Navigating the inspection process when buying or selling a home

Whether you’re buying or selling a home, there will almost always be inspections done. Oftentimes, buyers will do roof, home, and pest inspections. Sometimes fireplace, foundation and sewer lateral inspections will be conducted as well.

Cranston, RI, April 17, 2010 -- FEMA inspector Mike Irwin with home owner Jose Henriquez run through his home inspection again to illustrate to the media what a FEMA home inspection looks like and what people can expect when they have their homes inspected. Photo: Michael Rieger/FEMA

Buyers are trying to determine the integrity of the house they want to buy – nobody wants to buy a home only to find out later that they will have to put additional money into it. However, sellers rarely know about these things off the top of their heads.

That is why it’s important, and beneficial to both parties, for inspections to be done. At the very least, a seller should do a pest inspection before going on the market to understand the cost of any issues, rather than deal with negotiating after something is discovered.

Once inspections are done, they become a disclosure. So, if a buyer gets scared off for some reason, the inspections are a disclosure for the next buyers. More than likely, this will incentivize the seller to work with the existing buyer. Occasionally, there are bad inspections with unreasonable pricing and there is no coming to agreement between parties. The seller will usually get another inspection from a more reputable inspector.

Tips for preparing to buy a home

It takes a lot of preparation to buy a home. I know, I know, thank you Captain Obvious, right? But if you’re going to be searching for a home in 2017, I want you to be ready for what is headed your way!

credit score

From our friends at Bank of the West, here is a list of great tips for preparing yourself to buy a home. See my summary below:

1. Fix Your Credit

Your credit is one of the first things a lender will look at when approving you for a mortgage loan. You can get a free credit report once every 12 months from each of the three credit bureaus: Equifax, Experian and TransUnion at annualcreditreport.com. Make sure to check for mistakes and file a dispute with the business in question, as well as the credit agency, if you find any inaccuracies. They must investigate within 30-45 days.

2. Maintain Your Credit Score

Your FICO score is the most common number used by mortgage lenders to rate your creditworthiness. You can get your credit report with a FICO score for free, or for a small fee. Anything above a 740 FICO score will help you secure better interest rates. If your score is lower, you may still qualify for a mortgage, just with a higher interest rate attached. Your first instinct may be to find ways to boost that credit score. Here are two things NOT to do:

– Don’t close lines of credit – it may indicate credit risk and actually hurt your score

– Don’t open new lines of credit – the uncertainty of your spending habits with a new card might indicate risk and cause your score to tick up

mortgage2

3. Get a Big Down Payment

You’ll get a better interest rate on a mortgage if you have a larger down payment because lenders will think you’re less likely to default on your loan. Aim for a down payment of at least 20 percent of the selling price. This will also protect you from paying private mortgage insurance (PMI), which protects lenders if you default on a loan.

4. Get Pre-Approved

Meet with a mortgage specialist before you start shopping. They can help you determine an accurate budget and decide what kind of home you can realistically afford. Get a pre-approval letter and add it to a good credit report, income verification and a maximum allowable loan, and home sellers will take you most seriously among the suitors.

5. Keep Track of Your Money

You’ll have lots of documents, bank statements, etc. during the pre-approval and underwriting processes. These will be examined closely to verify income and expenses. If your records show unusual activity, you’ll be asked to explain it and you’ll have to jump that hurdle before continuing the approval process.

If you need a recommendation for outstanding mortgage brokers.  I have a few that I highly regard.

 

Supplemental property taxes can confuse a buyer

Have you recently purchased a home and been thrown off by getting bills about “supplemental property taxes?” Our friend Jay Vorhees at JVM Lending breaks it down for you:

Supplemental property taxes often create significant confusion for new homebuyers. When someone purchases a property in California, the County Assessor is required to immediately re-asses the property for property tax purposes. This re-assessment usually correlates to the purchase price and can take up to six months to complete.

JVM Supplemental property taxes

When a home is purchased, property taxes are usually based on the property tax bill of the current owner or seller. But usually, their property tax bill correlates to the price the seller paid for the property – often much less than the buyer is paying. Then, buyers mistakenly believe the property tax payment estimate when they purchase is an accurate reflection of their actual property tax. Usually, that’s false.

Anywhere from three months and beyond, buyers should expect a “supplemental tax bill” from the County Assessor. Even if a buyer has an escrow or impound account, they have to pay for the supplemental taxes, which can be sizable. As soon as a supplemental bill is received, a buyer should contact their loan servicer.

Also, when new buyers refinance into a new loan less than a year after a purchase, supplemental tax bills can cause confusion. Even if a borrower is refinancing into a lower rate, the housing payment can appear to increase. This is because lenders are basing the new housing payment on the new property tax liability, while borrowers are still basing their housing payment on the seller’s property tax liability, which is too low.

Pantone “Color of the Year”

Everything’s coming up Better Homes and Gardens right now. Even Pantone’s Color of the Year is “Greenery,” which is very similar to what we use here at BHG.

Lee_Eisemann Pantone Color of the Year 2017 GREENERY
Picture Credit: Pantone.com

Check out the story on the Color of the Year, which Pantone describes as “a fresh and zesty yellow-green shade that evokes the first days of spring when nature’s greens revive, restore and renew.” As an outdoor enthusiast and BHG realtor, I love this. But, I probably won’t be painting my walls this color – I think it makes a great accent color!

My favorite part of Pantone’s description, though, is this at the end: “A life-affirming shade, Greenery is also emblematic of the pursuit of personal passions and vitality.”

As we near the end of 2016 and move into 2017, it’s a good time to reflect and consider what we’ve accomplished and what there is to look forward to. I have a few resolutions: up by 6, work out Monday through Friday and in bed before 11 (no more falling asleep on the couch)! And of course, the time to lose some weight needs to become a reality versus just thinking about it. I am also going to start a remodel and add an in-law unit to my current house; I’m thinking about setting myself up for retirement. What is on your New Year’s resolution list?

How bathroom remodels are trending

Of all the things to remodel in a house, bathrooms and kitchens are probably the two most popular rooms.

bathroom-remodel-2

Houzz.com wrote a cool article about how homeowners are “craving stylish, beautiful spaces, with luxurious finishes and big showers.”Their study surveyed more than 2,100 Houzz users in the U.S. who own homes and are currently renovating their bathrooms, are recently done with a renovation, or are planning on one in the near future.

Check out some of the graphs that reveal the current trends for bathroom remodels:

How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend
How People Upgrade Their Main Bathrooms, and How Much They Spend

The climbing stock market’s effect on housing

Did you know interest rates climbed about 1/4 of a percent in the aftermath of Donald Trump’s election? This was the biggest single-day rate increase in three years.

trump-rates

Despite being told over and over again that a Trump victory would result in lower rates, the opposite has happened. In a recent Forbes column (Dec. 6 issue) Gary Shilling said he thinks the markets have massively overreacted to Trump’s election. He points out that the root causes of weak economic growth (that have kept rates low) will remain. He also says that Trump’s proposed tax cuts and stimulus programs will be watered down by Congress; the expectations of an economic boom are overblown. If he is correct, this means rates may fall again.

images-2

This now begs the point: nobody can predict anything in this market. So, if you have been thinking about buying or selling, is it time to get off the fence? Rates are still historically low, but for every 1/2 percent increase in rate on a $500,000 loan, the payment increases about $140 to $150 (and even less after “tax benefits”). Should buyers and borrowers wait to see if rates fall before moving forward with transactions? Absolutely not. Borrowers can easily take advantage of no-cost refi’s if rates fall.

500_f_112661321_cpogf2tpziyed8z81tkb9wpun9mfazw3

If you do decide to buy or sell, give me a call, I would love to help you navigate the process!

December/January housing market is stronger than you think

December and January are usually busy months with holidays, vacations and school breaks. But, contrary to popular belief, that does not mean the housing market slows down. On the contrary, actually!

for-sale-1

Based on 2015 numbers, listing your home in December and January actually give you a benefit. You can garner multiple offers and close above list price. In Spring, you get the price increase but also more houses listed, which lead to many more choices for buyers, making multiple offers rarer (or, you’ll get fewer offers at least, like 3 vs. 8 in Dec./Jan.).

If you’d like to take advantage of this market in December and January, reach out to me. I’d love to help you navigate the holiday season weather you are selling or buying a home or just consult with you on the best overall strategy for you!

Happy Veterans Day 11/11

Tomorrow is Veterans Day – a day to honor and celebrate the men and women who protect our country. I have a son who is currently serving and know many who are veterans of the military. I’d like to first and foremost thank them for their years of bravery, courage and selflessness in defending the United States of America.

One of my main focuses in real estate is helping veterans get into the crazy California housing market.  I believe those who have served our country deserve to own a home in that very same country.  The VA loan is the best loan going and I strive to educate other agents about the benefits to help them when there is more than one offer.  The VA loan allows our veterans to purchase with zero down, but the government backs 25% of the loan, thus it is like putting down 25%.

If you are a veteran or know anyone who is that may be looking for a new home, please contact me. For those of you who aren’t, but would like to make a difference for our veterans tomorrow, please visit serve.gov and search “veterans” to find volunteer opportunities.

East Bay housing market is shifting

housing-marketLately, we’ve started to see a “shift” in the Walnut Creek-area housing market. Price appreciation growth has slowed and we are now seeing more price reductions. Home price appreciation has generally declined to single-digit annual appreciation with estimates in the next year of 3-5 percent.

In the 24/680 corridor, homes are sitting on the market longer than they did in the Spring (20-26 days, as compared to 15-20 days). I am receiving 1-3 offers  with a final sales price of 4 percent over the asking price on most of my listings.

The Federal Reserve Bank will not increase interest rates this month. Currently, the best mortgage interest rate for a 30-year fixed rate is approximately 3.5 percent. In the big picture, global growth concerns remain the driving force behind the long-term trend toward lower rates.

Kitty Cole, who coaches many Bay Area agents, has noticed two distinct Bay Area markets. Many of them are side by side. Check out her insights:

Some of the market (still a seller’s market) is hot, with low DOM’s, high Sales Price to List Price ratios, low inventory, no contingencies, multiple offers and buyers aplenty. This market is going on in Oakland, Berkeley and surrounding cities.

It looks similar to the last 4 1/2 years. The only thing that is quite different is the number of offers that was 10-25 a few months ago, and is now 2-6 (and occasionally higher). This market requires savvy pricing and negotiating to get your seller the highest price. san-francisco

The other part of the market (a buyer’s market) has slowed with these factors in place: price reductions (up to 10 percent, and sometimes two before it brings an offer), contingent offers (contingent upon the sale of another property), high DOM’s, few offers (sometimes only one!), expired listings, cranky sellers and demanding buyers (because they can be!).

In the city, one client whose specialty is high-rise condos, literally slowed overnight and now the DOM’s for her listings are more than 30 days. Another San Francisco agent has had three listings expire in the past three months. One agent in the East Bay (Pleasant Hill) is stymied by her listings that sold within seven days and are now sitting for weeks. Many newer agents are not prepared to have the “I need a price adjustment to sell your property” conversation.  In three months, it will be different … how, I don’t know, wished I had that elusive crystal ball.

Will the Presidential race affect our mortgage rates?

I thought this might be interesting to share. Traditionally, there is very little on the market as we enter the holiday season. The last couple years, sellers listing in December and the beginning of January tended to have multiple offers because there isn’t much inventory (meaning, people don’t like to have Open Houses or showings during the holiday season as they are usually entertaining family or friends).

With the Presidential election around the corner, many agents are getting the feel the market has softened. It will be interesting to see how this year’s election will affect our market. Here are some insights from my friend Jay Vorhees at JVM Lending:

trump-clinton

Trump = Lower Rates; Clinton = Same or Higher Rates

We have blogged several times about how rates are not held artificially low prior to major elections. It is a myth that they are. Presidents, in fact, like to see proof that the economy is getting stronger, and these signs usually push rates higher. Presidents hope for positive signs like GDP growth, job growth, lower unemployment, etc. These signs usually push investors into stocks and out of bonds, causing rates to go up.

(Quick reminder: When investors demand more stocks, rates go up; when investors demand more bonds, rates go down.)

With respect to Donald Trump and Hillary Clinton, it is all about “stability.” Stock market investors like “stability” as much as they like growth. Worries about instability or shakeups send investors away from stocks and into the safety of bonds (pushing rates down).

Investors believe that Clinton will follow President Obama’s course, and this is perceived as “stability.” So, signs that Clinton might win will probably keep investors in stocks, which will ultimately keep rates largely the same.

Investors are not sure what Trump might do, so signs that Trump might win will probably push investors to the safety of bonds, pushing rates lower.

This is very similar to the uncertainty the Brexit vote created and its influence in pushing rates lower.