The Offer: Walking You Through Every Step

I want to talk to all you folks who will be selling your house this Spring. It’s exciting isn’t it? Buying a house is great, but when you do that you’re paying money. When you sell, you’re making money. And maybe a lot of money. At least that’s the plan.

So let’s talk about what to do when you get one or maybe ten offers on your house.

It’s such a great moment, when your REALTOR calls and says “We have an offer”! Now, your first question will be “How much”? What price did the buyer come up with? And yes, that’s huge. It’s human nature to react that way. But, price isn’t everything. So you’re gonna want to sit down with your REALTOR and walk through the offer page-by-page. And if there are multiple offers on your house – well, first of all, well done. But in that case you might need a second pot of coffee. There will be a lot to talk about.

Now sure, even though price isn’t the only thing, it’s huge. So let’s start with price. Now if the price offered by one or more potential buyers is just sky high, more than you ever thought you would get. That’s pretty exciting but you might want to come down to earth. Because if those buyers are getting a mortgage, the house will still have to pass an appraisal. And if it appraises lower than that sky high offer, you’ll either have to reduce the price at that point or the buyer will have to come up with more cash or the whole deal just might end right there. So a nice, fat, realistic price is much better than one way up in the stratosphere. Now if it’s all cash, that’s completely different. If they offer an all cash deal at a widely high price, that’s awesome and good for you.

Next, you and your REALTOR will look at the terms. When does the buyer want to take possession? Does that work for you? How much earnest money is the buyer putting down? How many contingencies do they have? In other words, walk aways. Does the buyer seem committed or do they have a long list of things that might make them leave the deal all together. That’s why price is somewhat relative. You see, if one offer is really high but contains a half dozen ways the buyer can get out of the deal – that might not be as good as a slightly lower priced offer in which the buyer has fewer walk aways. You’re looking for the buyer that will go the distance all the way to closing.

And that brings us to one more really important issue. Can the buyer really afford to do the deal? Your REALTOR will help you there. A pre-approval letter should give you a pretty good idea of whether they have the horsepower to buy the house and make it to the closing table.

And finally, after you pick the best offer, you may need to make a counter offer. In fact, that happens most of the time. Very few offers are accepted as is or rejected as is. Most of them involve counter offers. And there might be several rounds. Just think of it this way, every time you do another round, you’re getting closing to a meeting of the minds. A ratified contract which will go all the way to the closing table.

Yep, getting an offer is a great moment. You feel like you did it. All the work you put into the house, all the showings, and all the open houses, all of that paid off because a buyer does want your house. But when you and your REALTOR go through every page of that offer and then make a counter offer that the buyer agrees to, well, that’s an even greater moment. Because the biggest transaction of your life is now in the final lap headed to the closing table. And that is awesome.

A Regrettable Emerging Trend in Real Estate

Bad guys. Guys that want to hack your smart home. Guys that want to cheat the closing company. Guys that want to steal your down payment. Guys that try to do all of that online.  You see, these days the bad guys never show their faces. They’re just at a computer somewhere trying to hack, cheat, and steal.

Now of course, online bad guys are nothing new. They’ve been around ever since the Internet was invented, but the unfortunate trend we’re seeing these days is that more and more of their online crime is being directed toward real estate. That’s why we are talking about it, because the more aware you are about what the bad guys are trying to do, the better protected you are against their criminal behavior.

So let’s talk about the bad guys, what they’re doing and how you can stop it before you’re affected. Let’s begin with hacking your smart home. Many of the really cool and really fun devices for our smart homes are apparently easy to hack. Hackers are targeting smart home devices to try and get into your network, and into your personal and financial data also. Two possible defenses here – use a special email address just for your smart home devices. So if they’re hacked the bad guys won’t have your primary email address. Also, you may want to have a separate network for your smart home devices. So if a criminal hacks into it they will not be in your main home network. They’ll be on a secondary network and they won’t be anywhere near your personal data.

Now the next thing the bad guys are doing is targeting the closing. We’ve heard that some title companies no longer accept certified checks, that’s right, certified checks. Because some people reportedly were photographing certified checks depositing them electronically into their bank account and then handing over that same check at closing. The solution, you wire the funds to the closing company. But that one requires a very careful approach. Because another bad guy real estate trend is that criminals are faking emails from your real estate agent, from the title company, or your lender. They’re telling buyers to wire their down payment to an account which turns out to be phony. They’ve stolen entire down payments. That money, it’s gone. This is grand theft real estate. Both the Department of Justice and the National Association of REALTORS have been getting the word out to make sure consumers know about it and to help them avoid being harmed by this cyber crime.

So here’s the best defense. Never rely on any email instructions to wire money. Never. If your agent or title company, or lender or anyone emails you with instructions on how to wire your down payment for the home you’re about to buy – delete it. Then call on the phone instead. Talk to your agent person to person. Talk to the title company person to person, or go to their office and meet with them face-to-face. Get the information on wiring your money directly from them. That way you can make the wire transfer with confidence.  But again, any instructions that come in an email, just delete it.

It’s unfortunate that we even have to mention fraud like this. But, fact is, it’s a trend in real estate. But, if enough people are aware of it and if enough people know how to stop it, then maybe stopping the bad guys before they do any harm will be the real trend of 2017.

 

What is Home Equity?

Home equity seems to be a very simple calculation—the total amount of mortgages owed subtracted from the current market value of a home. One side of the equation is well defined and it is found on the monthly mortgage statement, the loan balance, the other side is less obvious—the current market value of the property.

As a homeowner, your down payment purchases your initial equity and your monthly (or additional) principal payments increase your equity. In strong real estate markets and in-demand locations, equity can increase quite rapidly as the property value increases, but the inverse can also happen—too much available inventory and market down-cycles can lead to falling home values and a reduction in homeowner equity.

Creating Value is in Your Hands Maintaining the condition of a home is vitally important to retaining and increasing value. Homes are judged against their peers—how do they compare to similar homes in the neighborhood. Another way to retain value is to not over upgrade, since it is rare to ever recoup the money spent if you exceed neighborhood value. Keep up the landscaping and do the little things to add curb appeal.

Putting Home Equity to Work Home equity represents the largest single asset of millions of Americans, and because it represents so much of an individual’s net worth, it must be treated with respect. Home equity is not a liquid asset until a property is sold, or it is borrowed against.

How Much Equity can be accessed?

Since the financial institution is lending money and using a home as collateral, they will not lend 100% of equity. Most banks will allow a qualified homeowner to borrow approximately 80% of their equity.

 It’s Important to use Your Home Equity Wisely.

Because it is likely the biggest asset most people have, losing your home equity is hard to overcome. It must be used in prudent ways and the payments against the loan must be the loan payment is only acceptable for a short-term solution.

There are number of good reasons to use money from a home equity loan and some really bad ones.

    1. Invest in Your Home.

The best way to use the money is create more equity in the home. Among the very best returns on your investment (ROI) include kitchen and bathroom remodels, adding square footage or an extra bath, enhancing curb appeal and repairing/keeping the existing structure sound. Making prudent investments in your home is a wonderful win-win, you enjoy the upgrades and they can add value to the home.

  1. Invest in your Children’s Education.

Using your home equity to finance a child’s higher education may be the greatest pay off of all. Not only is the rate much lower than a student loan, it is an investment in the child’s future.

  1. Supplement Retirement Needs.

Older homeowners spent their working lives paying down their mortgage. At retirement, when monthly income is reduced, a home equity loan could pay for a dream vacation or an unexpected major expense.

  1. Augment the Impending Sale of a Home.

If you’re planning to sell soon, a home equity line of credit may be the best way to finance improvements, and you can pay it off entirely when you sell. Investing wisely on upgrades and repairs may even reap a profit on your investment.

 Some Not Very Wise Choices

On the flip side, adding luxury amenities like a swimming pool, hot spa, lavish landscaping, expensive appliances and exotic countertops and flooring rarely pay off.

Purchasing a car or boat or most any personal luxury items is a poor use of the funds, since these quickly depreciate in value.

Also stay away from using money on risk-heavy investments. Financing stock purchases, start-up businesses and paying routine bills is not smart. If one cannot afford to purchase those items with available funds, using equity from your home means they should not be in your budget.

Treat a home equity loan as an investment and not as extra cash when making financial decisions.

If your intended use of the money doesn’t pay you back in some way, it’s not the best use of your valuable equity.

 

We are Happy to Assist You if you would like an assessment of the market value of your home and the current equity you can access, give us a call for a comparative market analysis.

The Spring Market: Selling Your Home in the Spring of 2017

Okay, you might have heard that it’s a seller’s market out there. That as soon as the “For Sale” sign goes up on the lawn the house is under contract. And that’s true in many areas in San Antonio. But, the goal is maximum profit in the minimum time. Selling your house fast is good, but selling your house fast at a great price is even better.

So let’s talk about how to achieve that this Spring. Maximum profit in the minimum time.

First, talk with your REALTOR.  Take them on a tour of your place, I’m talking the inside and the outside. Let the REALTOR get a great look at all the rooms, the flooring, the paint, the windows, the walkways, the yard, everything. Now, be sure to point out any improvements you’ve made.  New kitchen, point it out. Wonderful landscaping, tell your REALTOR that and also tell them when the property is in full bloom. That can make a big difference to potential buyers, so you might want to discuss putting your house on the market while the flowers, bushes, and trees are at their peak. After all, first impressions count, especially when you’re trying to sell your home. You’ll have to put some time and effort into that curb appeal.

Now it’s possible your REALTOR will also recommend decluttering your house. Now you’re not alone, that happens a lot. You might need to move out some of the huge pieces of furniture you have and put them in storage. That’s a hassle but your place might look more spacious, airy, and inviting as a result.

Now, you’ve taken your REALTOR on the tour of the house. What’s next? Try to anticipate questions that most buyers will have. Here’s a big one – how much are the utilities? People are asking that all the time. So one great idea is to get out several months worth of gas, electric, and water bills. Copy them and have them for available for potential buyers to examine. They’ll really appreciate that. Another idea is if you have any photographs of your property in different seasons, it’s a great plan to print them out and have them on display so buyers can see how the place looks in different times of the year.

Okay, ready to put up that “For Sale” sign? Well, not quite. First you’ll have to discuss some key issues with your REALTOR. One is how the house will be shown. There’s a simple reality here. The more people who see your property, the better chance you’ll have of selling it fast for the maximum price. So if you insist on “appointment only” showings or perhaps only on Sunday from 2:00 to 3:00 pm, it might take your house a lot longer to sell. A better option, make your house really easy to show. Anytime during the day, 7 days a week. That way you’ll get the most showings possible. And you never know, the buyer who desperately who wants to see your place just as you’re sitting down to dinner, that might be the person who makes an offer. Discuss it with your REALTOR and see what you both come up with.

And finally, I kept the best thing for last, discuss the potential selling price with your REALTOR. Many people have a figure in their heads about what their home is worth. For instance, you bought it for $300,000 and you built a $20,000 deck and now you expect to get at least $320,000, right?  Well maybe. But remember, the market determines your price, not the amount you put into it. What you need instead is good, hard data. Your REALTOR can tell you what comparable homes have sold for. They can also tell you what homes failed to sell because they were over priced (there’s some of that going on). But if you base your sales price on solid data, you’ll have a better chance at a successful transaction.

So there we have it. Fix the place up, get your utility bills and photos together, discuss the whole process with your REALTOR and price it right. If you do all that, you have the best possible chance of hitting that goal of maximum profit in the minimum time. And you know what, the Spring market of 2017 might be the best one ever for you.

 

The Tax Benefits of Home Ownership

Tax time. There’s just a little over one month left before your Federal income tax return is due. The vast majority of Americans will file between now and April 18th. That’s right, this year it’s not April 15th, the deadline is the 18th. So you have a few extra days.

Did you know that home ownership can make your Federal tax bill smaller, that’s right, smaller.

Uncle Sam understands how critically important home ownership is to creating a vibrant and healthy economy. It’s one reason why the Federal government has included many financial incentives in the tax code to encourage home ownership.

If you bought a new home in 2016, dig out your settlement sheet. On that document you’ll find some great tax deductions. First, any points you paid to get a better rate on your loan are deductible. If you paid one point on a $100,000 loan you can subtract $1000 from your taxable income. If you refinanced your home this year you can also deduct the points but they have to be spread out over the life of the loan. If you paid less than 20% down you probably have to pay mortgage insurance premiums. If your home loan was originated after January 1, 2007, then that PMI may be tax deductible. Odds are your PMI payment is wrapped up in your monthly mortgage payment. There may be other deductions in there as well. When you pay your mortgage each month, you’re really paying 4 things: principal, interest, taxes, and insurance. You’ve probably heard it called PITI. The property taxes you pay are tax deductible. The mortgage interest deduction allows you to take all the interest you paid on your loan each year and knock it off your taxable income. This is the most beloved of all tax deductions.

If you work from home, you could qualify for a home office deduction. It just has to be your primary place of business and the room has to be dedicated as your workspace. Your kitchen table can’t also be your desk.

The tax benefits continue when you sell your house. This is a big one. If you sell most investments and make a nice profit your capital gain would cost 15 to 20% in taxes. When you sell your home — different rules. The capital gains exception allows people who sell their home and pay NO taxes on up to $250,000 in profit if you’re single and up to $500,000 if you’re married. That’s a lot of money you can save. The home will have to be your primary residence for 2 of the last 5 years and some other requirements as well.

Discuss these rules with a tax professional before you claim any of these deductions.

You see, there are tax benefits to home owners at every stage of the process. When you buy the place, when you live there year after year, and eventually when you sell it. These tax benefits represent big savings, not pocket change, and they’re only for home owners. Another good thing is that it doesn’t matter what kind of home you have — single family home in the suburbs, high-rise condo downtown, or even a one room cabin in the Hill Country, if it’s your home, you’re on tract for some big tax savings.

If you think about it, as homeowners, we celebrate so many special days in our home every year. There are birthdays, Thanksgiving, Christmas, Hanukkah, not to mention Valentine’s Day, Mother’s Day, Father’s Day and many more. But the one day we DO NOT celebrate is Tax Day. We could, even though there’s no big game, no big meal, and no big party that day. There might be big tax deductions, big tax credits, and big tax exemptions. All that might be worth raising a glass on Tax Day to the one thing that makes all of those things possible — this wonderful thing called your house.

One last word — Don’t forget, this is the weekend you change your clocks. Spring forward, set your clocks ahead one hour forward this weekend. You’ll lose one hour of sleep, but you’ll have one extra hour of daylight to get stuff done.

Why the Pre-Approval is so Important

A few words about a really important part of the process of buying a home – getting pre-approved for a mortgage.

Being pre-approved for a mortgage can give you a crucial advantage as a buyer. Because it assures the seller that you’re ready and able to purchase the home and it sets you apart from other potential buyers who might be just looking. It’s also wonderful in a competitive environment. Because if you’re pre-approved and your competition isn’t, chances are you would get the house. And even when you are at the very beginning stage of house hunting, being pre-approved is important then too. Because if you see a house for X number of dollars for sale, you’ll know right away if you can afford it or not. There’s nothing worse than looking at a place and wanting it really badly only to find out later it’s out of your price range. Being pre-approved can help avoid all that disappointment.

You really have nothing to lose here. Getting a pre-approval from a lender is easy and it can often be done in just a few hours. But make sure you’re being pre-approved and not pre-qualified. Because pre-qualification, that doesn’t really count. Pre-approval is what you want. It’s an extremely detailed process that examines your financial picture in-depth. Your bank statements, pay stubs, tax returns, and information about other loans you might have. They’ll look at your credit card balances, and your credit report. Once your lender has all the facts they’ll determine in writing how much you’ll be eligible to borrow when you buy a home.

So what’s it take to be pre-approved for a mortgage? Well, a decent credit score and a decent credit report to start. You’ll also need enough money in the bank for at least a 3% down payment, another 3% to 4% for closing costs and enough left over to cover the mortgage and other bills for at least two months. As far as income goes, you’ll need to make enough money to comfortably afford the home you want to buy. If there’s a problem and you’re not approved, that could actually help you. Because the lender will tell you why. Like maybe your credit card balances are too high. And that tells you what you have to work on before you do purchase a house.

But assuming you are approved, you’ll end up wth a letter. That letter will accompany every offer you make and tell the seller you’re ready to do the deal.

So how do you begin? You call your REALTOR today and get a few names of trusted mortgage experts. And if you’re thinking “Hey, I’ll just wait until the spring market to get pre-approved”. Well guess what, the spring market starts in less than one month. So if you want to buy this spring, it’s smart to get pre-approved this winter (what’s left of it). You’ll be ready to go when many more for-sale signs start to pop up on lawns all across San Antonio.

 

 

 

Real Estate and the Military: The VA Loan Quiz.

Five true or false questions designed to see what you know when it comes to VA loans. Here we go:

1.True or False, the VA loan is only for veterans.

That’s false. It’s available to veterans of course but it’s also available to active duty service men and women, members of the National Guard, and surviving spouses.

2. True or False, you better be careful when you use the VA loan, because you can only use it once.

False again.  You can use the VA loan multiple times. You just to restore what’s called the entitlement. Which is the dollar amount you’re able to borrow under the program. In most cases that means paying off one loan before you get another.  But in some cases you might be able to have two VA loans at once, as long as both loans combined are under the entitlement cap.

3. True or False, the VA loan can be used for buying a house, refinancing a house, or even a cash out refi.

True.  The VA loan can be used for many, many purposes, not just buying a house. You can also refinance a place to get a lower interest rate or do that cash out refi. You can also pull out equity for home improvements, education, or paying off debt. The VA loan is very flexible.

4. True or False. The VA does not hold the mortgage, a private lender does.

That’s true.  The VA guarantees the loan, they don’t actually hold the note. But that guarantee is so powerful in today’s mortgage market place that over 22 million people have used the VA loan since World War 2. That guarantee also means there’s no Private Mortgage Insurance (PMI), which the VA says will save you a lot of money over the course of your loan.

5.True or False, a VA loan is risky because it’s a zero down mortgage, and that’s what got us into the housing crisis.

That my friend is false. Yes, the housing crisis was fueled in part by zero down home loans. And yes, the VA loan is also zero down, but the rate of default among VA loans is among the lowest of any mortgage in America. Even lower than FHA backed loans. Why, the vast majority of veterans and active duty service members pay their mortgages and pay them on time every month.

So, how did you do on the quiz? I hope you did well. If you’re a veteran or active duty member of the armed services I hope you understand all the benefits you’ve earned. Contact a real estate professional to help you get into a home with the VA loan.

If you’re a civilian, have you ever told a veteran or active duty service member, “Thank you for your service”.  Just think, the VA loan says the same thing. Except it’s not just you, it’s everyone. It’s the people and government of America speaking with one collective voice telling every one of our Nation’s defenders, thank you for your service.