Propositions 13/60/90

If you’ve ever lived in California or owned property here, you know there are some significant propositions that have been voted in over the years which greatly impact property taxes and ownership.  I remember as a kid when Prop 13 was on the ballot. While I wasn’t entirely sure what it meant, I did know that we were TOTALLY behind it and worked hard to get others to support it. All these years later, I understand why my parents wanted this proposition to pass, but I also see the impact that it’s had over 40 years on the state, the economy and the housing market.

The three most significant propositions we have in the state that impact home ownership, especially those who have owned their properties for a long time and seen a huge increase in value, are Props 13, 60 and 90. Let’s explore what they are, and how they impact our housing market and the economy.

Prop 13

What is it?

With Prop 13, property tax values were rolled back and frozen at the 1976 assessed value level. Property tax increases on any given property were limited to no more than 2% per year as long as the property was not sold. Once sold, the property was reassessed at 1% of the sale price, and the 2% yearly cap became applicable to future years.

When did it become law?

Prop 13 was voted in June 6, 1978 by nearly ⅔ of voters.

Why was it voted in?

Prior to Proposition 13, the property tax rate throughout California averaged a little less than 3% of market value. Additionally, there were no limits on increases for the tax rate or on individual ad valorem charges. (“Ad valorem” refers to taxes based on the assessed value of property. ) Some properties were reassessed 50% to 100% in just one year and their owners’ property tax bills increased accordingly.  

As California’s real estate market value was exploding, so were the property taxes. This was creating an untenable situation for property owners.

What is the impact it has had?

Prop 13 has had an impact on every element of the state’s economy and real estate market.

• Property Lock-in – Owners who have been in their home an extended time are reticent to sell and give up their tax rate, creating less inventory on the market.

• Tax Disparity – Two properties valued at $4M could have extraordinarily different tax rates if one is newly purchased (and paying taxes based on the $4M value,) and the other has been owned for 40 years (and paying taxes based on annual increases of 1-2% from the 1976 assessed value).

• Education Failures – as a result of decreased tax bases and related reductions in spending on education, California schools have gone from some of the top in the country to 48th in the nation.

• State Infrastructure – there’s much debate as to whether or not Prop 13 is to blame for California’s antiquated and failing infrastructure. One can only assume that the reduction in property taxes over the years has had some related impact on infrastructure funding as well.

Prop 60

What is it?

Prop 60 gives homeowners over the age of 55 the option to transfer the assessed value of their current home to a replacement home if the replacement home is located in the same county, is of equal or lesser value than the original property, and purchased or newly constructed within two years of the sale of the present property.

Prop 60 can only be used once in a claimant’s lifetime.

When did it become law?

Prop 60 was voted into law on November 4, 1986

Why was it voted in?

Prop 60 helps to address the “lock-in” impact of Prop 13 by allowing 55+ owners to sell their homes, but keep their tax rate.

What is the impact it has had?

Prop 60 opened up some long-time owned property within counties. As these properties were sold, tax rates were increased to reflect the purchase price for the new owners.  However, the lower tax rates of the original owners still resulted in reduced revenue for the state and counties.

Prop 90

What is it?

Prop 90 allows homeowners over the age of 55 to transfer the assessed value of their present home to a replacement home if the replacement home is located in another county, is of equal or lesser value than the original property, if the county of the replacement dwelling adopts an ordinance participating in the program.

Participating counties are: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura.

A claimant can only use Prop 90 OR Prop 60 once in their lifetime. It is not possible to use both.

When did it become law?

Prop 90 was voted into law on November 8, 1988

Why was it voted in?

Realizing the limitations of Prop 60 mandating that the new property must be in the same county, Prop 90 sought to provide for more flexibility and opportunity.

What is the impact it has had?

Like Prop 60, Prop 90 has further opened up some long-time owned properties within counties. As these properties were sold, tax rates were increased to reflect the purchase price for the new owners.  However, the lower tax rates of the original owners still resulted in reduced revenue for the both the state and counties.

For more insight into Propositions 60/90, including an extensive FAQ, visit the California BOE page on these props.

If you’re a current property owner in California, no matter when you purchased your home, you fall under these proposition guidelines. If you bought in 1995, Prop 13 locked in your tax rate at 1995 values. If you’re looking to sell in 2018 and you’re over 55, Props 60 and 90 give you the flexibility to take your tax rate with you, on a conditional basis.

Over the years, there have been many debates about reforming or repealing Prop 13. As of now, neither action has occurred, but it is reasonable to expect that this conversation will continue. Time will tell.

By Sally Lee

All About Private Mortgage Insurance

If you’ve ever looked into getting a mortgage, you’re familiar with the term PMI. But how much do you know about it? Do you know what it stands for? What it is? How to avoid it? Let’s dig into PMI and how it impacts real estate transactions.

What is PMI?

PMI stands for “Private Mortgage Insurance”. It protects the lender on a mortgage when the down payment is between 3% and 19.9%. The person who takes out the mortgage pays this insurance premium to the lender as an assurance that the lender will be covered (in the event the borrower stops paying the mortgage).

Whereas most insurance we buy is to cover ourselves, it’s important to note that PMI covers the lender. So why would you care about that? In order to secure a loan with a lower down payment, PMI is the price you pay.  (Unless you take out a loan to cover that down payment, but that’s a different post all together!)

PMI is generally associated with conventional loans, as these are not guaranteed by FHA, the VA or a program like CalVet.

How is PMI Paid?

There are three general ways that PMI is paid – monthly, all at once, or a combo.

• Monthly – This is the most common method of payment. The fee will be wrapped into your monthly mortgage payment, so you won’t have to think about it. Your monthly mortgage payment will cover principal, interest, taxes and PMI.

• All At Once – Less common is the lump sum payment at time of closing. If this is the case with your loan, it should be made clear in your loan estimate so be sure to read closely.

• Combo – Think of the combo as being like a mortgage – you pay a “down payment” at closing, and then pay monthly premiums to pay off your PMI. This serves to make your monthly payment lower, but does require more out of pocket at closing, which is what you were trying to avoid by having a lower down payment in the first place.

How can you avoid PMI?

For starters, you could look to take out a lower value loan. One of the benefits of PMI is that it allows borrowers to get into loans that they might not otherwise qualify for, because they don’t have the full down payment. If you find yourself in this situation, you may want to reconsider the purchase price range you’re looking at and see if you can drop yourself down to a lower loan amount.

Another approach is to look at getting an FHA or VA loan. If you meet the qualifying criteria, these can allow you to put less money down (as low as 3.5% for FHA,) and avoid PMI as the debt is insured by FHA or VA. That being said, the high end limit for an FHA loan is currently $726,525, which may not help you as much as you need on the Peninsula.

As always, shop your loan. Only by talking to different lenders can you get a clear picture of all your options. Some lenders may have programs that are more favorable to the situation you are in. Not all loans programs are the same.

What to do when PMI is “paid in full”

PMI can be removed when you have a minimum of 20% equity in your home. Conveniently, it’s up to the borrower to track their principal payments and determine when they have reached a loan value that is less than 80% of the original price of the home. Once that milestone has occurred, the borrower can contact the lender and request PMI cancellation.

The good news is that once the mortgage balance drops to 78% of the original value of the home, the lender is required to automatically eliminate the PMI. But it’s still good to stay on top of that so you can request the PMI be cancelled at 80% and avoid additional payments.

Additionally, once you reach the mid-term of the loan (15 years for a 30-year fixed,) the PMI is required to be removed.

Finally, if the value of your home has increased significantly and you believe your equity is now 20% or higher against the current market value, your lender may allow you to cancel your PMI payments if the professional appraisal they require supports your assumption. It doesn’t hurt to ask.

Bottom line, PMI is a necessary evil for many home buyers here on the Peninsula. Given the costs of our real estate and the size of the typical mortgage, it’s not uncommon to have to deal with PMI.  Talk with your lender and figure out the best path forward for you.

And if you need a good lender to talk to, let me know. I’ve got a couple of great ones I’d be happy to introduce you to.

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

By Sally Slate Lee

Closing 101: Ways to Hold Title

Your offer has just been accepted on that home you’ve been dreaming about – congratulations! 🎉 You’re ready to wrap up escrow and move on in, right? Well hold on just a moment. Along with all of the other things to consider during the escrow process is to determine how you will hold title on your new property.

No idea what I’m talking about? Let’s dig in a bit on title – what it is, why it matters and what your options are.

What is Title?

According to Wikipedia:

In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. Title is distinct from possession, a right that often accompanies ownership but is not necessarily sufficient to prove it. In many cases, possession and title may each be transferred independently of the other. For real property, land registration and recording provide public notice of ownership information.

It’s important to note that title is separate from a deed. Title is the concept while a deed is the physical certification reflecting title.

Why does it matter how Title is held?

How title is held affects the legal rights of title holders and their heirs, so having title done correctly is crucial. Before finalizing your purchase, it’s important to consult an attorney about how title should be held. Your legal advisors are the only ones who can provide you with an accurate recommendation relevant to your situation.

There are several common ways to hold title, broken down into three sub-groups.

Sole Title

1. A Single Man or Woman, an Unmarried Man or Woman or a Widow or Widower:

A man or woman who is not legally married or in a domestic partnership. How this might look on title is: Stella Smith, a Single Woman

2. A Married Man or Woman as His or Her Sole and Separate Property:

A married man or woman who wishes to acquire title in his or her name alone. This could be as part of an inheritance or a separate investment not purchased through marital assets. In this situation, the spouse would be required to relinquish their rights to title and property. How this might look on title is: Stella Smith, a Married Woman as Her Sole and Separate Property.

3. A Domestic Partner as His or Her Sole and Separate Property:

A domestic partner who wishes to acquire title in his or her name alone. This would be for the same types of situations as a married couple, but apply to those who are registered domestic partners. How this might look on title is: Stella Smith, A registered Domestic Partner, as her sole and separate property.

Joint/Common Title

Title to property owned by two or more persons may appear on title in one of the following ways:

1. Community Property:

Typically used for property owned together by married persons or by domestic partners. Community property is distinguished from separate property (see above,) which is agreed in writing to be owned by one spouse or domestic partner.

In California, real property transferred to a married person/domestic partner, is presumed to be community property, unless otherwise stated. Both parties must sign all documents to sell the property in full or use it as security for a loan. However, each party is free to sell their half of community property whenever they want. How this might look on title: Stella Smith and Steve Smith, who are married to each other, as community property; or Stella Smith and Maddie Smith, who are married to each other, as community property.

2. Community Property with Right of Survivorship:

This form of title is also for community property between spouses or domestic partners. The difference here is that it provides the for the share of one party to be transferred in full to the other upon the death of the first. This could provide tax benefits and should be discussed with your attorney and CPA. How this might look on title: Stella Smith and Steve Smith, husband and wife, as community property with right of survivorship; or Steve Smith and Michael Smith, husband and husband, as community property with right of survivorship.

3. Joint Tenancy:

Joint Tenancy works for properties owned by 2 or more people, regardless of their relationship, who have equal interests in the property. Joint tenancy provides the right of survivorship (as explained above). There are some guidelines – title must be acquired at the same time, in the same way, and the document must make clear the intent to create a joint tenancy holding. Joint tenancy is not subject to disposition by a will, as the right of survivorship is built in. How this might look on title: Stella Smith, a single woman, and Dave Smith, a married man, as joint tenants.

4. Tenancy in Common:

Tenancy in Common is similar to Joint Tenancy, in that it works for properties owned by 2 or more people. However, with Tenancy in Common, interests  can be unequal in time or amount, and may start at different times. A tenant in common essentially owns a share of the property and any income or expenses for the property will be split proportionally based on share level. Each tenant in common can sell, lease or will their share of the property belonging to them. How this might look on title: Stella Smith, a single woman, as to an undivided 60% interest and Craig Smith, a single man, as to an undivided 40%.

Other Types of Title

1. A Corporation:

A corporation is a legal entity, created under state law, consisting of one or more shareholders but considered to be a separate entity from the individual shareholders.

2. A Partnership:

A partnership is between two or more people, carrying out work for profit. Title can be held in the name of the partnership.

3. Trustees of a Trust:

A Trust is an arrangement whereby legal title to property is transferred by a grantor to a person called a trustee, to be held and managed by that person for the benefit of the people specified in the trust agreement, called the beneficiaries. A trust is generally not an entity that can hold title in its own name. Instead title is often vested in the trustee of the trust. For example: Stella Smith trustee of the Smith Family Trust. (definition by California Land Title Association)

4. Limited Liability Companies (LLC):

Similar to corporations and partnerships, an LLC can hold title, which is separate from its owners. Tax implications may vary from those for a corporation.

As you can see, there are a lot of options so determining how you will hold title on your new property is critical. So don’t wait until the 11th hour. Prepare early and talk to your expert advisors on what will work best for your situation.

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

By Sally Slate Lee

5 Tips for First Time Homebuyers

So you’re thinking you might be ready to be a first time homebuyer?  That’s so exciting – and totally overwhelming. Where do you start? How much is it going to cost you? How do you make sure you can get the home you want?

Take a deep breath, I’ve got you covered.  These 5 tips will help you to be ready to roll once you get serious about finding your first home.

Make A Hobby Out Of Open Houses

Long before you start actively looking for a house, you should start going to open houses.  It can be your weekend thing – a hike, brunch, open houses. So why would I tell you to go to open houses if you’re not remotely close to being ready to buy a place?  Think of it as similar to an SAT prep class – you’re not ready for the final exam, but you are ready to learn how to take the test.

The great thing about open houses for a first time homebuyer is that they’re all about learning.  You can explore neighborhoods and see which you like and which you don’t.  Check out different styles of homes and figure out what style suits you and what just won’t work.  Listen to more active home buyers and the questions they ask. Talk to agents to learn more about the area, the market and more (that’s what we’re there for).

Going to open houses is fun, especially if you have nothing on the line.  When you’re going just to learn, you don’t have to worry about the act of actually buying it.  You can meander through, take the information you need and leave the rest. The next house you go into, you’ll be all the more knowledgeable.

Think About The Future

When you’re a first time homebuyer going to buy a house, you need to think beyond just today.  It’s easy to say “I’m single and work in Menlo Park so this little place will be great.”  But what happens when you have a partner or spouse move in? And then what if you have kids?  Yes, I’m going way down the line here, but you do want to give some thought to what the future might bring, at least the next 5-7 years.

Beyond just your personal life, when thinking about the future keep in mind the elements of resale.  A time will likely come when you will look to sell your house (the average American moves 11.7 times in their life).  So even though you may look at it as your forever home, also think of it as your investment. Take a quick look at the state of the schools, the neighborhood and the economic factors around the property.  If they seem to be on the upswing, that’s great. If not, you may want to keep looking.

Have Vision

By this point, we’ve all watched enough Fixer Upper to know you have to look beyond the facade to see the potential.  When you walk into that home with chartreuse shag carpet, try to block that out of your mind’s eye and look at what that room could become and how you could adapt it to be just what you want.  

Sometimes it’s as simple as a fresh coat of paint and taking out the carpet. Other times, there may be wall removal involved. But open up your mind and get creative. There is no such thing as the “perfect” house.

Make A List And Check It Twice

That Santa is a wise man with his list making, so we should all take a lesson from that.  This is especially true as you gear up to begin your home search. It’s crucial that you understand what your “must haves” and “can’t haves” are.  For some people, a pool is the be all, end all while for others, they want nothing to do with a property that has one.

A great way to start this list is during your open house tours.  You’ll see all sorts of things you’d never even thought about, so just keep a notebook handy to jot down ideas.  But another way to work on this list is to think about the way you use a house. Do you love entertaining? Gardening? Having friends over for Westworld viewing parties?  The way you live your life is the road map for your “must have” list.

It’s All About The Benjamins

Don’t freak out, money has a way of doing that to people – especially for a first time homebuyer.  In this pre-search stage, it’s the perfect time to start getting your ducks in a row.  Pull your credit report and see where your credit score falls. If needed, you can actively start to work to clean up your report and improve your score.  This can actually be quicker than you might think.

Remember, your credit score is only a reflection of your financial life so if you need to, pay off whatever debts you can (at least get individual credit cards down below 75% of credit limit,) figure out how to save money, and start working on creative planning for down payment sources (gifts, 401k borrowing, life insurance, etc.).

Bottom line, with a little pre-planning, you can make the search for your home that much more enjoyable.  And it should be enjoyable – you’ve worked hard to get to a place of home ownership!

Let me know in the comments section what some of your best home buying advice has been!

 By Sally Slate Lee

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

Down Payment 101: Getting Creative With Savings

One of the most daunting things to think about when considering buying a home is how you will afford the down payment.  Once you own a home, this usually becomes a non-issue as you use the equity from your existing home to help you. But when you’re going for your first home, this nut can be overwhelming.  This is especially true on the Peninsula, where “starter homes” can cost upwards of $1,000,000 – that means a 20% down deposit is $200,000. That’s a lot!

Don’t despair! In addition to mortgage programs that require less than 20% down, there are also many ways that you can bring in money to get you to your down payment amount much quicker than you ever imagined.  Let’s look at some of the more creative options:

Down Payment Gift Funds

While gifting is traditionally thought of as a method for paying for education, it’s a great way to accrue funds for your down payment.  Consider asking relatives (who you have very close relationships with,) to contribute to your gift fund. In some situations, employers will have assistance programs that will gift or subsidize down payments, so be sure to check with your HR department.  

If you want to kick up your gift fund fundraising even more, consider setting up a page on HomeFundMe.  Like GoFundMe, friends, family (and even strangers,) can contribute to your down payment savings efforts.  If you qualify, you may even be able to get matching funds from the site’s parent company, up to $2,500.

Do the Hustle

Getting a side hustle is a no-brainer in terms of raising additional funds.  There are so many side gig opportunities in the Bay Area, finding the right fit for you shouldn’t be hard.  Whether it’s driving for Uber or Lyft, or delivering for Instacart or DoorDash, there are lots of options.

If you don’t want to be out running around, consider taking your skills and putting them to work on a freelance basis.  Through sites like Elance or Upwork, you can find freelance work in finance, creative, virtual assistant roles and so much more.  Work from the comfort of your home at the times that work for you.

If you truly don’t have time for any of that, consider totally passive ways to earn money.  Have a strong web/social presence?  Explore ways you can monetize that by taking advertising and sponsorships.  Drive a lot? Look into turning your car into a billboard. You could earn up to $400 a month just by letting someone advertise on your car.  You literally don’t have to do anything different, just keep driving to work, errands, etc.

Cut It Out

We all spend so much more money every month than we’re even aware of, so do a tough accounting of how you’re spending your money and figure out where you can cut back.  Some ideas include:

Cancel Cable

Shocking, I know, but with so many streaming services, how much do you really use that pricey cable box?  There are great, less expensive options for video and internet, so maybe you can save $100 or more each month!

Don’t Deliver 

I’m a horrible example of this.  Just this week I had two deliveries from Instacart and three from DoorDash.  I can give you great rationale for why I needed these services this week (and sometimes we really do,) but the truth is that I could have definitely saved a lot of money by doing these things myself, and not incurring the delivery expense.  Keep in mind, when you get delivery, there’s the delivery fee and tip, and sometimes even a slight increase on the item feel.

DIY 

This comes out of the point above.  If I had just made those dinners myself, I would have saved probably close to $100.  I do make a habit out of making and bringing my lunch every day versus going out to a restaurant or grocery store.  But think beyond the meals. Are there items you use in the home that you can make yourself and save some money? Most common in this area are cleaning supplies.  Search online for easy ways to DIY and save yourself some money. It may seem like small savings, but these do add up.

Cash Only

I have friends who run almost entirely on cash every month.  They have a detailed budget and at the start of the month, they withdraw the cash they need for the month.  This doesn’t cover items like mortgage payments, insurance, etc, but does cover things like entertainment, groceries, clothing, home improvements and anything their kids might need for school.  They have an envelope and know what they have to spend for the month. They never go over that amount, and sometimes need to make hard choices, but they save a LOT of money by not making frivolous purchases at Costco or Target.  Cash in hand means more than digital currency in terms of really understanding what you’re spending.

Don’t Forget

Not all savings ideas are creative, but some are easily overlooked.  Two very practical ones that you should be sure to explore are using your 401k and looking for assistance programs.

When using your 401k, you can use this as a loan or make a withdrawal.  There are limitations and consequences both ways, so be sure to talk with your CPA and plan administrator to make sure you are very well informed before choosing to use your 401k as part of your down payment.

There are numerous down payment assistance programs available to residents of California.  The best thing to do is take a look at this FHA site and see if there’s a program that works for you – https://www.fha.com/fha-grants?state=CA

With all of these ideas and options, you should be able to have your down payment saved in no time.  Break the savings down into small goals so it doesn’t feel so overwhelming. Celebrate your savings victories and start planning for your new home.  This is a great time to check out my tips for first time homebuyers too. You’ve got this!!

Are You Giving Away Leverage By Working With The Listing Agent?

As agents, we run into buyers that believe they will have an advantage over competing buyers if they chose to work directly with the listing agent. On one level it makes sense, but is it really in the best interest of the buyer?

Listing Agent’s Motivation

When representing both parties, the listing agent is incentivized to have the sellers accept the offer from their buyer and to just get the deal done. They would then receive both commissions offered to the seller’s agent and the buyer’s agent, thus doubling the amount they would have received if they would only have represented the seller. While that may work out great for the agent, does it really work best for the buyer?

Double-ending & Lawsuits

The majority of lawsuits that occur in real estate transactions happen when a deal is double ended. If you’re not familiar with the term, it’s pretty self explanatory. Double ending is when an agent represents both ends of the transaction, the seller’s end and the buyer’s end. 

When you use a buyer’s agent, you are hiring a professional with a trained eye who will look over the disclosures and call out any items that may be of concern to you. A buyer’s agent has only your interests in mind and one of their jobs is to help you to avoid lawsuits in the future. Even if a listing agent’s intentions are honest and pure, mistakes still happen and you better believe that when there’s a lawsuit their doubling-ending will be scrutinized.

You wouldn’t hire a defense attorney who was representing the plaintiff as well, would you?

Negotiating

The very word “negotiations” bring to mind an image of two people playing cards against one another, both keeping their cards close to their chest so the other can’t get a peek. Can you imagine one person playing two different hands of poker against themselves? At some point they’re going to have to make a decision who wins.

Now let me apply it directly to real estate. Let’s say you submit an offer on a home using the listing agent to represent you. You write the offer at the list price of $2M and when the listing agent calls your lender, your lender says that $2M is perfectly fine. In fact, they have pre-approved you for $2.5M. Now the listing agent has a dilemma. Their duty is to their seller but now it is also to their buyer thus creating a conflict of interest. 

As a seller’s agent they should be trying to get as much of that $2.5M for their seller as they can while still keeping the deal alive. As the buyer’s agent they should be negotiating the best possible price for you.

So if you can’t gain an advantage from working directly with the listing agent then what is the best way to get a leg up on the competition? Your best course of action is to find a buyer’s agent who will represent you exclusively, is a local expert and has relationships with all the agents in the area you are looking to buy in. But most importantly, an agent who can negotiate the best possible price for you.

If you are looking for representation, drop me an email to lindsey@lindsey-matthews.com to ask for a consultation so we can see if we would work well together.

By Sally Slate Lee

12 Mistakes to Avoid When Buying a Home

Do you want to overpay for your home? Would you like to get stuck in a mortgage that is all wrong for you? How about swinging and missing on an opportunity to purchase your dream home? Of course the answer to these questions is a no but these are the results from the common mistakes made by home buyers.

Buying a home is something that you may do only a handful of times in your life. Don’t learn by trial and error - it’ll cost you too much. Instead take it from a seasoned professional on which pitfalls of home-buying you should avoid. Here are the top 12 mistakes buyers make.

#1: Not Getting Pre-approved

Imagine the stars align and you find the perfect house that fits perfectly within your budget. You write an offer over asking, and maybe it's even the highest offer, but the sellers go with another buyer. Why? The accepted offer included a pre-approval letter (not just pre-qualified). A fully underwritten pre-approval letter shows the seller and seller's agent that they are dealing with a serious buyer and that the deal will move faster because a large part of the paperwork process has already been taken care of. Getting pre-approved in a rapidly paced market like the peninsula is a key element in making a strong offer.

#2: Getting The Wrong Mortgage

Many loans like ARM, FHA, VA, and USDA are designed to help you buy a house, no matter what your financial situation is. It’s best to speak with a few different mortgage professionals before you decide on which mortgage product you will go with. It’s important to understand the actual costs involved and how they will affect you for years to come. Some products may end up costing you tens of thousands of dollars in fees and interest.

#3: Not Saving Enough for a Down Payment

One of the worst home-buying mistakes you can make is not saving enough for a down payment. Although it is possible at times to put 5% or even 3%, anything less than 10% is way too low! The extra fees and interest charged in the types of mortgages that allow these smaller down payments will bury you and you’ll feel like you’re never going to pay off your mortgage.

So how much should you save for a down payment? As much as you can but set a goal for 20% of the purchase price. With 20% you will avoid having to pay PMI (private mortgage insurance) which is an insurance for your lender if you were unable to make your mortgage payments.

#4: Not Using a Real Estate Agent

It is important to not only use an agent but to use a local expert. Buyers who decide to go it alone without the use of a real estate professional tend to overpay. With so much information available online to the public, buyers feel they have all the information they need to make an offer on a home. What agents understand are the intangibles that don’t show up on a spreadsheet or can’t be reflected in an online algorithm.

An experienced local real estate expert will help you to:

• Find the latest homes available through the MLS and their agent network

• Give insight about neighborhoods and specific homes and WHY they sold at that price

• Negotiate the best possible price for you

Let’s not forget that buyers’ agents are paid out of the seller's proceeds. Buyers will essentially get this wealth of knowledge and expertise for free!

#5: Assuming The List Price is The Sale Price

Buyers often look at the listing price and imagine the home will sell for that price. What you need to consider is how homes are priced. Sellers and their agents will approach the listing price with different marketing strategies in mind. Some homes are priced to sell exactly at listing price, others are priced purposely low for the area so as to attract more interest and get the home maximum exposure.

For this reason, it’s important for buyers to look at homes below what their pre-approval amount is and give themselves room to negotiate up.

#6: Holding out for the "perfect" home

Waiting to find the perfect home that checks off every single box is most likely not going to happen. Nothing in this life is perfect and if that’s your objective, you may be looking for a long time. Instead, looking for a home that has about 80% of what you want is much more attainable. Hopefully, as you grow into your new home you can make the changes that will close that 20% gap a bit.

#7: Passing on a Great Home Early in Your Search

This happens all too often. A buyer may come across a home they absolutely love and instead of making an offer they opt to keep looking to see what else is out there. It is very possible that you may find the home you want to buy in the beginning of your search.

It’s important to clearly understand what type of home and what neighborhood you want so when you find it, you can pounce on it. Don’t let it be “the home that got away.”

#8: Buying Without a Home Inspection

Spending a few hundred bucks on inspections could possibly save you hundreds of thousands of dollars in the long run. Uncovering issues with the property’s condition can be leveraged in negotiations to help get the buyer a lower price. Not to mention, it gives the buyer a clear picture of what it is they are truly buying and taking away any unfortunate surprises down the road.

Typically in a fast-paced market like the SF bay area, sellers will provide inspection reports as part of their disclosures. However, buyers are always encouraged to conduct their own inspections to satisfy themselves to the condition of the property.

#9: Taking on Credit While Closing

Buying a house with debt is not a very smart thing to do and taking on new debt while you are in the process of purchasing a home is just as bad. Any changes to your credit score or debt-to-income ratio may cause a delay in the closing process. At worst, it could potentially disqualify you from a loan altogether. Make sure you are up-front about all of your financial obligations to your lender and hold off on buying that boat or quitting your job until after you close that escrow!

#10: Not Walking Away From a Bad Deal

Buying a home can be scary at times but overall it should be exciting for the buyer. If you find yourself doubting or second guessing a property more than you are looking forward to it, you may want to consider passing on it. Your Realtor should be able to give you perspective on the home and may be able to substantiate your concerns about the home.

#11: Forgetting About Closing Costs and Moving Expenses

Another common mistake buyers make is focusing so much on saving for a down payment, they forget about closing costs and moving expenses. Closing costs may include loan origination fees, escrow fees, property taxes, insurance, the appraisal fee, and legal fees. Home buyers in California can typically expect to pay closing costs between 2% and 3% of their home's purchase price, depending on price, discount points, transfer taxes and other factors.

And unless you plan on moving everything yourself, moving fees are generally around $1,000-$2,500 for a three-bedroom home.

#12: Not Thinking About Resale Value

Most buyers are focused on how much a home will cost them, how many bedrooms and bathrooms it will have, or if there’s an extra room for their Star Wars memorabilia (some do). Buyers should also be thinking about the home’s resale value. At some point in the future you will eventually sell the home so it’s important to pay attention to the health of the neighborhood. Are the local businesses thriving, are the parks well-maintained, do the schools have high ratings? Most things with a house can be fixed but you can’t change the location. Buy LOCATION!

Honorable Mention:

Buying More House Than You Need or Can Afford

A mortgage is not the only payment you need to make. Consider costs of insurance, HOA fees, property taxes and living expenses.

Not Seeing The True Potential of a Home

Don’t get distracted by easily replaceable ugly carpets or old kitchen cabinets. Focus on layout and buy something with good bones.

Making a Lowball Offer

You don’t want to offend sellers with low ball offers. An experienced agent with local knowledge should help guide you as to price.

Everything That Glitters Ain’t Gold

Don’t focus on the shiny things.  Buyers should be looking at the quality of materials, the quality of construction and the level of finish used.

Overlooking Important Details

Pay attention to the big ticket items such as the roof, furnace, and electrical system. If these problems exist, repair/replacement could be costly.

Buying with confidence is priceless. Educating yourself on the process and working with a knowledgeable Realtor who can expertly guide you will go a long way. Now sit back, take a breath, and get ready to enjoy what you've worked so long to achieve...

Congratulations, you're about to buy a house!!

by Vincent Ergas

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Off-Market Properties

You may have heard about buying or selling a home ‘off-market,’ but what does that actually mean? An off-market home is a property that is for sale but not made available to the general public through the multiple listing services (MLS). It may also be referred to as a “pocket listing”. As such, the real estate agent must do extra legwork marketing a home to potential buyers. This type of sale can be perceived as more ‘exclusive’ however is it right for you? Let’s look at some pros and cons to listing and selling off market, as well as some new guidelines set forth by the National Association of Realtors (NAR).

Why List a Home Off Market?

There are a handful of reasons a seller may opt for an off-market sale. Sometimes a seller wants to test the value of their home without accumulating excessive days on market and the potential of lowball offers. Others simply prefer a private sales process or feel they can maintain more control through an off-market sale.

Pros and Cons of Off-Market Listings

Pro - Seller:  Selling a home off-market offers more privacy. Homeowners who are living in their homes can avoid intrusion of open house foot traffic through personal space and posting photos of their home on the internet. Additionally, in a low inventory market some sellers feel that an off-market listing will be perceived as more ‘exclusive’. They hope that buyers are willing to pay a premium to avoid competing with other potential buyers. 

Con - Seller:  Less exposure to the public means less exposure to buyers. Interest creates competition therefore, a home that can be marketed to generate as much interest as possible is more likely to sell for the highest possible price. You’ll never know if you’ve left money on the table.

Pro - Buyer:  Off-market listings provide additional inventory to buyers. The major advantage is less competition. A trade-off is that typically, the list price is firm and less negotiable. It is always a good idea to have your agent review recent sales comps for the home to support the price.

Con - Buyer: You will never know if you paid too much or too little. This may be fine for you depending on your situation. Remember that if you are getting a loan, the house will need to appraise for the loan to be approved. With any home purchase it is important to be in close communication with your lender!

MLS Statement 8.0 Clear Cooperation Policy

In an effort to curb this secondary market, NAR has enacted the MLS Statement 8.0 Clear Cooperation Policy as of January 2020. This policy aims to create a more equitable market for all buyers. It states:

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public. (Adopted 11/19)

This limits an agent's ability to market an off-market property outside of his/her office. It does not apply to commercial properties, rental properties or new construction with multi units. Exemptions are allowed if a seller wants to keep the listing private as an office exclusive listing. In this case, the marketing can not be passed outside the office of the listing agent. At this time, we have yet to see how this will impact sales in our Bay Area market.

Is buying or selling off-market right for you? You now know the advantages and disadvantages that are involved and what it really comes down to is what best suits you and your housing needs. When working with an experienced local agent, you are exposing yourself to their vast agent network where off-market opportunities will undoubtedly present themselves. To receive the off-market properties in your area, contact me directly. I look forward to working with you. 

By Lindsey Matthews

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.