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What Home Sellers Should Consider When Reviewing an Offer
Selling a home can be nerve-wracking. One of the more stressful parts is waiting for an offer to come in. But even when you receive one, make sure you review it well before accepting. Here are a few of the things you need to look at before deciding whether or not to accept it.
What Home Sellers Should Consider When Reviewing an Offer
Offer Price
Everyone likes a deal. And our Inland Empire real estate market appears to be more balanced between buyer and seller. So, do not be discouraged if you see a lower-than-asking offer…especially if you priced it right to begin with. You can always counter back. What if they come in at asking? Well, meeting your asking price is great. However, there are other factors to think about as well.
Contingencies
The fewer contingencies, the better. It makes the whole process run a bit smoother with fewer conditions put into place. Some common contingencies buyers ask for include financing, selling their current home first, making sure the home appraises high enough, and a home inspection. If the buyer pays cash, they may waive the financing, appraisal, and home sale contingencies. Just make sure that they have enough funds in their bank account to cover the entire purchase before accepting an all-cash offer. If a buyer needs loan approval, an offer with pre-approval or pre-underwriting is much more sound than an offer with just a pre-qualification letter attached.
Financing Method
Speaking of financing, look at how they plan on getting financed. All-cash offers appear great at first. After all, they shorten up your closing timeframe. And if you need to sell your home quickly, that is definitely ideal. However, (again) make sure they have proof of funds first. Also, all-cash buyers tend to have the upper hand with negotiations. So, they may offer below asking and want a few extra perks thrown in as well.
If your buyer needs to procure a loan, see what method of funding they used. Request that the buyer include a pre-approval letter (at the very least) with their offer. This demonstrates that they have talked to a lender and the lender found them solid enough financially to pre-approve the funding for the home in question. Nevertheless, “pre-approval” is not the same as “final approval”. Sometimes, sales fall out of escrow even when a buyer receives pre-approval.
Earnest Money Deposit
An earnest money deposit (also known as a “good-faith deposit”) is the money a buyer puts down at the start of escrow. In the past, $1000 was considered normal. However, nowadays, it typically runs about 1-2% of the sale price. For a $500,000 home, sellers may expect to see $5,000 to $10,000 for just the EMD. This money goes towards the mortgage loan once escrow closes. A higher earnest money deposit shows just how serious the buyer feels about purchasing the property. The more they deposit, the more they potentially may lose. If the sale falls through, the seller could possibly end up with the EMD. That usually serves as plenty of motivation for a serious buyer.
Closing Timeline
Finally, sellers should consider the closing timeline spelled out in an offer. Have you already bought another home and want to be out of your financial obligation to your current home? A shorter timeline works better for you. But what if you need a bit more time to pack up years of memories and find a new place to live? Look for a longer timeline.
Always discuss any offer you receive with your Inland Empire REALTOR® before making a final decision. They know the local market. So, they have the kind of insight you need to make the most informed choice.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How Discount Points Work
Last week, I talked about the closing costs home buyers need to be aware of when purchasing a property. These included lender fees such as loan origination, underwriting, and paying points (aka “discount points”), if applicable. It might help to know exactly what these points are and how they work before you decide if the extra expense is worth it.
How Discount Points Work
Basically, when you pay “points” up front, this lowers your interest rate. While you bring more to the table at closing time, it saves you money in interest payments over the life of your loan. Each “point” costs approximately 1% of your loan’s value. In other words, if you borrow $350,000 to pay for your Inland Empire home, it costs you $3500 upfront to bring your interest rate down by 0.25%. That is in addition to your other closing costs and your down payment.
As of the writing of this post, Freddie Mac puts current interest rates for a 30-year fixed-rate loan at 6.33% for those with excellent credit. On that $350,000 mortgage loan, paying one point saves you $57 per month. Paying two points saves you $117. But then you also must come up with another $7000 at closing in order to pay 0.5% less interest. At this point, you might be thinking to yourself “is it worth paying this extra upfront cost?”.
Are Paying Points Worth It?
Short answer? It depends. If your credit score does not qualify you for the best interest rates, it may be worthwhile. Keep in mind, though, that it takes anywhere from five to ten years to recoup that extra cost. So, if you plan on only staying in your home for a few years before selling it, that money might be better spent towards your down payment or saved for your household emergency fund instead.
How Does This Affect My Taxes?
Generally, you can deduct the interest you pay on your mortgage throughout the year. Since discount points serve as prepaid interest, it also usually falls in the “tax-deductible” category. However, the IRS only allows this deduction on the first $750,000 borrowed for your mortgage. So, if you borrow $800,000 for your mortgage and pay for one point (1% or $80,000), only $75,000 of your discount points paid will be tax deductible.
Discuss your options with your mortgage broker before you decide whether or not discount points work to your advantage. You may also want to talk to your tax advisor as well.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Closing Costs Buyers Need to Be Aware Of
Your down payment is only one of the expenses you need to save up for when buying an Inland Empire home. You also need to save up for your closing costs. While these costs for a Riverside County home average about 5.35% of its sale price, the actual number may vary. These are the five main closing expenses that every buyer should keep in mind when saving up for their dream home.
Closing Costs Buyers Need to Be Aware Of
Lender Fees
Lender fees encompass a wide variety of fees associated with the processing, approval, and funding of your home loan. They include a loan origination fee, underwriting fee, and processing fee, among others. They may also include any discount points you pay to decrease your interest rate.
Escrow Fees
Next up on your list of closing costs are your escrow fees. The escrow company holds all money involved in the real estate transaction. At closing, they determine who is owed what and distribute the money accordingly. In California, both the buyer and seller typically split the escrow fees evenly between each other.
Appraisal Fee
Lenders will not approve a mortgage loan for more than what a property is worth. Therefore, they require that an appraisal be performed. As the buyer, you must pay for the appraisal.
HOA Fees
It is almost impossible to find an Inland Empire home that is not located in a homeowners association (HOA). They do exist…but they are rare. Therefore, another closing cost you may find yourself paying is the transfer of HOA fees from the previous owner’s name to yours. Plus, you may end up paying pro-rated HOA fees as well as a capital improvement fee.
Inspections
While not technically a “closing cost”, a smart home buyer should never pass up getting inspections done on their home. In fact, depending on what the initial home inspection finds, and the condition of your home, you may end up paying for several specialized inspections in addition to your initial home inspection. For example, you may want a roof inspection done as well as a more thorough HVAC inspection. And if your home includes a swimming pool, you may want to hire a company specializing in that arena as well. Remember, the problems that any of these inspectors uncover before your final closing may end up saving you thousands of dollars down the road. So conduct as many inspections as you must to feel confident in your home purchase.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Smart Home Features Today’s Buyers Want
For the past couple of years, sellers ruled the Inland Empire real estate market. While areas like Riverside, Redlands, Rancho Cucamonga, and Yorba Linda still favor the seller to varying degrees, most of the Inland Empire has seen a shift to a more balanced market. That means that sellers may need to make some changes to keep up. One area that has only gained in popularity over the years? Smart home technology. If you want to sell your home quickly, you might want to focus on incorporating these smart home features.
Smart Home Features Today’s Buyers Want
Smart Thermostats
One of the easiest, most cost-effective, and most popular features buyers like to see is a smart thermostat. Consumer Reports named models from Ecobee, Google Nest, and Honeywell as their top picks for smart thermostats. These devices learn your family’s regular habits and adjust to your heating and cooling needs automatically. They may also be controlled directly from your smartphone.
Smart Security System
Home security has come a long way. Many of these systems can be set up without any professional assistance whatsoever. Systems from Vivint, ADT, Simplisafe, and Ring rank high on PC Mag’s list. Several systems allow you to store video clips for a monthly fee as well.
Smart Lighting
Speaking of security, another one of the features becoming more and more popular is smart lighting. Again, you can control this system from your smartphone. This adds another level of security by making would-be thieves think that your home remains occupied even while you sun yourself on a beach somewhere far away. Add them to both the inside and outside of your home for extra security. CNET placed the Wyze bulb at the top of their list. Several other consumer websites agree that Wyze provides a good entry point into the smart lighting arena.
Smart Locks
Yet another one of the smart home features buyers look for are smart locks. They also work well with a doorbell camera for another added level of security. These come in keypads as well as biometric options. PC Mag rated the Ultraloq U-Bolt Pro as their top choice overall. But they also provide a breakdown for several others depending on your budget and personal taste.
These are just a few of the smart home features today’s buyer likes to see. So, if you want to sell your Inland Empire home faster, you might want to invest in at least a few of them.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How Interest Rates Affect Home Buyers
Last week, the real estate market was set abuzz by an almost 0.5% decline in the 30-year fixed-rate mortgage (FRM) interest rate. It dropped from a high of 7.08% to 6.61% in just one week. Why? Reports began to surface that inflation may have already peaked back in June. However, several Fed members tried to keep expectations in check. After all, one month of positive economic news does not a trend make. They even suggested that more prime rate increases should be expected in the near future. If you wish to buy an Inland Empire home anytime soon, you need to understand how interest rates affect you.
How Interest Rates Affect Home Buyers
Redfin conducted a survey that found just how much of an impact higher interest rates hit home buyers’ budgets. They found that home buyers could purchase a $517,000 home at 3% with a $2500 monthly budget for their mortgage. But when that rate rose to 6%, that same $2500 budget only allowed them to pay $400,000 for a home. With the current 6.61% rate, that sale price comes down even more. With an average sale price for a Riverside, CA home coming in at $577,000 last month, Inland Empire home buyers continue to feel the pinch.
How to Get Yourself in the Best Financial Position to Buy a Home
You cannot control interest rates. However, you do have some control over your finances. If rates go up again (and they might), you may need to increase your budget to accommodate your mortgage payment. That means getting your credit in tip-top shape. That way, you qualify for the best rates. It also means paying down as much debt as possible and coming up with a larger down payment. It also may mean looking outside of your dream neighborhood. And the old real estate advice of buying the worst house in the best neighborhood still rings true. Talk to your lender well before you start looking for your new Inland Empire home. They can provide you with an excellent roadmap of where to concentrate your financial efforts to prepare yourself for homeownership based on your current situation.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Home Selling Tips for a Changing Market
Like much of the rest of the country, the Riverside real estate market really flourished over the last couple of years. We saw double-digit increases in home prices. Unfortunately for sellers, the market has cooled off a bit over the past few months. Multiple offers and same-day-as-listed sales appear to be thing of the past. Even so, anyone who bought their Inland Empire home pre-pandemic may still own a nice chunk of equity in their properties. So, putting your home on the market is still a profitable enterprise. Here are a few home-selling tips that you might want to consider as our market changes from the seller’s favor to a more balanced market (tipping toward the buyer’s favor).
Home Selling Tips for a Changing Market
Buy Down Buyer’s Interest Rate
Interest rates rose above 7% for the first time in over 20 years. It looks like they may even climb higher. This may restrict home buyers’ budgets. As the seller, you may consider offering to pay down the buyer’s interest rate to make it a little more affordable for them to buy your home. This can either be done through a credit or by paying points at closing. The amount each point costs varies per lender. But it usually costs 1% of the total mortgage. Each point typically lowers the interest rate by 0.25%. On a $500,000 home, a point could cost you $5000. However, that is a small price to pay to get your home sold more quickly.
Price Reduction
One of the most important things any seller should focus on is setting an appropriate price when initially listing your property. That is especially true when home selling in today’s transitioning market. But if you find your house sitting on the market for a couple of weeks with no buyer interest, you might want to consider reducing your price. To spark renewed interest in your listing, there are two trains of thought. First, make a statement with a 5% drop. This may be enough for spur interest from multiple buyers. Or perform a “micro drop” (1% every couple of weeks or so). Some buyers look for recent price changes because this may indicate that the seller is more eager to negotiate with them. Talk to your real estate agent to determine which option works best for your property.
Sweeten the Pot
With everyone feeling the crimp in their budgets nowadays, anything you can do to lessen a buyer’s costs once they move in may help motivate them to seal the deal. For example, offer to replace your worn-out roof or almost out-of-date HVAC system before closing. At the very least, offer a credit at closing equal to the cost of replacement. Ask your agent to find out if the buyer was interested in specific artwork, furniture, or other items that you would be willing to part with. Sometimes, even throwing in your riding lawnmower might be enough to make a buyer sign a contract with you.
Pay for a Home Warranty
Finally, offer to pay for a home warranty. Gas. Groceries. Utilities. The cost of everything has gone up recently. Bring peace of mind for your buyer (and a sales contract) to the table with a home warranty. Forbes says that a mid-tier home warranty in California costs about $540 a year (or $45 per month). You (the seller) pay for the first year and then the new buyer can opt to pay for it after that or just let it expire. It is completely transferrable to the new owner upon closing.
These are just a few home-selling tips that may help you secure a sale during this changing market. When you are ready to list your property, contact me. I’d love to discuss how we can turn a “for sale” sign into “sold”.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
An Amateur’s Guide to Taking the Best Listing Photos
They say that a picture’s worth a thousand words. Well, 97% of people use the internet at some point during their search for a house. Therefore, you need to make sure that your listing photos really show off the best aspects of your Inland Empire home. Now, some real estate agents include professional photos as part of their services. But if they do not and a professional photographer is not in your budget, you may want to keep these tips in mind when taking your own listing photos.
How to Take the Best Listing Photos
Clear Out the Clutter
Always clean and stage your property before taking any photos. Every bit of dirt, dust, and clutter shows up in photographs. Make sure to stash away any signs of pets (dishes, food, litter box, etc.). Store toys in toy boxes or containers and put them neatly away in the garage or closet. Clear off the countertops completely in the kitchen and bathrooms. Keep holiday decorations out of the picture until after you finish taking your listing photos. Scrub those windows until they are absolutely spotless.
Plan Your Pics
Taste varies from person to person. But most buyers like to focus on a few specific areas when searching for a home. So, take at least two wide photos of the front of the property. Include one or two wide-angle photos in each of the primary bedrooms, kitchen, and livingroom. Also, include a good shot of the primary bathroom. Then, make sure to include a shot of any other well-organized features you wish to include, such as a walk-in closet or a nicely-sized pantry.
Wide-Angle is the Best Angle
Inside. Outside. It does not matter. Use a wide-angle lens when taking photos of your home. This allows you to capture the entirety of your curb appeal in one shot. Plus, it helps make rooms appear larger and allows for a better focus on the space. This is especially helpful in smaller, harder-to-access spaces.
Use a Tripod
You do not have to spend a ton of money on a tripod in order to make a huge difference in the quality of your photos. Tripods reduce the chances of blurry, out-of-focus pics, especially when using the long exposure function on your camera. Plus, it helps create consistency in your photos by using the same exact height in each room. This tends to be more pleasing to the eye.
Pay Attention to the Lighting
Natural light is great. That is one of the reasons you want your windows to be super clean. But some areas need more help to make your listing photos pop. So, make sure each room includes a good light source located outside of the camera’s eye to illuminate each area properly.
When in doubt, talk to your REALTOR®. They may have tips and tricks to help you capture the perfect shot for each important area of your Inland Empire home.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How Principal-Only Payments Work for Homeowners
Congratulations on buying an Inland Empire home. Now that you’ve settled in, let’s talk terms. When you signed your mortgage loan papers, your lender provided you with a breakdown of your monthly payment. It includes your principal and interest. At the beginning of your loan, most of your payment goes towards your interest with little going towards your principal. But many lenders allow you to make extra payments that help you pay down your principal faster. These are called “principal-only payments” and will save you tens of thousands of dollars in interest over the life of your loan.
Principal-Only Payments
As the name suggests, these payments get directly applied to your principal (the amount of the loan you took out). You still need to make your regular monthly payment. For principal-only payments, contact your lender first. They usually want you to make a completely separate payment that you designate to be applied only to your principal. Sometimes, if you do not make this distinction, your extra payment may just be applied to the next month’s payment (which goes to the principal and interest instead of just the principal). That defeats the whole purpose of making that extra payment.
How Does This Help?
When you take out a mortgage loan, it starts up the amortization process. This determines how much of each payment gets applied to the principal and how much goes to interest. The interest applied is determined by your principal. So, if you reduce your principal, you reduce the amount of interest applied. Plus, reducing your principal ahead of schedule also gets your loan paid off faster. Additionally, it helps increase your equity.
Weighing the Pros and Cons
Saving tons of money in interest. Paying off your Inland Empire home faster. Getting to use that money to pay off other debts or invest it. All of that sounds fantastic, right? It is! But you need to know the possible downsides of principal-only payments as well.
Some lenders charge a significant pre-payment penalty. Also, some lenders charge a fee to process extra payments. Check your paperwork or ask your lender about this before making any extra payments. Finally, that money you set aside for paying down your mortgage loan cannot be used for anything else…like paying off other debt right now. Instead, you must wait until later to have the extra cash to pay off your current debt. Weigh these pros and cons carefully before you decide to make any additional payments. You do not want to put yourself in a worse financial situation because of it.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Kitchen Updates for the Budget-Conscious Home Seller
We are smack dab in the middle of the holiday season right now. Fortunately, you can still decorate (with a bit of restraint) even when you try to sell your home during the holidays. However, you need to let your home shine through those decorations. Overwhelmingly, today’s buyers put an updated kitchen and bathrooms at the top of their list. So, before you list your property, consider making some of these kitchen updates that won’t break the bank.
Kitchen Updates for the Budget-Conscious Home Seller
Stash the Stuff
Clear counters make them (and your kitchen in general) look much larger. It also gives the impression that your kitchen includes tons of storage. Remove items from your cabinets that you do not use on a regular basis. Pack them away. Then, neatly place your blender, toaster, spices, etc. inside the cabinets. This allows easy access when you need them but clears the counters for when buyers come looking.
Keep Counters Clean
Another one of the “kitchen updates” that actually cost you nothing to perform. Seems like a no-brainer, right? But you might be surprised how many sellers forget this simple step. Buyers like to run their hands over surfaces. You don’t want sticky, stain-filled counters to be the impression they are left with.
Easy Island Solution
Extra prep space in a kitchen always impresses. But, adding a permanent kitchen island typically costs between $3000 and $5000. For the budget-conscious home seller and for those with smaller kitchens, add a butcher-block counter on wheels. This allows the homeowner to wheel it out when they need it and then tuck it away when they are done.
Add Light
No one likes a dark room, especially in the kitchen. And if your kitchen includes those old fluorescent lights popular in the 80s, it is definitely time for an update. Replace those with nice pendant lighting over an island. Or add flush-mounted or recessed lighting in their place. Under cabinet lights also add extra lighting directly where you need it, on your countertop workspace.
Update the Appliances
Today’s home buyers also like to see energy-efficient appliances. That includes the refrigerator, stove, and dishwasher. If your appliances belong in a museum, you need to replace them. Fortunately, many companies offer great sales at this time of year. So, you may even score yourself a discount for these kitchen updates.
Fix the Flooring
Old linoleum. Broken tiles. Torn vinyl. Our kitchens see a lot of traffic. Because of that, our floors take a beating. But you do not need to spend an arm and a leg to make your kitchen floors look great. Check out options at your local big box store. While installation can oftentimes be done by a homeowner, pay a little extra for the pros if you do not feel up to the task. You want your floors to look their best.
Add Some Green to Get More Green
Finally, add a few plants here and there for a nice finishing touch. A window herb garden provides wonderful smells, adding another subconscious layer of “buy me” to your decor.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
First-Time Homebuyer Guide: When You Find “The One”
For the past couple of weeks, I’ve been trying to make the Inland Empire home-buying process a little easier for first-timers by providing you with a guide of sorts to help ease the stress this so often creates. First, we talked about what to do before you start looking at homes. Then, we talked about the actual search itself. Now, in this final post for my First-Time Homebuyer Guide series, let’s discuss what happens when you find a home you love.
First-Time Homebuyer Guide: When You Find “The One”
Time to Make an Offer
While we rarely see bidding wars anymore, you still need to create a solid offer to present to a seller. Talk to your real estate agent. Find out what they believe would be considered a strong offer. While it is easy to get excited when you find a home you absolutely love, never offer more than you are comfortable with. Make sure to include your pre-approval or pre-underwriting letter (if not paying cash). Highlight the fact that you do not have to sell a home before you can purchase a new one. Sellers like to hear that. Plus, it provides some flexibility on timing that puts you ahead of many other buyers.
Schedule Your Home Inspection
Technically, a home inspection is not required in the State of California. However, even with a newly constructed home, problems may lurk below the surface. Therefore, real estate professionals strongly encourage you to hire a professional to perform your home inspection. They may find something you never noticed during your initial walk-through of the home. Keep in mind that the inspection rarely comes up with absolutely no issues…even on a new build. Fortunately, most problems are very fixable.
Time for Your Home Appraisal
When you borrow money to pay for your home, your lender requires that a home appraisal be conducted. If the appraised value comes in under the agreed-upon sale price, it may hold up your sale (or cancel it altogether). At that point, you (the first-time homebuyer) must make a decision. Either come up with more money out of pocket to make up the difference, try to talk the seller down in price, or walk away from the deal.
Closing Time
Finally, the last step in my First-Time Homebuyer Guide: closing time. Your agent will schedule a time to meet to sign the paperwork (usually at the title company). Bring your photo ID, a cashier’s check or certified check for money due at closing (closing costs, down payment, etc), and any other paperwork required. Your real estate agent should let you know ahead of time what you need to bring. Once you sign all the closing paperwork, you officially receive the keys to your new home. Just remember that the home does not officially become yours until the paperwork gets filed at the recorder’s office. This may take an extra business day to complete. Congratulations! You are now a homeowner!
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
