What is Fair Market Value?

If you’re buying or selling a home, the concept of fair market value is important. Each home, even if it were built identically to its neighbors, is unique. Variables such as physical condition, improvements or damages, location and overall desirability can each affect the perceived value of any property.

According to Smartasset.com, fair market value is the price a property would sell for in an open and competitive market where the buyer and seller each have adequate information of relevant facts. Buyers and sellers must act in their own interests and not be compelled by outside forces. They must agree to the price without coercion as well as give each other a reasonable time period to complete the transaction.

So how do buyers and sellers agree to fair market values? Since there’s no exact figure to begin with, most people rely on a lender’s appraisal of a given property. The appraisal utilizes information from tax records, recently recorded sales of properties, and comparable homes for sale as provided by the local real estate multiple listing service. Your Berkshire Hathaway HomeServices Select Realty professional can also provide you with a comparable market analysis of homes similar to yours based on recent closed sales, pending sales and current listing prices.

Keep in mind that these professionals are providing you with an educated starting point. You won’t know the true fair market value of your home until it’s offered on the open market and you reach an agreement with a willing buyer or seller.


Down Payment Assistance and Resources

It’s a great time to buy a home, so now is the time to start lining up resources to help you make a down payment. There’s plenty of assistance available if both you and the home you want to buy meet eligibility requirements.

While most programs are designed for first-time and/or low-income homebuyers, some are reserved for workforce personnel such as teachers, firefighters and police or for those who meet other criteria for the community.

According to TheMortgageReports.com, there are four types of down payment assistance:

  • Grants which don’t have to be repaid
  • Loans (second mortgages) that have to be repaid
  • Loans (second mortgages) that can be deferred until the property is sold
  • Loans (second mortgages) that are forgiven over a period of time

The gold standard in down payments is a minimum of 20 percent, but you can put as little as three percent down through Freddie Mac’s Home Possible® or HomeOne federally guaranteed mortgages. You’ll have to pay private mortgage insurance until your home reaches 20 percent equity, either through making mortgage payments to reduce the principle, or through the increased market value of your home over time.

The Veterans Administration provides certificates of eligibility for veterans to present to their mortgage lender that may entitle them to a mortgage with little or no down payment required.

Check for assistance programs and grants in your state beginning with Hud.gov and FHA.com. These programs will typically require minimum credit scores of 580 and a 3.5 percent down payment.


Winning in Multiple Offers

It seems as if the real estate market has been on fire in several parts of the country. Interest
rates remain low and buyers are out in full force. That’s great news if you’re looking to sell your
house. Not so much if you’re looking to buy your house. Why? Because there is a lot of
competition for the houses that are for sale. In fact, a lot of the homes that are for sale, are
getting multiple offers.


If you find yourself in a situation where the house you want has multiple offers, talk with your
agent to see what you can do to win the bidding war. Asking your agent to start a dialogue with
the listing agent is a good thing. Find out if there’s anything in particular that the sellers are
looking for or anything specifically that could get your offer to stand out.
If the listing agent is reluctant to share or seems to be keeping their cards close to the chest,
here are a few tips to get your offer noticed and considered.

SALES PRICE
When it comes to the sales price, anything under full asking price probably won’t be considered.
You’re going to have to come in above or at least at the full asking price. Most offers will be
above asking price. If you choose to do that, don’t get too carried away. An above asking price
offer isn’t any good if the house won’t appraise for that value. Sellers and listing agents know
that. So unless you’re willing to waive the appraisal or pay more for the house than it’s worth
(and that’s ok too), keep your above offer price somewhat reasonable. But over asking price is
the way to go.


CONCESSIONS
Asking the sellers to pay all or even contribute to some of the closing costs should be avoided if
possible. If you’re in a position where you need some help with closing costs and it’s
unavoidable, that’s one thing. But if you can pay your own closing costs, you definitely should.
Seller contributions, whether it’s closing costs, home warranties, carpet allowances or any other
concession eats away at the sellers’ net profit. And that’s what they’re going to be looking at.
There will be other opportunities to negotiate things like that (after the inspection and/or
appraisal). Including concessions right off the bat with your offer will likely encourage sellers to
pass on your offer.


FINANCIALS
When submitting your offer, be sure to include your pre approval letter. You want to present
yourself as an excited, willing and able buyer to the sellers. You want the sellers to know that if
they choose you, the deal will close (and close on time). A pre approval letter shows that you’ve
been in contact with a mortgage lender and taken all the financial prerequisites. If you’re a cash
buyer, be willing to provide some sort of proof of funds, whether that’s a letter from your bank or
print off of your bank statement.
It can be tough out there. Buyers can find themselves discouraged after losing in multiple offers.
Hopefully, these little tips can help.


Super Sleuth Your Next Home

You’re ready to make an offer on a home. You’ve got competing offers due to tight inventory and feel pressured to just make an offer with no contingencies. Before you sign your purchase offer, do a little quick research.

Get a loss history report. The Insurance Information Institute advises homebuyers to obtain a loss history report from the seller. This LexisNexis free service tracks hazard insurance claims. You’ll learn when the roof was replaced from hail damage but also if there have been any water leaks or other damage. During the home inspection phase, you can see how the damage was corrected.

Check Housefax.com. – Your first Property History Report is free and includes property details and building permits, among other information, so you can learn whether that room addition was done by professionals.

Visit DiedinHouse.com. For $11.99, you’ll receive an instant report that reveals if there’ve been any deaths in the home, because in many states, anything that isn’t a material fact doesn’t need to be disclosed to you. You’ll also learn if there’s been any fire damage, and whether the property was ever used as a meth lab. It also alerts you to nearby sex offenders.

Ask for an updated CMA. Your Berkshire Hathaway HomeServices Select Realty professional can provide you with an up-to-the-minute comparable market analysis (CMA) report. You’ll soon know if there’s been a change in the marketplace, such as new listings or solds that can help you decide how much money to offer.


How Fast Does Equity Build During Homeownership?

Building equity in your home is like a savings account – the more you put toward it, the better. Your home’s equity grows with each mortgage payment you make and with time.

According to BankofAmerica.com, you can calculate your equity based on current appraised value less any mortgages tied to your home. If your home is appraised at $400,000 and you owe $120,000, then your equity is $280,000. But that doesn’t mean you have savings of $280K; it just means that you have a general idea of how much your home will yield should you sell it at that moment, less closing costs, of course.

Lenders consider equity differently. You can begin building equity the moment you purchase your home with your down-payment. ($400K – 20% = $320K) Your loan amount would be $320K and the equity in your home would be $80,000. You can increase your equity by paying your mortgage regularly and paying a little extra every month, which speeds up the amortization of your loan.

To approve a home improvement loan or to determine whether to eliminate private mortgage insurance, lenders take the appraised amount and divide it by your loan balance to get a percentage of how much equity you have.  Divide your current loan balance by your home’s appraised value, then multiply by 100. ($120K ÷ $400K = 35%) That means you own 65% of your home. 

These numbers are theoretical until you sell your home. Meanwhile, watch your savings grow on your monthly mortgage statement!


Making Gutters Usefully Beautiful

One pleasure in buying an older home is the beauty of mature trees on your property and their dazzling display of fall colors when the weather turns cool. But, what happens to the leaves when they fall?

What you don’t want is leaves clogging your gutters, preventing them doing their most important job – to route roof water away from vulnerable areas of the home’s exterior and garden. If your new home doesn’t have gutters or needs new ones, consider investing in them as an important and elegant part of your home’s curb appeal.  

Today’s gutters are far from the boring half-pipe gullies of the past. You can choose gutters in an array of sizes, materials and designs that add style and value to your home.  A general rule is the more durable and valuable the material, the higher the cost, but the longer it will last, according to Bankrate.com.

Vinyl is the most economical, but least durable. Aluminum is more durable but can crack like vinyl, but not as quickly. Some lower cost options may be available in faux-metal finishes. If your home is surrounded by trees, or your area experiences strong winds, choose steel, zinc or copper which can carry much more weight and last a lifetime.

A popular choice for gutters is the K-style which has a staircase design that resembles crown molding, so your home appears finished in finer detail from the street. Choose gutters with leaf and debris guards to minimize home maintenance chores.


BUYING A HOME IN THE AGE OF COVID-19

While the U.S. wrestles with social distancing and a disrupted economy, you may not feel it’s the best time to buy a home, but you may be missing a great opportunity. Many buyers prefer to wait and sit on the bench, giving you more access to homes with less competition.

The real estate industry is still very much in business, but there have been many changes in how homes are being bought and sold. Here’s what you can expect.

Higher credit scores/down payments are requiredNews outlets are reporting that some banks, such as JP Morgan-Chase, are requiring higher credit scores as well as larger down payments to limit risk as people lose jobs and the economy wobbles. If you are in an essential business, that’s good, but you may need to sign a statement to that effect.

Virtual showings are the new normal. Virtual tours have been around for decades, but how they’re different is that your Berkshire Hathaway HomeServices network professional may hold the “camera” themselves, helping you zoom in details, features and concerns as you request them to. They can also conduct open houses, thanks to Zoom or other conference software. You can still see homes in person, but this is a great elimination and selection tool.

Inspections, final walk-throughs and closings are social distanced. To protect appraisers, inspectors, real estate personnel, etc., you may have to stay firmly six feet or more away, wear a medical-grade mask, and use sanitizer or wear gloves.


How Long Should a Roof Last?

Angieslist.com suggests that a typical asphalt shingle roof will last about 20 to 25 years, depending on variables such as the quality of the shingles, the professionalism of the installation, homeowner maintenance over the years, and, of course, the weather.

Your roof should have several lines of defense or redundancies. If one part fails, such as when a shingle blows off, there should be other protective layers such as an underlying membrane, flashing around chimneys and sealants that prevent the roof from leaking.

Because 70 percent of U.S. homes have asphalt or composition shingle roofs, replacement roofs tend to be similar. According to Roofingcalc.com, the average roof size in the U.S. is 1,700 square feet. Professional roofers calculate area by 100 square feet, so it would take 17 “squares” to reroof the average home. Materials and labor can run anywhere between $350 and $550 per square, or approximately $6000 to $9350.

Leaks through the ceiling, missing shingles, frayed or curling shingle edges, or erosion of the mineral granules are all signs that it’s time to repair or replace your roof.  Have your roof inspected by a reputable roofing contractor, who can tell you if the roof was properly installed and maintained.

Check with your homeowner’s insurance company about coverage. Insurance.com warns that many companies will amortize coverage according to the age of the roof and refuse coverage if the roof has two or more previous layers of roofs or if the roof is 20 years or older.


The Renewed Appeal of Suburbia

It’s typical for single-family home sales to surge in the spring and summer, but this year, there are some differences due to Covid-19. The pandemic is causing more urbanites to move out of the city say The New York TimesForbes.comNPR.org and other news services.

Many of the attractions that make city living attractive, such as theater, shopping and dining out, simply aren’t available, causing some homebuyers to feel pent-up in their small apartments. They’re questioning if there isn’t a better way to live.

The result is a notable increase in home searches and purchases for single-family homes in smaller towns, exurbs and suburbs as many city-dwellers, particularly millennials, decide to ditch living in close quarters, paying high rents and home prices, and settling for views of buildings instead of trees.

One factor that’s driving the decision to move out of the city is that many white-collar workers believe they will continue to work from home permanently. The Star Tribune reported that Ford Motor Company, for example, intends to make many telecommuting jobs permanent, partly due to worker polls in favor working from home.  

If you’re of like mind, what can you expect when you shop for a home in the ‘burbs? According to Realtor.com, on average, a suburban home costs $230,000 compared to $431,000 home in the city with 300 more square feet of living space. You may pay over list price or get into a bidding war, due to intensifying demand, but you’ll still save a bundle. 


Student Loans

Looking to buy a home, but worried that your student loan debt will prevent you? Here are some things you can do to help you purchase a home after college:

  1. Look at your Debt-to-Income Ratio: Pay down any debts you can, including student loans, credit card bills, and other debts you may have. Save up some money, and start paying down debts wherever possible.
  2. Look at your Credit Score: Make sure you pay all bills on time and get your score up. Your credit score makes a big impact on your home purchase, so it helps to keep your score high.
  3. Speak with a Lender: You are going to need a pre-approval letter to purchase a home. Talk with a lender to get pre-approved for a mortgage loan. Your lender can also help give you some advice on getting approved for the amount you are looking for, and they can give you tips for how to get where you’d like to be financially.
  4. Contact a Real Estate Agent: If you have any questions on the home buying process, speak with one of our Berkshire Hathaway Home Services Select Agents. They can help you in your home search process and answer any questions you may have.

If you are a recent college graduate, don’t let that student loan debt keep you from your dreams of owning a home. There are ways you can purchase a home, or plan for it in the near future. Speak with one of our agents for more information!