Residential Real Estate in SW Washington State

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How to Make a Winning Offer on a Home

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How to Make a Winning Offer on a Home | MyKCM

Today’s homebuyers are faced with a strong sellers’ market, which means there are a lot of active buyers competing for a relatively low number of available homes. As a result, it’s essential to understand how to make a confident and competitive offer on your dream home. Here are five tips for success in this critical stage of the homebuying process.

1. Listen to Your Real Estate Advisor

An article from Freddie Mac gives direction on making an offer on a home. From the start, it emphasizes how trusted professionals can help you stay focused on the most important things, especially at times when this process can get emotional for buyers:

“Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.”

A real estate professional should be the expert guide you lean on for advice when you’re ready to make an offer.

2. Understand Your Finances

Having a complete understanding of your budget and how much house you can afford is essential. The best way to know this is to get pre-approved for a loan early in the homebuying process. Only 44% of today’s prospective homebuyers are planning to apply for pre-approval, so be sure to take this step so you stand out from the crowd. Ask your loan officer to do a full pre-approval, all the way through underwriting. Doing so makes it clear to sellers you’re a serious and qualified buyer and it can give you a competitive edge in a bidding war.

3. Be Prepared to Move Quickly

According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), the average property sold today receives 3.7 offers and is on the market for just 21 days. These are both results of today’s competitive market, showing how important it is to stay agile and alert in your search. As soon as you find the right home for your needs, be prepared to submit an offer as quickly as possible. In the Thurston County area of our SW Washington market, the average property is on the market for just 5 days. Lewis County is similar — an average of just 18 days on market!

4. Make a Fair Offer

It’s only natural to want the best deal you can get on a home. However, Freddie Mac also warns that submitting an offer that’s too low can lead sellers to doubt how serious you are as a buyer. Don’t make an offer that will be tossed out as soon as it’s received. The expertise your agent brings to this part of the process will help you stay competitive:

“Your agent will work with you to make an informed offer based on the market value of the home, the condition of the home and recent home sale prices in the area.”

5. Stay Flexible in Negotiations

After submitting an offer, the seller may accept it, reject it, or counter it with their own changes. In a competitive market, it’s important to stay nimble throughout the negotiation process. You can strengthen your position with an offer that includes flexible move-in dates, a higher price, or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). Freddie Mac explains that there are, however, certain contingencies you don’t want to forego:

“Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”

Bottom Line

Today’s competitive market makes it more important than ever to make a strong offer on a home. Let’s connect to make sure you rise to the top along the way.

 

Buyers: Are You Ready for a Bidding War?

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Buyers: Are You Ready for a Bidding War? | MyKCM

With businesses reopening throughout the country and some experts indicating early signs of a much-anticipated economic recovery, more homebuyers are actively entering the housing market this summer. Today, housing is truly driving the U.S. economy forward. With so many buyers looking for homes to purchase and so few houses for sale right now, there’s a disconnect between supply and demand. This imbalance is pushing home prices upward while driving more bidding wars and multiple-offer scenarios. Danielle Hale, Chief Economist at realtor.com explains:

“People are surprised that prices are rising, not falling, because in the last recession home prices fell, the difference this time is the severe shortage of homes for sale…We are seeing bigger price increases with [a limited] number of homes…That is likely to lead to more competition and potentially multiple offers and bidding wars.”

According to the recent Realtors Confidence Index (RCI) survey conducted by the National Association of Realtors (NAR), this trend is growing:

“On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”

HousingWire also indicates:

“42% of homeowners who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.”

With more people returning to work we’ll continue to see the number of interested buyers increase. So, if you’re among the many people looking for a home to buy this summer, it’s important to ensure you have the right guidance from the start. This way, you make sure your offer stands out from the crowd when it really counts. Here are two tips to follow.

1. Hire a Trusted Local Expert

A trusted local real estate professional matters more than ever right now, as noted in a recent survey shared by NAR. In fact, according to respondents, 54% of buyers and 62% of sellers indicated that “Particularly during the pandemic, a real estate agent’s guidance is especially valued.”

We’re not in a normal market. We are in one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers must take to purchase a home. To successfully navigate the landscape today, you need a true expert on your side.

2. Get Pre-Approved for a Mortgage

When there are more buyers than sellers on the market, the process to find a home becomes much more challenging. One way to show you’re serious about buying a home is to work with a lender to get pre-approved for a mortgage before starting your search. With a pre-approval letter, sellers will see your true desire to buy this year, potentially helping your offer rise to the top.

Bottom Line

If this is the year you’re ready to buy, let’s connect to get the process started so you can make sure your offer is a strong one when the competition heats up.

Seller-Paid Closing Costs?

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Buying a home typically takes some cash out-of-pocket. There are a few loan types that require minimal or no down payment, but there are many extra fees and costs required to actually complete a purchase.

From experience, I know that for many buyers closing costs are typically about 2½% to somewhere around 3½%-4% of the purchase price. As an example assuming that the purchase price of a home is $300,000, out-of-pocket costs of actually closing on the sale (in addition to any down payment) might range from about $7,500 to, say, $12,000. Of the total, 1½%-2½% or so are actual loan fees — lender fees, recording fees, processing fees, appraisal fees, etc, — with the remaining 1%-1½% or so made up of prepaid costs such as upfront homeowner insurance, property taxes, homeowner association fees, prepaid interest, and so on.

Purchase Price $300,000
Loan Fees (1½%) $4,500
Prepaid Expenses (1%) $3,000
Total Closing Costs Paid by Buyer $7,500

So who pays these costs?

One approach often suggested by lenders is that a buyer request the seller foot the bill for all of the costs involved in closing the buyer’s loan.

Depending on the status of the current market or perhaps if a home listing has languished on the market, a seller “might” be willing to pitch in and contribute. However, as is most typical in my greater Pacific Northwest area of quick sales and multiple offers, it’s not realistic to expect a seller to pitch in and help in order to sell their home. That seller is unwilling to reduce the proceeds of their sale (their bottom $$) to pay a portion or all of a buyer’s purchase costs. In the mind of a seller, after all, if a buyer doesn’t have sufficient resources to pay their own way, another buyer will be coming along in the next 10 minutes!

Another strategy is to stack any loan costs on top of the purchase price, with the request that a seller then pay the closing costs out of that increased purchase price. That scenario might look like this:

Purchase Price $307,500
Loan Fees (1½%) $4,500
Prepaid Expenses (1%) $3,000
Total Closing Costs Paid by Seller $7,500

Note that you must be a bit careful with this type of approach. Not only must you, as the buyer, qualify for a higher loan amount, the actual dollar amount of the closing costs will increase based on the higher price and, perhaps most importantly, the home must also appraise at the higher purchase price. With rapidly escalating prices in my area, adding closing costs to a purchase might be just enough to effect a low appraisal–below that all-inclusive purchase price.

Keep in mind, also, that a seller has their own closing costs to pay, which may include brokerage fees, recording fees, notary, HOA dues, etc, and excise or other taxes. Many of these fees are based on the purchase price and if you’ve added closing costs into the purchase price, the seller must pay fees on that inflated price. You may need to offer a seller a slight bit more to cover their extra expenses.

Obviously, if you can pay your own closing costs as part of your purchase, your offer may be looked upon more favorably by the seller and you may have a greater chance that your offer will be accepted. If you do need assistance, be sure to review all of these factors when obtaining loan approval. I’ve seen many offers fail because a buyer asked a seller to pay closing costs … and I’ve seen transactions fail when appraisals come in low.

Your loan officer should provide you with an estimate of closing costs for your purchase. Your real estate representative should provide you with thoughts an options about how to structure a purchase that includes consideration of closing costs.

20 Tips to Buying a New Construction Home

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Buying a new construction home is a bit different than purchasing a resale home – one that’s been previously owned by someone else. You’ll need to be familiar with a few tricks of the trade, along with understanding a bit about how the process works. These 20 tips to buying a new construction home are just the starting point on your way to the new construction home of your dreams. When you’re ready, I’d be delighted to be of assistance to you!

1. Use your own Broker/Agent

ALWAYS use your own Broker/Agent; doing so will help ensure that you get what you want. Understand that the sales reps you meet at a new construction community are likely really representatives of the Seller – the Builder, corporate owners, developers, whomever – that are there to present their product, answer your questions … and do the best job for the Seller that they can.

YOU want the same thing, but from your standpoint. You want to see the product, get your questions answered, but have your needs be number one. By using your own Broker/Agent, you can be assured that there’s no conflict of interest.

Most importantly, if at all possible, be sure to contract with a Broker/Agent before you start shopping. Often the policies at a community require that your agent be present at the first showing and then at every showing. If they’re not, you may find yourself working with the site rep even if you didn’t intend to do so. And your agent, who comes along later, may not get paid either – or perhaps will be paid a significantly less amount because the site rep was the person who registered you. 

2. Don’t expect price reductions

imageYes, it does happen. But overall, remember that Builders, etc., have established a set of prices that they feel best makes their product (the houses) marketable with an expected profit margin. Furthermore, lowering the price on a house drops the comparable value of other houses in the community, thus bringing the entire suite of houses down in price. Typically a pre-sale home … one that has not yet been built … will be slightly higher in price than a home that the builder erected as a “spec” house – one that was built to attract Buyers to the site. Note also, that very often homes that have not sold for a period of time will not drop in price – they actually go up in price at a new home development, thus supporting the builder’s position that materials and labor costs increase. 

3. Look instead for builder concessions in the form of additional upgrades

Rather than price reductions, you may be able to gain a few upgrades from the Builder at no cost, or for less money. Perhaps the Builder would be willing to include a fence, landscaping, upgraded carpeting, or appliances as part of your purchase without charging you extra. 

4. Builder incentives in the form of interest rates, etc., may not be coming from the builder

Lots of new communities boast incentive programs that cite things like “3.75% financing for 30 years” or “Zero Closing Costs.” What’s important to know is that the Builder may not be the one actually paying those closing costs, or reducing the interest rates. Typically, those types of incentives are coming from the Builder’s preferred lender who is counting on a sufficient number of loan transactions in order to recoup the cost of the incentives.

While Builders can’t require you to use their preferred lender in order to purchase a home from them, they can require you to use their lender in order to gain the benefit of the incentive. You’ll want to check with your own lender first to see if they’ll match the incentive or can give you a benefit in another fashion before deciding to switch gears and go with the Builder’s lender. Remember that nothing’s really free, so be a bit cautious when making decisions like this one. 

5. Expect to use the builder addendum

imageIn almost every case, new construction homes require the use of a Builder’s contract or at least a lengthy addendum in addition to the typical purchase forms used by a Broker/Agent. Generally those Builder forms include language specific to the terms of the building process and can be many many pages long full of tightly packed terms. While much of the language is common sense, be sure to read the contract thoroughly yourself (as will your Broker/Agent) and then consult with a qualified real estate attorney if you have questions or concerns. Agents, even those sales reps for the Seller, aren’t allowed to (and shouldn’t) attempt to advise you or interpret what those custom forms really say. 

6. Builder warranties vary

Not all builder warranties are the same. Some builders warrant their work from top to bottom for several years, some only for one. Many builders will offer a warranty of up to about 10 years for structural-type issues, with other warranty time frames for things like plumbing leaks. In addition, you’ll find that your new home will likely have individual warranties for appliances, roofs, windows, etc. Be sure to carefully review the warranty offered by the builder of your desired home before signing the final contract for your Purchase. 

7. The floor plan isn’t the floor plan

imageThe little floor plan you see when viewing your potential home at the builder site isn’t an exact representation of what your home may look like. For example, you may see a nicely drawn oval bathtub with rounded edges on the drawing only to find out when the home is almost finished that the actual tub is rectangular. Room sizes are close estimates, but usually measurements are rounded. Sometimes the location of outlets will move around. Sometimes your chosen particular lot requires other modifications in order to fit the home properly. 

8. Rarely can you modify the floor plans

imageUnlike building a custom home, most community sites where several homes are being built by the same or a group of builders are based on a preapproved set of plans that have already received the stamp of approval from the local building authorities. Conversely, in a custom home situation, your set of plans can be modified prior to building or even during the construction process if you want to pay the extra associated costs.

In these preapproved communities, fewer options for modifications are generally allowed. Doing so would significantly increase the amount of time the builder wants to spend on any one house, while also increasing his/her costs. Changes to floor plans, even to add extra outlets, etc., must be included in the particular permit and approved, which can involve new drawings and perhaps repeated permit processes. If you do want to make changes, be absolutely certain you’ve worked this out as part of your purchase contract.

9. Expect changes

While everyone starts out thinking all of the choices have been made, finishes chosen and the idea that the new home will look just like the model, realistically suppliers run out of or change products or prices, thus affecting the appearance of your home. Builders typically reserve the right to substitute materials and finishes, sometimes leading to surprises. Try to tour a finished home or two and do ask lots of questions about the sorts of things that the builder might substitute. It’s nice to know upfront what you might expect! 

10. Expect about 5 months after permit or approximately 100-120 days after lumber drop

Every builder, City, County, etc. has different time frames that historically work for them when completing a home. For most builders in the greater Thurston and Lewis County areas, I’ve found that it takes approximately four months for a builder to complete a home after lumber drop – i.e., the date on which that huge stack of wood is delivered to your home site. Remember that lumber drop occurs after the construction permit from the city/county/etc. has been received by the builder … and after the foundation is complete. Those two tasks can add another month or even two to the process. 

11. Add an extra month or so to the anticipated build-out time

imageAs part of your pre-sale purchase, the Builder and/or sales rep will provide an estimated date of completion for the building of your new home. What’s important to remember is that the estimate is just that – a projection of when the home will be complete and ready for occupancy providing everything goes according to plan. Realistically, however, plans don’t work out exactly on time. In my experience, I’ve found it best to add about an extra month to the whole thing. Go ahead and include the Builder’s date in your contract, but in your heart expect delays. 

12. Be sure to include your Broker/Agent in every walk through; cc them on all conversations, etc.

As indicated in Tip #1, your Broker/Agent is a critical part of your purchase team. With that in mind, be sure that you’ve asked your Agent to attend every walk through and meetings with the builder, and that you’ve included them in email conversations, etc. Note that some builders really try to restrict Agent attendance, but in my experience, you need an extra, knowledgeable set of eyes and ears to help keep things on track. You’ll want to negotiate or handle any restrictions they may have to this at the time you work through your Purchase agreement. 

13. Don’t expect perfection

As much as we feel we’d like to control every piece of the building of our new home, realistically the house won’t be perfect when it’s complete. For example, the quality of wood used to frame the walls of your home is just not what it used to be. You’ll see knot holes, crooked boards, perhaps what look like curious framing practices, and so on. Unless you see significant problems, however, remember that each step of the build process has been inspected not only by the foreman in charge of your project, but also by the local building inspector who should be keeping an eye on things to be sure that the local building codes have been met. If you do see problems, be sure to bring them to the attention of your own Broker/Agent who will assist you in working out any issues with the builder. 

14. Walking the site will get you into trouble

Stay away from the construction site, especially during working hours. There are a lot of physical hazards involved – workers are carrying lumber, shooting nails, stringing wires, spraying drywall compounds, etc. Most job sites require workers and visitors to wear hard hats in an attempt to prevent injuries.

Equally as important is the fact that you don’t really want to disrupt work flow. You want your house finished. By getting in the way of the current project, you’ll cause inordinate delays. Those workers can’t make changes and, as odd as it may seem, probably won’t even talk with you. They’re there to do their jobs, not chat with the Buyer.

Your purchase contract will probably state that you cannot visit the site without making an appointment with the seller rep who will then set up an appointment with the project superintendent or foreman. And then, of course, you’ll also want your Broker/Agent to also be in attendance so that there’s a good record of who said what and when. (Your Broker/Agent should also be conversant and knowledgeable enough with the process to help interpret what’s going on and what could be done to satisfy everyone involved.) 

15. Be nice to the foreman!

You may only meet the construction foreman for your home build a few times, but these folks are gold when it comes to completing what you need. They’re usually very nice … but very busy … trying to coordinate several projects all at the same time and making sure that everything is done correctly. Remember, they have a critical job to do, but you want them to also be your advocate. They want the job done right too! 

16. imageTake lots of pictures

Each time you have the chance to take a walk through of the home or when you do visit the home site, be sure to take your camera along. I can almost guarantee that you’ll want to hang a shelf on a wall at some point – and wouldn’t it be great to know approximately what’s behind that drywall? Not only that, it’ll be fun to look back at the process … later.

17. Ask for leftover paint, vinyl, granite tiles, carpet scraps, etc.

Most of the bigger builders will put together a very nice box of touch-up paint for you as normal practice, but if you can, you may want to also request that leftover vinyl flooring, the sink cut-out from your granite counter, and the leftover hardwood flooring pieces and carpet remnant be left for you. These can be helpful patching materials when accidents happen and it’s nice to have everything match. Note that many of the finishing steps are done by subcontractors, however, and it may just not be possible to capture any of the leftovers. In addition, significant leftover materials may be used in other homes or even returned to the supplier. It never hurts to ask! 

18. Do your own inspection

j0282788More precisely, prior to closing on the purchase of your home, be sure that your purchase contract allows you to bring in a qualified home inspector to test the various workings of your home … checking outlets, plumbing fixtures, walking the roof, the crawlspace and attic, and so on. Typically the items found on your independent inspection will be repaired by the Builder, but will not affect timely close of your purchase. Builders often retain a time period after closing to repair defects. 

19. The “certificate of occupancy” is probably not a certificate at all

The final step before the Builder releases the home to you for closing of your purchase will involve receiving signatures on the final inspections by the City/County, etc. thus allowing the home to be occupied. The term “certificate of occupancy” is a phrase used to indicate that the final signature was received and you’re ready to go! 

20. Move-in day is the sweetest day on earth

champagne toastWell, of course it is for every Buyer for every home … but there’s just nothing like the unparalleled excitement that seems to surround moving in to a brand new home in which you made all your own choices. On the day before the furniture arrives, buy a roll or two of that tacky carpet protector stuff or paper to cover the walking paths on the rugs and floors so that you and the movers don’t track the great outdoors into your new home.

… And then take a moment for a big smile! Take a few minutes to sit on the floor, on the deck, on the sofa in the middle of the room (because you can’t figure out where to exactly position it) and reflect on what you’ve accomplished. This was a BIG deal!

 

 

4 Critical Facts When Selling Your Manufactured Home

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Selling a manufactured home on land is a bit different than selling a stick-built home. There are a few more inspections and requirements, not to mention finding a lender that will lend!

Here in Western Washington, I’ve had the dubious pleasure of working through a few sticky manufactured home transactions over the last few months. Now, don’t get me wrong — working with the buyers and sellers was truly a pleasure! It’s just that there are so many different steps to be taken that sometimes clients can feel a bit overwhelmed by the whole process;  and it’s so necessary to be the knowledgeable hand that helps guide the sale.

With a couple of caveats that every transaction is truly different and that different jurisdictions have slightly different requirements, here are a few starter points.

1.       Not every manufactured home qualifies for traditional financing methods – only those built after June 15, 1976. Your home built on May 31, 1976 won’t qualify for traditional financing — you’ll need to appeal to a buyer that has all cash or some source of private funding.

2.       Know that in order to get any sort of financing for the purchase of a manufactured home, the home must have gone through a title elimination process. A bit of background – when a manufactured home is purchased, it’s personal property – like a car or boat. Title is maintained by the Department of Licensing just like the title to a car. This is likely a testament to the fact that a manufactured home is towed down the road on its own axles and tires, which are then typically removed when the home is placed on its foundation.

That personal property title must be eliminated and the home married to the real property (the land) on which it sits. Home loans are for real property – not for vehicles.

3.       Speaking of Foundations — this gets a bit tricky. Prior to 1996, manufactured homes were often trucked to their site and then set up on a series of concrete blocks. Those blocks often sat on poured or prefab cement slabs. Then tie downs were attached to the underlying steel beams that run the length of the home and subsequently secured to the earth or the cement slabs, or whatever. In our area, which is generally not subject to enormously high winds such as hurricanes, some homes were installed without the tie downs and just sit on the blocks.

Now then – bear with me – FHA and VA loans are often used for manufactured homes. It used to be that conventional funding was a bit more lenient with requirements, but I’ve found lately that conventional and FHA/VA requirements are similar. So here’s the thing. In 1996, HUD (Dept. of Housing and Urban Development) placed a requirement that all manufactured homes on private land must be secured to a “permanent foundation,” which they defined. These permanent foundations are designed to prevent the home from shifting or moving away from their supporting structures.

HUD guidelines state that compliance with the guidelines must be certified for all re-sales.

This means that a homeowner must ensure that the foundation system complies with the guidelines by hiring a licensed professional engineer to examine the current foundation structure and certify, in writing, that the foundation is compliant. If not, the homeowner must have the foundation retrofitted prior to sale.

 

4.       One additional step can also be critical, and yet is so often overlooked by an existing manufactured home homeowner. Prior to adding anything to the exterior structure of the home, such as deck, porch, awning, an extra room, etc., you should have obtained an L&I permit in addition to obtaining the appropriate jurisdictional building permit (if required). That’s right – the Dept. of Labor and Industries must also permit and inspect your addition and certify that it meets the manufactured home standards.

See, manufactured homes are designed to be dismantled from their foundation and pulled down the road. That means all exterior structures surround the house must be self-supporting. For example, that deck must have supports and beams of its own – not merely attached to the home by means of a ledger board.

Similarly, electrical modifications, replacing your hot water heater, adding a wood burning or pellet stove, etc. must be approved by L&I. You’ll likely need proof of the modification. If you did not obtain the L&I permit before altering your home, you may need to obtain an L&I inspection before your home can be sold.

Absolutely your manufactured home can be sold. Paying attention to these 4 Critical Facts when selling your manufactured home can make all the difference in an easy sale!

 

13 Reasons Why That House Might Not Qualify for FHA Financing

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2/4/2020 — This blog entry, originally written in 2011 has been one of the most read posts on my site. While FHA loans are still an incredibly good choice for many buyers, there are now some 3% down payment conventional loans that are also extremely popular.

I did want to point out, as I edit this post, that, at least in our busy area, it’s definitely far less likely that a Seller will assist with a Buyer’s closing costs. The market is HOT, with multiple offers and Sellers are just less willing to pay anything out of pocket except their own expenses.

Gabrielle-bold
In my practice, FHA loans are used for a large chunk of home purchases. Without a doubt, an FHA 203(b) can be a logical choice, especially for folks with credit scores below about 680 or so. (Note that while FHA lists credit score qualifications starting at about 580, most lending institutions pad that requirement raising the minimum score to the mid-upper 600’s.) With FHA’s awesome interest rates, the low minimum down payment requirement of only 3 1/2% and closing costs running right around 3% of the purchase price, FHA financing makes a home buying possible for many many buyers.

However, one thing to remember is that not only do YOU, the buyer, have to qualify for a mortgage loan, the home must also qualify under typical FHA 203(b) loans (the most common type). A home in good repair with typical maintenance generally is no problem … it’s the home that’s been neglected that can so often be problematic–those homes may need a Rehab loan FHA 203(k) where the cost of home repair is included in the home loan. FHA wants to be sure that the home they insure … the one you’re buying … has no health or safety issues that could compromise your ability to repay your mortgage.

As you tour a home with your agent anticipating that you’ll use an FHA loan for purchase, watch for these items. The FHA appraiser that values the home for your bank loan will be watching for these items as well:

  1. Roofs that are at or near the end of their useful life, or in tough shape. Curling and missing shingles, gutters that are missing, lots and lots of moss. In our area, moss is common, but it should be minimal at best and easily removed with a light sweeping or cleaning. Most appraisers look for roofs that have an obvious 5 years or more life left in them. That original 3-tab roof that’s now 15 years old or so could be problematic. Note that some roofing companies will inspect a roof for you and write a letter (for a small fee) stating their opinion of the remain life of a roof. 
  2. Cracked or missing window panes. It’s certainly not necessary that the windows be newer — old, single pane windows can be just fine as long as they’re sound and in one piece. In a recent transaction, however, I did have an FHA appraiser insist that a window that had a broken seal (indicated by fogging between the panes) be replaced prior to closing. 
  3. Peeling, cracked, or checked paint. Where the house is older than 1979, that paint could be lead based. Not a problem where the paint is in good shape, but where it could possibly be ingested — even on outbuildings. For that matter, asbestos potential in a popcorn ceiling that’s falling down or in old cracked siding could also be an issue.
  4. Water issues. This is one of the biggest hot spots for an FHA appraiser and rightly so. A quick glance under a sink to see rotting floors and moldy walls will nix a loan every time. Watch for soft floors around toilets and tubs, leaky faucets, roof leak stains in the ceiling. Water in the crawl space is a definite no-no as is significant water standing in the yard.
  5. Open/exposed wiring … Not good, not good. Electrical wires must be properly terminated, secured and finished in an electrical box and covered with the appropriate plate. Missing outlet plates even in a garage or outbuilding typically need to be in place. 
  6. Missing electrical fixtures. Especially on foreclosure sales, the dining room light fixture is sometimes missing. Sometimes it’s all of the kitchen lights or bedroom center light fixtures. Remember, an appraiser is looking for “safety” problems!
  7. Missing appliances. A missing free-standing refrigerator, washer or dryer aren’t problems. It’s the built-ins such as a missing dishwasher, range, cooktop, or oven that’ll cause a comment in the Appraiser’s report. I’ll include the missing hot water heater and furnace here as well. A home has to have heat and water! (A quick note here as well … In 2019 an appraiser called out a missing freestanding wood-burning stove. The chimney piping was all there, right through the ceiling and roof, and the cap was on the top of the chimney, so no leaks. But the end of the pipe was open in the room and the appraiser called it.)
  8. Missing or damaged carpets, drywall, or typical finishes. Yeah, sometimes that plywood floor is a problem as are huge holes in the drywall where the previous owner got creative and cut through the drywall to find who knows what. Note, however, mere cosmetic issues are generally not a problem unless the carpet is so soiled with maybe pet stains that it’s not cleanable. Remember that the goal here is to have a home that is safe and healthy.
  9. Add-ons that were obviously not permitted. We’ve all seen them. The deck built on stilts that isn’t properly attached to the house, the garage/bedroom conversion with sloping floors, the rented basement apartment that doesn’t have its own meter and is accessible only through the main house door. However, I’ve yet to have an appraiser ask for permit information for ADUs (additional dwelling units) or in-law spaces that are part of a home.
  10. Critters in the crawl space or attic. Ugh. But facts are that four-legged and/or winged creatures like to infiltrate the crawl space and attic if allowed. Evidence of lots of droppings and open foundation or attic vents can be an issue. Especially if the appraiser pokes his/her head down into a crawl space or up into an attic and is greeted by a pair of green eyes looking back at him. Not so good.
  11. Concrete cracks. A small crack typically isn’t necessarily a problem, but that foundation crack extending from top to bottom and is over, say, a 1/4″ or so can be an issue. Same thing in large cracks in garage floors or sometimes even in walkways leading to the doors, especially where the surface is uneven or slabs have sunk.
  12. Septic or Sewer issues. A rehab loan or full repair will absolutely be needed to purchase a home with one of these problems!
  13. Unsound or Aging Outbuildings. Over the last few months I’ve had the pleasure of touring really neat old houses that had been updated and were really gorgeous. However … then there were these sheds/outbuildings/garages in the back yard that had definitely seen better days and were just waiting for a heavy snowfall or wind to drop them to the ground. I’ve seen marginal buildings with paint literally falling off the siding, full garden-thick moss and saplings on the roof, and vines creeping in through their foundations. You guessed it .. the appraiser called for repair.

A few things to remember:

  • Not every FHA appraiser will note the same defects. Some appraisers will overlook moss on the roof, or a small corner crack in a window while others will insist that the item be corrected before the loan can close.
  • Ideally, the Seller is able and willing to make repairs so that the home can be sold. However if that can’t be accomplished, the Buyer may need to pass on the home, change loan types, or make small repairs prior to closing (not a good idea, but it happens).
  • Be absolutely certain that you are also working with an experienced FHA loan officer, especially if you decide to pursue an FHA 203(k) Rehab loan. You’ll need their help!
  • Work with an agent that has experience with FHA transactions. He or she can often spot issues that will be problematic and can direct you to further resources as needed. I’m here to help, of course, especially if you’re buying in the “south of Seattle” area of Washington. Don’t hesitate to reach out to me here.

 

 

 

 

Will Your Side Hustle Buy You a House This Year?

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The top concern for most first-time home buyers is their ability to save for a down payment. According to a new survey, 36% of millennials took on a second job to make their dreams of homeownership a reality in 2017.

Among millennials with incomes over $100,000 a year, the top ways to come up with the necessary funds were to sell stocks (20%) or to sell cryptocurrency (16%).

The most popular method of savings was the most traditional; 60% of those saving for a down payment used a percentage of their paychecks to achieve their goal, while 75% of those with salaries over $100k were able to save this way.

For those who have not yet begun to save for their down payment, 32% plan on pursuing additional employment, while 15% plan on driving for a ride-share service as their second job.

Many first-time buyers are mistaken about the down payment needed in today’s real estate market. In fact,

“In a 2017 survey, 68% of renters cited saving for a down payment as an obstacle to homeownership. Thirty-nine percent of renters believe that more than 20% is needed for a down payment and many renters are unaware of low-down payment programs.”

The many benefits of homeownership make the extra jobs, sacrificing new clothes, or skipping vacations well worth it.

Bottom Line

If you have been saving for your down payment for a while now and are curious how much further you have to go, let’s get together to help you determine what priced home you can afford and what size down payment you’ll need.

What to Expect in a Home Inspection

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So you made an offer, it was accepted, and now your next task is to have the home inspected prior to closing. Oftentimes, agents make your offer contingent on a clean home inspection.

 

 

 

This contingency allows you to renegotiate the price you paid for the home, ask the sellers to cover repairs, or even, in some cases, walk away. Your agent can advise you on the best course of action once the report is filed.

How to Choose an Inspector

Your agent will most likely have a short list of inspectors that they have worked with in the past that they can recommend to you. HGTV recommends that you consider the following 5 areas when choosing the right home inspector for you:

  1. Qualifications – find out what’s included in your inspection and if the age or location of your home may warrant specific certifications or specialties.
  2. Sample Reports – ask for a sample inspection report so you can review how thoroughly they will be inspecting your dream home. The more detailed the report, the better in most cases.
  3. References – do your homework – ask for phone numbers and names of past clients who you can call to ask about their experiences.
  4. Memberships – Not all inspectors belong to a national or state association of home inspectors, and membership in one of these groups should not be the only way to evaluate your choice. Membership in one of these organizations often means that continued training and education are provided.
  5. Errors & Omission Insurance – Find out what the liability of the inspector or inspection company is once the inspection is over. The inspector is only human after all, and it is possible that they might miss something they should have seen.

Ask your inspector if it’s okay for y

 

ou to tag along during the inspection, that way they can point out anything that should be addressed or fixed.

Don’t be surprised to see your inspector climbing on the roof or crawling around in the attic and on the floors. The job of the inspector is to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating & air conditioning systems, ventilation, windows, the fireplace and chimney, the foundation, and so much more!

Bottom Line

They say ‘ignorance is bliss,’ but not when investing your hard-earned money into a home of your own. Work with a professional who you can trust to give you the most information possible about your new home so that you can make the most educated decision about your purchase.

Calm Down! The Real Estate Market is NOT Falling Apart

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There has been tremendous volatility in certain markets over the last few weeks (for example, the stock and currency markets). When this happens, some tend to lump all of their investments together and create an almost ‘Armageddon’ scenario where everything loses value quickly and dramatically. Real estate is an investment that can get caught up in this hysteria. Does the concern about the current housing market have merit?

  • Financial advisors have been warning us for months that the stock market was ripe for a “correction.”
  • Experts have been questioning the value of alternative currencies for over a year.
  • In contrast, here are the opinions of three major players in the residential housing market:

Ralph DeFranco, Chief Economist, Arch Capital Services Inc.

“It’s premature to worry about a housing bubble. The typical warning signs – excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on house flipping – are not present.”

Liu-Down, Genworth Chief Economist

“My thoughts on many recent discussions of ‘housing bubble’ – the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation.”

Fitch Report

“US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates…a meaningful correction should only be triggered by an unexpected economic shock.”

Bottom Line

Speculation has driven certain markets over the last year. However, it has not been speculation, but instead people’s desire for homeownership, that has driven the real estate market.