Welcome to our weekly blog, dedicated to the wild world of real estate! We've had many different adventures with our clients as we've helped them to achieve their real estate goals. Without a doubt, we've encountered some unique situations! We hope you enjoy our posts and that you will share your experiences with us, too.
Have you ever seen the commercials on TV for an “instant pre-approval” or a way to get “instantly approved” through an app? I had a client recently get pre-approved for an online application through a mortgage company that was not local with no local offices and was remotely based. She never had an opportunity to speak with the lender in depth regarding her rates, credit, income or programs she may qualify for. They pushed the application through and pre-approved her.
At this time they pre-approved her for a $3,000 a month mortgage. She was really happy she was pre-approved and felt like she was 100% ready to go. We spoke with her about her comfort levels with payments, overall home prices, etc and I had her speak with a local lender afterward. It was important she could buy a home she was comfortable in down the road and would not cause a financial stress. She sat down with the lender, they went over the documentation and turns out that she made $29,000 per year of funds that can be used towards a pre-approval amount. Which was great, however, this online mortgage company pre-approved her for a $3,000 a month mortgage, that’s a $36,000 a year mortgage but she is making $29,000 a year. The numbers just did not make sense at all.
When you are looking at these different online-only companies, it’s great you can get a pre-approval and it is great it is so quick, but you really do not know what you are getting. The fees on the back side (a lenders closing costs), of what they are charging on the interest rate and really how quality is that pre-approval overall. That’s the thing you need to understand with these online mortgage companies. They are not going in-depth, they are not looking at your documentation, they do not understand who you are, where you work or unique things that can aid in your income or debts. Those are the things that are extremely important when you’re going to spend hundreds of thousands of dollars on your next home. For most people, this will be the biggest purchase of their life, make sure it’s the right choice.
When selecting an online lender, look at their references. Learn everything you can about the company’s background so you can be certain you are not working with a company that may not provide you the best service and deal ultimately. Also, if a company charges a fee just to fill out a form on its website, you should keep looking for another lender. If you do have a question, you have not spoken with a lender yet, or just want to know what to look for in a lender, feel free to reach out and I would be happy to point you in the right direction ensure you get a quality mortgage that makes sense for you.
When you are looking to hire someone to represent you, you want to make sure they are experienced. What exactly does that mean in real estate? One of the main things many folks ask is: how long have you been in the business? Well, if you’ve been in the business for 10 years and you sell an average of 6 homes a year; you’re looking at 60 homes that have been sold in their career, which is great! If you look at other agents that are selling more homes and let’s say they are selling around 20 homes a year, they have that same amount of transactional experience in 3 years compared to 10 years.It really does make a significant difference for you as a client and how they’ve managed their business. How often are they working for their clients with attending inspections on a regular basis, marketing a home, negotiating for your home and other qualities that can make a huge impact in the long run? These all need to be done regularly to keep all of your negotiation skills sharp, you are knowledgeable about current trends and make sure you’re doing the best you can for your client.
When asking an agent about their experience, also make sure you’re asking how many transactions they have personally closed. I can promise that will tell you far more than how many years they’ve been in the business! I often ask this to home inspectors and other vendors that we contact when purchasing or selling a home in order to make sure they’ve been hands-on in their trade and have been working with a lot of clients. This also helps ensure they are not just doing this as a side gig and may or may not work out for my clients in the long run. One of the most important things to me is that you have a good experience. I want to make sure that happens! Make sure you ask the same questions of the real estate agent you are considering and hire the best agent for YOU!
It is vital for you to meet with potential real estate agents and ask them about their experience and track-record of success before you hire someone for likely the largest purchase or sale of your life. While knowledge counts for a great deal, ultimately only real-world experience will give an agent the tools required to generate speedy, profitable sales. One of place that you can look at that is helpful to be able to independently look at agent status in terms of how many homes that they’ve sold, the price points that they work in, how many buyers or sellers they work with and the actual reviews from clients are all going to be on Zillow. Make sure you’re working with a quality agent and I look forward to being able to interview for that position soon.
Have you ever thought about the big, unexpected expenses of owning a home? Things you may not expect can be really costly but things to be aware of? I have Aaron Lewis with BPG Inspections here today to give us a better idea of things to watch out for and asked what are things you watch out for?
“One is if you have low water flow out of one of the water fixtures in the home. Sometimes during the inspection, when a faucet is turned on it will have great flow out of one sink but not on another or maybe a great flow out of the cold water but not out of the hot water. Now that might not seem like a big deal to you because you might think that you can take showers with little less water flow so it’s not a big deal. However, what is the reason for that? Well with a lot of the homes, especially those build in 1975 in Sacramento, you have something called galvanized water supply piping. Galvanized supply pipes rust out from the inside and rust builds up. Kind of like a clogged artery and it reduces the amount of water flow that can get through there. All galvanized supply eventually need to be replaced because of this. Although It is not bad to have galvanized supply piping, just know that at some point, depending on its age, it all does need to be replaced. Typically people upgrade those with copper and pecks, which is a type of plastic and line piping. The main point is that this can be pretty expensive depending on how much needs to be replaced and how the system is set up and piped. Sometimes you can get away with just replacing a small section but just know that if there is no water flow it could be an indication especially if it is an older home.” said Aaron
“The next one would be vegetation on the property, which is also related to plumbing. It might seem really great if your property has beautiful big trees on it. However, especially if it is an older home, the roots may grow and impact sewer drain lines that are made of clay. They are very easily damaged. Those big beautiful trees also have big beautiful roots that work their way into those drain lines. The roots can collapse the pipes or fill them and cause a blockage. Now, this is another item that can be really expensive if a plumber or contractor needs to come out, tear up the yard and replace these drain lines. Some things definitely need to be considered if the home is older and you have large trees on the property especially in the front yard or depending on where the train lines are. You definitely want to get a sewer inspection to where someone comes out and sends a camera down the line so you can determine what the sewers condition is,” Aaron added, “we have a few different vendors that we work with to do full sewer line inspections to ensure we know what is happening and any issues that can come up.
“The last thing would be grading around the home, the slope of the yard around the home. It is preferred to have at least five feet of yard sloping away from the home and the purpose of that is to not have water intrusion into the structure. This is obviously due to water being the number one enemy of any building because of the damage it can cause. Grading might not seem like that big of a deal. You might look at the yard and see a beautiful green yard well landscaped. However, that slope, if it is sloping toward the home can cause expensive repairs. Waterproofing is quite expensive and not cheap. However, landscaping can be done relatively cost efficient but this is just something else to be aware of it. It can be quite expensive if you have to recreate the yard or fixing waterproofing of the structure to avoid potential water damage. Just keep these things in mind. Grading, waterproofing can be quite expensive if it that needs to be done. Low flow out of water fixtures could need replacement of plumbing supply lines and big beautiful trees might mean they need to replace sections of the draining pipes.” said Aaron.
These are things that I have run into personally, that we have experienced so make sure that when you are doing a home inspection if you do see things, there are signs that you might see that are a bigger concern. Be sure you talk to your inspector about them, make sure they address them and you have a better idea on the biggest issues. We look forward to pointing you in the right direction with your home inspection and I personally attend inspections to ensure we have everything handled for you!
Home inspections are extremely important but what about the reports? What should you look for in your home inspection report overall? The report is a written result of a limited, non-invasive examination of the condition of a home conducted by a home/building inspector such as Aaron Lewis. Aaron is with BPG Inspection and is one of our preferred vendors. He has giving us an exclusive interview to give us an idea on things to be aware of when reading a home inspection report.
“When you are considering the findings of an inspection, whether you’re looking at a report or discussing it with your inspector, it’s easy to let your inspector go wild on the findings especially when it comes to the critical components of the home such as the electrical, plumbing, roof and structural because those are the most common ones that can cause a scare. It’s important for you to know that most items can be addressed relatively easily. Repairs might be complicated for you but everything can be fixed so keep that in mind. Your main focus should not be the length of the report but really those big ticket items that we mentioned. The next step after you find out what those items are is to contact the relevant licensed and qualified professionals in those fields so they can provide you a quote for the repairs. Now that doesn’t mean you are going to have to pay to have those things done. Your realtor can help you with negotiations if that’s what you decide to take. Maybe he can have the seller address those things to you or perhaps give you credit toward them.” says Aaron. There are main things that are fairly common to see and they are not a huge concern, we just need to address them properly.”
“The main focus or the goal should be for you to decide does the price of the home commensurate the condition and what it’s going to cost you to repair those items and a home inspector like myself can’t decide that for you. Your realtor is going to be your expert in helping you to decide that. So write these questions down: Does the price commensurate the condition, and; Does the cost of what I need to put into repairs add up to what this home is worth? If the answers to these are all ‘yes’ then keep going,” Aaron added.
As a realtor, when I’m out viewing homes with buyers, I’m usually going out and doing visual inspections on the heater and AC systems, roof, water heaters and other major components that can be very costly. It’s good to note these items in advance and bring up any concerns up front so that we can understand before we get too far along with the buying process. If you are looking to buy a home make sure that you have the right team working with you!
Have you ever wondered why you really need a home inspection when purchasing a home and who you should be working with? I had the privilege of talking with Aaron Lewis from BPG Home Inspections and he shared some more details on home inspections and the things that should be helpful when you go through the inspection process.
“One of the main reasons you want to have a home inspection is because it is different compared to when you, as a buyer, inspects a home. When you’re buying a home it is exciting and when you walk into one you will mostly only look at the nice landscape around the home, its appliances, its nice new paint they put in or the new carpet. Whereas home inspectors like myself have a systematic method to not just look at the aesthetic things but to go over the house with a fine tooth comb to really find out what is going on underneath the home as it will help you protect your investment. We open up the electric panel to make sure there aren’t electrical hazards in the place. We are crawling under the home to ensure there are no plumbing leaks there that will cause mildew or mold or that there are structural issues that could be a potential hazard for your home so that’s one of one of the key things is we’re going to see, things you are just not going to see or read no matter how hard you look. Unless you’re crawling under the house or opening electric panel too which, I don’t recommend,” says Aaron.
“Beyond that, you want to make sure you’re choosing the right home inspector. There are a couple of things that you should look for: one, the home inspector should be certified and accredited by a nationally recognized organization. I myself am actually certified as a member of American Society of Home Inspectors and this organization set a lot of the standards in place throughout the country and the laws that are in place are there because of them for how home inspections should be performed. So ask if your potential home inspector is certified, actually certified, or pre-certified. There are strict regulations, code of ethics and standards of practice that they must be following to have that accreditation. Two, you want to ask them not only how long they’ve been doing inspections but how many inspections do they do. A home inspector who has done the inspections for thirty years doesn’t really mean that much if he’s only doing one every other month. So asking what their experience level is as well as what their background is will contribute to them doing a good job for you.”
“Now when doing a home inspection and when you do a little research on who is doing the home inspection, make sure you’re comfortable with them. One thing I always suggest to my clients is if they have the ability to, come towards the end of the inspection to do a walk through with the inspector and really find out the issues that they need to be aware of. Sometimes just reading the inspection report can make it a little bit tougher to really understand and comprehend things unlike when you’re there during the inspection you can physically see them pointed out to you. Those things can be really helpful.” says Aaron.
Make sure when it gets to be time for your home inspection that you do some homework and research on your inspectors. It’s important to understand who you are working with and if you have any questions, make sure you reach out and we’ll get you in the right direction.
Have you ever thought about purchasing a home but did not have the funds needed to buy one? Something many folks don't realize is that we can actually utilize gift funds when purchasing a home. Often times, buyers will not have a huge amount of liquid cash to be able to access for buying a home and one way we can get around that to be able to help save is going to be having gift funds. If you have relatives, friends, or other family who are willing to contribute funds to you, it's going to be as simple as writing a document with it that can be tracked by the lender. It makes it a great benefit for you as the buyer to be able to get into a home and often times there's a family member who wants to be able to help you out as well.
There are some things you need to know about utilizing gift funds with your home loan beforehand. First and foremost, make sure it is truly a gift. Lenders often explore your assets and want to ensure all funds used are proper funds and not just cash put into your account. This is to ensure that the money in your account is truly yours. You will want a letter that your lender can help with from the person supplying the gift funds and make sure that a large amount of deposits gifts are noted to your lender with documentation. In order to make sure that it’s a gift, gift letters can be used as a proof that those funds were freely given to you. You’ll need the donors to write these gift letters for your mortgage company, signifying that they don’t have any plans to retrieve the money back.
If you plan to use gift funds it’s very important to advise your lender in advance so that they can prepare paperwork, explain to underwriting and get any letters needed. Moreover, lenders will require you to provide documentation for the past 60 days for qualification purposes so it's important to be prepared.
Regardless of which loan you’ll choose, the down payment gifts are only acceptable if the house you’re purchasing will be your primary residence. One other detail that is also important for the person gifting the money, are any taxes or penalties they may pay. Make sure both you and the person giving the gift understand and are comfortable with all aspects of using outside funds. If you do have additional questions, please feel free to reach out!
When you first decide to purchase a home, you want to take your time since buying a home requires attention to detail because it is a huge investment in which you will likely be spending the largest amount of money in your life.
One thing many clients often look at is how much the home was originally purchased for in comparison to how much they should offer to get the best price. Occasionally a buyer will want to purchase a home for close to what the homeowner has paid for the home. When looking at homes and making offers, we will look at area sales to get an indication of what we really should offer. The reason why the amount the homeowner has paid for the home doesn't necessarily matter is because if a home was most purchased through a short sale, had condition issues, was bank owned, auctioned, etc, can actually make this very tough to judge how much the seller is making and will skew things quite a bit.
Let’s also take this as an example comparing to a car; a seller has a B.M.W. that typically would cost $50,000 but has a ripped seat. They are selling it for $40,000 since they didn’t want to deal with the ripped seat that, let’s say, cost $1,000 to repair. They may be in a tough spot, do not want to do the repairs, or just do not have the finances to do so. Therefore, they are selling you a $50,000 car for $40,000 and $1,000 additional to repair the seat. A $41,000 investment for a $50,000 car... that's awesome!
But are you now going sell that car to somebody else for $41,000 or for $42,000, or would you sell that car closer to that price of similar cars on the market which are around the $50,000 mark? Generally speaking, if you want to get the most that you can, you're going to stay close to that $50,000 amount and if somebody were to offer you $41,000, you really would not even consider knowing what you have put into it.
This is what happens when we are looking at properties. When they purchased the home, it would not necessarily cost the market price because it had either a condition issue, the home went through a certain process such as short sale, or auction or the home was purchased a long time ago. These situations don't necessarily impact today's value and the amount that you should offer to be able to get that home. If you're comfortable with putting in a lower offer but you don't really love the home, then that would be okay. Another consideration is if you really love the home make sure that you're putting in an offer that makes sense for everybody. Make sure you are making wise decisions and consider things especially in making an offer and in choosing a home for you. If you are considering putting an offer, please do let me know.
I'd be happy to navigate that with you a little bit more but make sure that you guys are doing the right thing from the get-go.