The Hidden Costs of Going Green

In this day and age, everyone wants to do right by the environment and reduce their carbon footprint by going green, but, let’s be really honest, sometimes the cost of going green is more than the average homeowner can afford.  While some things are easy to do, like recycling, gardening, and using more environmentally conscious products around the home, others can have hidden costs associated with them.  For instance, installing solar panels on your home is a great way to lower your electrical bills on a month to month basis, and you could get some tax credit to reduce your federal tax liability in the year that the system was purchased.  But, what are the actual costs to the homeowner?

Purchasing solar panels outright is a huge expense and you need to weigh how long it will take for the monthly savings to cover the cost of the system.  In most cases, this will take years.  Also, you need to consider the fact that you will be responsible for any upkeep and maintenance of the system.  Some parts can cost as much as $2500, and need to be replaced more than once during the lifetime of the system.  Leasing solar panels is another way to go.  With a lease, you pay half to no money down and receive the same environmental benefits as purchasing.  If something goes wrong, the leasing company is responsible for the upkeep and maintenance.  However, you do not get the tax credit, the leasing company does.  Also, if you try to sell your home before the lease is up, you will need to ensure that the purchaser is eligible to take over the lease.  Additionally, make sure you read the fine print on your lease; some companies have hidden rates and fees that the homeowner may never even know about.  Going green is great but make sure you know what you are getting into upfront, or all those savings will be coming out of your pocket instead of going in.  

What Makes a Good Lender ?

Many people who are deciding to buy a house take the convenient way of being preapproval by using an online service.  Although this may be convenient, in most cases it is not the best source for that all important preapproval letter.  Purchasing a house can be a very stressful and emotional time for my clients.  There are many obstacles during the process, the last thing a buyer needs is an incompetent loan officer.  The number one cause of stress for my clients is not the inspections and escrow process, it is getting fully approved for the loan.  A lender is only as good as the loan officer who handed out the preapproval.  If the loan officer simply looks over the preapproval documents and glances at the credit history in order to rush out the preapproval it is a recipe for disastor.  A loan officer that carefully reviews all documentation, critically reviews the credit history, and asks the right questions makes the buyer feel like their in a dream during escrow period not a nightmare.

For example, I have a listing that fell out of escrow due to the buyer not being able to get fully approved for the loan.  This was after the loan officer told me that the buyer was fully approved and they were waiting for the loan docs to be drawn.  The next thing I know there is an email from the buyer's agent cancelling the contract.  One day the loan is approved and the following day the contract is cancelled.  (That's my nightmare.)  The proprety went back on the market and one of my new clients wanted to purchse the house.  These people are great clients, they are smart, know what they want, and even had two preapprovals.  Despite the online approval and the second one with an unknown lender, I requested that if they wanted to purchase the house they had to become preapproved with one of my preferred loan officers.  Sure enough during the meeting with the loan officer, which I attended, multiple issues were discovered from the questions asked by the loan officer.  These were issues not found during the preapproval process of teh other two loan officers.  But like a good Realtor, a good loan officer also knows how to correct minor problems, so the potential deal breakers were resolved in the first few days and now my clients are preparing to move without any worries.

                                            

So remember, a loan officer who does a thorough job during the preapproval process will lead you to a fully approved loan and your escrow will feel like a dream. 

 

FICO Scores and More

What is a FICO score and who cares anyway?  FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score.  Your FICO score tells lenders how good you have been paying your bills.  The more credit cards and loans you have the higher potential for your FICO score.  However if you miss a payment it could damage your FICO score.  When you go to buy a car or a house the first thing a lender does when performing a preapproval is run your credit. 

 

Depending on the type of loan you will need to have minimum FICO score.  For instance, if you are applying for a FHA loan you will need to have a minimum FICO score of 640. If you are trying to get conventional financing your score will have to be at least 660 and some lenders will require 680.  One of the most important things to remember is paying your bills on time will save you money.  When you are not late in paying your bills it has a positive affect on your FICO score.  You may qualify for a FHA loan with a 640 FICO score but your interest rate will be higher than if your score was 680.  This will cost you big money over the life of the loan.  So remember, not missing a credit card payment does not only raise your FICO score it also saves you money when you need it the most for a car or home loan.

Timing and Luck

When the real estate market is hot and it is difficult for buyers to get an offer accepted, I tell my clients in this type of market it is timing and luck.  The more active you are looking for houses the more likely you will find a house you love in time to have your offer accepted.  Sometimes I will have a new listing that matches what one of my clients is looking for and they get lucky.  Or sometimes a house will come back on the market the same day I am showing houses to a particular client who previously wanted to make an offer but it was just a little too late.  Then before you know  it that client submits an offer and they are in contract.

Not too long ago I decided to take my year and a half old German Shepard for a little trip in the country. Since this guy is about ninety pounds and can be a handful when he is excited I was not sure what to expect. I decided to take him to a state park in the country called Knights Ferry.  Because my puppy, Magnum, is still young he gets very excited when he sees other dogs.  This can make it very difficult to control him as he soon forgets all of his commands and only wants to play.  Well I was pleasantly surprised when Magnum barely acknowledged some of the other dogs we passed on the trails and was marginally interested in other people.  I think he was overwhelmed with all the new smells, sounds, and sights.  But I really got lucky to find the flowers were in full bloom which created an amazingly beautiful sight.  I was lucky on my only day of the week it was sunny and warm outside and the time of year was perfect for a beautiful time of the year for Magnum's first walk in the country. The timing was perfect and I was lucky Magnum did not drag me into the water.

To Permit or Not to Permit

In one of my current transactions in which I represent the seller a front deck of the property needs to be replaced due to 28 years of moisture and dry rot damage.  Before listing the property I let the seller know that the deck would be an issue and it certainly is an issue.  The pest inspector found major damage underneath and determined it needed complete replacement.  Since the seller was receiving a full price cash offer and the listing price was on the high end of the market it was not too painful for the seller to agree to the deck replacement.  This deck is about eight feet wide and thirty feet long that wraps around the front of the house and leads to the front door.  When discussing the process of replacing the deck the seller immediately said that some neighbors not far away were building a similar deck without permits and she did not think a permit was required.  Well if the neighbor doesn't need a permit why should my seller, right? Wrong.  As I reviewed the situation with the city it was determined the property was located out of the city limits and I was told to talk to the county personnel.  The representative for the county told me it was under state control, so I called the state.  Does this sound familiar?  The state told me a permit was required and it could be obtained over the counter for $195.00.  In this case it is not about having to pay for the permit but protecting the seller in the future.  If something happened to someone on the deck after the sale the new owner would look for a permit.  If a permit was not found the new owner could potentially put blame on the seller for not having a permit when the deck was rebuilt.  In this case, although the deck can be replaced easily without the permit by a licensed contractor, the seller and myself will sleep better knowing that a simple $195.00 dollars will prevent any possible lawsuit.  The lesson learned in this case is don't follow your neighbor because it is easier, take the time and due it right and stay out of court.

Who Keeps the Money?

I have recently had a new experience in a recent transaction.  I was representing a seller and an offer was accepted.  It was a strong offer, the buyer's agent claimed his client could pay cash if needed but may want to finance the loan.  The sellers were okay with either way, how could a person with enough cash to buy and a preapproval not qualify for a loan, right?  The proof of funds was from a house the buyer selling and it was closing in a matter of days and money in a bank account.  The buyer's house closed, but after more investigation I discovered the property was co-owned.  The buyer received well over $100,000 dollars for his share and all of it was being used as a down payment.  Okay, so we were mislead a little, but with over $130,000 as a down payment, almost half the cost of the house what could go wrong.  The escrow period continued and towards the end the buyer's agent asked for an extension.  The lender said buyer's funds needed to season before the lender would allow them to be used towards the purchase.  No problem, it is only a couple of weeks and we were guaranteed by both the loan officer and buyer's agent nothing else would get in the way of closing. So the sellers agreed to the extension.  Now the escrow is about to expire again and after waiting a couple days for an update from the buyer's agent I was told the lender questioned why someone else was making the buyer's car payments.  Well the answer was simple and we were guaranteed the buyer would clear it up in a matter of a couple of days.  A couple of days passed and the buyer did not clear up the problem.  The agent pleads for another extension of just a few days and the sellers again granted the time.  After sixty days of waiting it made sense to wait another five days.  So I sent out the forty eight hour notice to perform to protect the sellers.  And sure enough, you guessed, the buyer did not perform.  The loan was denied and the buyers agent sent a cancellation of contract on the end of the very last day of escrow.  Anticipating this, I already had a cancellation waiting to send from the sellers.  The difference between the two cancellation of contracts is that the seller wanted the ten thousand dollar deposit to go to them and the buyer thought it should returned to him.  What would you do?  We'll find out as this soap opera plays out.  By the way, after the house was on the market for only three days the sellers have a new solid offer over asking price.

Home Prices Stumble in San Joaquin Valley

Last November I sent a flyer to my neighborhood about the average house price in Manteca and what the average household income could afford to buy.  At that time it appeared the average household income could afford to purchase a house for $325,000 and the average sold price was $293,000.  This led me to believe Manteca had a little more room for house prices to increase.  After looking at the homes sold through February of 2014 the average sold price decreased to $279,000.  It appears buyers are spending less of their available income on a home which has decreased the average sold price.  However, the quantity of homes sold under $250,000 has decreased.  This means the lower priced homes increased in value due to higher demand and the higher priced homes decreased due to lower demand.  This leads me to the believe that home prices have stopped increasing and things are starting to be more stable in the San Joaquin and Stanislaus Valley.