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What is an earnest money deposit in a real estate transaction? Many buyers know they need to spend money to purchase a home, but many do not know when they need to put a deposit down or how much that typically can be. The earnest money deposit is the initial deposit that a buyer would put towards purchasing a home to show good faith. This usually happens within a day or two of submitting the residential purchase agreement, or “offer.”

The earnest money deposit is considered a good faith deposit because it shows the seller of the home that you are willing to put money on the line and you are serious about the purchase. This deposit is typically held by the listing agent and can be cashed and put into an escrow account. If the offer is accepted and a contract is finalized the deposit will be treated as part of the down payment. However, if the buyer breaks the contract there is a chance that the earnest money deposit can be lost and kept by the seller.

The seller may be able to keep this deposit if the buyer breaks terms of the contract. That being said, the buyer has rights set forth in contingencies that will allow the buyer to walk away from the contract and have the earnest money deposit returned. These contingency periods are determined by the buyer in the offer so it is important to make sure the buyer is working with an educated Realtor to make sure they are aware of these time periods so they know when they can cancel the contract without losing their deposit.

There is no definitive amount for an earnest money deposit. It is simply up to the buyer to decide how much they would like to put down. Typically, it can be anywhere between 1-5% of the home’s sale price. A buyer may want to put more money down to show the seller that they are very serious about the purchase which could make your offer stronger when comparing with others.

In summary, it is important for the buyer to know the contingencies and what obligations and responsibilities they have during these times periods. It is essential to pay close attention to what needs done when so the buyer does not lose the earnest money deposit. If you are unsure of this ask your Realtor for guidance. A good Realtor will keep track of these time periods for you so you can rest assured knowing there is an extra set of eyes on these time frames.

Are you looking to possibly live in Alpine, California? Let’s take a look to see what is for sale in Alpine. There is currently one 1-bedroom home for sale with a median price of $220,000. With the assumption of 20% down that would be a $44,000 down payment with monthly payments of $1,038. The median asking price for a 2-bedroom in Alpine is $274,000. There are currently four 2-bedroom homes for sale. With the same down payment assumption of 20% that would be a $55,000 down payment with monthly payments of $1,293. Looking for something bigger? The median asking price for a 3-bedroom in Alpine jumps to $670,000 and 4+ bedroom median asking price is $849,000. There could be several factors for this such as lot size, home square footage, age of home, or interior design amongst many other factors. There is more inventory available for 4+ bedrooms in Alpine with fifteen homes for sale compared to five 3-bedroom homes. Remember, these are just asking numbers and not a good representation of sold prices. If you are interested in the Alpine area please reach out to Garrett Trainor at First Line Realty and he will provide a detailed report to you catered to your specific interests.

Please keep in mind these are general figures and the home you are looking for could be reflected in a higher or lower price. Also, your monthly payments may vary given your financial situation. The estimated monthly mortgage payment assumes a 30-year fixed-rate mortgage (FRM) at the current interest rate. Current interest rates are favorable at an average of 3.45% down from 3.46% last month and 4.26% from last year. Payments mentioned above also includes an assumption of 1.38% for property taxes and insurance. 

Source: https://www.car.org/marketdata/interactive/citybuyersguide

Buying a home is a complicated process. Even finding the right home can be difficult in California’s inventory- constrained market. Once you do, there is the negotiation process, contracts, inspections, appraisals, financing, and myriad other issues that pop up along the way. In many cases, your monthly mortgage payment when you do purchase a home can be more expensive than your rent, and that’s without considering the upfront cost of a down payment.

Taking all of this into account, why should you invest in homeownership? First, and perhaps most important, homeownership is the one tried and true way that Americans have actually managed to generate wealth in this society. In part, this is because home prices appreciate over time—even after adjusting for inflation. Back in 1980, the typical home in California cost less than $100,000. Today, that number is more than $600,000.

However, price appreciation is only part of the story. The leveraged/collateralized nature of the investment is also critical. Let’s face it, if you walked into your local bank branch tomorrow and asked for $500,000 because you had a hot stock tip, the conversation probably wouldn’t last very long. However, if you ask that same bank for money to invest in buying your own home, there’s a much higher probability of getting that loan. And, you are only required to produce a fraction of the upfront costs yourself—in some cases as low as 3.5%. However, when it comes time to sell, the bank does not require a 96.5% split of your profits—you keep it all despite putting a much smaller amount down.

Next, your rent will continue to increase, but your mortgage payment won’t. Aside from wealth creation, locking in a fixed-rate mortgage is one of the best ways to hedge against housing inflation. Since the 1980s, rents have more than tripled nationwide. In California, the typical apartment ranges from roughly $1,200/month for a studio to as much as $3,000 for a 4 bedroom unit. In some coastal metros, rents are significantly higher than that. Locking in a fixed payment now can generate significant savings over the course of 30+ years.

Also, interest rates are almost as low as ever. Today, the median-priced home in California exceeds $600,000, but rates have fallen. It has never been more affordable in modern history to borrow for homeownership than in the past few years. Although rates are not forecasted to rise rapidly, even an increase to 5% will cost you significantly more over time. At 4%, the monthly mortgage payment for a median-priced home is $2,713 including taxes and insurance. At just 5%, that monthly payment goes up by $259 per month—costing you an additional $93,240, over the life of the loan.

Not only will your future generations benefit from the wealth creation and savings generated by your decision to purchase a home, but studies have shown that even after controlling for parents’ incomes, race, education levels, and other socioeconomic factors, homeownership has a positive impact on children’s health, high school graduation rates, and college attendance.

Although homeownership has big paybacks for the economy as well as society at large, it is not for everyone. Just because I discussed some favorable reasons for homeownership does not mean you should start looking without addressing your current and future financial goals. Sometimes renting makes the most sense given your current finances and your plan for the future. Everyone’s situation is different so please keep that in mind. If you have any questions if homeownership is right for you please reach out to Garrett Trainor at First Line Realty to discuss further.

Source: https://www.car.org/-/media/Sites/CAR/Documents/temp/673221_pdfFooter_20200424070258.pdf

You’ve probably already considered your personal reasons for selling. Now you need to take into account the other factors involved, such as market conditions, your property’s value and tax implications. Unless you’re locked into selling your home (e.g., you’ve already accepted a job offer in another city), it’s a good idea to look at the whole picture before deciding to sell.

Assessing Market Conditions

There’s a rule of thumb to keep in mind when deciding to sell your home: Your home is only worth what a qualified buyer is willing to pay at the time it’s on the market. The current real estate market fluctuates based on supply and demand, interest rates, general economic conditions, and other factors. The same house may sell for more or less under a different economy. Garrett Trainor at First Line Realty can inform you of the going price for homes in your area at the current time; this data is included in a comparative market analysis that he could kindly provide.

Tax Implications of Selling

There are many dynamics that can affect your tax liability upon selling your home. These issues include whether you purchased the home or inherited it, if you used your home for business or rental purposes, costs associated with selling your home, and any home improvements and additions that you’ve undertaken.

The Federal Taxpayer Relief Act of 1997 provides capital gains tax exclusions of up to $500,000 for married taxpayers filing jointly and $250,000 for single taxpayers or married taxpayers filing separately. Current capitol gains rates are 20 percent for those in upper tax brackets and 10 percent for those in lower tax brackets. Overall capital gains rates have been lowered even further — to 18 percent and 8 percent respectively — for assets acquired after December 31, 2000, and held five years or more.

To qualify for this tax break, you must have used the home as your primary residence for at least two of the prior five years; these two years don’t have to be consecutive. If you relocate for your job but don’t meet the requirement, you may be allowed to take a capital gains exclusion proportionate to your circumstances. This exclusion is not a one-time benefit; you may take advantage of it once every two years as long as you meet the qualifications.

The tax rules differ when you sell a home that you’ve inherited. If you sell the inherited home for a profit, you’re required to pay federal and state taxes on the gain. If you keep the house as a second residence and/or eventually move into it after renting it to tenants, you may take the $250,000/$500,000 capital gains tax exclusion if you meet the requirements. When you’re deciding what to do with inherited property, you should consider the current estate tax laws and basis practices.

Beyond these general rules, it’s wise to discuss your home’s sale with a tax professional who can advise you on tax benefits in more detail.

Timing Your Decision to Sell

Because most sellers finance a new home purchase with the sale of their present home, they usually put their homes on the market before they begin their search for a new home. Learning the price you can expect from the sale often sets the pricing parameters for your new home search.

Obviously, it’s not wise to wait until the sale on your property closes completely before beginning to look for your new home. Timing your search properly with the buyers’ transaction can make the difference between having the available funds to buy a new home and cutting down on the interim period between homes.

Source: https://www.car.org/marketing/clients/selling/decidingtosell

Here are current trends for San Diego real estate for March 2020:

The median price for single family detached homes in San Diego County is currently at $675,000. That is a 0.7% month to month increase and a 8.2% year to year increase.

While prices are increasing, sales for single family detached homes in San Diego county decreased by 1.3% year to year. Although there has been a slight decrease from last year there has been a 23.4% month to month increase and a 5.7% year to date increase.

Median time on the market for single family detached homes is currently 10 days. That is a 16.7% decrease month to month and a 47.4% decrease year to year. Single family detached homes are selling quickly in San Diego County!

For any questions about San Diego housing market please contact Garrett Trainor at First Line Realty!

Source: https://car.sharefile.com/share/view/s3240ede614d4f2a8/focd0649-a18b-4386-a9a7-6e61da97eea0

Are you interested in living in Santee, California? There are currently zero 1-bedroom homes for sale but twenty-one 2 and 3-bedrooms for sale. The median asking price for a 2-bedroom in Santee is $340,000. With the assumption of 20% down that would be a $68,000 down payment with monthly payments of $1,605. Looking for something bigger? The median asking price for a 3-bedroom in Santee is $574,000. With the assumption of 20% down that would be a $115,000 down payment with monthly payments of $2,709. Please keep in mind these are general figures and the home you are looking for could be reflected in a higher or lower price. Also, your monthly payments may vary given your financial situation. The estimated monthly mortgage payment assumes a 30-year fixed-rate mortgage (FRM) at the current interest rate. Payment also includes an assumption of 1.38% for property taxes and insurance. 

Current interest rates are favorable at an average of 3.45% down from 3.46% last month and 4.26% from last year. If you are interested in buying or would like further information about the market in Santee, California please reach out to First Line Realty!

Source: https://www.car.org/marketdata/interactive/citybuyersguide

Appraisals and CMAs

Appraisals are primarily used to protect the lender’s interest in the property. Just like lenders can be hesitant to issue a mortgage to credit-risky borrowers, they don’t like to underwrite properties for more than they’re worth. Appraisals also are used when other factors have made it difficult to assess your property’s value, such as a lack of real estate activity in your area.

I like to stress the importance of understanding that an appraisal is just the opinion of a trained professional: Five different appraisers could attach five different price tags to your home. Appraisals are based on past sales data, the location of the home, the size of the lot and the condition of the home. If the buyer’s mortgage is insured through the FHA, the appraiser must disclose potential problems relating to the physical condition of the home; there are no similar stipulations for non-FHA mortgages.

The Appraisal Subcommittee of the Federal Financial Institutions Examination Council offers a member directory on its Web site if you would like to get in touch with an appraiser. You can check the status of California appraisers’ licenses through the Office of Real Estate Appraisers.

To determine an accurate measure of what your home is worth, I can supply a comparative market analysis (CMA), which provides information on recent selling prices of similar properties in the same market. With a CMA, you can monitor the closing price of specific house types in certain areas (e.g., a condominium in Downtown San Diego or a 4 bedroom house in Ramona). Again, please let me know if you’re interested in learning more about a CMA.

Setting The Price

In establishing the listing price for your home, you need to strike a delicate balance between a figure that will scare off potential buyers and a low price that doesn’t represent your home’s worth. Buyers will compare your home’s price with other properties on the market. Therefore, you should use a CMA to assess what consumers are paying for similar homes. CMAs also include information about area homes that failed to sell in recent months along with their corresponding list prices. I can can assist you in obtaining and analyzing that information.

I like to suggest some additional steps to help you set your list price. After analyzing sales data, you may wish to conduct some market research on your own. Attend an open house or two and make an impartial assessment of how those homes compare to yours in terms of size, location, amenities and condition.

I can assist with analyzing all the pertinent information with you to develop a list price. However, the final decision on the listing price for your home is your choice to make.

Source: https://www.car.org/marketing/clients/selling/determiningyourhomesvalue

Given all the rain we have had in the past week it may be a good time to look to check if you are covered from floods and mudslides! Here is what the California Department of Insurance and FEMA want California home owners to know about floods and mudslides in San Diego.

Flood and Mudflow Damage:

• Know that flood damage is NOT covered by most homeowners policies. To be covered in case of a flood, you must purchase separate flood insurance prior to the flood itself.
• Consider purchasing flood insurance. Check with your current insurance provider to see if they offer flood insurance as an add-on. You can also purchase and learn more about flood insurance through the National Flood Insurance Program at floodsmart.gov. The average policy costs around $600 per year. Note that it may take 30 days from date of purchase for the policy to go into effect.
• Remember that an elevated risk of flooding can remain up to five years after a wildfire. Keep track of your renewal date to make sure your policy does not accidentally lapse.
• Not that a mudflow (in which a river of mud moves downhill) is usually covered by flood insurance instead of homeowners insurance.

Mudslide Damage:

• A mudslide is typically classified as “earth movement” and is not covered by most homeowners policies. However, if a mudslide was caused by a wildfire, the resulting damage may be covered.
• If your house is damaged by a mudslide, first file a claim with your homeowners insurance provider and flood insurance provider.
• If your claim is denied, ask for a written explanation. Depending on the amount of damage, you may wish to consult with an insurance coverage attorney to assist you in any dispute with the insurer. You may also file a “Request for Assistance” form with the California Department of Insurance (CDI).
• If your homeowners policy doesn’t cover damages, check whether a Local Assistance Center (LAC) in your area can help with special assistance programs. In a declared state of emergency, you may be able to get help from the Federal Emergency Management Agency (FEMA) or obtain low-interest loans form the Small Business Administration (SBA).

Sources: “Coverage for Flood, Mudflow, Mudslide, Debris Flow, Landslide, or other Similar Event After a Wildfire,” California Department of Insurance; “Flood After Fire Fact Sheet,” FEMA, California Association of Realtors.

Why do we save? We save because we can’t predict the future no matter how hard we try. Saving money can help you become more financially secure and provide a safety net in case of an emergency. Here are a few reasons why we save: retirement, emergency cushioning, education for children, and home buying. It is important to develop a household budget so you can develop a savings strategy and plan. Did you know 21% of Americans do not set any money aside for emergencies? It may be a good time to start looking at how we are developing our savings strategy. Who could have predicted the effects of a global pandemic like Covid-19?

Thinking of downsizing? People of all generations are deciding to downsize their homes. Look below to find out why Baby Boomers, specifically, are choosing to do so! Is it because you are an empty nester or to save money? Here are some stats of why some people choose to downsize in San Diego.