Home Buying Power

by Marti Kilby

  If you’re buying a brand new home, the builder’s representative will supply you with all the answers to any of your questions, along with warranties and manuals. If you’re buying a foreclosure, you’re on your own in terms of learning about the property and how everything works. On the other hand, if buying from a seller who occupied the property, try to have them meet you for your walk-through, or email them your questions. Here are some suggested questions:

  Are there manuals and/or warranties for the appliances?

  Is there a warranty from the builder or a separate warranty for the roof?

  If there is a security system, which company provides the monitoring, what does it cost, and how does it work?

  Where is the mailbox? Is there a key?

  If there is an automatic landscape sprinkler system, are there instructions for setting the controls?

  When was the last time any of the chimneys were cleaned (if wood burning)?

  Where are the exterior clean-outs for the drains?

  If on a septic system, it was probably inspected. Make sure you know where the tank is located and how it is accessed.

  Are the property lines clearly marked?

  Where is the main shut-off for the water and gas?

  Swimming pool or spa? Have the current owner walk you through basic operations.

  Learn how to operate any exterior lights, fountains, or ponds.

  Is there any type of built-in water softener or filter? How does it operate?

  When was the last time the furnace filter was changed?

  Who are the current service providers (gardener, pool maintenance, etc.), and what are their phone numbers?

  Every home is different, and the questions you need to ask will vary according to the type and age of your home and where you live. But do take time to ask your questions now while you and your agent still have access to the seller.

  Savvy Shopper Tips: Do not waive the right to a final walk-through. Check the property carefully to make sure the condition is relatively the same as when you last saw it. When meeting with the seller and learning about operating lights, pools, or sprinklers, take notes! You will not remember everything. Keep these notes and any warranty or equipment information in a file folder for easy reference in the future.

  Chapter 21

  Happily Ever After: Keeping the Romance

  with Your Home Alive

  Congratulations! You’ve just purchased a home. Whether this is your starter home, move-up home, forever home, or your downsize home, it is an exciting experience, and a big commitment. Beyond the financial commitment to make payments on your loan, there is also a commitment to take care of the property. Not only is that commitment part of your promise to the lender, it is critical to maintaining and improving the value of your investment.

  Maintaining Your New Home

  Unfortunately, some buyers lose their enthusiasm once they realize there is no landlord to call, and small repairs and mowing the lawn starts to eat up their weekends. At the other end of the spectrum, there are those who are eager to tackle a long list of home improvement projects. Wherever you lie on the home-project scale, here are a few tips that will help you keep the romance with your home alive:

  Home maintenance is like laundry: If you just keep putting it off, the task becomes overwhelming. When small problems appear, try to take care of them before they become a major issue. If a faucet has a slight drip, fix it before you waste hundreds of gallons of water. If a storm loosens a fence post, reset it before the next storm takes down the whole fence.

  Do not attempt DIY projects for which you are not qualified. One of the quickest ways to ruin the value of your home is to fill it with unprofessional finishes. You can certainly learn, and DIY projects are fun, but do seek advice and start with a project that is manageable, like painting a room or hanging a light fixture, versus adding a tile backsplash or crown molding. And whatever you do, finish it! Nothing is worse than a house full of half-completed projects.

  If you plan on selling in the next couple of years, try to avoid decorations or improvements that are too taste-specific. For instance, lining the living room walls with knotty pine for that cabin feel, or hanging zebra-print wallpaper in the guest room, could be a big turn-off for many buyers. If you’re planning to stay indefinitely, go for it, and satisfy your inner decorator.

  Have some money saved for unforeseen repairs, such as when your dog runs through the screen door or you manage to spill a gallon of paint on the living room carpet. Things happen to homes, and they aren’t always covered by insurance or a warranty.

  Be proud of your home and respect the money you’ve invested. Show it some love, and you’ll enjoy many years of happy homeownership.

  And speaking of happily ever after, here is a fun little real estate story!

  Last summer, one of my listings was in escrow, with a very sweet young man as the buyer. The property was a charming townhome—perfect for him, his girlfriend, and their young child. They were so excited when my seller accepted their offer, and couldn’t wait to move into their first home!

  A few days before closing, the buyer made a special request of his agent, who then contacted me, and I confirmed with my seller: The following day, with the seller’s permission, he took his sweetheart to the condo and proposed inside the home that they would soon share! Can it get any more romantic? I shed a tear just thinking about it, and of course she said “yes.”

  That Unexpected Property Tax Bill

  Sometime around 4–9 months after purchasing your home, you might receive what is called a supplemental property tax bill. This will depend on the state and county where you live, so be sure to check with your escrow officer or attorney so you’ll be prepared.

  In California, property taxes are based on a local tax rate, which is applied to an assessed value. When a property is sold, the sales price becomes the new assessed value until such time as it is re-assessed, due to overall increases or decreases in home values. So, if you buy a home for $700,000 and it was previously assessed at $500,000, your new taxes will be based on the $700,000 sales price.

  This doesn’t happen instantly, however, so any taxes you pay at closing or any impound account that is set up is based on the current assessed value—in this example, $500,000. As the new assessed value becomes effective the day after closing, you will receive a supplemental bill for the difference between the old tax and the new tax. So, in our example, if you closed escrow on November 1, sometime in the spring of the following year, you would receive a supplemental tax bill on the $200,000 difference between the previous $500,000 assessed value and the new value of $700,000. The bill would cover the time period from November 2—after you closed escrow—through June 30, as the new property tax year begins on July 1. The changes to the regular tax bill will be reflected in the bill you receive in September, and if you have an impound account, that new bill will go directly to your lender. This will mean an increase in your monthly payment to cover the increased taxes.

  Savvy Shopper Tips: Stay on top of home maintenance items. Issues seldom disappear and tend to get larger and more expensive over time. Make sure you have some money tucked away for repair items that aren’t covered by insurance or a home warranty. Be prepared for a supplemental tax bill by asking questions and doing your calculations in advance.

  Final Thoughts

  Well, by now you must have figured out that I love real estate and the entire process of buying and selling homes. Real estate today is a rapidly-changing industry, highly impacted by advancing technologies in the areas of document management, marketing, advertising, inspection, and home valuation. But at the heart of the business, it’s still all about people and helping them achieve homeownership goals.

  My hope is that, over the course of reading this book, you’ve become a savvy shopper and are less terrified of the home-buying process—and better prepared to get the best possible deal. While it’s impossible to cover every conceivable circumstance in one book,
I hope that you now know where to turn to get your questions answered if your particular situation wasn’t addressed. Or contact me, and I’ll do my best to help you find an answer.

  If you come away with nothing else, I hope you understand the importance of finding the right agent to represent you in your purchase. Your real estate agent is your champion. They should be ready to strongly negotiate on your behalf and be sympathetic to your concerns. Your personalities should click, and, in the best-case scenario, a bond of trust and friendship will develop.

  I’m proud to be a REALTOR, and I like to think I’ve expanded my reach and helped more people by writing this book. I’d love to hear what you think, so please leave a review or contact me directly with your feedback or questions at marti@kilby.com. You can also stay on top of my latest blog posts at www.steelegrouprealty.com/blog.

  Happy house hunting!

  Marti Kilby

  Glossary

  Here are a few terms and acronyms used in the book that might need additional explanation:

  1003

  The 10-Oh-3 is the Fannie Mae Uniform Residential Loan Application, which is the standardized form used across the country by mortgage-lending institutions.

  Amortization

  In real estate, amortization most commonly refers to paying off a mortgage by making regular equal payments over the term of the loan. A 30-year fixed-rate mortgage is a fully amortizing loan that is paid off in 30 years by making equal monthly payments.

  CC&Rs

  Covenants, Codes, and Restrictions are rules established by a developer or homeowners’ association to govern certain aspects of ownership within a specific development or complex. CC&Rs may place restrictions on paint color, parking, exterior improvements, noise, rentals, and more.

  Comps

  Refers to comparable properties that are most similar to the subject property. Comps are researched in order to determine accurate market value for a given piece of property. Comps that have sold within the last six months are the most valuable.

  Concession

  Providing something of value to the other party in a transaction in order to reach an agreement. For example, a seller might offer $5,000 towards the buyer’s closing costs, or a buyer might offer to allow the seller to stay rent-free in the property for three days past close of escrow.

  Contingency

  A condition of purchase that must be satisfied within a specific time frame once escrow has opened. For instance, in California, the buyer’s loan approval contingency must generally be removed within 21 days.

  Convey

  Convey means to be included in the sale of the property and usually refers to personal property. For example, a refrigerator is personal property, as it is not attached and therefore may or may not convey with the property.

  EMD

  The earnest money deposit or good faith deposit represents the initial deposit a buyer makes on a purchase. It is generally deposited with escrow or with the attorney within three days of a purchase contract being executed by both parties.

  HOA

  Acronym for homeowners’ association. An HOA is an organization within a development that makes and enforces rules for the homes within its jurisdiction and provides certain common-interest services, such as landscaping or a community pool. Owners are charged a monthly HOA fee, and membership is part of owning in that particular community.

  HVAC

  Acronym for heating, ventilation, and air conditioning.

  Mello-Roos

  Mello-Roos Community Facilities Districts raise money for facilities and services in California through special taxes. The taxes must be approved by a two-thirds vote of residents of the district and are paid as part of the homeowner’s annual property tax. If a home is in a Mello-Roos district, it must be disclosed to the buyer.

  MIP

  Acronym for mortgage insurance premium. When you obtain an FHA loan, the FHA assesses an upfront and monthly insurance premium to protect against your default.

  MLS

  A multiple listing service is a regional organization that allows brokers to share listing information on an online platform that provides both public and broker-only information.

  Mortgage Interest Deduction

  The IRS mortgage interest deduction allows homeowners to deduct the amount of interest they pay on their mortgage against their taxable income, according to IRS guidelines.

  PITI

  Lenders’ acronym for principal, interest, taxes, and insurance—the four possible components of your monthly house payment.

  PMI

  Private mortgage insurance is paid by a borrower obtaining conventional financing when the down payment is less than 20%. It is paid on a monthly basis to insure the lender against borrower default. The amount of the monthly premium is determined by the amount of down payment, loan amount, and the borrower’s credit score.

  Points

  Points are also referred to as discount points. They are paid to the lender to “buy down” or reduce the interest rate. 1 point equals 1% of the loan amount, so $1,000 for every $100,000.

  Reserves

  When qualifying for a loan, the lender may want to see proof you have sufficient funds in some type of account to cover 3–6 months of your house payments with taxes and insurance.

  Value Range Pricing

  This is a method of pricing a property for sale in a range, such as $571,000-$599,000, instead of a single price, such as $589,000. This may increase the number of people who find the home in an online search.

  Appendix

  House-Hunting Checklist

  There’s more to viewing a home than counting the bedrooms and bathrooms! Here are some other important considerations that can often be overlooked, especially regarding a home’s condition and functionality. Completing a checklist with notes for each home you visit is a good way of determining how well the home would fit your needs and how much work it might need in comparison to other homes you view.

  Follow this link or place in your web browser to download a pdf version of the House-Hunting Checklist.

  https://pages.convertkit.com/7a496e338a/d7c69acc9e

  Address

  Date

  Curb appeal / condition of front yard

  Condition of other homes on the street

  Condition of roof as visible

  Condition of exterior walls and trim

  Entry foyer / or opens directly into living space

  Kitchen work space / storage / layout

  Condition of cabinets / appliances

  Living room / family room / size / furniture layout

  Child safety / banisters / stairs

  Condition of bathroom(s)

  Condition of interior walls and trim

  Condition of flooring

  Condition of window coverings

  Closet space in bedrooms

  Location of laundry

  Overall storage

  Condition of back yard / patio

  Noise interior / exterior

  Condition of windows

  Garage condition / storage

  Know Your Fair Housing Rights

  as a Buyer

  As a home buyer, you have the right to purchase the home of your choosing without discrimination or limitations based on your race, sex, color, religion, handicap, familial status, or national origin. In practice, this means you have the right to:

  Be shown a broad selection of homes in your price range without limitation to certain neighborhoods.

  Receive equal professional service by your real estate agent.

  Receive equal consideration for financing and insurance.

  Experience fair appraisal practices.

  Be given reasonable accommodation for persons with disabilities.

  Be free from harassment when exercising your fair housing rights.

  These rights are national law under the following:

  Civil Rights Act of 1964

  Fair Housing Act

  Ame
ricans with Disabilities Act

  Equal Credit Opportunity Act

  Additionally, there may be state and local laws that provide broader coverage in protecting groups not covered by federal law.

  If you suspect discrimination, contact your local Board of REALTORS, and/or contact your local office of Housing and Urban Development (HUD) to file a complaint.

  With that said, I’d like to share one final story:

  Several years ago, I was showing a lovely couple a nice home in a well-maintained neighborhood in northern San Diego County. The home needed some updates, but that didn’t scare my buyers, as this was the neighborhood they desired. The owner and his wife were there packing and cleaning, as the home had belonged to his recently deceased sister.

  My clients stepped out into the back yard to examine the outside area, and the owner bent over and whispered to me in a confidential manner, “You know, there are some other people like them that live at the end of the cul-de-sac, so your buyers wouldn’t be alone or feel like they’re the first ones in the neighborhood.”

  OMG! Did he REALLY just say that, or was I flashing back to the 1960s or ‘50s? I was so taken aback I could barely speak! I gathered my wits, smiled, and simply replied, “My buyers currently live in the neighborhood and are very familiar with it. That is why they are looking here.” He just shrugged, and I walked away to join my buyers.