Kentucky is called the Bluegrass State for a reason. There’s a lot of great land to be had, and the prices are quite reasonable. Additionally, there is a lot of both urban and rural land available. But whether you’re thinking of taking a leap into investing in Kentucky real estate, or if you just want to homestead there, you need to remember that every state has its individual rules to be followed. Remember that the motto of Kentucky is “United we stand, divided we fall.” Don’t let your knowledge of the situation be divided into half-truths. When you are armed with the best information, “My old Kentucky home” can be your home, too.
How Kentucky Real Estate Stacks up to Other States
On the average, Kentucky real estate is far less expensive than that of other states. In highly urbanized areas such as Louisville, an average single family dwelling is $133,000, whereas the national average is $172,900. Considering that over 40% of the state is urban, this leads to plenty of low cost options, if you have been looking to stay in the urban world, but still want to embrace a more frugal lifestyle.
However, rural areas are where the costs of living are the absolute cheapest. Since more than half the state is rural, this creates extraordinary bargains, at an average sale price of $69,000. Of course, there are also multi-million dollar homes to be found in Kentucky, as well. Your housing options are limited far more by your budget and desires than by the market itself. The most expensive city to buy a home in is Florence, with its median price of $212,720. The most low-priced city is Lexington, where the average is $188,017.
The Most Popular Cities in Kentucky
The most popular cities to live in are Lexington, Louisville and Richmond.
Lexington is a bit complicated to describe, but simple enough to buy a home in. And since Lexington is extremely popular, a little added complexity only adds to its character. In 1974, the city and its county merged together, forming the Lexington-Fayette Urban County. Lexington is the second largest city in the state, with over 450,000 people living there. These people have called the place both “The Horse Capital of the World” and “Thoroughbred City.” If you want to see the bluegrass we talked about earlier, Lexington sits dead center in the middle of that region. Also, because of the abundance of unique cultural flavor, Lexington has even been called “The Athens of the West.”
One very good bit of fortune for Lexington is that, unlike many of the cities in America, its housing market did not encounter nearly as much of the roller coaster ride of the past few years. Because of this relative stability, the median home price of $164,000 has experience a modest 3% gain per year, which is the same percentage increase as the volume of sales in recent years.
One of the reasons for this stability may be the fact that many businesses are housed in Fayette County. While unemployment rates have soared the past few years, Fayette County has been spared by having the primary headquarters of Lexmark, Toyota’s largest plant in America and the University of Kentucky. Since all of these businesses offer ample blue and white collar employment, the unemployment rates have been far softer than in many locales around the country.
While Frankfurt is the capital of the state, Louisville is far better known, since it is the home of Churchill Downs, the site of the annual Kentucky Derby every may. The U.S. Council of Mayors has even billed Louisville as “America’s Most Livable Large City” and the citizens of Louisville proudly proclaim it to be “Possibility City.” The locals pride themselves on being warm and hospitable, even amongst all of the urban amenities one could hope for. Just because you live in a city does not mean you can sacrifice the southern tradition of being friendly to your neighbors. In spite of these excellent benefits to living in this mid-size city, Louisville’s home prices and general cost of living are very low, compared to similar cities in other parts of the country.
Madison County’s Richmond is also extremely popular. Being both a work and shopping hub, as well as the home of Eastern Kentucky University, its population is just over 35,000 people, making it the sixth largest city in the state. The massive price gap in homes also shows itself here, where $15,000 can purchase a three-bedroom single family home, all the way up to five million dollars for a gargantuan mansion. Between these two extremes, the median prices is around $140,000 here. The historic attractions abound in Richmond, including its grandly restored 19th century downtown commercial district, which attracts both locals and tourists all year round. Another notable fact about Richmond is that it is only twelve miles to the south of where Daniel Boone established the state’s first settlement in 1775.
The Fastest Growing Cities
Nicholasville is the fastest growing city in Kentucky, as of 2010. Lying on the outskirts of Lexington and boasting a thriving local business scene of its own, it sports the Enterprise Industrial Park, as well as the main corporate offices of R.J. Corman Railroad Group and Alltech Biotechnology. Boasting 12,966 households, Nicholasville has still managed to grow 35% since 2000, and 5% since 2008.
Berea is the second most rapidly growing city in Kentucky. Home to Berea College, this town is located in Madison County, and has grown by more than 43% since the year 2000. Having numerous craft festivals, Berea actually boasts of having more arts and crafts than anywhere else in the state. Visitors to Berea have a habit of turning into full time residents. The median home price in Berea is $132,000.
How Kentucky Handles Mortgages
All kinds of mortgages may be obtained in Kentucky, including:
- Adjustable rate mortgages (also known as ARMs) can be obtained in either 5/5 or 5/1 forms, which both mean that the interest rates and payment are set for the first five years. The difference is, thereafter the payment and rate may be adjusted every year (in the case of a 5/1 ARM) or every five years (as in a 5/5 ARM), until the mortgage is paid off or refinanced.
- Fixed rate mortgages, where a set interest rate and monthly payment are set up from the start and carried through for the life of the loan. Often these are LIBOR (London Interbank Offered Rate) loans, where the rate is based on what the bank of London is lending for at the moment.
- Interest only mortgages, where the borrower only pays the interest on their mortgage for a beginning term (often five years), typically followed by a fixed rate mortgage
At the moment, the most popular type of mortgage is fixed rate, as consumers have been stung over the past few years by adjustable rate mortgages where the payments have become unaffordably high.
The Refinance Process
Kentucky allows those who have reasonably good credit to refinance or take out second mortgages on their homes. The average credit score in Kentucky is 675, which compares reasonably against the national average of 677. Refinancing may be as easy as contacting a loan officer at a local bank or credit union and submitting their required paperwork. As of this writing, fixed rates were between four and five percent, with the tendency being to have slightly lower rates, due to lower average home prices.
Recourse for Defaults
Kentucky is a recourse state, which means that anyone who has a mortgage on their home would be wise to keep up with their payments. In a recourse state, the lender may take a borrower to court if they default on their loan, and may even ask the court to allow them to seize the borrower’s assets in the case of a foreclosure. In recourse states, a person who does not pay their mortgage may lose far more than the home (and many points off of their credit score). They may also lose their non-retirement investment account proceeds, their automobiles, boats and other tangible assets, as well.
The Foreclosure Process
In Kentucky, lien theory takes precedence. The property itself acts as the security for the underlying loan. There are no power of sale foreclosures through a deed of trust. The mortgage itself places the lien on the property.
The foreclosure process works on what is called Judicial Process, which means that the holder of the mortgage must go to court and demonstrate to the judge that the homeowner is in default on their loan. The attorney for the mortgage company may then try to resolve the problem, and if that fails, may file a lawsuit against the homeowner. The process may take up to a year (though the period to institute a foreclosure is 147 days), and the redemption period is an entire year. This generally gives the homeowner ample time to either refinance the loan, or take care of it through some other means.
When a Foreclosure Happens
The process of foreclosing on a home takes 147 days, if the foreclosure is uncontested. It may be delayed, however, if the borrower files a motion to contest the action, seeks delays and adjournments of hearings, or files for bankruptcy. If the borrower abandons the property during the foreclosure process, the lender is permitted to immediately take possession of the property.
Once a property has been foreclosed upon, a notice of sale is published for three weeks in a newspaper. Following that, there is a sale (in an auction format) of the property at the local courthouse, generally along with other properties in the same situation. The highest bidder at this auction takes the deed, and thus the property. The purchaser may either pay for the property in cash, or post a bond which allows them to pay through installments. After the sale, a motion to confirm is sent, and a deed to the property is prepared and presented to the clerk.
The Redemption Period
However, if the sale price is less than two thirds of the appraised value of the property, the borrower has the right to redeem the property from the buyer through simply paying the total amount of the unpaid loan plus expenses and 10% interest. The redemption period, during which the borrower can redeem the property, lasts for one year after the foreclosure sale date. As well, the mortgagor’s right to redemption is saleable, and may be sold to a previously uninvolved third party.