Month: February 2017

First-Time Home Buyers On: The Finances

By Adrienne Breaux

 

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(Image credit: Reagen Taylor )

How long do you need to save up for a down payment? How long does it take to get approved for a mortgage? Buying a home—especially for the first time—is a learning process, made all the more intense thanks to the fact that large sums of money are also involved. So I asked real-life first-time home buyers Tiffany and Alan Goldsteinto help illuminate some of the money-related concerns of buying a home.

Saving starts with getting a grasp on what you’re making and what you’re spending.

Early on in our marriage, we made a habit of sitting down and making a budget. How much are we going to make each month after taxes? What known expenses do we have (i.e. rent, car payments, charitable giving etc.)? What is our targeted spend for things like groceries, clothing, eating out, and various luxuries? Everything after that would go towards savings and a down payment. After a few tweaks, we had a plan to have an “emergency fund” and a targeted down payment in about three years.

The next step was following through, but also reevaluating and adjusting as we went along. Want to take a trip? That’s fine — we would go add the expense to our plan and see how much longer it would take for us to meet our home ownership goal and decide if we were comfortable with that.

Spend less going out to eat or pass on that awesome shoe sale? At the end of the month we could see how much closer those decisions brought us to meeting our goal. Getting organized put us in control and took the fear out of making decisions. Ultimately, we compared ourselves to our plan each month and were able to stay on track.

→ Where you put your savings is just as important

On a side-note, it was equally important to decide where we wanted to put our savings. We decided to put the money for our down payment in a high interest savings account through a different bank than the one we used for our checking account. This gave us better growth prospects than a checking account, took away the risk that it would drop with the stock market the day before closing, and put it out of sight while still leaving it accessible in case of a major emergency. We also took advantage of a credit card that provided 2% cash back on all purchases. Since we were closely monitoring our expenses and paying off our card each month, these became ways to reach our down payment goal faster at no additional cost.

Get pre-approved

We did get pre-approved for a loan long before we were even serious about looking for a home. As we considered getting pre-approval, we were nervous about how the whole financing process worked. We asked around and were recommended a mortgage loan officer who met us on the weekend, talked through the entire process, and gave us advice about what we should be doing in anticipation of getting serious. When we finally made the decision to buy this house, we went back to him and he actually recommended we reach out to other people to test his rates. He ultimately matched the best offer we found.

→ Be ready to move quickly depending on the housing market

The Austin housing market is pretty aggressive right now with finite inventory and a lot of demand. This doesn’t leave a lot of wiggle room to negotiate. Our offer was accepted two days after we put it in. The house had only been listed for four days and there wound up being three backup bids after they accepted ours. That said, we did go through a process with our realtor to develop a list of post-close items we would need to address with the house and asked the seller for related concessions off of the purchase price. They were amenable, so it was definitely worth the exercise.

→ Between the offer being accepted and closing, there’s still a lot to do

The offer was accepted in late December and we closed in February, so the overall process took about two months. To be honest, we spent most of that time focused on scheduling the necessary vendors required for closing (inspector, bank appraiser, etc.), as well as looking for a contractor, budgeting renovations, and aggregating furniture and accessory lists. Overall, it was more along the lines of dreaming about paint colors…and doors…and light fixtures…in the middle of the work week.

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Where House Flippers Can Get Financing

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Chris Gash

Until recently, home flippers—investors who buy houses to improve and resell for a quick profit—had few options for financing. Now, traditional lenders and crowdfunding firms are increasingly willing to put up the money.

Luxury-home flips can be lucrative, but risky. “With one flip, you could make the same amount that you could with 10 deals of a lower-end property,” says Daren Blomquist, senior vice president of Attom Data Solutions, an Irvine, Calif.-based real-estate data provider. “But you’re putting many more eggs in one basket and counting on that one property to deliver.”

Jeff Pintar, founder of Pintar Investment Co. in San Juan Capistrano, Calif., is one of the most active luxury flippers in the nation, according to Attom Data. Last year, Mr. Pintar says he purchased 65 homes priced at $500,000 or more, and he’s averaging returns on equity of about 12% to 15% per flip.

Mr. Pintar, 47, says he uses multiple sources for financing. He has established business lines of credit at local banks with about a 5% interest rate that he can draw against to acquire homes. He also works with private-investment companies, which he says charge higher rates but are able to respond quickly. “The banks have trouble keeping up with the pace that we need,” says Mr. Pintar.

Many small-scale home flippers still rely on so-called hard-money loans—short-term, high-interest loans provided by private investors. David Dweck, a hard-money lender from Boca Raton, Fla., will finance up to 60% of the estimated after-repair value of homes purchased for over $500,000. That means if a house costs $600,000 but will be worth $750,000 after repairs, Mr. Dweck will lend up to $450,000, with the flipper putting down $150,000 in cash.

“Most people can’t walk into a bank and get a loan for one of these deals,” says Mr. Dweck, who also flips homes. His terms: an interest rate of between 11% and 14%, with two to four points—a point is equal to 1% of the mortgage amount—and up to one year to repay the loan.

Another source of capital for luxury flippers: crowdfunding, where the funds to finance a deal are raised through the contributions of a large number of people, usually via the internet. “The biggest benefit we offer is flexibility and a national focus,” says Nav Athwal, chief executive officer of RealtyShares, a San Francisco-based company that finances investment properties in 35 states. Funds come from more than 38,000 high-net-worth individuals who invest in a specific transaction for as little as $5,000.

RealtyShares funds up to 70% of the estimated after-repair value of a property in as little as 10 days. Interest rates vary from 8% to 11%, with the average loan term on luxury flips 12 months. RealtyShares also does preferred-equity deals, where they take a partnership interest in the property and benefit from both the interest paid and the potential upside of the transaction.

Jumbo Jungle Tips

Here are some things luxury flippers should consider.

The numbers are critical. Make sure your budget is realistic and your contractor has a record of finishing on time. Luxury flips take more time than lower-cost ones—an average of 208 days, compared with 181 days for all flips, according to Attom Data. A delay of just days can bring additional costs that will eat into profits, so make sure your budget includes reserves for contingencies, such as delays in getting construction permits.

Details count. Luxury buyers are demanding when it comes to high-end finishes. Hire a good designer and pay attention to the details when renovating a property. Factor in the cost of luxury upgrades a buyer will expect.

Beware of defaulting. Like banks, hard-money lenders and crowdfunders secure their loans with a mortgage on the property you’re flipping. If you default, they can foreclose on that mortgage. They may also report your failure to pay to the credit bureaus, which can affect your credit score.

See inside ‘The Mary Tyler Moore Show’ home that’s on the market

Millions mourning the recent loss of Mary Tyler Moore will be heartened to see photos of the Minneapolis home where she lived in the popular ’70s show that carried her name.

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The stone Victorian mansion’s exterior was used in the show, but Mary’s actual apartment was a Hollywood set. It was meant to be behind the Palladian windows next to a turret on this Minneapolis home’s third story.

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In real life, that space is a family room with a gas fireplace, built-ins, and a beautiful view of the tree-lined street. The home is listed for $1.695 million with Barry Berg and Chad Larsen of Coldwell Banker Burnet.

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It spans 9,500 square feet — plenty of room for Mary and her fictional best friend, Rhoda, who lived in the TV mansion’s turret. In real life, that’s a third-story office with a sitting room.
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Altogether, there are 7 bedrooms and 9 baths, which means that theoretically even Mary’s crusty journalist boss, Lou Grant, could move in.

 

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Built in 1900, the home has been remodeled to include a chef’s kitchen with four — count ’em, four! — ovens and an L-shaped, granite island.mary-tyler-moore-bedroom-today-170126_15982ebe29244a137fdd23a9d339557c-today-inline-large

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The master suite features a fireplace, sitting and dressing rooms, and a spa-like bathroom. For kicking back, there’s a sauna and a rooftop deck with a hammock.

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The home’s Victorian aesthetic remains strong in the ornate millwork, bay windows and leaded glass transom accents. It boasts five gas fireplaces and two laundry centers.

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Although Mary Tyler Moore never visited the home while the show was on, she did drop by in 1996, and everyone was thrilled to see she’d made it after all.

 

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*Photography by: Landmark Photography

 

10 Things to Toss From Your Junk Drawer Now: How Many Are Hiding in Yours?

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We all have one—a drawer that either by accident or design becomes the “junk drawer.” The one into which we throw random things that soon meld into a sea of mangled paper clips, empty tape rolls, and chip clips. Even the most obsessive-compulsive organized among us have this compartment of chaos somewhere.

There are few things in life, however, that feel better than tackling the junk drawer. The easiest way to start is to just dump the whole thing out and put back only the items you need. But what should you keep and what should you toss?

Here are 10 things to ditch from your junk drawer to transform it into an organized, efficient storage space—or at least one that will open and close easily, without getting jammed because of all the worthless crap in there.

1. Nonworking pens

The cap is gone and the ink has long since dried up, yet for some reason someone keeps putting them back in the drawer. Get a notepad, test them all, and get rid of every single pen that doesn’t work. Do it now. The relief you’ll feel the next time you go to grab a pen that actually works will feel downright sublime.

2. Expired coupons

You had the best intentions of using the coupons and saving money; however, they never made it into your wallet. Now they’re just sitting there, crumpled and expired. Sad. Toss them into the recycling bin (save the ones from Bed Bath & Beyond, or other stores that honor expired coupons), and consider collecting digital coupons instead going forward. Another option is to send the old coupons to Support Our Troops, which allows U.S. military families to use manufacturers’ coupons even if they’re expired.

3. Batteries

The big question is: Do they work? It turns out, you don’t need a battery tester to find out. Just try this simple trick: Drop each battery—negative end down—on a hard surface. If it bounces, it’s a dud. If it makes a thud, it should still have some juice. Seriously!

If you don’t believe us, check out the video below for a demonstration and a search for the explanation that’s worthy of “MythBusters.”

4. Duplicates

When I recently cleaned out my junk drawer, I found four rulers. Why? Probably because every time someone needed one they couldn’t find one in all the clutter, so we bought another one, then stuffed it in the junk drawer. Rinse and repeat a few times, and we’ve got 48 inches taking up space in the drawer. Take inventory and discover which duplicates you can ditch.

5. Cords, chargers, and cables

Long after phones, cameras, games, and other electronic devices are abandoned for shiny, new models, their chargers and other accessories linger on. You keep them around because you’re worried you might need them at some point in the future. If you can’t remember what something goes to and/or the last time you used it, get rid of it.

6. Spare change

Pennies and nickels scattered throughout, maybe even a handful of quarters. Scoop it all up, and take the pile to a coin machine—and finally let your junk hoarding ways pay off. Or just dump it into some lucky barista’s tip jar.

7.  Random keys

How people wind up with random keys is anyone’s guess, but for whatever reason, it’s a pretty safe guess that there are at least a couple of them in your junk drawer. If you can’t figure out what they open, it’s probably safe to toss them. If you do successfully ID them, go ahead and label ’em to keep them from going back into key purgatory.

8. Rubber bands, paper clips, and chip clips

All of these have legitimate uses, but you’ll never actually use them if they’re buried in all of the clutter. Separate them into groups and place them in containers or drawer dividers so they can be easily found.

9.  Corks

Once upon a time I thought about making a corkboard with all the corks I amassed, but I gave up on that dream many bottles of pinot ago. If you are the crafty type, you probably would have recycled these into a Pinterest-worthy project a long time ago. Since you haven’t, make it a rule to get rid of corks when the bottle is dry. Recork provides a search tool for wine cork recycling drop-off locations.

10.  Buttons

From the extra ones that come with clothing to random ones that pop off, there are often colorful little buttons swimming about in the senseless sea that is your junk drawer. Scoop them up, and put them in a sewing kit for those times when you might need them. Or if the thought of sewing a stitch has you in stitches, you can also collect them for crafts projects or donate them to local schools or day care centers that might use them for art projects.

Think You Know The Best Time Of Year To Sell Your Home? Think Again.

By Jessica Cates

The best time of year to sell is a hotly debated topic. Many experts agree that spring is a safe bet, and industry research backs this up. But, a recent Redfin report also brings some surprising data to light. Read on to learn which seasons will help you sell faster and for more money in your metro.

Spring Selling is Usually a Safe Bet:

As expected, homeowners who decide to list in the spring tend to do pretty well when it comes to selling fairly quickly and getting a good return on their real estate investment. This is often attributed to the fact that nicer weather and more free time tend to prompt more buyer activity. More activity means more competition in the market, which helps drive prices up. But if waiting until spring isn’t your ideal scenario – you’ve got options.

Winter is a Surprisingly Good Time to List:

While you’d think people tend to hunker down in the winter and are less likely to home shop, Redfin’s data proves otherwise. They pulled numbers on over seven million home sales across the US that occurred over the past four years. In their analysis, they discovered that winter sellers are actually on pace with spring sellers when it comes to getting over asking price and selling quickly. Part of it has to do with the fact that winter shoppers tend to be more serious buyers and part of it has to do with other factors that impact local and national real estate markets, a number of which are outlined here. Check out Redfin’s data, organized by major metros, below:

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Redfin has reported similar findings in the past – and has even shown that in previous years, winter sellers sold faster and made more money than those who listed at other times of the year.

Summer and Fall Lag Behind:

Summer break can get busy for people when the kids are out of school and fall gets busy as the holidays approach. Knowing that, it’s no surprise to see that these two times of the year come up short when it comes to faster sales and higher payouts. But be sure you take a look at the impact on your specific city. In some cities, the differences are negligible. In other major metros, the impact is more severe, which means listing in slower seasons can translate into making significantly less money on your sale.

Don’t Forget to Consider Your Motivation to Sell:

The real estate market is fluid and is impacted by a variety of factors, so what’s true now may not be true six months from now (or even one month from now). For example, rising interest rates are driving a lot of activity now, as buyers try to lock in low rates on their home purchase. But the same may not be true this time next year.

All market trends aside, your motivation to sell should also play a big role in determining when you should list. If you have an immovable deadline, all you can do is price right and do everything in your power to make the best of current market conditions. But, if you have more flexibility with your timeline and your local market tends to favor a particular season, it may be worth it for you to time your sale in a way that allows you to take advantage of the optimum selling season.

In any case, it’s always a good idea to consider historical data, current market trends, and your own needs as you work to decide when it makes the most sense to sell your home.

Steps to Sell a House: How Long Does Each One Take?

By Jamie Wiebe

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Adam Gault/Getty Images; realtor.com

Even in the hottest markets, selling a house is by no means a transaction that happens overnight. Every step—from listing your house to getting an offer to closing—takes time. But how much time?

To help you pace yourself, here are the steps to sell a house, and how long each one typically takes so you can plan accordingly. Depending on where you live, you may need to settle in for a long ride!

How long does it take to list a home?

Answer: 3 to 5 days

It will take your listing agent a few days or a bit longer to gather all the necessary info on your home (e.g., square footage, special features, and photos). But once your agent has it all, things generally happen fast. Your agent will then upload these details onto the multiple listing service, which will make the listing viewable to agents. A shorter, consumer-friendly version of the MLS listing will also appear on sites like realtor.com®—and since this site refreshes its data at least every 15 minutes, your home will be in front of plenty of eyeballs in no time at all.

How long does it take to get an offer on a home?

Answer: 65 days

The current average age of properties on the market is 65 days. That said, this varies greatly by location and time of year, so there’s no one right answer to how long you’ll wait for that blessed first offer. Is your market hot or chilly? San Francisco residents might sell their house in a hot second, but if your place is rural, expensive, or unique, you’ll probably wait longer.

How long does it take to close after we receive an offer?

Answer: 50 days

Currently, there’s an average of 50 days between when buyers apply for financing and when they get approved and can close on a home. Yes, that’s a long time, especially if you’re selling and eager to get on with it. But buyers and mortgage companies need to do their due diligence—and you certainly don’t want any last-minute surprises before the buyer takes possession. Closings fail for a number of reasons, like contingencies (perhaps the buyer’s home didn’t sell, or the bank rejected her loan). Whatever you do, don’t be a pain and not fix issues that arise during inspection (assuming, of course, you agreed to fix them). Final walk-through surprises can delay closing even longer.

How long before I get paid?

Answer: 0 days!

Here’s good news: Your money should be available immediately after you sign on the dotted line. Cash is typically disbursed by the title or escrow company, which will wire the money to your bank account or cut a check on closing day with little to no lag time. Make sure to check with your attorney or real estate agent, though—they’ll be able to provide specific details on the process for your sale.

How long do I have to move out?

Answer: 0 days, except by special agreement

Typically, sellers are expected to move out by the day they close on the home so the new buyers can move in as soon as they’ve signed on the dotted line. Most people move out in advance of the close, but if you need more time, you can negotiate a rent-back agreement, which allows the new buyers to essentially become your landlords for a few months while you find a new place to live. But considering how long the home-selling process takes, odds are you’ll be chomping at the bit to get out!

Is It Hard to Get a Mortgage?

Standards have tightened from the pre-housing bubble days, but are they actually tough?

 Daniel B. Kline

 

From the early 2000s through the housing bubble’s burst in 2006, mortgages were extremely easy to get for anyone with even decent credit.

Back in those days, legitimate banks and lenders offered no-documentation loans — mortgages where the consumer tells the bank how much he or she makes, which is then not verified — and low-documentation loans, where some checking (maybe looking at pay stubs) was done, but not much. Less-scrupulous lenders even offered something known as a “NINJA” loan, or a “no income, no job, no assets” mortgage.

It’s easy to see why standards needed to be tightened up from those days. People were getting loans to buy houses they could not afford based on banks’ accepting their word that they would be good for the money. That, as you might imagine, led to huge numbers of defaults, which caused housing prices to collapse in many markets.

Post-housing bubble, the mortgage industry tightened up. Nearly all loans required traditional documentation — two years of tax returns, two months (or more) of bank statements, two pay stubs for every borrower, and verification of any non-payroll financial gains. In addition, many banks were less tolerant when it came to credit scores.

Now, while the no-doc days have not returned, standards are looser than they were in the aftermath of the bubble’s burst. It’s not easy to get a mortgage, but it’s certainly easier than it has been.

 

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GETTING A MORTGAGE SOMETIMES COMES DOWN TO SIMPLE NUMBERS. IMAGE SOURCE: GETTY IMAGES.

What does it take to get a mortgage?

It’s worth noting that with mortgage loans, there is always an exception to every rule. For example, when my wife and I recently purchased the condo we live in, our bank granted an exemption on verifying our tax returns with the Internal Revenue Service because we had our identities stolen to file a fraudulent tax return the previous year.

That exemption, which would have been easy to come by in 2004, was only granted because we were well-qualified, buying much less home than we could technically afford, and were putting 25% down. Had one of those three not been true, we may well have been denied.

In general, however, a credible mortgage company (and there still are predatory ones that will make non-traditional loans, generally not benefiting consumers) wants to see borrowers conform to the 28/36 rule. This means that the household should be spending no more than 28% of its verifiable monthly income on housing expenses (mortgage plus insurance and any homeowners’ association fees) and no more than 36% on revolving debt in total.

The other major factor beyond income is credit score. There is no hard and fast rule for credit, but the Federal Housing Administration (FHA), which helps first-time buyers, requires at least a 580 for its loans with the lowest-required down payments. In general, borrowers falling into the poor-to-fair credit range — 501-660 — will face a harder time. It’s not impossible to get a loan with credit at those numbers, but interest rates may be higher, and higher down payments may be required.

It’s harder than it was, but not as hard as it has been

Qualifying for a mortgage has always had some grey area. For example, someone with a 620 credit score but income that puts him or her well below the 28/36 ratio should be able to get approved. Lenders are not being as lenient as they were pre-2006, but they have generally been more flexible than they were in the immediate aftermath of the housing bubble’s bursting.

How hard it is to get a mortgage generally varies based on how qualified you are and how well you have your ducks in a row. A well-qualified buyer with all of his or her documentation ready to go should generally have an easier time of it. Someone pushing against the 28/36 rule or with less-than-stellar credit may have to speak with multiple lenders and will generally have to work much harder for approval.

The $15,834 Social Security bonus you could be missing
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.

 

What Is a Smart Home? How to Create One Even If You’re Not a Nerd

By Cathie Ericson
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David Paul Morris/Bloomberg via Getty Images

Ever since “The Jetsons” aired on TV in the early 1960s, we’ve been dreaming of the day our own homes would be “smart” enough to pretty much run themselves. (We kinda had a thing for Rosie the Robot, too.) And now that the term “smart home” seems to be everywhere, that day has apparently arrived! But what exactly is a smart home?

A smart home is equipped with technology that operates with minimal human input: You can lock your doors from miles away by pressing a button on your smartphone; or your heating/AC adjusts all on its own based on your preferences. There are homes that are completely tricked out, and others that make use of a clever gadget or two.

“Smart products utilize machine learning and can adapt to the environment, or the behavior of the users in their surroundings,” explains Tom Flanagan, founder of Real Estate Things, a blog that explores the intersection of technology and real estate.

Here’s how smart homes have evolved since their inception, and what it takes to have a smart home of your own.

A brief history of smart homes

While the idea of a “smart home” has been bandied about since the dawn of science fiction, Bill Gates turbocharged the concept in 1995 when he wrote “The Road Ahead,” which included his vision of the home of the future, encompassing technology like touchpads that control lighting, temperature, music, and even art. He wrote about an electronic wearable pin that “will tell the house who and where you are, and the house will use this information to try to meet and even anticipate your needs—all as unobtrusively as possible.”

Gates’ predictions turned out to be surprisingly (or, perhaps not surprisingly) on target. Starting after 2000, devices like security systems could be hooked up to a homeowner’s Wi-Fi, and smart home “hubs” grew from there, enabling more and more gadgets to be controlled from one central device. Some can even “talk” to each other (i.e., your clock can tell your coffee maker to brew a cup of joe once you’re up).

In 2013, the Consumer Electronics Show, a trade show showcasing all things tech, introduced the term “smart home,” and by 2016, the show was devoting two entire floors to smart home technology. Homeowners today are wooed by an assortment of smart home systems, including Amazon’s Echo, Google Home, Apple HomeKit, Samsung’s Smart Things, and more.

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Google Home, Amazon Echo, and Apple HomeKit are some of the leading smart home technologies

Many smart home products have already come and gone, but it’s clear that smart home technology is here to stay and of growing interest to homeowners. One survey found that almost half of all Americans either already own smart home technology or plan to invest in it soon.

According to Flanagan, almost 2 billion smart home devices will be shipped by 2019, generating an estimated $490 billion in revenue.

Steps to create a smart home: Where to start

If you’re curious about incorporating some smart home features into your house but aren’t all that tech-savvy, you’ll probably want to hold off on the cutting-edge stuff for starters. Sure, it may be cute if your toaster starts making breakfast as soon as your Jawbone registers that you’re awake, but how useful is that, really?

A more sensible place to start is smart home tech that’s simple and will save you money. Some of the most popular smart home devices include the following:

  • Smart thermostats like Google’s Nest that will automatically lower your home’s temperature at night, cutting your electricity bills.
  • Smart home smoke detectors: Installing one (which will alert you to smoke by phone even if you’re not at home) can save about 5% on your insurance premiums.
  • Smart locks: These handy locks can be programmed with special codes so you know who’s entering your house. For example, when your kids arrive home from school, you’ll get an alert so you can call and start nagging them about their homework. You can also program guest codes that work at certain times, such as for when a housecleaner or dog walker is expected. Codes can be canceled, if you decide that you don’t want the window washer inside after all, or changed remotely at any time. No more wondering who has one of your house keys, or whether your kids are going to be locked out.
  • Smart video cameras: These connected cameras allow you to check your home when you’re away. They can also be programmed to send alerts when there is activity. For example, they can start recording and send you a video clip when your kids come home from school or if they detect motion in a certain room.
  • Smart lighting: Some lighting systems allow you to set timers that you can override with an app if you’re going to be home later than expected. Other systems have sensors that recognize when dusk is approaching and turn on automatically.

 

While no one can predict for sure what smart homes of the future might look like, Facebook founder Mark Zuckerberg—who built a rather imperfect artificial-intelligence assistant modeled “kind of like Jarvis in ‘Iron Man’”—cautions, “AI is both closer and farther off than we imagine.” In other words, don’t get too caught up in any sci-fi fantasies of martini-mixing robotic butlers just yet.