5 Things Buyers Should Do When Housing Inventory Levels Are Low

I have been a Realtor for almost 40 years, and this current market is one of the trickiest I have seen for buyers ever. Housing inventories are at historic lows and interest rates have been rising.  I have quite a few clients searching for homes and it has been a tricky and sometimes frustrating process. The good news is that it is not impossible to find a home when inventories are low, you just need to keep a few things in mind:

Prepare to Write a Quick Offer

Keep in mind that no seller in this market will even entertain an offer from a buyer who is not already pre-approved. Obtaining a pre-approval takes time – if you wait to start the process until you find your dream home, it will likely be under contract before you can get the pre-approval letter in hand.  So, before you even start looking at homes, get in contact with a mortgage lender and get a pre-approval letter. Your mortgage lender will help you determine much you can afford to spend (including your down payment and closing costs).  Work with your agent to ensure you are looking in a price range that allows you to make the best offer possible.

Get Ready to React

You will not have much time to see listings. Well priced homes in good condition sometimes go under contract in a single day or just hours after they are listed. You have to make yourself available to see new listings and you need to mentally prepare yourself to write an offer quickly. In this type of market you will not have a few days to think about whether or not this is the right home for you. This does not mean that you should buy the first home you see or that you should compromise on criteria that are most important to you in a property. You just need to be prepared to write the offer immediately when the right house comes along.

Be Realistic

Trust your Realtor and listen to her advice. Look over the comps and make your first offer a good one. If you know you are in a multiple offer situation, work with your agent to submit your highest and best offer. You may increase your chances by writing a personal note to a seller when submitting your offer. Tell them why you like their house and help convince them that you are the right buyer.

It’s easy to feel desperate or discouraged as a buyer in this type of market.  Remember that the house must appraise for the sales price on the contract or the lender will not allow the loan to go through as written.

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Move On

You may lose out on several homes before you go under contract. Keep your head up and remind yourself that there will be other homes that will work for you.  Keep evaluating your list of “must haves”. You can always renovate a home over time to fix things that may be less important on your list. Taking your price range a bit lower or higher may give you new options to consider. Above all, keep your budget and goals in mind and trust that you and your agent will find the right home.

 

Be Patient

This is certainly a challenging time to be a buyer. But, even with low inventory levels, new homes are being listed every day and I have 4 clients closing on home purchases in the coming weeks. A couple of those clients had written contracts on other properties but had been beaten out by other buyers. Be patient and follow the steps above – you will be able to find the right home that works for you and your family, it may just take a little longer than you had thought.  The good news is that these market conditions will not last forever. There is one constant in life & that is change.

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What a Market with Low Inventory Levels Means to You

If you have been paying any attention to the real estate market lately, I am sure you have heard that current housing inventory levels in our area (and nationwide) are low. You may have also heard people refer to the fact that we are in tight housing market or use the phrase “seller’s market”.  All of those terms mean the same thing – there are less homes for sale now than at any time in the past few years. But what does that mean, and how does that affect you as a buyer or seller?

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Buying a Home in a Seller’s Market

I have quite a few buyers who have been searching for a home over the past few months and it has been a tricky and sometimes frustrating process. The good news is that it is not impossible to find a home when inventories are low, you just need to keep a few things in mind:

Prepare to Write a Quick Offer

Before you even start looking at homes, get in contact with a mortgage lender and get a pre-approval letter. You need to know how much you can afford to spend (including your down payment and closing costs).  Work with your agent to ensure you are looking in a price range that allows you to make the best offer possible. Make a short list of the things most important to you in a new home and stick to that list.

Get Ready to React

You will not have much time to see listings. In the past few months, well priced homes in good condition go under contract in just 1 or 2 days and sometimes in just hours. You have to make yourself available to see new listings and you need to mentally prepare yourself to write an offer quickly. In this type of market you will not have a few days to think about whether or not this is the right home for you.

Be Realistic

Trust your Realtor and listen to her advice. Look over the comps and make your first offer a good one. If you know you are in a multiple offer situation, work with your agent to submit your highest and best offer. You may increase your chances by writing a personal note to a seller when submitting your offer. Tell them why you like their house and help convince them that you are the right buyers.

Do not overpay for a home! It’s easy to feel desperate or discouraged as a buyer in this type of market.  Remember that the house must appraise for the sales price on the contract or the lender will not allow the loan to go through. Also, don’t forget that you will have to sell this home some day –  and we won’t always be in a tight housing market. Do not overpay now and find yourself losing money when it’s time to sell.

Move On

You may lose out on several homes before you go under contract. Keep your head up and remind yourself that there will be other homes that will work for you.  Keep evaluating your list of “must haves”. You can always renovate a home over time to fix things that may be less important on your list. Taking your price range a bit lower or higher may give you new options to consider. Above all, keep your budget and goals in mind and trust that you and your agent will find the right home.

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Selling a Home in a Tight Market

Consider this, from 2015 to 2017 the average sale price of homes in our area rose from $144,300 to $162,247. That’s an increase of 12.4%. In that same time period the average number of homes for sale dropped from 4609 to 4020 – a decrease of 12.8%.  If you are thinking of selling, now is a great time to do it! But, there are a few things to keep in mind:

Buyers Are Savvy

It is very tempting to overprice your home to see how much you can get when you are in a “seller’s market”. It’s important to note that the homes that are selling quickly have one thing in common, they are priced at or close to market value. There are plenty of homes on the market that are not selling and the primary reason is price. It is not usual to see listings that have been on the market for 3 or 6 months while other properties in the same neighborhood sell in just 2 days. The longer your home stays on the market, the less perceived value it will have to buyers.

Your agent will provide you with a competitive market analysis of comparable homes that have sold in the past 6 months. Trust your Realtor when she presents you with her pricing recommendation. Buyers and agents, especially in this market, have a very good sense of how much homes are worth. They are looking at homes in their price point both online and in person every day. They will not pay more than your home is worth.

Your Home Must Appraise

Even with a signed contract in hand, your home is not sold until the closing. Once you go under contract, the buyer’s lender will conduct an appraisal to make sure that your home is worth the price on the sales contract. The appraiser will look at sales of similar properties for the past 6 months to evaluate the market value of your home. If the sales price on the contract is higher than the appraised value, the mortgage lender will NOT let the sale go through at the contract price. Short appraisals have become very common lately and it is easy for deals to fall apart.  Want to know more about how appraisals can affect you?  Click here.

 

While we are all keeping our fingers crossed that inventory levels increase soon, we have to deal with the realities of the current market. Well priced homes in good condition are going quickly and buyers must be able to adapt in order to purchase. While it may be tempting for both buyers and sellers to go under contract for a higher price than the home is worth in the current market, the mortgage lender will not allow this to happen (remember the financial and housing crisis?).  With some patience and realistic pricing expectations everyone can win, even in a market with tight inventory levels.

Thinking of buying or selling? I am happy to be of service and put my almost 40 years of experience to work for you.

 

 

 

Do I Need a Realtor If I Am Building a New Home? In a Word, Yes!

Are you thinking of building your next home? With low housing inventory levels, the option to build may sound better than it has in recent years. If you are trying to weigh the pros and cons of building new home, check out this article I wrote on the subject by clicking here.

Once you have decided that building a new home is the right choice for you, your next step in the process may be a little confusing.  It’s certainly fun to drive around and look at new developments and dream of possibilities.  But, how do you know which subdivision is the right one for you?   How do you know which builder to choose?  Even if you know which builder and neighborhood you want, how can ensure you get the most for your money?

While it seems quite easy to go straight to a builder’s model home to get the process started, there some important things you should keep in mind.  The most critical is that when you enter a model home and meet with a sales agent, you must remember that the agent works for the builder.  While they are very knowledgeable about new construction and all of the steps that need to be taken in order to build your new home, they represent the builder and the builder’s best interests in every phase of the transaction.

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Hiring a Realtor (or buyer’s agent) will ensure that your interests are well represented with the builder and can help you with the following:

Community Expertise

An experienced Realtor has a wealth of knowledge about local home values as well as the features and amenities in the surrounding area. They can help identify neighborhoods with good schools, parks and easy access to local shopping and restaurants. They should also have a good idea of the reputation and financial stability of local builders and can help make sure that you are not overpaying for the area.

Financing Options

Many builders can offer attractive financing for new clients, but it is important to weigh the costs & benefits of all your financing options. A Realtor can help you by recommending alternative mortgage experts that may be able to find you a better deal long term.  At the very least, you can compare your all your options to make sure that you are getting the best deal possible.

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Advice on Floor plans and Upgrades

When you are building a new home, you will be asked to make hundreds of decisions both large and small.  You will be making choices from exterior finishes and floor plan options to flooring, fixture finishes and upgrade options. It is so easy to exceed your budget and to make decisions that may hurt your ability to resell the home in the future. Having a real estate expert at your side while you make key decisions can help keep you focused and stay on budget. Realtors are very familiar with current trends and what features will draw the most buyers when it is time to sell.

Home Inspections

It is important that you get an knowledgeable third party to inspect your new home prior to the closing. While the builder may have the best intentions of handing over a quality home to you, people make mistakes. Your home was built by many subcontractors with varying levels of skill. Doing a whole house inspection should uncover any defects in the building process and help ensure that everything was done correctly. Your agent should have a list of home inspectors that they trust and have dealt with in the past. I also recommend that prior to closing, you do a final walk-through of the property with your Realtor. Having an extra set of eyes is always helpful

Your Advocate

As I said earlier, the sales agent working for the builder has a legal obligation to represent the builder’s best interest during the building process. Hiring a Realtor to represent your interests in the building process is critical. And, for those concerned about the bottom line, you will be happy to know that it won’t cost you anything out of pocket. The builder has already accounted for an agent’s commission as part of the cost of building homes.  Hiring a Realtor to assist you when building your next home is certainly one of the smartest things you can do to protect yourself while you are building a home that you can enjoy for years to come and that will fetch the highest price possible if you ever need to move.

 

Paying Attention to the “Small Stuff” May Add Big Dollars to Your Bottom Line

I know the saying goes, “Don’t sweat the small stuff”, but when selling your home, the small stuff can add up quickly and may lead to a lower sales price. While making sure your house is clean and ready to show is critical, don’t lose sight of the details. Make sure to focus on fixing things that may distract buyers or raise a red flag during inspections before your home goes on the market.  When we live in a space every day, it’s easy to overlook small items like a leaky faucet or a wobbly toilet. Walk through your home and try to examine it with fresh eyes. The checklist below may help.

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1. Your Front Door

Most of us enter & exit our home through a garage or side door, so it’s easy to forget that your front door is a buyer’s first impression of your home.  Make sure you are putting your best foot forward.

  • Make sure the lock works properly and is easy to operate.
  • Ensure that front porch lights are operational and have working light bulbs.
  • Clean the door well and remove any cobwebs or leaves from the porch area.
  • Place a doormat both outside and inside the front door to eliminate dirt and water from damaging your flooring surfaces.

2. Kitchen & Bathrooms

As you know, kitchens and bathrooms sell homes. Even if you haven’t renovated these rooms, you can get the biggest bang for your buck by making sure they look fresh, clean and trouble free.

  • Fix leaky faucets and make sure that toilets are properly seated.
  • Remove small appliances and other clutter from counters to show off work space.
  • If the room has not been updated in awhile, consider a fresh coat of paint and some matching accessories (towels, throw rugs, shower curtain) to freshen it up.
  • Make sure that tile & grout is in good condition, replace tile or re-grout if neccessary.
  • Deep clean those major appliances & make them sparkle.

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3. Windows

  • Pull screens off windows & repair any holes or tears you may find. Re-screening is a simple and inexpensive process that you can do yourself or it can be done at your local hardware store. Store screens once they are in good condition since the house will look brighter without them.
  • Clean windows to let the in natural light in and let buyers have a clean view of the property.
  • Make sure windows are clear (with unbroken seals) and that they open, close and lock easily. Home inspectors will check each window during the inspection process.

4. Mechanical systems

  • Make sure to have your furnace and air conditioning units serviced and in good working order. They will both be inspected.
  • Check your water heater and water softener (if you have one) for leaks.
  • Do all of your light switches work? Do you have GFCI plugs in your kitchen & bath?

5. Walls

  • Check walls and woodwork for dings and repair where necessary.
  • If walls are filled with scuff marks, consider a fresh coat of paint in a neutral color.
  • Do you have lots of color on your walls? Consider repainting to a neutral palette. Color is personal. Even though you may love the red walls in your dining room or your lavender master bedroom, those bright colors may turn off potential buyers who may lower their offer price because they plan to repaint these rooms once they move in.
  • Has the wallpaper on your walls been there awhile? Wallpaper is one of the biggest turn-offs for younger buyers. If removing all the wallpaper is not an option for you, consider removing it from at least a few rooms like the living room, dining room or kitchen.

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6. The exterior & yard

Not all of us have a green thumb, but you can make the best of your home’s curb appeal by attending to just a few items.

  • Make sure the grass is mowed and that leaves are removed.
  • If you are listing in the winter, remove snow & ice from driveway and walkways.
  • Get rid of weeds in planting beds and put down a thin layer of fresh mulch.
  • Do you have mildew build-up on your siding or concrete surfaces? Make sure to clean them with a pressure washer. You can rent one to use yourself or have a local service provider do the job for you.
  • A lot of homes have piles of wood or extra building materials in the back yard.  Stack the wood neatly and either store or get rid of old bricks, stones and other building materials that you no longer need.
  • Check those gutters! Make sure they are clean and in good working order.

 

It is easy to lose sight of the “small things” when you list your home, especially if you have lived in it for a long time. Issues like a lock that sticks or a light switch that doesn’t work may not bother you, but they can be a big deal (especially if there are a lot of problems) to a potential buyer. By taking care of these issues before listing, you present your home in the best possible light and help ensure that you get the highest offer possible.

Finding the “Right” Realtor

In a past article, I wrote about why using a Realtor is important in a real estate transaction whether you are buying or selling a home.  Once you have decided that hiring a Realtor to represent you is the right thing to do, the important question becomes who do you choose?

There are several things to consider when you are making a decision about the person who will help you make one of the biggest decisions in your life.  Before you get too far in the process, the first thing you should do is talk to friends and family to see if anyone has a Realtor they can recommend. You can also look online at websites like Zillow.com to find local real estate agents. Often these websites let you see how many transactions a real estate agent has completed in the past year and may also include testimonials from past clients. I recommend that you get at least 2-3 agents to interview before deciding on which Realtor you will hire.

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Before you begin the interview process, sit down and think about what is important to you in an agent. Check out the list below for some important attributes you may want to keep in mind.

Experience

You want to make sure that the person you hire has plenty of experience in the type of real estate transaction ahead of you. If you are selling, make sure that the Realtor you hire has sold listings in your area and price point. If you are buying, make sure that your agent is familiar with the area and can help guide you to make sure that you are making a good investment. Real estate transactions are complicated and you want someone in your corner who knows how to protect your best interests if issues crop up along the way. Being a full-time Realtor is tough and to survive & thrive in this business over the course of many years takes tenacity,  hard work and an ability to read the market correctly.  Having someone with this kind of experience can help ease the path toward your goal.

Rapport

This may go without saying, but you should like the Realtor you choose.  The process of buying and selling homes takes longer than you think and you will be spending a lot of time with your Realtor. You will be in contact with them on a weekly and sometimes daily basis.  Make sure your choice is someone with whom you enjoy spending time.

Trust

Finding an agent you trust is perhaps even more important than experience and rapport. Your Realtor is going to guide and advise you through perhaps one of the largest investments you will make in your lifetime. You need to be able to look your agent in the eye and know that they will be looking out for you and for your best interests in every stage of the deal.

Team vs. Solo Agent

Successful agents can work alone or choose work as part of a team. As a client, you have to decide which business model you prefer.

If you work with a solo agent, he/she will be involved in every detail of your real estate transaction. In most cases these agents represent both buyers and sellers so they have a really good handle on what is going on in the local marketplace at multiple price points.  While most solo agents with lots of experience are pros and do a good job juggling the multiple needs of their clients, keep in mind that they are just once person.  So, if your Realtor gets really busy or sick, you may have more difficulty getting an immediate response from them.

There are also agents who work in a team environment where different people manage the various parts of a real estate transaction. So for example, one agent may handle listing your home and a separate agent may assist you with the purchase of your new house. In addition, many teams have transaction coordinators that you will deal with once your home goes under contract. The advantage of a team is that you have more than one person helping you, so you should be able to get immediate attention to your needs. The downside of having a team is that you are working with multiple people, some whom you may never meet have met in person.

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Past Listings

If you are selling your home, make sure to go out and review the agent’s current and past listings online. Are the photos well lit and professional looking? Does the description of the property sound interesting and engaging?  The photos and property descriptions are the most important part of the marketing effort to sell your home online. You want to make sure that whomever you choose is able to make the most of your home’s first impression.

The Interview

Once you have narrowed your choice of Realtors, make sure to sit down with them in person and go over your needs and goals for this real estate transaction.  You should feel comfortable enough with them to express any concerns you have and ask questions about the process ahead of you.

If you are selling a home, ask them these questions to get a better feel for their business:

  1. On average how long do your listings remain on the market before selling? How does this compare to other agents?
  2. How does the final sales price compare to the home’s original listing price?
  3. How many listings have you sold in the past 12 months? Where where the homes located?

If you have not gotten this agent’s name as a referral from a friend or relative, ask the agent if you can speak to a couple of past clients to get their input on the Realtor’s strengths and weaknesses.

Choosing the right Realtor can be the most important part of buying or selling a home. The agent you select will, in many ways, determine the outcome of your transaction. A good agent will guide you through every step of the process and will help you overcome any hurdles that you face along the way. In short, your Realtor is your partner in this journey so take your time and choose your partner carefully.

If you are thinking of buying or selling, I would be happy to sit down with you and review your goals and tell you more about myself, my experience and how I can help you achieve your real estate dreams.

 

Determining What a Home is Worth

Figuring out a home’s value is a tricky but critical factor in any real estate transaction. Why is it so hard to do? The value of a home is affected by many factors, including its  age, location, condition, features and property size.  Other forces like comparable home sales, inventory levels and timing can also have an big impact on what a home is worth.

In a typical real estate transaction, three parties have to agree on the price in order to determine a property’s value. The seller, the buyer, and the lender must all come to terms on price in order for the deal to be successful.

The good news is that Realtors and appraisers, who help lenders determine the value of properties, have similar tools at their disposal in order to help determine what a home is worth.  The single biggest resource that all professionals use to determine the value of a home is recent comparable sales of similar properties.  What does this mean?  The best indicator of value is sales of similar homes sold within the past 6 months within the subject property’s neighborhood. In an idea situation, both realtors and appraisers would like to find at least 3 comparable homes when determining market price.

If there are no recent sales in the immediate neighborhood, then the search will expand to similar homes within the same school district, built in a similar time frame with features that resemble the subject property.

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The Importance of the Right Price for Sellers

Many sellers try to use the following formula to try and determine the value of their home:  Original purchase price + the retail value of all improvements and repairs made to the property since the date of purchase.  Unfortunately these two factors combined do NOT determine the current market value of your home.  While repairs and remodeling efforts certainly improve the overall value of your property, it is unlikely that you will recoup 100% of your out-of-pocket costs. It may be tempting then, to do nothing and simply save your money and avoid updating your home. Unfortunately, you will find that in this market, the value of your home may in fact decrease. Buyers today expect to see updates especially in bathrooms and kitchens.

So if you are thinking of selling your home, how do you determine what the right price should be? First, you should contact a few experienced Realtors and get their impressions of your home as well their recommendation for a listing price.  After touring your home, the Realtors should be able to present you with a competitive market analysis that will help guide them on the value of your home. Listen to their advice on pricing – they are in homes every day and have a really good grasp on the market. In order to maximize the value of your property, the Realtors may recommend things like replacing flooring, applying a fresh coat of paint or ideas on how to better stage your home. Sometimes just a few updates can drastically improve your home’s value in the eyes of buyers.

Above all, be careful not to overprice your home. It is temping to try and test the market to see if you can get a higher price.  Keep in mind that buyers and their Realtors are savvy and have a good feel for the competitive marketplace. If you set the listing price too high, you will find that there are few buyers coming to see your property. This will lead to a longer time spent on the market and will in turn lead to future listing price reductions as you try and tempt potential buyers to come and see your property. In the end, you may find that you will get less for the house that you would have if you had priced it correctly up front and taken advantage of buyer interest when your listing was new on the market.

Finally, keep in mind that your home must appraise for the contract purchase price. Although a buyer may agree to your price, their lender must also agree that the home is worth the price on the contract or the deal may fall apart. I wrote an article about the importance of the appraisal process here.

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The Importance of the Right Price for Buyers

It can be tempting especially in a seller’s market, when inventories are tight, to overpay for a home. Before writing an offer on a home, make sure your Realtor gives you a competitive market analysis for the property and listen to their advice on the current market value. Even if you fall in love with the property, don’t forget that the house must appraise for the price on the contract or your lender will not allow you to go forward with the purchase at the contract price.  You can read more about the details of the appraisal process here.

Even if you are lucky and get an appraisal above the true market value of the property, keep in mind that eventually you will need to sell the house yourself. If you overpay now, you may find that the house is not even worth your purchase price when you go to sell. Nothing is guaranteed in the real estate market and prices fluctuate. Remember that the housing crisis a few years back found many homeowners with mortgage values far higher than the market value of their homes.

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Whether you are buying or selling, your Realtor is a terrific resource on property values. Not only do they have access to the MLS system which catalogs all home listings and recent sales, but they are out in the market place and inside homes every day. Listen to their advice on pricing, since they have first hand experience.

Are you thinking of selling but aren’t sure of the value of your home?  Please contact me and let me put my almost 40 years of experience to work for you!

Looking at Homes Through the Eyes of a Realtor

With the proliferation of house hunting and home improvement shows, the average person has seen the inside of more homes than ever before. The upside with all this exposure is that home buyers today seem to have a firmer grasp on what they are looking for as they set out to find their dream home. The downside is that they may be less willing to look beyond the decor and surface finishes to see the real potential a property might offer their family.

As anyone who has spent time in the real estate market knows, purchasing a home is process that takes an open mind, patience and a good deal of compromise. Most buyers are working with a set price range and a long list of “must haves”.   It easy to imagine (especially for those of us who watch a lot of HGTV) that we will find our perfect home with every upgrade and amenity we desire within our budget, but the truth is there are always trade-offs that will have to be made.

When you start the process of looking for a home, make sure you work with your Realtor to identify items that you require in your new property vs. those items that you’d like to have.  I talk more about making that list here.  Before you start your home search, talk with your Realtor about the realism of your wish list as it relates to your budget. Your Realtor is an expert and can let you know what items on your list will fit within your housing budget so there are no surprises when you start looking at listings.

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Good Bones vs Flash

I figured it may be helpful to understand what I focus on as a Realtor when I walk into a listing with my clients. We I walk into a home for the first time, I focus on items that indicate how well it was originally built and maintained. Since I have lived and worked in the same area for almost 40 years,  I will often have my first indication of quality simply based on who originally built the home.

As I walk the property with my clients, I will focus on the exterior surfaces and windows, including the condition of the roof.  Once inside, I will look at the walls, doors and trim for signs that indicate how well the home has been maintained by its current owners. A home that has been well looked after by its current owners is less likely to be hiding issues that may come back to bite you down the road.

I am less concerned about the paint color on the walls or the condition of the carpeting. Those items can be easily and inexpensively updated. I will instead focus on the layout of the home. Will the current layout meet your family’s needs?  What about the property and location?  Will the location and yard work be a good fit for you?

Often, poor quality construction or amateur DIY remodeling jobs can be camouflaged by updated interior design or good staging. It is easy to focus on the beautiful decor of a room and imagine yourself living there.  It is your Realtor’s job to be able to see beyond the curtains and paint to the condition of windows and walls beyond.

While your budget may not allow for high end upgrades to kitchens and bathrooms, your Realtor should be able to help you find a home within your budget that will offer you the best quality your housing dollar can afford.  In the long run, having a well built home will save you from the constant drain a cheaply built or poorly maintained home will have on your wallet.  And while you may not have the kitchen of your dreams today, fewer maintenance issues and problems will allow you to save up for a remodel more quickly.

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New vs Existing

Often, my clients are trying to decide between building a new home or finding an existing home that will meet their needs. I wrote an article that has more details about what to consider here, but there are a couple of important things to think about.

There are home builders at every tier of the market, from starter homes to custom builders. If you have a sizable budget and plan to live in the house for many years, building a new home may be the best option for you.

But if you are working with a limited budget, I would always recommend buying an existing home. Why? You will pay a significant upcharge in order to build a new home vs finding an existing home of a similar size. It is similar to the cost difference you will find buying a brand new car vs. purchasing one that is just two or three years old.  You may find that you have to give up more items on your wish list to build a new home because the cost of upgrades can be very costly. And, although the idea of a brand new home can be appealing, you will have to live there for quite some time just to break even on your investment.

An existing home will help you stretch your housing dollar and afford a better quality home.  While an existing property may not be perfect, you will typically find that upgrades done well will add to the value of your home when you go to sell even if you find you need to move within a year or two of purchasing.

 

As you go through the process of buying a home, trust the eyes of your Realtor and listen to their comments as you walk through each property.  A Realtor’s experience and expertise allows them to look beyond the surface details to see the underlying quality and potential.  They will be able to guide you in finding the best home for your dollar.

If you are thinking about buying a home, please give me a call. I am always happy to be of service!

 

What You Need to Know About Home Inspections

After you’ve negotiated the contract for the sale/purchase of a home, you have two big hurdles ahead of you.  The first one you will face will be come in the form of a home inspection.  The second is the appraisal process which I wrote about here.  Both of these are potential places where your real estate deal can fall apart.  I have had more than 1 or 2 deals unravel this year due to the results of a home inspection.

What is a home inspection? It is a review of the electrical, plumbing, and mechanical systems within a house by a licensed whole house inspector.  Inspectors also check the interior and exterior structure of a property.

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Whether you are buying or selling a property, home inspections are stressful.  It’s important to note that both sides of transaction want good inspection results.  No seller wants to hear that the home they have been living in has electrical or plumbing issues and no buyer wants to purchase a home with major problems that will need to be repaired just as they are trying to figure out where to place their furniture.

Home inspections are a safeguard for buyers to make sure that there are no hidden problems with the property they want to purchase.  Since most buyers are not knowledgeable about all of the plumbing, electrical, mechanical and structural components of house, an inspection gives them a way to make sure that there are no habitability issues with their new home.

The home inspector’s checklist

On the exterior of the home, the inspector will be looking at the roof, chimney, and windows. They will look at the condition of the siding or masonry and will check for cracks, rot or peeling paint. Some inspectors will walk the grounds and look for potential drainage issues or things that point to foundation problems.

Inside the home they will be checking the appliances, HVAC system, as well as the electrical panel and outlets to make sure everything is operating properly. They will check under sinks for leaks, will make sure toilets and vanities are stable and that all sinks, tubs and showers drain properly.  Inspectors will also check ceilings for potential water damage and will make sure windows open and close properly.  In short, they will check the house from basement to attic to make sure that there are no surprises for the buyer.

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If you are a buyer…

Make sure to get references and do some research before hiring an inspector.  I have seen more than once how differently home inspections can go (on the same property) when conducted by two different individuals.  Inspectors are human, just like you and I. Not only can they make mistakes, but they have differing personalities. I have seen some inspectors who are alarmists and some who are reassuring.  Your Realtor should be able to provide a list of inspectors that he/she can recommend.

While it isn’t necessary for you to be present for the entire inspection, make sure you are there to discuss the results with the inspector. While it is important to know as much as you can about everything the inspector finds, make sure to focus your attention on the items that affect the safety and habitability of the home.  Your Realtor should be able to go through the report with you and help you decide which items on the report should be addressed and corrected by the sellers.

You may find that you need multiple inspectors. For example, not all home inspection companies can perform termite or radon inspections.  Another case where an expert might be warranted is if your whole house inspector suspects a problem with something mechanical or structural.  In that case, he/she may recommend that you get a licensed professional to take a closer look.

If you are a seller…

Make sure to take care of any known maintenance issues in your home prior to the inspection. Your HVAC system should be in good repair and all of the appliances that convey with the home should be clean and in good working order.  If you have noticed a leaking faucet or a toilet that runs, call your plumber and have the issues fixed before the date of your home inspection. Your goal is to have your home in the best shape possible for the inspector and the buyers of your property.

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The Post Inspection Addendum – Buyers

Once the inspection is complete and you have the report in hand, it is time to decide what, if any, repairs are needed. Work with your agent to make sure you are picking items that ensure the safety and habitability of your new home. While it may be tempting to ask the sellers to fix every item on the inspection report, keep in mind that you are not purchasing a brand new home. There are issues with every home on the market. Focus your efforts on the big items that are most concerning to you.

Also, realize that the seller may not agree to fix all of the repairs on the list.  The post inspection is a negotiation process, just like the one you went through when you went under contract on the home.

The Post Inspection Addendum – Sellers

While it may be tempting to dismiss the inspector’s findings as false or exaggerated, realize that the buyers are trying to make sure that their new home is safe and habitable. You are under contract with a buyer who likes your home and wants to purchase it. Work with your realtor and do what you can to fix the issues that are on the post inspection addendum.   Please remember that if you decide to walk away from the deal, you will have to disclose any issues on the home inspection report on your residential property disclosure that will be seen by anyone else interested in your home.

It is almost always in your best interest to try and work with the people on the other side of the table. That being said, you don’t necessarily need to address every issue on the report. Your agent can guide on the best course of action.

The End Result

The inspection period is critical in the successful sale of a home.  As long as both parties in the deal are flexible and focused on safety and habitability issues, negotiating this hurdle should be easier for everyone.

If you are thinking of buying or selling your home, I am happy to put my 40 years of experience to work for you!

 

 

Why an Appraisal is So Important

I have had more than a few deals fall apart – on both the buyer and the seller sides – because of a low appraisal.  The appraisal process is typically the last hurdle buyers and sellers need to overcome in order for a transaction to close.  Since I have had this issue rear its head several times over the past few months, I thought it worth writing an article.

What is an appraisal?

First of all, an appraisal is a good thing.  It enables both lenders and buyers to ensure that the price they are paying for a home is justified.  No one wants to overpay for a home and the appraisal process helps validate that the sales price agreed to on the real estate contract accurately reflects the true value of a property.

An appraisal is simply a report required by a mortgage lender, generated for them by a third party, to evaluate the market value of a home.  An appraisal is required in any deal that involves a mortgage company or bank.

How is an appraisal done?

Once a mortgage company orders the appraisal, the appraiser will make an appointment to see the house through Showingtime.  He/she will go to the property to inspect both the interior and exterior of the home.  While there, he/she will take photos and will look at the home’s general condition, as well as finishes and upgrades.  Once the tour of the property has been completed, he/she will then look at recent sales of comparable homes in the area by looking at several factors including:

  1. Recent sales in the neighborhood going back 6 months
  2. Size and condition of the subject home vs. other properties
  3. Year the home was built

Appraisers have access to the MLS and can view interior and exterior photos of similar homes to get a feel of what people have paid for comparable homes in the recent past. They will compare these recent home sales to the subject property to come up with a market value for the home under contract.

If you are a seller, that is why it is so important that your home is clean and “market ready” for your appraisal walk through. You want to put your best foot forward for the appraiser so that you minimize anything that can negatively impact the value of your home.

How much does an appraisal cost & how long will it take to get the results?

Typically, an appraisal costs $250.00-$400.00 in this area.  The buyer pays for the appraisal and it is typically reflected as one of the costs on the settlement statement at closing.

Depending on the time of year and the volume of appraisals that are happening, the buyer can expect to get the results from their lender anywhere from 3 to 10 days after the appraisal appointment.  The buyer’s agent will then share the results of the appraisal with the selling agent who will in turn share the news with the seller.

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What happens next?

If the home appraises for a value equal to or greater than the sales price on the contract, you have cleared your last hurdle. The mortgage company will proceed to work on final loan approval and both buyer and seller can look forward to closing.

What if the home does not appraise?

A “short appraisal” means that the appraiser found that value of the home was less than the sales price on the contract.  For example, the appraiser valued the home at $150,000, but the price on the real estate sales contract was for $155,000.  A short appraisal sends a red flag to the mortgage company or bank that the property is not worth the agreed upon price on the contract. In other words, in the bank’s eyes the buyer is overpaying for the property.

So, what happens next?  Typically one or both of the agents involved in the transaction will review the properties used in the appraisal to see if they agree that the appraiser used comparable properties.  Appraisers are human, and just like everyone else, they can make mistakes.  In some cases, appraisers may not be as familiar with an area or neighborhood as the Realtors involved in the transaction and may not have pulled properties that are truly comparable to the house under contract.  If this is the case, the Realtors can go to the mortgage lender and request a second appraisal. While considering whether or not to grant a second appraisal, the mortgage lender will want to see a listing of homes that the Realtors agree more accurately reflect the home’s value. It is important to note that there is no guarantee that the lender will agree to a new appraisal.  And, even if the bank does agree to a second appraisal, there is no guarantee that a second appraiser will come up with a higher value.

There are a few options if a second appraisal is not going to happen:

  1. The buyer & seller can agree to the change the sales price on the contract to the appraised value of the home.
  2. The buyer can increase their down payment to cover the difference between the appraised price and the sales price on the contract.
  3. The buyer and seller can agree to void the contract and go their separate ways.

If you are a seller and your home has a “short appraisal” you need to think hard about the price of your home. There is no guarantee that a second appraisal will increase the market value of your home. As much as we all love our homes and want the highest price possible, we cannot expect that anyone will pay us more than it is worth.  In addition, if this contract falls apart, there is no guarantee that you will get a higher appraisal from a second bank.  In most cases, it is in your best interest to negotiate with the buyer on a price everyone (including the mortgage lender) can agree upon.  You are almost at the finish line of this transaction and you need to think about the all of the consequences and costs associated with voiding this contract to put the house back onto the market again.

If you are a buyer, you need to consider if you are willing to pay more than the market value for this home.  If you are not planning on staying in the property for a long time, overpaying is certainly not in your best interest. There is no guarantee that property values will rise quickly enough to increase the market value of the home when it comes time for you to sell.  And pricing it too high to recover the cost of your over-payment will only subject you to an increased chance of a short appraisal when you are ready sell.  If however, you plan to live in the property for a long time & the appraised value is relatively close to the contract price you may want to consider paying a little extra to secure your “dream home.”

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The good news is that the majority of homes do appraise for the contract price. Most Realtors do a good job of performing their own market analyses whether they are representing the sellers or the buyers in a transaction.  In my experience, the majority of homes here in the Dayton area sell at a price very close to their true market value.

If you are curious about the market value of your home, just let me know!  I am happy to do a free competitive analysis and email you the results.