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The Lowdown on the Seller’s Disclosure
When buying a Southern California home, you deal with a lot of paperwork. But selling a home comes with paperwork, too. One very important form you need to fill out will be the Seller’s Disclosure form. This form is required as part of California Civil Code 1102 within seven days of an accepted purchase agreement. Sellers need to understand how this disclosure works and the importance of total transparency on this document in the sale process.
The Lowdown on the Seller’s Disclosure
What is a Seller’s Disclosure?
Also known as a property disclosure statement, a home disclosure, a real estate disclosure form, or (in California) the Transfer Disclosure Statement (or TDS), the seller’s disclosure is an important document in the home sale process. On this form, sellers provide answers to questions about the house’s condition, including current or former issues that the seller knows about. Typically these forms focus on roofing, basement and/or crawl spaces, plumbing, water/sewage, heating and cooling systems, drainage, electrical, HOA rules, and structural integrity.
What Does It Do?
This not only protects the buyer but also protects the seller. How? Well, let’s say that a few months after you sell your Southern California home, the buyer comes back and claims that they shelled out thousands of dollars for an issue they were never made aware of before they bought the home. If you disclosed it (as you should) before you sold it, this may protect you from paying for those issues. Also, in California, you must disclose whether your home resides in a natural hazard zone (subject to flash flooding, earthquakes, or wildfires). Even so, there is no way for sellers to know everything about a home, especially if the issues arose before they bought the home. And they are not legally held accountable for issues they were unaware of.
Honesty is Key
Real estate agents strongly encourage sellers to answer all questions with 100% honesty on the disclosure form. If you lie on the form, you may be held liable if a buyer proves you were aware of the problem and did not disclose it. That could cost you dearly. Also, half-truths could hurt you. For example, your pipes burst and caused a flood under your kitchen sink. From this flood, mold grew. You fixed the broken pipe, got rid of the mold, and replaced all of the drywall and cabinetry. Since it is no longer an issue, why worry the buyer by letting them know about it on the form? Well, if a leak happens again and the buyer learns from the plumber that there is evidence of it happening before, you might find yourself paying for their repairs…and then some. So, just answer the questions on the seller’s disclosure form as honestly as you can.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
New Homeowners: What to Do Before You Settle In
After searching high and low, you found “the one”. Congratulations! You’re a new homeowner. Once escrow closes, you get to move into your new home. Ah, the excitement. But before you do that, you might want to take a few moments to complete some very important tasks first.
New Homeowners: What to Do Before You Settle In
Change Those Locks!
First and foremost, change the locks. Yes, you received a set of keys at closing. However, you don’t know how many other sets of keys are out there (if any). That leaves you vulnerable to would-be thieves. For your general safety and peace of mind, replace all of the locks to your exterior doors. It might also be a great opportunity to change your front door to a keyless entry for a high-tech security option.
Walk Around
Before a stick of furniture gets moved in is the best time to take one good hard look at your new Southern California home. Walk around both inside and out. Make sure you know where to find the water shutoff, locate the water heater, and find your electrical box. Make sure others in the household know where to locate all of these as well. The more people who know, the better off you are in case of an emergency.
Change the Batteries
You hope the old homeowners kept up with battery changes on the smoke detectors and carbon monoxide detectors. However, not all homeowners are vigilant about those things. So, take this opportunity to refresh those batteries. Again, good for your family’s safety as well as your own peace of mind.
Get to Cleaning
As a new homeowner, treat yourself to a nice deep cleaning from a professional service. They’ll go through your entire home, top to bottom, to make sure everything is sparkling clean when you move in. I understand, though, that you just spent a ton of money buying your new home. So, paying a professional may be out of your budget right now. In that case, rent a steam cleaner from your local grocery or big box home improvement store. Then, get to cleaning those carpets and other upholstery. Wipe down all the cabinets and drawers. Scrub the windows and window sills. Just go through each room to make sure all the cobwebs and dust bunnies exit your home post haste.
Say “Hi” to the Neighbors
Finally, go out and introduce yourself to your new neighbors. Too often, we isolate ourselves from the rest of the world. Getting to know your neighbors allows you to create a sense of community right away. This will prove invaluable as you make this house your home. Again, congratulations on becoming a new homeowner.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Home Showings: Protecting Your Home and Yourself
It is inevitable. At some point during your home sale journey, strangers will step foot inside. Rarely do home buyers buy a property sight unseen. They want to see it. They want to touch it. Ultimately, they want to picture themselves living there. And you want that for them as well. But you worry about safety. And with the number of reported positive COVID cases on the rise in Riverside County recently, that may also include your health. When it comes to home showings, what steps should you take to protect your home and yourself?
Home Showings: Protecting Your Home and Yourself
Avoid Open Houses
First of all, some real estate agents like them. Others do not see any value in them. They may encourage a potential buyer to ask their own agent to set up a private showing. Ultimately, they bring many people into your home. More traffic may increase the possibility of someone stealing from you. After all, your agent cannot be everywhere at once. Talk to your REALTOR® about whether or not they believe an open house is necessary.
Clean Before, Clean After
Even with private home showings only, you still need to be cautious. Sanitize all surfaces, including door knobs, light switches, faucets, and countertops before a showing. Then go through the house and repeat these steps afterward.
Limit Contact
The fewer points of contact, the lower the chance of spreading germs. Open up all the blinds in your home. Make sure views out of your window remain unobstructed from window treatments. Turn on the light in every single room and closet. Leave all interior doors open.
Secure Your Valuables
This includes jewelry and watches as well as financial documents, passports, and other important paperwork. Take all prescriptions and other medicines out of the medicine cabinet in your bathrooms. Even regular mail may be enough for a sly criminal to grab for use later (like for identity theft). If you do not own a locking safe, you might want to put these all in a box and keep them in your car during the showing.
Nanny Cam Reporting for Duty!
Finally, make smart technology your friend. Install “nanny cams” inconspicuously throughout your home. Today’s cameras can easily be hidden on shelves and inside everyday items such as alarm clocks, smoke detectors, lamps, picture frames, and even electrical outlets (depending on how covert you wish to operate). Shop around to see what is available for your budget.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Money-Saving Tips for Your Closing Costs
Your down payment is only part of the financial picture when buying a Southern California home. You also need to pay closing costs. Some of these costs are fixed. Others are not. A savvy homebuyer may want to consider some of these money-saving tips to lower what they can.
Money-Saving Tips for Your Closing Costs
Which Costs are Negotiable?
First, it helps to know which costs are fixed and which are negotiable. Appraisal fees, title fees, recording fees, and credit reporting fees all fall under the “non-negotiable” banner. However, your bank might remain open to negotiation on your origination fees, application fees, commissions, and your mortgage lock fee. And with the possibility for negotiation also comes the possibility to save money. But how?
Start Shopping
Fees vary from lender to lender. So, start with talking to several different lenders first. Yes, that may mean filling out more than one application. But the time you spend doing so may save you hundreds and even thousands of dollars in the long run.
Loan Estimates
Once you submit an application, the lender must legally supply you with an official loan estimate. These documents provide the estimated costs for every part of your loan, including your mortgage payment, interest rate, taxes, insurance, and closing costs. Compare all of the estimates you receive to see which ones offer the best terms and lowest fees before you decide which one to use.
Make sure to pay special attention to page two of your loan estimate. Why? There is a section called “Services You Can Shop For”. Use this checklist to do your shopping.
Ask the Seller to Pay
Depending on the state of the market at the time you buy your Southern California home, you might want to ask the seller to pay all or some of your closing costs. A motivated seller may do whatever it takes to get the deal done. That may very well extend to helping you with your closing costs.
Choose a Late-Month Closing Date
Finally, while not an actual negotiable “fee” per se, the date of the month you close can save you money as well. Some things like HOA fees, taxes, and prepaid interest get prorated. So, the later in the month you close, the lower these costs at closing. If you close on the 1st, you must pay an entire month of these fees. However, if you close on the 25th, you only pay for five or six days. That may save you a significant chunk of change.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Home Improvement Projects with the Best ROI
With the rising cost of just about everything, homeowners look to make smarter choices in improving their homes, especially if they plan on selling it soon. While installing a pool sounds like a great way to increase your home’s value, it actually offers one of the lowest ROIs of any project. Truth be told, most home improvement projects cost more than they actually receive in return. However, the following projects give you a 100+% return on your investment.
Home Improvement Projects with the Best ROI
#4 – New Entry Door
Coming in at #4 for ROI, experts suggest replacing your entry door with a new, stronger steel door. According to the 2023 Cost vs. Value Report conducted by Zonda Media, the average cost to install a brand new, quality steel door runs about $2214. But upon sale, homeowners can expect to receive $2235. That provides a 101% return on investment.
#3 – Update Siding
If your Southern California home actually has siding on it that looks worse for wear, you definitely need to replace it. But for the best ROI, replace that typical siding with manufactured stone veneer. The average cost of replacement runs about $10,925. However, it raises the value of your property when you sell it to $11,177. That is over 102% ROI.
#2 – Replace the Garage Door
This may come as a surprise to some, but it shouldn’t. After all, the garage door takes up a large portion of a home’s facade. The simple act of replacing this one thing creates a massive change in your home’s appearance as well as its curb appeal. In fact, this was one of the areas I suggest that homeowners focus on when they want to make any upgrades. On average, garage door replacement costs just over $4300. However, its value rises to $4418 when you sell your home. That means an almost 103% return on your investment.
#1 – Updating Your HVAC System to Electric
Home buyers continually look to decrease their carbon footprint and increase their home’s energy efficiency. Converting a natural gas-fueled HVAC system to an electrical one is becoming more and more in demand. But changing the HVAC to an electric heat pump comes at a cost. While #1 in ROI (at 103.5% on average), this also tends to be the most expensive. On average, it costs homeowners $17,747 to change over from fossil-fueled heating and air to an electric system. In turn, this increases your value to $18,366 during the sale of your home.
Some of these home improvement projects seem a little more budget-friendly than others. But they all recoup their costs and then some when you go to sell your Southern California home. So they are well worth the investment. When you are ready to put your property on the market, please make sure to contact me.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How Freddie Mac Works
Last week, I explained how Fannie Mae operated from a home buyer’s perspective. This week, I figured it would be appropriate to discuss Fannie Mae’s counterpart: Freddie Mac. While similar in some aspects, they differ from each other as well. Let’s explore this, shall we?
How Freddie Mac Works
Similarities
Congress created both of these organizations (Fannie Mae in the late 1930s and Freddie Mac in 1970). Neither one provides funding directly to home buyers. Instead, they help keep the market stable by purchasing loans on the secondary market. This frees up money for banks to lend to more home buyers.
With the housing bubble bursting in 2008, both entities received money from the government to help stabilize a rapidly devolving economy before a major crash could occur. The Federal Housing Finance Agency (FHFA) became the conservator for both organizations. Within one year of FHFA’s oversight, Freddie Mac, Fannie Mae, and the FHLB were responsible for 90% of all new mortgages on the market, more than double the amount prior to 2008.
Then came COVID. Many people and businesses struggled in the early days of COVID-19. Again, this threatened the real estate market. People couldn’t keep up with their mortgages. These struggles brought about the CARES Act. This protected homeowners with Fannie Mae or Freddie Mac-backed loans from foreclosure for a set period of time (with restrictions).
Differences
While similar in many respects, these two entities also differ. Fannie Mae buys its mortgages from bigger and more commercial banks. Freddie Mac purchases them from smaller banks. While the former was created to help make housing more affordable and provide more access to funding for home buyers, the latter came about due to a desire to expand the secondary mortgage market.
While Fannie Mae offers assistance to home buyers via its HomeReady loan program, Freddie Mac offers Home Possible. Home Possible limits household income to 80% of the local median income. However, it also allows you to fund some of your down payment as part of your mortgage loan through its Affordable Seconds program where allowed. Both programs benefit home buyers whether this is their first home or not. Discuss the pros and cons of both with your lender before deciding which one to pursue.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Fannie Mae Explained
When buying a Southern California home, most people talk about interest rates, how much to save for a down payment, and loan pre-approval. But what happens with your home loan after you purchase your property? Some companies purchase loans from mortgage lenders on what is known as the secondary market. Two of these companies are Fannie Mae and Freddie Mac. This week, I’ll be discussing how the former operates.
Fannie Mae Explained
A Little Background
During the Great Depression, everyone struggled. Homeowners. Non-homeowners. Businesses. Banks. As part of FDR’s New Deal, Congress founded the Federal National Mortgage Association (aka “Fannie Mae”) in 1938. Instead of providing direct funding to borrowers, this organization bought existing mortgage loans from lenders. In turn, this freed up money for banks to offer up mortgage loans to more borrowers. Currently, Freddie Mac and Fannie Mae represent the two largest operators in the secondary mortgage market.
What Does Fannie Mae Do?
Fannie Mae takes these loans that it buys from lenders and turns some of them into mortgage-backed securities. These MBS are then sold to investors. Additionally, they provide counseling and financial programs that help low to moderate-income buyers purchase their homes. Their Home Ready program (geared primarily towards first-time home buyers) backs loans with as little as 3% down. Their 97% LTV program (aka “Conventional 97”) also backs loans with 3% down for home buyers with a slightly higher income level than those in the Home Ready program. If you currently own a home with considerable equity, their ReFi Now program helps you use that equity to lower your monthly housing costs even with a debt-to-income ratio as high as 65%. Finally, their HFA Preferred program operates similarly to an FHA. However, they request as little as 3% down, charge a lower mortgage insurance cost per month, and allow buyers to cancel their mortgage insurance once certain requirements are met among other things.
Talk to your lender about what Fannie Mae can do for you.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
ADUs Explained
Over the past few years, homeowners looked for extra ways to add living space to their properties without breaking the bank (and creating a huge remodel headache). Enter the Accessory Dwelling Unit. ADUs have seen a huge rise in popularity along the West Coast in recent years, especially in California.
Accessory Dwelling Units Explained
What are ADUs?
In-law quarters. She-shed. Studio. Guest house. An accessory dwelling unit is a completely separate housing unit from the main residence that sits on the same lot. These dwelling units range anywhere from a converted garage to residential space above the garage to a building independent from the main house.
Junior ADUs
These tend to run smaller than a traditional accessory dwelling unit. They must reside within the existing walls of the home. They cannot exceed 500 square feet of living space and must include an exterior door. Typically, this may be a bedroom converted into a mother-in-law suite with its own kitchenette and doorway outside.
California’s Rules and Regulations
Riverside County allows homeowners to add one accessory dwelling unit to their property. However, it cannot be placed in the front yard. Separate ADUs may house up to 1200 square feet of living space. However, attached units (such as a converted garage or space above the garage) cannot exceed 1200 square feet or more than half the main home’s living space (whichever number is smaller). Also, two-story units are allowed but cannot exceed 35 feet high.
ADUs require a permit to build. Homeowners must submit plans for their proposed unit as part of the permit application process. These units may be connected to current utilities on the property or they can have their own separate utility connection. This comes in handy if you plan on renting out the ADU.
Pros
Adding an accessory dwelling unit comes with quite a few positives. For example, they can create an extra income stream for homeowners. Unlike renting out a room in your house, a detached ADU provides an extra feeling of safety by allowing a renter to come and go without entering your residence. They also add value to your property. Finally, they increase your usable living space. For people who work from home, they provide a quiet place to perform their duties without distractions from others nearby.
Cons
On the flip side, they also come with some negatives. For example, they require a monetary investment. Plus, the additional space requires additional maintenance…which means additional monthly costs. If you rent out your unit, your renter knows exactly where to find you if there is a problem. And that could be at any time of the day or night. Also, they take up space in your yard that you will no longer be able to use for anything else. That’s a long-term commitment.
Before you build your own accessory dwelling unit, consider the pros and cons. Get quotes from several contractors. If you know your way around a hammer and nails, you might want to think about purchasing a kit. Make sure you do your due diligence with the City to find out permit requirements and costs as well. Good luck!
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Priced Out of the Market?
First-time home buyers in Southern California find themselves in an unenviable position. Higher interest rates and lower inventory levels put prices out of reach for some buyers. In other words, they find themselves priced out of the market. You may have heard that term before. But what does it actually mean and what should you do if you find yourself in that position?
Priced Out of the Market
What Does That Mean?
Basically, being priced out of the market means that prices are so high that you cannot afford to purchase even an entry-level home. That may turn these potential home buyers into more permanent renters. Or they may decide to move on to another city or even to another state where their dollar stretches further.
What Can You Do?
Save, save, and save some more. Unfortunately, there is no way around that. First, take an honest look at your regular expenses. Second, create a budget. Figure out where you can cut out excess expenditures. Next, start paying down as much debt as possible. That may mean keeping your car for longer than you thought instead of buying a new one. Even smaller changes in your everyday lifestyle add up. Like bringing leftovers for lunch. Or switching from that huge cable package to one or two streaming services. Make movie night at home a regular ritual instead of a night out at the movie theater. Search for free recipes online and then get the kids involved in making dinner using that recipe. The best way to not become “house poor” when you do eventually buy your house is to make sure that your debt load is as low as possible.
Smarter Savings
Along with lowering your debt load, you may want to continue setting aside a certain amount of money each month. Even if you decide to concentrate only on paying down debt for now, take the money you already saved up and make a change or two. Seek out a high-yield savings account instead. Or ask your bank for a better interest rate on your current savings account. If you find another bank willing to offer you a stronger interest rate, open an account there. Make your money work smarter for you.
“Wants” vs “Needs”
Set a realistic vision of what to look for in your new Southern California home. Brand new construction may be out of the question with your budget. Consider an older, slightly smaller home instead. If you are willing to put in some sweat equity, look at purchasing a fixer-upper. Turning the worst house in the neighborhood into the best house brings about the highest equity. You may even need to look outside of your favorite neighborhood in order to find a home in your price range.
Find the Right Agent
A great REALTOR® can take you a long way in buying a home. Interview several agents before deciding on “the one”. Don’t be afraid to ask lots of questions either. For example, how many homes have they helped buyers find? How long have they worked in the area? What was the best experience they had while doing so? What was the worst and how did they overcome those issues? This helps you determine whether or not they offer a good “fit” for you. After all, this will probably be the biggest financial investment you make in your life. You need someone that you feel comfortable with handling this important moment for you.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How to Handle a Lowball Offer
Unfortunately, the days of expecting multiple offers above the list price sit firmly in the rearview mirror for most Inland Empire home sellers. Even so, it feels pretty exciting to get an offer for your property. However, that excitement may quickly change to dread when you realize that you just received a lowball offer. But before you turn that buyer down flat, find out the best way to handle this situation. You may still turn it into a sale you can be happy with after all.
How to Handle a Lowball Offer
Keep Your Emotions in Check
First of all, it’s understandable that you may feel insulted about the low offer price. After all, you put your blood, sweat, and tears into making this house a home. Nevertheless, you should not respond in anger or disgust. The buyer may have received bad advice or simply come from another area where submitting an extremely low offer on homes tends to be the norm.
Counter That Offer
Instead of getting angry, consider that lowball offer as more of a starting point for negotiations. Just because the offer came in much lower than you expected does not mean that you must accept it. Counter their offer with one of your own.
Counteroffer Options
Your REALTOR® should be able to help you draft a good counteroffer. Sometimes, dropping your price by 3-5% may be enough to make a deal happen. Other times, you might receive a counteroffer to your counteroffer. At that time, you might want to consider thinking about other things to sweeten the pot. For example, change the timeframe of escrow. Change it from 30 days to 45 days or vice versa depending on the buyer’s needs. Or accept their lower counteroffer but only if they agree to decrease the number of contingencies they put in place. Also, asking for a higher earnest money deposit or requiring a higher down payment helps insure that the buyer is serious about this sale as well. Talk over your options with your real estate agent first.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
