The California Association of REALTORS® (C.A.R.) recently published a consumer survey, which reveals useful insights about how potential home buyers in California perceive the current housing market, and what challenges they face with regard to owning a home.
According to the survey, one in two California renters rate homeownership as extremely important or very important, and nearly 80 percent of renters aspire to own a home someday.
Homeownership continues to be a major goal for most despite the current affordability challenges. Many renters see inherent benefits in owning a home, which go beyond just having a roof over their heads. One in five renters believes that buying a home is a prudent investment in the long run, while a similar number of renters feel that homeownership gives them a free hand to do what they want with their home. About 12 percent of renters perceive that having own home provides greater stability and roots to the owner and their family. Renters in California typically spend 45 percent of their income on housing, and almost seven in 10 spend more than the recommended 30 percent. Rent burden is particularly high for the Millennials, who spend half of their income on rent.
C.A.R.’s 2018 State of the California Consumer Survey also revealed valuable insights about the opportunities and challenges for actual home buyers in the state. Many home buyers in California are making compromises with regard to the cost, size, location, and quality of schools while purchasing a home.
Due to the low affordability of homes, 44 percent of the buyers surveyed said that they had purchased a more expensive home that they would have liked to. About one-third bought a smaller home than they wanted, and 36 percent bought a home in a location further from school or workplace than they wished. According to 2019 C.A.R. President Jared Martin, home buyers in California recognize the realities of a competitive housing market, and accept that they may not be able to purchase the ideal home. Therefore, they are looking for a home that is a good enough fit for them rather than a perfect fit.
Home buyers have some good news coming from the Federal Housing Administration (FHA). The FHA has increased its 2019 loan limits in most areas across the country. No jurisdiction will face a reduction in loan limits from 2018 levels. For lower-cost areas, the loan limit will now be $314,827, while in high-cost areas the limit will be $726,525. This creates a slightly better opportunity for home buyers in California to afford the home of their dreams in 2019.
If you’re thinking about listing your home as for sale by owner (FSBO), there are several pros and cons you should definitely consider before deciding to sell the home yourself. While saving 5–7% on commission costs by not using the service of a licensed real estate agent seems very appealing to many, the things are not that simple and the selling process is way more complex and involves a lot more than just putting a for sale sign on your front lawn.
One of the advantages to going the FSBO route is that you are in total control of price setting, the showing days and times and the negotiations with the buyers. You can take advantage of the many websites that can help with listing your home for sale, such as ForSalebyOwner.com, Zillow.com, Craigslist, etc.
One of the cons to listing your home as for sale by owner is the risk of selling your home for less than what it’s really worth.
Statistics have shown that the average For Sale by Owner home sells for about 15% less than homes sold through a Realtor®.
Many homeowners set the price of their home based on what their neighbor down the street is asking for their home. What you have to keep in mind is that the asking price is not the actual selling price and a lot more factors go into determining the accurate value of your home. What you paid for your home 5, 10 or 15 years ago or the cost of any improvements that you’ve made since then are not important when trying to come up with an accurate number. Your home is worth what buyers are willing and able to pay for it, and only an educated and thorough understanding of the current real estate market is going to help determine the value of your home.
Also, your home will benefit from less visibility and exposure to potential buyers, as only licensed real estate agents can list homes on the Multiple Listing Service (MLS), the largest online tool used by Realtors® to promote their listings. You can market the home yourself by using the websites mentioned earlier, as well as flyers, for sale and open house signs.
Preparing all the legal disclosures and forms is your responsibility, and if you are not familiar with the guidelines and requirements, there is a financial and legal liability related to the accuracy and delivery of these forms.
Weeding out the unqualified buyers can also be difficult, as many people who are not yet ready to buy a home or able to obtain proper financing, will seek out homes that are for sale of owner, with the thought in mind that most sellers are pretty inexperienced and unable to recognize these issues. There’s also the “just looking” and “just curious” folks that will waste a lot of your time which could be used toward assisting serious buyers.
One last thing I would like you to take into consideration is the fact that safety is a major issue when selling your home by owner. A for sale by owner sign is often an invitation to strangers with not so honorable intentions to come into your home. Take proper measures to stay safe and screen the people that ask to view your home. Asking for a copy of their pre-approval letter or proof of funds is a good way to make sure that they are bona fide buyers.
I am not saying that selling a home without the assistance of a Realtor® is a bad idea or impossible to accomplish. What I am saying is that you should take all these factors into consideration, prepare and educate yourself on the process, so you don’t end up spending dollars to save pennies in the end.
Unlike the experience of buying a first home, when you’re looking to move-up and already own a home, there are certain factors that can complicate the situation. It’s very important for you to consider these issues before you list your home for sale.
Not only is there the issue of financing to consider, but you also have to sell your present home at exactly the right time in order to avoid either the financial burden of owning two homes or, just as bad, the dilemma of having no place to live during the gap between closings.
Five Strategies: In this report, I am going to outline the five most common mistakes homeowners make when moving to a larger home. Knowledge of these five mistakes and the strategies to overcome them, will help you make informed choices before you put your existing home on the market.
1. Rose-coloured glasses
Most of us dream of improving our lifestyle and moving to a larger home. The problem is that there’s sometimes a discrepancy between our hearts and our bank accounts. You drive by a home that you fall in love with only to find that it’s more than what you are willing to pay. Most homeowners get caught in this hit and miss strategy of house hunting when there’s a much easier way of going about the process. For example, find out if your agent offers a Buyer Profile System or “House Hunting Service,” which takes the guess work away and helps put you in a home of your dreams. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed or e-mailed information on an on-going basis. A program like this helps homeowners take off the rose-coloured glasses and, affordably, move into the home of their dreams.
2. Failing to make the necessary improvements
If you want to get the best price for the home you’re selling, there will certainly be things you can do to enhance it in a prospective buyer’s eyes. These fix-ups don’t necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It’s very important that these improvements be made before you put your home on the market. If cash is tight, investigate an equity loan that you can repay on closing. Failing to make the necessary improvements
If you want to get the best price for the home you’re selling, there will certainly be things you can do to enhance it in a prospective buyer’s eyes. These fix-ups don’t necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It’s very important that these improvements be made before you put your home on the market. If cash is tight, investigate an equity loan that you can repay on closing.
3. Not selling first
You should plan to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below market value because you have to meet a purchase deadline. If you’ve already sold your home, you can buy your next one with no strings attached. If you do get a tempting offer on your home but haven’t made significant headway on finding your next home, you might want to put in a contingency clause in the sales contract which gives you a reasonable time to find a home to buy. If the market is slow and you find your home is not selling as quickly as you anticipated, another option could be renting your home and putting it up on the market later?—?particularly if you are selling a smaller, starter home. You’ll have to investigate the tax rules if you choose the later option.
4. Failing to get a pre-approved mortgage
Pre-approval is a very simple process that many homeowners fail to take advantage of. While it doesn’t cost or obligate you to anything , pre-approval gives you a significant advantage when you put an offer on the home you want to purchase because you know exactly how much house you can afford, and you already have the green light from your lending institution. With a pre-approved mortgage, your offer will be viewed far more favorably by the seller?—?sometimes even if it’s a little lower than another offer that’s contingent on financing. Don’t fail to take this important step.
5. Failing to coordinate closings
With two major transactions to coordinate together with all the people involved such as mortgage experts, appraisers, lawyers, loan officers, title company representatives, home inspectors or pest inspectors the chances of mix-ups and miscommunication go up dramatically. To avoid a logistical nightmare ensure you work closely with your agent.
To get top dollar, it’s essential to price a property accurately for the current marketplace. The reason is simple. Virtually all buyers search for properties online before scheduling time to see a listing in person. That means these buyers know in great detail what comparable homes are listed for in your area. If you overprice the property, you risk having your home sit on the market with few buyers who will consider viewing (let alone putting an offer on) a home that is clearly more expensive than comparable homes.
This lack of interest can lead to a compounding issue. If your home is listed for a longer than average time, you will have created a perception problem. Buyers often assume that there is something wrong with a property that’s been sitting on the market for too long.
When you fall into the overpricing trap, corrections can be costly. To generate enough interest in your property, you may be required to drop the price below what would have originally been considered market value. Instead of giving yourself room to negotiate with buyers, you will have set yourself up for selling the property under market value.
To get top dollar, it’s essential to price a property accurately for the current marketplace.
Nitpicking the comps by placing too much value on negligible differences between their home and the comps is one of the very common mistakes sellers make?—?“My home has a new water heater and a larger deck than my neighbor’s. I also have a beautiful lemon tree and rose bushes in the yard!”
While small features like these are worth pointing out to potential buyers, overpricing your home on that account is not a good idea at all.
Some sellers focus on the return on their investment too much and set the list price based on what they want or need to sell their home for. The reality is that a home’s worth is determined by what a buyer is ready, willing and able to pay for it. If you are looking to buy a $900,000 home after selling your current residence, that doesn’t mean that your home will sell for close to that.
Sellers looking to negotiate may be the most common reason people overprice their home. The strategy behind that may look like a Craigslist scenario, where you post your old rocking chair at an inflated price, an offer comes in at half that, but you eventually end up negotiating and selling the item for 60% of your original list price. It doesn’t work quite the same in real estate. Pricing the home right in the beginning and creating that much needed demand and interest from buyers is a way better strategy than trying to chase the buyers hoping that they will fit into the scenario that you imagined in the first place.
“It is always cheaper to do the job right the first time.” - Phil Crosby
Buyers who have no experience with homeowner’s associations (HOAs) often know little about them, except that they will be charged a monthly fee over and above their monthly mortgage payment. So if you are considering buying a property with shared common areas, such as condominium complexes and planned unit developments, you may want to read on.
Here are the answers to some customary buyer questions:
Q: What is a homeowner’s association (HOA)?
A: An HOA is charged with ensuring that your community?—?the common areas outside your condo walls or property lines?—?look good and function well. They are responsible for maintaining the landscaping, the swimming pool and all other shared areas. They charge a monthly fee for these services, and set rules and regulations for the homeowners to help ensure that community standards are upheld.
Q: How much are HOA fees?
A: To cover maintenance expenses, HOAs charge fees generally between $200 and $400 per month, sometimes lower and sometimes higher depending on the locale, the size of the residential units, and the services provided. Most HOAs charge a bit more than the actual maintenance costs in order to build up reserves to cover emergency repairs or unforeseen costs. If there is not enough reserved to cover such a needed expense, homeowners may be charged a special assessment fee.
Q: Who runs the HOA?
A: The HOA is governed by a board of directors typically elected by the homeowners in the complex. They meet regularly to discuss and vote on HOA issues. Meetings are open to all homeowners and any resident homeowner may run for a board seat.
Q: How do I know the HOA rules and regulations?
A: All buyers receive a copy of the HOA’s covenants, conditions and restrictions (CC&Rs) for their review and approval before escrow closes, and by proceeding with the purchase, they are agreeing to abide by them. For safety and aesthetics, the CC&Rs may govern such things as what color you may paint your house, what type of pets you may have, and the style of your front door, roof or mailbox. If you break the rules, or fail to pay your dues, you could be fined, or ultimately foreclosed upon.
Q: What about homeowner’s insurance?
A: As with all private residences, homeowner’s insurance, or hazard insurance, (1) is required by the lender to insure against damage or destruction to the property and/or improvements, and (2) is highly recommended to insure against damage, loss or theft of contents or injuries sustained on the property. But the HOA does not oversee insurance issues. The title company works with the homeowner’s insurance provider to make sure the first coverage period is paid in full following closing and that the amount to be paid is correctly stated on closing documents.
The purchase of a home is usually the most expensive and long-term financial undertaking an individual or family ever makes, therefore it is very important to fully protect their investment. The homebuyer and his mortgage lender will want to make sure the property is free of liens, claims or encumbrances and that the seller really owns the property and is free to sell it.
The basic function of a title insurance company is to take steps to minimize the risk that a policyholder will suffer any loss or be subject to any adverse claim, as well as to safeguard his ownership of the property. If title problems do arise, in spite of this preventative work, title insurance will pay for the cost of defending against an attack on the title, as well as any valid claims.
Who Needs Title Insurance? Buyers and lenders in real estate transactions need title insurance. Both want to know that the property they are involved with is insured against certain title defects. Title companies provide this needed insurance coverage subject to the terms of the policy. The seller, buyer and lender all benefit from the insurance provided by title companies.
What Does The Title Insurance Cover? Title insurance offers protection against claims resulting from various defects (as set out in the policy), which may exist in the title to a specific parcel of real property, effective on the recording date of the documents. For example, a person might claim to have a deed or lease giving them ownership or the right to possess your property. Another person could claim to hold an easement giving them a right of access across your land. Yet another person may claim that they have a lien on your property securing the payment of a debt. That property may be an empty lot or it may hold a 50 story office tower?—?title companies work with all types of real property.
What If You Are Buying Property From Someone You Know? People undergo changes in their personal lives that may affect title to their property. People get divorced, change their wills, engage in transactions that limit the use of the property or have liens and judgements places against them personally for various reasons. There may also be matters affecting the property that are not obvious or known, even by the existing owner, which a title search and examination seeks to uncover as part of the process leading up to the insurance of the title insurance policy.
The process of risk identification and elimination performed by the title companies prior to the issuance of a title policy benefits all parties in the real estate transaction. It minimizes the chances that adverse claims might be raised and by doing so, reduces the number of claims that need to be defended or satisfied.
Twenty Reasons for Title Insurance
Information for this article was made possible throught the courtesy of Equity Title Company