Author: Marlowe Clark

Don’t Skimp On Preparing Your Home For Sale This Spring

Spring is already halfway over, so if you’re planning to sell your home this season, you should get on it quickly. Especially since you may need to do some sprucing up to get a good deal. If you bought your home during or shortly before the pandemic, this may be your last chance to benefit from the spike in prices. But buyers aren’t simply snatching up any home they see, like they were during the pandemic. They’re being more deliberate, so you need your home to be appealing.

This means all the standard procedures for increasing your home’s appeal apply. These include things such as repairs, upgrades, repainting, curb appeal, and staging. In some markets, you can get away with not doing these things, or only doing some of them, because the buyers are happy to purchase a cheaper home and perform the upgrades themselves. Not the case this spring. The seller will have to make the investment, which hopefully translates to a higher price as well.

Photo by Marta Bibi on Unsplash

More: https://www.realtor.com/advice/sell/what-first-time-home-sellers-need-to-know-to-be-successful-this-spring/

When You Should And Shouldn’t Put 20% Down

Having a 20% down payment used to be a requirement for nearly all loans. That hasn’t been the case for quite some time, but it’s still touted as the conventional wisdom. In many cases, that may be true, but it’s not always the best idea. There are both advantages and disadvantages to putting 20% down.

If you have the money available already, it’s quite likely that the benefits heavily outweigh the drawbacks. Even though 20% down is no longer a requirement to get a loan, it is still a requirement to avoid mortgage insurance fees. Putting 19% down, for example, simply makes no financial sense at all, regardless of your financial situation. It’s also good to put down as much as you feasibly can in order to reduce the loan amount, thereby reducing your payments. The 20% mark is important if you can reach it.

If you still need to save money in order to achieve a 20% down payment, you’re going to need to crunch some numbers and also make some predictions in order to arrive at the correct solution. If you’re close to being able to put down 20%, it may be in your best interest to continue saving up to avoid mortgage insurance fees. But if you aren’t close, it may be best to simply forget about it. Even if you are definitely able to save money, by the time you get to the point that you can put down whatever 20% is now, home prices are likely to be significantly higher. In that case, it may be better not to wait. You also need to consider other costs and where you’re getting the money. If you need to take out a loan or draw on investments to reach 20%, this is probably not a good investment, unless it’s the only way you can viably make a home purchase.

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Cash-Out Refinancing A Solid Option For Home Renovations

If you’re planning to renovate your home, whether you intend to continue to live in it or to sell it at a profit, you need to think about how to pay for the renovations. Of course, it’s possible you have the cash on hand, which is great. But if not, there are a few financing options you can look into. It’s common to get a home equity line of credit (HELOC) or simply take out an additional loan. However, another option you may not be aware of is cash-out refinancing. It works by refinancing to a loan amount higher than your current loan balance, and taking the difference as cash.

The most important thing to consider when determining if you should get a cash-out refinance loan is the interest rate. It very likely won’t be the same as your current interest rate. If the rate is higher or even the same, it’s probably financially negative in the long run unless you can increase your home’s value significantly with the renovations. That’s why it’s a good option specifically for renovations. On the other hand, it’s entirely possible the rate is lower, or simply lower than traditional loans or HELOCs, in which case it’s a good financing option for any purpose. However, you may not want to use cash-out refinancing for large projects. Since you don’t receive the entire value of the new loan, but only the difference between the new loan balance and old loan balance, you’d need to increase the principal significantly to finance large projects. This could increase your interest payments by quite a bit even if the rate is lower.

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The Bills That The Business Lobby Doesn’t Want Passing

The business lobby in California, and in particular the California Chamber of Commerce, has had quite a lot of success taking down bills that they deem “job killers.” Many of these bills are not at all designed to kill jobs, but rather to improve conditions for employees. To the business lobby, these are the same thing, but these are often the types of bills that the majority of the populace in California would tend to support.

One of the bills the California Chamber of Commerce is targeting is a bill to tax total wealth on individuals with a net worth of $50 million or more. Introduced by Milpitas Democratic Assemblymember Alex Lee, the bill would be the first of its kind if it passes. Obviously, there have been taxes on income, but so far, none on net worth. Lee’s argument is that the stocks and properties owned by the ultra-wealthy allow them to legally borrow and transfer funds in a way that avoids a significant percentage of income taxes. According to the chamber, this would simply convince the ultra-wealthy to leave California, rather than increase tax revenues.

The second bill was proposed by Los Angeles Democratic Senator María Elena Durazo. The bill would increase the minimum wage for health care workers to $25 per hour. According to Durazo, health care workers — especially whose who are women or people of color — frequently take home poverty wages, despite working multiple shifts due to being understaffed. The chamber argues that increased payroll costs for health care facilities would simply be passed onto patients, reducing health care affordability.

The chamber has a similar argument against the proposal to increase the required minimum paid sick days offered per year from three to seven, claiming that either the costs will be passed to consumers or the employers will cut benefits or lay off workers. Long Beach Democratic Senator Lena Gonzalez, who introduced the bill, says that the current sick leave is not adequate and forces employees to either forego pay to stay home or risk infecting coworkers.

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More: https://calmatters.org/newsletters/whatmatters/2023/03/california-business-job-killer-bills/

Sharp Divide Between East And West US Market Direction

For the past couple of years, house prices had been rising dramatically across the country. Here in California, we’re now starting to see prices drop since the start of this year. Prices are now falling in all 12 major housing regions west of Texas, as well as in Austin, TX. The same can’t be said everywhere, though. In the 37 largest metros east of Colorado, excluding Austin, TX, prices are still rising. Of course, markets can differ drastically by state, but such a clear divide between eastern and western US may be unprecedented.

Falling home prices was the expected result of the federal benchmark rate hikes. It seems to be working in the western US, as prices become too unsustainable to continue to increase. The regions with the most significant price drops are the ones that were rather expensive. But there are still other factors at play in the eastern US, driving prices still upward. Some areas, such as Hartford, CT and Buffalo, NY, never reached unsustainable home prices and remain rather affordable. They also have rather low inventory. These factors combined are keeping prices from dropping, leading to an 8% increase in prices in January. Florida is attracting many new employees with multiple financial companies relocating to Miami in 2021 and 2022. Prices are expected to eventually start falling even in the east, but don’t expect anything drastic. Low inventory across the country is preventing any sudden market collapse.

Photo by Will Francis on Unsplash

More: https://www.foxbusiness.com/real-estate/tale-two-housing-markets-prices-fall-in-west-while-east-booms

How To Prepare To Buy A Home In A Short Sale

Short sale is the term for the sale of a property when the seller owes more on their mortgage than the listing price. The extra regulations that apply to a short sale typically apply to the seller, but that doesn’t mean the buyer doesn’t need to do their research as well. Much of the homework that goes into buying a short sale property is best done ahead of time, so these types of transactions work most smoothly when the buyer is specifically looking for short sale properties.

If you know you’re looking for a short sale property to buy, make sure to find an agent that specializes in short sales, or at least has a large amount of experience with them. Expert short sale agents will have the best idea of a reasonable purchase price and what types of offers will be most attractive to the seller. You may have heard the common advice to get a pre-approval for your mortgage. In the case of a short sale, it’s best to go a step further and get a full approval. Nearly everyone who offers on a short sale will be pre-approved, so that alone won’t make you stand out, but a full approval will. And whether you’ve planned on purchasing a short sale property ahead of time or not, it’s important to be patient. Short sales typically take longer than traditional home sales. In fact, buyers often drop out of short sale negotiations because they simply don’t have the time, leaving you with less competition if you’re patient.

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Huntington Beach Adamant About Anti-ADU Stance

SB 9, also called the HOME Act of 2021, is a California law requiring cities to allow homeowners to subdivide lots into potentially up to 4 units. This law makes it significantly easier to built accessory dwelling units (ADUs). Huntington Beach has decided it doesn’t like this, and is willfully ignoring the law, stating that they won’t process ADU applications. The City Council has even gone as far as to enact an ordinance declaring that they are exempt from some of the requirements of the Housing Accountability Act (HAA). The HAA streamlines the approval process for low- and moderate-income housing. Huntington Beach is not compliant with HAA requirements, and so the city is attempting to declare that the regulations simply don’t apply to them.

This is entirely illegal on the part of Huntington Beach, and so naturally, it hasn’t gone over well. The city has received letters from the Department of Housing and Community Development (HCD) and has been sued by the California Office of the Attorney General (OAG). Knowing that the state does have authority in this regard, the Huntington Beach City Council is starting to backpedal. But this probably isn’t the end, nor was it the beginning. Huntington Beach has already been sued previously by the state for housing law violations, settling in 2020 and losing millions of dollars in state funding.

Photo by Tetiana SHYSHKINA on Unsplash

More: https://journal.firsttuesday.us/california-attorney-general-clashes-with-nimbys-in-huntington-beach/89592/

Most Recent Buyers Underestimated Costs Beyond Purchase Price

Most buyers are aware that homeownership has some extra costs associated with it. You can’t just pay the purchase price and be done. But it seems the vast majority aren’t prepared for just how high those costs can be. A whopping 90% of homebuyers in the past three years underestimated the hidden costs of homeownership, and 73% regretted some aspect of their purchase.

For a third of them, the culprit was property taxes. Even if you have purchased before, buying a new home in a high-priced market will probably drastically change your property tax values. A quarter or slightly over a quarter of respondents didn’t think roof work, renovations, or utilities would be so expensive. Annual expenses among respondents average $17,459 on top of mortgage payments. In hindsight, 57% of buyers know what they would have done differently. Among this subgroup, 42% would have purchased a home that didn’t require quite so much maintenance. It may cost more up front, but the annual costs could be significantly lower. 33% think they just needed to negotiate a lower price, and 29% would have gone for a lower-priced home to begin with. 27% believe it was simply the wrong time to buy, and they would have waited for a better deal.

Photo by Антон Дмитриев on Unsplash

More: https://www.cnbc.com/2023/03/17/90-percent-of-homeowners-underestimated-costs.html

You May Be Eligible For California’s New Dream For All Shared Appreciation Loan

The California Housing Finance Agency (CalHFA) recently launched the Dream For All Shared Appreciation Loan, a secondary loan to be used in conjunction with CalHFA’s Dream For All Conventional first mortgage. This secondary loan carries its own set of requirements, which may or may not differ from the initial Dream For All Conventional first mortgage. The requirements of the secondary loan are provided here, but you should consult with CalHFA to be sure that you meet all requirements. The requirements are provided for two categories, both for the borrower and for the property.

The borrower must be a first-time homebuyer, which CalHFA defines as not having owned and occupied a home in the past three years. The borrower must also occupy the property as their primary residence and meet income limits for the program. In addition, the borrower, or at least one of the co-borrowers if there is more than one, for any CalHFA first-time homebuyer loan must take a CalHFA approved Homebuyer Education and Counseling course. This course does have a fee, which varies by method and agency, and can be done online or in-person. The Dream For All program also has its own additional course. Fortunately, this course is free, but it is only accessible online.

The property requirements are simple for single-family residences and manufactured homes, which are both allowed, but may be more complex for other types of properties. Condominiums must also meet the guidelines for whichever initial mortgage you choose. Guest houses, granny units, and in-law quarters may be eligible, but would not be eligible in addition to the main residence, since the property must be only one unit.

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More information about the Dream For All Shared Appreciation Loan here: https://www.calhfa.ca.gov/dream/index.htm

What Is A Wrap-Around Mortgage?

Wrap-around mortgages are not very common, but it’s still a good concept to know in case you find it difficult to get a more traditional mortgage loan. A sale with a wrap-around mortgage has two important components distinguishing it from a regular sale: First, the seller retains the current mortgage on the property being sold. This differs from standard sales in which the seller normally pays off the remaining mortgage as part of the sale process. Second, the loan is not issued by a lender but rather by the seller. In this way, the seller is most likely planning to pay their mortgage using the money gained from payments the buyer makes to the seller on their new mortgage.

Wrap-around mortgages have both advantages and disadvantages. The primary reason to get a wrap-around mortgage is that they don’t have any standardized qualification requirements. This mostly benefits the buyer, but can also be useful to the seller if they’re having difficulty finding buyers. The primary drawback is that the buyer and seller must write up the contract themselves, since there is no lender involved. That means both parties need to be legally and financially savvy. It’s also impossible to wrap around a mortgage that doesn’t exist, so the seller needs to have a mortgage. There are also cons specific to the seller and buyer. The seller in this instance incurs the same financial risk that a lender would normally. The buyer is very likely paying a higher interest rate, since the arrangement is not worth the risk to the seller unless they are profiting.

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How To Baby-Proof Your New Home

A common reason to purchase a new home is needing more space because you are expecting kids. But just having more space isn’t going to prepare your home for all the trouble a baby can get into. By the time your kid is able to crawl, you’ll want to have finished baby-proofing your home.

Some things are probably pretty obvious, like using baby gates, locking drawers, keeping hazardous substances away, and covering up sharp edges. But some safety precautions are things you may not think about. While it’s true that babies often like soft and fluffy blankets, leaving them around loose can be a suffocation risk. When you’re in the kitchen, you’re probably used to having pot and pan handles turned towards you for ease of access. But once your kid can walk, there’s a good chance they can reach up there. Make sure to turn the handles inward. You should also acquire a latch for the oven. Bathrooms can be dangerous for both kids and adults, so you may already have taken precautions such as non-slip mats for your bathroom. But if not, make sure to get some. You may also want to get soft covers for the knobs and spouts.

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Honesty Is The Best Policy On Mortgage Applications

Some of the questions on a mortgage application may seem unnecessary, but they’re all there for a reason. Certain omissions can lower your interest rate and make your offer seem more appealing. But even if you haven’t done anything wrong — especially if you haven’t done anything wrong — you should always disclose all relevant information.

Money changes hands all the time, and the transfer doesn’t always leave a paper trail. But lenders will still find it odd for you to suddenly have additional money or fewer debts. It’s perfectly legal to ask a friend or family member for some cash to help you buy a home or pay off a debt. That money came from somewhere, though, and if you don’t list it, your lender could assume you are hiding something and deny your application.

A common lie that seems more innocuous but can actually have even more drastic consequences is stating that you plan to live in the home when you actually don’t. People do this because interest rate is lower on loans for primary residences, and they figure it’s fine because of course they can always change their mind. However, this is actually a crime. It’s considered a form of mortgage fraud.

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Preparing Your Home As A Vacation Rental

If you’re looking to earn some extra income over the summer, consider renting out your home as a vacation rental. It’s not too early to start thinking about it, especially if you want to buy a vacation rental house. Spring is the top of the real estate market and there will usually be more options available to buy. Even if you want to rent out your current house, there’s some prep work to be done first.

When marketing a short-term rental, think of it as a hotel. That’s where most people stay while on vacation, so you need to make sure it’s attractive to people who would otherwise simply book a hotel room. Advertise the amenities you have and the benefits of staying there over a hotel room. Price probably isn’t going to be one of them, but it’s still definitely something you need to think about. Pricing vacation rentals is difficult because they probably won’t be earning income all throughout the year, especially if you live there yourself most of the time. This means you may need to charge more to cover your monthly costs and retain a profit, unless you don’t have a mortgage. But you don’t want to charge so much that no one rents from you.

The other thing to consider is protecting yourself and maintaining your property. With the property changing hands between multiple tenants, you never know what could happen unless you keep an eye on it, which may be difficult if you are also on vacation yourself. Talk to property management companies to see what services they offer and for how much. You’ll want your home cleaned in between tenants, which may or may not require hiring cleaners separately from a property manager. Also take a look to see if you want additional liability insurance.

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Black Homeownership Inching Upward

Discrimination — sometimes legal, sometimes not — has kept Black homeownership rates below white homeownership rates for decades. Even now, Black homeownership rates are nearly 20 percentage points lower than the overall homeownership rate in California, at 35.6% versus 55% in 2021. Fortunately, it’s going up, albeit slowly. Between 2016 and 2021, the rate increased 2.5% percentage points.

Riverside County experienced the largest increase, going from 44% to 53% across the five years. However, the rate stayed the same or even decreased in some counties, including San Francisco where it’s remained just 22% and Santa Clara County which saw a drop from 30% to 25%. Even with the Black population in California only being about 6%, compared to the national value of 13.6%, it still accounts for over 2 million people. It certainly is difficult to find affordable non-rental housing for that many people, but there’s no reason it should be more difficult to house Black people than white people.

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More: https://journal.firsttuesday.us/black-homeownership-is-growing-slowly-but-surely/89465/

Biggest Regrets Of First-Time Sellers

Real estate articles will frequently talk about first-time buyers, since they are a significant proportion of buyers overall. Less discussed are first-time sellers. It may be time to change that, since it seems like they could use some advice from experts. In the past two years, 84% of first-time sellers wished they did something differently during the sale process. The four things first-time sellers most regret are their decisions regarding pricing, online presence, timing, and repairs.

The most frequent comment was that they should have priced their home higher. Of course, that depends on the market. That may have been true when they sold, but don’t necessarily take that to heart. It’s also possible to list too high, which may be a more common regret this upcoming spring. Regardless of the list price, though, 90% of first-time sellers believe they could have done something to get a higher price. For 39% of them, this may be better listing photos. Virtual curb appeal is important nowadays when many people are looking online for their purchases. Since listings with virtual tours get 69% more views, this could boost your chances by quite a bit, and 25% of people agree a virtual tour would have helped. According to Zillow, the optimal time to sell is the second half of April. Not everyone has the flexibility to do this, but 25% still wish they listed at different time. 36% also didn’t have a good idea of how long it would take to sell. Even though 66% of first-time sellers completed at least two home improvements before selling, 25% believe a bigger investment in repairs or improvements would have increased the sale price.

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More: https://www.yahoo.com/lifestyle/4-things-first-time-home-161131016.html

Despite Population Decline, California Remains Desirable

California has been experiencing a significant exodus of its residents, many of them moving to arguably quite dissimilar states, such as Florida, Texas, and North Carolina. The most salient difference between California and these states is political leanings; however, that’s not the reason people are leaving. The real reason is that California is simply too expensive. When asked where they would move if money were no object, the greatest percentage of people named California, at 27% of respondents.

This is definitely not where most people did move in 2022, but the responses of those people regarding their reasons for moving corroborate this idea. The two biggest reasons were better quality of life for 24% of respondents and lower cost of living or home prices for 23% of respondents. Note that respondents could pick multiple options, so they do not add up to 100%. Within quality of life, affordability was rated as the second most important factor, only below a safe neighborhood.

Along with California, New York and Illinois were also among the states that the greatest number of people left. The fact that these three states contain the three most populous cities in the country is probably not a coincidence. But this is not because people don’t like big cities. 40% of people would prefer to move to a city if they could, but many can’t afford it.

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More: https://homebay.com/moving-trends/

Home Improvement Projects For The Upcoming Spring Season

Spring is the hottest season in the real estate market. If your home is in need of some improvements before selling, now is the right time. Or, even if you aren’t selling, some seasonal DIY projects can bring something new to your own enjoyment of your home.

Something that will always help sell your home is a fresh coat of paint. And if you have the time, it doesn’t require contractors. Painting is relatively easy and only takes a couple hours to learn online even if you’ve never done it before. Or maybe you aren’t selling, and simply want a new look for the spring season. In that case, pastel greens, blues, and creams are good spring colors. If you have a garden, a project that will only take up a weekend of your time is building DIY planters. Many planters are made of wood, but stone planters are more durable. Building a stone planter just requires four slabs of stone such as granite or marble, one to two tubes of stone adhesive, a ruler, and cement tape. All you need to do is make sure the slabs are positioned correctly with the aid of a ruler, apply adhesive to the inside edges, and use cement tape to hold it together while the adhesive dries. Something more on the fun than practical side is bird seed rings, which are a treat for birds, and for yourself if you enjoy feeding them. They are made by combining gelatin, corn syrup, and flour into a paste, mixing that with a bag of bird seed, then using a donut pan to mold them into a ring shape. You can then hang them outside where they will attract birds.

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Fremont Retains Title As Happiest City In US

WalletHub, a personal finance website, releases its report on the Happiest Cities in America each year. 182 of the largest cities are ranked on 30 different metrics, condensed into three categories — emotional & physical well being, income & employment, and community & environment. Taking the number one spot with a total score of 76.10 out of 100 is Fremont, California, which has now been number one for its third consecutive year. Not only that, Fremont ranks highest in two of the three major categories, both emotional & physical well being and community & environment. Fremont’s rank in income & employment is 34.

California’s San Francisco Bay Area seems to be doing quite well for itself. Fremont itself is in this region, and so are the number 2 and number 5 ranked cities on the list, San Jose and San Francisco. These three cities and Oakland are the four largest cities in the Bay Area. Oakland is also in the top 15, sitting at number 13. The other 2 cities in the top 5 aren’t in California, though. These are Madison, WI at number 3 and Overland Park, KS at number 4. As far as best in category, we already know Fremont takes the top spot in two of them. But the top spot for income & employment belongs to Burlington, VT, which is also number 10 overall. The least happy city overall is Detroit, MI, but at least it’s not the absolute bottom in any category.

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More: https://www.foxla.com/news/california-happiest-cities-america-study

What To Ask Lenders When Negotiating Mortgages

There’s plenty of advice out there telling you that negotiating your mortgage is important and that you should get multiple opinions. However, unless you know what you’re looking for, you’re probably not actually getting the best deal. On the surface, it may look like the lowest rate you can find, but it likely isn’t. You’ll often need to dig and ask the right questions.

So what are the right questions? Ultimately, you want to know the exact breakdown of the estimate. As you probably already know, interest rates aren’t based on just one factor. You may not realize that some of these factors are actually negotiable, or you may even have more information about it than the lender and be able to correct the estimate. Ask if the estimate includes any discount points. Discount points are an up-front payment that lenders aren’t going to tell you actually lowers your interest rate, rather than being just a standard fee. Discount points are negotiable, but lenders won’t mention that unless you bring it up. The estimate that a lender provides may or may not also include closing costs. Discount points and lender fees are part of closing costs, but a significant portion of them are not actually under the lender’s control. Lenders frequently underestimate escrow fees, so when it comes time for you to pay the closing costs, your fee may be higher than the estimate even if the rate is locked. Make sure to only compare costs the lender can control.

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More: https://www.cnbc.com/select/negotiating-mortgage-rates/

What A Pocket Listing Is, And Why You Should Avoid Them

Most agents are probably familiar with a pocket listing, but if you aren’t an agent, you may not know what that is. Even if you do know what it is, you may not realize why they’re a problem. A pocket listing is a listing that is temporarily exclusive, before a delayed release into the open market. At first glance, this can seem like a win-win-win situation. Sellers don’t need to do as much preparation and their agent can vet the buyers for them. Buyers don’t have to deal with nearly as much competition. The agent gets double the commission by representing both sides.

However, it’s not all upside. There are also plenty of cons to pocket listings, and they may outweigh the benefits. A big problem is that pocket listings simultaneously skew the market while not being governed by the market. Not listing the properties on the market reduces inventory values, which skews both competition and prices upward, significantly hurting buyers overall. You may think this benefits the seller, but it actually doesn’t. Because the pocket listing isn’t governed by this upwardly skewed market, the buyer of a pocket listing is likely to pay significantly less than the distorted high prices. In fact, because of the total lack of competition, they’re likely to pay less than the actual market value. For the agent, being a dual agent is a lot of work and stress, and it’s only increased by attempting to make it a pocket listing. In the event the seller suggests a pocket listing, this isn’t as much of an issue. But an agent truly can’t push for a pocket listing without breaching their fiduciary duties to the seller, which include taking reasonable steps to locate a buyer. Even if it’s on the seller’s suggestion, there will always be a conflict of interest when representing both sides that the agent will need to delicately navigate.

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More: https://journal.firsttuesday.us/the-many-pitfalls-of-pocket-listings/89065/