With the recent significant spike in home loan interest rates along with the highly probable additional home loan interest rate increases through the remainder of 2022, it's important to understand the impact of higher borrowing costs affecting the real estate market velocity and market values.
* When interest rates rise, some people will simply not be able to afford to buy many homes at their current prices. When a seller considers a price reduction to help 'match' the monthly mortgage payments of lower rates, this is how to adjust:
- A 6% mortgage rate monthly payment is equal to a mortgage payment with a 5% rate when the asking price is reduced by roughly 8.25%.
- A 6% mortgage rate monthly payment is equal to a mortgage payment with a 4% rate when the asking price is reduced by roughly 16.25%.
* Many buyers who for the past months approached a listing almost certain they would have to bid over the asking price, may now not encounter as much competition (and/or a seller/agent with a less aggressive asking price)....combined, these two factors may offset what might have been a higher selling price to offset higher borrowing costs.
Remember, if a home price has risen 20% in the past year, a 10% price reduction erodes 12% of that 20% gain.
DISCOVER THE BENEFITS OF BUYING DOWN A HOME LOAN INTEREST RATE TO SELL YOUR HOME FOR TOP DOLLAR...
One effective option is to offer a Seller credit to the buyer to "buy down" the home loan interest rate by applying this credit to pay loan fee points.
This option is mutually beneficial to both parties as illustrated by this example chart:
Benefits of discounting the loan interest rate:
$27,000 credit saves $23,000 compared to a $50,000 price discount
Competitive advantage to attract purchase offers
Monthly payment approximately $557 less than payment @ 5.625% interest rate
Monthly payment approximately $265 less than payment $1,500,000 price
Save approximately $8,560 for 4.875% interest paid over 10 years compared to 5.625% interest rate
Discover more real estate tips and strategies...Visit OurFiveStarTeam.com
Pete Sabine & Leslie Whitney
From the Desk of Pete Sabine & Leslie Whitney
- Real Estate Market insights and expertise
A Housing Correction May Be Coming,
Not a Crash…
Almost everyone is wondering if a housing crash is on the horizon. However, most experts think the real estate market is headed for a softer landing. It's true that the market has slowed over the last few weeks. In fact, 12% of homes for sale had a price drop in the four weeks ending April 3 based on recent data.
That's up from 9% as compared to 2021. Rising mortgage rates are also putting some would-be homebuyers' plans on the backburner. But as the real estate market cools, its foundation of record-high home equity and housing prices is probably going to keep the market relatively healthy.
After a survey of a wide number of Bay Area Realtors, it is clear that the Bay Area real estate market has begun its shift cooler, not surprising with interest rates up a shocking 69% in 2022, the volatility of stock markets, and the increase in media coverage of negative economic/market issues.
Though not every Bay Area region has seen the same trends, and the trends are preliminary and not universal, these reports were repeated over and over: less traffic at many open houses, fewer offers on many new listings, some buyers dropping out or becoming much more selective, and some sellers moving their listing dates earlier.
The San Francisco Bay Area Real Estate Trend Report reveals the incredibly heated market sales statistics through April, 2022. The preliminary shifts in market psychology and dynamics that are generally not yet reflected in the closed-sales statistics.
Pete Sabine & Leslie Whitney
Call or Text 925.787.2548
Help for first-time homebuyers
The State of California is offering forgivable loans of up to 10% of a dwelling’s purchase price; aim is to give working families a hand in making down payments.
Seeking to chip away at an ambitious goal of boosting home ownership in California, the state has launched a new program of forgivable loans for first-time home buyers. The program, Forgivable Equity Builder Loan, allows qualified, first-time buyers to borrow up to 10% of a home’s purchase price, and have the debt forgiven if the buyer lives in the home for five years.
The loans are available to middle-income families making less than 80% of their county’s annual median income, below $120,000 in all Bay Area counties. California lawmakers earmarked $100 million in the state budget for the first-time homeowner loans. The goal is to help working families with enough income to pay a mortgage but not enough savings to ante up for a down payment.
Eric Johnson, spokesman for the California Housing Finance Agency, said the state wants to encourage families to build generational wealth through long-term home ownership. The gap in generational wealth has been particularly wide in Black, Hispanic and some immigrant communities. “The down payment and closing costs are a real hump,” he said.
The new effort comes as Bay Area housing costs hit record highs, and rising interest rates have pushed monthly payments up hundreds of dollars. The median price of a Bay Area home in March was $1.4 million, according to the California Association of Realtors. Raising a standard down payment of 20% — more than $200,000 for many starter homes — is beyond the reach of many would-be buyers.
Affordability for first-time buyers has been particularly challenging, according to CAR surveys. About two in five Bay Area residents could afford the median-priced single-family home at the end of 2021. The minimum qualifying income was $150,000 for a typical home priced at just over $1 million. Zillow senior economist Jeff Tucker said a program boosting a buyer’s payment by 10% “makes a meaningful difference.”
The forgivable loan allows a home owner to develop equity much faster, and could help a first-time buyer refinance to a lower interest rate after the five year period is up, he said. But, Tucker noted, first-time Bay Area buyers face a challenging market.
After two years of record low interest rates, mortgage costs have shot above 5%. Between rising rates and accelerating home prices, Bay Area buyers in March paid 37% more in monthly costs than a year ago. “That is not affordable to most people,” he said.
California’s forgivable loan program has already received about a dozen applications, Johnson said. The agency does not limit the size of the loan. It requires buyers to attend a first-time home owner class, and use a recommended loan officer familiar with state programs.
The first step is to speak with a preferred loan officer listed on CalHFA’s website. Eligibility for the loans in the Bay Area ranges from an annual median income of $119,000 in Santa Clara County to $107,000 in San Francisco, San Mateo, Alameda and Contra Costa counties, according to Fannie Mae.
The California Department of Housing and Community Development also announced $66 million in new grants to boost home ownership for low-income residents. The program will provide funding for 33 low- and moderate-income housing projects across the state. In the Bay Area, $5 million will go to the Santa Clara County Housing Authority, $5 million to Santa Clara County, $2.5 million to the Housing Authority of the County of Marin, and Habitat for Humanity will receive several grants for projects across the region.
The grants are aimed at helping low-income residents become homeowners, or renovate and remain in their existing homes.
BY LOUIS HANSEN LHANSEN@ BAYAREANEWSGROUP.COM
How to Price Your Home Strategically - Buyers for residential real estate base their decision to buy a home driven primarily by the emotional appeal and secondarily supported by their perception of fair market value. The List Price of your home is compared to other available homes for sale in the area with similar intrinsic qualities.
When financing is a part of the purchase transaction, the Purchase Price must meet real estate appraisal guidelines supported by recent nearby sales (within the past 120 days) of like-kind Sold Properties, and current Pending Sales and Active Listings.
The art of pricing a home accurately is to analyze the above stated perspectives and data to determine a range of Fair Market Value and then select a List Price within this range. If the List Price is too high, make List Price adjustments if needed, usually after the first 3 to 4 weeks of full market exposure on the MLS.
When a property in high demand is offered for sale in a "Seller’s Market", we usually recommend a specific Offer Review date within 7 to 10 days from the MLS debut date to generate competing offers and the highest possible sales price.
Together with you, we develop a List Price strategy incorporating your primary goals and objectives:
• Your urgent need to sell as soon as possible
• Your ability to "time the market" to benefit from limited supply with high demand
• Your resources to complete cosmetic and/or repair improvements to obtain the highest possible sales price
• Your goal to sell "As-ls" or in "fully optimized" condition including professional staging
Local real estate market trends
• Supply and Demand, average Days on Market, Seller sales concessions or price adjustments
• Buyer's Market or Seller’s Market trend
• Median home value for your zip code versus the estimated value of your property
• Current volume of Pending Sales versus Active Listings (velocity of sales)
• List Price to Sold Price ratio
Macro - economic conditions
• Home loan interest rates – increasing or decreasing
• Availability of financing - tightening or loosening credit, appraisal, and loan underwriting requirements
From the desk of Pete Sabine & Leslie Whitney
Real Estate Market insights and expertise
Call or text 925.787.2548
Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it's dwindling. You're not alone either if you're already feeling drained by the complex logistics of trying to sell and buy a new home all at once.
Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since listings are expected to remain limited in the most coveted neighborhoods for some time.
That doesn't mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one.
We can help you prepare for the road ahead and answer any questions you have about the real estate market. For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time.
“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”
This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you'll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise.
Here are some ideas to make sure you're in the best possible position when you decide to list your home:
Tip #1: Flex your muscles as a seller.
In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a rent-back clause that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.
This can be a great option for sellers who need to tap into their home equity for a down payment or who aren’t logistically ready to move into their next home. However, many lenders limit the duration of a rent-back to 60 days, and there are liability issues to consider before entering into an agreement. A contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the rent-back period.
Tip #2: Open your mind to short-term housing options.
While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage.
You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighborhood better—and lead to a more informed decision about your upcoming purchase.
Tip #3: Embrace the idea of selling now and buying later.
Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages.
For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty.
“WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”
This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgages. To make sure you don't get into a situation where you are carrying dual mortgages for longer than you can afford, examine your budget and calculate the maximum number of months you can afford to pay both.
If you simply can’t afford to carry both mortgages at once, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process:
Tip #4: As you get ready to sell, simplify.
You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal, and fix any outstanding maintenance issues as quickly as possible.
But don't drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment.
Tip #5: Prep your paperwork.
You'll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you'll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan.
Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you're ready to provide quick answers to buyers' questions should they arise.
Tip #6: Ask us about other contingencies that can be included in your contracts.
Part of our job as agents is to negotiate on your behalf and help you win favorable terms. For example, it’s possible to add a contingency to your purchase offer that lets you cancel the contract if you haven't sold your previous home.
This tactic could backfire, though, if you're competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics.
“WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”
When you're in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it's easy to get carried away by stress and emotions. To make sure you're in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition:
Tip #7: Relax and accept that compromise is inevitable
Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn't look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn't necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you've got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes.
Tip #8: Don't worry too much if your path is straying from convention
Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn't going exactly like your neighbor’s, it doesn't mean that you are doomed to fail.
It's possible, for example, that seasonality trends may affect sales in your neighborhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the National Association of Realtors, the housing market tends to be more competitive during the summer and less competitive during the winter. But it's not a hard and fast rule, and every real estate transaction is different. That's why it's important to talk to a local agent about your specific situation.
Tip #9: Enlist help early.
Which leads us to our final tip: If possible, call us early in the process. We'll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we'll also help you narrow down your list of must-haves and wants for your next one. That way, you'll be prepared to act quickly and confidently when it’s time to list your house or make an offer on a new one.
It's our job to guide you and advocate on your behalf. So don't be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible.
BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU
Buying and selling a home at the same time is challenging. But it doesn't have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent.
A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you're better off pausing your search for a while longer.
Contact us for a free consultation so that we can help you review your options and decide the best way forward.
Pete Sabine & Leslie Whitney
Call or text 925.787.2548
The topic is how to buy your next home before you sell your current home.
You will learn about a home buying strategy using consumer bridge loan financing that provides a competitive edge in our fast pace real estate market.
There is a shortage of available housing for sale in markets all across the country.
One primary reason for the scarcity of homes for sale is many homeowners are unwilling to sell their current homes without being confident they can secure their next home.
Many homeowners who want to sell are stuck in a holding pattern because they have been told by their lender that they must sell their existing home first to qualify for a home loan.
Homeowners are choosing to stay in their homes believe they will not be able to compete with buyers who do not have a home sale contingency or have all cash to purchase a home.
Selling your home first without knowing where you are moving creates anxiety in the homebuying process, especially when the supply of homes for sale is limited.
In our competitive real estate market, any contingencies in your purchase offer signal risk to a Seller, especially if the contingency is related to the sale of your current home.
Most home sellers will not accept a purchase offer if there is a contingency for selling another property.
One primary reason is the home sale contingency will impact their ability to buy their next home with a chain of home sale contingencies linked to their purchase offer.
One option is to buy your next home before offering your current home for sale.
What are some of the benefits of buying first and then selling?
It strengthens your negotiation position in a competitive Seller’s Market to compete with cash buyers.
There is no contingency for the sale of your home. You know where you are moving and how soon you can take possession of the home.
You can time the sale of your current home to avoid the hassle and cost of making a double move into interim rental housing.
There are some challenges with buying first then selling.
Tying up your financial resources in home equity and having the financial resources required to qualify for interim financing plus the carrying costs for 2 homes until you can sell your current home.
The bridge loan solution enables homeowners to buy their next home before offering their current home for sale.
Compass provides access to a Bridge Loan Advance for up to 6 months of mortgage payments for the bridge loan.
First, you apply for a bridge loan approval with Pacific Private Money.
When you are approved for the bridge loan, then you apply with Notable Finance for getting the first 6 months of your bridge loan payments fronted via the Bridge Loan Advance program.
Then you begin searching for your next home with your Compass agent.
When you find the right home, use your approved bridge loan to bid on a new home without a contingency to sell your current home.
Once you move into your new home, your Compass agent helps you to sell your current home.
When your former home sells, use the proceeds to pay back the Bridge Loan, the Bridge Loan Payment Advance and Concierge improvement loan.
Who is eligible for the Bridge Loan Advance Program?
The Bridge Loan Advance program is available exclusively for qualified clients with a consumer bridge loan who are working with a Compass Realtor to sell their existing home.
What does the Bridge Loan Advance cover?
The Advance can equal up to 6 months of monthly bridge loan payments and eligible closing costs incurred from the bridge loan. Eligible closing costs include the dollar value of any loan fees or points paid upfront origination or application fees where applicable and appraisal fees.
What if a home requires renovations or other work before offering it for sale?
Compass provides access for our clients to a home improvement loan to sell your home faster and for more money.
If you are approved for the Concierge home improvement loan, it has a zero percent APR for the life of the loan and there no additional loan or closing fees.
Whether you are using the improvement loan to increase your home's value, or making improvements with cash, it is easier to have construction work done after you have moved out of the house.
A bridge loan can help you sell your former home faster because you have moved into your new home while repairs and improvements are being completed.
When your former home sells, use the proceeds to pay back the Concierge improvement loan.
Other things you will learn:
Listen to our Real Estate Pro Tips podcasts. You can find our podcasts on Spotify and at http://RealEstateProTips.Podbean.com.
Pete Sabine and Leslie Whitney are Realtors with Compass in the San Francisco Bay Area.
Mark Hanf is the broker and president of Pacific Private Money, one of the fastest-growing private lenders in Northern California. Pacific Private Money is different from conventional lenders.
Compass. license #01866771
There is a shortage of available housing for sale in markets all across the country. One primary reason for the scarcity of homes for sale is homeowners who are unwilling to sell their current homes without being confident they can secure their next home.
Homeowners who want to sell are stuck in a holding pattern because they have been told by their bank that they must sell their existing home first to qualify for a home loan.
Homeowners are choosing to stay in their homes fear they won’t be able to compete with buyers who do not have a home sale contingency.
Selling your home first without knowing where you are moving creates anxiety in the homebuying process, exacerbated by the limited supply of homes for sale.
In today’s competitive real estate market, any contingencies in your purchase offer signal risk to a Seller, especially if the contingency is related to the sale of your current home.
Most home sellers will not accept a purchase offer there is a contingency for selling another property.
One primary reason is the home sale contingency will impact their ability to buy their next home with a chain of home sale contingencies linked to their purchase offer.
One option is to buy your next home before offering your current home for sale.
There are significant benefits of buying first and then selling.
A few private lenders offer consumer bridge loans tailored made for this multiple-offer, cash-always-wins, contingency free offer, real estate marketplace.
What’s a bridge loan?
A simple solution to bridge the gap between the home you have and the home you want.
A bridge loan is a short-term loan that uses the equity from your current home to help you make an offer on a new one, without rushing to sell.
You won’t find this loan offered by institutional or conventional lenders. In fact, only a small segment of the private lending industry offers this type of loan.
The name bridge loan is a term widely used in lending, and it mostly refers to a very different type of loan than the topic of this post.
It is often used in commercial lending to simply mean a short-term loan.
Many lenders advertise bridge loans, and almost all of them are referring to short-term commercial or investment loans – not loans for purchasing a primary residence.
A consumer bridge loan is a unique loan that requires consumer licensing and underwriting, and most private and alternative finance lenders specifically avoid them.
Does a bridge loan make sense for you?
Is your money tied up in the equity of your current home?
If you want to move but your money is tied up in the equity of your current house, a bridge loan can help you secure funding to facilitate the transition to a new home — like for a down payment or mortgage payments.
Once your current home sells, you can use the proceeds to pay the bridge loan back.
Do you need to move within a specific timeframe?
If you're relocating for a new job or other reason, a bridge loan can afford you the freedom to move on your own terms and secure a new house when you need to, without having to wait for your old home to sell.
Does your home require renovations or other work?
Whether you're using Compass Concierge to increase your home's value, or are making improvements on your own, it may be easier to have construction work done when you're out of the house.
A bridge loan can help you move faster so you're out of the house while those improvements are being completed.
One lender offering the consumer bridge loan is Pacific Private Money located in the San Francisco Bay Area.
Pacific Private Money offers a unique financing program allowing homeowners to make an offer on the home they want to buy without having to list their current house for sale.
This financing program gives homeowners the confidence they need to buy the right home and when it’s the right time to do so.
Our real estate company, Compass, provides a loan for up to 6 months of mortgage payments for the bridge loan.
How it works:
Inquire directly with a bridge loan lender to see financing options and if you qualify.
Apply to get pre-approved for a bridge loan with the lender of your choice, while searching with your Compass agent for your next home.
If approved for a bridge loan, learn more about getting the first six months of your bridge loan payments fronted via the Bridge Loan Advance by Notable, an independent lender.
If needed, use your approved bridge loan to strengthen your bid on a new home.
Move into your new home while your Compass agent works to sell your current home.
Use Compass Concierge home improvement services to sell your home faster and for more money.
When your old home sells, simply use the proceeds to pay back the bridge loan and Bridge Loan Advance.
Here are a some more ways a consumer bridge loan can be used to help purchase your primary residence:
If you are approved for the Bridge Loan Advance, it has a 0% APR for the life of the loan and has no additional application or closing fees.
What rates and fees accompany a bridge loan?
The rates and fees for each bridge loan are determined by the lender.
If you are approved for the Notable Bridge Loan Advance, it has a 0% APR for the life of the loan and has no additional application or closing fees.
What is covered by the Bridge Loan Advance?
The Bridge Loan Advance can equal up to 6 months of monthly payments and eligible closing costs incurred from the bridge loan.
Eligible closing costs include the dollar value of any points paid upfront, origination or application fees where applicable and appraisal fees.
Who is eligible for the Bridge Loan Advance?
The Bridge Loan Advance is available exclusively for qualified clients with a traditional bridge loan who are working with a Compass agent to sell their existing primary residence.
Bank and conventional financing rates are at historic lows and are expected to remain that way for years to come. Everyone that can get conventional financing should.
But bank financing is also harder to obtain today than ever before, especially for the self-employed borrowers, and these loans often take longer to close.
For those and many other common reasons, bank financing isn’t an option for many purchase situations.
A consumer bridge loan may not be the perfect solution for every situation, but it is the right option for so many situations.
Applied correctly, a consumer bridge loan can help you purchase a home that you otherwise would not be able do so in today’s real estate marketplace.
Pete Sabine & Leslie Whitney
Five Star Real Estate Team
Call or text 925.297.5335
The fine print
The Bridge Loan Advance for Compass clients is a loan provided by Notable Finance, LLC, NMLS# 1824748 and is available to all eligible Compass clients working with the Bridge Loan lender of their choice. Notable's phone number for applicants only: 833-615-0249. Loan eligibility is not guaranteed and all loans are subject to credit approval and underwriting by Notable. Loans made or arranged pursuant to a California Finance Lenders Law license. Compass is not a lender and is not providing loans as part of Compass Bridge Loan Services.
Information regarding lenders which offer short-term Bridge Loan financing is provided for informational purposes only and does not constitute an endorsement of the particular lenders referenced. Compass cannot guarantee that these institutions will be able to assist and does not assume any responsibility as to the performance of services to be provided by these institutions. There are no requirements that you participate in the Compass Bridge Loan Services or obtain a loan from these providers to participate in any other Compass programs (such as Compass Concierge). Speak to your Bridge Loan lender about all the costs you may be responsible for in connection with your Bridge Loan.
What You Need to Know About Home Insurance...
Homeowners insurance is not required by law. The purpose of insurance is to make you “whole” again should your property experience a loss. Your home is likely to be your most asset, and protecting this asset is essential.
Pete Sabine and Leslie Whitney interview Alie Lopez with Pro Insurance Solutions. You will learn about the right questions to ask and important information to understand about homeowner insurance.
Why is home insurance needed?
The purpose of insurance is to make you “whole” again should your property experience a loss. Your home is likely to be your most valuable asset, and protecting this asset is essential. Also, if there is a lender involved, homeowners’ insurance is a requirement.
How do you decide how much coverage is needed?
Most insurance companies have minimum replacement cost standards, in California we do not recommend insuring for less than $350 per square foot, depending on the property modifications.
Insurance companies have a replacement cost estimator tool on their websites. When a policy binder is issued, the insurance company completes an inspection and confirms the coverage.
If I am buying a home does the amount of the coverage need to cover the amount of the home loan?
One thing to note is that the replacement cost is usually less than the purchase price of the home. The reason is the purchase price includes the value of the land. Replacement cost applies to rebuilding only the structure if there is a total loss. A lender will often ask for a copy of the replacement cost estimator previously mentioned to confirm that the coverage is sufficient for their specific requirements.
If you do not own a home, can you buy renter’s insurance?
Yes. Renters insurance will cover all your personal property, provide liability coverage as well as loss of use if you are under evacuation and need temporary housing until you can move in after damage repairs are completed.
What is the most common standard coverage provided?
A basic Homeowners policy with a standard company in the San Francisco Bay Area is for home with $750,000 in replacement cost and below. Usually, the liability coverage is $500,000 to $1,000,000.
What about basic coverage available for events that cause property damage such as fire, wind, and theft?
These items are covered perils under a Homeowners policy. If any of these events occur and there is significant damage to the structure, the dwelling limit is what pays out for damage repairs, replacement, etc., subject to the deductible amount. For example, wind knocks a tree onto your roof and the roof needs replacement, or fire damage that is now common in California.
Theft loss is covered under personal property.
What are the additional coverage items in a typical policy?
Ancillary structures, such as any structure on the property not directly attached to the home. Personal property, all your belongings. Loss of use provides coverage for renting temporary housing while repairs are completed. Liability coverage from personal injury on your property resulting in litigation if you were found to be negligent.
What are the differences between an actual cash value and replacement cost policy?
Replacement cost is the cost of replacing your personal property. Actual cash value is the current market value less any accrued depreciation.
Is it worth the additional premium cost for a replacement cost policy to ensure your home can be restored to its former glory with only your deductible as your payout?
In California, replacement cost is applied to personal property contents only, but for the dwelling structure, you are provided with extended replacement cost coverage.
This is a percentage and varies from 110%, 125%, 150% & 200% depending on the insurance carrier. If an insurance carrier offers 200% extended replacement cost, it is most definitely worth the extra premium expense.
Are home repairs covered at replacement cost?
Not always, it depends on the dwelling coverage limits.
Is personal property such as your furniture, appliances and clothing replaced at actual cash value?
Basic policies will provide actual cash value for personal property contents.
Can you upgrade your policy to have your personal property insured at replacement value?
Yes, if you have the option to have your contents insured at replacement value, it is recommended that you do so.
Do most policies place a limit on claims for luxury items such as fine art or jewelry?
Yes, most sub-limits for fine art and jewelry are between $1,000 and $10,000. If you have jewelry or art worth more than $10,000, you can purchase a personal articles policy.
Are you covered no matter how your home is damaged?
There is no coverage if you intentionally set your own house on fire and there are specific exclusions depending on the insurance carrier.
Is Flood damage covered in a standard policy?
No, flood damages are specifically excluded. Some companies like AIG will offer coverage as an endorsement.
What about other natural disaster damage coverage from earthquakes?
Earthquake damage is specifically excluded as is damage from landslides. You can sometimes add coverage by endorsement if the carrier offers coverage. You can also purchase separate flood and earthquake insurance policies.
What are endorsements, and how do you know if they are included on a policy?
Endorsements are amendments or changes to the policy. An endorsement can include adding or removing a lender to the policy or adding or removing a coverage line. Policies have a section for endorsements. You can always ask your insurance agent to review each line item.
Can identity theft coverage can be added to your policy with an endorsement?
Yes. Some insurance carriers include coverage at no extra cost.
Am I fully covered if someone is injured in my home?
This is where liability coverage comes in. Injuries vary, so carrying the highest amount of liability coverage is the best way to guarantee you will be fully covered.
Where do you find the maximum amount the insurance company will pay in legal bills and damages if you are sued?
Under Liability Coverage, the limits vary from $100,000 to $1,000,000.
What is an umbrella insurance policy?
An umbrella liability policy covers many different exposures, including your home, rental properties, vacation homes and anyone listed on your auto or boat policies.
For example, if you were involved in a car accident and found to be at fault with multiple vehicles and the underlying liability coverage is insufficient, the umbrella coverage will add more protection for your assets. When someone is injured on your property and suffer damages that cost more than the liability coverage on your Homeowner policy, the umbrella policy provides additional coverage beyond the limits of the Homeowner policy.
What is usually excluded from a home insurance policy?
Damage from earthquakes, floods, and landslides.
What is the easiest way to reduce your monthly premium?
Bundling Homeowner, auto, and umbrella policies will significantly lower your monthly premium cost.
Can you save money for an alarm system, non-smoker credits, and retiree discounts?
Yes. Centrally monitored alarm systems for fire, burglar, or even water flow alarms to prevent water damage claims. Retiree affiliations, such as AARP, or alumni affiliation credits are sometimes applied.
Will it cost less to insure a newer home compared to an older home?
Newly constructed homes will have lower monthly premiums because the systems and components such as the roof, electrical and plumbing meet current building and safety codes.
If you own an older home, will bringing the home up to current building codes or doing renovations can help to lower your premiums?
Remodeling a home to meet current building codes and updating the home will not only help with the premium cost, but it will help with eligibility for coverage. Most insurance carriers do not want to insure older homes built prior to 1945 without any updates to systems and components.
If you make substantial improvements or remodeling to a home, should you modify your insurance coverage?
Yes. Any improvements as well as increasing the square footage, can change the overall dwelling limit coverage for the home.
What can you expect when you make a claim?
If you work with an insurance broker, always check with your account manager for advice on filing a claim. Sometimes it helps to have a designated account manager to assist with a claim does not go smoothly. Otherwise, claims adjusters from the companies ultimately determine the claim pay out amount and eligibility.
What are some of the challenges and costs for homes located in a high fire risk or wildfire hazard zone?
The biggest challenge now is finding insurance carriers to accept a home in a high wildfire hazard area. Carriers are scaling back tremendously on where they are offering new coverage.
This leads into another challenge, non-renewals. Not only are carriers not wanting to take on new coverage, but they are cancelling existing policies due to the specified high-risk locations.
Another challenge is if a carrier will accept your property in a high wildfire area. Do not be surprised if the premium is three times the amount you used to pay. Some of these policies have annual premiums as high as $30,000 to $50,000K because of the dwelling limit and a location within a high-risk wildfire area.
What do you recommend for people who are in the process of buying a home to make sure coverage is available?
Check insurability and related cost BEFORE making an offer on a home or before removing your investigation of property contingency. The cost of insurance can make or break a deal if the insurance is too high.
Should a home buyer have back-up quotes handy in case your current agent or broker is not able to bind a policy to close escrow?
Yes, do not assume that if you have been with a company for many years, they would insure you no matter what. That is not always the reality. Buyers get into panic mode and scramble at the last minute to find a policy so always have a back- up plan with more than one insurance quote and commitment.
How to you check to confirm if a home is in a flood zone during the home buying process?
Ask your insurance agent or broker or your Realtor to check on your behalf.
What can a home seller do to prepare your home before going on the market to help insurability for buyers?
Make any updates you can if you have an older home, have any work orders that show completion of any updates. If you could pick one major update, focus on the roof. Carriers want to see that it has been updated within 20 years. If you have a wood shake roof, replace the roof before offering the home for sale.
Other items include making sure handrails are not wobbly, tree limbs are not touching the structure, remove any firewood from near the house. Create as much defensible space as you can. Lastly, make sure there are no open insurance claims.
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How to sell your home in a hot sellers’ market.
What are the characteristics of a Sellers’ Market?
A “Sellers’ Market” trend is driven by
* a lack of supply of available homes for sale
* strong buyer demand for homes
* low home loan interest rates
The supply metric is 3 months or less of available homes for sale
based on closed sales activity. As an example, you divide the number of homes for sale by the number of homes sold in one month to determine the number of months of supply.
Another characteristic is the average Days on Market metric. If the average Days on Market is less than 30 days, this is another indicator of a Sellers’ market.
The List Price to Sold Price ratio is another indicator of a Seller’s Market.
Homes consistently sell quickly and above the List Price in a Seller’s Market.
How long will this trend last?
Most likely through the first half of this year
and possibly through the remainder of 2022. Beyond then requires a crystal ball.
What is the formula for selling a home above the list price?
Preparation, Presentation and Pricing.
Obtain property inspection reports. Complete recommended repairs related to systems operation such as appliances, mechanical components, and safety hazards.
All Sellers want an AS-IS sale and most Sellers would love to avoid making repairs or repair concessions.
When you are selling in a Sellers’ Market, provide buyers with a Disclosure Package in advance of accepting an offer.
The Disclosure Package includes property inspection reports and the required property disclosures completed by the Seller. The Disclosure Package creates transparency and provides useful information for a buyer to confirm the existing condition of the property.
In many cases, the Buyer is more willing to accept a home in AS-IS condition
if the Seller has provided accurate and qualified information about the condition of the home.
Include this provision with a purchase agreement:
“Any inspections performed by the Buyer are for information purposes only. There shall be no Seller repair concessions”
This provision emphasizes your intent and confirms the AS-IS nature of the purchase agreement with the buyer.
Obtain a proposal from a professional home staging company.
The proposal should include recommendations for interior and exterior paint colors, landscaping, light fixtures, flooring, plumbing fixtures, and cabinet hardware.
Beware of Realtors who “self-stage” homes. Hire a professional with liability and workman’s comp insurance and controls their own inventory of staging furniture and accessories.
Follow the recommendations of the staging proposal to update your home.
Then have your home professionally cleaned including windows and tune up your landscaping.
Enhance the Presentation of the home for sale.
Hire a professional photographer and videographer to capture the essence of your home. Home buyers scan for homes online and your home must present well
with a high level of emotional appeal or most buyers will not make the effort to visit your home.
No showings equal no sale.
Price your home strategically.
Review recent Sold Properties that are nearby and “like-kind” in size, location, and condition characteristics. This data will set the current “fair market value” of your home.
Review Pending Properties of similar homes that recently went into escrow.
Focus on the List Price of these properties to provide insight of the price point that attracted buyers to make an offer.
Review Active Properties currently for sale in your targeted price range.
Determine how well your home will compete with homes priced 10 percent above and 10 percent below your target List Price.
Buyers base their decision to buy a home driven by its emotional appeal and supported by a perception of fair market value of the List Price when compared to other available homes for sale with similar qualities.
Create a condition for buyer competition to get the highest possible sales price.
Set an Offer Date to review purchase offers 7 to 10 days from your MLS debut date. The offer date strategy ensures that all buyers currently in the market will have a chance to view and bid to purchase your home. It sets the stage for multiple offers with offer prices above your List Price.
One of the best tools to use when you have more than one offer is the Seller Multiple Counter Offer.
If the Seller receives more than one offer, the Seller has the option of responding to more than one offer using a Seller Multiple Counteroffer.
The Multiple Counter Offer has a provision that requires the Seller to sign the Counteroffer one more time after the Seller receives the Counter Offer signed by a Buyer.
This allow a Seller to negotiate with more than one Buyer at the same time without being obligated to sell until one of the multiple counter offers is signed one more time after it is signed and accepted by a Buyer
The most important items to be included from a buyer with an offer:
Some must have items in a loan pre-approval letter:
The most valuable attribute to look for when hiring a Realtor to represent you: Hire a skilled negotiator. Your Realtor should have a proven track record.
We have been selling homes in your area since 1985 with over 1000 successful sales. There is no substitute for contract negotiation experience.
Hire us to win with us!
Leslie Whitney & Pete Sabine.
To find out more about our real estate services and expertise go to
Despite fierce opposition, including over 5,000 constituents personally expressing opposition to the bill, California Governor Newsom signed Assembly Bill 3182 into law on September 29, 2020.
It creates a new Civil Code Section 4741 which voids rental limits below 25% of the members. Per Civil Code 4741, a condominium or stock cooperative association may not unreasonably restrict the rental or leasing of the owner’s unit.
A planned unit development (PUD) association may not unreasonably restrict the rental or leasing of any of the owner’s individual lot, including the residence, Accessory Dwelling Unit (detached ADU), or Junior Accessory Dwelling Unit (attached ADU).
The intent of this bill is help combat the housing and homelessness crises in California, noting that many owners are currently prohibited from renting houses under HOA rules.
Supporters believe that house rentals would help bridge the middle-class housing shortage, freeing up housing for lower-income Californians in need of housing.
There are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated homeowners association rules.
AB 3182 prohibits rental bans in HOAs to allow homeowners who want to rent out their homes.
Under the new law, any provision in a governing document “that prohibits, has the effect of prohibiting, or unreasonably restricts” the rental of any of the separate interests, accessory dwelling units (“ADU”), or junior accessory dwelling units (“JADU”) in a community association is rendered unenforceable.
While there is uncertainty and disagreement over the impact of this language on minimum rental terms, the law specifically allows associations to prohibit short term and transient rentals, defined as rentals of 30 days or less, and also allows associations to place a rental cap of twenty-five percent (25%) of the separate interests (or greater) in the association.
However, AB 3182 also states that if the owner lives in either the main residence or an ADU or JADU on the property, then the property does not count as a rental unit.
As for the required duration of a lease, an association may only limit short-term rentals by imposing a minimum lease term of 30 days or less. This applies to all associations, but does not apply to the rental of ADUs and JADUs.
This means that owner-occupied rental properties are essentially exempt from these rental restrictions under the new law.
There are many different rental requirements HOA memberships often approve by a majority vote.
For example, a one-year minimum lease term, or a waiting period of one year before a new owner can rent a home, or the requirement that the tenant promise to abide by the HOA rules.
Are any of these requirements unreasonable? The issue of unreasonably restricting rentals is a vague standard, which could lead to litigation between homeowners and their HOA, since the definition of “reasonable” in this context is not obvious to all.
AB 3182 also requires any associations with provisions in their governing documents that conflict with the new requirements to amend their governing documents no later than December 31, 2021.
Associations must comply with the prohibition on rental restrictions specified in the new law starting on January 1, 2021, regardless of whether the association has revised their governing documents to comply with the new requirements.
Any association that willfully violates the new law is subject to a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).
AB 3182 also amends the government code to require quick approval of applications to cities and counties for construction of ADUs and JADUs, deeming all such applications approved if not acted upon within 60 days (this applies to governmental agencies, not associations).
The new bill also requires that properties which meet the minimum requirements be allowed to construct one ADU and one JADU on the same property. ADUs and JADUs are not allowed in condominium developments, so this distinction will only apply to planned developments with properties on individual lots.
Some reasons for having HOA rental restrictions include home loan lending requirements that have minimum Owner Occupancy ratios. As an example, many lending institutions will not provide home loan financing if the HOA complex has less than 50 or 60 percent of the total units occupied by the owner.
The new Civil Code has the maximum of 25% of the total units as tenant occupied and 75% owner occupied.
Other reasons relate to the upkeep and maintenance of each condo or home in the HOA. Many believe that renters do not take care as well as a homeowner. However, maintenance and upkeep standards can be enforced by the HOA rules and regulations with the burden and cost of compliance placed on the owner instead of a tenant.
Associations with rental restrictions or rental caps in their governing documents should discuss the impact of AB 3182 and how to address the new limitations on rental restrictions with legal counsel to avoid compliance issues and any civil penalties.
If you are buying a property within a Homeowners Association, having a contingency in your purchase contract to review and approve of the HOA Rules and Regulations is important because if you plan to rent the property you must understand what is allowed before completing the sale transaction.
Hiring an experienced Realtor to represent you will help you navigate through this complicated area.
Call or text Pete Sabine with your questions. 925.297.5335 or send an email to Pete@PeteSabine.com. Visit our web site OurFiveStarTeam.com
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