Vero Beach home buyers have been flocking to the market in droves this past year, trying to take advantage of affordable prices and record-low mortgage interest rates while they still can.
When it comes to applying for a mortgage — the most important aspect of the home-buying process — recent surveys found that about one in three buyers have no idea what they're doing.
In today's market, where the low supply of listings and bidding wars require swift decision-making, it's pretty unsettling that few buyers come in well-prepared. And considering the fact that the housing crisis was largely attributed to homeowners who took on mortgages they couldn't afford, buyers apparently haven't learned many lessons.
Vero Beach Home Buyers Need Education
Here are some key findings from the recent unrelated reports by Zillow and the Yale Law Journal study:
- One-third of about 1,000 potential buyers who took Zillow's Mortgage IQ Survey did not know they could get a mortgage with less than 5 percent down. (The minimum down payment for FHA loans is 3.5 percent and VA loans can be obtained with zero down.)
- One-third of buyers incorrectly believe that all lenders are required by law to charge the same fees for credit reports and appraisals.
- 26 percent of buyers thought they were obligated to stay with the lender that pre-approved them (not so) while 24 percent believed the best interest rates and fees are only obtained through their own bank (again, not true).
- The Yale study, conducted over three years, also found that 31 percent of its participants did not understand the basic principals of a mortgage, and many didn't even bother to read the terms of the documents they were signing.
- Nearly one-third of participants who read a lender disclosure form didn't know the loan being presented had an adjustable rate, despite the fact that the form clearly specified so.
If you'd like to see how prepared you are to join the ranks of Vero Beach home buyers, take Zillow’s 10-question mortgage quiz.
Get more mortgage information by checking out the mortgage related articles under Vero Beach Mortgage Info to your right.
According to a survey by Bankrate.com, 81% of Vero Beach homeowners know that a standard homeowners insurance policy doesn't cover flood damage, but a separate survey by the Insurance Information Institute found that only 13% of Vero Beach homeowners had a flood insurance policy.
The Federal Emergency Management Agency (FEMA) and its National Flood Insurance Program (NFIP) identify flooding as the United States’ No. 1 natural hazard.
Princeton Survey Research Associates International surveyed 1,003 U.S. adults, on behalf of Bankrate.com. The telephone survey was fielded from April 4 to 7, 2013. The survey responses were weighted by gender, age, education, race, Hispanic origin, region, and telephone status. Interviews were conducted by landline and cell phone.
Based on a Researchscape assessment of the questionnaire and methodology, this survey is moderately likely to be representative of U.S. consumers in general. The awareness question is a leading question that may overstate actual understanding that flood insurance is not included in homeowners insurance.
In a prepared statement, Michael Barry, spokesman for the Insurance Information Institute, an industry trade group, said "I was very happy that 4 out of 5 survey respondents understood that standard homeowners insurance does not cover flood. This number is a much higher awareness level than we've seen in the past."
FEMA usually classifies properties as either high flood risks or low-to-moderate flood risks. Bankrate.com asked Vero Beach homeowners whether or not they know the correct classification for their home and only 51% said they know the correct risk category.
Statistics show that recognizing the need for separate flood insurance does not always lead homeowners to purchase it. An Insurance Information Institute poll last year found that the number of American households with flood insurance actually decreased from 17 percent in 2008 to 13 percent in 2012.
Amy Bach, executive director of United Policyholders, a San Francisco-based non-profit advocacy group for insurance consumers, says some homeowners get lured by history into a false sense of security. "People have this notion that if it hasn't flooded in the past, it's not going to flood," she says. "While I can understand that thinking, I wouldn't trust it anymore because of Sandy and all the talk about climate change. If you live near a body of water, it behooves you not to use the past as your only decision point."
Vero Beach homeowners are urged to study their local flood map carefully to make an informed decision. The best place to start? The NFIP's user-friendly consumer site, FloodSmart.gov.
For more information concerning insurance, check out our other articles about Vero Beach Insurance to your right under the Vero Beach Real Estate Categories.
Everyone who owns a Vero Beach home must face routine maintenance, such as replacing worn-out plumbing components or staining a deck, but some choose to make improvements with the intention of increasing the home's value.
Certain projects, such as adding a well thought-out family room – or other functional space – can be a wise investment, as they do add to the value of your Vero Beach home. Other projects, however, allow little if any opportunity to recover the costs when it's time to sell.
Things You Think Add Value To Your Vero Beach Home, But Really Don't
A swimming pool is one of those things that may be nice to enjoy at your friend's or neighbor's house, but can be a hassle to have at your own Vero Beach home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen. Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above ground pool or filling in an in-ground pool.
An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.
Installing stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your Vero Beach home if the bathrooms are still vinyl-flooring and the shag carpeting in the master bedroom is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home. A remodel might not fetch as high a return if the rest of the home is not brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the house.
Potential homebuyers today often cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and color you thought was absolutely perfect might not be what someone else had in mind.
Overbuilding for the Neighborhood
Homeowners often make improvements to their property that unintentionally makes the home fall outside of the norm for the neighborhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make your Vero Beach home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighborhood of small, one-story homes.
Homebuyers don't want to pay $450,000 for a house in a neighborhood with an average sales price of $250,000; the house will seem overpriced even if it is more desirable than the surrounding homes. The buyers will instead look to spend the $450,000 in a $450,000 neighborhood. Your house with all its improvements might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood are pretty much the same.
Vero Beach home buyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.
The Bottom Line
It's hard to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for figuring out which projects will bring the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house.
Homeowners frequently must choose between an improvement they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate appraiser, can help homeowners avoid costly projects that don't really add value to your Vero Beach home.
A foreclosure backlog could slow the Vero Beach housing recovery. All states are not backed up with foreclosures in waiting, some are, some aren't. This backlog, coupled with the continued problem of homeowners being underwater on their mortgage, could mean the housing uptick we've seen over the past year could be confronted with a slowdown.
The Vero Beach housing recovery continues to also be hampered by record low inventory of homes on the market for sale. Many sellers are either holding out for higher prices later, or, as mentioned before, are dealing with mortgages that are still underwater because values fell so far during the previous real estate bust.
We have more news and articles as they relate to the Vero Beach housing situation at our Vero Beach Real Estate News category to your right under the Vero Beach Real Estate Categories.
Vero Beach home prices are rising at double digit rates. Inventories are at historic lows. Two out of five applicants for a mortgage don't qualify or are turned down. Yet nearly three quarters of all potential homebuyers say it's a good time to buy a Vero Beach home.
While some would argue its always a good time to buy, conditions have turned to favor sellers in most markets across the nation, including Vero Beach . Yet even though a slight majority of consumers participating in Fannie Mae's latest monthly National Housing Survey expect prices to rise over the next three months, 71 percent said it's still a good time to buy a Vero Beach home.
By contrast, the share of respondents who say now is a good time to sell climbed 4 percentage points in April but still reached only 30 percent, compared to 15 percent at the same time last year. That's not even half as many as those who said it's a good time to buy. The percentage that said it's a good time to buy stayed steady from March.
The share of respondents who say mortgage rates will go up fell 3 percentage points to 43 percent, while those who say they will go down increased slightly to 7 percent.
The share of respondents who said they would buy if they were going to move increased slightly to 65 percent.
“For the first time in the survey’s three-year history, the majority of Americans surveyed now expect home prices to increase,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Crossing the 50 percent threshold marks a significant milestone as most Americans believe a housing recovery is truly occurring throughout the country. Reflecting that increased optimism toward housing, the share of Americans who think it is a good time to sell has doubled during the last year. Many homeowners who have been underwater are gradually returning to positive equity, and selling is now becoming an available and attractive option again.” (Read the complete survey here – PDF.)
Do you agree with the majority of survey respondents who said they think now is a good time to buy a Vero Beach home? Your email address will never be displayed on our site for your security and we will never contact you via your email address unless you ask us to. We'd love to hear from you whether you agree or disagree with Fannie Mae's survey results.