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

 
 

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

 
 

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

 
 

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. 

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Grand Lake, still reeling from East Troublesome fire, is being shaken again by mayoral recall over housing

 
 

Mayor Steve Kudron is the target of a recall election fueled by concerns over housing and keeping the mountain town’s character intact.

Like a dozen Grand Lake mayors before him, Steve Kudron smiled and waved at his constituents during the annual Buffalo Days parade last month.

But Kudron added a twist no one had ever seen in 74 years of Buffalo Days. The vintage Hummer he paraded in sported a sign reading: “Vote No! Stop the Recall of Mayor Steve.” The hubcaps were replaced with “no bully” logos. And the vehicle was flanked by people waving their own “vote no” signs.

This juxtaposition of the old with the new is at the heart of the Grand Lake mayoral recall election, which is scheduled for Oct. 5. On one side are longtime residents who are afraid the small town’s character and sense of community are being destroyed. On the other side are relative newcomers like Kudron who want to move quickly to address a changing town’s needs. 

And at the center of the conflict is a rising crisis that other mountain towns have faced for decades: how to provide affordable housing for workers and young families.

“It’s small-town politics, but it’s really a microcosm for the bigger world,” says Kirsten Heckendorf, a member of the Grand Lake Area Citizens Against Recall group.

A sign urging residents to retain Grand Lake Mayor Steve Kudron seen in town on Tuesday. (Hugh Carey, The Colorado Sun)

Lakefront boomtown

The 1-mile-square town of Grand Lake, which is wedged between Colorado’s largest natural lake and the western entrance of Rocky Mountain National Park, has a population of around 500 people. But some Grand Lake residents also view the thousands of second-home owners in nearby Grand County as part of the community. And that number is growing.

“A lot of people have discovered Grand Lake over the last couple of years,” Town Manager John Crone says. “It’s only two hours from Denver. People are realizing it doesn’t take any more time to get to Grand County than to Summit County.”

Within the past year, property values in and around Grand Lake have gone “absolutely crazy,” Crone says. “We’re seeing houses selling for $800 a square foot, with no view and almost no land.”

Many of those are second homes that are only occupied during the summer. Crone says Grand Lake has traditionally had a 16-week tourism season, from June through September. Winter visitors to Grand County have mainly focused on the ski town of Winter Park and, to a lesser extent, the nearby U.S. 40 towns of Fraser, Granby and Hot Sulphur Springs. But increasingly, cold-weather tourists are heading to Grand Lake to snowmobile, cross-country ski and ice fish. 

Crone says that’s resulted in more need for year-round, affordable workforce housing, which is in short supply throughout Grand Lake and Grand County.  A 2018 report said by 2023, Grand County would need 175 more affordable housing units. But that was before the coronavirus-fueled rush to the high country  and the East Troublesome fire that destroyed or damaged 366 homes.

How other towns cope

On Aug. 17, the Winter Park Town Council began discussing a proposal that would offer cash incentives to short-term rental owners willing to lease their properties to local businesses. The businesses would then sublease those rental units to their employees. 

If approved, the town would spend $325,000 on the program, with incentives ranging from $5,000 for a studio leased for six months, to $20,000 for a three-bedroom unit leased for a year. The goal is to create 40 new workforce housing units. 

In Granby, which has traditionally supplied much of the workforce housing for towns and resorts throughout Grand County, there’s land available for affordable housing—but no one to build it. Granby Town Manager Ted Cherry says the town was deeded 30 acres in 2006 as part of the Granby Ranch housing development annexation agreement, and there have been plans for years to build workforce and affordable housing on the land. 

But most private developers are busy building new, market-rate housing or rebuilding homes burned last fall in the East Troublesome fire. And trying to get Housing and Urban Development or Colorado Housing and Finance Authority funding for affordable housing is a bureaucratic nightmare, Cherry says.

Homes along the shoreline of Grand Lake with visible burn scars from East Troublesome Fire inside Rocky Mountain National Park in the background . (Hugh Carey, The Colorado Sun)

Grand County does have a housing authority, but it’s understaffed and underfunded. It mainly manages three senior affordable-housing facilities in Granby and Kremmling. But that may soon change. 

Sheena Darland, operations manager for the Grand County Housing Authority, says she’s been working with local town attorneys on intergovernmental agreements to form a regional housing authority that would be funded by a mill levy or sales tax. 

“We’ve been trying to get this done for a year, and it seems like we now have support or buy-in from all municipalities in the county,” Darland says. If all goes well, she says funding for the new housing authority could be on the November 2022 ballot. 

A grand property battle

In the meantime, Grand County towns are on their own when it comes to providing not only workforce housing, but also housing for younger, lower-income residents who are leaving town because they can’t find an affordable place to live.

“The reality is that people live in their campers, in the forest that got burnt,” Kudron says. 

He says that’s a big reason why the Grand Lake Town Board of Trustees moved quickly last year to buy 21 acres of undeveloped property in unincorporated Grand County, about a mile northwest of downtown.

Property owner Tom Stanley tried for over a decade to develop the 21 acres and annex it into Grand Lake, with plans to build about 100 single-family homes and duplexes. In mid-2019, he listed the property for sale for $1.3 million. 

In April 2020, Grand Lake residents voted in four new members to the town’s six-person board. Kudron, who moved to Grand Lake in 2012 and opened the Quacker Gift Shop, was elected to a four-year mayoral term by an 83-13 vote. 

“There’s new, fresh blood on the town trustee board, and we’re doing things differently,” says Ernie Bjorkman, the former Denver TV news anchor who’s part of the new wave of trustees. “The town has been talking for 20 years about affordable housing, but hasn’t been doing enough.”

The board reportedly discussed buying the Stanley property during its retreat in August 2020. About two weeks later, the board held a closed-door executive session regarding negotiations for the property. Two weeks after that, on Sept. 28, 2020, it voted unanimously in a public meeting to approve a contract to buy the Stanley property for $1.25 million. 

“Since we’re surrounded by national forests and parks, this is the only big piece of developable property left. We felt we had better take it and land-bank it,” Bjorkman says. “My thought is that we’d be better stewards of that land than a developer coming in and building 100 homes.”

Tom and Kathy Weydert, residents of Grand Lake of 34 years, pause for a photo at the town park. The Weyderts and several residents filed a petition to recall the mayor citing lack of transparency and communication in the town’s planning. (Hugh Carey, The Colorado Sun)

But some residents, including Tom Weydert, who has lived in Grand Lake for more than 34 years and served on the town board for 20 years before being defeated in the 2020 election, have concerns about how quickly the board voted to make such a big purchase and the lack of public input. In December, Weydert, who is also the Grand County assessor, and other residents circulated a petition against the property purchase.

About 325 people signed the petition, many of them second-home owners in Columbine Lake Country Club, a Grand County neighborhood that backs up to the Stanley property. Their outcry, along with a 107-page letter from a lawyer hired by Weydert, his wife, Kathy, and two Columbine Lake homeowners, led to a virtual town meeting on Jan. 19 that 144 people attended.

Some town trustees cited that opposition when voting during a Jan. 25 board meeting on a financing package to buy the Stanley property and a small park the town had been leasing. The package was approved by a 4-3 vote, with Kudron voting in favor. 

The town has since hired a consultant to determine the best use of the Stanley property. Along with forging a public-private partnership to build affordable and workforce housing, other ideas include relocating the town’s public works facility and preserving some land as open space. Kudron promises that the consultant’s plan will have plenty of opportunities for public input. 

But Weydert says the town should have worked out all of this, along with water rights, road access, an environmental study and other key development logistics, before buying the property. He would have liked the trustees to put down a retainer on the property, hold more public meetings and then have an election about the purchase. 

“The government used to listen to the citizenry,” Weydert says. “We need to be kinder, gentler and more transparent.”

“A very vocal face of change”

Kudron says Tom Stanley was only interested in a “straight sale” that didn’t involve a retainer. And Kudron opposed more delays. 

“I’m pretty adamant about things getting done,” he says. “Grand Lake is changing and while I didn’t cause it — the world caused it — I am a very vocal face of change.” 

And now he’s the face of a recall. In June, Kathy Weydert and three other residents filed a petition with the town to recall Kudron, citing improper leadership, fiscal irresponsibility, violation of Colorado open meetings laws and insufficient financial and comprehensive planning. Many of the charges have to do with the Stanley property purchase. 

After a challenge from Kudron’s allies about improper signature collecting, an independent hearing officer ruled the petition was valid and the recall election could proceed.

Voters who are residents of Grand Lake will decide whether Kudron should be recalled and whether Judy Burke, the only person who filed to be mayor as part of the recall election, should be elected. Burke, who owns Grand Realty and was Grand Lake’s mayor from 2004 to 2016, says she’s on the ballot because “I feel like we need to get things straightened out quickly. I have the background and I know how to do that.”

Town Manager Crone says ballots will be mailed to the approximately 300 registered voters in mid-September. He estimates the recall election will cost about $10,000, plus up to another $50,000 in staff time and professional and legal fees. 

Read the full article on The Colorado Sun.

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Housing CEO details 'the safest bet in real estate'

 
 

When it comes to getting the best return on investment in the housing market, one real estate investor swears on student housing.

“I think that's the safest bet in real estate,” said Rogers Healy, CEO and Owner of Dallas real estate company Rogers Healy and Associates.

The student housing market is what initially drew Healy to real estate: He gained his footing in the real estate market as an undergraduate at Southern Methodist University in 2001.

“If I could go do it all over again, I would have taken what I learned pretty early on as a college student about helping find my friends an apartment and I would have parlayed that into doing some development deals,” Healy said. “I think it's as guaranteed money as you can get, whether the school is paying for it, the parents are paying for it, or they have some kind of scholarship or stipend.”

The focus on student housing may seem counterintuitive given the drop-off in college enrollment during the pandemic and the increase in students taking a gap year. But Healy maintained that finding housing for undergrads is still "easy money."

"I know that right now, college applications are at an all-time low," he said. "But I think those trends are going to shift here in the next few years as well because people my age who went to college want their kids to go to college because we're getting older."

'Millennials are the driving force' 

Sending children off to university is just one way millennials could shape real estate in the coming years. Zillow forecasts that 6.4 million more households will be formed by 2025 as the largest U.S. generation and hits 34 — the prime age for first-time homebuyers.

“I'm 42 years old, and I've been in real estate half of my life. And for the first half of my real estate life, millennials were the enemy,” Healy said. “They were the ones that were driving rent prices, and they weren't able to go and afford property. And next thing you know, you know, whether it was pandemic fueled or not, millennials are the driving force, where we have almost 50% of buyers nationwide, especially in a city like Dallas, they're the ones that are making the decisions.”

Millennial wealth has doubled since the COVID-19 outbreak from $4.55 trillion at the end of 2019 to $9.13 trillion by the end of 2021, according to the Federal Reserve.

However, housing costs have also surged for millennials who are just now getting their foot in the door of the American dream of homeownership. The reality of higher mortgage rates, a lack of affordable housing, and low inventory means buyers may not be able to afford their forever home yet. And renters are also facing an uphill battle.

“So, interest rates, obviously, are higher than they were a month ago, higher than they were a week ago. But we still have rising rental rates as well,” Healy said. “So if people want to go and get into the American dream, and they want to go own real estate, they're going to have to shift their mindset and realize that you might not live there for 10 years. You might be there for two years.”

That’s good news if you’re a realtor looking for sustainable success as buyers seek out their next move at a faster pace.

Like student housing, Healy also expects the commercial market to come roaring back as workers return to the office and pent-up demand outstrips consumers' inflation concerns.

"I think commercial usually is two to three years behind the trends of residential, and we do a lot of commercial deals here in [Dallas-Fort Worth]," Healy said. "And I think, again, whether it's expanding our office space here, where 2 and 1/2 years ago... if someone would have told me we were going to 5x our space in two years, I would have said, 'You're crazy.' But now we're literally busting at the seams because people want to come back to the office."

“The experience we missed out on with retail, with going to dinner, going to get frozen yogurt, to a coffee, whatever, those things are starting to catch up as well," Healy said. "So we see a significant shortage of office space, retail, but especially industrial."

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