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Is That Home You're Buying Really Worth Its Asking Price?

by Craig Whitlock

Determining the accurate value of a home can often be a difficult task. If you're looking to buy a new home, there are some factors that you should be aware of that can help you decide whether or not a particular listing is really worth its value. Here are four ways to find out if a home's price is really worth that much:
 
Home Inspection Results
Hiring a licensed home inspector is definitely something you'll want to do before agreeing to the sale. This person can check the condition of the home and look for damage that may diminish its value.
 
An inspector's job is to go over every element of a home with a fine-tooth comb so that no important details are missed—this includes examining a home's attic and basement. You'll be given a report after the inspection is completed.
 
Review Current Market Conditions
The current trends of the local housing market can greatly impact a home's value. If it's a seller's market, you may decide that the house you want to buy is overpriced relative to what you're comfortable with spending. 

It may also appear to be overpriced compared to past sales as recent as 90 days.  This is the reality many face in many market segments that are overheated due to a lack of sufficient inventory.  The competitive-bidding process (multiple offers and counteroffers) is what drives market appreciation.
 
Some websites that list current market conditions will let you know what the market is expected to do over the next year. You can also review market conditions from previous years to see if the current trends are likely to remain consistent.
 
Comparable Sales in the Area
Look for information about other homes sold in the area that are similar to the one you're thinking of buying. Reviewing the listing prices and what the homes actually sold for will help you determine if you're getting a fair deal. It's also important to know the dates when the sales took place so that you can take current housing market conditions into consideration.
 
One of the best ways to find information about local home sales is to search online—many sites will provide these details. You can also ask your real estate agent about similar homes that sold in the neighborhood.  Working with a local agent can give you valuable insights to help with your decision-making.
 
Amenities
The amenities can make a major difference in a home's value. It's obvious to expect that a house with more up-to-date amenities will be priced higher. Amenities can include new windows and a washing machine, as well as a swimming pool and hot tub.
 
Just because a home has more amenities, however, doesn't mean that it'll be worth your investment to pay more. Odd amenities or ones that you likely won't use may be inflating the home's value, which does little good for you. It's best to review the specific amenities and try to determine how much they're adding to the home's price before submitting your offer.
 
Knowing what a home should be worth can help you make the smartest decision when it comes to buying. By taking the time to do the necessary footwork, you might save yourself a lot of money on your real estate investment.

Smart Homes - Are They Worth The Risk?

by Liz Dominguez

Glitches of early iterations aside, AI-based technology has come a long way, and has an increasingly active presence in the lives of homeowners who are looking for convenience and savings in a pushed-for-time era. From adaptive thermostats that automatically gauge energy usage and alter temperatures for optimal savings, to smart home speakers that use sophisticated artificial intelligence to provide services and information in real-time, a smart homeowner can now cross off a variety of menial tasks from their daily to-do list without doing more than speaking a phrase out loud or clicking a button on their mobile device.
 
What is the true cost of this convenience? Some gadget adopters are reporting invasion of privacy, security risks, and more. For those who have not yet invested in smart home technology, these factors are largely holding them back; in fact, it is the second-biggest reason for hesitation for 17 percent of non-users, behind price (42 percent), according to a recently released report by PricewaterhouseCoopers (PwC), "Smart Home, Seamless Life: Unlocking a Culture of Convenience." In addition, 56 percent of surveyed individuals stated they would choose encryption to protect their data when creating their own smart home.
 
What are these misuses of technology that could lead to privacy or security risks? These are a few of the reported instances thus far:
 
1. Gadgets May Be Susceptible to Hacking
Last August, Wired published a story about a British security researcher for MWR Labs, Mark Barnes, who was able to install malware on an Amazon Echo device, turning it into a surveillance device that silently streamed audio to his own server. While newer models cannot be jailbroken this way, Amazon has not released any software to fix the issue with older units.
 
For the typical owner, this may not seem like a significant violation; however, this could lead to another type of home theft in which fraudsters break into homes looking to steal identifying information via smart home gadgets, leaving little to no evidence of their break-in behind. While Barnes installed code for the specific purpose of audio streaming, he clarified that the installation of malware could serve other uses, such as stealing access to a homeowner's Amazon account, installing ransomware or attacking parts of the network.
 
2. Smart Technology Could Lead to Location-Based Tracking
Earlier this month, security investigator Brian Krebs reported on a privacy vulnerability for both Google Home and Chromecast—found by Craig Young, a researcher with security firm Tripwire—that leaks accurate location information about its users.
 
According to Young, attackers can use these Google devices to send a link (which could be anything from a tweet to an advertisement) to the connected user; if the link is clicked and the page left opened for about a minute, the attacker is able to obtain a location.
 
"The difference between this and a basic IP geo-location is the level of precision," Young said in the article. "For example, if I geo-locate my IP address right now, I get a location that is roughly two miles from my current location at work. For my home internet connection, the IP geo-location is only accurate to about three miles. With my attack demo, however, I've been consistently getting locations within about 10 meters [32 feet] of the device."
 
Google initially told Young they would not be fixing the problem; however, after going to the press about the issue, Young reports that Google will be releasing an update in mid-July to address the privacy leak for both devices.
 
3. Glitches Could Lead to Invasion of Privacy
According to local news stations in Portland, Ore., a resident (reportedly named Danielle) received a disturbing phone call from one of her husband's employers telling her to shut off her smart home devices. After using Amazon devices throughout her home to control temperature, lighting and security, Danielle was made aware that a private conversation was accidentally recorded by Amazon's artificial intelligence system, Alexa, and was sent to a number on the family's contact list.
 
Amazon has since reported that the Echo speaker picked up words in Danielle's background conversations that it interpreted as "wake words" for recording and sending audio to a contact; however, an article published by website The Information last July states that Amazon was considering obtaining recorded conversations and sending transcripts to developers so they can build more responsive software, making it unclear if these devices automatically record audio without waiting for "wake words."
 
These Vulnerabilities Could Impact Real Estate
Smart homes are increasing across the country. According to Statista, a statistics website, the estimated value of the North American smart home market will be $27 billion by 2021.
 
Of course, the vulnerabilities that have cropped up for some users could have an impact on the selling process. For example, some sellers have already begun using their security systems as a way to listen in on prospective buyers or watch them as they visit the listed home, regardless of whether local laws prohibit these recording practices.
 
Additionally, if homeowners have devices such as Google Home or Amazon Echo, but do not have security cameras, how can they be sure that visiting buyers are not accessing sensitive information through these speakers? While agents always play a role in adding a measure of security by being present during showings, fraudulent activity that is internet-based only, such as obtaining online data through links, will be difficult to identify.

Hard Money Loans - What Are They And How Much Do They Cost?

by Steven Kaufman via RIS Media

Many real estate investors or properties don't qualify for a traditional loan through a bank for a variety of reasons. This is where a hard money loan comes in. It can accomplish the same job of helping investors secure funding for their next investment property.
 
You're probably wondering how these loans work, and, more importantly, how much they actually cost the borrower. First, let's clearly define what a hard money loan is.
 
What Is a Hard Money Loan?
I hear this question all the time. A hard money loan is a loan based on "hard" assets, like real estate. The loans offered by hard money lenders are designed to be short-term loans, usually extending for around 6-12 months. (Depending on the lender, some borrowers might be able to extend for longer terms.)
 
The actual loan amount offered by a hard money lender is secured by real property. The state of the borrower's credit is still important, but since the loan amount is secured against property, credit is less critical than with a traditional loan.
 
Most hard money lenders calculate the amount you can borrow based on either the "as is value" of your property or the "After Repair Value" (ARV). You could borrow up to 80 percent of the ARV in at least one case. A loan based on the ARV can include the repair costs along with the purchase price. This is ideal for "fix and flip" or "fix and hold" deals.
 
There are many property types lenders are able to finance: single- and multi-family residential homes; commercial property; vacant land; or industrial property. However, the majority of hard money lenders don't lend on owner-occupied residential homes.
 
How a Hard Money Loan Differs From Traditional Loans
Hard money loans can come in many different shapes and sizes, so the differences between hard money loans and traditional loans can be significant. For one, the repayment structure is different than conventional mortgages.
 
With a traditional loan, the repayments are calculated using amortization. Each repayment contains a portion that covers the interest due and a portion which pays down the loan principal a little more each time. Payments on hard money loans are interest-only payments. Then, at the end of the loan term, the borrower pays the principal owed in a lump sum.
 
With traditional home loans, the money is issued by banks, financial institutions or lenders. In comparison, hard money loans are usually issued by hard money lenders or private investors.
 
Mortgage originators and banks must adhere to strict regulations. These can inhibit lending for real estate investment deals (even great ones). Hard money lenders, on the other hand, aren't constrained by those same regulations, and can make decisions based on good business sense.
 
The approval process for hard money loans is generally faster—significantly faster—than the conventional loan process. This makes sense for investors who need to act quickly in a short period of time. In most situations, a hard money loan can be funded in as little as 7-10 days, sometimes less.

With hard money loans, less-than-perfect credit might be offset by other factors such as the property's location, total value and available cash assets. Additional real estate could also be pledged as collateral, and the borrower's contribution to the transaction is also an important element. These factors should all be taken into consideration.
 
Actual Cost Associated With Hard Money Loans
Now we're getting down to the juicy facts! Avoid the most common mistakes calculating the actual cost associated with hard money loans. This requires some expertise. Many people focus solely on the interest rate charged on the loan. It's important to factor other costs into your calculations before agreeing on a lender.
 
Here are some of the costs that may be associated with your loan:
 
Interest Rate: Interest rates on hard money are higher than traditional loans, but the loan term is much shorter. It's wise to consider the actual dollars that will be paid during the term of the loan, rather than the APR.
 
While there are hard money loans available for less, the average APR tends run between 10-15 percent, depending on three things: the lender, the property and the borrower's qualifications.

Points: Points are calculated as a percentage of the loan amount. This is the charge for originating the loan.
 
With most lenders, points can vary between 2-4 percent of the total loan amount. The actual points charged on your loan may depend heavily on the loan-to-value (LTV) ratio of your deal, the interest rate charged and the risk associated with the loan.
 
Processing and Underwriting Fees: Lenders typically charge a fee to process the loan application and documentation in order to underwrite the loan.
 
Appraisal Fee: Typically the borrower pays a fee for an appraisal by a licensed appraiser.
 
Referral Fees: If you were referred to your hard money lender by a REALTOR® or broker, a referral fee might be added to the cost of your loan.
 
Pre-Payment Penalties: Check the fine print for fees charged for paying off loans early. Some, but not all, hard money lenders charge a pre-payment penalty.
 
Why Use Hard Money Loans?
There are many situations where hard money loans can be ideal for investors, including:

  • Securing financing very quickly
  • Conservation of capital/no big down payments
  • Properties that need renovation and don't qualify for traditional loans as is
  • Land loans or construction loans 

Real estate investors normally take out hard money loans when purchasing property that requires a lot of work. The total amount of the loan given is for how much the property will be worth once renovations are complete. Again, this is known as the "After Repair Value." No matter what your reasons are for using a hard money loan, the lender you choose will also want to know your exit strategy (in other words, your plan for how you'll repay the money you borrow).
 
Since this type of loan would be short-term, the buyer has plenty of options following repairs. Your plan might be to quickly rehab and sell the property to repay the loan—this is typically the favorite strategy among "flippers." Otherwise, your plan to repay your hard money loan may be to transition into a traditional loan after the renovations are complete. This second strategy is a favorite among landlords.
 
Conclusion for Property Investors Searching for a Hard Money Lender
There are plenty of different hard money lenders available, so be sure you find a reputable company. Most mortgage brokers and REALTORS® and even traditional banks have connections with experienced hard money lenders and can usually recommend one. Alternatively, it's easy to search online for reviews and recommendations from other investors who have successfully completed deals using hard money loans.
 
Above all, don't get overwhelmed by the details of how this all works. Great lenders will steer you right, helping to pinpoint the perfect loan that suits your property investing goals. You will then be provided with substantial expertise, whether making a quick flip or owning rental property.

Sellers Are Winning Big!

by Craig Whitlock

Sellers are winning.
 
According to an analysis recently released by Zillow, the average homeowner pocketed $38,856, or a 20.8 percent return, when selling, having had their home for 8.4 years.
 
"In a housing market that's been plagued by low inventory and increasing demand, homeowners in the nation's hottest markets have been able to cash in when they sell their homes," says Aaron Terrazas, senior economist at Zillow. "A home is typically the biggest investment someone makes, and it's paid off for longtime owners in many markets across the country. Today's typical seller bought in 2010, just before the national housing market bottomed out in 2012. Of course, these sellers typically are buyers, as well, but the profits from the sale of their former home give them an advantage over first-time buyers who may be coming in with smaller down payments."
 
The earnings jump in pricey San Jose, where the average homeowner gains a 53.8 percent return, or $296,000, having had the home for 8.9 years. Homeowners are also profiting richly in San Francisco, with a 45.5 percent return, or $222,000, over 8.5 years, and in Los Angeles, with a 33.1 percent return, or $137,000, over 9.1 years.
 
In 20 of the largest markets:
 

 
For more information, please visit www.zillow.com.

How To Start A Home Remodel

by Craig Whitlock

Apprehension and inexperience keep many homeowners from pursuing renovation projects that would make their homes more functional, enjoyable and comfortable. Getting your hands dirty on the front end – with some planning and preparation – is the best blueprint for a successful home remodeling project.

To help you start your remodel on the right track, consider these tips from Gary White with JCPenney Home Services.

Start with a plan. Although it may sound obvious, the first step really is to decide what you hope to accomplish with your renovation. At the least, begin to outline rough ideas to discuss with an expert. Reaching out to contractors before you've determined a basic idea for your project can waste time and money. Spend time listing the features you must have, as well as some nice-to-haves if budget allows. Also think about overall functionality, design and layout. If you get overwhelmed or need ideas, don't hesitate to turn to online showrooms or magazines for inspiration.

Set a budget. If the sky is the limit, skip ahead, but if you're like most homeowners, money matters. Have a clear idea of what you can afford to invest in your renovation before you get started, and if necessary, research the financing options available to you. Look for financing that provides deferred interest or low monthly payments to help manage the project cost. Setting a clear budget can help keep your contractors accountable, and it goes a long way toward ensuring you can enjoy your finished project without regret.

Draw up the plans. To help set your plan in motion, there are numerous online tools you can utilize to simplify each step of the process including design, budgeting and more.

Involve a professional. Unless you have the time and skills, you'll want a licensed and insured contractor to lead the project when you're ready to get your renovation in motion. It can be wise to solicit multiple bids, not only to ensure you get the best value, but also to find someone whose work, style and experience is most in line with the needs of your project. After all, this person will be a big part of your life during a fairly stressful time period. Always check references and verify the contractor's standing with local associations.

Get ready for work. Remember that you'll need to create a work environment that is safe for your contractors and protects your valuable possessions. Establish a clear path to the project space for easy access and removal of debris. Furniture, appliances, room furnishings, valuables and breakable items should be removed from both the path to the work site and the work site itself. If your renovation project will involve an essential room, such as the kitchen or a bathroom, make alternate arrangements such as creating a makeshift kitchen with the bare necessities in another part of the house.

Reprinted with permission from RISMedia. ©2018. All rights reserved.

How To Improve Indoor Air Quality

by Craig Whitlock

More efficient, tightly built homes than those constructed in previous generations are generally well-regarded, for the most part with good reason. However, when you consider people spend 90 percent of their time indoors on average, according to the Environmental Protection Agency (EPA), such airtight environments raise some concerns.

All that efficiency cuts down on airflow, effectively trapping allergens and toxins inside. According to estimates from the EPA, the air inside the average home may be as much as five times more polluted than the air outdoors, even in a bustling city.

"We know instinctively that spending so many hours in stuffy places isn't good for us," says Peter Foldbjerg, head of daylight energy and indoor climate at Velux. "According to research, living in damp and moldy homes increases our risk of asthma by 40 percent and leaves us vulnerable to developing other ailments."

Limited fresh air and light during the day can negatively impact mood, sleep and performance. Air pollution can also pose a health risk through irritation to the eyes, nose and throat; headaches, dizziness and fatigue; and respiratory conditions, heart disease and cancer. To help alleviate some of these concerns, consider these tips.

Bring the outside in.
Even a small step like adding some potted plants, which are known to purify air, can improve your indoor environment. In addition, think of how you could create a better view to the outside through smart use of windows, skylights and doors that bring in fresh air and daylight.

Rely on natural air flow.
Open your windows 3-4 times a day, at least 10 minutes at a time, to allow fresh air in. To complement natural light and fresh air from vertical windows, consider adding skylights to rooms you use most often. Skylights that can be opened contribute to greater indoor comfort and ventilation by removing excess heat, moisture, odors and other indoor pollutants. They can also help reduce the need for air-conditioning due to the chimney effect, which occurs when skylights and vertical windows are both opened, allowing warm, stale air to rise and escape through the roof, replaced by fresh air drawn in through traditional windows.

Eliminate potential obstacles.
Avoid blocking fresh air with drapes, blinds and other hindrances, like heavy furniture placed too close to windows. Also consider other aspects of your home that could be thwarting your efforts to improve air circulation and quality, such as dust, dirt and mold. Regular and thorough cleaning can help keep those irritants at bay and make your quest for cleaner air easier.

Source: Family Features Editorial Syndicate

Countertops 101: Granite vs. Quartz

by Craig Whitlock

Family Features)—Kitchens and bathrooms are among the most common renovation projects, and countertops are often a focal point of these redesigns; however, choosing the right countertop can be overwhelming. To help make the difficult decision a little simpler, JCPenney Home Services experts offer insight on two of the most popular choices:

Granite
Granite countertops have long been the mainstay of a beautiful kitchen or bathroom. Granite is a natural stone, quarried from large stone deposits around the world. It can have many different variations of patterns and colors, giving each slab a unique appearance that is visually rich and dynamic.

In addition to its distinctive beauty and classic elegance, granite is also extremely durable. Granite is highly resistant to heat and scratches and, with proper sealing, offers good water and stain resistance, and is easy to clean.

Granite typically needs to be sealed, both prior to installation and at least once per year. If properly maintained, a granite countertop will last for as long as you own your home, making it a potential long-term investment.

Quartz
Quartz is another popular choice for countertops due to its durability, stain resistance and ease of maintenance.

It's an engineered product made mostly from up to 93 percent quartz, a non-porous natural stone, combined with a small amount of binder and color. Small particles of glass or reflective metal flakes can also be added to some quartz designs to achieve a more unique look. The result is an attractive slab that can be made in a wide variety of tones and colors, and can be finished to duplicate high-gloss, polished stone.

Quartz is one of the most durable countertop materials and one of the easiest to maintain. It is highly resistant to heat, water and stains, including stains from coffee, wine, lemon juice, olive oil, vinegar and more. Unlike granite, quartz does not need to be sealed, making it easier to maintain over time.

Source: JCPenney Home Services

Homes Sold Quick in March

by Craig Whitlock

50% of Homes Sold in 30 days in March [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The National Association of REALTORS® recently surveyed their members for their Confidence Index.
  • The REALTORS® Confidence Index is a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions.
  • Homes sold in less than 60 days in 35 out of 50 states and Washington D.C.
  • Homes typically went under contract in 30 days in March!

4 Reasons Why Today's Housing Market is More Stable

by Craig Whitlock

With home prices rising again this year, some are concerned that we may be repeating the 2006 housing bubble that caused families so much pain when it collapsed. Today’s market is quite different than the bubble market of twelve years ago. There are four key metrics that explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Mortgage Debt
  4. Housing Affordability

1. HOME PRICES

There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.

Frank Nothaft is the Chief Economist for CoreLogic (which compiles some of the best data on past, current, and future home prices). Nothaft recently explained:

“Even though CoreLogic’s national home price index got to the same level it was at the prior peak in April of 2006, once you account for inflation over the ensuing 11.5 years, values are still about 18% below where they were.” (emphasis added)

2. MORTGAGE STANDARDS

Some are concerned that banks are once again easing lending standards to a level similar to the one that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a Housing Credit Availability Index (HCAI). According to the Urban Institute:

“The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

The graph below reveals that standards today are much tighter on a borrower’s credit situation and have all but eliminated the riskiest loan products.

4 Reasons Why Today’s Housing Market is NOT 2006 All Over Again | Simplifying The Market

3. MORTGAGE DEBT

Back in 2006, many homeowners mistakenly used their homes as ATMs by withdrawing their equity and spending it with no concern for the ramifications. They overloaded themselves with mortgage debt that they couldn’t (or wouldn’t) repay when prices crashed. That is not occurring today.

The best indicator of mortgage debt is the Federal Reserve Board’s household Debt Service Ratio for mortgages, which calculates mortgage debt as a percentage of disposable personal income.

At the height of the bubble market a decade ago, the ratio stood at 7.21%. That meant over 7% of disposable personal income was being spent on mortgage payments. Today, the ratio stands at 4.48% – the lowest level in 38 years!

4. HOUSING AFFORDABILITY

With both house prices and mortgage rates on the rise, there is concern that many buyers may no longer be able to afford a home. However, when we look at the Housing Affordability Index released by the National Association of Realtors, homes are more affordable now than at any other time since 1985 (except for when prices crashed after the bubble popped in 2008).

4 Reasons Why Today’s Housing Market is NOT 2006 All Over Again | Simplifying The Market

Bottom Line

After using four key housing metrics to compare today to 2006, we can see that the current market is not anything like the bubble market.

How Do Property Taxes Work?

by Craig Whitlock

If you’re a new or soon-to-be homeowner, you may be wondering about how property taxes work. Unlike the income tax and the sales tax you pay, the property tax is not based on how much money you earn or how much you spend. Instead, it is based solely on how much the property you own is worth. This is based on a comparison of the properties around you, as well as market factors.      

The real property tax is an ad valorem tax, or a tax based on the value of property. Ideally, the owners of property of equal value pay the same amount of property taxes, and the owners of more valuable property pay more in taxes than the owners of less valuable property.

The tax is calculated using a variety of formulas and is based on a property’s assessed value – its full market value or a percentage thereof – and the tax rate of the taxing jurisdiction, minus any property tax exemptions, such as those offered for the elderly or veterans.

Property taxes are assessed by city and county governments to generate the bulk of their operating revenues. The taxes help pay for such public services as schools, libraries, roads, and police protection.

Re-valuations of the tax are often done periodically, although the time interval varies from state to state or, in some states, from town to town, and can range from annual reassessments to periods of ten years or more.

Reprinted with permission from RISMedia. ©2018. All rights reserved.

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Craig Whitlock
COLDWELL BANKER BRENTWOOD
11661 San Vicente Blvd., 10th Floor
Los Angeles CA 90049
Mobile: (310) 488-4399
Fax: (310) 820-1457

Broker/Agent does not guarantee the accuracy of the square footage, lot size or other information concerning the conditions or features of properties provided by the seller or obtained from Public Records or other sources as presented in this website.  Interested parties are advised to independently verify the accuracy of all information through personal inspection and with appropriate professionals.  Information herein deemed reliable but not guaranteed.

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