Peninsula Real Estate

Staging Home Could Land Sellers in Trouble

2009-12-28T11:30:00.000-08:00

by Dian Hymer

Fixing your house up for sale is highly recommended in the current market if you hope to sell within a reasonable period of time and for an acceptable price. Today's buyers want turnkey houses that they can move right into without having much work.

In addition to repairing defects that might turn a buyer off, your house should be clean, tidy and look attractive. From a marketing point of view, most homes contain too much furniture and knickknacks that make it difficult for buyers to appreciate what the place has to offer. If your home is too personalized with your own belongings, buyers might have difficulty envisioning living there.

To enhance appeal, many sellers hire a stager, which is a decorator who specializes in presenting homes for sale. Stagers help rearrange furniture and artwork. They also recommend work that needs to be done, such as painting; suggest what should be removed; and bring in furniture, house plants and accessories. The point of all this is to generate enthusiasm for your home. Real estate agents prefer to show homes that look great. The more showings your home receives, the higher the likelihood it will sell.

Turning your home into a showcase makes good sense. Just make sure you don't cross the line between fix-up and concealment. Seller disclosure laws vary from state to state. However, the trend over the last decade or so has been to disclose material defects.

Sellers often fear that if they tell all about their homes, it will keep it from selling. Or if the house does sell, the price will be low. This is usually an overreaction. Buyers prefer to know about defects before they buy a home, not after.

Put yourself in the buyers' shoes: Would you rather know before or after closing that the basement floods in heavy rainstorms? If you receive advance notice, you can research remedies and find out how much it would cost to keep the basement dry. This could result in a buyer asking the seller for a credit or modification in the price. The seller can decide whether to grant a concession.

However, sellers who paint the basement walls and floor to conceal signs that there was water in the basement could be in for big trouble. One seller finished a basement room with Sheetrock walls and a carpeted floor and staged it as a den. The first time it rained after the buyers moved in, the den was so water damaged that it had to be torn out. The buyers sued the sellers and won.

HOUSE HUNTING TIP: It's a good idea to make a list of all the defects you are covering or correcting before you do the fix-up work. Taking before pictures is not a bad idea. Then make sure the prospective buyers have the opportunity to review your list before they make an offer. This way, the buyers have a good idea of the property condition before the seller accepts your offer.

Sellers often wonder what they should disclose. Generally, if you're wondering whether you should disclose something, it's probably something you should disclose.

For instance, if your house sits on clay soil, cracks may develop on the interior walls as the soil expands and contracts during the wet and dry seasons. You might decide to paint the walls before selling the house so that it shows nicely. If so, you should also disclose that stucco cracks appear from time to time and that you recently painted the interior.

THE CLOSING: Consult with your real estate agent or attorney if you have any questions regarding what should be disclosed.

What is the Value of Your Home?

2009-12-21T11:33:00.000-08:00

by Dian Hymer

How much your home is worth depends on who's looking at it. Your home insurer will value your home in terms of the cost to rebuild it. A mortgage lender's appraiser will value your property in terms of the sale prices of similar homes in your neighborhood that sold recently. The property tax assessor may have a different set of criteria.

Due to recent changes in the economy, the market value of your home could be considerably less than it was a few years ago. However, don't be too quick to ask your insurance carrier to drop the valuation on your homeowner's insurance. This would save you money but could leave you underinsured.

Replacement cost and market value aren't necessarily the same. When home prices peaked in 2006, the market value of your home might have been much higher than the replacement cost value. Today, the sale price of your home could be a lot less than the cost to rebuild.

Talk to your insurance agent about how much coverage you need. This will depend on the square footage of your home, upgrades and amenities, and the price per square foot to rebuild in your area.

HOUSE HUNTING TIP: Most states levy property taxes, and the property tax structure and rate varies from state to state. In California, your initial property tax assessment is based on the purchase price. If you purchased your home in 2006, your property tax base could be higher than your home's current market value. In this case, you can appeal to the assessor's office for a reduction in your property taxes.

The current appraised value of your home, or one you want to buy, may be lower than you expected due to changes brought about by the Fannie Mae Home Valuation Code of Conduct that took effect May 1, 2009. One of the major changes is that loan originators -- mortgage brokers and loan agents -- can no longer talk directly to the appraiser.

This new restriction, while intended to be in the consumer's best interest by keeping loan originators from pressuring appraisers, is resulting in misleading valuations -- not in every case, but in enough cases to raise concern.

Many loan originators now order arm's-length appraisals from third-party appraisal services. Some of the appraisers who work for these companies are hired to appraise properties outside their area of expertise. In one case, an out-of-area appraiser used a property in East Oakland, Calif., as a comparable for a home in Albany, Calif., a much pricier community located 15 miles away.

Appraisers used to appraising homes in planned-unit developments where there is uniformity in the housing stock often have a hard time making sense of market value in areas with a lot of diversity.

For example, some older neighborhoods were developed over several decades. Some homes have been remodeled and some not. House size can differ significantly. A 1,500-square-foot home could be next door to one with 2,400 or 3,000 square feet.

Another negative repercussion of the new code of conduct is that there are more inexperienced appraisers doing appraisals. Many of the experienced appraisers, who have plenty of work, won't work for fees offered by the third-party appraisal companies, which may take a big chunk of the fee to run their companies.

Homebuyers or homeowners trying to refinance who receive a low appraisal should ask to see the comparable sales used by the appraiser. Even though your mortgage originator can't talk to the appraiser, a homeowner or real estate agent can.

THE CLOSING: Ask your real estate agent to provide you with recent comparable sales that closed within the last three months. Then, ask the appraiser to consider these.

Selling Home During the Holidays

2009-12-18T11:40:00.000-08:00

by Robin & Les Wrigley

Who in the world would go home shopping during the holidays? All those prospective home buyers who still have not found their home! This real estate market has frustrated many home buyers. The inventory of homes for sale has been low all year. We don’t expect the supply of homes for sale to increase until late spring. This could be a terrific opportunity for you as a potential home seller.

If you want to stand out from the crowd, put your home on the market during the holidays or early in the New Year. Since few people do, there will be even less competition.

Decorate your home for the holidays, as you normally would, so that it looks ever more inviting and appealing. It would be the ultimate way to stage the house for its best appearance.

Plan to take advantage of this temporary, seasonal lull in the market. Sellers usually do not put their home on the market until next year, beginning in March or April. With little competition in January or February, sellers have their best chance all year to sell their home, and for the best price. Buyers are out there looking for homes all year long, especially starting the New Year. It seems as if buyers make New Year’s resolutions that this will be the year to move, and they start looking right away.

Don’t worry about moving during the holidays. You are aiming only to market your home and sell it in December or January, but negotiate to have it close escrow in February. Better yet, negotiate to have the option to stay in the house after close of escrow and rent back from the buyer for another month or so. In this way, you will have until April to move out, plenty of time to find your next home. And wouldn’t that be a great holiday gift?

Is Now a Good Time to Downsize?

2009-12-14T11:28:00.000-08:00

by Dian Hymer

Interest rates are low. Prices have come down in many areas. More buyers are deciding it's a good time to buy, even though it may be awhile before the housing market stabilizes.

Buyers who have a house to sell face a more complicated situation than they did when they bought their first home. They may not be able to afford to buy a new house before selling the old one. And, it may be more difficult to find a home to buy because many sellers are not selling now due to current market conditions.

Despite complications, homeowners who want to trade up in a down market can benefit financially. They may sell their current home for less than it might have sold for a few years ago, but they also could pay a lot to less for the replacement home.

Let's say your current home that was worth $500,000 two years ago is now worth $400,000, or 20 percent less. Even though you would sell for $100,000 less today, if you buy a $1 million house that two years ago was worth $1.25 million, or 20 percent more, you come out $150,000 ahead.

The math may not be as advantageous if you're downsizing. You may find that you sell at a bigger discount than you would have a few years ago without realizing as large a cash discount on the purchase of the smaller, less expensive house. You also might find that you are in competition with buyers who are either first-timers or trade-down buyers like yourself.

Another factor is that, in general, the price per square foot of smaller houses is more than the price per square foot of larger houses in the same area. So you might have to pay more than half the selling price of your house to buy a house that's less than half the size of your house. That is, if you're purchasing the new home in an equally expensive neighborhood.

Regardless of this disparity in prices, if housing prices in your area are falling, it would be better to sell now than wait for the market to turn, as your home might sell for even less if you wait.

HOUSE HUNTING TIP: There is more to consider than how much profit you might realize in making a scale-down move. The first step is to make a list of all the reasons why you are considering downsizing. Common reasons are that the house is too big; it costs too much time and money to maintain; it's in an inconvenient location; or it's not located close to family. Then make a list of all of the reasons it would make sense to stay in your home. Weigh the pros and cons.

The next step is to do a cost comparison to figure out how much it costs to own your present home, including property taxes, home maintenance, utility bills, mortgage payments, insurance premiums, and homeowners association dues, if there are any. Then consider how much it would cost to get your home into prime selling condition. And factor in the costs of sale. Quality of life is hard to quantify monetarily, but is a major factor in most moves.

Then, calculate the cost of buying and owning a smaller home. Make certain you consult with your tax adviser to find out about the tax consequences of making the move.

Downsizers who are contemplating an out-of-area move should consider renting before buying. It usually takes awhile to learn the neighborhoods and figure out which one is best for you. Even if you're not moving out of the area, it may make sense to rent for a while.

THE CLOSING: In low-inventory markets it can take time to find the right home.

Sellers Think Twice About High Offers

2009-12-07T11:26:00.000-08:00

by Dian Hymer

Sellers who are lucky and receive more than one offer should carefully consider all aspects of the offers before accepting the one with the highest price. Even if you receive only one offer and it's lower than your asking price, you might want to consider bending some on your price in exchange for a transaction that is likely to close.

Ideally, you want a committed buyer who has a good credit score and financial resources, and who has been preapproved for a mortgage, as lenders have tightened their qualifying criteria considerably.

HOUSE HUNTING TIP: Your real estate agent should ask the buyer's agent for permission to contact the buyer's mortgage person directly to find out if there is any reason the buyer wouldn't receive credit approval. An offer from a gold-plated buyer at a lower price may be a better deal than a higher-priced offer from a marginally qualified or low-cash-down buyer.

Another issue to consider if you receive more than one offer is the likelihood of the property appraising for the higher price. Appraisals have become a problem recently, particularly in declining markets. Appraisers make downward adjustments for properties that are deemed to be in declining markets.

Are there at least three comparable sales that closed within the last three months that can be used to justify the buyer's offer price? If not, the appraiser might have difficulty appraising your property for the purchase price.

Buyers usually include an appraisal contingency in their offer. If so, the buyer usually has the option to withdraw from the contract if the property appraises for less than the contract price. Some buyers won't buy a home that appraises for less than they've agreed to pay.

A buyer who is committed to making the deal work is more likely to be able to accept an appraisal that is lower than the purchase price. In this case, the buyers and sellers negotiate a mutually acceptable resolution. For example, the sellers could agree to accept a lower price if the buyers agree to increase their cash down payment.

Many buyers don't have additional cash. In this case, if the seller wants to keep the deal together and the buyers won't or can't complete the purchase at a price higher than the appraised value, the contract price will need to be reduced or the deal will fall apart.

There are a lot of uncontrollable elements in a home-sale transaction. One is that you have no control over who represents the buyer. That is, unless you receive more than one offer. In some cases, it may be worthwhile to accept a lower-priced offer from a buyer who is represented by an agent with a good track record in your area -- one who is experienced, trustworthy and diligent.

A clean offer is one that is not loaded up with contingencies. Typical contingencies are for inspections, and loan and appraisal approval. An offer that's contingent upon the sale of another property is riskier than one that's not. A noncontingent offer, even at a lower price, might be the best offer because it has more certainty of closing.

An offer that is contingent upon the close of another escrow may be worth the risk, particularly if all contingencies have been removed from the buyer's contract. Request confirmation from the buyers that contract contingencies have been removed and find out from the closing agent or escrow officer when the closing is likely to occur.

THE CLOSING: The uncertainties in the current market make it important to carefully consider the terms of an offer, not just the price, before you accept it.

Home Foreclosures: When the Right Price is Not Correct

2009-11-12T11:43:00.000-08:00

Bob Schwartz

The San Diego housing market is once again hot! Selling quickly and at above listed prices are the bank-owned foreclosure properties, both detached homes and condominiums. Alan Greenspan's term "irrational exuberance" is once again characteristic of the San Diego home buyer's behavior. Any property description using "bank-owned," "lender repossession," "foreclosure sale," etc., is drawing a crowd to see the property. If the property is in decent condition, there will be offers and multiple offers, at that.

Sounds like déjà-vu? Not quite. Adding my observation to the above facts, a number of lenders have hit on a marketing ploy to create a buying frenzy which guarantees an almost instant sale. In the majority of cases the offer(s) exceed what may have been realistically expected if the property was marketed the traditional way.

Here are some actual examples of this technique for San Diego home sales.

Example 1: On 4-8-09, a bank owned home in east Carlsbad was listed at $499,900. Based on the location, age and size of the home, I estimated the current value at $575,000 to just over $600,000. Within one day of the listing, the listing agent had multiple offers. According to the agent, the lender required it to be on the market one week before they would look at any offers. The agent speculated that based on the number of inquires, she would have 40 to 50 offers in the one week period. This home sold for $597,000. The sales price was almost 20% over the listed price. Doesn't a sale of $97,100 over the listed price suggest that it was listed way under the market?

Example 2: A bank-owned Little Italy one bedroom condominium was listed in March for $234,900. The estimated fair current value for this condo was approximately $275,000 to $280,000. The listing agent stated that within 3 hours of the MLS listing being submitted, he had an offer. Again, the lender would not look at any offer until the condo was on the market one week. This San Diego property generated 21 offers within the 1st. week, of these, 11 were at or above the $234,900, listed price. This Little Italy condo sold at $295,600, or $60,700, approximately 26% above the listed price! I was told the accepted price was $15,000 above the next highest offer.

Example 3: A San Carlos planned-unit-development, bank-owned 4 bedroom was listed at $344,900. The estimated fair value for this condo was approximately $410,000 to $425,000. Inside of one week, this San Carlos property had an accepted offer at $410,000. This was approximately 19%, or $65,100, above the listed price! Banks are purposely under listing property with the strategy of creating a buying frenzy to result not only in a very quick sale, but, a sale at or above the fair market value. Is this practice fair or even legal? It is on both counts. If the bank does not list it properly, they could end up with a sale way below the current fair market value.

On the other hand, it isn't fair to neophyte buyers/agents. Buyers and/or their agent who do not recognize the ploy, may be wasting quite a bit of time writing offers that in some cases, will not even be considered or countered. Also, what about shattered expectations? A number of buyers/agents may honestly believe that their full price offer has a chance of being accepted. In reality, they not only have zero chance of getting their offer accepted, but in the majority of cases, they will not even get a counter-offer.

This is not the time for buyers to be represented by neophyte agents. Bargains are available and buyers can position themselves to be one of the lucky ones by selecting an experienced agent familiar with the areas in which they are interested. A good agent will have reasonable advice about structuring offers and which properties are worth the work and wait. Follow that advice!

Cute cottage near downtown Oakland

2009-11-09T15:22:00.000-08:00

Are you looking for a home near downtown Oakland?
Check out 2831 Richmond Avenue in Oakland.

This 1915 cottage is filled with charm.
Yet nicely updated for today's living.
Affordably priced at $350,000.
To see more photos and details, click here.

4 Bedroom home, top rated schools, 1/3 acre lot with lake views

2009-11-09T15:11:00.000-08:00

Are you looking for a large home in a top school district?
Check out 1436 Lexington Avenue in San Mateo.

4 Bedroom home in the beautiful San Mateo Highlands.
2 story Hansen-built home on 1/3 acre lot.
Lovely views of Crystal Springs Lake.

Offered at $1,150,000.
Open House on Sunday, November 15, 1-4pm.
Click here to see photos and more details.

Home Buyer Income Tax Credit Extended and Expanded

2009-11-09T13:20:00.000-08:00

Good news for home buyers! The Federal income tax credit for home buyers has been extended and expanded.

First time buyers (people who have not owned a property in the past 3 years, and who make less than $125,000 single or $225,000 married) may buy a home (up to $800,000) and earn an income tax credit ($4,000 single or $8,000 married). However, there is a time limit on this program: you must purchase the home before April 30, 2010, and close escrow before July 1, 2010.

The income tax credit is now also available to homeowners who wish to trade up from their current home to a more expensive one. Trade up buyers are eligible for an income tax credit ($3,250 single, or $6,500 married). Same price limits and income limits apply.

For more information, contact your lender, or call Robin and Les Wrigley at (650)483-7661.

Do's and Don'ts of Home Selling

2009-11-05T12:51:00.000-08:00

An energetic real estate agent can have your home on the market in a day. However, to provide the kind of marketing exposure you need to sell in today's market takes a little longer, unless your home is photo-ready when you list.

Ideally, you should start planning for your home sale months before you want your home to be on the market. First, find an agent to represent you. Then, create a game plan together for the premarketing phase of the process.Use your agent as a resource. Walk through your home with your agent to get feedback on work, decluttering, and rearranging that needs to be done before the house is photographed for advertising and shown to prospective buyers. If your agent doesn't have a good eye for design, ask for a recommendation of a staging decorator.

Preferably, your home should not be submitted to the multiple listing service (MLS) or home-sale Internet sites without photos. Studies have shown that many buyers don't consider a listing that doesn't have photos.

Some sellers have presale inspections done to find out if repairs should be made before the property goes on the market. This wasn't as important several years ago when buyers were enthusiastic about the prospect of making money in the residential real estate market. Now buyers are much more cautious, and property condition is a critical variable.

One seller did a beautiful job fixing up her house for sale. She ordered a termite report and had some of the work done. But she didn't hire a home inspector to inspect the house. The interior was top-notch. In fact, more money was spent on this than was necessary. The listing agent was hired after the work had been done so the seller didn't benefit from the agent's advice about how much to spend and on what. The house sold with multiple offers. However, the buyer's home inspection report revealed that the house needed a new foundation. Fortunately, there was a backup buyer. But, the price was negotiated down significantly. In hindsight, it would have been better to have fixed the foundation and done a less expensive redo of the interior.

A couple sold a similar home. They worked with their agent for months before the house was marketed. They did presale inspections and got estimates for painting, staging, furnace replacement, making necessary structural modifications and fixing miscellaneous defects referenced in the termite report. Then, they prioritized, with input from their agent, and had the most critical repairs and enhancements done before the listing hit the MLS. There was no renegotiation necessary with the buyers after they completed their inspections.

Another couple, who plan to move in a few years, decided to get their home ready to sell now. They put in a new master bathroom, refinished floors and plan to replace a dry-rotted deck. They will enjoy the improvements for the remaining years they stay in the house. Most sellers wait until the last minute to get their house ready for sale. It can be very stressful trying to get all the work done in a short time frame. Doing work gradually over time is a saner approach. Sadly, most homes never look as good as they do when they're sold.

Now is a good time to have work done. A lot of contractors are looking for work. You might receive more competitive bids and be able to have the work done when you want.

Home Warranties

2009-10-29T12:46:00.000-07:00

by Dyan Hymer

When something malfunctions in your home, wouldn't it be wonderful if you could pick up the phone, request a service call, pay a nominal service charge and have the problem fixed?

A home protection plan--also called a home warranty-is an insurance policy that insures homeowners against defects in the major systems of their home. Precisely what is covered will vary from one company to the next. Most policies cover the heating, plumbing and electrical systems as well as built-in appliances like the stove, dishwasher and garbage disposal. Some companies will cover movable appliances like the refrigerator, washer and dryer for an extra charge. And some policies even include roof coverage-if you pay an additional fee.

Policy terms are usually for one year and they are renewable. The annual cost of a policy varies but you might expect to pay about $250 for a moderate-size home. Protection plans are available for both single-family residences and condominiums. The plans are offered in most states.

Home protection plans are popular in the home sale industry because they provide a relatively inexpensive way to take care of home defects that develop soon after the home sale closes. For example, let's say the water heater quits working the day after closing. Depending on the terms of the purchase agreement, the seller may be responsible for replacing the water heater. A new hot water heater can cost several hundred dollars. However, if there is a home protection plan in place at closing, the hot water heater will probably be replaced for the nominal cost of a service charge. Home warranty service charges vary but they are often in the range of $30-35 per call.

Some sellers offer to pay for a home protection plan to cover the home for the buyer for one year. If problems arise during that year, the buyers simply call the warranty company and pay the service charge. The warranty company pays for the repair or replacement.

Be sure to read the policy carefully because there are exclusions from coverage. For example, pre-existing conditions are not usually covered. So if the furnace hasn't worked properly for years, it probably won't be covered by the buyer's home protection plan. Also, there are limitations on coverage. For instance, some policies offer roof coverage, but only up to $1,000 of work.

Seller coverage is also available to cover the home during the listing and sale period. Seller coverage works the same as buyer coverage except that there are usually more limitations on the coverage. For example, the furnace is usually covered under both buyer and seller coverage. But, the amount of coverage offered under seller coverage is often less than the amount that's available to the buyer if the furnace breaks down after closing.

One seller who had signed up for seller coverage was able to have some of the defects that were discovered during the buyer's inspections fixed by the home protection plan company for the cost of a service charge. This was a great deal for the seller because it saved him money and he didn't have to pay the policy premium until closing. Seller coverage is usually charged by the day. The cost varies, but it can run about 75 to 85 cents a day.

If the seller of a home you're buying does not offer to pay for a home protection plan, you can pay for one. Be sure to order it before the closing date.

It Doesn't Matter What the Seller Thinks It's Worth

2009-10-22T12:45:00.000-07:00

by David Fialk

When selling a home, there are many factors which affect market value and the eventual sale price of a home, such as location, condition, size, amenities, features, improvements and upgrades, local economic conditions, the current real estate market and mortgage interest rates, among others. Some of these factors are within the control of the owner, and others are beyond the control of the owner.

The definition of Fair Market Value includes various terms such as: the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale; the buyer and seller each acting prudently and knowledgeably; assuming the price is not affected by undue stimulus; normal marketing time period, informed buyer and seller.

In helping owners obtain a Market Value estimate for their home, Realtors can provide a Comparative Market Analysis (commonly referred to as CMA). A thorough Market Analysis will include full property details and pricing information of the most comparable type properties currently listed on the market for sale, pending or under contract sales where a contract offer has been recently accepted, closed sale transactions and listings which have expired, those that did not sell during the marketing time period. The purpose of a report like this is to provide the owner with factual information to help them in their decision to sell by providing a recommended asking price and estimated sales price. While no two properties are truly identical, an analysis like this can provide home owners with the most reliable method of obtaining a market value estimate for their home.

In the process of reviewing the pricing information however, it is quite common for owners to question the market value estimate and pricing recommendations. The questions and concerns they have about price, while valid in their situation, do not have an affect in determining the market value for their home. What are some of the factors that do not have an effect in establishing Market Value?

The price paid for a home one year ago, three years ago, five or ten years ago has nothing to do with what the home is worth today. Real estate values exist at a fixed point in time. A home may have been purchased for $300,000 three years ago, and may be worth $315,000 today. Someone else may have bought a substantially similar home for $250,000 five years ago and it is worth $315,000 today. That is a drastic difference in equity in a relatively short period of time.

Real estate ownership has been blessed with appreciation in home values, but that appreciation is not always in a straight line. Real estate values are not static. Over the long term, an investment in real estate is generally considered the most valuable type of investment, one with the best financial returns. Over the long run, it is probably the best investment people can make.
Depending on the market conditions when the home was purchased, some owners were fortunate and purchased their home in a buyers market before the increases in real estate values like we just recently witnessed between 2001 and early 2006. Others may have bought at the end of a strong real market and were forced to pay top dollar in a highly competitive sellers market, as many owners are experiencing now who purchased their home in 2006. It is economic market conditions, the economy, employment, mortgage rates and supply and demand that create changes in the real estate market and cause real estate values to increase, remain stable and perhaps drop at different periods of time. These are the factors that are beyond a seller’s control.

All owners would like to get the price they feel they should get for their home when they choose to sell. The reality is, their home is worth what it is worth, and that is the price a buyer is willing to pay. A buyer will not pay more for a home than what they would have to pay for another home with similar features and amenities in a similar location, something called the "Principle of Substitution". It is for that reason why so much reliance is placed on sales data when establishing market value, and not personal emotions or personal circumstances.

Whether a home was purchased twenty five years ago, three years ago or just last year, the purchase price was the value when it was purchased, and has nothing to do with it’s current market value when being sold. A seller with twenty five years of home ownership and substantial equity has the same right to fair market value as an owner with just 3 years of home ownership and perhaps little or no equity.

Decisions to sell may be more difficult for owners with short term ownership especially when real estate values have not increased or have dropped since the home was purchased. Home owners with short term ownership may have mortgage balances higher than the value of the home and a sale would require bringing cash to the closing to pay off the mortgage balance. Home owners with long term ownership and substantial equity can make selling decisions easier than owners selling their home without the benefit of real estate appreciation. In either case, the real estate market is the real estate market, regardless of when the home was purchased, and the home is worth what is worth.

While it is true that that the condition of a home has a definite affect on its market value, and that a well maintained home will sell for more than a home in need of updating and repair, the actual cost of making repairs and improvements may not be equal to the increase in market value. Why? Cost does not necessarily equal value in real estate.

Repairs and improvements are two different things. A repair corrects something that is broken or is not working properly, and does not necessarily add value to a home when fixed. Some types of repairs are considered necessary repairs. A leaking faucet, broken windows, clogged drains, screens with holes, gutters hanging from the roof, missing downspouts, cracked concrete walkways, among others, are examples of this. Repairs like these can be considered deferred maintenance, and are considered minor repairs. They are maintenance related and are easily noticed by buyers. They draw attention and become distracting to buyers when viewing a home. If not taken care of, conditions like these will definitely have a negative impact on the marketability of a home, which then will have a negative affect on market value. When repaired or fixed, these type repairs make a home more saleable, not necessarily more valuable.

In other words, just because repairs like these cost $1,500 does not mean that they have increased the value of the home in the same amount. However, if not repaired, they could result in a loss in value of more than the cost to repair and, maybe more important, the loss of potential buyers because they feel the home needs too much repair and work.

What about the roof, exterior siding, windows, heating system, electrical system, central air conditioning system and hot water heater? These type improvements are more costly than the repair items noted above and can have a larger impact on marketability and market value. While a buyer may not rave about how beautiful the furnace looks because it is now, they will definitely have negative thoughts on a home where the furnace is original and is 50 years old. A new or newer furnace will be more efficient than the original, save the buyer money in monthly fuel bills and, more importantly, is an item that will not need to be replaced by the buyer in the near future. These type items relate to the effective age of a home. The chronological age of a home can be much different than its effective age. There is a life expectancy in how long a roof will last, how long a furnace will last, etc. A 50 year home can have an effective age of 20-30 years when improvements like these have been made. When comparing homes, buyers are concerned with near future essential repairs and improvements which need to be made, especially those that are costly, like these.

Quite often buyers will pass up on homes they are interested in simply because they need too much near future updating, even if the asking price is appropriate considering the condition of the home. Why? Very often buyers just do not have the time or inclination to take care of major updating, but more importantly, they may not have the additional cash to make the improvements after closing as they have exhausted their savings for the down payment and closing costs.

Should a homeowner replace the original 50 year old furnace when they are ready to sell? Should they invest the $2,300 to $4,000 and have the furnace replaced? A furnace is an integral system in the home, and something buyers are concerned with. However, it is just one aspect of the home. The question relates more to whether it will cost more to sell the home with the original furnace than what it would cost to replace it. If the furnace is the only item requiring immediate attention, it may not prevent a sale. However, if there are other must do improvements, the furnace will have a negative impact on market value. Decisions like this have to take into consideration the overall condition of the home. When investing in a new furnace today and spending $2,500, what is the likelihood of receiving a full return on the investment? The reality is that it will help sell the home, but not necessarily at a price to recapture the actual cost of new furnace.

What about the home where a state of the art kitchen or main bath are new improvements made by the owner? Can a seller expect to recapture all or most of the cost? Improvements like these are very costly, and will definitely add to market value. But will the seller recapture all or most of the cost? That depends on various other factors, such as how recent the improvements are, what the overall condition of the home is, the price range the home is in, where the home is located and, more importantly, what buyers are expecting to see in a home like this.

With regard to major improvements in a home, all too often the improvements are made for the benefit and enjoyment of the owner and not solely for recapturing the total investment! Each and every major improvement to a home is unique. There is no rule that guarantees an exact amount of value added for specific improvements. There are studies available that approximate increased values for specific improvements, but every real estate market area is different! Contact Robin & Les Wrigley for details on "cost versus value improvements".

Whether a home owner has owned their home for 30 years and has paid off their mortgage, or is one who has owned their home for only a few years and has an equity loan on top of the original mortgage, the market value of their home is what it is. Market value has nothing to do with mortgage balance.

Likewise, where the owner is planning on moving to another home, what they need to spend for their next home does not have an affect on the value of their current home. Their home is worth what is worth, whether they are moving into a home they already own, buying a less expensive home or are purchasing a much more expensive home. Market value has nothing to do with the amount the owner needs to purchase another home.

In either scenario, there is a reality however. In order to sell a current home, there needs to be sufficient sale proceeds to pay off the existing mortgage(s) and, or, provide enough equity to enable the purchase of the next home. For many owners, it is a matter of choice. Is it worth it to me to sell my current home and move forward or not? For others, the options are not that simple.

Home buyers make their purchase price decisions based on how much a home is worth to them, not on how much the seller is asking or how much the seller needs. Buyers look and compare one home to another. They ask to see comparable sales, and they base their contract offer on what the real estate market is saying the value of the home is. In most cases, a home buyer will not pay more for a home than it would cost them to find a similar home, in similar condition and with similar amenities, commonly referred to as the "principle of substitution.

If you would like an independent view of how much your home is worth, contact Robin & Les Wrigley today at (650)483-7661.

Energy Upgrade Can Yield Tax Credits

2009-10-15T13:38:00.000-07:00

By Elyse Umlauf-Garneau

If you’ve been putting off energy-efficient home upgrades, now may be the time to take on some home improvement projects. Thanks to the American Recovery and Reinvestment Act of 2009, signed by President Barack Obama on Feb. 17, there are new incentives for consumers to eliminate outdated, inefficient building systems that affect residents’ comfort and pocketbooks.

The stimulus bill expanded and extended the tax credits for the home improvements that had expired in 2007. That means through 2010, consumers can claim a 30 percent tax credit for costs of buying things like new windows, furnaces and insulation. The lifetime cap is $1,500. Before, consumers only could claim 10 percent of the costs and the cap was $500.

Among the common home projects covered are:

-Exterior windows, including skylights and storm windows; -Insulation, exterior doors and roofs, including sealants to minimize air infiltration (caulk, weather stripping and sealants), and storm doors; and -Central air conditioning; heat pumps; furnaces and boilers; and water heaters.

Because there are certain quirks and deadlines associated with what does and doesn’t meet the guidelines. You have to be careful looking at what exactly qualifies. You have to have the right windows, for example. Similarly, for roofs and insulation projects, those placed in service between January 1 and Feb. 17, 2009, must meet certain requirements and those placed in service between Feb.18, 2009, and Dec. 31, 2010, must meet slightly different criteria.

Homeowners able to make more significant investments may want to consider some longer-term energy solutions, such as geothermal heat pumps, solar photovoltaic cells, solar water heaters, and fuel cells, because the tax credits also were changed for such systems. They’re eligible for the 30 percent tax credit and there’s no maximum cost. Again, it’s important to understand all the criteria to receive full tax benefits.

Resources:

- Alliance to Save Energy (www.ase.org/taxcredits ) offers an easy-to-follow guide on the available tax credits.

-Energy Star: http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#c6 offers information and a Q&A about the Federal tax credits.

-Flex Your Power— http://www.fypower.org/res/tools/rgl.html lets you search by zip code for energy-efficient rebates and incentives in California.

-The Database of State Incentives for Renewables & Efficiency is another source for information on California-specific financial incentives for energy upgrades. http://www.dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=CA&RE=1&EE=1

Appraisals are Another Challenge in Today's Market

2009-09-26T15:22:00.000-07:00

by Dyan Hymer

Finding the right house to buy is never easy; selling a home today is also challenge. It's best to prepare yourself for obstacles that could cross your path so that you're prepared should they arise.

In some markets, one in three transactions doesn't close. This is a high ratio compared to the fallout ratio in previous years when the housing market was stronger and financing options were plentiful. In past years, most transactions fell apart over inspection issues. The biggest hitch today is financing, which is not to say that property defects don't come into play.

For some time, lenders have tightened up on their qualifying criteria, making it more difficult for buyers to obtain the financing they need to close a sale. Recently, appraisals have become problematic, particularly in low-inventory, higher-priced neighborhoods.

There are three components to lender approval. The borrower must be financially qualified. This requires a good credit score, sufficient cash for a down payment and closing costs, as well as verifiable income. The lender also needs to approve a title report on the property to confirm that the seller has marketable title to the property. And, the lender needs an appraisal of the property to confirm that the buyer is not overpaying.

Previously, lenders' underwriters required three comparable sales in the area that occurred within the last six months to validate the purchase price. Due to the soft housing market, lenders now want to see comparable sales information on listings that sold and closed within the last three months. The listing inventory in some areas was very low from December 2008 through March 2009, making it difficult for appraisers to come up with enough comparable sales information to satisfy the lenders.

To complicate matters, some appraisers and lenders automatically lower the appraised value by a certain amount if the property is in an area that is deemed as a declining market. This can result in an appraised value that is lower than the price the buyer and seller agreed to in the purchase contract.

The most accurate appraisals are done by appraisers who know the local market well. Unfortunately, changes in the lender's practices are resulting in more appraisals done by appraisers from outside the local area. Many lenders no longer have their own, in-house appraisers; many are relying on large nationwide appraisal services to provide appraisal services.

Let's say a listing sold for $1 million, but appraised for only $950,000. One way to resolve the problem is for the buyers and sellers to split the difference. In this case, the sellers lower their price by $25,000 and the buyers put an additional $25,000 cash down.

For the cash-strapped, this is not an option. In this case, the sellers would have to lower the price by $50,000 to keep the deal together. Some sellers might be willing to carry a second mortgage as long as it doesn't exceed the lender's loan-to-value (LTV) limit and the loan isn't due for at least five years.

Check with your lender before attempting to negotiate a seller carry-back; some lenders won't allow it.

CONFORMING LOAN LIMITS MAY DROP

2009-09-21T14:47:00.000-07:00

The Federal government increased the maximum loan limit for FHA and conforming loans up to $729,750 as part of the American Recovery and Reinvestment Act. This increase was to be only temporary, expiring on December 31, 2009. After that date, the maximum will revert back down to $625,500.

Any loan amount above conforming loan levels typically requires a higher interest rate and down payment. If you are planning to take advantage of this temporary increase, you must buy your home and close escrow by December 31, 2009.

We will keep monitoring this situation and keep you updated if and when there are any changes. If you have any questions, let us know.

More Home Selling Tips

2009-09-19T15:19:00.000-07:00

by Dyan Hymer

An energetic real estate agent can have your home on the market in a day. However, to provide the kind of marketing exposure you need to sell in today's market takes a little longer, unless your home is photo-ready when you list.

Ideally, you should start planning for your home sale months before you want your home to be on the market. First, find an agent to represent you. Then, create a game plan together for the premarketing phase of the process.

Use your agent as a resource. Walk through your home with your agent to get feedback on work, decluttering, and rearranging that needs to be done before the house is photographed for advertising and shown to prospective buyers. If your agent doesn't have a good eye for design, ask for a recommendation of a staging decorator.

Preferably, your home should not be submitted to the multiple listing service (MLS) or home-sale Internet sites without photos. Studies have shown that many buyers don't consider a listing that doesn't have photos.

Some sellers have presale inspections done to find out if repairs should be made before the property goes on the market. This wasn't as important several years ago when buyers were enthusiastic about the prospect of making money in the residential real estate market. Now buyers are much more cautious, and property condition is a critical variable.

One seller did a beautiful job fixing up her house for sale. She ordered a termite report and had some of the work done. But she didn't hire a home inspector to inspect the house. The interior was top-notch. In fact, more money was spent on this than was necessary. The listing agent was hired after the work had been done so the seller didn't benefit from the agent's advice about how much to spend and on what.

The house sold with multiple offers. However, the buyer's home inspection report revealed that the house needed a new foundation. Fortunately, there was a backup buyer. But, the price was negotiated down significantly. In hindsight, it would have been better to have fixed the foundation and done a less expensive redo of the interior.

A couple sold a similar home. They worked with their agent for months before the house was marketed. They did presale inspections and got estimates for painting, staging, furnace replacement, making necessary structural modifications and fixing miscellaneous defects referenced in the termite report.

Then, they prioritized, with input from their agent, and had the most critical repairs and enhancements done before the listing hit the MLS. There was no renegotiation necessary with the buyers after they completed their inspections.

Make sure buyers receive copies of proposals and paid invoices for work you did to your home so they know which items in your presale inspection reports have been repaired.

Another couple, who plan to move in a few years, decided to get their home ready to sell now. They put in a new master bathroom, refinished floors and plan to replace a dry-rotted deck. They will enjoy the improvements for the remaining years they stay in the house.

Most sellers wait until the last minute to get their house ready for sale. It can be very stressful trying to get all the work done in a short time frame. Doing work gradually over time is a saner approach. Sadly, most homes never look as good as they do when they're sold.

Now is a good time to have work done. A lot of contractors are looking for work. You might receive more competitive bids and be able to have the work done when you want.

Multiple Offers Making a Comeback

2009-09-12T15:14:00.000-07:00

by Dyan Hymer

In the current home sale market, it might seem ludicrous to make an offer on a listing if it means competing with another buyer. However, multiple offers are on the rise in some markets. But, it doesn't always mean that you need to pay a lot more than the asking price.

Sellers are ever hopeful of receiving multiple offers. These days, this is usually an unrealistic expectation. That is, unless the listing is a prime property in a high-demand neighborhood where few homes are being offered for sale.

Price is a critical part of the equation. Some sellers price their homes low because they need a quick sale. If the price is below market, multiple buyers could step forward with offers. Sometimes an overpriced listing is reduced to market price or below and results in offers from more than one buyer.

Investors make up a large part of the buyers in this segment of the market. Don't shy away from making an offer just because there is more than one offer. In some cases, a dozen or more buyers make offers on foreclosure properties that are listed at bargain prices. But, the highest bidder is not always the winner.

Even in non-distressed-sale situations, multiple offers in today's market don't always result in an overinflated sale price. There are far fewer financially qualified buyers in the home-buying market today than there were two years ago due to credit tightening, more rigorous financial qualification requirements and recent stock market losses. In some areas, as many as one-third of home sale transactions fail to close, often due to the inability of buyers to obtain the financing they need.

Sellers who receive more than one offer should carefully consider all aspects of the offers, not merely the offer price. An offer from an all-cash buyer who doesn't need a mortgage to finance the purchase, and who can close quickly, should be taken seriously even if the price is lower than the other offer(s). However, some all-cash buyers -- who are fully aware of their strong position in this market -- feel they are entitled to a major price discount.

Whether or not you'll have success countering for a higher price will depend a lot on the profile of the buyer. Buyers who intend to occupy the property for the long term are more likely to pay more than will investors who base their purchase decisions on the numbers, not their emotions.

Sellers should try to keep greed out of their decision when faced with multiple offers. Today's buyers are willing to walk away from a negotiation rather than pay over market value, or it they think the sellers are unreasonable.

Contingent Sale Offers Can Benefit Home Sellers

2009-09-03T15:10:00.000-07:00

by Dyan Hymer

Convincing a seller to accept an offer that's contingent on the sale of another property can be challenging. The odds of acceptance improve if the offer is structured to the mutual benefit of both buyers and sellers.

From the buyers' perspective, there are advantages and disadvantages to contingent sale offers. A big advantage is that the buyers don't have to go through with the purchase if their home doesn't sell. They don't risk much.

The buyers may incur costs of inspecting and appraising the property, but the expense is minimal compared to buying a new home before selling the old one and ending up owning two homes at once.

From the sellers' point of view, contingent sale offers are not desirable because the outcome is uncertain. This is why sellers who agree to a contingent sale offer usually want a release clause in the contract.

A release clause allows sellers to continue to market their home and accept other offers in backup position, subject to the collapse of the primary offer. If the first buyers can't perform, they have to withdraw from the contract so that the seller can proceed with backup offer.

Buyers can spend a lot of time finding the right house to buy. If they can't sell their current home before another buyer boots them out of contract, they have to start house hunting again.

A contingent sale offer can be structured to give buyers more certainty about being able to close the deal. Normally, when there is a release in a contingent sale offer, it goes into effect as soon as the contract is ratified. But it doesn't necessarily have to go into effect then.

Buyers can request that the release clause not go into effect for a period of time, say 14 to 21 or so days. If the buyers' home is ready to be put on the market and it's priced right and well located, there's a chance it will be under contract before the release clause goes into effect.

A release clause that doesn't go into effect immediately should specify that if the buyers' property is under contract within the specified time frame, the release clause will not go into effect unless that deal were to fall apart.

Sellers might think this approach benefits only the buyers. However, it can benefit the sellers in terms of their overall marketing strategy.

When sellers of a property that's listed on the Multiple Listing Service (MLS) accept a contingent sale offer with a release clause, this information is published in the MLS. It is a material fact affecting the sale. A buyer can make an offer only for a backup position. Many buyers don't want to waste their time.

So, a release clause can slow down the marketing of the sellers' property. And, it can be difficult to regenerate enthusiasm about the property if the buyers' property doesn't sell and the sellers' listing is still encumbered by a release clause.

The sellers' property will show up as pending in the MLS if the buyers and sellers agree to delay the activation of the release clause. If the buyers' property doesn't sell by the end of the specified time period, the sellers' property will show up in the MLS as back on the market. This quickly and clearly announces that the listing is available for sale with no strings attached.

Make sure your agent includes in the confidential MLS remarks to agents that the listing is back on the market because the buyers' home didn't sell, and due to no fault of the listing.

Home Buyer Tips

2009-08-29T15:05:00.000-07:00

by Dyan Hymer

It's risky to buy a home in an area you know nothing about. Plan to investigate the neighborhood before you buy to make sure you'll like living there. Buyers who know homeowners in the neighborhood have a ready source of information. Buyers transferring from out of the area face a bigger challenge.

Your future employer can recommend neighborhoods, and may know people living there that you can contact. Subscribing to a local newspaper will give you access to local news and events.

There is some neighborhood information online. Check REALTOR.com, the NATIONAL ASSOCIATION OF REALTORS®’ national Web site. Go to "Find Neighborhood" on the home page. You might also find information by using your search engine to find a certain neighborhood.

Good public schools are a priority with most homebuyers, even if they don't have school-age children. Housing demand and property values tend to be higher in areas that have good school systems. These neighborhoods may hold up better during down cycles in the housing market.

Due to overcrowding in some areas, you might not be able to send your child to the school closest to your home. If a local school is important to you, plan to visit the school to find pertinent details. In areas where the public schools don't live up to your expectations, make sure that there are good alternate private schools that have space available for new students. It's difficult to get in to the best private schools in places where demand is high.

Good public transit and easy access to urban centers are key attributes of sought-after neighborhoods. An increasing number of homebuyers want to become less dependent on using a car. Investors who are buying foreclosure properties at discounted prices should keep this in mind. Tenants also favor housing that's close to public transportation. If you plan to drive to work each day, test out the commute ahead of time.

Today's buyers favor convenience to shopping, cafés and entertainment. Neighborhoods that are within walking distance of an attractive commercial center are in high demand. Houses in such neighborhoods may command a premium price.

Unfortunately, a convenient location can also be one where the crime rate is higher due to easy access. Check with the local precinct for information about crime in the neighborhood. Ask local homeowners if they have experienced criminal activity locally.

Is there a neighborhood watch group? If there is a neighborhood homeowner association, either mandatory or voluntary, ask to see copies of minutes from recent board meetings. This will give you an insight into homeowners' concerns.

Plan to visit the neighborhood several times at different hours of the day and night. Talk to residents to find out what they like and don't like about where they live. A good way to find local homeowners to talk to is to attend Sunday open houses in the neighborhood.

It's important to find out if there are any planned changes in or around the neighborhood that could impact the quality of your life. For example, a new public transit station or freeway close by could boost property values. However, if a freeway will run directly behind the house you're considering, this could negatively impact its value.

Pay attention to the consistency of the housing in the area. Are the homes well-maintained, or are they run-down? A low number of "For Sale" signs can be a good indicator that homeowners move in to the neighborhood and stay put. Evidence of remodeling is also a good sign.

Home Seller Tips

2009-08-22T14:56:00.000-07:00

by Dyan Hymer

Low interest rates could spark a pickup in the home-sale market in some areas. If you're inclined to sell, here are some mistakes you'll want to avoid. The biggest mistake sellers make is listing at an unrealistic price. If you want or need to sell, your home must be priced at or under current market value, particularly in places where prices are declining.

To avoid pricing too high or too low, carefully research your local market before selling. If you can't get the price you want, and you don't have an urgent need to sell, wait for a better market.

Some sellers want to price under the market to stimulate multiple offers. In some price ranges, such as low-end foreclosures, this can be an effective strategy. However, in higher price ranges, this approach could boomerang. It's not a good idea to list your home for a lower price than you're willing to accept.

Sellers who need to sell because they can no longer afford their mortgage payment should check with their lender about reworking the loan to make it more affordable. It could be fruitless to put your home on the market for the price you need in order to pay off your mortgage if that price is above market value.

Consider the benefit of having presale inspections done on your home. It can be beneficial to the sale process if buyers know as much as possible about the property's condition before they make an offer. A house may be priced right and beautifully prepared for sale. It sold for more than the asking price with multiple offers. Then the buyer's home inspection revealed a problem with the foundation. This started a round of renegotiation that ultimately resulted in a canceled sale.

It's a mistake to refuse to entertain any offer from a qualified buyer. In a soft market, it's natural for buyers to make low offers. Many sellers would rather set a price and say take it or leave it. But, you'll never know what price the buyer will pay unless you negotiate. Make sure to select a listing agent who has good negotiation and communication skills. A lot can be accomplished through verbal communication between the buyer's and seller's agents, even though a real estate agreement is not binding unless written.

Be wary of working with an out-of-the-area agent. Especially in the current market, you need an agent who specializes in your local market. The status of the housing market varies significantly from one niche market to the next. An agent who works in an area with a high percentage of foreclosures will have a very different opinion of the market than one who works in an area that is low on inventory.

Don't get into contract with a buyer who isn't financially qualified. A prequalification letter isn't enough. You need to know who the lender is. The buyer should have underwriting approval within a number of days of acceptance. Make sure this is written into your purchase contract if the buyer isn't already lender approved.

Sellers who are fortunate enough to receive more than one offer usually go with the highest price. But, the highest-priced offer isn't always the best offer. The turmoil in the home mortgage business has resulted in an increase in failed home-sale contracts due to financing issues. Consider accepting an offer in backup position in case the first deal falls apart. An offer from a buyer with a large down payment but a lower price is often a more solid deal than one with a higher price and a 10 percent cash down payment.

Low Down Payment Financing

2009-08-15T16:29:00.000-07:00

Dyan Hymer

It's widely known that the easy-qualifier loans that got so many homeowners into trouble recently are no longer available. Most conventional lenders want the borrower to put cash into the deal, have very good credit scores, and be able to verify employment. Mortgage lenders are in a very cautious mode.

The 80-10-10 financing, a popular financing vehicle for qualified, low-cash-down buyers, has virtually disappeared. With 80-10-10 financing, the buyer makes a 10 percent cash down payment. A conventional lender gives the buyer a mortgage for 80 percent of the purchase price, and the borrower takes out a second mortgage against the property for the remaining 10 percent.

When buyers put less than 20 percent down on a home purchase, the mortgage lender usually charges private mortgage insurance, or PMI. This insurance protects the lender in the event that the buyer defaults on the loan. PMI adds to the cost of the monthly mortgage payment. In time, if the buyer can substantiate that there is 20 percent equity in the property, the PMI can be eliminated. But, it doesn't happen automatically. It requires a verification process. Buyers who can't get financing without PMI should be prepared to pay PMI for the foreseeable future.

There are few lenders who do 10 percent second mortgages for home purchases. If the value of the property were to drop 10 percent, the property would be 100 percent financed. Should values drop further, and the borrower stopped making payments, the lender could lose out completely if the property couldn't sell for enough to repay the second mortgage.

Your mortgage broker may be able to arrange a 90 percent mortgage for you -- one that requires PMI. But, you may shop around and find an 80 percent first mortgage with a lower interest rate. Then get a private second mortgage for 10 percent of the purchase price, so you don't have to pay PMI. This approach may result in a lower overall mortgage payment.

If you don't have access to a private-money second, see if the seller might be willing to carry back 10 percent. If you have 15 percent to put down, perhaps the seller would agree to a second mortgage for 5 percent of the purchase price.

And, don't be bashful about asking your parents for an early inheritance. Many parents are pitching in so that their children and grandchildren can settle in a good long-term home in a desirable location.

Remodeling Adds More Than Just Value

2009-08-08T17:01:00.000-07:00

Dyan Hymer

“Remodeling Magazine's” 2008-2009 Cost vs. Value Report, produced each year in conjunction with REALTOR® Magazine, contains good news about the value of remodeling projects. The recent Cost vs. Value Report showed that renovations on a nationwide basis held their value better than home prices did in 2008. According to the NATIONAL ASSOCIATION OF REALTORS® (NAR), home prices declined 7 percent in 2008, while the value of homeowners' investments in remodeling dropped only 2.8 percent in 2008.

During slow real estate cycles, many would-be sellers postpone their move and remodel instead. This makes sense as long as the projects are selected carefully for maximum return on the investment. It's important to avoid renovations that would overimprove the property for the neighborhood.

One benefit of remodeling sooner rather than just before selling is that the homeowner is able to enjoy the improvements before moving on. All too often, sellers wait until right before they put their home on the market to enhance its appeal.

Remodeling, if done smartly, can result in a quicker sale and less negotiation with buyers over perceived shortcomings. Painting the house and updating the kitchen, baths, lighting fixtures and floor coverings are examples of improvements that can improve the sale price.

In today's slow economy, there are more contractors looking for work in some areas. And, in some cases, their prices have come down. This positively impacts the return on investment when the home is sold.

The amount of return from a remodel investment that is recouped when the property is sold varies significantly from one place to the next and from project to project. For example, nationally, 70.7 percent of the cost of a major kitchen remodel was recouped at sale. In the Pacific region (Alaska, California, Hawaii, Oregon and Washington), a major kitchen remodel returned 95.5 percent. In San Francisco, a major kitchen remodel returned 131.5 percent of the investment at sale. Despite higher labor and material costs, The Pacific Coast average cost recouped at sale was 14.8 percent higher than in the rest of the country.

The data used to generate the Cost vs. Value Report was obtained from surveys sent to more than 150,000 appraisers, real estate agents and brokers in July and August 2008. The cost data was obtained from HomeTech Information Systems, a remodeling estimating software company. The confidence level of the results is 99 percent, plus or minus 2 percent, according to NAR.

Homeowners who are concerned about the resale value of their home should first consult contractors to obtain estimates. Then consult with an experienced local real estate agent for input on the estimated cost recovery of the anticipated improvements before moving forward.

If you are considering whether to remodel or to sell and move, call Robin & Les Wrigley at (650)483-7661. They will be glad to give you a complimentary consulation.

Be an Informed Home Buyer

2009-08-01T16:53:00.000-07:00

Dyan Hymer

It's risky to buy a home in an area you know nothing about.

Plan to investigate the neighborhood before you buy to make sure you'll like living there. Buyers who know homeowners in the neighborhood have a ready source of information. Buyers transferring from out of the area face a bigger challenge. Your future employer can recommend neighborhoods, and may know people living there that you can contact. Subscribing to a local newspaper will give you access to local news and events. There is some neighborhood information online. Check REALTOR.com, the NATIONAL ASSOCIATION OF REALTORS®’ national Web site. Go to "Find Neighborhood" on the home page. You might also find information by using your search engine to find a certain neighborhood.

Good public schools are a priority with most homebuyers, even if they don't have school-age children. Housing demand and property values tend to be higher in areas that have good school systems. These neighborhoods may hold up better during down cycles in the housing market. Due to overcrowding in some areas, you might not be able to send your child to the school closest to your home. If a local school is important to you, plan to visit the school to find pertinent details. In areas where the public schools don't live up to your expectations, make sure that there are good alternate private schools that have space available for new students. It's difficult to get in to the best private schools in places where demand is high.

Good public transit and easy access to urban centers are key attributes of sought-after neighborhoods. An increasing number of homebuyers want to become less dependent on using a car. Investors who are buying foreclosure properties at discounted prices should keep this in mind. Tenants also favor housing that's close to public transportation.

Today's buyers favor convenience to shopping, cafés and entertainment. Neighborhoods that are within walking distance of an attractive commercial center are in high demand. Houses in such neighborhoods may command a premium price. Unfortunately, a convenient location can also be one where the crime rate is higher due to easy access. Check with the local precinct for information about crime in the neighborhood. Ask local homeowners if they have experienced criminal activity locally. Is there a neighborhood watch group?

If there is a neighborhood homeowner association, either mandatory or voluntary, ask to see copies of minutes from recent board meetings. This will give you an insight into homeowners' concerns.

Plan to visit the neighborhood several times at different hours of the day and night. Talk to residents to find out what they like and don't like about where they live. A good way to find local homeowners to talk to is to attend Sunday open houses in the neighborhood.

It's important to find out if there are any planned changes in or around the neighborhood that could impact the quality of your life. For example, a new public transit station or freeway close by could boost property values. However, if a freeway will run directly behind the house you're considering, this could negatively impact its value.

Pay attention to the consistency of the housing in the area. Are the homes well-maintained, or are they run-down? A low number of "For Sale" signs can be a good indicator that homeowners move in to the neighborhood and stay put. Evidence of remodeling is also a good sign. A lot of "For Sale" signs can signal a problem. Surplus inventory might not diminish quickly or easily if job growth in the area is low or diminishing. This would lead to a decline in property values.

Tips for Home Sellers in Today's Market

2009-07-25T16:33:00.000-07:00

Dyan Hymer

The biggest mistake sellers make is listing at an unrealistic price. If you want or need to sell, your home must be priced at or under current market value, particularly in places where prices are declining. To avoid pricing too high or too low, carefully research your local market before selling. If you can't get the price you want, and you don't have an urgent need to sell, wait for a better market.

Some sellers want to price under the market to stimulate multiple offers. In some price ranges, such as low-end foreclosures, this can be an effective strategy. However, in higher price ranges, this approach could boomerang. It's not a good idea to list your home for a lower price than you're willing to accept.

Sellers who need to sell because they can no longer afford the mortgage payment should check with their lender about reworking the loan to make it more affordable. It could be fruitless to put your home on the market for the price you need in order to pay off your mortgage if that price is above market value.

Consider the benefit of having presale inspections done on your home. It can be beneficial to the sale process if buyers know as much as possible about the property's condition before they make an offer. Recently, a home seller decided not to have a presale home inspection done. The house was priced right and beautifully prepared for sale. It sold for more than the asking price with multiple offers. Then the buyer's home inspection revealed a problem with the foundation. This started a round of renegotiation that ultimately resulted in a canceled sale.

It's a mistake to refuse to entertain any offer from a qualified buyer. In a soft market, it's natural for buyers to make low offers. Many sellers would rather set a price and say take it or leave it. But, you'll never know what price the buyer will pay unless you negotiate.

Make sure to select a listing agent who has good negotiation and communication skills. A lot can be accomplished through verbal communication between the buyer's and seller's agents, even though a real estate agreement is not binding unless written.Be wary of working with an out-of-the-area agent.

Don't get into contract with a buyer who isn't financially qualified. A prequalification letter isn't enough. You need to know who the lender is. The buyer should have underwriting approval within a number of days of acceptance. Make sure this is written into your purchase contract if the buyer isn't already lender approved.

Sellers who are fortunate enough to receive more than one offer usually go with the highest price. But, the highest-priced offer isn't always the best offer. An offer with a large down payment but a lower price is oftern a more solid deal than one with a higher pice and a 5 or 10% down payment. The turmoil in the home mortgage business has resulted in an increase in failed home-sale contracts due to financing issues. Consider accepting an offer in backup position in case the first deal falls apart.

There are No Steals Out There

2009-07-18T16:18:00.000-07:00

With the turmoil in today’s market, the media portrays a story of “some real steals” out there right now. Nothing could be further from the truth.

What about so-called short sales? These are properties where the owner is selling the property for less than he owes on it. Since he won’t get a dollar from the sale, it doesn’t matter what price it sells for. Home buyers get really excited about this opportunity. They find some homes for sale with very attractive prices, and they figure this is how much the market has declined. The buyer makes an offer, and the seller accepts it, “subject to the seller’s lender’s approval”. After all, the bank would be taking a hit for the shortfall.

The bank will most likely go through the due process of investigating the situation. Is the seller really in some kind of hardship? What is the property really worth? This will take several months for the bank to review and consider.

In the meantime, the buyer is waiting to hear about his offer. The home is not really sold until the bank accepts these terms, and the bank is in no rush to decide. The buyer may wait several months to know whether his offer is even accepted.

Meanwhile, other buyers may make offers to purchase the home. Naturally, the bank will want to look at all offers and accept the highest one, if and when it even decides to work with the deal.

80% of the time, the bank rejects the short sale. Typically, the bank finds out that the seller is not in any hardship position or falsified his initial loan application. The bank will then foreclose instead.

Meanwhile, the buyer, who waited several months to hear an answer from the bank, then learns that the offer is rejected. The buyer will have to start again.

If the buyer is one of the few lucky ones to get his offer accepted by the bank, then he goes into escrow. If he finds some big problems with the home, he can’t ask the seller to take care of them, since the seller has no money for make necessary repairs anyway. The buyer also finally starts the loan process and has the risk that interest rates may have risen during the whole waiting process.

As Robin says, “If it’s too good to be true, then it’s too good to be true!” There are some good buys out there. Give Robin & Les Wrigley a call today (650-483-7661) to help your sort out “the real buys”.