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THE BIG NO-NO

So here is an agent’s nightmare: I’ll have an appointment with a client to sign the final closing papers on their new home, and they drive up in a brand spankin’ new car. My clients usually want me to compliment them on their new “ride” when I instead blurt out, “Does your lender know about this?” Hopefully, they say “yes.” If not, we might have a big problem.

 

When you apply for a loan, you are providing a snapshot of your financial picture, with so much income to support so much in payment obligations. Then the lender takes out your old home payment, and inserts your new home payment. As long as that ratio (your debt ratio) is under that lender’s acceptable range, you are OK. However, if you incur any new payments before you buy the home, the lender will have to recalculate your debt ratio to make sure you still meet their criteria. If that new payment takes you over their limit, your loan could be turned down, or they could raise your points and/or interest rate.

 

And just how will they find out about it? Well, first, you are supposed to tell them. You usually sign something when you first applied for your loan that you would alert them to significant changes in your financial picture. Even if you don’t tell them, many lenders run another credit report right before close of escrow, and your new car payment may show up. At the very least the inquiry will show up, which will raise a red flag to your lender as to why an auto financing company is asking for a copy of your credit report.

 

So, put the Tesla brochure down, and step away from the dealership… It’s for your own good!

PAYING CASH

Some buyers pay cash for their homes. It doesn’t happen in our area as much as the Silicon Valley, but it still happens enough to talk about it. Some buyers pay cash and never intend to get a loan on the property. But other buyers pay cash just for negotiating purposes, and then they’ll take a loan out after close of escrow. They think they can get a better deal by paying cash, and for the most part they are right.

 

Most sellers will prefer a cash offer over a financed offer and many will give a cash buyer a bit of a discount. There is less uncertainty regarding the buyer’s loan, the appraisal (although a cash buyer CAN still retain an appraisal contingency, but few of them actually pay for an appraisal) and usually fewer delays at closing.

 

So if you have the cash, this strategy is sound as far as increasing your negotiating power at the time of hammering out a deal with the seller. However, there is a drawback to this approach that you may not have thought of. By taking a loan out AFTER close of escrow, the IRS will likely consider that loan a “home equity” loan, and therefore you could be limited to only writing off the interest on the first $100,000 of the balance. In addition, this loan will likely be considered a “recourse” loan, which means your lender may be able to pursue you personally if you aren’t able to make your payments. If you get a loan to purchase the property, it’s considered a “purchase-money” loan which may provide you some superior legal protection in the event you default. So be sure to consult with your legal and tax experts before employing this strategy!

I AM NOT A TAX OR LEGAL EXPERT AND THIS ARTICLE IS GENERAL IN NATURE.

HOTEL ROOM TRICKS FOR REAL ESTATE

Medium and high-end hotel management companies spend a LOT of time and effort to make their rooms look appealing as possible when you walk in the door. Especially if the rooms are on the smallish side. Here are some tips you can borrow from them if you are putting your home on the market.

Coordination is key – Did you ever notice how the décor in hotel rooms coordinate? Pillows and bedsheets match and towels match in the bathroom. Make sure the patterns complement each other and use multiple textures to create a “layered” look.

Luxury linens – Sometimes you’ll walk into an otherwise dumpy hotel room, but the linens on the bed and in the bath are very high-end, which sets the tone for the whole room.

Concentrate on lighting – Good hotels do a really good job of lighting their rooms. They often layer with overhead, ambient and desk lighting to multiple sources of light.

Accentuate the positive – If you have a view, or a pool, make sure it’s easy to get to and to see. Put colorful drapes around view windows to draw buyer’s eyes. Make sure your pool area is clean and de-cluttered so buyers can see themselves there enjoying the pool. Set out a table and chairs with some plastic glasses. If you have a home office or library, put a nice book out, open with a desk light on so buyers visualize themselves there.

Clean, clean, clean – And then of course, a good hotel company puts a great deal of effort into keeping their rooms looking and smelling fresh and clean. If your furnishings are otherwise old and dated and you can’t afford new ones, just make sure everything is as CLEAN as possible!

 

INTEREST RATE UPDATE

The Federal Reserve recently raised interest rates. That is the first time they’ve done that in about 10 years. Gasp! That must mean that we’ll all be paying higher interest rates and our hot real estate market will cool down, right? Actually, since the Fed raised rates, actual mortgage rates haven’t changed that much. Maybe up a little. So what gives?

 

One of the biggest myths in the financial realm is that the Fed controls mortgage interest rates. They absolutely do NOT. They do control some of the levers that influence mortgage rates. However, the rate your lender quotes you depends most heavily on what the bond market is doing. The bond market looks forward 5, 10, 20+ years in the future. At the moment, the bond market isn’t betting on big increases in rates, so mortgage rates are still down near historic lows.

 

The threat of a global economic slowdown is still looming large in many investor’s eyes. As I write this article, stock indexes across the world are tanking to start out 2016. Historically when this happens, there is a “flight to safety” as investors move their money from stocks to US government bonds. This means the government can offer lower rates of return and still get investors to buy their bonds.

 

On the flip side, China is having major problems right now with their economy and their currency value. Over the last few years they were buying billions of dollars of Treasury bills, which helped keep rates low. But now, in an effort to prop things up, they have started selling billions of dollars of Treasury bills. That may have some upward pressure on rates if that continues. So we very well may see interest rates creep up this year, but most “experts” don’t think it will be a big increase.

SO HOW IS THE MARKET NOW?

The market in East County is still hot, although if inventory continues to rise, we may see appreciation slow later this year.

 

Here are all the good things going on right now for our real estate market: Inventory (number of homes for sale) is still very low and buyers are plentiful. Many people who lost a home due to foreclosure or short sale 2-5 years ago can now qualify to buy again. Interest rates are still incredibly low. The economy appears to a muddling through into a tepid recovery, but a recovery nonetheless. Maybe wages aren’t as high as they could be, but at least the massive layoffs we saw during the “Great Recession” have slowed. The Silicon Valley continues to go gangbusters, and real estate prices there are above the peak prices of a few years ago. That’s driving homebuyers out our way again in droves as they seek affordable housing. Highway 4 is getting better and about to get a whole lot better when the current expansion is completed. Bart is coming to Antioch soon and e-Bart is coming to Brentwood (sometime in my lifetime).

 

Here are the things we need to monitor that may slow things down: Inventory, while low, is starting to rise again, and I’m hearing a lot of agents talk about the new listings they are going to put on the market soon. Many of the investors that bought homes at “the bottom” are looking to cash in their profits. Plus all the homeowners that really wanted to move the past 5-8 years but were “trapped” with no equity can now sell, so look for more homes on the market over the next few months. Affordability is also becoming a problem for many buyers because prices have risen so quickly the last few years.

BATTERY CHIRP

So lately I’ve been battling “low battery chirp” at my home, my office and my parents’ home. I’ve learned a LOT about these detectors that I didn’t know before! I woke up at 3 am a few weeks ago due to a smoke detector chirping, and of course it was a super-high ceiling in my house, so I had to get the extension ladder out while wearing my pajamas. Good luck going to sleep after THAT!

 

A few days later I hear chirping at my office. We have quite a few close to each other, so it was hard to tell which one was chirping. I take them all down and start replacing batteries one at a time, but I still hear chirping. Come to find out that some detectors keep a small charge even AFTER you remove the battery, so they can still chirp for a while even WITHOUT a battery. So it wasn’t until I replaced ALL the batteries that I finally got rid of all the chirping.

 

Then a week later my mom calls because she is hearing chirping. Hey, I’m an expert at this now! So I replace all the batteries in her detectors and put them back up. A few minutes later, “Chirp!” I take them all down and test the batteries, which test fine, but still I hear a “Chirp!” somewhere, but it doesn’t seem like it’s coming from any of the detectors. I take them all down and put them in a sealed box in the garage but I still hear a “Chirp!” inside the home. I’m thinking I’m either going insane, or I’m on some hidden camera TV show! Finally I pay attention to the plug-in carbon monoxide detector and IT’S the one chirping! Apparently these detectors now have battery backup (the first few I bought years ago did NOT have them) so now you know!

 

HANG IT PERFECT

If you come to my house, the first thing you’ll notice is the noise. Five kids will do that! The second thing is that I am HORRIBLE at hanging things on the wall! I don’t know that any of our pictures are actually level, but it’s not for want of trying. I measure, then I measure again, I make marks on the wall, hold up a level, put the first nail in, then check again with the level before I put the second nail in, etc. but all to no avail. So then I take the picture down and put another nail in slightly higher or lower as needed, but it seems like it’s never quite right, and my walls end up with tons of holes in them.

That’s why I was so excited to see an ad in a recent real estate agent magazine for a device that helps you hang pictures easily and LEVELLY! It’s called “Hang It Perfect” and it runs about $20-30 depending on the size you get.

It has a cross beam, and then two arms that you line up with the hooks on the back of your picture. You line them up, then tighten them, then set it against the wall where you want to hang something. Then you look at the built-in level to make sure it’s lined up correctly and press to make small indentations in the wall where the nails should go. Set the device aside, then pound in a couple of nails and hang your art. Awesome!

You can learn more here: http://hangitperfect.com. I don’t get a dime from this. Just thought it was a cool thing that you’d probably benefit from if you are picture-hanging-challenged like me!

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