What Is the Probability That Home Values Sink?

With the current uncertainty about the economy triggered by a potential trade war, some people are waiting to purchase their first home or move-up to their dream house because they think or hope home prices will drop over the next few years. However, the experts disagree with this perspective.

Here is a table showing the predicted levels of appreciation from six major housing sources:What Is the Probability That Home Values Sink?| MyKCMAs we can see, every source believes home prices will continue to appreciate (albeit at lower levels than we have seen over the last several years). But, not one source is calling for residential real estate values to depreciate.

Additionally, ARCH Mortgage Insurance Company in their current Housing and Mortgage Market Review revealed their latest ARCH Risk Index, which estimates the probability of home prices being lower in two years. There was not one state that even had a moderate probability of home prices lowering. In fact, 34 of the 50 states had a minimal probability.What Is the Probability That Home Values Sink?| MyKCM

Bottom Line

Those waiting for prices to fall before purchasing a home should realize that the probability of that happening anytime soon is very low. With mortgage rates already at near historic lows, now may be the time to act.

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What’s the Latest on Interest Rates?

Mortgage rates have fallen by over a full percentage point since Q4 of 2018, settling at near-historic lows. This is big news for buyers looking to get more for their money in the current housing market.

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According to Freddie Mac’s Primary Mortgage Market Survey,

the 30-year fixed-rate mortgage (FRM) rate averaged 3.60 percent, the lowest it has been since November 2016.

Sam Khater, Chief Economist at Freddie Mac, notes how this is great news for homebuyers. He states,

“…consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.”

As a potential buyer, the best thing you can do is work with a trusted advisor who can help you keep a close eye on how the market is changing. Relying on current expert advice is more important than ever when it comes to making a confident and informed decision for you and your family.

Bottom Line

Even a small increase (or decrease) in interest rates can impact your monthly housing cost. If buying a home is on your short list of goals to achieve, let’s get together to determine your best move.

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Busting the Myth About a Housing Affordability Crisis

It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.

Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.

1. National Association of Realtors’ (NAR)Housing Affordability Index:

Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:Busting the Myth About a Housing Affordability Crisis | MyKCMWe can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.

NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.Busting the Myth About a Housing Affordability Crisis | MyKCM

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment…Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”

3. First American’s Real House Price Index:

While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:

“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”

Bottom Line

If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!

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VLOG: Top 4 Reasons to Sell this Summer

Summer is now upon us in Silicon Valley, which usually means that the weather is heating up, many families are enjoying their summertime vacations, and that we’re close to reaching our annual peak in housing inventory. So, if you’re looking to sell your home this summer, what are the top considerations you should have before putting your home on the market?

#1. Strong Demand 

So far the real estate market is still bustling…The latest Buyer Traffic Index from the National Association of Realtors shows that buyer demand remains strong throughout the vast majority of the country. 

Motivated by lower interest rates and prices at the beginning of the year, we’ve continued to see strong buyer demand through most price points within Silicon Valley. These buyers are ready, willing, and able to purchase and, they are in the market right now! 

And, even with our current increased inventory levels, when properties are priced right we’re still experiencing multiple buyers competing with each other for the same home.

#2. Less Competition – Speaking of housing inventory, even at our current peak-levels we’re still under a 6-month supply across most price-points, which is usually considered as a “balanced” housing market. This means that, just like in most of the country, there are just not enough homes for sale to satisfy the number of buyers looking to purchase.

Lower inventory levels are something that has continued to plague our housing markets. This trend has remained strong due to an increase in the length of time that homeowners have historically stayed in their homes. 

Many of these homeowners were reluctant to list their home over the last couple of years for fear that they would not find a home to move in to. However, that is now finally changing as more inventory is becoming available at the higher-end. As more choices become available for these “move-up” buyers, the more inventory we’ll see become available at the entry-level market.

So if you’re thinking of selling, don’t wait until additional inventory comes to market before you to decide to sell.

#3. Now is a Great Time to Move Up 

If you’re one of the many home sellers looking to make a move into a larger home, or into a better location, now is “the time” to make that move up! 

We’re currently experiencing higher available inventory of homes for sale in the higher price ranges which has created a buyer’s market for “move-up” buyers. This means that if you are planning on selling an entry-level or trade-up home, it will sell quickly, AND you’ll be able to find a premium home to call your own!

#4. The Selling Process Has Become Quicker 

Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing and saving up a downpayment before they begin shopping for a home. 

This means that most buyers will know exactly what they can afford before they even take a tour of your home…which has made the entire selling process much faster and simpler as most transactions involving purchase financing are closing within 40-days or less per a recent Origination Insights Report, by Ellie Mae.

In closing…

Although generally speaking, summer seems to be a more difficult time of the year in which to sell a property as we usually experience our highest inventory levels combined with diminishing buyer traffic, this summer looks more optimistic. Interest rates are at their lowest levels in several years, buyer traffic has increased, and prices are still stable.

As always, our goal is to provide some insight into current market conditions so that you can make a more informed decision about whether the timing is right for you to sell your home this summer.

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Special Mid-Year Market Update (July 2019)

It’s the beginning of July and we’re now half-way through 2019. And, if you’ve been considering to make a move in real estate, either to purchase a home or sell a home, I wanted to make sure I was able to provide some clarity on the current market conditions in and around Silicon Valley.

First of all, how have things been going this year?

2019 was speculated to be a great market for first-time homebuyers and move-up buyers due to rising inventory levels, diminishing investor demand for housing, and an easing of interest rates. And, with inventory beginning the year at very healthy levels (about twice as many homes available for sale when compared to last year), and interest rates remaining relatively low (even falling again recently), 2019 has held true to its forecast. 

[Side-bar: my team and I have already helped numerous families with the simultaneous sale and purchase of real estate…with many purchasing up into a larger home before selling their current home].

But, is this trend likely to hold up through the rest of the year?

Well, let’s talk about supply & demand trends…

So far we’ve seen the rebound in inventory from 2018 continue to hold up. Current “active” inventory across Santa Clara County is sitting at 2,222 listings, down slightly 9% from our peak in May, but up 8% from last year in July. And within San Jose, we’re currently sitting at 1,129 active listings, down slightly again from the peak earlier in May, and up 6% from the same time last year.

What’s interesting to me about this trend, is that our inventory levels are slightly down from the end of the spring market. And, with current interest rates for a 30-year fixed-rate mortgage sitting at 3.75%, down 0.75% from the same time last year, my assumption is that this trend is most likely due to the continued easing of interest rates allowing for an increased number of buyers to come into the market and absorb our housing supply. When interest rates fall, it can be less expensive to own than to rent across many entry-level price points.

And, if we look at “pending sales” figures you’ll notice that our demand has held steady at around 1,300 properties obtaining a contract each month for that last 4-months at the county level, and an average of 700 properties per month going into contract for the City of San Jose.

So, as long as rates continue to remain low, and new inventory continues to be absorbed by steady demand, I expect that we should have a well-balanced market through the end of the year, which will play well for move-up buyers and first-time homebuyers.

So how are these conditions affecting sales prices?

Have we seen a huge crash in home prices across Silicon Valley as some media outlets would suggest?

I hate to disappoint you but in fact, our median sales price for June is up 16% from the beginning of the year at $1,190,000 for Santa Clara County

Now, considering the spike in sales prices witnessed at the beginning of 2018, when prices shot up as much as 24% in some areas, we’re still down about 8% from these peak prices, but when you consider the longer-term trends our prices have consistently appreciated annually in the 9-10% range.

I may be going out on a limb, but I don’t think our prices are “crashing!,” especially when you consider that the current median Sales Price-to-List Price ratio is sitting around 102%, up 2% from January and holding steady. And provided median days to sell have also declined from January and are sitting at about 2-weeks or less. To me, these statistics still represent a very vibrant housing market across the Valley.

So, how will these conditions affect you if you’re thinking about making a move in real estate this year?

As you know, we’re on the front lines interacting with homebuyers and sellers on a daily basis. What we can share with you is that we’re beginning to see a shift in the way that buyers are approaching our market.

A large majority of the buyers we’ve recently met are getting into the market for the first time this year and haven’t been exposed to the past years of competitive multiple offers. So, as inventory levels have risen recently, these inexperienced buyers are becoming increasingly indecisive.

This is creating issues for sellers and opportunities for savvy buyers. Indecisive buyers mean that sellers need to be more strategic when selling their homes; they should take the time to properly prepare their home for sale, and make sure they price appropriately provided the increased competition they in their neighborhoods.

And for buyers, the influx of inexperienced buyers is making it easier for move-up buyers, or those with experience, to negotiate our market and recognize great values with little competition. And, we’re seeing a lot of great properties in the higher-end of the market selling at very reasonable prices quickly to homebuyers that have gained experience from the competitive markets of years past.

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VLOG: Top 4 Reasons to Buy a Home this Summer!

1. Prices Will Continue to Rise

CoreLogic’s latest U.S. Home Price Insights reports that home prices have appreciated by 3.7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.8% over the next year.

Home values will continue to appreciate. Waiting may no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year fixed rate mortgage have started to level off around 4.3%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting rates will increase by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You Are Paying a Mortgage

Some renters have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

Are you ready to put your housing cost to work for you?

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Examine the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, greater safety for your family, or you just want to have control over renovations, now could be the time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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VLOG: Why work with a Buyer's Agent?

Buying a House is Easy…said No One Ever!

Ready to house hunt? It’s a jungle out there: Prepare for a flurry of paperwork, stampedes of buyers competing for the same digs, and other challenges before you get your hands on those house keys. The process can be complex and stressful—which is why having the right professional by your side can make all the difference!

You might have heard of buyer’s agents, seller’s agents, listing agents, and so on. You’re a buyer, so what is a buyer’s agent? True to their name, buyer’s agents assist home buyers every step of the way; they can also save you tons of time and money on the road to homeownership.

But do you really need a buyer’s agent? And, how do you find a good one?

Benefits of using buyer’s agents

Buyer’s agents do more than just show you houses…any real estate agent with a license and an MLS membership will be able to accomplish that. However, a professional buyer’s agent will help you from the initial phases of the home buying process, from connecting you with trustworthy lender partners, assisting you through an evaluation of available inventory, and informing you of the best steps take to take in order to be best positioned for successfully contracting your NextHome…there’s a so much they will assist you with while also being at your disposal for any questions or concerns. 

Here are just a few of the many, many services that a buyer’s agent helps you with:

    • Find the right property. After assisting you with an evaluation of your property preferences, factoring in price range based on your financial pre-qualifications, a buyer’s agent will provide recommendations of property types, neighborhoods and communities that may best fit your search criteria. Then, a buyer’s agent can tour these properties with you, and explain the ins and outs of various properties and neighborhoods to help buyers decide which home is right for them by explaining the pros and cons of various options. *Pro-Tip: An experienced buyer’s agent will have access to homes not available to the general public
    • Negotiate the offer. A buyer’s agent will also advise clients on an appropriate price to offer, based on a full evaluation of the property’s condition and disclosure records, and present it to the seller’s agent. This is where the agent’s experience in negotiating deals can save you money and help you avoid pitfalls like a fixer-upper that’s more trouble than it’s worth. *Pro-Tip: An experienced buyer’s agent will help evaluate a property’s condition prior to making offers so that you will be protected from unforeseen maintenance & repair costs
    • Recommend other professionals. A buyer’s agent acts more like a project manager as a huge value add from their service and experience is access to their preferred services networks which consist of reliable mortgage lenders, home inspectors, contractors, tradesmen, movers, and more. This greatly helps expedite each step of the process and move you to a successful sale all the faster, which will save you money in an upward appreciating marketplace. *Pro-Tip: We’ve been organizing our preferred services network for over the last 30-years in business
    • Help overcome setbacks. Although a good buyer’s agent will be able to help foresee many issues before they occur, no endeavor goes without its speed bumps…so, when repair issues from a home inspector’s report or appraisal issues are caught by your lender, a buyer’s agent will advise you on how to proceed, and then act as a buffer between you and the sellers or their agent. *Pro-Tip: An experienced buyer’s agent will most likely have faced most unpredictable surprises in the past, and will be an invaluable resource to assist a buyer through them

So now that you have some background on the numerous reasons you should consider using a buyer’s agent to your advantage while home shopping, let’s look at the other agent in the equation…the one that’s already representing the seller.

Would it make sense just to work with the listing agent, the agent representing the seller? Would you be able to get a better deal on the property, or gain and advantage from the competing buyers and their agents?

Buyer’s vs. listing agent: What’s the difference?

Buyer’s agents are legally bound to help buyers, whereas listing agents—the agent representing the seller selling the home—have a fiduciary duty to the home seller. 

So, first of all, what’s a fiduciary duty?

Under California State Law, real estate agents owe their clients what’s referred to as “fiduciary duty.” Fiduciary duties are the highest duties known to the law. Classic examples of fiduciaries are trustees, executors, and guardians. As a fiduciary, a real estate agent will be held under the law to owe certain specific duties to his principal, in addition to any duties or obligations set forth in a listing agreement or other contract of employment. These specific fiduciary duties include: 

    • Loyalty,
    • Confidentiality,
    • Disclosure Obedience,
    • Reasonable care and diligence,
    • Accounting

But, the duties and obligations owed from a real estate agent to the client will vary significantly based on the type of representation to which you, as the client, have contractually agreed. Which is why it’s in the best interest as a buyer to get an agent who is there to represent them…and not working with the agent that is already contractually obligated to help the seller get the highest price for their home.

Think about it this way: If you were getting sued, would you hire the same attorney as the person suing you? Of course not. You need someone who will diligently fight for your interests and rights.

Let’s say, for instance, you walked up to the listing agent at an open house and gushed about how you love the home and want to buy it, but you will need to move soon because you’re expecting your second child and need to decorate the nursery pronto, or the lease on your rental is up in a couple of months. A seller’s agent could then use this information against you by informing the seller that your clock is ticking, so they shouldn’t budge too much on their asking price—or at all.

Yet make this same confession to the buyer’s agent you’re working with, and it’s all fine—this professional would know to keep this info private from sellers (and their agents) so it can’t be used against you. Plus, a dedicated buyers agent will help gain sensitive information from the seller’s agent about the seller’s reasons for moving, which you can then use to your advantage in order to get the best price possible for the home.

Next Steps

Now that you’re aware of the numerous advantages of hiring and working with a buyer’s agent, not to mention all the risks you would take by skipping the privilege of having your own dedicated agent assisting you through the process…let’s take the next step and schedule a consultation today so that I can walk you through the rest of the purchase process, and help you get started today on the right path to homeownership!

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Starting the Search for Your Dream Home? Here Are 5 Tips!

In today’s real estate market, low inventory dominates the
conversation in many areas of the country. It can often be frustrating
to be a first-time homebuyer if you aren’t prepared.

In a realtor.com article entitled, “How to Find Your Dream Home—Without Losing Your Mind,”
the author highlights some steps that first-time homebuyers can take to
help carry their excitement of buying a home throughout the whole
process.

1. Get Pre-Approved for a Mortgage Before You Start Your Search

One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved
for a mortgage before starting your search. Even if you are in a market
that is not as competitive, understanding your budget will give you the
confidence of knowing whether or not your dream home is within your
reach.

This step will also help you narrow your search based on
your budget and won’t leave you disappointed if the home you tour, and
love, ends up being outside your budget!

2. Know the Difference Between Your ‘Must-Haves’ and ‘Would-Like-To-Haves’

Do
you really need that farmhouse sink in the kitchen to be happy with
your home choice? Would a two-car garage be a convenience or a
necessity? Could the ‘man cave’ of your dreams be a future renovation
project instead of a make-or-break right now?

Before you start your search, list all the features of a home you would like and then qualify them as ‘must-haves’, ‘should-haves’, or ‘absolute-wish list’ items. This will help keep you focused on what’s most important.

3. Research and Choose a Neighborhood You Want to Live In

Every
neighborhood has its own charm. Before you commit to a home based
solely on the house itself, the article suggests test-driving the area.
Make sure that the area meets your needs for “amenities, commute, school district, etc. and then spend a weekend exploring before you commit.”

4. Pick a House Style You Love and Stick to It

Evaluate your family’s needs and settle on a style of home
that would best serve those needs. Just because you’ve narrowed your
search to a zip code, doesn’t mean that you need to tour every listing
in that zip code.

An example from the article says, “if you
have several younger kids and don’t want your bedroom on a different
level, steer clear of Cape Cod–style homes, which typically feature two
or more bedrooms on the upper level and the master on the main.”

5. Document Your Home Visits

Once
you start touring homes, the features of each individual home will
start to blur together. The article suggests keeping your camera handy
to document what you love and don’t love about each property you visit.

Making
notes on the listing sheet as you tour the property will also help you
remember what the photos mean, or what you were feeling while touring
the home.

Bottom Line

In a high-paced,
competitive environment, any advantage you can give yourself will help
you on your path to buying your dream home.

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4 Tips for Making a Competitive Offer

So, you’ve been searching for that perfect house to call ‘home,’
and you’ve finally found it! The price is right, and in such a
competitive market, you want to make sure you make a good offer so that
you can guarantee that your dream of making this house yours comes true!

Below are 4 steps provided by Freddie Mac to help buyers make offers, along with some additional information for your consideration:

1. Determine Your Price

“You’ve found the perfect home and you’re ready to buy.
Now what? Your real estate agent will be by your side, helping you
determine an offer price that is fair.”

Based on your agent’s experience and key
considerations (like similar homes recently sold in the same
neighborhood or the condition of the house and what you can afford),
your agent will help you to determine the offer that you are going to
present.

Getting pre-approved
will not only show home-sellers that you are serious about buying, but
it will also allow you to make your offer with confidence because you’ll
know that you have already been approved for a mortgage in that amount.

2. Submit an Offer

“Once you’ve determined your price, your agent will draw
up an offer, or purchase agreement, to submit to the seller’s real
estate agent. This offer will include the purchase price and terms and
conditions of the purchase.”

Talk with your agent to find out if there are any
ways in which you can make your offer stand out in this competitive
market! A licensed real estate agent who is active in the neighborhoods
you are considering will be instrumental in helping you put in a solid
offer.

3. Negotiate the Offer

“Oftentimes, the seller will counter the offer, typically
asking for a higher purchase price or to adjust the closing date. In
these cases, the seller’s agent will submit a counteroffer to your
agent, detailing their desired changes, at this time, you can either
accept the offer or decide if you want to counter.

Each time changes are made through a counteroffer, you or
the seller have the option to accept, reject or counter it again. The
contract is considered final when both parties sign the written offer.”

If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home.”
If the inspector uncovers undisclosed problems or issues, you can
discuss any repairs that may need to be made with the seller or even
cancel the contract altogether.

4. Act Fast

The inventory of homes listed for sale has remained well below the 6-month supply that is needed for a ‘normal’
market. Buyer demand has continued to outpace the supply of homes for
sale, causing buyers to compete with each other for their dream homes.

Make
sure that as soon as you decide that you want to make an offer, you
work with your agent to present it as quickly as possible.

Bottom Line

Whether
buying your first home or your fifth, having a local real estate
professional who is an expert in his or her market on your side is your
best bet in making sure the process goes smoothly. Let’s talk about how
we can make your dream of homeownership a reality!

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Selling Your House: Here's Why You Need A Pro In Your Corner!

With home prices on the rise and buyer demand still strong, some sellers may be tempted to try to sell their homes on their own rather than using the services of a real estate professional.

Real estate agents are trained and experienced in negotiation while, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.

Here is a list of just some of the people with whom the seller must be prepared to negotiate with if they decide to For Sale by Owner (FSBO):

  • The buyer, who wants the best deal possible
  • The buyer’s agent, who solely represents the best interests of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies, which work for the buyer and will almost always find some problems with the house
  • The termite company, if there are challenges
  • The buyer’s lender, if the structure of the mortgage requires the sellers’ participation
  • The appraiser, if there is a question of value
  • The title company, if there are challenges with certificates of occupancy (CO) or other permits
  • The town or municipality, if you need to get the CO permits mentioned above
  • The buyer’s buyer, in case there are challenges with the house your buyer is selling

Bottom Line

The percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get together to discuss all that we can do to make the process of selling your house easier for you.