What constitutes a “bedroom?”

Jay Vorhees of JVM Lending raises an important question in a recent blog: what constitutes a “bedroom” in a real estate context? I’ve always told my clients that if it has a closet, it’s a bedroom – but I learned there’s actually a lot more to it! Read on, from Jay:

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My wife Heejin spoke in front of a brokerage recently and an agent approached her afterward to complain about a transaction we closed over three years ago. The agent was still upset because the appraisal came in low. We researched the transaction and found out that the county records and the MLS had the bedroom count wrong.

The agent was adamant that the home was a 3-bedroom house, as per county records, but it was actually only a 2-bedroom home, necessitating the use of more similar and lower-priced 2-bedroom comps. The ostensible “third bedroom” was only 42 square feet – far too small to constitute an actual bedroom.

Superstar appraisal-blogger Ryan Lundquist, of course, addressed this issue in one of his excellent blogs – Four Requirements for a Room to Be a Bedroom. Here are a few simplified takeaways (I recommend reading Ryan’s entire blog for more detail):

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  1. Entrance/Exit: A bedroom needs to have a door to the main house and a window to the outside.
  2. Ceiling Height: At least 50% of the ceiling needs to be 7 feet high. Hence, a sloping attic ceiling is okay in most cases.
  3. Size: A bedroom needs to be at least 70 square feet, with no side being less than 7 feet. Hence, a 6 by 12-foot room is not a bedroom.
  4. Closets Not Required (Usually): Many agents and buyers mistakenly believe that a “bedroom” must have a closet, but if often depends on local real estate norms, per Ryan. The last point is my own, and not Ryan’s.

County records and MLS info are sometimes incorrect, too. My above story involving the upset agent is a great example. County records say the house has “three bedrooms,” when it definitely only has two.

This is also another reason why we need skilled human beings to appraise homes. AI/computers will believe county records every time, but that is a topic for another blog.

(Kristin’s Thoughts) Another thing to note: if you don’t pull the permits, the tax records won’t reflect the addition of a bedroom, but an appraiser may use it if it is functional as a bedroom.

4 things not to do when putting your house on the market

RIS Media re-posted an older blog recently, and its advice still rings true. There are plenty of things you SHOULD do when putting your house on the market. But what about the things you shouldn’t do? Read on for more:

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So you’ve decided to put your home on the market. Congratulations! Hopefully, you’ve brought a rockin’ realtor on board to help list your home and together you’ve done your due diligence on what to ask for. As you start checking things off your to-do list, it’s also important to pay mind of what not to do. Below are a handful of things to get you started.

Don’t over-improve.
As you ready your home for sale, you may realize you will get a great return on your investment if you make a couple of changes. Updating the appliances or replacing that cracked cabinet in the bathroom are all great ideas. However, it’s important not to over-improve, or make improvements that are hyper-specific to your tastes. For example, not everyone wants a pimped out finished basement equipped with a wet bar and lifted stage for their rock and roll buds to jam out on. (Okay, everyone should want that.) What if your buyers are family-oriented and want a basement space for their kids to play in? That rock-and-roll room may look to them like a huge project to un-do. Make any needed fixes to your space, but don’t go above and beyond—you may lose money doing so.

Don’t over-decorate.
Over-decorating is just as bad as over-improving. You may love the look of lace and lavender, but your potential buyer may enter your home and cringe. When prepping for sale, neutralize your decorating scheme so it’s more universally palatable.

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Don’t hang around.
Your agent calls to let you know they will be bringing buyers by this afternoon. Great! You rally your whole family, Fluffy the dog included, to be waiting at the door with fresh baked cookies and big smiles. Right? Wrong. Buyers want to imagine themselves in your space, not be confronted by you in your space. Trust, it’s awkward for them to go about judging your home while you stand in the corner smiling like a maniac. Get out of the house, take the kids with you, and if you can’t leave for whatever reason, at least go sit in the backyard. (On the other hand, if you’re buying a home and not selling, then making it personal is the way to go, especially when writing your offer letter. Pull those heartstrings!)

Don’t take things personally.
Real estate is a business, but buying and selling homes is very, very emotional. However, when selling your homes, try your very best not to take things personally. When a buyer lowballs you or says they will need to replace your prized 1970s vintage shag carpet with something “more modern,” try not to raise your hackles.

And all of this is sage advice, choosing the right realtor to work with will streamline that process, talk you off the ledge and help you navigate the offer(s) and in the end if you hired right, will give you peace of mind.

Landscaping tips to improve home value

I wanted to go back to a blog I saw a few weeks ago. It’s an RIS Media blog about landscaping and how you can make the most out of your yards when trying to sell. Read below:

Landscaping is one of the most important ways to increase your property’s value quickly. In fact, a gorgeous landscape design can increase the value of your home by at least 5 to 11 percent—and maybe more. The best part about landscaping is that even though it’s one of the most valuable home improvements you can make, it’s also one of the easiest. If you’re wondering how to turn your landscape into one of your home’s most valuable assets, here are some tips to get you started.

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1. Match Landscape to Your Home’s Style

The best way to get an excellent return on investment with landscaping is to make sure it fits with your home’s style. For instance, if you own a Victorian home, a Japanese garden will be sorely out of place and may even lower your home’s value rather than add to it. In this instance, you’re much better off with a country or cottage-style landscape that blends in with the old-fashioned formality of your home.

The same holds true for more modern home styles, such as the prairie or industrial style. If your home falls into one of these categories, you’ll want to stay away from square, formal gardens or a profusion of airy blooms. Instead, create a more modern landscape by relying on plenty of greenery and natural-looking beds that fit the contours of your property.

2. Design With a Strategy in Mind

You’ll need to have a good strategy. That means you shouldn’t clutter the entire yard with various high-maintenance plantings, but you also shouldn’t have plain grass with no landscaping. A study by the Virginia Tech Department of Horticulture found that a good foundation planting along with a couple of well-designed points of interest can increase your home’s value by up to 42 percent.

By that same token, you should encourage diversity among your plantings without taking it too far. The ideal landscape has a good mixture of shrubs and perennials, but it doesn’t have one of every kind of plant that you can find at the garden center. Instead, it has a uniform look with just enough diversity to make it interesting, but not so little that it becomes boring.

3. Achieve Seasonal Balance

A profusion of spring blooms won’t interest potential buyers who look at your home during other parts of the year. Think about ways to make your landscape attractive all year — blooming bulbs for spring, annual beds around the house during the summer, shrubs with brightly colored leaves in the fall, and evergreens for the winter. Even though most buyers will be looking at your home during one season, they’ll notice the balance you’ve created and they’ll think about how beautiful the home will be as the seasons change.

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4. Plant Trees

A few simple trees can make an enormous difference to the sale price of your home. In one study, simply living on a tree-lined street added between 10 to 15 percent to the sale price compared to neighborhoods with fewer trees. So why are trees worth so much? Trees remove carbon dioxide and pollution from the air, so people view them as an eco-friendly option. The shade helps keep neighborhoods and homes cooler and more pleasant, which in turn cuts air conditioning costs. Trees are also a stress reliever — people enjoy relaxing in their shade or gazing at the leafy view.

5. Edge Your Lawn

Few things look nicer than a healthy, vibrant, carefully maintained lawn — except for a lawn that is all of those things and neatly edged. The confined look of an edged lawn gives it an easy-to-maintain look. In other words, no weed whipping or weeding required.

Edging along driveways, sidewalks and garden beds also shows prospective buyers how meticulous you have been concerning the property’s upkeep. They’ll know that if you’re willing to keep the edges of your yard looking nice, the rest of the property is likely in pristine condition, too.

Of all improvements to boost home value, landscape is one that will get you the largest return on your investment.  Just make sure that you design your landscape with a plan, and don’t let that design become so complex that the mere thought of all the maintenance chases away your buyers.

A quick comment: I heard Jay Vorhees at JVM Lending telling me this after I made a comment on one of his blogs. The neighbor down the street had a bunch of Juniper bushes, which did not give great curb appeal and the house sat on the market. Had they removed those bushes and done some generic landscaping, that house would have probably sold for $100k more as a similar one did come on the market with a nicely landscaped front yard and sold in less time and for about $100k more!

Way too much concern over credit inquiries

Our friend Jay Vorhees at JVM Lending put forth a good blog recently about credit inquiries. As a member of USAA and Capitol One, I get free credit monitoring, which is a super helpful tool. Read on for more:

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Over 500 borrowers come to JVM every month seeking mortgages. And way too many of them are far too concerned about credit inquiries. It is our strongest borrowers who are often the most concerned, which is ironic because they are the least affected by credit inquiries, but also why they have high credit scores.

This is because credit inquiries only affect a strong borrower’s credit score by a few points at most. And even that impact disappears after a few months. It is true that “hard inquiries” remain on a credit report for a few years, but they stop impacting credit scores long before they drop off a credit report.

Further, the credit bureaus or scoring models treat multiple inquiries from different mortgage lenders over a 30-day period as a single inquiry. It is only when borrowers apply for a large number of credit cards or apply for a large amount of credit from different types of credit providers over a short period of time that the scoring models become concerned.

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A single inquiry from one mortgage provider will hardly impact a strong borrower’s credit at all. And even if it does, the impact will only be a few points and it will disappear in a few months.

For readers who would like to learn more, Credit Karma has a more detailed discussion about credit inquiries here. As an aside, I also recommend signing up for the Credit Karma App. It is a great way to keep tabs on your credit and credit score. Or, like me open a Capitol One Credit Card (as long as you don’t have too many credit cards already and then you will be able to keep tabs on your credit scores for FREE!

Two Notes:

  1. Your scores from these reports are usually a bit different than the way a lender will see your scores. I recently had a client work to build up his credit to 705, but when they ran his credit for a loan it was in the high $600s.
  2. My girlfriend just went in with her son on an investment property where he will be living in it and they have roommates who will be paying rent (my youngest is one of the renters). She called me to inquire about going FHA as her lender recommended. I was very surprised because she was putting more than 20% down. I told her she shouldn’t be going FHA. Come to find out her son had no credit and thus he had a very low credit score and a lender will always take the lowest of two credit scores. Make sure your kids start to establish credit by having a gas card or a credit card that they pay on time.


A recently closed home finishes the American dream

I have a great story to tell you today about one of my clients. This client closed on a house last Friday, which is a big deal for anyone, so congratulations are in order. However, they also closed on a long-awaited chapter of the American dream.

The Tolentino family had been renting in Richmond for almost 20 years in the same house. As a veteran, Eulogio finally decided to use his VA benefits to purchase a big home in Pittsburg. I met them through a referral from USAA when they had been working with another agent, but they felt they were not being fully represented.

They were motivated to see some houses, so my team member, Lilly, went and showed them some newer construction in Pittsburg and they decided to write an offer. They came back to the office and we all sat down and discussed the process and what they would need. Their previous agent never explained that if they were getting money out of a 401K, they might need to know how long it will take and then put in an offer after they had the money in hand.

After much discussion, they decided they could not write on this house as offers were due that day. They then set their sights on some new construction, got all their ducks in a row, and now are the proud owners of a brand new house!

Eulogio is a native Filipino who moved to the United States and served our country. I can’t think of a better example of what the United States stands for and the diversity that inhabits this country. It is what the USA was built on. A big congratulations for achieving the American dream and owning a piece of land in the country he defended.

I’m so happy for the Tolentino family and proud to have helped them achieve their dream! This moment is more than well-deserved.

Dublin’s newest listing!

This is a legacy client, if you will! The sellers have used me four times now, and I found out recently that’s at least partially because they like my direct, straightforward style. They are from New York, so that makes sense!

Gio and Bessie moved to the Bay Area from New York and have progressively moved up: from a condo, to a detached, and now into a new construction single-family home with a yard and driveway! They already are a family of 4 and hope to get a dog once the move and construction are completed. They are listing their tri-level home with a very small yard in Dublin and making the move to Livermore.

If you are looking for a newer detached home in Dublin – or are planning to buy or sell in the near future – let me know! As you can see in these pictures, it’s a very stylish and bright home with many upgrades!

Won’t you be my neighbor!

I have a new listing in my own neighborhood of Parkmead! Come be my neighbor and live in a great little part of Walnut Creek. We are walking distance to downtown, top rated schools, and to Dewing Park pool. We have a small-town feel in Parkmead, where 4th of July parades, chili cook-offs and BBQ pool parties sprinkle the calendar.

This is a great family community, and the house itself reflects that. It’s a huge, flat lot with a play area in the backyard. There is a cabana, shed, and solar-heated pool. The seller is now an empty nester and is ready for her next chapter.

Inside, there is a remodeled kitchen, vaulted ceilings, fresh paint, dual pane windows and a well. Overall, it is a 4-bedroom/3-bathroom with a bonus room that can be an office. It is over 3,000 square feet and has a 2-car circular driveway. This opportunity with such a large, flat lot is rare for our neighborhood!

Come by to see the house this week: 45 Arlene Lane. I am hosting a Broker Tour today from 10:30 a.m. – 1 p.m., and a Twilight Wine and Cheese event on Thursday from 5-7 p.m. f you are looking to downsize in the near future, give me a call!

And if you are looking to downsize in the near future, give me a call.

A whirlwind process!

Recently, I represented the buyer on 9 Hansen Ct. in Moraga. My clients were very motivated, just moving back to the Bay Area from Texas. They were also living in a parents’ 2-bed home with four additional people and a daughter needing to be registered for high school. So all this put the house-hunting process on high alert.

As an agent, you often learn about critical information, or those that inform the decision-making process, as you go. In this case, it was how important being close to the high school would be, as the daughter would have to get there in the mornings and she doesn’t drive yet.

We put one offer in on a duet by Rudgear Park, but got beat out on a home with multiple offers. They had been eyeing Hansen, which had just reduced the price, so we negotiated down a bit more and then started doing inspections. The house had been beautifully updated after being a rental for 20 years, but we found the sprinklers had been leaking and there was water under the house. After the sellers addressed the sprinkler issue we got a credit for a few other repairs and closed the day after school started.

Luckily, this home is a block from Campolindo and the daughter was able to register, but proof of closing was required within the month. Now they are just waiting for their furniture to be delivered.

Buying or selling can be stressful at times. It is my job to consistently communicate the process and help mitigate some of the stress. Here are reviews on how I do just that. If you are thinking about buying or selling a home, let’s chat!

Home Sales Fall Despite Falling Rates?

Another great blog from Jay Vorhees at JVM Lending! He asks, with home sales falling despite the rates also falling, whether the end is finally here? “We can only hope,” he quips. Read on for more from Jay, and a bit of insight from yours truly at the end!

Tulip Mania

In the 1630s, the Dutch experienced one of the world’s first major financial bubbles – Tulip Mania. They were all convinced that the price of the exotic (at the time) tulip bulbs would increase forever, not taking into account how easy it was to reproduce them and how the ridiculously high prices were clearly not sustainable.

Everyone (even common laborers) was borrowing money to buy as many tulips as they could, trying to get in on the action. At one point, a single bulb cost as much as some of Amsterdam’s most expensive mansions at the time. Then, it all collapsed. There have been many bubbles since, including the 1929 stock market crash, the dotcom crash of the late 1990s, and most recently – the mortgage meltdown of 2008. All those bubbles were partially driven by easy credit, so every time the Fed lowers rates, I am terrified that it is fostering a new bubble.

Home sales fall in June – despite lower rates, higher wages, and lower unemployment

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So, that is why I was actually marginally encouraged to see this recent headline and article in the WSJ: U.S. Home Sales Stumble (in June). “Home sales slumped in June as home prices for major West Coast cities decline for the first time since 2012, ending the spring selling season with a thud.”

This is amazing to me because rates were about 1% lower than where they were the previous June, and everyone thinks rates drive housing prices. But, they clearly don’t. Home sales fell in the face of rising wages and decreasing unemployment too, leaving economists perplexed, as those factors are also supposed to drive prices higher.

Sales are probably falling because borrowers are hitting their affordability limit, and because buyers are acting prudently (unlike prior to 2008). While fewer sales overall are never a good thing, it is a good thing to see a potential bubble start to deflate instead of popping – so YAY! (sort of)

I might add that a huge brokerage we work with in Texas is currently projecting a downturn in the near future, telling agents that they need to trim expenses by 20%. So, it is not just the West Coast experiencing a slowdown. And finally, despite the apparent slowdown, numerous agents we work with are still experiencing record years simply because of their relentless marketing. We too have almost tripled our purchase volume year over year by improving our value props and increasing our marketing efforts.

Takeaways from this blog: This slowdown might be averting another bubble-pop! The Fed can’t stimulate everything with low rates. They might call Japan and ask how their low-rate experiment has gone, as 20 years of near-zero rates have not revived Japan’s economy at all. No matter how soft markets get, the overall market remains huge and business can always be found with stellar value props and very aggressive marketing.

Kristin’s insight: Some houses still have multiple offers, usually ones that are updated, and are priced slightly below market or in a highly desired neighborhood. The rest are sitting longer on the market and may see a price reduction or two as buyers become much more discriminant.

Who funds Mortgage Loans?

For buyers, this JVM Lending blog from Jay Vorhees is a great “101” on the differences, pros, and cons of the three institutions you can go to for your loan. I often recommend JVM for their efficiency and getting the loan done in a short time frame, not because I get something in return. Having said that, I do get a big benefit by having a smooth escrow, closing on time with short contingencies, and happy clients. A buyer who has never been through a nightmare purchase will never fully appreciate a smooth buying process, but at least I know I have done a good job representing them.

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We host “Homebuyer Seminars” for buyers and “Mortgage 101 Seminars” for agents, and one of the slides that always derive a surprising amount of interest is the one that sets out the different mortgage origination channels.

This is because there are so many companies and individuals offering mortgages that it can be both very confusing and overwhelming for consumers and agents alike. Because of this, I am revisiting the topic in today’s blog.

Three Primary Channels for Mortgages: Commercial Banks and Credit Unions

These big institutions dominated the mortgage industry after the 2008 meltdown, but their overall market share has been dropping quickly in recent years, as Mortgage Banks and Brokers (see below) reclaim market share. The “big banks” include Wells Fargo, Citi, Chase, B of A, and U.S. Bank, among others. Major Credit Unions include Navy Federal and USAA, but there are hundreds of others.

Advantages: Bank and credit union advantages include a low cost of funds; they can loan out customer deposits and sometimes offer low rates. They also can “portfolio” (or retain) tough loans that otherwise could not be sold on the secondary market.

Disadvantages: The big banks are very slow and bureaucratic largely because they are so heavily regulated. They also rely on national appraisal management companies that do not employ the best, local appraisers – so appraisal issues are common.

Private Banking: Commercial banks have an offshoot for “high net worth” customers called “private banking.” These channels often offer exceptionally low rates that other entities usually can’t compete with.

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Mortgage Banks: Mortgage Banks include Quicken, Guaranteed Rate, and Fairway at the national level, and RPM and SWBC at the regional level. JVM Lending is also part of a mortgage bank. Mortgage banks do not hold deposits; the ONLY thing they do is underwrite and fund mortgages. Mortgage Banks use lines of credit to fund mortgage loans and then quickly sell the loans to investors or third parties to make money.

Advantages: Mortgage Banks can typically move much faster than commercial banks because they are less regulated, smaller and more nimble. They can also set up their own appraisal management companies, ensuring access to local appraisers and better appraisal quality.

Brokers: Brokers do no underwrite or fund loans. They only “originate” loans and then send them to outside “wholesale” lenders for underwriting and funding.

Advantages: Brokers can access dozens of different wholesale lenders and submit loans to whichever lender is offering the lowest rates or best terms at any given time.

Disadvantages: Wholesale lenders force brokers to use national appraisal management companies (like the big banks use) and there are frequent appraisal issues as a result. In addition, brokers have no control over underwriting (because it’s not “in house”) and turn-times. Brokers also have very few competitive options for jumbo financing. JVM was in the broker channel for years, but left it in 2014 because we had too many appraisal and service issues.