Don't Bring Dad to the Home Inspection.

Nothing will be good enough for Daddy's little (insert pronoun here). We get it, this is probably the most expensive thing you've ever bought - and you definitely don't want to get into something that is just going to be a sink hole. We don't want that for you either. Realtors have a fiduciary duty to act in their client's best interest, if the house has some hidden issues we can terminate the contract and get your earnest money back. That's why God made option periods. Let's get real about option periods and property inspections.

So what is an option period and what happens in that time? An option period is a negotiated amount of time (usually between 3-7 days) for which the buyer pays a fee (usually a couple hundred dollars) for the unrestricted right, or option, to terminate the contract for any reason and get your earnest money back.

During this time, we recommend that you, as a buyer, get a home inspection and allow us to negotiate any resulting repairs. Are you required to have an inspection? No, but we strongly recommend it. Home inspectors are not made equally - I have had clients insist on hiring a friend and have seen them come back with an absolutely clean inspection, super suspect. Not even brand new homes have completely clean inspections (btw, new construction properties need to be inspected too, things get overlooked). Let us recommend some tried and true inspectors who will go over your home with a fine tooth comb. Inspections usually cost between $350-$500, pool inspections and septic systems might cost a bit more. Luxury properties usually cost a bit more too - it is based on square footage and features.

Some things to remember when looking at your inspection report: Just because it is marked "deficient" doesn't mean it's broken. Inspections are done to current day code. This means, if the property you have under contract was built in the 1960's and everything was built to 1960's code, everything may be in perfect working order and not in need of repairs, but might get flagged anyway. Another thing to consider is the gravity and costs of certain repairs. There are major systems like the electrical, plumbing, HVAC and structural items like foundation and roof that could be quite costly. Smaller items like GFCI outlets and caulking don't cost much at all. Another thing we see on almost all inspections is inadequate drainage. Ideally the earth around the foundation is supposed to slope away from the house, to carry water off so it doesn't pool around the house. We can chat about foundations in another post. If an important system is flagged in the inspection report, we will get a specific inspector or contractor to look at the item more throughly.

Negotiating repairs: Certain types of loans (FHA & VA mainly) might require specific items to be done before closing, but generally we like to negotiate a concession for you in lieu of repairs. This method is mutually beneficial for both parties. The seller doesn't have to come out of pocket and scramble around with handymen and contractors. The buyer can pick their own contractor, do it themselves, or take the money and apply it to something else. Otherwise there really is no motivation for a seller to make sure the repair is done correctly, just cheaply. We recommend taking care of things after close, at your convenience. This negotiated concession gets credited to you at the closing table, and is that much less you have to bring with you at closing.

MM - 5/2022

Let's Talk Property Taxes

Oh no, here we go... It's tax season, the property tax assessments have been mailed out, and you have received that dreaded blue paper in the mail. We understand when we purchase a home that the government has the right to tax our property. Those funds go towards supporting schools, repairing public streets, public services like police and fire, etc. Unfortunately though, as we watch our property values skyrocket in the current climate, we inevitably also watch our tax bill climb as well.

So my taxes went up, what does that mean for me? Most of us make mortgage payments on our properties. The vast majority of mortgage payments are made up of three parts:

1. The actual loan with interest.

2. Homeowner's insurance.

3. Property taxes.

Conveniently, most mortgages are set up with an escrow account for the taxes, you pay into it every month and then the mortgage company sends the balance when taxes are due. This saves us from having to manage a huge payment all at once (which you'll have to do if you end up paying off your loan). With that being said, higher taxes equate to higher monthly payment. For example, for every $40k your assessment rises, $100 is added to your monthly payment. This year, a neighbor two houses down saw a rise of $137,000!!! That equates to almost $345 added to their payment a month, over $4,100 for the year. By the way, my tax assessment stayed the same, and I will actually be able to get it reduced further, I'll explain why in a bit.

Okay, the taxes have been assessed, what can be done to remedy that? There are a couple things you can do. Pull up your account through your county appraisal district website. Some counties have a way to "negotiate" with a computer for an instant drop in the assessment. If that isn't available or doesn't yield the results you need, you can call your favorite realtor and ask her to find comps to support a lower price, sometimes this is possible. You can also provide evidence of your home's condition if it isn't fully updated or being renovated. Keep in mind, the tax assessment is a snapshot of the condition of your home on January 1st (of the current year). Also, the assessed value is assuming you could listing the home for "top dollar." Like, in my case, we experienced a flood and the majority of my first floor was gutted and remodeled. On January 1st, it was down to the studs. If I listed the home in the condition it was in, I wouldn't be able to sell it for what my appraised value is. I can take my condition photos and repair estimates to the appraisal district to get a reduction for this year. Every penny counts!

If your house is perfectly updated and we cannot find lower comps, there are still ways to keep your tax assessment in check. Exemptions! If this home is your primary residence, make sure your file for your free homestead exemption. This caps the taxable value increase at 10% (my neighbor's went up over 30% for example). If you are 65+ you can file a senior exemption that will freeze your rate.

The deadline to file an appeal with the Appraisal Review Board is 30 days after the date of the notice or May 15th - whichever is the later of the two. If you want us to take a look at your assessment or talk further about your options, please reach out!

MM - 4/2022

Mortgage Rates are on the Rise, What Does That Mean for Buyers?

If you've been thinking about buying or selling a home in this market, by now I know you've been seeing reports about mortgage interest rates on the upward climb. It's hard to decipher when the best time is to get off the sidelines and get into the market. I get asked this question a lot. Always, my answer will be today... or better yet, yesterday. Yesterday only because if you spoke with your lender yesterday, you would be ready to write an offer today. Why not tomorrow? Tomorrow is not promised or certain, we only know what's happening today... for all we know, an asteroid could hit us or we could be leveled by a nuclear blast. Bleak, I know, especially coming from someone who's supposed to be helping you make one of the largest purchases in your life. Please disregard my elder millennial existential crisis, it's ongoing.

In the past two years, this country has seen record setting low interest rates, a result of a number of factors, but mainly an attempt to avoid economic collapse as a result of the Covid pandemic. People were extremely unsure about the future, we were scared of absolutely everything, there was record unemployment, and as a result, we weren't spending money. Our capitalist society really only functions and grows if investments are being made, and money is being spent (and lent). In an attempt to incentivize consumers to part with their pile of acorns and keep dollars circulating, the Federal Reserve lowered the Federal Funds Rate (the target rate banks borrow and lend money to each other) to a record low 0.05%. While there isn't a direct correlation between the Fed rate and mortgage rates, they follow the same trend. When the Fed rate rises, it makes it more expensive for banks to borrow and lend money, and as you'd expect, banks pass that cost onto consumers in the shape of higher interest rates. In 2020 we saw rates drop into the mid 2's and basically hover in the 2's and very low 3's through the end of 2021. Now rates are climbing into the low 4's (back to 2019 levels) as markets respond to a recent Fed rate hike, one of at least 7 raises promised in 2022. Why so many? Our economy, although still shaky, is clawing back to pre-pandemic levels. This weird chapter in our nation's history will be known for social distancing, record inflation, and the unbreakable spirit of Americans. I wish I would have bought more stock in Zoom.

Historically speaking, rates in the 3's, 4's , 5's and even 6's are still low. We just got spoiled, really fast. In the early 1980's, mortgage rates were over 16%!!! Arguably, homebuyers didn't have to borrow that much in those days, real estate was so much cheaper, but still. Don't get me started on the plight of Millennials and the unobtainable American Dream. Check out this chart below, laying out the annual mortgage rates dating back to 1972 - maybe you will feel better about where rates are now.

So yeah, yesterday was the best time to buy a house... but today is a close second.

What does it matter if interest rates rise? What does that mean for buyers? Let's look at an example and find out. On a $300,000 house (credit in the mid 700's), the payment at a 4% interest rate is about $2,060 a month. If you wait and the rate goes up to 5%, the payment jumps to $2,230. If your debt to income ratio is tight (we will talk about this in another post), or your monthly budget is tight, the difference in the payment might force you to look at cheaper houses or worse yet, price you out of the market entirely. There are many factors that contribute to your rate, including a change in credit score and the type of loan product. When you trust us to guide you through the process, we will connect you with our tried and true local lender partners, who can help guide you through the loan process - from pre-approval to close. Don't be afraid to talk with a lender about your situation, it's the first step in the home buying process and painless, I promise.

MM - 4/2022