What to Expect from a Home Inspection

You’ve finally found what seems to be the perfect home. It’s got all your must-haves and some of your nice-to-haves, too. It looks like it’s in excellent condition, but merely looking like it’s in good condition is not enough when it comes to such a huge financial decision.

To make sure you’re not buying a money pit, you need a professional home inspection before you commit. An inspection should uncover any potential issues so you have a complete picture of what you’re buying.

Finding a Home Inspector

Many first-time home buyers don’t realize that it’s their responsibility to hire a home inspector. Make sure you make your offer conditional upon inspection or get one done before you make a bid.

To find a home inspector, people often turn to recommendations from trusted friends and family members. Your broker might also have an inspector to recommend. While other people’s opinions are helpful, what’s paramount is that you hire someone who is qualified.

Some states require home inspectors to have certifications. For those that don’t, membership in organizations like the American Society of Home Inspectors can give you some assurance about an inspector’s professionalism.

Interview potential inspectors before hiring one. Ask about their experience and whether they’re familiar with the type of home you’re buying. Find out what will be included in the inspection and report.

What the Inspector Should Look At

During a home inspection, the inspector should thoroughly evaluate the physical structure of the home as well as critical internal systems. You should make sure the examination includes the following:

● Electrical system ● Plumbing system ● Heating and cooling systems ● Radon detection equipment, if applicable ● Walls, ceiling and flooring ● Windows and doors ● Roofing ● Foundation ● Basement ●Attic ● Insulation

What Should You Do During the Inspection?

You should make every effort to be present when the inspection is taking place. You can follow the inspector around the house and ask questions so you can learn more about your potential new home. If you can’t make it for the inspection, you should meet with the inspector to go over the report in detail.

If you have questions about potential issues or how to take care of parts of the home, feel free to ask the evaluator. Take care, however, not to get in the inspector’s way. Don’t start inspecting the home yourself, either. If you test a sink while the inspector is testing a shower, for example, you might alter the results.

It’s also important to remember that “an inspection is only a snapshot in time on the day of the inspection,” said John Bodrozic, a co-founder of HomeZada. So if you’re buying a house in the middle of summer, try to consider how the home might perform in different conditions, like the winter or fall.

A Home’s Report Card

Once the inspector completes an evaluation, you will receive a report with the inspector’s findings. Don’t be alarmed if you see a lot of deficiencies noted. Home inspections are detailed, so reports often include between 50 and 100 issues, most of which are relatively small.

The report should include information about how severe each listed problem is, plus estimates on how much it would cost to fix each problem. Ask the inspector for clarifications on this if necessary.

If the inspection finds more problems than you’re comfortable dealing with, you can choose to back out of the sale or try to negotiate to have the seller make the repairs or lower the price. If you’re satisfied with the condition of the home or the shape it will be in after the seller meets the arrangements of your negotiations, you can move into your new home with more peace of mind.

~Megan Wild, New York Times

How Trump’s new tax law affects homeowners

President Donald Trump signed the Republican tax bill into law at the end of December.

The new tax law makes sweeping changes to the tax code for businesses and, on average, American taxpayers. It changes a few longstanding tax benefits for homeowners, too.

Under the new law, the deduction for state and local property taxes is capped at $10,000. Plus, homeowners who deduct mortgage interest are limited to the amount they pay on $750,000 worth of debt, down from $1 million. On the flip side, the standard deduction has doubled, likely leading fewer homeowners to itemize their taxes.

These changes may weaken incentives for homeownership, especially in expensive coastal markets in California and the Northeast where home prices are high and residents pay state taxes on income as well as property. Homeowners in these markets will see the biggest change in their housing-related tax deductions.

“The impact of the changes is felt disproportionately in left-leaning parts of the country,” writes Chris Salviati, a housing economist at Apartment List, in a new report. “There are 15 states in which the median homeowner will receive at least $100 less in housing tax deductions under the new plan — President Trump carried none of these states in the 2016 election.”

Apartment List analyzed the affect of Trump’s new tax law on homeowners with home values below, at, and above the median in the largest metros in the US. They estimated the overall tax bill for a married couple filing jointly with a dependent child under the previous tax code and the new tax code.

In much of the US, only owners of the most expensive homes in a local market will see a loss in housing tax deductions. But on the California coast and along the Northeastern seaboard, most homeowners — even those with homes valued below the median — will lose deductions they had pre-tax reform.

For homeowners of a median-priced house in the Bay Area, the loss of mortgage interest and property tax deductions could total more than $100,000 over the course of a 30-year mortgage, according to Salviati’s calculations. The estimation does not factor in projected home price changes over that time period, however.

You can see the effect of Trump’s tax law on homeowners of the highest-value homes — the 75th percentile — in 27 of the largest US metros, ranked by home value, using Salviati’s calculations here: Tax Effects. You can see Chris Salviati’s report here: Apartment List report.

~Tanza Loudenbeck, Business Insider

Home buyers, sellers feel “looming pressure” but Western Washington market stays strong

Interest rates are creeping up, inventory is still squeezed, and some feared revised tax laws would have a chilling effect on home sales, but Northwest Multiple Listing Service leaders say the local market remains competitive.

“It seemed like there would have been a chilling effect on the real estate market at the start of 2018 with the newly revised tax laws limiting mortgage interest deductions,” suggested Gary O’Leyar, designated broker and owner at Berkshire Hathaway HomeServices Signature Properties. “Not only did the revisions not have a chilling effect, if anything, the local market has been even hotter and more competitive than last year at this time,” he added in commenting on new MLS numbers summarizing February activity.

Northwest MLS figures for last month show a slight year-over-year decrease (about 2.8 percent) in overall pending sales, a likely consequence of inventory being down nearly 12.9 percent. Other key indicators of the market – new listings, closed sales, and selling prices – all showed gains in February compared to 12 months ago.

The just-released report from Northwest MLS shows 7,980 pending sales last month, down from the year-ago volume of 8,209 mutually accepted offers for single family homes and condos. Thirteen of the 23 counties in the report had more pending sales than at this time last year.

Closed sales outgained last year’s volume, 5,548 to 5,358, for an increase of nearly 3.6 percent. Median prices on those sales surged almost 14.8 percent area-wide, rising from the year ago figure of $335,515 to last month’s price of $385,000.

Among the four Puget Sound area counties, Snohomish had the largest year-over-year price increase at 18.8 percent. Its countywide median price for February’s sales spiked to $460,000 from $387,250, but that is $130,000 below the $590,000 median price for transactions that closed in King County last month.

For single family homes (excluding condos), prices rose 13.7 percent overall, from $343,000 to $390,000. Within King County, the median price was $649,950, with three areas (Mercer Island, Bellevue west of I-405, and Kirkland-Bridle Trails) reporting median prices of more than $1 million for single family homes.

“As was the case the last two years, home values spiked in February, thanks to a cyclical low point in supply,” commented Robert Wasser, owner/broker at Prospera Real Estate. Prices are now back around the peak levels of last summer, and cyclically speaking, are headed for additional increases until summer arrives,” commented Wasser, a board member at Northwest MLS.

Brokers added 7,284 new listings of single family homes and condos during February, an improvement of nearly 6.4 percent from a year ago when they added 6,848 new listings. Like many months during 2017, last month’s pending sales (7,980) outgained new listings (7,284), keeping inventory depleted in many areas.

There is about 1.4 months of supply area-wide, but both King and Snohomish counties have less than a month’s supply. For condos, there is only 0.88 months of supply – and even less than that in King, Snohomish, and Kitsap counties.

Many brokers expect inventory levels to improve. “The arrival of daylight savings triggers a burst in new listings,” proclaimed J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “More listings lead to more sales. In real estate, it’s all about the new listing,” he stated.

Scott expects the boost in home price appreciation during the winter market when inventory is reduced will moderate. “Over the second half of the year, as more listings come on the market, home price appreciation tends to flatten out,” he explained while noting small upticks in mortgage interest rates. Such increases have led to slightly higher mortgage payments, Scott said, “but they have not put a damper on the market.”

New construction could also help ease some of the pressure, suggests Mike Grady, president and COO at Coldwell Banker Bain. “Even though Commerce Department data show purchases of newly built single-family homes nationwide fell 7.8 percent in January after dropping 7.6 percent in December, and purchases have declined for four of the past six months, we are not seeing that trend in the Northwest.”

Inventory is improving in some areas, Grady noted, adding, “The hyper job market in the Pacific Northwest continues to outpace almost every metro area in the nation, and thus our housing market is booming; for now, there is no end in sight.”

Ken Anderson, president/owner and designated broker at Coldwell Banker Evergreen in Olympia, noted some buyers are frustrated with what appears to be lack of choice. “The reality is, we have an 8-year high in the number of homes coming to market in Thurston County,” he stated. His analysis of MLS data show the total number of new listings added in that county in the first two months of this year is at the highest level since 2010.

“The challenge is that the number of buyers is near record highs, too,” said Anderson. Given this competition, he believes “The right plan, including help from a skilled broker, can help buyers find success in this fast-paced market.”

“Many buyers and sellers feel looming pressure, and with a mix of doom and elation, both are preparing for a flurry of activity,” reported George Moorhead, designated broker at Bentley Properties. “We have not seen the typical aggressive spring market yet,” he added, noting “Buyers are coming to the harsh reality that high home prices are here to stay” and they need to consider smaller homes or longer than hoped-for drive times.

Moorhead also noted 30-year mortgage rates climbed slightly for the seventh consecutive weekly increase, but he said these small increases “are not yet creating too much of a stir.” Conversations with buyers are “more around the cost of commuting and time away from home versus floor plan and home size.”

For some wage earners in the Seattle area, “Kitsap looks very affordable,” said Northwest MLS board member Frank Wilson. “Kitsap’s real estate market continues at a flurry pace with homes going off the market almost as fast as they come on. Available inventory in our county is down 32 percent compared to a year ago, which continues to put upward pressure on prices and buyer’s nerves,” stated Wilson, the branch managing broker at John L. Scott Real Estate in Poulsbo.

As commuters flock to the more affordable side of the sound, “affordability gets further and further in the rearview mirror for many,” Wilson lamented. MLS statistics for February show year-over-year prices in Kitsap County jumped more than 15.7 percent, with single family home prices up 17.5 percent. Compared to January, last month’s prices for homes and condos in that county rose another $25,000 (8.3 percent).

“History tells us that the real estate market is cyclical,” acknowledged O’Leyar, who also mentioned the Federal Reserve chairman hinting at further rate increases and possible impacts on the pace of appreciation and the availability of listings. “Hopefully,” he suggested, “Any changes in interest rates will have a moderating effect, easing the extremely difficult times some buyers are having in purchasing real estate in the Greater Seattle/Puget Sound market.”

~NW Multiple Listing Service

How to Buy a Home When Interest Rates Are Rising

Mortgage rates have risen about half a percentage point since September. What does that mean for you if you’re buying a home now or plan to buy one soon?

For starters, don’t panic.

When you’re buying a home, the mortgage rate matters, but it shouldn’t monopolize your attention, says Robert Frick, corporate economist for Navy Federal Credit Union. “You shouldn’t focus on the rate and let that scare you into making a hasty decision about buying a house,” he says.

How rising rates affect your monthly payment

The average rate on the 30-year fixed-rate mortgage rose to 4.54% on Feb. 16, 2018, according to NerdWallet’s daily rate survey. It averaged 3.99% on Sept. 26, 2017 — meaning it has gone up more than half a percentage point in less than five months.

While a half-point increase doesn’t have a major impact on the monthly payment, the added cost does add up over time. On a 30-year loan for $200,000, the monthly payment would be nearly $59 more at a 4.5% interest rate than at a 4% interest rate. That adds up to more than $21,000 over 30 years.

What to do when rates rise

Mortgage rate fluctuations have been catching home buyers off guard for generations. Your forebears have developed tried-and-true strategies to cope with rising rates. Here are some things you can do when mortgage rates trend higher:

No. 1: Lock your mortgage rate. With a mortgage rate lock, the lender promises a defined combo of interest rate and points. If you close the home loan by the specified date, the rate can’t go up. You can use this tactic after the lender has approved you for a mortgage for a specific house. Some lenders offer a one-time “float down” option allowing you to secure a lower interest rate if rates go down; this option is more common for construction loans and long-term rate locks.

No. 2: Buy “points” to reduce the interest rate. If you have the cash, you can pay for discount points — in effect, prepaying some of the interest in exchange for a lower mortgage rate. One point equals 1% of the loan amount. The discount you get for one point varies as mortgage rates fluctuate. But as a rule of thumb, paying one point often gives a rate cut of one-quarter of a percentage point.

No. 3: Revise your price range. A higher mortgage rate brings higher monthly payments. When you begin your home search, determine a range of interest rates that will still allow you to afford the type of home you want without stretching your budget past the point of reason. Or, rising rates might force you to adjust your home-price range downward. Start with this loan affordability calculator and click “Edit rate” on the right side.

Why rates are rising now

This recent rise in mortgage rates arrived in two stages:

The first happened in the weeks after the passage of tax reform in late December
The second happened Feb. 2, 2018, when the January employment report indicated that hourly wages had risen 2.9% compared with 12 months before
The tax cuts and the wage report were both regarded as inflationary, because when people have more money in their pockets, they tend to spend it, driving up prices. And higher inflation tends to bring higher interest rates for everything, including mortgages.

On top of that, futures traders expect the Federal Reserve to raise short-term interest rates at least two, if not three, times this year, which could exert upward pressure on long-term mortgage rates.

Frick says businesses and governments around the world are ramping up their borrowing. As they compete with one another to borrow money, they bid up interest rates. This upward pressure trickles down to consumers, who end up paying higher interest rates for everything from credit cards to mortgages.

Are higher rates the ‘new normal’?

Talk to any housing economist about mortgage rates, and you’ll hear that rates have been abnormally low in the decade since the housing crash.

“I remember in the mid-’90s, getting a 7% rate, being happy with that,” says Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research. “The rates we’re looking at today are still, by any measure, pretty low. So it’s basically the economy getting back closer to normal.”

Frick says: “People have gotten kind of lulled into these low rates, and a lot of people think this is normal, but this is not normal. We’re returning to normal, and that’s still going to be a painful process because we’ve gotten used to low rates.”

Holden Lewis, NerdWallet