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The Guide to Understanding Your Home Value

Understanding Home Value

Here’s a look at the process of calculating the value of your home and what it means for your home’s sale price.

You know how much you paid for your home, and you likely factor the work you’ve done and the memories you’ve made there into your idea of what it’s worth. But while your home may be your castle, your personal feelings toward the property and even how much you paid for it a few years ago play no part in the value of your home today.

In short, a house’s value is based on the amount the property would likely sell for if it went on the market.

Why Should You Know the Value of Your Home?

You should have a grasp of the value of your home in a variety of situations: if you’re getting ready to sell your house, looking to refinance your mortgage or buying a new homeowners insurance policy, for example.

For a better understanding of what your home’s value means, how it may change over time and what the impact may be if the housing market shifts significantly in your neighborhood, city or even the whole country, here’s our breakdown.

What Is the Value of My Home?

If your property value is based on what a buyer is willing to pay for it, all you have to do is find someone willing to pay as much as you think it’s worth, right?

Determining a home’s value is a bit more complicated. Keep in mind that buyers place no value on the good times you’ve spent there and might not consider your updated bathroom or in-ground swimming pool to be worth the same amount you paid for the upgrades.

And even if you find a buyer willing to pay $450,000 for your home, the value of your house isn’t necessarily $450,000. Ultimately, the financial backing in a deal determines the property’s value, and it’s most often a mortgage lender making the call.

Property valuation primarily takes into account recent sales of comparable properties in the area. Key identifying factors are the same square footage, number of bedrooms and lot size, among other details. Professionals who determine property values for a living compare all the details that make your house similar and different from those recent sales, and then calculate the value.

But when your property is unique – maybe it’s a triangular lot or a four-bedroom house in a neighborhood full of condos – determining the value can be more difficult.

The individual, group or tool appraising the property may also influence the outcome of the appraisal since they all appraise properties differently for a variety of reasons. Here’s a look at common appraisal scenarios.

Lender Appraiser

In the case of a property sale, the appraisal often happens once the property has gone under contract. The lender will hire an appraiser to complete a report on the property, getting all the details on the house and its history, as well as the details of similar real estate deals that have closed in the last six months or so.

If the appraiser comes back with a valuation below that $450,000 sale price you’ve agreed upon, the lender will likely state that it is willing to lend an amount equal to the property’s value as determined by the appraisal, but not more. If the appraisal comes in at $425,000, the buyer has the option to come up with the $25,000 difference or try to negotiate the price down.

Sellers are often open to negotiation at this point, knowing that a low appraisal likely means the house won’t sell for a higher price once it’s back on the market, though excessive interest in a property may be able to sway an appraiser.

Lindsay Katz, a real estate agent with Redfin in the Los Angeles area, says low inventory and high demand has made the Los Angeles market extremely competitive. In cases of multiple offers on a home that drive the price above its initial asking point, a higher value becomes easier to prove to an appraiser that the market value of the home has risen. “I don’t know how you can’t justify that price when 13 people agree,” Katz says.

Appraiser You’ve Hired

If you haven’t yet put your house on the market and are struggling to determine price, hiring an appraiser can help you get a realistic estimate.

Especially if you’re struggling to agree with your real estate agent on what the most likely sale price will be, bringing in a third party could provide additional context. The cost of a formal appraisal is about $350 on average, according to home services company Angi.

Online Home Value Estimator

Many real estate information sites offer more informal home appraisal tools that will give you a ballpark value for your home. You may have previously taken a look at U.S. News’ own home value estimator, Zillow’s Zestimate, realtor.com’s RealEstimate tool or explored the Federal Housing Finance Agency’s House Price Calculator.

It’s important to keep in mind that an online home value estimator is simply pulling from available information online and may not have all the facts that a professional appraiser would utilize in a valuation report. The online algorithms can catch many details, but they don’t necessarily have the ability to account for more localized factors, like the impact of severe storm damage or trends taking place in your city.

“There’s a lot of information out there,” says Danielle Hale, chief economist for realtor.com. “They don’t always agree, depending on how unique your home is or if there aren’t a lot of sales where your home is.”

Tax Assessor

Your home’s value also determines annual property taxes. In addition to examining the sale prices of similar houses that sold recently, a tax assessor looks at what the cost would be to build a similar house, whether you’ve done any recent improvements, if you earn income from the property and the cost of upkeep.

A property’s assessed value for tax purposes is often less than the appraised value – and that’s a good thing. The property taxes you pay annually are based on the assessed value, so the higher it is, the more you owe.

How Do Market Values Apply to My Home?

There are multiple ways to find out the current value of your house, but individual appraisals and assessments aren’t the only cases where you’ll hear about home values. In annual, quarterly or even monthly reports, home values are often discussed along with the rising cost of homeownership on a local, state and national level.

Depending on the source of information, reported values may be based on online estimator tools, listing prices for houses currently on the market or property value information from local assessors’ offices. These numbers are useful to discuss trends on a large scale, but they don’t always reflect the actual sale prices of real estate deals that closed in those time periods.

The details you get about rising values can be useful as you prepare to put your home on the market, buy your first house or learn more about economic forecasts, but don’t take national trends as indicators of what’s happening in your area.

The importance of trends in home values depends on the stage of homeownership you’re in or moving toward. Here’s what you should know:

For Buyers

As you’re preparing to start house hunting, keeping up on real estate market trends can be an excellent way to know what you’ll be facing. If values are climbing every month and year-over-year comparisons show fast growth – for example, 5% or more – those are signs that a lot of buyers are looking for houses at the same time as you. In mid-2021, home values were climbing at an incredibly fast pace, and the median sale price in the U.S. was seeing more than 20% year-over-year growth. Don’t expect this to repeat soon.

For Investors

Whether you’re looking to invest in a property for rental income or buy a fixer-upper for a quick turnaround, current market trends may influence your choice of purchase. In Los Angeles and many other parts of the country, more time spent at home during the pandemic caused many buyers to shift their focus when looking for a place to live. Instead of prioritizing proximity to shopping and nightlife, for example, “people renting or living in a condo are thinking they’d like to have a backyard, perhaps a pool,” Katz says.

But before you invest in a sprawling property with all the outdoor amenities, learn more about the market and its previous trends. You’ll also want to crunch the numbers to see if rent will be able to cover the mortgage and upkeep on an income property.

For Homeowners and Sellers

If you’re preparing your home for sale or just looking to learn more about your net worth, keep in mind that wider home value trends and reports have little impact on you.

Instead, keep a close eye on local reports; those that provide monthly or quarterly trends on your specific ZIP code can be a better reflection of what’s happening to your property value, Hale says.

Especially if you’re considering selling your home, a knowledgeable real estate agent could be your best source in understanding your property value. “You would want to reach out and talk to an agent and get a local expert’s assessment,” Hale says.

On the other hand, “if you’re not selling, a (positive) change in value still might help you feel wealthier,” says Hale, noting that a current valuation of your home may help you make future financial decisions.

How Can I Increase My Home’s Value?

Whether you’re planning to sell now or in a couple of years, or you’re simply looking to make your home as valuable as possible in the long term, you can potentially help increase its value with regular maintenance, renovations or even additions that could appeal to homebuyers.

Short Term

Many homeowners are motivated to add value to a property when they’re preparing to sell. It’s not impossible to add a couple of thousand dollars to the price tag with some simple remodeling projects that can make your home look fresh and appeal to buyers. Here are a few:

    • Fresh paint in neutral colors.
    • New landscaping.
    • Smart thermostat.
    • New or refinished cabinets.
    • New or well-maintained roof.
    • New or well-maintained furnace or air conditioning.

Maximizing value isn’t just about cosmetic fixes – it’s also about focusing on key areas like the roof and HVAC systems that would come up in a home inspection. Issues like leftover water damage on the ceiling from an old roof leak or a cracked window will show up in the home inspector’s report. If anything concerns the buyer too much, you may run the risk of the deal falling through.

Midterm

If you’re looking to make changes to your home so it’s on par with a different caliber of properties in your neighborhood, consider these larger construction projects:

    • Primary suite addition.
    • Guest bedroom add-on.
    • Finished basement.
    • Garage construction.
    • Complete kitchen renovation.
    • Bathroom addition.

These more extensive changes can be an excellent way to take your home to the next level, but only if other houses like this exist in the area. Adding a master suite and new garage to a neighborhood full of two-bedroom bungalows with street parking won’t make the property appraise much higher than the others. That’s because your house may no longer appeal to the typical buyer in that neighborhood.

Long Term

If you’re looking to increase your home’s value for the sake of your overall wealth, the best thing you can do is continue to pay off your mortgage and gain equity in the property. With proper upkeep and work to keep the home up to date, your home value will, on the whole, naturally increase over time.

Source: realestate.usnews.com  ~ By Devon Thorsby ~ Image: Canva Pro

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SOLD – 9527 Meadow Dr, Winton

SOLD - 9527 Meadow Dr, Winton
9527 Meadow drive.. What a View!! Approx. 3.4 acre Ranchette on a Hilltop, Overlooking the Central Valley, and the Merced river. Custom designed Home of Almost 2500 ft. with 3/2.5 with a Possible 4th Bedroom. Many Custom Features from Views, to Wood-Work, to Design Details, and More. There’s a Loft, Media Room, and a Private Balcony off the Kitchen Nook. Master Bath and Kitchen were Remodeled in Recent years, Newer Black Top Driveway, and More. Lots of Privacy, Big Trees, Many Fruit Trees, and a Big Pool with lots of Decking to Entertain. Big Backyard with Grass and Basketball Court. Big Barn of Approx 33×36 Barn w/ 3 Roll up Doors and a Separate 33×60 Carport-Overhang for Storage or a Shop Conversion. MID Irrigation Water Available to this Parcel. There’s is Room For to Setup for Animals or Another Shop. A Very Special Place with Privacy and Views!! A Must See!!
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California’s Guide to Solar Panels, Including Pricing and Incentives

Guide to Solar Panels

Going solar in California could be worth it even with the state’s new net metering rules.

California is a leader in the solar industry, with enough solar power installed statewide as of December to power 10.7 million homes. Solar panels may be a good option if you live in the Golden State and are interested in lowering your household carbon emissions while also saving on energy bills.

California’s average residential electricity rate is higher than the national average making Californians pay a higher traditional energy bill than residents in other states, according to SaveOnEnergy, CNET’s sister company.

On April 15, California’s new net metering regulations went into effect. Overall, they increase the incentives for going solar with a battery while reducing the payouts for solar without storage.

Meanwhile, the cost of residential solar panels has decreased by more than 69% in the last two decades, according to a Lawrence Berkeley National Laboratory report. Tax credits and rebates at the federal, state and local levels can help bring that cost down further. Whether you’re interested in helping the environment or lowering your energy bills, the amount you could save on solar panels in 2022 is higher than in previous years.

California solar panel costs

The cost of a home solar panel system will depend on the system size (i.e., the number of panels included), components like solar batteries and installation costs. California’s average solar panel system is smaller (and therefore cheaper) than the national average, even though the cost per watt is normally above the US average.

Because solar is so popular in California, there is also a high number of solar panel installers, which gives customers plenty of options to choose from when looking for the right solar company.

Here’s a breakdown of the average size and cost of solar panels in California and nationwide based on 2022 data from Findenergy.com and consulting firm Wood Mackenzie.

How to pay for solar panels in Californ

If you decide to invest in solar panels for your home, there are several financing options to make the purchase easier.

Cash: A big expensive project like solar panels requires a lot of cash. If you see solar power in your future consider saving money now. Regular contributions to a high-yield savings account can help pad your savings.

Solar loan: Many solar companies will offer third party financing. Shop around with different lenders, because your solar company’s third party choice might not have the best terms or interest rate.

Home equity loan or HELOC: You can also consider a home equity loan or line of credit,. These can save you on interest but your home is at risk if you fail to repay.

Mortgage: Another way to get the cash for solar panels is to refinance your mortgage. Fannie Mae’s HomeStyle energy mortgage is designed to fund energy efficiency projects.

California solar panel incentives and rebates

Even though the cost of solar panels has decreased in the last two decades, they’re still a substantial investment. But several solar tax credits and incentives make solar more affordable, especially in California. One key solar incentive, net metering, was reduced in a utility commission vote last year. When that change goes into effect April 15, it’s expected to increase a solar system’s payback period from six years to 10. California also introduced time of use rates, which could make installing backup batteries more profitable.

The residential clean energy credit (previously known as the investment tax credit) is a federal solar tax incentive offered in California that credits 30% of the cost of a solar system back to consumers who buy solar panels. This solar tax credit was increased and extended due to the Inflation Reduction Act, passed in August. There is no cap on the federal tax credit, so you can claim the entire 30% regardless of the size of the system.

You can apply for the residential clean energy credit by including IRS Form 5695 with your tax return. The IRS provides instructions on how to fill out this form, or the best tax software can take care of it for you. Your savings from the tax credit will be included in your tax refund or used to offset taxes you owe.

There are various state and local solar incentives available in California, too. You can find a more comprehensive list through the Database of State Incentives for Renewables and Efficiency. Here are just a few you should know.

California Solar Incentives
California Solar Incentives

California solar panel companies

According to the Solar Energy Industry Association, nearly 2,000 solar companies operate across California. While this means there are plenty of California solar installers to choose from, it can also feel overwhelming to sort through your options.

We’ve compiled a list of solar panel companies that stand out in the industry. Here are a few California solar installers you can consider during your search.

ADT Solar

Formerly Sunpro Solar, ADT Solar operates throughout California and provides a variety of solar systems, including battery installations. ADT Solar says it prioritizes customer satisfaction and offers 25-year labor, power production and manufacturer warranties. The company also extends a price-match guarantee on installations.

ADT Solar does not offer solar leases or PPAs. It previously preferred to source its solar panels from LG, which left the industry in 2022. Since then, ADT Solar has confirmed it is committed to providing solar customers with a 25-year manufacturer warranty and will continue to extend a 25-year production guarantee from ADT.

Palmetto Solar

Palmetto is one of the largest solar companies in the country and offers home solar systems in California. With Palmetto, you can buy solar panels outright or sign a solar lease or PPA. The majority of Palmetto’s customers choose to buy their solar system to save the most money on energy bills over time.

Palmetto has operated in the solar industry since 2010 and says it’s committed to top-tier customer service. It offers a subscription called Palmetto Protect, which monitors the performance of a solar system and provides tiered levels of support if the solar panels are damaged or fail. Palmetto solar panels have an efficiency rating above 19.8%, a minimum 12-year product warranty, and a 25-year performance guarantee.

SunPower Solar

SunPower offers some of the most efficient residential solar panels and the best warranties on the market. With an efficiency rating of up to 22.8%, the SunPower Equinox solar panels outrank all competitors. The SunPower Equinox package includes solar panels from Maxeon, a manufacturer that worked with the company until 2020, and Enphase microinverters and mounting equipment.

SunPower operates across most California regions and aims to continue providing more accessible and affordable solar products. The company was founded in 1985 and offers some of the strongest warranties available, guaranteeing 92% production capacity for 25 years.

Sunrun

Sunrun is the largest solar company in the US and offers a strong lineup of solar products and warranties. Sunrun’s focus is on solar leases, which come with a different set of pros and cons, but can be a good option for consumers who aren’t able to purchase a solar system. While most of Sunrun’s customers lease their equipment, the company still offers the option to buy solar panels.

The company currently sources its solar panels from several manufacturers. For people who lease their system from Sunrun, the company provides “bumper-to-bumper” coverage on maintenance and monitoring. However, those looking to buy a system will rely on the manufacturer’s warranties. Sunrun does offer a 10-year quality warranty, which covers roof damage and installation issues.

Tesla Solar

Tesla became a big player in the solar market in 2016 when it purchased SolarCity, which significantly increased Tesla’s installation capacity. Between the solar panel branch of Tesla and the Tesla Solar Roof, Tesla is one of the most recognizable brands in the industry.

The price tag, efficiency rating and warranty terms will differ depending on the solar system you buy from Tesla. The Tesla Solar Roof comes with a 25-year product warranty and a performance warranty at 95% capacity after five years and 85% after 25 years. However, the Solar Roof has a much higher price tag than many competitors.

Meanwhile, Tesla solar panels are more affordable than the Solar Roof, and the quality remains high. Its solar panels are warranted at 85% capacity after 25 years and have an efficiency range between 19.3% to 20.6%. It is worth noting that some Tesla customers have reported issues with customer service.

Installation factors to keep in mind

Solar panels are a big investment, so it’s important to consider all elements that could impact whether they’re right for you. Some installation aspects to consider include:

  • The condition of your roof: The size, shape and slope of your roof can affect how much electricity a solar system generates. According to the Department of Energy, solar panels are most efficient on roofs with a slope between 15 and 40 degrees. The age and overall condition of your roof are also considerations. Older roofs or roofs needing maintenance should be replaced or repaired before solar panel installation.
  • HOA and neighborhood regulations: California law prohibits homeowner associations from banning solar panel installations, but there may still be specific requirements and approval processes in your neighborhood. Be sure to research the requirements for solar installation in your neighborhood ahead of time, so there are no issues down the road.
  • Insurance coverage: After installing solar panels, contact your homeowner’s insurance agency to add the panels to your policy. Most standard homeowner’s policies cover rooftop solar panels, but you’ll need to check with your agency for the specific details of your policy.
  • Your location: Solar panels are designed to work in all climates and areas that receive indirect sunlight. But they’ll be much more efficient when installed where they receive at least four hours of direct sunlight each day. If your home is in a cloudy region of California or gets shade coverage throughout the day, a solar panel system will not generate as much electricity as it would with direct sunlight.
  • Rentals: If you rent your home, you may not be allowed to install solar panels. You can check with your landlord or rental management company to confirm whether solar panels are allowed. If not, you can consider community solar programs as an alternative. These let you subscribe to electricity produced by solar panels at another location and receive a credit on your energy bills. The subscription fees are set at a lower rate than the value of these credits, so you come out ahead financially. In California, community solar programs are expected to grow quickly due to new regulations.

Source: cnet.com/home ~ By Caitlin Ritchie ~ Image: Canva Pro

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Selling Your Home in 2023: 5 Rules to Help You Get Ahead of a Buyer’s Market

Selling Your Home

Two-thirds of Americans plan to sell, buy, or refinance homes in 2023.[1] But they’ll face a housing market that has changed dramatically in the past year – and will keep shifting.

A rapid slowdown started last summer as inflation and mortgage rates rose and potential buyers dropped out, ending the red-hot pandemic housing market. With homes taking longer to sell — and fewer buyers to compete with — the buyers who remain hold more of the cards.So, what does that mean for home sellers?With borrowing costs higher than they’ve been in several years, buyers are looking for bargains. They also have more time to shop.

Don’t expect bidding wars to drive up your price, for one. Instead, expect to negotiate and possibly offer concessions. And if your home needs some work, get ready to help with the costs or give a little on your list price.

That said, there are still ways for sellers to walk away from a home sale happy.

Here’s how to get ahead of a buyer’s market in 2023 — including what to do when you’re selling AND buying or selling and older home in need of repairs.

5 rules for selling your home in 2023

1. Spend wisely to fix up your home

Homes with the best presentation, condition, curb appeal and appearance will always command a premium. But that doesn’t mean you should jump into extensive renovations to prepare your home for sale.

Instead, focus on repairs and improvements that will help your home compete against comparable ones in your area. Make sure that you’ll regain at least what you put into your home through your sale prices. Make every dollar count, especially in a 2023 real estate market that will increasingly favor buyers.

Your improvements will depend on your home’s age and condition. Also, consider your time frame. How much time do you have before you plan to sell? Use your available time well, especially if you plan to save money. This is no time to sit back.

Give the highest priority to items that allow a good return on investment, especially low-cost but noticeable repairs and improvements. Here are a few items that can provide bang for your buck:

    • Repaint your home’s exterior and key interior rooms.
    • Landscape your yard and discard items you’ve been accumulating outside.
    • Declutter and deep-clean your entire home, area by area.
    • Fix leaky faucets, toilets, and showerheads.
    • Adjust and lubricate your windows, doors, cabinets and drawers.
    • Replace worn or damaged carpeting or flooring.
    • If you’re considering a bigger project due to the home’s condition, focus on the kitchen or bathrooms. They tend to have the highest return on investment.

Can you do some of the work yourself? Every dollar you save puts you in a better financial position for your home sale. For example, saving $5,000 on landscaping could enable you to offer a closing credit to seal a deal with your eventual buyer.

2. Manage your cash and credit well

Be careful about your finances, especially if you plan to buy a home after you sell your current one. Don’t take on unnecessary debt without a fairly good certainty of eventual payoff.

How will you pay for the repairs and improvements you are planning? If you have an existing home equity line of credit, or HELOC, that might be a good approach. However, if you’re planning to sell in 2023, taking out a new HELOC or cash-out refinance probably won’t make sense. You won’t recover your costs. If you have a longer time frame, you might find it will pay off, but keep in mind that interest rates are high. However, mortgage interest is tax-deductible, which could help in a longer time frame.

If you have enough cash on hand, that may be your best option. Just make sure you’re not cutting into your savings too much.

Also, you might be able to find a contractor who will take a down payment but wait until the home sells to collect the rest. Usually, the contractor will charge a premium for work that isn’t paid in advance. But that might be worth it to you.

3. Line up good contractors while they’re available

It’s a slow time for many contractors, so now’s a good time to compare quotes and find a good deal to fix your home. Even if you’re considering selling later in 2023, consider having the work done now. Take advantage of the time you have and get ahead of the curve.

Also, talk with an experienced realtor with a network of contractors and vendors who can maximize your renovation dollars. The good news is that many contractors will be glad to have work over the winter, and you probably can get a better deal.

4. Don’t wait to find a good realtor

Speaking of realtors, you don’t have to wait until you’re ready to sell to talk to an agent or two or three. Activity has slowed for most agents, so they’ll be happy to take your call, discuss your plans, and advise you.

You can discuss what improvements you should make, what contractors you might use, and how to best compete in your local market.

Also, many realtors will list your home for a reduced commission, especially if they might also earn your business for your next home purchase. No good realtor should turn down two bites at the apple. (More on this below.)

5. Manage your expectations: Price your home to sell, not sit

The biggest mistake that sellers make is pricing their homes too high. It’s often hard for a seller to have an unbiased view of their home’s value.

As the market slowed in 2022, many sellers chose to take their homes off the market rather than adjust their thinking. As a result, we now have a low supply of homes for sale but relatively few buyers. But with drops in mortgage rates and more seller concessions, more buyers could jump back in this spring.

So, sellers in 2023 should prepare to make deals. First, you and your realtor need to have a conversation about what your house can fetch in the coming months. Ask the agent for a comparative market analysis of your home. The best defense for your price is a tight, well-researched CMA and a house in prime selling condition.

The National Association of Realtors predicts that price appreciation for homes nationally will slow to 5.4% in 2023, compared to 10.2% in 2022 and 17% in 2021. Also, keep in mind that home values have been dropping from their mid-2022 highs in some markets.

Options for older homes that need extensive repairs

Older homes can present challenges, so sellers might take different approaches.

1. Sell it “as-is” to regular buyers or investors

Sometimes, it makes sense to throw in the towel and sell your property “as-is.” Your situation and time frame may lead you to this option.

A good realtor can prepare a comparative market analysis (CMA) for you at a listing appointment. The agent will also advise you on negotiating inspection contingencies and issues that arise from them.

You can still get a good offer for an “as-is” property in this market. Investors are always looking for properties in disrepair so they can fix them up and flip them.

And buyers who are priced out of other homes may be interested in your fixer-upper. They can use FHA 203K loans to pay for renovations if it’s their primary residence.

2. Donate it to charity and get the tax write-off

If the home is in bad shape, consider donating it to charity. You’ll get a generous tax write-off for the home’s full market value as if it didn’t need repairs. In addition, in many cases you can carry over the deduction for up to five years. And you avoid any capital gains taxes.

I recently had a client with a one-acre plot of land in Potomac, Maryland. Unfortunately, it failed its perc test for a septic system, dropping its value. So, instead of selling the land for little more than he paid for it 30 years ago, he donated it to a charity and got full market value as a tax write-off.

What if you’re selling AND buying?

As we discussed earlier, buyers hold more cards in this housing market. But it’s hard to consider it a true buyer’s market. Mortgage rates have dropped almost a point from their 7% peak, but they remain double what they were a year ago. So purchasing power has fallen.

Here’s what to do if you’ll be on both sides of the table: selling and buying.

1. Crush your debt as if you were a first-time home buyer

Suppose you’re planning to buy a bigger house and counting on getting the best interest rate for that new loan. You don’t want maxed-out credit cards and other debt harming your credit score. That would mean a higher rate.

Also, you want a healthy debt-to-income ratio, which lenders will review closely.

2. Put your listing agent to work finding you a new home

If you’re going to use your seller’s agent as your buyer’s agent once your house sells, put them to work NOW looking for homes for you.

With luck, the agent can scout out some good deals for you early. They might even arrange an off-market deal so you can buy your home without contingencies, such as needing to sell your current home first and extinguish the mortgage before buying another one.

The good news is in this market, more sellers will entertain offers with contingencies. They may be in the same boat as you, offering closing help for buyers.

As previously mentioned, using the same agent for both transactions gives you leverage to negotiate a discounted commission for the sale. The agent will then likely make a larger commission on your purchase, and that commission comes from that seller. (Of course, it’s worked into the selling price, though.)

The commissions depend partly on what’s customary in your market and the competition. Here’s a state-by-state comparison of average commission rates.

3. Work with a lender to get a rate buy-down and longer lock

Mortgage rates rose to 7% but have dropped closer to 6% in recent weeks. Some economists predict they could hit 7% again, but nobody knows for sure with all the economic factors at play.

One good way for buyers to approach this volatility is by “buying down” the mortgage rate. That means you pay for percentage points to bring down your rate.

You might even negotiate a concession with your seller to pay for the buy-down. A smaller concession on this can often beat a bigger lowering of the home’s price. For example, a $6,000 concession for a rate-buydown could save your more than a $20,000 drop in the selling price, depending on the home’s value and your mortgage rate.

To that end, many lenders have been offering rate buydowns and longer rate locks. Long locks enable you to shop with confidence, knowing that a rate increase won’t knock you out of qualifying.

In this market, you might need every available tool to make the numbers work.

Source: listwithclever.com ~ By Daniel J. Goldstein ~ Image: Canva Pro

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4 Ways for Buyers To Deal With a Low Home Appraisal

home appraisal

Roller-coaster rides don’t have anything on the real estate market in terms of stomach-churning lows and adrenaline-pumping highs. But when you finally find the home of your dreams and are ready to sign on the dotted line, you’re in the clear, right? No more drama?

Not if your home appraisal comes in significantly lower than the accepted offer. Even if you think your offer is fair, it doesn’t matter to your mortgage lender. If you receive a low appraisal, chances are you won’t be approved for the full amount of your loan. And if the seller’s unwilling to lower the price, you’ll have to make up the difference.

According to Fannie Mae, about 10% of home appraisals come in low. If it happens to you, it doesn’t mean your dream is doomed. Here are the four options you have when you receive an appraisal below your offer price, plus insight into the chances for success in each case.

1. Appeal the appraisal

Appealing what you consider to be an unjust appraisal requires a concerted effort, but it is doable.

“In order to appeal an appraisal, you will have to request a copy of the appraisal report,” says Carter Crowley, co-owner and acquisition manager at CB Home Solutions in Wisconsin. “This way, you can check the details and find concrete evidence of any miscalculation. It works all the time if discrepancies are found.”

Errors and discrepancies are more common than you might think.

“There are sometimes errors to the processing, such as failing to include certain sources of income or incorrect comparables used in the comparison,” says Joel Camino, CEO and founder of Indiana’s Next Modular. “In these cases, if you can provide evidence to support your claim, then it may be possible to have the appraisal revisited and a revised result given.”

Chances of success: It’s hit or miss. While errors aren’t unheard of, Jonathan Faccone, managing member and founder of New Jersey’s Halo Homebuyers, says that “the success rate [of appeals] is generally low, as appraisals are typically conducted by licensed professionals and are based on objective criteria.”

2. Order a second appraisal

If you suspect the first appraisal was flawed, ordering a second one is a viable option. But it will cost you.

“To order a second appraisal, you need to keep in mind that you will bear the fee,” says Zach Tetley, co-founder of Nexus Home Buyers in Knoxville, TN. “Once you ask for the second appraisal, the lender asks you to fill out the form for ‘reconsideration of value.’ The lender may or may not entertain your request.”

Chances of success: Snagging a second appraisal can be time-consuming and costly, and it might not pay off.

“Lenders may also be cautious about accepting a second appraisal, as it may be seen as an attempt to cherry-pick a higher valuation,” says Faccone.

3. Negotiate with the seller

Trying to come to a mutual agreement with the seller is probably the easiest and most obvious option on the table.

“Negotiating the sale price with a seller is easier than attempting to get a second appraisal,” Melanie Hartman, owner of Maryland’s Creo Home Buyers. “Any homeowner will have a hard time selling their house for more than it’s worth. As long as the appraisal is accurate, most sellers are willing to adjust their selling price to get their house sold.”

A renegotiation can also help “to bridge the gap between the appraised value and accepted offer,” points out Boyd Rudy, team leader at Keller Williams Living in Brighton, MI.

Chances of success: If sellers are as eager to offload their home as you are to buy it, this might be a promising avenue.

“However, sellers are not obligated to renegotiate, and they may be unwilling to lower the price,” Faccone says.

4. Walk away

Walking away from your dream home often feels like a divorce—it’s emotional, and there are financial implications.

“Walking away from the purchase is a drastic option that should be considered carefully,” Rudy says. “On the one hand, it can help to avoid a situation where the buyer is locked into a purchase that is significantly overpriced. On the other hand, it may mean forfeiting the time and money that you have invested in the purchase process.”

If you have an appraisal contingency in your contract, that means you take yourself out of the deal and still get your earnest money deposit back. But without an appraisal contingency, walking away can mean losing any upfront costs like your inspection fee and earnest money.

In certain situations, you might have no other choice.

The seller is not obligated to lower the asking price if the house appraises low. So in a seller’s market—where houses are in demand—the seller might not be amenable to price negotiation. For many buyers, this means they’re forced to drop the purchase because they can no longer afford the home. Their mortgage lender will loan them only enough for the appraised value, leaving it up to the buyers to make up the difference. And if they can’t make up the difference, they’ll have to say goodbye.

Ultimately, the decision will come down to your financial circumstances and whether you believe the appraisal is accurate, Rudy says.

Source: realtor.com ~ By Kathleen Willcox ~ Image: Canva Pro

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How Much Does It Cost to Sell Your Home?

Cost to Sell Your Home

Many sellers might not realize the true cost of selling a house until they’re signing documents at the closing table – which can quickly add up to tens of thousands of dollars.

Sellers can expect to pay between 10% and 15% of their home’s sale price in selling costs. It’s important to be aware of these costs so you can budget for these expenses or see if there’s a way to bring that total percentage down.

While the cost of selling a house depends on your unique circumstances, here are some common expenses for sellers:

    • Home sale preparations.
    • Home staging.
    • Carrying costs and losses.
    • Real estate commission.
    • Closing costs.
    • Capital gains tax.
    • The total estimate of home sale costs.

First impressions matter in real estate. A study published in The Journal of Real Estate Finance and Economics noted that curb appeal can boost a home’s value by 7%.

The cost to prepare your home for sale can vary significantly. You may need to make some minor cosmetic fixes or major repairs to enhance its curb appeal, get buyers in the door, and potentially raise your property value.

According to the home improvement information site and network Home Advisor, every home will need one or more major repairs at some point in its lifetime, which can range between $3,984 and $22,574 with a national average of $13,247. However, if your home isn’t in need of any major repairs, typical pre-listing projects include interior painting and cosmetic updates. This can cost anywhere from a few hundred to several thousand dollars, depending on what needs to be done, whether or not you hired a professional, and the quality of materials.

However, it’s important to keep your potential return on investment in mind. There’s no guarantee that you’ll recoup the cost of repairs or renovations.

Home stagers work with sellers within their budget for the best potential ROI. Stagers make recommendations from paint selection, advising whether to replace or update items, what stays, and what should be packed up and stored away. Professionally staged properties can increase the number of offers and the selling price. Staged properties may also sell faster compared to properties that have not been staged.

The Real Estate Staging Association found that homes that were staged sold approximately nine days faster than average and $40,000 over list price in 2021. The average staging investment of 1.3% resulted in a 7.1% over-list return on investment.

Home Staging Costs

The average national cost of home staging is $1776, according to Home Advisor; however, many homeowners pay between $779 and $2,851. This includes furniture and decor rental. Full furniture rentals can cost $6,000 or more over an extended period of time.

There may also be no upfront investment options depending on the staging company, listing agent or brokerage. For example, Compass offers a no-interest concierge service for sellers to stage or make upgrades to their homes that they repay at closing. The home stager may accept payment out of escrow after the home sale. The agent may also consider covering the cost if they believe it will substantially increase the selling price of the home.

The longer a home sits on the market, the higher the carrying costs like mortgage payments, homeowners association fees, utilities, and more.

Additionally, when buyers see that a home has been on the market for a considerable amount of time, they may make assumptions that there’s something wrong with the property. Homes that sit on the market for 90 days or longer are known as stale listings and may sell for less money when they finally do sell.

Another thing to consider is your homeowner’s insurance. Typical policies won’t cover claims on an unoccupied or vacant property. If your home is vacant for more than 30 to 60 days, you’ll need to purchase vacant and unoccupied homeowners insurance, according to experts at the online insurance marketplace Policygenius. While rates vary, sellers can expect to pay 25% to 50% more for vacant home insurance than they would for standard home insurance.

The real estate commission is typically the largest cost associated with selling a home. The seller can expect to pay 5% to 6% of the sale price, which is split between the brokers representing the buyer and the seller. Each agent receives a portion of this commission. Based on the U.S. News Housing Market Index, which uses data supplied by Redfin, the national median home sale price is $387,000. Real estate commission on a home of that price would be $19,350 to $23,220.

While it is possible to negotiate a real estate commission, it’s unlikely that it will be lowered. Research from the Consumer Federation of America found that 70% of agents charge a 6% commission and 73% said they would not be open to negotiations.

Closing costs are fees that are paid to finalize the transaction and transfer ownership of the home to the buyer. These fees are paid according to the terms of the purchase contract between the buyer and the seller. Both buyers and sellers typically pay their own closing costs.

Sellers can expect to pay 2% to 4% of the sale price of the home in fees and taxes on top of the agent commission. Based on the national median home sale price, this means that closing costs in 2023 for sellers are about $7,740 to $15,480, excluding real estate commission.

However, the seller’s closing costs are deducted from the sale proceeds. Here are the potential closing costs for sellers:

    • Agent commission.
    • Transfer tax.
    • Owner’s title insurance.
    • Escrow and closing fees.
    • Prorated property taxes.
    • HOA fees.
    • Credits toward closing costs.
    • Attorney’s fees.
    • Existing liens.
    • Mortgage payoff penalty.

“As the real estate market continues to boom, you might be eager to make some money by selling your primary residence; but Uncle Sam also wants his money – be aware of the tax implications of selling your personal residence at a gain, ” explains Anna Klein, a real estate-focused CPA at AKK Tax & Accounting.

Home sales may be tax-free, given that the condition of the sale meets certain standards.

“The rules are different for married versus single individuals. Per Section 121 of the Internal Revenue Code, you may be eligible for exclusion of the gain on your personal residence,” she says.

Klein explains that taxpayers can exclude up to $500,000 if married filing jointly or $250,000 if filing as single from the gain on the sale of their primary residence. Sellers must have also owned the home for at least two out of the last five years. The two years do not have to be consecutive.

You can determine the gains from the sale by subtracting the home’s basis (what you paid for the home) from its closing price (how much you sold it for). If the home was sold for more than what was paid, then that is a realized capital gain.

Total Estimate of Home Sale 

There are too many variables to accurately estimate the total cost of selling a house, but you should still try to estimate the total cost so you can be better prepared.

Assuming you sell your house for the typical home value of $387,000 in 2023, and you pay an average of 12.5% in closing costs, you could potentially be paying $48,375 and walking away with $338,625 in proceeds. This number doesn’t assume you made a major repair before selling your home and it excludes possible carrying costs and losses, existing liens and debts and a potential mortgage payoff penalty.

Source: realestate.usnews.com ~ By Josephine Nesbit ~ Image: Canva Pro

 

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SOLD – 800 Stonecreek Cir. Modesto

SOLD - 800 Stonecreek Cir. Modesto

Lakewood Schools. Custom Home on a Huge Lot. Over 2700sf with a lot of 0.35 of an acre, Cul-de-Sac Lot. The home has Lots of Wood Work on Ceilings, Wood Clad Windows, and more. Pool with Huge Patio Areas and Decking Areas. 3 Car Tandem and 4 Bedrooms. A spacious side yard great for the gardener with a lush landscape & refreshing pool. The kitchen opens onto a Family room with a Dining bar and Casual dining for busy Lifestyles. The Front bedroom is perfect for an Office or Craft Room. Spacious Master suite with Fireplace, a Wonderful Deep Shower with a Separate Sunken Jetted Tub. A Must See! If you like to be close to downtown for work or nighttime activities this is the perfect home.

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8 Things to Consider Before Buying a Rental Property

Things to Consider Before Buying a Rental Property

Investing in a rental property is a great way to generate steady, ongoing income. And if you hold on to a rental property for many years, it could appreciate quite nicely in value over time.

But investing in real estate isn’t the same thing as investing in assets like stocks. Real estate requires a lot of hands-on work, and there are notable risks involved. So if you’re looking at buying a rental property, be sure to consider these things first:

    • Know your costs.
    • Have a great real estate lawyer.
    • Make sure your property isn’t subject to rental restrictions.
    • Be mindful of surprise costs.
    • Understand what being a landlord really means.
    • Don’t assume hiring a property manager is a perfect solution.
    • Prepare for your rental to sit vacant.
    • Make sure you have plenty of cash reserves.

It’s important to purchase a rental property you can comfortably afford. But many first-time investors don’t realize what it takes to close on a rental property.

Lindsay Barton Barrett, a real estate agent with Douglas Elliman in Brooklyn, New York, explains that it takes more than just a down payment to finalize a rental property purchase.

“Even from the get-go, it’s really, really important to understand all of the actual closing costs on a purchase, because they can really creep up on you,” she says. Barton Barrett also warns that closing costs can’t always be financed, so it’s important to make sure you’re not maxing out your budget on a down payment itself.

When you’re making an investment in real estate, “you need to have the right professionals in place advising you,” says Barton Barrett. And she especially thinks it’s important to have a great lawyer.

Not only should your real estate attorney be doing plenty of due diligence for you, but they should also make a point to explain what they’re doing. As Barton Barrett explains, a lawyer might say “oh, this contract or arrangement looks standard.” But do you know what “standard” means? If you’re new to real estate investing, you may not.

When you’re looking to rent out a property on a short-term basis, there can be specific hurdles you might face that won’t apply to a long-term rental. Those restrictions, says Barton Barrett, tend to come at the local level, or at the HOA level for properties that are part of a homeowners association.

Now you may be inclined to move forward with a rental property purchase because you’ve seen a unit or home within the same complex listed consistently for short-term rental purposes. But Barton Barrett cautions that won’t automatically give you the green light to do the same.

“Don’t assume if the neighboring apartment shows up on Airbnb that it’s legal,” she says. “Airbnb does not police those situations.”

Surprise costs can eat into your profits and, in some cases, exceed them. These can range from rising property taxes to maintenance and repairs.

Barton Barrett warns, “If you’re renting out a condo, there may be fees associated with renting that unit out.” It’s essential that you understand what costs apply in these situations.

Barton Barrett also says that investors who buy rental properties in newly constructed or remodeled buildings can get hit with higher than anticipated property taxes. In that situation, she explains, “It can take a couple of years for property taxes to catch up to the value of a building or property that’s been renovated. Sometimes taxes can double over the course of a year.”

One way to potentially mitigate surprise costs when buying a rental property is to vet it thoroughly before completing your purchase, says Eddie Martini, strategic real estate investment advisor at Real Estate Bees.

“As you walk through the property, you want to look at things like a home inspector would,” he says. “Assume nothing functions properly until you prove it functions properly. “

Becoming a landlord doesn’t just mean taking on the expense of maintaining a rental property. It also means having to be available at all times and deal with tenant issues as they arise.

“It’s important to understand that if something breaks, you have to fix it right away,” says Barton Barrett. “You might be disturbed early in the morning or late at night if an issue arises.”

It’s possible to minimize your work as a landlord by hiring a property manager to oversee your rental. This solution may be appealing, but Barton Barrett warns that it isn’t perfect.

“Property managers are not all phenomenal,” she says. And, a property manager can go out of business, or fail to give your tenants the service they want.

Barton Barrett also says that delegating absolutely everything to a property manager could mean compromising the value of your investment. After all, if a property manager puts on the wrong roof, it’s going to hurt you financially.

That said, one benefit of using a property manager is that, according to Martini, they will “typically have access to vetted contractors who can assist with needed repairs.” So while you may not be able to rely on your property manager to do everything, their connections might come in handy.

When it comes to making money on a rental, a lot of the financial upside you see is apt to come in the form of property appreciation. But you’ll still need to cover your costs along the way. And Barton Barrett warns that you may not always have a tenant paying rent to offset those costs.

If you’re relying on commanding the top rent for your property, she says, “It might take six months to get a tenant instead of one.”

Because owning a rental property can cost more than expected, it’s important to have plenty of cash reserves on hand to cover those expenses as they arise. You might have to pay for a sudden repair, or you might end up with an apartment that has to sit vacant for a handful of months until a major issue is fixed.

Having a solid cushion of money in the bank could help you avoid cash flow issues when situations like these arise. And it might buy you more peace of mind. That said, when you own a rental property, there really is an endless opportunity for something to go wrong, and you’ll need to come to terms with that before taking the leap.

“If you want a worry-free investment,” says Barton Barrett , “real estate is probably not the right thing.”

Source: realestate.usnews.com ~ By: Maurie Backman ~ Image: Canva Pro

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SOLD – 1760 Churchill Downs Cir. Oakdale

SOLD – 1760 Churchill Downs Cir. Oakdale

Remarkable Single Story Home in Oakdale. Almost 2700sf with 4 Bedrooms, 2 Full Bathrooms, and a 3 Car Tandem. New Paint Inside and Exterior, New Quartz Counter Tops, Completely Remodeled Master Bathroom, New Laminate Flooring Throughout, Newer Carpet, New Fence, New Backyard Concrete Paint, Newer Appliances, New Light Fixtures, New Workout Shiplap/Shelving in the Garage Tandem, and New Plumbing Fixtures. Huge Open Floor Plan with Large Living Areas. Kitchen Has a Large Island with Lots of Counters and Cabinetry. This Kitchen has a large Island with Sink, Stainless Steel Appliances, 4 Burner Gas Stove Top, Double Oven, and New Dishwasher. Master Bedroom is Large with an Enormous Walk-in Closet. This Backyard has a Big Pergola with a Dcor Retaining Wall, and a Large Area of Concrete to Entertain at Ease!!

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Property Insurance: Definition and How Coverage Works

home on fire

What Is Property Insurance?

Property insurance is a broad term for a series of policies that provide either property protection coverage or liability coverage for property owners. Property insurance provides financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft—and to a person other than the owner or renter if that person is injured on the property.

Property insurance can include a number of policies, such as homeowners insurance, renters insurance, flood insurance, and earthquake insurance. Personal property is usually covered by a homeowners or renters policy. The exception is personal property that is very high value and expensive—this is usually covered by purchasing an addition to the policy called a “rider.” If there’s a claim, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to fix the problem.

KEY TAKEAWAYS

  • Property insurance refers to a series of policies that offer either property protection or liability coverage.
  • Property insurance can include homeowners insurance, renters insurance, flood insurance, and earthquake insurance, among other policies.
  • The three types of property insurance coverage include replacement costs, actual cash value, and extended replacement costs.

How Property Insurance Works

Perils covered by property insurance typically include select weather-related afflictions, including damage caused by fire, smoke, wind, hail, the impact of snow and ice, lightning, and more. Property insurance also protects against vandalism and theft, covering the structure and its contents. Property insurance also provides liability coverage in case someone other than the property owner or renter is injured while on the property and decides to sue.

Property insurance policies normally exclude damage that results from a variety of events, including tsunamis, floods, drain and sewer backups, seeping groundwater, standing water, and a number of other sources of water. Mold is usually not covered, nor is the damage from an earthquake. In addition, most policies will not cover extreme circumstances, such as nuclear events, acts of war, or terrorism.

Property insurance includes homeowners insurance, renters insurance, flood insurance, and earthquake insurance.

Understanding Property Insurance

There are three types of property insurance coverage: replacement cost, actual cash value, and extended replacement costs.

  • Replacement cost covers the cost of repairing or replacing property at the same or equal value. The coverage is based on replacement cost values rather than the cash value of items.
  • Actual cash value coverage pays the owner or renter the replacement cost minus depreciation. If the destroyed item is 10 years old, you get the value of a 10-year-old item, not a new one.
  • Extended replacement costs will pay more than the coverage limit if the costs for construction have gone up; however, this usually won’t exceed 25% of the limit. When you buy insurance, the limit is the maximum amount of benefit the insurance company will pay for a given situation or occurrence.

Special Considerations

Most homeowners purchase a hybrid policy that compensates for physical loss or damage caused by 16 perils, including fire, vandalism, and theft. The coverage, known as an HO3 policy, has certain conditions and exclusions. There is a predetermined limit on the coverage of certain valuables and collectibles, including gold, wedding rings, and other jewelry, furs, cash, firearms, and other items. No coverage is usually provided in an HO3 for accidental breakage/damage and mysterious disappearance (lost, misplaced) of valuables, including fine art and antiques.

HO5 homeowners coverage includes everything in an HO3 policy but is geared toward the structure itself and the property within the home, including furniture, appliances, clothing, and other personal items. An HO5 doesn’t cover earthquakes or floods. HO5 insurance policies are available to homes that were either built in the last 30 years or renovated in the last 40 years, and they typically cover any damages at replacement cost.

HO4 property insurance is usually known as renter’s insurance—it covers tenants from loss of personal property and liability coverage. It does not cover the actual house or apartment being rented, which should be covered by the landlord’s insurance policy.

Note that none of these coverage levels reimburses the homeowner for a property that breaks down or is damaged in more normal wear-and-tear situations, such as a roof that begins to leak without damage from wind and hail. That’s where home warranties—another way to protect your property—can be helpful.

Source: investopedia.com ~ By ALEXANDRA TWIN ~ Image: Canva Pro

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