Real Estate Basics

Avoid These Home Equity Loan Risks

March 25, 2020 By David Warren

If you’re a homeowner, you may be eligible for a home equity loan, or HEL. An HEL is a special loan that allows you to borrow 80% of the value of your home, minus your current mortgage balance. In addition to these loans, banks may also offer home equity lines of credit, or HELOCs. Instead of the lump sum an HEL provides, a HELOC creates a set line of credit that homeowners may use over time. Each month, the borrower may pay the monthly minimum or more, as desired. These lines typically have interest rates that change on a monthly or yearly basis, while HELs typically have fixed interest rates.

While having an additional option for your finances is important, there are also risks that come with HELs and HELOCs. If you fail to make your HEL payments on time, you could risk losing your home while still having to pay the remaining balance. Similarly, failure to stay current on HELOC payments can result in home repossession. Unlike HELs, however, your credit limit through a HELOC can be dropped to whatever you currently owe, preventing you from using any more credit. To stay informed when debating a HEL or HELOC, consider the following:

Be Aware of Variable Rates: A low initial interest rate can be tempting at first, but variable rates are notorious for skyrocketing after the first year. Ask your lender about the worst-case scenario of interest rate changes, especially before pulling the trigger on a HELOC.
Understand Tax Breaks: HELs and HELOCs are enticing because the interest you pay may be tax deductible. In fact, if you’re using the money for home improvements, the interest is tax deductible up to $750,000.
Watch Out for Fees: Many lenders charge large initial or ongoing fees when you wish to borrow against your home equity. In some instances, however, these fees can be waived. Always understand the full scope of these fees before deciding if a HEL or HELOC makes sense for you.
Shop Around: Before deciding on a home equity lender, it’s important to know all your options so you can make the best decision for your situation. Contact me if you have any questions, and I am more than happy to help you find the best fit for your needs.

How Real Estate Professionals Can Help Sell Your Home

March 25, 2020 By David Warren

It has been statistically proven time and again that homeowners selling their houses through professional real estate agents get a higher price than if they try to sell on their own. If you’re considering listing your house, consider these five ways real estate agents can maximize your profit:

Marketing Power: Most home buyers begin their search by checking online listings. When sellers use a real estate agent, their house will be automatically listed on multiple services, casting the net wide for potential buyers. Agents also share listings with other agents, allowing your house to be marketed among clients of those agents as well.
Proper Pricing: There’s no easy way to determine the correct sale price for a home, but an experienced real estate agent will know how to find the sweet spot: not too high to dissuade buyers, but not too low to leave you without your proper profits.
Improvement Intuition: Remodeled homes appeal to broader audiences, but it can be challenging knowing how much to spend on improvements and what to focus on. An experienced agent will have the eye for detail necessary to determine what’s worth fixing up and what isn’t. Making only the essential improvements, be it a coat of paint or selective renovation, will ensure the most profit when the home eventually sells.
Informative Showings: Real estate agents will take care of all the details of showing your house, including scheduling houses and talking with potential buyers. They can also collect feedback from the buyers who decide to pass on your home but would be uncomfortable telling you, the owner, why. Taking note of these reasons will provide invaluable information that will allow you to make listing tweaks and get the house moving.
Paperwork, Paperwork, Paperwork: The actual closing of a home sale requires dozens of pages of complex documentation that the inexperienced seller may find daunting. A real estate agent can guide you through the legalities of the transaction and take care of large amounts of the paperwork, ensuring you don’t become overwhelmed in the final stages of the sale.

Six Life Changes to Avoid When Closing a Home Purchase

March 16, 2020 By David Warren

Finally, after months of searching, making offers, and waiting for approval, you’ve found your perfect home and are well into the escrow process of closing the purchase. From here on out, it should be smooth sailing, and you’re free to start thinking about the next chapter of your life. Right? Unfortunately, that isn’t quite the case. Until the sale has officially closed, there are still things you can do that, while they seem smart, may actually derail the purchase. Here are six life changes to hold out on until you’re totally settled in your new home.

Changing jobs: No matter how attractive that new position or company may be, any occupation switch counts as a major change in status which could invalidate your mortgage approval. It’s best to wait until the keys are in your hand before making a leap like this.
Changing banks: While bank switching can often be beneficial for your personal funds, doing so can add some serious murkiness to your financial situation, resulting in your lender having to start their verification process over from the very beginning.
Applying for new credit: Remember that your mortgage approval was based on your existing credit availability. Any small changes you make in the credit realm can have huge consequences, especially if your situation was borderline.
Paying off debt: Similar to applying for new credit, paying off debt can change your credit status enough to start an eligibility reevaluation. While getting rid of debt is a smart idea overall, it’s best to hold off that extra bit until you’re sure your home loan situation is set in stone.
Changing marital status: It may seem like buying a home together is the perfect moment to solidify your commitment to your partner, but marriage also means a change in how each of your credit is evaluated. While a couple with similar credit may not experience much change, it’s important to avoid any disruption until you’ve totally closed on your home.
Making large purchases: As tempting as getting that new bed, couch, or table may be as you anticipate move-in, it’s best to hold off on any significant changes to your financial situation until your mortgage is delivered and rock-solid

Closing is an exciting time in every home buyer’s life, but don’t let the heightened emotions get the better of you. Have patience with your life and finances during this period, and you’ll find that things will work out smoothly.

What is a FSBO (For Sale By Owner) Home?

March 7, 2018 By David Warren

During your scouring of the Seattle real estate market, you may periodically come across the phrase “for sale by owner”, or “FSBO”. The words themselves are pretty self-explanatory, but what exactly does an FSBO home entail? And, more importantly, what does it mean for you, the buyer?

In the simplest sense, the only difference between an FSBO home and anything else on the market is that the seller is not using a real estate professional to assist with the sale, usually in order to avoid paying commission. Without a hired professional on the seller’s side, it’s up to the seller and you (or your agent) to determine who takes on the duties that might otherwise be handled by the listing agent. These tasks can include holding escrow, writing up contracts, and negotiation.

While the seller is opting to avoid having a professional on their side, it isn’t to say that the seller is necessarily unqualified. While some sellers are not as well-educated as they could be on pricing or negotiation, it’s possible to find sellers who have extensive experience in the market and believe the FSBO route just makes financial sense. The most common places where the seller may stumble are the pricing of their property and the negotiation process. In the case of list price, sellers can sometimes be too emotionally-attached to their home to set a fair price, resulting in an overpriced home that often goes unsold. In the negotiation stage, some sales can be lost due to the seller not wanting to budge, but research by the National Association of Realtors indicates that most FSBO homes actually sell for less than homes sold with agents.

FSBO also doesn’t mean the seller has something to hide. All sellers, whether they have an agent or not, must still adhere to local real estate laws, including full disclosure of problems in the house. However, it’s important to trust your gut, or your own agent, when it comes to how the seller conducts business. Some sellers may not be aware of proper procedure, or want to do things their own way. In these cases, you have every right to request proper procedure, or move on if the transaction becomes questionable.

When considering a FSBO home purchase in Seattle, the important thing is to not treat the house any differently than you would if the home had an agent attached. Negotiate well, enlist help from your real estate professionals, and take the home inspection very seriously. FSBO listings can be viable homes, despite the negative buzz that can sometimes surround them. Who knows—your next Seattle home may end up having been for sale by owner

Why Do I Need A Home Inspection?

March 7, 2018 By David Warren

When faced with the reality of how expensive it already is to buy a home in Seattle, or anywhere else, it’s common to want to cut corners where possible to save money. This is a natural urge, and one of the more common items to consider cutting from the list of fees is the home inspection. After all, why bother paying someone hundreds of dollars to look around a home that you’re perfectly capable of doing a walkthrough on yourself? In reality, the home inspection is one of the most valuable investments you can make during the process of buying a home, and here are a few key reasons why.

Top to Bottom: A typical inspection lasts two or three hours, and costs in the neighborhood of $500. Home inspection often begins at the roof and continues all the way down to the foundation, with several key stops in areas like plumbing, electrical, and heating. Taking in the whole house in one large sweep like this creates a comprehensive list of any and all problems that may need to be addressed before the home is purchased or moved into.

What’s Seen and What’s Not: A home inspector will take a look at many aspects of the house, but there are some things that they will not check, such as inside pipes, the interior of walls, or behind electrical panels. These areas are often best left to specialists, but a good home inspector can usually tell from the exteriors of these areas that there may be a problem in these areas, and offer suggestions on who to contact to take a closer look should that become necessary.

New or Old: Home inspections may seem like a no-brainer for old houses, but what about new constructions? Well, just because a house is new doesn’t mean it’s flawless. A professional home inspector knows not just what to look for in run-down, aged homes, but also what may have gone wrong during a brand-new construction.

Categorizing Issues: A good home inspector won’t just make a list of what’s wrong, but classify the issues as well. This means that they will point out what is an immediate safety hazard, what should be replaced immediately, and what should be monitored but does not need immediate action. Instead of overwhelming you with every issue a potential home has, you will instead come away with something closer to a plan of attack based on the priority of each issue found.

Negotiation Leverage: A full home inspection will provide you with some concrete evidence of what issues your potential purchase has, and you can use these problems in the negotiation phase. You can decide for yourself what is a deal-breaker, what you would like to see fixed before you move in, and what you’re willing to work on yourself after the purchase. The more you know about the home before you purchase, the more room you have to negotiate with the seller for a deal that seems fair on both ends.
Spend Money to Save Money: Sure, a home inspection might cost an additional few hundred dollars up front, but catching small problems before they become big ones can often save you thousands in the long run. Houses are big purchases and big investments, and it pays off to be smart with your money.

A home inspection is among the most valuable tools you have as a home buyer. With the Seattle buyer’s market as competitive as it is, some sellers may consider a buyer willing to waive the inspection as more promising than the competition. This is a risky strategy, and is ultimately your choice. However, a home inspection is far more often than not a worthwhile investment that can make the coming years of home-ownership smoother than going into a new home blind.

Realtor vs. Real Estate Agent: The Difference

February 7, 2018 By David Warren

It’s common for those unfamiliar with the specifics of real estate terminology to use “Realtor” and “real estate agent” interchangeably. In fact, because of how clunky “real estate agent” can sound in conversation, it’s very common to hear people use “Realtor” almost exclusively. Despite the fact that they share many commonalities, these titles refer to two different things, and it’s important to make the distinction. Here are the key differences between the two terms.

A real estate agent is anyone who holds a real estate license. The license can designate someone as a sales professional, an associate broker, or a broker. While the distinctions between the different kinds of real estate agents varies, they are all licensed to sell real estate.

A Realtor is someone who is an active member of the National Association of Realtors, and “Realtor” is a trademarked term owned by the NAR. While many members of the NAR are in fact real estate agents, members also include property managers, appraisers, real estate counselors, and other real estate professionals.

The key difference between a practicing Realtor and a professional in the same position without being part of the NAR is that all Realtors must ascribe to the NAR Code of Ethics. The Code of Ethics consists of seventeen Articles that include putting the interests of buyers and sellers ahead of the Realtor’s own interests, not practicing law unless they are a lawyer, and engaging in truth in advertising.

That’s not to say that real estate professionals outside the NAR don’t follow the same guidelines, or that they aren’t held to the same legal standards. Most real estate professionals you encounter will operate in much the same way, but only Realtors have this additional code that is officially documented and enforced by local real estate boards. This is an attempt by the real estate industry to self-regulate.

When talking about real estate professionals, the terminology you use does in fact matter. “Realtor” comes with its own set of additional guidelines and requirements that “real estate agent” does not, and many real estate professionals fall into one category but not the other, or neither at all. Choosing the correct term when speaking to or about real estate professionals will avoid confusion among all parties.

If you are looking for professional assistance with selling your Seattle area home I highly recommend selecting a broker that is a member of the Realtors association and not just a licensed real estate agent.

David Warren
Managing Broker | Realtor
METROPOLIST

Member of:
Seattle / King Country Association of Realtors
Washington Association of Realtors
National Association of Realtors