Seller Concession Limits

The real estate market is shifting. In some areas of the country, it has flipped to a strong buyer’s market. Sellers challenged by this change are looking for creative ways to attract buyers. In addition, buyers suddenly in the driver’s seat are asking for more concessions from sellers than ever before.

Seller concessions are a useful tool in real estate. Used correctly, it can benefit both buyer and seller. For example, concessions can be offered in lieu of seller repairs or upgrades, saving out of pocket cash in an uncertain market. Buyers can also benefit from “financing” some of their own out-of-pocket costs for specified fees and charges.

However, there are limits to what the lender will accept for seller concessions and understanding this ahead of time can save time and frustration. Here is a snapshot of the most common loan types and concessions possibly allowed (always check with your lender).

Conventional (Fannie Mae/Freddie Mac):

· 25% down payment – 9% concessions

· 10-25% down payment – 6% concessions

· <10% down payment – 3% concessions

FHA : 6% maximum concession

VA: 4% closing costs concession

USDA: USDA allows the seller to pay all the closing costs and prepaid for the buyer with no percentage limit. Other restrictions and considerations apply, so speak with your lender.

Seller concessions are a great way to save cash on both sides. Used properly, it can be a great tool to put real estate transactions together in a challenging market.

How to Use Comps to Price Your Home Correctly

The most important aspect of listing your home for sales is the asking price. Unlike many other items we purchase, home prices are based on what a willing and able buyer would pay for the property. Sounds complicated, right? This is why real estate agents bring comps ( short for comparable properties) information with them to the discussion. Yet are you using the right comps to successfully sell your home? The idea is to gather information about comparable properties that have sold recently that are similar to your own. The goal is to compare apples to apples. In other words, the properties should be as close to the subject home as possible. This includes things like:

· Location – how far is the property from yours.

· Size – square footage is an important aspect of value.

· Number of bedrooms/bathrooms – even if the square footage is close, the number of bedrooms and bathrooms can have a large effect on price.

· Style, view, street, yard – even the exact same floorplan can have vastly different value based on the street it’s on or the view. Size of the yard and privacy are also critical components of value.

· Amenities – private or community pools and other amenities can affect value as well.

Your agent will bring recent sales for homes that compare to yours. As you look through these listings, you can add or subtract values based on the differences. This is the same process an appraiser will use to approve the loan. While this is more of an art than a science, the right comps can help you properly price your home for a smooth sale.

Overall Market Update – 5 Realities for Sellers Now

Over the past few years, most of the US has been in a strong seller’s market. Historically low interest rates coupled with rising incomes resulted in buyers who were ready and able to buy a new home. It was a crazy time when sellers needed to do little more than put a sign in the yard to attract multiple offers.

However, the post-Covid housing market is quite different. The uncertainty in the economy has slowed the pace and rising interest rates have caused buyers to reconsider their purchase, and the amount they are willing to pay. As a result, sellers must go back to the tried-and-true methods of selling a home, debunking the myths of the past few years. 5 “New” Realities for Sellers

1. Price the Home Realistically –Now sellers must be more careful and price the home realistically to avoid losing the precious early days of a listing when buyer’s interest is highest.

2. Make Repairs – Buyers have more choices now and they will be more careful about buying a home that needs a lot of work.

3. Consider Making Concessions – Buyers often ask for reasonable concessions; sellers should weigh the offer before rejecting.

4. Staging is Back – Make sure the home is show-ready and sellers may consider some simple staging to make the home more appealing to buyers.

5. Be Prepared to Wait – The pace has slowed. In a “normal” market, most homes take 30-45 days to enter escrow.

Finally, sellers should pay attention to their local market and determine the right time to list. Balance has returned to the housing market.

Is My House Up to Code?

Building codes change over time and for people who have owned their homes for a long time, they may not know if their home is out of code and if so, does it matter.

Building codes and violations from jurisdiction to jurisdiction and focus on issues that can affect the safety of the dwelling and its occupants. A home that’s “up to code” may answer the questions:

· Does the home have fire escapes and exits?

· Are plumbing lines intact and functional?

· Are construction materials in good condition and free from asbestos and other hazardous chemicals? ·

Is the home well-lit and free from tripping hazards?

· Is the HVAC system working efficiently?

Avoid Code Violations

There are things to look for in both an existing house and a potential home.

· Check for any permits on the home and always ensure any work done on the home includes permits.

· Test for hazardous materials such as asbestos or lead. These materials are common in older homes. If found, these need to be removed by professionals to avoid health issues from contamination.

· Poor bathroom ventilation is a big code violation. The humidity can lead to rot and mold which is expensive to remove and dangerous to the occupants’ health.

· Shoddy electrical work is also common in older homes. Lack of grounded wires, spliced wires, and DIY repairs duct-taped together can be very dangerous.

Understanding code violations can help the homeowner to avoid issues. All this information is readily available through local jurisdictions and home inspectors can provide more explanations to help mitigate any problems.

Can My HOA Make Me Get Rid of My Dog?

Most homebuyers know to review the HOA (Homeowner’s Association) documents provided by the seller during disclosures to ensure the rules will not interfere with their lifestyle. Yet, once they become homeowners, often these same people do not pay attention to bylaw changes over the years. So, when they find themselves in violation of a bylaw, they are caught off guard. When this affects a beloved pet, this can be very upsetting. But can an HOA force a homeowner to get rid of their pet? Often, they can.

An HOA has a duty to create and enforce restrictions to ensure the well-being and safety of the homeowners in the association. If they operate within the guidelines of federal anti-discrimination laws, HOAs have broad latitude to create their bylaws, including the complete restriction on having animals in one’s home or on HOA property.

This is an extreme rule, however. Typically, restrictions include the requirement to keep pets on a leash, to remove pet waste, and to keep pets off association grass or landscaping. Considered “reasonable restrictions,” an HOA may prohibit a specific type of pet, such as a pig or bird. It may also limit the size or breed of a dog.

One exception to any restriction is the ability of an owner to have a service animal. Another situation that may allow a pet in contradiction to a bylaw is a member who has already had a specific animal when the rules changed. In most cases, these animals are allowed to remain.

Most HOA communities welcome pets, but an HOA does have significant power to influence the standard of living within the community. Careful understanding of the HOA and climate of a community will avoid painful issues and ensure a pleasant homeowning experience.

6 Features of a Kitchen Remodel That Are a Waste of Money

Kitchen remodels are always popular. The pandemic has increased home improvement projects even more as people embrace the idea of staying home more. While it’s easy to find inspiration for these kitchen remodels, there are great ways to save money and still create a beautiful, welcoming space. 6 Kitchen Remodel Features That Are a Waste of Money

1. Expensive Backsplashes – Backsplashes can make a huge visual impact, but more expensive isn’t necessarily better. There are many cost-effective materials that mimic more expensive quartz, marble, and glass.

2. Designer Appliances – Designer labels look great on shoes and purses but look for style and function for new appliances and forget the designer brands that can cost twice as much for the same look.

3. Trendy Hardware – Hardware is one of the least expensive ways to update a kitchen, but there is still a cost. Balance personal style with price and avoid fad fixtures that will need to be replaced soon.

4. High-Tech Gadgets – Tech is fun, but will you really use your refrigerator to build a shopping list or turn on your oven from the beach? Most likely, tech gadgets in the kitchen will go to waste.

5. Moving Electrical/Plumbing – When possible, work within the current layout of electrical and plumbing access. Relocating these sources is expensive and difficult.

6. Open Shelving – Displaying beautiful plates and glassware may be appealing but consider the upkeep to maintain this look. You may end up adding closed cabinets anyway for more money after the remodel.

A kitchen remodel is exciting but expensive and time consuming. Fortunately, there are ways to lower the cost and still have the fresh, beautiful kitchen you’ll want to spend time in.

10 Most Common Home Buyer Questions

Buying a new home is exciting and confusing. There are a lot of steps to buying a home, and people have questions. These are the most common questions home buyers have, and the answers.

1. How do I get started? – The first step is to speak with a lender and get a pre-approval. This will tell you, and potential sellers, how much you can afford.

2. How long does it take to close on a home? – Typically, it takes about 30-45 days once contracts are signed to complete the lending, appraisal, and inspection processes.

3. What does my agent do? – A buyer’s agent will negotiate terms and manage the closing process from start to finish.

4. How much do I pay for a buyer’s agent? – Nothing. The seller’s agent gives the buyer’s agent a portion of their commission from the seller.

5. What credit score do I need to qualify? – A 620 FICO score or higher is required for most home loan programs. Talk to a lender for other options for lower scores.

6. How much money do I need for a down payment? – It varies. FHA loans start as low as 3% and most lenders offer standard programs for a 5% down payment.

7. What other fees will I need to pay? – Closing costs and loan origination fees will add another 2-4% to the costs.

8. What if I change my mind? – Your agent will work with you to build in contingencies for conditions, loan terms/approval, and other protections to allow you time to evaluate the home during escrow.

9. When do I get the keys? – Unless you’ve negotiated extra time for the sellers to move, you’ll get the keys at the closing.

10. What’s the best advice for home buyers? – Trust the experts and ask lots of questions. Buying a new home is exciting. Reduce any anxiety by finding a good buyer’s agent who can help you make the best choice for your needs.

Should I Use My 401k to Buy a Home?

Buying a home can be a financial stretch. With soaring home values and rising interest rates, many potential first time home buyers find saving for a down payment increasingly difficult. For many people, the main source of savings is in the form of a 401k and tapping into this resource for a home purchase is one way to find the down payment necessary to finance a new home; but should you use your 401k to buy a home? Experts are conflicted.

A 401k is a retirement savings plan offered by employers which takes pre-tax earnings and deposits it into an investment account for use in retirement. The money in a 401k account can be accessed by either taking out a loan against the balance or by a straight withdrawal. A withdrawal before the age of 59.5 is also subject to a 10% penalty.

Taking out a loan from a 401k account may be a viable option for potential home buyers. For one thing, a loan from your 401k should not count against your borrowing power. You also don’t need to qualify because you are borrowing from yourself. The amount you can borrow is limited, for example 50% of the balance, and typically must be repaid within 5 years. The other option is a simple withdrawal; the 10% penalty is incurred, but the value is not usually limited.

Saving for a down payment can be challenging. Using your 401k to help may be a great option. Speak with your financial advisor and see if this is the right financial move for you.

Short-Term vs Long-Term Rentals

Over the past few years, there has been a lot of excitement about owning a short-term rental as part of an investment portfolio. This marks a dramatic change from the traditional long-term rental model. As more travelers utilize vacation rentals instead of hotel chains for their trips, you may be wondering if owning a short-term rental may be the right situation for your needs.

Short-term rentals have caused a stir in many communities. Many full-time homeowners do not like having these properties in their neighborhood. Unruly vacationers often bring a party atmosphere to their quiet streets and some cities have banned them completely. In other areas, they are severely restricted in their use.

Another consideration is the amount of time a short-term rental will take to manage. Unlike their long-term counterparts, short-term rentals often require more repairs and maintenance as the tenants do not treat these properties as their homes, as long-term tenants do. Short-term rentals also require someone to be available 24/7 to address any needs of the guests. Of course, you can hire a property management company to handle these issues, but that will cut into profits and average 20%-30% of rents.

Short-term rentals can have a larger return on investment than long-term rentals, but they come with more work. They also have significantly higher vacancy rates, advertising costs, cleaning, and maintenance costs. On the other hand, having a vacation property you can enjoy yourself may tip the scale. There is no one-size-fits-all approach to real estate investing. Consider what works for you and make the best choice for your goals.

How to Price Your Home to Sell in a Softening Market

The summer selling season has come. Unfortunately, those home sellers who were looking forward to sky-high prices and multiple offers may be disappointed to find the market softening. In a declining market, pricing a home becomes critical to success.

Pricing your home in a softening market

The first step is to realize the market has changed. Buyers will not overpay for a home in an uncertain market. Whereas just a few months ago it might have made sense to “test the market” and set an aggressive price, sellers who try that strategy today will lose valuable time, risking an even slower market when the home sells.

Home Value Truths

• What you paid for your home doesn’t affect its value.

• Your asking price does not affect its value.

• What it might have sold for 2 months ago does not affect its value.

• What your agent tells you about price does not affect its value.

The value of your home is determined by what a qualified buyer in today’s market is willing to pay for it, comparing it to others on the market for sale.

Pricing Strategy in a Softening Market

Your pricing strategy should be the same, regardless of whether you are in an accelerating or declining market – to price the home ahead of the market. In a declining market, that means you should price your home slightly below the most recent comp.

Selling a Property with Tenants in Place

The strong seller’s market has prompted homeowners across the country to consider selling their homes. What if your property is a rental unit with tenants in place? Can you still sell and take advantage of the rising home values? Yes, by understanding the steps and following a few tips, you maximize your profit in this strong market.

The first step in selling your home with tenants in place is to understand your rights and responsibilities. The kind of lease you hold will determine if you can simply give notice to the tenants or if the new owners will buy the home with a lease in place. Only month-to-month leases can be terminated unilaterally with proper notice.

Next, meet with the tenants and discuss the situation. Explain your reasons for selling and assure them that you wish to make it as easy as possible. Offer to sell the home to the renters first, and then discuss any future plans they may have. If they can’t or don’t want to buy the property, you may be able to offer them money to move. Your goal must be to have the cooperation of your tenants so they will help facilitate showings and maintain the home.

When you have tenants, who will remain in the home after the close due to their lease, then you must disclose the lease terms to the buyer. The new owner will be legally obligated by the lease. In a strong market, you may find a buyer willing to wait for the expiration of the lease, even if they intend to occupy the home.

Selling with tenants in place doesn’t have to be difficult. Do your homework, understand your obligations and be transparent with the renters and potential buyers. This way, you make it easy on all parties and can reap the reward of high home values.

Two Ways Homebuyers Can Win in Today’s Market

It’s no secret that many prospective homebuyers are finding the current real estate market challenging. One of the more unexpected consequences of the Covid pandemic was the hyper-focus on one’s home. This has resulted in a robust market where sellers are seeing advancing home sales prices and multiple offers.

While competition is fierce, clearly for sellers to sell, they need buyers. If your goal is to find a new home this year, there are a couple ways you can maximize your ability to have your offer accepted.

Two Ways Homebuyers Can Win in Today’s Market

1. Act Early - There are a couple reasons why home buyers should start early this year. With rising inflation, interest rates are likely to rise this year. While conventional wisdom may suggest lower real estate prices with an increase in mortgage rates, this is a gamble. Lower interest rates can not only save homeowners thousands of dollars over a 30-year term, but also provides better buying power with lenders, providing more choices.

2. Buy Now and Move Later - The rapid pace of the current market affects not only buyers but sellers as well. In a typical market, sellers often have weeks or months to find their replacement property. Buyers can sweeten their offer by asking about the sellers needs and allowing them extra time to move, offering to close quickly but renting to the sellers for 2-3 months to allow them time to find their new home. The bottom line is that home loan rates and home prices will likely continue to advance throughout 2022. Potential homebuyers who move quickly can maximize their buying power and ability to win the home.

Home Improvements During Labor Shortage

Tight labor markets are affecting industries across the country. Skilled and unskilled jobs remain unfilled as employers struggle to find prospective employees. For anyone ready to hire a contractor or handyman to perform home improvement projects, this shortage is causing frustration. As more people embrace the “staycation” and seek ways to upgrade their homes, many are finding few tradesmen to even come to provide estimates, much less schedule the work.

If you are trying to find good people to help with home improvement projects, there are still a few ways to achieve your goals.

Here are a few tips to help you find a professional to help with your project.

• Social Media – One great way to find reputable laborers is to ask for help from local social media groups. Apps like Facebook and Next Door have local groups where you can ask for help. Make sure to mention where you got the referral; the tradesmen will want to live up to the referral and are more likely to provide good, timely service.

• Big Box Stores – Home improvement stores like Lowes and Home Depot offer a wide variety of in-home services. They also have referral services for projects outside their scope and these contractors keep the stores happy by providing good service to homeowners.

• Online Service – There are sites like Angie’s List and Home Advisor where professionals pay for leads. Because they have paid for the contact, they tend to be more likely to follow through on the project.

The labor shortage is affecting all aspects of life right now. If you have a home improvement or upgrade project, there is no reason to put off the work. Try these tips for finding qualified and vetted help.

Stay Focused on Your Goal

Buying or selling a home can be stressful, even in normal times. Right now, when the housing market is moving at a frenetic pace, both buyers and sellers are making quick decisions and are feeling extreme pressure. As the tension rises, it can be easy to overlook the end goal; right-sized home, relocation, dream home, etc. Try not to lose focus!

Buyer Challenges

Facing a very tight inventory of available properties, buyers have limited time to arrange to tour homes and knowing they must make a quick decision once they have. Buyers do not have the luxury of a second look or hesitation and often are competing against multiple offers, adding to the pressure.

Seller Challenges

Sellers are also feeling the challenge of the frantic pace. While it is nice to have multiple offers from which to choose, the fact that the offers are at times being made sight-unseen means that some of the offers may not be the buyer’s first choice and they could lose a “real” offer by choosing to work with the wrong one. In addition, if the seller intends to buy another home, then they will be in the same position as the buyers once they enter that side of the competitive market. The bottom line in each case, however, is to stay focused on the end goal. Why are you looking to buy or sell? Working with your agent, and relying on their experience, keep your eye on the prize and recognize that the goal will be worth the effort.

Landlord Deductions from Security Deposits

A rental deposit against damage is a standard part of all housing rental agreements. The purpose of the security deposit is to protect the landlord from loss in the event the tenant does not take proper care of the property. Most renters don’t even think about it when they sign a new lease, assuming they will get their entire deposit back when they move out. So, it often comes as a surprise when the refund amount is lower than they paid when they signed the agreement. Many renters are surprised to find out what the landlord can deduct from their deposit.

Here are some common items that the landlord can charge to renters when they leave:

• Non-Payment of Rent – This should seem obvious; if the tenant leaves before the lease is up or simply owes back rent, the landlord can deduct or keep the deposit to compensate.

• Unpaid Utilities – Utility companies will hold the landlord responsible for unpaid bills, so if the water or electric bill has been unpaid, they will deduct this from the security deposit.

• Unusual or Excessive Cleaning – While normal wear and tear are not deductible, excessive cleaning can be charged to the renter.

• Damage – This also should be obvious. This was the main purpose of the deposit.

• Trash and Other Items Left Behind – Renters should think twice about leaving that old patio furniture behind. Any cost to remove and dispose of anything left in the property can be charged against the deposit.

Finally, breaking the lease for any reason could put your deposit at risk. Renters need to educate themselves about the risks to their deposit and read the lease carefully for any specific terms included by the landlord. This can help renters avoid the shock of a smaller-than-expected refund check.

10 Ways to Make a Small Bathroom Look Bigger

Small bathrooms don’t have to be dark and dank. Contrary to popular belief, making a small bathroom appear larger is not as hard as it seems.

Here are 10 easy ways to quickly make a small bathroom look bigger.

1. Mirrors – Add larger mirrors to reflect light and provide the illusion of space.

2. Lighten Up – Lighting doesn’t have to be harsh, but adequate lighting is a must.

3. Remove Barriers – Open up the room with clear glass shower doors or shelves.

4. Monotone Decorating – Use the same light colors on walls, countertops, floors and cabinetry to allow for the eyes to flow through the space.

5. Negative Space – Consider using a pedestal sink which takes less space than traditional cabinets.

6. Declutter – Find locations out of sight for toiletry items.

7. Heads Up – Use the vertical space in the room too, tall cabinets provide storage and add interest to the room.

8. Store Mats and Towels – Keep towels and floor mats out of sight unless in use. A simple hand towel in a complementary color tone is all most guests need.

9. Pocket Doors – Where you have room, use pocket doors or popular barn sliding doors to add extra space inside the bathroom.

10.Glass – Clear glass shower doors is a great way to remove a visual barrier and make the room seem larger.

Top Home Improvements with the Best ROI

You already know that your home does not look like the pictures in the home magazines. If you’re ready to list your home, you might be wondering if you should do some home improvements or upgrades before listing. The truth is not all changes will bring the best Return on Investment (ROI). Before you plan a big, or small, improvement project, here are the top home improvements which have been shown to bring the best “bang for the buck.”

• Yard clean-up and landscaping

• Complete home cleaning and de-cluttering

• Replacing the front door

• New siding, exterior repairs and/or fresh paint

• Kitchen and/or bath upgrades. New countertops, fixtures, cabinetry

• Deck and patio additions, outdoor kitchens and/or BBQs

• Addition of living space; bonus rooms, extra bathrooms

First and foremost, home buyers search for properties with good bones. Ensure there is no deferred maintenance, and then consider a few updates to give your home a fresh appeal.

Age-Old Real Estate Selling Tips to Ignore

Homeowners planning to sell their home tend to get unsolicited advice from every direction. “Do this,” “don’t do that”; it can be difficult to decipher the good from the bad advice. As homebuyers become more informed and market-savvy, knowing which age-old advice to ignore can be important. Here are some adages which should be retired immediately.

• Spring is the best time to sell – While spring is traditionally when home sales tick upward, the real key to selling is inventory levels, which typically occur other times of the year.

• The first offer is always the best – While all offers should be considered, don’t feel pressured to take a sub-par offer just because it was the first.

• Open houses sell houses – Not anymore. Only 2% of homes sell as the direct result of an open house, according to the National Association of Realtors®. Virtual tours and online photos will attract more interest than foot traffic.

• Price high so there is room to negotiate – Homebuyers are more sophisticated about pricing and will not bother with overpriced homes.

• If you don’t want to make repairs then lower your price – Unless you market your home as a fixer-upper, buyers expect the home to be in reasonable condition and a low price might not be enough to encourage an offer.

• You must update your kitchen to sell – Buyers do love renovated kitchens, but keep in mind that you typically recover only 81% of the cost of a remodel when selling.

Selling a home is a major life decision. Before you begin the process of listing your home, do your research and make sure the advice you rely on is valid in today’s changing environment.

Investment Rent or Flip

There are a wide variety of ways to invest in real estate; one can make money in any of these options, one can also lose their money. To be successful in real estate investing, it’s critical that you identify what skills you have and your tolerance for risk. Then choose a type of investment that works for you and repeat that model.

Investors can make great profits by both flipping properties as well as holding them as rentals. The difference really boils down to a few considerations. First, what kind of income are you seeking? Active or Passive? Actively buying, fixing and flipping properties is quick cash that requires careful timing and effort. Rental properties on the other hand offer passive long-term income which accumulates over time. Additionally the property value increases during this time. The downside is that one must invest time in property maintenance and tenant management.

The second concern is risk. Flipping a property is not traditional investing where one buys and holds an investment. Flipping is really speculation. When buying a flipper, one must carefully gauge the cost of refurbishment, remodeling and the cost of the holding time into the price valuation, then carefully market the home and realize the profit. Any number of variances can go wrong which could cause the value to drop and profits to reduce or even disappear, such as a delay in remodeling or a slow real estate market.

Both types of investments can bring nice profits. Determining what’s best for you and your talents is important in choosing the best option for your financial goals.

Pavilion Park January Housing Stats are here...