Blog - George L. Duarte

Why Do People Stage Homes To Sell?

August 2, 2019 by George Duarte

Why Do People Stage Homes To Sell If you’re selling your home, your real estate agent has likely advised you to stage your home to sell. But why exactly do people stage homes to sell? Some people go to great lengths to stage their home too, even going so far as moving possessions into storage units or renting furnishings!

If your home is already nicely decorated, why should you go to the added trouble of “staging” it? There are many good reasons to stage your home to sell.

1. Staging Makes Your Home Appear More Spacious

Having lived in your home for a number of years, you probably haven’t noticed how many things you’ve accumulated. When you stage your home to sell, these things get put away out of sight. This tends to clear tabletops, open up floor space and generally make your home look larger. Homebuyers will see the spaciousness as a huge asset.

2. Staging Gives Every Area A Purpose

Part of the staging process is to give every area of the home a purposeful identity. A space by the front door becomes a true foyer, a bay window becomes a reading nook and a short hallway becomes a mail organization station. This lets homebuyers imagine how organized and productive their new lives will be in your home.

3. Buyer’s Agents Will Be Proud To Show Your Home

It may seem odd, but the homes that a buyer’s agent shows can reflect on the agent. When your home is beautifully staged, seller’s agents will be delighted to bring their buyers to see it. This can result in more traffic, which can lead to increased offers on your home for sale.

4. Staging Helps Buyers Envision Living There

Another process of staging is the removal of personal items from your home. This would include trophies, family portraits and similar memorabilia. This enables homebuyers to more easily envision themselves living in your home, which is more likely to lead to them making an offer.

5. Staging Takes The Burden Off The Seller

As the homeowner, you need to make sure all your possessions are in tip top shape for showings. Your favorite “sloppy” couch would have to be refreshed and steam cleaned to pass muster with discriminating buyers. Instead of going though all that, you can rent temporary staging furniture that’s already in pristine condition.

As you can see, there are benefits to home sellers to stage the home. For help with the staging process, consult with your trusted real estate agent. And, if you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted home mortgage professional.

Case-Shiller: Home Prices Growth Slows in March

August 1, 2019 by George Duarte

Case-Shiller: Home Prices Growth Slows in March Home price growth slowed again in May according to Case-Shiller home price indices. Home price growth slowed for the 14th consecutive month to its lowest rate in 12 years. Case-Shiller’s National Home Price Index showed 3.40 percent growth year-over-year in May as compared to April’s year-over-year reading of 3.50 percent.

Las Vegas, Nevada held its first place position in the 20-City Home Price Index for highest year-over-year home price growth rate at 6.40 percent; Phoenix, Arizona held second place with a year-over-year home price growth reading of 5.70 percent. Tampa, Florida home prices grew by 5.10 percent year-over-year in May.

Home Price Growth Rates Fall In West Coast Cities

West coast cities that posted double-digit annual home price gains in recent years posted less than two percent growth in home prices in May. Seattle, Washington was the first city to post negative home price growth with a negative year-over-year reading of -1.20 percent in May. San Francisco, California home prices rose by 1.00 percent year-over-year and home prices in San Diego, California grew 1.30 percent year-over-year.

This trend suggests that home prices were topped out in terms of affordability as buyers looked elsewhere for larger selections of homes at affordable prices.

Analysts predicted a plateau in home price growth and did not expect steep declines in home prices. Steady growth in wages and jobs could help to ease affordability challenges for home buyers. Lower mortgage rates provided additional opportunity for first-time and moderate income home buyers, but home price growth needs to ease further to help would-be buyers conquer affordability concerns. Shortages of homes for sale are most pronounced for lower-priced homes, where demand is largest. Higher demand for homes during the peak selling season could boost prices in popular metro areas.

If you’re in the market for a new home or interested in refinancing your current property, please contact your trusted home mortgage professional.

What Is Eminent Domain?

July 31, 2019 by George Duarte

What Is Eminent Domain Eminent domain is a law that gives the federal, state, county, and municipal governments in the United States the legal right to “condemn” property and then seize it to allow its use for development. Eminent domain is supposed to be used by the government at the various levels to do things for the public benefit, such as to build new roads or construct new public schools.

Compensation Under Eminent Domain Seizure

The government cannot take property without compensating the owner for its market value. Disputes that lead to lawsuits arise when the property owner and the government have a serious disagreement about the value of the property.

Imagine an acre of desert land in Nevada with no water, nothing built on it, and no utilities. The owner would be lucky to get $10,000 for it. Now, imagine it is less than a few miles away and that same amount of land is on the world-famous Las Vegas Strip. Now, it can sell for up to $10 million per acre.

What if the vacant land becomes a part of a new extension of Las Vegas? Is it worth $10,000 or $10 million? This is the type of thing that causes major legal disputes over the property valuations.

Abuse Of Eminent Domain

Eminent domain is supposed to be only used sparingly for the public benefit. Unfortunately, that is not always the case. Developers sometimes use eminent domain laws with the complicit help of government officials to seize all kinds of property that the owners have no intention of ever selling at any price. People may lose their family homes where they lived for generations so that the city can allow a developer to build a parking lot.

To make matters worse, in 2005, the U.S. Supreme Court ruled in a case called Keto v. City of London that the city could seize property on the mere expectation of increased tax revenues for the city or jobs.

This landmark case basically removed any restrictions and expanded the ability of the government to seize property on a mere pretense of having an expectation of revenues. In response to the U.S. Supreme Court ruling, 44 states enacted laws restricting eminent domain seizures in those states.

Summary

When a property owner gets hit with an eminent domain action, it is usually a surprise. The owner should immediately seek out competent legal counsel to help protect their rights and not necessarily let the abusers get away with using eminent domain laws inappropriately. There are non-profit organizations that are legal action groups, such as the Institute for Justice working on these issues that can help as well.

If you are in the market for a new home or interested in refinancing your current property, please contact your trusted home mortgage professional.

The Community Reinvestment Act Explained In Simple Terms

July 30, 2019 by George Duarte

The federal government adopted the Housing and Community Development Act in 1977, and the Community Reinvestment Act (CRA) portion was designed to prompt lending institutions to provide mortgages for low- and moderate-income Americans. The underlying reasoning for the CRA was to discourage discriminatory lending practices that inhibited low-income communities and neighborhoods.

Over the years, its regulations have been revised to improve effectiveness. During the early 1990s, upwards of five changes were made and more following the 2007 financial crisis. With the country currently in the midst of an economic comeback, the Office of the Comptroller of the Currency announced that it favored making changes to the rules that govern lending under the CRA. These changes could have a significant impact on the real estate market.

Modernization of the Community Reinvestment Act

Critics of the CRA say that it has failed to keep pace with the emerging technologies readily available in the low- to moderate-income communities it was designed to serve. Falling behind in this capacity reportedly inhibited the worthy goal of the policy.

Organizations such as the American Bankers Association are said to be in favor of modernizing the CRA. This group continues to press regulators to bring resources into the technology era. Improved technological resources appear to be critical elements to meeting community borrowing needs and improving banking transparency.

Another aspect of the CRA some feel has trailed behind the times is that not all lending institutions are subject to CRA guidelines. If the goal of the CRA is to give low- and moderate-income families a fair shot at the American dream of homeownership, other financial organizations may need to come under the CRA umbrella. A greater CRA borrowing pool is likely to increase residential and commercial buying.

How The CRA Helps Communities Build Wealth

The current administration has made some hay about pushing policies that centralize ownership in community members’ hands. Several of the potential rule changes to the CRA point to improved home and business ownership within low- and moderate-income communities. In essence, the changes are a kind of throwback to the days when the person who owned the local bakery, breakfast restaurant and hardware store lived within the community.

If successful, the discussed policy shift would encourage residents to buy residential and commercial real estate where they live. In some sense, the administration appears to be shielding living, breathing communities from the widespread corporate takeovers that occurred in the 1990s and early 21^st Century.

Critics seem to worry that tinkering with guidelines may lead to quantity over quality lending. However, proponents see a long-term plan to revitalize communities by restoring and increasing localized property ownership.

If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted home mortgage professional.

What’s Ahead For Mortgage Rates This Week – July 29th, 2019

July 29, 2019 by George Duarte

What’s Ahead For Mortgage Rates This Week – July 29th, 2019 Last week’s economic reports included readings on sales of new and pre-owned homes and weekly reports on mortgage rates and first-time jobless claims.

Realtors® Report Sales of Pre-Owned Homes Fall in June

Sales of previously-owned homes fell last month according to real estate pros. 5.27 million homes would be sold in 2019 if the current pace of sales was unchanged for all of 2019. Analysts expected a reading of 5.33 million sales based on May’s reading of 5.38 million sales. Analysts said that sales of pre-owned homes fell despite lower mortgage rates and the seasonal peak home-buying season.

Sales of pre-owned homes rose 1.60 percent in the Northeast and were 1.60 percent higher in the Midwest. Sales fell 3.40 percent in the South and were 3.50 percent lower in the West. Factors contributing to lagging home sales included low inventories of available homes and steadily rising home prices.

Home prices have risen every month for more than seven years. Fewer homes for sale and higher home prices limit buyers’ choices and their ability to qualify for financing needed to buy higher-priced homes.

New Home Sales Rise in June after Two-Month Lull

The sales pace for new single-family homes rose to a seasonally-adjusted annual rate of 646,000 sales as compared to an expected sales pace of 657,000 for new homes. May’s reading was downwardly revised from a sales pace of 626,000 sales to 604,000 sales. New homes sold fastest in the South and West and were slower in the Northeast and Midwest regions according to the Commerce Department.

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported average mortgage rates approaching three year lows last week. Rates for 30-year fixed rate mortgages averaged 3.75 percent and were six basis points lower. The average rate for 15-year fixed rate mortgages dropped five basis points to 3.18 percent; rates for 5/1 adjustable rate mortgages averaged 3.47 percent and were one basis point lower.

First-time jobless claims fell last week to 206,000 new claims filed as compared to the expected reading of 218,000 new claims filed and the prior week’s reading of 216,000 first-time unemployment claims filed.

What‘s Ahead

This week’s economic reports include readings on housing markets, pending home sales and the post meeting statement of the Fed’s Federal Open Market Committee.

Fed Chair Jerome Powell is scheduled to give a press conference and the Labor Department will release monthly updates for public and private-sector jobs created and the national unemployment rate. Weekly reports on average mortgage rates and new jobless claims will also be released.

Innovative Home Security Technology

July 26, 2019 by George Duarte

Innovative Home Security Technology For market value and the comfort of a home’s occupants, home security is just as important as energy-efficiency. Innovation in smart home technology focuses on both of these areas.

Here are some tips about things a homeowner can do to make a home more secure and a few pitfalls to look out for, which may not be obvious.

Smart View Doorbell

No matter how reinforced the front door of a home is, it is not secure if it is opened by someone inside without first knowing who is there. Additionally, smart doorbells allow the homeowner to view the front of their home using a smartphone application, even when they are not home.

These systems use motion sensors and video cameras. When someone approaches the front door, the motion sensors trigger and the camera captures the images of what is happening. The smartphone application notifies the homeowner that there is physical activity at the front door.

It may be a neighbor’s cat passing by or a burglar trying to steal a package or attempt a break in. The homeowner can trigger a response through some systems to send a security guard to the premises or has the option to call law enforcement.

Biometric Door Locks

Biometric door locks use fingerprints, iris (eye) scans, and/or facial recognition along with passwords to control who is authorized to enter a home. These systems improve door security and eliminate any problems caused by lost keys or unauthorized duplication of keys.

Improved Remote Garage Door Opener

These are convenient systems, especially when driving up to a home in bad weather and not wanting to get out to open the garage door. They do expose the home to vulnerabilities because the wireless signal that triggers their operations is hackable.

The newest systems use a password-protected system with a two-part security authorization that includes entering a password and responding to a text message sent to the homeowner’s smartphone. The wireless communications of the most innovative systems are encrypted, which makes them impenetrable to hacking.

Automatic Lighting

Smart home lighting can turn on and off automatically. This is useful to save energy and turn things off when a room is not in use. It is also useful to give the appearance that the home is in use even when the occupants are away. Lights and television sets can be turned off and on in the home, based on a pre-determined schedule as if done by occupants, which discourages burglars.

Remote Home Monitoring

Many systems exist that allow a homeowner to remotely monitor a home. “Nanny” cams allow parents to use a smartphone application to view their baby at home when in the care of a babysitter. Other systems allow viewing the entire home.

Be cautious when implementing wireless systems. It is very important to use point-to-point encryption technology to protect the wireless transmission from hacking. It is critical to understand that having a wireless view of the interior of the home creates a security risk if hacked by unauthorized users. As an alternative, the home can be hard-wired (not use a wireless signal) and encryption used to send data to the homeowner’s smartphone.

Summary

Improved home security is a value-added thing to have for a property to protect the occupants and may also improve the home’s resale value. Just be careful not to create new security vulnerabilities by using systems with unprotected wireless communications.

If you are looking for a new home or interested in refinancing your current property, be sure to contact your trusted home mortgage professional.

The Monopoly Technique – How To Build Value By Acquiring Adjacent Properties

July 25, 2019 by George Duarte

The Monopoly Technique - How To Build Value By Acquiring Adjacent Properties Have you ever played the classic board game called Monopoly? The object of the game is to collect all the properties until one winner bankrupts all the other players. The other part of the game is that accumulating properties adjacent to each other increases the value of the individual properties. When a player acquires all the properties of the same color (two or three), then the rents go up and property development can begin.

The Monopoly Game In Real Life

The same basic principles sometimes work in real life. Owning a property and then buying the one next door creates a value-added possibility of the combined properties being worth more than the individual pieces.

To start this strategy, tell the neighbors of having an interest in buying their home in the future if they want to sell. This is a way to get the first option to buy a home before it lists on the market.

Control Of The Neighbors Adds Value

In many neighborhoods, there is one home that creates severe negative pressure on property values. These homes may be neglected and badly needing a paint job and landscaping. The home may be a source of neighborhood noise problems or heavy traffic.

When considering buying into this neighborhood, make a plan to buy the derelict house. Then, before bringing it back into a marketable condition, there may be a chance to buy the ones next door for a steep discount from the market value.

If possible, buy all the properties at once and close them around the same time. This helps avoid triggering a profit demand from those who are opportunistic and learn about the interest of a buyer in more than one property.

Cashing Out

If possible, buy three houses, one of each side of the derelict house, then renovate all three properties. Make them into rental units or to sell them as a “flipped” property after the renovation for a big profit.

If there is the possibility of controlling a full block on both sides in a rundown neighborhood, it is possible to start with one block of home improvements at a time. Entire neighborhoods may improve one block at a time.

Redevelopment

In some neighborhoods, there is a chance of re-zoning and redevelopment. For example, it may be possible to build a larger structure by combining two properties. There is profit possible in assembling the land for redevelopment purposes, even for those who do not do the construction for the redevelopment.

Summary

Playing Monopoly in real life can make investing in real estate fun. It is possible to start with a few low-cost rental homes. For rental properties, it makes it much easier to manage them if they are next to each other. Values may increase in the neighborhood by the renovation of a derelict house.

If you are intested in refinancing your current property or in the market for a new home, be sure to contact your trusted home mortgage professional!

What’s The Value Of Water?

July 24, 2019 by George Duarte

What's The Value Of Water When investing in real estate, few people think about water as a high priority. All of us have become used to water being readily available and rarely give it a second thought. Most would think that water is only a consideration for farmers who need it to irrigate agriculture. However, due to climate change and population growth, the world is experiencing large impacted areas and major cities that are running out of water.

Will Water Run Out?

Las Vegas expects to run out of water by 2030. Lake Mead near Las Vegas is the water supply for more than two million people. Its level has been declining steadily for decades. Las Vegas gets a limited supply of water from the Colorado River that goes through Nevada all the way to Southern California. The river water is not sufficient to support the population there either.

California now has droughts that last for many years. This makes wildfires more likely, like the one that burned the entire town of Paradise and the surrounding area to the ground in 2018. This wildfire named “Camp Fire” burned over 150,000 acres, destroyed nearly 19,000 buildings, and cost $16.5 billion in damages. Sounds more like hell than paradise.

NASA scientists predict that California could run out of water by the end of 2020 and thereafter experience a mega-drought that might last for decades. All of a sudden, that multi-million-dollar luxury house in the desert or in beautiful, sunny California seems much less appealing.

Investing In Water Rights

Major investors, including gigantic hedge funds, have been buying up water rights all across the United States. Water rights are like any other mineral rights for a property in that they can be sold separately from the land.

Real estate investors who are interested in participating in the potential success of companies that own water rights can now consider investing in exchange-traded funds (EFTs) that include a bundle of stocks from companies that own these rights.

Water Everywhere And Not Drop To Drink

A homeowner might have beautiful lakefront property or a lot with a river running through the land. However, if the owner does not have the rights to access any of that water for residential use it is only a nice view and not a water resource.

Oceanfront properties have a vast supply of seawater that sits in front of them. However, again the legal right to use it may not exist and the cost of desalinization of salt water is still prohibitive.

Properties in rural areas may need to get a permit to drill a water well that must be approved by the county authorities. Even with an operating well on the property, it is possible for a well to run dry.

Conclusion

Real estate investors and home buyers looking to acquire a property now need to include the serious consideration of the access to water and any available water rights as part of their due diligence process.

If you are in the market for a new property or interested in refinancing your current property, be sure to contact your trusted home mortgage professional.

What Is A 1031 Tax Exchange?

July 23, 2019 by George Duarte

What Is A 1031 Tax Exchange A 1031 tax exchange is a legal way to defer paying capital gains when selling a property and then buying a “like-kind” property within the allowed period. The time limits allowed are 45 calendar days after the close of the sale of the first property to identify the like-kind property for acquisition and then close the purchase transaction to complete the 1031 exchange within 180 calendar days.

Like-Kind Property

The property’s broad characteristics determine if it is a like-kind property, not the quality of the asset. In real estate investing, there is a wide variety of things that qualify for like-kind exchanges. For example, vacant land is exchangeable for a commercial building, an industrial site, or a portfolio of residential rental properties.

Since all these properties are types of real estate investments made in commerce, they are like-kind properties. It is not permitted to make like-kind exchanges of property for personal use. The properties that qualify for 1031 exchanges are for investment purposes only. Investors need to hold them for at least two years for them to qualify. A 1031 exchange cannot be used to “flip” a property purchased and then resold more quickly.

Equal Or Greater Value

The property for the acquisition side of a 1031 deal must have a value that is equal to or greater than the property sold. There are three ways to identify the property with the sufficient combined value needed for the acquisition, which are:

Identify up to three properties for the acquisition regardless of their individual values.
Identify an unlimited amount of properties that have a combined value of up to 200% of the value of the property sold.
Identify an unlimited amount of properties that exceed 200% of the value of the property sold as long as the acquisition equals 95% of the total value of the identified properties.

Reverse 1031 Exchange

In a reverse 1031 exchange, the property acquisition occurs first and then within 45 calendar days identify the property to sell as part of the 1031 exchange and complete the entire transaction in 180 calendar days.

1031 Exchange Intermediary

A qualified intermediary is necessary to complete a 1031 exchange. The intermediary holds the funds in a segregated escrow account from the sale of the first property and then uses those funds in the acquisition transaction of the identified property.

It is extremely important that the owner of the first property never has direct control over the proceeds from the sale. If the owner takes direct control of those funds, for even just a moment, this triggers a tax event and the capital gains taxes will be due.

Conclusion

A 1031 tax exchange is a very convenient way to defer paying capital gains tax. Use competent legal counsel for the transaction and an intermediary to hold the funds that has a perfect reputation for successfully working with this process.

If you are interested in buying a new property for personal or investment purposes, or in refinancing your current property, be sure to contact your trusted home mortgage professional.

What’s Ahead For Mortgage Rates This Week – July 22nd, 2019

July 22, 2019 by George Duarte

What’s Ahead For Mortgage Rates This Week – July 22nd, 2019 Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, Commerce Department reports on housing starts and building permits issued.

The University of Michigan consumer sentiment index was also released. Weekly readings on mortgage rates and new jobless claims were also reported.

NAHB: Builder Confidence Rises as Housing Starts Slip

Home builder confidence in current market conditions rose one point to an index reading of 65 in June. Any reading over 50 means that most builders view housing markets conditions as positive, but July’s reading was lower year-over-year.

Builders have long cited a shortage of buildable lots and labor, but also face new obstacles including strict local zoning laws and overall regulation. High demand for affordable homes coupled with short supplies of homes in this market range provided challenges to home builders, communities and would-be home buyers.

Housing starts fell in June to 1.125 million on a seasonally-adjusted annual basis. Analysts predicted 1.244 million starts based on May’s reading of 1.265 million starts. The housing market index used to foreshadow the number of housing starts, but the two readings are no longer as closely connected.

The Commerce Department reported 1.220 million building permits issued in June as compared to 1.299 million permits issued in May.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher mortgage rates last week after three weeks of minor movement. Rates for 30-year fixed rate mortgages averaged six basis points higher at 3.81 percent. The average rate for 15-year fixed rate mortgages rose one basis point to 3.23 percent.

5/1 adjustable rate mortgage rates averaged two basis points higher at 3.48 percent. Discount points averaged 0.60 percent for 30-year fixed rate mortgages and 0.50 percent for 15-year fixed rate mortgages. Discount points for 5/1 adjustable averaged 0.40 percent.

New jobless claims rose to 216,000 new claims filed as compared to 208,000 new claims filed the prior week. Analysts predicted 220,000 first-time claims would be filed. The University of Michigan’s Consumer Sentiment Index rose in July to 98.40 percent as compared to June’s reading of 98.20. Analysts expected a reading of 99.00.

What‘s Ahead

This week’s scheduled economic news includes readings on sales of new and previously-owned homes along with weekly reports on mortgage rates and new jobless claims.