Archive

Archive for the ‘Fast Facts’ Category

FAST FACTS #5: Real Estate Terminology – Average Price Vs. Median Price

When reading data or reports about Real Estate trends or when comparing prices in different markets you will, more often than not, see the term MEDIAN PRICE.

At first glance, if you haven’t been exposed to this term, you might assume this is the same as AVERAGE PRICE.  It is not.

A mathematical median, is the middle point in a set of data.   A mathematical average is a calculation derived by adding up a set of numbers then dividing by the number of entries.

So if there are 200 homes sold during a time period, the median price would be to find the house “in the middle”. There are an equal number of homes priced higher and lower than that house.    That price is the median.

Many mathematicians argue that using a median price will give you a much more accurate way of looking at the “typical” selling price of a group of homes. An average price will likely be skewed by a very high number or a very large number that is in the mix.  Using median, you reduce that risk.

Here’s an example:

Using the following 11 sold homes in ANYTOWN, the average selling price would be $214,000.  The median price would be $219,000.  Not that far off.

LIST #1

$255,000
$252,000
$250,000
$235,000
$220,000
$219,000
$199,000
$185,000
$182,000
$179,000
$178,000

Average = $214;  Median = $219

—————————————-

This was an easy one – all the house were sold in the price range of $178 – $255.   Allowing for certain market variables, these homes had many similarities.

Suppose that, that two of the homes were NOT similar – they were, instead very high-end luxury homes built a short distance away but had much more to offer: Bigger, more property, extra bathroom, etc.   So take the same list but change the price of the top two homes to $619 and $579.

NOW, your average price jumps up to 276 from $214.   The median remains the same, since it based on finding the house that has an equal number of higher and lower priced houses.

Using the second list, which would give a clearer “feel” of the values of recent homes sold in your town?

List #2

$619,000
$579,000
$250,000
$235,000
$220,000
$219,000
$199,000
$185,000
$182,000
$179,000
$178,000

Average = $276,  Median = $219

Which would give a clearer “feel” of the values of recent homes sold in your town?

——————————

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

FAST FACTS #4: Real Estate Terminology: Real Property Vs. Personal Property

Real Property Vs. Personal Property

When you are buying or selling a home, the real property is considered a part of the property and therefore is, by default included in the transfer of title.  Personal Property is a separate possession of the owner of the property (or someone else) and is not included in the transfer of title unless specifically negotiated and specified in the purchase and sale contract.

Real Property. The easy part of this definition is the land itself and the dwelling or other permanent structures such as a detached garage, barn, etc.

The more complicated part of Real Property refers to thing that are “attached” to the house.  This might mean light fixtures, hot water heaters, an awning or things such as this.  It also refers to appliances that are attached.

Personal Property refers to anything that is located on the property or in the dwelling that are not attached.

EXAMPLE: A Microwave oven that sits on the kitchen counter or a shelf and is powered by plugging it in to an outlet would be Personal Property.   A Microwave oven that is mounted and hanging under the cabinets or is hard-wired would be considered Real Property.
————-

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

FAST FACTS #3 – Mortgage Terminology: LTV (Loan to Value), DTI (Debt to Income)

LTV Loan To Value ratio.  This is the ratio of a mortgage expressed as a percentage of the value of home.  For example, if you were to purchase a home valued at $100K and you were borrowing $76K, your LTV would be 76%.

The higher the LTV, the bigger risk for the lender. In other words, should you default on a loan with a 40% LTV the bank would only be losing 40% of the value of the home.  If you should default on a loan with a 95% LTV, the bank would stand to lose all but 5% of the value of a home.

This is of particular importance to lenders in a depreciating market  If, for example, the bank were to loan 95% of the value of a home and the market declines by 6% over the course of a year, the amount of the bank’s risk now exceeds the value of the property.

DTI Debt To Income ratio.  This is the ratio of your monthly expenses expressed as a percentage of your monthly income. This ratio is used, actually to mean two different things.

  • The first is based strictly on the monthly cost of the home (Mortgage payment, taxes and insurance) against your total income.
  • The second meaning includes ALL of your monthly obligations including credit cards, car loans, etc. against your total income.

Most lenders will look at and set limits for both ratios in determining your qualifications to obtain a mortgage.

—————–

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

FAST FACTS #2: Real Estate Terminology – Easements

February 23, 2010 Leave a comment

An Easement is a right granted (typically in the deed)  for use of a portion of property by someone other than the owner.

Generally speaking there are two types:  An Easement allowing one party to cross over a piece of property in order to gain access to another piece of property that is landlocked.  Sometimes this will manifest itself as a “Shared Driveway” which is actually owned by one party or the other but both have access.

The second type is a public easement or right-of-way which comes to be when a municipality/public utility has the right to cross a piece of property to provide continuous service.

There are other types of easements but these are the most common occurrences.

———-

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

FAST FACTS #1: Real Estate Terminology – Liens and Encumbrances

February 21, 2010 Leave a comment

ENCUMBRANCE: A claim, lien, charge or liability attached to real property.

LIEN: An encumbrance against property for money – either voluntary or involuntary.  Mortgages are liens as are court judgments for payment in consideration of work done on the property by a contractor (commonly called a Mechanic’s Lien)

All Liens are encumbrances but not all encumbrances are liens. Liens refer specifically to financial encumbrances. Deed restrictions on property use and right-of-way easements are examples of  encumbrances that are not financial.

————————–

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.