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After You Sell Your House, Make Sure You Do These 10 Things

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After you sell your house, you’re done, right? You can walk away and celebrate?

Well, not exactly! After you sell your house, you certainly should celebrate, but you have more things to think about, from tax prep to buying your next house. In “House Selling for Dummies,” authors Eric Tyson and Ray Brown lay out things you can do to save money and increase your peace of mind, post-sale.

What to do after you sell your house

You’re going to need to do something with any proceeds you have left from the sale. Plus there are tax implications to consider, and if you haven’t already, you need to think about where you’re going to live long term.

Here are some tips from Tyson and Brown that can help guide you after you sell your house:

1. Keep copies of all paperwork related to the closing and settlement after you sell your house

Although it might be tempting to shred the paperwork or put it in storage, you’ll want to have it handy for April 15. When you file your taxes, you’ll need documentation for the expenses and proceeds of the sale. And after you file your return, you’ll want to keep the paperwork in case you’re audited.

2. Keep proof of improvements and prior purchases

This is for tax purposes, too. The IRS allows you to add the cost of improvements to your home’s cost basis during the time you own the home, which is nice if you have a sizable capital gain. But to use this tax provision, you need to keep receipts for everything you spent on home improvement.

3. Stay on top of tax laws after you sell

Because tax laws constantly change, you’ll want to keep current to avoid losing money. For example, a recent law allows you to exclude from tax a significant portion of the profits from the sale of your primary residence.

4. Put your proceeds in a money market fund

If you sell and then don’t immediately buy, you’ll need a safe place to put your money. A money market mutual fund offers safety, a reasonable rate of return, daily access to your money and check-writing privileges.

5. Choose your next home carefully

Scope out a variety of areas and housing options that meet your family’s needs.

6. Don’t feel pressured to buy

Take your time purchasing your next home; rent for awhile if you’d like extra time or want to try an area out first before buying. “Keep in mind that you have two years to defer tax on your house-sale profits,” Tyson and Brown point out.

7. Reevaluate your personal finances

If your situation changes before you buy another house – you get a promotion, have a baby, go through a divorce – you’ll need to rethink your finances and how much you can afford to pay for your new house.

8. Think about what you need from an agent to help you buy

Carefully consider whether the agent who helped sell your house can meet your needs when you’re buying. Buying and selling require different skills. And, if you’re moving to a new area, you may want someone familiar with the area.

9. Think through your next down payment

Brown and Tyson recommend putting at least 20 percent down on your next house in order to qualify for the best mortgage programs. If you can afford more than 20 percent, consider whether it’s better to put that money in the down payment or to invest the money elsewhere.

“Younger home buyers willing to take on more investment risk should lean toward a 20-percent down payment, whereas older home buyers, who tend to invest less aggressively, should opt for larger down payments,” the pair recommends.

10. Remember to send change-of-address notices

The U.S. Postal Service recommends you complete your change of address 30 days before you move.

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How Does The Escrow Process Work in Real Estate

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When you are buying a home, some parts of the transaction can be confusing, and the escrow meaning is one of them. It is not unusual for homebuyers to ask, what is an escrow account and how will it affect me in the buying process?

Having escrow funds ensures that the buyer has some skin in the game and will not walk from the transaction.

Let's look at how escrow works and what you need to know when you encounter this when buying a home. As a first-time homebuyer, it is one of the essential things to know about.

What is an Escrow?

Escrow deposits are a way for a third party to hold onto an asset until both sides of the financial transaction have completed their obligations.

When you buy a home, this will mean giving your earnest money deposit to a third party until closing. This money is placed in an escrow account until the purchase agreement conditions have been met.

The escrow held is typically one to five percent of the purchase price. It can vary tremendously based on where you're located and familiar traditions.

After getting an accepted offer on a home, it will mean handing over a check to your escrow agent to be safely deposited with the escrow company. The company is the third party that will oversee some of the documents and funds involved at the start of the process and at closing.

Escrow funds are almost always held by one of three parties—a real estate broker, an escrow company or an attorney.

Let’s look at some of the stages you’ll need to go through before your funds are released from escrow and close on the home.

Home Loan Approval

Before you make an offer on a home, you should have already received pre-approval for a mortgage. When you have the address of the home you want to buy, your lender can begin the underwriting process to approve the loan.

Your lender will give you a breakdown of your closing costs and other fees. They will also need an appraisal of the home to know they aren’t lending more than it is worth.

Should you end up in foreclosure, the lender doesn’t want to lose out financially. The buyer will pay for a house appraisal, and the result could be a problem if it finds the value is less than the offer amount. If that happens, you aren’t going to get the loan you expect unless you can pay the difference or negotiate with the seller to reduce the price.

If the appraisal is lower than you expect, there are other options, like changing lenders and getting another estimate. You can also challenge the finding, though you will need some solid evidence to prove the home is worth more.

If none of these options resolves the situation, you can still walk away from the deal. But if the appraisal is dealt with, the contingency can be removed.

If your lender hasn’t found any problems with your application, they should give you a written loan commitment. At this point, any financing contingency has been fulfilled and you are closer to owning the home.

Seller Disclosures

If there are any problems that the seller or their real estate agent is aware of, they will create a written notification. Perhaps, something about the home doesn’t meet the housing code, and it hasn’t been previously mentioned in the listing.

Even if there isn’t this type of disclosure, any problems should be revealed in the home inspection. While you don’t have to get the home inspected, it is in your best interests to do so. There are other inspections you might need as well:

  • Pest Inspection - To check for termites and other problems

  • Environmental Inspection - To look for mold, radon, and any potential contamination from hazardous materials.

  • Geologic Check - If the home is in an earthquake or flood zone.

Title Insurance

Lenders typically require title insurance and title reports. The report ensures that there isn't a problem with the title, like liens or other claims to the home. If someone makes a claim of ownership over the house in the future, title insurance ensures the lender is covered.

Buyers have the option to purchase their own title insurance policy. When getting a home loan, every lender will require a buyer to buy lender's title insurance.

Final Walk-Through

When you are through the other stages, it is advisable to make a last check of the home before closing. This will let you make sure the house is in the same condition and that items have been left that were agreed upon.

Closing Escrow

At closing, you will have documents to check and sign. It would be best to take your time to ensure that everything is as it should be. With signatures on all the dotted lines, you’ll need to pay your down payment with a cashier’s check or wire transfer.

The escrow company will now release your earnest money to help you cover the costs required at closing. You will also be given the keys as the home's new owner.

Final Thoughts

Understanding how escrow works in real estate is essential for buyers and sellers. It is not uncommon for disputes over escrow deposits if a home sale goes south. It is crucial to understand that the third party holding the money cannot release the funds to either party during a dispute.

If there is no resolution with dispersing the funds, the court will eventually decide it.

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Mortgage rate locks tumble amid sharp rate rise

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Black Knight and Mortgage Capital Trading both show that mortgage rate lock and cash-out refinance rate lock volume dipped in April

Fewer buyers rushed to lock mortgages last month amid a rapid climb in long-term mortgage rates, reflecting home affordability concerns, reports from Mortgage Capital Trading and Black Knight showed. 

Total mortgage rate locks by dollar volume were down 5% in April from the previous month, according to MCT’s monthly Mortgage Lock Volume Indices report. Compared with the same period last year, the number of rate locks by mortgage volume was down 25.4%. 

The average 30-year conforming mortgage rate climbed to 5.27% last week, marking the highest average since 2009, according to Freddie Mac PMMS. Black Knight’s Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association, finished the month of April at 5.42%.

Refinancing has seen the biggest impact of the rising-rate pressure. Rate locks for rate-and-term refinances, which is driven primarily by a drop in interest rates to lower monthly mortgage payments, were down 36.4% in April from the previous month. Compared with April 2021, rate-and-term refinances were down 89.2%. 

Cash-out refinance activity, in contrast, is led by increasing home values by homeowners seeking to tap into their home equity. In April, cash-out refinance rate locks were down 31.1% from March and slumped 51.7% from a year earlier.

Black Knight’s monthly originations market monitor report showed a similar downward trend of mortgage rate locks. Rate lock production volume activity was down 20.3% month over month, driven by a 50% drop in rate-term-refinance lending activity.

Cash-out refi locks dipped 40% in April as homeowners likely sought other products including Home Equity Line of Credits [HELOCs] or second linens, to access tappable equity without sacrificing historically low first-lien mortgage rates, which were secured with real estate as collateral.

In a traditional home equity product, the lender disburses a lump sum of cash upfront to the buyer, who then pays the loan back in fixed-rate payments. A HELOC, by contrast, is a revolving line of credit that allows borrowing as needed, with a variable interest rate. 

April’s decline in rate lock activity is “hardly surprising,” said Scott Happ, president at Optimal Blue, citing half of all mortgage holders holding current first lien rates below 3.5%. The combined decline in refinance locks pushed the refi share of the market down to 20% last month, marking the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. 

“That being said, while purchase locks were down somewhat from March, they remained flat from last April, reflecting consistent and resilient demand from homebuyers,” Happ said in a statement. 

Purchase rate locks measured by MCT, however, were up 2.2% month over month in April and 7.55% from a year earlier, “a bright spot even as mortgage rates have increased rapidly in 2022.”

MCT, founded in 2001, launched its first monthly mortgage lock volume report on Monday. The indices are based on the actual dollar volume of locked loans, not the numbers of applications. 

“Especially in a tight purchase market. Applications are a less reliable metric for the mortgage industry as there is a higher likelihood of having multiple applications per funded loan,” the MCT report noted. 

Black Knight’s monthly market monitor reports provide origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. The New York-Newark-Jersey City regions had the highest rate lock volume at 4.1% in April. The Los Angeles-Long Beach-Anaheim regions had the second-highest lock volume rate (3.9%) trailed by the Washington-Arlington-Alexandria (3.8%) region. 

Read more like this on Housing Wire.

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Will outdoor irrigation rules in Colorado Springs tighten amid drought conditions?

 
 

As unprecedented drought conditions trigger emergency actions along the Colorado River, Colorado Springs Utilities does not expect to tighten watering restrictions this summer. 

Colorado Springs Utilities limits outdoor irrigation to three days a week from May 1 through Oct. 15 each year and does not plan to enact any additional steps to cut outdoor water use this year because the city's reservoir storage is strong with enough water to serve the city for 2.7 years, said Abby Ortega, water resources manager for Utilities. 

The limits on outdoor watering were first enacted in 2020, and that year 560 acre-feet of water was conserved, Utilities spokeswoman Jennifer Jordan said. That's equal to 500 football fields covered in 1 foot of water. Last year, the city achieved a slight increase on that initial big savings with an additional 10.15 acre-feet conserved. 

However, residents' conservation is critical as the future of the Colorado River, which supplies 70% of the city's water, could continue to see what the Assistant Secretary of the Interior Tanya Trujillo called unprecedented drought conditions last week.

"Every drop they save is a drop that stays in our reservoirs. ... All of those savings help us," Ortega said. 

Utilities will not reduce outdoor watering to two days a week until the water in storage drops below enough water to serve the city for 1.5 years, she said. 

Spring runoff is expected to be below normal this year despite snowpack reaching average levels because the dry and thirsty soils are expected to soak up water on its way to rivers and streams. 

Utilities is preparing for about 90% of the water it would normally expect to reach reservoirs, Ortega said. 

The city will not see cutbacks triggered by the overall drought along the Colorado River until the upper basin states — Colorado, Wyoming, New Mexico and Utah — fail to meet their obligation to the lower basin states, she said. The upper basin must deliver 75 million acre-feet on a 10-year rolling average. 

It is unknown if the upper basin users would take cuts as a percentage of their rights or if senior water right holders would get preference over junior water rights holders, if the obligation cannot be met otherwise, Ortega said.

"We don't know exactly what that is going to look like," she said. 

However, the rules are expected to be renegotiated in coming years and water users will likely need to learn to live with a decreasing amount of water, Trujillo said. She said that the Bureau of Reclamation is willing to accelerate funding for projects that would reduce water use and maximize efficiencies.

"We simply need to do more and we need to do more now," she said. 

Trujillo called for more action as she described how 500,000 acre-feet would be released from the Flaming Gorge Reservoir in southwestern Wyoming and 480,000 would be held back to protect power production in Lake Powell. 

Trujillo said she expected more water recycling projects along the Colorado River as part of conservation efforts. 

Colorado Springs reuses all the water that it brings in from other basins, Ortega said. 

The city has also transitioned from using 60% of its water on outdoor irrigation to 60% on indoor uses over the past 20 years, Jordan said. But the work needs to continue. 

"Can we do better and still maintain healthy vibrant landscapes?" she asked. 

Keep reading on The Gazette.

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Colorado Springs home prices soar to a new round of record highs in April

 
 

Colorado Springs-area home prices spiked to more record highs last month, as local real estate agents wait to see if rising mortgage rates trigger a slowdown in demand and a cooling off or even a reduction in housing costs.

The median price of single-family and patio homes sold in April shot up to $484,450, nearly $60,000, or 14%, higher than the same month last year and topping March’s record of $475,000, according to a Pike Peak Association of Realtors market trends report.

The average sale price of homes in April climbed to $561,907, also a record high and 16.6% or $86,050 higher on a year-over-year basis, the association’s report showed.

April was the third straight month in which median and average prices set record highs.

The Realtors Association’s report and Gazette historical data also show:

• Home prices now have climbed on a year-over-year basis every month since December 2014 — a streak that’s approaching 7½ years.

• On a percentage basis, prices have increased by double digits for 22 straight months.

• Home sales totaled 1,489 in April, which was identical to the same month last year. Over the first four months of 2022, home sales totaled 4,919 or 2.9% more than the same period last year.

• Properties averaged 12 days on the market before selling in April, slightly more than the nine-day average in April 2021.

• The supply of homes for sale totaled 969 at the end of April, up 74% from the same month a year ago. Though inventory is on the rise, it remains well below historical norms; five years ago, in April 2017, there were 1,570 homes for sale.

Clement said his team of brokers sold three homes in April, whose asking prices were in the $400,000s. Each home had roughly 30 showings, more than 10 offers and sold for $40,000 to $60,000 above asking price, he said.

“We just seem to keep plugging right along,” Clement said. “Putting things on the market, we’re getting tons of activity. The showings are there. And they sell. ... It’s crazy. It keeps going.”

Patrick Muldoon, broker-owner of Muldoon Associates in Colorado Springs, listed a home last weekend for $800,000. It’s under contract for a figure that’s over the seller’s asking price after it received multiple bids, he said.

Whether the market continues its breakneck pace, however, will depend on several factors, Clement and Muldoon said.

Thirty-year, fixed rate mortgages rose to an average of 5% nationally in mid-April, and last week were at 5.1%, according to mortgage buyer Freddie Mac. A year ago, rates hovered just below 3%.

If rates climb another percentage point and beyond, Clement said, some buyers will have to lower their sights and look for smaller homes, while others might be priced out of the market altogether.

“If they keep going, and all of a sudden we’re at 6, 6½, I think we’ll start to see it and feel it,” Clement said of higher mortgage rates. “It will start eliminating people from the market because their house is shrinking and their payment is going up.

“They’re not able to go to $475,000 or some number,” he said. “They can only go to $400,000. Well, what happens then? It’s smaller, it’s not as nice. They still might buy it. But there’s going to be an interest rate number that starts affecting things negatively. But it’s not hit yet. It just hasn’t.”

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