COVID-19 Completely Transformed the Way We Buy Homes—but Will It Stick?

Remember lazy Sunday afternoons when home buyers could leisurely hop from open house to open house, partaking of wine and cheese laid out to reel in more foot traffic—the more the merrier.

Much can change in a year.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, triggering a wave of lockdowns that dramatically changed our lives in countless ways—including how we buy and sell homes.

Still, now that vaccines are becoming more widely available and life soon promises to resume some semblance of pre-COVID-19 normalcy, home buyers and sellers might be wondering: Will the old ways of real estate return, too?

Now that we’ve passed the one-year mark, we thought it fitting to look at all the ways the pandemic has changed residential real estate transactions—and why many of these adjustments are likely to stick around for good.

Over: Large, lavish open houses

Pre-pandemic, holding an open house was often akin to throwing a party, with some brokers spending tens of thousands of dollars to throw buzz-worthy events complete with Champagne, live music, and more.

Yet once COVID-19 precautions prohibited large gatherings in enclosed spaces, this glitzy breed of open house quickly disappeared. Instead, buyers weren’t even allowed to visit homes; but if they were, they did so individually, by appointment only—encased in masks, gloves, and booties.

While poking heads in closets and checking water pressure was once par for the course, pandemic buyers were discouraged from touching doorknobs and faucets, lest they leave traces of the coronavirus behind.

While the legendary open houses before COVID-19 were certainly fun, they aren’t likely to return in their usual splendor—which is fine by many real estate agents, since these epic events attracted tons of looky-loos who had a low probability of actually making an offer.

“To me, it’s a gift,” says Michelle Schwartz of The Agency in Los Angeles. She adds that most agents agree that individual showings are a far safer and efficient use of time, as it narrows down visitors to those who are more serious about buying.

Schwartz adds that this more modest approach has also tamped down on people entering the home for more nefarious purposes, like stealing belongings,

“This has reduced the sellers’ fear of putting their most prized possessions on display to the public,” she explains.

More subdued open houses will likely return as pandemic precautions are removed, but “don’t touch” provisions and requirements of always having a real estate agent or representative with you are likely to stay in place.

Here to stay: Virtual home tours

Given home buyers couldn’t tour homes in person easily during the pandemic, technology ramped up to allow them to check out homes in other ways. They include video tours (where a real estate agent shows a home remotely to buyers on a live video steam), virtual open houses (same as above, but to numerous buyers simultaneously), and 3D virtual tours (where buyers click through an interactive, 360-degree view of a home on their own).

A year ago, virtual viewings were a safety precaution. But since then, they’ve become a beloved convenience among buyers who adore checking out homes from the comfort of their couch. As such, this relatively new technology is no doubt here to stay, and will only become more sophisticated over time. (Think: virtual reality headsets with which you can “walk” through a house.)

“Virtual showings through 3D videos have revolutionized the way our industry does business and likely will continue to do so,” says Kirste Gaudet, broker for @properties in Chicago. “The 3D tours are so realistic that we may be able to put open houses to rest. I find that my clients now want them as part of the marketing effort.”

Aside from the convenience, virtual tours help home buyers quickly and easily narrow their options to a few houses they might like to actually visit.

“Ideally, most people want to see a home in person before they buy, but virtual home tours certainly help them reduce the number of homes they have to spend time and effort touring,” says Josh Judge of Berkshire Hathaway HomeServices/Verani Realty in Southern New Hampshire.

Here to stay: Greater comfort with sight-unseen offers

Most people used to shudder at the thought of making an offer on a house without seeing it in person, and most experts advised against it. But the pandemic has persuaded many to take that leap of faith.

“Now the average home buyer is more inclined to buy a property sight-unseen,” says Lance Kalfeltz, a broker with LV RE Services in Las Vegas. “Being able to work from home allows them to live almost anywhere, and it’s not always convenient to tour a home before buying it.”

Kalfeltz points out that in hot markets like his—where many buyers are making an exodus from Orange County and Los Angeles—by the time a would-be buyer got on a plane (which many were reluctant to do over the past year) or made the drive, the property would be gone.

Besides, unless they agree to an “as is” contract, buyers are most often allowed to back out of a sale if the property doesn’t pass inspection. As such, sight-unseen offers aren’t as risky as they might seem, which is helping more buyers feel comfortable enough to go for it on homes they’re admiring via the many virtual viewing options they now have at their disposal.

Here to stay: Remote closings

In the past, closing on a house was one moment when all parties gathered together in an office to sign paperwork, swap keys, shake hands, and be off on their merry way. But no more!

During the pandemic, “drive by” or “drive up” closings became common, where you’d sign papers sitting in your car, while a masked and gloved runner delivered papers back and forth.

Odds are, remote closings are here to stay, and may even be doable from home. In some states where remote online notarizations are permitted, all documents can now be signed through an approved online notary platform (e.g., Notarize) or audiovisual portal (e.g., Microsoft Teams).

And in the many states where only professionally witnessed ink signatures will do, lending officials may send a notary public to the buyer’s residence or place of business. Although this convenience might cost extra, many buyers seem happy to pay for it.

“I have one client who lives about two blocks from the escrow office, but still opted to pay the $125 extra to have a notary come to his house,” says Kalfeltz.

Over: Desktop appraisals

For all the changes that seem here to stay, there are some aspects of residential real estate transactions that will likely revert to the way they were done before the pandemic, like desktop appraisals. This is where a home appraiser assesses the value of a home merely by looking at it online. However, banks, buyers, and sellers don’t seem to be consistently happy with this practice, as important details can easily be missed this way.

“It’s impossible to assess the value of the neighborhood and the position of the house within it when you’re doing a remote appraisal,” says Schwartz.

Also, one bad camera angle on an online photo can unduly influence an appraisal by thousands of dollars, and keep a loan from going through. No one wins in a situation like that.


Clear Capital’s New OwnerInsight Tool Lets Homeowners Fill in Appraisal Gaps

Posted on March 26th, 2020

As reported earlier this week, some important pieces of the home loan process have been disrupted by the ongoing and seemingly intensifying coronavirus epidemic.

One issue has been home appraisals, which are required for most mortgages and often require a human being to enter the subject property to take photos and inspect the condition of the home.

Due to social distancing measures and shelter in place mandates in many cities and states nationwide, this has become increasingly difficult in certain areas the country.

Even if business is permitted, it might make either party uncomfortable, rightfully so.

And while the FHFA has already directed Fannie Mae and Freddie Mac to make temporary alternatives available, such as desktop appraisals and exterior-only appraisals, Clear Capital has gone a step further.

Clear Capital’s OwnerInsight Asks Homeowners to Be the Photographers


The company, which is focused on appraisal modernization, has released a new product called OwnerInsight (being offered for free in response to COVID-19) that puts homeowners in the driving seat.

Instead of someone entering your home, or the property you wish to purchase, the existing homeowner takes the interior photos and answers related questions using an easy-to-follow guide.

This ensures appraisers have the information required to complete accurate appraisals, while also giving homeowners and appraisers space that allows them to comply with social distancing guidelines.

OwnerInsight doesn’t require the user to download an app, and it works seamlessly on camera-enabled mobile devices, such as our everyday smartphones.

Additionally, the photo metadata (time/location/etc.) is captured when the images are taken to ensure there aren’t any fraud-related issues.

This sounds a lot better than asking appraisers to use information found on the MLS, or relying on outdated satellite imagery and street views to obtain vital property information.

It Could Change the Way Appraisals Are Done in the Future

One thing I mentioned the other day is how this epidemic might force change in the mortgage industry, which is often slow moving and dare I say stuck in its ways.

One pain point in the mortgage process happens to be appraisals, because they can take a lot of time to complete (or book) and slow down the rest of the show.

If this becomes a permanent solution, whereby homeowners and real estate agents can help out to expedite things, the time it takes to get a mortgage could be reduced tremendously.

So while the industry is facing headwinds and a lot of uncertainty at the moment, there are good things that could come out of this too.

The old saying “necessity is the mother of innovation” comes to mind.

The product will launch the week of March 30th, and also be available to mortgage lenders who are on the Ellie Mae Digital Lending Platform via Encompass Partner Connect.

(photo: Marco Verch)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.


Streamlined Mortgage Relief Program Could Mean No Payments for 12 Months

Last updated on April 7th, 2020

A group of mortgage industry heavyweights have sent a letter to the Federal Reserve, HUD, FHFA, CFPB, Treasury Department, and the White House advocating for a uniform, streamlined mortgage relief program in the wake of the coronavirus outbreak.

It could result in waived mortgage payments for up to 12 months for millions of Americans, without the need for much paperwork if any.

However, they did stress that “those who can pay their mortgage, should pay their mortgage.”

How a Uniform Mortgage Relief Program Could Work

  • Same assistance across all government agencies and the GSEs
  • Limited documentation requirements
  • Available to owner-occupants and investors
  • Payment forbearance for 90 days initially
  • Payment relief can be extended up to 12 months if necessary
  • Followed by either a loan modification or the resumption of regular mortgage payments
  • No credit hit, fees, penalties, etc.
  • Nationwide foreclosure and eviction moratorium

The mortgage relief proposal would allow all homeowners with a mortgage to receive an initial forbearance of 90 days, in which monthly payments would not be due.

This would apply to those with conventional loans backed by Fannie Mae or Freddie Mac, along with those who hold a government loan, such as an FHA loan, USDA loan, or VA loan.

Importantly, it would provide universal relief regardless of loan type, without the stringent documentation typically required.

If we learned anything from HAMP and HARP, the last thing the industry needs is paperwork delays and bureaucratic procedures, especially with social distancing and lockdowns in place.

Anyway, the payment forbearance would eliminate the possibility of foreclosure, negative credit reporting, collection calls/letters, and late fees.

In terms of qualifying for relief, borrowers would simply need to make a “statement of hardship,” with no additional validation required.

Loan servicers could also identify customers eligible for COVID-19 assistance and offer deferred payments and other forbearance options.

Even those delinquent prior to the March 13th declaration date (the date the coronavirus emergency was declared) could receive payment forbearance.

As for homeowners with jumbo loans or loans not backed by one of these agencies (portfolio mortgages), they’d likely need to inquire with their bank or loan servicer.

What Happens After the Mortgage Relief Runs Out?

  • Those who are able can simply return to making their mortgage payments
  • Those in need of more relief can receive a permanent loan modification without cost or penalty
  • This might include a partial claim for government home loans
  • And a Flex Mod for those with a conforming home loan

For some, it would be as simple as allowing homeowners to resume their previous mortgage payments, without any additional costs or penalties.

The accrued interest piece is unclear here, but freezing mortgage payments and the interest could certainly help a lot of people out. And could be argued as fair given the current situation is no one’s fault.

Those in greater need could receive an appropriate loan modification, which might vary based on the housing agency involved.

For example, a stand-alone partial claim for FHA loans and USDA loans, which is an interest-free second mortgage that includes the missed payments, due at sale or payoff.

Or a streamlined loan mod (Flex Mod) for Fannie Mae and Freddie Mac loans that brings the loan current with things like an extended term or reduced mortgage rate.

This payment relief would also be delivered without additional cost or penalty.

Tip: How is mortgage forbearance paid back?

Relief for Loan Servicers Needed to Make It All Work

At the same time, loan servicers will need relief to make it all work, especially non-depository mortgage servicers that don’t rely on cash deposits from customers like big banks.

“As background, when a borrower fails to make their monthly mortgage payment, the mortgage servicer must still pay the principal and interest to investors, as well as pay the real estate taxes, homeowners’ insurance, and mortgage insurance on their behalf.”

Loan servicers maintain liquid reserves to cover such advances, but with millions of Americans experiencing expected to see income disruption related to COVID-19, it will likely “strain and possibly overwhelm some servicers’ liquidity reserves, all of which were calculated and set aside for more ordinary times.”

The group estimated that if just 25% of the nation receives forbearance for three months, servicers will need to cover roughly $36 billion in missed payments.

That number would exceed $100 billion if this same number of homeowners were to miss nine monthly mortgage payments.

They propose a backstop liquidity source for these independent mortgage servicers, including two suggestions, one being Ginnie Mae’s Pass-Through Assistance authority, and the other the Federal Reserve’s 13(3) authority.

What About Refinances and Home Purchase Loans?

They also addressed new loan originations, which have faced some uncertainty given the closure of government offices and the limiting of face-to-face interactions.

To combat the appraisal issue, they have recommended waiving appraisals on rate and term refinances.

For other loans, they suggest a hybrid approach that uses external property review by the appraiser combined with a desktop review, along with interior photos from the real estate agent or seller.

For verification of employment, they question the reliability of employment confirmation at the moment, and for rate and term refinances, argue that being current on the loan could suffice.

The idea being to provide payment relief without the typical hoops to jump through, as a lower interest rate theoretically should reduce the probability of mortgage default.

They also note that title searches and recording deeds could be impossible unless local government offices reopen or find alternative solutions.

And are looking for solutions beyond remote closings to solve the face-to-face dilemma.

In other words, there seem to be more questions than answers, so new mortgages face some headwinds as well, even if mortgage rates are low.


My Appraisal Came in Low: Why It Happens and Buyer Options

A lot of questions can keep a home buyer awake at night. What if we can’t find a house before our lease ends? What if we fall in love with a house and get bad news during the inspection?

Add one more question to the list: What happens if the appraisal comes in low? Here’s what to do so you can rest easy.

What is a home appraisal?

If you are obtaining a mortgage to purchase a home, a bank appraisal is necessary.

Why? Because your lending partner is going to be highly invested in your purchase. For instance, if you are putting down 5%, the lender is bringing 95% to the closing table. That’s a lot of money!

Understandably, your lender will want to do some research on your future home to make sure it’s a solid investment. To do this, a bank will send out an appraiser to determine the fair market value of your property based on recent sales and comparable market data.

Why would a home appraisal come in low?

Sometimes the appraised price comes back lower than the agreed-upon purchase price. Let’s say you offered $390,000. After signing the purchase agreement and moving forward with your financing, the bank appraiser determines that the value is only $380,000. Why does this happen?

There are a few reasons.

Bidding wars

In competitive housing markets where there are multiple bids, the demand on a property can push the price beyond what an appraiser determines it is worth. Appraisers work off historical data and need to back up your purchase price with recently sold comparable houses.

Bad timing

Seasonal peaks can be another culprit. For example, early spring is the most common time for low appraisals in New England. The nice weather gets buyers out of the winter slump, and all the fresh inventory and activity can drive prices upward. This makes it tough for appraisers who have to pull from winter sales to justify current values and seasonal pricing spikes.

Poor appraiser

Another reason your appraisal may come in low is if the appraiser missed the mark.

For most residential transactions, you can’t choose the appraiser, because as the buyer, it’s a conflict of interest. But if the appraiser is new at the job or from out of town, they may make some oversights and come up with an opinion that doesn’t make sense.

No comps

Appraisers use historical data and comparable homes to build a case about value. But in some situations, there aren’t enough comps to justify pricing. In these cases, the appraiser will be conservative.

What if the appraisal is lower than purchase price: your options

A low appraisal is bad news because the lender will only provide a loan up to the appraised value, overriding your agreed-upon purchase price. Going back to the example provided earlier, who covers the $10,000 discrepancy between your offer of $390,000 and the appraisal of $380,000?

There are a few things you can do. First, scrutinize the appraisal. Do you see any glaring issues? Did the appraiser miss something or overlook a perfect comp? Speak with your lender to see if there’s anything you can do to get a second opinion and revisit the report. You may want to order a new appraisal if things are really out of whack.

If ordering a new appraisal doesn’t seem like the best path forward, you have other options:

Ask for a price reduction

Are the sellers motivated? The easiest solution is for them to drop the price down to the appraised value. If the situation is not competitive, you might be able to get the seller to reduce the sale price based on the findings within the appraisal report. This would be the best-case scenario for you.

If they won’t drop the price all the way, you may still be able to negotiate a reduction and meet them in the middle.

Find the money

If the seller isn’t motivated or has plenty of backup offers, they may tell you to take it or leave it. At that point, you need to decide if you can put the extra money down to cover the difference. Putting more money down will offset the low appraisal.

Reconfigure your financing

What if you don’t have the money to pay out of pocket? You may be able to work with your lender on a new program that frees up some cash. Rather than putting down the amount you intended, you can put down a little less and use the extra cushion to close the gap between the purchase price and the appraisal price.

If all else fails, you can terminate the transaction if you have a financing contingency.


The Cash Out Refi Share Is Above 80%, But There’s a Catch

Posted on November 27th, 2018

While it would appear that borrowers are using their homes as ATMs again, it’s a bit misleading.

Yes, the share of home mortgage refinances that resulted in cash out rose above 80% in the third quarter, per Freddie Mac data, but one must also consider overall loan volume.

Let’s start with the basics here. Of the refinances recorded in the third quarter, an overwhelming 81% resulted in a loan amount 5%+ higher.

That means the homeowner took on a larger loan amount in exchange for some sweet, sweet equity.

These were very common during the lead-up to the housing bubble, and partially why it bubbled to begin with, but became very rare post-crisis.

This is kind of a big deal because the cash out share was in the ~40% range as recently as 2017.

The Cash Out Share Bottomed in 2012

  • The cash out share hit 12% in the second quarter of 2012
  • The lowest since Freddie Mac began compiling records in 1994
  • This was the result of restrictive underwriting guidelines
  • Combined with sinking house values

However, the cash out share was a paltry 12% in the second quarter of 2012, and hovered below 20% for much of the time between 2010 and 2014.

Part of that had to do with the fact that homeowners didn’t have any equity to tap, what with home prices in the gutter and large outstanding mortgage balances ensuring there was nothing left to access.

Further exacerbating the issue was tight underwriting restrictions that limited cash out to very low loan-to-value ratios.

In other words, you basically needed to own your home free and clear or very close to it in order to get some cash out of the property.

Fast forward to 2018 and cash outs are king again, well, at least on paper. That 81% share is the highest since the third quarter of 2007, when the share was a staggering 87%.

It was actually slightly higher in the second and third quarter of 2006, at 89%. What made that even more remarkable was the volume seen at that time.

Not only were cash out refis all the rage, the loan amounts associated were massive thanks to questionable home appraisals and liberal underwriting standards, if you could even call them that.

Pretty much everyone and their mother was taking advantage of the 100% LTV cash out refinance, which when coupled with an option arm or other type of ARM, resulted in an unsustainable monthly payment once financing options dried up.

And as home prices tanked, so too did the incentive to keep the darn mortgage, which is why we experienced the worse housing downturn in decades.

But before we get too concerned about another home equity crisis, we need to consider the volume of these refis today.

Today’s Cash Out Volume Is a Drop in the Bucket

  • If we look beyond refinance share and at volume instead
  • It’s clear that cash out refis aren’t out of control again
  • Less than $15 billion was cashed out in the third quarter
  • It was as high as $84 billion in the second quarter of 2006

In the same report, Freddie lists the total home equity cashed out each quarter, in billions of dollars.

Sure, 81% is an overwhelming share, but it really only speaks to the fact that rate and term refinancing is all but gone, thanks to the recent increase in mortgage rates this past year and change.

Back to that volume – during the third quarter, an estimated $14.6 billion was cashed out. Sounds like a lot, but it’s not, at least relative to what we saw a decade ago.

In the second quarter of 2006, some $84 billion was cashed out of some very artificially inflated homes. That’s nearly six times the volume and doesn’t even factor in inflation over the past decade.

Basically, today’s cash out volume is a drop in the bucket compared to what we saw in the early 2000s.

In a three-year span between 2005 and 2007, more than $800 billion dollars was cashed out of U.S. properties nationwide. Where’d it all go? How much of it was actually paid back?

In 2005, volume was $262.7 billion, followed by $320.5 billion in 2006 and $239.7 billion in 2007.

Throw in 2004 and 2008 and you’re over a trillion dollars. Wow.

For more perspective, annual cash out volume for 2018 will likely be less than $70 billion. And it was only $69.6 billion last year.

Of course, we should certainly keep an eye on volume going forward to see if there’s another home equity party materializing.

Sure, homeowners like their low fixed mortgage rates an awful lot, but there’s a good chance they like cash even more. If and when the cash out volumes get closer to what we saw a decade ago, you can start to worry.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.


7 Myths About Buying a Foreclosure Home That’ll Surprise Deal Seekers

Considering buying a foreclosed home? Any home buyer looking to pay below market value should be paying attention to foreclosure listings. But the process of buying a repossessed home is full of misconceptions—and we’re here to help separate the false stereotypes from the reality.

These are some common myths that need to be set straight.

Myth 1: The house must be bought in cash

That all depends on what stage a foreclosure property is in, says Bill Gassett with Re/Max Executive Realty in Hopkinton, MA. If the home is in pre-foreclosure or “short sale,” the buyer does not need to shell out an all-cash offer.

“They can procure a mortgage just like any traditional sale,” Gassett says.

If the bank sells a property at public auction, the mortgage holder usually does require that the home is bought with cash and mortgage contingencies are not allowed in the sale.

If you don’t have a lot of cash on hand but know you’d like to buy a home in foreclosure, Bobbi Dempsey, author of “Idiot’s Guide to Buying Foreclosures,” suggests drawing from a line of credit obtained using current property.

When the foreclosure is a bank-owned property, Gassett says the bank is usually actively looking for an end buyer.

“The purchaser of a bank-owned property is almost always able to procure a mortgage as part of the contract with the bank,” he says.

Myth 2: Buyers forfeit their right to have a home inspection

Definitely not true! Buyers have the right to do a home inspection and ask for repairs, but banks or sellers aren’t required to make them, says Rob Jensen, broker and president of Rob Jensen Co., in Las Vegas. But home inspections are actually encouraged since nearly all banks sell their foreclosed homes in as-is condition, and want to avoid liability down the line.

“It is common for structural, electrical, and plumbing issues that pertain to the safety and integrity of the home to be repaired, but there’s no guarantee,” says Jensen. “Every bank and every deal is different.” However, don’t count on the bank to fix those cosmetic issues.

Jensen says paint, carpet stains, and other minor blemishes are not likely to be addressed.

Buyers considering a foreclosure should make sure the sales contract has a contingency clause that requires a passing home inspection. This way, buyers can either choose to accept any issues with the home or back out of the contract.

With courthouse sales, however, homes are sold as they are, with no inspection.

Myth 3: Foreclosure homes require huge overhauls

It’s incorrect to assume that all homes in foreclosure are in shoddy condition. A large percentage of foreclosures are the result of job loss, illness, death, divorce, or even fluctuations in the real estate market, which means many of these homes were well maintained and may need only minor touch-ups.

“It quite often depends on the attitude of who last owned the property and whether or not they went out of their way to destroy the place,” says Jensen.

Myth 4: Foreclosures sell at heavy discounts

A common belief is that a foreclosure home will sell for at least half of its original value. But remember, the bank still wants to make a profit. Buying a foreclosure home can save you green, but the seller will hold out for the maximum price possible.

Home buyers often make a beeline to foreclosures because they think they can get a home for pennies on the dollar. But, Jensen says, by the time they factor in the time and renovation costs, they may reconsider.

“Foreclosures can provide opportunity to save, but you usually need time and extra cash to take advantage of it,” he says.

Myth 5: Foreclosure homes carry hidden costs

The fear of hidden costs may send would-be buyers running, but it’s not necessarily a worthwhile concern.

“A lot of the costs involved are typical for any real estate purchase—things like inspections, appraisals, transfer fees, etc.,” says Dempsey.

Yes, repairs or liens on a foreclosure can prove costly, but a home inspection will reveal any potential problems during escrow (this is where that inspection contingency comes in handy).

Also, the property deed can be researched on a foreclosed home. And, buying a HUD home or REO (or real estate–owned property) means the Department of Housing and Urban Development is required to clear the title of liens before it resells the home. Lenders will usually clear them, too, but buyers should make sure of that before they purchase.

“Generally speaking, there are not any more hidden expenses in purchasing a foreclosed home than there would be in a traditional sale,” says Gassett.

Myth 6: Foreclosures lose value faster than regular homes

Foreclosed homes actually tend to rise quickly in value. With any home, there’s no guarantee it will deliver increases, but buying a foreclosure sold below market value can provide instant equity. And any extra work done to the home can only increase the value.

“There are a variety of factors that influence home values, including economic conditions, local market conditions, and the overall condition of the property,” says Andrew Leff, senior vice president and head of strategic alliance programs at Wells Fargo in New York City.

Myth 7: Buying a foreclosure is risky

Let’s be honest. Any real estate purchase comes with risk. Gassett says the only scenario where there’s some extreme risk is when buying at auction, since you are buying the property as is. Buyers are not able to conduct a professional home inspection and often not even able to see the inside of the property. Plus, they will be inheriting whatever came with the home.

“For example, if there is a lien on the property, you could become responsible for it. When buying a home at auction, it is essential to do a title search first,” says Gassett.

Leff says buyers should be informed before entering into any type of real estate transaction. This means aligning themselves with resources that can help them navigate the purchase and financing process with confidence.

“A knowledgeable real estate agent and lender can help ensure that a buyer is making an educated decision so that the property and any resulting financing is the right fit for them,” says Leff.


Boise, ID Real Estate Market 2020 Recap & 2021 Forecast

2020 brought us one of the wildest real estate markets in memory. When COVID-19 began to take a foothold in early spring, the real estate market came to a screeching halt…for about two weeks. As the pandemic moved through spring and summer, the Boise market grew red hot once again.

[embedded content]

Here are some of the most notable takeaways of the Boise area real estate market in 2020.

A Major Sellers’ Market

Throughout the year, sellers in the Treasure Valley were seeing multiple offers, home bids well over asking price, rapid appreciation, and buyers waiving home inspections and appraisals. It was a good year to be a homeowner or a home seller. Homebuyers, on the other hand, had to learn to navigate an increasingly competitive market.

Record Low Inventory

2020 began with a shortage of homes listed on the market. Listings were hovering around 2-3 months of inventory at the start of the year. Other than the short-lived halt in the market due to COVID-19, the trend of low inventory only increased throughout the year. In late spring, inventory fell to record lows, with only a one-month supply. In total, active listings in both Ada and Canyon counties fell 79% in 2020.

Rising Home Values

Dropping inventory levels often lead to rising home values, and this principle held true in the Boise area this year. For context, the year-over-year increase in values for Ada County homes between 2018 and 2019 was only 9.9%. The 2019 to 2020 growth was immense.

In addition to record-low inventory, record-low interest rates also drove the increase in home values. Buyers were jumping to buy new homes, even while fewer and fewer homes became available.

Migration to Idaho

During the 2020 and the COVID-19 pandemic, the entire country saw a trend of urbanites moving out of major cities and into areas with more space and fewer people. This trend accelerated the already expanding Boise market and our surrounding vacation markets, such as McCall and Sun Valley.

The cost of driving a Uhaul from San Francisco to Boise was 10-30 times more expensive than moving the exact same Uhauls from Boise to San Francisco. Uhaul parking lots are literally bursting at the seams with idle trucks from people having moved to Boise or the surrounding areas. Idaho is now the fastest-growing state in the country.

Expectations for 2021

As we enter 2021, the story of the Treasure Valley remains the same. Huge numbers of people are moving to Boise and the surrounding areas. There is an extreme shortage of homes for sale and for rent. Prices of homes for rent and sale continue to escalate.

On the bright side for prospective buyers, interest rates are near their all-time lows, and this fact has helped keep affordability in check despite the massive growth in appreciation. If interest rates are to reverse course then affordability could become a major impediment to home buyers.

With possible increases in income taxes and capital gains, we could see new headwinds on luxury real estate which has had a good run. Investors are more likely to participate in a 1031 exchange to defer rising capital gains rates. In short, 2021 is starting off as 2020 ended. It’s a great time to be a homeowner. This is good news for sellers and buyers alike.

Talk to A Homie in 2021

If you’re looking to take advantage of the current sellers’ market, click here to get in touch with us and start listing your home. Our Homie team will help you get an awesome price for your home while making the transaction run smoothly and quickly.

If you’re looking to buy a home in the Boise area this upcoming year, our expert agents will make navigating this competitive market a breeze. Click here to start buying.


8 Steps to Buying a Vacation Home

If you’re like many Americans, you dream of having a beach house, a desert escape, or a mountain hideaway. Perhaps you’re tired of staying at hotels and want the comforts of home at your fingertips.

You’re ready to make this dream a reality. Before you do, consider these steps.

How to Buy a Vacation Home

1. Choose a Home That Fits Your Needs

As you begin your search for a vacation home, carefully consider your goals and needs. Start with the location. Do you prefer an urban or rural area? Lots of property or a townhouse with just a small yard to care for?

Consider what amenities are important to be close to. Where is the nearest grocery store? Is a hospital accessible?

Consider your goals for the property. Is this a place that only you and your family will use? Do you plan to rent it out from time to time? Or maybe you plan to be there only a couple of weeks out of the year, using it as a rental property the rest of the time.

The answers to these questions will have a cascade effect on the other factors you’ll need to consider, from financing to taxes and other costs.

2. Figure Out Financing

Next, consider what kind of mortgage works best for you, if you’re not paying cash. You may want to engage a mortgage broker or direct lender to help with this process.

If you have a primary residence, you may be in the market for a second mortgage. The key question: Are you purchasing a second home or an investment property?

Second home. A second home is one that you, family members, or friends plan to live in for a certain period of time every year and not rent it out. Second-home loans have the same rates as primary residences. The down payment could be as low as 10%, though 20% is typical.

Investment property. If you plan on using your vacation home to generate rental income, expect a down payment of 25% or 30% and a higher rate for a non-owner- occupied loan. If you need the rental income in order to qualify for the additional home purchase, you may need to identify a renter and have a lease. A lender still may only consider a percentage of the rental income toward your qualifying income.

Some people may choose to tap equity in their primary home to buy the vacation home. One popular option is a cash-out refinance, in which you borrow more than you owe on your primary home and take the extra money as cash.

3. Consider Costs

While you consider the goals you’re hoping to accomplish by acquiring a vacation home, try to avoid home buying mistakes.

A mortgage lender can delineate the down payment, monthly mortgage payment, and closing costs. But remember that there are other costs to consider, including maintenance of the home and landscape, utilities, furnishings, insurance, property taxes, and travel to and from the home.

If you’re planning on renting out the house, determine frequency and expected rental income. Be prepared to take a financial hit if you are unable to rent the property out as much as you planned. For a full picture of cost, check out our home affordability calculator.

4. Learn About Taxes

Taxes will be an ongoing consideration if you buy a vacation home.

A second home qualifies for mortgage interest and property tax deductions as long as the home is for personal use. And if you rent out the home for 14 or fewer days during the year, you can pocket the rental income tax-free.

If you rent out the home for more than 14 days, you must report all rental income to the IRS. You also can deduct rental expenses.

The mortgage interest deduction is available on total mortgages up to $750,000. If you already have a mortgage equal to the amount you on primary residence, your second home will not qualify.

The bottom line: Tax rules vary greatly, depending on personal or rental use.

5. Research Alternatives

There are a number of options to owning a vacation home. For example, you may consider buying a home with friends or family members, or purchasing a timeshare. But before you pursue an option, carefully weigh the pros and cons.

If you’re considering purchasing a home with other people, beware the potential challenges. Owning a home together requires a lot of compromise and cooperation.

You also must decide what will happen if one party is having trouble paying the mortgage. Are the others willing to cover it?

In addition to second home and investment properties, you may be tempted by timeshares, vacation clubs, fractional ownership, and condo hotels. Be aware that it may be hard to resell these, and the property may not retain its value over time.

6. Make It Easy to Rent

If you do decide to use your vacation home as a rental property, you have to take other people’s concerns and desires into account. Be sure to consider the factors that will make it easy to rent. A home near tourist hot spots, amenities, and a beach or lake may be more desirable.

Consider, too, factors that will make the house less desirable. Is there planned construction nearby that will make it unpleasant to stay at the house?

How far the house is from your main residence takes on increased significance when you’re a rental property owner. Will you have to engage a property manager to maintain the house and address renters’ concerns? Doing so will increase your costs.

7. Pay Attention to Local Rules

Local laws or homeowners association rules may limit who you can rent to and when.

For example, a homeowners association might limit how often you can rent your vacation home, whether renters can have pets, where they can park, and how much noise they can make.

Be aware that these rules can be put in place after you’ve purchased your vacation home.

8. Tap Local Expertise

It’s a good idea to enlist the help of local real estate agents and lenders.

Vacation homes tend to exist in specialized markets, and these experts can help you navigate local taxes, transaction fees, zoning, and rental ordinances. They can also help you determine the best time to buy a house in the area you’re interested in.

Because they are familiar with the local market and comparable properties, they are also likely to be more comfortable with appraisals, especially in low-population areas where there may be fewer houses to compare.

The Takeaway

Buying a vacation home can be a ticket to relaxation or a rough trip. It’s imperative to know the rules governing a second home vs. a rental property, how to finance a vacation house, tax considerations, and more.

Ready to buy? SoFi offers mortgages for second homes and investment properties, including single-family homes, two-unit buildings, condos, and planned unit developments.

SoFi also offers a cash-out refinance, all at competitive rates.

Got two minutes to spare? That’s how long it takes to check your rate for a mortgage with SoFi.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.



5 Ways to Win a Real Estate Bidding War without the Highest Bid

You may shortly find yourself in a real estate bidding war if you’re one of the many first-time homebuyers looking to buy in competitive markets like Austin, TX or Denver, CO. You may also think the only way to win the house is by putting in the highest offer. While this sounds like the right and possibly only strategy, you might be surprised when a homeowner selects a lower bid. 

Winning a real estate bidding war doesn’t always come down to price – there are actually many other tactics that are extremely effective. All-cash offers, pre-approval letters, and flexible timelines are all strategies that can beat out the highest offer. When you’re planning your bidding strategy, consider the following tactics to help make your offer stand out amongst the competition.

1. Get pre-approved for a mortgage

One of the first steps you should take towards purchasing a house is obtaining a pre-approval letter. A pre-approval letter states that a lender is willing to lend money up to a certain amount. These are typically acquired from a mortgage company or a bank. 

Getting pre-approved is almost always beneficial when buying a house, but especially if another buyer puts in a large offer during a real estate bidding war, but isn’t pre-approved. By having this letter, you can show the seller that you’re a qualified and serious buyer, even if you don’t have the highest bid. Pre-approval letters typically have an expiration date of 30 to 60 days, however, they can be updated with reverification of your information.

2. Go in with an all-cash offer

We’ve all heard the term “cash is king,” and when it comes to real estate bidding wars it’s no different. Having cash on hand means that mortgage companies don’t need to get involved, escrow closes faster, and you don’t have to worry about appraisals. All-cash offers show the seller you mean business and are ready to buy the house today.

3. Provide a flexible timeline

Flexibility around specific details in real estate transactions is nearly as good as offering the highest bid. Sometimes sellers need more or less time in the home than the typical 30-day closing period. If you are not in a rush to move, be flexible with your closing timeline and let the seller decide when works best for them. This can go a long way in a real estate bidding war especially if competing offers come in with hard deadlines. 

4. Eliminate contingencies during a real estate bidding war

Of course, there will always be contingencies when buying a house. Home inspections, financing, and appraisals are all important, however, you want to make sure that you aren’t overwhelming the seller by asking for too much. If you want to be the victor in a bidding war without the highest offer, you should remove as many contingencies as possible. However, it’s important to note that as you eliminate contingencies, you’re effectively taking risk off the home seller (which is why it’s a winning strategy) and putting it instead on yourself. 

5. Write a personal letter about why you are the perfect homeowners

Almost all sellers want to make sure their home is going to people that will take care of it and love it as much as they do. Including a personal offer letter, complimenting recent renovations, stating why you would be the perfect caretakers, and sharing what you love about the home, will help you stand out. It won’t always make a major difference, but this personal touch can help compliment an offer even if it’s not the highest bid. 

Real estate bidding wars can be extremely competitive, but implementing these five strategies can help your offer stand out. You should also consult with your real estate agent, as they may have additional insight on how to make your offer more attractive. In the end, the sellers are going to choose the offer that’s most attractive to them, so do whatever you can to make your offer the best on the table.