Home Ownership

Climate Change: How Does It Affect Your Home?

The construction, financing, insuring, and maintenance of all buildings have undergone gradual updates over the last several years due to inexorable climate change. For homeowners, once optional features are now standard in new construction. Retrofitting homes with climate-adaptive features is becoming the norm. Here’s how climate change is affecting homeownership and what you can expect in the future....

The steady ratcheting up of climate extremes

Weather patterns over the last decade are erasing doubts about the reality of climate change. Hurricanes are becoming more intense, wreaking devastation in the southeastern United States. So-called “Tornado Alley,” which once covered the Midwest, has shifted east into states such as Tennessee, Mississippi, and Alabama, where the number and intensity of tornadoes have increased. The southwestern states are enduring a long-term drought, which brings the risk of massive wildfires....

These environmental conditions are forcing changes in the design and construction of all types of buildings. As homeowners, we must adapt to protect our investments. ...

The impact of climate change on homeownership

Here are the most noticeable upgrades that climate change is imposing on home construction and remodeling:

The construction of new homes is incorporating features directly related to climate change. Insulation, thermal sheathing, and seam sealing behind the outer facade material are more robust, helping prevent outside temperatures from increasing HVAC costs.
Retrofitting homes with more climate-control features, both inside and out, is on the rise.
Local or state codes may require certain structural safeguards, such as “hurricane straps,” to protect the roofs of houses along the Gulf Coast.
HVAC systems are more efficient than ever, seeking to insulate homeowners from utility rate increases. Heat pumps process air cost-efficiently. Smart-home thermostats ensure the most efficient operation of HVAC equipment.
Building materials are made from nontoxic and environmentally friendly materials.
Solar panels, though still expensive, help homeowners save on utility costs.
Lighting has advanced from incandescent to fluorescent to LED bulbs, reducing electricity use to pennies on the dollar.

Here are the lending and insurance financial effects of climate change:

Banks and other lenders are applying ESG principles to their lending practices. Environmental, social, and governance standards are used to rate vendors and affect lending guidelines. Lending terms are shaped to encourage “green” building practices. Lenders do climate risk assessments in disaster-prone areas to shape lending policies.
Houses in high-risk areas, such as the Gulf Coast hurricane zones and California wildfire zones, face a double whammy: higher insurance rates and lower home values as demand for properties in those areas wanes.
Some insurers have withdrawn from the hardest-hit states. The limited number of insurers means increased rates.

Industry experts advise home shoppers not only to crunch the numbers on the purchase price, but also to assess how environmentally resilient the home’s building materials are and whether it needs retrofitting if it is an existing home. Be sure to obtain detailed quotes from mortgage lenders and insurance companies before committing to purchase, and ensure the numbers fit your budget....

Selling, Selling Your Home,

Smart Selling—Home Price Reduction vs. Closing Credit

For a seller, when is a home price reduction a good choice? Say you’re selling your home and have a decent offer in hand. But to get the agreement, the buyers want to negotiate a credit from you at closing. Should you agree to that, or would a home price reduction be the smarter option? Here’s how to think it through....

Is one as good as the other?

To illustrate how each concession works, say you get an offer on your house for $300,000. The buyers request a $7,000 credit toward their closing costs. You and your agent consider offering a $7,000 price reduction instead. In most cases, the numbers support a price reduction rather than a credit. Here’s why:...

A buyer hungry for credit at closing could be short on cash for the purchase. This becomes more apparent when you offer a price reduction, and they still insist on a credit.
Since many closing fees are calculated as a percentage of the sales price, they will decrease with a sales price reduction, but will remain higher when you issue a closing credit instead.
A lower sales price could reduce capital gains tax liability later. People below certain income thresholds pay no capital gains tax on the sale of their homestead if the capital gain is below $250,000 for individuals and $500,000 for married couples. A lower sales price might make the difference between paying the tax and not paying it.
Lowering the price could help avoid a mortgage lender’s loan-to-value limit. Your buyer’s mortgage company will only lend against what their appraisal of the home’s worth is. If the sales price exceeds that limit, the buyer and seller must reach a compromise by either the buyer putting more cash down on the house, the seller reducing the price, or both. A sales price reduction addresses this issue.

Being smart about a home price reduction

While a home price reduction generally prevails over a closing credit, price reductions should be used strategically....

First, don’t reflexively drop the price if no offers come right away. Instead, your agent should collect buyer feedback from showings and open houses. Rather than just dropping the price, see whether there is negative feedback about the home that can be addressed through moderately priced improvements. ...

If you decide to reduce the price, first research comparable home prices in your area and make a reduction that aligns with market conditions and timing. ...

If a buyer sends you a low-ball offer, keep a cool head. Do not reject the offer brusquely as an insult. Let the buyer know you’ll accept a more reasonable offer, and send a counteroffer much closer to your price than theirs. This communicates that their offer isn’t reasonable while leaving the door open to a mutually agreeable compromise. ...

Finally, be mindful of the image you may be presenting with a price drop. Too much or too quick can signal to potential buyers that something is wrong with the house. Or it may imply that you are desperate to sell, which can lead buyers to pass over your listing without proper consideration....

Investment, Money,

Pros and Cons of Using Property Management

Owners of investment rental properties face a decision whether to manage their rentals themselves or to hire a professional property management company. The advantages and disadvantages are multifaceted, so let’s analyze them....

Direct vs. indirect control of property management

Owning one or two rental properties can be a profitable long-term investment. It entails a set of responsibilities that the owner must juggle. When the owner has only a small number of properties, this may be doable, but as the portfolio grows, many owners hire a property management service....

Responsibilities for rental property owners include:

Listing and advertising available properties
Interviewing and screening applicants
Negotiating lease agreement terms
Complying with laws and regulations on landlord-tenant relations
Contract signing and enactment
Collecting deposits and monthly rent payments
Managing property make-ready
Managing property maintenance and repairs
Negotiating and settling disagreements and disputes
End-of-lease management and deposit refunds

The fundamental difference between DIY property management and a professional service is the degree of direct involvement and the relationship the owner has with tenants. Many owners want to build that relationship, but some prefer that a management team take on the responsibilities....

Advantages of using a property management service

Hiring a property manager brings these benefits:

Having an expert in the legal dynamics of advertising the property, screening applicants, negotiating lease terms, dealing with disputes, and maintaining the property
Unburdening yourself from the time commitment of property management
Maximizing rental income from each property
Cost control for maintenance and repairs
Having an established vendor list of repair companies, so you don’t have to find your own plumbers, electricians, and so on.
Relieving the stress of dealing with all these pressures
The ability to scale the management scope as your portfolio of properties grows

Disadvantages of using a property management service

Paying management fees that cut into your profits
Loss of relationship with your tenants
Less personal control of decisions as you give that responsibility to the manager

The decision point

For many owners, the decision to use a management company comes when they realize that
growing a portfolio of properties will require professional help. An owner can only handle so much responsibility, after all. A growing number of properties forces the owner to seek help in keeping the enterprise running smoothly....

Selling, Selling Your Home,

How Seller Concessions Can Help You Buy a Home

Buying a home is an expensive proposition, but there’s a way to ease some of that financial burden without cutting corners: Enter seller concessions. These are powerful negotiation tools that can help buyers afford more and sellers close faster. Between the down payment, closing costs, inspections, and other fees, the expenses add up fast, so it pays to learn more. Here’s what you should know. ...

Understanding seller concessions in real estate

Seller concessions are agreements in which the home seller covers some of the buyer’s purchase costs. These costs are typically part of the buyer’s closing costs but may also include other transaction-related fees....

Think of it as the seller offering a financial “boost” to the buyer, a smart move in competitive markets or when a home has been on the market a little too long....

How do seller concessions work?

Seller concessions are negotiated as part of the purchase agreement between the buyer and the seller. The concession can be a fixed dollar amount or a percentage of the home’s sale price....

For example, if a home is listed for $350,000 and the seller agrees to a 3% concession, that’s $10,500 the seller contributes toward the buyer’s closing costs, a significant help for a buyer trying to conserve cash....

The funds usually go toward closing costs, including appraisal fees, title insurance, search fees, loan origination fees, home inspections, HOA transfer fees, and real estate taxes. These concessions reduce the buyer’s out-of-pocket expenses at closing, making homeownership more accessible....

Who benefits from seller concessions?

Seller concessions benefit both buyers and sellers in meaningful ways. For buyers, especially first-time purchasers or those with limited cash reserves, concessions can significantly reduce upfront costs and make homeownership more attainable. ...

On the flip side, sellers can use concessions as a strategic tool to make their property more appealing and competitive in the market, particularly in a buyer’s market or when a quick sale is needed....

In some situations, offering concessions can even help salvage a deal that might otherwise fall through due to repair concerns or appraisal shortfalls....

Examples of common concessions

Not all concessions look the same. Here are a few real-world examples of how they can be used:...

Covering closing costs: The most common use of concessions is to help buyers pay for required fees, such as appraisal, title, and lender fees....

Home warranty: Sellers may include a home warranty as part of the deal, providing the buyer with peace of mind regarding potential repairs after move-in....

Price adjustments for repairs: If an inspection reveals needed repairs, a seller might instead offer a price reduction or credit to cover the costs, effectively making another form of concession....

Limits on seller concessions by loan type...

Before you ask for (or offer) seller concessions, it’s essential to know that limits apply, and they vary by mortgage type:...

Conventional loans: Seller concessions range from 3% to 6%, depending on the buyer’s down payment amount....

FHA loans: The Federal Housing Administration allows concessions up to 6% of the purchase price or appraised value (whichever is lower)....

VA loans (for veterans): The Department of Veterans Affairs caps concessions at 4% of the home’s price....

USDA loans: Buyers using a USDA loan may receive up to 6% in concessions....

Real estate agents and lenders can advise you on the amount you’re eligible for based on your financing and circumstances....

When should buyers ask for seller concessions?...

Buyers should consider requesting seller concessions when the market favors buyers, an inspection uncovers repair needs, cash is tight, or the home appraises below the contract price. While not guaranteed, especially in competitive markets, concessions can be a valuable way to align buyer affordability with seller goals. A skilled real estate agent can help navigate these negotiations and determine when concessions are most likely to be successful....

Home Improvements, Ownership,

Does Soaking Dishes Expose You to Pathogens?

We’ve all done it: left a sink full of dishes soaking in soapy water because we were too tired to finish cleaning or because some had hardened food stuck to them. But is that soaking dish generating a biohazard? The short answer is yes, but don’t let that scare you. There are ways to clean without getting sick. ...

Soaking dishes are havens for germs.

Though most people may think another room in the house has the most pathogens, the real danger lies in the kitchen sink. Also, dish rags and sponges play host to colonies of bacterial predators. Salmonella, E. coli, and other illness-causing bacteria thrive in sinks and on surfaces like cutting boards because food has been prepped there. Raw meat and eggs are the most likely to contaminate countertops and other areas. ...

When you leave dirty dishes in the sink after food prep—and after eating—bacteria can explode on plates, glasses, and silverware. Crusty food, even when soaking in hot water to soften it, creates an ideal breeding ground for pathogens. ...

It gets worse. Unattended soaking dishes attract insects like ants and roaches, which can spread germs throughout the kitchen as they roam....

Germ warfare

The best thing you can do is wash up the dishes right after dinner, put them in the dishwasher, and turn it on. Immediate cleanup interrupts the bacterial breeding cycle.
If time doesn’t allow you to do a complete cleanup, do as much as you can. If you have dishes and silverware with caked-on food, place them in hot, soapy water, preferably with antibacterial soap.
After all dishes are cleaned, scrub the sink thoroughly with a dish sponge soaked in antibacterial soap. Allow the antibacterial soapy water to remain on surfaces for at least 5 minutes (known as “dwell time”) to kill germs.
Run the dishes in the dishwasher on high heat to thoroughly sanitize them. Some dishes and cutting boards are not dishwasher-safe, so hand-scrub them with antibacterial soap, then set them out to dry. Do not put them away until they’re completely dry.
Finally, either put your dish sponge in the dishwasher with the dishes or zap it in the microwave for about 30 seconds, until the water is saturated with scalds.
Be sure to wash and rinse your hands thoroughly at the end.

Building a Home, Buying,

Why You Need Your Own Real Estate Agent for New Construction

Buying a shiny new home straight from the builder’s sales office might feel as simple as buying a new car, but you should have your own real estate agent for new construction. Of course, the model home is beautiful, the salesperson is friendly, and the price is right there on the flyer. So, do you really need your own agent? Yes, you do, and here’s why it can save you time, money, and future headaches....

The builder’s agent works for the builder.

Those smiling sales agents in the model home office? They work for the builder. Their job is to represent the builder’s interests, not yours. That means everything—from pricing to upgrades and contract terms—is designed to benefit the builder....

By contrast, your own agent is your advocate. She’s in your corner to protect your investment, negotiate better terms, and walk you through the process from dirt lot to closing day....

Having a real estate agent for new construction helps the buyer.

A skilled real estate agent brings a wealth of knowledge to the table, including:...

Builder reputation: They know which builders are known for quality—and which ones cut corners.
Contract expertise: Builder contracts are often lengthy and packed with legal jargon. Your agent can review them to make sure you’re protected.
Negotiation power: From price to upgrades, your agent may be able to negotiate perks like free countertops or better fixtures—things the builder’s agent won’t volunteer.
Knowledge of the area: Agents offer insights on schools, traffic plans, future development, and all things that affect your home’s long-term value.
Lender advice: Builders often push their preferred lender. Your agent can help you compare options and make the best choice.
Construction oversight: An agent monitors the build, flags potential issues, and helps you ask the right questions.
Final walk-throughs and inspections: Your agent can advocate for an independent inspection, even on new homes, and help ensure issues are fixed before closing.

What will it cost you?

Here’s the kicker: It typically costs you nothing! The builder pays your agent’s commission, not you. But you must register your agent on your first visit to the builder’s office or model home. If you show up alone and don’t list your agent, the builder may deny your agent’s involvement later, and you’ll lose the right to that representation....

Investment, Money,

Looking for a Creative Way to Pay the Mortgage? Consider Rental Income

Have you considered generating rental income? What if someone else could help make your mortgage payment while you earn all the equity? Many homeowners rely on others to handle the heavy lifting through various rental strategies. Here’s what you can do....

How can rental income help pay your mortgage?

One method is to rent out part of your home and use the rental income to supplement your mortgage payments. Here’s how: ...

Today, a very popular option is to offer guest bedrooms for Airbnb rentals. You, of course, sleep in the primary suite, while your other two or three bedrooms host Airbnb guests.
You can go the long-term rental route and lease out a bedroom to a family member or even a close friend.
Instead of a single-family home, purchase a duplex or even a quadplex, then rent out the other units, whether to long-term renters or on a short-term basis via Airbnb.
Buy a house you intend to stay in only part of the year, and list it on VRBO as a vacation rental for the rest of the year.

Short-term rentals, such as Airbnb, can generate higher rental income than long-term rentals, with higher daily rates, provided you can maintain high occupancy in your bedrooms. Short-term rentals entail more work and management, including washing linens, cleaning, and restocking amenities between guests. Still, if you don’t mind the extra responsibility, you can earn good money this way....

Do your homework

If you think you’d be willing to go the rental route, do some due diligence....

First, crunch the numbers to see what your budget allows you to buy in a home without rental income support. How much house can you afford in purchase price, monthly principal and interest payments, plus property taxes and insurance? Stay within a budget you can afford, excluding rental income assistance....

Then check Airbnb to see what comparable homes are renting for in your area and how much income they generate. ...

Calculate how much income that could bring in each month, and apply that against your mortgage payment in your calculations. ...

Don’t assume you’ll rent your bedrooms out every night. Use a conservative figure, such as renting for half the nights in a month, to estimate income potential....

Other important considerations

If you live in a neighborhood with a homeowners’ association, read your covenants, restrictions, and bylaws. Your HOA may not permit short-term rentals. Flouting that rule could lead to stiff penalties....

Research local and federal tax laws. Some cities impose a form of hotel-motel tax on short-term home rentals, which adds some bureaucracy to your efforts and cuts into your profits. ...

Likewise, you should study up on the federal income tax rules for renting out part of your home. There are specific rules governing how much of the year you rent and the percentage of your space used when calculating taxes owed....

Buying, Financing a Home,

Dreaming of Owning a Home? Consider Down Payment Assistance

The American dream of homeownership increasingly seems out of reach for many first-time buyers, especially those carrying student loan debt, but down payment assistance programs can help. To purchase a home, a 10%–20% down payment is required, so young homebuyers often feel defeated before they even begin. These programs seek to alleviate the problem. ...

Who is eligible for down payment assistance?

There are thousands of down payment assistance programs available, most offered by state and local governments, nonprofit organizations, and lenders. Many are geared toward first-time homeowners, although not all. ...

Most programs require buyers to meet specific criteria:...

The home must be a primary residence, not an investment property.
It must be a single-family home. Multifamily dwellings may be allowed in some circumstances.
Buyers must have an income below the Area Median Income (AMI).
Buyers must work in public service or purchase a home in a specific geographic area.
Buyers must meet the lending requirements for a 30-year fixed-rate mortgage.

Additionally, many down payment assistance programs require recipients to complete a homebuyer education course. ...

Types of assistance programs

There are several different types of programs nationwide:...

Gifts and grants are monies given to qualified buyers that do not require repayment. There are tax implications associated with receiving this money, so it is recommended that you consult a tax advisor.
A forgivable loan is issued as a mortgage, but if the buyer meets specific criteria during repayment, it need not be repaid; in essence, it acts like a grant.
A low-interest loan for the down payment is a second mortgage. The primary loan on the remaining balance is usually at a higher interest rate.
Deferred payment loans are repaid toward the end of the primary loan payment schedule or upon refinancing.
Individual Development Accounts are matching programs in which the IDA matches the qualified buyer’s down payment.
Lender programs by banks such as Chase, Wells Fargo, and others offer special down payment assistance to qualified buyers.
Homebuyers should begin their search for down payment assistance by exploring their state’s housing assistance programs. Information websites exist in most states.

Money, Mortgage,

Lower Fed Rates Mean Lower Mortgages, Right? Not Exactly

Mortgage rates have been higher since the Federal Reserve began hiking interest rates to combat inflation in 2021, but what is the relationship between mortgage rates and Fed rates? Now that inflation has cooled, the public hopes interest rates will be dialed back, and prospective home buyers hope for lower mortgage rates. But are lower mortgage rates automatically tied to the Fed lowering interest rates?...

The role of the Federal Reserve and Fed rates

The Federal Reserve is not a government agency. It is a private corporation empowered by the government to serve as the nation’s bank, influencing interest rates and the supply of money for the entire U.S. banking system. Banks lend money to each other continually to restore regulatory reserve requirements. The interest rate they charge each other is called the federal funds rate, which is what the Fed raises or lowers. The Federal Reserve influences rates through the purchase and sale of U.S. government bonds and by creating additional money and distributing it into the banking system....

Think of the federal funds rate as being like the wholesale cost of money sold from one bank to another. The retail price for money is the rate banks charge customers for car loans, mortgages, and other lending products. However, between the federal funds rate and the mortgage rate, there are additional layers that influence the cost of car loans, mortgages, and other types of retail lending....

Meet the 10-Year Treasury Note

Between the wholesale federal funds rate and consumer interest rates lies the 10-Year Treasury rate. The 10-Year Treasury is a debt obligation of the U.S. government, its way of borrowing money from investors to fund government spending. The Federal Reserve does not set the rate paid on 10-Year Treasury notes. Instead, the rate rises or falls on the open market just like any other investment. The rate is higher than the federal funds wholesale rate but lower than the 30-year mortgage rate. The spreads between the three different lending rates are affected by expectations of investors:...

The 10-Year Treasury must pay a higher interest rate than competing shorter-term debt investments to make it worthwhile for investors to tie their money up for 10 years.
Investors have confidence that their Treasury investments are secure because the U.S. government backs them.
The spread between the federal funds rate and Treasury rates also includes various lending costs, such as fees, guarantees, and miscellaneous expenses.
Economic conditions, such as inflation, expectations of economic growth, or recession, spur investors to bid rates up or down.
Between the 10-Year Treasury and mortgage rates lie additional costs, including higher fees, investor profits, and compensation for taking on added risk. Mortgages are often bundled into investment products, and since mortgages can be defaulted on, unlike U.S. Treasury securities, investors want part of the spread to be profit that offsets the risk.

So why is it that sometimes the Federal Reserve lowers the federal funds rate, but mortgage rates don’t automatically follow suit? Between the federal funds rate and mortgage rates are the 10-Year Treasury, which is a much better predictor of mortgage rates, plus all the economic conditions that affect consumer and investor confidence. The Fed’s rate cuts are not an automatic guarantee of lower mortgage rates, given the complex relationship between the two....

Home Energy, Ownership,

Ultimate in Comfortable Ambience: Wood-Burning Stoves

As cold weather approaches, it’s a good time to learn the basics of one of life’s great comfort appliances: wood-burning stoves. Harkening back to ancient times, wood-burning stoves offer heat, cooking, and even hot water, but the aesthetic delight of a crackling fire tops all advantages. Here’s what you need to know....

A long, historic legacy

Wood-burning stoves go back to medieval times, even longer in some ancient cultures. Having a contained metal box for burning wood and coal for heat and cooking has served humans for millennia. ...

In America, wood-burning stoves evoke memories of early times, when family life centered on warmth and the aroma of wood smoke....

Benefits of wood-burning stoves

If you have the right space for a wood-burning stove, you can enjoy:...

Cost-effective heating because wood is a cheaper fuel source than oil and gas
Cozy ambience with toasty, snuggly winter nights
No dependence on power companies (staying warm even in power outages)
Up to 80% heating efficiency with modern stoves

Types of wood-burning stoves

There are five types to consider:...

A free-standing model typically has an enclosed firebox and a front door with a glass window. It stands on a brick or other heat-resistant platform and has a “stovepipe” exhaust that rises through the roof or a high wall to the outside. Heat radiates from the door, the small window, and the firebox body.
An insert version is a firebox that fits into a fireplace, with the exhaust rising up the chimney. It has a glass door that radiates heat into the room.
A built-in stove is installed in a wall or on the floor; it heats through a glass front.
A boiler stove includes a water-supply line. The water is heated in a jacket space around the firebox, providing dual use: home heating and hot water for daily living.
A cooking stove provides a place on top (and sometimes in the firebox) for preparing meals.

Shopping for wood-burning stoves

Measure the square footage of the room you want to heat, and select a stove sized appropriately using the guide in the online listing or in-store box. You don’t want an undersized stove that leaves the room too cold, nor an oversized one that makes your home uncomfortably hot. ...

Choose the stove type based on your usage, and have it installed by a professional to ensure safety and warranty coverage....

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