The process of starting a financial plan

Don’t wait to get started with your financial plan

 

After years of managing my own finances (and starting to get serious about retirement), I decided it was time to get a professional look at how I’ve been doing.  It had been over 20 years since meeting with a planner for the first time who suggested what I felt, was an impossible plan.  I couldn’t have afforded what he suggested and he gave me no direction or support in doing something.  In the end, it made me take no action at all and I suspect that that situation is true for many of us, who ultimately, bury our heads in the sand rather than take any action that may at least start the process.

 

I got referrals to four or so financial planners, had a phone conversation about my goals with three of them, then selected one to do the final plan.  I went into the process with eyes wide open, a flexible mind and hopes for a silver bullet investment.  I selected a fee-based planner so that I would not be solicited to buy investment vehicles

 

What I found:

 

There is no silver bullet.   My planner suggested my main investment should be an IRA.  I was very lukewarm about that because of how volatile the stock market has been.   If you can invest in an IRA over the long-term, it may work alright for you, but the closer you are to retirement, the harder it is throw the dice given the market’s volatility.

 

Getting a projection of expenses and retirement contributions up to retirement helps set priorities and is absolutely crucial in staying focused.  Once you know that, the after retirement income and expenses can be calculated.  The planner I worked with looked at this projection each year up to the time I thought my heirs would take over.  This component was probably the most important thing that came out of my meeting.  If that doesn’t spur you into action, I don’t know what will.

 

The planner gave me an annual financial goal that I felt was too unattainable (just like 20+ years ago!).  You have to make your saving attainable, or you won’t do it.  Just get started with what you can and watch it grow.  Once you see progress, you may be able to commit to more.

 

Social security is not likely to be enough income in your retirement.  The time to start saving could have been a long time ago, but that time is gone, so get started now.

 

Consider looking at a whole-life insurance policy taking an indexed-strategy in mind as an investment tool.  The income will grow and can be withdrawn when needed after retirement.  The other nice thing is that your principal is protected, which is not true in an IRA.

 

Pay yourself first.  This can get set up as a automatic payment into an online bank account, which has a higher interest rate than the brick and mortar banks.

 

Take a careful look at the tax implications of your choices.  IRAs are a key part of retirement savings, however the taxes can be high when you are required to start taking distributions.

 

Plan for big purchases like a principal residence, rental property, or car.

 

Take a look at long term disability insurance to protect your income during your earning years.  My planner did not have a high opinion of it, because it took away from money that could be used toward investments.  I felt strongly that I should maintain such a policy.

 

Take a look at long-term care insurance to take care of you if you cannot take care of yourself.  Health care costs are astronomical and can deplete all you have worked for pretty quickly.  You should look at how you plan on financing your incapacity as well as your capacity.

 

Do challenge your planner.  You are the one that must live with the choices you make.  Read information on the internet, talk to friends and get their opinions.  The more you read and talk to people, the more your own plan will start to materialize.

Who pays closing costs?

Closing costs are the moneys necessary to pay off all expenses incurred by buyer and seller on a property.  This will include an accounting of all funds spent and received in the transaction for both the buyer and seller.  Following is a partial list for items generally paid for by either buyer or seller in San Francisco.

Buyers:

  • Escrow fees
  • Title insurance
  • Loan fees, including points
  • Appraisal fee
  • One year’s hazard insurance premium (if not a condominium)
  • Deed recording fees
  • Notary fees
  • Prorated property taxes split between buyer and seller
  • Pre-paid interest to your lender
  • Prorated homeowners dues is you are purchasing a condominium.

Sellers:

  • Transfer tax
  • Real Estate agent commissions
  • Loans and loan fees (to close out existing loans)
  • Prorated property taxes split between buyer and seller
  • A portion of the taxable gain if above allowed limits
  • Prorated rents and security deposits if an income property
  • Deed and recording fees

The estimate of closing costs is generated when both the agents in the transaction, provided to the escrow officer that reflect the terms and conditions of the purchase contract.  The escrow officer will then compare the two sets of instructions and, if they match, the escrow holder will execute these instructions, disbursing funds and recording the deed which marks your ownership of the property.

West Portal Property Values

West Portal Property Values on Fire

By Eric Castongia

Residential Sales Specialist

 

It may be hard to believe, but the market has actually gotten more accelerated than the last time I filled you in.  Signs of recovery started quickly at the start of 2012, over the course of the first few weeks of  February.  In 2012, we saw multiple offers, over asking prices and steady appreciation.  In the fall, it slowed a bit and then in January of 2013, we were off to the races again; this time with prices even higher and offers more aggressive.  We are seeing no contingencies on the part of buyers in an effort to look more appealing to a seller.  It’s hard to believe that it was as recent as 16 months ago buyers were reluctantly in the market and were able to negotiate as they pleased.

At the close of the first quarter of this year, we had one active (it just came on the market and hasn’t taken offers yet), eight pending (not yet closed) and 13 sold (closed) properties.

Of the 13 sold, 10 received multiple offers (77%) and all 10 sold over their asking price.  The amount of over bids ranged from as little as $5,000 to as much as $241,000 (really).  Conversely, $70,000 is the largest amount under in which one listing sold.

For a little perspective, at the close of the first quarter of 2012, we had eight sold (closed) properties.  Of the eight, five received multiple offers (63%) and four of them sold over their asking price.  The amount of over bids ranged from as little as $14,000 to as much as $52,000. Conversely, $69,000 is the largest amount under in which one listing sold.

We were coming out of a slow market in 2011, so $52,000 over asking at that time was really good; now we can get a sense of the level of competition there is in the market one short year later.  Buyers who win in competition are setting the market, those who are not, are following it.

We did not have any short sales and foreclosures on the market in this neighborhood this quarter; it was down citywide too.

Interest rates remain historically low.  Part of the panic in the mind of buyers now is getting to take advantage of the low interest rates while they can.

The market is still being driven by a supply and demand problem (lack of inventory).

For West Portal and Inner Parkside up to Ulloa, prices were up from the end of last year to now (one quarter!) 12 to 18 percent.  This percentage is based on one specific property profile that had the most activity-two bedroom, one baths with rooms and baths down.  That segment had eight of the 13 sales in the first quarter.

The area that I call North of Ulloa, has seen a big change in property values for the better.  This area got hit the hardest when the economy went down and it has regained much of what it lost.  I figure approximately 17 percent in the past year.

Interestingly, North of Ulloa typically has the most sales in the neighborhood, but that is not true in the current analysis; they had only three of the 13 sales, which is exactly opposite of expectation.  Notably, seven of the eight properties pending in the first quarter due to close in the second are all in this area.  Once these properties close, I think we will get a better sense of how this part of the neighborhood really appreciated in the last quarter.

This may be a great time to sell but a few words of warning: 1) buyers still take a hard calculating look at what is available, if there is more than one fatal flaw in the property, they may pass you by, and 2)  Iist price is still critical; it must seem like it is a good value in order for buyers to be motivated to act.  Pricing a little under neighborhood expectation is still the best way to net you the most on your sale.

Eric Castongia, Residential Sales Specialist at Zephyr Real Estate provided the information in this article. The content of this article is an interpretation of data from the San Francisco Multiple Listing Service and Eric’s observations in the marketplace.  Eric can be reached by e-mail at Eric@SFHotBuy.com, or via mobile phone at (415)307-1700. DRE Lic. No. 01188380

Vacant houses in San Francisco

Via SFGate, I was forwarded to an article in the San Francisco Business Times that discussed how San Francisco has the highest number of vacant homes in the Bay Area.  At almost 8.3% vacancy, that seems like a lot-the article suggested one in 12 homes was vacant.  According to the article, California has a vacancy rate of just over 8%.  Surrounding Bay Area Counties range from 4.39-7.2%

Anyone home?

I can think of several reasons.

1. People in metropolitan areas are leaving for the burbs to get into decent schools and out of the nightmare that is the consolidated system.

2. People are leaving for jobs in other areas.

3. Rent control/fear of being a landlord.  I know of many landlords that have long tired of having no control over their buildings-particularly if they get a bad tenant.

4. It’s expensive to live in SF.  At some point, the value of the amenities (Symphony, Restaurants, ‘Walk to coffee’) becomes less important when looking at simplifying your life.

That’s the glass half empty.  Let’s look at the half full version.  Well, I guess that’s really the 91.7% full version.

To read the article and check out the charts From Blanca Torres, San Francisco Business Times

The West Portal/Inner Parkside First Quarter 2013 Real Estate Market Update

By Eric Castongia, Zephyr Real Estate

It may be hard to believe, but the market has actually gotten more accelerated than the last time I filled you in.  Signs of recovery started quickly at the start of 2012, over the course of the first few weeks of  February.  In 2012, we saw multiple offers, over asking prices and steady appreciation.  In the fall, it slowed a bit and then in January of 2013, we were off to the races again; this time with prices even higher and offers more aggressive.  We are seeing no contingencies on the part of buyers in an effort to look more appealing to a seller.  It’s hard to believe that it was as recent as 16 months ago buyers were reluctantly in the market and were able to negotiate as they pleased.

  • At the close of the first quarter of this year, we had one active (it just came on the market and hasn’t taken offers yet), eight pending (not yet closed) and 13 sold (closed) properties. 
  • Of the 13 sold, 10 received multiple offers (77%) and all 10 sold over their asking price.  The amount of over bids ranged from as little as $5,000 to as much as $241,000 (really).  Conversely, $70,000 is the largest amount under in which one listing sold.
  • For a little perspective, at the close of the first quarter of 2012, we had eight sold (closed) properties.  Of the eight, five received multiple offers (63%) and four of them sold over their asking price.  The amount of over bids ranged from as little as $14,000 to as much as $52,000. Conversely, $69,000 is the largest amount under in which one listing sold.
  • We were coming out of a slow market in 2011, so $52,000 over asking at that time was really good; now we can get a sense of the level of competition there is in the market one short year later.  Buyers who win in competition are setting the market, those who are not, are following it.
  • We did not have any short sales and foreclosures on the market in this neighborhood this quarter; it was down citywide too.
  • Interest rates remain historically low.  Part of the panic in the mind of buyers now is getting to take advantage of the low interest rates while they can.
  • The market is still being driven by a supply and demand problem (lack of inventory). 
  • For West Portal and Inner Parkside up to Ulloa, prices were up from the end of last year to now (one quarter!) 12 to 18 percent.  This percentage is based on one specific property profile that had the most activity-two bedroom, one baths with rooms and baths down.  That segment had eight of the 13 sales in the first quarter.
  • The area that I call North of Ulloa, has seen a big change in property values for the better.  This area got hit the hardest when the economy went down and it has regained much of what it lost.  I figure approximately 17 percent in the past year.
  • Interestingly, North of Ulloa typically has the most sales in the neighborhood, but that is not true in the current analysis; they had only three of the 13 sales, which is exactly opposite of expectation.  Notably, seven of the eight properties pending in the first quarter due to close in the second are all in this area.  Once these properties close, I think we will get a better sense of how this part of the neighborhood really appreciated in the last quarter.
  • This may be a great time to sell but a few words of warning: 1) buyers still take a hard calculating look at what is available, if there is more than one fatal flaw in the property, they may pass you by, and 2)  Iist price is still critical; it must seem like it is a good value in order for buyers to be motivated to act.  Pricing a little under neighborhood expectation is still the best way to net you the most on your sale.

Eric Castongia, Residential Sales Specialist at Zephyr Real Estate provided the information in this article. The content of this article is an interpretation of data from the San Francisco Multiple Listing Service and Eric’s observations in the marketplace.  Eric can be reached by e-mail at Eric@SFHotBuy.com, or via mobile phone at (415)307-1700. DRE Lic. No. 01188380

What is escrow?

Once you have successfully ratified (get into contract), escrow begins, which comprises of two things:

the length of time necessary to complete the purchase or sale of your property and,

the inclusion of a neutral third party in the transaction (an escrow officer at a title company) who acts as an intermediary to create a secure environment in which to collect and disburse all the funds and documents related to the purchase of your property, including recordation and delivery of the deed to the buyer and any proceeds to the seller at closing.

During the escrow period, there are many activities going on simultaneously of which you will be a part. You will be very busy during this time. You should plan to ease your normal routine to make time for meeting your contractual responsibilities.

A few of the buyers’ activities will comprise of:

  • Schedule and attend physical inspections.
  • Work through the financing specifics with your mortgage broker or direct lender to secure financing
  • Review all disclosure materials
  • remove contingencies.
  • Increase your deposits for down payment and closing costs
  • Choose how you want to hold title if more than one person is buying the property
  • Sign loan documents
  • Review the accounting of moneys owed (or received from) escrow
  • Arrange for hazard insurance
  • Give 30-day notice to your landlord if you are renting.  I recommend waiting until your loan has been approved or giving a provisional notice.
  • Select a moving company and begin packing.
  • Arrange for all utilities to start when you close escrow.
  • Notify the post office, doctors, banks, and others of your new address.

A few of the seller’s activities will comprise of:

  • Making the property available for inspections
  • Answering questions
  • Making negotiated repairs
  • Preparing to move
  • Compiling information requested from the buyer