6 Mortgage Programs That Allow For Low Down Payments

Based on the average price of houses these days, coming up with a down payment can be a major endeavor. According to the California Association of Realtors (CAR), the average price for a single-family existing home currently sits at $584,460. If you were to try and come up a 20% down payment, you would need to gather up $116,892! That’s a hefty sum for the average American, but conventional mortgages require 20%, or else Private Mortgage Insurance (PMI) will be applied. That means more money dished out.

Of course, it is not mandatory to put down 20%. Conventional mortgages will accept a minimum down payment of 5% towards the purchase price of a home, as long as your credit is in good standing and your financials are in check. Even still, 5% of the statewide average home price is $29,223, which is still a large amount for many borrowers to save up.

Luckily, there are several low down payment options available to homebuyers who struggle to save up a large down payment.

1. FHA Loan

One of the more popular mortgage programs available for those with a low down payment are FHA loans. This type of mortgage program is backed by the Federal Housing Administration (FHA) allows down payments as low as 3.5%.

While the government doesn’t actually fund the loans, it does provide lenders with some reassurance in case borrowers default on their mortgages. Not only are FHA loans good for borrowers with a low down payment, they’re also suitable for lower-income borrowers and those who don’t have excellent credit.

It should be noted that if your credit score is less than 580, you may have to put down slightly more than 3.5%. In addition, you’ll have to pay mortgage insurance premiums over the life of the loan if your down payment is less than 10%.

2. HomeReady Program

Fannie Mae’s HomeReady mortgage is also backed by the government and only requires 3% down to secure a mortgage. This type of program is geared towards low- to moderate-income borrowers with decent credit scores.

One of the great things about this program is that it can take into consideration the incomes of other adults living in the home. That means any grandparents, adult children, or siblings can include their income in the calculations to make securing a mortgage and coming up with a decent down payment much easier if you’re struggling to do so on your own.

3. Home Possible Program

Similar to Fannie Mae’s HomeReady program, Freddie Mac’s Home Possible program allows borrowers to put down as little as 3% towards a down payment. This mortgage option is great for low- to moderate-income homebuyers, as well as first-time homebuyers who are struggling to make the leap from renting to owning.

There are income limits that apply, however. In order to be eligible for this mortgage program, your income can’t go over the median income in the area where the home that you’re buying is located. That said, there are some exceptions, including situations where the home that’s being purchased is located in high-cost areas. In these cases, higher AMIs may still qualify.

4. Conventional 97 Program

Fannie Mae has another low down payment mortgage program for borrowers struggling to collect a large sum of money. The Conventional 97 program is designed to help borrowers who are only able to afford no more than a 3% down payment, and there are no credit requirements to qualify, either.

In addition, the Conventional 97 program allows 100% of the down payment to be a gift, as long as the proper paper trail shows that it is not a loan. Private Mortgage Insurance (PMI) is required on conventional mortgages with a loan-to-value ratio (LTV) of over 80%. However, once the LTV dips to 78% or below, PMI automatically drops off the mortgage.

5. VA Loan

If you’re a veteran or are the spouse of a veteran, you may be eligible for a VA mortgage, which is backed by the U.S. Department of Veterans Affairs (VA). These types of loans actually require no down payment at all and offer 100% financing, making them as affordable as mortgages can get. Not only that, but VA loans do not require any mortgage insurance, which can save you even more money over the life of the loan.

As far as credit requirements are concerned, individual lenders will have their own criteria for borrowers to meet. That said, the majority of lenders require a credit score of at least 620, though lower credit requirements may be found with specific lenders.

6. USDA Loan

USDA loans are meant for buyers who are purchasing a property in a designated rural area, as long as the property itself is not considered a working farm. This type of loan, which is backed by the U.S. Department of Agriculture, is designed to help stimulate growth and development of rural areas. In exchange, USDA loans do not require a down payment. In addition, the upfront fees are typically lower compared to other types of mortgages.

In addition to the type of property being purchased, there are also income restrictions in order for borrowers to qualify. The total household earnings – including all adults working in the home, including adult children – cannot exceed 115% of the Area Median Income (AMI). However, you may be able to deduct specific expenses from the total income amount.

Other requirements include a minimum credit score of 620 and a debt-to-income (DTI) ratio of no more than 45%.

The Bottom Line

Depending on your specific situation, you may be eligible for any one of the above mortgage programs that allow a small down payment, and sometimes none at all. Just keep in mind that mortgage insurance will most likely be required in most cases if your down payment isn’t above the 20% mark. Be sure to speak with a mortgage specialist who can walk you through all your options before settling on one particular mortgage program.

How to Finally Get Rid of Your PMI or FHA Mortgage Insurance

If you’re planning to apply for a mortgage to help you finance a home purchase, you could get stuck paying mortgage insurance, depending on the type of home loan you take out and your down payment amount.

If it’s a conventional mortgage you’re applying for, you’ll need to come up with at least 20% towards a down payment, or else you will be required to pay Private Mortgage Insurance (PMI) on top of your mortgage payment. The amount you pay is based on a percentage of the initial purchase price of the home.

Fees for PMI range from anywhere between 0.3% and 1.5%, depending on factors such as your down payment amount and credit score. The higher these numbers are, the lower percentage you’ll likely be charged.

If you’re applying for an FHA-backed home loan, you’ll automatically be billed for FHA Mortgage Insurance Premium (MIP), which is an insurance policy that protects lenders if borrowers default on their mortgages. Regardless of the down payment amount, borrowers with an FHA-backed home loan will be responsible for paying MIP.

Since FHA loans come with less stringent lending requirements for borrowers – including a lower down payment amount and lower credit scores for approval – lenders who are eligible to issue them need added protection in the event of mortgage default.

FHA mortgage insurance policies have two separate payments: one is a lump sum that is paid upfront, and another is paid on a monthly basis over the life of the loan.

Regardless of whether you’re paying PMI or FHA MIP, the added fees can make your mortgage more expensive than it has to be. But there may be ways to get rid of that extra payment for good at some point in the future, which will help you keep more money in your pocket every month.

How to Eliminate PMI

Before you can get rid of PMI, you will need to pay down your mortgage to at least 80% or less of the principal amount of the loan. This can be done in a few different ways, including the following:

Pay down your loan – The most obvious way to get to the 80% equity mark is by simply contributing to your mortgage every month until your loan-to-value ratio (LTV) – which is the loan amount relative to the value of the property – is 80% or less. Once you’ve paid off at least 20% of the original loan amount and reached the 80% LTV threshold, you should be eligible to have PMI eliminated.

That said, you will likely have to get in touch with your lender once you’ve reached that 80% mark, as PMI cancellation doesn’t happen automatically until you’ve actually reached 78% of the outstanding principal.

Have the home appraised – The great thing about real estate is that it typically increases in value over time. Many real estate investors have built wealth by simply owning and holding real estate and allowing appreciation to add value. If you believe that your home is worth a lot more than what you paid for it, you may have built up enough equity through appreciation to bring your equity amount to at least 20% of the home’s value.

In this case, you would need to contact your lender to have an appraiser come out and assess the current value of your home. If it is determined that your home has in fact increased in value to the point that you’ve reached 20% equity or more, PMI can be removed.

Refinance your home loan – Another way to remove PMI from your mortgage is to refinance your mortgage. If you can refinance with a new loan that accounts for less than 80% of the value of your home and has a lower interest rate than your original home loan, you may be able to have your PMI dropped from your mortgage. Having said that, you’ll want to ensure that refinancing makes financial sense for you.

Update your property – By taking on certain home improvement projects, you may be able to effectively add equity to your home to make you eligible to have PMI removed. Just be sure to tackle smart projects that will add more value compared to the cost of the improvement. Your real estate agent will be able to help guide you in the right direction.

Automatic cancellation – Lenders are required by law to remove PMI automatically from a borrower’s mortgage if all pertinent criteria are met. When the loan balance drops to 78%, lenders must eliminate PMI as per the Homeowners Protection Act, as long as you stay up-to-date on all your scheduled payments.

How to Eliminate FHA MIP

FHA loans are not eligible for mortgage insurance cancellation. However, there are still ways that you may be able to get out of it, and refinancing is usually the way to go about it.

If your finances are in order and your credit score is high enough, you may be able to refinance out of your original FHA home loan into a conventional mortgage without PMI. Since FHA loans don’t have prepayment penalties for paying these types of loans off early, you won’t have to worry about having to pay an added fee to get out of it. As such, you can refinance whenever you like, as long as you have an LTV of at least 80%.

If you took out your FHA mortgage before June 2013, you can cancel your MIP after five years if you have a 30-year mortgage without the need to refinance. With a 15-year loan, there’s no minimum. In this case, you need to have at least 22% equity in your home and have been on time with all of your payments.

The Bottom Line

Paying mortgage insurance on top of your mortgage may seem like wasted money, but you may be able to cancel it if you’ve got all your ducks in a row. Be sure to speak with an experienced mortgage specialist to help you assess whether you’re ready to finally ditch that pesky payment once and for all.

Different Types of Homeowners Insurance Policies to Consider

Homeowners insurance is essential when buying and owning a home. In fact, you won’t even be able to get a mortgage if you are unable to secure an insurance policy for your home, as lenders will want to make sure a home is eligible for insurance before extending a mortgage.

But there isn’t just one type of homeowners insurance policy. In fact, there are several different types, and the one that you choose will depend on the specific type of property you’re buying and your particular needs.

The following are the different types of homeowners insurance policies you should become familiar with before choosing the one suits your situation best.

HO-1

This is the most basic form of insurance and only covers the dwelling against damage from:

  • Fire
  • Lightning
  • Explosions
  • Windstorms
  • Hail
  • Theft & vandalism
  • Damage from vehicles
  • Damage from airplanes
  • Riots
  • Volcanic eruptions

You’ll notice that floods and earthquakes are not included in this list. That’s because the HO-1 policy is very basic in nature and only covers costs associated with disasters that are not very common (aside from fire). Floods and earthquakes are much more common, and as such, you’d have to take out additional insurance riders to cover any damage associated with such disasters.

These policies are not very common given their vague nature and limited coverage offered.

HO-2

An HO-2 is more common and covers all the perils included in an HO-1 policy, as well as things such as damage from the weight of ice or snow, falling objects, overflow of water, freezing of HVAC systems, cracking or bursting of plumbing pipes, and damage from electrical currents. Unlike the HO-1, the HO-2 policy also covers personal liability if you or a family member are responsible for causing property damage or bodily injury to someone else.

HO-3

This is the most common type of homeowners insurance and provides coverage for your home and other structures, such as detached garages, sheds, pool houses, and so forth, except for damage caused by mishaps specifically excluded. It also covers your personal belongings and personal liability. While this is the more popular form of insurance, it’s important to go over the policy with an insurance provider to fully understand what’s covered and what isn’t.

HO-4

If you are renting a property, this policy is for you. HO-4 insurance policies cover personal belongings and personal liability for renters. Your landlord is responsible for insuring the actual building itself. Under this policy, your belongings would be covered against the same mishaps included under an HO-2 policy, as well as additional living expenses if you ever have to stay somewhere else temporarily while your unit is being repaired.

HO-5

This is a popular type of homeowners insurance policy because it is comprehensive and covers many more items that are not included in other policy types. While the HO-3 policy is popular, the HO-5 offers even more coverage and is often recommended by professionals, though they do come with a higher premium in exchange for more comprehensive coverage.

That said, certain perils are not covered under this type of policy, such as damage from:

Floods

Earthquakes

Mold/fungus

Birds, pets, and insects

Foundation settling

War

If you want to be covered for any one of the above-mentioned perils, you will have to take out an insurance rider, which will cost extra.

HO-6

If you own a condo, you will want to take out a specialized type of homeowners insurance policy that is designed specifically for these unique types of residences. The actual building itself and all common areas are covered by the condo association’s own insurance policy, but you’re responsible for taking out your own policy – an HO-6 – which covers the ceilings, walls, and floors of the unit itself, as well as personal belongings and personal liability.

HO-7

Even mobile homes require some form of homeowners insurance, and the HO-7 policy is specifically for these dwelling types. This form is similar to the HO-3, but is meant specifically for mobile and manufactured homes.

HO-8

This insurance policy is designed for older properties to cover issues that are not typically covered under other policy types. Older homes are often made with materials that are no longer used or available today, so it would be nearly impossible to replace the materials to rebuild the property in case anything ever happened. Historic and heritage homes are typically covered under these policies.

The Bottom Line

While HO-3 and HO-5 policies are the more common types of homeowners insurance policies, the one you choose will depend on your specific dwelling type and needs. You can also add on insurance “riders” in order to fully customize your coverage in case one particular policy doesn’t provide you with the exact type of coverage you require. Be sure to discuss all of your needs with your insurance provider to help you select the appropriate policy for you.

INFOGRAPHIC: How Much Value Can Be Added With Exterior Upgrades?

8 Trends in Outdoor Living Spaces

Given California’s fabulous climate, the outdoors can be enjoyed year-round, especially at home. An outdoor living space is a lot more than just a couple of lawn chairs and a table. These days, savvy homeowners are making the most of their outdoor spaces by incorporating a number of convenient and ingenious ideas.

The following are some of the hottest trends in outdoor living that are big in 2018 and will likely maintain steam going forward.

1. Vertical Gardens

Fruit, vegetable, and herb gardens are a common staple in outdoor spaces. But in addition to planting all of your greens on the ground, you can use any vertical space you may have as well. This is especially helpful if you lack a lot of square footage outside, in which case growing your gardens vertically can save a lot of space.

Those who live in condo units or townhomes would particularly benefit from vertical gardens. You can hang your plants on walls or install pergolas or arches to provide added vertical surfaces for this purpose. Not only do vertical gardens make good use of a small space, they also add an element of depth to the area.

2. Fire Tables

Having a fire pit in the backyard is the great way to add some ambiance as the sun starts to set and provide a little bit of warmth on particularly cool nights. But in addition to a traditional fire pit, today’s outdoor spaces are increasingly being outfitted with fire tables.

As the name suggests, these pieces combine the functionality of a table with the convenience of a fire in the center. The great thing about fire tables is that they blend in seamlessly with all other patio furniture while simultaneously offering a heat source and a cozy atmosphere.

3. Deep, Bold Blues

As far as colors are concerned, blue seems to be taking the top spot for outdoor decor. While bright reds and natural greens are still hot, deep blues are becoming the color of choice among homeowners as of late This vibrant hue can be incorporated in seat cushions, umbrellas, and area rugs. When coupled with neutrals that are traditionally found in outdoor furniture such as black, grey, and natural wood, bold blues can make a backyard really stand out.

4. Porcelain Floors

Concrete, wood planks, and interlocking stone have long been used for flooring outdoors, but other non-traditional types of materials are making their appearance outdoors, including porcelain pavers.

A highly durable and strong material, porcelain makes a great alternative for patio and deck flooring. It’s also aesthetically appealing and can easily add a decorative element to any outdoor space. Porcelain pavers can also make the transition from the indoors to the outdoors as seamless as possible.

5. Folding Glass Doors

As an alternative to sliders or swinging doors, folding glass doors fold neatly out of the way without the need to have a double-door entry. Folding glass doors basically stack as they slide along a track system. Unconventional elements like these can also help create a seamless transition from the inside out.

6. Motorized Retractable Screens

Similar to folding glass doors, retractable screens roll out of sight. While there are manual options available, motorized retractable screens quickly roll up and are housed in the door frame at the touch of a button when you don’t need them. When it’s time to close the retractable screen, simply push the button again to have it roll back into place to provide fresh air indoors without letting any pests in.

7. Outdoor Televisions

You can catch the big game right from the comfort of your own backyard with the installation of a big screen TV. Outdoor televisions are specifically made to withstand the elements and are properly sealed so that no precipitation will be able to destroy the unit. In addition, sealing will also help reduce the glare from the sun so that you can enjoy what you’re watching.

8. Patio Bars

Joining the increasingly popular outdoor kitchens are patio bars, which are perfect for entertaining outdoors. In fact, patio bars are easily one of the hottest trends in outdoor space design these days. And with a myriad of finishes and materials to choose from, you can easily create the most unique patio bar to suit your style and your home.

The Bottom Line

If you’re creating a new outdoor living space or are looking to update or add to your existing space, any one of these trends can help you give your backyard a major boost. So far, 2018 home design is all about making outdoor living spaces function like indoor spaces as far as entertainment, relaxation, and convenience is concerned. Consider implementing any one of these ideas into your outdoor space to create a backyard oasis you’ll never want to leave.

What is an Estate Sale and How Does it Work?

An estate sale is the sale of a property of a recently deceased homeowner with the purpose of liquidating the home and all assets in it. While there could be any number of reasons to liquidate the property to free up cash, an estate sale usually happens when the owner passes away. Those who inherit the property will receive the proceeds from the sale.

That said, there may also be other potential reasons for an estate sale, also referred to as an “estate liquidation.” For instance, the surviving family members with stake in the property may be unable to agree on a decision about what to do with the property. In this case, a dispute might arise, forcing the situation to be resolved by the court. If this happens, the court will be the one to decide on an estate sale, after which the proceeds of the sale will be divided among the surviving members of the family.

Estate sales can also happen when the owner decides to downsize and liquidate everything, or when the deceased owner’s will requires a sale of all property assets.

Listings for estate sales typically stipulate that the property is being sold in “as is” condition, meaning the home likely has not been updated in a while and may need some improvements. Being sold “as is” means the seller will not be making any updates to the property before ownership changes hands.

Estate homes are often are priced well to accommodate for the fact that they require some improvements, which will cost money to do.

When Estate Sales Become Probate Sales

Many times the sale of a home and everything in it occurs when the owner dies without having a will in place or without naming any specific heirs. In this situation, the estate sale becomes a probate sale because the court will need to appoint a representative to handle the sale of the deceased owner’s property.

When an owner does not bequeath their property to anyone, the state usually steps in and deals with the sale of the home. As such, the court then assumes the responsibility of selling the home while adhering to specific regulations that must be followed during a sale like this, including the following:

  • The estate representative can find buyers directly or list the property for sale with a real estate agent;
  • The listing period cannot exceed 90 days (although extensions are possible);
  • An accepted offer from a willing buyer must be approved by the court;
  • A hearing date will be established by the court to confirm the sale, at which point other buyers may place their bids on the home;
  • The initial accepted offer is the starting bid of the auction;
  • The first overbid is subject to specific formulas to ensure a minimum bid amount;
  • The court can set minimum bid amounts for subsequent bids;
  • The court will only confirm the highest bid until its terms are deemed to be acceptable by the estate’s representative.

These rules are put in place in an effort to get the highest price for the estate. That said, the court has a lot of power in a probate sale and can disapprove a sale and require a new one if necessary.

Buyers often seek out probate sales because they are typically listed below market value. But with the auction-style bidding process, buyers will have to compete with other interested buyers to snag a property in a probate sale and may find themselves bidding pretty close to market value if the competition is fierce.

The Bottom Line

If you’re a buyer looking for a deal on a home, a probate sale might be a promising resource. But there are certain nuances that you need to be aware of if the property ends up being auctioned off in a probate sale. If you are considering purchasing a property that is being handled by an estate representative, be sure to team up with an experienced real estate agent who can help you navigate these waters and get the best price.

9 Things to Consider Before Installing a Pool

Having a pool in the confines of your own backyard can certainly be a statement element for your outdoor oasis. And considering the fact that the climate in California typically allows for year-round enjoyment of swimming outdoors, adding a pool can offer you and your family plenty of recreational time. Plus, buyers in the Golden State often look for homes with a pool, and may even expect it.

That said, there are still certain things you should consider before making the decision to install a pool on your property, including the following.

1. How Will You Use it?

Sounds like a silly question, but you might want to ponder it for a moment because the answer will help determine the type of pool you install. Are you installing the pool for entertainment purposes? For the kids? To exercise or relax? Or simply for investment purposes?

Pools for one purpose will look significantly different than pools for another. For instance, a pool meant for the kids to frolic in might look completely different than one used for tranquil spa-like afternoons. Answering these types questions can help you determine the right type of pool design that will suit you best.

2. What is Your Budget?

Obviously, the amount of money you have available to spend on a pool installation will be a key factor. Is your budget even capable of covering the installation of a pool? If it is, what type of pool and features will it be able to accommodate?

You will definitely want to have a chat with your pool builder to get a detailed idea of how much it will cost you. Knowing these numbers in advance will help you determine if the project is possible and what type of pool and amenities you’ll be able to afford so you can adjust your budget accordingly.

3. What Security Options Will You Include?

You will need to obtain a building permit before you have a pool installed, and part of this permit involves the types of safety codes that will need to be met. But in addition to what the bylaws stipulate, what other means of safety and security will you implement into your pool design?

You might want to take measures to keep children or pets safe if there are any in the home, and there are plenty of safety gadgets and features available to make your pool very safe. These may include water entry alarms, locks on gates, and child-proof pool covers.

4. What Materials Will You Use?

Pools can be constructed using a number of different material types, some of which are more durable and expensive than others. The best material is typically concrete, as it is the most durable and long-lasting. It also allows for more flexibility in shape and size. But, it’s also more expensive than other options and is more invasive to install. Other options include vinyl and fiberglass, both of which are quick and easy to install.

As far as pool surfaces are concerned, you also have a number of options to choose from, including vinyl covers and even tile surfaces, the latter of which is becoming more and more popular, especially among luxury pool owners.

5. What Shape Do you Prefer?

Pool builders typically recommend that homeowners select a pool shape and style that goes well with the surrounding landscaping, the size and shape of the property, and the architecture of the home. If you have a specific pool shape that you are hard-pressed to have installed but doesn’t complement your home’s architecture or landscape, you can always add an area that transitions from the surroundings to the pool, such as walkways, different hardscape materials, or plants.

Of course, you will also want to consider how the pool will be used when determining the shape of the pool. For instance, a lap pool meant for fitness should probably be long and rectangular in shape, while leisurely pools can take virtually any type of shape you want.

6. Is Your Lot Suitable For a Pool?

You will need to consider whether or not your lot is easily capable of accommodating a pool. For example, significant changes in elevation might make pool installation much more of a chore. In addition, the soil itself will need to be tested before pool installation to see if it is suitable for any construction. Rocky or sandy soil, for instance, might make things more difficult.

There may also be accessibility issues, making pool installation very difficult, if not impossible. Lots of heavy machinery will be required to install a pool, and if that equipment can’t reach the pool site easily, there could be a problem.

7. Where Will You Put the Pool?

If your backyard is very small, you might not have many choices about where to have your pool installed. But if you’re dealing with a larger property, you’ll need to determine a few things first before deciding on the exact location of the pool on your property.

Start with finding out what the exact zoning and building laws are in your area. There may be restrictions in terms of how your pool needs to be fenced in, the direction of the slope for water runoff, and where the gas, electrical, and cable lines are located. You will also want to think about how people will get in and out of the pool, where bathers will be hanging out, and exposure to the sun’s rays.

8. How Much Maintenance is Involved?

Pools require a great deal of maintenance, and unless you hire a pool maintenance service to tackle this job for you, it will be your responsibility. Find out how much maintenance is required to keep up with the pool equipment, keeping water chemicals balanced, and cleaning the water and pool surfaces.

9. What Types of Amenities and Features Do You Want?

If your budget permits, you might want to think about adding some features or amenities that will make your pool much more enjoyable. These days, the options are seemingly endless, with features such as lighting, waterfalls, infinity edges, underwater sundecks, swim-up bars, and sporting equipment all available to make the most of your pool.

Think about the amenities you want outside of the pool as well, such as a cabana, bathroom with shower, dinette area, gazebo, fire pit, and outdoor kitchen. If you plan to add any of these amenities, make sure that your pool plan accommodates such features in terms of space and utility lines. 

The Bottom Line

There are definitely a number of things to consider when it comes to installing a pool in your backyard. Once you’ve decided to add a pool on your property, a lot of planning will be involved. But after you’ve covered all your bases and communicated with your pool builder about everything you’d like to have, your home can become a resort that you never have to take a plane ride to visit and enjoy.

INFOGRAPHIC: N.A.R.’s Existing Home Sales Report For March 2018

What Factors Matter When Determining Your Home’s Listing Price?

If there’s one thing you definitely want to get right when you market your home for sale, it’s the listing price. In fact, your price is a big determinant of how fast your home can sell and how much you can sell it for. 

Home prices continue to rise across California, which is exactly what home sellers want to hear. Unfortunately, this continued trend in price increases might make homeowners believe that their properties are worth more than they really are. But sellers who list too high run the risk of scaring a lot of qualified buyers off and leaving money on the table.

Given the importance of the listing price, it’s important to understand what factors play a role in determining how much to list your house at. In fact, there are a lot of factors that can impact the listing price of a home, including the following.

Location

Number one on this list is the location of a home. You can make any number of changes to a house, but you can’t change its location. Your home’s proximity to major transportation routes, good schools, everyday amenities, parks and greenspace, and other desirable features can make it more appealing to buyers and can, therefore, increase its perceived value.

On the other hand, close proximity to train tracks, power lines, and industrial activity can have a negative impact on property values. Crime rates and the local economy also play key roles in the overall location of a home, as well as its value.

Even the exact location in a neighborhood or a street plays an important role in the value of a home and how much it should be listed at. For instance, a home at the end of a quiet cul-de-sac will be worth more than a home on the other end of the block that abuts a busy street.

Certain Upgrades and Features

There are certainly a number of features and amenities in a home that can add to its value. But not all upgrades will necessarily add to the overall value of the home dollar for dollar. Just because you spend $30,000 on a specific improvement doesn’t translate into an added $30,000 in value to your home.

There are specific upgrades and features that buyers look for in a property they intend to purchase. In addition, the quality of the upgrades and features also affect the listing price of a home.

A home with higher-end upgrades compared to a home without any upgrades can usually sell at a higher sale price because of its desirability from the point of view of buyers. For instance, a home that has hardwood floors and granite countertops will typically be able to sell for more money than a home that is similar in size and layout without such features.

But it’s important to understand that certain home improvement projects don’t necessarily bring in a high ROI or have a positive effect on the listing and inevitable sale price of your home. It’s important to learn about the particular upgrades that buyers in your area are looking for in a home they buy versus those that they don’t perceive as valuable before you tackle any home improvement projects.

Condition

Two homes that are identical in size, layout, and features won’t sell for the same price if one is in considerably better shape than the other. The condition of your home plays an important role in what you can list your home at. Obviously, the better condition your home is in, the higher you will be able to list for. On the other hand, a home that is in need of a number of improvements and repairs will likely have to be listed at a lower price.

That’s why it’s generally advised that sellers make specific repairs and improvements in order to bring their home up to par. This, in turn, will allow sellers to list a little higher and command a higher sale price when all is said and done.

Comparables

Often referred to as “comps,” comparables are similar homes in the neighborhood that have recently sold. These listings paint a much clearer and more accurate picture of how much you can realistically expect to sell for. Ideally, the homes on this list will be located no farther away than one to three miles from your property, and should be similar in style, size, layout, number of bedrooms and bathrooms, and features.

In addition, the homes should not have sold any further back than three to six months ago. Any more than this will not accurately reflect the current market. While you can always look at what currently listings are priced at, you’ll get a much better idea of how much you should list at by looking at homes that have already sold.

Sellers can ask for whatever they want, but that doesn’t mean they will end up selling at the price they’ve listed at, which is why it’s always best to look at sold comps when determining your listing price.

Competition

The more homes that are for sale in your area, the heavier the competition will be. This can have an impact on what you might be able to list your home at. It’s important for sellers to know what’s going on in the area. In this case, you’ll need to look to your real estate agent to help you understand what the exact competition level is like in your area and what the trends are in terms of the number of listings on the market over the recent past.

Your Motivation

How motivated are you to sell your home and get it off your hands? This can be a big factor at play in your listing price. The more desperate you are to sell quickly, the more likely you may be to list a bit lower to make a quick sale happen. On the other hand, if you’re just testing out the market or aren’t in much of a rush to sell, you won’t be in a position to list lower just to bring in buyers quickly.

But not only does your motivation level matter when pricing your home, so does that of buyers in the area. How can you tell what buyers’ motivation is? From things such as the list versus sale price and average number of days on the market, among others. Insights like these can give you some idea of how quickly buyers are likely to pounce on a home in your specific market.

The Bottom Line

There are definitely plenty of factors that come into play that should be carefully assessed when listing your home for sale. It’s important that you scope them all out and work alongside your real estate agent to establish a listing price that will maximize your chances of selling in a reasonable amount of time and for as much money as your current market dictates.

8 Reasons Why Sellers Regret Not Selling With a Real Estate Agent

No one said that selling real estate was cheap. In fact, it can be downright expensive. Because of the potentially hefty price tag associated with selling, many sellers may be tempted to go it alone without the help of a seasoned real estate agent in an effort to save some money in commissions.

But while they think they may be avoiding some fees, solo sellers might actually be biting off more than they can chew. In fact, most sellers regret not employing the services of a real estate agent and wind up calling a professional at some point throughout the transaction.

Here are a few reasons why you might regret not hiring a real estate agent to help you sell your home.

1. You Don’t Have the Training and Experience

There’s a lot to know about selling real estate than just how to post a listing on MLS. Selling a house takes a lot of industry knowledge and know-how to ensure a successful transaction. Without the help of an agent, you’ll have to acquire all of this information on your own if you want to come out on the other end with a successful deal.

Many sellers who go the FSBO route regret not using a realtor for the simple fact that these professionals have far more education and experience that could have come in handy when marketing the property and negotiating a contract.

2. You Don’t Have the Inside Scoop of the Neighborhood

Sure, you may have lived in your home for a while, but how well do you know the area in terms of real estate value and what buyers might be willing to spend in your area? Do you know what buyers are looking for in a home in your neighborhood? In-depth knowledge of real estate in a particular community is crucial to ensuring a lucrative deal.

Real estate agents have in-depth knowledge and are experienced in finding the pertinent info about your neighborhood. They have the tools to find comparable sales to help you identify how much your home is worth, which will come in handy when it comes time to price your home.

They’ll also know the type of buyers searching in the area and what they’re looking for in a home to help you market it accordingly and attract an offer quickly. Unless you’re an agent yourself, you won’t be able to take advantage of this insider information.

3. You Won’t Have a Buffer Between You and Buyers

Do you really want to hear buyers complain and nit-pick about your home at showings and open houses? Do you want to wheel and deal directly with buyers at the negotiating table? Selling real estate is a highly emotional experience for sellers.

It’s not surprising to know that debates on price and other factors can get pretty heated between buyers and sellers. Part of the job of a real estate agent is to act as a buffer between buyers and sellers so that the transaction can proceed in a professional way without any heated exchanges.

4. You’ll Spend a Lot of Time Fielding Calls and Scheduling Showings

Like most Americans, you probably have a job to go to every day. As such, you probably don’t have a lot of free time to dedicate to selling your home. Real estate agents spend a lot of time taking phone calls, booking showings, hosting open houses, marketing the property, and networking with other agents to get the word out there about a listing.

Do you have the time and the network do all that? Probably not, which is a solid reason why an agent should be part of your sales team.

5. You Won’t Know Exactly How Much to List For

You might be tempted to price your home high in order to profit handsomely. But arbitrarily picking a price based on what you believe (whether accurately or falsely) your home is worth is not the way to sell a home in a reasonable amount of time. In fact, you could be sabotaging the sale of your home if you don’t price according to market values.

Real estate agents help guide their clients to make the right choices in terms of listing prices. They’re able to use the tools available to them and the knowledge they’ve acquired through training and experience to establish an appropriate listing price.

If you can come with the right listing price for your home, you stand the best chance of selling quickly and for top dollar. On the other hand, listing at a price that does not accurately reflect the current market will leave you high and dry.

6. You’ll Have to Gather All the Industry Experts Yourself

Selling real estate rarely only involves just a real estate agent. Typically, there are plenty of other experts that are involved with these types of transactions, such as lawyers, escrow companies, title insurance companies, home inspectors, home stagers, and contractors. These services are usually needed to successfully sell real estate.

Having an agent working with you will afford you with the benefit of being able to tap into their network of professionals. Sure, you can always find and choose your own professionals, but an agent can offer you recommendations of experts that they’ve previously had positive experiences with. For this reason, your agent can help you make the best decisions on who to work with.

7. You’ll Have to Deal With a Lot of Paperwork

Today’s real estate purchase agreements are several pages long and are filled with a ton of jargon that you might not understand. On top of the actual contract, there is usually other paperwork that is typically associated with transferring property ownership.

Not only is all that documentation time-consuming to go through, it can even land you in legal hot water if there is anything missing or incorrect. You don’t want to be on the hook for any mishaps with real estate paperwork, and you don’t have to be if you let the experts in real estate handle all that pesky paperwork for you.

8. You Might Not Have the Appropriate Negotiating Skills

Negotiating the sale price and all other terms of the contract requires a good deal of skill, level-headedness, and experience. If you’re the emotional type and have little to no experience wheeling and dealing real estate deals, you could wind up with a transaction that doesn’t benefit you as much as it could have had you hired an experienced real estate agent to handle the negotiations for you.

The Bottom Line

A real estate transaction is not the time to attempt a DIY endeavor. Your home sale is a big deal and is certainly not something that you want to mess up. As such, you’d be well advised to team up with an agent who knows all the ins and outs of selling real estate so that you don’t end up making mistakes along the way that can cost you a lot more than what you may have saved in commission fees.