6 Reasons to Come Up With a Large Down Payment

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Buying a home is undoubtedly a massive purchase that requires a substantial amount of money up front in the form of a down payment. But it can be tough to come up with a lump sum of money. As such, many homebuyers choose to buy homes with minimum down payment amounts, such as 5% down, 3.5% down, and even 0% down in some cases.

But there are a number of benefits associated with coming up with a larger down payment. By putting 20% down on a home purchase, you’ll have plenty of benefits to take advantage of. Here are some reasons why coming up with a large down payment for a home purchase will work to your advantage.

1. Avoid Paying Private Mortgage Insurance (PMI)

If your down payment is less than 20% (for a conventional mortgage), you’ll need to pay Private Mortgage Insurance (PMI). This amount is typically added to the monthly mortgage payment and is required by lenders to reduce their risk should you ever default on your loan payments.

This can be a big chunk of money added to your monthly payments. The amount added to your payments will range from 0.5% to 1% of the property value annually, depending on how much you actually put down. This can add up to thousands of dollars spent on mortgage insurance every year.

For instance, you could be paying as much as $3,000 a year – or $250 a month – based on a 1% PMI fee on a $300,000 mortgage. That’s a lot of money, and can add up very quickly over the term of your mortgage. If you’re able to come up with a hefty 20% down payment, you could be saving all that money year after year.

2. Reduce the Loan Amount

The less you have to borrow, the less you have to pay back. It’s that simple. You can effectively reduce the amount of money you need to borrow to finance a home purchase by coming up with a larger down payment. And the less money you have to take out, the smaller your monthly payments will be.

Let’s say you agree to buy a home for $500,000. If you put down 20% – or $100,000 – you’d have to borrow $400,000. If, on the other hand, you only put down 5% – or $25,000 – you’d have to borrow $475,000.

A $400,000 mortgage at 4% (assuming a 5-year, fixed-rate mortgage) would translate into monthly payments of $2,326.42, while a $475,000 mortgage with the same rate and terms would require $2,762.62 in monthly payments. That’s a difference of $436.20 per month, or $5,234.40 a year.

Borrowing less money obviously means that you’ll have less to pay back, leaving you with more money left over to spend on other things, including saving up for retirement.

3. Pay Your Mortgage Off Faster

Nobody wants to may a mortgage forever. That’s usually not the plan. Every mortgage is set up so that there is an end date at which point the entire mortgage amount will be paid off in full. It should be your goal to pay off your mortgage at some point in the future; ideally, the sooner the better.

Imagine the savings you’d realize if you no longer have a mortgage to pay. All that money going towards those mortgage payments could be put to much better use.

You can realistically pay off your mortgage a lot faster if you have less money to pay back. By putting down a significant down payment, you can effectively reduce the amount you need to borrow and subsequently reduce the amount of time needed to fully repay your mortgage balance.

4. Increase Chances of Mortgage Approval

Coming up with a large down payment shows lenders that you have the financial capacity to afford a home purchase. Not only does a big down payment amount reduce the amount you have to borrow, it also shows lenders that you’re able to save, which goes a long way for your creditworthiness.

Since a higher down payment reduces the loan amount, your loan-to-value ratio (LTV) will be lower. Lenders use your LTV for lending risk assessment purposes before approving or rejecting a mortgage. It basically represents the total loan amount relative to the value of the home you agreed to purchase. If your loan amount is a lot lower than the property value, your LTV will also be lower, which makes you less of perceived risk to a lender.

Ultimately, a larger down payment can help boost your odds of mortgage approval, which is exactly what you’re aiming for.

5. Improve the Chances of Getting a Better Interest Rate

In addition to increasing the chances of getting approved for a home loan, a larger down payment can also help you secure a lower interest rate. Lenders tend to offer lower rates to borrowers who present less of a risk to them, and coming up with a big down payment can place you in that category.

Lenders prefer to lend to borrowers who take out smaller mortgages. That’s because they’ll have a better chance of selling the property for more than what was borrowed should the borrower default and end up in foreclosure. As such, lenders will usually offer low-risk borrowers a better interest rate, and a lower rate can translate into tens of thousands of dollars in savings over the life of the loan.

For instance, a 4% interest rate on a $400,000 mortgage will require far less interest payments than a 6% rate on the same loan amount. At the end of a 25-year amortization period, you would have paid $372,927 based on a 6% interest rate compared to $233,309 with a 4% rate. That’s a difference of $139,618!

There’s no doubt that a lower interest rate can save you a ton of money at the end of the day, and a bigger down payment can certainly help.

6. Boost the Odds of Winning a Bidding War

The California real estate market continues to sizzle, and as such, multiple-offer situations are the norm. If you find yourself in this position as a buyer, you’ll need to ensure that every aspect of your offer is as strong as can be in order to come out the winner. While there are plenty of important factors that go into a strong offer, one of them is a large down payment.

Sellers will likely look favorably on bidders who are able to come up with a sizeable amount of money to be put towards the purchase price of the home. It shows a level of seriousness to buy, as well as the financial capability to secure a mortgage.

Failure to secure a mortgage is one of the biggest reasons why real estate deals fall through, and sellers don’t want to risk ending up having to get back in the market after a failed transaction. If you’re able to come up with a bigger down payment, you’ll be perceived as a strong buyer in the eyes of a seller, which can be particularly beneficial during bidding wars.

The Bottom Line

There are obvious financial perks that come with larger down payment amounts. Ultimately, you’ll be able to increase the odds of securing a mortgage, pay less every month, and pay your mortgage off faster. Of course, saving up for a hefty down payment can take a while, but it might be worth the time and effort based on the benefits you’ll be able to afford.

What Are HOA Transfer Fees and Who Pays For Them?

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Whether you’re buying or selling a condo or other type of home governed by a homeowner’s association (HOA), there are few extra considerations that need to be made compared to the average freehold home.

No matter what type of home you buy or sell, there will definitely be a list of closing costs that you’ll have to pay. And when it comes to homes governed by an HOA, there may be HOA transfer fees to pay on top of all other closing costs.

HOA’s are responsible for managing the housing development and collecting fees from all homeowners in order to cover the costs associated with the community’s upkeep. They also establish and enforce a set of regulations that are meant to maintain the value of the community, and all homeowners are required to abide by them.

Among the rules that HOA’s may have in place are HOA transfer fees, which might have to be paid when a unit in an HOA is sold and thereby transferred to a new owner. But what exactly is this transfer fee, who pays it, and why does it have to be paid at all?

What Are HOA Fees?

HOA transfer fees are actually standard fees that may occur when a property is transferred from one owner to another. They are meant to cover the costs associated with preparing documents, handing out HOA’s rules to the new owner, dealing with property inspection records, changing names in the homeowner databases, changing security codes, creating new security cards, and other administrative costs.

How Much Do HOA Transfer Fees Cost?

HOA transfer fees vary from one community to the next and are established by HOA management. These costs are charged based on the specific types of services that the HOA provides to both buyers and sellers involved in a transaction. That said, these specific types of fees typically range between $100 to as much as $1,000, though the average is somewhere around the $250 mark.

While it’s the HOA that determines the cost of transfer fees, state laws can come into play to regulate them. For instance, California state laws only allow HOA’s to charge transfer fees for costs directly associated with gathering, copying, and distributing documents.

Buyers and sellers should be aware that HOA transfer fees aren’t always included in real estate contracts. That’s because it’s not a term that can be negotiated between the two parties as it’s a fee that is mandated by the HOA.

Having said that, HOA’s are sometimes required to disclose these transfer fees to all parties prior to the sale. In California, HOA’s must make certain disclosures to buyers and are required to provide an estimate of the transfer fees within 10 days following a request for disclosure documents. Buyers and sellers would be well-advised to get in touch with the HOA management team to find out about any transfer fees that may be charged.

Who’s Responsible For Paying HOA Transfer Fees?

In California, HOA transfer fees are usually the responsibility of the seller and are added to all the closing costs when escrow is complete. However, there may be cases where the buyer is billed for this expense.

It’s important for both buyers and sellers to determine who will be responsible for paying this transfer fee in order to budget for all closing costs accordingly.

The Bottom Line

It’s not uncommon for buyers and sellers to be surprised by certain costs by the time their real estate deals close, and HOA transfer fees can be one of them. Don’t let these fees come as a surprise to you and make sure you do your due diligence, no matter what side of the real estate playing field you happen to be on.

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9 Things to Know About Buying Pre-Construction Homes

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There are obvious perks to buying a brand new home; namely, new materials, the ability to customize to your liking, and the potential to buy at pre-construction prices. But as convenient as new home construction may be, there are certain things that buyers should be wary of when buying a new home from a builder.

Understanding all the ins and outs of buying pre-construction can help you make a more informed decision before being bound by the contract.

1. You’ll Need a Hefty Down Payment

When you purchase a resale home on the market, you can put as little as 5% down for a conventional mortgage (with private mortgage insurance), and even 3.5% for government-backed mortgages. But buying new home construction with a builder will require you to put a bigger down payment towards your purchase, typically as much as 20% or more of the final purchase price.

That said, the down payment isn’t usually due all at once. Typically, builders require buyers to submit a 5% deposit upfront, then pay the remainder in increments over the course of the next year or two. If you’re buying new home construction, be prepared to dish out a larger down payment for the property.

2. Delays Are Commonplace

When you buy a new home with a builder, your contract should stipulate the completion date of construction. However, it’s very common for these completion dates to get pushed out a few times and by several months or more.

It should be no surprise that anything can happen to cause delays in the completion of construction. Even still, delays can be frustrating for buyers who have already made plans to move in by a certain date.

While delays with new builds are common, it would still be in your best interests to do some research on the builders that you’re considering buying from to see which ones have a habit of experiencing delays versus those who are pretty good at sticking to their schedules. Some builders are just better than others at foreseeing potential delays and taking steps to reduce their occurrences.

3. There Could Be Hidden Costs Involved

In addition to the deposit and purchase price spelled out in the purchase contract, be wary of plenty of other hidden fees that might not come up until well into construction. It’s possible for buyers to get hit with a ton of surprise closing costs, such as development charges and levies. These extra expenses can cause the overall price to soar.

Do your best to be diligent when inquiring about any extra charges that are likely to pop up right before closing so you can budget appropriately. If possible, set a limit of how much you are comfortable with paying from the onset so you don’t wind up stuck with a contract that will cost you more than what you expected. Ideally, these extra fees shouldn’t end up costing you any more than 2% of the purchase price.

4. Model Homes Are Usually Filled With Upgrades

The model home is probably what prompted you to buy from the builder, thanks to all the fancy upgrades and finishes that are typically used to create a stunning home. But don’t be lured into making a purchase after being mesmerized by the model home. Many of the finishes used in model homes are upgrades, which means they’ll cost extra.

Find out exactly what finishes and materials come standard with the home purchase versus those that are considered an upgrade and will require additional expenditures. It’s crucial that you fully understand what you’ll be getting with the base price and how much you would have to spend to get certain finishes that don’t come standard. Calculate exactly how much any upgrades will end up costing you so you work with a price that you’re comfortable with and won’t be unpleasantly surprised.

5. Builders Don’t Like to Negotiate on Price

It’s commonplace for buyers and sellers to negotiate on the price of resale homes, but builders typically expect to be paid the quoted price of their homes. They’re not in the habit of wheeling and dealing with buyers, because if they do, that will open the floodgates to more negotiations with future buyers, which they would much rather avoid.

That said, you can still try to lower the overall cost of the home purchase by asking the builder to cover some closing costs or throw in an upgrade or two. Builders may be more open to negotiating in this way while still keeping the purchase price as is.

6. The Home Should Be Inspected When Complete

Just because you’re buying a brand new home doesn’t mean it shouldn’t be inspected before you take possession. Even though new homes are often required to pass inspections from the municipality, you might want to bring in your own home inspector to check the place out in addition to the final walk-through that builders generally allow just before closing.

7. Not All Warranties Are All-Encompassing

New homes usually come with a warranty from the builder, but that doesn’t mean that the warranty you get covers absolutely everything. Many components of new homes come with their own warranties from contractors and manufacturers, such as those for windows, doors, HVAC systems, and so forth. In this case, you’d have to deal with third parties if issues arise. It’s important to find out exactly what is covered and when those warranties expire. 

8. Other Surrounding Developments Can Pop Up in the Future

Just because there may be greenspace surrounding the home you buy today doesn’t mean there won’t be other structures built some time in the future. Be aware that future developments surrounding your home and subdivision can be built, which could impact your enjoyment of your home if you’re not prepared.

Builders don’t necessarily have to tell you about what plans might be in the forecast, so it’s up to you to either find out if there are plans in the works for other developments or simply accept whatever pops up in the near future.

9. You Should Get Your Own Real Estate Agent

Builders typically have their own team of agents who are responsible for sealing the deal with buyers, but that doesn’t mean you have to go in it alone. Instead, you’d be well-advised to hire your own real estate agent to represent you in order to ensure the contract you enter is a sound one. The builder’s agents represent the builder, not you. That’s why you should have your own representation to look after your best interests.

A real estate agent can guide you about which features you might want to add for resale purposes. They’ll also be able to help you identify which features come standard versus those that are upgrades and come at an additional cost.

The Bottom Line

Buying a brand new home from a builder can afford you with the benefit of being able to customize the home to your tastes and not have to worry about repairing or replacing any materials or systems anytime soon. It’s also a great opportunity to buy at pre-construction prices and build some equity by the time the closing date arrives.

But buying pre-construction doesn’t come without its downsides. The earlier you’re made aware of certain potentially negative aspects of buying pre-construction, the better able you’ll be to make a sound buying decision.

INFOGRAPHIC: 16 Guidelines to Follow For a Well-Organized Home

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7 Ways to Eliminate Pet Odors Before Listing

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You might be sharing your home with a furry friend or two, but those cute critters have a tendency of leaving foul odors behind. While you might not notice these smells that much, buyers will. You can be sure that any bad odors from your pets will be a huge turnoff for buyers who may otherwise have been inclined to put in an offer on your home.

Here are some ways to help you get rid of those awful scents before the first prospective buyer walks through your front door.

1. Open the Windows

One of the first things you should do to eliminate odors is open up all windows of the home and leave them open for a few hours. It only takes a minute to do and is highly effective. Letting all that foul odor out while allowing fresh air in can help circulate all those smells and refresh your indoor air. Try to make it a point of airing out your home at least once a week.

2. Wash Your Window Drapes

Bad smells have a knack for lingering on softer surfaces like fabric. Take down all those drapes hanging by your windows and throw them in the wash to rid them of any pet odors and refresh them with a renewed scent.

3. Steam Clean Your Upholstery

Not only should your drapes be laundered, so should your upholstery. Pet odors can easily linger on the surface of your sofas and chairs, especially if your furry friend has a tendency to lay on them.

Simply spraying them with cleaning solution isn’t going to do the thorough job that needs to be done. Instead, you should consider having your upholstery steam cleaned – either done yourself or by a professional – in order to eliminate any microscopic smells that surface cleaning won’t remove.

4. Shampoo Your Carpets

If you’ve got any wall-to-wall carpeting in your home, you may need to have it shampooed. But before you take this step, try deodorizing the carpeting by sprinkling some baking soda all over it and let it sit for a few hours to trap any odors. After that, vacuum it all up to get rid of the baking soda and the trapped smells along with it.

If this doesn’t do the trick, then you may have to deep-clean the carpets in the form of shampooing. You can either do this yourself by renting a carpet shampooer from your local home improvement store or hire the pros to do it for you. Shampooing your carpets can be tricky because you don’t want to use too much soap, which will make it hard to eliminate all the suds. In addition, you want to make sure the carpet is entirely dry before replacing any furniture on it.

You might also want to try using a HEPA vacuum, which is designed to trap minuscule particles that the naked eye can’t see. The filters in HEPA vacuums can remove years’ worth of pet dander and odor build-up in carpeting. Again, you can rent this piece of equipment to get the job done.

5. Clean Your Pets Toys

The surface of your pet’s toys contain all sorts of odor-producing particles after being chewed on all day long, so be sure to thoroughly wash these items as part of your overall strategy to eliminate pet odors from your home. And don’t forget to clean and wash your pet’s bowls, bed, cage, and litter box/pee pads too.

6. Change Your HEPA Filters

Ideally, your home should be outfitted with a HEPA air filtration system which is designed to traps particles like pet dander, dust mites, pollen, and even cigarette smoke. Not only are these highly effective in eliminating odors, they’re also fantastic for improving the overall air quality in a home. This makes for a much safer and pleasant interior.

That said, the filters on HEPA air filtration systems need to be replaced every so often. These filters can become inundated with debris after working so hard to clean the air. Regularly changing them can ensure that they are working properly to continue eliminating odors from your home, including those that come from your beloved pet. 

7. Repaint Your Walls

Sealing your walls can help get rid of any unwanted pet smells that are lingering around on these surfaces. You can easily seal your walls by either applying a sealant product appropriate for drywall, but also by giving your walls a fresh coat of paint. Not only will you be able to effectively rid your home of these unpleasant smells, but you’ll also be giving your home a facelift at the same time.

The Bottom Line

Before you list, it’s imperative that you take steps to prep your home for visiting buyers, and one of the tasks on your list is to ensure your home has a pleasant smell. While you don’t want to overpower your home’s interior with strong smells in an effort to mask any odors from your pets, you do want to neutral the smell and leave it smelling clean. If you’ve got a pet as part of the family, keep these tips in mind to keep any bad odors at bay.

What’s the Difference Between Mortgage “Term” Vs. “Amortization”?

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When it comes time to buy a home, one of the first things you’ll have to do is shop around for a mortgage. When doing so, you’ll quickly realize that there are plenty of different types of mortgages to choose from. It’s obviously important to determine how each type of mortgage differs in order to make the right choice, but it’s also helpful to understand how a mortgage ‘term’ and ‘amortization’ differ from each other.

In fact, terms and amortizations are often the sources of great confusion among buyers, many of whom aren’t fully aware of their distinctions. So, what exactly is the difference between a mortgage term versus amortization?

Mortgage Term

The mortgage term refers to the length of time that you are under contract with a mortgage lender. During this time, you’ll also be committed to the interest rate that you locked into when you first entered the contract, as well as any conditions and terms that come with the mortgage.

The majority of mortgage terms can be as short as six months, though the most common term length is typically five years. When your term has elapsed, the mortgage can be renewed for the loan amount left to be repaid with your current lender, usually with the same terms and conditions. However, a new interest rate will be applied based on the current market.

Essentially, the term just represents the time frame within which you are committed to your lender. Once the term is up, you can either renew with your current lender or switch to another if you are able to find a lower rate and better conditions. At the end of the day, the mortgage term is what your interest rate is based on.

Mortgage Amortization

The mortgage amortization refers to the length of time that you’ll have to repay the loan amount in full. It begins when you first make your home purchase and take out your mortgage. The more common amortization period among American homebuyers is 25 years, which means the home loan would be fully repaid after 25 years based on the monthly payment amount and interest rate.

Obviously, the longer the amortization period, the lower your monthly mortgage payments will be simply because you have more time to pay back your loan. However, the mortgage will cost you more over the long run because you’ll be paying more in interest until the loan amount is fully paid off.

For instance, let’s say you have a mortgage amount of $200,000 with a 4% interest rate and 5-year term. With a 25-year amortization period, you’ll end up paying $116,656 in interest over the life of the mortgage, compared to $66,256 over a 15-year amortization period. However, the former would offer you a smaller monthly mortgage payment of $1,055.67, compared to $1,479.38 for the latter.

Borrowers who have the funds available to comfortably cover larger monthly payments may opt for shorter amortization periods in order to pay off their mortgages faster and save tens of thousands of dollars in interest. However, those on a tighter budget may want a longer amortization period in order to effectively reduce their monthly debt payment obligations.

While the term of your mortgage is the time frame that your interest rate is based on, the mortgage amortization impacts your monthly mortgage payments.

The Bottom Line

While the mortgage term and amortization are closely related, they are certainly different. Understanding the difference between the two can help you identify what type of interest rate you’d get and how much your mortgage will cost you overall. Based on these figures, you’ll be better able to pick a mortgage with a term and amortization period that makes financial sense for you.

Things Guests Notice About Your House Right Away

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It’s always nice to have people come to visit, but being a host typically involves a little tidying up. But getting your home ready for guests might involve a little more than just clearing the shoes out of the front entrance or getting that pile of dishes done. Your guests will notice a lot more than what you may think.

The Smell

You may have gone “nose blind” to the scent in your home because you’ve become accustomed to it, but that smell will be noticeable to your guests once they walk through the front door – whether it’s pleasant or not. Regardless of whether the scent is coming from burning incense all day or last night’s fried fish dinner, you can bet that anyone who comes over will notice it right away.

To make sure you don’t turn anyone off, try to neutralize the odor in your home. Even smells that you might enjoy could be off-putting to others. Eliminate the source of the odors, then take some steps to improve the smell of your home. Open the windows to let some fresh air in, light a candle, or lay out a few vases of freshly-cut flowers to infuse the interior air with a waft of pleasant smells.

Counter Clutter

Your front entrance and floors may be tidy and clean, but what about other areas of your home? Table and counter surfaces are notorious for accumulating clutter which doesn’t exactly do much for the look and feel of your home. All those small appliances, cell phone chargers, or piled-up mail can create unsightly clutter that guests won’t be too impressed with.

In order to keep clutter at bay, make it a point of staying on top of the tidying. Toss out items you don’t need, and put things away in their proper places. Keep a few decorative boxes or baskets handy to store little knick-knacks that tend to linger on surfaces for longer than they really should.

Poor Lighting

One of the most underestimated and neglected components of home decor is lighting. Homeowners often pay plenty of attention to color schemes, furniture, finishes, hardware, and artwork, but it’s not uncommon for them to forget about the lighting that is needed to illuminate such components. Inadequate lighting can make a room feel dull, dingy, or even off-balance. 

Every room in the house requires its own particular type of lighting. For instance, the kitchen does well with pot lights, pendant lamps, and under-cabinet lighting, while the living room should ideally have recessed lights on dimmer switches, table lamps, and floor lamps. Proper lighting can make a huge difference in your home’s atmosphere, which your guests will certainly notice.

Bathroom Amenities

Anyone who uses your bathroom will definitely notice if you’re missing any necessities. Toilet paper, tissues, and clean towels, for instance, should always be well-stocked in any bathroom that is used on a regular basis. And if you’re hosting any overnighters, the list of amenities will grow to include things such as bath towels, shampoo and conditioner, bath soap, and maybe even a robe or hair dryer.

Before you have guests over, make sure your bathroom is equipped with everything they’ll need to enjoy a comfortable stay.

Dirty Bathroom

While we’re on the subject of bathrooms, the level of cleanliness should be mentioned. There’s nothing more disgusting than a filthy bathroom. All surfaces – including the sink, toilet, bathtub, and floors – should be wiped down before your first guest arrives.

It goes without saying that your bathroom should be kept clean at all times, whether or not you’ve got visitors. But if not for yourself, clean for your guests, because they will likely form an opinion about your level of sanitation if you don’t.

Wall Art

Whatever is hanging on your walls will grab your guests’ attention. You might not necessarily care too much about what people think about your taste in wall art, but you should know that people will definitely notice it and develop an opinion of it. It’s common for people to judge homeowners based on their choice in artwork, so if you want to make a good impression, then you may want to take a closer look at what’s hanging on your walls.

Plants and Fresh Flowers

Speaking of greenery, people have a tendency of noticing the presence – or lack thereof – of plants and flowers in a home. Generally speaking, fresh greenery evokes a positive vibe thanks to the colors and scents that it gives off. Plants and flowers have a knack for livening up indoor spaces, especially those that are lacking in decor. Just be sure to keep your greens well-watered so they’re not wilted.

Messy Fridge

If you’ve got good friends coming over who are accustomed to fetching their own drinks or snacks, then you’ll want to make sure your fridge is clean. Any caked-on spills on the shelves or rotting food products that are giving off a nasty odor should be eliminated right away. All it takes is a few minutes to go through the items in the fridge, remove whatever has stayed past its shelf life, and give the shelves a good wipe.

While you’re at it, make sure your fridge – as well as your pantry and/or bar – is stocked with everything you think your guests will need to fill their bellies and quench their thirst. One of the first things hosts usually do is offer a drink or refreshment, so be sure to have what you need to please your guests.

The Bottom Line

If making a good impression on your guests matters to you, then perhaps you might want to take a closer look at what they really notice and make any necessary changes.  Don’t bother with time-consuming tasks that guests likely won’t even notice, like vacuuming under the sofa or reorganizing your linen closet. Instead, knowing what visitors are really paying attention to can help you focus on elements of your home that really matter when it comes to impressing your guests.

6 Signs of a Seller’s Markets

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Whether you’re a buyer or seller, knowing what type of market you’re currently in will make a big difference in your approach. Obviously, a seller’s market is a good thing for homeowners who are thinking of listing their homes for sale. Buyers, on the other hand, need to go into their homebuying strategy with a little more caution and ensure they’re adequately supported by an experienced real estate team.

Regardless of what side of the real estate coin you happen to be on, here are some tell-tale signs that you’re smack dab in the middle of a seller’s market.

1. Inventory is Tight

Supply and demand play a key role in determining whether or not the market favors buyers or sellers. If supply is short relative to the demand, that’s typically a sign of a seller’s market. The fewer homes on the market, the more competitive it will be for buyers, which means sellers are typically in the driver’s seat.

2. Multiple Offers Are Common

A sure sign of a seller’s market is the frequency of bidding wars, whereby several buyers submit their offers on the same property at the same time. In a multiple offer situation, sellers are often able to get well over the asking price as buyers compete against each other to come out the winning bidder. It’s not uncommon for buyers to find themselves in several bidding wars before finally realizing a successful deal.

If multiple offer scenarios happen more frequently, you can safely assume that the market is in favor of sellers. And as the frequency of bidding wars increases, so do the sale prices. As such, you can expect to pay more for homes in a seller’s market, which brings us to our next point.

3. Prices Are on the Rise

As the demand for homes increases (with a subsequent decrease in supply), so does the price of real estate. It’s the simple law of supply and demand at play that dictates which direction housing prices will go. And in a seller’s market, housing prices and demand tend to follow the same direction.

California’s housing prices have been on a steep incline over the recent past as the perfect storm of high demand and low inventory has defined markets across the Golden State. As such, California is certainly experiencing a strong seller’s market with no evidence showing that it’s running out of steam anytime soon.

4. Sale Prices Exceed Listing Prices

Not only do prices tend to rise in a seller’s market, they can actually push past the actual listing prices. This is typical in a bidding war, as several buyers are trying to outbid each other.

5. Low DOM (Days On the Market)

A good way to identify a seller’s market is by the amount of time it takes for listings to sell. Real estate professionals can access data that tells them the number of days a listing sat on the market before being sold. The fewer the number of days on the market, the more the market is siding with sellers.

It’s not uncommon for listings in a seller’s market to be sold the same day they were listed. Given this information, buyers may often have to make a quick decision on a hot property if homes are being snatched up as quickly as they are listed.

6. Sellers Don’t Offer Incentives

In a buyer’s or transitional market, sellers may often consider offering buyers incentives as a means of encouraging offers, especially if the listings have been lingering on the market. Sellers can offer all sorts of different incentives, such as offering to cover closing costs, throwing in the furniture and appliances, or even offering cash back to pay for any requested repairs.

But in a seller’s market, incentives are rare, if they even exist at all. There’s no incentive for sellers to sweeten the deal if buyers are flocking to their listings. As a seller’s market heats up, incentives are virtually nonexistent.

The Bottom Line

Homeowners obviously want to get the most money when they sell, and a seller’s market is definitely the best and easiest time to do that. In this market, sellers have the advantage of being a little more selective in the offers that come through and can be more demanding with their sale price and terms of their offer. On the other hand, buyers need to be well-prepared when faced with stiff competition from other buyers, as is customary in a seller’s market.

Right now, it’s a great time to be a seller in California. All the signs of a seller’s market are there and have been for quite some time. Whether you’re buying or selling in this particular market, be sure to team up with a seasoned real estate professional who can help you make the most of the housing climate we’re in today.

7 Reasons Your Credit Score Dropped

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Your credit score is a critical component of your financial health, so you want to make sure it’s as high as it can be. If it’s in bad shape, you’ll find it difficult to get approved for a mortgage, auto loan, and other loans on credit.

But if you think all is well with your finances, it can be rather disheartening to find out that your credit score dropped from one month to the next. The question is, how and why would this happen?

There are plenty of reasons, including the following.

1. Your Payment is Over 30 Days Late

One of the biggest reasons why a credit score plummets is because of missed a payment that is at least 30 days overdue. If you were a couple of days late on a payment, you won’t notice a difference in your credit score. But once it’s past due by at least 30 days, it will be reported to the credit bureaus. When the credit bureaus get wind of your overdue payment, your credit score will suffer.

Your payment history accounts for 35% of your credit score, so you can be sure that a missed payment will have a major impact. Even just one missed payment can make a big difference. Not only will your credit be dinged, you’ll also be stuck with a late payment fee from the creditor you owe.

2. You Maxed Out Your Credit Card

It’s recommended that you stay well under your credit limit on your credit card if you don’t want your credit score to be affected. Your credit utilization plays a big role in the health of your credit score, so you don’t want to spend so much on your credit card that you have little or no available credit left.

If you make a large purchase on your credit card one month, your lender might think that you depend too much on your credit to make purchases, which they’ll view unfavorably. As such, you might notice a drop in your score even if you pay off the entire balance in full and on time.

3. You Applied For a Few New Credit Accounts

Too many new accounts opened within a short period of time can be a bad thing for your credit score. Every time you apply for another credit account, the creditor will pull a “hard inquiry” on your credit to verify your financial health and check out your payment history.

Creditors aren’t usually in the habit of extending credit to those with a bad track record of late or missed payments, so checking your credit is a crucial way for them to make sure you’re a low-risk borrower.

But every time they check your credit, your credit score can drop a few points. And the more accounts you open, the more inquiries will be made, which means your credit can be significantly affected as all those hard inquiries add up.

4. You Recently Closed an Old Account

Old credit can actually be beneficial for your credit score, even if you don’t use it. Financial advisors will often recommend keeping old credit accounts open in an effort to improve credit scores, so closing them can actually have the opposite effect on your score. If you’ve recently closed an old account, your credit score might drop.

5. You Paid Off One of Your Loans

Paying down your debt is typically viewed as a positive thing for a person’s financial health, but sometimes paying off a loan can be a bad thing for your credit score initially. After your loan has been paid off and the account has been closed, you’ll have one less account on your books, which can impact your score.

That’s because having a mix of different types of credit helps establish and maintain a sound credit history, which is therefore good for your score. If you take one account out of the mix, your credit score could decrease.

6. Your Name is on Someone Else’s Delinquent Account

If you co-signed for someone else’s loan, you take on a huge risk if they happen to default on their payments. Some people may not be able to get approved for a loan on their own without someone else’s help, which is why they would need a co-signer to get the loan they require.

If the borrower happens to be very good at making their payments in full and on time each month, your credit score can actually get a boost. But the opposite is also true: if the individual is delinquent on the loan, your credit score can suffer.

7. There’s a Mistake on Your Credit Report

Sometimes a drop in your credit score might not necessarily be your fault. It’s possible that there’s a mistake on your credit report that’s pulling your score down. To find out for sure, you’d have to pull your report (which you can do for free once a year) and review it to see if there are any errors.

If you find any, that could explain the sudden drop in your score. In that case, you should have it investigated and resolved to help bring your score back up to where it should be.

The Bottom Line

There are all sorts of reasons why you may have noticed a drop in your credit score. The key is to identify the exact reason why your score changed for the worse and take steps to rectify it. You can also get in touch with a financial advisor or credit counselor who can guide you on the path to a solid credit score.