Wednesday, December 2, 2020
Five Questions for a Fresh Seller Perspective
In this time of supreme uncertainty, how can sellers decide whats the best thing to do now or next with their real estate?
Real estate sellers are trying to guess what the future holds as much as everyone else:
When they are wrong, sellers may put their home and other real estate at risk.
When they are right, sellers may add wealth and security.
Talking to local real estate professionals has always been a great way for sellers to start when charting plans for the future. This is still a good launching pad, even when no one, including professionals, currently knows what is coming next. However:
Real estate professionals have the facts about what has happened locally since March 2020 and what was going on before that.
Choose the right real estate professional and youve found someone who is well-connected locally and through the industry to ensure you learn about current key trends in time to take advantage of them.
Real estate professionals are committed to filtering pressures and impact of the pandemic and other social and economic changes through their real estate lens to make sense for each individual property owner-client.
Aim to achieve clarity about what you can live with and without.
Project and expect the worstWhat exactly would that mean to you?or project and expect the bestHow could that materialize for you? Your choice.
In your world, you control some things and not others. Direct your future where you have more control and the outcome may involve more of what youd favor, but it may also be more of the same. Select a path less traveled, with a move outside your comfort zone, and risks may increase, but benefits may also take a giant step forward.
Your attitude and stage of life determine what the future holds for you. Glass-half-full thinkers may look for some good to come out of the pandemics interruption of life and career; glass-half-empty thinkers may concentrate on what has been lost or disrupted so looking forward may mean settling for less. Couples have the potential to complement each other with their attitudes and recovery strategies. What would you like to see ahead? What steps can you take in that direction?
Even if youve managed to hold onto status quo through the pandemic, theres no guarantee that will continue. Those whove had a tough haul so far may find things leveling off. Regardless of your path to date, it may be too soon to forecast how youll emerge financially. If pressures mount, ask your real estate professional and your financial advisor how selling nowbefore the pandemic is overmight improve your financial situation and life>
Your biggest financial asset may be your earning ability. Post-pandemic job security and business sustainability may not yet be evident. Dramatic change is to be expected in some areas and industries. The restaurant, hospitality, and travel industries were hard-hit by the pandemic while other sectors thrived or at least chugged on. Which industries does your earning power revolve around? Can online learning top-up your earning credentials?
Select your own track. Sellers who chose to live near their workplace and, thanks to telecommuting, will no longer need to, may consider a move. Those who are making a life>
You may repeatedly change your mind about the next step as the nature of the pandemic alters in your area. Taking time to see where things are headed before you plunge into the market may be wise. Reversing real estate decisions is much more difficult than making them in the first place.
One great way to get a fresh look at your real estate, is to try and get out of your home in less than 2 minutes. Have you planned a fire-escape route lately? Do you know at least two ways out of each room and from each level? In planning a 2-minute fire-escape route, youll see how well spaces work and dont. This intimate exploration will help you decide whether this is the ideal place to live or not.
Cooking, a popular Covid activity, is also the number one cause of home fires. As the holiday season approaches with its candles and inflammables, and colder weather drives us inside, fire safety becomes an even more significant issue.
With a safety overview in mind, take a long hard look at your home and what needs to be done to ensure it is safe and comfortable. Even if your last renovation was fairly recent, there can be things that need attention or repair.
nbsp;House Fires: Less Than Two Minutes To Survivenbsp;
nbsp;Is a Silent Killer Lurking?nbsp;
How your community manages Covid-19 outbreaks is vital to your safety. How well do available medical and hospital capacities serve the population?
What issues does that question bring to mind? Covid-19 has irreversibly changed some lives, but not others. The pandemic has altered many aspects of life temporarily and just as many permanently. Normal is being redefined.nbsp;
What do you want to return to and what would you like to improve on? As you flesh out this exploration to see if a move makes sense, consider the full cost of owning and maintaining your current property and the complete cost of moving not me>
If you suddenly had a good reason to selllike a red-hot market or a distant job offerhow quickly could you get your home listed and on the market to earn top dollar? If there is a dramatic market change due to the pandemic, sellers may have to react quickly or be left behind.
Do you have a real estate professional who you continue to work with or will you have to interview to find a compatible match?
How ready is your home? Is it a cosmetic do-over or major make-over that will be required to earn top dollar?
Do you understand what you would net from the sale of your property? Would it be enough to acquire your desired next home or to finance your next venture?
Have you researched the practicality of purchasing or renting your next desired home? Low listing inventories are common in this stay-at-home time.
Talk to your real estate professional to determine who will buy your home. Whos the target buyer for your neighborhood and type of property? Once you learn how your real estate would fare in the current local market, take an equally-detailed look at what choices you have for your next home.
Keep in mind that an ideal market for selling may not be an ideal market for buying the particular type and value of real estate youre interested in. For instance, low inventory of listings may inflate your sale price, but when youre the buyer there may not be much to choose from.
Your home may sell very quickly, so make sure you have all the choice you need for your next purchase before you sell.
In a real estate transaction, there are typically three main parties involved. There are the real estate agent, the buyer and the seller. The takeaway for the agent is a commission, but many people experience confusion about things like how much it is and how its paid. They also wonder if they can negotiate a commission.
Most people think theres a standard percentage across real estate for commissions. There isnt a fixed price. There is an average prevailing fee in most states thats around 6 of the final sales price of a home, however. If an agent sells land, they may get a higher commission of anywhere from 10 to 20 because it takes more time and a larger marketing budget to sell land.
The seller of a property is typically the one who pays a commission. It goes to the listing agent, and then the listing agent gives a portion to the agent representing the buyer. The home buyer doesnt pay anything.
Most real estate agents only work on commission and dont earn a base salary.
So what it might look like if you were to sell a 200,000 home is that the listing agent would charge a 12,000 fee. That would be a 6 commission. Then, they would split that with the buyers agent, so the agent representing the buyer gets 6,000, and the listing agent gets 6,000.
Then the agent has to share part of that 3 with their brokerage office. Sometimes that amount could be as high as 40 of the 3.
Agents also pay for a lot out of the fee, including their marketing and insurance costs. Commissions are paid at the time the title transfers for the home.
Legally, a commission is negotiable. However, sellers have to be careful here. While an agent might be willing to negotiate in certain circumstancesfor example, the property is high-end or it may help them break into a great neighborhood, in many cases, they wouldnt be.
If a real estate agent is too willing to settle for a lower commission for seemingly no reason, you have to think about how their negotiation skills will look later on when theyre working on a deal for you.
The entire goal of hiring a real estate agent is to get the best price for your home, along with the best terms. A real estate agent who quickly agrees to take a lower commission may not achieve those goals. Also, the marketing costs will come from that commission, so in taking a lower fee, will the agent be cutting corners on their efforts to advertise your home?
Its not unusual for an agent to be unwilling to negotiate their commission simply because they dont have to. They may be so busy that theres no reason for them to take a lower commission. They can simply move onto other sellers.
If youre going to sell your home and then the same agent will help you buy another one, they earn both commissions. Its possible that you could get a discount in this situation, but again, maybe not. Both transactions are separate from one another, and both require their own work. It doesnt matter to the agent if the seller and buyer are the same people because the workload would be the same as if they were different people.
What if the same agent represents you and the buyer?
This is a situation known as dual agency, but not all states allow this.
In this case, if its legal, an agent could earn the listing and selling fees. You might ask a listing agent if they will lower their commission fees, although again, theres no obligation on the part of the agent.
While negotiating is possible for real estate commissions, its not always the best idea nor will it always result in a discount for you as a seller.
According to the United Nations, a whirlwind of issues, many of which are likely caused by man, threaten to harm our precious Earth in irreversible ways. From greenhouse gas emissions to air pollution, deforestation, and issues with water and waste, the human impact on our planet has become real. And if we dont change, we face both unintended and potentially permanent consequences.
According to most experts, the biggest issue we face is climate change. Although the Earths temperature has ebbed and flowed throughout the course of history, some evidence suggests human activity is altering its natural path.
While some environmental changes can be easily explained, much of the evidence for climate change is compelling. According to NASA, global sea levels are rising faster than in recorded history and global temperatures are surging, with 15 of the 16 hottest years in history taking place since 2001. Ocean temperatures continue to rise while artic sea ice retreats. Decreased snow cover, ocean acidification, and global weather events provide even more proof our planet is changing.
Fortunately, there is plenty anyone can do to change the course of history. If youre losing sleep over environmental issues, you can do more than worry you can act. With the introduction of new technologies and new, Earth-friendly products, its easier to go green than ever before.
You cant change the planet on your own, but you can take steps to reduce your environmental footprint, limit waste, and create a sustainable life>
When you think of going green or adopting an Earth-friendly life>
Those ideas probably make you chuckle, and thats okay. The good news is, you dont have to be a radical or drastically change your life to help the planet or reduce your impact. When it comes to going green this is one of the biggest misconceptions we face. Many families assume they must uproot their lives or make huge changes to reduce their impact on the planet.
And even once you get past the stigma, youll also find that far too many people overestimate the costs of caring for the environment. Maybe they read how expensive going green can be in the past. Or, perhaps they just wrongly assume any potential changes they could make would be expensive.
Regardless of what youve read or heard, taking steps to help our planet doesnt have to break the bank. For every costly change you make, there are several Earth-friendly alternatives that are 100 percent free
Well get to some of those steps in a minute. But first, lets talk about why. Why should you care about the Earth? Why should you take steps to change? Further, why should you spend your own money going green?
Believe it or not, embracing a greener life>
Reason 1: This is the only planet well ever have.
The top reason to go green is an obvious one; planet Earth is our only home. If we spoil our planet, we cant move to Jupiter or Mars and start over.
Reason 2: Real food is better for you.
The big benefit here is that most Earth-friendly foods are also foods that are good for you. Fresh vegetables and fruits farmed locally are some of the best foods you can find, for example.
Reason 3: Some green technologies can help you save money.
While its commonly believed that going green is crazy-expensive, this is no longer the case. Even energy-efficient LED lightbulbs, which are somewhat expensive upfront, will help you save money on your home energy bills over time. Meanwhile, the price of newer technologies like solar panels continues to decrease every year.
Reason 4: Going green can increase your homes value.
Adding energy-efficient appliances or upgrades to your home will help you save money over the long run. And since buyers love the idea of saving on utilities and energy, you can increase your homes value and fetch a higher sales price, too.
Reason 5: We need water to live.
If you dont care about the health of our water, youre forgetting one crucial detail: We need water to live. As humans, we cannot afford to ignore the health of our water supply.
Reason 6: Green living is often more humane
As the scientific journal Nature noted earlier this year, human diets are directly linked to the health of our planet. More than anything else, a vegetarian or mostly-vegetarian diet is the best way for humans to reduce carbon emissions and stop global warming.
For more great tips on green living, check out "The Ultimate Guide to Cheap Green Living" on couponchief.com.
Michael Tamez is a certified eco-consultant who shares tips, tools and strategies for green living on his website, MichaelTamez.com.
Jeff Wilson has hosted over 200 television episodes on environmental topics for HGTV, The DIY Network, and public television. He currently writes over at The Greenhouse Effect and you can find him on Twitter tgheffect.
For those who invest in real estate, cash flow is king. Investors considering buying a rental property take into account how much rent can be charged compared to ownership costs. Those costs can include a mortgage, property taxes, insurance and maintenance. If the expected rental is more than that, the property will cash flow. Otherwise, its an expense and the investor is likely to move on to another property. There are also some tax incentives for real estate investors.nbsp;
For renters, they need to consider how much they can comfortably afford each month for housing and utilities. Lenders typically view about one-third of gross monthly income should be used as a general rule of affordability. As rent is paid each month, the investor takes that cash and pays the mortgage with it. In essence, you are paying a mortgage, just a mortgage that belongs to someone else.
For first time buyers, getting financing can be a bewildering process for some. Theres lots of documents that need to be signed and reviewed. Lenders need to make sure you have enough funds on hand for a down payment, closing costs and leftover cash reserves. Credit is reviewed as is employment and income. But it doesnt need to be an intimidating process. Thats also where a good loan officer comes into play, to walk with you side-by-side from initial prequalification to the settlement table.nbsp;
Most renters will ultimately end up owning at some point in the future. In the long run, owning compared to renting makes sense in a lot of ways. In todays interest rate market where rates are low compared to areas where rents are steadily increasing, its ultimately cheaper to own compared to renting.nbsp;
Renters may have a goal of owning but not sure how to get there and when. They realize renting is not a long term solution, but their current situation makes it better to rent than own. Someone that is short term for example is probably a better renting candidate compared to someone with the intent to keep the property for the long haul.
Its usually at this stage where renters first begin to get the urge to explore buying. They can do their own research online to get an idea on where rates are and even run a few mortgage calculators to see what monthly payments might be. Yet its important at this point to stop flying solo and contact an experienced loan officer. If you dont know of anyone in the mortgage business, your real estate agent can point you in the right direction as well as friends, family and co-workers.
Your loan officer will provide you with an approximate qualifying loan amount for starters. This prequalification takes into account your gross monthly income and expenses and at some point, your credit report will be pulled along with credit scores. Your loan officer will give you an estimated amount for a down payment and associated closing costs. Its a lot easier to be an owner than you might think. Maybe if youre asking these questions, its time to get your own mortgage and stop paying for someone elses.
In nation of 300 million, theres at least one sharp-eyed person who can see a marketing tool for what it really is.
I read your recent article about storage and the fact that real estate agents urge clients to reduce the amount of clutter to make the house look bigger, the sharp-eyed reader writes.
Sounds a bit sneaky to pare down the contents of a house interior to give the appearance of spaciousness. If owners do this and Realtors advise this, I believe this minimizing should be part of disclosure. Is there no end to what people will do to make things seem something other than what they really are?
Id never thought about it that way. It made me want to travel through time, back to when we were readying our last house for the market. My wife spent an entire weekend filling 16 30-gallon trash bags with old clothes and shoes that we ended up donating to Goodwill and similar charities, thus extricating 14 years of clutter from our bedroom closets.
Id never bothered to tell the prospective buyers what we had done. Id failed to list it on the disclosure form. They thought they were buying a bedroom with a spacious walk-in closet, a rarity in a house built at the turn of the 20th century when the few clothes we owned could fit in freestanding wardrobes or armoires, and permanent closets were the size of postage stamps.
When I begin thinking of the other things we did to get that house on the market that we didnt disclose, I start to cringe.
For instance, I hired a couple of guys to finish painting the hallways from the first to the third floors and never bothered to say anything about it. For at least 10 years, the hallways had been half-painted. I kept meaning to get to them, but never had the time. I should have disclosed that.
The living-room ceiling wasnt original, nor were the lights. A couple of days after we moved in, the living room light stopped working. When we went to replace the light with high hats, we discovered that the ceiling was weak and we needed a new one. I know that happened 12 years before we put the house on the market, but we should have said something.
I should have disclosed that we used a plasterer with more than 70 years experience and a licensed electrician for the work. I might have inadvertently led the buyers to believe I had done the work myself, making them worry endlessly about the quality.
I never really said flat out that the kitchen was new, and maybe I should have. Perhaps I should have taken before photos and attached them to the disclosure form. It would have given the successful bidder the opportunity to negotiate to get me to put the old one back. I mean, some people really prefer 30-year-old electric stoves with two non-working burners to a modern gas one, or washing dishes in a chipped porcelain sink instead of a dishwasher.
Its true. There is no end to what people will do to make things seem something other than what they really are, and I guess Im one of those people.
Although I have no intention of selling my present house soon, Ive been making notes about things Ive been doing to prepare for that inevitability, so Ill have enough to disclose.
For example, I changed the color of the exterior of the house from tan to cream. I wasnt trying to hide anything. I just didnt like tan.
I turned my garage into a workshop, not because there was anything wrong with the garage, but because I needed to put a workshop somewhere. I didnt want to put it in the basement, not because there was something wrong with the basement, but because the garage was bigger. I dont know why it is bigger. It just came that way.
In the fall, the trees lose their leaves, so I have to rake them up. I dont think anything is wrong with the trees. My neighbors trees shed their leaves, too, all except the ones that look like Christmas trees, so maybe it is a neighborhood thing.
The one thing I wont do is get rid of any clutter. When you come to look at my house, I want to make sure that your junk will look just as nice as mine does in the same space.
I dont want anyone ever saying that Im one of those people who tries to make things seem other than they really are.
Freddie Macs results of its Primary Mortgage Market Survey shows that "Mortgage rates remain at record lows and while that has fueled a refinance boom, its been driven mainly by higher income borrowers. With about 20 million borrowers eligible to refinance, lower-and middle-income borrowers are leaving money on the table by not taking advantage of low rates. On the homebuying side, demand continues to surge, and it has created a sellers market where inventory is at a record low and home prices are rising, beginning to offset the benefits of the low rates."
30-year fixed-rate mortgage FRM averaged 2.72 percent with an average 0.7 points for the week ending November 25, 2020, down from last month when it averaged 2.81 percent. A year ago, at this time, the 30-year FRM averaged 3.68 percent.
15-year FRM this week averaged 2.28 percent with an average 0.6 points, down from last month when it averaged 2.32 percent. A year ago, at this time, the 15-year FRM averaged 3.15 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage ARM averaged 3.16 percent this week with an average 0.3 points, up from last month when it averaged 2.88 percent. A year ago, at this time, the 5-year ARM averaged 3.43 percent.
When youre planning a home renovation project, there is one of two categories its likely to fall into. The first is a simple cosmetic refresh. For example, maybe youre going to reface your cabinets and change out the light fixtures, but theres no major work to be done. Changing floors is another example of a cosmetic project.
Then, there are those large-scale projects that involve taking out walls and changing the layout of your home.
Big projects involving layout can be intimidating, so what should you know?
Before you start hiring or knocking down walls, are you sure that reconfiguration is the right choice?
Think about what your current limitations are with your layout and think about if youre better off with an addition, a change in floorplan, or maybe both. As youre weighing the decision, dont start thinking about finishes and furniture just yet. Those are largely superficial elements of home design. You need to get the logistics right first, and then the other things come later.
Think about what challenges you currently face and the solutions most likely to address those.
One of the primary reasons to change a homes layout is to open up the main living areas. For example, you might want an open-concept kitchen, living area, and dining area.
If youre going to open up a floorplan, youre likely going to be taking out at least one wall. If so, you should talk to an architect to figure out which walls are load-bearing and what you can do to make up for the loss of those. For example, you might use beams or pillars. Maybe you need both. Youll also probably need a permit if youre changing a load-bearing wall and plumbing or electrical work that might be required.
If youre planning to create an open floor plan, the cost is usually anywhere from 8 to 15 per square foot of affected space, and you might be able to get a return on your investment of anywhere from 54 to 60.
While most people prefer open concepts, some people want to go in the opposite direction. They want to create more enclosed rooms out of open spaces. For example, maybe you want to create a formal dining room.
Adding a wall will also probably require you to get permits, especially if the changes will involve electrical work. Youll probably work with a contractor, but not necessarily an architect if youre adding rooms.
If you have a master bedroom now thats small and you want to expand into another bedroom, for example, you will again need an architect if you plan to take out walls. What a lot of homeowners will do is reduce the size of a connecting bedroom and then add a master bathroom suite and perhaps a large closet.
In a project like this, a general contractor can be valuable because they can keep your workflows moving along efficiently, and they can manage subcontractors so you dont have to.
Finally, if you want to add a bathroom, you may choose to either use space thats already connected to an existing bedroom. You might also turn a bedroom, back-to-back closets, storage area, or walk-in closet into a bathroom.
As with the circumstances above, you will need full permits. You also will want to hire a general contractor. It will be more expensive, time-consuming, and generally a larger headache if you try to hire everyone on your own unless you already have people you know and trust such as a carpenter, electrician and plumber.
A lot of sellers dont listen to their real estate agents, so well tell you what your agent wants to say, but cant say to you and this is it - your agent cant get you the price you want unless your home is in pristine move-in condition.
That means no sticking drawers in the kitchen. No leaning fences. No rust-stained plumbing fixtures. We could go on, but maybe we need to make it clear. If you have even one of following "turn-offs," your home wont sell.
Buyers can get instantly turned off. Here are their five biggest turn-offs:
1. Overpricing for the market
4. Deferred maintenance
5. Dark, dated dcor
Overpricing your home is like trying to crash the country club without a membership. Youll be found out and escorted out.
If you ignored your agents advice and listed at a higher price than recommended, youre going to get some negative feedback from buyers. The worst feedback, of course, is silence. That could include no showings and no offers.
The problem with overpricing your home is that the buyers who are qualified to buy your home wont see it because theyre shopping in a lower price range. The buyers who do it will quickly realize that there are other homes in the same price range that offer more value.
Smells can come from a number of sources - pets, lack of cleanliness, stale air, water damage, and much more. You may not even notice it, but your real estate agent may have hinted to you that something needs to be done.
Theres not a buyer in the world that will buy a home that smells unless theyre investors looking for a bargain. Even so, theyll get a forensic inspection to find out the source of the smells. If they find anything like undisclosed water damage, or pet urine under the "new" carpet, then they will either seve>
If your tables are full to the edges with photos, figurines, mail, and drinking glasses, buyers attention is going to more focused on running the gauntlet of your living room without breaking any Hummels than in considering your home for purchase.
Too much furniture confuses the eye - it makes it really difficult for buyers to see the proportions of rooms. If they cant see what they need to know, they move on to the next home.
Deferred maintenance is a polite euphemism for letting your home fall apart. Just like people age due to the effects of the sun, wind and gravity, so do structures like your home. Things wear out, break and weather, and its your job as a homeowner to keep your home repaired.
Your buyers really want a home thats been well-maintained. They dont want to wonder what needs to fixed next or how much it will cost.
The reason people are looking at your home instead of buying brand new is because of cost and location. They want your neighborhood, but that doesnt mean they want a dated-looking home. Just like they want a home in good repair, they want a home that looks updated, even if its from a different era.
Harvest gold and avocado green from the seventies; soft blues and mauves from the eighties, jewel tones from the nineties, and onyx and pewter from the oughts are all colorways that can date your home. Textures like popcorn ceilings, shag or berber carpet, and flocked wallpaper can also date your home.
When youre behind the times, buyers dont want to join you. They want to be perceived as savvy and cool.
In conclusion, the market is a brutal mirror. if youre guilty of not putting money into your home because you believe its an investment that others should pay you to profit, youre in for a rude awakening. Youll be stuck with an asset that isnt selling.
Committees are an untapped gold mine available to a homeowner association board. Besides benefitting the board by spreading the work around, committees are an excellent training ground for future board members. Members that are >
Committees come in all shapes, sizes and functions and may be temporary or long term, as the need dictates. They are only limited by the boards imagination. A committee can assume a variety of roles, such as:
Complex tasks can be assigned to a special committee which can research the task and advise various courses of action to the board. This includes large renovation projects, proposed amendments to the governing documents and local zoning or crime issues.
Committees like Rules Enforcement and Architectural Restriction can hand out citations and review appeals.
Committees like Landscape/Grounds and Pool oversee the contractors performance and help maintain a high quality of service.
The Maintenance Committee can prescreen requests to ensure they are indeed the HOAs responsibility and, if so, prioritize and group them for better cost efficiency. The Budget Committee studies past costs to better anticipate future expenses.
An often overlooked function is planning social events to help neighbors meet neighbors. The events dont necessarily need to be party oriented. The Annual Meeting can become the Social Event of the Year with food and beverages. Spring Planting Parties dont have to be all work. Reward the volunteers with catered food, beverages and T-shirts. The Social Committee can help build real community and lasting friendships.
Turn that nosey member into the Neighborhood Watch Chair who can monitor suspicious activity or recommend better security techniques.
To facilitate committees, the board should provide the proper resources. Some need funding but most just need clear marching orders. The board should never abrogate its final authority over HOA matters to a committee. Committee power should usually be limited to an advisory role. If a committee is allowed greater authority, like rules enforcement, there should always be the right of appeal to the board.
Part of a good plan of action includes reporting to the board at scheduled meetings. That report should include recommendations for board approval. These reports provide a good way for the board to assess the ongoing need or effectiveness of a committee. If little is being done, it might be time to retire a committee or find a new chair.
Some committees need to meet regularly and some as needed. It all has to do with the goals laid out by the board. The board should select the committee chair carefully as someone who has the time for the job and inclination for leadership.
Heres a novel idea: Allow renters to join committees. Many want to be good neighbors and to serve. At least ask. You might be surprised at the response and it might encourage owners to step up.
Recognizing effort and superior performance is 1 on every Job Satisfaction Survey. It works the same way in an HOA. It is the currency of care in HOAs which brings a huge return. Thank you notes, newsletter accolades, plaques and Certificates of Merit go a long way.
Mining your committee options will produce a wealth of riches for the community. Committees lead to better information, greater harmony, new friendships, enhanced trust, involved members and less work for the board. Its all good. This is the Mother Lode. Grab your picks and shovels and start digging
If youre a service member or veteran in the United States, you might be eligible for a Department of Veterans Affairs VA home loan. The spouse of a service member or veteran may also be eligible for a VA home loan. The entire objective of this program is to help veterans and service members obtain a mortgage with little-to-no money down.
The Department of Veterans Affairs guarantees a VA loan. The government doesnt make the loan. Instead, since the federal government is backing it, lenders feel more comfortable offering the loans even to higher-risk borrowers. The backing of the federal government mitigates the risk for the lender.
Along with being able to get a loan without a down payment, sometimes the program has less stringent credit requirements too. You still have to meet some requirements, and you have to be approved by the lender, but it facilitates an easier path to homeownership.
There are requirements as far as your military service that you have to meet for VA loan eligibility. The requirements include that you are currently a veteran who was honorably discharged or that youre active duty military.
You must have at least 90 days of consecutive active service during wartime or at least 181 consecutive service days during peacetime. You may also be eligible with more than six years of service in the National Guard or Select Reserve.
If youre the spouse of someone who died in the active line of duty, you could qualify for a VA loan.
To go through this home loan process, you need a VA Certificate of Eligibility called COE.
To get a VA COE, you can go online to the VA and fill out an application through their eBenefits portal, or you might be able to apply through your lender if youve selected one.
First, as was mentioned, you need to fill out VA paperwork to verify your program eligibility. Youll receive an entitlement, which is an amount guaranteed on each loan. Lenders may be willing to give you a loan thats up to four times more than the entitlement.
Then, you can get a VA loan without a down payment. Instead of paying mortgage insurance, you pay a VA funding fee.
The entitlement is an important part of a VA loan, and there are two types. The first is a basic entitlement which is the lesser of either 25 of your total mortgage or 36,000. The second is called a bonus entitlement, which is up to 25 of the FHA loan limit, minus the basic entitlement.
A lender is going to have their own criteria for who theyll lend to, but typically you need to be able to show you have adequate income to cover your mortgage payments. Youre not likely to be approved if you have a lot of existing debt. Also, there isnt a minimum credit score requirement, but you have a >
Youll need first to get all of the necessary documents and paperwork completed through the VA. Then, youll have to find a lender that does VA loans because not all do. An experienced VA lender will be able to walk you through the process and answer your questions.
Youll still need to compare their loan terms and rates and comparison shop for the best deal.
Finally, if you have a full loan entitlement, there arent any limits on how much you can finance. However, entitlements are based on conforming loan limits. Also, lenders will more than likely have criteria dictating how much you can borrow.
A lot of people, thanks to low interest rates, are thinking about home renovations right now. You have different options to pay for these projects if youre not going to pay in cash. One option is a Home Equity Line of Credit or HELOC.
A HELOC is a way to borrow against your homes equity, and it provides flexibility. With that being said, because of that flexibility, you need to be careful to stay on budget when you use funds.
The following are some things to know about a HELOC, particularly if youre thinking about using it for a renovation.
With a HELOC, youre spending in a way thats similar to a credit card. You borrow up to a certain limit as defined by your lender. Then, you pay back whatever you borrow with interest. You can withdraw and make payments on whatever basis works best for you.
A lender gives you a draw period, which is the time you can withdraw money. When your draw period is ended, you may be able to renew the credit line.
If you dont or cant renew, you pay the outstanding balance either all at one time, or you do so over a repayment period.
HELOC lengths can run as long as 30 years.
The benefits of a HELOC and flexible repayment include the fact that you only borrow what you need, and many have no fees. The interest on a HELOC might be deductible if you use your funds for home improvements.
While HELOCs can work well for funding a renovation, there are possible risks to be aware of before you borrow.
Since your home is your collateral, if you dont make the payments, you could lose your home. Typically a lender will try to protect against this by limiting borrowing amounts, but its still a big consideration.
A lender can also freeze a credit line or reduce it. Youll only see this usually if you havent made your payments or your homes equity changes, but its something to think about.
The interest rates on a HELOC are variable, and theyre tied to the prime rate. If there are changes in the market, you may end up paying more so that uncertainty may not be ideal.
A home equity loan is another financial product often used to fund renovations and home projects.
A home equity loan also involves borrowing against the equity in your home, which is used as collateral. A home equity loan differs from a HELOC because its a lump-sum loan rather than a revolving line of credit. You pay the loan back over its life plus interest, and you make those payments based on a set schedule. Most home equity loans have a fixed interest rate, which alleviates the worry of fluctuating market conditions impacting interest rates.
If youre deciding between a HELOC and a home equity loan, the loan might be better if youre certain of the cost of your project. If youre comfortable with a fixed monthly payment, a home equity loan could be the better option.
On the other hand, a HELOC might be right if you want a lot of flexibility in how much you borrow. Maybe youre not sure about the scope of your project or what your budget will be.
The biggest differentiators between the two will come down to first, flexibility, and second, certainty. If you want flexibility, consider a HELOC. If you want certainty, think about a home equity loan.
Maybe youve heard this and maybe you havent, but when someone asks when the best time is to close on a contract its typically at or near the end of the month. Why? Because its how mortgage interest is accrued. When someone makes a mortgage payment on the first of the month, the payment doesnt apply to the month about to be lived in but instead its for the interest that accrued for the previous month. But at the settlement table when a purchase mortgage is taken out there are no previous occupied days, yet interest is still collected.
Its called prepaid interest and its an amount that includes interest on the first day of the new note up until the first of the following month. If a closing takes place on the 20th of the month, the lender will collect interest up to the first of the following month. In this example that would be 10 days. If on the last day of the month, there will only be one days worth of interest collected.nbsp;
Then, there would be no mortgage payment on the first of the following month because its already been paid. So, with a purchase transaction, it makes sense to close as close to the end of the month as possible. Some like to give a little breathing room and close on the next to last day of the month just in case something happens to cause a delay.nbsp;
The closing date on a purchase is clearly laid out on the first page of the contract. Closing must take place on or before that date. Any extension must be agreed to by both parties. Theres really no wiggle room about that. If the buyers cant close on the specified date, they run into the possibility of losing their earnest money deposit.
On the other hand, theres a bit of a difference as it >
When refinancing, there will be interest in arrears for the number of days for the old mortgage plus prepaid interest collected up to the first of the following month. Again, because the interest has been prepaid, there will be no mortgage payment on the first day of the next month because its already been paid.
During a purchase transaction the closing date is established upon execution of the contract. When refinancing, its completely up to the homeowners not just whether or not it makes sense to refinance but setting a closing date.
One area that many people never think about changing is their driveway. Over the years, a lot of people have learned that they can expand their driveway to hold more cars. This is especially useful if you have multiple vehicles that members of your family drive.
In the average neighborhood, there is simply not enough space for more than a few cars. It is a small investment to expand the driveway of your home, and the potential future buyers will love this feature.
The kitchen is one of the most important areas of the home when it comes to selling. Cabinets are a central point of any kitchen. If you want to improve or replace your cabinets, it is vital to work with a company that has experience in the field. Look for cabinet refinishing companies near you through online sources.
The cabinets in your kitchen should flow with the rest of your home. With such a large investment of both time and money, make sure that you have conducted research on the best cabinets for your current home.
Another vital room in your home is the master bathroom. You will spend a lot of your time in this room, so it is important to make it as inviting as possible.
Upgrading the floors in your bathroom is a great choice. Tile is the most common piece of material to use. Not only does it last longer, but it looks much better than other options as well.
Heated tile is another feature that many people enjoy. In the cold mornings of the winter, heated tile can be a nice luxury. As soon as you walk on the tile, your feet will be heated and you will enjoy the bathroom experience much more. This is new technology that a lot of people are upgrading to.
Everyone knows that a new HVAC system is not cheap. However, there are new HVAC systems that focus on reducing your total energy consumption. Although these units are still expensive, you will save some money every month on lower electricity bills.
With so many options on the market today, it is vital to spend some time finding the right model for your home. If you live in a cold area, make sure the heating unit is large enough to heat your entire home. In many areas, the upstairs part of the home is difficult to heat in the winter without a large unit.
Perhaps the easiest way to improve the value of your home is to simply paint the walls. New paint on the walls can really improve the look and feel of your home. Although you can do the painting yourself, it makes sense to hire someone who has experience painting.
Painting an entire house is a long process. Although it will not be cheap, it will improve the value of your home greatly. This is one of the best things to do right before you list a home on the market.
Investing in your home is one of the best financial decisions that you can make. As the housing market continues to improve in value, investing in your home will help you financially. You can even use the equity in your home to pay for the new upgrades that you want.
Exceptional curb appeal will add to the enjoyment and value of your property and home. Maintaining your curb appeal throughout each season may pose its challenges, but with these tips, you can ensure that your home and landscaping will look their very best throughout the year.
A thorough power wash is essential for maintaining the cleanliness of your home, driveway and walkways. Many homeowners prefer to do this in the spring, but you might consider an additional wash in the fall as well. By keeping your landscape free of debris like broken branches and dead trees, you can better maintain the appearance of your property.
Its helpful to plant with each season in mind to ensure that your landscape looks great year-round. Spring bulbs and flowering trees add visual interest to your landscape at the start of the growing season. A lush lawn and pots of colorful annuals can provide eye-catching appeal in the summer. Think about late summer perennials and deciduous trees or shrubs that boast spectacular fall colors. Evergreens are >
To avoid flat looking landscaping, be sure to include vertical interest. Arches, even when bare during the winter season, will add visual interest to your front yard. Hanging plants, vines, climbing plants, t>
Plants arent the only method of achieving excellent curb appeal. Consider replacing a worn-out front walkway with elegant cobblestone or brick pavers. Replace mulch with stone or encircle trees and shrubs to achieve a more formal look for your property. Boulders can be strategically placed to draw the eye and provide further visual interest for your setting.
If you have a slope thats difficult to mow or a sunken section of landscaping that always seems to flood, consider a solution. A low-maintenance, terraced garden is ideal for sloping sections of land that are difficult to mow. On the other hand, there are no-mow grasses that can replace a traditional lawn. Installing adequate drainage for low-lying areas of your landscape can help reduce the flooding that occurs during stormy seasons.
You can increase the year-round curb appeal of your home by maintaining its outward appearance. A pleasing door, elegant fixtures, contemporary railings, eye-catching shutters and stylized window boxes will go a long way to boost your curb appeal. For an additional wow factor, consider expanding your porch or replacing worn siding to improve the appearance of your home.
Great curb appeal begins with assessing your current setting. When you do install new features, its important to consider how they will appear during each season.
Andrea Davis is the editor for HomeAdvisor, which helps homeowners find home improvement professionals in their area at no charge to ensure the best service in the shortest amount of time.
A lot of people want to invest in real estate, but theyre not ready to flip properties or be a landlord. There are other ways to invest in real estate without having the responsibility of holding physical property. One way is a Real Estate Investment Trust or REIT.
The purpose of a REIT is to help individuals invest in income-producing real estate. A REIT will own and usually operate real estate or >
The REIT isnt a developer who aims to resell. Instead, they buy and develop properties to operate them as part of their portfolio.
Again, one of the big benefits of a REIT is that as an individual retailer investor, you can own a share of real estate income without going and buying commercial real estate.
There are a few different ways to invest in REITs. In general, you buy shares listed on stock exchanges. You can also purchase shares in a REIT ETF or mutual fund. An estimated 87 million Americans invest in REITS through their financial funds and retirement.
The price of REIT shares fluctuates throughout the trading day, like companies with publicly-traded stocks.
The four types of REITs are:
If you want to buy shares of a REIT listed on a major stock exchange, the process is the same as buying shares of another public company. If you buy an ETF or mutual fund, you may find more liquidity than buying traditional shares.
Buying private REITs is more complex, with them being limited to accredited and institutional investors.
Some of the benefits of adding a REIT to your portfolio include:
The biggest advantage is exposure to real estate. You dont have to acquire properties directly, and you can still take advantage of the upside of the real estate market. Owning real estate directly can be lucrative but also risky and time-consuming.
REIT companies must payout at least 90 of their taxable income to their shareholders, so theyre a good option for dividends. You could use REITs as a source of income.
Theres diversification with REITs. Real estate is an asset >
The downsides of REITs include:
The dividends earned on REITs are usually taxed at a higher rate than the dividends of traditional stocks.
Theres a high level of risk and volatility that comes with REIT investment, even though they dont always follow the market. There can be big swings in the real estate market and the economic market in general that have a massive impact on the volatility of REITs.
Whether or not to invest in a REIT depends on a few factors. First, how risk-averse or tolerant are you? Second, are you interested in adding something to your portfolio that tracks the real estate market? Is this a better option for you than a traditional real estate investment?
Theyre all things to ask yourself about REITs, which do have the advantage of beingnbsp;income producers.
Homeowner associations are often portrayed as the detached governed by thankless volunteers. Its the blind leading the blind or rather the clueless in charge of those that could care less. So how should this union of the unwilling go about acquiring the wisdom it needs?
James Surowiecki makes the case that a group is smarter than the smartest individual in his book "Wisdom of Crowds." Surowiekis research indicates that the wisdom of answers from those with only general life experience exceeds the wisdom of world experts. Here are some excerpts from an interview:
"The idea really came out of my writing on how markets work. Markets are made up of diverse people with different levels of information and intelligence, and yet when you put all those people together and they start buying and selling, they come up with generally intelligent decisions. I realized that it wasnt just markets that were smart."
"A "crowd" is any group which can act collectively to make decisions and solve problems. So, big organizations like a company count as crowds and so do small groups, like a team of scientists working on a problem. But so are groups that arent really aware of themselves as groups, like investors in the stock market. They make up crowds, too, because theyre collectively producing a solution to a complicated problem: the choices of investors determine stock prices."
"There are four qualities that make a crowd smart:
Diversity. Group members are bringing different pieces of information to the table.
Decentralized. No one at the top is dictating the crowds answer.
Summarizes Answers. Combines all member answers into one collective verdict.
Independent. Individual answers are independently arrived at without worrying about what others think."
"Bad answers are more likely when most of the group are biased in the same direction. When diverse opinions are squelched, groups tend to be dumb. It usually spells disaster when too much attention is paid to what others think. Stock market bubbles are a >
"Crowds are best when theres a "right" answer to a problem. If there is a factual question, groups consistently provide the correct answer. Groups arent good at problems of skill -- for instance, dont ask a group to perform surgery or fly a plane."
"Experts, no matter how smart, only have limited amounts of information. They also have biases. Its very rare that one person can know more than a large group of people, and almost never does that same person know more about a whole series of questions. Its actually hard to identify true experts."
"The principle works for individuals as long as the groups are diverse and individuals try to be as independent as possible."
"No. The wisdom of crowds emerges from disagreement. Its the "average" opinion of the group, but not an opinion that every one in the group can agree on. Collective wisdom does not result from compromise."
Maybe youve been planning a remodel for quite some time, and youre finally getting started. You might be doing a large-scale remodel to make your home more functional for your family, or perhaps the plan is to get it ready to sell.
Regardless of why youre remodeling, theres a big question that will arise: should you stay, or should you go? Meaning, should you move out while the work is being done?
The following are some of the things to think about as you decide.
If you have family or friends that are willing to take you in for a period of time, this may not be a concern, but otherwise, can you realistically afford to move out? If youre paying several months of rent, for example, think about how much this will add to your total renovation costs.
It could be thousands or tens of thousands. Thats even if you can find a short-term rental for the window of time youll need.
Even if you technically have the money to move out and into temporary housing, could that money be put to better use in the remodel itself?
A lot of people work from home for the foreseeable future because of coronavirus. If youre one of them, and perhaps your spouse is as well, you may need at a minimum a >
Working in a construction zone can be even tougher than trying to live your day-to-day life in one.
Maybe staying throughout your renovation would cause your productivity to take such a hit that you just cant manage it, in which case you might move out.
If you stay during a remodel, the contractor is going to have to work around you. Theyre not going to be able to work hours that are as flexible such as in the evenings. Theyre going to be building their schedule around yours, which might mean that it takes longer to finish things.
Plus, youre taking up space, and your personal items are as well. That can slow down the process.
Whether or not you move out can depend on your budget and timeline and what the project is. If youre renovating something like a kitchen or bathroom, it can make more sense to move out. Otherwise, you may have to set up a temporary area of your home for essential functions like preparing snacks and meals.
Of course, if youre doing a gut renovation you probably dont have any choice. Youll have to move out. Otherwise, in addition to the obvious downsides, you might also be exposed to toxic chemicals and fumes.
If youre renovating something like a basement or a living area, you might not have to move. It could be that you can stay out of that area easily enough during the renovation. You just need to think about your needs and life>
Some homes have layouts that are more conducive to staying put during a renovation too. For example, maybe you have a multi-level house so you can confine most of your activities to one level or the other during renovations.
If you do stay in your home, but you restrict yourself to an area where work isnt being done, you can rent a storage pod so you can completely empty the work area. This will keep your furniture and other items protected, and it will also make it easier for the people who are working.
Safety is another issue that is likely to sway you in one direction or the other. If you dont have kids or pets, or your kids are older, this might not be a concern. If you do have kids or pets, staying in your home during renovations can be a safety concern.
The contractor and subcontractors should make an effort to keep their work areas sectioned off, but worksites are inherently risky.
If youre trying to decide whether or not to move out during a remodel, theres not one right answer that works for everyone. It depends a lot on how much you can tolerate in terms of inconvenience, your family and life>
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The Pitfalls of Fractionalized Deeds of Trust
Many investors like the alternative lending space where they can invest in mortgages, otherwise known as, Trust Deed investing, whereby they become the lender on real estate. The two major ways to invest in these mortgages is either in some kind of pooled investment [a Fund], similar to a mutual fund or owning the deed of trust on a specific piece of real estate, similar to owning an individual stock.
In the case of investing in a Fund, the investor invests in the Fund, and the manager chooses which loans to make to borrowers. In the situation of owning an individual deed of trust, the investor chooses which specific loan to invest in and is recorded on title. It is the latter that is the focus of this article, and specifically fractionalized deeds of trust where the investor shares ownership in the investment with on or more other parties.
Most note brokers [in California; other states may vary] are licensed to fractionalize a deed of trust [notes] with up to 10 owners [beneficiaries]. Other brokers have licenses from the Department of Corporations to have more than 10 beneficiaries. The reason brokers fractionalize notes isnbsp;usually because they are too big for one investor. A 40,000 note may be able to find a home with one investor, but a 700,000 note may need more than one investor in order to be funded. Each investor receives a recorded deed of trust [for their protection as evidence for their loan]. When the borrower pays the loan off, each investor is required to reconvey their interest in the loan [notarized signature] in a timely manner [California requires this be done within 21 days of the request]. The reconveyances are deposited in escrow, and each lender is paid off in escrow as well.
If everything goes smoothly, no one complains; however, what happens if things dont go according to plan? What if a lender is unavailable to sign off in a timely manner? What if a lender refuses to sign? What happens if the borrower defaults on a fractionalized loan? What happens if you have a minority interest [less than 50 ownership] in a fractionalized loan? These are just a few instances where a fractionalized lender faces challenges, and these challenges can be monumental.
First, lets look at a simple situation where a 900,000 loan has been fractionalized into 9 different lenders [each having 100,000 ownership in the loan] and 8 of the 9 lenders signs the reconveyance paperwork in a timely manner but one chooses not to sign [in time, or not at all]. Why would the lone lender choose not sign? What if the loan was very well secured and the note was yielding a higher than market rate of interest? A nave lender may think that they can enjoy the higher interest for longer than allowed [not signing in a timely manner]. This situation is not as far fetched as one might think. In the 1990s, first deed of trust notes yielding 12 were not uncommon. When rates dropped dramatically, borrowers were quick to refinance. One investor tells the story of how a 12, 1.2M loan was trying to be refinanced by the borrower at 9 with a new lender. The fractionalized note had 5 owners. 4 of the 5 had their reconveyances notarized and delivered to the escrow company in a timely manner. The last investor had 500,000 in the note and did not want to lose his 12 rate; he was under the misconception that he could just keep coming up with excuses as to why he was not able to get to a notary [he was a busy surgeon]. After more than a month went by, the borrower sued all of the lenders for the difference in the rates  plus attorney fees. Although thenbsp;lone holdout was ultimately responsible, all of the other lenders had to defend themselves, which put undue burdens upon the innocent 4 lenders.
Next, lets look at a situation where a majority [over 50] lender chooses to extend a loan when it matures, and a minority lender does not. Unless the minority lender requests a partition action so as to separate himself from the majority lender, the majority lender is in control of the fate of that loan.
Dealing with foreclosures by the lenders introduces an enti>
Thus, foreclosing may not even be possible if the note holders cannot agree to their destiny or come up with the funds needed to file the paperwork to foreclose [which can be many thousands, depending on the size of the loan].
Other issues arise even if foreclosure has been started; one lender tells the story of how the borrower stopped making payments to both the 1st and 2nd mortgage. This particular lender was one of many in the 2nd mortgage. The 1st started the foreclosure process. Nobody in the 2nd mortgage wanted to cure the 1st. There was an offer by an independent 3rd party to purchase the property for the 100,000 over the1st mortgage, which would have been given to the 2nd [which would have paid its loan down but not off]. There were 25 beneficiaries on the 2nd DOT. 24 of them chose to allow the salenbsp;and take the 100,000, which would have amounted to a short sale; however, the one lone holdout, who represented only 4 of the 2nd, refused to sign off on the sale. His reasoning? He stated that he believed that, at the foreclosure sale, someone would bid the property up more than 100,000 over the 1st. Not only was this illogical [based upon the value of the property], but it went against his previously signed documents stating that he would go along with the majority, opening himself up to a lawsuit by the other lenders. The title company refused to give title insurance to the potential buyer, and the sale never went through. At the trustee sale, one bidder bid just over the 1sts credit bid, and the 2nd walked away with zero.nbsp;
Many individual trust deed investors believe they are protected from many perils if they own over 50 of the note, as most states have a rule that the majority holder makes the rules; however, title companies are not bound by such laws. If they refuse to give title insurance, any prudent would-be buyer of the property will walk away.
Another issue is that an investor in a note does not have to come up with his fair share of the money it takes to file foreclosure, and there is no provision that states that other investors who come up with more money get a preference, so it is difficult to maneuver a foreclosure unless each person comes up with his percentage required.
Other not infrequent situations come up where the borrower wants to do a loan workout or re-write the note. Unless all parties agree, everything is at a standstill. Some unethical fractionalize note holders will sometimes hold this over on the rest of the note holders by demanding a larger share than they are entitled to or demand that the other investors buy them out.
For these reasons, many investors have turned to Funds where the Fund manager handles the foreclosure paperwork, pays the fees, and sees the entire process through.
The takeaway here is that one needs to be extremely careful if one wants to invest in a fractionalized note not only do you want to own more than 50 of the note, but make sure you know every other owner and have like minds, which, in todays world, is more than a daunting task.
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