6 reasons your competitors are beating you in the bidding wars

It’s Sunday evening and John and Mary Homeseller and Anita Deal, their real estate agent, are sitting at the dining room table, ready to confront a pile of purchase agreements. The Homesellers were smart to listen to Ms. Deal’s advice and decided to entertain all offers simultaneously, rather than have them trickle in, piecemeal.

It’s a hot market, and the Homeseller’s own an attractive home, priced right. One of these offers will win the day. Which one? And, why is your offer the one that didn’t? What does your competition have that you don’t?

  1. They have loan preapproval

Even a suspicion that you may have trouble qualifying for a mortgage could cause the seller to eliminate your offer from consideration. Your competition took the time to prepare for the war by seeing a lender and going through the pre-approval process.

They may have even gone so far as to request a letter from the lender stating that they’ve completed the underwriting process and they’re ready to go, pending the home appraisal.

Benjamin Franklin was right. “By failing to prepare, you are preparing to fail.”

  1. Their offer contains an escalation clause

Suppose Mr. and Mrs. Homeseller are asking $250,000 for their lovely home. Since your competition knows there will be multiple offers, their aim is to submit the cleanest, strongest offer possible.

So, their real estate agent, I.M. Best, writes the offer at full price with an escalation clause stating that Mr. Best’s client will pay $2,500 more than competing offers up to a specified maximum – an amount his client is comfortable paying.

In essence, this buyer’s offer will increase incrementally up to that maximum. Is this a smart move? There are two schools of thought — yes and no.

Those who think it’s a wise move say that the strategy shows that you are earnest in your desire to win the home. And, in fiery real estate markets, the strategy grabs most sellers’ attention.

The naysayers feel that buyers may get carried away and place the maximum bid higher than they can live with should they win the bidding war.

If you aren’t comfortable with an escalation clause, your agent can request that your offer be held in backup in case the accepted offer falls through. It happens frequently in multiple-offer situations. In their frenzy to win the battle, many buyers make irrational offers that they can’t fulfill.

  1. Your offer has too many contingencies

Think about the scenario we painted at the beginning: Mr. & Mrs. Homeseller and their pile of offers. Unlike kids in a candy shop, they and their agent will scrutinize every line of every offer, down to the smallest detail. While we may not know exactly what their hot buttons are, we do know that they want top dollar. So, naturally, the offering price will be the first place in the contract they look.

After that, they will scrutinize the terms of each offer. How many contingencies is each buyer requesting and how long do they want to be able to take to fulfill them? Are there any deal-breaker contingencies, such as the buyer needing to sell his or her current home before consummating this deal?

Offers with too many demands and lengthy contingency periods will most likely end up at the bottom of the pile.

The competition that wins the home won’t ask the seller to buy him a home warranty, pay for closing costs or get nit-picky on the repairs he wants the seller to either make or pay for.

  1. They have more cash than you

Cash is just as much, if not more so, “king” in real estate as it is in any other financial transaction. The all-cash buyer has an enormous advantage over buyers who need financing to buy the home.

If you can’t pay cash for the home, a larger down payment will be attractive to the seller as will proof that you have the funds to close the deal and the cash reserves to make up the shortfall if the appraisal is too low.

Some sellers are impressed with a large earnest money deposit and that strategy just might give you an advantage in a bidding war situation.

  1. They did their homework

You most likely lost the bidding war because your competition outsmarted you. They hired the right real estate agent who painstakingly researched current market value in the neighborhoods so their clients knew exactly how high to bid and when to stop.

The agent took the time to speak with the listing agent to find out what the seller’s hot buttons are – what their motivation is for selling and what the buyer could do to help the seller reach his or her goals, and then structured the offer to purchase accordingly.

For instance, suppose the seller is hoping to be able to rent back the home for a month or two after closing while he closes on his new home. This is valuable information for the buyer to be privy to because her agent can structure the offer to allow the sellers to remain in the home after closing, as tenants. In particularly hot markets, some buyers even offer the seller a reduced rent during the rent-back period.

  1. They’re faster than you

If you’ve missed out on any number of homes by not being among the first to view them, you understand that time is of the essence in a sellers’ real estate market. Sure, it’s challenging to create spaces, especially at the last minute, in a busy schedule to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.

Your competition has signed up on their agent’s website to be notified of new listings as soon as they hit the market. Their agents are on top of their game by vigilantly seeking listings that fit their clients’ criteria.

Like any battle, it’s incredibly hard to win a bidding war against an equally matched foe. Hone your tactics and strategy and enlist a battle-hardened real estate agent and the chances are good you’ll prevail.

 

What the rich and famous look for in a home

Across the country, inventories of available homes are suppressed and buyers in most price ranges are meeting stiff competition for homes that are in decent condition and priced right.

As we climb the price range, however, the pace slows down and buyers can be more relaxed and pickier. Ah, what life must be like when money is no object.

What do the rich and famous seek in a new home? Read on to find out.

Robert Downey, Jr.

For most of us, buying one home is stressful and financially depleting. According to the experts, we won’t do it again for another eight years. Not Robert Downey, Jr., however. He bought not one, but two homes in a single month. Well, he is Iron Man, after all.

Downey, Jr. is now bicoastal, with a $10.5 home in East Hampton and one in Malibu. The former is a “cottage” while the latter is a $3.8 million mansion.

Considering what California real estate is going for nowadays, $3.8 million actually sounds quite reasonable for the 3,384 square-foot home, especially since it sits on a cliff and offers yummy water views.

The views, of course, most likely caught his eye, but the retractable glass walls, to better take in said view, must’ve cinched the deal.

Natalie Portman

If the outdoor living space at Natalie Portman’s new digs isn’t the reason she bought the home, we can’t figure out what is. The Oscar-winning “Black Swan” actress paid $6.5 million for the home, located in Montecito, California (yup, the same Montecito where Ms. Oprah lives).

She, her husband and two kids will have loads of room to spread out – the home sits on more than 10 acres. The architecture is sleek and modern – almost industrial in design – with lots of steel, concrete and glass.

Like Morton Downey, Jr.’s new digs, Portman’s boasts dramatic glass doors that open to blend the outdoors with the interior.

We’ve watched the marketing video for the home and, if we were touring it, it’s the patios and other outdoor features that would’ve lured us to sign the purchase agreement. But, then again, that library . . .

Angelina Jolie

Angelina Jolie dropped a cool $24.5 million to snatch up prolific filmmaker Cecil B. DeMille’s estate in Los Feliz, California (a Los Angeles hillside neighborhood). She and former hubby Brad Pitt shared a home in the neighborhood, so it won’t be a long-distance move.

The 11,000-square-foot mansion sits on a smidge more than 2 acres and features six bedrooms and 10 bathrooms (imagine having to clean that many toilets every week!).

Built in 1913, it was designed in the Beaux Arts-style, popular at the time. We can’t begin to guess which of the home’s fabulous features cinched the deal for Ms. Jolie. We rather like the grand foyer, but the multiple gardens on the property may have been a draw.

Come to think of it, ditching the $95,000 she spent in rent every month for a Malibu hideaway may have been all the impetus the former Mrs. Pitt needed.

Michael Phelps

What does a former professional swimmer with 23 Olympic gold medals and a net worth of net worth of $55 million do with his money? He buys a pool, of course — with a house wrapped around it. In this case, the buyer is Michael Phelps and the home is in Scottsdale, Arizona.

It’s a no brainer to figure out what Phelps was looking for in a new home. Step outside and check out the almost Grecian-like custom pool, complete with fountains at one end.

Phelps purchased the contemporary home for only $2.5 million last summer. We say “only,” because pick up the 6010 square-foot home and set it down in one of the country’s celeb enclaves and it would bring at least twice that much.

We pegged the pool as the draw for Phelps but he actually loves the view of Camelback Mountain from the backyard and the fruit trees on the property. “You go outside in our backyard and we have orange and tangerine and lemon and lime and peach and apple — all these different fruit trees growing in our backyard.”

David Geffen

Music and the movies – two industries in which many a man and woman have made their fortunes, but not quite as well as David Geffen. With a net worth of $7.5 billion, the college dropout has no shortage of funds to splurge on fabulous homes.

The latest addition to Geffen’s trophy-home collection is a $70-million-dollar East Hampton estate. Sitting on 2.04 acres, it boasts a tennis court, beach-side swimming pool, pond and lots of privacy-inspired landscaping.

Details about the home are sparse but what we do know is that it’s huge and it’s a safe bet it won’t be an Airbnb rental.

What would you want in a home if price didn’t matter?

Summer countdown – one week away. Is your patio ready?

Yikes! Doesn’t it seem that frigid temperatures greeted us in the morning just yesterday? Believe it or not, summer is knocking on the door. If you love entertaining outdoors during these glorious warm months, it’s time to turn your attention to your patio furniture, especially if you didn’t take steps to protect it during winter.

Good for you if you did actually store your furniture out of the elements. Whether you did or didn’t, though, let’s take a look at what to do with the stuff as you pull it out to seat your guests this summer.

Do sweat the small stuff

Once your patio furniture is again facing the light of day, get rid of the cobwebs that took up residence over the fall and winter. Anything that appears unsafe or broken should meet the trashcan. Then, check the bolts and screws and tighten any that need it.

A buildup of dirt and debris dulls the finish and shortens the life of patio furniture. Use a damp cloth to wipe off “the gunk.” If the accumulation requires more work, use a few drops of dish soap in a bucket of water, and a scrub brush. Depending on how long it’s been between cleanings, you may need to blast the furniture with a power washer. If so, we feel your pain.

Otherwise, use the appropriate products, depending on what the furniture is made of. For instance, a few drops of dishwashing detergent in a quart of warm water is fine for aluminum and even some wicker.

For moving parts and hinges, a couple of squirts of a lubricant, such as WD-40 or an all-purpose oil will quiet them.

Cleaning patio furniture sucks

It sure does. . .regardless of the season. But, when your mother-in-law rises from her chair to step up to the barbecue, and she lacks dirt stains on her hiney, you will thank yourself for paying attention to those nasty patio furniture cushions.

Remove the cushion covers and launder them. The cushions should be attended to with a vacuum, according to Bob Vila of This Old House fame. After you suck out the debris, scrub them clean with a solution of 1 tablespoon of dishwashing liquid in a gallon of warm water.

Got mildew? Vila suggests adding one-quarter cup of borax (an all-natural mineral powdered product) to the solution and allow the cushions to soak for 15 minutes. You can even use the borax for mildew stains on the covers, depending on the material (check the labels). Purchase borax at hardware stores, some grocery stores (Walmart, Safeway and others), health food stores, farm supply stores and online at amazon.com and bulkapothecary.com.

Then, train the hose on the cushions to rinse off the solution and allow them to air-dry. Don’t rush to put the covers on until the cushions are completely dry, warns Vila, or you’ll end up creating more mildew.

Tackle the rust on your patio furniture

Humidity is great for our skin but takes a toll on our metal patio furniture. The Family Handyman has several suggestions for how to rid the furniture of the red/brown stuff:

Creepy chemicals

Ah, rust remover products. With ingredients such as hydrochloric or phosphoric acid, how can we go wrong?

Well, when the instructions caution you to wear goggles, a respirator mask and gloves, you know this stuff isn’t to be taken lightly.

If  you’re ok with chemicals, head to the paint department of your favorite home improvement store and buy rust remover, such as Rust-Oleum® Rust Reformer, Krud Kutter or one of the “4 Best Liquid Rust Removers” recommended by Popular Mechanics.

And, do follow every word of the instructions on the label.

By the way, our friend, handyman.com says that there are “newer nontoxic and acid-free soaking solutions, such as Evapo-Rust” (which he got at an auto parts store).

Sand, scour or grind

Sure, this method will remove the paint as well, but at least you didn’t need to use chemicals, right? This method requires that you “use a power tool like a grinder, sander, oscillating tool or drill, and that you “keep the tool moving so you don’t gouge the metal,” according to the Family Handyman.

Rust converter

Ah, the terms homeowners learn; “rust converter” has to be among the most arcane. Rust converter can be either an aerosol spray or a liquid that you brush on, like paint.

“It kills the rust, prevents its spread and dries into a ready-to-paint primer,” according to the Handyman. Prep the surfaces by rubbing with a wire brush and then spray or brush on the product. When it dries, you can either paint the surface or, as the handy guy recommends, apply another primer and then paint.

Cleaning patio furniture is a lot of work, but well worth it when your summer soirees are the talk of the town . . . or at least the neighborhood.

 

 

 

Tips to stretch your home-buying dollars

big pile of the money. dollars usa

Budgets: They reflect a reality that we either revel in or despise. If yours is reflecting the fact that, yes, you can afford to make a mortgage payment every month, but it will be tight, you have some tough decisions to make.

These include the obvious, such as putting off the purchase until you have more income or savings or buying the least expensive home you can find. Let’s take a look at some of the less-obvious ways to take the money you have right now and stretch it to make the purchase a bit more comfortable.

Pay more now to save later

Whether you know it as PMI (private mortgage insurance) or MIP (the FHA Mortgage Insurance Premium), it’s a monthly payment that you would be wise to try to avoid.

Required on all mortgages for which the borrower makes a down payment of less than 20 percent, PMI can add a big chunk to your house payment. We’ll use the median home price nationwide for the following scenario.

For example, if you use a 30-year, FHA-backed loan at 3.750 percent interest to purchase a home for $250,000, and offer a down payment of $8,750, your MIP will be about $170.00.

Take the time to save more money so that you can pay a 20 percent down payment, and you’ll skip that MIP or PMI fee every month. We don’t know about you, but we can put that $2,040 per year savings to much better use than handing it over to the lender.

But here’s the really exciting part: With a 20 percent down payment, you not only ditch the mortgage insurance requirement but, because the loan amount is smaller, your monthly payment will be significantly less as well. In our scenario, in fact, you’ll save nearly $500 per month on your house payment.

Now THAT’S using your ‘noggin!

Ok, we hear you – who wants to wait as long as it will take to save all that money? Is there someone that will gift you the funds for the down payment?

While FHA mandates that the borrower kick down at least 3.5 percent of the down payment, conventional loan guidelines permit gift funds for all or part of the down payment, as long as the loan-to-value will be 80 percent or less (meaning you’ll need a 20 percent down payment). Or, they can be used for closing costs and other items.

The donor has to be related to you, however, or a domestic partner, fiancée or fiancé.

Build sweat equity

Ok, so not all of us can come up with a $50,000 down payment for a $250,000 mortgage. For those on a limited budget with sparse savings, buying a fixer home may be the answer. Nationwide, fixers are priced an average of 8 percent less than market value, according to a Zillow analysis.

The drawback to buying a home that needs work is that, since you have a tight budget, the renovation work will be piecemeal, on an as-you-can-afford-to-make-repairs basis. Some buyers aren’t bothered by this prospect, especially if there isn’t a lot of work to be performed.

If you are among them, fixers are the ideal way to get into homeownership for a lot less money than you’d pay for a turnkey home. Eventually, you will have a home that’s customized to your lifestyle and tastes.

All those nickels and dimes add up

There are several “legs” to your monthly mortgage payment and a big chunk of it goes into an escrow fund to pay for your insurance and taxes and, sometimes, your homeowner association dues and fees.

Hoa fees

In fact, if you’re an “average” American, and you live in a managed community, your HOA fees, taxes and insurance add nearly $600 to your house payment each month. Thankfully there are ways to cut that number and stretch your home-buying dollars.

HOA fees are on the rise, nationwide. In a recent Trulia study, these fees outpaced home-price growth and now average $331 a month. If you don’t mind doing your own exterior home maintenance, seek out a home that isn’t in a managed community. Your mortgage payment will be a lot easier to swallow if it’s more than $300 a month lighter.

Insurance

Next, consider homeowner insurance. The average annual premium, nationwide, is $964, according to Value Penguin. The Insurance Information Institute offers several ideas on how to whittle down the cost of insurance.

In a nutshell, you can ask for a higher deductible, install security features and take advantage of discounts, such as those for seniors. Shop carefully and compare policies among several insurers.

Property taxes

Wallet Hub’s John S Kiernan claims that “The average American household spends $2,149 on property taxes.” That’s a smidge more than $179 per month.

Interestingly, few homebuyers research a home’s property taxes before deciding to purchase. It’s easy to do – many assessor’s offices have tax information online.

“Buyers also should find out whether a home may be subject to multiple property tax authorities. Not only states, but also counties, cities and special districts, such as local water, sewer or school authorities, may wield such powers,” according to bankrate.com’s Marcie Geffner.

While a tight budget doesn’t preclude one from buying a home, finding ways to stretch what little money you have may just allow you to purchase more home than you thought possible. At the very least, taking cost-saving measures will help lower your monthly payment.

 

 

3 questions you absolutely, positively must run by your real estate agent

Caution: Taking action on a whim, without consulting your real estate agent, may be hazardous to your real estate transaction and, thus, your pocketbook. All questions, no matter how difficult to ask, or how small they may seem, should be run by your agent.

Let’s take a look at three common scenarios and show you why you need your agent’s counsel.

  1. “We found a brand new house at Delusional Knolls!”

    “We don’t mean to hurt your feelings, but we’re pretty sure we’ll be using that nice real estate agent we met at the sales office – is this a good idea?”

Oh, heck no! Sure, it seems convenient – the agent is right there in the new-home community in which you want to buy, so you won’t have to make an appointment to see her – you can just pop in whenever you like, right?

Consider this: that agent represents the builder or developer. How will she do her ethical duties to you and the builder, simultaneously? If you wouldn’t hire your soon-to-be-ex-spouse’s attorney to handle your divorce, why would you hire the builder’s agent and hope that he or she will have your best interests in mind? Dual agency is a fine line to walk for even the most ethical agents.

As a buyer, you pay nothing for the services of a real estate agent. Be selfish – get your own. That way you’ll know for sure that there is someone in your corner at all points during the process.

 

  1. Here’s my seller’s disclosure statement. I was so busy I just checked “no” on all the boxes. That’s ok, right?

Sure it is, if you like litigation.

The typical seller’s disclosure statement asks something to this effect: “Are you (seller) aware of any significant defects/malfunctions in any of the following?”

You checked “no” on all the boxes, which means that you aren’t aware that the basement floods every time we have a heavy downpour, despite you making that very clear to me, your agent.

Of course, the buyer, who suffered the loss of all his basement furnishings,  will need to prove to a judge that you were aware of and actually concealed the problem. But, since you shared your travails with your buddy across the street, the buyer won’t have to do much digging. Neighbors are frequently deposed in these cases.

Disclosure laws are different in many states and even in many counties within states. Depending on where you live, if you’re found guilty of concealing material facts about the home, you could be held liable for the buyer’s monetary losses (compensatory damages), be forced to pay punitive damages on top of that and, in rare cases, the buyer is allowed to cancel the purchase and give you back the house.

If the concealed defect results in substantial harm or death to the buyer, you could end up in prison, like the homeowner in Vermont who deliberately failed to disclose a faulty driveway heater to the family of four who purchased the home.

All but one member of that family (an infant) died of carbon monoxide poisoning, the former owner was convicted of involuntary manslaughter and was sentenced to four years in prison.

By the way, in some parts of the country, this duty to disclose may cover up to a 10-year period, post-sale.

We understand how hard it is to expose even the home’s tiniest flaws to the prospective buyer, but to not do so may turn out to be exorbitantly expensive. Take your time with the seller’s disclosure statement and answer each question honestly.

 

  1. I can’t believe we’re closing in just two weeks! Did I tell you we’re shopping for furniture and appliances this weekend? We got an awesome financing program for them!

This one is so common, and so sad. In the excitement in the run-up to closing, many buyers begin to imagine furnishing the new home. Many others actually take steps toward buying the furnishings. It’s a huge mistake.

Shortly before closing your lender will most likely pull your credit reports again, a process known as a “soft pull,” because it doesn’t affect your credit score. This is the lender’s final assurance that you truly can afford the monthly payment and that you will actually make that payment.

Applying for credit for those new appliances or furniture will show up on the soft pull and will catch the underwriter’s attention. The new credit changes your risk profile and the new monthly payment for the items you purchase with that credit may change your debt ratios so much that you will no longer qualify for the loan.

It does happen and it’s heartbreaking. Until you close on the house, don’t apply for new credit, don’t switch jobs or move money around to different accounts. Keep your financial situation exactly as it was when you applied for the mortgage.

Communicating with your real estate agent, even if you think what you are about to do is innocent or non-threatening to the process, is the wisest move you can make during the real estate transaction. You never know just how huge it may turn out to be.

 

It’s wildfire season – are you ready?

From the elderly couple who broke down in tears when they returned to find a pile of rubble where their home once stood, to the countless stories about brave and heroic neighbors, farmers, ranchers, veterans and complete strangers, wildfires make headlines.

“We didn’t have a chance to react. It was here, and we got out with the clothes on our back. All of our memories, everything is gone,” 70-year-old Martha Grimm tells the Associated Press’ Brian Skoloff and Kristin J. Bender.

The good news is that last year, the incidence of wildfires was lower than the year before. The bad news? From January through April of this year, 2017, there were nearly 3,000 more fires than in the same time period in 2016, according to the Insurance Information Institute.

What is wildfire?

Think back to that firefighter that visited your elementary school class. During his or her address, the talk most likely centered around the fire triangle – the three elements necessary for a fire to “live.” These include oxygen, fuel (flammable materials such as dry grassland, brush, trees and homes) and a source of heat (campfire, the sun, lightning and cigarettes, for example).

When all three elements converge, in a susceptible area, a wildfire breaks out. The more fuel there is, the more intense the flames will be and the hotter and faster the fire moves.

“Even before the flames of a wildfire arrive at a particular location, heat transfer from the wildfire front warms the air to 800 °C (1,470 °F),” according to Doug Knowling, author of “Ecological Restoration: Wildfire Ecology Reference Manual.” Can you imagine what 1,470 degrees feels like? This extreme temperature dries out flammable materials, causing them to ignite faster and the fire to spread more quickly.

Knowling says that wildfires in forests move about 6.7 miles-per-hour while those in grasslands spread at a rate of 14 miles-per-hour. Not understanding how quickly a fire moves is the reason so many victims are caught off-guard, and, unprepared.

Protect your family and your home from wildfires

Scientists believe that the first wildfire occurred about 420 million years ago. And, before chalking up recent blazes to climate change, understand that the most devastating fires in our country’s history occurred in the late 18th century (the Great Peshtigo Fire) in Wisconsin and the early 19th centuries (the “Great Fire of 1910”) in Idaho, Montana and Washington.

What has changed since then is that we have more information about wildfires and how to protect ourselves. Readyforwildfire.org suggests these three preliminary steps:

Prepare your home for wildfire by:

  • Ridding your landscape of combustible materials to within 5-feet of it. Use brick, gravel or concrete instead. Remove tree branches that overhang the deck and house. Ensure there is no dry or dead vegetation.
  • Consider replacing your siding with noncombustible siding. Otherwise, ensure that there is a 6-inch ground-to-siding clearance,” according to the Insurance Institute for Business and Safety.
  • Maintain your roof by consistently removing debris. Hot embers love the stuff.
  • Do the same with gutters – keep them clear of debris during fire season.
  • Replace wood fences with noncombustible materials.
  • Install 1/8-inch metal mesh over roof vents.
  • Close the windows when fire threatens.
  • Don’t forget the deck. Those boards are combustible. . .maintain that defensible space mentioned in the first step.

For a more detailed list of ways to protect your home, visit disastersafety.org.

The months of June through September of 2017 have been designated wildfire season, according to the U.S. government’s National Interagency Fire Center. Last year, wildfires simultaneously raged across seven states.

Take steps now to protect your family and your home.

What’s it worth? 3 questions about value-boosting home characteristics

Of the many questions we field from homeowners thinking of selling their homes, the most frequent starts with “What’s it worth?” Of course they’re referring to their home’s value, but even after that is determined, the “What’s it worth” questions continue. Following are three of the most common questions about items that may, or may not, add to a home’s value

What’s a view worth?

We typically get this question from a homeowner who just found out that his home with a gorgeous view is worth less than he thought. If two homes are identical and only one of them has a view, it’s a safe bet that the one with the view will be worth more.

How much more? It depends on who you ask. Some real estate professionals claim there is no value in a view, yet others claim that the view may increase the home’s value by up to 15 percent over similar homes that lack one.

Texas Christian University’s Mauricio Rodriguez, PhD and C.F. Sirmans of Florida State University studied the topic and found that, at least for the housing market they examined, “a good view adds about 8% to the value of a single-family house.” (Rodriques/Sirmans: Quantifying the Value of a View in Single-Family Housing Markets)

Since the final determination of a home’s market value is decided by the appraiser, we went on a hunt for an appraiser’s opinion. Michael Fox, a New York State Certified Residential Appraiser with MF Appraisals  in Westchester, conducted his own, informal study of the value of a golf course view.

He analyzed 4 years’ worth of sales in a townhome development and found that the golf course view was worth from nearly 6 percent to 6.85 percent, depending on the year the home sold. “Throughout the marketing of the project, regardless of changing market conditions, buyers paid more for units with a view of the golf course.”

Whether the view is of the city skyline, water, open space or a golf course, it is worth something. What’s lacking is a consensus on precisely how much it’s worth.

Will a pool add value to my home?

Oh, this one is popular. Thankfully, it’s easier to answer than questions about the worth of a view.

The National Association of Realtors’ National Center for Real Estate Research claims that “. . .an in-ground swimming pool adds about eight percent to value” and that “an above ground pool adds no value.”

The National Association of Homebuilders, however, finds that, of homebuyers who expressed a desire for a pool, most said they would be ok with a community pool.

Again, real estate value comes down to location. The value of a pool depends a great deal on where the home is located. Buyers in warm regions tend to put more value on them than those in our country’s cooler areas. So, yes, a pool adds value to a Phoenix or Las Vegas home but may not add a penny to a similar home in Minneapolis or Omaha.

In fact, the National Association of Realtors study we mentioned earlier finds that Southwest homeowners with a pool can realize an 11 percent bump in value (unlike the eight percent for homeowners elsewhere).

For any pool to be considered valuable it needs to be in good condition, otherwise, it may actually drag down the home’s value.

Which renovations will boost my home’s value the most?

Keep in mind that any renovations you make to the home will only pay you back, on average, “64.3 cents on the dollar in resale value,” according to Remodeling Magazine’s 2017 Cost vs. Value Report.

That said, the projects from which you’ll get the most bang for your buck, according to the report, include:

  • Replacing attic insulation – A contractor air-seals the attic floor to stop air leakage and then adds fiberglass insulation to a thickness equal to R-30 insulation. This project pays for itself, according to the magazine’s report – returning 107.7 percent of the cost when the home sells.
  • Front door replacement – Ditch the old door and replace it with a steel one. It will cost you about $1,400 (national average) and you’ll recoup 90.7 percent upon the sale of the home.
  • Minor kitchen remodel – This project involves replacing the cabinet and drawer fronts and adding new hardware; replacing the appliances with energy-efficient models; installing new laminate countertops; installing a new sink and faucet; repainting trim, adding wall covering and replacing the flooring. Total cost: $20,830 and the homeowner will recoup 80.2 percent of that after the sale.

Since kitchens are so important to buyers, we dug deeper into this facet of home renovations. Consumer Reports finds that millennial homebuyers overwhelmingly want a “modern/updated kitchen” The group goes on to suggest that for a mere $5,000 you can add new appliances, countertops and flooring and splash some fresh paint on the walls and realize a 3 to 7 percent bump in home value.

Anything you do to the home that helps save on energy bills will be popular with buyers. This includes replacing old windows with high-efficiency versions, replacing utility-hogging appliances and the aforementioned beef-up of the home’s insulation. The Consumer Reports study claims that replacing old windows with “Energy Star certified windows can lower your home’s energy bills by 7 to 15 percent.”

Now THAT is a hot selling point!

What are you talking about? Real estate terms explained

Remember that first day on a new job when it sounded as if your colleagues were speaking a different language? Most industries have their own jargon and real estate is no exception. In fact, this industry seems to be the King of Jargon. What’s worse is that those who use it assume that the rest of us know what they’re talking about.

Today we’re going to help you master this language by defining some of the most common terms you’ll hear throughout the process of buying or selling a home. Soon you’ll be slinging this jargon as if you were a real estate pro!

Addendum – This is a document that is attached to and made a part of the original contract. It is typically used to provide clarity on certain parts of the contract. An example of an addendum is the Addendum for Seller’s Disclosure of Information on Lead-Based Paint Hazards as Required by Federal Law. Another example is the “As-Is” addendum, used to disclose to the buyer that the seller refuses to warrant the condition of the property and that the seller will not be responsible for the replacement, repair or modification of any defects in the home.

The addendum is submitted before the contract is ratified and ratification won’t occur unless all parties sign it.

Amendment – Suppose you make an offer on a home and the seller accepts it – you have a contract. Then, suppose that you discover that you need to extend the closing date. Your agent will submit an amendment to the contract (the purchase agreement) stating the new closing date. If accepted by the seller, the information, obligations or terms stated in the amendment supersede the previous terms and become part of the original contract.

Contingency – The dictionary defines a contingency as “a provision for an unforeseen event or circumstance.” In a real estate contract, anything that puts a condition on the buyer’s willingness to proceed with the purchase is a contingency. For instance, you, as the buyer, agree to consummate the purchase if the home appraises for X number of dollars. The appraisal becomes a contingency item. If you need to sell your current home before closing the purchase on this home, you will create a contingency to that effect. In essence, what contingencies do is tell the seller that you will consummate the purchase if x, y or z occurs by a certain date.

Counteroffer – This is a form used to counter the terms put forth by the other party. Suppose you submit an offer to purchase a home for $125,000. The seller wants $150,000. Now he or she can either ignore your offer and hope for a better one, or submit a counteroffer stating his desired price. Counteroffers are also used to propose different terms (such as closing date, possession date, etc).

Disclosures – You’ll encounter a number of disclosure forms during the buying and selling process. This form is used to let the parties know about something that either the seller or the broker is legally obligated to disclose. A common disclosure form is a Transfer Disclosure Statement. The seller fills out this form which details everything he or she knows about the home that may affect the buyer’s safety, comfort and enjoyment of the home.

Due Diligence – Due diligence is a legal term, and one that should be taken very seriously. It describes the buyer’s duty to undertake a thorough assessment of the property to determine its assets and liabilities. For instance, after closing on a home, a buyer discovers that the home doesn’t have air conditioning and he assumed when he bought it that it did. He attempted to extract the price of a new unit from both the seller and the real estate broker. The judge determined that, since the seller’s Transfer Disclosure Statement stated there was no air conditioning unit in the home, the buyer failed in his due diligence (either by signing the disclosure statement without reading it or by not inspecting the home thoroughly) and denied remedy.

Earnest Money Deposit – When a buyer submits an offer to purchase a home, or shortly thereafter, he or she will show good faith by submitting an earnest money deposit. This is often confused with the down payment. This deposit also satisfies one of the six elements required for a contract to be enforceable and is known in the legal world as “consideration.” The amount of the deposit varies, but plan on paying at least 1 percent of the purchase price of the home. The deposit is held in escrow, or the broker’s trust account, until the close of escrow when it will be applied toward the purchase price.

Escrow – We’ve found this to be one of the most confusing terms for our first-time buyer clients. Escrow is, simply, a third party with no ties to the transaction who holds all of the pertinent documents (the purchase agreement, deed, etc.) and money until it’s disbursed, according to the terms of the contract, at closing.

Escrow Impounds – This is where the confusion comes in for folks new to the real estate purchase process. Escrow impounds describes an account set up by the lender to hold your prepaid taxes and insurance. Not all lenders require an escrow impound, but most do and it’s wise for the homeowner to have one.

Title Insurance – Title insurance protects the new homeowner and the lender against any future claims to the property, liens and encumbrances. There are two types of policies, one for the lender (which is required) and one for the homeowner. Before issuing either policy, the title insurance company will do a thorough examination of the home’s title to ensure that the owner really does own it, that there is no additional owner who hasn’t been listed as a party to the transaction, as well as other issues.

Naturally, this list is far from comprehensive, but we hope it answers your questions. Should we ever use a term that you don’t fully understand, please speak up. We’re happy to clarify it for you.

4 tips to make small rooms look larger

Sure, “tiny homes” are now a fact of life in the real estate world. No, they aren’t the rage some would have you think, but a minimalist lifestyle is on many American’s bucket lists.

One doesn’t necessarily have to live in a dollhouse, however, to know the challenges of trying to furnish and live in and with tiny rooms. Homeowners in older homes are keenly aware of “small-room syndrome.”

One of the most important aspects of staging a home for sale is to declutter in an effort to make rooms, closets and cupboards appear roomier. Believe it or not, with strategic staging, even the tiniest spaces can look larger.

1. Lighten and brighten

Dark rooms have a cave-like quality – small and cramped. Obviously, adding more light will help, so opt for smaller lamps spread around the room. These will draw the eyes around the room, making the space seem larger. If the room is so small that it lacks the furniture to hold lamps, consider using wall sconces and floor lamps to lighten up dark corners.

One trick designers use is track lighting. It makes the room less cluttered and adds light across the room. Use small lights in the track lighting; large lights may overwhelm the small space.

2. Paint

Paint is the miracle cure for many things that ail a home. Not only does it freshen up a room but, choose your color strategically, and it will help the room appear much larger than it is.

Surf the Internet to find which colors make a room look larger and you’ll see that most folks swear that white is the best. As a matter of fact, nothing could be further from the truth, according to professional designers. Since they’re taught that “light colors advance and dark colors recede,” and visual perception tests back this up, dark colors will actually make the room seem larger.

“Now, if I’m in a room and all the walls seem to be closer to me, I would say that makes the room ‘feel’ smaller. Accordingly, the gray walls would seem to be farther away, giving the impression of more space between myself and the walls – to wit: a bigger room,” argues the experts at Sherwin Williams.

Now, that’s for the walls.

You’ll also want the ceiling to appear higher to add to the this-room-isn’t-as-small-as-it-appears illusion. The ceiling should be darker than the walls, according to Laurel Bern with Laurel Bern Interiors.

3. Choose accessories carefully

Too many accessories make a small space appear cluttered. Like an overstuffed closet, clutter makes a room appear small. You’ll need to be ruthless when ridding the room of the excess accessories. In fact, remove everything and then, “add back only the things that you love,” suggests Lori May, owner of Lori May Interiors.

When it comes to art work, hang the most interesting on the wall furthest from the door. “By drawing the eye to a distant spot that has a striking visual element, you expand the perceived depth of field,” Jeffrey Blum of SixZero6 Design in New York City tells Forbes’ Bethany Lyttle. “It gives the space a way-over-there feeling,” he concludes.

Another trick with photographs and artwork is to hang them lower than you normally would. “It gives the impression of a taller ceiling,” according to the experts at Amara, a luxury home fashion retailer.

4. Furniture placement

Yes, too much furniture and overly large and heavy furniture will make a small room feel cramped, but even smaller furniture won’t work if it’s not placed strategically. Pull the sofa out so that it’s 3 to 4 inches from the wall. “Leaving space creates the illusion a wall is further away than it actually is,” suggests the Amara designers.

Tall bookcases or shelves hung all the way to the ceiling also create an illusion of more room by emphasizing the vertical space. “Higher placement of design features helps create the feeling of volume in the room,” according to Houzz contributor Neila Deen.

 

What every homebuyer needs to know about mortgage rates

Will they go up again? It’s the top-of-mind question for lenders, real estate professionals and real estate consumers. When interest rates take a hike, the complexion of the housing market completely changes.

If you’re a first-time homebuyer, you are no doubt following interest rates and the doings of the Fed. It’s confusing, isn’t it? Real estate industry jargon is bad enough but with mortgage lingo thrown in, it’s no wonder homebuyers don’t know where to start.

Because interest rates fluctuate daily, it’s important to shop for a loan quickly, yet effectively. Comparing lenders’ offers is a critical step if you hope to keep your monthly mortgage rates as low as possible.

While interest rates are but one aspect of a mortgage quote to compare against others, it is probably the most important, so let’s take a look at why rates change and what you can do to get the lowest rate.

What impacts mortgage rates?

The Federal Reserve System, also known as “The Fed,” is the U.S. central banking system, controlling the way money moves in and out of our country’s financial system.

The Fed is governed by a seven-member Board of Governors and includes 12 regional Federal Reserve Banks. Within this group are committees; the most significant of which to a discussion of mortgage interest rates is the Federal Open Market Committee or FOMC.

The members of the FOMC are tasked with figuring out the Fed Funds Rate – the interest rate charged to banks when they borrow money. Banks that lend to other banks also use this rate. In turn, this is the base rate banks use when they determine how much to loan to their mortgage customers.

The secondary market’s impact on mortgage rates

Mortgage rates also fluctuate according to what is happening on the secondary market. Without getting too technical, the secondary market is the place mortgage banks turn to sell their loans. Without these sales, the mortgage banks couldn’t remain in business as they lack long-term funding. So, this is the only method they use to create more money to lend. Mortgage bankers also make a commission on each loan sold.

So, who buys these loans on the secondary market? Investors include pension funds, securities dealers, other banks, Freddie Mac and Fannie Mae (with certain restrictions).

How your interest rate is determined

While the Fed and the markets set the starting point for a bank’s determination of interest rates for their customers, the rate offered to you is determined on a much more personal level.

Your Credit

Your credit score, determined by the Fair Isaac Corporation (FICO), has the most significant impact on the rate you’ll be offered.

FICO considers many things when determining your credit score. The two items that most impact your score, however, are your payment history and the amount owed.

The FICO score is a three-digit number – between 300 and 850 – and it signifies, to lenders, your reliability in repaying your debts. A low score may mean that you won’t get the loan or you’ll receive a high interest rate. A higher score means you’ll have more options available. Fortunately, FICO scores, like interest rates, fluctuate so it’s possible to raise your score.

While FICO only considers information in credit reports, your lender will look at far more.

Income and assets

Your job, and your time on the job, also impacts the amount of interest you’ll pay on your mortgage loan. A two-year history in the same line of work, whether as an employee or self-employed – shows the lender income stability.

Lenders also look at earned investment interest, royalties and commissions. It may also consider income from Social Security, child support and alimony.

The lender will use your income and debt numbers to calculate your debt-to-income ratio, which should not exceed 36 percent of your gross (pre-tax) income. The ratio is further broken down, looking to ensure that you spend no more than 28 percent on housing and 8 percent to pay off debt, such as installment loans and credit card balances.

Learn how to calculate your debt-to-income ratio at bankrate.com.

Down payment

Consumers who make large down payments on their homes are typically more likely to continue paying for the home since they have so much invested in it. Lenders often offer a lower interest rate when the customer is willing to make a large down payment.

Federal guarantee

Because the government guarantees repayment, a government-backed loan, such as FHA, VA or USDA, will have a lower interest rate than a traditional mortgage loan. Even customers with what may be described as a “risky” credit history may be offered a loan because the lender isn’t on the hook for the entire balance should the borrower default on the loan.

Length of the loan

Lenders know that the likelihood of default rises the longer a borrower holds a loan. For this reason, a 30-year fixed loan bears a higher interest rate than a 15-year fixed. Not only does a 15-year mortgage allay lender fears, it offers the borrower a wealth of savings.

Type of loan program

While there are many loan programs available, the two most commonly offered to homebuyers are fixed rate and adjustable rate loans.

With a fixed rate, your mortgage interest rate remains the same for the life of the loan. Borrowers like this program because their mortgage payments remain predictable until the loan is paid off.

The adjustable rate mortgage (ARM), on the other hand, has fluctuating interest rates at pre-determined intervals. For example, a 5/1 ARM has a fixed rate for five years and then adjusts, either up or down depending on current rates, every year.

The annual percentage rate

When comparing interest rates of various lenders, pay attention to the annual percentage rate (APR) quoted in each offering. This number represents the annual cost of the mortgage with interest, points and mortgage insurance factored in.

While mortgage interest rates are an important consideration when comparing offerings from various lenders, they are only one factor to consider. You should compare all loan features, such as points and closing costs, before settling on a lender and a loan product.