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Important Questions to Ask Before You Buy a Home
You saved up money for your down payment and closing costs. Then, you found an agent you love and trust. After searching and searching, you finally found the Southern California home of your dreams. But before you put in an offer to buy a home, you might want to ask your real estate agent a few important questions first.
Important Questions to Ask Before You Buy a Home
Is This a Home YOU Would Buy?
Sometimes, you just need to ask a blunt question like this to get an honest response. If your REALTOR® sings its praises, then yay! But, if they respond with concerns, it might do you well to heed their warnings. The decision ultimately lies on your shoulders. However, input from a professional can make this decision easier.
What Contingencies Should I Ask For?
Typically when you buy a home, it is normal to ask for some contingencies. These clauses set conditions on an offer in order to complete a sale. When you include contingencies and they are not met, you (the buyer) can legally walk away with your earnest money in hand. For example, you may need to sell your current property before you can buy a new one (home sale contingency). Or you want to make sure the house appraises for the sale price (appraisal contingency). Lenders will not approve a loan for more than a property is worth at the time of the sale.
Another smart contingency to ask for is a home inspection contingency. Your inspector may end up finding issues that you did not see on your initial walkthrough. In turn, you might go back and negotiate for the repairs (or their costs). Or, if you feel the issues are insurmountable for you, you may choose to walk away from the deal. Finally, a mortgage contingency means that if the bank does not approve your loan, you are not responsible for buying the new home in question. As you can imagine, sellers are not too keen on this possibility. Reduce the chances of this happening by obtaining pre-approval or pre-underwriting status before you start looking for a new Southern California home.
When is the Next HOA/Condo Assessment Due?
California has almost 50,000 HOAs in the entire state. Almost one-quarter of all California homeowners live in an HOA community. That includes condos. So, you run a good chance of buying a home that is part of an HOA. Every so often, the HOA runs an assessment to determine if they need to collect additional fees from homeowners for things like community improvements, repairs, etc. These are one-time payments required by homeowners that go above and beyond their regular monthly fees. It helps to know when the last assessment was done. If it has been a while, you may be in for another one soon.
Do You Have Any Recommendations for…?
Finally, unless you personally know someone in the area, your REALTOR® may be able to recommend a home inspector, a handyman for both the little things and the big things, a landscaper, a real estate attorney, etc. It never hurts to ask.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
For Sale by Owner Explained
DIY has become quite an industry in the last several years. TV shows like “Fixer Upper”, “Rehab Addict”, and “This Old House” make you feel like you can tackle just about any renovation project. And a simple search on YouTube brings up videos on everything from how to clean out your dryer vent to how to replace a toilet. Couple that with the rising cost of just about everything and it seems only natural that you might want to consider selling your home yourself. In fact, 10% of homes sold in the US in 2021 were sold by their owners, not licensed REALTORS®. But have you ever considered what actually goes into a “for sale by owner” transaction (commonly known as FSBO)? Let me break it down for you before you decide to DIY your home sale.
For Sale by Owner Explained
Pros of FSBO
First of all, when you sell your Southern California home yourself, you do not pay any commissions. The seller pays the commissions for a home sale. That can amount to 5% to 6% of the sale price. While half of that usually goes to the buyer’s agent, the seller’s agent receives thousands of dollars for their services as well. Another plus for FSBO is that you take total control over the sale, including how to market it, paying for photographers/videographers, when buyers see your property, fielding offers, and negotiating the final deal. That sounds like a lot of work, right? Well, that’s because it is. And that brings us to the “cons”.
Cons of FSBO
Like I said before it’s a lot of work to sell a home…even for seasoned real estate veterans. Also, FSBOs tend to take longer to sell than agent-represented properties. A licensed REALTOR® has access to the MLS. This allows your property to be seen by thousands of other agents across the country. More eyeballs on your property usually translate to more bodies through your door. More bodies through your door mean a higher likelihood of finding a buyer quicker. Real estate negotiations can be tricky when you lack experience in the field. Finally, how do you know where to set your list price? Ask for too little and you run the risk of losing out on some profits. Ask for too much and you may end up sitting on the market for much longer than necessary. A licensed agent knows the market and can help you run comps in the area to set a realistic listing price that will bring buyers to your door.
Carefully weigh the pros and cons of a “for sale by owner” scenario. There are several factors you need to consider before making a decision. If you decide to hire a professional, contact me. I’m always happy to help.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
How an Escalation Clause May Win Over a Home Seller
Since 2020, the real estate market went crazy. We saw prices and demand spike to levels not seen in a very long time. Homes sold well over asking in less than a day on the market. Higher interest rates, inflation, and rising prices have tempered that feeding frenzy a bit. However, while those crazy times may have passed, sellers sometimes still receive multiple offers for their homes…especially in highly desirable neighborhoods. In that case, a buyer’s secret weapon may be an escalation clause. What’s that and when/how should you include it in your offer?
How an Escalation Clause May Win Over a Home Seller
What is an Escalation Clause?
As a potential home buyer, you offer a specific amount for a home. An escalation clause (aka “escalator”) says that you also offer to increase your price in certain increments up to a set limit. For example, let’s say the list price is $400,000. You offer $400,000 but then include an escalator of $5000 over the highest offered price up to $425,000. So, if the seller receives another offer at $415,000, your offer bumps up to $420,000.
When Should a Home Buyer Include It?
If you find yourself in a bidding war with other buyers, you might want to include an escalation clause as part of your offer. This especially rings true if you really believe this to be the home for you. First, it keeps you competitive with other buyers. Second, it keeps you levelheaded enough not to go above what you budget for the home. It’s very easy to get caught up in the “competition” of wanting to be the winning bid. An escalator automatically includes a limit. Third, it shows the seller how serious you are about buying the home.
On the downside, though, if you end up being the only offer on the table, an escalation clause puts all your cards on the table. It shows the seller how high you are willing to go to buy the house. Therefore, they may end up countering your initial offer with the escalated price. Then, you end up paying more for the home.
Talk over your options with your Southern California REALTOR® before deciding on what to offer the seller. They know the market. They can help you determine when an escalation clause is necessary and when you can go without one.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
What Home Buyers Want Most in 2023
Virtual staging company Stuccco.com researched what today’s home buyers wanted to see most of all when looking for a new property. Yes, buyers like smart-home features and updated kitchens. But you might be surprised by what tied for first place: a laundry room and exterior lighting. If you plan on selling your Inland Empire this year, it may help you to focus some of your pre-listing efforts on these two areas.
What Home Buyers Want Most in 2023
Laundry Room
I remember when we used to go to the garage to do our laundry. But that won’t work for today’s home buyers. And only enough space for the washer and dryer behind bi-fold doors is not enough. They want a dedicated laundry room inside the house. If your house already has one of these, great. You still might want to spruce it up a little to make it more attractive to potential buyers. Add a fresh coat of paint. Include shelves and/or cabinets for storage. Save space by installing a full-size stackable washer and dryer. (Score extra points by making them high-efficiency models.) Finally, add a place to fold and iron clothing.
Exterior Lighting
Of all the things you thought about when getting your house ready to sell, the exterior lighting may not have been one of them. But, it tied with the laundry room for what today’s home buyers look for most (at 87%). Replace old fixtures with newer ones. Install motion-sensor security lights above the garage and in the backyard. You might already have installed smart lightbulbs inside of your home. Don’t forget to do so outside. The Spruce identified Phillips Hue White Outdoor lights as their top choice for outdoor lighting. However, there are plenty of lights to choose from. Just make sure they are bright enough to illuminate the perimeter of your home. Landscape lighting also brings an added dimension of style. You can even find solar-powered ones for a more energy-efficient and cost-effective solution.
As always, when you are ready to list your home to sell, contact me. I’m always ready to answer any questions you may have.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
Outdoor Home Staging: What Not to Do
You want to sell your Southern California home. So, you perform the repairs and updates necessary to make it marketable. Another part of the home selling process includes staging. Why? Because studies show that 85% of staged homes sold for up to 23% of the list price. They also sold faster than unstaged ones. While some people set their focus on the inside, never forget about your outside home staging.
Outdoor Home Staging: What Not to Do
Don’t Ignore Your Exterior
First of all, get rid of dead plants. Pull the weeds. But do not leave empty pots laying around. Instead, fill them with flowers or greenery. Add some drought-tolerant plants, as well. Trim overgrown shrubbery and keep the lawn mowed to 1″ to 2″ tall. Also, store lawn care implements neatly in either the garage or an outdoor shed. Finally, place trash bins on the side of the house, behind your fencing.
Don’t Forget to Add Furniture
Here in Southern California, we enjoy great weather for most of the year. Buyers want to see the living space expand into outside areas. One outdoor home staging tip that entices buyers is to add outdoor furniture. Outdoor kitchens are very popular and will increase your home value. But they can get expensive. Even something simple like adding a small table with a few chairs and an umbrella shows potential buyers possible entertainment ideas. Add colorful placemats, a nice potted plant, and some outdoor tableware to complete the look.
Don’t Leave Clutter
I always tell my clients to declutter their Inland Empire homes before listing them. This makes rooms look larger and allows buyers to picture themselves (and their things) in the space. The same goes for outside home staging. Toys (both for kids and pets) need to be stored out of sight. Either repaint or remove rusted furniture. Replace stained furniture pads and pillows with newer ones.
Don’t Forget to Clean
Power wash your driveway and walkways. Scrub tabletops and counters. Trim back grass and shrubbery surrounding your walkways. You want buyers to easily find your front door and avoid tripping hazards to get there.
Don’t Ignore Exterior Paint and Driveway Maintenance
If buyers see peeling paint or a cracked driveway, they quickly worry about what else has not been taken care of in the home. Also, make sure your decking is in good condition. Make sure all of these fixes are finished before you take listing photos.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
What is a Mortgage Origination Fee?
Forget about location, location, location. What about the fees, fees, fees?! When you buy a Southern California home, you receive a Closing Disclosure form. This document lists all of the details of your purchase, including the type of loan you used, the terms of your loan (length as well as interest rate), any discount points paid, your down payment, closing costs due, and all of the fees associated with your loan. This includes a mortgage origination fee. You might be thinking to yourself, “what is that?!” Well, let me explain it to you.
What is a Mortgage Origination Fee?
Mortgage Origination Fee 101
Basically, a lender charges this fee to process your mortgage loan. Most lenders charge this fee. However, not all of them do. This is one of the reasons it behooves the buyer to shop around for lenders before they settle on which one to use. The lenders that do charge this fee may impose this either as an upfront fee or include this with other expenses that incur interest. Those end up costing you more over the life of the loan. So, you need to be aware of how exactly the lender chooses to charge you.
How Much Do You Pay for This Fee?
Like most fees, these vary from lender to lender. However, buyers should expect to pay between 0.5 and 1% of the total amount borrowed. For example, if you pay $750,000 for a home and put 10% down, you might expect to pay between $3,375 and $6750 for your mortgage origination fee. But this fee is negotiable. So, don’t hesitate to ask about lowering your fee…or eliminating it altogether.
Review Your Loan Estimate
By law, a lender must provide a borrower with a loan estimate within three days of receiving a borrower’s loan application. Make sure you look it over thoroughly. Pay special attention to Section A to find out what your origination fee will be. Other fees you may find include underwriting, admin, appraisal review, and processing (among others). If you have any questions about these fees, talk to your lender. You may be able to reduce some of them simply by asking. That could save you a nice chunk of change. So, it’s definitely worth a try.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
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
