October 2024 Real Estate News

{original post 10/21/2024}

Hello! Thanks for tuning in to this month’s newsletter. Our goal is to bring you valuable real estate content and local updates, so we hope you enjoy it. 

We would also love to hear from you! Let us know what type of content you’d like to see more of in next month’s newsletter!

In this e-newsletter, we’ll cover the recent decrease in interest rates, offer valuable tips for getting your offer accepted, discuss common issues with insurance, and highlight key factors to consider when hiring contractors.

The Schwaegerle Team strives to educate and empower all people on the ins and outs of real estate, so thank you for tuning in and following the team on social media! 

What the Federal Funds Rate Decrease Really Means

The Federal Reserve has dropped the Federal funds rate for the first time since 2020. This means that interest rates for credit cards, lines of credit, and other variable loans will be coming down. This will provide monthly payment relief to people who have been hit hard by these higher rates. 

It does not mean that mortgage rates are immediately coming down. In fact, we’ve already seen mortgage rates drop 1% from the high 6-7% range to about 5-6.5% in the last month. This is because the market had priced in a buffer anticipating that the Federal funds rate would be coming back down soon. They are anticipating another 0.25% cut in November and 0.25% cut in December, followed by another 1% cut next year. 

Overall, this is great news for real estate. We have already seen an uptick in buyer and seller activity. People who have been rate-locked in their homes because their homes are at incredibly low interest rates are finally able to get back into the market. It’s easier to stomach going from a 3% to a 5% rate than a 3% to a 7% rate. 

Our team has been very busy the past few weeks meeting with various buyers and sellers to create a game plan for their next move. We have also had quite a few buyers from out of the area start their search on the Central Coast, so activity has definitely increased. If you are interested in making your next move, now could be a great time to take advantage of the dropping rates and increasing inventory!

Top 5 Tips for Getting Your Offer Accepted

For years, the market has had a steady stream of buyers looking for a home. This can often lead to bidding wars over the most desirable homes. If you see a house that is perfect for you and your family’s needs, how do you make sure you win? In this section, we are going to share some strategies to help you write a winning offer.

Gone are the days when you can start out by low-balling a seller, especially if they’ve been on the market for less than 2 weeks. If it’s been on the market for an extended period of time, then maybe the seller will be open to all offers. But, if it’s a hot new listing, writing a low offer is the best way to lose. 

Here are just a few questions that we ask the listing agent before writing an offer: What are the sellers looking for in the ideal offer? Where are they moving after they sell? How quickly do they need to be in their new home? What terms would be favorable to the sellers in order to win the bidding war?

It all comes down to seller motivation, and it’s critical we have a good understanding of what the sellers need before writing a winning offer. With that said, here are some things to keep in mind to help the sellers choose your offer over the competition:

1. Price. The most important thing to the majority of sellers is how much they net after the sale of their house. That’s why sellers frequently ask for the buyer's highest and best offer in the middle of a bidding war. If you want your offer to win, write the offer at the maximum price you feel comfortable with because you are not guaranteed a counter offer. Make your first offer your best offer. 

2. Earnest Money Deposit. Every offer includes a good faith deposit, also known as an earnest money deposit. A seller wants to make sure a buyer has skin in the game once escrow is opened, so the earnest money deposit shows the seller that the buyer is acting in good faith while they are operating within their contingency period. The earnest money deposit ranges from 1-3% of the purchase price and is a portion of the buyer’s down payment. This deposit is entirely protected by the agreed upon contingencies. We have seen that winning offers include the maximum 3% deposit as it shows the seller that the buyer has strong purchasing power and is committed to the deal. 

3. Escrow Timeline and Contingencies. Because a seller wants to sell to a serious buyer, sellers prefer as few contingencies as possible. In competitive situations, buyers will need to shorten their contingency timeframes in order to win the deal. For example, a buyer has 17 days for their inspection, appraisal, and loan contingencies, but they may need to shorten some or all of those contingencies to 10 or 12 days to get their offer accepted. In some instances, buyers will even release a contingency up front if they are feeling confident in the purchase. Always be sure to consult with your real estate team prior to releasing any contingencies because your deposit is at stake if you prematurely release contingencies. 

4. Prequalification. Receiving a pre-approval from a local and reputable lender will definitely boost the chances of your offer getting accepted. When a seller has a choice between choosing an offer from a buyer working with a local lender versus an online lender (i.e., Rocket Mortgage, Quicken Loans, etc.), they will almost always choose the buyer working with a local lender because that lender has much more knowledge on our specific market and is easily accessible if any issues come up. It’s also wise to submit proof of funds with an offer to show the seller that you have your down payment funds ready to go. 

5. Closing Costs. If you are in a highly competitive situation, you may want to consider paying for some or all of the seller’s closing costs. Closing costs include escrow, title, broker, and lender fees. Those fees typically range from 3-5% depending on the purchase price of the house. Some savvy buyers offer to pay the seller’s closing costs as well as their own in order to increase the net number for the seller.

As always, who you work with matters in any transaction. The agent you choose to represent you will be communicating with the seller’s agent on the other side of the transaction on your behalf. You want to make sure that they are communicating your interest in the home, your strength as a buyer, and that they are fighting for you to get your offer accepted. Sometimes, a hot new listing hits the market, and it’s a dog fight. Only one buyer comes out victorious at the end of the day. If you follow these tips, it could be you!

Issues with Insurance

“We’re sorry, but your homeowners insurance has been dropped.” Have you received a letter like this in the mail from your insurance provider? Unfortunately, we have heard stories from too many clients who have received this type of message. 

The reality is that insurance companies don’t want to have to settle any claims. In California, far too many insurance claims have been submitted due to factors outside of the homeowner’s control and it has caused a number of insurance companies to go bankrupt or simply move out of state. To prevent claims, insurance companies have become much more stringent on what properties they choose to insure. 

Recently, a client shared a story with us that their insurance inspector saw tall weeds in the front yard and issued a notice stating that the weeds must be removed immediately or else the policy will be dropped. We also heard of another situation where an insurance company took satellite images of a house and said they would be dropped because the roof looked old and a tree was growing too close to the house. In both situations, the property owners were thankfully able to attend to the requested repairs quickly to keep their policies, but not all homeowners are as fortunate.

Sadly, one client informed us that their policy was dropped completely due to a miscommunication between mortgage companies. Their mortgage was sold to another mortgage house and they had impound accounts set up to pay for property taxes and insurance. Well, during the transition, the impound accounts were not transferred over and payments were not made to the insurance company, so they were dropped for not paying. If you have impound accounts and your mortgage has recently switched to a new mortgage company, follow up with the new company to ensure your policy is still getting paid each month. 

Now, these are just a few examples of issues with insurance lately. Insurance itself is a detailed and highly important topic, and we’d like to provide you with accurate information on how to understand your current policy, how to know if you are adequately insured, etc. Over the next couple months, we will be having these conversations with different insurance agents and synthesize this information for you. Please let us know if there are any specific questions you’d like us to ask and address in upcoming newsletters. 

Contractors: What to Look for Before Hiring

Finding a reliable contractor to do house projects can be challenging, but making the right choice is essential to ensure your project is done safely and up to code. Here are some tips to keep in mind when hiring a contractor:

1. Verify Their License and Insurance: Always check that the contractor is licensed and insured. This protects you in case something goes wrong and ensures they are qualified to do the work. Here is a link to the state’s license board to verify a contractor’s information and standing.
2. Get Multiple Quotes: Don’t just go with the lowest bid. While it’s important to compare prices, it is imperative to hire a contractor with high integrity, professionalism, knowledge, and quality work. Oftentimes, a low bid could mean corners are being cut.
3. Ask for References: A good contractor should have no problem providing references or showing you examples of their previous work.
4. Check Reviews and Credentials: Look at online reviews, ratings, and any affiliations with professional organizations. This can help you avoid working with unqualified contractors.

Our Recent Experience

Unfortunately, even with experience, we recently learned this lesson the hard way. We hired someone based on his low bid and confidence that he could handle the job. However, after the work was completed and inspected by a professional home inspector, we received some shocking feedback: the inspector said it was the worst electrical work he had ever seen.

When we dug a little deeper, we discovered that he was not even a licensed general contractor despite him saying he was. Needless to say, we had to redo the work with a qualified professional, costing us more time and money in the long run. It was a tough lesson, but it reinforced the importance of vetting contractors thoroughly before hiring them. 

The Happy House Hacking Podcast: Estate Planning

Worried about what happens to your loved ones and your assets if something happens to you? On this episode, estate attorney Matthew O'Leary breaks down the essentials of estate planning, even for young people. Learn how to protect your family from financial hardship, avoid probate court, and ensure your legacy is secure.

Takeaways

• Estate planning is essential for securing your family's financial future and protecting your assets.
• Having a comprehensive estate plan can help avoid probate and minimize the financial and emotional burden on your loved ones.
• Asset protection is an important aspect of estate planning, and there are steps you can take to safeguard your assets.
• Planning for the unexpected, such as incapacity or death, is crucial to ensure your wishes are carried out and your loved ones are taken care of.
• Consulting with an estate planning attorney can help you create a personalized plan that meets your specific needs and goals.
• Follow this link to learn more about estate planning.

The Importance of Estate Planning for Young People

Dream Makers: Making a Difference in Our Community

Did you know that The Schwaegerle Team donates 2.5% of every transaction to Dream Makers? Dream Makers is a local nonprofit dedicated to making dreams come true for terminally ill adults in our community.

Coming Soon

4 bed/4 bath Rice Ranch home in Santa Maria - $1,000,000

3 bed/2 bath on 15 acres in Atascadero - $750,000

2 bed/2 bath with detached 1 bed/1 bath cottage in Paso - Price Coming Soon!

Current Active Listings 

1981 Green St, Cambria - Multifamily Zoned 1.25 acre lot Senior Affordable Apartment project

290 Daffodil Ave, Nipomo - 5 bed/3 bath spacious home in Nipomo 

3860 S Higuera St #B4, San Luis Obispo - 2 bed/1 bath affordable living in SLO

3960 S. Higuera St #22, San Luis Obispo - 3 bed/ 2 bath in Creekside Mobile Home Community

Current Pending Listings

2425 Canal Dr, Stockton - 2 bed/1 bath beautifully updated with low maintenance landscaping

110 Seacliff Dr, Shell Beach - 4 bed/ 3 bath just steps away from the ocean

10815 San Marcos Rd, Atascadero - Off-market transaction with partially completed renovations

Just Sold

3211 Via Ensenada, San Luis Obispo - $693,000

2478 Victoria Ave #104, San Luis Obispo - $825,000

531 Lemoore Ave, Pismo Beach - $1,000,000

1432 Tanglewood Ct, San Luis Obispo - $1,140,000

420 Campana Place, Arroyo Grande - $1,240,000

Let's Be Social

Thanks so much for reading our newsletter this month! We want to hear from you! Please let us know how we can support you on your real estate journey. Whether you just purchased a new home, want to explore home-buying options, are curious about what your property might be worth, or just want to know more about the market, please reach out! 

@theschwaegerleteam
@your.realtor.slo
@kylereis70

You can also follow us on YouTube and Facebook for more updates throughout the month.

The Schwaegerle Team donates 2.5% of all transactions to Dream Makers. Thank you for helping make dreams come true for terminally-ill adults in SLO County!