What is PMI (And Do I Need It When Buying a Home)?

If you’re looking to buy a home, you may have come across the term PMI (Private Mortgage Insurance). And you might be wondering why you would need to purchase a private insurance policy for your mortgage. As the local real estate experts in the Bay Area, Sequoia Real Estate is happy to answer your burning PMI questions. 

Starting with… 

What is PMI?

PMI (Private Mortgage Insurance) is insurance homeowners purchase to protect their lenders in cases where the lender puts up a large percentage of the home’s value. 

This relates directly to the traditional 20% down payment rule of thumb. For decades, home buyers were expected to put at least 20% down. But, as home values grew faster than incomes, 20% became unrealistic for most buyers (especially first-time buyers). Lenders were happy to loan more money so that homeowners could have lower down payments, but lenders were afraid to take on the additional risk. What if they loaned 95%, and then the buyer defaulted on their mortgage? This would put lenders in a vulnerable position. 

So the industry created PMI. Buyers can pay a monthly insurance premium to protect the lender’s investment in the home if the buyer defaults on the mortgage.    

Who Needs PMI?

In general, any buyer who puts down less than 20% of the purchase price will need some form of PMI. 

One notable exception is buyers with VA loans. VA loans are reserved for military service members, veterans, and their spouses, and they are backed by the Department of Veteran’s Affairs, which offers additional protection for the lender. VA loan recipients can put down 0% and still avoid PMI!

Will I Be Stuck With PMI Forever?

How long your PMI stays with you depends on your loan type. 

For conventional loans, you can request the removal of your PMI once you have enough equity built up. Usually, once the loan amount drops to 78% of the home’s value, you can get the PMI removed. 

FHA loans, on the other hand, require ongoing PMI payments. The only way to remove your FHA PMI is to refinance your mortgage once you have enough equity in the home to avoid PMI. 

USDA loans don’t technically charge a PMI, but they charge an upfront fee plus annual fees that serve the same purpose as PMI. These fees are required for the lifetime of the loan. But if you refinance to a different loan type once you have enough equity, you can avoid PMI on your refinanced mortgage.  

Are You Ready to Buy a Home?

We understand how overwhelming the home buying process can be. Not only do you want to choose the right home in the right neighborhood, but you also need to choose the right financing to make the most of your purchase.

At Sequoia Real Estate, we help you with every stage of the buying process. With our connections in the mortgage industry, we can put you in touch with a mortgage broker who can help you understand your options and choose the loan type that serves you best. Then we’ll use our local market knowledge to help you get the best deal possible on a home that will suit you. Contact the experts here at Sequoia Real Estate today for a friendly, no-obligation consultation.  

What to Expect From Your Listing Agent

The success of your home sale largely depends on you choosing the right listing agent. But many home sellers are unsure about the expectations they should have for their listing agent. 

Here are five things you should expect from your listing agent.   

1. A Custom Marketing Plan

No house is the same as any other house. Even in a subdivision of cookie-cutter homes, your house occupies a unique piece of land and is decorated in your personal style, making it different from all other properties on earth. So your listing agent should bring a custom marketing plan to the table.

Your listing agent’s comprehensive marketing plan should include:

• A pricing strategy based on recent sales of similar local properties

• Features of your home that will attract buyer attention and should be highlighted

• Strategies for preparing your house for the market

• Marketing channels for promoting your listing (websites, social media, mailers, print ads, etc)

2. Many Hours of Work Behind the Scenes

Your listing agent will be putting in lots of work that you never see. Here are just a few examples of the many, many tasks that your agent will be working on for you:

• Contacting their professional network to personally notify colleagues of the new listing so those colleagues can notify their buyers

• Contacting each of their buyers to promote the listing directly

• Researching county records to confirm the property details

• Writing the listing description and entering the property data on all relevant websites

• Creating property-specific marketing materials like flyers, brochures, mailers, door hangers, and social media graphics

• Fielding inquiries from unqualified buyers

• Coordinating showings with buyers and their agents

• Collecting feedback from showings

• Fielding inquiries from buyers’ agents

• Working with the many professionals involved in the due diligence process once an over is accepted

3. Proper Communication

Communication is paramount. You need a listing agent who keeps you informed as you move through the selling process. Your agent should communicate:

• Honestly. There is no room for half-truths, purposeful omissions, or lies.

• Frequently. Frequency is a matter of preference, so discuss your preferences with your listing agent upfront. Do you want weekly updates? Updates after every showing? Or do you just want a call once you have an offer?

• Professionally. Professional communication can be warm and friendly or cool and straight-forward. The important thing is that your agent treats you, their colleagues, and the buyers with respect.

• Clearly. When it comes to a big move like selling a home, confusion is frustrating! Your listing agent should be able to communicate complex real estate concepts in easy-to-understand language so you always know what’s going on.

4. Strong Negotiation

Your listing agent will be negotiating on your behalf with the buyer’s agent. Negotiations start with the sales price and terms of the contract. But after the inspection, there’s often a second round of negotiations regarding the buyer’s request for repairs. Your agent should be an expert negotiator. 

This is why it’s a red flag if an agent offers to take less than the local standard commission. If they can’t negotiate their own earnings, how fiercely will they negotiate to get you the best price and best terms?

5. Transaction Management    

Completing a real estate transaction requires several industry professionals. You need a listing agent who can coordinate with the:

• Listing photographer,

• Home stager (if necessary),

• Buyer’s agent,

• Home inspector,

• Appraiser,

• Tile rep,

• Surveyor (if necessary)

• Escrow officer,

• Attorneys (if necessary)

• And any contractors needed to complete necessary repairs.

Real estate transactions are complex, and a good listing agent knows how to smoothly manage all these moving parts.

How to Find the Best Listing Agent

Whether you’re ready to sell today or you just have questions about the process, contact the experts here at Sequoia Real Estate. Our experienced listing agents are happy to answer all your questions and help you strategize for a successful sale. There is no charge and no obligation for our friendly consultations. Contact us today!

Pros and Cons of Listing Your Home For Sale By Owner

Most real estate agents will tell you not to even consider listing your home for sale by owner (FSBO). And those agents mean well. They know that, statistically, homes sold by real estate agents sell faster and for more money than FSBO properties.

But many homeowners still want to learn more about the possibility of going FSBO before deciding if listing with an agent is better for them. At Sequoia Real Estate, we’re all about empowering buyers and sellers with information to make the best choices for their unique situations. So we’re going to give you the facts on going FSBO. 

Here are the pros and cons of listing your home for sale by owner.    

Pros of Listing Your Home For Sale By Owner

First, let’s talk about the advantages of going FSBO:

• You save on real estate commissions. In most markets, sellers pay 6% of the sales price to cover real estate agent fees.

• Sites like Zillow and FSBO.com make it easy to list your home. All you need to do is create an account, provide the property details and some photos, and you’re done. In most cases, listing your home on these sites can help you generate some interest.

• Showing a house isn’t that hard. If we’re being honest, most agents love showing homes! It’s usually fun and exciting. And while there are some industry insider tips agents employ during showings, you can easily find these online.

The Downsides to Listing for Sale By Owner

Ok, now let’s list the reasons why going FSBO might not be a good fit for you:

• Agent-listed homes sell faster and for more money. This is statistically confirmed, year after year. The most recent data (from 2020) shows that the typical FSBO home sold for $260,000 compared to $318,000 for agent-assisted home sales. In nearly all cases, the amount you pay in real estate commissions is more-than-covered by the higher sales price.

• You’ll probably still need to pay the buyer’s agent. In our current system, buyer’s agents are paid out of the commission you pay to your listing agent. The listing agent typically splits the commission 50/50 with the buyer’s agent. Since this is the norm, buyers are not likely to pay their own agent to purchase your home; they’ll look at agent-listed homes instead.

• Pricing correctly required in-depth market knowledge. Zillow’s Zestimates are laughably inaccurate, proving that you need specialized local market knowledge to price a property correctly. The only way to properly value a home is to complete a comparative market analysis (CMA), adjusting prices from recent sales to determine the appropriate value for your home. If you’ve never done one before, it’s an intimidating process. By the way, we offer CMAs for free, so you can contact us any time to get the current value of your home.

• FSBOs attract a certain type of buyer. The interest you generate from listing your home FSBO will mostly be from experienced real estate investors who are looking to get a good deal. They will very likely lowball you.

• Selling a house takes a lot of time and energy. Showing homes is fun. Actually selling them is work. It’s a testament to real estate professionals that the general public thinks or job looks easy. You will likely be shocked at how much time you spend fielding inquiries, scheduling showings, and conducting showings, only to come up with zero offers.

• You need a marketing budget. Listing your FSBO on a few websites will only get you so far. In most cases, you’ll also need to budget for marketing expenses like professional listing photos, social media ads, and listings in local publications. When you list with an agent, the agent covers these expenses for you.

• You leave yourself open to liability. What happens when you get an offer? Do you know which forms you’re legally required to provide to your buyers? Do you know what you’re required to disclose? What will you do if there’s a problem with the home inspection, appraisal, or buyer’s financing? Listing agents handle all of this for you. And they do it with professional knowledge and expertise, minimizing your liability.

How to Get the Best Listing Agent for Your Home

You can probably see why so many agents are quick to dismiss the idea of going FSBO. Unless there are extenuating circumstances (like you’re selling directly to a friend or family member), it truly is in your best interest to hire a listing agent. And choosing the right listing agent is critical to making the most of your home sale. Take a look at our simple 3-step process for getting the best listing agent for your home.    

Whether you’re ready to sell today or you just have questions about the process, contact us. We have a team of experienced professionals who are happy to discuss your options with you in a friendly, no-obligation consultation. 

What are Government-Backed Home Loans?

Government-backed home loans are mortgages that are secured by some branch of the US government. This means that the government guarantees the lender that the loan will be repaid. 

The purpose of government-backed home loans is to reduce the risk for lenders so that they will be more willing to loan money to special groups of buyers (like first-time buyers, American veterans, or buyers in rural areas). The government is willing to do this because homeownership contributes to a stable economy, and it’s in the country’s best interest to provide a path to homeownership.

If you qualify for a government-backed home loan, you get extra benefits like lower down payment options. But it’s not always easy to qualify. 

So let’s look at the three primary types of government-backed home loans, what it takes to qualify for each, and how qualified buyers can benefit from each.   

VA Loans

VA loans are backed by the Department of Veteran’s Affairs to make sure American military service members, veterans, and their families are able to buy a home. To qualify, you must be an active military member, a veteran, or the spouse of one. Children of service members and veterans do not qualify, nor do boyfriends, girlfriends, or fiances of members and veterans.   

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

• $0 down payment,

• Low interest rates,

• No private mortgage insurance requirement,

• Relaxed 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 Department of Agriculture. The goal is to promote rural areas by making it possible for low-to-moderate-income buyers to purchase homes in those areas on favorable terms.

Only homes located in a qualifying rural area can be approved for a USDA loan. But you might be surprised at how many towns, and even suburbs, are included in the USDA’s “rural areas.” There are income caps that change annually, so only buyers who make less than the caps can qualify. USDA loans also only cover single-family homes that you occupy as your primary residence. So you can’t buy a multi-unit property or income property with a USDA loan. 

If you and your chosen home qualify for a USDA loan, you benefit from:

• A $0 down payment,

• Low interest rates,

• And no specific loan limit (though the amount a lender will loan you will be limited based on your income and ability to repay the loan).

FHA Loans

FHA loans are backed by the Department of Housing and Urban Development (HUD). FHA loans were originally designed to be the “first-time buyer” loan, making it possible for buyers with comparatively little savings or perfect credit to qualify for a home loan. But today, anyone looking to buy a single-family primary residence can apply for an FHA loan. Just know that the amount you can borrow with an FHA loan is capped at specific amounts, depending on your location. 

FHA loans offer:

• Relaxed income and credit requirements,

• Low closing costs,

• Down payments as low as 3.5% (or 10% if you have credit issues), and

• Down payment assistance for qualified borrowers.

How to Get Pre-Approved for a Home Loan 

Whether you decide to get a government-backed home loan or a conventional loan, getting pre-approved for your loan is the first step in the house-hunting process. When you’re ready to start your home search, contact the experienced agents at Sequoia Real Estate. We can put you in touch with a mortgage broker who can help you decide which loan type would work best for you. Your mortgage broker can also help you find a lender who can work with you to get your pre-approval.  

We’re excited to help you on your path to homeownership! Contact us today.

Your Seasonal Home Maintenance Checklist

A well-maintained home is more likely to retain its value and less likely to give homeowners an unexpected expense from minor issues that became major problems over time. 

But there are lots of home maintenance projects to keep track of. So, we decided to make a seasonal home maintenance checklist to help you take care of all your most important home maintenance tasks! 

Home Maintenance Tasks by Season

Here is your home maintenance checklist by season.

Spring Home Maintenance Tasks

• Spring Cleaning! Give your whole home a good scrubbing.

• Test smoke alarms and carbon monoxide detectors.

• Vacuum the air vents.

• Plant new trees, shrubs, or flowers.

• Fertilize your lawn.

• Make sure your lawnmower is in working condition.

• Keep an eye out for potential leaks during heavy rains.

• Clean out the gutters following the rainy spring season.

• Check the roof for any damage and repair as needed.

• Look for rotting wood around your home’s exterior and replace as needed.

• Have your air conditioner checked by a certified technician.

• Check on the condition of your outdoor spaces: decks, balconies, patios, porches, etc., and make any necessary repairs.

Summer Home Maintenance Tasks

• Check the caulking around doors and windows and repair as needed.

• Clean your windows and window frames, inside and out.

• Wash your window screens and repair or replace any damaged screens.

• Prune trees and trim back bushes and shrubs.

• Clean any debris out of your flowerbeds.

• Power wash your home’s exterior.

• Power wash the driveway, sidewalk, and pathways on your property.

• Touch up exterior paint as needed.

• Oil the garage door hinges and chains.

• Replace the garage door opener batteries.

• Clean your kitchen exhaust fan.

• Deep clean your flooring with a professional-grade carpet cleaner and/or steam cleaner.

• Clean your refrigerator and freezer coils to keep your appliance operating efficiently.

• Reseal the grout lines in your tile flooring.

Fall Home Maintenance Tasks

• Have your heating system inspected by a licensed technician.

• Check the fireplace and chimney for any damage or debris.

• Flush and clean your hot water heater.

• Inspect electrical cords for any sign of damage and replace as needed.

• Check the salt levels in your water softener.

• Check your exterior grading to make sure the ground slopes smoothly away from the house.

• Fill any holes or dips in the grading as needed.

• Seal any cracks in the driveway as needed.

• Remove leaves and debris from gutters and downspouts.

• Repair or replace any broken gutters or downspouts.

• Drain your exterior plumbing to avoid having water freeze in the pipes.

• Test smoke alarms and carbon monoxide detectors.

• Test your kitchen appliances, especially the ones you rarely use, to make sure you’re ready for baking season.

Winter Home Maintenance Tasks

• Check your inventory of guest items (extra toiletries, clean bedding, and fresh towels) for your holiday visitors.

• Organize closets and drawers.

• Gather little-used toys, clothing, and housewares to donate to charity.

• Stock up on new linens during January’s traditional “White Sale.”

• Clean out the drains in your sinks, tubs, and showers.

• Refresh your interior paint.

• Test your sump pump before the rainy season starts.

• Shovel snow from the driveway, sidewalk, and paths as needed.

• Check the basement for potential water intrusion during thaws.

• Soak your showerheads and faucets in vinegar to remove limescale build-up.

Is Your Home Too High-Maintenance?

If you’re feeling overwhelmed by the maintenance required for your home, it might be time to move to a smaller home or a condo where less time and energy are needed to keep up your home. The experienced agents at Sequoia Real Estate would be happy to help you find your next home while getting top dollar for your current home! 

Contact us today for a free, no-obligation consultation. We can discuss how much you could potentially make from the sale of your home and how to get you into a home that’s a better fit for your current lifestyle. We are looking forward to hearing from you!

Should You Fix-and-Flip or Buy-and-Hold?

Today we’re tackling the age-old real estate investor question, should you fix-and-flip or buy-and-hold. 

If you’re new to real estate investing, you might not be completely clear on these investment strategies, but the names are fairly apt descriptions of each model. 

With fix-and-flips, you purchase a property that needs lots of work (at least cosmetic work), renovate it, and resell it for a profit as quickly as possible. With buy-and-holds, you purchase a property for the long-term, finding reliable tenants to rent the property from you. 

Both are completely legitimate investment strategies. You just need to know which will work best for you. At Sequoia Real Estate, we’re happy to provide the information you need to make the best possible decision for your real estate investments. 

Fix-and-Flip

The first thing you need to know about fix-and-flips is that they work best in quickly growing markets (like we’re seeing now in 2022). You don’t want to purchase a flip when the market is slowing because you could be stuck with a vacant property, just sitting on the market, losing money. But when markets are hot, your renovated property will likely be purchased quickly, so you won’t have to make many mortgage payments before the property is sold for a profit.

Pros and Cons of Fixing and Flipping

Fix-and-flip pros:

• Quick returns. You might be able to complete the renovation and sell the property in just 4-6 months.

• The opportunity to add value. You can improve the profile of the neighborhood through strategic projects.

Fix-and-flip cons:

• You need the cash to cover the down payment plus the cost of renovations and the cost of holding the property until it is sold.

• Specialized skill required. You need to know how to make the necessary renovations or be able to pay someone with the skill.

• It takes a lot of time and effort. Unless you’re hiring someone to do all the work, be prepared to work hard for long hours until the project is complete.

Buy-and-Hold

Buy-and-hold investments are less dependent on market conditions because they are long-term investments. You’ll be able to ride out the slow years and capitalize on the hot years.

You might decide to buy a fixer-upper and renovate the property to immediately increase the value and the rental rates. Or you might choose a turn-key property that’s ready for renters. In some cases, you can even buy a tenant-occupied property from another investor, so you have immediate income. 

Pros and Cons of Buying and Holding

Buy-and-hold pros:

• Appreciation as the property grows in value over the long term

• Cash flow as you receive rental income

• Tax breaks on expenses like depreciation, capital improvements, and mortgage interest

• Tenants pay down your mortgage debt

Buy-and-hold cons:

• Your capital will be tied up for a long time.

• You’ll need to either deal with renters yourself (for issues like rent collection, lease renewals, and maintenance requests) or hire a property manager to handle the day-to-day operations.

• You’ll be responsible for maintaining the property, which can mean unexpected expenses if repairs are needed.

Are You Ready to Become a Real Estate Investor?

The experienced agents at Sequoia Real Estate would be happy to help you find your investment property! Whether you’re looking to fix-and-flip or buy-and-hold, our agents have access to opportunities both on the market and off-market. And since all real estate fees are typically paid by the seller, it doesn’t cost you anything to have professional representation in the purchase of your investment property. 

Contact us today to let us know what type of property you’re looking for, and we’ll start combing the market to find suitable deals for you.

3 Reasons to Start Searching TODAY if You Want to Buy in 2022

Are you planning to buy a home this year? Great! You’re joining an estimated 26 million Americans who want to buy a home in 2022. 

But you might want to move your home buying plans from the back-burner to the forefront. Based on the market data, you should start your search now if you want to get the best price and the best terms. Let’s look at why it makes sense to buy early in 2022 instead of waiting until later in the year. 

1. Home Prices Are Projected to Rise Higher 

Home values in the Bay Area (San Francisco-Oakland-Hayward Metro) have increased by 17.0% over the past year! While that kind of growth isn’t sustainable, Zillow predicts they will rise another 9.9% over the next twelve months.

As the saying goes, “the best time to buy a home is five years ago; the second-best time is now.” If you plan on buying a home this year, why not buy early before prices rise even higher? If an $800,000 home appreciates 9.9% this year, it will end the year valued at nearly $880,000. You could pay that much more for the house at the end of the year, or you could buy now and watch your net worth increase by that amount this year!

2. Beat the Flood of Buyers

Every year, we see a busy period from late spring through early fall. Buyers generally like to move during the summer when kids are out of school and it might be easier to take a break from work. So buyer competition is at its peak during this time. 

If you’ve had an eye on the market over the past two years, you’ve seen how fierce buyer competition can be. All-cash offers, bidding wars, homes going for 10% above asking price, sellers holding all the negotiating power…

Now, we’re not expecting that level of competition in 2022, but we’re still facing a seller’s market. Buyer demand is still high and the supply of homes available for sale is still low. So multiple offers on a single home are still likely, and homes will probably still sell for more than the asking price on average. 

Why compete with all those other buyers when you can beat them to the market? By starting your search today, you could be comfortably moved into your new home before the summer buying frenzy begins. 

3. Interest Rates are Scheduled to Increase

If you’re still not convinced that you should start looking now if you want to buy a home in 2022, we have another factor for you to consider: interest rates. 

The interest rate is simply the cost of borrowing money. And we’ve seen historically low interest rates since the Great Recession in 2009. In 2008, rates were above 6%. Today, they’re below 4%. A 2% difference might not sound like much, But on a long-term loan (like a mortgage), for a big-ticket item (like a house), this small percentage adds up to large amounts of money. Tens of thousands of dollars in most cases. 

The Federal Reserve plans to increase interest rates by up to 1% in 2022 to combat our current level of inflation. So if you’re planning to get a mortgage for your new home, it’s in your best interest to lock in your low interest rate before the increase. 

Are You Ready to Start Your Search?

With all this in mind, are you ready to start your home search? Contact the experienced agents at Sequoia Real Estate to help you in your search! Our agents have access to listings before they hit the market, are trained to negotiate the best terms possible for you, and cost you nothing since all real estate fees are paid by the seller. You have nothing to lose and everything to gain by getting a Sequoia professional in your corner. 

Let’s get you in that new home as quickly as possible! Contact us today.

3 Reasons to Downsize in 2022

If your house has more space than you need, 2022 is the perfect time to downsize. 

You know you’re ready to downsize when:

• You have rooms you rarely (or never) use.

• You’re tired of the cleaning and maintenance a large house requires.

• Retiring in the home is unappealing because of an inconvenient layout or the distance from family.

• You’re getting worried about the environmental impact of heating, cooling, and lighting such a large space.

• You’re feeling trapped by your large mortgage payment or the many belongings that are tying you to one location.

• All of the above!

If you’re experiencing any of these signs that it’s time to downsize, consider doing it this year. Here are three reasons to downsize in 2022.

1. You’re Probably Swimming in Equity

How much has your home grown in value since the beginning of the pandemic? (If you’re not sure, contact the experts at Sequoia Real Estate for a free, no-obligation home valuation.)

While your value has been increasing your mortgage debt has also been decreasing as you’ve made your mortgage payments over the last two years. This means your home equity has been growing on both fronts, increased value and reduced debt. And with so much equity, you stand to earn a nice profit on the sale of your home. 

You can use this equity to buy a smaller place, potentially paying cash and living mortgage-free!

2. We’ve Likely Seen the Biggest Gains from this Boom

You know the market has gone crazy since the beginning of the pandemic. San Francisco, for example, saw median sales price increases of 10.2% from December 2020 to December 2021. Alameda saw an increase of 19.8% over that same period!

Nationwide, median sales prices were up 15.2% year-over-year by December 2021. This growth is entirely unsustainable and has priced many first-time buyers out of the market. With these buyers forced to exit the market, there is a limit to how much higher the remaining buyers are willing to go. And prices, while still increasing, will be increasing at a slower pace in 2022 and beyond than they did in 2021.

Why not cash out now since you’ve already realized the biggest gains? Then you can invest your cash into a smaller home, which still stands to enjoy additional gains over your ownership period.

3. Demand is Still Sky-High

Yes, some buyers have decided not to continue their search since values have increased by so much. But we’re in a golden period where there is still high demand from the many remaining buyers in the market. Homes in Alameda and Oakland are still selling in under three weeks. So a quick sale is highly likely.

Furthermore, buyers are still paying well over the asking price because they are anxious to get their offers accepted. In San Francisco, homes sold for 7.6% above asking, even in December, which is typically a slower month where buyers have a bit more leverage.  

Yes, this means it will be harder for you to find your next home. But we can help with that as well. Sequoia agents have deep networks of investors, sellers, and industry insiders who can alert us to new listings before they even hit the market. We can help you find your new home while we optimize the sale of your current one. 

Whether you’re planning to downsize in 2022 or simply considering whether or not it would be a wise move for you, our team of experienced real estate professionals is happy to discuss your options with you. We can provide you with a free custom analysis of your home’s current value and a calculation of how much you can make on the sale of your home. We can even create a custom marketing plan to help your home sell quickly for top dollar. And create a plan to find your new home.  

But no pressure. If you find that this isn’t the right time for you to downsize, we’re not going to try to push you to sell. We’ll simply keep you informed of market conditions as they change so that you will know when the time is right for you. 

Contact us today and create a plan to achieve your real estate goals in 2022. 

How Much Do Interest Rates Matter When Buying a Home?

If you’re looking to buy a home, you’re seeing a lot of talk about interest rates. You may have heard that interest rates are rising. But what exactly does that mean for you as a buyer? How much do interest rates matter when buying a home?

We’re going to answer that critical question, complete with a comparison of a home purchase at different interest rates. But first, let’s cover a few basics, like what exactly an interest rate is and what is considered a “good” interest rate.   

What is an Interest Rate?

An interest rate is simply the cost of borrowing money. 

Generally, interest rates are lower on debts that people are most likely to repay. Even though home loans can be hundreds of thousands of dollars, they aren’t overly risky for lenders because most people prioritize making their mortgage payments over making every other payment. And, if a borrower defaults on a home loan, the lender can foreclose on the home and resell it to recoup their losses. So interest rates on home loans are typically lower than with other types of debts. 

What is a Good Interest Rate on a Home Loan?

A “good” interest rate on a home loan changes over time. At the turn of the millennium, the going rate for a 30-year mortgage was around 8%. During the Great Recession, interest rates fell below 5% for the first time in recorded history. And the average for 2021 was an unprecedented 2.96%.

The Federal Reserve raises and lowers interest rates to help manage the economy. When times are tough, the Fed lowers interest rates to incentivize people to spend money and boost the economy. But during periods of inflation, as we’re starting to see in 2022, the Fed raises interest rates to slow inflation and keep economic growth manageable. 

How Much Do Interest Rates Matter?

Interest rates are perhaps the most important detail of a standard home loan. Interest rates impact your monthly payment and your interest expense over the term of the loan. When interest rates increase, your buying power decreases. 

If you’re looking to buy a $1 million home, for example, with a 30-year fixed interest rate and 10% down payment, here’s what your payments would look like (using the Bankrate mortgage calculator):

• At a 3.5% interest rate: your monthly payment would be around $4,765, and you’d pay $555,015 in total interest expense over that 30-year period.

• At 4.0%: your monthly payment would be around $5,020, and you’d pay $647,072 in total interest expense.

• At 4.5%: your monthly payment would be around $5,284, and you’d pay $741,251 in total interest expense.

In this example, an increase of a single percentage point to your interest rate raises your monthly payment by over $500 and adds over $185,000 to your total interest expense.

How Do I Get the Best Interest Rate?

There are several things you can do to keep your interest rate as low as possible:

1. Build and maintain excellent credit. The higher your credit score, the lower your interest rate.

2. Shop around when looking for a lender. Different lenders offer different rates and terms.

3. Increase your down payment if possible to get a lower interest rate.

4. Buy down your interest rate by purchasing “points” up front from your lender.

5. Buy when interest rates are low. Like today.

Interest rates are projected to increase as the Fed fights inflation in 2022. And while rates are still exceptionally low by historical standards, every percentage point matters. So by purchasing your new home now, you can avoid paying more in interest expense as interest rates rise. 

Are you ready to buy your new home? Contact the experts at Sequoia Real Estate. Our team of buyer’s agents understands how real estate financing affects your home purchase. We can put you in contact with reputable lenders, help you find the right home, and help you navigate the buying process. And because sellers pay all real estate agent fees, it costs you nothing to get professional representation in your real estate purchase. 

Don’t wait…interest rates are creeping up. 

Can a Cloud on Title Kill My Real Estate Transaction?

One of the tasks that needs to be completed before your real estate transaction can close is the title search. A title rep will research the property to make sure that the seller has the legal right to sell the property. If there are no problems found in the title search, the title is clear, and the deal can proceed. But if there is a problem, the title is “clouded.” 

In most cases, a cloud on title can be resolved quickly and your real estate deal can close on schedule. But in some cases, a cloud on title can kill your real estate transaction. 

Here’s what you need to know about clouds on title and how they affect your real estate deal.

What is a Cloud on Title?

Several different types of problems create a cloud on title. These include:

• Liens. Liens are claims against the property for unpaid debts. This can be a tax lien, HOA lien, mechanic’s lien (for work performed on the property by a contractor), or judgment lien (for money owed to another party through a court order).

• A deed that was signed, but never properly recorded.

• Easements that have not been properly recorded.

• Pending lawsuits (lis pendens) over ownership rights to the property.

• Legal relationship changes where a previous owner has not been removed from the deed. This is common when spouses purchase a property together then divorce and fail to remove one party from the deed.

What Do I Do About a Cloud on Title?

If you’re the buyer, there’s very little you can do about a cloud on title. You need to wait for the seller to resolve the issue. It is technically possible to purchase a property with a cloud on title (unless you’re using a mortgage to finance the purchase since most lenders won’t loan money for a property with a clouded title). But, if you purchase a property with a clouded title, you’re assuming the legal responsibility for that claim against the property, which can be a serious risk.

If you’re the seller, you can remove the cloud by resolving whatever issue created the cloud. 

For example, if there is a lien against the property for an unpaid debt, you need to pay the debt to remove the lien. If a deed or easement were not properly recorded, you need to file the appropriate paperwork to legally record the documents. Or, if the cloud is caused by an ex-spouse who was not removed from the deed, you need to have that ex legally release their claim on the property.

How We Can Help

Clouds on title are one of the many issues that can quickly complicate a real estate transaction. This is why it’s so important to have a licensed professional represent you when buying and selling property. It’s important to remember that buyers don’t typically pay any real estate agent fees (since all fees are paid by the seller), so if you’re buying, it costs you nothing to hire a real estate professional. 

And if you’re selling, we understand that the real estate fees can be substantial. But it’s important to remember that homes sold by the owner sell for an average of 26% less than homes represented by real estate agents. Listing with an agent more than pays for itself. And it will save you so much time and trouble!   

The experts at Sequoia Real Estate have seen it all. We know how to help you navigate complications like clouds on title. And we’re ready to serve you. Contact us today for a free consultation! 

5 Quick Ways to Increase Your Home’s Value

Increasing your home’s value doesn’t require an extensive renovation project. There are plenty of things you can do to enhance your home quickly, easily, and inexpensively. 

Here are five quick ways to increase your home’s value. 

1. Paint

A fresh coat of paint makes a world of difference! By painting over all the scuffs and nail holes on your walls, you’re going to make your entire house feel cleaner and newer instantly. Fresh paint can even help to remove unpleasant lingering scents of things like smoke and pets.

To maximize value, choose a light, neutral color. By going with a light color, you help the home appear larger. And by sticking with neutral tones, you help the home appeal to as many buyers as possible.  

2. Replace Fixtures

Outdating lighting and plumbing fixtures can drag down the entire vibe of a home. But by replacing the old fixtures with either timeless or trendy ones, you breathe fresh life into the space. 

If you’re planning to sell in the very near future, trendy fixtures will probably get you the best bang for your buck. But if it will be a little while before you sell, and you don’t want to have to replace the fixtures again before listing your home, it’s probably best to stick with timeless fixtures that won’t instantly date themselves. 

Make sure your fixtures match the property in both style and quality. HIgh-end homes require more expensive lighting fixtures while mid-range homes can be updated with less expensive fixtures.

3. Get Smart

Smart home technology has become increasingly accessible over the past decade and is in high demand by buyers. Smart locks, security cameras, thermostats, and lighting all make your home more valuable, especially to tech-savvy buyers.

These systems can usually be installed without hiring a technician, so you won’t need to wait weeks for an installer to come out. Instead, you can boost your home’s value this weekend by installing these smart systems yourself. 

4. Boost Curb Appeal

In a world where first impressions are everything, the entrance to your home is a big deal. Not only is this how people will perceive your home when arriving in person, but it also sets the tone for your listing photos when buyers view your home online. 

Cleaning the front entrance, adding a fresh coat of paint to the front door, and sprucing up the landscaping in the front of the home all enhance your home’s perceived value without much time, money, or effort.

5. Increase Energy-Efficiency

Buyers love energy-efficient homes. Many buyers are environmentally conscious and appreciate homes that work to conserve energy. And buyers are also aware of the cost savings that accompany energy-efficient homes. Buyers are usually willing to pay a little more for a home when they know they can save money on their utility bills month after month.

Are you considering increasing your home’s value so you can sell for top dollar in the near future, we can help! The listing agents at Sequoia Real Estate specialize in creating intensive marketing plans to help you sell quickly and move on to the next phase of your life. Contact Sequoia Real Estate for a free consultation. We’re happy to walk through the house and help you create a custom plan for selling at top value. 

The Real Reason Your Home Isn't Selling

You might be able to think of hundreds of things that would keep a home from selling:

• Location on a noisy street

• Too small

• Too big

• Not enough bedrooms or bathrooms

• No yard

• Too dark

• Needs renovating

• Limited parking

• Too far from amenities

• No pool

• Not enough privacy

• Structural issues

• No view

• Pest damage

• Etc, etc, etc…

But the fact is that all of these factors can be overcome by adjusting just one thing: the price. If the price is too high, a house will not sell. 

You could have the most beautiful home in the world, but if it’s priced too high, no one will buy it. On the other hand, your home could be small, dark, and located on a busy street, but when priced correctly, it will sell!

How is the Price Set?

If you’re serious about selling your home, the price should be set by the market. By looking at recent sales of properties that are similar to yours, we can see how much buyers are truly willing to pay for a home like yours. 

This sounds simple enough, but it can be a complicated process since no two properties are the exact same. Even in a planned community where homes have the same layout, the condition may be different, or they may be positioned geographically so that the views are different. So real estate experts have a tool called a CMA (Comparable Market Analysis) that considers all the factors that make your home different from similar homes, then adjusts the prices to reflect the differences. 

At Sequoia Real Estate, we’re happy to provide a no-cost, no-obligation CMA for your unique property. Simply contact us and ask for a CMA. We’ll have a qualified real estate professional find comparable properties and calculate your home’s current value. 

The Importance of Pricing Right from Day One

Many sellers try to set the list price too high. They think that they need to leave room for negotiations. And they think that they can always reduce the price later if no one makes an offer on the high list price. 

But this strategy almost always backfires.

When the list price is too high, two bad things happen:

1. The listing doesn’t even get shown to many buyers because they filter listings by price. If your listing is just over their max price filter, they won’t even know your property is on the market.

2. Buyers and their agents might think you’re not serious about selling. So then they’ll ignore your listing.

Then, by the time you reduce the price, the excitement of your listing has already worn off. Buyer’s agents may have already dismissed your listing as being over-priced and might be too busy with new listings to revisit the price reduction. And buyers may have already eliminated your property from their online “favorites”. 

Even worse, buyers who see the price reduction might think you were forced to lower the price because something is wrong with the property. 

And with so many buyers in the market today, you don’t need to leave room for negotiation. The competition among buyers will ensure that buyers are bringing their highest and best offer to the table. 

Are You Ready to Sell?

The experts at Sequoia Real Estate know what it takes to get top dollar in today’s market. We’re ready to help you sell your house and move on to the next chapter of your life. We look forward to working with you!

How to Become a Homeowner in 2022

Are you ready to become a homeowner in 2022? Homeownership is a cornerstone of financial stability. Not only will your home grow in value over time, but you’ll also enjoy income tax breaks as a homeowner. And you still have a chance to lock in a low interest rate, which saves you money every month.

We’re happy to show you exactly how to make your dream of homeownership a reality in 2022. And you can do it in five simple steps. 

1. Get Pre-Approved for a Home Loan

Financing is everything. Getting pre-approved for a loan confirms how much money you’ll be able to borrow, which helps you search in the appropriate price range. Then, when you’re ready to make an offer on your dream home, having a pre-approval letter shows the seller that you’re a serious buyer who will, in all likelihood, qualify for the loan needed to close the deal. This makes sellers more likely to accept your offer. 

You can compare lenders online. And when you’re ready to get pre-approved, most lenders offer convenient online pre-approval.

2. Find a Buyer’s Agent

All real estate agent fees are typically covered by the seller, so it doesn’t cost you anything to hire a buyer’s agent to professionally represent you in your purchase. And you will benefit greatly from getting a real estate agent on your team as early in the process as possible.

Well-connected real estate agents often learn of upcoming listings before they hit the market. So your agent could be your ticket to getting an early heads-up on a new listing, giving you a competitive edge over other buyers. 

Sequoia real estate agents have the market knowledge, negotiation skills, and industry expertise to help you navigate the buying process successfully. 

3. Enjoy the Home Search

Shopping for the right home should be fun! Enjoy browsing home listings online and touring the properties that pique your interest.

Just don’t be surprised if you find your dream home sooner than expected. Some buyers are afraid to make an offer until they’ve seen lots of properties, and they often regret missing out on one of the first homes they saw. So be ready to make an offer when you find the right home.

4. Get an Offer Accepted

The 2022 real estate market might not hit the same level of frenzy that we saw in 2021, but that doesn’t mean it isn’t competitive. We still have high buyer demand and comparatively low seller supply. So you will need to make an appealing offer if you want to beat out other buyers.

Don’t mess around with low-ball offers. Bring your best offer if you really want the home. 

5. Sail through Escrow

The 30-60 day period between getting your offer accepted and taking ownership of the house is called escrow. This time is needed for administrative tasks like confirming clear title to the property, completing inspections, and securing financing. Having an experienced real estate agent in your corner is critical to navigating the escrow process smoothly. Your agent can help keep the transaction on track and help you address any potential issues that come up during the escrow process.

If you’re interested in becoming a homeowner in 2022, contact Sequoia Real Estate today. Our friendly agents will walk you through the process, patiently explaining each step, and representing your best interest for a successful purchase.

What are Liens?

Liens are extremely common in real estate. But since they don’t become an issue for most buyers and sellers, many people don’t know much about them. However, when they do become an issue, they can be a big problem. So we want to explain the basics of liens and how they can affect your real estate transaction. 

Here’s your quick guide to liens.

What are Liens?

Real estate liens are claims made on a property by a creditor. If a property has a lien, it means the owner owes money to someone before they can legally sell the home.  

Liens are classified as either voluntary or involuntary. The most common example of a voluntary lien is the mortgage on your home. The lender will use your home as collateral to make sure you pay your mortgage debt, so when you get a mortgage, you are voluntarily allowing the lender to put a lien on your property.

Involuntary liens, on the other hand, don’t require the property owner’s consent. Creditors who are owed money can place a lien against the borrower’s property without the owner’s permission. Common involuntary liens include:

• Property tax liens: liens placed against a property when the property taxes are past due.

• IRS liens: liens placed against a property when the owner owes back income taxes to the IRS.

• Mechanic’s liens: liens placed against a property by a contractor who worked on your home (like a roofer, electrician, plumber, or general contractor for a renovation project).

• Child support liens: liens placed against a property for past-due child support payments.

Can I Buy or Sell a House With a Lien?

In most cases, a home with a lien can absolutely be bought and sold; the lien just needs to be addressed before the title can transfer from the seller to the buyer. This means the seller needs to repay the debt plus interest to the creditor so the creditor can release the lien. With a voluntary mortgage lien, for example, arrangements are made to pay the loan balance with the proceeds from the sale, which satisfies the lien. 

Can I Be Forced to Sell My Home to Satisfy a Lien?

In extreme cases, creditors can force the sale of your home to satisfy a lien. If, for example, you failed to make your mortgage payments, the lender could foreclose on the house in order to recoup their losses. Or if you failed to make property tax payments for five years or more, the county government could sell your property at auction to recover the delinquent taxes. 

If you’re struggling to repay your debts, it’s always best to talk to your creditors. In most cases, they will work with you to create a manageable payment plan because they don’t want to force the sale of your home. Forcing a sale is a last resort.

Get Professional Representation 

Liens are one of the many reasons it pays to have professional representation in your real estate transactions. Licensed real estate agents have experience in dealing with liens and can advise buyers and sellers as they navigate around liens. Whether you’re planning to buy or sell, contact Sequoia Real Estate to be matched with a knowledgeable real estate professional who can make your transaction as smooth and profitable as possible. 

California Property Tax Basics for Homeowners

Property taxes are confusing for California homeowners. How much do you have to pay? How is that amount calculated? Did your lender already pay it?

Whether you’re in San Francisco County, San Mateo County, Alameda County, or any other CA county, your property taxes will generally work the same way. Here’s what you need to know about property taxes as a California homeowner. 

It all starts with an assessed value...

What is an Assessed Value?

The assessed value of your home is the value that your property taxes are based on. But the assessed value is a little confusing because it isn’t just the current value of your home. In fact, your home’s assessed value is probably a lot lower than the real value because of a handy piece of legislation known as Prop 13. 

Proposition 13, passed in 1978, limits the increases on your property value for tax purposes to 2% per year. So if you bought a home for $1.5 million in 2020, your assessed value for 2021 would be capped at $1,530,000 (even though values are currently up 17.7% in Alameda County, which would make the real value closer to $1,765,500).

Normally, when you buy a home or complete construction on a home, your assessed value gets reset to the current market rate. Then the Prop 13 cap applies to that home until you either sell it or take on such a massive renovation that it’s considered new construction. But in 2021, the rules changed for people over 55 thanks to Proposition 19. Prop 19 allows senior citizens to keep their cap when they move to a property of equal or lesser value. This gives seniors the option to downsize without facing an insane property tax bill increase.    

How are Property Taxes Calculated in California?

Property taxes start by taking the assessed value times the local tax rate. Tax rates vary by neighborhood, but you’ll usually see the rate between 1.1% and 1.5% in the Bay Area. Then “special assessments” are added to account for local services like fire protection or special projects like expanding local infrastructure. Special assessments are flat fees that are unrelated to the assessed value of your home. In most cases, special fees don’t add more than a few hundred dollars to your annual bill.

When are California Property Taxes Due?

California property taxes are paid in two installments. The due dates listed on your tax bill are usually around November 1 of the current year and February 1 of the following year. But there is no penalty until the delinquent dates, which are December 10 and April 10.

But before you pay your property taxes, check with your lender to see if they will make the payment on your behalf. Most lenders keep an escrow account for necessities like homeowners insurance and property taxes. The costs are rolled into your monthly mortgage payment, and the funds are paid out as needed to make sure you don’t miss a payment that could put the property (and the lender’s investment!) in jeopardy.

How Do I Get My Tax Bill?

Your county tax collector will mail you a tax bill every year, usually in October. But if you haven’t received your bill by November, you can contact your county tax collector’s office to request a copy. Most California counties even have a tax bill finder on their website where you can get a copy yourself. 

How CA Property Tax Law Affects Homebuyers

If you’re looking for a home online, you’ll often see an “estimated property tax” section in the listing. In most cases, these estimates are based on the current owner’s tax amounts, which could be much lower than the taxes you would pay. Remember, the current owner’s assessed value may have been capped for years. And if you’re under 55, your new purchase will reset the assessed value to the market rate (typically the purchase price).

A good buyer’s agent knows this. And can help you estimate the property taxes on a listing more accurately than real estate websites like Zillow. If you are thinking of buying a home in the Bay Area, contact Sequoia Real Estate. Our experienced buyer’s agents understand how complex factors like property taxes impact your purchase and can advise you accordingly to help you make the best possible purchasing decision.

5 Reasons to Buy a Home During the Fall and Winter Months

Buying a home during the fall and winter months may cost you the convenience of moving during good-weather months or around school schedules. But it also comes with some impressive advantages. Here are five compelling reasons to buy a home during the fall and winter months.

1. There’s Lower Buyer Competition

In very general terms, buyers like to look for homes in the spring so they can move in the summer. This is traditionally true of families who want to move during summer break, particularly if they’re changing school districts. But there are also lots of buyers who prefer the better summer weather with longer daylight for moving and getting settled into a new home.

If you’re willing to move during the late fall, winter, or even early spring, you’ll enjoy less competition for homes on the market. And less competition means a lower likelihood of getting in a bidding war or being beaten by an all-cash offer.  

2. Sellers are More Motivated

Especially going into the holidays, many sellers get nervous because they know buyers don’t like to move around the holiday season. So if they don’t have a buyer by the end of October, they may be afraid that they’ll have to remain in the house (or cover two mortgages if they’ve already moved) for all of November, December, and perhaps January. This gives sellers a good reason to accept your offer when it comes along during the slower fall and winter months.

3. You Get a Real Idea of a Home’s Weatherproofing 

With the cooler temps and increased rainfall of a Bay Area winter, buyers get to see how the home holds up to poor weather in real-time. Do you see signs of water intrusion on the ceiling? The roof may need to be repaired or replaced. Do you feel a draft from the windows or doors? They may need new weather stripping or you might want to upgrade for the sake of energy efficiency. What about water pooling in the yard? That can be a sign of poor grading and should be inspected to make sure water is being properly funneled away from the foundations.

4. The Potential for a Faster Move

During the spring and summer months, lenders, appraisers, inspectors, escrow companies, title agencies, and movers are all busy. In some cases, your closing date or your move-in date can be delayed simply because someone’s schedule is too tight to fit you in.

But in the winter months, when fewer homes are selling, schedules are more open, and you can be accommodated more quickly. There is, of course, one glaring exception. Many professionals take vacation in the final week or two of the year. So it might be harder to schedule a closing between Christmas Day and New Year’s Day.

5. You Might Save Money Buying in the Slow Months

Every year, real estate markets all over the country record slightly lower median sales prices during January and February than during other times of the year. Take San Francisco County, for example. In January of 2019, the median sale price in SF County dropped to $1.2 million from $1.35 million the month before. Then rebounded to $1.31 million by February. Similarly, in January of 2020, the price dropped to $1.3 million from $1.38 million in November. Then it climbed back to $1.41 million by February. 

With fewer other buyers and motivated sellers, you hold more negotiating power to get a better price when you buy in the fall and winter months. If you’re ready to take advantage of the winter market conditions, contact Sequoia Real Estate today to be matched with an exceptional real estate agent to help you navigate the process.

5 Tips for Selling Your Home During the Holidays

5 Tips for Selling Your Home During the Holidays

Selling your home during the holidays comes with the inherent advantage of lower competition. But it also means you have fewer potential buyers since many buyers take a break from their home search during the holidays. 

So what can you do to draw the attention of buyers even if they had planned to wait until the New Year to resume their search? Here are five tips for selling your home during the holidays. 

1. Keep Your Holiday Decorations Neutral

There’s nothing wrong with decorating your home for Christmas while it’s on the market. But you do need to be careful about which holiday decorations you display. 

Overly personal holiday decorations, like homemade ornaments, for example, remind buyers that this is not their home. And that’s the opposite of our goal to sell your house! We want buyers to feel at home the moment they walk through the door so that they can imagine themselves living here. 

So pack away the personal keepsakes for next year. This year, stick to holiday decorations that appeal to a wide range of buyers. You can’t go wrong with naturals like pinecones, holly, and evergreens.  

2. Price Strategically

With today’s online home search platforms, buyers can set a specific price range and receive notifications when a new home in their range hits the market. Generally, price settings go in increments of one hundred thousand, but in high-value markets like the bay area, you’re likely to see increments of a quarter of a million.

So if a group of buyers have their desired price range set for up to $2.5 million, and you set your price at $2.6, you’re going to miss out on that entire group because the online settings prevent them from seeing your listing. This is why you’ll often see prices like $2,495,000; it ensures that your listing gets shown to a wider audience. This is especially important during the holidays when fewer buyers are actively searching. 

3. Make it Cozy

As the temperatures drop, buyers naturally become more interested in a warm and cozy home than in an open, breezy home. Yes, the buyers will likely live there year-round, so this isn’t logical, but buying a house is largely about having an emotional connection to a home. And when you come inside on a chilly, windy day to a warm home with fluffy throw blankets and a roaring fire, you just feel good about it. 

Throw in the scent of freshly baked gingerbread or mulled apple cider, and you create a feeling buyers will want to recreate when they move in.

4. Light it Up

Holiday lighting isn’t just magical for kids. It can also be used to strategically highlight some of your home’s most desirable structural features. 

You can use holiday lighting to draw attention to large windows, beautiful archways, and outdoor spaces. String some lights through evergreen garland and drape it along banisters. Or place a lighted holiday decoration in your original built-ins to bring your buyer’s focus to these impressive fixtures. 

5. Select a Listing Agent Who Specializes in Real Estate Marketing

The most important tip for selling your home during the holidays is to choose a listing agent who knows how to market a home, even in a slower market. When there are fewer buyers, you can’t have an agent who simply sits back and waits for buyers to come to the house. You need an agent who will go out, find potential buyers, and snap them out of their holiday break from house-hunting. 

The experienced agents at Sequoia Real Estate have been trained to use their industry connections with buyers agents to actively search for buyers for your listing. If you’re planning to sell your Bay Area over the holiday season, contact Sequoia Real Estate to get a listing agent who can guide you to a quick and profitable sale at any season.

What are Real Estate Contingencies?

Whether you’re buying or selling a home, you’ll hear a lot about real estate contingencies the moment you’re in escrow. But what are real estate contingencies? And are they really necessary?

Here’s your quick guide to real estate contingencies.

What are Real Estate Contingencies?

Real estate contingencies are simply conditions that need to be met before the sale can move forward. There are several types of contingencies, but we’re going to focus on the five most common contingencies and how they can affect your real estate deal. 

1. Title Contingency

The purpose of a title contingency is to make sure that the sellers have the legal right to sell the home. 

In most cases, the title company will find that the sellers have “clear title,” which means that they have every legal right to sell. But in rare cases, there will be a “cloud on title,” which means there is something preventing the sellers from legally transferring property rights to the buyer. This could be because of circumstances like:

• Delinquent property taxes

• Divorce, bankruptcy, or other legal proceedings

• Liens against the property (liens are financial claims that prevent the owner from selling until the liens are paid)

In many cases, clouds on title can be cleared. But the sale can’t proceed until the contingency is met by addressing the issue.

2. Inspection Contingency

Home inspections ensure that the buyer understands the condition of the property before completing the purchase. After the buyers review the inspection report, they can sign a document to confirm that they want to proceed with the deal. This signature means the contingency has been met.

If a deal-breaker is found during the inspection, buyers do have the option to back out of the deal without penalty because the contingency is not met.

3. Appraisal

Home appraisals are independent assessments of a home’s value by a licensed appraiser. The purpose of an appraisal contingency is to make sure the property appraises for an acceptable value (the acceptable value usually being a figure near the offer price).

In the hot market conditions of 2021, we’re seeing many buyers waive the appraisal contingency. This is because buyers in heavy competition are willing to spend more than market value to win the home. As long as the buyer is paying all-cash or has enough of a down-payment to cover the difference between the appraised value and the offer price, this is entirely acceptable. In fact, carefully waiving contingencies can be a good way to get your offer accepted.  

4. Financing

If a buyer is using a loan to purchase the home, there will be a financing contingency to make sure the buyer is able to obtain the funding to complete the purchase. This is why sellers prefer all-cash offers; when buyers pay cash, there is no financing contingency to overcome. 

Getting pre-qualified for a home loan is an important step to help avoid potential financing issues as a buyer. Buyers should always get pre-qualified with a lender before looking at homes, and sellers should generally only consider offers from buyers who have been pre-qualified.

5. Final Walk-Through

The final walk-through contingency is in place to make sure the seller leaves the home to the buyers in the expected condition. This contingency is nearly always met without any problems, but in rare cases, where there is a material difference in the condition of the home during the final walk-through, the buyer can refuse to remove the contingency until the issues are addressed. 

While this list of real estate contingencies covers the most common contingencies, it’s important to note that these aren’t the only contingencies. Navigating real estate contingencies is one of the many complex tasks our experienced agents at Sequoia Real Estate manage for our clients every day. If you’re considering buying a home in the Bay Area, contact Sequoia Real Estate to be matched with a real estate professional who can make your transaction as smooth and profitable as possible. 

5 Reasons to List Your Home in the Fall

Are you ready to list your home this fall? But then you heard some chatter that it’s better to wait until the spring, and now you’re not quite sure what you should do? Let the real estate experts here at Sequoia Real Estate provide the information you need to make the right decision.

First, you should know that there isn’t only one right time to list. Homes listed in the spring generally sell a little faster than homes listed in the fall. But they’re also up against stiff competition as lots of homeowners list their homes in the spring.  

Instead of trying to time the market, focus on your needs. If you’re ready to start the next chapter of your life, there’s no need to wait until spring. You can take advantage of these five reasons to list your home in the fall.

1. Competition Is Usually Lower in the Fall

Listing inventory typically goes up in the spring. This means buyers have more homes to choose from. And this makes it harder for your home to stand out in a sea of listings.

But when you list in the fall, when inventory is lower, you have less competition, which makes it easier to capture the attention of qualified buyers.

2. Buyers Who Gave Up May Have Renewed Interest

During the chaotic market conditions from the summer of 2020 to the summer of 2021, many buyers simply gave up. They grew tired of getting outbid, losing out to cash buyers, and getting offers rejected. 

While we’re still very much in a seller’s market, we’re no longer experiencing the out-of-control frenzy from earlier this year. So buyers who had given up on the market are starting to come back. They’re tired of the search, and they’re serious about making a competitive offer today. 

3. You Can Appeal to the Holiday Ideal

Buying a home is as much an emotional decision as a rational one. And with the holidays around the corner, you can appeal to buyers looking for the holiday spirit. 

Does your home look its best decked in lights and holiday decorations? Set the holiday mood for buyers and watch them make an offer so they can experience the same feeling year after year.

4. You’ll Be Able to Buy Early Before the Market Heats Up Again in the Spring

Selling your home and immediately buying a new one can be tricky. Sell during peak season, and you’ll have to pay peak season prices for your new home. But if you sell in the fall, you’ll be perfectly positioned to purchase your new home during the off-season of the winter/early spring before the influx of buyers starts competing for listings. 

5. The Market May Have Peaked

Even the best real estate analysts don’t have a crystal ball; we can’t know for sure that the market has peaked without the benefit of hindsight. But we do know that there are signs of a stabilizing market in 2021. We’re starting to see listings stay on the market longer and have fewer bidding wars. So, while we’re certainly not expecting any kind of market crash, we are seeing growth slow to a more sustainable level. If you’ve been waiting for the peak of the market to sell, this may be it!

Don’t let the market keep you stuck in a home when you’re ready to move on. There are benefits to listing your home in the fall that you can’t get during the spring and summer. So there’s no reason to wait it out. Contact Sequoia Real Estate today for a customized marketing plan for your unique home.

Clever Ways to Buy a Home With a Low Down Payment

Back in the day, a 20% down payment was standard. But as property values have grown over the past few decades, 20% down became more and more unrealistic (especially in high-value markets like the Bay Area). By 2020, the median down payment was just 12%. But even this is unreasonably high for many buyers. 

Luckily, there are several options for buyers who are unable to save for a substantial down payment. Here are four clever ways to buy a home with a low down payment.

1. 3% Down Conventional Loans

If you have good credit, a conventional loan with a 3% down payment might work well for you. The exact qualification requirements vary by lender, but you generally need a credit score of at least 620 to qualify for the 3% down.  

The downside to a low down payment conventional loan is that you will need to pay monthly PMI (Private Mortgage Insurance). This insurance protects the lender against borrowers who default on their mortgage. This can add hundreds of dollars to your monthly mortgage payment, but most lenders allow you to remove the PMI once your equity in the home reaches 20%. And with growing property values, you might hit that mark sooner than you’d expect! 

2. 3.5% Down FHA Loans

FHA loans are generally known as the first-time buyer loan because they were designed to help people buy their first home, even if those buyers had a low down payment and some credit issues. FHA loans have a broad definition of first-time buyer. Even if you’ve owned a home before, you can qualify as a first-time buyer if you haven’t owned a home in the past three years. 

FHA loans are insured by the US government, so they pose less of a risk to the lender. And since the lender is taking less risk, they’re willing to work with lower credit ratings. You can qualify for 3.5% down with a 580 credit score. And if your credit score is lower, you might still qualify for a 10% down payment. 

Like with conventional loans, you’ll need to pay PMI if you put down less than 20%.

3. 0% VA Loans

VA loans are reserved specifically for military service members, veterans, and their families. In addition to the benefit of 0% down, qualified buyers can avoid the PMI charge with VA loans!

Another cool benefit is that you can use VA loans to buy multi-family properties of up to four units as long as you live in one of the units. So if you have dreams of becoming a real estate investor, this could be a great option for you. But you will need good credit. Expect lenders to require a credit score of at least 640. 

4. 0% USDA Loans

The USDA launched this 0% down program to help low-to-medium earners buy a home in rural areas. To qualify for a USDA loan, you need to choose a home in a qualifying rural area. While much of the Bay Area is too urban to qualify, you can find qualifying areas outside of the cities.

In addition to finding a qualifying property, you need to have good credit of around 640 and you can’t exceed the income caps. 

The Bottom Line

There are several ways to buy a home with a low down payment. You just need a lender who can help you explore your options and a real estate agent who can find homes that qualify for your chosen loan program. 

If you’re considering buying a home in the Bay Area, contact Sequoia Real Estate. Our experienced real estate agents can refer you to qualified lenders and help you find the home of your dreams, even with a low down payment!