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How Will Recession Affect My Home Purchase?

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It’s well known that the housing market is heavily influenced by the economy — especially local economies. When the economy is strong, people have more money for large purchases and investments in real estate. When things are tighter, though, a lot of prospective homeowners may start to ask whether they’re really ready to take on such a potentially large debt.

If you’ve been thinking of buying a home, you might be wondering about this yourself. How will economic problems, or even a recession, affect your home purchase? Will the local housing market all but grind to a halt? While it’s good to keep questions in mind so that you aren’t taken by surprise, the chance of a recession or other economic downturn having a profound effect on your home purchase is relatively low.

What Is a Recession?

First things first: just what is a recession? It’s a term that’s been tossed around a lot in the last decade or so, but there usually isn’t a whole lot of explanation provided with it. Essentially, a recession is a downturn in the economy that lasts for at least six months. Typically during a recession you’ll see both trade and industry take a hit, and the gross domestic product (the value of the goods and services produced over a period of time, usually called the GDP) fall for at least two quarters in a row.

A recession can last for quite a while and can result in a significant slump in the economy that takes months or even years to recover from. An example of this would be the Great Recession which lasted from 2007 to 2009; its fallout lasted for years in some places and caused a number of significant problems for several sectors of the economy.

The Economy and the Housing Market

The economy and the housing market are pretty strongly connected. When the economy is in a slump, this can drive the housing market down. While this generally applies at the national level, this is especially true at the local level. When business is booming and the economy is doing well, the housing market usually gets a boost as well. This can run the other way, too; problems in the housing market can drag the economy down with it, while a strong housing market can help to lift up an otherwise shaky economy. Issues with the housing market contributed to the Great Recession and led to economic problems in other countries around the world.

Will the Housing Market Collapse?

Just because there is a link between the housing market and the economy at large doesn’t mean that a recession will bring the housing market down, however. A downturn in the economy might slow housing sales in some areas, especially early on as both buyers and sellers wait to see whether the economic turmoil is going to last long-term. In most cases, though, this slowdown will only be temporary and will not affect all parts of the country equally. In some cases, it can even result in unmatched opportunities for buyers who are willing to act.

Inform Your Decisions

Any time there’s economic uncertainty, it’s always a good idea to consult professionals who will help you find options to protect your investment and avoid paying more than you have to for a home. 

3 Ways to Buy a Foreclosure

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Buying a foreclosure is a smart move. There’s no better way to get a rock-bottom price for a new home unless your favorite uncle leaves one to you or you’re being absolutely swindled. You can buy a home in pre-foreclosure, at a foreclosure auction, or from the mortgage lender. But even if you are able to take advantage of the opportunity, buying a foreclosure requires some extra effort, research and patience.

First of all, what is foreclosure? It’s a situation where the bank, a mortgage company or other lien holder takes a property from the owner to satisfy a debt. The bank or lender takes ownership of the property and usually sells it immediately to pay off the debt. The owners lose all rights to the property, including any and all of the investment they’ve put into it. Foreclosure tanks your credit report and is usually the result of whoever owned the property being in a very bad financial situation. So, if you’re dealing with the people being kicked out of their own house, try to be nice. This is probably one of the worst times in their lives.

However, if you’re dealing with the lender, the foreclosed property is probably one of many on the books, so you may be dealing with an officer who knows nothing about the property and doesn’t consider selling it a high priority. This may drive you crazy, but just remember, aggressiveness and patience are the keys to getting through this.

Here are the 3 situations you can buy a foreclosure as explained by Zillow:

Stage 1: Pre-foreclosure

At this point, the property owner has been given legal notice that the foreclosure process is about to begin. If the owner can’t cure the default and get the loan back into good standing, the only way to avoid foreclosure is to sell the property before the mortgage holder takes it away.

Buying a property in pre-foreclosure involves approaching the owner — usually before the property is listed for sale — and offering to buy it outright. The right buyer at the right time can salvage a terrible situation, giving the owner something to show for his equity and saving his credit score from that foreclosure hit. Time, and a smooth transaction, are of the essence. Read more about buying a pre-foreclosure property.

Stage 2: Foreclosure auction

If the owner can’t manage to hang on to the property, it will probably go up for sale in a foreclosure auction next. Successful bidders usually have to pay in cash at the time of purchase, and there’s not much time or opportunity to research the property beforehand.

A foreclosure auction offers some tempting bargains — but the buyer assumes all risk of anything going wrong with the title, condition or any other aspect of the property. It’s a big bet to make, and not for the faint of heart. Read more about buying at a foreclosure auction.

Stage 3: Bank-owned property or real estate owned (REO)

In contrast to the urgency of the earlier two stages, patience is essential for buying lender-owned properties. Once the mortgage holder takes ownership of the property, their eventual goal is to sell it to make back the unpaid loan amount.

Eventual is the key word here. Between clearing the title, performing necessary repairs, following the complexities of state-to-state foreclosure regulations and dealing with the many other foreclosed properties on their slate, lenders can move maddeningly slowly from a buyer’s perspective. If you’re in a hurry to buy, this might not be for you.”

Also, unless you’re an expert in real estate law and transactions, it’s a good idea to contact the counsel of a real estate agent familiar with foreclosures. It’s not the kind of purchase you want to mess around with!

2 Big Changes to Know About VA Home Loans

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Want to buy a house in Sacramento with your VA Home Loan this year? Here is what you need to know to be successful!

For more usual info join our free online education program HERE https://www.facebook.com/groups/buysacramento/.

The VA home loans program is by far one of the most beneficial programs for vets, allowing honorably discharged veterans to buy a house without a down payment. That’s right, civilians: without a down payment!

But it’s about to get even better.

The Blue Water Navy Veterans Act of 2019 became law, expanding VA disability benefits to more veterans who were exposed to the herbicide Agent Orange during the Vietnam War. To pay for the expanded disability benefits for the approximately 90,000 veterans who may now be eligible, the VA is removing some restrictions on VA home limits.

Currently, the Federal Housing Administration (FHA) limits the price of a home you can buy without a down payment to $484,350 for most of the country save for some urban areas and Alaska & Hawaii (but that number changes every year). So, if you currently want to buy a house that costs more than the FHA limit, you can’t use a VA home loan without having to pay a down payment. That down payment usually has to be enough to cover 25% of the difference between the price of the home you want and the FHA limit. (Meaning if you buy a $500,000 house you have to come up with a cash down payment of $3,912 [$500,000 – $484,350]).

Now that it’s 2020, the new law is in effect and the VA no longer caps the size of the VA loan a veteran can get with no money down. That doesn’t mean a lender might not put a cap on the loan you can get, but it won’t be because of an FHA limit anymore. 

You see, a VA home loan is not the VA lending you money. It’s the Department of Veterans Affairs guaranteeing to a lender that you’re a good credit risk, which allows you to get a home loan without having to make a down payment.

To give you a good idea of what a huge benefit this is, just know that the average lender requires a civilian to make a down payment of 20% of the home purchase price before they’ll give you a mortgage. Considering the average home value in the U.S. is around $244,000, that means vets are saving having to make a $48,800 cash payment before they can even consider buying a decent home. That’s a lot of dough.

There is one other change the new law brings that will affect fees for some veterans regarding the funding fees for VA loans. Veterans receiving any VA disability benefits are exempt from the funding fee. But, the funding fee for an active-duty veteran using a VA home loan for the first time will increase from 2.15% of the purchase price to 2.35% of the price on Jan. 1, 2021. (However, funding fees may differ depending on the kind of loan and the situation of the borrower.) The change, however, also eliminates the funding fee for active duty Purple Heart recipients as well.

If you’re considering buying a home education is the first place to start. Join thousands of people just like you learning about how to be successful in today’s market. For more usual info join our free online education program HERE https://www.facebook.com/groups/buysacramento/.

5 Tips for a Healthy Chimney

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For many people in our community, the weather outside is still pretty frightful, but a fire is so delightful. That is, as long as their flues are in good shape. Many of us, may not realize how much maintenance a flue requires if it’s part of a wood-burning fireplace.

But you can absolutely have the whole crackling fire experience in your own house with a little care and planning. After all, a dirty flue is a deadly flue.

The Good, the Bad and the Ugly of Flue Care

Owning a fireplace is a little like owning an exotic sports car. It’s nice to look at, you might use it now and again, but most owners don’t really know how to properly care for them. That’s ok, that’s what we’re here for. If you’re eyeballing that firebox right about now, make sure your flue is totally safe and ready to go with these five tips:

  1. Check that the bricks are secured and not falling apart. Don’t even think about firing up the fireplace until you’ve thoroughly inspected the brick on the outside. As fireplaces age, the bricks experience a condition known as spalling, where the faces of the bricks literally fall off due to repeated exposure to the environment. Bricks that are spalling have got to be repaired or replaced, otherwise your brick flue may not be able to tolerate the heat from the fire. They can also randomly fall and injure people below.
  2. Have a chimney Inspection. Did you have your chimney inspected? Ever? If not, now is the time. Many chimney fires go undetected because they’re slow burning and occur in the upper portion of the flue. Although these are often minor fires, over time, the wear to the chimney is for real and can cause much more serious problems like heat damage to your attic, damaged roofing or destruction of the chimney liner which can then lead to carbon monoxide leaking into the house You can inspect the lower part of your flue fairly easily, but you will need a pro for the upper portion, so you might as well let them take a look from top to bottom.
  3. Clean that chimney. If your inspection determined that there was some sort of issue or significant creosote build-up, you want to have your chimney professionally cleaned before using it. Again, this is not something you can really do yourself and skipping it is putting you at serious risk of a flue fire, which is not something you want to wake up to at 2 am. Your chimney inspector is likely also a chimney sweep, just ask them to do the work while they’re there and you’ll save a seperate trip charge.
  4. Legally remove any unwanted visitors. Even if that flue is totally clean, you’re still not necessarily in the clear. There are a number of animals that tend to take up residence inside unguarded flues. Do you ever hear strange noises or scratching coming from the inside of the flue? It could be all sorts of critters, from chimney swallows to bats and even raccoons. Adding a special chimney cap that allows the pest out after their young have been raised (check your local laws because some of these animals are considered protected species) will keep them from coming back again.
  5. Install a new liner. Older brick chimneys are notorious for leaking dangerous gasses and smoke into homes because the aged clay liners crack and break down over time. It’s not that you can’t use them, but you’ll need to replace the interior lining first. Chimney pros can generally install a new clay, metal or cast-in-place cement-like liners in almost no time and with little stress to you. In fact, you’ll find that you can rest a lot easier knowing that your flue liner is all brand new and with proper care, can last a very long time.

It’s hard to stress enough that major flue care is not a do-it-yourself project. Even if your local building codes allow you to make changes to your flue without a permit, don’t do it. This is a recipe for a house fire. Instead, always call a chimney pro to ensure that all is well. A yearly chimney inspection is a good idea if you intend to use your fireplace a lot. Having a wood-burning fireplace insert installed is another way to help reduce the risk of unwanted fires.

The Truth about Zestimates – How Much is Your Home REALLY Worth?

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The Truth about Zestimates – How Much is Your Home REALLY Worth?

Martha Loveless of Loveless Real Estate Services
The Best Carmichael Realtor | HomeSmart ICARE Realty 916-.270.7081
Homes for Sale in Carmichael / What’s Your Carmichael Home Worth?

Do you know how much your home is worth? No, really, do you?

Homeowners and buyers across the country often answer this question by turning to a figure known as a Zestimate, produced by Zillow.com. Zillow’s intention is to create an accurate value estimate for the over 100 million homes indexed by the site. Although it won’t give you a figure that’s right on the nose, it can provide a price range to start with during your real estate negotiation.

Wait, What’s a Zestimate?
A Zestimate is Zillow’s attempt to use algorithms and publicly available data points that influence housing prices to estimate a home’s value at any given time. While this is a good idea, in concept, it’s important for buyers and sellers to realize that there’s a bit more to predicting prices than the cold, hard facts.

Often, real estate becomes a very personal and emotional buy. Two houses with the same floor plan, but different shades of brick or different trees in the front yard can have different values to the person doing the buying. That’s really what matters. Ultimately, a home is only worth what the market will bear and what a buyer will give.

The Perception Versus the Reality of Zestimates
Zestimates became popular because outside of an appraisal or comparative market analysis generated by an experienced Realtor, it can be really hard to judge whether your home is gaining or losing value. After all, no one wants to bet on a losing horse, even if they live inside that horse and it provides them with shelter from the elements and a place to make memories (must be a Trojan horse).

Unfortunately, the Zestimate has been responsible for a great deal of confusion since Zillow started using the original algorithm in 2006. Even though the algorithm has been upgraded several times since its inception, it’s not perfect. Unfortunately, people deeply enveloped in the stressful process that is buying a house sometimes become ultra focused on the numbers that Zestimates provide, treating them more as an absolute than a flexible guide.

Because most people don’t really know what goes into valuing a home, this issue of getting married to a valuation that’s not quite on the dot isn’t new. Even before Zillow, many homeowners believed that their home was worth so many dollars due to tax assessments that were often based on outdated information, collected during the initial construction of their home and updated based on average inflation.

Why Have a Zestimate, Then?
Zestimates aren’t the most accurate way to assess the value of your home because they aren’t able to pick up on the harder to quantify items that go into determining the value of a home. They can’t tell a freshly remodeled 1960’s ranch home from one that’s still got the original shag carpet, for example. They aren’t appraisals. For many homes, though, a Zestimate will get you in the ballpark.

Zestimates work best in areas of high turnover, in neighborhoods with fairly similar homes. Because a Zestimate relies on public data like tax assessments and homeowner corrections of the basics, including the number of bathrooms and bedrooms, it can make a fine starting point for the potential home buyer or seller.

Since you don’t buy and sell real estate constantly, having an overview of the neighborhood’s stats is helpful when you do–but you have to allow for wiggle room. Just because a listed house on Maple Drive has a Zestimate of $203,000 and it’s almost identical to your house next door, it doesn’t mean you won’t get more (or less) when you go to sell.

Taking Your Zestimate to the Next Level
Zestimates can give you a very general idea about the value of your home or a home you’re considering buying, but they aren’t appraisals. The only way to know what a home’s actual value is in the moment (because this can change rapidly in some markets) is to reach out to your local Realtor® for their formal opinion.

If you’ve reached that point where you’re ready to buy or sell a home and want a highly accurate price point to start from, contact me (Martha Loveless) for a comparative market analysis. Once we have a contract in hand, a professional appraiser will take it from there and give you an exact dollar figure based on hundreds of factors that are a bit too nebulous for the technology we currently have available to reliably assess.

What’s my Carmichael Home Worth? Call us today at 916-270-7081 for a free consultation or log on to www.HomeValuesinCarmichael.com to find out.

Martha Loveless
916.270.7081
The Best Carmichael Realtor
www.LoveSacMetroHomes.com