Facebook
X
Pinterest
Copy Link
Guide to Buying a Home to Age in Place
The following is provided courtesy of the wonderful people at Caring.com.
If asked about major life changes, most people would probably think of their younger days. While some older citizens are settled since their decades of work and raising children are far behind them, others make significant lifestyle decisions in their golden years, including where they will live if their current home is no longer suitable.
The home they purchased many years earlier might have cumbersome stairs that they struggle to climb, a yard that’s difficult to maintain, or more rooms than necessary. Its location may not be suitable either because it’s too noisy and busy or too far from anywhere.
During this time, some seniors seriously consider aging in place. This term refers to older people who choose to live independently in their own homes as they age, rather than entering a residential care community, such as assisted living. A University of Michigan National Poll on Healthy Aging conducted in 2022 asked a sample of seniors nationwide about their preferences regarding aging in place. This study found that 88% of 50-80-year-olds think it’s important to remain in their homes for as long as they safely can.
This guide considers several aspects of aging in place, including the best location to age in place, what seniors should look for in a new home, and which professionals can make relocating easier. It also covers several options for buying a home and finding ways to pay for it.
Where should you age in place? What should you consider about the environment surrounding where you choose to live? What should you look for in the home you choose? How should your personal preferences factor into your choice? Who can help you find the right home to age in place? How are you going to pay for that home? Find the answers to these questions and more by reading Caring.com’s “A Guide to Buying a Home to Age-in-Place“.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Common Contingencies Home Buyers Ask For
I previously talked about what to negotiate when buying a home. These included things like furniture, a home warranty, repairs, and timing. It is not unheard of for buyers to make requests for certain circumstances to be met in order to complete a sale. These are called “contingencies”. Here are a few common contingencies that home buyers ask for as part of the sale.
Common Contingencies Home Buyers Ask For
What is a Contingency
First, it may be helpful to explain what a contingency actually is. In a real estate transaction, a contingency is a clause put into a sales agreement that requires a specific action. If these conditions are not met, the sale may fall through. For the buyer, this may also mean receiving their earnest money back. But only if the specific contingency is actually listed in the agreement and okayed by both parties.
Home Sale Contingency
First up? The home sale contingency. For many buyers to qualify for a mortgage on a new Inland Empire home, they must first sell their current home. Otherwise, they may end up dealing with two mortgages…at least for a bit. But in order to do that, they must qualify for two mortgages. A home sale contingency states that the buyer has a certain amount of time to sell their current home. If they don’t, then the seller puts the property back on the market.
Appraisal Contingency
An appraisal contingency provides a safeguard for the buyer in case the appraisal comes in below the agreed sale price. Why is this important? Because lenders will not approve a mortgage loan for more than the home’s appraised value. If that happens, the buyer has three options: come up with more money down, try to negotiate a lower sale price, or walk away.
Home Inspection Contingency
Next…the home inspection contingency. First, California buyers are not required by law to conduct an official inspection of the property before purchasing a property. However, it makes good sense to do so. The home inspection contingency allows a buyer to back out of a sale if it shows any major issues. But keep in mind that minor issues may show up even on newly constructed homes. And instead of walking away, you might want to negotiate either the completion of repairs or reducing the price of the property to compensate for the cost of repairs/replacement instead.
Financing Contingency
Finally, the financing contingency. This states a specific time period that the buyer must obtain financing for the home’s purchase. In today’s market, many sellers won’t even entertain an offer without a pre-approval letter from a reputable lender. So make sure you get your ducks in a row financially speaking before you start looking at homes.
All of these common contingencies help a buyer keep their earnest money deposit in case a sale falls through. Talk to your Southern California REALTOR® about which (if any) of these contingencies you need to put in place when buying a home. It’s always better to be safe than sorry.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Debt-to-Income Ratio and the Home Buying Process
I’ve talked about pre-approval vs pre-underwriting. I also explained loan-to-value. But another term any home buyer who finances their mortgage needs to understand is debt-to-income. Why? Because it may mean the difference between loan approval and heartbreak.
Debt-to-Income Ratio
What is It?
In a nutshell, the debt-to-income ratio (DTI) is how much of your income is used to pay your debts. These debts include credit card payments, car loan/lease payments. student loan payments, child support, and mortgage or rent payments among other things. To determine your DTI, take the total of all of these payments and divide it by your monthly income before taxes. For example, let’s say that your payments total $2500. Your annual household income is $84,000. That works out to $7000 a month before taxes. A lower debt load looks much more attractive to lenders than a higher debt load. And if your DTI ratio goes above a certain percentage, lenders may decide that you are not a good credit risk.
What is a Good DTI?
The number varies from lender to lender. However, typically, lenders like to see a DTI of around 36%. However, some lenders go as high as 43%. Of that debt, no more than 28% should go toward your mortgage. In the example I gave above, $2500 falls just under 36% of your income. If your DTI gets too high, you run the risk of not being able to meet all of your financial obligations. Therefore, you run a higher possibility of defaulting on your loan.
What to Do Before You Apply for a Mortgage
Tackle your debt load. Pay down balances on all of your revolving credit accounts. Get your credit card balances under 30% of their limits. Why? Lenders also look at credit utilization. Maxed out on your credit cards? Lenders see this as fiscal irresponsibility or that your finances are stretched as far as they can possibly go. Neither one of these looks great to banks. Start lowering your debt-to-income ratio as soon as possible to present yourself in the best possible light when it comes time to apply for a mortgage loan.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Moving Tips for a Smooth Transition
According to Forbes, approximately 27 million people moved from one place to another in 2021 (the latest year they found statistics). That means roughly 73,973 people per day…or 51 people every minute. That’s a lot of moving. In the rush of moving into a new Inland Empire home, you might miss something. So, in addition to performing some of these priority tasks before you move into your new home, I created this list of helpful moving tips to help make your transition a little smoother.
Moving Tips for a Smooth Transition
Contact Internet and/or Cable Companies ASAP
With how much our lives depend on accessing “the web”, you really need to contact your local internet company as soon as possible. Their wait times can be extra long compared to other services, such as utilities, for example. And if you happen to work from home, you don’t want to be left in a bind after you move. Also, you may find the same situation with your local cable company. Therefore, it’s a good idea to contact these companies as soon as you have a move-in date so you can set up an appointment.
Make an “Open Now” Box
You started packing weeks ago. Good for you. But in an effort to get everything done, you might find yourself throwing things into boxes to just get it done. But then you end up scrambling to find the simple everyday things you need on moving day. For this reason, pack up an “open now” box. In it, include paper plates, napkins, paper towels, disposable utensils, plastic cups, toilet paper, extra chargers, a first aid kit, extra medication, pet food and medicine (if needed), water dish(es), a couple of changes of clothing per family member, bath towels, shampoo, soap, toiletries, blanket, and pillows. You also might want to include a few books, toys, coloring books, and card or board games to keep the kids (and yourself) entertained on that first night in your new home.
Vet the Movers
Moving companies help make the transition into a new home very easy. But it does come at a cost. Unfortunately, bad moving companies exist right along with good ones. Hence the need to vet the movers. What does that mean? Contact several different companies for quotes. Ask for references. Make sure they are insured. See if they show up on the Better Business Bureau or MovingScam.com. Another great resource to check their legitimacy is the American Moving & Storage Association’s website.
I hope these moving tips help make the transition to your new home a little easier. Good luck!
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Earnest Money and Its Role in the Home Buying Process
So, you decided to buy a Southern California home this year. You scrimped and saved in order to come up with a good down payment. After looking at several homes, you found one that you absolutely love and plan on making an offer. Once the seller accepts your offer, you enter escrow. What’s next after that? Your earnest money deposit. What is that and how does it factor into the home-buying process?
Earnest Money and the Home Buyer
What is It?
In a real estate transaction, a buyer will be asked to put down an earnest money deposit when entering escrow. Also known as a “good faith deposit”, this shows the seller just how serious you are about buying the home in question. This good faith deposit exists independently from your down payment. If you back out of the deal due to reasons outside of any contingencies in place, the seller keeps this money.
How Much is Enough?
But how much money should you expect to put down as an earnest money deposit? According to the Credit Union of Southern California, 1% to 3% of the sale price of the home is typical. For a $450,000 home, that means anywhere from $4500 to $13,500. This money gets deposited into an escrow account held by a third party for safekeeping throughout the escrow process.
What Happens to This Money After Closing?
Upon a successful close, the earnest money deposit usually ends up as part of the buyer’s down payment. If the buyer decides not to purchase the property, they may get their earnest money back as long as they have a contingency in place that covers the reason why they backed out. Some typical contingencies include a home sale contingency, a home inspection contingency, an appraisal contingency, and a financing contingency. But if a contingency is not in place, that money automatically defaults to the seller.
Before you decide on how much money you want to provide in good faith with your offer, make sure you really want the home. Sometimes, you may offer even less than 1% to show interest to a seller. Talk to your real estate agent before determining how much money is enough and to make sure you include contingencies that protect you and your money in case the sale falls through.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Can You Trust Those Online Value Estimators?
You want to sell your Southern California home. First, you make any necessary repairs and clear up the clutter. Then, you hire a great REALTOR®. (Hint: contact me.) One of the things your REALTOR® will discuss with you is pricing. You may be tempted to look at those online value estimators to help determine your list price. But wait. How much can you really trust the accuracy of them?
Can You Trust Those Online Value Estimators?
If you type “what is my home worth” into Google, you’ll come up with literally millions of results. Some of the most popular include Zillow, Trulia, Redfin, and Realtor.com. You’ll also come up with several different “values” for your home. These can vary by thousands of dollars. Why? First of all, it might help you to understand how these estimators work.
How Do Value Estimators Work?
Like just about everything else online, they work off an algorithm. Much like credit reporting agencies, the info they gather may vary depending on what algorithm they use. Typically, they pull data from a variety of sources (public records, online listings, user info, etc.). However, they tend to start with the premise that all properties are in the same condition. They do not factor in updated features, improvements, or even if the property is rundown. That’s where you need a pro.
More Accurate Comps
Online value estimators may provide a point from which to start determining your list price. But don’t let it be the end-all-be-all of pricing. Instead, talk to your REALTOR®. They know the area and understand current pricing trends. Also, you might want to consider obtaining an appraisal before you list. A buyer gets one as part of the loan process. But this also provides the seller with the most accurate up-to-date value of their property from the moment they list it. So, the $300 to $400 you spend on an appraisal can easily be recouped when you sell your property.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
What Does Loan-to-Value Mean?
That’s it. You’re tired of renting a home. You want to own one now. Even with interest rates at more than 6% right now, homeownership is within your grasp. I mean, even when interest rates hit double digits back in the 1980s and 1990s, people still bought houses. And today’s interest rates are nowhere near that right now. When you go through the home-buying process you hear terms like FHA, Fannie-Mae, FICO, and PMI. Another term lenders pay attention to is loan-to-value. You need to understand this term as well.
How Loan-to-Value Affects a Home Buyer
What Does It Mean?
First of all, it helps to know what loan-to-value (LTV) means. Basically, the LTV is the ratio of the balance of your mortgage loan to the property’s actual value. For example, your property is worth $500,000. The balance on your mortgage is $450,000. That gives you an LTV of 90%. But what does that mean to a home buyer?
Why Does a Lender Look at LTV?
Well, the lower your LTV, the better risk you appear to the lender. On the flip side, the higher your LTV, the riskier you look to a lender. Why? Because the more you are willing to invest in the property, the less likely you will be to walk away from it, leaving the lender holding the bag for the balance of your loan. However, things like a great credit score and a sizeable down payment increase your likelihood of loan approval as well at this point in time.
What is a Good LTV?
Ideally, your LTV ratio should be at least 80% if not lower. But that means putting at least 20% of the sale price down on the loan…and that’s before closing costs. Not everyone can afford that much of a down payment. Fortunately, many lenders offer programs that require a much lower down payment for approval. But, when you borrow more than 80% of the sale price, it will cost you. Lenders charge PMI (Private Mortgage Insurance) to cover them in case you default. It’s an additional fee to your principal and interest payments. You must pay this under your balance falls below 80% of the property’s value.
Before you sign your final paperwork, talk to your lender about the loan-to-value ratio. How can you make it better? What other factors should you work on to get a good interest rate? Feel free to ask your lender any questions that might come up before you sign on the dotted line.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Clutter-Free Kid Spaces That Help Sell Homes
Preparing your Southern California home to sell is only the first step. You must keep it “show ready” at all times while looking for a buyer. Your own bedroom may be relatively easy to keep clean. However, keeping up clutter-free kid spaces may pose a bigger problem. Here are a few tips to help you create and, even more importantly, maintain a home free of children’s clutter.
Clutter-Free Kid Spaces That Help Sell Homes
Minimize the “Stuff” to Maximize the Impression on Buyers
First of all, you need to go through all of the clutter in your house, not just the kids’ stuff. Throw out any broken items. Then, see what you or your children have outgrown (either size-wise or age-wise). These items may be donated. Include your children in the process. Explain to your kids that it might be time for that unused toy to bring joy to another child. This may help make paring down a little easier on them. Finally, store away out-of-season clothing, seldom-used toys, most of the books, and any other items that your kids rarely use right now.
Transforming Furniture
Toy boxes only hold so much. Here is where furniture that performs double duty comes in handy. Ottomans or benches with hidden storage compartments help you stash away smaller items in a hurry anywhere in your home. Add some pretty baskets with lids around your home (on a console, on a shelf, on the floor next to the couch) to hide extra toys and blankets.
Underbed or Overhead
Want to put that extra clutter out of sight? Store it in containers under the bed or stacked neatly in storage bins in the closet and/or garage. You may also stash extra clothing, linens, and other items in these bins. Just make sure they look neat and tidy to the eye when stored away.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How to Handle a Low Home Appraisal
You found the Southern California home of your dreams. So, you put in an offer. Happily, the seller accepted the offer. Now, you enter escrow. There’s nothing to do now but wait, right? Unfortunately, no…at least not if you plan on borrowing money to pay for your home. Lenders do not approve mortgage loans for more than the appraised value. But if your home appraisal comes in on the low side, that doesn’t necessarily mean that the sale is sunk. On the contrary! You have options.
How to Handle a Low Home Appraisal
Appeal
Your first option is to appeal the appraisal. This happens a lot in real estate. If your agent genuinely believes that the house is worth more, they could make a case for a higher appraisal. First, request a copy of the appraisal. Then, look for any errors on it. While it is not unheard of to appeal the appraisal, your chances of success may be low. Why? Because a third party completes the process using unbiased criteria. But it might be worth the effort. Talk to your Southern California REALTOR® to determine if this option is viable for your situation.
Get a Second Opinion
If you received a serious diagnosis from your doctor, you’d want to seek out a second opinion before beginning treatment, wouldn’t you? Well, while a low home appraisal may not be as serious as that, you should consider paying for a second appraisal. While the criteria for an appraisal may be unbiased, the experience of the appraiser may vary. And because of that, one appraiser may value the property differently than another appraiser.
Negotiate
Another option? Negotiate a lower sale price. After all, the seller will surely come up against the same issue with a future buyer. But, as you can imagine, this is not an option sellers are too keen to embrace.
Put Up More Cash
Yet another option is to put up more money. If you really want this home, you might want to dig even deeper into your savings to offset the difference between the appraised value and the sale price. This money increases your down payment. Then, the lender may be more open to approving your loan.
Walk Away
Finally, if the home appraisal comes in really low, your best option may be to simply walk away. However, make this your last resort. Consider trying any or all of the other options first. And always talk to your REALTOR® before deciding how to proceed when you receive a low appraisal.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Home Seller Tax Deductions
In case you didn’t know, tomorrow (April 18th) is the official deadline to file your taxes. Since the regular tax filing deadline (April 15th) fell on a Saturday this year and the next business day happens to be Emancipation Day in Washington DC, the IRS moved the deadline to the 18th. If you waited until the very last minute to file, you might be in luck. If you sold a Southern California home in 2022, we compiled a few home seller tax deductions to be aware of to help you maximize your return this year.
Home Seller Tax Deductions
Your Selling Expenses
It costs money to make money. That rings true with selling a Southern California home, too. Some costs shouldered by the seller include advertising fees, title fees, escrow fees, commissions, staging costs, and sale prep costs. Fortunately, you may be able to deduct some of these expenses on your income taxes. However, the home in question must have been your primary residence for at least two of the last five years in order to qualify. So, if you sold an investment property, this tax deduction does not apply.
Cost of Improvements/Repairs
Did you need to paint or update the flooring in order to appeal to today’s buyers? Were repairs necessary to make your property saleable? You may be able to write these off on your taxes as well. But they need to have been completed within 90 days of your closing date in order to be considered for a deduction. It pays to keep your receipts just in case.
Partially Paid Property Taxes & Mortgage Loan Interest
The IRS allows home sellers to write off any property taxes you paid on your Southern California home up until the closing date (up to $10,000). The same is true for any interest paid on your mortgage loan during that time as well. However, some caveats apply.
Capital Gains Exemption
While not a “deduction” per se, the capital gains exemption saves you thousands of dollars. When you sell your home for a profit, Uncle Sam considers that profit as “income”. Therefore, it is taxable. Fortunately, though, some if not all of that profit may actually be exempt from taxes. The first $250,000 of profit for single sellers and $500,000 of profit for married couples are considered exempt from taxes as of the date of this writing. So, if your and your spouse paid $300,000 for your Southern California home several years ago and sold it last year for $750,000, that $450,000 in profit goes to you free from taxes. If you are a single seller or married filing separately, you pay taxes on $200,000 of profit…not the full $450,000. Again, though, this must be your primary residence in which you lived for at least two of the last five years to qualify for the exemption. Also, this is where your home-selling expenses can reduce your capital gains and, in turn, your taxes due on them.
As always, talk these home seller tax deductions over with your tax preparer. Make sure to tell them about all of your expenses. Ask any questions that pop up in your mind, too. Good luck!
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
