining the property. 

You Don’t Have to Be a Landlord.  If you know being a landlord just isn’t for you, another option is buying a multi-family for you with family members as tenants. Another option is to pool resources and buy a multi-family with some of your family members. 

Definition of a Multi-family.  A multi-family is a property with two-four legal units.  Anything with more units is considered commercial property.  A single family home with an in-law apartment may also be considered a multi-family depending on the location and size of the unit in relation to the primary home.  Always check with town hall to make sure the units are legal.  An owner-occupied multi-family means that you, the owner, live in one of the units.   

Obtaining a Mortgage.  Because you live in one of the units as your primary residence, you may obtain a mortgage at the same interest rate as a single family. Typically, you are able to use 75% of the income you expect from tenants to qualify for a larger mortgage.  For example, if your household earns $5000/month in income and you anticipate taking in an additional $1600/month in rent for other apartments in the building, the lender will count your $5000 in income, plus $1200 (or 75% of the expected rent). 

In the Market for a Multi-family.  Over the last few years, multi-families have kept pace with the increasing value of single family homes.  Based on homes with similar square footage, the average sales price in 2006 for a multi-family in Hartford is $242,000 and the average sales price for a single family is $245,000.  

The Benefits of an Owner-occupied Multi-family.    More for the money. In addition to being able to purchase a larger, more expensive house than you could otherwise afford, you will have help paying the mortgage from your tenants.  The rent you collect from tenants may offset the mortgage so much so that you are paying less to own a multi-family than to rent an apartment.    (more…)

While doing research for another article, I came across a disturbing study by the Consumer Federation of America stating that women are more likely to be put into subprime mortgages than men - even if their income and credit is comparable to the men in their same market. 

Even more disturbing is the finding that as women made more money, the disparity actually increased - women earning more than the double median income were almost 50% more likely than men to receive a subprime rate (mortgage rate over 7.66%).  Apparently, creditworthiness and income isn’t the most important factor in determining your mortgage rate. 

The lesson to be learned here is that if you are a woman seeking pre-approval for a mortgage, shop around and don’t assume that the lender is giving you the best loan rate.  Know your credit before going to a lender and do research on mortgage rates and lenders in your area.  And don’t be afraid to negotiate with a lender for the best rate and loan terms. 

I was out showing some houses this weekend during the warmest Connecticut weather in 70 years for January.  I kept thinking that it’s not supposed to be 71 degrees and balmy.  And I should not be driving with my sunroof open.  But there I was, no boots on, no gloves and no trouble getting in and out of driveways that haven’t been plowed in a week.  I must say, I’m beginning to really like this Global Warming trend (Please don’t send me hate mail-I’m just kidding).

It occurred to me that in January, I expect certain things based on the weather in Connecticut: fewer quality homes on the market and fewer people looking for them.  Really, who wants to be climbing in and out of their cars when it’s 20 degrees outside and icy? And who wants to put their house on the market when buyers will be tracking snow, salt and ice into your house?  But as I met new clients at the first house, I wondered if they would even be looking if there were three feet of snow on the ground.  Maybe not. 

Also, I have been surprised that there seems to be more decent houses coming on the market - not the usual winter duds that a seller is desperate to unload or the houses that have been overpriced for a year and the agent keeps re-listing it (the “it’s new to you” mentality). 

Not only is the local wildlife confused - so is this real estate agent.  Will a warmer winter than normal result in a busier winter market?   The news on the market has been mixed so I’m wondering if this weather will give the market a little extra boost.  From where I sit, buyers and sellers seem equally optimistic and that, to quote Martha Stewart, is a good thing.