Price It Right the First Time

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The Internet has empowered all buyers with information and home buyers are no exception. The amount of information available to public includes details on size, condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.

When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth.

If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price. It is a natural reaction from people, personally or professionally, to assume that something must be wrong with a home that doesn’t sell in a reasonable time for that market.

The seller is entitled to maximize the equity in their home and pricing it properly in the beginning is the best way to achieve that. Overpricing can reduce buyers activity because they assume that the best homes are purchased soon after they are offered for sale and if one has been on the market longer than normal, there must be a problem with it. Similarly, sales associates may come to the same conclusion.

After buyers have seen a few homes in a certain price range, they begin to expect similar amenities in each home they look at. If a home is overpriced, it will not compare favorably with the other homes that are being viewed. Sometimes, the buyer may even think that another home could be a bargain because it offers much more for the same price as the overpriced listing.

Shopping the market means looking at the homes that meet a buyers’ wants and needs and selecting the one that gives them the most, whether it is in price or amenities. The overpriced listing doesn’t compete well, and it extends the market time. There is a documented study that shows that the longer a home stays on the market, the lower the price will be.

It is essential that a seller receive factual information to price their home to compete favorably in the current market. Some of the obstacles can include:

  • Failure to objectively compare the current and sold homes with theirs
  • Neighbors who mislead the seller as to how much they got for their home
  • Fear of making a mistake and thinking they can start high and always lower the price
  • Loss of perspective because the seller is emotionally involved
  • Expecting the home to sell for more than fair market value because they need the money
  • Agents who will accept a listing at any price in order to tie up the property until the seller realizes the price is too high

What a seller paid for the home or the cost to rebuild it today do not affect market value. Neither does the amount spent by sellers on certain improvements that were made for their own pleasure and enjoyment.

It is unrealistic to expect a buyer to pay more than market value for a home. The seller sets the price of a home but the buyer determines the value. If the home is priced properly in the beginning, it is more likely to sell for a higher price, in a shorter period and with less problems.

What every homeowner should know about their property insurance

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Insurance is required on a home by the mortgage company, but homeowners rely on it for peace of mind also. Unfortunately, people may not take the time to investigate their policy and what it covers until they need to file a claim, which could be too late.

While it may not seem like the best use of your time, an in-depth visit with your property insurance agent once a year could be valuable to you if you have losses and could increase your peace of mind.

The following are some questions you can ask your insurance agent:

  • What is the insured value of the policy and the replacement cost of your home? Insured value is the amount that would be paid for a total loss but replacing the home could cost more than that amount.
  • What is the deductible? Higher deductibles on the first amount of the loss are one way to lower the cost of the premium. It may sound good when you’re having to pay for the policy but feel very different at the time you file a claim.
  • What does the policy cover? Typical policies cover fire, theft, vandalism, and storms. Homeowner policies bundle personal belongings and some liability coverage. They can differ not only from company to company but from policy to policy. Be clear on what is covered.
  • What does it not cover? … Some perils are usually not covered by policies like a hurricane, flooding, power outage, rising water, and earthquake. It can be confusing because a broken pipe might be covered but rising water from the backed-up sewer is not.
  • What is your anniversary date? … Policies are usually written for one year and should be renewed before they expire. Mortgage companies like to renew them a month before they expire so there will not be a lapse in coverage. That is why borrowers with escrow accounts for taxes and insurance must fund them accordingly.
  • Is it paid by an escrow account with the mortgage? New homeowners should verify that their house payment includes 1/12th the annual taxes and insurance so they will not be surprised with a large bill when they become due.
  • Does your policy include liability coverage? … This covers claims made by third parties of bodily or property damage done by the insured. It could be as simple as a guest slips and injures themselves in your home. It is important to know the limits of liability and consider larger amounts especially if you have a higher net worth or risk profile.
  • What is an umbrella policy? – This is a separate policy that increases the liability coverage above the limits of the homeowner’s policy. It can be a relatively inexpensive coverage.
  • Are personal belongings included? … Most homeowners policies include an amount toward personal belongings like furniture, rugs, housewares, and clothes. It may be expressed as a percentage of the overall policy. The question is: will it cover your belongings or does it need to be increased?
  • What is the process to file a claim? … Most claims require proof of purchase or a current inventory of the home. Since most people don’t have receipts except for big-ticket items at best, the inventory becomes important. Videos, still pictures or a detailed list can help to satisfy this need. Click here for a digital Home Inventory.
  • Are there additional living expenses included? … Some policies include temporary living expenses if you are displaced from your home.
  • Does a home office require additional insurance? … Many homeowners work from their home and have special equipment that may not be covered normally. If you “meet and greet” people at home, ask about additional liability coverage.
  • Ask about floater policies on big-ticket items? … Some items like jewelry, furs or collectibles need to be scheduled or covered on a separate policy.

Insurance is meant to give you peace of mind against possible losses that could financially harm you without it. Because insurance is very specific about what it does and does not cover, it is important that you have a good understanding of your policy. A policy is a contract between you and the insurance company, and it deserves due consideration.

Thinking about buying or selling? Let me help make your home buying or sell a success or if you’re ready to begin the buying or selling process, give me a call today!

Stella Bonin
Associate Broker

Coldwell Banker Residential Brokerage (Arizona)
Burke Real Estate Consultants (California)

http://www.CallStellaBonin.com (AZ MLS Search)

Follow me on Twitter: @StellaBRealtor

Join my Facebook International Real Estate Group: https://www.facebook.com/groups/irealestate/

https://www.facebook.com/myrealestateservices/

I am licensed in California and Arizona and we have a great team to serve you with members around the world.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

What disclosure forms and reports are necessary when selling a home?

Sellers, through various forms and reports, disclose any conditions known to them which might negatively affect the value and desirability of the property for a prospective buyer.

Mandated property disclosures include:

The Transfer Disclosure Statement (TDS): As the seller of a one-to-four unit residential property, you are required to furnish prospective buyers with a TDS setting forth the physical conditions and any other value-affecting facts regarding the property, its improvements, and its surrounding area. The TDS is handed to prospective buyers as soon as practicable (ASAP) — when negotiations to purchase your property commence.

The Natural Hazard Disclosure (NHD) Statement: The NHD statement is a mandated form prepared by a third-party NHD expert used by you and your agent to disclose publically available natural hazard information such as potential flooding, fire hazards and earthquake fault zones.

The Lead-Based Paint (LBP) Disclosure: The federal LBP disclosure form is required for all pre-1978 residential construction. LBP disclosure rules set forth the requirements for you to disclose any known LBP hazards and the buyer’s right to investigate them.

You may obtain additional reports to best disclose your property’s conditions to a prospective buyer. These reports, which your seller’s agent will advise you about, provide additional information to include in the TDS:

The Home Inspection Report (HIR): A home inspector conducts a physical examination of your property to determine the condition of its components and systems. On completion of their examination, they hand you an HIR on their observations and findings.

In turn, you use the HIR to prepare your TDS, and then attach it to the TDS to avoid claims of misrepresentation against you and your agent.

A Structural Pest Control (SPC) report: A report disclosing the existence of termites or structural damage due to a termite or fungal infestation.
Whether you or the buyer will pay for corrective actions and repairs outlined in the SPC report is negotiated between you and the buyer in the purchase agreement.

A neighborhood security disclosure: A form disclosing the known security conditions or criminal activity affecting the property and its surrounding area.
Further, your duty to disclose your knowledge about adverse conditions cannot be waived by your placing an “as-is” disclaimer in the purchase agreement. Property cannot be sold “as is” without disclosure.

Note: You and your agent are both liable for monetary losses in pricing or costs incurred
by the buyer due to the failure to disclose defects you or your agent knew or should have known existed when you entered into the purchase agreement.

Let me help make your home sale a success. If you’re ready to begin the selling process, give me a call today!

Stella Bonin
Associate Broker

480.797.4884 / 619.250.6214

stella.bonin@yahoo.com

Coldwell Banker Residential Brokerage (Arizona)
Burke Real Estate Consultants (California)

http://www.CallStellaBonin.com (AZ MLS Search)

Follow me on Twitter: @StellaBRealtor

Join my Facebook International Real Estate Group: https://www.facebook.com/groups/irealestate/

https://www.facebook.com/myrealestateservices/

I am licensed in California and Arizona and we have a great team to serve you with members around the world.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

 

Why do I need to do my own inspection?

As a prospective buyer, you obtain and review a home inspection report (HIR) prepared by an independent, neutral home inspector.

The home inspection is a non-invasive examination of the mechanical, electrical and plumbing systems of the dwelling, as well as the components of the structure, such as the roof, ceiling, walls, floors, and foundations.

An HIR from a competent and certified inspector assures you the property is free of defects, except those listed on their inspection report. The inspector is paid a fee for their services on delivery of the HIR.

The HIR:

• identifies each system and component of the structure inspected;

• describes any material defects the home inspector finds or suspects in the condition of
the structure and its systems and components;

• makes recommendations about the conditions observed; and

• suggests any further evaluation of other experts need to undertake to clarify the home
inspector’s suspicions.

Material defects are conditions which affect the property: 

market value;

desirability as a dwelling;

habitability; and

safety from injury in its use as a dwelling.

Defects are material when they adversely affect the price a prudent and reasonably well-informed buyer offers to pay for the property when entering into a purchase agreement.

In contrast to the assurances of an HIR, the mandated transfer disclosure statement (TDS) you receive from the seller on which they disclose property information — a disclosure limited to the seller’s and their agent’s knowledge — may not be relied on as
fact unless the TDS has an HIR attached to it and the seller and their agent obtained information from it to fill it out.

However, when the seller’s agent does not hand you an HIR before you submit a purchase agreement offer, it is imperative you condition your offer on either the seller or you obtaining an HIR to confirm the property’s condition as disclosed on the TDS.

The cost of the HIR is the premium paid to eliminate the risk of later discovery of undisclosed defects in the improvements.

Your agent will review with you the advantages of selecting an experienced, insured and preferably certified home inspector. When the seller’s agent has not obtained an HIR to hand you along with the TDS, it is your agent you turn to for expertise regarding
the home inspection process and selection of a qualified home inspector.

Stella Bonin
Associate Broker

480.797.4884 / 619.250.6214

stella.bonin@yahoo.com

Coldwell Banker Residential Brokerage (Arizona)
Burke Real Estate Consultants (California)

http://www.CallStellaBonin.com (AZ MLS Search)

Follow me on Twitter: @StellaBRealtor

Join my Facebook International Real Estate Group: https://www.facebook.com/groups/irealestate/

https://www.facebook.com/myrealestateservices/

I am licensed in California and Arizona and we have a great team to serve you with members around the world.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

How can I prepare for the final walk-through?

The final walk-through of the property you are set to purchase is your last chance to confirm that all agreed-to repairs are completed and that nothing has materially changed since your home inspection.

The final walk-through happens shortly before closing. It will likely take you and your
agent an hour or less to complete. Also, be sure to bring a copy of your home inspection
and final purchase agreement so you know which specific repairs to review.

Here is a list of what to look for when doing the final walk-through:

  1.  Ensure agreed-to repairs have been made.

  2.  Check that all appliances and fixtures to be included in the home purchase
    are present.

  3.  Ensure no trash or unwanted items left by the seller are present.
  4.  Check for the presence of mold or standing water in all the rooms, including
    the bathrooms, the kitchen, near the water heater and the laundry room.

  5.  Test all of the home’s systems, including the heater, air conditioner, appliances,
    garage door, and doorbell.

  6.  Check the outlets by bringing along your cellphone charger.

  7.  Walk around the exterior of the home to ensure the landscaping is intact and no
    exterior damage has occurred.

Finally, don’t hesitate to ask questions! I will be there at the final walk-through to provide answers and help you if issues arise.

Let me help make your home buying success or if you’re ready to begin the buying process, give me a call today!

Stella Bonin
Associate Broker

480.797.4884 / 619.250.6214

stella.bonin@yahoo.com

Coldwell Banker Residential Brokerage (Arizona)
Burke Real Estate Consultants (California)

http://www.CallStellaBonin.com (AZ MLS Search)

Follow me on Twitter: @StellaBRealtor

Join my Facebook International Real Estate Group: https://www.facebook.com/groups/irealestate/

https://www.facebook.com/myrealestateservices/

I am licensed in California and Arizona and we have a great team to serve you with members around the world.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

Want to be a Landlord?

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Real estate has consistently been one of the highest rated investments available to individuals. TV shows certainly make rentals look easy and you may even know someone who has made a lot of money with them. Possibly, the thought has crossed your mind that if they can do it, you can too.

Before you contract for your first investment, ask yourself some questions that could save you time and energy. Not all people have the time, the inclination or even the skill to manage property. Landlords need to be good business people who can maximize revenue and minimize expenses. If investors don’t have the skills and talent to handle some of the repairs, they at least need to know reputable and reasonable service professionals.

Another important element is to be familiar with the state and local landlord tenant laws. You’ll need to know what are allowable security deposits and where the money can be held. Knowing how long you have to return it to a tenant is important and what to do if you plan to keep all or part of it for damages done. It is important to know about the eviction process and how fair housing applies.

If you decide that you may not be cut out for being a landlord, it won’t eliminate investing in rentals. It does mean that you will need to engage a property management company who is capable of dealing with all aspects of the process. The peace of mind and convenience will cost you a fee, usually a percentage of the rent collected. They can handle finding a tenant, doing the background check and writing the lease but there will be an additional fee for that service.

Even though your expenses will be higher with a property manager, with their experience, they should be able to help you lease the property for more money than you can get and will probably have service providers to do the work needed for less.

Occasionally, rental property requires out of pocket expenses for repairs and improvements which is like making another capital contribution. As equity builds in a rental property due to appreciation and principal reduction, the owner does have the option to take cash out of the investment either to pay additional expenses or to use any way the owner wants. Pulling equity out of a rental doesn’t even trigger a taxable event.

Single-family homes and up to four-unit buildings offer an investor the opportunity to get a high loan-to-value mortgage at a fixed interest rate for 30 years on appreciating assets with tax advantages and reasonable control compared to other alternative investments.

Many investors like the fact that you can borrow to purchase a rental investment where many other investments require cash. The use of borrowed funds can create an advantage called leverage. Assume you paid cash for a $100,000 home that generated $7,000 income after the rent was collected and expenses were paid. Divide the value of the home into the income and it would earn 7%.

If you decided to put an $80,000 mortgage on it at 5% interest, the interest expense would be $4,000 leaving only $3,000 income. However, at that point, you’d only have $20,000 invested in the property. Divide the cash invested into the income and the rate of return would increase to 15%.

This is a simple example of leverage showing that borrowed funds can increase an investor’s yield on a property.

Rental property can be an excellent investment when it is treated like the business that it is. Knowledge of the investment will reduce the risk and enhance the opportunity to make a profit. Some investors consider their rental income as “mailbox money” because each month, they go to their mailbox and they have money being sent to them by their tenants. The benefits of rental property can easily outweigh risk involved.

Contact me for more information on rental properties and the option to be the landlord or to delegate it to a property manager.

Money You Saved for a Down Payment

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Occasionally, buyers who can qualify to purchase a home decide to “take a break” and wait to purchase a home. When the focus of buying a home is relaxed, other uses for the money that was going to be used for the home are considered.

Maybe they think how much fun it would be to have a Sea Doo or a motorcycle or a new car. It is amazing how many people would like to buy a home but either don’t have the down payment, the income or the good credit to make it possible.

Instead of spending the money, consider investing the money for two years until the time is right to buy a home. Let’s look at putting the money in a certificate of deposit that earns 2% or in the stock market that could average a 5% return.

Assume you were purchasing a $295,000 home on a FHA loan with 3.5% down payment. The $10,325 would grow to $10,742 in the CD which isn’t a big increase but at least it is safe and secure, and it will be available when you’re ready.

If the same amount were invested in a safe stock or mutual fund that earned 5%, it would grow to $11,383 in the same two-year period. It earns more but there is more risk involved.

Your Best Investment
CD Stock Market Home
Cash to Invest $10,325 $10,325 $10,325
Wealth Position $10,742 $11,383 $38,871
Profit Taxed as Ordinary Income Long-term capital gains §121 exclusion applies

Alternatively, if you invest the same amount in purchasing a home that appreciates at 3% a year, the equity would be $38,871 two years from now. The dramatic increase is due to leverage, being able to control a large asset with a small amount of cash. The appreciation is based on the purchase price not the down payment.

Another factor is that there is principal reduction with each payment that is made.

Make your own projections with Your Best Investment.

Downsizing is an Alternative

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It is estimated that over 15% of the population in the U.S. are over 65 years of age. With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.

Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their “big” home like they did before. In other situations, their lifestyle might have changed, and the house just doesn’t “fit” anymore.

The benefits of a smaller home can include the following:

  • Easier to maintain
  • Lower utilities
  • Lower property taxes
  • Lower insurance
  • More convenient location
  • Single level
  • Possibly more energy efficient
  • Possibly lower maintenance

Like any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes. Are they going to stay in the same area? What type of property would suit their needs for the future?

The tax-free exclusion allows a homeowner to take up to $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers. Part or all of this could be used to generate income for retirement. Other uses for the equity could include paying off other debt, taking the trip of a lifetime or making a special gift.

There will be expenses involved in selling a home as well as the purchase of a new home. These will lower the amount of net proceeds you’ll have to invest in the new home.

Homeowners should consult their tax professionals to see how this applies to their situation. Please contact me at (480) 797-4884 or Stella.Bonin if you have any questions about what your home is worth or how long it might take to sell it. Other things that could be of value are our Homeowners Tax Guide or Sellers Guide.