Though the real estate industry is constantly evolving, long-thought myths are still plaguing the market and consumers’ decisions. This week, we debunk some of the most commonly thought myths including the truth behind moving to the suburbs, remodeling as an investment and licensed vs. registered mortgage loan originators.
Myth #1: Suburbs Provide More Bang for your Buck
In an effort to escape the noise, high home prices and crime, people are regularly fleeing the city for life in the suburbs. While you do generally get more square-footage for your money in the suburbs, the hidden costs of suburbia can put a strain on a wallet and livelihood. MSNBC reported that The Center for Neighborhood Technology found that homes built away from services cost an additional $1,500-$3,800 a year. The Center’s Housing and Transportation Affordability Index shows homeowners a more comprehensive way of thinking about the cost of housing and true affordability in their own city.
MSNBC also reported that the Census Bureau found that Americans in the suburbs spend an average of 100 hours a year commuting to work. If you got just half of those hours back from living closer to the city, imagine the effects of having an extra five days in your schedule per year!
Myth #2: Remodeling is Always an Investment
Remodeling is often encouraged before a home is put on the market with the promise of a high return from the buyer. However, with recent sky rocketing labor and construction costs, thousands of dollars are being tacked onto what was once a cost-efficient model. Remodeling Magazine’s Cost vs. Value Report shows the percentage of return on many home improvement projects. Only entry door replacements and deck additions received more than an 80 percent return in 2013. Sunroom additions and home office remodeling received less than a 50 percent return, while most improvements only received a 60-70 percent return.
Home maintenance is extremely important, but don’t expect luxury additions and remodeling to get back what you put into it. If you are going to make renovations, The National Association of Realtors recommends that the home’s exterior be the first area to receive repairs.
Myth #3: Licensed and Registered Mortgage Loan Originators are Similar
In 2008, the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act) created a standard for residential mortgage originators. Unfortunately, originators who work for a depository bank, such as Citibank, are excluded from the licensing and only have to be registered.
Unlike registered loan originators, licensed originators must demonstrate financial responsibility (such as through a credit check), complete 20 hours of pre-licensing education, pass a national mortgage exam with uniform state content, pass a separate state exam in some states, take eight hours of continuing education annually and never have had their license revoked. All mortgage originators are not created equally and should be treated as such. Search on the Nationwide Mortgage Licensing System & Registry to see if your mortgage originator is licensed.
Having a licensed originator is necessary from a safety, cost and service perspective. A licensed originator is vital for reducing the chance of a risky mortgage while mitigating cost. Registered originators work with the “bias up environment” that is the inverse relationship between bond prices and interest rates. Since non-bank mortgage companies specialize in residential mortgages, service is superior and faster than banks. Mortgage originators must meet clients’ unique needs and registered originators are more equipped to do as such due to their extensive training and background.