Bay Area Real Estate and Community News

Feb. 28, 2024

What's Going On With Insurance in California?

Home insurance - home owners are required to have it, but why does it seem so crazy right now? California is experiencing a home insurance crisis right now. Insurers are leaving, premiums are skyrocketing, and some home owners are even seeing their insurance coverage disappear completely. So what's going on, how can you prepare and who can you turn to?

The most basic answer as to what's going on is climate change. As we're seeing these drastic weather events - firestorms, flooding, landslides and more - insurance companies are making conscious decisions about whether or not they will continue to provide coverage in California. They're also becoming more picky about the coverage they do provide.

What we're seeing these days in California are:

  • Fewer insurers
  • Skyrocketing premiums (some doubling!)
  • Homeowners losing their insurance due to new zoning, deferred maintenance, or age of the home, and more
  • Home buyers having a harder time getting insurance to meet lender requirements
  • More homeowners needing to utilize California FAIR Plan insurance - the insurer of last resort - with reduced coverage and high premiums

The pool of insurers has changed dramatically in the last couple of years. Here are some examples of the changes insurance companies have made in California. These aren't even the total in each category, so lots of movement has been taking place:

  • Stopped insuring in California -  AmGuard, Kemper, others
  • Stopped writing new policies in CA - State Farm, Allstate, Nationwide, others
  • Offering limited new policies in CA - Safeco, Farmers, USAA, others
  • Offering new policies in CA - AAA, Mercury, Homesite, others

For their existing clients, some insurance companies have even started to do client inspections, which are both in home and via drone, to look for any hazards they feel make the policy ineligible. These could include old/damaged roofs, fire hazards, tree/shrub overgrowth, etc.

Honestly, the insurance situation in California right now is a mess. So what can you do to help yourself out?

  • Be patient - if you're looking to buy a home, talk to your lender upfront about what their insurance requirements are. As soon as you have identified a home you are going to make an offer on, contact your insurance agent to see if they will insure it. You may need to consider a financing contingency if securing insurance is going to require you to go beyond your current insurer.
  • Be diligent - if you're a current homeowner, stay on top of your maintenance. Do roof repairs, update electrical and plumbing/pipes, cut back trees and shrubs, etc. Don't defer maintenance, it could cost you more in the long run if your insurance company notices.
  • Be prepared - rates are going up for everyone. So know it's going to hit your doorstep eventually as well and plan ahead. Set aside extra money for when that increase comes.

Insurance is an issue that impacts most residents in California, so everyone is feeling the pain. But if you can plan and prepare, it may make it a little less painful. And if you need a good insurance agent to guide you through things, let me know - I have some good recommendations!

Posted in Financial
Feb. 16, 2023

Why Listing with a Local Agent is to Your Advantage

 

Local Real Estate AgentWhen it comes to selling a home, there are a lot of decisions to make, and one of the most important is who to work with as your real estate agent. While some may think that going it alone (for sale by owner,) discount agents, or using a friend in another area is the best option, there are many advantages to listing with a local real estate agent that simply cannot be matched.

Here are just a few reasons why listing with a local real estate agent is to your advantage:

Resources 

San Carlos Home InspectionOne of the most significant benefits of working with a local real estate agent is their vast network of resources. Local agents have established relationships with local service providers such as home inspectors, contractors, and painters, making the process of selling a home much smoother. This means that they can provide you with a list of trusted service providers that they know and have worked with before, saving you the time and energy of searching for the right people on your own.

Area Knowledge

San Carlos Real EstateLocal real estate agents are experts in their community, with a deep understanding of the local housing market, schools, amenities, and other important factors that affect the value of a home. Having this knowledge allows a local agent to do a better job of marketing and representing your home. This is especially important when interacting with buyers at an open house. This level of community knowledge is something that out of area agents simply cannot match.

Market Knowledge 

Local agents have access to the local MLS, ensuring your home gets seen by the right agents and buyers. Additionally, local agents regularly tour homes in the area, providing them a first hand view of what the competition looks like - crucial for setting a sale price for your property. Only a local agent can provide you with valuable insights into local trends, such as changes in property values or new developments in the area. Furthermore, local agents typically have an extensive network of other agents in the area that they can tap into to market your home in a more personal way and expand the reach for your listing. These points, in particular, leave out of area agents and a significant disadvantage (and by association, any sellers who work with them). 

Accessible

Local Listing AgentFinally, working with a local real estate agent means that you will have someone who is accessible when you need them. Local agents can be on site quickly to show a property, meet vendors, or address any emergencies. While this may not seem like an important factor, it is actually one of the most important factors, particularly if your home is vacant while on the market. Keeping your property “show” ready and secure is critical.

While an out of area or discount agent may be appealing to you, it’s important to keep focused on your ultimate goal - selling your home for the highest possible price. The absolute best way to do this is to work with a local realtor. Local agents’ community knowledge, in depth market knowledge, networks, and availability make working with a local agent the only way to go for optimal success.

Posted in Selling Your Home
Jan. 31, 2023

How Prop 19 Can Impact You as a Homeowner

55+ tax rate transfer california

In November, 2020, California voters approved Proposition 19, which was enacted in September, 2021. What voters primarily thought they were voting on was a bill that would provide taxable value transfers throughout the state for homeowners 55+. While this is true, it also has a very significant aspect that has a huge impact on the intergenerational transfer of property. This is something that a lot of homeowners didn’t know about and may not understand. With the advertising for this proposition being primarily focused on the taxable value transfers, some voters are coming to feel like there was a bait and switch as a result of this law passing. It’s crucial that, as a homeowner, you understand how this law impacts you.

 

Let’s look at the easy part first. The bill does indeed offer homeowners who are 55+, or severely and permanently disabled of any age, to transfer the “taxable value” of their primary residence to a replacement property up to three times, anywhere in the state. There’s also a component of this portion that’s specific to victims of natural disasters - fires, floods, earthquakes, etc. Generally, it’s an expansion of the Prop 13 rules for taxable value transfer, with a few more guidelines, such as who’s included.

 

All in all, good news for the taxable value transfer. Now let’s get into the less spoken about, more impactful, intergenerational transfer. 

 

Intergenerational Real Estate Transfer

 

Before Prop 19, property owners were allowed to transfer real property to a parent or child with the recipient permitted to keep the donor’s property tax basis, provided (1) the property was the donor’s primary residence, or (2) the total assessed value of the property is less than $1 million. Proposition 193 (effective in 1996,) extended this benefit to certain transfers between grandparents and grandchildren. Proposition 19 changed all of this, creating exclusions and greatly complicating the transfer. For many families, this means that intergenerational transfer no longer makes any financial sense.

 

Here’s how the exclusions work:

  1. As with the taxable transfer, we start again with “taxable value” (the original purchase price plus inflationary adjustments).
  2. The property must be the primary home of both the transferor and the transferee. The transfer can be to a grandchild ONLY if the parent of the grandchild is no longer living.
  3. Transferee must be living in the home within one year of transfer and apply for the exemption within this time to qualify for exclusion. (Side note, some folks are seeing extensive delays on getting their exemptions approved as assessor’s offices are so overloaded. As a result, one may have to pay market value taxes until their exemption is approved. A bitter pill for many beneficiaries.)
  4. The assessor’s office then does their calculations. This is convoluted so I won’t even try to explain it. I will say, it does include the allowance of $1 million dollars in additional value to the taxable value amount. The best way to understand is to review the State Board of Equalization’s examples below:

For properties in markets where homes sell for less than $1 million, this won’t have much of an impact. But for homes here on the Peninsula, the impact is significant. Here’s my example for the home my parents purchased in 1967 in Menlo Park:

  • Taxable Value - $60,000
  • Prop 19 Allowance - $1,000,000
  • Excluded Amount - $1,060,000
  • Fair Market Value - $3,260,000 (I just used the Zillow estimate for this, which isn’t terribly accurate, but will suffice for our example here.)
  • Fair Market Value ($3,260,000) minus excluded amount ($1,060,000) equals a difference of  $2,200,000
  • Taxable value ($60,000) plus difference ($2,200,000) equals a new taxable value of $2,260,000.

So my parents’ home, which they bought for $60k and (theoretically,) transferred to me in 2023 would now have a taxable value of $2,260,000. The old benefit of being able to retain a tax value on a transferred home is gone. And for many beneficiaries, taxes on a home with a MUCH higher value just aren’t feasible. 

 

For many families, most families, the intergenerational transfer option is no longer a viable option for them. The best solution for a lot of families is, grimly, to wait until one of the original owners dies, take the step-up cost basis, and sell the home with little to no capital gains. (For more insight into the step-up cost basis, read this post.) 

 

I will say this, everyone’s situation is different, and I’m not an attorney or an accountant, so always consult with your professionals in these areas to determine what’s best for your family. This is complex stuff and you need the right people evaluating your options based on your situation.

So, there you have it, that’s Prop 19. For most people, it’s not exactly the law they thought they were voting for. Transferring your tax rate up to three times sounds great but for many, no longer being able to transfer the family home to children or grandchildren is a huge negative. Either way, it’s crucial that all homeowners understand this law and the impact it could have on your homeownership.

 

If you’ve got questions on this, or are wanting a custom-tailored current market valuation done on your home, reach out to me at sally@sereno.com.

Posted in Selling Your Home
Jan. 18, 2023

Why Early 2023 is the Perfect Time to Buy a New Home on the Peninsula!

San Carlos New Home Buyers

 

If you were to listen to the national news (which is a good way to get your anxiety, fear and panic going,) you’d think that the real estate market was tanking. That mortgage rates were in the 7’s and 8’s, prices were plummeting and sellers were losing their shirts. Fortunately, the national news has it wrong, at least for here on the Peninsula. With the market the way it is now, early 2023 is actually a fantastic time to buy (which also makes it a great time to sell). Why, you ask? Let me tell you.

 

Let’s start by taking a look back at the last few years to understand what’s really going on. 2020 started off feeling like it might be a fairly typical year on the Peninsula. A continuation of the strong market we’d been having since 2009/2010, with maybe a little bit of leveling out. But then something changed in early Spring - anyone recall what happened? That’s right, we were all asked to stay home to avoid the spread of Covid and help our fellow citizens - and especially our valiant healthcare workers - to stay safe. So home we stayed, but a lot of folks decided that their home wasn’t going to work for them if they were going to need to be there for months on end. Either they needed more space, or a different location, or yard space to feel less captive.

 

Around late-April 2020, we started to see a tremendous amount of movement in the Peninsula real estate market. A lot of folks just up and left the Bay Area, bringing a ton of properties on the market. But instead of creating a glut and driving prices down, homes were being snapped up by buyers eager for more of what was mentioned above. Add to this, the Fed started dropping rates to try to help lighten the financial load on citizens and to keep the economy going in unprecedented times. 

Mid-Peninsula Real Estate Trends

As a result of all this, there was a real estate feeding frenzy. Massive bidding wars ensued with homes selling in just a few days, hugely over list price. Just when we’d thought the 10+ year boom was going to be settling in a bit, things exploded. (Worth noting, real estate booms historically last about 7 years on average before having a correction, so we have been due for one for sometime.) 

 

Things went on like this for a while - tons of properties on the market, selling fast, and for well over list with multiple offers. In the second part of 2021 and first part of 2022, we saw historic lows in inventory, driving up the competition and prices even more. There just weren’t enough properties for eager buyers. Then, the Fed stepped in. They could see inflation was running rampant and knew something had to be done, so they started increasing rates. The first increase was in March at a reasonable 25 basis points, but it kept going from there. By June, the Fed had increased rates by 150 basis points, driving up mortgage rates (while the two are not directly correlated, there is a tangential relationship). The stock market also got funky, so a lot of buyers ran to hit the pause button. They were afraid of the “high” rates and some had lost parts of their down payment funds.

 

Since about June, 2022, the market has been different here on the Peninsula. We’re still at lower levels of new listings (some sellers are anxious about timing, as I’ll discuss below,) and a lot of buyers have continued to sit on the sidelines. Prices are correcting, but not plummeting - as noted above, we were years overdue for a correction. And while days on market have increased over early 2021, those early days were artificially low and our current days on market are still faster than most national markets.

 

I believe that this is the best time to buy real estate that our market has seen in over a decade, and here’s why:

  • There’s Less Competition for Buyers

 

Less Home Buyer Competition

 

A lot of buyers have the mindset of “rates are too high,” “prices are going to keep dropping,” or “I don’t have the same down payment I did before,” and are choosing to stay out of the market right now. This creates a great opportunity for savvy buyers to get into the market with less rush and fewer competitive situations. Buyers have a little more luxury of time right now as homes aren’t being snapped up in the first 3 days on market. There’s more time to think about purchases and not get into frenzied bidding wars. Many properties are selling with just one or two offers on them.

 

As for some of those mindset issues, I’ll discuss rates in a minute. Prices may correct a bit more but at the end of the day, the factors that drive our real estate prices still exist (Prop 13, limited inventory, little to no new construction, no new places to build, a thriving employment market). As a result, in the absence of something cataclysmic (which would cause us all a lot more problems than real estate,) the market will continue to grow over time. Maybe a bit slower than the last decade plus, but growth will still occur. And in regards to lack of down payment, in this “new” market, buyers have a lot more flexibility and may not need a 20% or higher down payment. So lenders can offer a lot of creative financing options to help buyers get into homes in the first place.

  • Mortgage Rates Are Short Term

Mortgage rates come and go, driven by lots of different factors. Freddie Mac says our current 30-year fixed rate is at 6.27% nationally, with a historic high of 18.53%. That means we’re currently at ⅓ of the all-time high. But this week one of my Wells Fargo lenders told me that jumbo 30-year fixed mortgages in San Mateo County were at 5.125% (remember what I said about national news? It’s not always relevant to us).

Historical Mortgage Rates

So yes, rates are higher now than they were in January, 2021 when a 30-year fixed was at a national rate of 2.65%, but we actually don’t want rates that low. Rates got that low because we had a financial crisis in 2008 that required rate drops to stabilize the economy, and then we had a global pandemic in 2020 that required the same. A healthier economy will actually have rates a little bit higher. But here’s the thing, the Fed was pretty aggressive with their rate increases over the last year. We’re already seeing rates dip down a bit (Freddie Mac has a national 30-year fixed high over the last year of 7.08% in October, 2022). 

 

Rates change, that’s what they do. So if you buy now at a rate in the low 5’s (there are even some loans in the 4’s,) you can always refinance in a couple of years when rates come back down. Short term pain for long term gain. That gain being you getting a house you love!

  • Sellers Still Need to Sell

 

Some people just need to sell homes. I have clients selling because they’ve had job transfers, family growth so they need to trade up, or family losses so they need to sell. Some sellers have come on the market at prices in line with Fall, 2021 and have been disappointed that they can’t get the same price as mid-frenzy. But smart sellers are being more practical in their pricing and are more patient. So while our inventory is lower than 2 ½ years ago, there are still a lot of purchase options.

 

Additionally, sellers are allowing more creativity in the offers that they’ll consider and accept. We’re seeing more properties sell with contingencies in place - something we hadn’t seen in years. There’s also more room for buyers to negotiate the purchase price down - something we haven’t seen in over a decade.

 

And ultimately, sellers shouldn’t feel bad about having to make some of these concessions. Anyone who purchased their home over 18 months ago has already seen a solid increase in their equity. And if they bought more than 5 years ago, they’ve had terrific returns on their investments. So sellers can absolutely win in today’s market as well.

 

Phew, that’s a lot, but it really does encapsulate how I perceive the market right now. I think that opportunistic sellers will do well and that savvy buyers can find their dream homes. BUT, I don’t believe this market will last long. I think competition may pick up later this year. So if you’re considering buying, don’t wait. NOW IS THE TIME!

Posted in Buying a Home
Nov. 10, 2022

San Carlos Real Estate Market Update - October, 2022

San Carlos Single Home Sales Activity

 

The San Carlos real estate market (like all markets right now,) continues to be in a state of flux. As we continue to adjust to changes in the national economy and interest rates, we'll continue to see market statistics that we haven't encountered in quite some time. My job is to put this into perspective and help buyers and sellers to understand why now is an opportunity for everyone.

During October, San Carlos had 27 new listings, down from 37 last month. Sales held steady from last month at 21 in total. It's interesting to compare this to the same time period last year, when we saw 39 listings and 35 sales. Overall numbers are down in both these categories, but months of inventory has nearly quadrupled since this time last year (we'll talk more about MOI in a moment). The reason why we have more average inventory (that being months of inventory,) is due to the fact that days on market is up to 32, versus 14 this time last year. However, as recently as May, 2022, days on market was in the single digits. So why is this happening?

San Carlos List to Sell October 2022As I've discussed before, the market began to shift in the May/June timeframe this year, as the Fed began increasing interest rates. Their hyper-aggressive approach has had a significant impact on the housing market, causing buyers to move much more slowly in their purchase making decisions. As they slow their roll, days on market creeps up, and months of inventory increases, even though the total number of new listings has decreased since last year. So does this mean we're in a buyers' market?

This is  where months of inventory comes in. Months of inventory (MOI) is the relationship of sales pace to the number of properties currently on the market if no additional homes were added to the supply. It is calculated by determining the number of homes sold per month and dividing by the total number of properties for sale on the last day of the month. MOI is one of the key criteria for determining if we're in a buyers' or sellers' market. Less than 5 months of inventory, we're in a sellers' market, more than 6 months and we're in a buyers' market. While we've nearly quadrupled since last year, we're still only at 1.5 months of inventory in the San Carlos market. 

While this would imply it's solidly a sellers' market, the abrupt market shifts are leveling the playing field a bit and we're seeing long overdue corrections. Last year at this time, homes were selling at 109.6% compared to list price. For this time period (October, 2022,) homes in San Carlos sold for 96.0% of list price. 

San Carlos Real Estate Market TrendsSo, we're in a sellers' market for those sellers who are patient and practical with their pricing, and what prices they will accept. And we're in a buyers' market for those buyers who are savvy enough to see that there are opportunities that we haven't had in a dozen years to negotiate offers without excessive competition. Mortgages can be refinanced in a couple of years when rates go down, but as rates go down, more buyers will return to the market creating more competition. Now is the time!

There are still plenty of buyers for San Carlos and not enough inventory, continuing to make it a great time to sell in San Carlos. So if you're thinking of making a change, let's chat!

Have questions about the San Carlos real estate market? Give me a ring and let's discuss!

 

Note: All market data based on Single Family Residences in San Carlos for the time period of 10/1/22 to 10/31/22. Data above is pulled directly from MLS Listings.

Posted in Market Updates
Aug. 24, 2022

What's Happening in Mid-Peninsula Real Estate

From my July, 2022 Newsletter:

Changes are upon us in the mid-Peninsula real estate market, and this past period of time in June/July really highlighted that. We saw significant changes in the number of new and sold listings, in the list to sell ratio and in days on market. But while the market appears to be slowing down, I still believe it's a time of great opportunity for both buyers and sellers.

                      source: MLS Listings, Single Family Homes 6/25/22 - 7/24/22

The list to sell ratio feels like the most significant difference from the two years previously. These last two years it feels like we've mostly seen the ratio at and above 100% for most markets, with multiple markets regularly being above 110%. This period, we saw three markets fall below 100% and none have sell prices higher than a 105% ratio. The three markets below 100% were Atherton and Portola Valley, which isn't that unexpected due to their typically low levels of sales and high price fluctuation; but very surprisingly, Palo Alto ended up with an average sale price at 97% of average list prices. And this is with a healthy 29 sold homes. On top of this, only two markets had fewer than 12 days on market - so homes are on market longer and selling much closer to list price.

So what exactly is happening? A few things are going on, actually. For starters, with interest rates going up, and the stock market being volatile, some people are deciding to hold on any real estate selling or buying, waiting to see how things settle. From an inventory perspective, this hold has made an already low inventory season even lower, so there's not a lot of new homes for buyers to consider anyways. And a lot of people are traveling this summer, so there aren't as many buyers in town as in months past (and certainly not as many as the past two summers, when no one was traveling!) 

Some doom-meisters may try to enthusiastically say that we're on the brink of a market crash, but that's just incredibly unlikely here on the Peninsula. All the reasons that have driven up our home values over the last 40 years, and that prevented us from having any significant value decreases during the 2008 national crash, should continue to protect our home values. At the end of the day, it's a simple case of supply and demand. And with more buyers than sellers, our home values hold. As long as we have people who have accrued significant capital gains in their homes, we're always going to have less turn-over, and there's just no place to build new homes. As a result, I expect we'll be holding fairly steady in value.

One of the biggest things is people accepting that the higher interest rates (though historically still VERY low,) are here to stay, at least for the next several years. If you look at the national economy, with its current inflation levels, there's just no way (or any reason,) to expect that rates will dip into the 2's or 3's again. So we need to adjust, adapt and then move forward. I still hold that this is a fantastic time of opportunity, especially for buyers. Somewhat gone are the crazy bidding wars of just a couple of months ago, so it's a great time to find a home and buy it at or near list price. Those who are bold will have great success.

Posted in Market Updates
Dec. 15, 2021

How Real Estate Commissions Are Paid

When it comes to buying and selling real estate, there are always various costs involved. Depending on your role (buyer or seller,) you’ll have certain closing costs and fees, and may also have costs for things like inspections. One cost a seller in California will always see on their closing sheet is agent commissions. But do you really understand what commissions cover, how they’re paid and how commission fees are achieved? Most people don’t, so let’s take a deep dive into commissions.

 

What Are Real Estate Commissions in California?

The standard commission in the State of California for real estate transactions is 6%. However, by law this commission rate is negotiable. Traditionally, the listing agent will split this commission with the buyer’s agent and they will each get 50%. So on a 6% commission listing, each agent would get 3%.

There are many brokerages who openly advertise having extremely low commissions - these are considered discount brokers. When it comes to real estate agents, you truly do get what you pay for. So when an agent agrees to a much lower commission (or worse, woos you with something like a 1% commission,) you can be certain that you will not be working with a full service agent. When we get down to the section on “What Do Commissions Cover”, you’ll see some of the services that are often eliminated by discount agents in order to accommodate these hyper low commissions.

Who Pays the Commission?

Per the closing sheets, it’s the seller who pays the commission to the listing agent (remember, the listing agent then shares half of that with the buyer’s agent).  But the reality is something different from that. Commissions are paid out of the negotiated proceeds of the sale of a house. In other words, they are paid out of the funds that the buyer pays the seller for the property. As such, commissions are really paid by both the buyer and the seller.

When working with the right agent, a seller can ensure that all of their closing costs are covered in the negotiation. This includes the commission fees. A good agent should be able to negotiate to cover their commissions.

What Do Commissions Cover?

An interesting point to keep in mind is that commissions are paid at closing. So that means that agents for both the seller and the buyer are working for free until the deal is done. For a buyers agent, this can mean the expense of time spent on the home search. But for a listing agent, this can include significant out of pocket expenses.

Commissions for listing agents generally break down in three expense areas:

  • 33% to the brokerage - for overhead, insurance, etc.
  • 33% to the agent - broken down further when you take out taxes and business operation expenditures
  • 33% for “other agent expenses” - this includes photography, advertising, printing, open house expenses and more, all focused on the promotion and sale of the listing

Oftentimes, a listing agent can work for months to get a property ready to sell, and all of this work is done without compensation. This means the expenses for marketing the property are coming directly from the listing agent’s own pockets.

If you take a look at these expenses and then reconsider section 1 above about discount brokers, it should make you wonder “where are they cutting expenses?” In most cases, discount agents have to cut their expenses by spending less of their time on the sale of your home and severely limiting their costs that support the promotion and sale of the listing. So while you may “save” money in your commission rate, you’re likely paying more than you save by having fewer buyers see your home, less adequate negotiations and ultimately getting less money for your home. Discounts can be expensive and when you're dealing with such an important asset the question is "Can you afford to cut corners?"

Overall, a good, full commission agent is worth their weight in gold. They are the agents who will take their fiduciary duty to you seriously and negotiate for you the highest possible price. And what can be more important than that?


IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Real Estate Basics
Nov. 18, 2021

Why Negotiating Matters

A home is most likely the largest financial investment that you have in your portfolio so when you’re selling, you want to make sure you’re getting the highest possible price. Conversely, if you’re buying you want that to be the best possible price. But there’s a lot more to negotiate in a real estate deal than just price, which is why it’s important to have a master negotiator on your side so you ensure you’re getting all you can out of the transaction.

There are some realtors, possibly even a majority, who feel that you shouldn’t negotiate. That if someone makes an offer on your home, you should just take the highest offer and be done with it. Some agents feel like buyers shouldn’t get involved in negotiating because the agent themselves may not be comfortable being a negotiator and may be fearful of losing out on something for their clients. But for both the buyer and the seller, negotiating is the most effective way to have a successful transaction that all parties are happy with.

A good negotiator knows that the power of negotiating is in being able to walk away, but the skill is in never having to. Contrary to what is shown in the movies, negotiating, when done right, is not a cut-throat blood sport. It is an exchange out of camaraderie that seeks to find the best outcome for all interested parties. Doesn’t that sound like the type of process you’d like to go through when buying or selling your home?

So what exactly can be negotiated in a real estate transaction? There’s actually a lot, so let’s explore.

  • Price - this is obvious, and the most commonly thought of in terms of real estate negotiating. Sellers want the highest possible price, buyers want the best possible price. Working together, a resolution can be reached that everyone can agree to. The problems arise when one party is afraid to negotiate, or is afraid to counter something that has come their way. Even if the counter is the same thing you originally proposed, it still keeps the conversation going and shows the other party that you actually are interested in working out a deal.

  • Contingencies - there are all kinds of contingencies, and some of them can be negotiated. Often times a financing contingency is hard to negotiate as that is driven by the lender. However, if the lender wants an appraisal, the buyer could decide to waive their appraisal contingency, taking on the risk if the property doesn’t appraise. When you’re negotiating on contingencies, you’re negotiating for the days within that specific contingency.

A subsection of the contingency negotiations has to do with home inspections. Here on the Peninsula, most sellers will do all the home inspections prior to putting the house on the market, and those will be a part of the disclosures. Buyers can negotiate to have their own home inspection done, but can also negotiate to have the seller cover some of the required home repairs that come out of the inspections. Not uncommon is to negotiate for costs for pest remediation or general handyman type repairs around the home.

  • Personal property / inclusions - sometimes there's just something in the house that the buyer feels “makes” the home, and they want it. It could be a piece of art, or furniture or a free-standing sauna. The general theory is that if you see it, you should always feel free to ask for it. The worst that can happen is the seller says no. Sellers shouldn’t be offended by these requests - they usually show that the buyer loves everything about the home, including your style!

  • Timing / Closing date - as mentioned above in contingencies, time is often negotiated. You can negotiate timing on contingencies, but also on closing dates. Maybe a seller wants to shorten the time frame, or they have holidays coming up and need to stretch out their time in the home. With both parties working in good faith, you can find the timing that works best for all.

  • Occupancy / rent back - rent back is when a property closes, but the seller stays in the home at a negotiated rent amount for an agreed upon period of time. This has been especially popular over the last several years with homes closing so quickly on the Peninsula. It’s not uncommon for buyers to offer free rent back to sellers, making their offers more appealing, but rents can be negotiated as well. 

  • Closing Costs - there are all sorts of closing costs, and all of them can be negotiated. Most common ones are escrow fees, title fees and city / county transfer taxes. 

As you can see, there’s a lot that can be negotiated when buying or selling real estate, and this isn’t even the total list. At the end of the day it’s important to remember that if you don’t ask, the answer is always no. But if you do ask, you may just get into a conversation where you can secure some additional benefits for yourself.

One final note. I can’t stress enough the significance of having a master negotiator acting on your behalf. Someone who is fully committed to representing you and only you. You don’t want to work with an agent who is representing both parties - their loyalties will be too divided. I mean, how can they negotiate with themselves. Find an agent who is solid, strong and amiable, who isn’t afraid to push back some, who encourages you to identify your self-imposed limits, and who isn’t afraid to walk away. You never want to be pushed into a decision and if your agent is trying to do that, you may want to seek different guidance.

If you’d like to learn more about how I approach buying, selling and negotiating, feel free to reach out to me at sally@illuminateproperties.com. I’m always happy to grab a cup of tea and talk business.

 

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial
Nov. 1, 2021

All About Off-Market Homes

Off-Market Homes

You may have heard about buying or selling a home ‘off-market,’ but what does that actually mean? An off-market home is a property that is for sale but not made available to the general public through the multiple listing services (MLS). It may also be referred to as a “pocket listing”.

As such, the real estate agent must do extra legwork marketing a home to potential buyers. This type of sale can be perceived as more ‘exclusive’ however is it right for you? Let’s look at some pros and cons to listing and selling off market, as well as some new guidelines set forth by the National Association of Realtors (NAR).

Why List a Home Off-Market?

There are a handful of reasons a seller may opt for an off-market sale. Sometimes a seller wants to test the value of their home without accumulating excessive days on market and the potential of lowball offers. Others simply prefer a private sales process or feel they can maintain more control through an off-market home sale.

Pros and Cons of Off-Market Home Listings

Pros and cons of off-market home sales

Pro - Seller: 

Selling a home off-market offers more privacy. Homeowners who are living in their homes can avoid the intrusion of open house foot traffic through personal space and posting photos of their home on the internet.

Additionally, in a low inventory market some sellers feel that an off-market home will be perceived as more ‘exclusive’. They hope that buyers are willing to pay a premium to avoid competing with other potential buyers. 

Con - Seller: 

Less exposure to the public means less exposure to buyers. Interest creates competition therefore, a home that can be marketed to generate as much interest as possible is more likely to sell for the highest possible price. You’ll never know if you’ve left money on the table.

Pro - Buyer: 

Off-market home listings provide additional inventory to buyers. The major advantage is less competition. A trade-off is that typically, the list price is firm and less negotiable. It is always a good idea to have your agent review recent sales comps for the home to support the price.

Con - Buyer:

You will never know if you paid too much or too little. This may be fine for you depending on your situation. Remember that if you are getting a loan, the house will still need to appraise for the loan to be approved. With any home purchase it is important to be in close communication with your lender!

MLS Statement 8.0 Clear Cooperation Policy

In an effort to curb this secondary market, NAR (the National Association of Realtors,) has enacted the MLS Statement 8.0 Clear Cooperation Policy as of January, 2020. This policy aims to create a more equitable market for all buyers. It states:

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public. (Adopted 11/19)

This limits an agent's ability to market an off-market property outside of his/her office. It does not apply to commercial properties, rental properties or new construction with multi units.

Exemptions are allowed if a seller wants to keep the listing private as an office exclusive listing. In this case, the marketing can not be passed outside the office of the listing agent. At this time, we have yet to see how this will impact sales in our Bay Area market.

Is buying or selling an off-market home right for you? You now know the advantages and disadvantages that are involved and what it really comes down to is what best suits you and your housing needs. When working with an experienced local agent, you are exposing yourself to their vast agent network where off-market opportunities will undoubtedly present themselves.

To receive the off-market properties in your area, contact me directly at sally@illuminateproperties.com. I can't wait to work with you! 

 

Post by Lindsey Matthews

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Oct. 14, 2021

12 Home Buying Mistakes to Avoid

Top 12 home buying mistakes to avoid


Do you want to overpay for your home? Would you like to get stuck in a mortgage that is all wrong for you? How about swinging and missing on an opportunity to purchase your dream home? Of course the answer to these questions is a "no", but these are the results of the common home buying mistakes buyers make.

Buying a home is something that you may do only a handful of times in your life. Don’t learn by trial and error - it’ll cost you too much. Instead take it from a seasoned professional on which pitfalls of home-buying you should avoid. Here are the top 12 home buying mistakes to avoid.

#1: Not Getting Pre-approved

Imagine the stars align and you find the perfect house that fits perfectly within your budget. You write an offer over asking, and maybe it’s even the highest offer, but the sellers go with another buyer. Why?

The accepted offer included a pre-approval letter (not just pre-qualified). A fully underwritten pre-approval letter shows the seller and seller’s agent that they are dealing with a serious buyer and that the deal will move faster because a large part of the paperwork process has already been taken care of. Getting pre-approved in a rapidly paced market like the Peninsula is a key element in making a strong offer. 

#2: Getting The Wrong Mortgage

Many loans like ARM, FHA, VA, and USDA are designed to help you buy a house, no matter what your financial situation is. It’s best to speak with a few different mortgage professionals before you decide on which mortgage product you will go with. It’s important to understand the actual costs involved and how they will affect you for years to come. Some products may end up costing you tens of thousands of dollars in fees and interest.

 #3: Not Saving Enough for a Down Payment

home buying mistakes - not saving enough<br />

One of the worst home-buying mistakes you can make is not saving enough for a down payment. Although it is possible at times to put 5% or even 3% down, anything less than 10% is way too low! The extra fees and interest charged in the types of mortgages that allow these smaller down payments will bury you and you’ll feel like you’re never going to pay off your mortgage. 

So how much should you save for a down payment? As much as you can, but set a goal for 20% of the purchase price. With 20% down you will avoid having to pay PMI (private mortgage insurance) which is an insurance for your lender if you were unable to make your mortgage payments. 

#4: Not Using a Real Estate Agent

It is important to not only use an agent but to use a local expert. Buyers who decide to go it alone without the use of a real estate professional tend to overpay. With so much information available online to the public, buyers feel they have all the information they need to make an offer on a home. What agents understand are the intangibles that don’t show up on a spreadsheet or can’t be reflected in an online algorithm.

An experienced local real estate expert will help you to:

  • Find the latest homes available through the MLS and their agent network
  • Give insight about neighborhoods and specific homes and WHY they sold at that price 
  • Negotiate the best possible price for you

Let’s not forget that buyers’ agents are paid out of the seller's proceeds. Buyers will essentially get this wealth of knowledge and expertise for free!

#5: Assuming The List Price is The Sale Price 

Buyers often look at the list price and imagine the home will sell for that price. What you need to consider is how homes are priced. Sellers and their agents will approach the listing price with different marketing strategies in mind. Some homes are priced to sell exactly at listing price, others are priced purposely low for the area so as to attract more interest and get the home maximum exposure. 

For this reason, it’s important for buyers to look at homes below what their pre-approval amount is and give themselves room to negotiate up.

#6: Holding out for the "perfect" home

Home buying mistakes - seeking perfection

Waiting to find the perfect home that checks off every single box is most likely not going to happen. Nothing in this life is perfect and if that’s your objective, you may be looking for a long time. Instead, looking for a home that has about 80% of what you want is much more attainable. Hopefully, as you grow into your new home you can make the changes that will close that 20% gap a bit.

#7: Passing on a Great Home Early in Your Search

This happens all too often. A buyer may come across a home they absolutely love and instead of making an offer they opt to keep looking to see what else is out there. It is very possible that you may find the home you want to buy in the beginning of your search. 

It’s important to clearly understand what type of home and what neighborhood you want so when you find it, you can pounce on it. Don’t let it be “the home that got away.”  

#8: Buying Without a Home Inspection

Spending a few hundred bucks on inspections could possibly save you hundreds of thousands of dollars in the long run. Uncovering issues with the property’s condition can be leveraged in negotiations to help get the buyer a lower price. Not to mention, it gives the buyer a clear picture of what it is they are truly buying and taking away any unfortunate surprises down the road. 

Typically in a fast-paced market like the SF Bay Area, sellers will provide inspection reports as part of their disclosures. However, buyers are always encouraged to conduct their own inspections to satisfy themselves to the condition of the property.

#9: Taking on Credit While Closing

Home buying mistakes - don't buy a boat

Buying a house with debt is not a very smart thing to do and taking on new debt while you are in the process of purchasing a home is just as bad. Any changes to your credit score or debt-to-income ratio may cause a delay in the closing process. At worst, it could potentially disqualify you from a loan altogether. Make sure you are up-front about all of your financial obligations to your lender and hold off on buying that boat or quitting your job until after you close that escrow! 

#10: Not Walking Away From a Bad Deal

Buying a home can be scary at times but overall it should be exciting for the buyer. If you find yourself doubting or second guessing a property more than you are looking forward to it, you may want to consider passing on it. Your Realtor should be able to give you perspective on the home and may be able to substantiate your concerns about the home.

#11: Forgetting About Closing Costs and Moving Expenses

Another common mistake buyers make is focusing so much on saving for a down payment, they forget about closing costs and moving expenses. Closing costs may include loan origination fees, escrow fees, property taxes, insurance, the appraisal fee, and legal fees.

Home buyers in California can typically expect to pay closing costs between 2% and 3% of their home’s purchase price, depending on price, discount points, transfer taxes and other factors. And unless you plan on moving everything yourself, moving fees are generally around $1,000-$2,500 for a three-bedroom home.

#12: Not thinking about resale value

Most buyers are focused on how much a home will cost them, how many bedrooms and bathrooms it will have, or if there’s an extra room for their Star Wars memorabilia (some do). Buyers should also be thinking about the home’s resale value.

At some point in the future you will eventually sell the home so it’s important to pay attention to the health of the neighborhood. Are the local businesses thriving, are the parks well-maintained, do the schools have high ratings? Most things with a house can be fixed but you can’t change the location. Buy LOCATION!

Honorable Mention:

Buying More House Than You Need or Can Afford

A mortgage is not the only payment you need to make. Consider costs of insurance, HOA fees, property taxes and living expenses.

Not Seeing The True Potential of a Home

Don’t get distracted by easily replaceable ugly carpets or old kitchen cabinets. Focus on layout and buy something with good bones.

Making a Lowball Offer

You don’t want to offend sellers with low ball offers. An experienced agent with local knowledge should help guide you as to price.

Everything That Glitters Ain’t Gold 

Don’t focus on the shiny things.  Buyers should be looking at the quality of materials, the quality of construction and the level of finish used.

Overlooking Important Details

Pay attention to the big ticket items such as the roof, furnace, and electrical system. If these problems exist, repair/replacement could be costly.

Buying with confidence is priceless. Educating yourself on the process and working with a knowledgeable Realtor who can expertly guide you will go a long way. Now sit back, take a breath, and get ready to enjoy what you’ve worked so long to achieve….

Congratulations, you’re about to buy a house!!

 

Post by Vincent Ergas

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in House Hunting