Tag Archives: Newport Beach

Benefits of Living in a HOA Community

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Millions of homeowners now live in communities governed by homeowner associations or HOAs.  In fact, it is estimated that one in six Americans live in a HOA community.  That statistic is probably higher in Orange County as so many of our beautiful subdivisions are HOA communities.

Buyers are often wary of purchasing properties that require HOA fees.  Many view HOA fees as another expensive monthly cost and find HOA rules and regulations to be too restrictive.  But, there are many benefits of living in a well-governed HOA as the intent of HOAs is to protect the value of the homes in the area.  While every buyer should weigh the cost of the fees and determine what amenities and services are included, here are some common benefits to being in an HOA community.

Property Value Protection

A HOA provides greater certainty that the community will remain visually appealing over time, by imposing and enforcing rules on architecture, landscaping, fences, signs, parking, usage of public spaces, and more.  The rules are designed to create parameters for aesthetic uniformity so that no house is an eyesore to the neighborhood.  In addition, the HOA is responsible for the physical maintenance of common areas.  While residents often find HOA rules to architectural enhancements to be thorns in the remodeling or construction process, they are put into place to protect the collective interest of the residents.

Recreational Amenities

One of the most attractive benefits to HOA fees are the amenities provided.  Many communities in Orange County offer gated access and around-the-clock security presence to provide added safety for the residents.  Others offer pools, clubhouses for rent, parks, gyms, basketball courts, tennis courts, community events and even private beaches!  Obviously, the more amenities offered, the higher the fees may be.

Property Updates

The HOA sets aside a reserve account for future capital improvements or repairs from unexpected damages.  The reserve account provides assurance that the properties will remain in good shape and may save homeowners money in the long run.  Many people recognize the benefit of owning a home but being able to share in some of the management responsibilities

Community Environment

When a community has an HOA, the residents of that neighborhood have agreed to a set of “good neighbor” rules fostering a greater sense of community.  Many HOAs also provide community events and socials to increase community bonding and communication among the residents.  While this benefit is difficult to quantify, it is highly desired especially by young families, and that desirability can be a factor in property values.

As a prospective buyer looking for a property, decide early in the process if the HOA lifestyle is a fit for you.  If so, do some research and determine how much you are willing to pay per month on HOA fees.  Also, research what amenities are provided in each subdivision to help you narrow your property search.  A seasoned real estate agent knowledgeable in the areas of your interest should be able to provide you with the information you need at the onset of your home search.

How To Get Top Dollar For Your Home

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How does a seller get top dollar for their home? Every seller wants the assurance that his/her house will sell at the highest price possible. But, real estate, as with most industries, is a highly inexact science. There are many factors at play within rapidly changing market terrain. While there are no concise answers as to how one ensures a house sells for top dollar, there are some important considerations to deliberate as the seller that can help you maximize profits, maintain control and reduce the stress that comes with home-selling.

  • Know why you’re selling and keep it to yourself.

The reasons behind your decision to sell impact the process greatly. Do you already have another house in escrow? Do you need to sell quickly? Or is profit your highest priority? All of these questions will factor into your pricing strategy. However, do not reveal your motivation to anyone else other than your agent or they may use the information against you during negotiations.

  • Set your price appropriately.

Setting the right price is the single most important decision you will make when you decide to sell. Price too high and you will turn off potential buyers. Price too low and you may leave money on the table. Make sure you do your homework by looking at comparable sales in your neighborhood in the last 3-6 months. Visit all the competitive offerings and see how they’ve been priced relative to the condition of the home. It’s always good practice to know your competition. While pricing, stay as objective as possible, and really look at your house from a potential buyer’s perspective. Emotional attachment to the house tends to drive pricing higher than necessary.

  • Maximize your home’s sales potential.

You may not be able to change your home’s floor plan or location, but you can make cosmetic updates that will enhance buyer impression. Assess your home, again, through the eyes of perspective buyers, and determine what can use updating. Fresh carpeting and/or a paint job can transform a space dramatically. If possible, avoid showing the house empty. You want to help potential buyers envision the home as their own, so provide neutral staging or de-personalize your existing décor. Furthermore, make repairs to visible damage. And don’t ignore the exterior. Buyer impression starts upon arrival at the house, so make your home appealing from the curb.

  • Consider a pre-appraisal and a pre-inspection.

A pre-appraisal will provide you with an objective basis for pricing your home. Additionally, a pre-inspection can identify any issues with the house that you can address ahead of time rather than during escrow as re-negotiating during escrow can be more costly since you’ll have less leverage and the transaction can be at stake.

  • Know your buyer.

While you shouldn’t disclose much about your reasons for selling, you should try and find out who your buyers are. Why are they moving? Do they need to move quickly? Are they in good financial standing? Having some information on the buyer’s motivation and personal situation will give you the upper hand in the negotiations process.

  • Time your sale.

If possible, watch market conditions carefully and time your sale. Typically, spring and summer are good times to sell. But specific to your market, be mindful of supply and demand. Are there more buyers than sellers? Are interest rates reasonably low? When there are more buyers in the market, sellers can get better pricing and terms, especially if there are multiple parties interested in your property.

  • Hire the right listing agent to represent you.

Truthfully, nothing is more instrumental to your successful home sale than the right real estate agent for your needs. Not all listing agents are created equal. If you hire an experienced agent, they will perform all the research necessary to advise you on all the points listed above: pricing, home improvements, negotiations, timing of the sale, etc. Get a few quality referrals from friends and interview several agents. As part of the interview, make sure you understand how each agent’s marketing plan for your property differs.

To sell your home for top dollar requires proper positioning of your property to the maximum number of prospective buyers. Educating yourself on market conditions and having an experienced agent as your representation will increase the likelihood of a successful transaction for top dollar.

 

Buy or Build?

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I hear it from buyers all the time, “For that price, I should just build my own dream house!” Maybe you should. But building a house comes with its own set of woes that may not be suitable for your current situation. Let’s take a look at some of the pros and cons of building a house.

Pros

  • The number one reason for building a house is so that you get exactly what you want from a house: floorplan, number of bedrooms, architectural style and design… right down to each and every last finish.
  • Because the house is new, it will have met all the latest building and safety codes so as an owner, you can be less concerned about the foundation, pipes, wiring, etc. Plus, you will get brand new appliances and not be so concerned with having to make repairs to an older home.
  • In certain markets and scenarios, building a house can be cost effective but it requires the owner to be fastidious with the budgeting and accounting.

Cons

  • There are a number of additional costs that need to be factored in, i.e. the carrying cost of the land during the construction, the construction loan, rent for the current abode, and more.
  • Very few construction projects are completed within the proposed timeline. Plus, there are issues that come up that are beyond your control, such as delays in city inspections or permitting. When the project is delayed, it costs you money and, most likely, stress.
  • Can you wait 18 months or 2 years for your dream house? Will your needs and wants have changed in that timeframe?
  • Chances are, you work and have a family. Building a house is an enormous strain on your time. Do you have the time or the patience to select all the finishes? Even if you hire a designer to help with those decisions, the designer will still need to meet with you to obtain your approval. What if you and your spouse don’t agree on fixtures and details? Can your family bear the anxiety and stress that comes with managing a construction project?

Now, buying a house is a relative cake walk to building especially if you’ve put together a good team of people to help with the purchase, i.e. your Realtor, your mortgage broker, lender, etc. The issue is that you are stuck selecting in current inventory and generally, every house has flaws that you can’t quite reconcile. And truth be told, a pre-existing house will never be 100% your taste or vision, so you are likely to embark on a construction project of some type even if you buy. Then there’s the frequent issue of not being able to remodel to your liking because of HOA regulations and restrictions or dilemmas presented by the home’s original structural engineering. All these scenarios are likely when it comes to buying an existing house.

So should you buy or build? It just depends on… you.

 

After the Listing Agreement: What to Expect

Red For Sale Real Estate Sign in Front of House.

You’ve decided to sell your house.  You’ve selected an experienced real estate agent to represent you and the “For Sale” sign has been placed in front of the house.  What next?

Selling a house is usually not a quick and easy process.  It takes longer than most imagine, can be emotionally taxing, and have some unexpected costs associated with it.  Knowing could happen next can help manage your personal expectations.  Here’s  a look at what you can expect once you’ve signed a listing agreement.

Prepping the House for Market

Most agents put their listings up in the local Multiple Listing Service (MLS) along with a set of beautiful photographs of the house to entice potential buyers.  Your real estate agent will hire the photographer and set the appointment.  All you have to do is tidy up, de-clutter and remove personal effects from sight.  Your real estate agent may also suggest some quick easy fixes to get the house photo-ready and primed for imminent showings.  Most sellers underestimate the time and effort required to get the house to market.

If you’ve already moved out, then staging might be a good idea to warm up the environment and give the buyers a sense of how to live in the space.  Whatever the case, the homeowner and the agent need to work together to make sure that the home is aesthetically ready for market, and that it is consistently maintained in tip-top condition during the selling period.  This is not an easy feat if you are actively living in the home with your family!

Open Houses

Your agent will want to hold the house open for colleagues and area agents.  This usually takes place on a weekday and it’s called a broker’s open.  The idea is to expose the house to as many agents as possible so they can start bringing forward suitable buyers.   Then, from time to time, your agents might suggest holding the house open for the general public.  It is best for the homeowners not to be present during an open house so that agents and buyers can tour the home freely and with ease.

Showings

During the first 2-3 weeks, you should be getting phone calls from your agent asking you to vacate your house while he/she brings through potential buyers.  If your agent placed a lockbox on your house, area agents and their clients may drop in on you during times you’ve specified as available for showings.

After a few weeks, traffic may taper a bit and showings may become a little less frequent.  Do not worry if the number of showings decreases, as the dip is rather typical.  Average days on market can be 60-90 days in a normal market.  If the market is slow, buyers will take their time.  It’s a positive sign of real interest when the same buyer returns for additional showings.

Next Steps

In my experience, after about 6 weeks, sellers tend to get anxious.  The initial excitement of being on the market has waned and keeping the house immaculate at all times has become tedious.  Unless you are in a very difficult market, if you haven’t netted any serious interest in 6 weeks, it might be time to assess a change in course or next steps.  The housing market can change quickly, so it may be worth a look at updated comps to determine if the house is competitively priced to sell.   Additionally, it may be in the best interest of everyone involved for the house to undergo some light improvements or cosmetic updates such as flooring or paint.

As real estate professionals, we hope that every house gets sold quickly and with minimal intrusiveness to the homeowner’s life.  But the truth is, the process of selling a house is laborious and can have many twists and turns.  Staying informed and knowing what to expect is key to a positive transaction.

Listing Agreement: What Does It Cover?

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You’ve decided to sell your home and you’ve engaged a real estate agent to get the job done. The agent will subsequently present you with a listing agreement, the contract between the seller and the agent that sets forth the conditions of the listing. It’s important to understand the terms of the agreement because once executed, you will be bound by them for the duration of the agreement. And while the listing agreement protects the agent because it obligates you to work with the agent for a minimum amount of time, it also protects you by detailing the agent’s responsibilities and what recourse you have should he/she not fulfill them.

Here are the key terms of listing agreements:

1)   Length of the listing period.

The listing agreement defines the start date and the end date. During this time period, your agent has the exclusive right to sell your property. Generally, the agreement is written for 3 to 6 months. While sellers typically prefer to have shorter time frames in case a sale doesn’t happen as quickly as imagined, it’s important to recognize that it takes a fair amount of time, effort and expense for the agent to prepare the house for sale, take it to market, and generate interest around the property.

2)   Sales price.

The listing agreement also defines the mutually agreed upon initial list price for the property. The sales price can be further amended during the listing agreement period with the execution of an addendum document.

3)   Amount of commission.

The commission rate is the percentage of your sale that is paid out to the brokerage companies that sponsor the real estate agents involved in the transaction. Typically this is set forth at 5-6%, to be split between the listing broker and the selling broker. The listing agreement should also specify exceptions to the commission as well. For instance, if your agent “double-ends” the sale, meaning that he/she also represents the buyer on the transaction, the commission rate for that scenario should be spelled out.

4)   Duties.

The agreement should lay out all the necessary activities the agent is authorized to conduct on your behalf to sell the property. In addition, the agreement will also specify how you will handle disputes should there be a disagreement between you and the agent. Generally, the contract calls for mediation or binding arbitration.

The listing agreement is the first of several forms a seller will be asked to review and sign during a sale transaction. Read it carefully and have your real estate agent walk you through any portions you don’t understand. Make sure you are comfortable with the terms and clear on how things will proceed.

Appraisals – Part II

Appraisal Report

After a few rounds of counter offers and negotiations, buyer and seller agree on a price and the home goes into escrow. Time to celebrate? No, not just yet unfortunately. Within the escrow process, there are several hurdles to overcome, one of which is the appraisal. As we mentioned in last week’s post, appraisals are a critical component of the lending process. A low appraisal can derail the agreement reached by the buyer and seller.

Low appraisals can arise in a declining housing market due to the lack of recent comparable homes sales, making it difficult for appraisers to determine the current market value of a property. When home sales slow, good comps “age” fast. Comps of homes that sold over six months earlier generally become obsolete data and aren’t factored in the valuation. Add foreclosures and short sales to the equation and appraisal values can vary greatly depending on the appraiser’s methodology. But, low appraisals can also occur when the market is rising rapidly as appraisers may have a hard time adjusting their valuations to account for escalating market value.

The reality is that appraisals are conducted by independent 3rd parties hired by the buyer’s lender. Legislation requires lenders to use an intermediary entity who then in turn selects the appraiser, ensuring that the lender and the appraiser have no conflict of interests. The regulatory intent is to have the appraisal be as impartial as possible. So it’s not at all possible for the buyer or the seller to choose who performs the appraisal. However, if you have a knowledgeable and seasoned real estate agent representing you, he or she can be instrumental to the process. Here’s how:

  • Your real estate agent would never want his/her client to overpay for a house so chances are, during the negotiations process, he/she will be facilitating the negotiations towards fair market value, already mitigating the chances of a low appraisal report.
  • Your real estate agent presumably is an area specialist so he/she should be well-studied in the specific neighborhood of the home so that he/she might drawn upon nuanced knowledge of schools, community and other neighborhood desirability details that can be shared with the appraiser.
  • All reputable real estate agents will attend the appraisal at the home and provide a package of most relevant comps to the appraiser.
  • In addition, the agent could have knowledge of off-market home sales in the area that can impact the appraisal or conversely have knowledge of recent foreclosures and short sales that should be exempt from the valuation.

Good agents are keen to the fact that appraisers tend to draw their comps straight from the MLS but that data collected may not represent the clearest picture of market activity and value.

And should the appraisal return a lower value than the negotiated sales price despite the diligent efforts of your agent, here are the buyer’s options:

  • Negotiate a new price – sellers may entertain a lower sales price as a low appraisal is a blemish on their home should they have to put the house back on the market, or there could be other circumstances at play like the purchase of the next home contingent of the close of the current home that might increase seller flexibility.
  • Put more money down – if feasible, buyers can always bridge the difference between the loanable amount with cash.
  • Hire a new lender – a new lending entity will restart the process potentially with a new appraiser.
  • Cancel contract – contracts are typically written with an appraisal contingency to protect the buyers from having to follow through on the heels of a low appraisal.

Under any of the circumstances above, the thing to avoid while navigating the pitfalls of a low appraisal is letting the appraisal contingency period expire or else the buyer is locked into the transaction.  Again, your real estate agent should be well aware of the contingency period and would never allow the period to expire.  A seller benefits from a mutual resolution so typically they will grant an extension while the buyer vets all options.

Whether you are the buyer or the seller in a low appraisal situation, your seasoned real estate agent should be guiding you through the entire process and see you through its resolution.

Appraisals Explained

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Appraisals are a critical component of the lending process.  In any home sale/purchase transaction that requires financing, the lender will mandate an appraisal on the property.  So what exactly is an appraisal?

Often confused, a home appraisal is a separate analytical report from the home inspection.  An inspection identifies potential physical issues with the house to prevent costly repairs down the road.  An appraisal is a third party expert opinion on the current value of a piece of property.  Lenders rely on the appraisal report to ensure that they are not over-loaning on a property.  In the event a borrower defaults on the mortgage and the property goes into foreclosure, the lender recoups the money it lent by selling the home.  If the bank loaned above the value of the property, then the lender is unlikely to recoup their investment.

An appraiser is an independent and objective third party who does not have any financial stake in the transaction apart from his fee for performing the appraisal. Appraisers are state-licensed and work in regions and neighborhoods they are familiar with so they have an expert knowledge of any environmental or other concerns that may affect the value of a property.  Typically, the homebuyer pays for the property appraisal when applying for a home loan and the cost varies greatly depending on the size of the home and the experience of the appraiser.

There are two basic methods of appraisal used for residential properties. First, there is the sales comparison approach whereby the market value of the subject property is determined via “comparable” analysis.  The appraiser typically visits the home in question and obtains specific home information and statistics and then compares the data with “comps,” properties of similar kind in the same geographical area that have recently sold.  The second method is the cost approach, which evaluates value by determining how much money it would require to replace the property if it were to be destroyed.  This approach is more commonly used in evaluating new construction.

The appraiser gathers information for the appraisal report from a number of sources, but the process always begins with a physical inspection of the property inside and out.  Additionally, the appraiser may look at county courthouse records and recent sales reports from the multiple listing service. The appraisal report typically includes:

  • An explanation of how the appraiser determined the value of the property.
  • The size and condition of the house and other permanent fixtures, along with description of any improvements that have been made and the materials used.
  • Statements regarding serious structural problems, such as water damage and cracked foundations.
  • Notes about the surrounding area, i.e. proximity to schools, new or established development, lot size, relevant aspects affecting desirability and resale, and so on.
  • An evaluation of recent market trends of the area that may affect the value.
  • A comparative market analysis that supports the appraisal including maps, photographs and sketches.

Next week we will discuss how to prepare for an appraisal and what happens if the appraiser returns a value lower than your contract price.

DIY Staging Tips

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In last week’s blog post, we covered a few tips on how to prep your house prior to listing it for sale.  We discussed improving curb appeal and light remodeling to make the home more universally appealing.  To that effort, we also mentioned the importance of de-cluttering, de-personalizing and cleanliness.  So now that the house is neutral and clean, how does one dress each space to additionally enhance a buyer’s impression of the house?  This is where the art of staging comes into play.  Should you want to take a crack at staging your house, here are some few helpful tips to consider.

Furniture Grouping

Roll up your sleeves and start moving furniture. There’s a common belief that rooms feel larger if the furniture is pushed up against the walls, but it actually isn’t true.  Reconfigure your sitting areas by floating furniture away from the walls.  Reposition sofas and chairs into groupings that look conducive to conversations. Not only will this make the room feel more inviting, but it will open up the space and the area will appear larger.  Give yourself permission to remove furniture items entirely if the room requires more breathing room for better traffic flow.

Accessorize

Style your dining room table as if you’re expecting a dinner party.  Bring some greenery indoors as flowers and plants instantly add vibrancy and life into any room.  Place pleasant, non-controversial artwork or photography that befit the style of your home on walls that seem too bare.  Dress each bed with complementary linens and pillows for a comfortable, lived-in look.  For the master bedroom, remember to tow a gender neutral line when selecting bedding and accessories.

Home Lighting

Do not forget to consider lighting.  The first thing a real estate agent does when showing a home is to turn on all the lights, regardless of the time of day.  So at some point, mimic a showing and turn on all the lights in the house to give yourself the buyer’s perspective.  What you want is to make sure that your home looks warm, inviting and well-lit.  As it turns out, most homes are improperly lighted. To remedy the problem, increase the wattage in your lamps and fixtures. Aim for a total of 100 watts for each 50 square feet.  Make sure you have all three types of lighting in the house: ambient (general or overhead), task (pendant, under-cabinet or reading) and accent (table, floor or wall lamps).

Make Awkward Spaces Functional

One way to really add value to a house via staging is by creating a purpose for an otherwise awkward space.  The area under the staircase can sometimes fit a small desk for a quaint office nook.  Transforming a blank space into a practical area gives the house a feature that is memorable to the buyer.  It also gives the impression that the house is bigger and thoughtfully functional.  If you have an awkward space, check out interior design websites like Houzz for inspiration on how to give it a quick transformation.

Make Every Room Count

Most of us have a room in the house that is a “hobby room” which is a euphemism for “dumping ground.”  As part of the decluttering process, make sure the room is thoroughly cleansed and all unnecessary items are removed.  Then, give the room a purpose.  Would potential buyers want to see a guest bedroom?  Or an additional kid’s room?  Making a real room out of what was your junk room will have a big payoff on buyer impression.

The goal of staging is to breathe new life into the house, giving it universal appeal.  Chances are, while living in the house, you’ve made it work very specifically for yourself over the years.  Staging removes some of the specificity and quirkiness.  When well done, it gives buyers an idea of how to use every space well and maximizes the home’s potential for positive impressions.  Staging is immensely valuable tool in selling a house.

Prepping a House For Sale

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If you are getting ready to put your house on the market, consider a few of these tips to help maximize appeal and improve how well your house shows to prospective buyers.

1)   Enhance curb appeal.

When a house goes on the market, generally the owners have expended some thought and energy towards making the interior of the home look immaculate.  But, you only get one opportunity to make a positive first impression, so do not let the exterior of your home go untouched:

  • Power wash the house!  A quick power wash takes years of dirt off of the house, making a huge immediate difference.  Get the siding back to a vibrant state and have the windows sparkle.
  • Make sure your house number is clean and easy to read.  Visitors dislike not being able to identify the house quickly as it makes the house not feel welcoming.
  • Consider a handful of new landscaping to impress upon visitors.  Fresh greenery really enhances the appeal of the home and gives the impression that the home is well attended to.  And don’t forget to prune back overgrowth.
  • Create a welcoming front door and porch area.  This can be a simply a new door mat, a coat of vibrant paint on the front door, or a casual patio set that creates an inviting seating area.

Many of these exterior improvements can set the tone for the rest of the showing, impressing upon buyers the feeling of a cared-for home, one of steady maintenance and quality upkeep.

2)   Make obvious repairs.

Now is a good time to attend to the small repairs that have accumulated over the years of living comfortably.  Broken window pane, cracked deck tiles, non-functioning light fixtures – addressing the visually-obvious issues beforehand helps touring buyers stay focused on the big picture of whether the house is a good fit for their needs.  Removing these detracting items paves the way for a smooth and favorable showing.

3)   De-clutter and depersonalize.

Buyers want to envision their belongings in the home they are touring. Help them see that vision by removing personal effects such as framed photos, tchotchkes, extra items of furniture, and toys.  The idea is to have the house look generic and spacious.  The old adage “less is more” is sage advice to heed.  Hire a cleaning crew to deep clean the house and have every surface return to near-original glory.  Keep in mind that people during showings may check out the closets and cluttered closets imply lack of storage, so definitely make a pass at organizing and filtering through your closet spaces.

4)   Neutralize.

The teal accent wall highlighting the dining room might be too bold for some buyers.  If you are going to make some light redecorating changes, consider going neutral in the choices you make.  A neutral palette is generally received as welcoming and will appeal to the majority of the people walking through the house.  Complementing color can be added through linens and bedding and décor items.

Once the house has been prepped, then the discussion can progress to furniture staging.  Stay tuned next week and we will provide some staging advice.