What is Earnest Money, and Can I Skip It?

If you have questions about earnest money, you’re not alone. All first-time buyers (and many experienced buyers!) ask questions like:

• What is earnest money?

• How much do I need?

• Is it required?

• And what happens to my earnest money?

Don’t worry; we can answer all of these earnest money questions for you. 

What is Earnest Money?

Earnest money (also known as a good faith deposit) is the money you put down when you get a home under contract to show the seller that you’re serious about seeing the deal through to closing. 

Remember, if a seller accepts your offer to purchase their home, they take their listing off the market in anticipation of the transaction being completed as planned. So if you back out, the sellers are in a tough spot. Not only will they have missed out on potential buyers while the home was off the market, but they might also have future buyers question whether something might be wrong with the house to have caused the deal to fall through. 

If buyers have an earnest money deposit on the line, they’re less likely to cancel on a whim.  

How Much is Earnest Money?

Earnest money in California typically falls somewhere between one and three percent of the home’s purchase price. So on a $1 million home, for example, the earnest money would likely be between $10,000 and $30,000.

The exact amount usually depends on market conditions and competition for a specific home. In a seller’s market, the earnest money will probably fall closer to three percent, but for a home that’s been sitting on the market for a long time with little interest, the seller might accept earnest money toward the lower end. 

Is Earnest Money Required?

Earnest money isn’t a legal requirement, but it’s a widely-accepted industry standard. So for all intents and purposes, earnest money is required if you’re going to get a seller to accept your offer.

Who Do I Pay the Earnest Money To?

You’ll pay your earnest money to the escrow company that will be handling your transaction. The escrow company is a neutral third party that keeps your money safe until it’s ready to be distributed. You should not pay your earnest money to the seller directly.

What Happens to My Earnest Money?

Assuming that everything goes according to plan, your earnest money will be applied toward closing costs to complete the transfer of the property. The escrow company will disperse the funds as needed to close the deal. But things don’t always go according to plan.

If you back out of the deal without a valid reason, the seller has the legal right to keep your earnest money to help offset the damage caused when they took their listing off the market for you. In this case, the escrow company will disperse the earnest money to the seller. 

But if you have a valid reason to back out of the deal, your earnest money will likely be refunded. Generally, if a contingency is not met, you have a valid reason to cancel the contract within the contingency period and get your money back. Contingencies are simply conditions that need to be met for the deal to close. They often include conditions like:

• The property needs to pass inspection to the buyer’s satisfaction, and

• The home needs to appraise for an amount greater than or equal to the purchase price.

If these conditions can’t be met, you can probably get your earnest money back (assuming you completed your responsibilities timely). 

Smart buyers know that they need professional representation by a licensed real estate agent when buying a home. Your agent can help you find a home, negotiate on your behalf, guide you smoothly through escrow, and offer earnest money guidance to make sure you’re protected. And since sellers pay real estate agent fees, it costs you nothing to hire an agent!  

Contact Sequoia Real Estate today for a free consultation with one of our experienced buyer’s agents. 

The Home Seller’s Escrow Checklist

Whether you bought your California home three years ago or three decades ago, you probably remember a thing or two about the escrow period, which gives buyers and sellers a chance to work out the details of their real estate transaction over a period of around 30-45 days. 

Many of the tasks will be handled behind the scenes by professionals like real estate agents, title reps, escrow agents, and loan officers. And many of the tasks will be handled by the buyers. But there are a few important things you’ll need to do during escrow as the home seller.   

Here is your home seller’s escrow checklist.

• Complete Several Important Disclosures

California law requires sellers to disclose material facts about the condition of the property and the area around the property. This means that you must notify the buyers if you have important information that could affect the buyer’s decision to purchase your house. Seller disclosure forms make it easy to list this information for the buyers. And they serve as a handy reminder of material information you might not otherwise remember to document.

If you’re working with a qualified real estate agent to sell your house, your agent will have all the disclosures ready for you to complete and sign. Your agent can even compile a list of new construction or infrastructure projects in the area to make sure you meet the requirements for disclosing neighborhood information.

• Make the Property Available for Inspections

The buyers have the right to inspect the property before closing the deal. In nearly all cases, the buyers will have a licensed home inspector examine the house and outdoor areas. The buyers might also want to arrange for a specialty inspection (like a termite inspection, chimney inspection, or pool inspection) in some cases. It is your job to make sure the inspectors have access to the areas of the property they have been hired to examine. 

It’s important to note that many lenders require their borrowers to have certain inspections. And many government-backed loans require specialty inspections as well. FHA loans, for example, require a termite inspection if any termite damage is suspected.  

• Complete Required Repairs

In many cases, especially in a hot seller’s market like we’re seeing in California, buyers won’t ask for any repairs. But there may be times when repairs aren’t just requested but are required. If, for example, your buyer is planning to use an FHA loan to buy your house, the loan can’t be issued until any termite damage is repaired. FHA loans can only be issued if the house is safe, secure, and sound, so sellers might need to make repairs to correct any issues in the home that would affect any of those three criteria. 

• Facilitate a Final Walk-Through

Your buyers will have the chance to conduct a final walk-through with their agent to make sure the house is in the same condition it was in when they first agreed to buy it. All you have to do is maintain the condition of the property through the escrow period, and make sure the buyers have access to the property near the closing date to complete their final walk-through. 

• Sign the Closing Docs

And finally, you get to sign the closing docs in front of a California notary to make the deal official!

While this home seller’s escrow checklist might be short, complications can creep up at any step. You may have questions about what needs to be disclosed, and what does not. Or you might need professional guidance to respond to buyer requests for repairs. 

Make sure you choose a listing agent who knows, not just how to market your house for sale, but also how to navigate the escrow process. Contact Sequoia Real Estate for a free consultation with an experienced real estate professional who knows how to guide you smoothly from contract to close!

What’s an Appraisal and Why Does it Matter?

Home appraisals are something of a necessary evil in real estate. We need appraisals to confirm the value of a property before the lender will fund the buyer’s purchase, but if the home doesn’t appraise, it can lead to complications and even potentially lead to a deal falling apart. 

Whether you’re buying or selling, here’s what you need to know about home appraisals. 

What Exactly is a Home Appraisal?

A home appraisal is a professional valuation of a home by a licensed real estate appraiser; it tells you how much the home is worth based on market data. 

If you (or your buyers) are getting a mortgage loan to purchase a home, the lender will order an appraisal once the home is under contract. The lender needs to know the market value of the property because they could end up owning the property through foreclosure if the buyer fails to make their mortgage payments.  

But appraisals aren’t just for homebuyers. They’re also regularly used to confirm the current value of a home when a homeowner decides to refinance their mortgage. 

What is Considered During an Appraisal?

Appraisals are a complex financial calculation based on recent sales of similar homes in the same general location. The idea is that sales prices indicate how much a buyer is willing to pay and how much a seller is willing to accept on the open market, and if a similar home located nearby recently sold for a certain price, your home will be worth about the same price. 

When conducting an appraisal, appraisers typically look at factors like:

• Date of the sale,

• Property location,

• Square footage and lot size,

• Number of bedrooms and bathrooms,

• Year built,

• Quality of construction and condition of the home,

• Views and amenities,

• And literally any other factor that could materially affect the value of the home.

Despite extensive training to standardize the industry, home appraisals are somewhat subjective because different appraisers could prioritize different factors. Which is a more comparable sale: the house next door that sold over six months ago or the house a mile away that sold yesterday? The answer isn’t always clear. In a fast market, the recent sale is probably more comparable, but if the house one mile away is in a different zip code or school district, the home next door may be more comparable. 

This is the art of appraisal. And it’s why two appraisers can calculate different values for the same home.

How Much Does an Appraisal Cost?

A home appraisal in California usually costs between $300 and $500. The fee is most often paid by whomever orders the appraisal. But if the appraisal is ordered by a lender, the lender will pass the fee along to the borrower. 

Why Appraisals Can Cause Trouble

The lender won’t allow the buyer to borrow more than the home is worth. In fact, most lenders require that the house be worth far more than the loan amount, depending on the loan type and borrower’s credit history. Generally speaking, your down payment covers the difference between the purchase price and the loan amount. So as long as the appraisal says the home value is at least as much as your purchase price, there’s no problem!

But if the appraisal comes in below the purchase price, there could be a potential problem. In most cases, the lender will refuse to exceed their predetermined loan-to-value ratio (LTV). If the lender says they will loan 90% of the home’s value, the buyer needs to come up with the other 10%. So if the appraisal is lower than the purchase price, the buyer needs to either:

• Come up with additional cash,

• Convince the seller to reduce the purchase price,

• Or, as a last resort, walk away from the deal.

If you’re in this situation, you might even want to get a second opinion from a different appraiser. Remember, different appraisers can arrive at different values for the same home. A second appraisal will cost you a new appraisal fee, but if the new appraisal comes in higher, you could save yourself a lot of trouble. 

Having an experienced real estate agent in your corner is critical when navigating potential issues like appraisals. Agents at Sequoia Real Estate are trained in reviewing comparable sales to help determine property values, and they can help you decide if your appraisal is fair or if you need a second appraisal. Your agent can also help you understand which of your options can yield the best results under current market conditions. 

If you have a question about appraisals, or you have questions about buying or selling a home in the Bay Area,  contact Sequoia Real Estate to get honest answers from reliable experts. 

Subtle Ways to Make Your Home More Appealing to Buyers

There are several obvious ways to make your home more appealing to buyers. Making sure the home is clean, tone down loud paint colors, and tidy up your landscaping to enhance curb appeal. But then there are also several subtle ways to make your home more appealing to buyers. And these subtle changes can make a big difference in helping your buyers feel more at home, which ultimately increases your chances of getting a solid offer. 

Here are four subtle ways to make your home more appealing to buyers.   

1. Depersonalize

When buyers see family photos, awards, and sports memorabilia everywhere they look, they are constantly being reminded that this is someone else’s home. Psychologically, this makes it more difficult for buyers to imagine this as their own home. 

To help buyers feel at home and imagine themselves living in the space, store the personal keepsakes, and use neutral decor. The less personal you can make your home, the better. It’s only for a short time, and you’ll be reunited with your favorite personal things in your new home! 

2. Create Inviting Lighting

Lighting plays a major role in making a space feel inviting. In smaller rooms, make sure the windows are clean and that the blinds and drapes are wide open to allow as much light in as possible. This will make the room feel brighter and larger. And if you’ll be doing nighttime showings, make sure you have ample lighting. It helps to have all the lights on when buyers enter the home (as opposed to turning lights on and off as they progress through the home tour).

And for large areas, lighting can be used to create more intimate spaces. Lamps around a conversation area, under-cabinet lighting in the kitchen, and spotlights to highlight architectural features all create a mood that draws buyers in. 

3. Pay Attention to Scent

Scent is tricky because most of us don’t notice smells in our own homes. We’re used to the pet smells, cooking smells, or smoking smells that can put buyers off. 

Unfortunately, it’s not as simple as using sprays or plugins to create a fresh scent. Many of the air fresheners on the market smell like chemicals or are nauseatingly overpowering. Your better bet is to keep houseplants, which can help clean the air inside your home. If you have a showing scheduled, you can light high-quality candles or even bake cookies just before your buyers arrive to make your home smell inviting. 

4. Clean Out the Storage Spaces

There is never enough storage space! And when your buyers open cabinets and closets (which they will), and they see things packed in tightly, they immediately think there must not be enough storage space.

To give the impression that your house has more storage space than you know what to do with, clear those cabinets and closets out. You can store everything you won’t need until the move with a friend or at a storage facility. If you have just a single stack of towels in your linen cabinet, that cabinet looks huge. And your coat closet will look massive with just one coat per person hanging neatly.

We know it can be hard to see your house through fresh eyes. That’s why our experienced real estate agents offer personalized suggestions to help you make your house show its best! No detail is too small when it comes to maximizing the profits on the sale of your home. 

If you’re considering selling your Bay Area home, contact Sequoia Real Estate for a free, no-obligation consultation. We’re excited to show you how much you can get for your home! 

The Homebuyer’s Escrow Checklist

A lot has to happen between the time your offer is accepted and the time you get to pick up your keys and move into your new home. This period is called “escrow,” and it typically takes around 30-45 days in California. 

If you have a professional real estate agent representing you (which you absolutely should; the seller pays all real estate fees, so it costs you nothing to hire a real estate agent), your agent will coordinate with other industry insiders to handle several tasks behind the scenes. These include:

• Opening escrow with an escrow officer,

• Arranging to have a title company confirm that the title to the property is clear of potential ownership discrepancies, and

• Collecting relevant disclosures from the sellers.

While your agent is working on that, they’ll also help you complete the critical tasks that require your direct attention. Here is your homebuyer’s escrow checklist.

• Pay Your Earnest Money

Earnest money is the small deposit you pay into the escrow company as soon as your agent opens escrow on your accepted offer. This money shows the seller that you are serious about completing the purchase. 

• Order Your Inspection

The home inspection should be ordered as soon as possible. It’s highly unlikely that the inspection will uncover any deal-breaking issues, but you want to know the condition of the property early in the deal just in case any serious issues require renegotiation.

• Work With Your Lender to Secure Your Loan

If you’re getting a home loan, you’ll be working with your lender through the entire escrow period. Initially, you’ll need to provide your financial records to confirm eligibility for the loan. Even though you were pre-approved before starting your home search, the lender needs to make sure that your financial situation has not changed. Then, the lender will continue checking on you every week to:

• Make sure you’re still employed,

• Confirm that you don’t have any new debts,

• Make sure you don’t suddenly have a large expense or deposit that changes your financial picture.

• Review the Appraisal

The appraisal is used to confirm the value of your new home. This is especially important if you’re getting a loan because the lender needs to know that the house is worth at least the amount that they are lending. In most cases, the appraisal comes in with a value at or above the agreed-upon price. But once in a while, the appraisal comes in low. In that case, we need to decide if it’s worth paying the difference out of pocket or if we need to reopen negotiations. 

• Complete a Final Walk-Through

Before signing the final closing docs, you’ll have a chance to walk through the new home one more time to make sure it’s in the condition you expect. This gives you the opportunity to make sure that specific fixtures, appliances, and furniture that were included in the deal are all present and that no additional damage was done to the home as the previous owner moved out.

• Sign a Small Mountain of Paperwork

To be clear, you’ll be signing paperwork all escrow long. In the beginning, you’ll get a flurry of disclosures from the seller to let you know about any potential issues the sellers are aware of. Then you’ll get a document here and there as we progress through the inspection and title search processes. But the mountain of paperwork comes toward the end when you sign your loan docs. Ask your lender for a copy of the docs several days before your signing appointment so you have time to review them before you sit down with the notary to sign.

• Wire Your Closing Costs

When all your i’s are dotted and t’s are crossed, it’s time to wire your closing costs to the escrow company. Make sure you confirm the wire instructions directly with your escrow officer. And give yourself a few days to make sure the funds transfer on time so the closing doesn’t get delayed.  

Oh, and don’t forget to pack and arrange movers while all of this is going on! 

Don’t worry if this homebuyer’s escrow checklist feels a little overwhelming; your real estate agent will guide you through each step. They’ll let you know exactly what’s needed and when. 

If you don’t already have an agent, contact Sequoia Real Estate for an organized real estate professional to make the escrow process as smooth as possible for you!

Home Inspection 101

Home inspections tend to make both buyers and sellers a little nervous. Both parties are afraid that some unknown problem will be found in the home that could be expensive to resolve or could even kill the deal. But inspections are a critical safeguard in the homebuying process, making sure everyone is aware of the condition of the home before completing the property transfer.

Here’s what you need to know about home inspections. 

What Exactly is a Home Inspection?

A home inspection is when a qualified home inspector visually examines a house to document the current condition of the structure and its systems.   

It’s most common for a home inspection to be ordered by a homebuyer when their offer gets accepted. But it’s also normal for sellers to get a home inspection before listing their home, just to avoid any surprises in the selling process.

What is Covered During a Home Inspection?

The typical home inspection covers the areas of the home that are visible to the inspector, including:

• Walls, floors, and ceilings,

• Doors and windows,

• Visible foundations,

• Heating and cooling systems,

• General electric,

• General plumbing,

• Roofing and any attic space.

But some areas of the home are either inaccessible to the inspector or require a specialized inspector. These areas are not included in the inspection:

• Sewers and plumbing interiors.

• Anything happening inside the walls that isn’t visible from inside or outside of the house.

• Asbestos, radon, or pests.

• Specialty items like pools or fireplaces.

If you are concerned about any of the areas not covered by the standard home inspection, you can contact specialists to conduct additional inspections. Termite inspections, for example, are commonly done separately from the home inspection in California.

How Much Does a Home Inspection Cost?

Home inspections in California typically cost between $300 and $600, depending on the size of the home. This amount covers the inspector’s time to physically examine the home as well as the time it takes the inspector to write up a detailed inspection report. 

Additional specialty inspections usually cost somewhere between $100 and $200 each. 

Inspections costs are typically paid by the party that orders the inspection. 

What to Do With Your Home Inspection Report

Be warned: your home inspection report will be full of issues that the inspector will recommend you address. But, in fact, most of the items listed in the inspection are simply noted for your information.

Issues will typically fall into one of three categories:

1. For your information. It is the inspector’s job to note that the imperfection, but no action needs to be taken.

2. Could potentially become an issue at some point. These items should be addressed in the future, but there is no urgency.

3. Needs to be addressed. Some items need to be addressed immediately. Depending on the buyer’s loan type, they may even need to be addressed before the lender will fund the purchase so the deal can close. In a seller’s market, these urgent issues are most often paid for by the buyer, but in a buyer’s market, they are often handled by the seller. In some cases, they can be grounds to reopen price negotiations. And in extreme cases, they may cause the buyer to walk away from the home.

Having an experienced real estate agent in your corner is critically important when it comes to navigating your home inspection. Not only can your agent provide a recommendation for a reputable home inspector, but they can also comb through the inspection report with you to help you prioritize items and decide how to proceed. 

If you’re a seller getting a pre-listing inspection, your agent can advise you on which items (if any) should be addressed before listing your home on the market. And if you’re a buyer, your agent can negotiate on your behalf to get serious issues resolved or perhaps to renegotiate the purchase price to offset the serious issues. 

Whether you’re buying or selling, contact Sequoia Real Estate today for a free consultation with one of our experienced real estate professionals. 

What More Inventory Means for Buyers and Sellers

More homes were listed in the Bay Area in the summer of 2021 than we had seen in the past year. In the real estate industry, we call these listed homes “inventory.” When more homes are on the market, there is more inventory available. This increased inventory naturally changes the market dynamics. 

But what brought about the increased inventory in 2021? And what does it mean for buyers and sellers?

Why Did Inventory Increase?

Inventory in 2020 was exceptionally low nationwide. This was due to a combination of under-building and low turn-over as more homeowners decided to stay in their homes longer (either because of uncertainty amid the pandemic, the desire to age in place, or because they were afraid they wouldn’t be able to find a new home).

But by June 2021, new listings increased 5.5% year over year and 10.9% compared with May as more homeowners chose to list their homes for sale.

There are several reasons inventory increased from 2020 to 2021:

• Home values have increased dramatically nationwide, making it more enticing for owners to sell.

• As working from home became a long-term possibility for many office workers, some owners have decided to sell their homes in high-value areas and relocate to areas with a lower cost of living.

• As inventory increased, owners became more confident in their ability to find a replacement home, so they are more comfortable listing their homes for sale.

• It’s also likely that more sellers felt comfortable having buyers tour their homes as COVID-19 vaccines rolled out through the area.

So What Does More Inventory Mean for Buyers?

As long as buyer demand remains consistent, things will get a little easier for buyers as inventory increases. You’ll have more homes to choose from, meaning you can be slightly more discerning and take a little more time to consider your options. It also means you’re less likely to encounter competing offers, and you’ll have a little more leverage in negotiations with sellers.

But you should still have a sense of urgency in today’s market. Homes might not be selling in two days to an all-cash buyer after a fierce bidding war, but it’s still a competitive market. You still need to be decisive, act quickly, and bring your best offer if you want to secure a home this year and lock in today’s low interest rates.  

And What Does More Inventory Mean for Sellers?

For sellers, more inventory means more competition. Buyers will have more options, so you need to make sure your home stands out in the crowd. You’re also less likely to see bidding wars and offer prices substantially over the asking price when inventory increases.

But there’s still time for you to capitalize on the extreme seller’s market of 2021. Sellers still have an advantage because buyer demand still exceeds available inventory as we prepare for the autumn season. Use these market conditions to get a high-priced offer on your home while you still can.   

Are you on the fence about buying or selling? The team of experienced professionals at Sequoia Real Estate has the market knowledge and industry insight to help you make informed decisions. Contact us today for a free, zero-pressure consultation 

When Is the Housing Market Going to Crash?

Home values in the Bay Area (and all over the country) have been rising faster than we’ve seen in years. While this is great news for homeowners looking to sell in the near future, it’s making some buyers a little nervous. These buyers wonder, “What if the market crashes right after I buy a home?”

Let us put your mind at ease. We might not have a crystal ball, but we can examine current market indicators to predict how the market will behave in the coming years. 

What the Current Market Tells Us About the Future Housing Market

Comparing housing market data from July to housing market data from earlier in the year shows us which direction the market is moving. 

Take the Oakland market, for example. 

• In July 2021, prices were up an impressive 14% year-over-year, but this is a slight decline from the 16.6% we saw in May.

• The average Oakland home sat on the market for only 14 days in July, but this is slightly longer than the 13 days we saw all spring.

• Only 11.2% of listings dropped their price in July 2021, but that’s still higher than the 6% we saw in April.

This data indicates that the buyer frenzy seems to be slowing to more sustainable levels. Each submarket is unique, but most Bay Area submarkets are seeing a comparable shift.

So When Is the Housing Market Going to Crash?

Based on the market data from the past decade, we can be fairly certain there won’t be a market crash at all. And this professional opinion is shared by the majority of real estate experts.

Headlines often imply that rising home values mean there’s a housing bubble that will burst. But rising home values don’t necessarily mean there’s a housing bubble. A housing bubble is caused by factors outside of supply and demand. For example, the housing bubble we saw early in the 2000s was a result of irresponsible lending practices. This led to homeowners owing more than they could ever reasonably afford to pay back, often on multiple properties.  

Today’s rising values are driven by legitimate supply and demand factors. So instead of creating a bubble and an impending market crash, our market is creating slightly inflated home values that will slowly correct themselves to fair market values over the course of several months or even years. 

The important thing to remember is that the market may not be in danger of crashing, but it also can’t last forever. So savvy buyers and sellers are capitalizing on these conditions while they can.  

How You Can Take Advantage of this Market

If you’ve been thinking about buying or selling, you can take advantage of these hot market conditions while they last. 

For sellers, all you need to do to capitalize on this market is list your home with an experienced real estate professional. Many listings are still getting multiple offers, favorable terms, and even bidding wars. A REALTOR will know how to best position your home on the market to maximize profitability. 

For buyers, you can take advantage of today’s low interest rates, which boost your purchasing power by allowing you to spend more on your home and less on mortgage loan interest. Plus, no one can tell exactly how long this growth will last or how much prices will increase over that time. Yes, you could wait until the market cools into more of a buyer’s market. But are you willing to wait for an unknown period and risk paying even higher prices?

When you’re ready to buy or sell, the team at Sequoia Real Estate is here to give you professional guidance with world-class service. Contact us today for a free, no-obligation consultation. 

What Type of Mortgage Loan is Right for Me?

The type of mortgage loan that’s right for you depends on several factors, including your unique financial situation and the type of property you’re purchasing. 

Here is a quick rundown of the most popular mortgage loan types to help you decide which is the best fit for you. 

Conventional Loans

Conventional loans are the industry standard and are the best option for a wide range of buyers. 

As long as you have good credit (around a 620 credit score for most lenders), and you’re not looking for an excessive amount of money, you likely qualify for a conventional loan that offers:

• Down payments as low as 3% of the purchase price.

• Flexible loan terms.

• Minimum property requirements (you can finance your primary residence, second home, or investment property, located in any residential area).

FHA Loans

FHA loans were designed for first-time homebuyers and are backed by the U.S. Department of Housing and Urban Development (HUD). If you don’t meet the income or credit requirements for a conventional loan, an FHA loan might be a better fit to help you buy a primary residence. 

FHA loans offer:

• Lenient income and credit requirements (you can qualify with a credit score as low as 500).

• Down payments as low as 3.5%.

• Down payment assistance programs for qualifying borrowers.

VA Loans

VA loans are backed by the Department of Veteran Affairs, specifically to help active military members, veterans, and their families own their homes. 

If you qualify for a VA loan, you can take advantage of benefits like:

• $0 down payment (plus no private mortgage insurance),

• Very low interest rates,

• Lenient credit requirements,

• And the possibility of buying a property with up to four units (as long as one of them is your primary residence).

USDA Loans

USDA loans are backed by the United States Department of Agriculture to help buyers of low-to-moderate income purchase properties in rural areas. To qualify for a USDA loan, the home must be located in a qualifying rural area, so your options are limited. But if you find a qualifying property, and you qualify based on the income limits, you can take advantage of:

• $0 down payment,

• Below-market interest rates,

• And no loan limits (unlike FHA loans, which are capped at specific amounts).

Fixed-Rate or Adjustable-Rate?

Any of these loan types can be taken with a fixed interest rate or an adjustable interest rate. 

Fixed-rate loans are best when interest rates are low; this allows you to lock in the low rate for the entire term of the loan. 

With an adjustable-rate mortgage (ARM), on the other hand, your interest rate will change over time as the going market rate changes. Adjustable-rate loans are a better option when interest rates are high and are expected to come down in the future. 

When you have questions about the complexities of buying a home (like how to choose a mortgage loan or mortgage lender), the team of experienced real estate professionals at Sequoia Real Estate is happy to assist you. We offer free, no-obligation consultations to answer your questions. And because real estate agent fees are paid by the seller, it costs you nothing to hire professional representation in your home purchase. Contact us today to get all your questions answered!

The Pros and Cons of Listing Your House For Sale by Owner

With today’s seller’s market conditions, some sellers are wondering if hiring an agent is worth the expense. After all, when homes are in such high demand, you might be able to sell without professional representation and save on real estate fees. 

But before you decide if going For Sale by Owner (FSBO) is the right move for you, consider the pros and cons.   

The Pros of Listing Your House For Sale by Owner

The main reason most FSBOs decide to try to sell on their own is that they want to save money on the real estate agent commission. Real estate commissions typically run between 5 and 6% of the home’s sales price, so you can save a substantial amount if you're successful in selling without an agent. Just remember that sellers typically pay both the listing agent and the buyer’s agent, so if you want to work with buyers who have an agent, you might have to pay between 2.5 and 3% of the sales price for the buyer’s agent anyway. 

Another pro: in a seller’s market, you have a better-than-normal chance of successfully selling your home. Buyers are willing to look at non-traditional listings like FSBOs where there is less buyer competition when they can’t find the right home on the MLS.

And finally, when you go FSBO, you’re in complete, direct control. There’s no need to worry about misunderstandings or disagreements with your real estate agent when you’re acting as your own agent!

The Cons of Listing Your House For Sale by Owner

While the pros might sound nice, the cons of listing your home FSBO usually far outweigh the few pros. 

The biggest downside to selling FSBO is that you’re not going to maximize your sales price. Year after year, homes sold by agents consistently sell for far more money than those sold FSBO. In 2020, for example, the average agent-represented home sold for 35% more than the average FSBO home. The higher price demanded by agent-represented homes far outweighs the real estate commission expense.

Here are some of the reasons for the sales price difference and some additional cons of going FSBO:

• You need to have the knowledge to properly price, stage, and market your home to sell it successfully.

• Without access to the MLS, you’re dramatically limiting your pool of potential buyers.

• Investors often target FSBO listings to get a deal on their next investment property. If you don’t understand the market and the selling process, investors could take advantage of you.

• You might not have the sales and negotiation skills required to successfully sell a home.

• Properly marketing a home often comes with upfront advertising expenses. When you list with an agent, the agent pays these expenses, but when you go FSBO, you’re stuck with the costs, even if you are unable to sell your home.

• Selling real estate without fully understanding the contracts and disclosures leaves you open to legal liability.

Should You List For Sale by Owner or Hire a Real Estate Agent?

There are only two times when it is statistically beneficial to go FSBO:

1. When the sale is not intended to be an arms-length transaction. If you’re selling to a family member for less than market value just to keep the property in the family, you might not need agent representation.

2. When you have direct real estate industry experience and buyer connections.

If you don’t fall into one of these two narrow categories, your best bet to maximize profits and sell quickly is to list your home with a professional real estate agent. Contact Sequoia Real Estate today for a free, no-obligation with an experienced listing agent, and see how much you can get for your home in today’s hot market.

7 Insider Tips for Choosing the Best Buyer's Agent

Are you looking for the best buyer’s agent to help you purchase your new home? With so many licensed real estate professionals in the Bay Area, it can be hard to figure out which agent is the best fit for you.

But we have seven insider tips for choosing the best buyer’s agent to help you get the best possible home buying experience.  

1. Interview Multiple Candidates

You might already have a friend or relative in the real estate industry, but you owe it to yourself to interview more than one person for the job. You’re looking for someone who has the local market knowledge, skill, and experience to properly represent you. Here are a few questions to ask:

• How is the real estate market? You want to see if your candidate can give you a detailed answer about the state of the market without looking up statistics.

• What can you do better than the other buyer’s agents in the area? This will give your candidates a chance to tell you about their skills.

• How many buyers have you represented? This is a better representation of experience than asking how long an agent has been in the industry since many agents go months between deals.

2. Check Online Reviews

Reviews aren’t everything, but they can be a good indicator of the general public’s experience with a buyer’s agent. Don’t let one or two bad reviews scare you off, but pay attention to what buyers generally liked and disliked about working with a particular agent. 

3. Ask Your Candidates About Their Availability

Many agents work part-time around other family or business commitments. And that’s fine as long as you’re aware of their availability and are ok with it. But when you’re trying to buy a home in a fast-paced seller’s market, you might be more comfortable with a full-time agent who can be available during evenings and weekends to best suit your schedule. 

4. Know the Difference Between a Real Estate Agent and a REALTOR® 

All real estate agents are licensed by the state to handle real estate transactions on behalf of buyers and sellers. An agent can only be called a REALTOR if they belong to the National Association of REALTORS (NAR). The key difference is that REALTORS are held to the NAR Code of Ethics, which is more strict than the state regulations. 

5. Get Familiar with the Relevant Designations and Certifications

Many agents choose to take additional courses to earn a designation or certification in a particular area of real estate. When you’re choosing the best buyer’s agent, you might look for things like CRS (Certified Residential Specialist), ABR (Accredited Buyer’s Representative), or the wide-reaching GRI (Graduate of the REALTOR Institute). 

6. Choose Someone You Are Comfortable Spending Time With

You might find your dream home on your first day of house hunting. But it’s likely to take longer than that. You’ll probably spend a fair amount of time with your buyer’s agent as you tour homes, discuss your offer strategy, and work through the escrow process to close on your new home. So it’s important to choose someone you’re comfortable spending a little time with. After all, your house hunt should be enjoyable!   

7. The Best Buyer’s Agent Is One Who Will Put Your Goals First

At the end of the day, the best buyer’s agent is one who will put your goals first. If you are budget-conscious, you need an agent who respects the budget and works to find you something affordable. Even if that means a lower commission for them. Take a little time to thoroughly explain your goals to your candidates and ask what they can do to help you meet your goals. 

With homes selling so fast, it’s important to get a buyer’s agent in your corner early in the process. They can keep an eye on the market for new listings that meet your needs. And, even better, with their industry connections, they might even be able to give you a heads-up on new listings before they hit the market, which will give you an edge in this competitive market.

When you’re ready to start your home search, contact Sequoia Real Estate for an experienced, professional buyer’s agent who will always put your goals first. 

What Are iBuyers (and Should I Sell to One?)

If you’re thinking of selling your home, you may have heard about iBuyers. Despite their low market share (well under 1% each year), iBuyers have made headlines for their unique business model. Sellers are taking note of iBuyers, but many sellers aren’t exactly sure how iBuyers work or if they’re worth using. 

We have the inside scoop on iBuyers and can help you decide if iBuyers are the right fit for you.

What Are iBuyers?

An iBuyer, which is short for instant buyer, is an entity that makes an offer to purchase your home immediately, typically without even a physical property tour. iBuyers use big data and predictive analytics to calculate an offer price based on the public information available online about your home and their models that estimate current property values for your local market. 

You can sell to an iBuyer without ever listing your home on the market, staging your home, or scheduling showings. Once the iBuyer takes possession of the property, it will make cosmetic repairs and resell the home. From the iBuyer’s perspective, the process works almost like a fix-and-flip, but without any major renovation. iBuyers want to get the house resold as soon as possible without investing much time or money in renovation work.   

What Are the Pros of Selling to an iBuyer?

There are several legitimate advantages of selling to an iBuyer, including:

• No guessing game. You don’t have to wonder when your house will sell or the sales price. You’ll have the information upfront.

• A quick sale. You have an offer instantly and can open escrow immediately.

• No updating or staging is needed. Since your house won’t be competing on the open market with other homes, you don’t need to get it market-ready.

• No showings. You won’t have to keep your home show-ready for weeks or months, and you won’t have to work your schedules around showings and open houses.

What Are the Cons of Selling to an iBuyer?

At this point, iBuyers might be sounding pretty good, right? But there are two major downsides to selling to iBuyers:

• iBuyers will offer you less than the market price for your home. If you want a fair value for your home, you’re not going to get it from an iBuyer. Their business models require them to buy at a lower price so they can turn around and sell the house at market value.

• They charge you a fee for selling to them. That’s right, you have to pay iBuyers to buy your home. The exact fees vary by company and market, but it’s generally on par with the amount you would pay in real estate agent fees to sell your home for top dollar.

Should I Sell to an iBuyer?

In a hot seller’s market like the Bay Area is experiencing today, there is very little upside to using an iBuyer. Homes in the Bay Area are selling in around 2 weeks, which means you’re inconvenienced by showings and uncertainty for a very short time. This alone de-values the iBuyer service to the point where it just doesn’t make sense to use one. 

But these conditions won’t last forever. In the future, when homes are sitting on the market longer, you might want to consider an iBuyer service if you’re comfortable accepting less than your home is worth.

If, on the other hand, profitability is more important to you than convenience, you will always be better off listing your home on the open market with a well-qualified real estate agent. Seller’s agents have the local market knowledge, marketing strategies, sales experience, and negotiation skills to get you the best price for your Bay Area home. 

So when you’re ready to sell for top dollar, contact Sequoia Real Estate to get an experienced real estate professional in your corner.

Your Down Payment Savings Plan

If you’re in the early stages of preparing to buy a home, you’re probably getting your down payment savings plan established. How much money will you need? And how will you reach that goal? 

With decades of experience helping buyers just like you land their dream homes, we can tell you how much you’ll need and how to get there. 

How Much Do I Need for a Down Payment?

You may have heard the old rule of thumb that says you need to save 20% of the purchase price for your down payment. But this advice is entirely outdated and no longer true. 

Today’s buyers only need around 3-5% with good credit. Even with less-than-stellar credit, you may be able to find a lender who will allow you to put just 10% down. 

As a first-time homebuyer, you might qualify for the popular FHA mortgage option, which requires just 3.5% down with fair credit. For reference, with the median purchase price in the Bay Area at $1,340,000 (as of May 2021), a 3.5% down payment would come to $46,900.

Be careful not to overlook the additional expenses of buying a home. In addition to the down payment, you’ll want to budget for:

• Closing costs (typically 3-5% of the purchase price),

• Moving expenses,

• And any renovation work you want to complete immediately.

How to Save For Your Down Payment

Now that you know how much you need, you need to figure out a way to save that money. 

Here’s a simple but effective 5-step down payment savings plan:

1. Review your current budget. To know how much you can save each month, you need to know how much cash is coming in and how much is going out. Check your credit cards and bank statements to get an accurate idea of where your money is going.

2. Calculate your monthly savings goal. Divide the amount of money you need by the number of months left until you want to achieve your goal and buy your home. That’s the amount of money you’ll need to save each month. If that amount seems too high or too low, try adjusting your timeframe to change the number of months you have to hit your target.

3. Choose which expenses to cut. We all have areas where we spend unnecessarily. Funneling that money toward your savings goal can help you get there faster.

4. Add income as needed. If you’re struggling to meet your down payment savings goal simply by cutting expenses, you might want to consider adding another income stream (easier said than done, right?). The good news is that the gig economy makes it easier than ever to earn extra money outside of your day job. Whatever marketable skills you have, you can offer your services on online platforms to supplement your income and reach your goal sooner.

5. Automate your savings. This is the secret sauce for savings success. To fool-proof your down payment savings plan, automate transfers to your savings account. Let’s face it...you’re probably not going to remember to transfer the money from checking to savings each month, and then you’re at risk of accidentally spending it. Eliminate this risk by setting up automatic transfers from your checking account to your savings account. Your down payment savings plan is now on autopilot!

To make your new home budget go as far as possible, contact the experienced real estate professionals at  Sequoia Real Estate. With real estate agent fees paid by the seller, it costs you nothing to hire professional representation in your home purchase. And with our sophisticated value analysis and negotiation skills, we will get you the best deal possible on your new Bay Area home.  

5 Costly Seller Mistakes (and How to Avoid Them)

Even in a hot seller’s market like we’re currently experiencing in the Bay Area, there are several mistakes that can cost sellers big money. 

Here are the top five costly seller mistakes and ways to avoid them.  

1. Trying to Sell Without Professional Representation

The single most costly mistake sellers make is trying the “For Sale By Owner” route in order to save on the real estate commission.

In 2020, the typical FSBO home sold for 35% less than professionally-represented homes. Going FSBO costs sellers far more than the typical 6% real estate agent commission. There are several reasons for this dramatic difference:

• Agents have proven marketing plans in place, as well as extensive networks of qualified buyers, to help you reach as many potential buyers as possible.

• Many buyers steer clear of FSBO listings, so FSBO buyers are more likely to be real estate investors looking to get a deal.

• Agents are market experts who understand price strategy and know how to negotiate to get you the best price for your home.

• Agents know the potential pitfalls of escrow and can help you avoid them for a smooth, profitable sale.

Selling on your own will save you some money on the commission. But it will cost you far more in terms of a lower sales price.

2. Pricing Incorrectly

Pricing your home correctly is critical. Sellers often think that they should price high to leave room for negotiation. After all, they can always drop the price later if necessary, right?

Actually, if your home is overpriced, it might not even be seen by many buyers who set price filters in their online home searches. And those who do see your overpriced listing might assume you’re not serious about selling. 

Then, by the time you’re ready to drop the price, the excitement of your home as a new listing has worn off. Buyers have already dismissed your house. And those who will reconsider your listing think you might be willing to go lower if you’ve already had one price drop. Even worse, if your home sits on the market too long, buyers start to think there’s something wrong with the condition of the house, and your listing becomes untouchable. 

3. Not Allowing Buyers to Feel at Home

The goal of your listing photos and showings should be to convince the buyers that they belong in this home. If your buyers can’t imagine living in the space, they won’t be willing to pay market price for your home. And it’s difficult for buyers to feel at home when they are reminded at every turn that this is, in fact, someone else’s home.

So when you list your home, try to make the space completely neutral so a broad range of buyers can feel comfortable in the house. This means taking down family photos and personal memorabilia. It also means toning down any paint colors or home decor that could potentially alienate a large percentage of buyers.  

4. Using Amateur Listing Photos

With 97% of homebuyers searching for homes online, you can’t afford to have poor-quality listing photos. You need professional listing photos that will grab the attention of buyers scrolling through page after page of listings.

At Sequoia Real Estate, our agents all use professional real estate photographers to make sure your home stands out in online searches. And we provide this service at no cost to you. We’re confident that our investment in professional listing photos will be mutually beneficial when we sell your home for top dollar.     

5. Failing to Disclose Material Facts

It is the seller’s legal responsibility to disclose material facts about the property to buyers. Attempting to hide or downplay potential issues with the property in order to boost the sales price is never worth the potential legal liability. When in doubt, disclose. 

When you’re ready to sell your Bay Area home, contact Sequoia Real Estate for experienced real estate professionals who can help you avoid these costly seller mistakes. 

The Top 5 Ways Real Estate Investors Find Off-Market Deals

When the seller’s market is so hot that homes are going under contract in under two weeks on average, a real estate investor’s best bet is to find off-market deals. Off-market properties are simply properties that aren’t listed for sale. Once a property hits the market, buyers flood the listing, and the competition is immediately fierce. But if you can find off-market deals, you might be able to snag them without any competition.    

Let’s count down the top five ways real estate investors are finding off-market deals.

5. Wholesalers

Wholesalers are investors who get a property under contract, then sell the contract to a new buyer. Wholesalers are essentially middlemen who agree to purchase a property at a price below market value, then sell the right to purchase to the eventual buyer at market value and pocket the difference. 

Wholesalers are typically well-connected and often find off-market properties through their networks. And technically, once they get the property under contract, it’s no longer active on the market, so it is an off-market deal at that point. 

4. Auctions

In many states, off-market properties can be purchased through auctions, the most common of which is a property tax auction. These properties are auctioned off to recover back property taxes owed by the homeowner. 

Counties in tax deed states, like California and about 30 others, will publish notices of upcoming tax auctions. Anyone is welcome to attend and bid on the property. But be prepared to bid against lots of seasoned real estate investors. And be prepared to invest a fair amount of money in renovating the property before it will be ready to rent or re-sell.  

3. Network with Attorneys  

Attorneys often learn of potential real estate listings, so networking with attorneys can give you a connection to sellers before they list their homes on the market. Divorce attorneys, for example, might be able to tell you when a couple is planning to sell the home as part of their division of assets. And an estate attorney can tell you if a family will need to sell the home of a deceased relative.

For empathetic investors, this can be an opportunity to help families in need of quick sales. Divorced couples and grieving families might appreciate a no-hassle sale with a short escrow period so they can pay their bills and start the next chapter of their lives. 

2. Real Estate Databases

In the age of Big Data, you can subscribe to real estate databases that contain clues to potentially motivated off-market sellers. 

PropStream, for example, cross-references databases to help you find distressed properties with owners who might be willing to sell quickly. The database includes divorce filings, bankruptcy filings, and pre-foreclosure notices, as well as county property records and MLS data.

Databases are great for generating targeted lists of homeowners that might be receptive to a direct mail campaign. Many of the databases even include skip-tracing to help you find the owner’s contact information.   

1. Real Estate Agents

No one has their finger on the pulse of the housing market like real estate agents. Real estate agents are typically the first to learn of upcoming listings because potential sellers contact agents to get more information about the selling process weeks, or even months, before listing. So if you have a relationship with a real estate agent, you get on the inside track to be notified of motivated sellers. 

Not only that, but agents talk to the other agents in their brokerage. When one agent gets word of a potential listing, that agent will let the others know so they can start lining up potential buyers. So having a relationship with a Sequoia Real Estate agent gives you access to information from around 100 active real estate agents. 

Would you like to be notified of off-market deals? Contact Sequoia Real Estate today so we can start watching the Bay Area real estate market for your next investment property. 

What to Look For When Evaluating Competing Offers

We’re seeing unprecedented seller’s markets throughout Northern California in 2021. And with so many sellers getting multiple offers, sellers are wondering what to look for when evaluating competing offers. 

Despite using the same basic forms, offers can vary wildly - and not just in price. Sellers need to dig a little deeper into the offer to consider more factors.

Here is a list of the top five things to look for when evaluating competing offers. 

1. Offer Price

If your goal is to maximize your net profit, the offer price is the most obvious differentiator in a group of competing offers. You naturally want the offer price to come in as high as possible. 

In areas like Oakland, where homes are selling for an average of 16.1% over the listing price (as of May 2021), you might want to hold off on accepting an offer that comes in at full price. Around 80% of homes are selling for more than the asking price right now, so you might get a higher offer in a day or two.

Some offers will include escalation clauses to automatically increase the offer price to match any competing bids. Keep an eye out for those in a hot seller’s market.

2. Contingencies

Contingencies are provisions that must be met before a real estate transaction can be completed. Contingencies can be sticking points, so the fewer contingencies an offer has, the more likely the deal is to close. 

It’s common for buyers to include the following contingencies:

• Financing: the buyer can cancel the offer if they can’t get mortgage financing.

• Appraisal: the buyer can cancel if the house doesn’t appraise for a value equal to (or greater than) the offer price.

• Home Inspection: the buyer can cancel if the home inspection uncovers issues the buyer isn’t willing or able to address.

• Title: the buyer can cancel if the ownership of the property is disputed or called into question.

But in a competing offer situation, buyers might be willing to waive some of these contingencies and carry the risk themselves to make the process easier for you, the seller. 

3. Buyer’s Mortgage Qualifications

Financing is one of the biggest obstacles for a real estate deal to overcome. When evaluating competing offers, ask yourself which buyer is most likely to secure the funding to close the deal.

All-cash buyers top the list because they don’t need to qualify for a mortgage at all. This is why sellers prefer cash buyers, all other things being equal. Next in the hierarchy is buyers with a large down payment and a pre-approval letter from a lender who has reviewed their finances. The large down payment is helpful because it allows these buyers to waive the appraisal contingency; if the house doesn’t appraise, the buyer will cover the difference between the appraised value and the purchase price (instead of expecting the lender to cover the risk). 

Low down payment buyers are at the bottom of the list. There’s a very good chance they will be able to close as planned, but there is a higher risk of the deal falling apart if the house doesn’t appraise. 

Make sure any offer you accept comes with a pre-approval letter from a reputable lender. 

4. Additional Requests

Do any of the offers request anything more of you? Sometimes a buyer will request that certain property be included in the sale (like furnishings or window coverings). And sometimes a buyer will ask for the seller to cover some of their closing costs. 

Most buyers in a hot seller’s market know better than to make additional requests when they’re competing with so many other buyers for so few homes. But it’s worth reviewing the offer to make sure there are no additional requests.

5. The Timeline

You should also compare timelines in your competing offers. If you want to move as quickly as possible, you want buyers who are willing to do a quick close. But if you need more time to pack and move, you might appreciate a buyer who’s willing to delay the closing or even rent the house back to you for a short time.

The Bottom Line

There are several important factors to consider when you’re evaluating competing offers. And you always have the option to counteroffer to win more favorable terms. That’s why you need an experienced real estate professional in your corner. Sequoia agents understand our changing market conditions and can help guide your decision to accept or counter offers, based on your unique circumstances. 

Contact Sequoia Real Estate today to learn more about the selling process and get a custom price analysis for your NorCal home.  

5 Factors to Consider When Choosing a Lender

The very first step of the home buying process for anyone who will need a home loan is to choose a lender for your mortgage pre-approval. This pre-approval tells you how much you qualify to borrow, which will help you shop in the right price range. The pre-approval also signals to sellers that you are a serious buyer and gives your offer more clout when you find the right home.

But how exactly do you choose which lender to get your pre-approval (and ultimately your home loan) from?

Here are five factors to consider when choosing a lender.

1. Qualification Requirements

The most important factor when choosing a lender is whether or not you can qualify for a loan from that lender.

Every lender has its own set of requirements. For example, a credit score of 580 might qualify you for a conventional loan with one lender but not another lender.

If you’re looking for a specific loan type to take advantage of lower down payments or lower credit requirements (like an FHA loan for first-time buyers or a VA loan for military members and veterans), confirm that your lender candidates offer that specific loan type.  

2. Interest Rates

Interest rates are crucial when choosing a lender. Your interest rate affects both your monthly payment and the overall amount you end up paying on your mortgage over the term of your loan.

The lower the interest rate, the better. A low interest rate means you’re paying less to borrow your home loan from the lender. Interest rates depend on several factors including your credit score, the loan term (15 or 30-year), and the loan rate type (fixed-rate or adjustable-rate).

As a general rule, you will get the best possible interest rate if you have exceptional credit and a shorter loan term. Fixed-rate mortgages work well when interest rates are low and expected to increase, while adjustable-rate mortgages work best when interest rates are high and expected to decrease.

3. Fees

Lenders make their money by charging fees. 

When choosing a lender, pay close attention to:

• Loan origination fees: the cost for processing your loan.

• Appraisal fees: the cost of getting a professional home valuation to confirm that your home is worth the amount of the loan.

• Credit report fees: the cost of obtaining your credit report from the credit bureaus.

• Discount points: the upfront cost of “buying” a lower interest rate.

These fees can add up. In some cases, the lender offering the lowest interest rate may be charging so much in fees that it offsets any savings from the low interest rate.

4. Response Times

How quickly does a lender respond to your inquiries? 

You’ll need to work closely with your chosen lender to make sure your home purchase closes on schedule. Slow response times to your emails or phone calls may indicate that the lender is overwhelmed with other borrowers. And the lack of any response may indicate that the lender is unreliable. 

5. Ease of the Application Process

Finally, how easy and convenient is it to apply for a loan? If a lender has good systems in place for accepting online applications quickly and easily, that lender will likely be easier to work with than a lender with inefficient systems. 

And when you’re ready to start your home search, make sure you get a professional real estate agent in your corner. Real estate agent fees are paid by sellers, so it won’t cost you anything to have professional representation by a buyer’s agent. Contact Sequoia Real Estate today to learn more. 

Why Sellers Prefer Cash Buyers (and What to Do If You Can’t Pay All Cash)

If you’ve been in the market for a home for any amount of time, you’ve probably learned that sellers give priority to buyers who pay cash. But you might be wondering why sellers prefer cash buyers. The sellers are going to get their money either way (whether from the buyer’s savings or from the buyer’s mortgage loan), so why does it matter?

Here’s a look behind the scenes to explain why sellers prefer cash buyers. And if you can’t pay all cash, we’ll give you a few tips to increase your chances of getting your offer accepted.

Why Do Sellers Prefer Cash Buyers?

One reason sellers prefer cash buyers is because deals can often close faster when you don’t need to get a lender involved. But the primary reason sellers prefer cash buyers is because there is a lower probability of the deal being delayed or falling apart when buyers use all cash. There are two key reasons why.

Reason #1: Sellers don’t have to worry about financing issues with cash buyers. 

Financing issues account for around 21% of contract delays and around 7% of canceled contracts (according to data by the National Association of REALTORS®). If a buyer is willing and able to pay all cash, they don’t need to secure financing, so this becomes a non-issue. 

Imagine yourself as a seller for a moment. You likely invested a fair amount of time, money, and energy in getting your home ready to be listed on the market. You’ve worked your schedule around showings of your home, keeping your home show-ready at all times, and making arrangements to get kids and pets out of the house for showings and open houses. And you probably need to move quickly because you have a new home lined up or you are relocating for a new job by a certain date. When you finally get a buyer, you need that deal to close. Because if it doesn’t, you have to go back to square one and start showings all over again. 

So sellers need to choose the offer that is most likely to close on time. And cash buyers are statistically more likely to do that.   

Reason #2: Cash buyers can bypass appraisal issues.

Appraisal issues account for around 26% of contract delays and 15% of contract cancelations. Here’s why appraisals matter:

If a buyer is getting a mortgage loan to purchase a home, the lender needs to be sure that the home value is high enough to cover the amount they are lending. They don’t want to lend you $1,200,000 for a home that’s only worth $1,000,000.   

Now, if a buyer is paying all cash, they can choose to waive the appraisal. They can decide they’re willing to pay more for the home than it is currently worth because they expect the property value to keep climbing. So again, this makes cash buyers less risky for sellers.

What to Do If You Can’t Pay All Cash

How can you compete with cash buyers if you need financing to afford your new home?

Here are a few ideas:

1. Increase your down payment if possible. Not only will this give sellers more assurance that you are a serious buyer, but it also means it will be easier for you to qualify for the amount you need to finance. Even better, if you can increase your down payment to cover the difference between the loan amount and the appraisal value, you can waive the appraisal contingency.

2. Bring a home inspector to showings with you. If you’re comfortable with the inspector’s quick overview of the home, you can waive the home inspection contingency, which will make the sellers feel better about accepting your offer.

3. Bring your highest offer. When you have to compete with cash buyers, out-bidding them might be your best weapon in winning the home.

At Sequoia Real Estate, we know what it takes to get an offer accepted, and we know how to negotiate aggressively on behalf of our clients to get you the best possible deal on your new home. 

If you’re serious about getting into a new home this year, whether as a cash buyer or through financing, we can help. Contact Sequoia Real Estate today. 

How Can I Find the Value of My Home for Free?

With values across much of the Bay Area increasing by the day, more homeowners are wondering about the value of their homes. Maybe you’re thinking of selling to capitalize on today’s hot seller’s market if you can get the right price. Or maybe you just want to tap into all the equity locked up in your home. 

But you might not want to pay for a formal appraisal if you’re on the fence about taking any real action. So you’re wondering how can I find the value of my home for free? 

You have a couple of options to find the value of your home for free. But one option is far better than the other. We’ll show you how to get a solid valuation at no cost.

Option 1: Sites like Zillow®

Sites like Zillow offer free home value estimates. But how accurate are these estimates?

To its credit, Zillow publishes accuracy rates for their Zestimates®. You just have to dig a little to understand how the accuracy rates are presented. 

In the San Francisco metro area, for example, Zillow reports that their Zestimate is within 5% of the sales price 71.9% of the time (as of September 2020). Not great, but not terrible. And they get within 20% of the sales price 98.4% of the time. That actually sounds promising, right? 

The problem is that the first set of numbers Zillow presents are for active listings. If your house is not on the market, it will not fall into this category. You need to scroll down to the off-market listings. There, Zestimates are only within 5% of the sales price 41.2% of the time. And only within 20% of the sales price 87.2% of the time. 

Let’s consider the real values for a moment. If your home is worth $1,500,000, for example, getting within 20% of the sales price would mean anywhere between $1,200,000 and $1,800,000. And Zillow will only get in that wide range 87.2% of the time. The other 12.8%, they’re not even in the ballpark. 

You may be able to get a free value estimate from Zillow, but please don’t make any decision based on this information that could be wildly inaccurate. 

Option 2: Contact a Sequoia Real Estate Agent

At Sequoia Real Estate, we think you deserve to get everything you need to make an informed decision when it comes to buying and selling property. So we offer free, no-obligation home valuations for any homeowner who wants to know how much their home is worth.    

To get an accurate estimate, our qualified real estate professionals will:

• Collect relevant details about your house via phone or email.

• Do a quick site visit to scout the location and inspect the condition.

• Review recent property sales to find out how much similar homes have sold for recently.

• Adjust those recent comparable sales to account for differences between those houses and your house.

• Deliver a professional analysis of your home’s value, along with supporting details.

Calculating the value of a home is not a quick, automated process. It takes real time and effort from skilled industry experts. And we’re happy to do it! Even if you decide not to list your home, we want you to have the information you need to make that decision. Our goal is to give you an exceptional client experience and earn your trust so that, when you are ready to sell your home, you will feel confident listing your home with us.  

Do you want to find the value of your home for free? Simply contact Sequoia Real Estate. We’ll gladly calculate that value for you.

How Much Do You Need For a Down Payment

When buyers ask how much do you need for a down payment, they’re usually hoping for a simple answer, like an exact dollar amount or an exact percentage of the home’s purchase price. 

But the truth is, your down payment depends on many factors, including your type of mortgage loan, your credit score, and your lender.  

Here’s what you need to know about how much to save for a down payment. 

How Much Do You Need For a Down Payment

The old rule of thumb was that you would need to save 20% of the purchase price. But as home value growth outpaced income growth, it became unrealistic for the average household to save enough for a 20% downpayment in a reasonable time frame. So lenders adjusted mortgage loan terms to accommodate lower down payments. If you can’t put 20% down upfront, you can put down less and pay a monthly fee for private mortgage insurance (or pay a higher interest rate if your lender allows).    

Today, you likely only need a down payment of around 3-5% of the home’s purchase price, depending on your credit score, financial situation, and lender. Some conventional loans require just 3% down with good credit, although 5% is more common. FHA mortgages are a popular option for first-time homebuyers and require just 3.5% down with fair credit. With questionable credit, you might still qualify for an FHA loan with around 10% down.

For reference, with the median sold price in the Bay Area at $1,225,000 (as of the end of the first quarter, 2021), a 3.5% down payment would come to $42,875.

What About 0% Down Payment Options? 

0% down payment options are available, but they are reserved for special circumstances. VA loans, for example, allow active military members and veterans to buy with 0% down. There are also USDA loans that allow buyers to put 0% down on rural properties. 

It’s important to note that sellers aren’t required to accept offers that rely on these 0% down payment programs. Many sellers are hesitant to accept offers with 100% financing because there is a greater statistical probability that the financing could fall through, preventing the deal from closing. This is why sellers prefer all-cash buyers. If sellers have competing offers at the same price, they will choose the offer that is most likely to close successfully. 

A Higher Down Payment May Strengthen Your Offer

In a hot seller’s market where multiple buyers are competing for each listing, a higher down payment can strengthen your offer. The more you can put down, the more confident the seller can be that you will be able to secure the remainder in financing to close the deal. 

A higher down payment also affords you the option to waive the appraisal contingency. Typically, an independent appraisal needs to confirm that the home’s value is at least as much as the purchase price before the lender will agree to finance the purchase. But if you can put enough down to cover the difference between the appraisal amount and the loan amount, then the bank doesn’t mind if the appraisal comes in low because you are taking responsibility for the amount of the difference. Waiving this appraisal contingency is another way to remove a hurdle from the transaction and improve your chances of getting an offer accepted.

Additional Items to Include in Your Purchase Budget

The down payment isn’t the only expense you’ll need to plan for when buying a home. You’ll also need to make sure you have enough saved to cover closing costs (typically 3-6% of the purchase price) and the costs of any repairs or renovations you plan to tackle in your new home. 

It’s also a good idea to leave a cushion for unexpected repairs. As a homeowner, you might not know what will need to be repaired or when, but you can bet something will need an unexpected repair at some point. It’s best to be prepared.   

How Sequoia Can Help

The experienced real estate agents at Sequoia real estate know what it takes to get an offer accepted. Whether you’re just starting to think about buying or you’re ready to make an offer, we provide personalized guidance through the purchasing process. Contact us today for a free buyer consultation.