In the Market? Here’s What You Should Know About Contingencies

Home contingencies are aspects of home purchase contracts that protect buyers or sellers by establishing conditions that must be met before the purchase can be completed. There are a variety of contingencies that can be included in a contract; some required by third parties, and others potentially created by the buyer. While sellers in the current market prefer to have little to no contingencies, the vast majority of purchase contracts do include them, so here’s a primer to help you navigate any that come your way!

Financing Contingency

The most common type of contingency in a real estate contract is the financing contingency. While the number of homes that sold for cash more than doubled over the last 10 years, the majority of home purchases — 87% of them, in fact— are still financed through mortgage loans.

Why is this important? Because most real estate contracts provide a contingency clause that states the contract is binding only if the buyer is approved for the loan. If a contract is written as cash, in most cases, the financing contingency is removed.


Why Does The Financing Contingency Exist?

This contingency exists to protect the buyer. If a buyer submits a winning offer, but can’t get approved for a loan to follow through with the purchase, this clause can protect the buyer from potential legal or financial ramifications.

Tip: Homeowners can, and should, request to see a buyer’s prequalification letter before accepting their offer.

Home Sale Contingency

For many repeat homebuyers, they must sell a property in order to afford a new home. Whether they’re relocating for work, moving to a larger home, or moving to a more rural area, 38% of home buyers in a recent survey reported using funds from a previous home to purchase a new one. This is where a home sale contingency comes into play; this clause states that the buyer must first sell their current home before they can proceed with purchasing a new one.

Why Does This Contingency Exist?

This is another contingency that exists to protect the buyer. If their current home sale doesn’t close, this clause can protect the buyer from being forced to purchase the new home. In other words, they can back out of the new home contract without consequence. Keep in mind that in a seller’s market, this type of contingency offer is less desirable to sellers; in fact,  they may rule out your offer completely if this is included.

TIP: In many situations, homeowners can negotiate escape clauses for the home sale which would allow them to solicit other offers and potentially bump the current buyer out of the picture.

Home Inspection Contingency

Not only is it common, it’s also wise to include a home inspection contingency in any offer. Whether it’s a new home or an existing home, there is no such thing as a flawless house. Home inspections can uncover hidden problems, detect deferred maintenance issues that may be costly down the road, or make the home less desirable to purchase completely. A home inspection contingency essentially states that the purchase of a home is dependent on the results from the home inspection.


Why Does This Contingency Exist?

Whether it’s a roof in need of replacement or an unsafe fireplace, homebuyers need to know the maintenance and safety issues of the properties they’re interested in purchasing. If a home inspection report reveals significant (or scary!) findings, this protects the buyer from the financial burden that repairs would require. This is why agents will tell you it’s never a good idea for a home to be purchased without a home inspection contingency.

TIP: The findings from the report can usually be used to negotiate repairs or financial concessions from the seller.

Sight-Unseen Contingency

Especially during sellers markets, it’s not uncommon for a home to have dozens of showings within the first couple of days of listing. This breakneck pace can create a scenario in which homebuyers may not be able to coordinate their schedules to get a timely showing appointment. To help prevent missing out on the chance to buy a home, buyers in this situation will sometimes make offers on the home, sight unseen.


There’s no sugarcoating it…this is a high-risk strategy with ample opportunity for negative consequences. However, if this strategy is used, many real estate agents will add a sight- unseen contingency to their offer. This contingency states that the offer for purchase is dependent on the buyer’s viewing of, and satisfaction with, the property.

Why Does This Contingency Exist?

In a market with shrinking inventory, desperate buyers want a fighting chance at a hot property; in some cases, that can only exist by submitting an offer before they can see it in person.

TIP: Sight unseen offers are also high risk to the seller. If you include this contingency in your offer, try to keep other seller requests to a minimum. 

Why Contingencies Can Be Positive

In a seller’s market, buyers may feel the pressure to remove as many contingencies as possible in order to compete. But, it’s important to remember that contingencies are actually safeguards in place to prevent buyer remorse, expensive future repairs, or financial calamity. It’s always crucial for buyers to hire a seasoned real estate agent who can advocate for their best interests, negotiate and strategize in safe and competitive ways, and advises them of the risks of each decision.

Looking to Buy? Don’t Go it Alone!

The homebuying process is a complex one, but that doesn’t mean you’re left with all the heavy lifting. Find your dream home and a local agent on, then visit our “How to Buy” section for all the step-by-step insights for a smooth process.

Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.


5 Ways to Win in a Purchase Money Market in the New Reality

During my recent conversations with sales leaders, managers across the board expressed concern about their originators adapting to the new environment of rising interest rates and the shift to purchase money.

Sherlock: not having an accurate view of sales performance is a recipe for disaster
Pat Sherlock

The decline in refinance business is a reality with mortgage applications dropping 43% in the last week, according to the MBA. This raises a critical question: how many lenders and originators will be able to transition to a purchase money marketplace when the easy money of refinancing is replaced by the hard work of finding customers who want to purchase and finance a home?

Every experienced mortgage lender has certainly witnessed big changes in interest rates over the last 20 years. Sometimes it happens quickly. Other times it can be a slow climb to higher interest rates. This time, it is a little of both. The global pandemic caused the Fed to drop interest rates to historic lows and now, with the end in sight, rates are inching back up.

The real question for lenders and originators that have 90%+ refinance business is: can they switch to the traditional purchase money market that still depends on local relationships or will they decide to sell out to other, better structured lenders? Frankly, the selling out strategy has likely already run its course, leaving lenders that have not invested in digital technology or sales training with few alternatives.

5 Steps to Success

That said, what changes should originators who have been living off of refinance lending make to succeed in a purchase money environment? Here are five recommendations:

  1. Develop a marketing plan. Yes, I know having a plan doesn’t seem like the right strategy when a loan officer is panicked and needs income. But, setting aside some time to analyze the market and identifying underserved opportunities is a worthwhile activity because where producers commit their time and marketing resources is always a balancing act. There are only so many hours in a day and spending them correctly matters a lot.
  2. Understand growth in the local area. An originator’s marketing plan should determine what home building activities in their local market are driving growth. Is it new construction, retirement homes, second homes, etc.? Every market is different and understanding where growth will be coming from is critical. Looking at the research the local municipality has already done is a good start.
  3. Identify underserved market opportunities and the people associated with them. Every market has underserved opportunities that some individuals have already recognized—you want to know these professionals. Rarely is an underserved market completely void of participants. An originator’s job is to develop relationships with the parties in the market before other loan officers decide to market to them. Building relationships takes time and requires originators to form relationships with builders, attorneys, real estate agents and other professionals.
  4. Don’t forget about previous customers. Since developing and building relationships is time-consuming, originators must also work their database of closed loans over the last several years. Former customers are already familiar with an originator’s service levels and a certain percentage might be interested in purchasing a second home or investment property. Some clients might be receptive to listening to a webinar on the latest trends in the local real estate market. This is a great opportunity for originators to partner with a realtor to target a particular audience. The real estate agent can provide his or her perspective as part of the webinar or live stream event. However originators reach out, they should avoid sending mass emails and direct mail. Consumers want a more personal, customized approach.
  5. Rekindle referral business. Originators who have a plan, determine their niche and develop relationships with referral sources and customers in an underserved marketplace are on the path to success in a purchase money environment. Working former customers is a smart way for producers to generate current business while establishing relationships with new referral sources.

Implementing all five strategies is a great way for originators to position themselves for robust performance in a purchase money market.

Pat Sherlock is the founder of QFS Sales Solutions, an organization that helps organizations improve their sales talent management and performance. For more information, visit


Housing Inventory Lowest Since 2007, But Median Price Unchanged

Last updated on January 10th, 2018

A while back, I mentioned that it appeared as if we were running out of homes for sale, despite being just years (or days) out of the housing crisis.

I was being somewhat facetious, but it’s true that there are very few homes for sale these days, at least in areas where people want to buy.

A new report from Realtor released today revealed that there were just 1.76 million single-family homes, townhouses, condos, and co-ops listed for sale in October nationwide.

That number is down 2.58% from September and 17.0% from a year ago, displaying just how bad things have become for would-be homebuyers.

Total listings in October were also 40% below the 3.1 million units for sale back in September 2007, when began tracking associated housing markets.

On a year-over-year basis, for-sale inventory declined in 141 of the 146 markets covered by Good luck finding a house!

Median Price Unchanged


Despite this drop in inventory, the median list price in October was $189,900, unchanged from a year ago (it dropped 0.83% month-over-month).

It has fallen for three straight months, and likely won’t see any improvement during the holiday season, so we could be in for a long winter.

So even though there are far fewer homes for sale, demand hasn’t won over supply, though it may prevent further home price declines. Phew.

Still, it doesn’t bode well for a recovery if home prices can’t even steady themselves with record low rates on hand and limited supply.

Recovery Uneven

List prices increased in 71 markets, remained unchanged in 31 markets, and dropped in 44 markets.

Median prices are up in many hard-hit regions, such as Phoenix, Atlanta, Seattle, Las Vegas, and much of California.

The median price in Vegas in October was 12.41% above year-ago levels, thanks to a 24.4% drop in housing inventory.

[Foreclosure resales hit five year low.]

But median prices are down in many areas of the country that didn’t experience a run-up in prices during the boom, namely the Midwestern “rust belt.”

In other words, continued economic uncertainty is killing demand and hurting home prices in areas that aren’t highly sought after.

And with the impending fiscal cliff, you have to wonder if this recovery really has any legs.

Still, investors seem to be scooping up properties and everyone I know wants a house; they just can’t seem to find one for sale.

So at minimum, that should buffer home prices, even if the economy takes another turn for the worse.

Two-Year Window to Buy

While that all sounds pretty grim, Blackstone, the world’s largest private equity firm, has purchased about 10,000 foreclosed properties in the United States this year, according to a Bloomberg report.

The price tag so far is a mere $1.5 billion, with about $100 million in weekly home purchases.

The company has been scooping up properties on the cheap, with an average purchase price of $150,000, many of which were valued at $300,000 during the boom.

Blackstone plans to renovate the homes and rent them out via property management companies.

But Blackstone Global Head of Real Estate Jonathan Gray believes there are only another two to three years of buying opportunities before the market becomes less attractive from an investment standpoint.

Clearly this presents a bit of a quandary, seeing that everyday buyers can’t even find a suitable property, thanks in part to these vulture investors coming in and paying with cash.

Read more: Should you buy a house now or wait?

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 15 years.


Pros & Cons to Building Your Own New Home

When it comes to owning a house, the decision whether to build or buy is one you have to contend with. Each option comes with its set of advantages and disadvantages. For instance, buying ensures you become homeowner in record time as opposed to building which takes longer. Whichever option you settle on, it helps to evaluate the argument for and against each. With that in mind, here are the pros and cons to building your own new home.

Building Your Own HomeBuilding Your Own Home



Building has less competition than buying when it comes to getting your desired home. Properties are typically on the market for a little over a month. This means the competition is not only high but it’s also possible not to get a home; between the time it takes for financing to be approved and shopping, ‘your house’ could already be off the market.


Building means that you get to come up with a
design that embodies your dream house. You can personalize every detail from
the wall colors to the types of faucets. This beats buying whereby you have little
or no control on the layout, number of rooms or even the types of installations.

With own construction you can replicate
design features from your parents house for nostalgia. You also get the chance
to choose the type of contractors whose work is reliable. This is in contrast
to buying a home whose construction integrity could be faulty and easily to be
missed by real estate assessors.    


Building codes and standards keep on
changing. This makes building from the ground up a chance for you to make your
home up-to-date. You can incorporate energy saving measures such as solar
powered HVAC systems. Furthermore, new appliances and building material means
you will be spending less on renovations for some years to come.



Building a new home can take anywhere between
a few to over 10 months, this is according a US Census Bureau report. This means for the entire duration of contraction you will have to
shoulder rent payments; money that could have gone to other expenses if you
opted to buy.

be More Expensive

According to figures from the National Association of Home Builders, on average the cost of building a single-family house is about $289,415; this translates to over $66,415 more than the cost of purchasing a ready home. The high cost is a result of the level of personalization that comes with your own design and preferences. This could be spacious rooms, expensive décor or antique finishes.


Building is quite stressful, even if you are not doing it with your own two hands; you are bound to get some headaches from overseeing the process. The project manager or foreman will be there to ask questions on specifications, design alterations and of course payments.

These issues will more than likely leave you exhausted and will eat into your daily routine. The stress from seeing construction can even lead to under performance in your job and cutting into your family time.

The Bottom Line  Building
comes with the satisfaction of knowing that you are the first owner of the
home. You get to install modern and energy saving appliances which lowers your
utility bills. You can also count on paying less for maintenance and upgrades
that comes with buying a house. On the other hand, building has some drawbacks.
These includes; having to wait for a long time before construction is
completed, being stressed due to strenuous decision making and lastly, there is
the possibility of spending way more on your new home than you would if you
chose to buy.


You Might Get a Better Deal If You Buy a House Where Kids Live

Last updated on August 16th, 2019

It’s common knowledge that home buyers are interested in purchasing properties in good school districts.

After all, many individuals purchase homes because they either have kids, or plan to in the near future.

Simply put, families and families-to-be need more space, and a house is where you get that.

But even if you don’t have children (and no plans to start a family), it can be smart to buy a house in a solid school district to ensure the resale value is strong when it comes time to sell.

What’s perhaps more interesting is the idea that you might be able to get a better deal on a home purchase if you buy it from a family.

Homeowners with Kids Sell More Urgently

  • 23% of homeowners with kids sold “very urgently” per Realtor survey
  • Versus just 14% of homeowners without kids
  • Nearly half of homeowners with kids sold “somewhat urgently”
  • While half of homeowners without kids said they could wait for right offer

A new survey from the National Association of Realtors revealed that homeowners with children sold more urgently than those with no children.

Specifically, 23% of sellers with children reported to NAR that they sold their home “very urgently.”

Comparatively, only 14% of sellers without kids said they had to sell their home quickly.

Additionally, 46% of those with children residing in the home said they had to sell “somewhat urgently,” while about half of sellers with no children said they were “able to wait for the right offer.”

NAR chief economist Lawrence Yun noted that when faced with an “upcoming school year or the outgrowing of a home – sellers find themselves rushed and forced to accept a less than ideal offer.”

Often, these parental homeowners are put in situations where they have to sell in shorter amounts of time versus the non-parent cohort.

For example, they may need to sell because they want to move into a different school district if their child is going from elementary to middle school.

It’s also more common for these homeowners to upgrade to larger homes once they find out another baby is on the way.

Per the survey, some 25% of home sellers with children said they sold because their prior home was too small.

And 19% said a job relocation forced them to sell, while 13% said a change in their family situation led to the sale.

Meanwhile, just 7% of those without kids indicated that they felt their home was too small.

This all lends itself to the idea that you might be able to get a deal if you know the seller has kids.

In other words, you could see greater success in trying to negotiate and/or lowballing a bit, asking for seller concessions, and so on.

Chances are a home seller won’t want to mess around if they have children to consider.

Conversely, a seller without kids might be happy to sit on their listing and play hardball with any prospective buyer who comes along.

The Downside to Buying a Home Kids Occupied

  • If kids lived in the home prior to you purchasing it
  • There’s a good chance it’s going to have some damage
  • You may need to repaint and make minor (or major) repairs
  • But you can ask for seller credits to bring down your acquisition cost

To put it bluntly, the house might be a mess. Kids can do a lot of damage in a short amount of time, so the property itself could be in need of some TLC.

Think slime stains on the carpet, strange paint colors on the walls, stickers on the windows and doors, dents in the drywall, and on and on.

Ultimately, having more people in the house will lead to more wear and tear, which could cost you once you move in.

You might need to repaint the place, replace the flooring, make minor repairs, etc.

The upside here, again, is if there is obvious damage, you can include repair requests in your offer to get the price down even further.

If you’re willing to overlook some of the aforementioned issues, you might be able to snag a home at a great price.

Even if kids didn’t live in the home, chances are it’ll need work anyway.

Assuming you can get some credits for those renovation/repair costs, and the seller is willing to accept a lower sales price, you could make out really well, even in a competitive housing market.

Read more: Why You Should Buy a Home Next to Trader Joe’s or Whole Foods

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 15 years.


Buying A Home? Here’s How To Navigate Intense Bidding Wars

It’s no secret that residential real estate is an extreme seller’s market. For sellers, this is excellent news, as many are netting hefty profits on their home sales. For buyers, however, the stress of multiple offer situations, higher prices, and intense bidding wars has become the new normal.

If homebuying is on your 2021 radar, it’s crucial to prepare for the reality of this market. And while you may have heard horror stories of bidding wars, don’t worry — it IS possible to win a multiple-offer situation and secure the house of your dreams! Here are 7 things to know when navigating these situations.

bidding warsbidding wars

Come Out Strong

Even if a home isn’t currently in a multiple-offer situation, it can become one in a matter of hours. That’s why it’s important for buyers to always put their best offer on the table from the start. While buyers may hope the seller will negotiate a lower offer, that just isn’t the reality of the current real estate market. Sellers have the luxury of rejecting any offer that isn’t ideal.

Dan McQuillen of The Danberry Company Realtors in NW Ohio says “In this market we are telling the buyers that they better assume they only get one chance at getting the house.” But, what is a strong offer in this market? In a nutshell, meeting the seller’s list price or above, not asking for concessions, providing a quick close, and even requesting minimal to no repairs, could go a long way in winning intense bidding wars.

Get Pre-Approved

While cash is king in the real estate world, most homebuyers need to obtain a loan to purchase. Sellers want the reassurance that buyers have the capability of getting approved for a home loan. McQuillen adds that he frequently sees buyers make the mistake of “not being pre-approved with a reputable lender.” By working with a local lender who is confident in your loan approval, you can help reassure sellers that you’re a qualified buyer who can make it to the closing table.

(READ MORE: How to Finance Your Home)

Keep Requests To A Minimum

In a seller’s market, the seller is in the driver’s seat, leaving buyers at their mercy. Given the current status of the real estate market, sellers don’t need to provide concessions to buyers. Sellers in today’s market prioritize “clean” offers: no closing cost assistance, no contingencies, no additional warranties, etc. McQuillen sums it up: “Don’t nickel and dime the seller.”

If a buyer does need to request seller-paid closing costs on their behalf, McQuillen suggests “write a higher offer and find out what else is important to the seller. There may be things besides price that the seller would like.”

Be Prepared To Lose A Few Rounds

It’s not uncommon for homebuyers to go through multiple rounds of bidding wars on multiple homes before they finally get an offer accepted. This is what causes many buyers to become discouraged with the process. However, it is possible to buy a home in this market—you just need perseverance, a highly experienced real estate agent, and realistic expectations.

Get An Agent….Then Get Real

The single greatest asset in navigating an intense seller’s market is a dedicated advocate in your corner. A buyer’s agent is a representative who does much of the heavy lifting for buyers. Their experience and knowledge of the market can assist buyers in creating offers that provide the most appeal—from price, to closing date, and everything in between. Buyer’s agents are knee-deep in multiple offer situations every day, and many have the hard-earned experience to set their client’s offer apart from the crowd.

bidding warsbidding wars

One of the greatest mistakes a buyer can make in a multiple offer situation is have lofty expectations. Expecting sellers to reduce the sale price, leave behind thousands of dollars worth of furniture or complete extensive repairs is simply not the reality of this real estate market. If you’re not entirely sure what the whole reality of the market is, it’s one more reason to work with an agent.

Be Flexible

Several factors can help you navigate intense bidding wars, but there is one thing that could derail all those efforts: inflexibility. If you’re unwilling to look outside a geographic area, or rigid on your closing date, or refuse to negotiate on the terms of your offer—you will create a scenario that only brings more difficulty and frustration.

In all areas of the process, it’s important that buyers are flexible. That flexibility can help you stand out among a sea of offers.

McQuillen suggests “It could be that the seller would really like to sell the house and be able to rent back the house for a period of time,” so by offering a flexible close date, your offer could very well rise to the top of the list.

Know When To Fold Them

In this market, real estate agents are seeing buyers offer thousands of dollars over list price, waiving inspections, and even agreeing to pay over appraisal value out of desperation to win bidding wars. But, that desperation can be a recipe for buyer’s remorse.

As McQuillen explains, “The risk in waiving an inspection is there are some pretty significant issues with the house that the purchaser would be stuck with. The risk of waiving an appraisal is that the house doesn’t appraise and, worse yet, appraises for significantly less than the purchase price; then the purchaser has to come up with more money out of pocket than they were anticipating.”

If in the course of the bidding war the seller is expecting you to overextend yourself or open you up to greater risk, it’s okay to walk away from negotiations. It’s better to have rejected the deal than to sign up for a bad deal.

Extra Advice: Stay Informed

Trends and market conditions can change in mere hours, so stay informed with all the up-to-date information you need with resources. Local market reports, tips and advice, and consumer resources are all at your fingertips, so keep us bookmarked!

Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.


Chart: Housing Affordability Set to Fall Off a Cliff

Last updated on September 9th, 2013

The National Association of Realtors will always be the first ones to tell you that housing is either highly affordable, still affordable (!), or that buying a home remains a great move even if housing affordability is low.

After all, they represent real estate agents, or rather, Realtors®, whose livelihood depends on selling homes, lots of homes.

In other words, they gush optimism, regardless of which way the market is headed.

But they threw a chart up on one of their blogs last week that certainly didn’t do them any favors, even though they tried to paint it in a positive light.

This Is the Affordability Chart Before Mortgage Rates Surged


If you look at the chart above, you’ll see the NAR’s measure of housing affordability, which takes into account average mortgage rates and median home prices, assuming the buyer puts down 20% and has a 25% front-end debt-to-income ratio.

As you can see, housing affordability took a major dive in May as home prices reached their highest point since July 2008.

While that’s all good and well for existing homeowners, it means those looking for an opportunity to purchase a home are running out of time, assuming they want to buy for the investment aspect.

The scariest part of this chart, however, is that it relied on the FHFA’s mortgage rate data from May.

During the month of May, the FHFA said mortgage rates actually fell 0.15% from April. Unfortunately, most of us know that mortgage rates are nowhere close to May levels anymore.

And we all know they didn’t drop in June, not by a long shot.

In fact, mortgage rates are back up to levels last seen two years ago. So taken together, we’re looking at mortgage rates that are significantly higher, coupled with home prices that are back at 2008 levels (and still rising).

Put simply, this chart is going to look a lot worse when NAR releases their next update on housing affordability.

Of course, they’ll likely come up with a way to make it look less detrimental, perhaps by comparing monthly mortgage payments on a small loan amount. Oh wait, they did that already.

I’m not trying to be overly pessimistic here – mortgage rates are in fact still historically low, as I’ve pointed out several times lately. And home prices aren’t back to their peak levels.

But we aren’t as far off from that crazy time anymore, and who’s to say we should return to those prices anytime soon.

Things didn’t exactly pan out very well back then. And the economy doesn’t exactly look stellar enough to support those boom times at the moment.

Read more: Home buyers are more concerned with rising mortgage rates than home prices.

Below is an updated chart released on September 6th, 2013. As you can see, affordability dropped to about a five-year low, and the Realtors expect it to sink next month as well:

updated chart

There’s still some room before we get back to those really dark years in 2006 and 2007, but we appear to be heading in that same direction for now…

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 15 years.


I Want to Buy a House, but It Needs Some Major Repairs. Is It Worth It?

‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Dear MarketWatch,

I want to buy a home that needs a lot of repairs and renovations, but I’m almost 50 years old. Is it worth it? How long does it take for home improvements to pay off?


Fixed on a Fixer-Upper

Dear Fixed,

If you watch a lot of shows on HGTV, the idea of buying a home in need of some TLC for a bargain and sprucing it up sure can sound appealing. Many among us fantasize about embracing their inner interior designer, taking a rundown home and giving it the Chip and Joanna Gaines treatment. In the interest of honesty, I’ll admit that I’m guilty of such day dreams.

I can say with a fair degree of confidence that you already have the right instincts here. There are plenty of reasons to be skeptical about taking on such a huge project. The biggest one: They don’t usually pay off.

Smaller-scale home-improvement projects might have a better return on investment. For instance, a can of paint or two costs hardly anything, and research shows that painting the rooms in your house the right color can add as much as $3,000 to the home’s sale price.

With anything bigger than that, you’re unlikely to recoup your investment. Remodeling Magazine each year puts out a list of the home upgrades that fetch the biggest returns. The 2020 edition of this report showed that on average not a single home-improvement project sees a 100% return. The closest you could come — adding a manufactured stone veneer to your house — was a 96% return on average. And in most cases, the returns on renovations had fallen between 2019 and 2020.

Americans generally view owning a home as a financial investment — and the four-bedroom home with a white-picket fence surely factors in the American Dream. Many people go into homeownership hoping to see their equity grow over time — with the goal of passing that money onto their children or using it as a cushion in retirement. But when you compare real estate to other assets, it’s clear that owning real estate is more complicated than that.

“Many financial investments will grow as fast, or faster, than personal real estate and be far more flexible if you need any access to liquidity along the way,” said Sean Pearson, a Pennsylvania-based financial adviser and associate vice president with Ameriprise Financial Services. “If you live in your house long enough, and you sell during certain types of markets, depending on interest rates, you might see a positive ROI from your home. But that could be a long way from now, and requires a lot of things to happen along the way.”

Instead of approaching buying a home with an investor’s mindset, I suggest you consider the myriad other reasons why homeownership can be beneficial. Owning a home allows you to take control over your housing costs. Sure, the property tax bill or utility rates may vary over time, but you won’t need to worry about a landlord jacking up the rent unexpectedly. And the equity in your home — if used appropriately — can become a useful financial tool to consolidate other debts or finance a child’s college education. (Again, approach cashing out home equity with caution.)

You’re almost 50 — and maybe a decade or so away from retirement. Think about whether this home could be your forever home. If you’re making major renovations, you could really ensure that this home would be one you could live in for the rest of your days by approaching those repairs with accessibility in mind. If you can afford major home improvements, and they’ll enrich your quality of life, it’s hard to put a price tag on that.

Or you might decide that owning a home isn’t worth it. There is a benefit, after all, to being able to rely on a landlord or property manager to handle upkeep. And in many parts of the country, renting a home and using your remaining money wisely could be a better deal that becoming a homeowner.

Whatever path you choose to take, I encourage you to keep trusting your gut. It’s not led you astray so far.


Adam Levine Joins the Crowd in Montecito, Buys $22.7M Mansion

The Maroon 5 frontman Adam Levine and his wife, the supermodel Behati Prinsloo, have purchased a storied estate in the ever more crowded celebrity enclave of Montecito, CA.

The couple paid $22.7 million for the expansive compound, known as El Miraval, Variety reported.

The estate had been and off the market for years, and its asking price had never budged from $2reThe spread includes a total of nine bedrooms, eight full bathrooms, and three half-bathrooms, in a series of buildings including a Spanish Revival main house, a two-bedroom guesthouse, a one-bedroom cottage, and an apartment over the detached, five-car garage.

The 12,000-square-foot main building features European-style interiors with wood beams and arched windows, and offers large living spaces built for grand entertaining.

The living room, with a fireplace and exposed beams, opens outside from French doors. Multiple al fresco options include a lovely loggia with a fireplace and seating, a picturesque terrace, patio, and garden.

A large kitchen contains a huge island, dark wood cabinets, and built-in storage shelves. The master bedroom features a fireplace, a balcony, and an en suite bathrooom with a separate tub. Other perks include a home theater and wine cellar.

In addition, the grounds include a tennis pavilion, pool, pool terrace, putting greens, and manicured lawns.

The listing also offers some renderings to suggest updates to the interiors—which could use a refresh. Suggestions include trendy light fixtures, a white palette, sleek furniture, and voilà!

Quite possibly, the longtime coach for “The Voice” will be tempted to put his signature stamp on the place.

The “Moves Like Jagger” singer does have some real estate moves of his own. After picking up a Beverly Hills mansion in 2018 for $34 million, and reportedly sinking $7 million into a remodel, he sold the updated estate to his fellow luxury real estate aficionado Ellen DeGeneres in 2019 for $45 million.

She and her wife, Portia de Rossi, then made some further changes, and recently listed the same home for $53.5 million. After a little more than two weeks on the open market, the property has already found a buyer. 

Levine also owns a resortlike residence he purchased in an off-market deal in 2019 for $32 million from Ben Affleck and Jennifer Garner, after their divorce.