How to live in a home for sale without losing your mind

There’s a frustrating dilemma that occurs when your home is for sale. It happens when the need to keep the home clean, tidy and staged collides with daily living.

Trying to keep the home in showing-condition when you’re living in it, complete with kids and/or pets, is a delicate balancing act.

Then, there are all those little annoyances that you should be prepared to tolerate. It’s always easier and less stressful to enter a new process armed with knowledge. So, let’s dive into what you can expect while your home is on the market and how to make it easier on you and your family.

Keeping the home clean

According to a study from a few years ago, clean homes with no clutter sell for $1500 to $2000 more than comparable homes that are messy. Ah, that caught your attention, right?

Homebuyers feel that clean homes show pride of ownership, which means their perception is that it’s also been well-maintained.

If you have children and/or pets, keeping the home clean isn’t an easy job. Create a plan before the home goes on the market where each family member has a set of tasks to complete before leaving the home in the morning.

Even the tiniest in the family can pick up toys and return them to their rightful place.

Yes, it may mean getting up a bit earlier in the morning, but for an extra thousand dollars (or two) it’s worth it.

Decide now what to do with your pets

Home sellers with pets have come up with some clever ideas on how to deal with their pets during home showings.

From dropping them at doggy daycare or a groomer to hiring a dog walker to get them out of the home during showings, crating them, come up with a solution that you can put into action on those days when agents will be showing the home.

Then, make sure their food and water bowls, leashes and toys don’t create clutter – stash them away.

Tip: If your dog uses the backyard as a potty, ensure that all the droppings are picked up before showings. The last thing you want is a potential buyer with “poop” all over her shoes.

Protect your privacy

While it may appear that they’re snooping, many homebuyers will open cupboards, drawers and closets to determine how much storage these areas provide.

Then, there are the small handful that are actually snooping, hoping to come upon anything they can pocket. Although it doesn’t happen often, it’s best to be safe and lock away or remove from the home the following:

  • Sensitive paper work (such as anything having to do with your mortgage and home, credit reports, anything could be used to steal your identity and anything else you wouldn’t want a stranger to see).
  • Checkbooks
  • Credit cards
  • Prescription medications
  • Firearms
  • Anything else that is easily pocketed that is of value

From the requests for last-minute showings to potential buyers wanting to view the home when you typically eat dinner, living in a home for sale can be challenging.

Relax into the process and keep reminding yourself that it’s temporary. Soon, you’ll find a buyer and can look forward to moving on to the next phase in your life.

And – a bonus – you won’t have to worry about what to do with the dirty dishes or laundry as you rush out to work in the morning.

Homebuyer: Can I Back Out if I Change My Mind?

What if you make an offer on a home for sale, the seller accepts it and then you change your mind about the purchase? Are you locked into the contract?

Whether you’re suffering from buyer’s remorse, you found another home you like more or any other reason, it’s a common fear.

The answer is, “it depends.” Finding another house you like more isn’t going to fly, nor will a bad case of buyer’s remorse.

There are other conditions, however, built right into the purchase contract, that will allow you to get out of the purchase. Often, this includes a return of your earnest money deposit, but not always.

These conditions even have a name: Contingencies.

The dictionary defines a contingency as “a provision for an unforeseen event or circumstance.” We like to think of it as an “if.”

“I will consummate the purchase of your home IF ‘Y’ occurs.”

Y is the contingency. It can stand for the success of your loan application, the sale of your current home, a satisfactory home inspection, the home appraises for what the bank is willing to lend. There are lots of different contingencies.

Contingencies have a time limit, which is written into the contract. For instance, the home inspection contingency may expire one or two weeks after receipt of the inspection report.

Let’s assume you didn’t miss the deadline. Instead, you ask the seller to fix the hole in the roof by a certain date. If the seller fails to complete the work to your satisfaction by that date, you can walk away from the purchase with a full return of your earnest money deposit.

Today, we take a look at some of the more common contingencies in a home purchase contract.

Common contingencies

Financing

That loan preapproval that you got from your lender? You do know that isn’t an offer, right? It is conditional on a number of factors, such as proof of employment and income as well as others.

Until the underwriter clears your file, you really don’t have a loan commitment, just a promise to try to get you one.

This is why buyers’ real estate agents insist on a loan contingency clause in the contract. This way, should you not get final approval for a mortgage, you can walk away from the agreement without penalty.

Appraisal

If the appraiser (hired by the lender) finds that your home is worth less than what you’ve agreed to pay for it, they won’t approve your loan.

There are, of course, ways to mitigate this disaster:

  • Come up with the additional money required
  • Come up with half the money required and request that the seller pay the other half
  • Ask the seller to lower the price
  • Walk away from the transaction

If it comes to it, and you end up walking away, the appraisal contingency allows you to do so.

Home inspection

The home inspection report doesn’t have to derail the deal. If there are issues that the buyer can’t accept, negotiations can reopen to convince the seller to take care of them.

If the results are completely unacceptable to the buyer, a home inspection contingency allows him or her to cancel the deal, without penalty.

All contingencies are negotiable. If you feel you need more time to conclude a task, we will negotiate with the seller for more time.

It’s critical to meet the deadlines demanded of the contingencies and we work hard to keep you on track to do just that.

If you have any questions about anything in the home purchase agreement, don’t hesitate to ask. We’re happy to answer them.

5 things you may not know about home warranties

If the home inspection leaves you less-than confident that the home you really, really want to buy won’t need repairs in the near future, you may want to ask the seller for a home warranty.

You’re not alone, by the way. The home warranty industry rakes in more than $2.5 billion each year from people just like you — new homeowners seeking peace of mind.

Home warranties provide just that when it comes to the life expectancy of the home’s major systems. Some experts say that peace of mind is an illusion for those who don’t understand how the warranties work.

Read on to learn the five things you need to know about home warranties.

1. Home warranties are service contracts

Many new homeowners think of their home warranty as a type of insurance. It is not.

Furthermore, the federal government considers a warranty something that is included in the purchase price of the item. A home warranty is purchased separately, so it isn’t technically a warranty.

“Simply put, a home warranty is a yearly service contract that protects specific home systems and appliances,” according to the folks at First American Home Warranty.

2. Understand what’s covered

What your warranty covers depends on several factors, including the price of the warranty. The more expensive the warranty, the more it will cover.

The basic home warranty provides some coverage for the major systems in the home, such as heating, cooling, electrical and plumbing.

The home’s major appliances may also be covered.

3. Find out what’s not covered

“There are plenty of limitations; these plans generally don’t cover non-mechanical items such as windows or the structure of your home, for instance,” say the experts at ConsumerReports.com.

Unfortunately, exclusions (anything that isn’t covered) aren’t uniform across the home warranty industry. Most, however, won’t cover any repair or replacement of a problem caused by “normal wear and tear,” insect damage, deferred maintenance and acts of God.

This leaves the companies with a lot of wiggle room when it comes to accepting or denying a claim.

Some companies offer additional coverage for some of their exclusions, at an additional cost, of course.

4. Then, there is optional coverage

Optional coverage is the term home warranty companies use to describe coverage that you can purchase for certain systems, such as a pool and spa, septic, central vacuum or well.

If the home features any items not covered and you want coverage, ask for a policy that offers these options.

5. Is a home warranty worth the price?

“The average cost of a home warranty service contract ranges between $300–$600 per year,” according to Jessica Render at ConsumerAffairs.com.

When you need to use the warranty, and the problem is covered by the home warranty, the provider will send a service technician to your home. You are required to pay for the visit, which will run you between $50 to $100 per visit, according to Render.

Is the cost worth it? It depends. Many in the real estate industry feel that the peace of mind a warranty offers the new homeowner, who is typically cash poor for at least the first year of homeownership, is invaluable.

Consumer Reports and other consumer advocates feel otherwise.  “We recommend avoiding service contracts . . . far too often, warranty claims are denied because the company says the problem was pre-existing. Or, the claim is denied because the consumer can’t prove that a broken item was properly maintained,” says Anthony Giorgianni with Consumer Reports.

“Put your money in the bank instead,” he suggests.

If you do decide to go ahead with the purchase of a home warranty, check each company’s Better Business Bureau ranking and keep records of all home maintenance tasks you perform.

Cooped up at home? 5 outdoor projects to get your home ready for the post-pandemic real estate market

There’s talk in real estate circles that homebuyers who get into the market after we’re released from “self-isolation” will have an entirely different wish list than those who bought homes before the pandemic.

This makes sense when you consider that we’ve never spent so much time in our homes as we have over the past few months.

Look for home offices to be on many homebuyer wish lists. Outdoor spaces, however, will be hot sellers as well.

How’s your backyard looking? If you’re planning on selling, take a good long look and get to work on some projects to make your home stand out when we get back to normal.

1. Start with a clean slate

Winter is firmly in the rearview mirror. If your front and backyards still show winter’s scars, it’s time to get that remedied.

Get rid of all the debris that winter deposited in your yard. Remove broken branches, trash, leaves and any other debris.

Although we love spring, we don’t care for the weeds it brings. Weeding should be next on the list.

Pruning dead or dying branches from trees and shrubs will not only make them look better but make them healthier as well.

Tip: Disinfect your pruning equipment before using. Give it a 5-minute soak in a disinfectant, such as Lysol. Rinse with water and allow to air-dry.

2. Turn your attention to the hardscaping

Hardscaping refers to the non-living elements in your landscape. This includes pottery, benches, water features, pavers, arbors and fencing.

Consider painting the fence if it needs it. Darker colors are better, according to Darin Bradbury, a landscape designer.

“Not only does the dark color give those vertical surfaces around the garden a uniform finish, but it creates the perfect backdrop for all that green foliage,” Bradbury tells Georgia Madden with Houzz Australia.

3. Add new plants

While the gardening centers at the big box home improvement stores remain open during the pandemic, it’s a good idea to shop online right now.

There are many online plant retailers and we’ve rounded up several for you: DirectGardening.com, NatureHills.com, BrighterBlooms.com and FastGrowingTrees.com.

Landscaping professionals suggest that we should choose a theme before planting. The theme can be based on color, scent, pollinators (such as butterflies) or choose from some of the popular gardening themes:

Sticking to a theme helps prevent the space from looking too “chaotic and disconnected,” landscape designer Wayne De Klijn tells Madden.

“The right plant for the right space” is an old gardening adage that describes one of the most important secrets to gardening success.

Before purchasing plants, observe the landscape for a few days. Where is it sunny all day, shady all day, partially sunny? Choose your plants based on the existing conditions in your garden and you should have far fewer problems.

4. Mulch – the workhorse of the landscape

Mulch offers so much to your garden. It’s ornamental, it helps suppress weeds, it keeps the soil cooler in the summer, it helps the soil conserve moisture and, if it’s organic, it breaks down, adding nutrients back into the soil.

Choose whichever type of mulch you like and spread at least 2 inches of it over the soil, keeping it about 6 inches from the base of each plant.

5. Spruce up outdoor furniture 

Since we are all supposed to be staying home, running out to buy a new patio furniture set is not a wise idea. Hopefully, with a little DIY action, you can spruce up what you have.

Best of all, you can buy most of the products you’ll need online at Amazon.com or Gardener’s Supply Company and have them delivered to your door.

If your outdoor furniture is made of wood, follow the instructions you’ll find online at YouTube.com. Ideas for updating other types of patio furniture can be found at BobVila.com.

Stay well!

 

3 types of home valuation

Whether it’s a car, garage sale items or you’re selling on websites such as Ebay, successfully selling “stuff” has one major requirement: you need to know how much it’s worth.

After all, price an item too high and it most likely won’t sell. Price it too low and you’ll lose money on the deal.

The same holds true for houses, but there is a lot more money involved and the stakes are far higher.

There are several different home evaluation models, depending on the purpose for which the value needs to be ascertained. Let’s take a look at these and the differences between them.

Your home’s assessed value

Homeowners can’t get around paying property taxes and they’re based on your home’s assessed value. Your county or other municipality official, most commonly known as the “assessor,” will come up with the number for this evaluation.

He or she will use many of the same resources as a professional appraiser, from public records to recent sales. After deducting any exemptions available to you, the assessor multiplies the value by the assessment rate for your municipality to come up with the tax value for your home.

You’ll notice that the assessor’s value is often quite different than your home’s actual market value. Again, this evaluation is for tax purposes only and does not express your home’s current market value.

The market value of a home

The market value of a piece of property is based on what a buyer is willing to pay and a seller will accept. It is reflected in the recent sales prices of similar homes, or “comps,” short for “comparable homes.”

Most home sellers rely on the skill and experience of their real estate agent to determine their home’s current market value. And, although they don’t call their determination an “appraisal,” real estate agents use many of the same valuation techniques as appraisers.

They will base their determination on the following, when comparing your home to the comps:

  • The size of the home
  • Age of the home
  • Condition of the home
  • Location of the home
  • Special features

Then, if the agent is familiar with your neighborhood, he or she will use any knowledge of recent home appraisals in the area to help narrow down a price for your home.

This is what knowing market value does for homeowners: it helps them determine a competitive price for their homes.

A home’s appraised value

The appraised value of a home is that which is determined by a professional home appraiser. Typically hired by a buyer’s lender, this is the value determination that can make or break a home sale.

The appraiser will visit the home, taking measurements and notes. Back at the office, she will use many of the same techniques that real estate agents use, with the addition of public record information and other assistance.

Whether or not your agent’s evaluation matches that of the appraiser depends largely on current market conditions. In a recovering market, such that we saw after the recession ended, it may be challenging to pinpoint value.

When purchasing a home, it’s a smart move to look at a home’s property tax burden. But, for sellers, this type of value means little. It’s the market value and the appraised value that are important.

Still have questions? Fee free to reach out to us.

Is this a good time to buy or sell a home?

Social distancing. Self-quarantine. Hand sanitizer, soap and water and elbow-bumping instead of shaking hands.

In our efforts to deal with a world-wide pandemic, not only are our priorities changing, but our vocabulary as well.

There was no warning, really, so it naturally caught many of us by surprise. We’re getting a lot of questions from our clients, worried about whether or not they should continue to close on their transactions, continue searching for a home or for a buyer for their current home.

We aren’t medical experts, so we can’t field medical questions. But we are real estate experts and are happy to offer our opinion of what is happening in the housing market and what experts expect in the coming weeks and months.

Uncertainty reigns

While there are plenty of rumors and much guessing from the experts as to how the U.S. economy will be impacted by the safety measures federal, state and municipal governments are enacting, nobody is certain.

We agree with those who claim that it all centers on how long the virus takes to get under control. The longer Americans are out of work, the longer retailers and other businesses remain closed, the bigger the impact on the economy.

Yes, President Trump is working on a stimulus package for both individual taxpayers and businesses. Hopefully, it can be pushed through Congress soon.

Will our deal close?

If you have already signed a purchase agreement, as a buyer or a seller, lenders are taking extra steps to help speed up the process.

The Department of Veterans Affairs, for instance, is allowing VA buyers and sellers to participate in meetings with title companies, appraisers, lenders and VA personnel via phone or “other electronic methods,” according to the experts at Military.com.

Newly constructed home sales are still quite strong and closings are running smoothly. “During the first two weeks of March, new orders were up 16%, closings continued on schedule and traffic in home sales centers was strong,” Stuart Miller, Lennar Corporation executive chairman told the South Florida Business Journal.

The real sticking point to be aware of is that with municipal buildings closing down, the sale may not be recorded when you expected it to. Some municipalities are offering alternatives, such as closing remotely, through e-recording (thank goodness for technology!) and even by mail.

Is this an ok time to buy a home?

Within the real estate industry there’s a well-known saying that the best time to buy a home is when you can afford to buy a home.

While mortgage interest rates have edged up a bit over the past few weeks, we’re still at historic lows. Borrowing money has rarely been so inexpensive.

When rates are higher you won’t get nearly the size or type of home you can right now.

If you’re worried about exposure while house hunting, understand that touring homes for sale is a bit different now but still quite doable. Much of the process can be done online via virtual open houses, 3-D home tours, floor plan drawings and more.

Even in-person tours can be accomplished in a safe, healthy way.

What about selling? Is this an ok time?

While spring is typically the best time of the year to put a house on the market, this spring is going to be quite different.

There are buyers in the market, however, so if you need to sell, by all means, let’s get that home on the market.

As mentioned in the buying section, above, we can employ a number of methods to keep your home and your family safe during and after showings.

Remember, the inventory of available homes is still quite low, so you will have little competition for homebuyers’ attention. We’re even seeing bidding wars still happening, across the country.

If the home is in good condition and priced well, it will sell.

Please don’t hesitate to reach out to us with any questions or concerns. We’re happy to help.

A day in the life of a real estate agent

Some jobs look so easy, don’t they? Take writers, for instance. They not only work when they feel like it, all they do is sit at a keyboard and kick out words. And, they make the big bucks for this life of leisure.

Many people feel the same way about real estate agents. Most misunderstand how little we actually earn out of that commission check for the work we do. In fact, let’s clear that one up right now.

The commission check for real estate agents is typically split in half, with 50 percent going to the buyers’ agent’s broker and 50 percent to the listing agent’s broker.

All agents negotiate what is known as a “split” with their brokers. This split can range anywhere from 20 percent of the broker’s half of the commission up to 100 percent in some cases. Most, however, range from 50/50 to 60/40.

Assume your agent has negotiated a 50/50 split with his or her broker. This means that the agent will receive half of the broker’s commission. Or, 25 percent of the total commission.

From this amount, the agent deducts his or her costs of the transaction, such as gas, wear and tear on her vehicle, marketing costs, MLS fees, lockbox fees and more.

In the end, we receive a far smaller piece of the pie than the general public assumes. Especially when one considers what a day in our shoes involves.

Here’s a list of what we do in a typical day at work:

  • Check the MLS every morning for new listings that fit buyers’ criteria
  • Preview new listings in person
  • Consultations with new clients
  • Set appointments to show homes to clients
  • Show property to clients
  • Navigate the purchase agreement with buying clients
  • Present offers to purchase to sellers and their agents
  • Schedule inspections (whole home, pest, etc.)
  • Analyze inspection reports
  • Negotiate contracts, repairs, etc. with listing agents
  • Schedule repairs
  • Meet service technicians at homes, wait while the technician inspects a system and while the technician writes up a price quote.
  • Inspect repairs
  • Shepherd transactions through escrow to closing
  • Attend the final walk-through with buying clients
  • Analyze the market for sellers to determine a likely market value for their homes
  • Navigate the listing agreement with selling clients
  • Schedule for sale sign installations
  • Install lockboxes on listings
  • Schedule photography session for listings
  • Create and execute a marketing plan for selling clients
  • Find buyers for listings
  • Plan, schedule and execute open houses
  • Plan, schedule and execute broker’s open houses
  • Compile pro forma financial statements for income property sellers and buyers
  • Attend broker’s open houses
  • Attend broker’s sales meetings
  • Attend MLS meetings
  • Coordinate closing with title companies and client
  • Attend closings with clients
  • Coordinate simultaneous closings for clients who require them
  • Make phone calls

Calls are a big part of a real estate agent’s workday. In fact, a typical day in the life of a real estate agent will include phone calls to or from:

  • Lenders
  • Inspectors
  • Appraisers
  • Clients
  • Other agents
  • Title company representatives
  • Escrow companies
  • Repair people
  • Pest control companies
  • Contractors
  • Vendors

Then, there are the phone calls related to marketing our services, to prospect for new clients and to follow up with leads.

Finally, we must set aside time each day to return the many voicemails, text messages and emails we receive.

Yes, these tasks make for long days. But, we wouldn’t trade what we do for  any other job.

The cost vs. benefit of buying a new-build home

You have to admit that the real estate industry is way out in front of the auto industry when it comes to marketing lingo.

The latter, for instance, gives us a choice between “new” and “used” cars while the former offers new and “existing” homes.

Unless we’re contemplating buying a priceless antique, it’s safe to say that most of us prefer new to used, whether it’s cars or homes.

In fact, a 2014 Harris Poll survey found that 41 percent of Americans prefer a newly-built home.

Can you blame them? You won’t get that “new car smell” in an old beater any more than you’ll get the satisfaction of knowing that nothing in a new home has ever been touched or used by anyone else. No grease on the appliances, smudges on the walls or pet or kid odor in the carpet.

It all boils down, like many things in life, to how much we can afford to spend. For instance, remember that survey I mentioned earlier?

The 41 percent of Americans who would prefer a new home over an existing one went on to claim that they weren’t willing to pay the extra money required to buy a new home.

Now, notice I said “buy” one; it’s not necessarily more expensive to own a new home but may be more expensive to purchase one. I’ll clear up that confusion in a minute.

Price considerations

Most of the homebuyers that we have worked with have one overriding concern when looking at homes: The price.

As a general rule, you’ll pay more for a newly-built home than you will if you buy an existing home.

Nationwide, for example, the median price of a newly-constructed home was $330,800 in the third quarter of 2019 according to the U.S. Census Bureau.

The median price of an existing home was $274,000. That’s a $56,800 difference, which is slightly more than the so-called 20 percent “new home premium.”

Keep in mind that the list price of the new homes is for the basic model and doesn’t include upgrades, which can cause the price to rise significantly.

One final note when it comes to the price of a new home: Negotiating on the price, an option when you purchase an existing home, is typically not an option available to you when you purchase new construction.

Ongoing costs

A mortgage payment is comprised of the loan’s principal, interest, property taxes and homeowner insurance. While all aspects of the payment should be considered when purchasing a home, we’ll take a look at the two most significant.

Property taxes

Taxes levied on an older home are typically lower than those for a new home. But, that doesn’t tell the whole story because for the first year to two years, taxes on a new home may be significantly lower.

Why? Because current-year taxes are based on the value of a home as of January of the previous year.

For example, if a home was completed in June 2020, the taxes for the property will be based on its value in January 2019. Most likely, at that time, there was no home, just a dirt lot. So, for the remainder of 2020, the homeowner would pay property taxes based on the value of a plot of dirt.

In 2021, the homeowner will pay taxes on the home’s value as of January 2020. Remember, the home wasn’t completed until June, so the property’s value was still quite low, ensuring another year of low property taxes.

This difference can be significant, possibly saving the new homeowner up to $250 a month for up to two years. We aren’t tax professionals, though, so this is an issue to run by your accountant.

Insurance

Consider that fourth “leg” of the mortgage payment — insurance. The new home definitely wins when it comes to homeowner insurance, generally being less expensive to insure.

The primary reason for this is that, with newer and more cost-effective building methods, new homes cost less to rebuild or repair.

There are additional factors to consider, however. These include:

  • The home’s location – homes built in areas with weather risks (floods, wildfires, etc.) will cost more to insure than new homes located outside these areas.
  • Proximity to a fire department – insurance rates are typically less for homes located in close proximity to a local fire station.

Maintenance

No, home maintenance costs aren’t a part of a monthly mortgage payment, but they do factor in to comparing the cost of owning a newly-built home vs. an existing home.

Although new homes can have problems, many builders offer a home warranty. As a general rule, you can plan on almost a decade of repair-free ownership when you purchase a newly-built home.

One aspect of the new-home purchase not often addressed is the home’s energy efficiency – a true money saver over the purchase of an existing home.

New homes are built with newer, better insulation and energy-efficient windows, for example. This significantly cuts the cost of heating and cooling the home.

As homes age, the need to repair things happen more frequently. This is why older homes in a managed community, such as townhomes and condos, typically have higher HOA fees.

There are a number of other benefits to purchasing a newly-constructed home, including that you can choose the floorplan that best fits your family’s lifestyle, you can choose the location within a neighborhood and, if you can afford it, you can choose upgraded features for the home.

If you’re interested in viewing newly constructed homes, reach out to us. We’re happy to help you avoid some of the more common pitfalls in the process.

Yes, you can over-improve a house and lose value in the process

It’s one thing to hope your house is the nicest on the block and another thing entirely to own the nicest home on the block. And, the latter isn’t what you should aim for when preparing the home to sell.

Sounds crazy, doesn’t it?

Not when you know how the market value of a home is determined. In a nutshell, your home is worth what a willing buyer will pay for it. Now, this isn’t necessarily what they offer you for the home.

The proof of what a buyer is willing to pay is what he or she actually pays. It’s what homes like yours have sold for in the recent past.

The reality is that if you make improvements to the home that bring the value to more than the neighborhood average, your home might not sell.

Would you pay $500,000 in a neighborhood of $200,000 homes?

Even individual rooms can be overimproved and return zilch on your investment

The two rooms Americans choose to renovate most often are the kitchen and bathroom. If you plan on joining them, ensure that you’re doing it for your enjoyment and not to add value to the home. Because, depending on the surrounding homes, it may not.

If you plan on moving soon, and the rooms need minimal work, go for it. Otherwise, “Save the million-dollar kitchen for a million-dollar home,” warns Katie Severance, co-author of “The Complete Idiot’s Guide to Selling Your Home.”

Even if you aren’t planning on moving in the near future, some renovations will haunt you when the time comes that you want or need to sell.

Take the couple who decided that a walk-in closet was more important than a bedroom. So, they converted the small bedroom adjacent to the master into the dream closet.

Which changed his home from four bedrooms to three in a neighborhood of four- and five-bedroom homes – a value killer.

The opposite holds true under certain conditions. Adding square footage would seem to be a good thing, right?

And, it typically is, unless you add a room so large that it eats up the backyard or unless that excess square footage figure swamps that of neighboring homes.

Call us before you make improvements

Before one hammer hits one nail, you should know the current market value of your home and that’s something we can help you with.

It’s a free service, and we offer it to you regardless of whether or not you plan on selling your home soon.

Once you’re clear on its present value, you’re better able to determine which improvements will give you the best return on your dollar and which might put you over the top when it comes time to sell.

If the improvements you want to make are for your own use, and you plan on staying in the home for the long-run, then go for it. If, on the other hand, you’re hoping to improve your home’s value, be careful. Remember:

The most expensive home in the neighborhood often intimidates homebuyers.

Maintaining your home is far more important than upgrading it. That said, if you’ve kept up the home and it needs cosmetic upgrades, we suggest making them.

 

Your handy real estate glossary

Once you enter the realm of real estate, whether buying or selling, you’ll hear a lot of language that may sound foreign.

Keep this decoder handy – you’ll most likely need to refer to it often in the beginning.

A

Addendum – Any time a change is made in the original purchase contract the party that makes the change must submit an addendum to the other party. Some of the changes that may be made include an extension of the closing date, additional time for inspections or changes in the purchase price to reflect the seller’s payment for repairs.

Appraisal – The buyer’s lender will have the house appraised by a professional appraiser to determine its current market value. This ensures the lender that it is lending the appropriate amount of money for the home.

C

Closing costs – An umbrella term for the fees paid at closing. These include lender charges, the down payment and others.

Closing disclosure – A five-page document detailing the exact terms of a mortgage, provided by the lender, by law. The borrower is entitled to receive this form no later than three days before closing. It includes, among other items, the fees required to close (closing costs).

CMA (Comparative Market Analysis) – A CMA is the determination of the home’s value by a real estate agent and is used to determine a fair asking price. It is similar to the appraisal but does not take the place of it.

Comps – Short for comparables, it describes homes that have sold within the last six months, typically within one mile of a subject property. Real estate agents and appraisers study comps to determine a home’s current market value.

Contingency – When certain conditions must be met before the buyer is locked into the contract the buyer’s agent will insert these conditions into the contract. Common contingencies include those for the sale of the buyer’s home, the successful procurement of financing at certain terms and inspections.

Contingency Release — When the contingency requirements are met, both parties to the transaction will be asked to sign a contingency release form to acknowledge that fact.

Counteroffer – If you are not in agreement with the price or terms of the buyer’s offer we’ll file a form known as a counteroffer, eliminating or changing the parts of the offer to which you don’t agree.

D

Debt-to-income ratio – You may hear this referred to as your “DTI.” It is a ratio of a borrower’s debts to his or her gross income.

Deed – A document used for the transfer of real property.

Disclosures – Full disclosure is the seller’s most important duty. Not only is it required by law, but it protects you as well as the seller.

Down payment – A percentage of the purchase price paid to the lender, typically at closing.

E

Earnest Money Deposit – Often 1 percent of the purchase price, the earnest money deposit is to show your good faith in following through on the purchase. The funds are held by either the escrow company or the broker’s trust account and applied to the purchase at closing.

Escrow – Escrow is a process that ensures the purchase funds are distributed and the transfer of the house is completed. It is overseen by an escrow company, which is a neutral third party.

Escrow Impounds – Escrow impounds include prepaid taxes and insurance. The impounded funds provide insurance to the lender that taxes and insurance payments will be made. The lender can request no more than two months payments.

F

Final Walk-Through – The final walk-through is performed by the buyers. They have one last chance to view the house to ensure that it is in the same condition as when they agreed to purchase it. The final walk-through generally happens during the week leading up to closing.

L

Loan estimate – The loan estimate is a document that the lender is required to send you within three days of applying for a mortgage. It details the terms of the loan, estimated closing costs and an estimate of the monthly payment. Consumers use this 3-page document to compare lenders when shopping among them. Learn more about it ConsumerFinance.gov.

Loan-to-value ratio – A mortgage formula that help lenders assess risk in lending to borrowers. It is realized by dividing the value of the home by the price. Some real estate agents are under the impression that the “price of the home” is the figure used, but it is not. The higher the DTI, the riskier the borrower. Borrowers with LTVs below 80 percent typically get more favorable loan terms.

M

MIP – Short for “mortgage insurance premium,” it’s FHA’s version of PMI (see below). Unlike PMI, MIP is payable for the life of the loan, in most cases.

MLS – Short for Multiple Listing Service, the database of properties for sale, sold, pending sale, withdrawn from the market and expired listings.

P

PITI – Short for principal, interest, taxes and insurance, the four parts of your mortgage payment.

PMI – Short for “private mortgage insurance,” it describes the fee charged to homebuyers who pay less than 20 percent down on the home. The fee is a percentage of the annual loan amount, and it varies.

T

Title Insurance – An insurance policy that protects against damages due to defects in the chain of title.

Title search – A search of public records to determine who owns the title of a piece of real estate and if there are any encumbrances on it, such as liens. These are known as “defects” or “clouds” on the property’s title and must be cleared before the sale can close.

Transfer taxes – Fees imposed by the federal, state, county or municipal government whenever there is a transfer of title of real property.