Home equity…Everybody wants it, but what exactly is it, and how do you get it?
Equity represents the degree of ownership an individual or entity has in an asset after subtracting any debts against the asset. To say someone shares equity in a company means they would share in any assets remaining after all debts are accounted for.
For example, if your business has sold $500,000 worth of product this year, but you have rent, operating expenses, and a business loan payment totaling $400,000 for the year, you have $100,000 of equity in your business. Equity changes as the value of your assets and debts change.
Home equity works the same way. When you take out a mortgage to purchase a home, your home is collateral on the mortgage loan, so the outstanding mortgage principal must be deducted from the value of the home to determine your home equity.
In most cases, you make a down payment when you purchase your home. That down payment is your initial home equity. If you pay a 20% down payment on a $200,000 home, you have $40,000 equity when you close on your purchase.
As time goes on and you continue to pay down your mortgage principal, your equity grows. Usually, the longer your own your home, the more equity you gain because you are paying down your mortgage. However, any debts you take on using your home value as collateral, such as a second mortgage or home equity line of credit (HELOC,) decrease your home equity.
The changing real estate market also influences your equity. If you paid $200,000 for your home, and two years later the homes in your neighborhood start selling in the $400,000 range, your theoretical equity increases. (Theoretical because you don’t realize your home equity until you sell your home and pay off all debts against it.) You can also lose equity if the market takes a dive but be patient and it should recover in time.
Equity also grows if you make improvements on your home that increase its value. Let’s say you add a swimming pool and all new appliances. You have increased the value of the home. Your equity doesn’t increase by the amount your spent on the improvements, but on the value you get upon resale. This is an important point when considering making improvements prior to putting your home on the market, and one that is often misunderstood.
Let’s say Joe spends $50,000 on upgrades to his home. He might tell his neighbor, “I have $50,000 in my home,” but when he goes to sell, the current market dictates how much he will actually get in return. If Joe ends up selling for $40,000 more than he originally paid, his $50,000 investment got him $40,000 in home equity.
Some things you can do to increase your home equity include:
1) Make a large down payment when you purchase your home. The more cash you put down, the more equity you begin with.
2) Make increased or extra payments on your mortgage principal. Adding to the principal portion only on your monthly payments, or making extra payments when you are able, helps chip away at your outstanding debt.
3) Be smart when making home improvements. Not all improvements build equity. Some improvements may be personal preferences that don’t necessarily add value for resale. Improvements such as a new HVAC system, new appliances, or a new roof are usually more reliable investments than a fountain in the front yard or surround sound speakers throughout the house.
4) Don’t borrow against your home equity unless you must. Home equity is often a homeowner’s biggest asset, and can help to build your retirement nest egg, but it can also come in handy if life throws you a curve ball and you need to borrow against it for an unforeseen emergency. Be careful not to borrow against your equity for frivolous purposes, so it will be there if you really need it.
5) Sell when the market is favorable. If you are counting on your home equity to help finance your next home, pay for your children’s education, or add to your retirement funds, try to sell during a seller’s market when inventory is needed in your area.
Spring is here! That means it’s time to stop hemmin' and hawin' and get after some home maintenance projects. A few ideas to get you started:
• Get down and dirty by scrubbing those baseboards, trim, doors, walls, and handles.
• Scared to look at those air filters after the long winter? Take a deep breath and swap them out with fresh new ones.
• Clean the blinds slate-by-slate (yes, it’s a PAIN) and wash, or easier yet, dry-clean window treatments.
• Get the grime and slime off kitchen cabinets with a top-to-bottom wipe down.
• Flip mattresses and, while you’re at it, wash ALL your bed linens (mattress pads and pillow shams included).
• Have a look at your gutters and downspouts for winter damage and debris. (You'll def want a buddy to hold the ladder.)
• Inspect wooden decks, railings, windowsills, and steps for damage or rot.
• Pressure wash patios, decks, driveway, and outdoor furniture. (Pressure washing is awesome. Seriously. You’ve gotta try it.)
• Tune-up any lawn maintenance equipment.
• Clear the front entryway of bugs and cobwebs. Go on and throw up a colorful spring wreath and welcome mat, too!
Whip your home into shape ASAP so you’ll be ready to kick up your feet when that to-die-for spring weather comes a' knockin'!
Buyer demand continues to outweigh supply in the VIREB market and competition for those few precious listings is fierce. Buyers continue to be frustrated with thier home search as inventory numbers reached an all-time low. The BCREA does not see the inventory situation improving until more supply comes on the market later this year. The BCREA and local real estate boards are advocating with policy makers to encourage streamlining the development process so that municipalities can expand supply more quickly to meet the growing demand.
It is an exciting time to sell your home as the robust market is impacting prices. Single family homes as a 15% increase over February 2020. Last month, we saw a 56% increase in the sales of single family homes since the same period last year with 417 units sold.
More than ever, it's important for buyers and sellers alike to work with a realtor to help them navigate the ever-changing envorinment.
We all want people to love our home as much as we do, but especially when you are trying to sell it! While it’s impossible to please every buyers’ taste, there are several easy things you can do to make your home more appealing without spending a lot of money. Try some of these tricks and see if your showings cause buyers to swoon.
1. Check your curb appeal. Take an honest look from the curbside. What are buyers seeing first? If your home needs to be painted or pressure washed, consider making that investment. Clean up landscaping by trimming trees and bushes, planting some fresh annuals and laying new mulch. Clean windows, repair sagging soffit, or porch railings, and have any trip hazards on your driveway or front walk repaired. Finally, consider some attractive, yet subtle decorations for your front porch.
2. Create an inviting entryway. When buyers step inside your front door, you want them to feel welcomed. If you have a foyer or front hall, it is easier to make an attractive entryway, but even if your front door opens right into your living room, you can create the feel of an entryway with a couple of simple tricks. Clear the area of clutter things that tend to pile up at the front door, like backpacks, dog leashes, or shoes. Place a small table or bench beside the door with plants, candles, or other simple décor. A small area rug can help define the space as the entryway.
3. Let the light shine in. Take advantage of natural light as much as you can. Trimming any bushes or trees outside your windows can help immensely. Wash your windows inside and out and replace or remove any worn screens. Make sure to open blinds or curtains before all showings.
4. Add some fresh color. Painting is an easy and inexpensive way to make an older home look new and is especially important if your current wall color is dark or outdated. Choose a light neutral color like a warm grey or light beige and use the same color throughout the house. If your home tends to be dark, this will help brighten it up.
5. Let storage spaces speak for themselves. Many sellers make the mistake of waiting until they have a contract to start cleaning out closets. Cleaning out clutter is part of getting ready to show, not just getting ready to move. You want buyers to perceive that there is ample storage in the home, and this doesn’t work if every drawer, cabinet, and closet is stuffed to the gills.
6. Eliminate distractions. Streamline your decorating so your buyers see the house and not your personal belongings. Go ahead and pack up collectibles and family photos and keep decorative touches to the minimum. Too many plants, magazines, or toys distract the buyers from seeing the home as their own.
7. Entice them with outdoor space. The back yard shouldn’t be an empty space of infinite possibility, nor should it be a storage area for neglected toys. Get rid of any eyesores you’ve been avoiding dealing with, spruce up your landscaping, repair irrigation or pool issues, and create an entertaining space with a patio set, or a backyard oasis with some potted plants and a hammock.
8. Make it easy for them. Taking care of minor repairs is another step you can take to help buyers see your home as an easy and comfortable move. You want them to be mentally arranging their furniture as they walk through, not making a list of nicked woodwork, torn window screens, and leaky faucets. The less work involved, the easier it is to fall in love.
Most people cringe at the thought of buying a home in December. Only the Grinch would want to pack up and moving during the holiday season! But hold on Cindy Lou Hoo, there are several reasons December can be a great time to buy.
1. Sellers are highly motivated. People who are listing their homes in December are usually on a timeline. They may be relocating for work, wanting to move over the school break, or need to sell their home before the end of the year.
2. You have less competition. Listings do go down in December, but many buyers also take a break during the holiday season. So while the overall number of homes available might be lower, you also have less competition looking.
3. You can get a better price. Motivated sellers and fewer lookers means you can make a better deal. If your seller needs to make a move before the end of the year, they will be willing to work with you on all other terms besides closing date.
4. Rates are staying low. Mortgage rates are forecast to remain low through the end of this year, and into 2021, so it’s a good time to buy.
5. Take advantage of tax benefits. If you close on your home purchase by December 31st, you can take tax deductions for mortgage interest, loan points, and property taxes.
6. Schedules are more flexible. You might think December is too busy a month for moving, but most people tend to have more flexible schedules in December. Children’s activities are suspended, work schedules are more lax, for both you, your sellers, as well as your lender, home inspector, and moving companies, so scheduling all the parts of your transaction and move may actually become easier.
I’d love to help you find your next home. Let’s make your holiday wishes come true!
- Ladysmith Light Up: Although the parade and festivities didn't happen this year, you can still take a drive through town and enjoy the festive lights.
- Lantzville Santa Drive-By: Happening TONIGHT, Santa and the Lantzville Fire Rescue Team will be playing Christmas carols as they drive through town. Check out the official schedule here: https://www.lantzville.ca/cms/wpattachments/wpID430atID5445.pdf
- U-Cut Christmas Trees: Nothing says Christmas like searching for that perfect tree. Check out Gogo's or Lantzville .
The cold season has already arrived in many parts of the country. Here in Nanaimo, it's not only cold...it's wet!
It’s important to prepare your home for the colder weather coming. Taking a little bit of time to winterize your home can save you a lot of time, and money, later on. Check out these tips for preparing your home for the fall and winter.
1. Check window and door weather stripping for damage.
2. Disconnect water hoses and turn off outdoor water supply lines and irrigation system.
3. Wrap exterior water pipes or hose bibs with heating tape.
4. Clean your gutters.
5. Check your roof for damage or leaks.
6. Fill cracks in your driveway and foundation.
7. Check attic insulation for pest damage.
8. Have your furnace serviced.
9. Check your chimney for obstructions and make sure your damper is working.
10. Clean and store your lawnmower.
11. Aerate and fertilize your lawn.
12. Change the air filters in your HVAC system.
13. Change smoke detector batteries.
14. Clean and store outdoor furniture.
15. Have landscaping pruned and put fresh mulch down.
16. Bring potted plants inside.
17. Change your ceiling fan direction.
18. Clean humidifiers before using.
19. Check the condition of your pool cover.
20. Make sure snow equipment is working.