home buying

How to Buy or Sell a Home in Need of Repair

During the purchase or sale of a home you’ll most likely hit some bumps in the road to closing. If you plan to finance your new home, homeowners insurance is required and a clean 4-point inspection (HVAC, electrical, plumbing, and roof) is necessary. So, what can be done if your soon to be new home is in need of a major repair such as roof replacement? 


I recently had a seller who suspected that their roof was in need of repair. They gleefully accepted an offer after only 1 day on the market!  As suspected, the home inspection showed that a flat portion of the roof was at the end of its life and needed to be replaced. However, the sellers didn’t have the cash to do the repair prior to closing.  Whether buying or selling, if you find yourself in circumstances where a repair is needed, you have a couple options that will still allow you to close the deal with little or no money out of pocket. 

The most favorable option is to have repairs complete before closing. Some companies will do repairs and allow the payment to be made at closing. Who pays for the repair depends on whether you have an as-is contract or standard residential...but that’s a whole other topic. If the seller is obligated by contract or willing to pay for repairs, payment can come out of their proceeds at closing so that they are not responsible for the full amount up front. As-is contracts do not require a seller to fix the issue but it also gives the buyer the opportunity to back out of the sale and get their deposit back. 

Another less desirable option is for the closing agent to hold money for the repairs in an escrow account that will pay for the repair after closing. The escrow account will hold 150% of the estimated cost to repair in the event the repair ends up costing more.

Most inspection reports are going to have a long list of items, don’t be alarmed, many items are not a deal breaker. Buyers and sellers can negotiate repairs even after the property is under contract. Thanks to HGTV, many buyers have become less detoured by a home in need of repairs or updates. 


I’m no stranger to a home in need of repairs. See how I financed and gained equity on my own fixer-upper here  or join my mailing list  for a FREE ebook of your choice (Buying, Selling or Credit Scores 101).

What’s my home worth? Click here for Your custom report.

4 Negotiation Tactics to Use When Buying a Home

In a real estate transaction, typically negotiating is thought of as price. However, there are many other factors that can either aid or hinder your probability of getting the house you want for the price you’re willing to pay. 


GET PREQUALIFIED.

As a buyer, the most important item you can provide to flex your buying power muscles is a pre-qualification letter. No seller wants to take their home off of the market for weeks just to find out that the buyer doesn’t qualify for the purchase amount. Any savvy buyers agent would make sure their client has a pre-qualification letter before even beginning the house hunt. 


MAKE A STRONG DEPOSIT.

Offers are normally accompanied by a “good faith” deposit that goes into an escrow account while the property is under contract. Contingencies on the contract protect your escrow deposit in case something arises during the contract period such as a cloud on the title, property appraisal not meeting the purchase price or a poor home inspection. Deposits are typically 1-2% of the purchase price. A larger deposit shows a seller you’re serious and committed to the process of buying the home. 


KEEP INSPECTIONS SHORT.

Inspection periods fall under contract contingencies that allow buyers to negotiate repairs, a lower price, or terminate the contract altogether if the inspection report is unsatisfactory. 15 days is the typical length of an inspection period, keep it at 15 days or shorter to make your offer more appealing. For a seller, a long inspection period means the property is off market for an extended period of time without a guarantee that the sale will go through. 


An “AS-IS” contract means the seller isn’t obligated to make repairs or pay for any items, however, the inspection period on an “AS-IS” contract also states, “If buyer determines, in buyers sole discretion, that the property is not acceptable to the buyer, the buyer may terminate the contract in writing before the end of the inspection period”. AS-IS contracts are basically a low-risk look behind the curtain of a home. Standard residential contracts are more difficult to negotiate repairs as a buyer because the contract has a certain amount built into the contract that the seller has allocated towards repairs. 


CLOSE QUICKLY.

When financing a property closing usually takes about 45 days, some lenders pride themselves on closing deals in as little as 30 days. A quick closing that isn’t contingent on the buyer selling their home is most desirable to a seller. Some buyers want to make the sale of their home a contingency for purchasing a new home but there is usually a “kick-out clause” meaning the seller can still accept another offer without that contingency. 


As a buyer, having Realtor® representation is typically at no cost to you. Don’t walk through the buying process alone or depend on the listing agent of the home. A listing agent can only represent the transaction if they have both sides of the deal and can NOT represent the best interest of both sides. Be prepared, have your own representation that’s looking out for you! If you are in need of a Realtor®, call me! It would be my pleasure to serve you. 

Avoid These 8 Home Inspection Mistakes

It’s easy to get swept up in the excitement of buying a home. Once you’ve had an offer accepted on your dream house, you’ll probably be anxious to move in. However, before you make a significant financial commitment, it’s best to know exactly what you’re buying.

When you hire a home inspector it's a worthwhile investment that can save you money in the long run, either by warning you away from a bad purchase or by providing a list of deficiencies you can use to negotiate with the sellers. Additionally, a good inspector can often predict the standard life expectancy of your roof, HVAC, and other big-ticket items so you can start planning for their eventual replacement.

However, many buyers make mistakes during the inspection process that cost them time and money and lead to unnecessary stress. Avoid these eight common buyer blunders to minimize your risk, protect your investment, and give yourself peace of mind and confidence in your new home purchase.

 

MISTAKE 1: Skip Your Own Inspection

Overall, does the home appear to be well maintained? Unless it’s a highly-competitive seller’s market, consider the overall condition of the property BEFORE you submit an offer. Work with your real estate agent to factor in repairs and updates you know you’ll need to make when you determine your offer price.

 

 

MISTAKE 2: Hire the Cheapest Inspector

We all love to save money, but not all inspectors are created equal. Before you hire one, do a little research.2 You may even want to start shopping for an inspector before you complete your home search. Inspection periods are typically short, so it never hurts to be prepared. 

Make sure the inspector is licensed and insured. Buyer beware...read the inspectors contract! Some inspectors have a clause in their contract that releases them from liability even if they make a big mistake. 

 

 

MISTAKE 3: Miss Attending the Inspection

Make every effort to be on-site during the inspection. Buyers who aren’t present during their inspection miss out on a great opportunity to gather valuable information about their new home.

 It’s the perfect chance to find out where everything is located, ask questions, and see first-hand what repairs and updates may be needed.3

 

 

MISTAKE 4: Skim Over the Report

Inspection reports can be long and tedious, and it can be tempting to skim over them. However, buyers who do this risk missing crucial information.

Instead, you should read over the report carefully, so you don’t miss anything significant. Now is the time to address any areas of concern. You have a limited window of time to request repairs or negotiate the selling price, so don’t squander it.

Your inspector may also flag some minor items that you wouldn’t typically expect a seller to fix. However, ignoring these small issues can sometimes lead to bigger problems down the road. Make sure you read everything in the report so you can take future action if needed.

 

 

MISTAKE 5: Avoid Asking Questions

Some buyers are too embarrassed to ask questions when there’s something in the inspection report they don’t understand. They avoid asking questions and end up uninformed about important issues that could impact their home purchase.

The reality is, questions are expected. You hired your inspector for their professional expertise, so don’t be shy about tapping into it. For example, you might ask:

 

  • Would you get this issue fixed in your own home?

  • How urgent is it?

  • What could happen if I don’t fix it?

  • Is this a simple issue I could fix myself?

  • What type of professional should I call?

  • Can you estimate how much it would cost to make this repair?

  • How much longer would you expect this system/structure/appliance to last?

  • What maintenance steps would you recommend?

 

 

MISTAKE 6: Expect a Perfect Report

Some buyers get scared off by a lengthy inspection report. But with around 1600 items on an inspector’s checklist, you shouldn’t be surprised if yours uncover a large number of deficiencies.4 The key is to understand which problems require simple fixes, and which ones will require extensive (and costly) repairs. 

Your real estate agent can help you decide if and how to approach the sellers about making repairs or reducing the price. Whatever you do, try to focus on the major issues identified in the inspector’s report, and don’t expect the sellers to address every minor item on the list. They will be more receptive if they perceive your requests to be reasonable.

 

 

MISTAKE 7: Forgo Additional Testing

There are times when an agent or inspector will recommend bringing in a specialist to evaluate a potential issue.5 For example, they may suggest testing for mold or consulting with a roofing expert. 

Some buyers get spooked by the possibility of a “red flag” and decide to jump ship. Or, in their haste to close or desire to save money, they choose to ignore the recommendation for additional testing altogether. 

Don’t make these potentially costly mistakes. In some cases, the specialist will offer a free evaluation that takes minimal time to schedule. And if not, the small investment you make could provide you with peace of mind or save you a fortune in future repairs.

 

 

MISTAKE 8: Skip Re-inspection of Repairs

While the majority of sellers are forthcoming, some will try to save money by cutting corners, hiring unlicensed technicians, or doing the work themselves. Make sure the repairs are completed properly now, so you aren’t paying to redo them later.

Some buyers prefer to avoid this step altogether by completing the work themselves. They either request that the seller to give a credit or reduce the selling price accordingly. Whichever path you choose, protect yourself and your investment by ensuring the work is done properly.

 

 

I CAN HELP

A home inspection can reduce your risk and save you money over the long-term. But to maximize its effectiveness, it must be done properly. Avoid these eight common home inspection mistakes to safeguard your investment.

While these are some of the most common missteps, there are countless others that can trip up home buyers, cost them time and money, and cause undue stress. Our brokerage partners with trusted inspectors and other professionals to help you avoid the potential pitfalls.

If you’re in the market to buy a home, I can help you navigate the inspection and all the other steps in the buying process.  Contact me to schedule a free consultation. It would be my pleasure to serve you on your home-buying venture! 

What’s my home worth? Click HERE to get your free custom report.

 

 

Sources:

  1. https://www.familyhandyman.com/tools/diy-home-inspection-tools/view-all/

  2. https://www.hgtv.com/design/real-estate/finding-the-right-home-inspector

  3. https://www.nytimes.com/2018/03/23/realestate/home-inspection.html

  4. https://www.realtor.com/advice/buy/what-does-a-home-inspector-look-for/

  5. https://realtytimes.com/advicefromagents/item/37369-top-5-biggest-home-inspection-mistakes

  6. https://www.realtor.com/advice/buy/home-inspection-mistakes-buyers-should-avoid/

  7. http://www.startribune.com/who-verifies-repairs-after-the-home-inspection/132844523/

Buying & Selling During Hurricane Season

June 1st marked the first day of hurricane season. The destruction caused by hurricane Irma in 2017 has Floridians wondering what's in store for this year.

Slightly lower than the initial forecast, Colorado State University has released a projection of what we should expect to see in 2018 through their Tropical Meteorology Project. 

2018 Hurricane Projections

  • 13 named storms

  • 6 hurricanes

  • 2 major hurricanes

Stock up on supplies this week (June 1st - June 7th) TAX FREE! Also check out the Tax Information Publication for qualifying items and other information on preparedness. 

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Last year, Irma was cause for damage to homes with pending contracts, delays and even cancellations of closings. If you're planning to buy or sell a home during hurricane season be sure that you ask your real estate agent about the force majeure portion of your contract. Also, have a discussion about what happens in the event a hurricane damages the home or interrupts the timely closing of your sale.

As a native Floridian who lives in a high risk coastal flood zone, I can help you navigate the challenges that come with living in paradise. 

 

Photo Credit of Hurricane Irma: Natural News

REAL ESTATE 2018: What to Expect

As we head into a new year, the most common question we receive is, “What’s the outlook for real estate in 2018?” 

 

It’s not just potential buyers and sellers who are curious; homeowners also want reassurance their home’s value is going up. The good news is that a strong U.S. economy, coupled with low unemployment rates, is expected to drive continued real estate growth in 2018. However, changes on the horizon could significantly impact you if you plan to buy, sell or refinance this year.

 

 

HOME VALUES WILL CONTINUE TO RISE

Get ready for another strong year! U.S. home values and sales volume will continue to rise in 2018. 

 

Experts agree that home prices will increase in 2018, but predict a slower rate of appreciation than 2017, which clocked in at nearly 7 percent nationwide. National Association of Realtors (NAR) Chief Economist Lawrence Yun predicts a growth rate this year of 5.5 percent,(1) while Freddie Mac’s September Outlook Report forecasts a rate of 4.9 percent. Either way, all indicators point towards continued growth in 2018. (2)

 

What does it mean for you? If you’re a current homeowner, congratulations! Real estate proves once again to be a solid investment over the long term. And if you’re considering selling this year, there’s never been a better time. Contact me to request a FREE Comparative Market Analysis to find out how much you can expect your home to sell for under current market conditions.

 

If you’re in the market to buy this year, there’s good news for you, too. Although prices continue to rise, the rate of appreciation has slowed. Still, don’t wait any longer. Prices will continue to go up, so you’ll pay more six months from now than you would today. Call me to setup a free, no-obligation property search and get notified about listings that meet your criteria as soon as (or before) they hit the market.

 

 

NEW CONSTRUCTION WILL MAKE REAL ESTATE MORE ACCESSIBLE

Lack of inventory in the housing market has been a primary impediment to homeownership for many Americans. “Ten years ago, the problem in the housing market was lack of buyers,” says Yun. “Today, the problem is lack of sellers. Inventory levels are near historic lows.”(3)

 

Yun also notes, “The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent. Despite improving confidence [in 2017] from renters that now is a good time to buy a home, the inability for them to do so is causing them to miss out on the significant wealth gains that homeowners have benefitted from through rising home values.”1

 

The good news? Yun expects a 9.4 percentage point increase in single-family new home construction starts.(4)

 

Economists at Freddie Mac make a similar prediction. “Existing home sales are unlikely to increase much going forward. Limited inventory will remain a consistent problem … Growth in home sales will be primarily driven by new home sales, which should continue to grind higher with single-family construction.”(2)

 

Robert Dietz, chief economist at the National Association of Home Builders, agrees. "The markets that are going to grow are ones where builders can add that entry level product."(5)


What does it mean for you? If you’ve been frustrated by lack of inventory in the past, 2018 may bring new opportunities for you to find a budget-friendly home that suits your needs. Give me a call to discuss options for new construction in our area.

 

 

MILLENNIALS WILL MOVE TO THE SUBURBS

The new entry-level construction will come with a catch though … it will be located in the suburbs, where the availability of land and fewer zoning requirements make it more cost-effective to build. Economists predict that’s where millennials and first-time buyers will flock for the greater variety of homes at affordable prices.(6)

 

Rising home prices, a sluggish job market, and an increase in student loan debt made homeownership largely unattainable for many millennials in past years. However, there’s significant evidence that this trend is turning around. For the fourth year a row, the National Association of Realtors' 2017 Home Buyer and Seller Generational Trends survey found that millennials were the largest group of homebuyers.(7)

 

As millennials age, they are settling down and having families, which has prompted an increasing demand for larger but affordable homes. Thus, many are flocking to the suburbs, with 57 percent of millennial buyers opting for a suburban location.

 

What does it mean for you? If you’re a millennial who is looking for more space for your growing family, a number of suburbs in our area have a lot to offer. I can point you towards the neighborhood that will best meet your needs.

 

And if you’re a suburban homeowner with plans to sell, give me a call. I know how to market your home to millennials (because I AM ONE!) and can help you sell quickly for top dollar by appealing to this growing market segment!

 

 

BOOMERANG BUYERS WILL RETURN TO THE MARKET

“Boomerang buyers” comprise the nearly 10 million Americans who lost their homes to foreclosure or short sales during the housing recession of 2006 to 2014.

 

According to MyFico.com, a foreclosure remains on a credit report for seven years. It takes many boomerang buyers at least that long to raise their credit score and save up enough cash to qualify for a new mortgage.(8)

 

With this “seven-year window” in mind, RealtyTrac predicts that the largest wave of boomerang buyers – more than 1.3 million – will be eligible to re-enter the housing market in 2018.(9)

 

Markets likely to see the highest influx of boomerang buyers are those that had a high percentage of foreclosures AND have remained affordable. The majority of boomerang buyers are middle-class Gen Xers or Baby Boomers. Expect to see even more competition for entry-level homes in those markets.

 

What does it mean for you? If you’re a boomerang buyer, we understand your unique circumstances. We can help you navigate the real estate process and write competitive offers that will play to your strengths. It would be my pleasure to discuss your options.

 

 

NEW TAX LEGISLATION WILL IMPACT HOMEOWNER DEDUCTIONS

The “Tax Cuts and Jobs Act” passed at the end of 2017 nearly doubles the standard deduction, so far fewer Americans are expected to itemize this year. For those who do, however, it could mean less homeowner deductions are available than in the past.

 

Previously, homeowners could deduct interest paid on the first $1 million of mortgage debt, but that threshold has been lowered to $750,000 for new mortgages. (Existing mortgages will not be impacted.) 

 

Additionally, taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. The new legislation restricts this deduction to $10,000. It also eliminates the deduction for moving expenses (except for members of the Armed Forces) and interest on home equity loans unless the proceeds are used to substantially improve the residence.10

 

It’s yet to be seen how the tax bill will impact the real estate market overall. While some economists predict a price reduction in certain markets, Republican lawmakers project the bill will increase take-home pay and stimulate the economy overall. According to Realtor.com Senior Economist Joseph Kirchner, “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already.”(11)

 

What does it mean for you? If you’re an existing homeowner, be sure to consult a tax professional if you’re concerned about the impact the new tax bill could have on you.

 

 

INTEREST RATES WILL RISE

No one knows exactly what will happen with mortgage rates this year, but the Mortgage Bankers Association anticipates the Federal Reserve will raise rates three times in 2018, with Freddie Mac’s 30-year fixed rate mortgage reaching 4.8 percent by the end of Q4, up from around 4 percent at the end of 2017.(12)

 

Kiplinger.com Economist David Payne also predicts interests rates will rise this year, with short-term rates outpacing long-term rates as the Fed aims to curb inflation in a tightening job market. He predicts the bank prime rate that home equity loans are based on will increase from 4.25 percent to 5 percent by the end of 2018. (13)

 

What does it mean for you? If you’re in the market to buy, act now. Rising interest rates will decrease your purchasing power, so act quickly before interest rates go up. Give me a call today to get your home search started. 

CHEERS to 2018! 

Sources:
Inman News –
https://www.inman.com/2017/11/03/what-to-expect-from-the-2018-housing-market/
Freddie Mac September Outlook Report –
http://www.freddiemac.com/research/outlook/20170921_looking_ahead_to_2018.html
Marketplace.org –
https://www.marketplace.org/2017/07/05/economy/tight-inventory-slows-housing-market-down-0
National Association of Realtors Press Release –
https://www.prnewswire.com/news-releases/existing-home-sales-to-grow-37-percent-in-2018-but-inventory-shortages-and-tax-reform-effects-loom-300549447.html
Fox Business News –
http://www.foxbusiness.com/features/2017/11/27/entry-level-buyers-drive-solid-new-home-sales.html
Zillow Research  –
https://www.zillow.com/research/2018-predictions-17217/
National Association of Realtors’ Home Buyer and Seller Generational Trends Report  –
https://www.nar.realtor/research-and-statistics/research-reports/home-buyer-and-seller-generational-trends
MyFico.com -
https://www.myfico.com/crediteducation/questions/foreclosure-fico-score-affect.aspx
RealtyTrac -
http://www.realtytrac.com/news/foreclosure-trends/boomerang-buyers/
National Association of Realtors -
https://www.nar.realtor/taxes/tax-reform/the-tax-cuts-and-jobs-act-what-it-means-for-homeowners-and-real-estate-professionals
Realtor.com -
https://www.realtor.com/news/real-estate-news/tax-cuts-survey/
Mortgage Bankers Association Economic Forecast  –
https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary
Kiplinger Economic Forecast  –
https://www.kiplinger.com/article/business/T019-C000-S010-interest-rate-forecast.html#iOf4mkSFvvTmi2wr.99