With the rapid appreciation that homes have had in the last two years, most homeowners have equity. A common way to release part of the equity is to cash-out refinance but some homeowners may not be eligible currently. This type of loan replaces the current mortgage by paying it off and an additional amount of cash for the owner. Generally, lenders will consider a new mortgage up to a total of 80% of the current value. Typically, the rate on a cash-out refinance will be slightly higher than a traditional purchase money mortgage. As is in any lending situation, the rate depends on the borrower's credit and income. The best interest rates are available to borrowers with higher credit scores, usually over 740. Loan-to-value can affect the rate a borrower pays also. A 70% loan-to-value mortgage could be expected to have a lower interest rate than an 80% LTV because there is a larger amount of equity remaining in the property and therefore, less risk for the lender. There are no … Continue reading...
Encouraging Multiple Offers
Based on the current competition due to lower than normal inventories, it is possible for a seller to find themselves on the beneficiary side of a multiple offers. Two or more parties may be trying to buy your home at the same time and because of the competition, they increase the purchase price, possibly, remove unnecessary contingencies and try to make their offer as attractive as possible. This can pleasantly result in you realizing higher-than-expected sales price and proceeds of sale. While it may not materialize, it is good to understand what could happen and the best way to handle it. Your real estate professional is positioned to offer you specific advice but the following are some things to consider. One tactic is to delay showings for a short period of time. Some agents will create this by putting a sign on the property with a rider that indicates "coming soon" and depending on the local MLS rules, it may even be put in the system. No showings will be allowed until a … Continue reading...
Homeowners Need to Know
In the Boy Scouts, a certification, called a Totin' Chip, is required for scouts to carry, and use woods tools like a knife, axe and a saw. They must read and understand the use and safety rules from the scout handbooks and demonstrate the proper handling, care, and use of each. No such certification is required for homeowners but there are a lot of good reasons why it should be self-imposed. Making minor repairs is part of the responsibility of owning a home that will save both time and money. A homeowner will certainly appreciate the need for such training the first time a call is made to a service company to fix their air conditioner that suddenly quit cooling. When the repairman arrives, he has a checklist which includes verifying the unit is getting electricity. If not, they go to the electrical panel to see if a breaker has been thrown. It can be very humbling and expensive to have to pay a service fee to have a repairman flip a breaker to get your air conditioning … Continue reading...
No Need to Make Common Mistakes
A successful home sale, considered by many owners, is to maximize their proceeds in the shortest time with the least inconveniences. Just because it is a seller's market doesn't mean that homeowners can shortcut some of the steps that make it happen and they certainly need to avoid commonly made mistakes. Pricing too high Low inventory and high demand have contributed to the rising prices of homes. NAR reports that the median sales price is up 17.8% in the past year and CoreLogic recently released data that July set new record growth of 18% year over year. This might give sellers a false sense of security about overpricing their home Pricing a home too high initially can limit activity, attract the wrong buyers and ultimately, cause the home to realize a lower price than optimum. There is an interesting dynamic that takes place when there is a shortage of homes to show, and a new home hits the market. Buyers, who have been in the market but not purchased yet, will rush out to … Continue reading...
A Lesson from a Pro
A well-known professional home stager, recently, decided to sell the 4,000+ square foot home which she lived in with her husband. It was certainly well maintained and by most standards, could have gone on the market immediately. However, she still went through a full staging effort before she listed the home. The work included painting inside and out especially, changing the kitchen cabinets from gray to white. The carpet was replaced along with a few dated light fixtures. They stained the fence and added minor landscaping to make it look fresh and inviting. They removed personal items from the home that might be distracting and replaced some furniture that was too large and might have limited a buyer's imagination. The home looked, smelled, and was clean. It had great drive-up appeal. Each room looked like it belonged in a magazine and the professional photos let potential buyers see the home before they visited it in person. When the home did come on the market, it sold in five … Continue reading...
Equity, Price and the Agent You Select
A Seller's equity in their home is the difference between what the home is worth and what they owe. At any point in time, it is an estimation because value is a very subjective term. If the seller thinks the home is worth more than an actual buyer will pay for it, the estimated equity is too high. If a buyer is willing to pay more than the seller believes the home is worth, the estimated equity is too low. A true determination of equity becomes more objective when the home is sold, and the value is solidified by the sales price. This value is determined by negotiations between a seller and buyer and eliminate speculation and conjecture because money and title are being exchanged. The equity being defined above is more accurately referred to as Gross Equity. After the ordinary and necessary expenses connected with the sale of a property are deducted from the sales price, along with any mortgage balance and/or liens, the proceeds are referred to as Net Equity. Like in business, … Continue reading...
Rising Rents – Music to Your Ears?
Rents going up may not be pleasant to hear for tenants, but it could be music to your ears if you are an investor. The recent CoreLogic Single-Family Rent Index, April 2021, showed a 5.3% increase in national rent year over year which doubled the increase experienced in April 2020. This is the largest annual rent price increase in nearly 15 years. Interestingly, detached rentals are experiencing an even higher growth rate of 7.9% year over year compared to the 2.2% annual rate for attached rentals. This is supported by the CoreLogic report that half of millennials and 2/3 of baby boomers "strongly prefer to live in a single, stand-alone home." From an investor's point of view, single-family rentals offer large loan-to-value mortgages at fixed interest rated for long terms on appreciating assets with definite tax advantages and reasonable control. Rentals are considered to be the IDEAL investment because if offers income to offset the carrying cost of the investment; … Continue reading...
Homeownership Cycle and Inventory
An interesting homeownership cycle begins with a starter home and progresses to larger and smaller homes throughout a person's lifetime. Within a few years after purchasing their initial home, they might move up to a little larger house. The reasons could be that they simply want a larger home and can afford it, or their increased family size may be motivating the move. While the children are small, they can probably get by with less space but as they grow and behave more like adults, even though they may not be, the need for more room becomes more pressing. Depending on the size of the family, this will last some time and then, as they go off to college, enter the work force and find their own living space, the parents may find that they no longer need the larger home. In the interest of saving money or possibly convenience, they migrate from a larger home to a smaller home until they consider an assisted living facility or possibly, a nursing home. Another alternative, many … Continue reading...
Mortgage Forbearance
Some homeowners who could not afford to make their mortgage payments this past year have been relieved to find out that their mortgage servicer or lender allowed them to pause or possibly, reduce their payments for a limited period. While it does relieve the financial pressure, it is a temporary remedy. About 2/3 of the people who entered forbearance during the pandemic have exited the program. There are only a little over two million homeowners remaining in forbearance. It is important for owners who find that they cannot make the payments on their mortgage to contact their lender and request a forbearance. If you stop making mortgage payments without a forbearance agreement, the servicer will report this information to the credit reporting companies, and it can have a lasting negative impact on your credit history. Without going through that process, the lender assumes you are delinquent, and protections afforded under forbearance may not apply. Forbearance does not forgive … Continue reading...
Selecting the Right Agent in a Seller’s Market
Even in the current, low inventory housing market, sellers are resisting the urge to sell it themselves and still seeking the help of a real estate professional. It may be more important than ever and there is too much at stake to risk going it alone. The number of people attempting to sell on their own has been in steady decline since 2003 from 14% to 8% in the latest Profile of Home Buyers and Sellers produced by the National Association of REALTORS®. The most frequently mentioned difficulties that owners who decided to sell it without the benefit of an agent included preparing the home for sale, understanding, and performing the paperwork, getting the price right and selling it within the length of time planned. Another commonly cited challenge was having enough time to devote to all aspects of the sale. The other nine out of ten homeowners who are selling are many times faced with the question: "How do I determine which agent to use?" In some situations, owners know more … Continue reading...