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Smart Sprinkler Systems

A smart sprinkler system can be installed onto most existing sprinkler/irrigation systems. To do so, you need to install a Smart Controller for your sprinkler system. These controllers save you money, resources and are very convenient to use. This is particularly important during these times of severe drought, where water rates are skyrocketing, and supply is lagging behind demand.

Through these apps, you can also customize the watering schedule for each of your zones to meet the specific needs for the plants in those zones. Also, you can modify the schedule to skip a watering run for whatever reason you need.

Managing Your Water Usage

Many systems also enable you to view your actual water usage as compared to what you expect scheduled usage to be. That will help you know how big a bill you will really get. Should you get a smart sprinkler controller? Generally these controllers cost between $100 to $200. For small areas with uniform watering needs, this may not be worthwhile. Click here to check out out this explanation of things to consider. But for larger areas with complex watering patterns, it could pay for itself quickly. In this case, if you upgrade to a Smart Sprinkler Controller, you’ll probably be very glad you did.

And remember, 70% of all water usage is for irrigation and half of that is wasted. If you don’t want to save money, save the planet.

Why Skills Are Needed

In today’s ultra-competitive real estate market there is only 1.7 months supply of inventory. Compare this to the 6 months supply in a balanced market. Moreover, the average home is getting 4.8 offers per sale. It is more important than ever to have the right person “champion” your cause when purchasing real estate. And that’s why there are high-level skills needed in today’s real estate market.

Sellers’ and buyers’ objectives are different and, in many cases opposing in nature.  Sellers attempt to get the most money for their home. They also want to minimize expenses and avoid any issues that could cause delays.  Buyers want to be treated fairly and have an opportunity to buy the home of their choice. They also want to take advantage of the protections of normal contingencies for things like mortgage approval and inspections.

In most situations, there are two real estate agents involved in a single sale.  You want your champion to be the most capable person available. Furthermore, you want them to have the skills needed in today’s real estate market

What Type of Skills Are Needed in Today’s Real Estate Market?

There are skills that agents need in today’s market. One of the most important is the ability to conduct negotiations.  Regardless of which side of the fence you’re on, your agent needs to be skilled in negotiating on your behalf.  Remember, every part of the contract is a negotiation. This starts with the price then continues to the other financial complex financial and transaction agreements involved with the purchase.  What’s a reasonable amount of earnest money?  Can the sale be “as is” yet still allow buyer inspections so you cqn be fully aware of what you’re buying? Will the buyer provide a CLUE report for the property? [Read our post about CLUE Reports. Then click here to learn more about CLUE Reports.]

The buyer wants to negotiate the best terms possible with the seller. They are depending on their agent to work for them to get them.  The home inspector is hired by the buyer to determine the condition of the home. The inspector and will point out what repairs are necessary. Your agent will help you negotiate who pays for those repaires.

Your lender hires an appraiser to determine the value of the home. This is because the loan will be secured by the property.  Recent sales can be used as comparables. But they trail the market. This becomes a challenge in rapidly appreciating markets, especially, when there are multiple offers. 

Consider Legal, Ethical and Personal Aspects of the Sale

And since multiple offers are the norm currently, agents must know how best to handle them based on the seller’s or buyer’s perspective.  There are legal and ethical procedures that must be followed. But an agent’s experience can contribute to creating a more favorable outcome.

The skilled and experienced negotiator understands that every transaction is different because of dealing with individuals, their families, their needs, and their emotions.  The role of the third-party negotiator can be invaluable to the success of the transaction. This is not only based on their experience but the juxtaposition to the principals and their objectivity of trying to reach a compromise.

Let Sound Investments be your skills champion. Click here to see what we can provide for you when looking to purchase a new home or other property.

What are the Three M’s of Homeownership?

Homes are valuable assets and must be maintained so they function properly, are safe, enjoyable and hold their value.  Attention to the Three M’s of homeownership: maintenance, minimizing expenses and managing debt and risk will protect your investment.

Maintenance

It is interesting that people understand the necessity of regular car maintenance. They regularly have their car inspected, repaired and maintained.  However, even though a house is worth many times more than a car, homeowners regularly neglect routine maintenance.

Failure to maintain a home properly adversely affects the value.  Buyers will discount the price they are willing to pay for a home that needs repair. Often this is for more than the actual cost of the repair or expenditure.  A home in good condition instills confidence. A home in “less than good condition” generates concern about unknown items that may also need repair.

If you maintain your HVAC systems and other appliances, they run more efficiently. This will result in lower utility bills.  Additionally, finding and repairing small issues during maintenance often prevents more expensive repairs complete replacements.

For example, failure to replace the air filters regularly may seem minor. But, clogged filters could lead to a more expensive repair like having to clean the coils. Eventually, it could even lead to a larger, much more expensive issue like burning out a HVAC motor.  The aggregate cost of replacing the filters is much less than the cost of a new furnace or A/C unit.

It is often more expensive to fix something that is not working, than prevent it from failing with regular maintenance.

Minimize Expenses

Every dollar you spend on maintenance, increases your cost of ownership.  Perform simple maintenance items yourself. For instance, change the air filters yourself and you’ll save the cost of having a professional do them.  However, the list of minimizing expenses goes way beyond maintenance.

Replacing all your light bulbs with energy efficient alternatives like LEDs is a great example.  As Ben Franklin’s said, “a penny saved is a penny earned.” Every dollar you save on utilities lowers your overall cost of housing.

Windows and doors with inadequate seals, or an improperly insulated house could be using considerably more energy than necessary.  Often these adjustment costs are recaptured in utility savings in a short period of time.

Knowing the right service providers can be a big source of savings as well as give you peace of mind.  Your real estate professional has developed a wide range of trusted service providers who are both reputable and reasonable.  You should feel comfortable asking for a recommendation whenever you need one.

Manage Debt & Risk

Refinancing your home to get a lower interest rate can be a big savings. However, you’ll need to determine how long it will cost you to recapture the cost involved.  A Refinance Analysis calculator can help.

Other cost-saving items could include investigating multi-policy discounts for insurance. You can also see if you can lower your property tax assessment. Other items like low-flow toilets and smart thermostats also help save you money. Unplugging small appliances when not in use and adjusting the temperature on HVAC units and water heaters also adds to your savings.

While you are talking to your insurance agent about possible discounts, ask about your liability coverage also.  Homeowner policies have a stated amount of coverage. However, your personal financial situation or exposure may indicate that you need to increase those amounts.  Generally, homeowners with pools or boats have increased risk. You may want to ask your agent about your other recreational activities.

Owning a home has a lot of responsibility and having a good source of information is valuable.  Your real estate professional can help you with the Three M’s of homeownership. They are uniquely qualified to be your source of credible real estate information.  You may be wondering why they would be helpful even when you are not buying or selling a home. This is because they want to establish long-term relationships with you. That way, whenever you need their services again, you will feel comfortable contacting them. You will also feel confident to refer them to your friends.

For help with your own Three M’s of Homeownership, contact us at Sound Investments by clicking here.

What is a CLUE Report?

Have you ever heard of using a CLUE Report when purchasing a new home? People purchasing a used car have most likely heard of CARFAX vehicle history reports. These help them avoid buying a car with costly hidden problems.  Buyers are less likely to know about CLUE Reports. These reports disclose some of the repair history of properties,

Lexis Nexis C.L.U.E. (Claims Loss Underwriting Exchange) is a claims history database that enables insurance companies to access consumer claims. These reports go back for the previous seven years when they are underwriting a risk or rating an insurance policy.

An insurance underwriter could identify a previous claim for substantial damage to a property. They can then find out about repair history before assuming the risk as a new insurer.  Similarly, a buyer benefits from knowing about former claims that may affect property value or possible, future repairs.

How Can a CLUE Report Help?

A CLUE report can discover insurance claims on a home. A buyer could check to see whether the repairs were done properly.  These reports are not directly available to potential buyers. However, their property casualty insurance agent could order a report during negotiations with the seller. A clean CLUE Report can be a condition of a successful contract of sale. 

With a CLUE Report, a buyer could pinpoint issues they were concerned about. They could address those things with the inspector during the inspection period.  Also, the CLUE Report could detect items that may not be visible during a home inspection.

In some cases, a listing agent might suggest a seller share their CLUE Report. This would show the buyer acting in the spirit of full disclosure to potential buyers.  Even if there were claims. if the repairs were done properly it could help to achieve a successful sale.

Obtaining a Report on Your Property

A current homeowner can request one free CLUE report every twelve months online or by calling 888-497-0011.  You can also send an email to consumer.documents@LexisNexisRisk.com.  You will need to provide your first and last name, social security number, driver’s license number and state in which it was issued, date of birth, current home address and phone number.  For more information, see Lexis Nexis Consumer Portal.

If a buyer doesn’t have a property casualty insurance agent, your real estate agent can recommend one.

Assuming a FHA or VA Loan Hasn’t Been Popular

You may not have heard of anyone assuming a FHA or VA home loan on an existing mortgage. You might not have known they were even possible any longer.  The reason this type of loan assumption hasn’t been popular for over thirty years is simple. It didn’t make financial sense. But now that interest rates are increasing, it may be an opportunity for some homebuyers.

Conventional loans added clauses to mortgages back in the early 80’s that gave the noteholder the right to raise the interest rate if a loan was assumed, as well as require the new buyer to qualify for the loan.  This essentially ended the practice of assuming conventional mortgages.

Then, in the late 80’s, FHA and VA mortgages did impose the right to qualify the new buyers, but the big difference was that the mortgage rate would remain the same as that for the original borrower.  Even so, it still effectively ended the assumptions of FHA and VA mortgages because rates on mortgages trended down for the next thirty years.

Why FHA and VH Loan Assumption Is Now Worth Looking Into

There was really no benefit to assume a mortgage that still required qualifying because it was possible to obtain a new mortgage with a lower rate.  Generations of buyers have never even contemplated assuming a mortgage. However, now it might well be an alternative that will lower the cost of buying a home. This is because mortgage rates hit a bottom in early 2021 and have been increasing ever since. Therefore, if the interest rate on the existing mortgage is less than the rate on a new mortgage, there could be a savings.

In addition to that, there are fewer closing costs involved on assumptions of FHA and VA mortgages than originating new mortgages.  Another benefit is that when you assume an existing mortgage, you will be further into the amortization schedule. This means your equity-buildup occurs faster than it would with a new loan.  And finally, lower interest rate loans amortize faster than higher rate loans.

Potential Difficulty in Assuming a Loan

The difficulty in this situation is that many buyers don’t have enough money to cover purchasing the equity on the existing home. But there is a potential remedy for that.  Let’s assume the buyer was considering a 90% conventional loan.  If they identified a home with an assumable mortgage, they could put the same 10% down payment in cash toward the equity. The buyer could then secure a second mortgage for the difference.

There are several lenders that make this type of loan. Buyers need to shop and compare rates and fees just like they would on a new first mortgage.  Your agent can suggest lenders for second mortgages.

If you want to take advantage of VHA loan assumption, it may be difficult to find them. Unfortunately most search filters on portal websites do not include assumable mortgages.  You can get assistance from your real estate agent to find them.  

Is Avoiding Renovations a Good Strategy?

Sellers try to rationalize avoiding renovations to their homes before marketing them. They do this because they think it is easier and will let the buyer make their own personal choices. It is a convenient story to justify not going to the effort for the necessary market preparation. But this is an obstacle to achieving the highest possible sales price.

An Actual Example

An agent told us about a home on the market that was structurally sound, but that needed significant cosmetic work. This included paint, floorcovering, updated fixtures, and a significant amount yard work. The house was vacant and the owner had moved out of town. The agent explained to a prospective buyer what he thought it would take to bring the home up-to-date and what it would be worth. The buyer was from out of town and was going to be teaching at the university the next semester. He returned home without buying and came back to look again two months later.

The prospective buyer asked about the previously viewed home that needed work. The agent told him that she had bought it and did all the things that she had suggested. The buyer asked to look at it. On seeing the property, now, in its pristine condition, the buyer asked the agent if she would sell the home to him at a profit.

Seeing the Actual Property Value

The agent told him that it wasn’t for sale but asked the buyer why they didn’t buy it before at below market rate and make the changes themselves. The buyer said that it looked like a lot of work and that he just didn’t want to take it on. He just saw a lot of work and couldn’t see the finished product, so he passed on the house at that time. Once renovations were made, the buyer could see the true value of the house.

This story is not unique. It happens frequently. Buyers are not experienced enough to recognize what needs to be done, how much it would cost and how long it would take. In many cases, they don’t have the connections with the different service providers. In others, they simply can’t imagine what the home would look like after the renovations are made. Therefore avoiding renovations and repairs hampers your ability to sell.

Are There People Who Want to Do-It-Themselves?

There are some buyers who scout out opportunities for do-it-yourself experiences where they can earn sweat equity by buying below market and making the repairs to add value to the home. There are many more buyers who don’t know how and/or may not want the hassle to do the needed renovations. They are willing to pay a higher price to be able to just “move in” to their new home.

Majority of Buyers Need Help to Renovate

A highly popular TV series, Fixer Upper now, uses this situation for the premise of each show. People want to buy a home in great condition but can’t find what they want. Chip and Joanna Gaines find a good home in a good neighborhood for them and sell the vision of what it could be. The unique aspect of the show is that Chip and Joanna act as agents, designers, and contractors to meet the buyers’ budget.

In the case of Fixer Upper, the buyer is the beneficiary of the increased equity for having taken the risk to make the repairs. For the seller to be the beneficiary, they need to do the updating and repairs before marketing the home.

Ask Your Agent to Help Maximize Your Sales Price

Ask your agent if they can provide suggestions of what items would most benefit from remodeling and if they have service providers that they can recommend. The proceeds from the sale of your home belongs to you and to maximize them, it needs to sell for the highest possible price. Your agent can work with you to make that happen.

Variables Affecting the Dynamics of Home Equity

Appreciation and amortization are the key factors in home equity dynamics for homeowners with mortgages.  Therefore, as the home goes up in value due to appreciation, and the unpaid balance goes down due to amortization, the equity increases.

Appreciation

Appreciation is the increase in value of a home and is usually measured year over year.  In recent years, appreciation has been robust (19% nationwide in 2021) due to high demand and low inventory.  While the news often quotes annual appreciation rates from a national or regional level, your local appreciation rate may differ.

Occasionally, you may see a chart that tracks the annual appreciation over time. But that information is more interesting than it is useful.  The reality is that supply and demand determine appreciation along with location and condition.  To more accurately understand what your individual home has appreciated, you’ll need to find local numbers. Your real estate professional can provide this for you.

Amortization

The amortization of a loan is consistent with regular monthly payments based on the term of the mortgage.  Homeowners frequently receive a monthly statement, either through the mail or online, from their lender declaring the current unpaid balance.

If a homeowner makes additional principal contributions toward the loan, the unpaid balance will accelerate the normal amortization schedule.  Additional principal payments on fixed-rate mortgages shorten the term of the mortgage.  Additional principal payments on adjustable-rate mortgages will lower the payment on the next anniversary date.

Impact on Equity

The difference between the value of the property and the amount owed on in is your home equity.  If there is no mortgage on a property, the equity and value of the home are the same. However, in every case, appreciation affects how much your equity grows.

For instance, let’s take at an example of a $400,000 purchased today that appreciates at 3% a year using a 90% mortgage at 4% for 30 years.  The $40,000 would grow in seven years to $182,135 in equity with $91,950 coming from appreciation and $50,186 from amortization.

If the appreciation is 5% annually in the same hypothetical example, then the amount of equity changes. Equity grows to $253,026 with $162,840 coming from appreciation and the same $50,186 from amortization.  The same loan amount, rate and term will result in the same unpaid balance as the example with lower appreciation.

With the considerable appreciation experienced in recent years, the values are going up fast and benefit the people who currently own a home. At the same time it makes it more expensive for would-be buyers.  Another factor facing buyers is rising interest rates.

Get the Facts About Home Equity Dynamics

It is important to get the facts about the market and your individual situation to determine what alternatives you have to purchase a home in the near future.  Your agent provides this objectivity and is able recommend a trusted mortgage professional to be pre-approved. For more information, download our Buyers Guide.

The process of showing your home to potential buyers is inconvenient. You have to straighten up and your family and pets have to vacate your property. If your property is on the market for an extended period of time, it feels even more difficult and annoying. However, it’s extremely important that you spend time and energy to show your home whenever possible.

Pitfalls of Not Showing Your Home

If you deny or delay showing your property for sale to a prospective buyer, you can suffer the following negative outcomes:

• The buyer believes you are not motivated to sell and will be difficult to work with. So they pass on making an offer.
• While the buyer waits to see your property, another similar home is available to view. They choose to pass on your home.
• Other real estate agents representing several buyers will choose to recommend other properties to their clients. This is because you are wasting their time and making it difficult to schedule their clients to view your home.
• Potential buyers and their real estate agents start to believe there is something wrong with your property. They either reduce what they want to offer, or pass on your property altogether.

All these factors work to increase the time your property is on the market. And, the longer it’s on the market, the more potential buyers wonder why other people are not interested in your property.

What it Means to Have a Successful Showing

SUCCESSFUL SHOWINGS > LEAD TO OFFERS > GETS YOUR HOME SOLD. It only takes one good buyer to sell your property. Therefore, your best option to sell your house quickly and for a good price is to have as many showings as possible. Moreover, maximize the positive impact of every showing you have.

That means you should make sure your home “shows” the best for every potential buyer. Here are some helpful hints to make your showing more successful:

You can also watch this video to get additional tips for prepping for a showing.

Remember, if you work outside your home, it means you must have it ready to go every time you leave each day. For even more property selling tips, get a copy of my free book, “Insider Home Selling Tips,” by CLICKING HERE.

Existing FHA and VA mortgage assumptions may be available at the note rate to owner-occupied buyers who qualify. This can be an alternative to paying higher, current rates and benefit buyers with lower closing costs while saving money on the payment. For the last 20 years, rates had been steadily coming down so there was no reason to qualify for an assumption when a new loan had a lower interest rate. But with rising mortgage rates, that trend is now changing.

Why Consider a Mortgage Assumptions Now?

Assuming an FHA or VA loan with a lower interest rate will obviously mean lower payments but it will also build equity faster because the amortization schedule is advanced from a new 30-year mortgage. Another benefit is that the acquisition costs on an assumption are much lower than starting a new loan.

Some Mortgage Assumption Examples

In the example in Table One, a couple bought a home two years ago for $400,000 with a 3% FHA mortgage that has principal and interest payments of $1,656. It is now worth $435,000.

Let’s look at a hypothetical situation involving the sale of this home after two years. The savvy listing agent explains that the home may have additional marketability due to the assumability of the FHA mortgage in place.

In scenario #1, the buyer purchases it for $435,000 with 10% down payment at the then, current rate of 5% for 30 years. The principal and interest payment is $2,102. If the home appreciates at 4% annually the equity will be $230,989 in seven years.

In scenario #2, the buyer purchases it at the same price with the same down payment but assumes the 3% mortgage with 28 years remaining. Since he doesn’t have enough cash to buy the equity, he gets a second mortgage for the balance at 5%. The combination of the payments on the first and second are $1,739 or $363 less than the payments in scenario #1.

Impact of Mortgage Assumptions

In seven years, the $363 savings accumulated to $30,492. The future equity is $21,457 larger on the assumption because the first mortgage is at a lower rate and the loan is amortizing faster. In this example, the buyer is much better off assuming the FHA mortgage.

Get Help Finding These Types of Opportunities

There will be a challenge in identifying which homes for sale have assumable FHA or VA mortgages because for decades it didn’t make much difference to list it in the description. Many MLS’s are not even including fields for existing mortgages.

Finding the “Right” home for a buyer is important but equally important is finding the “Right” financing. Not all agents have the training or the tools to identify the possible opportunities for buyers but the ones who do are invaluable. Contact us at Sound Investments by calling (510)-244-0081 or CLICK HERE to send us a message.

There’s More to Selling a House

What Agents Do for You

Long before the home goes on the market, the agent will create a detailed value and pricing study based on similar homes in size, price, proximity, and condition. An overpriced home will sit on the market longer than it should. When that happens, buyers, as well as other agents, begin to wonder if there is something wrong with it.

The agent will develop a staging and de-clutter plan to make the house show at its best. This is critical since first impressions matter. This effort provides a neutral canvas for buyers to start imagining their things in the home.

The Marketing

The marketing plan is a comprehensive strategy to consider every aspect of selling the home. The focus is to maximize efforts to get the highest possible price, in the shortest time with the fewest unanticipated events.

The individual marketing materials must present the home in its best light. It begins with professional photos. This is because today’s buyers will most likely first see the home online. If the pictures don’t make the property look good, they may decide not to see it. Those photos will also be used on brochures for the home and “just listed” announcements, as well as social media. They are crucial.

Negotiation Experience

Among the most important value agents bring to the table is their negotiation experience. Every phase of the sale involves negotiation. The presence of a third-party negotiator eliminates an uncomfortable situation of sellers having to deal directly with buyers, other agents, appraisers, inspectors, and lenders. Your listing agent will be your champion.

Points to Cover

The following list includes typical things that most professionals will provide. When interviewing an agent, feel comfortable to ask questions regarding their position on these items. Another item you might find helpful is our Sellers Guide.

As you can see, there is a lot more to selling a house than just listing it.