Maximizing a Homeowner's Chance to Sell

Recent policy changes made by the National Association of Realtors (NAR) have shifted the dynamics of buyer's agent compensation, prompting sellers to reconsider their strategies.

Many buyers, especially first-time homebuyers, have limited savings and may struggle to cover additional costs beyond the down payment, closing costs, and other expenses associated with purchasing a home.  Mortgage lenders typically do not allow buyers to include agent fees in their loan amount, meaning buyers must pay these fees out-of-pocket, which can be a significant financial burden.

Requiring buyers to cover their agent's compensation, as opposed to the traditional seller-offered model, exacerbates affordability issues and limits many buyers' ability to purchase a home. To maximize market appeal and facilitate a quicker sale at full market value, sellers should strongly consider offering buyer's agent compensation.

1. Increased Buyer Pool: Offering compensation to buyer's agents can attract more potential buyers. Many buyers rely on agents to navigate the home-buying process, and agents are more likely to show homes where they are compensated, expanding the pool of potential buyers for the seller's home.
2. Competitive Advantage: In a competitive real estate market, offering buyer's agent compensation can make a seller's property stand out compared to similar listings that do not offer such incentives. This could lead to quicker sales and potentially higher offers.
3. Facilitated Negotiations: Providing compensation can simplify negotiations. Without the need for buyers to negotiate agent fees separately, the transaction process becomes more straightforward, reducing potential friction points that could delay or derail a sale.
4. Legal and Compliance Benefits: Buyer agents help ensure compliance with legal and regulatory requirements during real estate transactions. By compensating buyer agents, sellers can mitigate the risk of non-compliance and potential litigation, which could arise from handling complex paperwork and disclosures on their own.
5. Market Perception: Not offering buyer's agent compensation might create a perception that the seller is less flexible or cooperative, which could deter potential buyers and their agents. This perception can be particularly detrimental in markets where such compensation is customary.
6. Preservation of Market Norms: While the NAR settlement allows for commission negotiations, many buyers and sellers are accustomed to the traditional model where sellers offer compensation to buyer's agents. Deviating from this norm might confuse or alienate potential buyers, affecting the property's marketability.

Sellers who choose to offer buyer's agent compensation can enhance their property's appeal and attract a wider range of buyers resulting in obtaining the highest price, in the shortest time, with the fewest problems. In a competitive market, this strategic decision may be crucial for achieving a successful and timely sale.

VA Allows Buyer-paid Broker Fees

The U.S. Department of Veterans Affairs, known as VA, issued a policy change that now allows payment to buyer brokers on VA loans.  They will be subject to certain safeguards, such as the requirement that all buyer-broker fees charged to veterans "must be reasonable and customary within local markets."  The circular is effective Aug. 10, 2024, and is valid until rescinded.

The VA also clarified that veterans can still ask sellers to cover these fees which in most cases will be negotiated in the offer to purchase agreement.  As the practicality of the settlement of the lawsuit becomes clearer, VA is expected to issue a permanent policy.

This change in policy will protect veterans in situations where there is competition for a particular property and the seller might select another offer because those buyers were paying their own buyer's agent fee.  Prior to this policy change, veterans were not allowed to pay, "under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals."

Both the National Association of REALTORS� and the Mortgage Bankers Association have been lobbying the VA to address this prohibition and are thankful for addressing the issue to keep veterans who want to use their VA benefits to purchase as home.

VA mortgage loans have many benefits and options to structure a home purchase to fit your individual situation.  Your real estate professional can help you find the home that fits your needs with affordable financing.

For more information on changes with buyer's agents, download Buyers Agent Guide and contact your agent with any questions you may have.

 

Smart living with home automation

In today's fast-paced world, home automation is becoming increasingly popular among homeowners seeking to enhance convenience and reduce energy costs. With advancements in technology, smart home devices offer innovative solutions that not only simplify daily tasks but also promote energy efficiency and sustainability.

Whether you're looking to upgrade your existing home or are in the process of building a new one, incorporating these home automation trends can significantly improve your living experience while saving you money in the long run.

• Smart Lighting - Automate your lighting to save on energy bills by setting schedules and controlling brightness and color through a smartphone app.
• Enhanced Home Security - Invest in smart security systems with features like facial recognition, motion sensing, and real-time alerts to enhance safety and provide peace of mind.
• Smart Thermostats - Use smart thermostats to learn your schedule and optimize heating and cooling, reducing energy consumption and lowering utility costs.
• Voice-Controlled Assistants - Incorporate voice-controlled assistants to manage daily tasks and control other smart devices, enhancing convenience and efficiency.
• Smart Appliances - Upgrade to smart appliances that offer features like remote control, energy efficiency, and inventory management, particularly in the kitchen.
• Sustainable Living Solutions - Implement energy-efficient appliances and solar-powered systems to reduce your carbon footprint and utility expenses.
• Smart Entertainment Systems - Integrate smart entertainment systems for a customized audio-visual experience that can be controlled remotely or by voice.
• Touchless Technology -Install touchless faucets and smart showers to promote hygiene and water conservation while adding convenience to daily routines.
• Eco-Friendly Smart Toilets - Consider eco-friendly smart toilets that offer features like water-saving flushes and self-cleaning capabilities, contributing to a sustainable lifestyle.

By integrating these home automation trends into your living space, you can create a more efficient, convenient, and enjoyable home environment. Not only do these innovations enhance your daily routines, but they also contribute to long-term savings on energy costs and improve the overall value of your property.

Embrace the future of home living by exploring these smart solutions and take the first step toward a more automated and sustainable lifestyle.

Overwhelming advantages aside, there is still resistance to pre-approval

Pre-approval is a comprehensive process where the lender verifies the buyer's financial information, including credit history, income, and assets. Pre-approval provides a conditional commitment from the mortgage company to lend a specific amount, pending appraisal of the property.

Pre-qualification is an initial assessment based on self-reported financial information provided by the buyer. It gives a rough estimate of how much a buyer might be able to borrow but it is merely an opinion.

Despite the well-known advantages of getting pre-approved for a mortgage early in the home-buying process, many buyers remain resistant even to their detriment. Here are several reasons why:

Some buyers may not fully understand the benefits of pre-approval or may underestimate its importance. They might see it as an unnecessary step rather than a strategic move that can give them a competitive edge and streamline the home-buying process.

Buyers often perceive the pre-approval process as complicated and time-consuming. Gathering financial documents, filling out applications, and dealing with lenders can seem daunting, especially for first-time buyers unfamiliar with the process.

Potential buyers may fear that they won't qualify for a mortgage or won't get approved for the amount they need. This fear of rejection can lead them to delay or avoid the pre-approval process altogether.

The pre-approval process requires sharing sensitive financial information, which some buyers may be uncomfortable with. Concerns about privacy and data security can make buyers hesitant to initiate pre-approval.

Buyers who feel confident in their financial situation might not see the need for pre-approval. They might believe they will easily secure a mortgage when needed and therefore consider pre-approval an unnecessary precaution.

Some buyers may be waiting for the perfect moment to get pre-approved, such as when they have a specific property in mind or when they believe their financial situation will improve. This can lead to delays and missed opportunities.

The belief that mortgage pre-approval will negatively impact their credit score can deter some buyers. Although pre-approval does involve a credit check, the impact is typically minor and temporary, but this is not always clearly understood.

Procrastination and indecision can also play a role. The home-buying process involves many decisions and actions, and pre-approval might get pushed aside in favor of more immediate tasks or simply due to procrastination.

Some buyers believe that they can get pre-approved later in the process without any negative consequences. This assumption can lead to delays and complications, especially in competitive markets where pre-approval can be crucial for making a timely offer.

"Pre-qualification is the crucial first step in the home buying journey, providing buyers with an initial understanding of their borrowing capacity and setting the foundation for a successful and informed search for their dream home."

Among the benefits to buyers are enhanced buying power, competitive edge, negotiating power, streamlined process, confidence, and peace of mind.  If there are potential issues identified early in the process, there may be time to cure them without delaying a transaction.

Pre-approval benefits the buyer directly as well as the seller by having a qualified buyer that can close the sale.  Download our Buyers Guide and Buyers Agent Guide.

Addressing the Buyer Agent's Fee

Traditionally in the U.S. housing market, the seller has offered the buyer's broker and agent a share in the commission specified in the listing agreement between the seller and the listing broker and agent.  In a settlement between the National Association of REALTORS�, beginning on August 17, 2024, buyers will have to sign an agreement with their buyer's agent specifying what services will be available and the fee the buyer's agent is charging.

Many sellers may continue to offer compensation to the buyer's broker and agent, maintaining the traditional practice of the seller paying both sides of the commission. However, when no offer of compensation is made, there are several distinct alternative ways to facilitate the buyer agent's fee, as well as a myriad of variations to suit different scenarios.

In an instance where the seller doesn't offer compensation to buyer agents regarding a property you're interested in, there are several options to consider:

1. Negotiation with the Seller
   As your agent I can negotiate with the seller or their agent, on your behalf, to include the buyer agent's commission in the terms of the sale. This becomes part of the overall negotiation strategy when making an offer.
   
   
2. Adjusting the Purchase Offer
   As your agent, I can modify the offer to indirectly cover the commission by raising the purchase price to include the commission and have it included in the financing. For example, if a home is listed at $400,000, and the commission is $12,000, the offer would be for $412,000 with a condition that the seller pays a $12,000 commission to the buyer's agent.
   
   This approach ensures the seller receives their expected amount while covering the commission.
   
   
3. Seller Concessions
   As your agent, I can negotiate for seller concessions, where the seller agrees to pay a portion of the closing costs. This can include loan origination fees, appraisal fees, points, and other items that are disclosed in the offer to purchase.
   Seller concessions can help offset your out-of-pocket expenses, potentially making the purchase more affordable even with commission obligations.
   
   
4. Buyer Pays Commission Directly
   If the seller refuses to pay the buyer's agent commission and it can't be incorporated into the purchase price, it may be necessary to pay the commission directly. This would be discussed and agreed on before proceeding with any offer, and it would be clearly stated in the buyer's agency agreement.

It's important to note that any combination of these strategies may be used to find the best solution for your specific situation. The overall goal is to ensure you can pursue properties you're interested in while fairly addressing the commission aspect.

Download our Buyer's Agent Guide for more information.

U.S. Homeowners Property Tax Increase

Last year, U.S. homeowners faced an average property tax bill exceeding $4,000, marking the highest increase in five years, according to data from Attom Data Solutions, a real estate data firm. Property taxes nationwide amounted to over $363 billion in 2023, reflecting a 6.9% rise, largely attributed to inflationary pressures on local government costs and public employee wages.

States with the highest effective property tax rates included Illinois, New Jersey, Connecticut, New York, and Nebraska, with notable disparities in tax increases observed across different regions, such as a 31.5% increase in Charlotte, North Carolina, and a 15.2% rise in Atlanta.

Property taxes are determined by the assessed value of the property and applying the tax rates for the different taxing authorities for that year.  Generally, homeowners are notified of the assessed value of the property for that year, many times, even before the tax rate is set.

There is often a procedure for disputing the assessment, which may involve various processes. In some states, independent appraisal boards convene to review arguments from the taxpayer and a representative of the taxing authority.

To help further understand the process, here are some helpful definitions:

Assessment Process - The local government assesses the value of your property periodically to determine its taxable value.

Taxable Value - This is the value of your property that is subject to taxation, which may not necessarily be the same as its market value.

Tax Challenge - Homeowners have the right to appeal their property tax assessment if they believe it is too high.

Tax Rates - Typically determined by the taxing authority based on funding needs to generate the necessary revenue.

Tax Exemptions - Some homeowners may qualify for tax exemptions or reductions based on factors like age, disability, or veteran status.

Escrow Accounts - Many homeowners pay their property taxes through an escrow account set up by their mortgage lender, which is included in their monthly mortgage payment.

Tax Due Dates - Property taxes are typically due annually or semi-annually, depending on local regulations.

Penalties for Non-payment - Failure to pay property taxes on time can result in penalties, interest charges, and even the loss of your property through tax foreclosure.

For information about federal income taxes relating to homeownership, download the Homeowners Tax Guide.

Tips for Hiring a Home Inspector

Congratulations on your offer being accepted! In many cases, you may have a provision in your sales contract for a satisfactory home inspection.  You're one step closer to owning your dream home. Now is the time to choose a home inspector to take a closer look at the property.

Inspectors are thorough and in some states are required to be licensed. They have extensive training and follow strict rules to inspect the home's structure, electrical systems, AC and heating, plumbing, appliances, and many other aspects.

Inspectors find things you might not be familiar with or have overlooked. Even in brand-new construction, inspectors will find issues. This way, you know about the problems and can determine how to deal with them.

Inspections help you make decisions. If the inspection uncovers big surprises, you may want to ask the seller to make repairs or lower the sales price. You may also decide to walk away from the transaction.

It's better to know about problems before you close the sale on a home. No one likes it when an inspector finds deficiencies, but it's better to know about them upfront than to find out later. An inspection can help you avoid surprises down the road and make an informed decision about your purchase.

Your agent can recommend a qualified inspector and answer questions you may have about the process and what to expect. Another alternative is to ask friends who have purchased a home recently about the inspector they used and any suggestions they might have.

Some additional tips for hiring a home inspector:

• Make sure the inspector is licensed, if required, and insured.  Ask if they belong to any professional organizations.
• Ask the inspector about their experience and what they will be inspecting, as well as the type of report you will be receiving from them and whether it includes pictures of items in question.
• Ask if you can be present for the inspection so you can ask questions and watch the process to better understand.

By following these tips, you can hire a qualified home inspector who will help you make a wise decision about your purchase and protect you from unforeseen surprises.