I will give you short answers on how to build home equity faster:)
Buy well: A good chunk of equity is made when you buy a property at a lower price than the current value.
Do some fixes: Simple as adding new paint on a property can add value. Let’s say a property has been neglected for many years and removing wallpaper and adding a fresh coat of paint in and outside for around $10,000. After the paint, can this property sell for around $50,000 more? If so, you just made $40,000 equity the day you bought it. How about adding new countertops, cleaning up the yard and fixing the broken fence? You get the idea.
Structure improvements: Do you have an unfinished basement that can be finished for around $20,000 while nearby homes with finished basements sell for $50,000 more? Then yes! Unfinished attic with potential to add a media room and a bathroom? How about an unused garage space that can be converted into living space? Big enough yard where you can build an ADU (additional dwelling unit–think of an independent studio/apartment building)? Or big enough yard that can be divided up?
Zoning opportunity: Does it have a mixed use zoning that can be used as commercial and residential with good food traffic in an attractive area? Commercial property is typically in higher price ranges and can yield higher returns when it comes to cashflow or equity building.
So, I’d like you to think about the above opportunities when you are looking for a home. This applies to a first-time home, move-up home or downsize home. Unless you want just a turn-key home that you don’t have to do anything with. Which is fine, but you’ll have less equity building opportunities.
How about if you are thinking about selling and looking for equity return opportunities? If you have a budget that you can spend toward some of the above ideas, it might be worth looking into. Just be careful on improvement choices and don’t overdo it. It will be a good idea to talk to your realtor about what kind of updates/upgrades will be attractive to a majority of the buyers and the ROI potential before pulling the trigger.
Today, I’d like to share with you the process of buying a brand new home and the checklist of what you should know.
#1: Going to the model home
Go with your buyer’s agent. If your agent cannot make it, then let them know that you’re working with one so that your agent can still help you throughout the transaction.
#2: Pick a lot and a plan
Like brand new subdivisions? Like this Reed’s Crossing–they’re building 2500 homes, right? Knowing where that first phase is located, compared to the rest of the development, that would give you a certain idea on which roads are going to connect to most of the homes. So those are going to be major roads. You don’t want to buy a home near a major road, unless you buy at a really discounted price. Because when you try to resell that home, you are going to lose compared to the other homes that are on the quiet street, because the major street backs to louder car noise and air pollution, possibly. It’s not peaceful. I think that’s the even bigger part. Knowing those roads, how they’re going to be developed, is going to be really important. Where are the parks and other amenities? Are you going to be near town home buildings with a higher density? Later, will it make it tougher to find parking spaces when you throw a party, like a Blazers’ playoff game when you have a dozen friends coming with 10 cars. They’re going to have a hard time finding parking and it’s not going to be that pleasant. I’m going way off here, but you get my point though, right? I think I saw about four different home builders that are building in the same phase. So you can pick and choose. You can pick a builder, you can pick within a builder’s homes, you can pick a lot and, you know, different types of plans. Now, the lot, I think, is one of the more important things and the plan is important in a sense, too, because certain homes flow well inside: it gets better lighting, it functions well, it doesn’t have a lot of wasted space in the house. So, the way I approach it is: when the newness of this brand new home goes away in 5, 7, 10 years, how will it resell well? That’s the question you’re going to have to ask. Everybody loves brand new homes but after the newness is gone, do you still see that home as a good home? That’s a good indicator for whether it’s a good reselling home or not.
#3: Getting pre-approved by a lender
The builders would like you to go through their lenders. They do offer some incentives. I’ve seen anywhere between $500 credit to $2,000 credit to when you use their preferred lender. It’s hard to beat that.
#4: Submitting an offer
It’s really submitting an application because there’s not a lot of negotiation happening, especially with the price, because brand new home builders don’t typically negotiate on the price. As long as they didn’t start too high on the price, they stick with the price.
#5: Waiting until the completion
They give you a completion date, but I wouldn’t count on that date to give notice to your landlord or sell your home because you may not have a place to live because building dates get delayed for many reasons such as too much rain before completion or they get backed up finishing another project. This delay could leave you homeless for a couple of weeks. You want to make sure that you have a place until you get the key.
And #6: Getting the key
So it’s a 6-step brand-new home-buying process. There we go.
A checklist.
Talking to a sales agent. Now, in Oregon, you have to be licensed. You’re talking to an agent who works for the builder. They are employees of the builder. They don’t really have the obligation to serve you as a fiduciary agent. Meaning, their first goal is to help the seller/ the builder for their best interest. So, this is where buyer’s agents roles come in pretty significantly. Advising, like I mentioned, on the value of that home and helping buyers understand the process of a brand new home. Knowing what kind of rights the buyers have, like the insulation policy and the home inspection policy while giving an opinion on the resale value down the road. Those are really the important ones, too. So that you don’t have to worry too much about it. At least you know what’s going to happen next. I think that’s the biggest part of having a buyer’s agent, so that you don’t get surprises. Who wants surprises, right? When you’re buying the biggest product in your life. Unless you’re buying a private jet. The house is going to be one of the most expensive items that you’re going to buy.
So talking about knowing your rights, the contracts that you’re going to sign with new build homes, they’re typically made by the builders’ attorneys, as far as I know. And they’re a different contract than Oregon Real Estate Agency drafted, the standard form that we use in resale homes. They’re very builder/seller-centric, made to protect the builder so much more so than the buyer. As far as I could read, compared to the Oregon Real Estate form, the owner’s money may not be refundable after 24, 48 hours. The buyers should know exactly, before signing the contract, what kind of rights they have.
The other part is the home inspection on a brand new home. You may think that home inspection may not be needed because it’s a “brand new home.” The builders typically provide a one year warranty, so you think it’s okay. However, what if there’s no insulation in the attic space? The subcontractor forgot to put it up there, right? Because they have to move to the next site. Kind of rushed, they forget to put insulation. Or what if they forgot to hook up the dishwasher plumbing, and you run the dishwasher. Guess what’s going to happen? Your kitchen floor will be flooded. Doing a home inspection points out the things that are made wrong. That’s what it is and, you know, it’s built by a human, not a machine. So there’s going to be some faulty things that you are going to deal with, and when you resell that home, your buyer, in 7 years, let’s say, is going to do the home inspection. By then, hopefully the dishwasher is hooked up, you’ve been using it for the last 7 years. So that won’t be an issue. But, let’s say, there’s water in the crawl space, which we find a lot here in Oregon, which is a problem. What else? The sewer line. I’ve actually had to deal with one sewer line on a brand new home that needed to be fixed. So, we were able to do the sewer scope and the builder fixed it before the closing date. If you didn’t do that, your next buyer will ask you to fix that. And that could be anywhere between, in 2019 pricing, between a thousand dollars to maybe $10,000 to repair. It is very important, I think. Even though you don’t find anything, and you may not find anything, but all the new building human errors shouldn’t be your problem when you resell the property down the road.
So once again I’d like to point out that when you go see a home, look at the subdivision map. Make sure the road your house is on will not become a super major road because they’re building almost 3,000 homes south of there. South of there, right? This road will become a huge road. So, if you do buy a home along a busy road, you better buy it at a really good price compared to homes that are next to a green space. And that’s going to be a bonus. They don’t have any neighbors looking in their backyard from the back side because these new homes’ lot sizes are really tight nowadays.
So I’m super excited to help out home buyers who want to buy a good brand new home like in Reed’s Crossing, the brand new subdivision in South Hillsboro. And I look forward to having some Korean food or Thai food near those new subdivisions because they’re going to build some shops, restaurants and, you know, places like that. Like Orenco Station or Tanasbourne. Those are other good choices for the west side. We don’t seem to have as many great restaurants as we do in East Portland or North East. We need to bring back some good food to the west side for sure. I mean, don’t get me wrong, there are food on the west side, but not as many choices as the east side, right?
So I look forward to hanging out in South Hillsboro. I look forward to seeing you out there. If you have any questions about these homes or the plans or new home buying process, or anything like that, feel free to give me a call.
Anyways, it’ll be great to hear your feedback: what you will like to know in the next videos. I know I missed a lot because I can’t cover everything. If I want to cover every possible situation on buying a home, I probably need to talk for about 4 hours. And nobody has that kind of time to watch me talking about real estate. So, I tried to make this as brief as possible, but it got to maybe 15 minutes right now. Love to hear from you. Let me know how I can help in your real estate goals.
Thanks so much for watching. See you next time.
Interested in buying a brand new home in the Portland Metro Areas, what questions do you have?
