Monthly Archives: January 2014

Tips on Touring A Home

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I recently read an astonishing statistic that on average potential buyers spend 17 minutes in a home before making an offer on it.  While I can’t verify how researchers arrived at this statistic, that number is shocking for two reasons; 1) It’s an extremely short amount of time to spend deciding on what is the biggest purchase of your life, but also 2) it’s truthfully not all that surprising.  In my experience, typical showings tend to last around 30 minutes.  If a house isn’t the right fit, often times the showing ends after a few quick minutes.

So if indeed, all it takes is anywhere between 17 to 30 minutes to determine if a house is right for you, here are a few tips on how to spend that time as efficiently as possible.

1)  Use all your senses and bring a camera!

Touring a house is first and foremost a visual activity.  Your eyes are busy taking in all the pros and cons, but often distracted by some of home’s charming features.  You might be so busy falling in love with the large Carrera marble countertops that you didn’t really take in the condition of the cabinets.  Open a drawer or two.  Turn on the faucet to gauge water pressure.  Does the floorboard creak or feel soft when you walk?  Does the house smell musty?  Can you hear street noise when all the windows are closed?  Use all your senses to get a full picture of what it might be like to live in the house.  Because that smell might be an indication of a hidden water issue.  And I have often heard about people moving into a house only to find unacceptable street noise after the fact.  You simply cannot rely on just your eyes to take everything in.  Which leads me to my next point: bring a camera.  There’s just no way after a day of looking at houses you will remember the color of the laundry room wallpaper in house number #2.

2)  Spend the most time in the kitchen and bathrooms.

The most expensive room to renovate is the kitchen, followed by bathrooms.  While most homebuyers draw the greatest impression of a house from its kitchen, people tend to overlook the bathrooms.  Additionally, both these rooms have running water and plumbing to contend with so make sure you are diligent in your assessment of their current condition.  Look under the sinks for signs of leakage or old plumbing.  Again, turn on the water and check for good pressure, clear run-off, and appropriate water temperature.  And finally, be honest with yourself about how these rooms look.  Your bedroom can be transformed with a coat of paint.  A kitchen or bathroom remodel is substantially more.  So if you aren’t in love with the cabinet style or the countertops, admit to yourself that you will likely want to change it in the near future, and factor that into your decision-making process.

3)  Go outside.

Guess what else is really expensive to tear out and redo?  Backyard and front yards.  Prospective buyers not surprisingly spend most of their time at a home tour indoors, surveying its finishes, floorplan and features.  But do not conclude your showing without spending a significant amount of time taking in your outdoor space.  Are there cracks on the hardscape that need to be addressed?  What condition is the hot tub or pool?  Does the backyard get enough sun?  If so, what time of day?  Is your fence in good condition?  And, don’t forget to look out at your neighbors and the immediate neighborhood.  What condition are the houses on your street?  Who might your neighbors be?  How busy is the street in front?  Don’t miss out on these critical cues of a property’s shortcomings.

4)  Bring a tape measure.

Do the due diligence and measure the rooms that matter to you and also a few major appliance openings to make sure that your existing furniture and appliances will fit.  Generally, washers and dryers don’t convey with the house.  If your current washer and dryer don’t fit the openings, and do not assume they will, a brand new pair of laundry machines will become additional expenditures that you didn’t anticipate.  Think about how annoyed you might become upon move in to find that your furniture doesn’t fit well or your TV is too small for the built-in opening.  While I’m not suggesting that the size of your furniture and appliances be deal-breakers should you love the house, it’s just important to be aware of these potential costs up front as it will improve your satisfaction with the overall home purchase.  Nothing dampens the excitement of moving into a new house as much as a growing list of unforeseen expenses.

5)  Go back for a few more showings!

If upon first impression, you make an emotional connection to a house, make sure you request additional showings, especially at different times of the day.  Today’s market isn’t moving at a pace where you wouldn’t have time to squeeze in a few more looks.  Chances are, after your first tour, you won’t remember several important details and you’ll have new questions about the home.

Happy house hunting!

Real Estate and the Internet

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Back when I first started in the residential real estate business, listings were made available to agents via a large volume newsprint book much like a phone book.  A good portion of the information in it was obsolete by the time it rolled off the presses.  No one had an efficient method for gathering relevant data like neighboring comp sales or tax records.

But along came the Internet.  And the real estate game changed.  A lot.

Every client I work with today has done a significant amount of research online prior to meeting me.  Buyers have already walked through most listings within their criteria via virtual online tours, and sellers come to the table with a deep comp list of recent sales and existing inventory.  For me, giving the consumer access to the world of home buying/selling information is actually a great thing.  And here’s why.

People once speculated that the Internet would kill the need for real estate agents.  But the truth is that buyers and sellers need us more than ever simply because at the end of the day, experience and expertise is still necessary to complete the complicated transaction. The California Residential Purchase Agreement is 8 pages of check boxes, fill-in-the-blanks, signature lines, and that’s before we start adding in addendums, disclosure documents, and counter agreements.  Most consumers know that a real estate transaction is so infrequent, expensive and highly emotional, that after the initial online research is completed, they turned to a professional.

Plus, of all the major dot-coms in the real estate space, only Redfin is trying to challenge the existing business paradigm by employing their own army of agents and then undercutting commissions.  Zillow and Trulia provide the platform for a consumer-driven search, but both sites refer out to a traditional local agent to execute a deal.  After years of closely following Redfin’s business trajectory, industry experts have yet to see them become a threatening player.  Nationally, Redfin saw only 3% of total transactions last year.

So instead, the Internet has elevated the business in a really positive way.  For one, the transparency provided by these websites holds all agents far more accountable.  Every consumer can fact check the statistics we arrive with at our initial meeting, so we better make sure that our information and numbers are correct.  Additionally, the business is hyper-efficient at this point.  By the time a client gets in my car to go house hunting, because of the extensive research he/she has already done, we are only seeing homes with the greatest potential.  The benefits of efficiency also apply to the ability to keep clients apprised of market activity and changes.  New listings can be automatically emailed to clients as soon as it becomes available.  Another practical benefit is that when I make a suggestion for sales price, rarely are people surprised because they have already studied comp sales in the neighborhood thoroughly.

And finally, with the explosion of real estate Internet activity, agents are able to cast a wide net in terms of listing exposure.  Potential buyers from all over the globe have eyes on our Newport Beach market.

Bottom line is that the Internet evolved and streamlined the real estate business.  It has forced agents and brokers to be at the top of their game.  By acknowledging how well-informed their clients have become, real estate professionals are finding ways to provide real value in the process.  Afterall, the buying and selling journey is an arduous and winding road, and no two transactions are remotely identical.  So a seasoned agent can facilitate the process, creatively solve for your residential housing needs, and potentially save you a few headaches and dollars along the way.  And while forces that challenge that notion exist in the digital space, the general public clearly still value a good real estate agent.

Changes to Lending Laws. Good or Bad for You?

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Last week, changes to current lending laws took effect.  These reforms seek to prevent the housing crisis of the late 2000s from happening again.  As we all vividly recall, millions of homes across the country during that time went into foreclosure because homeowners found themselves with loans they simply could not afford.

So, what are these changes and how do they affect you?

First, there’s the Ability-To-Repay Rule aimed at tightening the bank’s underwriting process.  Borrowers without a lot of debt won’t be affected by this new rule, but those who have a debt-to-income ratio above 43% will find it harder to qualify for a loan.  Self-employed borrowers will have to show more proof of income.  This rule attempts to hold banks more accountable by increasing the due diligence work required to qualify their clients.  While there are opposing opinions on whether this Ability-to-Repay Rule truly benefits the homeowning public, it does mean that borrowers from this point forward will likely have to jump through a few more hoops to secure a loan.  It potentially could mean that there are less qualified buyers in the market place as well.

Under this rule, you may start hearing the term “QM” which stands for Qualified Mortgage.  A QM loan meets the new guidelines.  So as a borrower, go and get yourself “QM-ed!”

The other changes to lending laws are likely to be less impactful.  For instance, there’s now a cap on loan origination fees.  Fees are to be limited to just 3% of the loan amount, which is great because borrowers won’t be paying an arm and leg for their loans.  But, this potentially could mean that lenders may not be interested in offering smaller loans.

Also, mortgage servicers are required to provide borrowers with a far more detailed statement on a monthly basis.  Statements must clearly show interest rate, loan balance and escrow balance.  Again, this is a consumer friendly rule trying to provide more transparency for the borrower.

A few things have not changed.  $625,500 is still the borrowing threshold at which it becomes a jumbo loan.  In a luxury market like Newport Beach, most buyers are seeking jumbo loans with a 20% down payment minimum.  Also, guarantee fees were scheduled to rise, but newly appointed FHFA head Mel Watt delayed the hike until further evaluation.  So for the time being, the guarantee fees remain unchanged.

Mostly, these changes imply more paperwork for the lender. While the intent of these changes is to avoid another foreclosure crisis, how these changes ultimately trickle down to the borrower and their impact on the greater housing market has yet to be fully determined.  What we surmise is this: it will be a little harder to qualify for a loan, more paperwork will be involved in the process, unconventional loans will be less available, and quite possibly, the market will have less ready and able buyers.

Goodbye 2013. Hello 2014.

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New year, new ventures. This year, in an attempt to keep up with how technologically savvy the real estate business has become, I am trying my hand at blogging and expanding our social media efforts. So, without further ado, welcome to my very first blog post.

2013 was an interesting year. For the most part, all the major headlines were positive. “U.S. Housing Prices Up 22%.” “Sales of New Homes Rise.” “Jobless Claims Down.” “U.S. Housing Valuations Remains Relatively Attractive.” In our micro-market of Newport Beach, we certainly saw our fair share of rising home prices, an influx of foreign investors, and a healthy dose of remodel and homebuilding activity. Typically, these three “thumbs up” indexes portray a productive exchange of buying and selling. However, if we took one step back and looked at our market with a slightly more macro lens, the truth is that overall prices are still down from the peak of 2006 by nearly 20%. And, our biggest ground zero obstacle continues to be low inventory.

In 2013, our team at the Tim Carr Group spent a lot more time looking for sellers. Many of us had buyers who were pre-qualified and ready to bite, but had to wait week after week for the right house to hit the market. What we found while pounding the pavement is that many homeowners took advantage of low interest rates and refinanced their homes. Some interpreted the rising home prices as a sign to start investing in their homes with much needed remodel and repair work. But the fundamental issue that we kept hearing from homeowners who might have wanted to capitalize on higher resale values was… “where would we go?” Low inventory is the real estate catch-22. If you sell a house to make a pretty penny, you may not find a house to buy with that penny.

2014 is gearing up to be an interesting year as well. Early indicators say nothing new about the real estate landscape. All vitals signs are still positive and yet we are still faced with inventory challenges. Additionally, changes in lending underwriting rules may be limiting to those looking to buy. The outlook here at the Tim Carr Group is positive but cautious. We anticipate that 2014 will bring new challenges for our clients on both the buying and selling side and have already been digging in deep with our community of lenders, homebuilders and other real estate professionals to survey the terrain on our clients’ behalf.

So goodbye 2013. Hello 2014! New year, new ventures. We are excited.